Panasonic Corp.
Annual Report 2020

Plain-text annual report

Annual Report 2020 Report on Financial Results and ESG for the year ended March 31, 2020 This PDF contains all contents from the online Annual Report 2020, merged into a single PDF file for convenience. 01 Contents / Editorial Policy About Panasonic Management Philosophy Our Corporate History Message from the CEO (September 2020) Message from the CEO —Transition to a Holding Company System— (January 2021) Changes in People’s Lives and Society Triggered by COVID-19 Initiatives for SDGs Strategies of each Divisional Company are available at presentations of Panasonic IR Day 2019, held on November 22, 2019. Appliances Life Solutions Connected Solutions Automotive Industrial Solutions China & Northeast Asia Strategies of Functions to Support Our Business Message from the CFO For Profit Growth and Profitability Improvement Message from the CTO/CMO, and Technology Introduction Message from the CHRO 03 05 07 13 19 21 23 27 29 35 Editorial Policy Thank you for reading Panasonic’s Annual Report 2020. Panasonic positions its Annual Report as an integrated report incorporating manage- ment strategies for medium- to long-term growth; environmental, social and governance (ESG) systems and initiatives; operating results and financial position for the fiscal year under review; and other information. It is published primarily for investors. This report discusses progress on the Mid-term strategy, which aims to have the Company overcome low-profit structure, our medium- to long-term management approach beyond COVID-19, and the aims of transitioning to a holding company system to further enhance business competitiveness. We also provide an overview of our new structure and its future direction. Also, we consider ESG to be one of our manage- ment foundations that underpin the Company’s business activities, and therefore present information about specific policies and initiatives from the viewpoints of business opportunities and social responsibilities. Since the Company’s foundation, Panasonic has endeavored to contribute to the progress and development of society and the well-being of people through its business activities based on the thinking that a company is a public entity of society. Moving forward, we will aim to achieve sustainable growth and enhance corporate value by putting into practice our management philosophy. Panasonic will actively conduct dialogues with investors and invite opinions to be considered regarding the Company's management. Thank you for your further understanding and support for the Company. Panasonic Annual Report 2020 02 ESG as Our Management Foundation ESG Initiatives (Opportunities and Social Responsibilities) ESG Highlights/External Recognition Message from the Chairman of the Board Messages from Outside Directors Directors, Audit & Supervisory Board Members, and Executive Officers Corporate Governance Structure and Initiatives Message from the Environmental Compliance Administrator/ Initiatives towards the Environment Human Resources Initiatives CSR Procurement 37 39 41 43 47 49 55 59 61 Links to Sustainability Data Book Risk Management Fair Operating Practices System for the Promotion of CSR Activities Human Resources Development and Promotion of Diversity Respect for Human Rights Raising Product Quality Levels and Ensuring Product Safety Environment: Policy Responsible Supply Chain Financial and Corporate Information Financial Highlights At a Glance 10-Year Financial Summary Financial Review Corporate Data 63 65 69 71 75 Disclaimer Regarding Forward-Looking Statements This Annual Report includes forward-looking statements about Panasonic and its Group companies (the Panasonic Group). To the extent that statements in this Annual Report do not relate to historical or current facts, they constitute forward-looking statements. These forward-look- ing statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Panasonic Group’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any for- ward-looking statements after the date of this Annual Report. Investors are advised to consult any further disclosures by Panasonic in its subse- quent filings under the Financial Instrument and Exchange Act of Japan (the FIEA) and other publicly disclosed documents. Such risks, uncertainties and other factors are not all-inclusive and further information is contained in the most recent English translated ver- sion of Panasonic’s securities reports under the FIEA and any other documents which are disclosed on its website. Panasonic Annual Report 2020 03 About Panasonic Management Philosophy “We will devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world.” This Basic Management Objective embodies our mission and devotion, and as the heart of our management philosophy, it has served as the founda- tion for all our management activities. Based on our management philosophy, Panasonic will continue to help solve social issues and contribute to fur- ther development in order to bring about a bright new future. We also intend to achieve sustained growth and con- tinue to enhance corporate value. Our Vision A Better Life, A Better World Foundation of activities of management: Immutable Management Philosophy Basic Management Objective Recognizing our responsibilities as industrialists, we will devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world. Company Creed Progress and development can be realized only through the combined efforts and cooperation of each employee of our company. United in spirit, we pledge to perform our corporate duties with dedication, diligence and integrity. Seven Principles Contribution to Society, Fairness and Honesty, Cooperation and Team Spirit, Untiring Effort for Improvement, Courtesy and Humility, Adaptability, Gratitude Guidance in putting the management philosophy into practice: Evolution in response to changes in social conditions, etc. Panasonic Code of Conduct (Revised and updated; current as of 2019) https://www.panasonic.com/global/corporate/management/code-of-conduct/list.html Panasonic Annual Report 2020About Panasonic 04 A company is a public entity of society. We must be fully aware of the responsibilities entrusted to us as a public institution. Corporate social responsibilities as envisaged by our founder 1. To contribute to the development of society and people’s happiness through our core business activities. 2. To generate fair profits from our business activities and return those profits to nation and its people in various ways. 3. To make every process of its corporate activities support the goal of a healthy society. Founder Konosuke Matsushita Panasonic Annual Report 202005 About Panasonic Our Corporate History Matsushita Electric Housewares Manufacturing Works (todayʼs Panasonic) established. Two new products, an attachment plug and, a two-way socket, launched on the market. Sales of radios commenced. This radio that “wouldn’t break down” delighted consumers and it brought news and cul- ture into peopleʼs homes. Five-day work week introduced ahead of other companies. With a slogan of “One day of study, and one day of rest,” the change played a major role in raising employee productivity and motivation. Washing machines, black and white TVs, refrigerators and other products launched that reduced the burden of housework and made life easier. 1918 1927 1931 1932 1950s 1961 1965 Panasonicʼs first overseas man- ufacturing facility, National Thai Manufacturing Company, estab- lished. Manufacturing facilities were subsequently established in countries with difficulty import- ing household appliances due to foreign exchange shortages. Trade department established and export business commenced. Square bicycle lamp launched under the name “National Lamp,” reflecting the hope that it would become indispensable to the nation’s citizens. The product became popular through- out Japan as a safe light source. Panasonic Annual Report 2020About Panasonic 06 Joint venture to produce picture tubes (CRTs) for color TVs established in Beijing with a view to China’s modernization. It was the first joint venture in China for Panasonic. Fujisawa Sustainable Smart Town established for eco-conscious and comfortable lifestyles while ensuring safety and security. To make the Company a truly global corporation, the company name was changed to “Panasonic Corporation,” and its corporate brands were unified as “Panasonic” worldwide. 1987 1988 2008 2010 2014 2018 Promoting world peace through sport. In accord with this philosophy of the Olympic Games, Panasonic has, since the Olympic Winter Games Calgary 1988, supported the Movement over 30 years as the highest ranking sponsor in “The Olympic Partner (TOP)” program. Marking the 100th anniversary of its founding, Panasonic introduced “Lifestyle Updates” as its future direction to take. Mass production of lithium-ion batteries for hybrid EV automobiles commenced, helping to popularize eco-cars. Panasonic Annual Report 202007 About Panasonic Message from the CEO Steady progress with Mid-term strategy to break away from low-profitability structure Take up the challenge to create new contributions as “a public entity of society,” with a view beyond COVID-19 Kazuhiro Tsuga Representative Director President CEO Panasonic Annual Report 2020About Panasonic 08 At present, the impact from the spread of novel coro- navirus disease (COVID-19 impact) is expanding world- the initial forecast, as well as the spread of COVID-19 infec- tions. Adjusted operating profit decreased with decreased wide, in various ways including economic and geopolitical effects. While Panasonic is making its best efforts to pre- sales, while our efforts to reduce fixed costs showed steady progress. Operating profit and net profit attributable vent the further spread of COVID-19, as well as ensuring business continuity to fulfil its social responsibility as a to Panasonic Corporation stockholders decreased due to factors including the recording of restructuring expenses. corporation, an adverse effect on its operating results for the short term is unavoidable. For the fiscal year ending March 2021 (fiscal 2021), sales and profit are expected to decrease largely due to the significant impact of COVID- 19, as well as deconsolidation effects from our business portfolio reform. Under these circumstances, we are making steady progress with the Mid-term strategy announced last year, specifically through our initiatives to enhance manage- ment structure, such as reducing fixed costs and taking measures to businesses that have loss-making structures, and our execution of portfolio management, such as shift- ing resources and replacing businesses. Moving forward, we will continue to accelerate our progress toward break- ing away from a low-profitability structure. In addition, we are trying to approach the current situation as an opportu- nity to transform ourselves. We will carefully monitor the continuously changing situation of the COVID-19 impact, clarify and execute countermeasures for the short term, and prepare future measures that respond to the trends of long-term changes. Changes in the business environment are becoming more intense year by year, and we believe the current COVID- 19 situation will make our business conditions even more intense. At Panasonic, we will respond to these changes appropriately, based on the philosophy we have inherited and practiced since our founding: “A company is a public entity of society.” Through this effort, we aim to be a com- pany that can offer true contributions to peopleʼs lives and to society. And we will continue to strive to make the “Panasonic” brand even better known as a valuable com- pany, always needed by society, and to achieve sustain- able growth and raise corporate value for the medium- to long-term future. Current business performance For fiscal 2020, overall sales decreased due to the impact of business portfolio reform and weak capital investment Our initial target of 300.0 billion yen of adjusted operat- ing profit (profit generated from our businesses) was not reached. This is due mainly to the impact of COVID-19 affecting our production, including procurement of parts and components, as well as temporary suspensions of fac- tory operations during the fourth quarter. For fiscal 2021, sales and profit are expected to decrease from the previous year, due to the severe business envi- ronment caused by COVID-19 and the effect of busi- ness portfolio reform, despite progress in efforts to reduce costs, mainly fixed costs. Regarding the COVID- 19 impact, signs of recovery were seen starting in June 2020, with lifted restrictions on movement and resump- tion of economic activity. Gradual improvements are expected from the second quarter and beyond. Most of the production-related issues have been solved. However, for the demand-related issues, the pandemicʼs impact is expected to remain in the second half on businesses for aviation, housing-related, and automotive industries. The uncertainties related to the COVID-19 impact sug- gest a variety of scenarios. At Panasonic, we will make efforts to generate new kinds of value propositions, not only supporting the short-term countermeasures but also responding to changes from a long-term perspective. Progress with Mid-term strategy Under the current Mid-term strategy, which started in fis- cal 2020, we aim to break away from our low-profitability structure. As management KPIs for fiscal 2022, the final year of the Mid-term strategy, and onward, Panasonic aims toward Company-wide management that can sta- bly achieve the following targets: for the Core growth business, which include Spatial Solutions, Gemba (oper- ational frontlines) Process, and Industrial Solutions, an EBITDA growth rate of 5–10% and an EBITDA margin of 10% or more, and for Company-wide operations, a ROE target of 10% or more. Initiatives to enhance our manage- ment structure and to execute portfolio management are demand in China, both of which were already factored in making steady progress. Panasonic Annual Report 202009 About Panasonic Message from the CEO completed in September 2020. For the LCD panel busi- ness, the decision was made to end production by 2021. We are currently communicating with customers and accelerating production in preparation for the termina- tion of this business. For the solar business, production ceased at the Buffalo factory in the U.S. in June 2020, scheduled to exit the facility at the end of September 2020. Regarding the partnership agreed in May 2019 with GS-Solar, a Chinese photovoltaic module manufacturer, the Company resolved in July 2020 not to proceed with the agreement. The Company will aim to restore profit- ability in fiscal 2023 by looking into every possible mea- sure, including new business collaboration. For the TV business, the Company is carrying out structural reform, including termination of production at the Mexico factory. The Company will proceed with further initiatives, aiming to restore profitability in fiscal 2022. Through such reform measures, in fiscal 2021, we expect a total loss-reduction effect of 15 billion yen from businesses with loss-making structures. In terms of achieving 100 billion yen of profit contributions in fiscal 2022, we expect to surpass the goal through greater efforts in fixed-cost reduction, despite the impact of cancelling the partnership related to the solar business. For the other businesses that are loss-making or low-prof- itable, we will carry out continuous monitoring and take necessary measures at an early stage to avoid further deterioration of profitability. For such businesses, we will set the direction to take by fiscal 2022. Execution of portfolio management With the Mid-term strategy, we are executing portfolio management according to the portfolio classifications of “Core growth business,” “Co-creation business,” and “Revitalization business.” Our initiatives will be conducted by transcending the boundaries of the Company and orga- nizations, including flexible capital policies without limit- ing our options to utilizing internal resources, and more flexible brand policies. In these ways, we aim to enhance the competitiveness of each business. First, Spatial Solutions, Gemba Process, and Industrial Solutions are positioned as Core growth business. These businesses are highly profitable, where we can exert our accumulated strengths in technological and manufacturing Enhancing management structure Toward fiscal 2022, the Company is aiming at 100 bil- lion yen of Company-wide profit contribution through fixed-cost reduction, such as reducing personnel costs and indirect work, as well as site integration. In addi- tion, efforts are being made to reduce the amount of loss through countermeasures taken for businesses with loss-making structures: semiconductor, LCD panel, solar, and TV businesses. Fixed-cost reduction is making steady progress through setting up internal projects and listing specific measures and targets for each segment. Toward the target of 60 billion yen over three years (an average of 20 billion yen for each year), in fiscal 2020 we achieved a cost-reduc- tion effect of 20 billion yen. In fiscal 2021, we expect to achieve 30 billion yen. Monitoring the COVID-19 impact, we will execute additional measures as necessary. We can now aim even higher than the initial 60 billion-yen tar- get for profit contribution. Regarding the need to take measures to businesses hav- ing loss-making structures, we are executing such mea- sures in a top-down manner to eliminate businesses with loss-making structures and achieve 40 billion yen of profit contribution (i.e. reduction of losses) by fiscal 2022. For the semiconductor business, a decision was made in November 2019 to transfer the business, and this was Panasonic Annual Report 2020 About Panasonic 10 capabilities. By focusing our resources on this classification, such businesses are expected to become our future prof- it-growth drivers. The basic approach is to make a transition to solution-type business models from individual hardware sales, taking a medium- to long-term perspective. For example, with Gemba Process, in July 2020, the Company extended the strategic partnership with a 20% strategic equity investment in Blue Yonder, a leading end-to-end supply chain software provider. The Gemba Process business aims to offer operational process inno- vations for the supply chain, since supply chain problems have become management issues for our corporate cus- Regarding the housing business, Prime Life Technologies Corporation, a joint venture with Toyota Motor Corporation in the field of town development, was established on January 7, 2020, integrating the housing businesses of the two corporations. Combining the mobility services pro- moted by Toyota and “Lifestyle Updates” promoted by Panasonic, we aim to create new value for the entire town as a whole. With the declining birth rate and aging popu- lation, along with the changes in peopleʼs lives and work- ing styles resulting from COVID-19, the requirements for houses and town development will change even further. By giving thoughts to the demands of society and custom- tomers who face such challenges as labor shortages and diverse consumer needs. Blue Yonder possesses ers, we will take up the challenge of offering new value in not only hardware but also integrated services developed strengths in software and AI, and its customer base is on a global scale. Combining Panasonicʼs strengths in hard- ware, robotics and sensing technologies, we believe we can generate new value in this market, where continuous growth can be expected. Triggered by this investment, we will further accelerate our business model transforma- tion. I strongly believe this will be a vital step to becoming a Company that provides solutions directly linked to our customersʼ management issues. Next, with the Co-creation business, we strive to enhance competitiveness through collaboration across regions and other companies. In particular, for the consumer electron- ics business, China & Northeast Asia Company, a region- based Divisional Company, was established in April 2019 with the aim of addressing the China market, where sig- nificant growth is expected for the medium to long term. Through collaboration between this Divisional Company and organizations based in Japan, we are promoting co-creation among different regions. An example is the utilization of reasonably priced industry-standard parts and components of rapidly developed Chinese suppliers by leveraging Panasonicʼs technological capability. This enables us to increase the cost-competitiveness of our consumer electronics business overall. The China market is showing recovery from COVID-19 at a relatively early stage, and our expectations of significant market growth for the medium- to long-term period remain the same. We will further strengthen our business in China, which is a starting point for taking up new challenges, and we will build new strengths by collaborating with existing organi- through co-creation with various corporations. Finally, we must consider the automotive-related busi- ness, which is positioned as a Revitalization business, where profitability improvement is the top priority. On the back of drastic changes and evolution in the electrification and computerization of the automobile industry, we have been taking up the various challenges aggressively and globally in the two businesses of Automotive Solutions, where we apply image-processing, communication, and optical technologies, and Automotive Batteries, which includes our cylindrical battery business for Tesla. While we have achieved sales expansion, we have struggled to achieve a corresponding increase in profit. Recently, however, our efforts to improve profitability are showing steady progress. Automotive Solutions faced heavy burdens due to development expenses, mainly with the challenging proj- ects ordered from Europe during fiscal 2020. With our continuous efforts to improve efficiency, we expect devel- opment expenses to be reduced in fiscal 2021 onward. In addition to this, on the back of rising demands, including those for enhanced comfort in the mobility space, fewer accidents, and lower environmental burden, we will focus our management resources on the areas where we have strengths, namely IVI, HUD, and ADAS, to refine product competitiveness and improve profitability. In Automotive Batteries, let us first consider the cylin- drical battery business. We faced struggles with the unprecedentedly rapid ramp-up of the North America fac- tory. By carrying out thorough productivity improvement zations in Japan. Furthermore, we intend to expand this business model globally. initiatives, we managed to turn profitable in the second half of fiscal 2020. For the first quarter of fiscal 2021, we Panasonic Annual Report 2020 11 About Panasonic faced the temporary impact of factory suspension due to offerings by making full use of this ongoing evolution. COVID-19. However, under our strong partnership with Tesla, we will continue efforts to improve productivity, as well as lead the industry in technological development of batteries with high energy density, thus improving profit- ability. For the prismatic battery business, Prime Planet Energy & Solutions, Inc., a joint venture with Toyota Motor Corporation specializing in automotive prismatic batteries, was established on April 1, 2020. The aim is to accelerate the development of highly competitive bat- teries that lead the industry and to achieve a stable sup- ply. As equal partners, the two corporations will integrate their management resources to accelerate technological development and further expand production, enabling us to meet societyʼs demands for expanded use of EVs. Since its founding, Panasonic has generated con- tributions by always staying close to peopleʼs lives and addressing a number of social issues. In these two ways, we want to generate new, unprecedented types of contri- butions utilizing digital technologies such as software, AI, and IoT, among others. A specific example is our “Lifestyle Updates” initiatives centered on B2C business. We will be taking up a new challenge, based on the idea of helping people to attain a healthy mind and body, by thoroughly staying close to peopleʼs lives and offering the most suit- able values to each of our customers. Another example is our contribution to solving various social issues, centered on our B2B business. These value offerings will be given an even higher priority in the current Mid-term strategy. Changes in society brought by COVID-19 and management approach for the medium to long term The recent spread of COVID-19 has definitely had a signif- icant impact on the entire world. However, the important thing is that we do not simply wait for the waves to pass but anticipate the changes awaiting in the post-COVID-19 world and take the needed preemptive moves. Toward achieving “Lifestyle Updates” “Lifestyle Updates” aims to offer the “most suitable” to individual customers, utilizing various data and the latest technologies of AI and IoT to design products and ser- vices that continue to evolve, even after they are sold. Panasonic has placed importance on bringing affluence to peopleʼs lives through offering better consumer electron- ics products. However, there is a limit to what we can do if we only pursue evolution of the product itself. Leveraging We have experienced economic recessions on a what we have accumulated in our conventional consumer worldwide scale in the past, such as the financial crisis in 2008. What makes the COVID-19 impact different is how peopleʼs movements and activities have been restricted in each country over a long term. Such restrictions have electronics business, we will take not only the stance of improving product functions but also the customerʼs per- spective on the kind of problems they are facing, always remaining connected with the customers through digital been mitigated by advances in digital technology and developments in logistics networks. Rather than people moving to accomplish something, products or services have come to the people. This is what we were forced to experience. If this had happened 20 years ago, when the environment was not yet ready, there would have been a much greater impact. We can say that the COVID-19 impact has made clear that the evolution of digital tech- nology brings changes to real society. So how will Panasonic address such changes? Panasonic has been engaged in bringing affluence to real society and peopleʼs lives through real products, mainly con- sumer electronics. However, as real society becomes deeply impacted by the evolution of digital technology, we need to transform our business models and value technology. In this way, we aim to provide contributions that bring better health to the mind and body. To accelerate this initiative, in October 2019 we brought aboard Yoky Matsuoka, who possesses world-leading technical expertise in AI and robotics. In July 2020, the Lifestyle Business Strategy Division was established to create new value and business models. Toward contributions to solving social issues As for solving social issues, we are promoting various ini- tiatives that leverage digital technologies. For example, the Gemba Process, as mentioned earlier, symbolizes such initiatives. Surging logistic traffic resulting from phenom- ena such as e-commerce expansion has become a heavy burden on the total supply chain, causing serious issues Panasonic Annual Report 2020 About Panasonic 12 of labor shortages and workstyles. With the COVID-19 impact, this trend can be expected to accelerate at a faster pace. Here, we are trying to propose new solutions utiliz- ing our digital, sensing, and robotics technologies. Going forward, through changes in society, the digital network itself will become even more important as the basis of everyday living. When that time arrives, stable high-speed and high-volume communication, as well as technology to protect important data, will become even more important. We can also expand our contributions in these areas with our advanced technologies and devices. Being a public entity of society Since its foundation, Panasonic has been engaged in management based on the philosophy that “A company is a public entity of society.” Utilizing the various manage- ment resources entrusted by society, we must respond to social needs through business activities, contribute to the solution of social issues and the development of soci- ety, and achieve sustainable growth. When the Company was founded, the overall society of Japan was facing poverty and a shortage of goods. Panasonic has devel- oped by responding to the needs of society, which was viewed as the desire to make life more affluent, through offering good-quality products, mainly home appliances, at affordable prices. More than a 100 years after its founding, peopleʼs daily lives have changed drastically. Today, how should Panasonic respond to the requirements of global society? We can cer- tainly say that society has become more affluent in terms of possessing goods. However, in pursuing affluence, I believe we are facing various imbalances in society. From the perspective of people, there are concerns of individ- ual health, declining birthrates, aging populations, and child raising, and we cannot necessarily say that peopleʼs minds and bodies have become healthy. Looking at society as a whole, many problems have arisen through the process of pursuing affluence, including environmental and energy issues as well as the population becoming urbanized. Now is the time for us to correct this, and to guide the way to a healthier future in a more appropriate direction. Through the expansion of COVID-19 infections, we have gone through the real-life experience of “advances in dig- ital technology changing real society.” Now, Panasonic should make further contributions to solving persistent social imbalances by making full use of the latest technol- ogies, including digital technology, applying our strength from being close to our customers over the past 100 years, and leveraging the strengths of our outside partners. Tak- ing this direction is also how we can contribute to achiev- ing Sustainable Development Goals (SDGs), thus building a sustainable society that the international community is aiming for. In order to fully respond to these requirements of society, we will continue to focus on ESG initiatives, including contribution to the global environment, human resources development, respect for human rights, fair business promotion, and enhanced corporate governance. These are our initiatives toward achieving “A Better Life, A Better World,” and they embody our efforts to achieve our basic management philosophy: “A company is a pub- lic entity of society.” Through these activities, we will con- tinue to strive to make the “Panasonic” brand even better known as a valuable company, achieve sustainable growth, and raise corporate value from a medium- to long-term per- spective. I ask for your continued support of our endeavors. Link to Initiatives for SDGs https://www.panasonic.com/global/corporate/sustainability/sdgs.html Panasonic Annual Report 202013 About Panasonic Message from the CEO —Transition to a Holding Company System— Transition to a holding company system to enhance our business competitiveness Aiming to become a group of businesses that are indispensable to the development of society Kazuhiro Tsuga Representative Director President CEO Panasonic has resolved to transition to a holding company system, planned to start April 2022. The aims are to thoroughly enhance business competitiveness and to ensure Group-wide growth for the long-term future. Each business, mainly from the businesses classified as “Core growth” in the current Mid-term strategy, will be incorporated as an operating company. By increasing empowerment in this way, we can execute more wide-ranging autonomous management and build a structure that enables us to offer new value, with each business staying close to people’s lives and squarely addressing various social issues. In doing this, Panasonic will become a group of businesses that are indispensable to the development of society and that can achieve sustainable growth. With a determination to achieve this transformation based on a long-range perspective toward the develop- ment of Panasonic’s future, we announced the change of CEO to Yuki Kusumi*, together with the announce- ment of our transition to the holding company system. The new CEO will also be involved in quickly shaping the direction of our company’s transformation. * Kusumi is currently Managing Executive Officer of Panasonic and CEO of Automotive Company. His appointment as the next CEO is based on a report by the optional Nomination and Compensation Advisory Committee (chaired by an independent outside director, with the majority of members also independent outside directors). Panasonic Annual Report 2020About Panasonic 14 Background and objective of transition to a holding company system Thoroughly enhance business competitiveness, aim to ensure long-term Group-wide growth Under the current Mid-term strategy, Panasonic engaged in thoroughly enhancing its management struc- is ture and business competitiveness through portfolio man- agement, based on the three Core growth businesses of “Spatial Solutions,” “Gemba (operational frontlines) Process” and “Industrial Solutions.” After reaching the half- way point of this effort, I am now confident about its prog- ress, including actual figures. Regarding the enhancement of management structure, we have seen steady progress in fixed-cost reduction and reforms of businesses having loss-making structures. The adjusted operating profit mar- gin for the second quarter of the current fiscal year ending March 2021 (fiscal 2021) has exceeded 5%, despite the lingering impact of COVID-19. Consequently, we are see- ing the completion of a firm base. And in terms of enhanc- ing business competitiveness, various plans and measures are already in progress, such as our 20% equity invest- ment in Blue Yonder, for the Gemba Process business, and the merging of air-conditioning and indoor air quality businesses, mainly in China for the Spatial Solutions busi- ness. The pillars of our growth businesses and the direc- tion of our strategy are becoming clearer. To define Panasonic’s development in the medium to long term, our next steps are to ensure growth potential as the entire Panasonic Group and to build an organiza- tional structure that enables us to increase the compet- itiveness of each business toward achieving sustainable development. These are extremely important steps, and we view the transition to a holding company system as a necessary process in accomplishing them. By focusing on specific business areas, and leveraging the best-in-class level of expertise, we will make further contributions to society and our customers with a sharp- ened competitive edge that is unmatched by our com- petitors. In other words, we will become “specialized and sharpened,” which is essential to increasing our business competitiveness. Through this structural change, we will accelerate our efforts to become “specialized and sharp- ened” in each business, with the operating companies further empowered to execute more wide-ranging auton- omous management as we also encourage each business to transform itself according to its own particular character- istics and conditions. Furthermore, the holding company will actively support each business as it strives to become “specialized and sharpened.” Concretely, it will encourage the business to swiftly and effectively implement a growth strategy from the Group-wide perspective, including defin- ing growth areas and making various investments. In doing this, we will establish a structure that enables us to build up the corporate value of the entire Group. Specific Initiatives toward Sustainable Growth Transition to holding company system (planned, April 2022) Operating companies Focus on specific areas and further contribute to society Become “specialized and sharpened” in each business Holding company Support each business and promote growth strategy from a Group-wide perspective Schedule for Transition to Holding Company System (planned) From October 2021, virtual reorganization based on the new structure to be carried out. In April 2022, the new medium-term strategy to start with the new structure, in both name and reality, upon transition to a holding company system. June 2021 Approval by ordinary meeting of shareholders for the company split agreement and the amendments to the articles of incorporation October 2021 Termination of current Divisional April 2022 Company system and reorganization of business structure Transition to a holding company system Change of corporate name and “Panasonic Corporation” to be used by a newly established operating company Panasonic Annual Report 2020 15 About Panasonic Message from the CEO —Transition to a Holding Company System— Groundwork laid to take the next step to prosper over the coming 100 years Panasonic was founded by Konosuke Matsushita and has Through these initiatives, we have realigned the strengths we have been building and the businesses we should focus on. Now the groundwork has been laid to developed by expanding its operations and product lines, mainly with home appliances. During the times of the soar- ing market environment in Japan, we strived to aggressively expand our business, even when this resulted in having overlapping businesses within the Group. However, in the 2000s, under digitalization and intensifying global compe- tition, we faced pressing issues imposed by the necessity to ensure market advantage through generating stronger businesses and products. Consequently, we acquired affil- iated companies that were previously highly independent and launched the “Business Domain system.” We reorga- nized duplicating businesses and built a structure aimed at shifting resources and creating synergy within the Group. In 2013, the year after I became President, the cur- rent “Divisional Company & Business Division system” was introduced. The aim was to visualize the details of management through the “Business Division sys- tem” and thus overcome unacceptable business perfor- mance as soon as possible. And with the larger grouping of Divisional Companies, we attempted to leverage the strengths of former Matsushita Electric Works and Sanyo take the next step. I believe this is the perfect opportunity for Panasonic, a company that has a history of 100 years, to take the drastic measures needed to prosper over the next 100 years. Outline of new structure “Specialize and sharpen” each business to make Panasonic a group of competitive businesses “Thoroughly enhance business competitiveness” – Based on this perspective, businesses such as Spatial Solutions, Gemba Process, and Industrial Solutions, which are classified as Core growth businesses under the current Mid-term strategy, will be incorporated as operating com- panies under the new structure. And the corporate name of the current “Panasonic Corporation” will be changed to “Panasonic Holdings Corporation.” Through these changes, the pillars of businesses that we should grow will become clear. Moreover, we will be able to establish a structure that permits wide-ranging autonomous man- Electric, which had become subsidiaries, as well as gen- erating synergies beyond organizations to clarify the agement at each business, leading to swift and effec- tive decision-making by those at the frontlines who really new pillars of business. And the positive outcomes have understand the business conditions. We aim to make become clear, as mentioned above. Panasonic a group of competitive operating companies Group Structure after Transition to a Holding Company System Panasonic Holdings Corporation P r o f e s s i o n a l S e r v i c e s * Panasonic Corporation H o m e A p p l i a n c e b u s i n e s s * * i C h n a & N o r t h e a s t A s i a b u s i n e s s * * b u s i n e s s * * A i r - c o n d i t i o n n g & i I n d o o r A i r Q u a l i t y D i s t r i b u t i o n b u s i n e s s * * C o m m e r c i a l R e f r i g e r a t i o n & E l e c t r i c a l i E q u p m e n t b u s i n e s s * * A u t o m o t i v e b u s i n e s s * S m a r t L i f e N e t w o r k b u s i n e s s * H o u s i n g S y s t e m b u s i n e s s * D e v i c e b u s i n e s s * E n e r g y b u s i n e s s * G e m b a P r o c e s s b u s i n e s s * O t h e r G r o u p c o m p a n i e s * Corporation ** Divisional Company (Names are tentative for businesses and corporations, except Panasonic Holdings Corporation and Panasonic Corporation) Panasonic Annual Report 2020 About Panasonic 16 that are “specialized and sharpened.” First, for the Spatial Solutions business, the newly established operating company based on the current Appliances Company and Life Solutions Company, to be called “Panasonic Corporation,” will play the central role. We aim to exert a significant synergy effect and comprehensive strengths across such businesses as air-conditioning/indoor air quality and electrical equip- ment, along with white goods and commercial refrig- eration and distribution. Furthermore, we will take up challenges in the consumer electronics and residential production line. And our high expertise in cylindrical bat- teries will continue to be a great strength in developing our business for Tesla. Along with the non-automotive battery business, we will steadily grow this business as a new pillar. “Automotive,” “Smart Life Network,” and “Housing System” businesses are expected to produce synergy with the new “Panasonic Corporation” from the perspectives of “living” and “people.” However, it is necessary to priori- tize the improvement of each business’s competitiveness and profitability. We aim to refine the competitiveness as space businesses in China. The reason we will continue an operating company so that it surpasses the level of our to use the name “Panasonic Corporation” for these busi- nesses is because I firmly believe they offer value that is competitors and, in addition, to improve profitability at the earliest time. most unique to Panasonic and they most directly inherit Panasonic Holdings Corporation and the newly estab- our DNA. We will pursue value creation that represents lished company in charge of professional services will be the key characteristics of Panasonic: bringing better health to the mind and body by “staying close to people.” Gemba Process business and Industrial Solutions busi- ness will each be incorporated as operating companies, along with “Energy business,” which is designated to play a central role in the Group’s development. Regarding our automotive battery business, we established a joint ven- ture with Toyota Motor Corporation for prismatic batter- ies; as for cylindrical batteries, profitability has improved in our business with Tesla. The direction to take in our next challenge is becoming clear, such as introducing technol- ogy for increasing battery capacity and investing in a new supporting each operating company’s efforts to enhance competitiveness in its own area. The parent holding com- pany will support each operating company’s growth strat- egy to become more “specialized and sharpened” and, moreover, enhance competitiveness from a functional view- point. In addition, it will execute the Group-wide growth strategy to attain higher corporate value from a Group-wide perspective. The aim of the new company in charge of pro- fessional services is to become a team of experts who are highly efficient and capable of providing high added value. This will be done by visualizing and continuously refining the value provided by these indirect functions. Relationship between Business Structure before and after Transition to a Holding Company System Structure after Transition to a Holding Company System (Operating companies and businesses) Relationship with current structure Panasonic Corporation To be established by consolidating businesses (China & Northeast Asia, Home Appliance, Air-conditioning & Indoor Air Quality, Commercial Refrigeration & Distribution, and Electrical Equipment) under one corporation China & Northeast Asia business To be established based on business area of current China & Northeast Asia Company Home Appliance business To be established based on white goods business area of current Appliances Company Air-conditioning & Indoor Air Quality business To be established based on air-conditioning and indoor air quality business area of current Appliances Company and Life Solutions Company Commercial Refrigeration & Distribution business To be established based on commercial refrigeration and distribution business area of current Appliances Company and US Company Electrical Equipment business To be established based on electrical equipment business area of current Appliances Company and Life Solutions Company Automotive business To be established based on business area of current Automotive Company Smart Life Network business To be established based on AVC business area of current Appliances Company Housing System business To be established based on business area of current Housing Systems Business Division Gemba Process business To be established based on business area of current Connected Solutions Company Device business To be established based on business area of current Industrial Solutions Company (excluding battery business) Energy business To be established based on battery business area of current Industrial Solutions Company and US Company Professional Services To be established based on current Professional Business Support Sector. Expected to support the growth of each operating company by leveraging its specialized capabilities * Names for operating companies and businesses are tentative except for Panasonic Corporation. Businesses under Panasonic Corporation are expected to be Divisional Companies. Panasonic Annual Report 2020 17 About Panasonic Message from the CEO —Transition to a Holding Company System— Toward sustainable growth Pursue high profitability with the four business pillars Under the new structure, there are three major areas where Panasonic aims to make contributions. First, the area where we strive to stay closer to “People,” as already incorporated in the Company’s DNA. Second, the area related to supporting what we consider the founda- tion underpinning the development of society, from the “Electric/Electronics” perspective. And third, the area where we tackle the “Issues at the Gemba,” such as man- ufacturing, logistics and distribution. We consider each of these areas promising, where we can exert our strengths and expect significant market growth. In terms of the area related to “People,” we will take up the challenge of offering new value, with the new Panasonic Corporation playing the central role in “Lifestyle Updates” from the perspective of bringing better health to the mind and body. We see expanding possibilities of our contributions in this area, not only in the evolu- tion of home appliances as tools to support household chores and everyday living but also in providing comfort- able spaces created with lighting, sound, air-conditioning and indoor air quality as the core, as well as smart infra- structure for living as the base for delivering these values. Considering the circumstances surrounding COVID-19, with raised consciousness of health and safety, as well as the further aging of society, we can expect greater atten- tion to these issues from our customers and society. We aim to be unique and unmatched, providing contributions only Panasonic can offer by fully applying the synergy between Appliances (from former Matsushita Electric Industrial) and Life Solutions (from former Matsushita Electric Works), leveraging the various technologies and expertise cultivated from the past. For “Electric/Electronics,” which we consider the foundation of society’s development, the Energy and Device businesses will play the central role. Without Reforms to internal policies toward energizing each business Significant reforms will also be made to internal policies and operations related to corporate governance by devel- oping new systems and finding ways to increase the effi- ciency of indirect functions. This is expected to further energize each business’s operational frontlines and help make it more competitive. First, to strongly promote “specializing and sharpening” of each business, we will increase empowerment in each business for speedier decision-making. At the same time, the responsibility for results among those in business man- agement positions will be clarified, and governance will be enhanced to improve the quality of decision-making through clearer accountability. Furthermore, we will optimize our cost structure by flex- ibly introducing various systems, including the personnel system that is most suitable to the particular environment that each business operates in. In this way, we can achieve the competitiveness needed to succeed in each industry. Regarding the multiple layers and overlaps at our indi- rect functions, we will rationalize these indirect functions by establishing a separate corporation for professional services with the transition to the new system. We aim to achieve further management efficiency and significantly contribute to the competitiveness of each business. Reforms under the Holding Company System Governance Improve specialization and speed of decision-making by increasing empowerment and clarifying accountability Develop systems Thoroughly enhance competitiveness to address the needs of each industry by applying the personnel system suitable for that industry, etc. Management structure Make indirect functions contribute to competitiveness as a Group by eliminating overlaps and improving efficiency Panasonic Annual Report 2020 About Panasonic 18 evolution in these technologies, communication infra- structures such as 5G, advances in vehicles, and the digital/green society cannot come to fruition. We will capture the ever-expanding business opportunities in Make Panasonic a brand that shares values with society Under the new structure, the Panasonic brand will become an ever more important asset that connects this increasingly important area by thoroughly enhancing our technological and manufacturing capabilities, as well as more widely establishing our presence. the entire Group. Conventionally, the Panasonic brand was used for our products, mainly home appliances. We have been committed to enhancing its value as a brand And lastly, the area tackling the issues our custom- ers face at the Gemba, such as manufacturing, logistics and distribution. Here, we aim to bring greater innova- tion to these processes by combining digital technolo- gies with our strengths in manufacturing expertise. This is really about getting involved in the Gemba of our corpo- rate customers, who face a variety of issues, and offering them solutions. By doing this, we can greatly contribute to transforming their management. I have a strong feel- ing that our business opportunities are expanding already, and we can expect long-term growth. In the areas of “People” and “Electric/Electronics,” we will further pursue and refine our strengths as well as expand new businesses by addressing “Issues at the Gemba.” This is our approach to making contributions and achieving growth as the new Panasonic Group. Based on this direction, we will attain sustainable growth as a Group in a highly profitable business structure, with the businesses of the four major operating companies, namely, Panasonic Corporation, Gemba Process, Device, and Energy, developing into our future pillars. This will be done through “specializing and sharpening,” along with enhancing the competitiveness of each business. Areas for Panasonic to make contributions People Healthy mind and body Issues at the “Gemba” (operational frontlines) Electric/ Electronics Transform management by process innovation Foundation for social development that represents what our customers yearn for in their lifestyles and home appliances. However, due to the advances in digitalization and changes in business mod- els, we face an era of creating new kinds of value through co-creation with society, beyond the concept of corpora- tions or consumers. In such a situation, we must strive to make the Panasonic brand even better known as a valu- able company. Sharing values with our customers and society, and taking up the challenge in creating new value together. In other words, when society adopts new lifestyles and creates the future, we want Panasonic to be a brand that people select as a partner. Therefore, we will keep evolv- ing the Panasonic brand and the Company itself. The raison d’être for Panasonic has always been to con- tribute to people’s lives and society through its business operations, and this will never change. Thus, we view this reorganization as a necessary process in fulfilling our rai- son d’être during an era of radical changes and uncertain- ties. Under autonomous management, we will thoroughly refine specialization in each business area, as well as stay close to people’s lives and society while working to make further contributions. In this way, Panasonic will continue to develop itself as a group of valuable businesses that are indispensable to the development of society. I ask for your continued understanding and support of Panasonic’s endeavors. Panasonic Annual Report 2020 19 About Panasonic Changes in People’s Lives and Society Triggered by COVID-19 The global spread of COVID-19 infections in 2020 has brought significant and irreversible changes to people’s lives and society. Alongside megatrends*, Panasonic is monitoring the impacts of these changes in terms of their degree of certainty, social impacts, and the effects on our business. Below we discuss the changes caused by the spread of COVID-19 infections and the main initiatives we consider to be business opportunities. *For more details about megatrends, please refer to P5–9 in the Annual Report 2019. Changes in people’s lives Panasonic’s initiatives People’s awareness of hygiene in order to prevent and stop the spread of COVID-19 infections, as well as awareness of preventive health, has increased. Infection countermeasures are required for not only the home, but also spaces where people gather, such as the workplace, public transport, and shops. Furthermore, the effectiveness of working remotely— an approach hitherto recognized as necessary for improv- ing productivity—has been acknowledged and gained further traction because more people refrain from, or are prevented from, going out in order to prevent infections and their further spread. This has led to more time spent at home or with one’s family, which in turn has driven an increase in the use of e-commerce and online services. On the other hand, due to the advancement of telework- ing and the development of online services, facilities in the city are now required to provide even more value that only “real” spaces can offer. Changes in number of people visiting or hours spent at workplaces, retail & recreation facilities (compared to pre-COVID-19) Workplaces In light of heightened awareness of hygiene and health, we are stepping up our response to meet demand for disinfection and ventilation mainly by expanding, and more vigorously promoting, our lineup of products equipped with nanoe X technol- ogy and increasing production capacity of Ziaino, spa- tial sterilizing/deodorizing equipment using sodium hypochlorite. We are also promoting the creation of spaces in which public hygiene is guaranteed mainly by providing non-contact personal identification sys- tems and body temperature detection systems. Furthermore, we intend to focus on developing solu- tions that merge air-conditioning and indoor air quality functions in one, taking into account not only health aspects, but other factors such as comfortability. To accommodate changes in people’s lives and the more time people spend at home as a result of teleworking, we are promoting the creation of living spaces that bring better health to the mind and body by providing home appliances and housing equipment that help people live comfortably. And for spaces such as offices, retail facilities, and recreation spaces, we intend to deliver solutions for creating the functional- ity and appeal that can only be found in “real” spaces. (%) 0 -10 -20 -30 -40 -50 (%) 0 -10 -20 -30 -40 -50 -60 Retail and recreation facilities Products equipped with nanoe X (air conditioners, air purifiers, washing machines, refrigerators, etc.) Ziaino Spatial sterilizing/deodorizing equipment using sodium hypochlorite 2020 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Japan US Germany Source: Compiled by Panasonic, based on Google data Google LLC“Google COVID-19 Community Mobility Reports”. https://www.google.com/covid19/mobility/ Accessed: 2020.12.15 Exhaust (outside) Air supply (outside) Temperature control unit Energy recovery ventilator (ERV) unit Air conditioner Air supply duct Air supply (to each room) Exhaust duct Exhaust (from each room) Example of solutions that merge air-conditioning and indoor air quality functions in one * Centralized temperature, humidity, and air ventilation (air cleanliness) control combining humid- ity control unit, energy recovery ventilator (ERV) system, and air conditioning. To be launched in April 2021 in the Chinese housing market. Panasonic Annual Report 2020About Panasonic 20 Changes in society Panasonic’s initiatives COVID-19 lockdowns and other restrictions have dis- rupted supply chains and exposed their vulnerabilities. There is now a greater awareness of the challenges sur- rounding stable product supply, such as lower factory operating rates or suspended operations caused by the situation where employees have contracted the virus. In addition, demand is rising for information and com- munication infrastructure owing to higher volumes of data network traffic as more employees work remotely and make greater use of online services. The volume of goods being distributed in society overall is also increasing due to the accelerated uptake of e-commerce and food deliv- ery services. The strains on, and labor shortages in, the overall supply chain, including logistics facilities, are grow- ing increasingly severe. Meanwhile, the governments of China, Germany, and France, among others, are hammering out economic stimulus packages centering on subsidies for consumers purchasing electric vehicles (EVs) in an effort to arrest the slowdown and stagnation of economic activities caused by COVID-19. These measures are driving demand for EVs, whilst investment in the electrification of mobility is also gaining momentum. For customers dealing with management issues that occurred at “Gemba” (operational frontlines) of man- ufacturing, transportation, and selling sites, such as disruptions to parts supply networks, we intend to pro- vide solutions aimed at rebuilding their supply chains. To help ease the burden on manufacturing, transpor- tation, and selling sites brought about mainly by higher volumes of distribution from e-commerce growth, we will look to provide visualization and optimization solu- tions with the use of sensing, robotics, and edge-de- vice technologies. Also, in the area of information and communication infrastructure, we intend to provide production equip- ment, materials, and devices that are supportive of increases in data traffic and the accompanying evo- lution of computing. Furthermore, we will step up our offering of solution services that underpin stable data center operations. We will aim to make greater strides in developing and supplying automotive cylindrical batteries to meet stronger demand for EVs as a measure to combat cli- mate change and as a measure backed by govern- ments worldwide in response to COVID-19. Examples of increased demand for data traffic and services around the time of COVID-19 Manufacture Transport Sell Digital Supply Chain Management Software Collect, Accumulate, Analyze, and Utilize Data Products/ services Marketing information Gemba Consumer Supply chain management solutions Conductive polymer electrolytic capacitors Multi-layer circuit board materials 9 ISPs* (Japan) Fixed broadband 50% increase in total download traffic AT&T (US) 22% increase in network traffic Amazon 26% YoY increase in net sales (incl. cloud business sales) Netflix Quarterly increase of 15.77 million paid subscribers (increase of 127% vs. previous year’s average quarterly increase) Zoom 30 times more meeting participants per day * Internet service providers that offer fixed broadband services surveyed by the Ministry of Internal Affairs and Communications Source: Compiled by Panasonic, based on publicly available information Examples of incentives for purchasing EVs China Extension of time frame on subsidy for NEV purchases Targeted ban on sale of fossil fuel vehicles Germany Increase in subsidy for EV purchases Extension of time frame on EV tax relief France Increase in subsidy for EV purchases Increase in subsidy for EV/PHV replacement purchases Source: Compiled by Panasonic, based on JETRO data Automotive cylindrical batteries Panasonic Annual Report 2020 あらゆる企業活動を通じてSDGs達成に貢献 2. 責任ある事業活動の推進 1. 事業活動による価値提供 3. 会社と社員による社会貢献 事業活動を支え、価値を生み出す 当社のテクノロジーや知見を生かし、人々のくらしや社会、 誰もが活き活きとくらす「共生社会」 プロセスにおいて、企業の社会的責 地球環境のサスティナビリティに貢献するイノベーティブ の実現に向けて、企業市民活動で 任（CSR）を果たします な商品やサービス、ソリューションを提供していきます お役立ちをします 21 About Panasonic Initiatives for SDGs ブランドスローガン ステークホルダーとの協働・共創 経営理念 （企業は社会の公器、事業活動を通じて社会に貢献する） At Panasonic we are working to solve issues in society through our wide-range of corporate activities. For more details, please refer to “Initiatives for SDGs” on our website. Contributing to the achievement of the SDGs through a wide range of corporate activities 2. Responsible business conduct 1. Providing value through business activities We will fulfill our corporate social responsibility (CSR) in the process of creating value and supporting business activities. Utilizing our technologies and knowledge, we will provide innovative products, services and solutions that will contribute to the sustainability of people’s lives, society and the global environment. 3. Social contributions by the company and employees We will provide a social impact through corporate citizenship activities toward the realization of an “inclusive society” where everyone can live an active life. Brand Slogan Collaborations and co-creation with various stakeholders Management Philosophy Contributing to society through business activities as a public entity 1. Providing value through business activities The following are excerpts of the policies and initiatives discussed by the CEO of each Divisional Company introduced on our website. Appliances Company We aim to help customers to attain a healthy mind and body by creating new value with home appliances and associ- ated services. We bring convenience, comfort, beauty, and enjoyment to people’s lives worldwide mainly in the areas of housekeeping, cooking, and beauty care. Particularly in the midst of the spread of COVID-19 infections, we are con- tributing greatly to the creation of clean spaces and improvements in public hygiene centering on our clean air tech- nologies. Also, in the area of lifestyle infrastructure, we are helping to decarbonize economies and contribute to safer, more comfortable lifestyles by developing environmentally-conscious equipment that use hydrogen energy and natu- ral refrigerants, as well as control systems and services powered by IoT and AI. Life Solutions Company We aim to provide spatial solutions that support both human well-being and environmental sustainability through the pursuit of human-centered comfort. More specifically, we employ software to update entire buildings in addition to physical renovations to lighting, ventilators, wiring devices, and so on. Together with our partner companies, we aim to harness the electric equipment control technology we have cultivated thus far to keep abreast with the needs of each building through its entire lifespan and optimize the comfort of the space around each individual according to the setting, time of day, and other factors. Connected Solutions Company We leverage the insight and expertise Panasonic has cultivated through manufacturing, as well as our strength in edge technologies including image sensing, robotics, AI, and IoT, to create process innovations that streamline man- ual, ad hoc tasks in the supply chain encompassing manufacturing, logistics, and retail operations. By delivering “Gemba Process Innovation” at the respective stages where things are made, shipped, or sold, we aim to achieve operational efficiency for our customers, reduce energy use and losses from waste, and increase worker productivity. In this way, we hope to solve societal issues and provide sustainable value. Panasonic Annual Report 2020About Panasonic 22 Automotive Company The automotive industry is currently undergoing revolutionary change symbolized by the acronym CASE: Connected, Autonomous, Shared, and Electric. We do business in a wide array of fields, including in-vehicle infotainment (IVI) sys- tems, advanced driver assistance systems (ADAS), automotive mirrors, and automotive electrification systems, such as automotive batteries. We offer devices and solutions that are engineered to enhance safety and comfort during travel and reduce driver burden and environmental impacts. We contribute to the SDGs through the realization of safe and environmentally sustainable mobility in partnership with automakers. Industrial Solutions Company In the fields of ICT infrastructure, automotive CASE, and smart factories, we aim to help customers overcome challenges when addressing such megatrends as climate change and a labor force decline. By providing devices that embrace the development of ICT infrastructure through energy conservation, devices that contribute to bet- ter energy-saving and safety performance of EVs, and networking devices that reduce factory labor, our goal is to help customers achieve the SDGs, and by extension, overcome social challenges. China & Northeast Asia Company We strive to positively contribute to Chinese society through our business by providing solutions that support healthy, comfortable living for the region’s aging population. With the aim of helping people in China live longer healthy lives by utilizing the know-how we accumulated in Japan, we are building a Wellness Smart Town for seniors with a local partner. Moreover, we have already launched sales of our fresh food cold chain solution, which reduces food losses, converts those losses into higher income for people in rural and fishing villages, and also improves food quality and safety. Through this service, we aspire to contribute to healthier and more comfortable living. US Company We have two core business segments: (1) supplying lithium-ion batteries to EV maker Tesla, Inc.; and (2) Hussmann Corporation, a refrigeration systems and display case provider. The former plays a part in popularizing EVs by supply- ing high-capacity batteries and also tackles the issue of climate change by furthering the uptake of clean energy. The latter, Hussmann Corporation, aims to help customers achieve reliable cold chain operations and lower their envi- ronmental footprint primarily by reducing energy and labor costs with IoT and promoting environmentally-conscious equipment. And as an incubation business, the US Company is looking to help solve social issues in the US by rolling out an IoT-driven information platform that will deliver safe urban road infrastructure. 2. Responsible business conduct Messages from the head of each corporate function can be found on our website. Related content is also published in this Annual Report. Reference: Related content in Annual Report 2020 Environment Message from the Environmental Compliance Administrator Procurement CSR Procurement Human Resources Message from the CHRO Legal and Compliance Corporate Governance Structure and Initiatives 3. Social contributions by the Company and employees Alongside business activities, we also aim to contribute to the SDGs by joining hands with employees to carry out corpo- rate citizenship activities. Details on these initiatives are available in the message from the Chief Brand Communications Officer on our website. Please refer to the following website for detailed examples of our initiatives on the SDGs. https://www.panasonic.com/global/corporate/sustainability/sdgs/case-study.html Panasonic Annual Report 202023 Strategies of Functions to Support Our Business Message from the CFO Steadily advancing Mid-term strategy initiatives with emphasis on return on invested capital and an awareness of financial discipline under our capital allocation policy Capture business opportunities arising from social changes brought on by COVID-19 Hirokazu Umeda Director Managing Executive Officer / CFO Basic approach to capital policy and Mid-term strategy Our basic approach to capital policy emphasizes return on invested capital and financial stability, and we endeavor to consistently generate returns in excess of the expected rate of return in the capital market. In addition, we are working hard to build a robust financial base so that we can push ahead with our business structural reform and investment in growth necessary for improving profitability. In terms of return on invested capital, we are aiming to stably achieve ROE of at least 10% on a Company- wide basis in an effort to generate returns that exceed the cost of stockholders’ equity over the medium to long term. As for financial stability, alongside the expansion of Panasonic Corporation stockholdersʼ equity driven by the accumulation of net profit, we are undertaking initiatives with a focus on financial discipline in line with our capital allocation policy. To be more specific, the funds needed for mainly investments, structural reforms, and dividend payments will, in principle, come from cash flow (oper- ating cash flow, divestitures) generated by businesses. That said, so that we can aptly respond to growth oppor- tunities, we will respond flexibly to one-off demand for capital for an M&A deal, for example, whilst taking into account the balance of funds over the medium term. Guided by this basic approach to capital policy, as part of our business portfolio reform—one key pillar in the Mid-term strategy—in addition to enhancing com- petitiveness of individual businesses, we are focusing on the efficiency of our balance sheet and the improve- ment of cash flow from a financial point of view. To this end, we apply rate of return on invested capital (ROIC) as a marker of return on overall invested capital in each Divisional Company and Business Division when under- taking comparison with competitors, portfolio manage- ment, and investment decision-making. Another key pillar in the Mid-term strategy is the enhancement of our management structure, thus, with the objective of realizing a profit contribution of 100 billion yen in fiscal 2022, we are working to reduce fixed costs by mainly reducing personnel costs and indirect operations, as well as integrating sites. We are also rolling out radi- cal measures to deal with businesses that have loss-mak- ing structures. Even if these initiatives are impacted by changes in the operating environment, as CFO, I will seek to manage their overall progress and steadily work towards reaping the benefits of improved profitability. Fiscal 2020 review Earnings and financial situation In fiscal 2020, both sales and profit decreased due to weak capital investment demand in China resulting from US-China trade friction, as well as lower sales caused by the spread of novel coronavirus disease (COVID-19 Panasonic Annual Report 2020 Strategies of Functions to Support Our Business 24 impact). Nevertheless, we were able to make progress on initiatives towards breaking away from a low-profitabil- ity structure, including business portfolio reform and man- agement structure enhancement. In particular, for our business portfolio reform, we ramped up our co-creation initiatives to enhance our busi- ness competitiveness. We established two joint ventures with an external partner—one in the automotive pris- matic battery business and the other in the town develop- ment business, and formed a strategic capital alliance in the security systems business. And to enhance our man- agement structure, we achieved profitability improve- ments of approximately 20 billion yen by reducing fixed costs, and we have firmly set the direction for those busi- nesses having loss-making structures by mainly deciding to transfer the semiconductor business and end produc- tion in the LCD panel business. ROE, a Company-wide target of return on invested capital, decreased to 11.5% compared to the previous fiscal year, but it remains stably above the 10% level by achieving the average of 12.5% over the past five years. In terms of financial stability, Panasonic Corporation stockholdersʼ equity was 1,998.3 billion yen as of end-fis- cal 2020 through the accumulation of net profit; the ratio of Panasonic Corporation stockholdersʼ equity rose from 31.8% last fiscal year to 32.1%. Moreover, free cash flow improved considerably this year, increasing to +224.2 bil- lion yen year on year compared to +10.3 billion yen last fiscal year. This owed to profit decrease being offset by mainly a reduction in working capital due to inventory reductions, strict control of investments, business port- folio reform, and sale of assets. The improvement in our financial position is also evident in net cash, which improved by 393.6 billion yen year on year to –419.5 billion ROE (Years ended March 31) Panasonic Corporation Stockholders’ Equity to Total Assets Ratio (Years ended March 31) 15.7 14.4 11.5 11.1 9.9 (%) 20 15 10 5 0 (%) 35 30 25 20 15 10 5 0 26.3 26.3 27.1 31.8 32.1 3/’16 3/’17 3/’18 4/’19 3/’20 3/’16 3/’17 3/’18 3/’19 3/’20 Free Cash Flows (Years ended March 31) (Billions of yen) 250 200 150 100 50 0 -50 224.2 125.6 10.3 3/’16 -34.8 3/’17 -35.6 3/’18 3/’19 3/’20 Dividends (Dividends declared per share) (Years ended March 31) (Yen) 40 30 20 10 0 30 30 30 25 25 3/’16 3/’17 3/’18 3/’19 3/’20 Panasonic Annual Report 2020 25 Strategies of Functions to Support Our Business Message from the CFO yen (–152.6 billion yen excluding lease liabilities*). This is partly attributable to the decrease in lease liabilities that resulted from the deconsolidation of Panasonic Homes. As for returning profits to shareholders, even though net profit attributable to Panasonic Corporation stockhold- ers decreased year on year, the Company distributed a dividend of 30 yen per share (unchanged from last fiscal year) in accordance with its dividend policy. *Lease liabilities Following the application of IFRS 16 beginning in fiscal 2020, leases (as les- see) previously recorded as expenses are booked on the balance sheet as either right-of-use assets that represent a right to use an underlying asset over the lease term or lease liabilities that represent a lease payment obliga- tion (lease liabilities are recognized as interest-bearing debt). Measures to strengthen financial base In fiscal 2020, we made efforts to diversify our fund- ing sources and strengthen our funding base through domestic and foreign capital markets; we issued senior notes denominated in U.S. dollars for the first time in 27 years with the aim of accessing overseas markets which encompass a broad range of investors, and we also issued domestic bonds mainly for the partial refinancing of bond redemptions. Also, with the aim of facilitating smooth financing, we have taken steps to better communicate Panasonic’s credit story. Our initiatives include; organizing IR activities for bond investors not only at the time of bond issuance, but also on a regular basis, and deepening our discussions with credit rating agencies primarily about how we are improving profitability, our approach to financial discipline, and our medium- to long-term strategies. In terms of cash, through to the end of fiscal 2020, the Company had secured over 1 trillion yen in cash and cash equivalents in preparation for the risk of potential deterio- ration in the financial and economic environment brought on by the gradual spread of COVID-19. On top of this, Panasonic entered into commitment line agreements in June 2018. The upper limit for unsecured borrowing based on the agreements is a total of 700.0 billion yen, but there have been no borrowing under these agree- ments, and we have secured sufficient liquidity. Credit Ratings (as of August 31, 2020) Ratings agency Long-term (Outlook) Short-term Rating and Investment Information A (Stable) Standard & Poorʼs A- (Negative) Moodyʼs Baa1(Negative) a-1 A-2 — Initiatives in fiscal 2021 Priority initiatives Sales and profit are expected to decrease in fiscal 2021 due to the impact of COVID-19, as well as deconsolidation effects from our business portfolio reform. Considering that sales and profit started to improve in June, we antic- ipate a moderate improvement from the second quar- ter onwards. At the same time, we expect the COVID-19 impact will likely remain in the second half and affect our businesses for the aviation, housing-related, and automo- tive industries. Despite this highly uncertain business environment, we aim to steadily execute the key initiatives in our Mid-term strategy; namely, business portfolio reform, improvement of profitability for automotive-related business—which is positioned as a Revitalization business—and enhance- ment of management structure. We will also push ahead with measures to improve profitability and get profit back on a growth trajectory by stepping up efforts to capture business opportunities brought on by changes in society as a result of the COVID-19 pandemic. To drive forward our business portfolio reform, we will continue to collaborate with partners on co-cre- ation initiatives and enter into strategic capital alliances. Meanwhile, in order to propel the strategic shift of mana- gerial resources, we will also aim to execute investment in growth whilst taking into account our capital alloca- tion policy. As a concrete example, in the Gemba (opera- tional frontlines) Process business—which we consider to be a Core growth business—we have made a stra- tegic equity investment in Blue Yonder, a leading end- to-end supply chain software provider. To complement the hardware we already possess in the Gemba Process business, this investment will enable us to bolster the functions, such as software and consulting capabilities, needed by our solutions businesses and drive growth in recurring business as a platform for stable earnings. We will also accelerate the transformation of our business model, and deliver results. From my standpoint as CFO, I will continue to thor- oughly manage the progress of initiatives geared towards improving profitability in automotive-related business and enhancing our management structure. Large-scale investments in automotive-related busi- ness have driven sales growth thus far, but we have struggled to convert this into profit growth, which is why a turnaround in profitability is such a pressing issue. In Automotive Solutions, we took steps to enhance the management structure ahead of schedule and develop- ment expenses in particular have started to decline after peaking in fiscal 2020. We will also ramp up our efforts Panasonic Annual Report 2020 Strategies of Functions to Support Our Business 26 to reduce fixed costs in an effort to return to profitabil- ity in this business as soon as possible. In Automotive Batteries, we aim to achieve sustained profitability by improving productivity at our North America factory for cylindrical batteries and aim to further boost profitability with the introduction of new technology. We have also decided to invest in the expansion of production capacity through to fiscal 2022. Up ahead, decisions on investment will be made after thorough assessment of profitability. Regarding the enhancement of our management structure, we will endeavor to further reduce costs with a focus on fixed costs, and look to reap the benefits of approximately 30 billion yen, which is more than what we initially targeted. We will also step up efforts to eliminate those businesses having loss-making structures and aim to generate profit improvements of 15 billion yen mainly in the semiconductor business, notwithstanding the neg- ative impact of COVID-19. Based on these measures, we intend to steadily achieve profit contributions by more than 100 billion yen by the end of fiscal 2022, the final year of our Mid-term strategy. In terms of the business opportunities brought on by changes in society as a result of the COVID-19 pandemic, we expect to see greater investment in information- and communication-infrastructure (base stations, servers, etc.) driven by sharp growth in network demand as peo- ple refrain from going out and choose to work remotely, as well as stronger demand for air purifying and air con- ditioning systems because of heightened interest in pub- lic health and as more people choose to stay home. Panasonic will develop products and services and invest in expanded production capacity. For example, storage battery systems and conductive polymer capacitors in the area of information and communication infrastruc- ture, as well as spatial sterilizing/deodorizing equipment using sodium hypochlorite (Ziaino) as an effective way to reduce airborne bacteria and virus particles and air condi- tioners in the air-conditioning and air quality field. Initiatives for generating cash flow In fiscal 2021, in addition to securing profits, we aim to keep improving inventory and working capital and be more discerning with the investments we make. We will also aim to generate free cash flow in excess of net profit levels by executing strategic investments within the scope of revenue generated by business portfolio reform and the sale of assets. Going forward, in aiming to steadily advance our Mid- term strategy, we will engage in financial management in a well-focused manner whilst securing capital necessary for growth by generating cash flow. Putting our management philosophy into action and aiming to enhance corporate value Since its foundation, Panasonic has undertaken business activities based on the philosophy: “A company is a pub- lic entity of society.” At present, the impact of COVID- 19 remains unpredictable and the future outlook for the financial and economic environment is still unclear. We believe, however, that over the medium to long term, it is our duty to help find solutions to various social issues through our business activities, including those trig- gered by societal changes in response to the pandemic, and that doing so is necessary if we are to enhance sus- tainable growth and corporate value. We also recognize that our actions can contribute to the attainment of the Sustainable Development Goals (SDGs) —an agenda the international community has its sights set on achieving. Also, we have long positioned ESG as one platform that underpins our business activities in the context of aiming to enhance corporate value in a sustained manner. Until recently, Europe had been a pioneer of ESG investment, but now the rest of the world, including Japan, is stress- ing the importance of ESG as a source of non-financial information on which investment decisions can be based. As a result, opportunities for ESG-themed dialogue with shareholders and investors are on the rise. Up until now, Panasonic had communicated its views on ESG and mes- sages from managers of ESG-related departments, but going forward, so that investors can gain a better under- standing of how we incorporate ESG into the value cre- ation process, we intend to disseminate information about ESG in an integrated manner with updates about our busi- ness and management activities and actively engage in dialogue with investors regarding ESG. The situation of COVID-19 prevents us from communicat- ing face to face with shareholders and investors at this time, but for financial announcements and one-on-one meetings, we are currently switching to virtual methods (conference calls, online meetings, etc.) in light of effi- ciency and convenience. We will continue to make every effort to deepen the understanding of investors about our initiatives on management reforms and utilize their feed- back in management operations. I look forward to your continued support of Panasonicʼs endeavors in the future. Link to Initiatives for SDGs https://www.panasonic.com/global/corporate/sustainability/sdgs.html Panasonic Annual Report 2020 27 Strategies of Functions to Support Our Business For Profit Growth and Profitability Improvement Business Portfolio Reform • In fiscal year ended March 31, 2020 (fiscal 2020), the first year of our new Mid-term strategy, we carried out initiatives for future profit growth and improved profitability by implementing portfolio management. Specifically, we concentrated resources on Core growth businesses with market growth potential where we can leverage our strengths. At the same time, in automotive prismatic batteries, town development, and security systems, we emphasized co-creation with partner companies aimed at enhancing our competitiveness. Furthermore, we completed the direction of the loss-making businesses of semiconductor and LCD panel. • In fiscal 2021 and beyond, we will continuously concentrate investments in Core growth businesses while enhancing compet- itiveness through co-creation, as well as setting the direction of low-profit businesses, with the overall aim of breaking away from low-profitability structure. • In July 2020, we made a 20% strategic equity investment in supply chain software company Blue Yonder after reaching an agreement to expand our strategic partnership with that company. By learning the advanced solutions and business models that Blue Yonder provides globally, we will strengthen our solutions capabilities and accelerate our business transformation. Progress of Key Initiatives Implementing strategies for growth (medium and long term) To transform business model and build stable profit pillars for the future (profit growth) Security systems Deploy the knowledge and experience we have gained through our strategic capital alliance with Polaris, which has strong investment power, with our technological strength and cus- tomer base, to create a swift and flexible solutions business Enhancing competitiveness through co-creation (medium term) To create new value with business partners (profitability improvement) Nov. 2019 Improving profitability (short term) To eliminate businesses with loss-making structures and set the direction for low-profit businesses (structural reform) • Announced decision on strategic capital alliance with Polaris Capital Group Co., Ltd. (May 2019) • Completed capital alliance process (November 2019) Semiconductors Partial transfer of discrete semiconductor business TVs Discontinue production in Mexico Apr. 2019 Jul. 2019 • Announced decision on par- tial transfer of discrete semi- conductor business to ROHM Co., Ltd. (April 2019) • Partial transfer completed (December 2019) • Announced decision to end production in Mexico (July 2019) • Currently promoting ongoing structural reforms of entire TV business Panasonic Annual Report 2020Strategies of Functions to Support Our Business 28 Because we cover multiple business fields, we believe achieving sustainable growth requires self-reforms. This means day-to-day reforms of our business port- folio. Accordingly, we regularly monitor all of our businesses while sharing and discussing the status and direction of each business with the Board of Directors and executive officers. Our top management members are united to promote the reforms with speed as the top priority. Eiichi Katayama Managing Executive Officer Chief Strategy Officer (CSO) Jul. 2020 Gemba process Strengthen software and consulting capabilities to promote Gemba process innovation in an integrated manner • Announced decision on strategic investment (20%) in supply chain soft- ware company Blue Yonder (May 2020) • Made strategic investment (July 2020) Town development Create value for the entire town as a whole by combining the mobility services pro- moted by Toyota and “Lifestyle Updates” promoted by Panasonic Automotive prismatic batteries Combine the electric vehicle know-how and manu- facturing capability of Toyota with our high-quality, high-safety battery technologies, mass production capa- bilities, and customer base to develop the No.1 auto- motive prismatic battery in the industry Jan. 2020 Apr. 2020 • Announced decision on joint venture with Toyota Motor Corporation to engage in town development business (May 2019) • Established Prime Life Technologies • Announced decision on joint venture with Toyota Motor Corporation to engage in automo- tive prismatic battery business (January 2019) • Established Prime Planet Energy & Solutions, Corporation (January 2020) Inc. (April 2020) Semiconductors Transfer business to Taiwanese company LCD panels Discontinue in-house production Lighting Transfer shares in European lighting device company Solar panels Wind down U.S. manufacturing in Buffalo Nov. 2019 Nov. 2019 Feb. 2020 Feb. 2020 • Announced decision on trans- fer of semiconductor busi- ness (November 2019) • Business transfer completed (September 2020) • Announced decision to end LCD panel production by 2021 (November 2019) • Announced and completed • Announced decision to end transfer of shares in European lighting device company (February 2020) production at plant in Buffalo, United States (February 2020) • Production suspended (end of June 2020); withdrawal of business scheduled (end of September 2020) Panasonic Annual Report 202029 Strategies of Functions to Support Our Business Message from the CTO/CMO, and Technology Introduction Supporting next-generation growth through innovation and rapid commercialization, and contributing to the realization of a sustainable society Yoshiyuki Miyabe Senior Managing Executive Officer Chief Technology Officer (CTO) Chief Manufacturing Officer (CMO) R&D and innovation strategies At Panasonic, we are engaged in R&D and strategies that create innovation with an eye to the future so that we can keep contributing to “A Better Life” and “A Better World” through our business activities. Looking at the business environment that envelops the Company, the spread of novel coronavirus disease (COVID-19) in 2020 had an enormous impact worldwide, which in turn triggered the rapid adoption of measures in the virtual world, such as teleworking, online learning, and remote medical care. The evolution of digital technol- ogy is currently having a profound effect on the real world and we continue to carry out our own historic changes and create innovation with the goal of turning the unprec- edented challenges brought on by COVID-19 into the cor- nerstone of our development. The Science and Technology Basic Plan drafted by the Cabinet Office of Japan calls for “Society 5.0,” a new future society that Japan should aspire to. The concept incorporates IoT, robots, artificial intelligence (AI), and other cutting-edge technologies to provide goods and services that meticulously address a diverse range of needs, thereby aiming to realize a society that balances economic development with solutions to the issues it faces. Digitalization and the uptake of IoT is taking place in a multitude of fields as the world we live in rapidly transitions from an industrial society to an informa- tion society, and then finally to a super-smart society advo- cated for by Society 5.0. We expect these changes in society to gather increased momentum up ahead as a result of the spread of COVID-19. To survive when faced with dramatic change, we must transform our overall business process so that we remain in step with the times. Previously with mass production, prod- ucts became independent of their manufacturers as soon as they were shipped from the factory. However, in the era of IoT, where all kinds of things are connected to the Internet, we will be able to continue offering contributions by main- taining the connection between manufacturer and customer through products and services even after shipping. To this end, simply aiming to have most of our customers feel completely satisfied when providing a product or service is unlikely to be good enough. We feel that we must offer ways to update these products and services while they are still being used so that they become the “most suitable” for each and every customer. In a sense, this is an attempt to rebuild the traditional bonds between a neighborhood store and its community in a way that the current times demand. By moving quickly to build and expand the software-hard- ware integrated business model unique to the manufacturing industry, we will aim to leverage our broad-ranging techno- logical and manufacturing capabilities accumulated thus far to create value for our customers. On top of this, we will also need to drastically change our approach to product quality so that it aligns with our business process. If we are to provide updates to products and ser- vices after they have been sold and delivered to customers, we will most likely need to continuously meet the after-sales requests of customers with a level of quality that exceeds that at the time of original delivery. We intend to steadily work on building such a system going forward. In addition, we will be required to change the very way we engage in technological development. In times when our target customers were the general public, we were Panasonic Annual Report 2020 Strategies of Functions to Support Our Business 30 expected to have the technology to mass produce “per- fect” products. However, in the age of IoT it is possible to target a “specified and large number” of customers, so in order to reach out to a certain customer segment and deliver value, having a framework that is conducive to speed and co-creation with external partners will be paramount. In other words, we must reinvent our tech- nological development and manufacturing processes. Demanding perfection from engineers from the outset, as was the case in the past, actually impeded innova- tion because of the restrictions they had to work under. To foster a culture that is always innovative, we must be ready to purposefully allow “imperfection” going forward. For example, if we quickly release a trial product to our customers, we could then go about further improving it together with customers. In 2017 we established a Business Innovation Division and since then we have pushed ahead on creating a culture of innovation by setting up flexible and cross-sectional orga- nizational units. Then in 2020 we set up a Lifestyle Business Strategy Division under the direct control of Panasonic Headquarters with the aim of creating a forward-thinking, user-oriented services businesses. Possessing business strategy and corporate management know-how, as well as Company-wide, cross-sectional collaboration functions for technologies and products, this Division has in place a struc- ture capable of pursuing the launch of new businesses. Under the umbrella of the Innovation Promotion Sector we established a Technology Division. This Division brings together the departments each tasked with technologi- cal development of software as well as devices and other hardware. Also, the Division will aim to deliver ongoing updates in conjunction with our Lifestyle Foundational Technology Center, which is responsible for develop- ing the technological frameworks and systems geared towards improving software. To go into more detail, the Division will continue to focus mainly on AI-driven inno- vation in digital technology, and innovation in materials development, the sharpening of the competitive edge of devices, and the development of sensing technologies, robotics, and software, which meet customer needs. In this way, it will support, from a technological standpoint, our Gemba (operational frontlines) process and other ini- tiatives to expand the contributions of our products and services. Furthermore, we have newly established an Energy Business Development Office to take charge of creating new businesses centering on sources of energy that contribute to the attainment of sustainable growth. This office will look to undertake projects on a Company- wide and cross-sectional basis. We will advance our initiatives for technological develop- ment and manufacturing to the next phase—namely, giving shape to “Lifestyle Updates” and stregthening our software business, and support the growth of next generation busi- nesses through innovation and rapid commercialization. R&D Outlook Our brand slogan, “A Better Life, A Better World,” rep- resents what we think to be our mission in society; namely, creating a better life and contributing to the hap- piness of people around the world, to the development Bring “Updates” to Individual’s Lifestyle and Society Autonomous Driving/Solutions Energy Optimizations Bringing inspiration to everyday life Next-Generation Stores and Facilities Spending everyday life Spending everyday life actively and freely actively and freely Everyday life starts here Integrating external Integrating external services into everyday life services into everyday life Improving Plant and Logistics Efficiency Please refer to “Technology & Design” on our website. https://www.panasonic.com/global/corporate/technology-design/vision.html Panasonic Annual Report 2020 31 Strategies of Functions to Support Our Business Message from the CTO/CMO, and Technology Introduction Technological and manufacturing capabilities accumulated in consumer electronics Since its establishment as a manufacturer of wiring equipment in 1918, Panasonic has continued to expand the scope of its business operations, mainly in the area of consumer electronics. Our major strengths are the wide-ranging technological capabilities and know-how accumulated and refined through manufacturing that is always conscious of our customers. We have produced a multitude of products that make society better and more convenient by skillfully combin- ing and amalgamating advanced technologies in a wide variety of fields, from visual/imaging and audio/voice to mechatronics (mechanisms), materials/devices, and even energy. We cannot, however, produce superior products through technological capabilities alone. Cutting-edge manufacturing capabilities are indispensable in the utili- zation of technology for improving performance, quality and usability. For instance, know-how relating to coating, molding, measurement, mounting, machine processing, control, CAE (simulation) and quality control, as well as the adjustment and integration of technologies that inter- connect these processes. These manufacturing capa- bilities are another major strength that Panasonic has cultivated, and their importance will remain unchanged even in the era of AI, IoT, and robots. At Panasonic we have two key strengths: technolog- ical capabilities and manufacturing capabilities. The for- mer spans a wide range of fields, while the latter enables us to make products in a reliable fashion. By leveraging these capabilities, we intend to promote innovation and create new businesses that offer the “most suitable” products and services to each and every customer. of society, and to the future of the globe. This thinking is also consistent with our approach to the development of technology, which is why we are formulating a course of action for R&D that is focused on future businesses so we can contribute to a better life and better world and continually create technology that brings “Updates” to individual’s lifestyle and society. We have identified the following three key areas in which we will rise to the challenge of continuing to pro- vide contributions, or in other words, bringing “Updates” to individual’s lifestyle and society, by further evolving the technologies we have honed thus far and combining them with AI and other digital technologies: (1) home— the foundation of all lifestyles; (2) mobility—concerning the movement of people and goods; and (3) business— stores, facilities, plants, etc. which support people’s lifestyles. Contributing to the realization of sustainable society The industrial societies that developed as a result of the industrial revolution provided the world with material wealth and dramatically improved people’s livelihoods, but at the same time they seriously affected the global environment. We believe it is also our mission, in terms of technological development, to use technology to find solutions to the detrimental effects that technology has brought on the environment. Not only do we adopt mea- sures to conserve energy in our own operations, but we have been engaged in the business of mainly fuel cells and storage batteries, which contribute greatly to the electrification of vehicles. Up ahead, we will work towards realizing the Panasonic Environment Vision 2050 (Please refer to “Message from the Environmental Compliance Administrator.”), which mainly outlines our response to climate change, by designing energy-saving products in order to reduce the amount of energy used, by refining battery technology and developing hydrogen energy tech- nology, to further increase the energy created and its effi- cient usage. We are establishing global partnerships with each supplier around the world. We will aim to establish fair, impartial, and sustainable supply chains by sharing with suppliers our values pertaining to not just economic aspect, but also the environment, CSR, and relationship with society. (Please refer to “CSR Procurement.”) Panasonic Annual Report 2020Strategies of Functions to Support Our Business 32 Examples of products that have improved Panasonic’s technological capabilities and manufacturing capabilities Various technological capabilities we have hitherto honed and developed in mainly visual, audio, and optical fields 1927 Launches National Lamp 1950 Launches Company’s first car radio Visual/Imaging Audio/Voice Light 1952 Company’s first black & white TV 1958 Launches Company’s first household tape recorder Connectivity/ Communications Heat (Thermal Control) Energy 1961 Launches first Matsushita home 1963 Launches “National Hi-Top,” world’s longest-lasting dry cell battery Mechatronics (Mechanisms) Materials/ Devices IoT, AI, Usability 1968 Develops first “Panasert” automated resistor mounting machine 1978 Launches Panasonic’s first compact office computer (PC) Manufacturing capabilities in mainly coating, molding, measurement, and mounting processes that produce reliable and safe products 1988 Launches Panasonic’s first electronic still camera 1996 Launches industry’s first digital mobile phone weighing less than 100 grams 2010 Begins mass production of HEV lithium-ion batteries 2017 Develops facial recognition gate, put into operation at Tokyo International Airport Coating Molding Measurement Mounting Machine Processing Control CAE (Simulation) Quality Panasonic Annual Report 202033 Strategies of Functions to Support Our Business Message from the CTO/CMO, and Technology Introduction Technology Introduction Achieving a safe and secure society in the IoT era by enhancing industry-leading Cybersecurity technology Panasonic has led many aspects of security technology for more than 30 years, including encryption, authentica- tion, and tamper resistance to prevent hacking of audio visual products and connected appliances. In the era of the Internet of Things (IoT), Cybersecurity has rapidly grown in importance as a way of safeguarding PC and IT systems. We are evolving our security technol- ogy further in the IoT Cybersecurity field for application in factories, buildings, automotive solutions, and homes. Growing threat of cyber-attacks The number of observed cyber-attacks are increasing and half of such attacks targeted IoT devices in 2019 (see figure below). The World Economic Forum pub- lished its “The Global Risks Report 2019,” highlighting cyber-attacks against key infrastructure and data fraud/ theft as “global risks” likely to cause serious damage throughout the world in the next decade. Under such circumstances, we are also anticipating a greater Cybersecurity risk in our business area. For example, in the smart factory and smart building area, network-based operations heighten Cybersecurity risk. In the automotive area, connected vehicles and driving assistance systems, including ADAS functionality, con- tribute to fewer traffic accidents, however, their vulner- abilities allow unauthorized remote operations, which can lead to recalls. These types of cars require security countermeasures in our business area. Panasonic Cybersecurity initiatives For more than 30 years, Panasonic has led many aspects of security technology, including encryption, authentica- tion, and tamper resistance to prevent hacking of audio visual products and connected appliances. Recently, Panasonic has focused more on IoT Cybersecurity technology such as connected factories, buildings, automotive solutions, and homes. This technol- ogy monitors data flow over networks to judge abnormal behavior as a cyber-attack by utilizing cutting-edge AI, and prevents not only known attacks, but also unknown attacks. Number of observed cyber-attacks by NICTER’s darknet sensor* Breakdown of observed cyber-attacks by NICTER’s darknet sensor 327.9 Other (other than the top 30 ports) 37.4% Attacks targeting IoT equipment (web cameras, routers, etc.) 48.8% 212.1 150.4 128.1 2019 Packets (billions) 350 300 250 200 150 100 50 0 54.5 25.7 2014 2015 2016 2017 2018 2019 * NICTER (Network Incident analysis Center for Tactical Emergency Response) is a network for monitoring cyber-attacks, operated by the National Institute of Information and Communications Technology (NICT) Source: Cybersecurity 2019, Cybersecurity Strategic Headquarters of the Japanese government Attacks targeting databases 1%, and others Attacks targeting encrypted assets 2% Attacks targeting Windows OS 9% Panasonic Annual Report 2020 Strategies of Functions to Support Our Business 34 We are currently conducting proof of concept (PoC) on multiple fronts to analyze huge data logs and to detect abnormalities. Our incident response team demonstrates the capability to discover security holes before attacks occur and minimize damages even if an incident has occurred in the PoC. We are moving towards the commercialization of IoT Cybersecurity technology by improving capabilities through these PoCs with Mori Building Co., Ltd. and Tokyo Tatemono Co., Ltd. in smart buildings and remote automotive monitoring field trials with mobility partners. Highly recognized security technology Panasonic Cybersecurity technology has been highly recognized in the industry. We presented our research achievements at the world leading automotive security conference “escar” and the ICS security conference “S4” in 2015, 2017, and 2019. In 2020, our research was pre- sented at “Black Hat,” the most prominent Cybersecurity conference since 1997. These achievements show that Panasonic commands the leading position in the Cybersecurity industry. Panasonic aims to provide “Lifestyle Updates” that deliver the best option to every customer by continu- ously improving our products and services after sale. We position Cybersecurity technology as a core technology that supports our “Lifestyle Updates” in many business areas such as factories, buildings, automotive solutions, and homes. This technology is not only applied to our cur- rent products or services, but also provides innovative Cybersecurity solutions to customers, such as “security consulting services,” “security monitoring services,” and “intrusion detection software,” which contribute to a safe and secure society in the era of IoT. Panasonic initiatives in Cybersecurity Solutions Accomplishments in security technologies AV Products ICT Devices HEMS Encryption, authentication, tamper resistance technology Security technologies being enhanced in anticipation of the IoT era Technologies for detecting known attacks Technologies for detecting unknown attacks Artificial intelligence (AI) Continuously updated IoT Cybersecurity Solutions • Security consulting • Security monitoring services • Intrusion detection software Monitor Update Factories Automobiles Buildings Homes Protect Panasonic Annual Report 2020 35 Strategies of Functions to Support Our Business Message from the CHRO “Become the Best Place to Work” where diverse talents work at their best Shigeki Mishima Executive Officer Chief Human Resources Officer (CHRO) “Develop people before making products.” That is what Panasonic founder Konosuke Matsushita used to say when expressing his views about human resources. This very philosophy underpins Panasonic’s people-oriented approach, and based on this thinking, we believe it is our mission to spearhead business challenges through the development of people, organizations, and corporate culture. To this end, and as part of our human resources strategies, we aim to “Become the Best Place to Work” where diverse talents work at their best with the greater goal of realizing our brand slogan “A Better Life, A Better World.” The environment surrounding human resources and the type of employees we seek to develop The environment surrounding human resources has changed dramatically in recent years. One factor behind this change is the remarkable evolution of technology capable of replac- ing labor, such as AI and robotics, in response to the antic- ipated worldwide decline in the working-age population as a percentage of overall population. Furthermore, an era in which more people will likely live to the age of 100 is fast approaching with life expectancies in mainly developed coun- tries continuing to increase. As such, prolonged careers and diversified personal values toward working are constantly progressing. And these environmental changes have inten- sified all at once as a result of the COVID-19. As we respond to such changes and adopt the right human resources strategy required for this new age, we must also successfully deploy a business strategy aimed at transforming our business model from one traditionally cen- tered on products to one that delivers “Lifestyle Updates” and shifts “from hardware to experience.” Accordingly, we believe the type of employees required in this new era are those that can achieve higher levels of self-sustaining growth and fully maximize their wide-rang- ing capabilities. In order to nurture such human talents, the Company must provide an environment in which each indi- vidual employee can play an active role. This kind of relation- ship between the Company and its employees is the source of corporate competitiveness and I believe it enables us to continually deliver new value to society. Human resources strategies linked to our business strategy At Panasonic we are currently driving forward a business strategy aimed at transforming our business model into one that delivers “Lifestyle Updates” and shifts “from hardware to experience.” I believe autonomous management holds the key to the success of this strategy, which will enable Panasonic—a conglomerate of multiple businesses—to generate synergies between various operations and achieve growth on a global scale by addressing the needs of each industry. To propel a business strategy based on this kind of auton- omous management, I believe we must also focus on auton- omy in our human resources strategies too. That means moving away from our approach that up until now was cen- tered on the combination of “Panasonic Corporation” and “Japan,” to focus more on “business-based perspectives” and “global regions.” As such, we need to formulate and exe- cute competitive and unique human resources strategies for each business and region. Accordingly, we intend to transfer responsibilities to and increase empowerment in each oper- ating company concerning human resources with our transi- tion to a holding company system in April 2022 and promote human resources strategies best suited to their respective business strategies. On the other hand, Panasonic Holdings Corporation will take on the role of vigorously supporting the execution of human resources strategies to develop man- agement executives, ensuring Group and global corporate governance, and having Professional Services Corporation enhance its consulting capabilities for strategies, measures, and management of systems, as well as shared services functions. Panasonic Annual Report 2020Strategies of Functions to Support Our Business 36 Appointing and developing management executives—Business execution structure and development of management executives As for the appointment of heads of business, we are moving away from the conventional idea of selecting a leader from existing successor candidates and shifting to the idea of nom- inating a person that is most qualified for the position (the right person for the right job). In other words, we are aiming to boost competitiveness by appointing the most suitable people required in each business—all of which continue to become more specialized and sharpened. We are furthering the development of management exec- utives that make up our portfolio of talents for heads of busi- ness and each job function by discovering and hiring a diverse pool of employees regardless of age, experience, national- ity, or gender, and offering them the opportunity to handle tough assignments*1. For example, taking responsibility for PL, BS, and CF in specific businesses. Regarding training for executive candidates, we are cur- rently preparing the most appropriate programs from within and outside the Company to suit the circumstances of partici- pants and meet their individual needs. In fiscal 2021 we com- pletely revamped the training curriculum and introduced such programs as LEL (Launching Executive Leaders)*2 and CEL (Creating Executive Leaders)*3, both of which place a par- ticular emphasis on improving thoughts and behaviors that lead to change. We are aggressively promoting the develop- ment of management executives mainly by stimulating their aspirations as management executives and offering them the chance to acquire necessary management literacy via numer- ous learning opportunities and friendly competition with par- ticipants from various business fields. As part of the process of appointment and development of management executives with this approach, in October 2019 we undertook a review of our business execution structure in order to realize a business structure that can resiliently respond to volatile changes in the business envi- ronment. This review aimed to clarify management roles and responsibilities by reorganizing the structure into two groups: executive officers tasked with leading the Group’s business structural reforms from the perspective of Group-wide opti- mization; and a business execution layer that will execute the transformation of individual businesses with the aim of strengthening their operations. Furthermore, for the business execution layer, a core part of Panasonic’s business management, tasked with improving profitability and generating future competitive advantage in their respective businesses, in fiscal 2021 we introduced a compensation system that rewards results, demands clearer accountability, and further encourages them to take up the challenge of instigating change for the future. Human resources development initiatives As for Group-wide human resources strategies, in addition to our business execution structure and development of man- agement executives, we offer support to employees taking on challenges, learning, and growing, as well as measures aimed at creating safe and secure workplaces. Regarding our support for employees taking on challenges, learning, and growing, we continue to develop an interactive personnel management called “A Better Dialogue” to bring out the enthusiasm in each and every employee so they can deliver results. At the same time, we are introducing a system whereby employees can apply for new postings within the Company and expand their areas of activity, and we are push- ing ahead with concrete initiatives on organizational develop- ment and diversity and inclusion with the aim of maximizing the potential of individuals and organizations. In creating safe and secure workplaces and guided by our respect for human rights in line with our management philos- ophy, we are once again reviewing our working styles and personnel management in the midst of the COVID-19. At the same time, we are making every effort to abide by compli- ance guidelines. *1 Tough assignment Taking on a role that comes with a responsibility and is a completely dif- ferent and tough experience for the individual. For example, a position that involves responsibility for PL, BS, and CF, a position that involves being in charge of planning and launching a new business, or a position that involves leading structural reforms. *2 Launching Executive Leaders (LEL) Training that aims to provide management executives with the finishing touches and firm resolve to comprehensively leverage their competency as thoughts and behaviors that lead to change and put management principles into action. *3 Creating Executive Leaders (CEL) Training that aims to prepare management executives by equipping them with self-awareness of the management skills to realize a customer focus, strategic mindset, and reformation by leveraging management literacy. Reforming the business management structure • Create a flexible and robust business structure in the drastically changing business environment • Work to increase motivation for business transform with management suited to roles Outside the Company Executive Officers Business execution layer New structure CEO Team Heads of Business (HOB) Candidates Development stage (Experiences where existing knowledge cannot help/ Decision making) Transparency in compensation × The right person for the right job × Selection of junior generation Previous Executive Officers Employees System for developing management executives By providing a range of job experiences to the carefully chosen diverse development targets, Panasonic will create management executive candidates with diverse role traits and perspectives. Assignment Heads of Business assigned based on the right-person-for-the- right-job policy will grow and transform their business Review Talent pool Create a pool of management executive candidates with diverse role traits Promote career development PDCA cycles optimized for individuals Development stage Identification and acquisition of diverse talents Targets will be carefully selected and reviewed Diverse job experiences Change role/position within five years Panasonic Annual Report 2020 37 ESG as Our Management Foundation ESG Initiatives (Opportunities and Social Responsibilities) Since its foundation, Panasonic has endeavored to contribute to the progress and development of society and the well-being of people through its business activities based on the thinking that as a public entity of society the Company must grow together with society and its stakeholders. Konosuke Matsushita, the founder of Panasonic, listed the following three prin- ciples when talking about corporate social responsibility: (1) to contribute to the development of society and people’s happi- ness through our core business activities; (2) to generate fair profits from our business activities and return those profits to the Main opportunities and social responsibilities Opportunity Items that contribute to the enhancement of corporate value Social responsibility Items that minimize the risk of damage to corporate value Related information This Annual Report Other Opportunity Contribute to growth in businesses related to the environment and energy with the use of clean technology, such as energy-saving, battery, and hydrogen technologies Message from the Environmental Compliance Administrator (P55) Sustainability Data Book Focusing on energy and resources as a climate change measure Energy Social responsibility Combat climate change, including more stringent regulations mainly on energy efficiency Resources Social responsibility Promote manufacturing to achieve a recycling-oriented society, including the recy- cling of factory waste Human resources Opportunity Contribute to business model transformation and the creation of new businesses mainly through the development of management executives, the development and the utilization of a diverse pool of human resources, and the creation of organizations Corporate citizenship activities Opportunity Work on solving social issues in a way that supplements Panasonic’s main business, and contribute to business growth as well by enhancing brand value and tapping new markets Human rights and occupational health and safety Social responsibility Abide by all labor laws and regulations, respect basic human rights, including the pro- hibition of forced labor, child labor, and all forms of discrimination, and develop safe and comfortable workplace environments CSR procurement Social responsibility Establish sustainable supply chains by working together with suppliers to promote pro- curement activities that fulfill social responsibilities concerning mainly legal compliance, human rights and labor issues, health and safety, and global environmental conservation Product quality Social responsibility Improve product quality and ensure product safety, observe product quality compli- ance, and engage in optimal manufacturing for every product Compliance Social responsibility Establish a global infrastructure and foster a compliance culture, aimed mainly at preventing the violation of competition laws and implementing the anti-bribery and anti-corruption policy, and promote the use of a global hotline Risk management Social responsibility Identify key risks of the entire Group from among those that may affect business man- agement, and strengthen Company-wide risk management through a process of eval- uation and progress monitoring of the countermeasures by the Board of Directors and making improvement based on that Opportunity Support timely and decisive decisions based on the decision-making functions of the Board of Directors, and accelerate the development of mainstay businesses and port- folio reform through flexible investments and appropriate risk taking Corporate governance Social responsibility Minimize erroneous investment decisions and other risks by conducting objective and multi-faceted examinations based on the supervisory functions of the Board of Directors Environment: Policy Website Initiatives for SDGs Sustainability Data Book System for the Promotion of CSR Activities Human Resources Development and Promotion of Diversity Respect for Human Rights Occupational Health and Safety Responsible Supply Chain Raising Product Quality Levels and Ensuring Product Safety Fair Operating Practices Risk Management Website Corporate Citizenship Activities Initiatives for SDGs Corporate Governance Report Initiatives towards the Environment (P56-P58) Environmental sustainability management / Energy-related initiatives / Resources-related initiatives / Response to TCFD Message from the CHRO (P35-P36) Become the Best Place to Work where diverse talents work at their best Human Resources Initiatives (P59-P60) safe and secure workplaces CSR Procurement (P61-P62) Supporting employee taking on challenges, learning, and growing / Creating Procurement policy / CSR self-assessments / Responsible minerals procure- ment / Environmental initiatives Message from the Chairman of the Board (P41-P42) Practicing our management philosophy based on ESG to achieve sustainable growth and enhance corporate value Messages from Outside Directors (P43-P46) Directors, Audit & Supervisory Board Members, and Executive Officers (P47-P48) Corporate Governance Structure and Initiatives (P49-P54) The Company considers corporate governance to be a key foundation for increas- ing its corporate value and will continue strengthening governance, including enhancing the discussion of business strategies by the Board of Directors E ( e n v i r o n m e n t ) S ( s o c i e t y ) G ( g o v e r n a n c e ) Panasonic Annual Report 2020 Main opportunities and social responsibilities Opportunity Contribute to growth in businesses related to the environment and energy with the use of clean technology, such as energy-saving, battery, and hydrogen technologies Energy Social Combat climate change, including more stringent regulations mainly on energy responsibility efficiency Resources responsibility cling of factory waste Social Promote manufacturing to achieve a recycling-oriented society, including the recy- Human resources Opportunity mainly through the development of management executives, the development and the utilization of a diverse pool of human resources, and the creation of organizations Contribute to business model transformation and the creation of new businesses Corporate citizenship activities markets Opportunity and contribute to business growth as well by enhancing brand value and tapping new Work on solving social issues in a way that supplements Panasonic’s main business, Human rights and occupational health and safety Social responsibility Abide by all labor laws and regulations, respect basic human rights, including the pro- hibition of forced labor, child labor, and all forms of discrimination, and develop safe and comfortable workplace environments CSR procurement Social responsibility Establish sustainable supply chains by working together with suppliers to promote pro- curement activities that fulfill social responsibilities concerning mainly legal compliance, human rights and labor issues, health and safety, and global environmental conservation Product quality Social responsibility Improve product quality and ensure product safety, observe product quality compli- ance, and engage in optimal manufacturing for every product Compliance Social responsibility Establish a global infrastructure and foster a compliance culture, aimed mainly at preventing the violation of competition laws and implementing the anti-bribery and anti-corruption policy, and promote the use of a global hotline Risk management Social responsibility agement, and strengthen Company-wide risk management through a process of eval- uation and progress monitoring of the countermeasures by the Board of Directors and Identify key risks of the entire Group from among those that may affect business man- making improvement based on that Opportunity Board of Directors, and accelerate the development of mainstay businesses and port- Support timely and decisive decisions based on the decision-making functions of the folio reform through flexible investments and appropriate risk taking Corporate governance Social responsibility Directors Minimize erroneous investment decisions and other risks by conducting objective and multi-faceted examinations based on the supervisory functions of the Board of ESG as Our Management Foundation 38 nation and its people in various ways; and (3) to make every process of our corporate activities support the goal of a healthy society. These principles now serve as the foundation of our ESG initiatives (Please refer to “Management Philosophy.”) We consider ESG to be one of our management foundations that underpin the Company’s business activities and we will therefore always aim to achieve sustainable increases in corporate value by identifying business opportunities and fulfilling our social responsibilities. Related information This Annual Report Other Message from the Environmental Compliance Administrator (P55) Sustainability Data Book Focusing on energy and resources as a climate change measure Initiatives towards the Environment (P56-P58) Environmental sustainability management / Energy-related initiatives / Resources-related initiatives / Response to TCFD Environment: Policy Website Initiatives for SDGs Sustainability Data Book System for the Promotion of CSR Activities Human Resources Development and Promotion of Diversity Respect for Human Rights Occupational Health and Safety Responsible Supply Chain Raising Product Quality Levels and Ensuring Product Safety Fair Operating Practices Risk Management Website Corporate Citizenship Activities Initiatives for SDGs Corporate Governance Report Message from the CHRO (P35-P36) Become the Best Place to Work where diverse talents work at their best Human Resources Initiatives (P59-P60) Supporting employee taking on challenges, learning, and growing / Creating safe and secure workplaces CSR Procurement (P61-P62) Procurement policy / CSR self-assessments / Responsible minerals procure- ment / Environmental initiatives Message from the Chairman of the Board (P41-P42) Practicing our management philosophy based on ESG to achieve sustainable growth and enhance corporate value Messages from Outside Directors (P43-P46) Directors, Audit & Supervisory Board Members, and Executive Officers (P47-P48) Corporate Governance Structure and Initiatives (P49-P54) The Company considers corporate governance to be a key foundation for increas- ing its corporate value and will continue strengthening governance, including enhancing the discussion of business strategies by the Board of Directors Panasonic Annual Report 202039 ESG as Our Management Foundation ESG Highlights CO2 Emissions in Production Activities and CO2 Emissions per Basic Unit (Million tons) 5.0 4.0 3.0 2.0 1.0 0 69% 2.23 (%) 100 80 60 40 20 0 3/’16 3/’17 3/’18 3/’19 3/’20 Volume of CO2 emissions (left scale) CO2 emissions per basic unit (Calculated based on the fiscal year ended March 2014) (right scale) Amount of In-house Renewable Energy Adoption (10,000 MWh) 4.0 3.0 2.0 1.0 0 3.2 3/’17 3/’18 3/’19 3/’20 Number of Women in Managerial Positions/ Percentage of Women in Positions of Responsibility (Persons) 600 400 200 0 573 8.0% (%) 9.0 6.0 3.0 0 4/’16 4/’17 4/’18 4/’19 4/’20 (as of April 30 of each year) Number of women in managerial positions (left scale) Percentage of women in positions of responsibility (right scale) Note: Figures are based on the persons in managerial positions (section leader or higher) and persons in positions of responsibility (including chief and assistant chief positions) at Panasonic Corporation and its key domestic Group companies. Number of Board Members/Outside Director Ratio (Persons) 20 16 12 8 4 0 46.2% 6 7 (%) 50 40 30 20 10 0 6/’16 6/’17 6/’18 6/’19 6/’20 (as of June 30 of each year) Outside directors (left scale) Inside directors (left scale) Ratio of outside directors (right scale) At its factories, Panasonic is push- ing ahead with the promotion of zero-CO2 model factories and work- ing to increase the use of renewable energy. Total CO2 emissions in this fis- cal year amounted to 2.23 million tons, while the volume of emissions per net sales had decreased 31% compared to the fiscal year ended March 2014. * In the fiscal year ended March 2020 we reviewed the CO2 emission factor for electricity for previ- ous fiscal years. For details: https://www.panasonic.com/global/corporate/ sustainability/eco/co2/site.html Owing to the solar photovoltaic sys- tems newly adopted at our business sites in China and Japan and the com- mencement of full-scale operations of existing photovoltaic systems, the amount of in-house renewable energy adoption in this fiscal year for the entire Company reached 32,000 MWh. For details: https://www.panasonic.com/global/corporate/ sustainability/eco/co2/site.html Promoting diversity is one of our key management initiatives and we are especially cognizant of the fact that in Japan there is a pressing need to appoint more women to senior man- agement and decision-making posi- tions. As a result of various initiatives, the number of women in manage- rial positions and the percentage of women in positions of responsibility at Panasonic is rising year on year. For details: https://www.panasonic.com/global/corporate/ sustainability/pdf/sdb2020e-06.pdf In fiscal 2017 we overhauled the structure of the Board of Directors so as to enhance its objectivity and neutrality and strengthen its supervi- sory function. As of June 30, 2020, the Board comprises 13 directors, 46.2% of which hail from outside of the Company. For details: Please refer to “Corporate Governance Structure and Initiatives.” Panasonic Annual Report 2020 External Recognition (Fiscal Year Ended March 2020) ESG as Our Management Foundation 40 Panasonic’s ESG initiatives implemented thus far have been highly rated by global indices and credit rating agencies. • Selected as a constituent stock in multiple ESG investment indices •FTSE4Good Index Series (20 consecutive years) •MSCI ESG Leaders Indexes (10 consecutive years) •FTSE Blossom Japan Index (4 consecutive years) •MSCI Japan ESG Select Leaders Index (4 consecutive years) • Selected as a constituent stock since 2018 in the environment-focused S&P/JPX Carbon Efficient Index • Awarded the highest Gold rating for five consecutive years by EcoVadis in its assessment of supplier sustain- 3/’16 3/’17 3/’18 3/’19 3/’20 ability performance Volume of CO2 emissions (left scale) CO2 emissions per basic unit (Calculated based on the fiscal year ended March 2014) (right scale) We have also been selected as a constituent stock since 2014 in the JPX-Nikkei Index 400, a stock market index compris- ing attractive companies for investors that meet the requirements of global investment standards, including the efficient use of capital and investor-focused management perspectives. THE INCLUSION OF PANASONIC 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 PANASONIC 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. (Million tons) 5.0 4.0 3.0 2.0 1.0 0 4.0 3.0 2.0 1.0 0 (10,000 MWh) (Persons) 600 400 200 0 (Persons) 20 16 12 8 4 0 69% 2.23 3.2 573 8.0% 46.2% 6 7 (%) 100 80 60 40 20 0 (%) 9.0 6.0 3.0 0 (%) 50 40 30 20 10 0 3/’17 3/’18 3/’19 3/’20 4/’16 4/’17 4/’18 4/’19 4/’20 (as of April 30 of each year) Number of women in managerial positions (left scale) Percentage of women in positions of responsibility (right scale) Note: Figures are based on the persons in managerial positions (section leader or higher) and persons in positions of responsibility (including chief and assistant chief positions) at Panasonic Corporation and its key domestic Group companies. 6/’16 6/’17 6/’18 6/’19 6/’20 (as of June 30 of each year) Outside directors (left scale) Inside directors (left scale) Ratio of outside directors (right scale) Panasonic Annual Report 2020 41 ESG as Our Management Foundation Message from the Chairman of the Board Practicing our management philosophy based on ESG to achieve sustainable growth and enhance corporate value Shusaku Nagae Director, Chairman of the Board Solving social issues and contributing to the further development of society through our business activities Continuing to reform governance and improving the effectiveness of the Board of Directors For more than 100 years since its founding, Panasonic has helped solve issues and contributed to the development of people’s lives and society through business activities based on the philosophy that “a company is a public entity of soci- ety.” We are fulfilling our role as a corporation and endeav- oring to enhance corporate value by continuing to provide value to customers, shareholders, and other stakeholders. In recent years, the Sustainable Development Goals (SDGs) have garnered a lot of attention as a blueprint for the international community to tackle issues faced by society with the goal of realizing a sustainable world. Panasonic has long contributed to the achievement of the SDGs by putting our management philosophy into practice through our busi- ness activities. We believe the social challenges highlighted by the SDGs present opportunities for us to create new busi- nesses and be innovative, so with this in mind, we will push ahead with initiatives that aim to deliver solutions, including those that involve co-creation with other companies. Moreover, ESG (environmental, social, and governance) has increasingly gained attention from the capital markets as one factor used to assess corporate value and has now become a key indicator in the evaluation of companies. With governance-focused ESG underpinning our corporate man- agement, we are advancing our initiatives on improving the effectiveness of the Board of Directors, reforming our orga- nizational culture, and tackling issues concerning the global environment. Moving forward, we will aim to achieve sus- tainable growth and enhance corporate value by putting into practice our management philosophy, which we have posi- tioned as one platform that underpins the Company’s busi- ness activities. Thus far Panasonic has reformed its corporate governance on multiple occasions in order to continuously engage in highly transparent and fair business activities. In fiscal 2016 we estab- lished the optional Nomination and Compensation Advisory Committee. In response to inquiries from, and consult with, the Board of Directors, the Committee monitors the candidates for the CEO successor and considers the candidates for direc- tor, executive officer, and Audit & Supervisory Board mem- ber, and deliberates on the compensation system for directors and executive officers. We have also introduced a system to evaluate the effectiveness of the Board of Directors and every year all members attending Board meetings are required to answer a questionnaire, the results and assessments of which are reported to the Board of Directors. We have taken steps to further increase management agility, transparency, and objec- tivity mainly by having raised the minimum ratio of outside directors to one-third of the total since fiscal 2018 and clarify- ing the roles of directors and executive officers. As part of the effectiveness evaluations of the Board of Directors carried out in fiscal 2020, in addition to the usual questionnaire, we conducted interviews with all directors and Audit & Supervisory Board members based on the advice of a third-party organization. The interviews focused on the ques- tionnaire items that returned low scores or items for which opinions varied. In this way, we are pushing ahead with ini- tiatives geared towards improving the effectiveness of the Board of Directors by mainly clarifying material issues and the measures to address them, and reflecting such measures into Board operation and its agenda. From fiscal 2021 the objectivity and neutrality of the Board has been bolstered by the addition of two more outside directors (from four to six) and the incorpo- ration of even more knowledge, expertise, and diversity. Also, Panasonic Annual Report 2020 ESG as Our Management Foundation 42 as part of our efforts to deepen the understanding of outside directors and outside Audit & Supervisory Board members regarding the Company’s business and develop an environ- ment in which they can play their role, we constantly offer them the opportunities to make visits to our business sites. Panasonic has resolved to transition to a holding company system in April 2022 with the goal of enhancing our business competitiveness from a medium- to long-term perspective. We intend to increase the empowerment of our operating companies to improve their expertise and speed of deci- sion-making. That said, our approach to optimizing gover- nance implemented thus far will remain unchanged and we will continue to undertake reforms aimed at improving the effectiveness of the Board of Directors. Fostering an organizational culture in which our diverse human resources can deploy their talents To achieve sustainable growth, a company must foster an organizational culture in which its employees—the source of value creation—can work comfortably and demonstrate their capabilities. And in order for an organization to leverage col- lective wisdom and strengthen its creativity and competitive- ness, it is imperative that it realizes diversity and inclusion in the workplace, free of discrimination based on gender, age, race, beliefs, or any other personal attributes. At Panasonic, we support these values and we are committed to devel- oping workplace environments where people with differ- ent points of view and knowledge can mingle, respect each other’s values, and have frank discussions. We aim to realize innovation and the creation of new value by letting each and every employee prove themselves as professionals, thereby reinforcing our strengths as an organization. In the midst of the spread of COVID-19 infections, the work style of teleworking from any location has gained trac- tion particularly among indirect department employees, most of whom used to commute to the office. While certain ben- efits have been observed as a direct result of this change in working style, for example, more efficient use of time and improvements in productivity, there have been disadvan- tages, such as communication and workplace management difficulties. Whilst we must strive to improve the develop- ment and management of workplace environments and take greater advantage of the merits of teleworking, our sights should be set on improving the skills and productivity of every employee, maximizing achievements as an organization, and bolstering our competitive edge. At the same time, we will look to actively employ measures geared towards improving and making progress on key employee topics such as perfor- mance assessments, motivation, and health management. Tackling environmental issues with a focus on energy and resources Under the framework of the Paris Agreement, Japan and many other countries aim to realize a carbon-neutral society. Panasonic too, through business growth, is doing what it can to contribute to this goal. As we work towards achieving the Panasonic Environment Vision 2050 formulated in 2017, we are currently advancing initiatives on two key issues: energy and resources. For the former, we aim to create more energy than we consume through to the year 2050 by curbing the amount of energy used in mainly business activities while increasing the amount of energy we create. For the latter, we are working to create circular economy businesses that promote the effective use of resources. For example, shar- ing services and expanding our efforts to recycle and reuse products and parts. In addition, based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), we have identified risks and opportunities stemming from cli- mate change, and we are currently analyzing their impacts and examining what countermeasures are needed. In par- ticular, we anticipate risks associated with the transition to a low-carbon economy—i.e., the loss of sales opportunities on products that fail to meet country standards—and phys- ical risks like impacts on operations at manufacturing sites. We expect the impact of these risks on our businesses to be minor, primarily because we are taking steps to lower our CO2 emissions with the launch of energy-saving and ener- gy-creating products and the rollout of zero-CO2 model fac- tories, alongside other measures such as the formulation of a Business Continuity Plan (BCP) and Business Continuity Management (BCM) Guidelines. Nevertheless, we will con- tinue to monitor the effects of climate change going forward. Given that we do business globally in a wide range of areas, we also consider it important that we play a role in contributing to disaster prevention, mitigation, recovery, and reconstruction in the same way we address environmental issues. Every year we are seeing bigger-than-expected natu- ral disasters causing damages globally. We will look to make use of our solutions and systems and contribute to the real- ization of a safer, more secure society by helping to prevent disasters, minimize damage, and answering the call for help during recovery and reconstruction. Continuing to communicate our medium- to long-term vision and results With the aim of improving profitability and achieving profit growth in the future, we continue to reform our business port- folio and enhance our management structure as part of the Mid-term strategy that started in fiscal 2020. We continue to make steady progress on these initiatives. In November 2020 we announced to transition to a holding company sys- tem (planned, April 2022) to further enhance our business competitiveness and achieve sustainable growth, but our policy of steadily executing the current Mid-term strategy will remain unchanged. For a deeper understanding and support of our investors, I believe it is important that we continuously communicate the Company’s vision for the future, along with the progress and results of the Mid-term strategy. The Board of Directors will fully support these activities. I would like to ask for your kind attention to our initiatives designed to transform the Company. Panasonic Annual Report 2020 43 ESG as Our Management Foundation Messages from Outside Directors Implementing the management philosophy and pursuing business growth by combining quality with speed Michitaka Sawada Outside Director Director, Chair of Kao Corporation. Leading a global company, he has achieved continuous profit growth, and prioritizes ESG-focused man- agement with the goal of realizing a sustainable society. Appointed outside director of Panasonic in June 2020. in place at the Company. The Board of Directors val- ues diversity and its members exchange opinions in a frank and honest manner. The optional Nomination and Compensation Advisory Committee has strengthened its objectivity and transparency. The challenge up ahead is to further leverage this structure. In particular, we will need to discuss in much greater detail on how the Board of Directors should be at the Company’s transition to a hold- ing company system. —What are your expectations of Panasonic? With regards to the management of the Group, I feel that convincing discussions have taken place after corporate activities undertaken thus far were reviewed. There are pros and cons to all systems, but what matters is how they are utilized. I’d like to see the heads of each oper- ating company embrace autonomous management and set their sights on running their respective companies in a way that lets the holding company system thrive. Going back to basics when difficulties arise, or in other words, revisiting Panasonic’s management philosophy, is a valid approach, but the most important thing is that it’s done in a way that is in step with the current times. Panasonic seeks to contribute to society by provid- ing “Lifestyle Updates” through various businesses, but even brilliant businesses continue to change according to the times and the operating environment. To achieve business growth, first and foremostly the Company must prove useful in society. And being able to combine high quality with speed will lead to business growth, but what underpins this is “people.” Every employee should be motivated to serve society and adapt to changes at greater speed. That is what leads to business growth and even greater support of all stakeholders. If this cycle can be repeated, Panasonic can become a company that excels on the world stage and I am confident it has the potential to do so. — For what reasons did you accept the position of outside director at Panasonic and what do you think is your role on the Board of Directors? There were two reasons. The first was to utilize my knowl- edge and experience as a president of a manufacturing company. I believed that the knowledge and experience I’ve gained from a style of management that stresses the importance of a corporate philosophy and emphasizes ESG (environment, social, and governance) from the cus- tomer’s perspective would be a positive for Panasonic’s development and growth. The second reason was to make use of my characteristics as a researcher engaged in all facets of manufacturing. Researchers are good at exam- ining issues intrinsically, so I believed I’d be able to pro- vide advice from this perspective upon decision-making. The Board of Directors has a parent-like role towards the execution side of the business. For instance, its role is to issue a warning when a correction is needed, or encourage the execution side to take on further chal- lenges. As an outside director I hope to fulfil this paren- tal role by monitoring the execution side of the business through a different lens and provide support to ensure the right path is taken. —What is your impression of Panasonic? My impression is a diligent and hardworking company loved by many people, that may not be too efficient at times. This straightforwardness, on the other hand, can also bring an enormous growth potential. So far I’ve vis- ited two of the Company’s business sites, and through factory visits and presentations I've got a sense of how enthusiastic the employees are. If the strategies, initia- tives, and activities that aim to realize the Company’s vision can be smoothly set in motion to align with the goals of that vision, I am sure Panasonic can become a company regarded even more highly. Also, a corporate governance structure has been Panasonic Annual Report 2020ESG as Our Management Foundation 44 Supporting reforms aimed at enhancing corporate value Yuko Kawamoto Outside Director Professor at Waseda University Graduate School. She has served on a number of Japanese government committees for finance, econom- ics, and others, and as an outside director for domestic and over- seas companies. She is a specialist in financial theory and corporate governance. Appointed outside director of Panasonic in June 2020. and corporate culture problems that hamper open dis- cussion, as well as raising cost awareness and executing numerous reforms with a greater focus on speed. Also, given that the Company continues to undertake reforms to place a more suitable structure, I feel that cer- tain activities will need to be carried out up ahead so as to add even more substance to Panasonic’s corporate gover- nance. The Board of Directors possesses corporate strat- egy decision-making functions and supervisory functions, but in addition to the examination of more suitable admin- istration for certain situations and more ideal systems and functions, the Board of Directors should further invigorate discussions and enhance its effectiveness so that it can have more of an impact as a team. —What are your expectations of Panasonic? Under a holding company system, Panasonic aims to trans- fer responsibilities to and increase empowerment in its oper- ating companies, and clarify accountability. I certainly hope that this new structure can reinforce what had been neces- sary. When making the transition to a holding company sys- tem, it will be crucial that Panasonic harnesses its strengths and designs the system in greater detail so that it’s easy to understand even for an outsider. I believe Panasonic can become a company that is more highly valued as long as each operating company earnestly reaches out to its cus- tomers, fully leverages its strengths—namely, brand power, technological capabilities, and know-how—and contributes to solving issues in society with a sense of speed. And even though the Company’s ESG initiatives and com- munication channels still need improving, I feel that these aspects have been assessed favorably to a certain extent by society. Considering that Panasonic possesses credit- worthiness, infrastructure, and plentiful human resources, I believe there to be plenty of room for enhancing its corpo- rate value if it can demonstrate its capabilities as a team. I certainly expect the Company to attach importance to this consciousness and tie it into its future activities. — For what reasons did you accept the position of outside director at Panasonic and what do you think is your role on the Board of Directors? In my career so far I’ve served as an outside director at multiple domestic and overseas companies, and also served on a number of Japanese government committees. I accepted the position because I believed I would be able to draw on my experience and expertise and, as a catalyst for corporate transformation, contribute to the Company’s reforms with the goal of enhancing corporate value. I believe there are two roles as an outside director. One role is to provide awareness to the execution side of the business. I hope to monitor the direction of the Company’s business and provide an awareness to those executing business so they can examine its appropri- ateness. In doing so, I hope to work alongside and look at how much we can enhance corporate value by. The important thing is whether the execution side of the busi- ness can turn this awareness into action. That is where the strength of an organization really lies. My other role is to help immeasurably improve the probability of appointing the most suitable leader who is in step with times to lead the Company. —What is your impression of Panasonic? I feel that Panasonic is a company that possesses techno- logical capabilities and has a lot of talented people, whilst conversations are always intellectual, stimulating, and hon- est. That said, just looking at Panasonic’s business perfor- mance at present, it may be difficult to say the skills of each employee are being fully utilized for the organization. It’s a traditional company with a solid reputation through- out society and its products have a bright and pleasant image, but those strengths should be translating into bet- ter results. I’m hoping that profitability improvement and profit growth can be achieved through a process of elimi- nating practices no longer useful along with organizational Panasonic Annual Report 2020 45 ESG as Our Management Foundation Messages from Outside Directors Yoshinobu Tsutsui Outside Director Hiroko Ota Outside Director About the effectiveness of the Board of Directors I definitely sense that the Board’s effectiveness is improving year on year. In fact, there are two points that symbolize this improvement: (1) the productive discussions that have unfolded this fiscal year regarding how the Group’s structure should be as it makes a transition to a holding company system; and (2) the thoroughgoing deliberation pro- cess undertaken by the Nomination and Compensation Advisory Committee which decides on leadership changes. About the transition to a holding company system I’ve so far participated in discussions about the transition with a supporting stance because I believe it is a significant development that will usher in a new chapter in the his- tory of Panasonic and trigger business portfolio reform and profitability structural reform. What we must focus on under the new system is bold decision-making and restructur- ing of accountability system by the top management of the holding company and of each operating company. To this end, it is vital that functions and roles—which will be essen- tially different from those of the Company’s Board of Directors and the boards of each operating company thus far—are made more sophisticated, transparent, and effective. I will be keeping a close eye on the transition to ensure that tangible and realistic substance will be incorporated into the new holding company system. About ESG ESG is often associated with high expectations for global sustainability, but for corpora- tions there are always some risks involved. To overcome these challenges, more unified ESG information disclosure and action is key. The businesses of each operating com- pany are capable of contributing a great deal to ESG initiatives, therefore an integrated Group approach going forward will demonstrate a stronger commitment to ESG issues and should help strengthen its ability to cope with unforeseen risks. From a long-term perspective, I have high expectations that Panasonic will set its sights on becoming a company that can combine growth performance with ESG assessments. About the effectiveness of the Board of Directors Progress was made on sharing issues with all directors, including outside directors, at Board meetings this fiscal year. For example, we deliberated on the Company’s medium- to long-term strategy, such as its business structure over the next 10 years and the basic structure surrounding Group management, and we exchanged straight- forward, exhaustive opinions about past investments and other management issues. The corporate governance structure continues to be strengthened and all directors ben- efited from more detailed reports on compliance initiatives. As for the multiple candi- dates for the CEO successor selected by the Nomination and Compensation Advisory Committee, I commend the objective and transparent way in which they were chosen through a process of being separately interviewed outside the Committee a number of times by the three outside directors that sit on the Committee. About the transition to a holding company system Employing a holding company system had long been a key option for establishing profit- able growth businesses. We can now say that the Company is in a position to put such a plan into action by realizing cross-value between Divisional Companies and eliminat- ing low-profit businesses. To ensure the success of this system, it is imperative that the Company returns to the starting point of “autonomous management,” ventures to increase empowerment in each business, and clarifies accountability for their business results. And speed is of pivotal importance here, which is why I will be watching closely to make sure that the Company develops its system with a sense of speed during the pre- paratory phase leading up to the transition to a holding company system. About ESG Panasonic was among the first companies to undertake initiatives that address issues of the environment, but given the rapidly growing interest in environmental and social issues worldwide, I expect the Company to ramp up its activities with greater sensitiv- ity and proactively communicate its ESG endeavors to all stakeholders. Panasonic Annual Report 2020ESG as Our Management Foundation 46 Kazuhiko Toyama Outside Director Kunio Noji Outside Director About the effectiveness of the Board of Directors At meetings of the Board of Directors there have been more opportunities to discuss the Company’s structure and basic strategies from a more long-term, in-depth point of view. There have also been more situations to engage in substantial discussion about the Company’s underlying transformation regarding the major direction of medium- to long- term management, which also coincided with the selection of management candidates. About the transition to a holding company system I believe the transition is precisely what is required to facilitate the metabolism of busi- nesses and functions for the overall Group, to enable decision-making at each business level, and in particular, to ensure that major strategic pivots are carried out quickly and decisively. As we increase empowerment in each operating company up ahead, man- agement will need to sit down and discuss how it should go about redefining the role of the holding company’s Board of Directors and how to enhance its effectiveness. Furthermore, we can anticipate that during the transition process the Board will likely come up against various strategic issues and topics that need to be discussed from a fundamental point of view. I therefore believe that in order to enhance the effectiveness of the Board of Directors, we will need to figure out how to set agenda items and con- duct the meetings during that transitional period. About ESG I believe ESG needs to be organized in the following way: (1) areas in which ESG should be integrated into and identified in business processes; and (2) areas that should be invested in or allocated funds from earnings on the assumption of strong earnings capa- bilities. Ever since the founder advocated corporate social responsibility, Panasonic’s business activities have, in a sense, embraced the forward-looking ideas of ESG and the SDGs. The Board of Directors and the execution side of the business must set great value on these basic thoughts and relentlessly and constantly pursue a company, man- agement, and business style that resonates with stronger earnings and ESG initiatives. About the effectiveness of the Board of Directors Since assuming my position as an outside director last year, the Board has continued to discuss various management issues. I believe the Company is currently concerned with two matters: (1) growth strategy (new business pillars); and (2) steadily improving prof- itability in existing businesses. The growth strategy will be rolled out over the medium term and it will take some time before we start seeing results, which is why we must nurture the seeds of numerous new businesses. And in order to steadily improve prof- itability in existing businesses, it is important that the necessary reforms are imple- mented with a sense of speed and that the achievement of set goals is given top priority. It is from this perspective that I intend to closely monitor the activities of each business. About the transition to a holding company system I feel that the Board of Directors has been able to candidly discuss realistic proposals put forward in response to current issues, whilst reflecting on the Company’s manage- ment history. That said, in any organization, it always comes down to how such plans can be materialized. I expect Panasonic to take full advantage of the merits of a hold- ing company system to deliver results by steadily carrying out management that is fully autonomous. About ESG To a certain extent, I believe Panasonic’s stakeholders have formed a favorable opin- ion of its social contributions and environmental initiatives. Environmental and social measures are one platform that underpins the Company’s business activities, and it is important that targets are set in all of its core business operations and that the results translate into business growth and profitability. Panasonic Annual Report 202047 ESG as Our Management Foundation Directors, Audit & Supervisory Board Members, and Executive Officers (As of June 25, 2020) Directors Director, Chairman of the Board Representative Directors Apr. 1972 Joined Matsushita Electric Works, Ltd. (MEW) Dec. 2004 Managing Executive Officer, MEW June 2007 Managing Director, MEW June 2010 President, Panasonic Electric Works Co., Ltd. (former MEW) Apr. 2011 Senior Managing Executive Officer of the Company / In charge of Lighting Company and Panasonic Ecology Systems Co., Ltd. Jan. 2012 In charge of Solution Business / President, Eco Solutions Company June 2012 Executive Vice President of the Company / In charge of Corporate Division for Promoting Energy Solution Business June 2013 Chairman of the Board of Directors (current position) Shusaku Nagae Representative Director, President Apr. 1979 Joined the Company June 2001 Director, Multimedia Development Center June 2004 Executive Officer of the Company / In charge of Digital Network & Software Technology Apr. 2008 Managing Executive Officer of the Company / President, Panasonic Automotive Systems Company Apr. 2011 Senior Managing Executive Officer of the Company / President, AVC Networks Company June 2011 Senior Managing Director of the Company June 2012 President of the Company June 2017 Representative Director, President of the Company (current position) / President of the Company (current position) / Chief Executive Officer (CEO) (current position) Kazuhiro Tsuga President / CEO May 2003 President and Representative Director, Hewlett- Packard Japan, Ltd. May 2005 President and Representative Director, The Daiei, Inc. Mar. 2007 Representative Executive Officer and COO, Microsoft Kabushiki Kaisha (now Microsoft Japan Co., Ltd.) Apr. 2008 Representative Executive Officer and President, Microsoft Kabushiki Kaisha (now Microsoft Japan Co., Ltd.) July 2015 Representative Executive Officer and Chairman, Microsoft Japan Co., Ltd. Apr. 2017 Senior Managing Executive Officer of the Company / President (now CEO), Connected Solutions Company (current position) June 2017 Representative Director of the Company (current position) / Senior Managing Executive Officer of the Company (current position) Apr. 1985 Joined the Company June 2012 General Manager, Corporate Planning Group Oct. 2013 Executive Officer of the Company Apr. 2015 Managing Executive Officer of the Company / President, Appliance Company June 2015 Managing Director of the Company Apr. 2016 Senior Managing Director of the Company June 2017 Senior Managing Executive Officer of the Company (current position) Apr. 2019 CEO, China & Northeast Asia Company (current position) June 2019 Representative Director of the Company (current position) Apr. 2020 Chairman, Panasonic Corporation of China (current position) Yasuyuki Higuchi Senior Managing Executive Officer / CEO, Connected Solutions Company Tetsuro Homma Senior Managing Executive Officer / CEO, China & Northeast Asia Company Representative Director Directors Mototsugu Sato Executive Vice President / CEO, US Company Apr. 1979 Joined Matsushita Electric Works, Ltd. (MEW) Apr. 2008 Executive Officer, MEW Apr. 2011 Senior Executive Officer, Panasonic Electric Works Co., Ltd. (former MEW) Oct. 2013 Executive Officer of the Company / In charge of Planning June 2014 Director of the Company Apr. 2015 Managing Director of the Company Apr. 2016 Senior Managing Director of the Company / In charge of Human Resources Mar. 2017 CEO, Panasonic Holding (Netherlands) B.V. June 2017 Representative Director of the Company (current position) / Senior Managing Executive Officer of the Company / Chief Strategy Officer (CSO) / Chief Human Resources Officer (CHRO) Apr. 2019 Executive Vice President of the Company (current position) Aug. 2019 CEO, US Company (current position) Apr. 1984 Joined the Company Oct. 2012 General Manager, Corporate Management Support Group, Corporate Strategy Division Apr. 2017 Executive Officer of the Company / In charge of Accounting and Finance June 2017 Director of the Company (current position) / Executive Officer of the Company / Chief Financial Officer (CFO) (current position) Apr. 2018 Managing Executive Officer of the Company (current position) / President, Panasonic Equity Management Japan Co., Ltd. (now Panasonic Equity Management Japan G.K.)(current position) Sep. 2019 CEO, Panasonic Holding (Netherlands) B.V. (current position) Mar. 1987 Admitted to New York State Bar (current position) Sep. 1998 General Counsel-Japan, General Electric Company, Tokyo Apr. 2014 Senior Managing Director and Chief Legal Officer, LIXIL Group Corporation, Tokyo Apr. 2018 Executive Officer of the Company / General Counsel (GC) (current position) / Chief Risk Management Officer (CRO) (current position) / Chief Compliance Officer (CCO) (current position) June 2018 Director of the Company (current position) Apr. 2019 Managing Executive Officer of the Company (current position) Hirokazu Umeda Managing Executive Officer / CFO Laurence W. Bates Managing Executive Officer / GC / CRO / CCO Executive Officers President Kazuhiro Tsuga Chief Executive Officer (CEO) Executive Vice President Mototsugu Sato Director, Corporate Strategy Division CEO, US Company In charge of General Affairs and Social Relations Occupational Safety and Health Director Senior Managing Executive Officers Yoshiyuki Miyabe Chief Technology Officer (CTO) Chief Manufacturing Officer (CMO) Tetsuro Homma CEO, China & Northeast Asia Company Regional Head for China & Northeast Asia Chairman, Panasonic Corporation of China Masahisa Shibata In charge of Automotive Sales Yasuyuki Higuchi CEO, Connected Solutions Company Shinji Sakamoto CEO, Industrial Solutions Company Panasonic Annual Report 2020 Directors Audit & Supervisory Board Members Outside Directors Senior Audit & Supervisory Board Members Apr. 2011 President, Nippon Life Insurance Company June 2015 Director of the Company (current position) Apr. 2018 Chairman, Nippon Life Insurance Company (current position) Apr. 1980 Joined the Company Jan. 2013 Senior Councilor, Accounting Center, Industrial Devices Company June 2016 President, Panasonic Industrial Devices SUNX Co., Ltd. June 2018 Corporate Advisor, Panasonic Industrial Devices SUNX Co., Ltd. June 2019 Senior Audit & Supervisory Board Member of the Yoshinobu Tsutsui (Independent director) Toshihide Tominaga Company (current position) ESG as Our Management Foundation 48 Sep. 2006 Minister of State for Economic and Fiscal Policy Aug. 2008 Professor of National Graduate Institute for Policy Studies June 2013 Director of the Company (current position) Apr. 2019 Senior Professor of National Graduate Institute for Policy Studies (current position) Hiroko Ota (Independent director) Eiji Fujii Apr. 1984 Joined the Company July 2015 Managing Officer, Automotive & Industrial Systems Company of the Company / Director, Engineering Division Apr. 2017 Executive Officer of the Company / Vice President, Automotive & Industrial Systems Company / In charge of Technology and Director, Engineering Division Apr. 2019 Executive Officer of the Company / Vice President, Industrial Solutions Company / In charge of Technology and Director, Engineering Division / In charge of Intellectual Property June 2020 Senior Audit & Supervisory Board Member of the Company (current position) Apr. 2003 Senior Representative Director (COO), Industrial Revitalization Corporation of Japan Apr. 2007 Representative Director (CEO), Industrial Growth Platform, Inc. (current position) June 2016 Director of the Company (current position) Outside Audit & Supervisory Board Members Executive Officers Kazuhiko Toyama (Independent director) Kunio Noji (Independent director) Michitaka Sawada (Independent director) Yuko Kawamoto (Independent director) June 2007 President and Representative Director, and CEO, Komatsu Ltd. Apr. 2013 Representative Director and Chairman of the Board, Komatsu Ltd. June 2019 Senior Advisor, Komatsu Ltd. (current position) / Director of the Company (current position) Yoshio Sato (Independent Audit & Supervisory Board member) June 2012 Representative Director, President and Chief Executive Officer, Kao Corporation (current position) June 2020 Director of the Company (current position) July 2001 Senior Expert, McKinsey & Company (Tokyo) Apr. 2004 Professor of Graduate School of Finance, Accounting and Law, Waseda University (now Graduate School of Business and Finance) (current position) June 2020 Director of the Company (current position) Toshio Kinoshita (Independent Audit & Supervisory Board member) Setsuko Yufu (Independent Audit & Supervisory Board member) July 2007 President and Director, Chief Executive Officer (Representative Director) of Sumitomo Life Insurance Company July 2011 President and Representative Director, Chief Executive Officer of Sumitomo Life Insurance Company Apr. 2014 Chairman and Representative Director of Sumitomo Life Insurance Company June 2014 Audit & Supervisory Board Member of the Company (current position) July 2015 Chairman of the Board of Sumitomo Life Insurance Company (current position) July 1983 Registered as Certified Public Accountant (Japan) (current position) June 1994 Senior Partner of Chuo Audit Corporation July 1998 Managing Partner for Japanese Business Network of PricewaterhouseCoopers LLP National Office July 2007 Chief Executive of The Japanese Institute of Certified Public Accountants July 2013 Council Member of The Japanese Institute of Certified Public Accountants June 2014 Audit & Supervisory Board Member of the Company (current position) Apr. 1981 Registered as Attorney at Law (Japan) (current position) Sep. 1986 Joined Loeff Claeys Verbeke (Brussels) (now Allen & Overy (Brussels)) Jan. 2002 Partner, Atsumi & Usui (now Atsumi & Sakai Janssen Foreign Law Joint Enterprise) (current position) June 2020 Audit & Supervisory Board Member of the Company (current position) Managing Executive Officers Takashi Toyama Representative in Tokyo In charge of Government and External Relations In charge of Tokyo Olympic & Paralympic Business Promotion Hirokazu Umeda Chief Financial Officer (CFO) In charge of Groupwide Cost Busters Project and BPR Project CEO, Panasonic Holding (Netherlands) B.V. President, Panasonic Equity Management Japan G.K. Yuki Kusumi In charge of the Automotive Segment CEO, Automotive Company Masahiro Shinada In charge of the Appliances Segment CEO, Appliances Company In charge of Consumer Business and FF Customer Support & Management Laurence W. Bates General Counsel (GC) Chief Risk Management Officer (CRO) Chief Compliance Officer (CCO) Director, Legal & Compliance Division Masaharu Michiura In charge of the Life Solutions Segment CEO, Life Solutions Company In charge of Construction Safety Regulations Administration Department Eiichi Katayama Chief Strategy Officer (CSO) In charge of Business Development Executive Officers Manish Sharma President, Panasonic India Pvt. Ltd. Shigeki Mishima Chief Human Resources Officer (CHRO) Panasonic Annual Report 202049 ESG as Our Management Foundation Corporate Governance Structure and Initiatives The Company considers corporate governance to be a key foundation for increasing its corporate value and will continue strengthening governance, including enhancing the discussion of business strategies by the Board of Directors. Basic policy Outline of structure (As of June 25, 2020) The Company, since its establishment, has operated its business under its management philosophy, “contribut- ing to the progress and development of society and the well-being of people worldwide through its business activities.” Also, the Company believes it is important to enhance corporate value by fulfilling accountability through dia- logue with various stakeholders such as shareholders and customers, making an effort to execute transparent busi- ness activities, and swiftly conducting business activities with fairness and honesty based on its basic philosophy of “A company is a public entity of society.” The Company recognizes that corporate governance is an important structure for this purpose, and is working to build and enhance an effective corporate governance structure. The Board of Directors • The Board of Directors is composed of thirteen direc- tors including six outside directors, of whom two are women (outside director). • The chairperson of the Board is the chairman who does not execute duties (inside director). • The Board of Directors focuses on “corporate strategy decision-making” and “company oversight” as a corpo- rate decision-making body. • The Company elects outside directors from among managers of external entities, who have extensive man- agerial experience in various careers and deep insight, and are expected to provide valuable opinions as super- visors of decision-making related to business execution and the execution of directorsʼ duties. • All directors are reelected at the annual general meeting of shareholders. Corporate Governance Structure Election Board of Directors Supervisory Functions Corporate Strategy Decision- making Functions Empowerment & Supervision Executive Functions Group Strategy Meeting*2 l S h a r e h o d e r s M e e t i n g Audit Nomination and Compensation Advisory Committee*1 President *3 Audit & Supervisory Board Election Audit Auditing Functions Divisional Companies Business Divisions Regional Management Corporate Strategy Head Office Professional Business Support Sector Collaboration Election Accounting Auditor Accounting Audit Innovation Promotion Sector *1 Deliberates on advisory matters and reports to the Board of Directors *2 Complements Board of Directorsʼ decision-making *3 Including affiliated companies (Japan and overseas), etc. * Please refer to the “Corporate Governance Report” for our systems for ensuring appropriate business operations (the basic policy of the internal control system, and its operational status). Panasonic Annual Report 2020 ESG as Our Management Foundation 50 Themes discussed by Board of Directors in fiscal 2020 In fiscal 2020, the Board of Directors discussed and reached decisions on various matters as part of its portfo- lio management efforts. These included transfer and ter- mination of businesses with loss-making structures and injections of external capital to maintain business competi- tiveness, medium- to long-term business strategies includ- ing establishment of joint ventures and large-scale capital investments, as well as important aspects of business exe- cution, such as dividend policy and executive HR issues. The Board also received business reports from Divi- sional Company CEOs and regional representatives, as well as directors in charge of R&D, compliance, quality management, and the like. In the process, it verified the operational status of the Groupʼs internal control system in addition to supervising business execution. The Board also discussed the past summary and the future direction of M&As, as well as investment and finan- cial soundness, innovations, and technology portfolio strategy. Here, the Board sought to take maximum advan- tage of the knowledge of outside officers and reflect that knowledge in its medium- to long-term vision. In addition, the Board carefully examined the significance of possessing strategic shareholdings and also received evaluation reports on the effectiveness of its own activities. Themes discussed in fiscal 2020 Deliberation/decision Monitoring status of business execution Debate Other • Business portfolio reforms • Establishment of joint ventures, large-scale capital investments, etc. • Dividend policy, executive HR issues, etc. • Performance and initiatives by company and region • Status of R&D, compliance, and quality initiatives • Operational status of internal control system • M&As (past summary and future direction) • Investment and financial soundness • Innovation and technology portfolio strategy • Significance of possessing strategic shareholdings • Effectiveness evaluations of Board of Directors Audit & Supervisory Board members (A&SB members) and Audit & Supervisory Board (A&SB) • The A&SB is composed of five A&SB members includ- ing three outside A&SB members, of whom one is a woman (outside A&SB member). • The Company sets A&SB members who are able to exert their monitoring functions according to their individual dis- cretionary decision, but not to majority vote decision. The A&SB members are also able to independently act upon their own decision in pursuing liabilities of directors. • The Company sets full-time senior A&SB members who are well versed about corporate operations and are able to comprehend actual condition of businesses by exercising their right to visit and investigate operat- ing sites. The senior A&SB members are elected from among those who have experience in positions equiva- lent to or higher than managing director. • The Company elects outside A&SB members from among managers, lawyers, and certified public accoun- tants, who have extensive expertise with various careers and deep insight and can be expected to conduct valu- able audits of the execution of business by directors. Optional Nomination and Compensation Advisory Committee • Composed of five members, the majority of whom are independent outside directors. • Chaired by an independent outside director. • Deliberates on the results of internal reviews of the nomination of candidates for director, executive offi- cer, and audit & supervisory board member and on the appropriateness of the Companyʼs director and execu- tive officer compensation system, and reports on these matters to the Board of Directors. • Monitors the candidates for the CEO successor and can propose the replacement timing of CEO. • Met four times in fiscal 2020; discussions included results of internal investigations of candidates for direc- tors and others and compensation for directors in the current fiscal year; reports were submitted to the Board of Directors. Group strategy meeting • Meetings are held about twice monthly in principle to discuss and set the direction of the Groupʼs medium- to long-term strategy and priority issues. • Chaired by the president, around 10 members of upper management participate, including Divisional Company CEOs and non-Japanese executive officers. • Managers of related business and functional divisions in positions of responsibility also participate in discussions depending on the matter considered. Panasonic Annual Report 2020 51 ESG as Our Management Foundation Corporate Governance Structure and Initiatives Utilization of outside directors Policy for nominating independent outside director candidates and their qualifications The Company nominates independent outside director candidates from the standpoint that there be no conflict of interest between the Company and the outside direc- tors, and the Company can increase and enhance the effectiveness of the monitoring of the Board based on an objective and neutral point of view. Candidates for independent outside director who satisfy the following independence standards are elected from among those who have extensive knowledge and exper- The Company’s Outside Directors tise, such as managers or experts of external entities. The Board of Directors resolved that the minimum ratio of outside directors should be one third on and after June 29, 2017. Based on this, we nominate candidates for out- side director and appoint them at the ordinary general meeting of shareholders, thereby enhancing the objectiv- ity and neutrality of the Board of Directors and strength- ening the supervisory function. Yoshinobu Tsutsui Hiroko Ota Kazuhiko Toyama Chairman of the Board, Nippon Life Insurance Company He brings extensive experience at the highest level of management along with expertise in domestic and inter- national financial developments. Professor, National Graduate Institute for Policy Studies A specialist in public economics and economic policy, she is involved in national economic policy as the former Minister of State for Economic and Fiscal Policy. Representative Director (CEO), Industrial Growth Platform, Inc. A leading figure in corporate gov- ernance in Japan, he is involved in numerous corporate revitalization proj- ects as the former COO of Industrial Revitalization Corporation of Japan. Kunio Noji Michitaka Sawada Yuko Kawamoto Senior Advisor, Komatsu Ltd. One of Japanʼs most noted executives, he built Komatsu into a global corpora- tion. He advocates reform of business management through innovation. President and Chief Executive Officer, Kao Corporation Leading a global company, he achieved continuous profit growth and prioritizes ESG-focused management to realize a sustainable society. Professor, Waseda University Graduate School A specialist in financial theory and cor- porate governance, she has served on a number of Japanese government com- mittees of finance, economics and oth- ers, and an outside director at domestic and overseas companies. Panasonic Annual Report 2020ESG as Our Management Foundation 52 Independence standards for independent directors / Audit & Supervisory Board members (A&SB members) The Company established independence standards for independent directors/A&SB members based on inde- pendence standards required by financial instruments exchanges such as the Tokyo Stock Exchange. For exam- ple, the following persons are not considered independent. • Business executives of the parent company and/or sis- ter companies • Major business partner of the Company or said execut- ing person (including those who had fallen under this category in the past) • Consultants, accountants or attorneys (or, in the case of companies, people who belong or belonged to such companies) who receive a significant amount of money from the Company • The aforementioned close relative (a second-degree or closer relative) or a close relative of an executing person of the Company or subsidiary Also, “past” shall mean “within the last three years” and “major business partner” shall mean the annual amount of transaction exceeds 2% of either of their annual consoli- dated sales. “Significant,” in the case of individuals, shall be judged as 12 million yen. For a detailed definition of the Companyʼs independence standards please refer to the “Corporate Governance Report.” Provision of information and assistance to outside directors The division in charge provides support to outside directors, such as prior explanation of agendas of the Board meet- ing and provision of information to enable effective discus- sions by the Board of Directors. In addition, the Company provides them with the opportunity to visit major operating sites and plants (Outside directorsʼ visit to business sites). Activities Aimed at Strengthening Corporate Governance Implementation and utilization of evaluation of the Board of Directors effectiveness Once a year, the Board of Directors administers a ques- tionnaire to all its members in order to further enhance the Boardʼs effectiveness. The results and evaluations of the questionnaire are reported to the Board of Directors. As part of effectiveness evaluations in fiscal 2020, we deployed third-party perspectives to conduct face-to-face interviews (in addition to the questionnaire-based survey as done to date). In the questionnaire, we focused on items that previously had low or inconsistent evaluations, and we clarified improvement measures for issues thus identified. Items of the survey in fiscal 2020 • Verification of the Board of Directors operation pol- icy for fiscal 2020 • How discussions/deliberations should be carried out at Board of Directors meetings (discussions/delibera- tions the Board of Directors should ideally have) • Unity of the Board of Directors • The Board of Directors-shareholders (investors) rela- tions, how they should be • The Board of Directorsʼ operations and others Upon analyzing the results of the survey and interview, the Companyʼs findings with respect to the effectiveness of the Board of Directors are such that the current state of the Board is essentially appropriate in terms of its monitoring and deci- sion-making function. On the other hand, findings with respect to strengthening functions of the Board of Directors included opinions that in order to strengthen functions of the Board of Directors, discussions at the Board of Directors should be acti- vated and information sharing with Outside Directors/Audit & Supervisory Board Members should be further promoted, and we are taking steps to respond and improve. Evaluating the effectiveness of the Board of Directors started in fiscal 2016. Corporate Governance has been strengthened while incor- porating opinions and proposals from questionnaires. Board of Directors Nomination and Compensation Advisory Committee Initiatives and other mechanisms Fiscal 2014 Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Appointed a female director Began evaluating the effectiveness of the Board of Directors Increased the number of outside directors from three to four Reduced the number of directors from 17 to 12 Appointed a non-Japanese director Raised the minimum ratio of outside directors to one third Established (Number of outside members/ Total number of members) 1/3 2/4 3/5 As of June 30, 2020 Increased the number of outside directors from four to six Outside director ratio 46.2% Introduced stock-type compensation SOs* * Stock options Established the Outside Directors and Outside A&SB Members Committee Outside directors as well as outside A&SB members began visiting business sites Reviewed the conferring of representation rights Reviewed the corporate advisor system Reviewed the business execution system Introduced restricted stock compensation Discontinued the ESV Plan* Clarified the roles of directors and executive officers * The Policy toward Large-Scale Purchases of Panasonic Shares Panasonic Annual Report 202053 ESG as Our Management Foundation Corporate Governance Structure and Initiatives Compensation Compensation for directors depends on each personʼs role and is divided into three parts: Basic compensation (fixed), performance-based compensation (short-term incentive), and restricted stock compensation (long-term incentive). Outside directors and Audit & Supervisory Board members receive only basic compensation, which is fixed. Performance-based compensation Performance-based compensation is designed as a short-term incentive to boost business performance. It is determined each year in conjunction with performance evaluations of Panasonic as a whole and the specific busi- ness of which the director is in charge. From the fiscal 2020 result, evaluation items focus on achievement of operating cash flow targets, as well as a combination of indicators, including adjusted operating profit, net income, and inventories. Performance-based compensation fluctuates widely depending on business results. It is designed to range from a minimum of 0% of basic compensation to a maximum of over 150% (75% when the standard value is achieved). Restricted stock compensation Restricted stock compensation, which is a long-term incentive, is allocated with the aim of providing an incen- tive to continuously improve corporate value and promote further value sharing with the Companyʼs shareholders. Reflecting on the reasons for introducing restricted stock compensation, the ratio of the incentive option to the overall compensation package is designed to increase as the position of the recipient director or executive officer gets higher. In addition, the total amount is set based on overall considerations of various items, such as duties of each director or executive officer and the balance with monetary compensation. Procedure for determining compensation Compensations of directors and executive officers are decided by the representative director and president, who was given the authority by the Board of Directors, based on the Companyʼs director and executive officer compensation system. In November 2015, the Company has established an optional Nomination and Compensa- tion Advisory Committee, majority-staffed and chaired by independent outside directors. In response to inquiries from the Board, this committee deliberates and reports on the appropriateness of the Companyʼs director and executive officer compensation system. Illustration of Compensation Structure*1 Restricted stock compensation 　Basic compensation 1 Performance-based compensation 0.75*2 0.25*3 Short-term incentive 　Long-term incentive *1 Excluding Outside Directors *2 When the standard value is achieved *3 Average compensation of applicable directors. The percentages vary according to the role and position. Amount of Compensation for Directors and A&SB Mem- bers for Fiscal 2020 (ended March 2020) Classification Number of persons Amount (million yen) Basic compensation Performance- based compensation Restricted stock compensation Directors (other than outside directors) A&SBMs (other than outside A&SBMs) Outside directors Outside A&SBMs 9 833 574 186 73 3 5 3 80 65 39 80 65 39 — — — — — — Note: Three directors and one A&SB member who retired at the conclusion of the 112th Ordinary General Meeting of Shareholders held on June 27, 2019 are included in the above. Directors Who Received Compensation over 100 Mil- lion Yen Name Classification Amount (million yen) Basic compensation Performance- based compensation Restricted stock compensation Shusaku Nagae Kazuhiro Tsuga Mototsugu Sato Yasuyuki Higuchi Director 109 100 Director 186 104 Director 121 Director 125 78 74 — 48 31 41 9 34 12 10 Panasonic Annual Report 2020ESG as Our Management Foundation 54 Information disclosure / Dialogue Information disclosure approach and system The Company clearly defines its policy on information dis- closure in the Panasonic Code of Conduct, the guideline for putting the Groupʼs Basic Business Philosophy into practice. The Company also publishes relevant practical standards, methodologies, internal processes, etc. as its Disclosure Policy. In accordance with this Policy, the Company pursues constructive dialogue with all its share- holders and investors. (For more details, please visit the Disclosure Policy page on the Companyʼs website.) We will provide our various stakeholders, including customers and shareholders, with fair and accurate information on corporate financial affairs, our Basic Business Philosophy, business policies and activities, as well as environmental, social, and governance activities in a timely, understandable and appropriate manner. At the same time, we will listen to our cus- tomersʼ requests and comments and reflect them in our business policies and activities. We will seek to be an enterprise with high transparency. (Quotes from the Panasonic Code of Conduct) Under this basic policy, we disclose information where disclosure of this information is required by securities-re- lated laws and regulations of all relevant countries and regions as well as other information that is deemed as necessary to disclose in a fair and timely manner while at the same time endeavoring to disclose accurately, fairly, and sufficiently. Moreover, the Company has established disclosure control procedures and in the preparation and submis- sion of annual securities reports, quarterly reports, etc., the Disclosure Committee, which is comprised of gen- eral managers from principal departments that handle rel- evant information, confirms the validity of the descriptive content and the appropriateness of the disclosure proce- dures under the supervision of the CEO and chief finan- cial officer (CFO). Based on listing regulations, Company information that requires timely disclosure shall be immediately reported to the Corporate Finance & IR Department or the Finan- cial & Accounting Department and disclosed timely and appropriately. Internal control for financial reporting The Company has documented the actual status of its internal control system from the control infrastructure to actual internal control activities, with integrated con- trol provided by the Internal Control Promotion Office, in order to ensure reliability in the financial reporting of the Panasonic Group including its subsidiaries. Specifically, the Company has reinforced its internal controls by implementing self-checks and self-assess- ment programs at each of the Divisional Companies and Business Divisions, etc. Then, internal auditing manag- ers of the Divisional Companies appointed by the Com- pany at each of the Divisional Companies, etc. conduct audits. Based on these audits, the Internal Control Pro- motion Office supervises the Group-wide internal control audits in order to confirm its effectiveness. In fiscal 2020, Panasonic had a total of 400 personnel assigned to con- duct internal audits in the entire Group. Constructive dialogue with shareholders and investors The CFO is responsible for investor relations (IR) activities. The CEO, CFO, and each CEO of Divisional Companies mainly engage in dialogue with shareholders and inves- tors. This includes announcements of financial results and individual meetings. Also, the IR staff members in the Cor- porate Finance & IR Department are in charge of day-to- day communication with shareholders and investors. For IR geared toward institutional investors and securities ana- lysts, the Company conducts presentation meetings of quarterly financial results announcements, annual presen- tations regarding business policy of the Company and Divi- sional Companies, and other activities. Also, for overseas investors, the Company holds pre- sentation meetings utilizing conferences hosted by finan- cial institutions. Views and management issues obtained from shareholders and investors through IR activities are conveyed to senior management and the relevant depart- ments including Divisional Companies in internal meet- ings such as the Group Strategy Meeting and are utilized to improve the quality of management of the entire Group. Panasonic Annual Report 2020 55 ESG as Our Management Foundation Message from the Environmental Compliance Administrator Focusing on energy and resources as a climate change measure Hirotoshi Uehara Director, Quality & Environment Division The growing focus on the UNʼs Sustainable Development Goals (SDGs) and the Paris Agreement, through which countries have allied together to combat global warming, indicates the seriousness of environmental and energy issues worldwide. In October 2020, the Japanese gov- ernment announced plans to become a carbon-neutral/ carbon-free society by the year 2050. In this environment, Panasonic has carried out scenario analyses with respect to the recommendations of the Task Force on Climate- related Financial Disclosures (TCFD), identified specific risks and opportunities, and confirmed the resilience of the Companyʼs strategy. Ever since its establishment, the Panasonic Group has actively addressed global environmental issues based on the management philosophy of contributing to the devel- opment of peopleʼs lives and society. Furthermore, in 2017 we formulated the Panasonic Environment Vision 2050 so that we can continue to meet the expectations and demands of our stakeholders. As we aim to balance a better life with a sustainable global environment, we believe that reducing the amount of energy we use and working to create and efficiently utilize an even greater amount of clean energy is in itself the very notion of “going carbon neutral.” To that end, in consideration of the gravity of social issues and the degree of relevance pertaining to Panasonicʼs businesses, we formulated our Green Plan 2021 with a focus on the material issues of energy and resources. Under this Plan, we will accelerate the development of products, technologies, and solutions in the areas of energy creation, energy saving, energy storage, and energy management. To step up the pace of these initiatives, Panasonic, as a managing company, joined the Environmental Digital Platform launched in June 2020 by Konica Minolta, which plays the role of an operating company. A total of 16 partic- ipating companies aims to facilitate the sharing of environ- mental knowledge, information, and know-how, as well as improve the environmental sustainability management of each company and generate new business opportunities. In terms of the Groupʼs activities, firstly as an initiative for reducing the amount of “energy used,” Panasonic is working on energy-saving designs by making “the size of contribution toward energy savings” a goal among its main products. In fiscal year ended March 2020 (fiscal 2020), our lights, air conditioners, and refrigerators contributed to greater energy reductions. As for production activities, we are working to achieve zero-CO2 model factories world- wide. In fiscal 2020, our Costa Rica plant joined the ranks of zero-CO2 model factories, following Japan, Belgium, and Brazil in fiscal 2019. We plan to build zero-CO2 model factories in other regions to serve as local models—next up we intend to target China and other regions in Asia. As an initiative for increasing the amount of “energy cre- ated,” Panasonic is stepping up the development of fuel cell technology to generate electricity from hydrogen as an energy source. At our Kusatsu site in Shiga Prefecture, we constructed a hydrogen station called “H2 Kusatsu Farm” to supply hydrogen to fuel cell-powered forklifts. The hydrogen is produced by water electrolysis using renewable energy in an effort to make site logistics carbon-free. Meanwhile, for “resources,” in line with changes in customer lifestyles and values, Panasonic is also taking up the challenge of creating circular economy business models that do not rely on the consumption of resources to generate sustainable growth. We are taking steps to make factory waste items the object of creative design, thereby turning them into completely different products of novel value. Moreover, we are currently launching a global circular economy project so that we can pick up the pace of initiatives in the area of resources recycling. Through initiatives like these, Panasonic will aim to achieve the goals it has set in the Panasonic Environment Vision 2050 by expanding and accelerating initiatives related to energy and resources. Panasonic Annual Report 2020 Initiatives towards the Environment ESG as Our Management Foundation 56 Environmental sustainability management Vision and action plan Guided by the Panasonic Environment Vision 2050 formu- lated by the Group, Panasonic will take up the challenge of expanding “energy created” to exceed the amount of “energy used” with its sights set on the year 2050. “Energy used” refers to the energy used in production and other business activities, as well as the energy con- sumed by our products when used by our customers. “Energy created” refers to clean energy that is created and/or made available by our products and services, such as photovoltaic power generation systems, storage bat- teries, and energy solutions. Panasonic’s Green Plan 2021, an environmental action plan formulated with the goal of realizing the Panasonic Environment Vision 2050, clearly lays out the targets that we need to achieve within the three years through fiscal 2022, alongside an action plan for all employees. Panasonic Environment Vision 2050 To achieve “a better life” and “a sustainable global environment,” Panasonic will work towards creation and more efficient utilization of energy which exceeds the amount of energy used, aiming for a society with clean energy and a more comfortable lifestyle. Energy used < Energy created Energy ratio (created versus used) in fiscal 2020 In achieving zero-CO2 model factories, we have reduced the amount of energy used during production, but the amount of energy consumed during procurement and distribution is increasing, which has led to the increase in the total amount (234 thousand GWh) of energy used. However, we made progress on the energy ratio (created versus used) to 1:9 from roughly 1:10 (when the Panasonic Environment Vision 2050 was formulated) by increasing the total amount (26 thousand GWh) of energy created, which mainly comprises photovoltaic power generation systems, fuel cells, and automotive batteries. Environmental Action Plan — “Green Plan 2021” (Extract) Category 2021 targets (fiscal 2022) Fiscal 2020 results Increase the ratio of total energy created to total energy used Total energy created: total energy used = 1:8.5 1:9.0 Increase amount of energy created Amount of energy created: 30 thousand GWh or more 26 thousand GWh Increase size of contribution toward energy savings through products and services Size of contribution toward energy savings through products and services: Direct: 25 thousand GWh or more Indirect: 2 thousand GWh or more Direct: 28 thousand GWh Indirect: 2.3 thousand GWh Products & Services Expand energy creation businesses — — — s e u s s i l a i r e t a M Energy Expand energy efficient products and service business, focusing on products and service utilizing IoT/AI Promote zero-CO2 model factories • Establish model factory using advanced hydrogen technology • Establish at least one zero-CO2 model factory in each region Factories Increase the use of renewable energy through the generation of renewable energy on-site and procurement of renewable energy Renewable energy generated on our sites: 40 thousand MWh or more 32 thousand MWh Promote energy efficiency in production • Reduce energy loss through IoT • Improve productivity through manufacturing innovation Create circular economy business models Analysis of the development of circular economy options for existing businesses: 100% — — Resources Reduce resource consumption and increase the use of sustainable materials Recycled resin usage: 42 thousand tons or more (2019 to 2021 total) 13 thousand tons Achieve Zero Waste Emissions from factories globally Factory waste recycling rate: 99% or more 98.9% Establishment of Environmental Digital Platform in association with other companies With the aim of sharing environmental know-how across Japan’s entire industrial sector and improving the effi- ciency of environmental sustainability management, we joined forces with Konica Minolta to establish the Environmental Digital Platform in which 16 compa- nies currently participate in. As a managing company, Panasonic participates from the standpoint of enhancing the platform’s content and supporting its administration. We provide case examples of activities, related technology, and solutions, which will hopefully lead to the co-creation of new value. We are also using this platform to promote our rollout of renewable energy and the global deployment of energy-saving initiatives. Konica Minolta’s press release: https://www.konicaminolta.com/jp-ja/newsroom/2020/0605-01-01.html (Japanese only) Panasonic Annual Report 2020 57 ESG as Our Management Foundation Initiatives towards the Environment Energy-related initiatives Zero-CO2 model factories In fiscal 2020, one more manufacturing site achieved zero-CO2 model factory status, in addition to three in fis- cal 2019. By making these factories leading models and by gradually increasing their numbers around the world, Panasonic will steadily ramp up manufacturing activities that do not emit CO2. Europe Japan South America Panasonic Energy Belgium Panasonic Eco Technology Center Panasonic Brazil Panasonic Energy Belgium installed wind power generation systems in its factory and has been utilizing electricity derived from renewable energy. It also replaced purchased electricity with the electricity derived from renewable energy. All operations at Panasonic Eco Technology Center are now powered by electricity derived from 100% renewable energy. This Group company also uses carbon credits to offset its remaining CO2 emissions derived from fossil fuels. Accordingly, its factory has achieved zero-CO2 status. Panasonic Brazil’s three factories in San Jose, Manaus, and Extrema were the first in the Group to power their manufacturing operations using electricity derived from 100% renewable energy. Zero-CO2 showroom Panasonic Center Tokyo As part of our efforts to expand our zero-CO2 model factory initiatives to the non-man- ufacturing sector, we set up Panasonic’s first-ever zero-CO2 showroom at Panasonic Center Tokyo. And as a site that utilizes hydrogen-based energy, we will facilitate demonstrations of Panasonic’s proprietary pure hydrogen fuel cells. Panasonic Centroamericana Having installed photovoltaic power genera- tion systems in its factory and entered into a contract with a public power utility to procure renewable energy, Panasonic Centroamericana now utilizes 100% renewable energy for its electricity needs. It also uses carbon credits to offset its remaining CO2 emissions derived from fossil fuels. Accordingly, its factory has achieved zero-CO2 status. Hydrogen energy As Japan sets its sights on transitioning to a carbon-free society, the Panasonic Group is using hydrogen as a new energy source to help realize a society that is free of CO2 emissions. In this way, we aim to contribute to the creation of a soci- ety that enjoys peace of mind because it uses clean energy. Panasonic Ecology Systems Kusatsu Farm (hydrogen station) At the Kasugai Factory of Panasonic Ecology Systems, tests are underway to demonstrate that electricity generated by a pure hydro- gen fuel cell system using hydrogen produced from renewable energy can be used to supply manufacturing lines. A hydrogen station on the grounds of the Kusatsu Factory produces hydrogen using electrolysis powered by renewable energy, then com- presses and stores it. By supplying this hydrogen to fuel cell-powered forklifts, the station contributes to making site logistics carbon-free. Electricity Pure hydrogen fuel cell system Manufacturing line at Kasugai Factory Panasonic Annual Report 2020Resources-related initiatives Upcycled products In aiming to realize a recycling-oriented society, Panasonic is starting to undertake initiatives on reusing factory waste. We are taking steps to utilize factory waste (parts and offcuts) and identify new value through creative design, thereby turning such items into completely differ- ent “upcycled” products. As one form of renovation that enhances the value of a certain space, we are efficiently utilizing factory waste generated in the manufacturing process of our clothes irons, rice cookers, and modular kitchen units to make upcycled products like bookends, lighting fixtures, and tables. ESG as Our Management Foundation 58 Circular economy Whilst evolving conventional recycling-oriented manufac- turing, Panasonic is also tackling the creation of circular economy businesses. Driven by the eco-design concept of maximizing value during customer use, the Company is pushing ahead with the creation of circular economy businesses that pursue sustainable economic growth without relying on the con- sumption of resources, as well as initiatives for evolv- ing recycling-oriented manufacturing by harnessing new materials and state-of-the-art digital technology. In this way the Company seeks to balance the idea of “a better life” with a sustainable global environment, as called for in the Panasonic Environment Vision 2050. Concept of activities for a circular economy Creation of circular economy business Sharing platform Product as a service Repair/Maintenance Achieving “a better life” and “a sustainable global environment” Top left: Bookends made from clothes irons Top right: Light shade made from the inner pot of a rice cooker Bottom left: Imitation marble table Refurbish Use Remanufacturing Pro- duction Procure- ment Design Zero waste emission Eco-design Utilization of sustainable materials Reduction of total resources used Recycling Evolution of recycling-oriented manufacturing Response to TCFD We compiled and disclosed information in our Sustainability Data Book 2020 in line with the recommendations of the TCFD. Governance Disclosing information regarding our system to promote Panasonic Environmental Sustainability Management spearheaded by the Board of Directors, as well as the meeting bodies required to engage in such management Identifying risks and opportunities and performing scenario analyses Strategy Scenario Anticipated situations Potential impact on Panasonic 2°C scenario More stringent regulations: Introduction of carbon pricing Minor impact owing to the fact that we are working on reducing CO2 emissions from products and manu- facturing by adopting various measures, including the enhancement of energy efficiency in existing prod- ucts, the creation of products that generate energy, and the rollout of zero-CO2 model factories. More stringent regulations: Changes/modifications to envi- ronmental regulations Minor impact owing to the fact that we continue to keep abreast of environmental laws and regula- tions around the world through collaboration with regional headquarters and environmental depart- ments in respective regions. 4°C scenario Increase in abnormal weather Minor impact owing to the fact that we are strengthening our risk management system by formulating Business Continuity Management (BCM) Guidelines based on a designated Business Continuity Plan (BCP). Risk management Disclosing information about Panasonic’s risk management systems and activities for each Divi- sional Company, as well as from a Company-wide standpoint Metrics and targets Setting short-term targets based on the amount of energy as metrics in our Green Plan 2021 Setting medium- to long-term targets based on GHG emissions as metrics (approved Science Based Targets (SBTs)) Emissions from business activities (scope 1 and 2) Target 30% reduction by 2030 (vs. fiscal 2014) Zero by 2050 Emissions from use of Panasonic products (scope 3) 30% reduction by 2030 (vs. fiscal 2014) Progress 112% 34% 22% Panasonic Annual Report 2020 59 ESG as Our Management Foundation Human Resources Initiatives Supporting employees taking on challenges, learning, and growing In the years ahead, our operating environment will likely experience increasingly significant changes, including those affecting the labor market and diversification of customer values. Panasonic believes that possessing a diverse pool of human resources capable of fully maxi- mizing their capabilities during such times will be the driving force behind the Company’s transformation and growth. To this end, we are stepping up our initiatives for the development of employees that are ready to take on challenges, the creation of organizations that engage in co-creation, and diversity and inclusion. 1. Developing employees that are ready to take on challenges One of our global initiatives is the roll-out of the “A Better Dialogue” project to support every employee’s personal growth and challenges by mainly utilizing one-on-one meetings to enhance the quality and quantity of dialogue with their respective managers. In addition, we have put in place a system of global core common knowledge that can be accessed by all global employees so that each indi- vidual employee can deeply understand the importance of learning and engage in self-studying. By utilizing this system, employees can acquire 24 areas of global com- mon knowledge that should be mastered. In Japan, we launched the “A Better Workstyle” pro- gram in fiscal 2019. This initiative has two aims: (1) to have every employee choose a better working style and grow as an individual whilst feeling that their work is rewarding; and (2) to achieve further development of the Company. As part of the initiative, employees concretely express their aspirations (what they aim to become) and goals (what they want to do) for the future. And in order to create an environment in which they can continue to grow, we have thus far provided more opportunities that facilitate growth, primarily through external working experiences and in-company multitasking. In fiscal 2021 we are further evolving this program and relaunching it as “A Better Workstyle 2.0” to generate new value and contribute to our customers. In order to create new value for customers, we believe we need to once again reas- sess our existing values from the ground up. For that reason, we have identified all of the items that each employee should be mindful of implementing on a daily basis from their respec- tive standpoints and compiled them into 10 statements. We are also simultaneously implementing the following three ini- tiatives (1) Better self-determination: Individuals should take up the challenge of adopting a new working style and creating value based on their own judgment in order to fully maximize their own capabilities. (2) Better cooperation and co-creation: Individuals and organizations possessing various capabilities and values should cross boundaries to connect with others in order to generate new value. (3) Better working environments: Organizations should enhance productivity as much as possi- ble by making full use of digital technology to reform business processes and reviewing inefficient systems and rules. 2. Creating organizations that engage in co-creation Our mission for organizational development is to create organizations and a culture in which individuals and teams can fully exert their true potential. Based on this approach, Panasonic continues to undertake a number of initiatives in countries and regions around the world. For example, at our Tesla business site in North America, we have listened to the opinions of employees closest to the frontline regarding certain issues. In response, we established a high perfor- mance culture management framework for ramping up the support of the leadership team in order to solve those issues, which is helping transform the mindset of every employee. In Japan, we set up a dedicated team at the head office in 2015 to carry out activities for a total of 90 business sites and departments, mainly focusing on building relationships within organizations, encouraging dialogue, formulating visions, and providing leadership development support. Also, every year as a global initiative we ask all employees A Better Workstyle 2.0 A Better Dialogue workshop Better cooperation and co-creation (managers, co-workers, external partners) Managers Better self-determination (full maximization of individual capabilities/ responsibilities and judgment) Customers Individual achievements Team results Organizational results Individuals Co-workers Team External partners Organization Creation of new value for customers Better working environments (business process reforms/elimination of systems that stand as barriers) Panasonic Annual Report 2020 ESG as Our Management Foundation 60 to participate in an employee opinion survey as a way of con- ducting a fixed-point observation of employee engagement. The results of the survey are shared in the workplace and used to improve the workplace environment, for example, through the aforementioned initiatives on the development of employees and the creation of organizations. We are begin- ning to see some positive results come out of these initia- tives, such as an increase in real value regarding the growth opportunities that the Company extends to employees to support their personal growth. 3. Diversity & Inclusion Panasonic brings together people of different back- grounds—whether it be geographically, culturally, or his- torically—as well as people possessing different capabilities and attributes, such as gender, age, race, beliefs, religion, nationality, sexual orientation, or gender identity. We aim to always be a Group that draws on the collective wis- dom of all employees to spark innovation. To that end, we implement initiatives regarding diversity in different regions worldwide so that each and every employee can harness their individuality and actively demonstrate their abilities. For example, in Japan we are focused on developing an environment in which our diverse pool of employees can prove themselves, mainly by running unconscious bias train- ing sessions*1 for management education and organizing networking sessions to further facilitate communication among employees with disabilities, foreign national employ- ees, female employees, or employees that consider them- selves to be part of the LGBTQ community. In Europe too, from the perspective that diversity in the leadership group can help boost productivity and profitability, and with the aim of nurturing female leaders and diversifying the pipe- line of human resources, we run a Women in Leadership Program throughout the year to improve skill levels and change mindsets mainly through 360-degree evaluations, coaching, and the drafting of personal transformation plans. * Please refer to our Global Diversity Policy for more information about how Panasonic develops and utilizes its diverse pool of human resources. Creating safe and secure workplaces The COVID-19 brought about an opportunity to rapidly accel- erate our transformation of working styles. Based on the assumption that all employees are conscious about prevent- ing the spread of infection to create safe and secure work- places, CEO Kazuhiro Tsuga sent a message to all employees of the Panasonic Group saying that the Company would opti- mize the way of management by combining real operations with digital technology, while urging every employee to act autonomously in an effort to continue increasing organiza- tional productivity through cooperation and co-creation. As such, we are working to raise employee awareness and fos- ter a culture of systematization in order to hasten the maxi- mum use of digital networks throughout the Company. More specifically, in order to enhance the value we generate, we are endeavoring to optimize real and digital operations for each job type and workplace and are implementing initia- tives that raise the productivity of both organizations and individuals. In addition, we are reviewing our personnel/labor management systems and frameworks, particularly those regarding working hours and locations. To thoroughly ensure compliance we implement various initiatives and measures that aim to raise awareness of com- pliance across the entire Group and foster a culture of com- pliance in the workplace. In fiscal 2021 we are reaffirming employees to check that they have a correct understanding of the laws and regulations pertaining to their business and region and to utilize our global hotline “EARS”*2 in order to detect issues from an early stage and prevent incidents from occurring. We are also stepping up awareness activities aimed at eradicating various forms of harassment in the workplace. *1 Unconscious bias training So that we can create organizations capable of realizing a whole host of synergies, this training aims to equip employees with a correct understand- ing and awareness of unconscious bias. *2 EARS (Ethical Action Real Solutions) Panasonic’s internal whistle-blowing hotline for employees to report concerns about compliance matters. All reports concerning compliance matters go through an independent, external system operated by a specialist firm. Reports can be submitted anonymously, confidentially, and without fear of retaliation. Optimizing real and digital operations to enhance the value we generate Case example of examination process Examples of initiatives for each job type/workplace Strategy Business strategy Technological, sales, and manufacturing strategies DX-driven business model transformation and manufacturing innovation Organizational productivity Individual productivity Business process Cooperation and co-creation within organizations Capabilities of the individual Customer (external) interaction process Optimal selection of remote operations to complement and reinforce real operations Internal business process Classification of work based on business/function; digital technology-powered process innovation; stronger direct-indirect collaboration Cooperating teams/ relationships Invigoration of communication and creation of cooperative framework through organizational development Management of organization leaders Results of enhancing quality and quantity of dialogue focused on the sharing of value; accurate understanding of behavior Individual engagement Company: Development of an environment that respects the individual; Individual: Awareness of responsibilities and improvement in self-determination Development of individual capabilities Thorough implementation of real OJT coupled with use of IT tools for agile learning Efficiency of the individual Time productivity of individuals Flexible work system assuming appropriate management of working hours; reforms to related systems Panasonic Annual Report 202061 ESG as Our Management Foundation CSR Procurement Panasonic currently does business with around 10,000 suppliers worldwide, roughly 70% of which are located in Japan and China. Industry-wise, 34% of them supply machined parts. We aim to establish fair, equitable, and sustainable supply chains by realizing co-existence and mutual prosperity with suppliers who can share our val- ues on fulfilling social responsibilities regarding not just economic relationships, but also the environment, CSR, and society. Fulfilling our social responsibilities together with our suppliers is in itself the practical implementa- tion of our management philosophy, and we consider the establishment of sustainable supply chains to be a key ini- tiative if we are to steadily undertake procurement activi- ties in the future and guarantee excellent product quality and competitive prices in order to deliver product value that is acceptable to our customers. Breakdown of transactions (by region) Latin America 1% Japan 39% Machined parts 34% Europe 3% North America 5% ASEAN & India 18% China 34% Other 19% Electricals/ electronics 23% Procurement policy Driven by the concept that, based on relationships of mutual trust and through diligent study and cooperation, our suppliers are invaluable partners in creating the values our customers demand, Panasonic’s Procurement Policy revolves around the following three points. 1. Implementation of global procurement activities The Company globally establishes partnerships with suppliers to respond to production activities on a global scale, and works to create the functions and values our customers demand based on relation- ships of mutual trust and through diligent studies and cooperation. 2. Implementation of CSR procurement Complying with laws and regulations, social norms, and corporate ethics, the Company promotes pro- curement activities together with suppliers that ful- fill their social responsibilities, such as human rights, labor, safety and health, global environmental conser- vation, and information security. 3. Procurement activities working closely with suppliers In order to achieve product values expected by cus- tomers, the Company serves as the contact point of suppliers with respect to information, such as the market trends of materials and goods, new technolo- gies, new materials, and new processes, and works to ensure and maintain the quality of purchased goods, realize competitive prices, and respond to market changes. Breakdown of transactions (by product) CSR self-assessments Raw materials 24% (as of March 31, 2020) It is also important to tackle child labor, forced labor, and other human rights and labor issues in the supply chain. When entering into an agreement with a supplier, the Company asks for the supplier’s cooperation in imple- menting CSR practices, supporting Panasonic Supply Chain CSR Promotion Guidelines, and performing CSR self-assessments. Panasonic Annual Report 2020ESG as Our Management Foundation 62 Panasonic Supply Chain CSR Promotion Guidelines (1) Labor rights: Prohibition of forced labor and child labor, appropriate working hours and payment of wages, humane treatment and elimination of dis- crimination, and freedom of association (2) Health and safety: Occupational safety and train- ing for emergency preparedness, machinery and equipment safeguarding, and health and safety facilities (3) Environment: Compliance with the Panasonic Group Green Procurement Standards (4) Ethics: Prohibition of corruption and bribery, and promotion of fair trade and responsible minerals procurement (5) Information security: Prevention of information leakage and protection against threats on com- puter networks (6) Quality and safety: Establishment of a product quality management system, provision of precise information on products and services, and ensur- ing of product safety (7) Contribution to society: Contributing to society and local community (8) Management system In the fiscal year ended March 2016, Panasonic began requesting that its suppliers conduct a CSR self-assessment of their initiatives for human rights, health and safety, the environment, and ethics, and Panasonic has been request- ing these self-assessments annually since then. If necessary, the Company has conducted field sur- veys and urged corrective actions to ensure fair, appropri- ate, and sustainable transactions. And the Company has made the same commitment in its Clean Procurement Declaration, which prohibits any employee from receiving money and valuables, and accepting any form of hospi- tality, entertainment or meals from suppliers, and estab- lished a global hotline by which Panasonic adheres to higher standards of moderation and ethics in its relation- ships with suppliers. Responsible minerals procurement Panasonic recognizes that the issue of conflict minerals is a matter of grave concern for society, given the various risks of child labor and other human rights abuses, harsh working conditions, environmental destruction, and cor- ruption in conflict-affected and high-risk regions, as well as the possibility that they are the source of funds for orga- nizations engaged in illegal or unethical activities. In order to promote the responsible procurement of minerals, the Company participates in JEITA’s Responsible Minerals Trade Working Group to raise awareness and improve the efficiency of surveys. Furthermore, since July 2017 the Company has been a member of the Responsible Minerals Initiative (RMI), through which it obtains the lat- est industry trends and promotes best practices regard- ing procurement activities. Moreover, Panasonic continues to implement initiatives in line with the Due Diligence Guidance of the Organization for Economic Co-operation and Development (OECD). The Company requires all related suppliers to provide information on smelters/refineries through the supply chain, and aims to procure minerals from smelters/refiner- ies that present no issues. In 2019 the Company surveyed around 3,600 suppliers concerning conflict minerals, but none of the minerals it sourced from them have been con- firmed to be directly or indirectly financing armed forces. There are also concerns about cobalt, which is used in lithium-ion batteries and other products, owing to human rights issues such as child labor at mining sites. Panasonic is constantly addressing this issue, mainly by conducting cobalt supply chain surveys and identifying and investigat- ing refineries/smelters. Environmental initiatives Panasonic asks its suppliers to actively engage in global envi- ronmental conservation and environmental management and also deliver their goods in accordance with its green pro- curement policy. We have revised our Green Procurement Standards with the aim of achieving the Green Plan 2021 (Please refer to “Message from Environmental Compliance Administrator.”) Based on these standards, we will push ahead with procurement activities so as to contribute to global environmental conservation together with suppliers. We ask our suppliers to reduce their environmental impact by establishing environmental management systems, ensur- ing comprehensive chemical substance management, low- ering GHG emissions, promoting the recycling of resources and water, engaging in biodiversity conservation, shar- ing results of collaborations (ECO-VC Activity), and urging upstream suppliers in the supply chain to do the same. The ECO-VC Activity recognizes outstanding initiatives and ideas aimed at generating added value. Panasonic, in its procurement activities, works closely with sup- pliers from the development stage to not only stream- line costs, but also reduce CO2 emissions, minimize the total resources used, and utilize recycled resources. The Activity receives around 700 applications on aver- age every year. Through partnerships with suppliers, the Company is helping to mitigate climate change by contrib- uting to the reduction in CO2 emissions. Through these activities Panasonic continues to pro- mote CSR procurement and fulfill its social responsibilities together with suppliers. At the same time, by establishing stable and sustainable supply chains, the Company will continue to underpin enhancements in corporate value in the future. Panasonic Annual Report 2020 63 Financial and Corporate Information Financial Highlights Panasonic Corporation and subsidiaries, years ended March 31 Panasonic began applying International Financial Reporting Standards (IFRS) on a voluntary basis in the fiscal year ended March 2017. Financial figures for the fiscal year ended March 2016 are also presented in accordance with IFRS in addition to conventional U.S. GAAP standards. Net Sales (Trillions of yen) 9 6 3 0 7.5 3.6 3.9 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Domestic Overseas Operating Profit and Ratio to Sales (Billions of yen) 500 400 300 200 100 0 293.8 286.7 (%) 10.0 8.0 6.0 4.0 2.0 3.9% 0 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Adjusted Operating Profit (left scale) Operating Profit (left scale) Operating Profit/Sales Ratio (right scale) Net Profit Attributable to Panasonic Corporation Stockholders and ROE (Billions of yen) 300 200 100 0 -900 225.7 11.5% 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Net Profit Attributable to Panasonic Corporation Stockholders (left scale) ROE (right scale) R&D Expenditures and Ratio to Sales (Billions of yen) 600 400 200 0 475.0 6.3% 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS R&D Expenditures (left scale) R&D Expenditures/Sales Ratio (right scale) (%) 15 10 5 0 -50 (%) 7.5 5.0 2.5 0 Despite year-on-year increases in domestic sales of in-vehicle infotain- ment systems and personal computers, as well as in overseas sales of automo- tive batteries, domestic housing related businesses were deconsolidated, and overseas TVs and Automotive Solu- tions struggled. Due also to the impact of COVID-19, consolidated net sales declined year on year. Operating profit decreased due largely to the impact of decreased sales by weak capital investment demand in China, as well as the impact of COVID- 19, in addition to recording of restruc- turing expenses, despite fixed cost reductions through enhancing man- agement structure, and rationalization efforts at the automotive cylindrical battery factory in North America, as well as gains from business transfers. Note: Adjusted operating profit = sales - cost of sales - SG&A Due to the decrease in operating profit, net profit attributable to Panasonic Corporation stockholders declined. This was despite a decrease in income taxes owing to tax benefits associated with the reorganization of subsidiaries. As a result, ROE ended the year at 11.5%. Panasonic concentrated on develop- ment of new technologies and new products to underpin the future based on the growth strategies for the major business fields. In addition, the Group developed technologies such as IoT, arti- ficial intelligence (AI), and big data, and also actively worked to create new busi- nesses that make use of such technol- ogies. As a result, R&D expenditures totaled 475.0 billion yen. (Billions of yen) 500 400 300 200 100 0 600 400 200 0 -200 -400 -600 (Billions of yen) (Billions of yen) 1,600 1,200 800 400 0 (Yen) 40.0 30.0 20.0 10.0 0 268.9 205.0 430.3 272.1 224.2 -206.1 3/’20 1,471.4 1,016.5 30.0 31.0% (%) 40.0 30.0 20.0 10.0 0 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Capital Investment Depreciation 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 U.S. GAAP IFRS Cash Flow from Operating Activities Cash Flow from Investing Activities Free Cash Flow Free Cash Flow Excluding Strategic Investments 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Cash and Cash Equivalents Interest-Bearing Debt 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Dividends Declared per Share (left scale) Consolidated Payout Ratio (right scale) Panasonic Annual Report 2020Financial and Corporate Information 64 Capital Investment and Depreciation (Billions of yen) 500 400 300 200 100 0 268.9 205.0 Panasonic makes capital investment based on a policy of steady invest- ments primarily in key businesses for future growth. The main capital invest- ments for fiscal 2020 have been made in production facilities in Japan and China for lithium-ion batteries for auto- motive use and in production facilities for electronic components, etc. 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Domestic Overseas 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Capital Investment Depreciation Free Cash Flows (Billions of yen) 600 400 200 0 -200 -400 -600 430.3 272.1 224.2 -206.1 3/’20 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 U.S. GAAP IFRS Cash Flow from Operating Activities Cash Flow from Investing Activities Free Cash Flow Free Cash Flow Excluding Strategic Investments Cash and Cash Equivalents and Interest-Bearing Debt (Billions of yen) 1,600 1,200 800 400 0 1,471.4 1,016.5 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Cash and Cash Equivalents Interest-Bearing Debt Dividends Declared per Share and Consolidated Payout Ratio (Yen) 40.0 30.0 20.0 10.0 0 30.0 31.0% (%) 40.0 30.0 20.0 10.0 0 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS R&D Expenditures (left scale) R&D Expenditures/Sales Ratio (right scale) 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Dividends Declared per Share (left scale) Consolidated Payout Ratio (right scale) Free cash flow increased significantly year on year, to 224.2 billion yen, due to cash inflows from the sales of busi- nesses and assets, as well as improve- ment in working capital and thorough controls of capital investments and inven- tories. This was despite upfront invest- ments in automotive prismatic batteries. Note: Lease receivables collected as a result of application of finance lease accounting as les- sor—based on product supply contracts deter- mined to contain leases—are included in cash flows from investing activities. (Lease receiv- ables collected amounted to 37.2 billion yen in fiscal 2020, 167.3 billion yen in fiscal 2019, and 19.3 billion yen in fiscal 2018.) Cash and cash equivalents increased year on year, due primarily to the improvement in free cash flow. Inter- est-bearing debt also increased, due mainly to issuance of bonds and an increase in lease liabilities resulting from the application of IFRS 16, “Leases” in the year under review. Note: Interest-bearing debt (amounting to 1,471.4 billion yen at March 31, 2020) includes lease liabilities of 266.9 billion yen. Panasonic works to provide a stable, sustained dividend based on a target consolidated payout ratio of approxi- mately 30%. According to this policy, the annual dividend per share for fiscal 2020 was set at 30 yen per share, the same as the previous year. Note: The dividend payout ratio is not calculated in fiscal years when net income attribut- able to Panasonic Corporation is negative. (Trillions of yen) (Billions of yen) (Billions of yen) (Billions of yen) 9 6 3 0 500 400 300 200 100 0 300 200 100 0 -900 600 400 200 0 7.5 3.6 3.9 293.8 286.7 (%) 10.0 8.0 6.0 4.0 2.0 3.9% 0 225.7 11.5% 475.0 6.3% (%) 15 10 5 0 -50 (%) 7.5 5.0 2.5 0 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Adjusted Operating Profit (left scale) Operating Profit (left scale) Operating Profit/Sales Ratio (right scale) 3/’11 3/’12 3/’13 3/’14 3/’15 3/’16 3/’16 3/’17 3/’18 3/’19 3/’20 U.S. GAAP IFRS Net Profit Attributable to Panasonic Corporation Stockholders (left scale) ROE (right scale) Panasonic Annual Report 202065 Financial and Corporate Information At a Glance Reportable Segment Fiscal 2020 Operating Results Sales (Years ended March 31) Adjusted operating profit (reference) Fiscal 2020 Net Sales Composition Ratio Appliances 15% 31% 18% Consolidated Net Sales ¥7,490.6 billion 13% 23% Life Solutions Note: Net sales composition ratio is calculated by dividing the sales of each reportable segment by the total of reportable segment sales (excluding “Other” and “Eliminations and Adjustments”). Connected Solutions Spatial sterilizing/deodorizing equipment using sodium hypochlorite (Ziaino) Reportable Segment Changes In fiscal 2020, the reportable segments have been changed as follows: (1) Eco Solutions has been renamed Life Solutions. (2) Automotive & Industrial Systems has been reorganized into two segments: Automotive, catering to vehicle manufacturers, and Industrial Solutions, centered on competi- tive devices. Fiscal 2019 Fiscal 2020 Appliances Appliances Let's Note notebook PCs for corporates Collaboration with Linkwiz, Inc. to enhance welding processes in manufacturing Fall detection system for Odakyu Electric Railway Co., Ltd. Automotive Car cockpits Heads-up display (Display example) In-vehicle lithium-ion battery Eco Solutions Name change Life Solutions Industrial Solutions Connected Solutions Connected Solutions Automotive & Industrial Systems Organization change Automotive Industrial Solutions Multi-layer circuit board material, which meets the requirements for high-speed transmission Storage module for lithium-ion battery Power Coil for automotive use Operating Profit (Years ended March 31) • Operating profit/sales ratio (Billions of yen) 3,000 2,750.6 2,592.6 (Billions of yen) 83.6 85.6 71.1 55.7 4.0 3.1 2.1 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 2,500 (Billions of yen) 200 2,036.1 1,912.5 179.8 9.4 1,250 100 89.9 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 1,200 1,127.7 (Billions of yen) 100 99.9 1,035.7 64.6 98.1 3.2 94.4 92.2 76.2 8.9 8.4 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 2,000 (Billions of yen) 1,523.2 1,482.4 -0.8 -11.8 -12.1 -30.5 -3.1 -46.6 -4.0 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 1,500 1,422.3 1,282.7 (Billions of yen) 68.6 63.5 4.8 37.6 3/‘19 3/‘20 3/‘19 3/‘20 4.6 0.4 0 2,000 1,000 0 0 800 400 0 1,000 0 1,000 500 0 90 60 30 0 0 50 0 0 -25 -50 80 60 40 20 0 (%) 6.0 2.0 0 (%) 12.0 6.0 0 (%) 12.0 6.0 0 (%) 0 -2.0 (%) 6.0 4.5 3.0 1.5 Panasonic Annual Report 202015% 31% 18% Consolidated Net Sales ¥7,490.6 billion 13% 23% Reportable Segment Fiscal 2020 Operating Results Sales (Years ended March 31) Financial and Corporate Information 66 Operating Profit (Years ended March 31) Adjusted operating profit (reference) • Operating profit/sales ratio Sales decreased by 6% to 2,592.6 billion yen from a year ago, declining overall as a result of struggling sales of TVs and digital cameras primarily in Europe, and the impact of COVID-19, despite increased sales of room air-conditioners in Asia and large air-conditioners in Japan. Operating profit decreased 29.9 billion yen to 55.7 billion yen from a year ago as a result of the impact of COVID-19 and the recording of restructuring expense, despite strong sales of washing machines and personal-care products in Japan. (Billions of yen) 3,000 2,750.6 2,592.6 2,000 1,000 0 90 60 30 0 (Billions of yen) 83.6 85.6 (%) 6.0 71.1 55.7 4.0 3.1 2.1 Sales decreased by 6% to 1,912.5 billion yen from a year ago, declining overall because Panasonic Homes Co., Ltd. and the construction solution business were removed from the scope of consolidation due to business transfers to Prime Life Technologies Corporation (PLT), a joint venture with Toyota Motor Corporation. Excluding that effect, sales increased as a result of the COVID-19 related sales reductions in all SDs at the end of the fiscal year being covered by the domestic and international electric mate- rials, housing, bicycles, and nursing care service, which had been solid earlier on. Operating profit increased 115.2 billion yen to 179.8 billion yen from a year ago, as a result of higher profit from sales, rationalization measures, along with a gain from stock transfers etc. in the housing business when PLT was established. Sales decreased by 8% to 1,035.7 billion yen from a year ago, decreasing overall, which was mainly due to weaker sales in the process automation business and avionics business and a sales decline across the segment triggered by the impact of COVID-19 and other factors, although Panasonic System Solutions Japan Co., Ltd. saw an increase in its sales. Operating profit decreased 2.2 billion yen to 92.2 billion yen from a year ago, mainly due to losses on lower sales in the process automation business and the avionics business, a sales decline triggered by the COVID-19, and other factors, despite accrued capital gains from the transfer of the security systems business. Sales decreased by 3% to 1,482.4 billion yen from a year ago. Despite increased sales at automotive batteries, resulting from the effect of investments in capacity expansion, overall sales declined due to decreased sales at Automotive Solutions which were mainly impacted by deteriorating market conditions in China and the spread of COVID-19. The segment recorded an operating loss of 46.6 billion yen, 34.5 billion yen down from a year ago, mainly because of increases in development expenses in the auto- motive solutions business for challenging development projects centered on battery chargers ordered from Europe, as well as recognition of impairment loss on goodwill at Spanish subsidiary Ficosa International S.A. due to market deterioration. In addition, there were increases in fixed costs in the automotive batteries business for the produc- tion launch of high-capacity cells for prismatic lithium-ion batteries at the Himeji Factory in Japan, despite increases in sales and profit in the automotive batteries business. Sales decreased by 10% to 1,282.7 billion yen from a year ago, declining overall as the U.S.-China trade dispute led to a deterioration of the Chinese market and deterred investments, and the impact of COVID-19, which offset steady growth in sales in key fields(Note 1) primarily of “automotive CASE(Note 2)” and “informa- tion communication infrastructure.” Operating profit decreased 64.0 billion yen to 4.6 billion yen from a year ago, because efforts to reduce fixed costs and promote the rationalization of materials fell short of offsetting weak sales and profit triggered by the market downturn and the COVID-19, and an impairment loss was also accrued when the transfer of the semiconductors business was decided. (Note 1) Key fields: the fields of “CASE for automotive use”, “information communication infra- structure”, and “factory labor saving,” which are continuously evolving (Note 2) CASE: Connected, Autonomous, Shared & Services, and Electric 2.0 0 (%) 12.0 6.0 0 (%) 12.0 6.0 0 (%) 0 -2.0 (%) 6.0 4.5 3.0 1.5 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 2,500 (Billions of yen) 200 2,036.1 1,912.5 179.8 9.4 1,250 100 89.9 64.6 98.1 3.2 0 0 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 1,200 1,127.7 (Billions of yen) 99.9 100 1,035.7 800 400 0 50 0 94.4 92.2 76.2 8.9 8.4 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 2,000 (Billions of yen) 0 1,523.2 1,482.4 -0.8 -11.8 -12.1 1,000 0 -25 -50 -30.5 -3.1 -46.6 -4.0 3/‘19 3/‘20 3/‘19 3/‘20 (Billions of yen) 68.6 63.5 4.8 37.6 (Billions of yen) 1,500 1,422.3 1,282.7 1,000 500 0 80 60 40 20 0 3/‘19 3/‘20 3/‘19 3/‘20 4.6 0.4 0 Panasonic Annual Report 2020 67 Financial and Corporate Information At a Glance Sales Composition (Based on Fiscal 2020 results) Appliances Others Commercial Refrigeration & Food Equipment Sales ¥2,592.6 billion Smart Life Network Life Solutions Others Panasonic Homes Housing Systems PSSJ Mobile Solutions Connected Solutions Sub-segments (Note) “Businesses whose sales are disclosed” renamed to “Sub-segment” from Fiscal 2021 Business Division Main products and services Heating and Cooling Solutions Heating and Cooling Solutions Heating and Cooling Solutions BD Home Appliances Smart Life Network Home Appliances Commercial Refrigeration & Food Equipment Cold Chain BD, Hussmann Corporation Lighting Others Lighting Energy Systems Sales Energy Systems Panasonic Ecology Systems Panasonic Ecology Systems Co.‚ Ltd. ¥1,912.5 billion Kitchen Appliances BD, Laundry Systems and Vacuum Cleaner BD, Beauty and Personal Care BD Smart Life Network BD Refrigeration and Air-Conditioning Devices BD, Smart Energy System BD, sales of other Divisional Company products, headquarter-related, eliminations, etc. Lighting BD Energy Systems BD Housing Systems BD Panasonic Homes Co., Ltd.* Bicycle, nursing-care, sales & marketing, eliminations, etc. Panasonic Avionics Corporation, Avionics BU Process Automation BD Media Entertainment BD Mobile Solutions BD Panasonic System Solutions Japan Co., Ltd. Other businesses, eliminations, etc. Panasonic Ecology Systems Avionics Sales ¥1,035.7 billion Process Automation Media Entertainment Housing Systems Panasonic Homes Others Avionics Process Automation Media Entertainment Mobile Solutions PSSJ Others The “Others” sub-segment is not shown in the pie chart because the amount has been negative due to the effects of eliminations and adjustments. Automotive Others Automotive Solutions Automotive Infotainment Systems BD, HMI Systems BD, Automotive Systems BD, Ficosa International, S.A. Automotive Batteries Sales ¥1,482.4 billion Automotive Solutions Automotive Batteries Automotive Energy BD, Tesla Energy BD Others Sales of other Divisional Company products, etc. Industrial Solutions Others Devices Sales ¥1,282.7 billion Systems Systems Devices Others Electromechanical Control BD, Industrial Device BD, Energy Solutions BD Device Solutions BD, Energy Device BD, Electronic Materials BD Semiconductor, LCD, sales of other Divisional Company products, eliminations, etc. Panasonic Annual Report 2020Financial and Corporate Information 68 (as of March 31, 2020) Heating and Cooling Solutions Commercial Refrigeration & Food Equipment Sales ¥2,592.6 billion Smart Life Network Others Lighting Panasonic Homes Housing Systems ¥1,912.5 billion Panasonic Ecology Systems Avionics Media Entertainment Sales ¥1,035.7 billion Process Automation Mobile Solutions PSSJ Others Home Appliances Smart Life Network Others Lighting Energy Systems Housing Systems Panasonic Homes Others Avionics Process Automation Media Entertainment Mobile Solutions PSSJ Others Sales Composition (Based on Fiscal 2020 results) Business Division Main products and services Sub-segments (Note) “Businesses whose sales are disclosed” renamed to “Sub-segment” from Fiscal 2021 Others Heating and Cooling Solutions Heating and Cooling Solutions BD Kitchen Appliances BD, Laundry Systems and Vacuum Cleaner BD, Beauty and Personal Care BD Room air-conditioners, large-sized air-conditioners, refrigerators, washing machines, vacuum cleaners, Home Appliances Commercial Refrigeration & Food Equipment Cold Chain BD, Hussmann Corporation Smart Life Network BD Refrigeration and Air-Conditioning Devices BD, Smart Energy System BD, sales of other Divisional Company products, headquarter-related, eliminations, etc. Lighting BD Energy Systems BD Sales Energy Systems Panasonic Ecology Systems Panasonic Ecology Systems Co.‚ Ltd. Housing Systems BD Panasonic Homes Co., Ltd.* Bicycle, nursing-care, sales & marketing, eliminations, etc. *Panasonic Homes Co., Ltd. was deconsolidated in January 7, 2020 Panasonic Avionics Corporation, Avionics BU Process Automation BD Media Entertainment BD Mobile Solutions BD Panasonic System Solutions Japan Co., Ltd. Other businesses, eliminations, etc. microwave ovens, rice cookers, personal-care products, TVs, digital cameras, video equipment, home audio equipment, fixed-phones, showcases, compressors, fuel cells Lighting fixtures, lamps, wiring devices, solar photovoltaic systems, ventilation and air-conditioning equipment, air purifiers, kitchen & bath, interior furnishing materials, exterior finishing materials, bicycles, nursing care service Aircraft in-flight entertainment systems and communications services, electronic-components-mounting machines, welding equipment, projectors, professional AV systems, PCs and tablets, Solutions for various industries, installation/ operation/maintenance services Automotive Batteries Sales ¥1,482.4 billion Automotive Solutions Automotive Batteries Automotive Energy BD, Tesla Energy BD Automotive Solutions Automotive Infotainment Systems BD, HMI Systems BD, Automotive Systems BD, Ficosa International, S.A. Automotive-use infotainment systems, automotive switches, automotive audio systems, Advanced driver assistance systems (ADAS), Device and systems for electric automobiles, automotive mirrors, automotive-use batteries Others Sales of other Divisional Company products, etc. Others Devices Sales ¥1,282.7 billion Systems Systems Devices Others Electromechanical Control BD, Industrial Device BD, Energy Solutions BD Device Solutions BD, Energy Device BD, Electronic Materials BD Semiconductor, LCD, sales of other Divisional Company products, eliminations, etc. Relays, switches, power supply, industrial motors and sensors, small lithium-ion batteries, capacitors, coils, resistors, electronic circuit board materials, dry batteries, micro batteries, semiconductors, LCD panels Panasonic Annual Report 202069 Financial and Corporate Information 10-Year Financial Summary Panasonic Corporation and Subsidiaries, Years ended March 31 Panasonic began applying International Financial Reporting Standards (IFRS) on a voluntary basis in the fiscal year ended March 2017. Financial figures for the fiscal year ended March 2016 are also presented in accordance with IFRS in addition to conventional U.S. GAAP standards. U.S. GAAP For the Year (Millions of yen) Net sales Operating profit 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 8,692,672 305,254 7,846,216 43,725 7,303,045 160,936 7,736,541 305,114 7,715,037 381,913 7,553,717 415,709 Income (loss) before income taxes Net income (loss) attributable to Panasonic Corporation Capital investment Depreciation R&D expenditures Free cash flow 178,807 74,017 403,778 284,244 527,798 266,250 (812,844) (772,172) 333,695 295,808 520,217 (339,893) (398,386) (754,250) 310,866 277,582 502,223 355,156 206,225 120,442 217,033 278,792 478,817 594,078 182,456 179,485 226,680 242,149 457,250 353,455 217,048 193,256 248,794 235,033 449,828 124,406 At Year-End (Millions of yen) Cash and cash equivalents Total assets Interest-bearing debt Panasonic Corporation shareholdersʼ equity Total equity Per Share Data (Yen) Net income (loss) attributable to Panasonic Corporation per common share: Basic Diluted Dividends declared per share Panasonic Corporation shareholdersʼ equity per share Financial Indicators Operating profit/sales (%) Income (loss) before income taxes/sales (%) ROE (%) Net income (loss) attributable to Panasonic Corporation/sales (%) Total asset turnover ratio (Times) Financial leverage (Times) Interest-bearing debt/total assets (%) Panasonic Corporation shareholdersʼ equity/total assets (%) Payout ratio (%) Exchange Rate (Yen) 1 USD 1 EUR 1 RMB 974,826 7,822,870 1,595,269 2,558,992 2,946,335 574,411 6,601,055 1,575,615 1,929,786 1,977,566 496,283 5,397,812 1,143,395 1,264,032 1,304,273 592,467 5,212,994 642,112 1,548,152 1,586,438 1,280,408 5,956,947 972,916 1,823,293 1,992,552 1,014,264 5,596,982 725,919 1,705,056 1,854,314 35.75 — 10.00 1,236.05 (333.96) — 10.00 834.79 (326.28) — — 546.81 52.10 — 13.00 669.74 77.65 77.64 18.00 788.87 83.40 83.39 25.00 734.62 3.5 2.1 2.8 0.9 1.1 3.0 20.4 32.7 28.0 86 113 — 0.6 (10.4) (34.4) (9.8) 1.1 3.2 23.9 29.2 — 79 109 — 2.2 (5.5) (47.2) (10.3) 1.2 3.8 21.2 23.4 — 83 107 13.3 3.9 2.7 8.6 1.6 1.5 3.8 12.3 29.7 25.0 100 134 16.4 5.0 2.4 10.6 2.3 1.4 3.3 16.3 30.6 23.2 110 139 17.7 5.5 2.9 11.0 2.6 1.3 3.3 13.0 30.5 30.0 120 133 18.9 Note to U.S. GAAP 1. The Companyʼs financial statements were prepared in conformity with U.S. gener- ally accepted accounting principles (U.S. GAAP) until the fiscal year ended March 2016. 8. Effective from the beginning of fiscal 2013, investments and depreciation expenses in molding dies are included in “Capital investment” and “Depreciation,” respectively. Accordingly, the amounts of “Depreciation” and “Capital investment” for fiscal 2012 are changed. 2. In order to be consistent with generally accepted financial reporting practices in Japan, operating profit, a non-GAAP measure, is presented as net sales less cost of sales and selling, general and administrative expenses. The Company believes that this is useful to investors in comparing the companyʼs financial results with those of other Japanese companies. See the Companyʼs annual securities report and finan- cial announcements for the details. 3. The Company defines capital investment as purchases of property, plant and equip- ment based on an accrual basis which reflects the effects of timing differences between acquisition date and payment date. 4. “Capital investment” and “Depreciation” do not include intangibles. 5. “Dividends declared per share” reflect those declared by Panasonic in each fiscal year and consist of interim dividends paid during the fiscal year and year-end divi- dends paid after the fiscal year-end. 6. Exchange rate is the average rate for the fiscal year. 7. “Diluted net income (loss) attributable to Panasonic Corporation per common share” from fiscal 2011 to fiscal 2014 has been omitted because the Company did not have potential common shares that were outstanding for the period. 9. Payout ratios have not been presented for those fiscal years in which the Company incurred a net loss attributable to Panasonic Corporation. 10. “Interest-bearing debt” is equal to the sum of short-term debt, including current portion of long-term debt, and long-term debt. 11. Formulas for financial ratios are as follows: Operating profit ratio = Operating profit / Net sales ROE (Return on equity) = Net income (loss) attributable to Panasonic Corporation / Average Panasonic Corporation shareholdersʼ equity at the beginning and the end of each fiscal year Total assets turnover = Net Sales / Average total assets at the beginning and the end of each fiscal year Financial leverage = Average total assets at the beginning and the end of each fiscal year / Average Panasonic Corporation shareholdersʼ equity at the beginning and the end of each fiscal year Payout ratio = Dividends declared per share / Basic net income attributable to Panasonic Corporation common shareholders per share Panasonic Annual Report 2020 Financial and Corporate Information 70 IFRS For the Year (Millions of yen) Net sales Adjusted operating profit Operating profit Profit before income taxes Net profit attributable to Panasonic Corporation stockholders Capital investment Depreciation R&D expenditures Free cash flow At Year-End (Millions of yen) Cash and cash equivalents Total assets Interest-bearing debt Panasonic Corporation stockholdersʼ equity Total equity Per Share Data (Yen) Earnings per share attributable to Panasonic Corporation stockholders: Basic Diluted Dividends declared per share Panasonic Corporation stockholdersʼ equity per share Financial Indicators Operating profit/sales (%) Profit before income taxes/sales (%) ROE (%) Net profit attributable to Panasonic Corporation stockholders/sales (%) Total asset turnover ratio (Times) Financial leverage (Times) Interest-bearing debt/total assets (%) Panasonic Corporation stockholdersʼ equity/total assets (%) Payout ratio (%) Exchange Rate (Yen) 1 USD 1 EUR 1 RMB 3/2016 3/2017 3/2018 3/2019 3/2020 7,626,306 413,246 230,299 227,529 165,212 252,905 238,214 438,851 125,551 1,012,666 5,488,024 724,841 1,444,442 1,647,233 7,343,707 343,616 276,784 275,066 149,360 311,641 224,405 436,130 (34,746) 1,270,787 5,982,961 1,124,004 1,571,889 1,759,935 7,982,164 401,202 380,539 378,590 236,040 392,234 226,576 448,879 (35,646) 1,089,585 6,291,148 1,239,444 1,707,551 1,882,285 8,002,733 327,032 411,498 416,456 284,149 300,450 226,788 488,757 10,290 772,264 6,013,931 998,721 1,913,513 2,084,615 7,490,601 286,663 293,751 291,050 225,707 268,850 204,990 475,005 224,207 1,016,504 6,218,518 1,471,311 1,998,349 2,155,868 71.30 71.29 25.00 622.34 64.33 64.31 25.00 673.93 101.20 101.15 30.00 732.12 121.83 121.75 30.00 820.41 96.76 96.70 30.00 856.57 3.0 3.0 11.1 2.2 1.3 3.8 13.2 26.3 35.1 120 133 18.9 3.8 3.7 9.9 2.0 1.3 3.8 18.8 26.3 38.9 108 119 16.1 4.8 4.7 14.4 3.0 1.3 3.7 19.7 27.1 29.6 111 130 16.8 5.1 5.2 15.7 3.6 1.3 3.4 16.6 31.8 24.6 111 128 16.5 3.9 3.9 11.5 3.0 1.2 3.1 23.7 32.1 31.0 109 121 15.6 Note to IFRS 1. The Companyʼs consolidated financial statements are prepared in conformity with International Financial Reporting Standards (IFRS). 2. Adjusted operating profit = Net sales - Cost of sales - SG&A 3. The Company defines capital investment as purchases of property, plant and equipment based on an accrual basis which reflects the effects of timing differences between acqui- sition date and payment date. 4. “Capital investment” and “Depreciation” do not include intangibles. 5. “Dividends declared per share” reflect those declared by Panasonic in each fiscal year and consist of interim dividends paid during the fiscal year and year-end dividends paid after the fiscal year-end. 6. Exchange rate is the average rate for the fiscal year. 7. “Interest-bearing debt” is equal to the sum of short-term debt, including current portion of long-term debt, long-term debt, and lease liabilities. 8. Formulas for financial ratios are as follows: Operating profit ratio = Operating profit / Net sales ROE (Return on equity) = Net profit attributable to Panasonic Corporation stockholders / Average Panasonic Corporation stockholdersʼ equity at the beginning and the end of each fiscal year Total assets turnover = Net Sales / Average total assets at the beginning and the end of each fiscal year Financial leverage = Average total asset at the beginning and the end of each fiscal year / Average Panasonic Corporation shareholdersʼ equity at the beginning and the end of each fiscal year Payout ratio = Dividends declared per share / Basic earnings per share attributable to Panasonic Corporation stockholders Panasonic Annual Report 2020 71 Financial and Corporate Information Financial Review Operating Results Business Overview During the year ended March 31, 2020 (fiscal 2020) under review, the global economy saw a moderate growth trend in the first half of the fiscal year, supported by spending in the U.S. and favorable employment conditions in Japan. However, there were also many sudden economic downside factors such as the slump in spending and investment in China, and the slowdown of imports and exports from/to various coun- tries, with a background of trade friction between the U.S. and China. Moreover, the period saw an increase in Japanʼs con- sumption tax, and the worldwide spread of the novel corona- virus infection (COVID-19) toward the end of the fiscal year. Under such a management environment, in fiscal 2020, as the first year of the new Mid-term strategy, the Com- pany executed the portfolio management and enhancement of management structure with three business classifica- tions of “Core growth business,” “Co-creation business” and “Revitalization business.” Specifically, Panasonic prioritizes its resources in areas where market growth is expected as well as the Company has advantages, particularly, in Core growth business in BtoB fields, and have been mak- ing efforts for future profit growth. In addition, toward enhancing competitiveness through collaboration and co-creation with external partners, in hous- ing business, the Company established a joint venture with Toyota Motor Corporation related to town development busi- ness, Prime Life Technologies Corporation on January 7, 2020. This aim is to generate a unique added value by integrat- ing “housing” and “mobility.” In automotive prismatic battery business, the Company decided to establish a joint venture, Prime Planet Energy & Solutions, Inc. with Toyota Motor Cor- poration. The aim is to develop highly competitive batteries that have excellent quality, performance and cost-effective- ness, and to provide a stable supply of batteries. The joint venture has been in operation since April 1, 2020. In terms of profitability improvement, the Company decided to transfer the semiconductor business, which faces extreme fierce competitive environment, to Nuvoton Technol- ogy Corporation, under the umbrella of Winbond Electronics Corporation in Taiwan. This transfer will enable to lead sustain- able growth by utilizing the Companyʼs accumulated technical and product capabilities. Furthermore, in LCD panel business, Financial Results Net sales Operating profit Profit before income taxes Net profit attributable to Panasonic Corporation stockholders ROE Exchange rates 1 USD 1 EUR 1 RMB the Company decided to end its production by 2021 due to the increasingly competitive global market environment. Net Sales The Companyʼs consolidated group sales for fiscal 2020 decreased by 6% to 7,490.6 billion yen from a year ago. Domestic sales decreased due to the deconsolidation of housing related businesses, in addition to the impact of COVID-19, despite sales increases in PCs and Infotainment Systems such as IVI (Note). Overseas sales decreased due mainly to sluggish sales in TVs and Automotive Solu- tions, the effect of exchange rates and the impact of the spread of the novel coronavirus infection, despite signifi- cant sales increases in Automotive Batteries. In addition, the impact of COVID-19 occurred in each segment mainly in Appliances and Connected Solutions. Note: IVI: In Vehicle Infotainment Overview by Geographic Region By geographic region, overall sales in Japan decreased by 3% to 3,609.1 billion yen, from 3,716.6 billion yen a year ago. Sales overseas decreased by 9% to 3,881.5 billion yen, from 4,286.1 billion yen a year ago. In real terms, excluding the impact of exchange rates, sales decreased by 6% year on year. In North and South America, sales totaled 1,442.3 billion yen, a year-on-year decrease of 3% in real terms. In Europe, sales totaled 720.6 billion yen, a year-on-year decrease of 5% in real terms. In Asia, sales were 963.8 billion yen, a 3% decrease in real terms, and China, sales were 754.8 billion yen, a 15% decrease in real terms. Sales by Region 3/2019 3/2020 (Billions of yen) Local currency basis vs. 3/2019 Japan Americas Europe Asia China Total 3,716.6 1,529.8 807.3 1,015.0 934.0 8,002.7 3,609.1 1,442.3 720.6 963.8 754.8 7,490.6 97% 97% 95% 97% 85% 95% (Billions of yen) vs. 3/2019 %/amount 94% 71% 70% 79% — -512.1 -117.7 -125.4 -58.4 -4.2% 3/2019 8,002.7 411.5 416.5 284.1 15.7% 111 yen 128 yen 16.5 yen 3/2020 7,490.6 293.8 291.1 225.7 11.5% 109 yen 121 yen 15.6 yen Panasonic Annual Report 2020 Operating Results Financial and Corporate Information 72 Sales (Years ended March 31) Operating Profit Operating Profit/Sales Ratio (Years ended March 31) Profit before Income Taxes (Years ended March 31) Net Profit Attributable to Panasonic Corporation Stockholders (Years ended March 31) (Trillions of yen) 9 8.0 7.5 (Billions of yen) 500 (%) 10.0 (Billions of yen) 500 411.5 416.5 6 3 0 327.0 286.7 293.8 5.0 250 291.1 5.1 3.9 0 0 250 0 (Billions of yen) 300 284.1 225.7 200 100 0 3/’19 3/’20 3/’19 3/’20 3/’19 3/’20 3/’19 3/’20 Adjusted Operating Profit (left scale) Operating Profit (left scale) Operating Profit/Sales Ratio (right scale) Operating Profit Operating profit decreased by 29% to 293.8 billion yen from a year ago. Adjusted operating profit fell 40.3 billion yen year on year, due largely to the impact of decreased sales by weak capital investment demand in China and the impact of COVID-19. This was despite fixed cost reductions through enhancing management structure by reducing various indirect costs and others, and rational- ization efforts at the automotive cylindrical battery fac- Fiscal 2020 Operating Profit Analysis (Billions of yen) tory in North America. Although we posted gains from housing-related busi- ness transfer, we reported a 77.4 billion yen year-on-year decline in other income (loss). This was due mainly to recording of restructuring expenses. As a result, operating profit fell 117.7 billion yen, and the operating profit ratio decreased from 5.1% to 3.9%. Sales increase/ decrease in real terms 411.5 Price declines/ rationalization/ sales mix, etc. Fixed cost Deconsolidation impact -13.3 Effect of exchange rates -11.8 Other income/loss -89.0 +43.2 +30.6 -77.4 293.8 Adjusted operating profit -40.3 Fiscal 2019 Operating profit -117.7 Fiscal 2020 Profit before Income Taxes Net Profit Attributable to Panasonic Corporation Stockholders Finance income increased from 25.6 billion yen the pre- vious fiscal year to 31.4 billion yen. Finance expenses increased from 20.6 billion yen to 34.1 billion yen. As a result, profit before income taxes was 291.1 billion yen, compared to 416.5 billion yen the previous fiscal year. Income taxes were 51.0 billion yen, compared to 113.7 bil- lion yen a year ago. As a result, net profit attributable to Panasonic Corporation stockholders totaled 225.7 billion yen, compared to 284.1 billion yen a year ago. Also, net profit attributable to Panasonic Corporation stockholders per share was 96.76 yen, against 121.83 yen the previ- ous fiscal year. Panasonic Annual Report 202073 Financial and Corporate Information Financial Review Financial Conditions and Liquidity Liquidity and Capital Resources Cash Flows The Company recognizes the importance of increasing free cash flow by strengthening business profitability and developing businesses over the mid- to long-term. The Company also works simultaneously to create cash flows through continuous reductions of working capital, revi- sions of asset holdings and other measures. Net cash provided by operating activities for fiscal 2020 was 430.3 billion yen and net cash used in investing activities was 206.1 billion yen. Free cash flow, the total of the two, was an inflow of 224.2 billion yen. The free cash flow for fiscal 2020 improved by 213.9 billion yen from the previous year. This was due mainly to improved work- ing capital, thorough controls of capital investments and inventory as well as an increase in cash inflow from the sales of business and assets, in spite of an upfront invest- ments in automotive prismatic batteries. Free Cash Flows (Years ended March 31) (Billions of yen) 250 224.2 200 150 100 50 0 -50 10.3 -35.6 3/’18 3/’19 3/’20 The Panasonic Group has a basic policy of generat- ing funds needed for business activities from internal sources. Funds generated are efficiently utilized through intra-Group financing. Based on this, when funds are needed for working capital or business investment, exter- nal financing is obtained through appropriate means based on financial strength and financial market conditions. Cash and cash equivalents as of March 31, 2020 were 1,016.5 billion yen, increased by 244.2 billion yen com- pared with the end of the previous fiscal year. During fiscal 2020, Panasonic issued USD-dominated senior notes of USD 2.5 billion in July 2019, and unse- cured straight bonds of 100.0 billion yen in March 2020, in order to raise funds for bond redemptions and securing funds necessary for future business operations. Panaso- nic mainly issued commercial paper (CP) to secure work- ing capital and others. Interest-bearing debt increased to 1,471.4 billion yen as of March 31, 2020 from 998.7 billion yen at the end of the previous fiscal year. This is due to the issuance of USD-denominated senior notes, unsecured straight bonds and short-term bonds, in addition to an increase of lease liabilities by applying IFRS 16, “Leases” from April 1, 2019, despite the repayments of straight bonds and other factors. Panasonic has been entered into three-year com- mitment line agreements (Note) with several banks in June 2018, in order to prepare for contingencies such as potential deterioration of the financial and economic envi- ronment. The upper limit for unsecured borrowing based on the agreements is a total of 700.0 billion yen, but there is no borrowing under these agreements. Note: Commitment line agreements: Contracts made with financial institu- tions to secure financing subject to pre-agreed limits on the time period and commitment line Cash and Cash Equivalents (Years ended March 31) Interest-Bearing Debt (Years ended March 31) (Billions of yen) 1,500 1,089.6 1,000 500 0 (Billions of yen) 1,500 1,239.4 1,471.4 1,016.5 1,000 998.7 772.3 500 0 3/’18 3/’19 3/’20 3/’18 3/’19 3/’20 Panasonic Annual Report 2020 Financial Conditions and Liquidity Capital Investment and Depreciations Assets, Liabilities and Equity Financial and Corporate Information 74 The Panasonic Group makes capital investment based on a policy of steady investments primarily in key businesses for future growth. Capital investment in fiscal 2020 (tangi- ble assets only) decreased 31.6 billion yen to 268.9 billion yen from 300.5 billion yen a year ago. The main capital investments have been made in production facilities in Japan and China for lithium-ion batteries for automotive use and in production facilities for electronic components, etc. in the Industrial Solutions segment. Depreciation (tangible assets only) decreased 21.8 billion yen to 205.0 billion yen from 226.8 billion yen a year ago. Fiscal 2020 Capital Investment by Segment (Tangible Assets Only) Other ¥10.6billion Industrial Solutions ¥54.1billion Automotive ¥103.5billion ¥268.9 billion Appliances ¥42.8billion Life Solutions ¥38.9billion Connected Solutions ¥19.0billion The Companyʼs consolidated total assets as of March 31, 2020 were 6,218.5 billion yen, an increase of 204.6 bil- lion yen from March 31, 2019. The Companyʼs consoli- dated total liabilities were 4,062.7 billion yen, an increase of 133.3 billion yen from March 31, 2019. These are due mainly to an increase of right-of-use-assets and lease lia- bilities by applying IFRS 16, in addition to an increase in cash and cash equivalents and long-term debt by issuing straight bonds, despite the impact of the deconsolidation of housing related businesses. Panasonic Corporation stockholdersʼ equity increased by 84.8 billion yen to 1,998.3 billion yen, compared to March 31, 2019. This was due mainly to recording of Net profit attributable to Panasonic Corporation stockholders. As a result, the ratio of Panasonic Corporation stock- holdersʼ equity was 32.1%, increasing from 31.8% on March 31, 2019. With non-controlling interests added to Panasonic Corporation stockholdersʼ equity, total equity was 2,155.9 billion yen. Total Assets (Years ended March 31) (Billions of yen) 8,000 6,291.1 6,013.9 6,218.5 Panasonic Corporation Stockholders’ Equity (Years ended March 31) (Billions of yen) 2,000 1,998.3 1,913.5 1,707.6 4,000 0 1,000 0 3/’18 3/’19 3/’20 3/’18 3/’19 3/’20 For details regarding consolidated financial statements, please refer to the Companyʼs Annual Securities Report (Yukashoken Hokokusho) • Consolidated Statements of Financial Position • Consolidated Statements of Profit or Loss and Consolidated Statements of Comprehensive Income • Consolidated Statement of Changes in Equity • Consolidated Statements of Cash Flows Panasonic Annual Report 202075 Financial and Corporate Information Corporate Data (As of March 31, 2020) Panasonic Corporation and Subsidiaries Years ended March 31 Corporate Data Company Name: Panasonic Corporation Stated Capital: 258,867 million yen (TSE Securities Code: 6752) Consolidated Companies (including parent company): Founded: March 1918 (Incorporated in December 1935) 529 companies Head Office Location: 1006, Oaza Kadoma, Kadoma-shi, Companies under the Equity Method: Osaka 571-8501, Japan 72 companies Number of Employees: 259,385 persons Share Data Number of Shares Issued: 2,453,326,997 shares (Including 120,365,301 shares held by Panasonic) Number of Shareholders: 488,540 TSE Securities Code: 6752 Unit of Stock: 100 Stock Exchange Listings: Tokyo, Nagoya Transfer Agent for Common Stock: Sumitomo Mitsui Trust Bank, Limited 5-33, Kitahama, 4-chome, Chuo-ku, Osaka-shi, Osaka 540-8639, Japan Phone: +81-3-3323-7111 American Depositary Receipts (ADRs) Depositary Bank: J.P. Morgan Chase Bank, N.A. Stock Exchange: U.S. Over-the-Counter (OTC) Market ADR Ratio: 1 ADR = 1 Share Symbol: PCRFY Stock Transfer Handling Office Shareowner Services P.O. Box 64504 St. Paul, MN 55164-0504, U.S.A. Phone: +1-800-990-1135 (U.S.: toll free) +1-651-453-2128 (International) 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 3/2017 3/2018 3/2019 3/2020 Number of Shares Issued (in thousands of shares) 2,453,053 2,453,053 2,453,053 2,453,053 2,453,053 2,453,053 2,453,053 2,453,053 2,453,053 557,102 577,756 499,728 469,295 514,129 486,489 485,053 505,402 2,453,326 488,540 364,618 Shareholders (%) Number of Shareholders Distribution by Type of Japanese Financial Institutions, etc. Overseas Investors, etc. Other Corporations Individuals and Others Treasury Stock Total Major Shareholders Name 30.9 22.7 7.1 23.7 15.6 100.0 34.2 21.9 8.4 29.7 5.8 100.0 28.3 25.3 8.3 32.3 5.8 100.0 27.2 33.2 7.4 26.4 5.8 100.0 30.1 32.9 7.1 24.1 5.8 100.0 30.6 31.2 6.9 25.9 5.4 100.0 30.8 32.6 7.0 24.7 4.9 100.0 31.9 33.4 6.8 23.0 4.9 100.0 34.8 28.9 6.8 24.6 4.9 100.0 34.7 30.3 6.1 24.0 4.9 100.0 Share ownership (in thousands of shares) Percentage of total issued shares (%) The Master Trust Bank of Japan, Ltd. (trust account) Japan Trustee Services Bank, Ltd. (trust account) NIPPON LIFE INSURANCE COMPANY JP MORGAN CHASE BANK 385151 Japan Trustee Services Bank, Ltd. (trust account 5) Panasonic Corporation Employee Shareholding Association Japan Trustee Services Bank, Ltd. (trust account 7) SUMITOMO LIFE INSURANCE COMPANY STATE STREET BANK WEST CLIENT - TREATY 505234 Matsushita Real Estate Co., Ltd. 188,150 177,805 69,056 54,945 46,536 41,573 41,454 37,465 33,340 29,121 8.06 7.62 2.96 2.35 1.99 1.78 1.77 1.60 1.42 1.24 Notes: 1. The figures in share ownership are rounded down to the nearest thousand shares. 2. Shareholding ratio is calculated by deducting the Companyʼs treasury stock (120,365,301) and rounded down to two decimal places. 3. The English names of foreign shareholders above are based on the General Shareholders Notification notified by Japan Securities Depository Center, Inc. Panasonic Annual Report 2020 Financial and Corporate Information 76 Company Stock Price and Trading Volume (Years ended March 31) Tokyo Stock Exchange monthly basis Stock Price (Yen) 3,000 2,000 1,000 0 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 3/2017 3/2018 3/2019 3/2020 Trading Volume (Millions of shares) 1,500 1,000 500 0 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 3/2017 3/2018 3/2019 3/2020 3/2011 3/2012 3/2013 3/2014 High (Yen) Low (Yen) Period-End (Yen) 1,480 826 1,058 1,070 582 761 781 376 654 1,408 594 1,173 3/2015 1,614.0 1,030.0 1,577.0 3/2016 1,853.5 799.0 1,033.5 3/2017 1,309.5 831.4 1,258.0 3/2018 1,800.0 1,207.5 1,521.0 3/2019 1,647.0 917.7 954.2 3/2020 1,264.0 691.7 825.0 Corporate Bonds Unsecured Straight Bonds in Japan Series 13th 14th 15th 16th 17th 18th 19th USD-Denominated Senior Notes Due 2022 Due 2024 Due 2029 Years 7 10 5 7 10 6 10 Years 3 5 10 Coupon rate (per annum) 0.568% 0.934% 0.190% 0.300% 0.470% 0.230% 0.370% Coupon rate (per annum) 2.536% 2.679% 3.113% Aggregate principal amount of issue 80 billion yen 100 billion yen 200 billion yen 70 billion yen 130 billion yen 30 billion yen 70 billion yen Aggregate principal amount of issue US$ 1 billion US$ 1 billion US$ 500 million Maturity date March 18, 2022 March 19, 2025 Sept. 17, 2021 Sept. 20, 2023 Sept. 18, 2026 March 5, 2026 March 5, 2030 Maturity date July 19, 2022 July 19, 2024 July 19, 2029 Investor Relations Offices Osaka Europe Investor Relations Panasonic Business Support Europe GmBH (UK branch) Maxis 2, Western Road, Bracknell, Berkshire, RG12 1RT, United Kingdom Phone: +44-1344-853135 Investor Relations Corporate Finance & Investor Relations Department Panasonic Corporation 1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan Phone: +81-6-6908-1121 Tokyo Investor Relations Corporate Finance & Investor Relations Department Panasonic Corporation TOKYO MIDTOWN HIBIYA 14F, 1-1-2 Yuraku-cho, Chiyoda-ku, Tokyo 100-0006, Japan Phone: +81-3-3437-1121 IR and Sustainability Websites IR Please refer to Panasonicʼs IR site for information on the Company including financial results and presentation materials. https://www.panasonic.com/global/corporate/ir.html Sustainability Please refer to the “Sustainability” section of the Companyʼs website for more information regarding environmental and social initiatives. https://www.panasonic.com/global/corporate/sustainability.html Panasonic Annual Report 2020 https://www.panasonic.com/global 

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