CSR activities in FY2021

Response to social issues

NTN Group views the global trend of carbon neutrality (environmental impact reduction and decarbonization), the accelerating electrification to achieve the carbon neutral goal, and a business environment facing labor shortages and human rights issues from the perspectives of "Response to paradigm shift," "Response to environmental issues," "Changes in demographics," and "Globalization of the business." We will contribute to solving social issues while continually growing through our business activities by implementing countermeasures in line with the materiality of anticipated risks and opportunities.

■Risks and Opportunities Surrounding NTN

NTN's Business Environment	Risks for the Company	Opportunities for the Company
Response to paradigm shift
Spread of next-generation mobility	Decrease in the total number of bearings used per unit Demand for higher performance products such as lighter weight products Reorganization of the automotive industry	Expansion of sales channels due to entry of new EV manufacturers Expanding sales opportunities for driveshafts and hub bearings that support not only gasoline-powered vehicles and HEVs but also axle/drivetrain of EVs Increase in ASP (average sales price) due to size-up of driveshafts corresponding to the motor's output characteristics Using driveshafts' patented technologies to propose products that are smaller and lighter Growing demand for high performance products for EVs A possibility of growth in demand for parts replacement as car sharing increases the operating rate of vehicles
Electrification of industrial machinery	Reduced use of bearings due to electrification of internal combustion and hydraulic equipment	Demand for high performance products such as higher efficiency products Increasing demand for high value-added products such as bearings with built-in sensors
Spread of AI and IoT	Difficulty in securing digital talent, for which demand is increasing Rationalization of distributor network Securing of aftermarket demand using industrial IoT Platforms (PFs) (missed demand opportunities outside PFs)	Advances in equipment-related manpower saving Rising demand for bearings with sensors Growing demand for analysis and analytical technologies Development of new fields Introduction of smart factories in the company
Spread of infectious diseases (COVID-19)	Decrease in scale of sales due to economic stagnation Crisis of business continuity Damage to employees’ health and safety Shutdown of business activities due to the spread of infectious diseases within the workplace Disconnection of supply chain	Growing demand for manpower-saving technologies Utilizing microscopic coating technologies for drug discovery
Response to environmental issues
Reduction in CO₂ emissions	Rising procurement and energy costs Decline in product needs due to the declining usage of general-purpose machinery Requirements for carbon neutrality in business activities Suspension of dealing with customers and deterioration of corporate image in the event of failure to respond to the demands of society	Increasing demand for wind turbines, including offshore ones Increasing demand for railways Increasing demand for green energy products Increasing needs for improvement of fuel efficiency (electricity consumption efficiency) Expansion of next-generation mobility (EVs, hydrogen-related)
Requests for energy-saving machinery	Decrease in the number of parts where bearings are used due to changes in the energy transmission type and structure of machines Establishment of a new mechanical structure that does not require bearings	Increasing demand for energy-saving products Responding to new needs
Reduction in environmental impact	Decrease in corporate image/ESG rating when environmental impact cannot be reduced Cost increase due to incurrence of costs by suppliers and limitation on suppliers that can meet environmental standards	Development of new customers through compliance with advanced environmental and customers’ standards Increasing demand for high-quality, long operating life products Promotion of environment-friendly business activities Pursuit of circular economy
Response to natural disasters	Shutdown due to a disaster Spillage of oil, chemical substances, etc. caused by natural disasters Disconnection of supply chain	Increasing demand for emergency power source Expansion of partnerships
Changes in demographics
Medium-to long-term labor shortage	Impact of a human-dependent production system on stability of operations	Accelerating labor saving and automation of production lines
Growth of emerging countries	Entry of emerging manufacturers Soaring procurement prices due to the entry of competitors Shortage of limited materials and resources	Expansion of sales opportunities due to increasing demand Increasing demand for new driveshafts due to transition to front-wheel drive (FF) vehicles Increasing demand for high performance products that meet environmental regulations
Issue of business succession	Suppliers and sales distributor going out of business	Start of business with new suppliers
Globalization of the business
Trade friction and tariffs	Sluggish global demand Disconnection of supply chain caused by dependence on one country (China risk, etc.) Downward pressure on profits due to higher tariff costs Rapid exchange-rate fluctuations	Expanding opportunities to supply products and services utilizing global networks
Prevention of child labor (human rights)	Stopping the supply of parts Suspension of dealing with customers and deterioration of corporate image in the event of failure to respond to human rights issues	Improvement of corporate image through active response to human rights issues
Response to conflict minerals	Deterioration of quality Suspension of dealing with customers and deterioration of corporate image in the event of failure to respond to conflict minerals issues	Improvement of corporate image through active response
Rise of low-cost products	Intensified price competition due to aggressive sales by emerging manufacturers Loss of sales opportunities Loss of brand value due to lower prices	Growing demand for high performance, highly functional products due to lower quality of products on the market Demonstrating competitive advantage through differentiation of products and services

■Materiality

Contributing to society through creation of original technologies

(Strengthening positive impacts)

Reducing energy loss

Realizing a sustainable society using natural energy

Providing safety and comfort

Forming management systems/corporate organization which are essential for NTN, a global company

(Reducing negative impacts)

Responding to climate change

Resource recycling and pollution prevention

Improve the reliability of products and services (Quality assurance, stable supply)

Procurement activities with an emphasis on the environment and society

Respect for human rights

Promote safety and health

Human resource development

Promoting diversity

Thorough compliance

Strengthening governance

■Main Measures and Related Materiality

NTN's Business Environment	Main Measures	Related Materiality
Response to paradigm shift
Spread of next-generation mobility	Provide lighter-weight, higher efficiency driveshafts and low friction hub bearings Provide next-generation mobility modules for EVs Concentrate production of high performance products for EVs (a new plant in Wakayama) Develop hydrogen-related products Promote production reform and reorganization aimed at improving productivity Strengthen the automotive aftermarket business
Electrification of industrial machinery	Strengthen development of products for electrification and high value-added products Provide next-generation mobility modules for industrial machinery
Spread of AI and IoT	Provide service solutions through CMS technology, etc. Develop service-oriented businesses that lead to product sales and transform into new business formats Strengthen CAE analysis technology Develop "talking bearings" (= use of sensors for bearings) Provide robot-related modules such asi-WRIST^TM in response to labor-saving issues E-commerce based on the new IT core system Realization of smart factories, including a new plant in Wakayama Strengthen external collaboration
Spread of infectious diseases (COVID-19)	Life science-related R&D centered on microscopic coating technology Provide robot-related modules such as i-WRIST^TMin response to labor-saving issues Promote the work style reform
Response to environmental issues
Reduction in CO₂ emissions	Increase sales of large bearings and CMSs for wind turbines Increase sales for rolling stock Expand sales of green energy products Promote development of environment-contributing products Promote use of energy-saving production equipment Use renewable energy Develop lighter-weight, higher efficiency driveshafts and low friction hub bearings Provide next-generation mobility modules Develop hydrogen-related products
Requests for energy-saving machinery	Provide compact, lightweight and low-torque products Product development utilizing original technologies
Reduction in environmental impact	Selection of business partners that can comply with green procurement and CSR procurement standards Reduce environmental impact in manufacturing processes (conserve water, increase the recycling rate, reduce the use of hazardous materials, etc.) Develop and provide long operating life products Strict control of environmentally hazardous substances contained in products Expand bearing refurbish business and MRO business
Response to natural disasters	Formulation of BCPs and BCP drills at the NTN Group Provide independent power supply utilizing renewable energy-based power generation and storage technologies
Changes in demographics
Medium- to long-term labor shortage	Provide robot-related modules such as i-WRIST^TM in response to labor-saving issues Realize smart factories, including a new plant in Wakayama Promote and maximize the diversity of employees Promoting production reform and reorganization Promote the work style reform
Growth of emerging countries	Stable supply of basic products Global production supporting optimal supply Realize the best mix of global and local procurement
Issue of business succession	Support business continuity through dialog with suppliers Develop new business partners Reorganize suppliers and shorten supply chain
Globalization of the business
Trade friction and tariffs	Realize the best mix of global and local procurement through variable cost reformation
Prevention of child labor (human rights)	Promote human rights due diligence Globalization of compliance Implement various training programs in compliance with laws and regulations in each region Start business with new suppliers Acquire new human resources
Response to conflict minerals	Promote human rights due diligence Implement CSR questionnaire surveys of suppliers Respond to conflict minerals surveys conducted by customers Stable supply of adapted products
Rise of low-cost products	Expand product lineup and inventory Develop markets for the aftermarket business Promote development of service-oriented businesses Active outsourcing of general-purpose products Integrated sales strategy in aftermarket and industrial machinery businesses Differentiation by services