For the fiscal year ended March 31, 2023
NS United Kaiun Group has built the U Brand, a symbol of security and trust, which is added value that we offer through engaging in long-term business relationships with various customers.
Recognizing that enhancing the U Brand that connects us with all stakeholders will help increase our corporate value and achieve sustainable growth, we are committed to sustainability management through promoting initiatives to address material issues.
We constantly review and update what brings competitiveness and differentiating factors for future growth in response to changes in the business environment, with a particular focus on boosting investments in human resources and other intangibles while expanding cooperation with stakeholders to attain shared goals.
The Group will continuously enhance its strength with the aim of contributing to the development of society and ever-higher living standards of people today and the future.
Purpose
Through Marine
Transportation, We Will
Work Together to Shape the
World Today and
Create a Sustainable Future.
Basic Philosophy
The NS United Kaiun Group will contribute to the development of society by providing trusted and high-quality marine transportation services.
Brand: a symbol of security and trust
Assured | Environmentally | Fine-tuned | ||
friendly marine | ||||
safe navigation | customer service | |||
transportation | ||||
Basic Sustainability Policy | ||||||
E | S | G | ||||
Environm | al Policy | Human | Policy | Basic Anti- | Policy | |
D&I Action Guideline | Basic Internal Controls Policy | |||||
Materiality | ||||||
Safe navigation | Environmental conservation | Customer satisfaction | ||||
Technological innovation | Securing and developing | Corporate governance | ||||
human resources | ||||||
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INDEX
Contents
PART 1 | NS United Kaiun's Value Creation Story | 05 | |||||||||||||||
Message from the President | 06 | ||||||||||||||||
History of the Company | 10 | ||||||||||||||||
Value Creation Process | 12 | ||||||||||||||||
Sustainability Priority Issues | 14 | ||||||||||||||||
Value Creation Strategies | 16 | ||||||||||||||||
Financial Strategy | 18 | ||||||||||||||||
At a Glance | The NS United Kaiun Group in Numbers | 20 | |||||||||||||||
PART 2 | NS United Kaiun's Value Creation ̶Materiality Topics̶ | 21 | |||||||||||||||
Topic 1 | Safe navigation | 22 | |||||||||||||||
Maximizing the Potential of a Diverse Workforce to Build Sustainable Safety Management Systems | |||||||||||||||||
Topic 2 | Environmental conservation | 26 | |||||||||||||||
Advancing toward High Goals of Achieving Carbon Neutral Marine Transportation Services | |||||||||||||||||
Topic 3 | Technological innovation | 28 | |||||||||||||||
Innovating Future Ship Technologies Together with Stakeholders | |||||||||||||||||
Topic 4 Securing and developing human resources | 30 | ||||||||||||||||
Promoting Personnel System Reform in the Time of Changes | |||||||||||||||||
Topic 5 | Corporate Governance | 32 | |||||||||||||||
Pursuing the Diversity of Core Personnel | |||||||||||||||||
PART 3 | NS United Kaiun's Value Creation ̶Business, ESG, Finance̶ | 35 | |||||||||||||||
Business Overview and Strategies | 36 | ||||||||||||||||
Sustainability | 42 | ||||||||||||||||
Environment | 44 | ||||||||||||||||
Social | 49 | ||||||||||||||||
Corporate Governance | 54 | ||||||||||||||||
Directors, Audit & Supervisory Board Members and Executive Officers | 59 | ||||||||||||||||
Financial & Non-financial Data | 60 | ||||||||||||||||
Glossary | 62 | ||||||||||||||||
Corporate Profile | 63 | ||||||||||||||||
Editorial Policy | |||||||||||||||||
This report explains to all stakeholders, | ● Media for information disclosure | ● Period Covered | |||||||||||||||
using both financial and non-financial | General | April 1, 2022 through March 31, 2023 | |||||||||||||||
information, how the NS United Kaiun | |||||||||||||||||
Please note that some matters that fall outside | |||||||||||||||||
Group fulfills its social responsibilities, | this period are also reported. Fiscal years referred | ||||||||||||||||
including ESG commitments, as well as | Website | to in this report cover the period from April 1 to | |||||||||||||||
Non-financial | March 31. Fiscal 2022 refers to the fiscal year | ||||||||||||||||
pursuing corporate profits by providing | Financialinformation | ended March 31, 2023. | |||||||||||||||
Financial | report | The forward-looking statements in | |||||||||||||||
marine transportation services. | Integrated repor | Corporate | ● Organizations Covered | ||||||||||||||
In editing this report, we have referred | |||||||||||||||||
profile | NS United Kaiun Group, and related | ||||||||||||||||
to the Guidance for Integrated Corpo- | |||||||||||||||||
affiliates | |||||||||||||||||
rate Disclosure and Company-Investor | Securities repor | Forward-Looking | |||||||||||||||
Dialogues for Collaborative Value Cre- | |||||||||||||||||
Quarterly | Materials for | ||||||||||||||||
ation of the Ministry of Economy, Trade | general | Statements | |||||||||||||||
and Industry. Our goal is to provide a | shareholder | Corporate | |||||||||||||||
results | meetings | governance | |||||||||||||||
deeper understanding of the Group's | this report, including | performance | |||||||||||||||
strategy for sustainable growth. In ad- | disclosures | forecasts, plans, and business strate- | |||||||||||||||
dition to this report, other information is | gies, are based on information avail- | ||||||||||||||||
available on our website. | Detail | able at the time and are subject to | |||||||||||||||
risks and uncertainties. Please note | |||||||||||||||||
that actual business results could | |||||||||||||||||
NS United Kaiun Website | differ substantially due to several fac- | ||||||||||||||||
tors, including changes in the busi- | |||||||||||||||||
https://www.nsuship.co.jp/en/ | ness environment. | ||||||||||||||||
PART 1
VALUE CREATION STORY
NS United Kaiun's Value Creation Story
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PART 1
Message from the President
We are increasing the value of
the U Brand despite rapid changes in
the business environment, and advancing toward its ideal state in 2030 as
a company that is both profitable and socially
Having achieved record profit for the second year straight, we are boosting profitability and growth potential.
During fiscal year 2022, the global economy generally slowed, largely as a result of China's zero-COVID policy as well as intensifying uncertainty due to inflation accompanying high resource prices worldwide, which prompted many countries to make a shift toward a tighter monetary policy. In the international shipping business, the dry bulk market was robust in the first half of the fiscal year. How- ever, it turned downward in the second half for all vessel types, as the shipping capacity constraint eased against the backdrop of the stagnant Chinese economy induced by the zero-COVID policy and the issue of increased demurrage related to COVID-19 began to resolve due to quarantine controls being relaxed at ports.
In these circumstances, the NS United Kaiun Group achieved record profit for the second consecutive year, supported by stable earnings from long-term contracts and the progressive depreciation of the yen during fiscal year 2022.
Our Group is pursuing the ideal state in 2030 as "a company that is both profitable and socially responsible," which is envisioned in line with the medium-term business plan "FORWARD 2030―Driving U forward over the next decade," as announced in 2020. Toward achieving the ideal state, we are developing initiatives throughout the Group, according to the three key strategies of strengthening our brand power, building a sustainable business structure, and establishing a resilient management base.
1. Strengthening our brand power
We are promoting ESG management based on the Basic Sustainability Policy formulated in 2021. In view of the recent rapid changes in the business environment caused by factors related to climate change, market trends, and financial conditions, we recognize the need to establish a more solid, sustainable business base. To this end, we are building organizational systems that boost employee engagement to maximize the potential of our workforce. In fiscal year 2022, we reviewed personnel systems while working on human resources development and workplace environment improvements in order to enhance internal resources. In January 2023, we established the NS United Kaiun Group Human Rights Policy and the Basic Anti-Corruption Policy. These represent clear statements of our business management policy that it is our social responsibility as a global corporate group to respect human rights and practice behavior that is compatible with social ethics.
In addition to the above, we are striving to further increase the value of the U Brand that we have built up over the years, principally through stepping up activities for safe
navigation and environmental conservation, adopting cutting -edge technologies, facilitating investment in human capital, and strengthening governance systems.
2. Building a sustainable business structure
As part of our commitment to our priority management issue of climate change action, we aim to achieve carbon neutrality by 2050. In pursuit of this goal, we have been promoting an array of initiatives.
In the field of international shipping, the highlight in 2022 was related to the joint ammonia-fueled ship development project, supported by the Green Innovation Fund, a grant program of the New Energy and Industrial Technology Development Organization (NEDO). In November, the basic design of the ship under this project obtained an Approval in Principle (AiP) from Nippon Kaiji Kyokai (ClassNK), in acknowledgement of its being "capable of ensuring the same level of safety as ships operating with existing fuels." This marked an important milestone toward implementing the technology under development for real-life applications. Also, notable progress was made for biodiesel-fueled vessel development in the same year. In September, we conducted a trial operation in the Pacific Ocean using biodiesel fuel supplied in Japan, marking the first ocean going vessel supplied with this type of fuel in the country. The recent trial was made using our ves- sel, representing the third in our fleet to engage in trial operations. Biodiesel fuel is garnering attention for its low carbon emissions as well as high versatility in light of compatibility with existing vessel engines and utilization of existing infrastructure for fuel supply.
In the field of coastal shipping, we are promoting a project to develop a costal cargo carrier equipped with a hybrid propulsion system combining an LNG-fueled engine and lithium-ion batteries, the first of its kind in Japan. The vessel is scheduled for delivery in 2024.
In addition to the development of next-generationfuel-powered vessels, our Group is carrying out a range of projects, specifically for implementing technologies to enable vessels powered by zero emission fuel in the future and creating business to meet new shipping demand that is expected to emerge from accelerating decarbonization trends. Pursuing all these efforts, we are steadily moving forward towards our ideal state as a company that is both profitable and socially responsible.
3. Establishing a resilient management base
We develop investment strategies in response to the uncertainty of the external environment. In addition to evaluating profitability based on investment criteria that take into account the cost of capital, we validate investments from a social perspective, particularly by introducing Internal Carbon Pricing programs.
Our financial policy is to strengthen our solid financial base, a valuable result of steadily accumulating profits
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PART 1
since the merger in 2010. As a leading strategy, we have been working to cut down on interest-bearing debt.
We achieved performance targets under the medium -term business plan FORWARD 2030 in fiscal years 2021 and 2022. In fiscal year 2023, the final year of the business plan, we are accelerating efforts to raise profit- ability and growth potential, aiming to achieve sustainable growth and enhance corporate value over the medium to long term.
"Raising profitability and growth potential" and "advancing the pursuit of sustainability management" are the key themes of the new medium-term business plan.
Our market outlook for the coming years is as follows. The shipping capacity constraints will be eased, chiefly owing to the end of special factors associated with strict quarantine controls at ports that have tightened their shipping capacity, while shipping demand is expected to increase as the Chinese economy beginning to recover from the slump induced by the zero-COVID policy. Other factors expected to constrain transport capacity and underpin the market are: new building orders being restrained in view of the uncertainty over environmentally friendly vessels and persistently high prices of vessels; and major applicable environmental regulations̶such as the Energy Effi- ciency Existing Ship Index and the Carbon Intensity Indi- cator̶going into effect in 2023, which will facilitate slow steaming operations and the decommissioning of aged vessels with low fuel efficiency. We are also concerned about the ongoing uncertainty surrounding the business situation, which is susceptible to significant changes related to geopolitical risks and financial conditions that may have a severe impact on maritime shipping demand. Paying close attention to such risks, we need to continue with persistent group-wide efforts to promote business operations, as we did in the past according to the medium -term business plan started in fiscal year 2020, while assessing various risks and examining and implementing appropriate measures against risks, factoring in current trends and following the three key strategies.
Based on our awareness of the above-mentioned fac- tors, we will focus on the following two issues under the next medium-term business plan starting fiscal year 2024.
The first issue is to raise profitability and growth potential. Our strategy for raised profitability is to ramp up efforts to pursue stable, high profitability and create added value, especially by concluding long-term shipping contracts, meeting stable cargo demand, and achieving high efficiency operations while seeking the understanding of customers. To raise growth potential, we will focus on carbon neutrality actions in response to major long- term decarbonization trends that influence our business conditions. Specifically, we will increase investment in
building and maintaining vessels to enhance the environmental value we offer, meet new cargo demand to accommodate the strategies of each customer's sector, and develop transport processes to handle liquid cargo, such as ammonia and liquid carbon dioxide, anticipating future social needs.
The second issue is to advance the pursuit of sustainability management. Our Company has defined six priority issues for sustainability under the Basic Sustainability Policy, and strives to solve ESG-related issues on an ongoing basis.
NSU's six material issues
- Giving top priority to ensuring safe navigation
- Enhancing activities for environmental conservation and climate change
- Increasing customer satisfaction by raising transporta- tion service quality
- Human resources development, personnel evaluation, D&I, human rights
- Technology, innovation, DX
- Sound corporate governance, BCP
We are carrying out specific actions for each of the six issues. Going forward, we will take changes in the external environment into account as we enhance these activities under the leadership of the ESG Committee, which was formed in October 2020. Under the oversight of the Board of Directors, the Committee discusses important issues associated with the environment, society and gov- ernance, and looks into relevant trends in order to achieve long-term growth. We will accelerate the implementation of these plans according to the new medium-term business plan starting fiscal year 2024, seeking to achieve the Group's sustainable growth and further enhance its corporate value.
We are enhancing the value of
the U Brand as an intangible asset by promoting carbon neutrality action and human capital-oriented management.
As a corporate group that provides marine transportation services worldwide, we aim to contribute to creating a sustainable society by protecting the global environment̶ an invaluable asset that is shared by all humankind. Being aware of our grave social responsibility in tackling climate change, we have expressed our commitment to achieving carbon neutrality by 2050 in three areas: our Company, the steel industry, and society.
First, to achieve carbon neutral operations by the target year, we have set two major goals: reducing CO2 emissions per transportation unit (ton-mile) by 20% by 2030 from 2019; and achieving net zero emissions by 2050. One key strategy to attain these goals is through reduc-
ing greenhouse gas emissions from operating vessels, for which fuel conversion is essential. At present, however, zero emission marine fuel has not yet been supplied in a form that we can use, and development of marine engines supporting ammonia or other zero emission fuels will likely require some time before appropriate technologies become marketable. Considering many uncertain factors from such situations, our Group is formulating plans based on scenarios related to the production and supply of future marine fuels. We are preparing to develop future zero emission fuel strategies to implement technologies to operate ammonia or other alternative fuel powered vessels, as described earlier, while at the same time striving to diminish CO2 emissions from conventional fuel-powered vessels that are currently in operation.
As one of our fuel-saving and CO2 emissions reduction measures, we have introduced operation support systems across the Company to facilitate slow steaming operations in response to the International Maritime Organiza- tion's environmental regulations. Also, we are employing and adopting increasingly advanced digital technologies in order to improve the efficiency of day-to-day operations and increase productivity as well as establishing database systems to organize and verify navigating and port-related data, seeking to optimize vessel allocation and operation. We are exploring the possibility of adopting a number of alternative power sources in addition to ammonia fuel, including wind power, and conducting demonstration projects to install a rotor sail system in large vessels and vessels dedicated to electricity power -related cargo.
The second area is contributing to the achievement of carbon neutrality in the steel industry. We have begun to
examine the possibility of establishing optimal transport methods for direct reduced iron, steel scrap and other raw materials, anticipating that demand for these cargoes will grow in the future as steel-making processes change to meet decarbonization requirements.
Third and last is contributing to a carbon neutral society, under which we have started projects jointly with energy companies to study possible ammonia transport methods in and outside of Japan. Also, in the coastal shipping segment, our Group company has agreed with a gas company to participate in its business to supply LNG fuel to vessels in Osaka Bay and Seto Inland Sea.
We are moving forward with the above-described initiatives in the three areas as we move toward the target year of 2050.
In Japan, where depopulation is progressing along with demographic aging, securing adequate human resources will become a serious challenge for many industries in the near future, including the marine transportation industry. Regarding human capital as an essential building block of our business foundation, we forecast that the issue with human resources will pose a substantial risk of undermining the Group's future growth potential. To address this issue, we have started to reform the Group's personnel systems.
To develop new personnel systems, we first fully analyzed the current status in consideration of the following three factors: changes in the labor market, changes in the business environment, and the opinions of employees and executives. Then, we identified issues with the present systems and specified areas for improvement in order to solve the issues. The objective of the reforms is to build organizational resilience so we can respond effectively to the period of major changes and create a diverse and inclusive workplace environment where many individuals with different values can thrive and feel satisfaction with their jobs. The new systems will be launched in 2024.
The U Brand represents our core values and is an intangible asset based on the strong trust and confidence we have built over the past years. It serves as a symbol of reliably safe navigation, environmentally friendly marine transportation, fine-tuned customer service, and other important values that guide our day-to-day operations.
The shipping business requires strong teamwork from working individuals. Good teamwork is enabled by each member being highly motivated and enthusiastic, showing respect to each other, and trying to improve by learning from others, backed by a culture of openness in the work- place. Boosting teamwork capabilities, we will enhance the value of the U Brand as a symbol of security and trust.
We deeply appreciate the continued support of all our stakeholders for our Group and the U Brand.
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NS United Kaiun Kaisha Ltd. published this content on 05 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 October 2023 09:18:39 UTC.