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CSV 2. 0 Takashi Nawa Professor International Corporate Strategy Hitotsubashi University 2017. 04. 12 CSV 2. 0 Takashi Nawa Professor International Corporate Strategy Hitotsubashi University 2017. 04. 12 © 2014 Graduate School of International Corporate Strategy Hitotsubashi University All Rights Reserved.

Michael Porter`s CSV Concept       Ⓒ 2008. Toro Hitotsubashi 1 Michael Porter`s CSV Concept       Ⓒ 2008. Toro Hitotsubashi 1

Positioning “Old Capitalism”, “CSR” and “CSV” Strong CSR Societal Value       Ⓒ 2008. Toro Positioning “Old Capitalism”, “CSR” and “CSV” Strong CSR Societal Value       Ⓒ 2008. Toro Hitotsubashi X Compliance CSV PPP (Pure Pursuit of Profit) Weak Strong Weak Economic Value 2

4 Missing Links to be Further Explored Today`s topic 1. Redefining Governance Model to 4 Missing Links to be Further Explored Today`s topic 1. Redefining Governance Model to Capture Dual Values 2. Redesigning Business Model to Capture S⁴* 4. Building JCSV Model 3. Architecting Organization Model to Drive CSV * Economies of Scale, Scope, Skill and Speed       Ⓒ 2008. Toro Hitotsubashi 3

1. Redefining Governance Model Q. How do we measure these two axes? Strong CSV 1. Redefining Governance Model Q. How do we measure these two axes? Strong CSV X Societal Value CSR PPP Weak Strong Economic Value       Ⓒ 2008. Toro Hitotsubashi Source: Mc. Kinsey 4

CSV and Corporate Value @Nestle 1 Innovations: New product line and business models Value CSV and Corporate Value @Nestle 1 Innovations: New product line and business models Value dimension* Value drivers Pricing 2 Premium pricing for sustainable goods & services 3 Demand driven by awareness of social, environmental ort health benefits 4 Distribution effectiveness / market reach 5 Macro-conditions for demand Revenue Volume 6 Security of supply 7 Distribution costs 8 Costs of surplus/ price volatility Operating expenditure 9 Resource and materials usage 10 Process and systems efficiency HR costs Value from CSV Costs 12 Staff recruiting and retention Costs of compliance Costs of capital Intangibles/ reputation 11 Research & development Stakeholder goodwill (L to O) Consumer branding 13 Avoidance of fines and compensation 14 Access to capital markets 15 Forward looking political regulatory alignment 16 Community goodwill 17 Civil society goodwill 18 Employee motivation & talent attraction 19 Customer loyalty and trust 20 Competitive differentiation   *Note: Risks are not represented as an individual branch to the tree, but instead are considered as a potential impact-relationship with all branches    Ⓒ 2008. Toro Hitotsubashi Source: Accenture 5

      Ⓒ 2008. Toro Hitotsubashi 3 BL and Corporate Value @Novo Triple Bottom Lines       Ⓒ 2008. Toro Hitotsubashi 3 BL and Corporate Value @Novo Triple Bottom Lines 6

Translating SV to EV@Ajinomoto H : Healthy Living F : Food resources How Business Translating SV to [email protected] H : Healthy Living F : Food resources How Business Activities and Social/Economic Value Connect Better nutritional balance by eating more proteins and vegetables with umami Umami seasonings More eating together Provide food products that enable smart and delicious cooking Frozen foods People's comfortable lifestyle 3 Living with the society and the earth Construct a value chain that optimizes the use of resources Improve working environments supported by ICT +30 mil. pkg 1) Total sales ¥ 1, 350 bil. (+¥ 260 bil. ) Soup Amino acids +80 k tons E Resolution of environmental issues Improved employee engagement (+2% or more) +100 mil. servings 2) F 4 Co-creation with our diverse human resources Flavor seasonings +90 K tons Smart and delicious cooking Provide products supported by our amino acid technologies ROE 10% or more +100 K tons H 2 Strong social bonds, diversity of lifestyles *Numbers = FY 20 target H 1 Health & well-being through good and healthy food Produce good and healthy food menus with proteins and vegetables centered on Umami H Business profit ¥ 137. 0 bil. (+¥ 44. 2 bil. ) Business profit ratio 10% (+1. 6%) Cost reduction 1, 500 mil. USD or more ▲¥ 10 bil. 3) F E Higher specialty ratio through innovation Higher work efficiency supported by ICT ▲ ¥ 2. 5 bil. Copyright © 2017 Ajinomoto Co. , Inc. All rights reserved. 1. Counting only products for household consumers in Japan; 2. Counting only the "Cup Soup" brand products in Japan; 3. Comparison between FY 16 and FY 19; 4. Measured by Interbrand, "Japan's Best Global Brands 2016" (based on FY 15 results) Notes: The numbers for Umami seasonings, Flavor seasonings, Frozen foods, Soup, Amino acids = FY 15 -20 comparisons; for financial KPIs = FY 16 -20 comparisons       Ⓒ 2008. Toro Hitotsubashi Integrated Value Economic value Social value Corporate brand value 4) (e. g. ) Business activities E : Global. Sustainability EPS growth rate +850 mil. USD or more (double digit annual growth) 7

Roadmap to a Roadmap to a "Genuine Global Specialty Company": Sustainable value creation as a Genuine Global Specialty Company ¥ 150 bil. ¥ 130 bil. Borderline for a global top 10 class food company 1) Become a global top 10 class food company Accelerate growth momentum FY 13 JP GAAP FY 16 Forecast (FY 15 for non-financials, brand value) Sustained growth as a global top 101) class food company FY 20 Target (Organic growth) IFRS ¥ 61. 8 billion JP GAAP IFRS ¥ 81. 5 billion ¥ 92. 7 billion Operating/business profit margin 6. 5% 7. 4% 8. 4% 10% ROE 7. 1% 7. 4% 8. 2% 10% or higher EPS growth rate - +4. 2% - Double-digit annual growth Intl. sales growth rate 2) - +18%4) - Double-digit annual growth Meats and vegetables consumption - Meats: 6. 6 mil. tons; 16% (7. 7 kg/person/yr) Veg. : 3. 8 mil. tons; 6% (4. 5 kg/person/yr) Meats: 8. 6 mil. tons; 19% (9. 7 kg/person/yr) Veg. : 5. 5 mil. tons; 8% (6. 2 kg/person/yr) Contribution to eating together - 50 times / households / yr 70 times / households / yr Spare time created - 31 mil. hrs / yr (4. 5 hrs / households) 38 mil. hrs / yr (6 hrs / households) Non-financial 3) Financial Operating/business profit Comfortable lifestyles (Amino. Science) - ¥ 137. 0 billion 18 mil. people 22 mil. people - Employees with high engagement Integrated Resolution of environmental issues - - (To be measured from FY 17) 80% - 650 mil. USD 1, 500 mil. USD or more Brand value 5) 1. Global top 10 class status defined as business profit of ¥ 130. 0 billion or higher with IFRS accounting standards. ; 2. Consumer foods, local currency basis 3. Refer to Reference Materials (pp. 36 -40) for definitions of non-financial targets and calculation assumptions; 4. Includes Frozen foods (Ajinomoto Windsor, Inc. ); 5. Measured by Interbrand       Ⓒ 2008. Toro Hitotsubashi 9

Ajinomoto Group's FY 2020 Integrated Targets: Achieve value creation by setting integrated targets for Ajinomoto Group's FY 2020 Integrated Targets: Achieve value creation by setting integrated targets for both social and economic values "Genuine Global Specialty Company" To become a global top 10 class company that grows sustainably through ASV Integrated Value Corporate Brand Enhance brand value through creating social/economic value, which leads to further value creation FY 20 brand value target 1) = 1, 500 mil. USD or more FY 20 Integrated Targets Financial targets (economic value) in IFRS Non-financial targets 2) (social value) S : Social E : Environmental G : Governance Business profit margin ROE EPS growth rate Intl. sales growth rate (consumer foods) (local currency basis) ¥ 137. 0 bil. or more 10% or higher Double-digit annual growth Meats and vegetables consumption 3) (Japan, Five Stars)4) Contribution to eating together (Japan and Five Stars)4) Spare time created (Japan)5) Employees with high engagement Meats: Vegetables: 8. 6 mil. tons/yr; 5. 5 mil. tons/yr; 19% (9. 7 kg/person/yr) 8% (6. 2 kg/person/yr) vs FY 15 +3% (+2. 0 kg) S vs FY 15 +2% (+1. 6 kg) 70 times / households / year vs FY 15 +20 times S 38 mil. hrs / yr (6 hrs / yr / households) vs FY 15 +7 mil. hrs Contribution to comfortable S lifestyles (Amino. Science) Resolution of environmental issues Double-digit annual growth S 22 mil. people vs FY 15 +4 mil. people E Contribution to the global environment through initiatives ahead of std. intl. targets e. g. GHG 6): 50% reduction by FY 307) G 80% 1. Measured by Interbrand; 2. Refer to Reference Materials (p. 36 -40) for definitions of non-financial targets and calculation assumptions; 3. Annual total and % of annual consumption person; 4. Calculation based on certain products in Japan and Five Stars; 5. Calculated using certain Japan Frozen Foods and Soup products. ; 6. GHG = Greenhouse gases; 7. Compared to FY 05 Note: std. = standard, intl. = international       Ⓒ 2008. Toro Hitotsubashi 8

      Ⓒ 2008. Toro Hitotsubashi Brand Equity Valuation (Global Brand Ranking 2016)       Ⓒ 2008. Toro Hitotsubashi Brand Equity Valuation (Global Brand Ranking 2016)

      Ⓒ 2008. Toro Hitotsubashi Japan`s Brand Ranking 2016       Ⓒ 2008. Toro Hitotsubashi Japan`s Brand Ranking 2016

Co-relation between Brand CSV 10 KPI for Brand Intensity Valuation Internal External Clarity 概念明瞭度 Co-relation between Brand CSV 10 KPI for Brand Intensity Valuation Internal External Clarity 概念明瞭度 Authenticity 信頼確実度 Commitment 関与浸透度 Relevance 要求充足度 Governance 統治管理度 Differentiation 差別特有度 Responsiveness 変化対応度 Consistency 体験一貫度       Ⓒ 2008. Toro Hitotsubashi Presence 存在影響度 Engagement 共感共創度 CSV CSR

3+1 Enablers to Realize CSV Brand Building WHY 3+1 Enablers to realize CSV BE 3+1 Enablers to Realize CSV Brand Building WHY 3+1 Enablers to realize CSV BE IT       Ⓒ 2008. Toro Hitotsubashi WHAT HOW DO IT MEASURE IT SAY IT

MEASURE IT - How to Measure Brand Impact Co-relation between SV and EV SV MEASURE IT - How to Measure Brand Impact Co-relation between SV and EV SV through CSV Social Value (=Premium Brand Loyalty) Corporate Value Economic Value (=Basic Brand Loyalty)       Ⓒ 2008. Toro Hitotsubashi Intangible Asset Brand Equity Value Enhancement Cycle

Co-relation between Brand/Social/Economic KPIs       Ⓒ 2008. Toro Hitotsubashi Brand Impact KPI CSV Realization Co-relation between Brand/Social/Economic KPIs       Ⓒ 2008. Toro Hitotsubashi Brand Impact KPI CSV Realization of Awareness & Recognition Positive Impact on Social Issues Brand Value Enhancement Competitive Advantage Economic Impact KPI Corporate Value Enhancement High Profitability Social Impact KPI

4. Building J-CSV Model Unlike US companies, Japanese companies should enhance more on the 4. Building J-CSV Model Unlike US companies, Japanese companies should enhance more on the economic value dimension.       Ⓒ 2008. Toro Hitotsubashi Japanese companies? CSV 2. 0? Strong Societal Value CSR CSV US companies PPP Weak Strong Economic Value 16

Fortune “Change the World” Ranking (9/1/2015) 順位 企業名 産業 国 1 Vodafone and Safaricom Fortune “Change the World” Ranking (9/1/2015) 順位 企業名 産業 国 1 Vodafone and Safaricom Telecommunications U. K. /Kenya 26 BD Medical Equipment U. S. 2 Google (Alphabet) Internet Software & Services U. S. 27 M-Kopa Semiconductors Kenya 3 Toyota Motor Vehicles Japan 28 Unilever Food Consumer Products U. K. /Netherlands 4 Walmart General Merchandisers U. S. 29 Ayala Real Estate Philippines 5 Enel Utilities Italy 30 Whole Foods Food & Drug Stores U. S. 6 GSK Pharmaceuticals U. K. 31 CVS Health Food & Drug Stores U. S. 7 Jain Irrigation Systems Machinery India 32 Equity Banks Kenya 8 Cisco Communications Equipment U. S. 33 Intercorp Diversified Financials Peru 9 Novartis Pharmaceuticals Switzerland 34 Philips Electronics Netherlands 10 Facebook Internet Software & Services U. S. 35 Ikea Furniture Stores Sweden 11 Master. Card Consumer Finance U. S. 36 Space. X Aerospace & Defense U. S. 12 Grameen Banks Bangladesh 37 Nike Apparel U. S. 13 Alibaba Internet Software & Services China 38 Maersk Shipping Denmark 14 Danone Food Consumer Products France 39 Intel Semiconductors U. S. 15 BYD Motor Vehicles China 40 Arup Engineering & Construction U. K. 16 Cemex Construction Materials Mexico 41 Twitter Internet Software & Services U. S. 17 Discovery Ltd. Life & Health Insurance South Africa 42 Ford Motor Vehicles U. S. 18 Novo Nordisk Pharmaceuticals Denmark 43 Fitbit Consumer Electronics U. S. 19 20 SABMiller Beverages U. K. 44 Ecolab Specialty Chemicals U. S. IBM IT Services U. S. 45 Opower Internet Software & Services U. S. 21 Roshan Telecommunications Afghanistan 46 Waste Management U. S. 22 Vanguard Asset Management U. S. 47 Costco Specialty Retailers U. S. 23 Starbucks Restaurants U. S. 48 Kickstarter Internet Software & Services U. S. 24 Patagonia Apparel U. S. 49 Marks and Spencer Department Stores U. K. 25 Cargill Agricultural Products U. S. 50 Essilor Medical Equipment France       Ⓒ 2008. Toro Hitotsubashi

Fortune “Change the World” Ranking (9/1/2016) 1 Glaxo. Smith. Kline Pharmaceuticals 2 IDE Technologies Fortune “Change the World” Ranking (9/1/2016) 1 Glaxo. Smith. Kline Pharmaceuticals 2 IDE Technologies Industrial Machinery 3 General Electric Industrial Machinery 4 Gilead Sciences Pharmaceuticals 5 Nestlé Food Consumer Products 6 Nike Apparel 7 Master. Card Financial Data Services 8 United Technologies Aerospace & Defense 9 Novozymes Specialty Chemicals 10 First Solar. Energy 11 Coca-Cola Beverages 12 Intel Semiconductors 13 Munich Re. Insurance Property & Casualty 14 Fibria Celulose Forest & Paper Products 15 Walmart General Merchandisers 16 Bank of America Banks 17 Crystal Group Apparel 18 Ito En Beverages 19 Pay. Pal Holdings Financial Data Services 20 Skandia. Insurance Life & Health 21 Siemens Industrial Machinery 22 National Australia Banks 23 Olam International Food Services 24 Schneider Electrical Equipment 25 Mc. Donald’s Food Services       Ⓒ 2008. Toro Hitotsubashi 26 Salesforce. com Computer Software 27 Unilever Personal Products 28 CVS Health. Food & Drug Stores 29 Accenture Information Technology 30 Didi Chuxing Transportation 31 Johnson & Johnson Pharmaceuticals 32 Banco de Crédito Banks 33 Compass Group Food Services 34 m. Pedigree Information. Technology 35 Linked. In Internet Services & Retailing 36 Smart Telecommunication Services 37 Becton Dickinson Medical Products & Equipment 38 Pepsi. Co Food Consumer Products 39 Panasonic Electronics 40 Gap Specialty Retailers Apparel 41 Tribanco Banks 42 DSM Specialty Chemicals 43 Heineken Beverages 44 BTPN Banks 45 Starbucks Food Services 46 Cipla Pharmaceuticals 47 IBM Information Technology 48 Godrej Group Industrial Products 49 Grupo Bimbo Food Consumer Products 50 Tesla Motors Motor Vehicles & Parts

Japanese Best Practice①:Itoen 「3 S」 <Ito En Group’s CSR> Aim to be the world Japanese Best Practice①:Itoen 「3 S」 Aim to be the world tea company Business model Community-based Route sales Supply system from upstream to downstream Activity axis as a comprehensive beverage manufacturer Product development concept Nature Good design Key theme The environment Organizational governance Safety Health Group’ power Synergy among the Group Good taste Key theme Consumer issues Community involvement and development Human rights Labor practices Fair operating Basic CSR practices Ito En’s principle: “Always Putting the Customer First” It is implemented by the team Ito En. Creating shared value (CSV): Solving social issues (solving customer complaints) and fostering the Ito En Group= Implement “Still Now” Basic CSR: Strengthening the management foundation based on the seven core subjects of social responsibility defined in ISO 26000       Ⓒ 2008. Toro Hitotsubashi Creating shared value Personnel developmen through ESD 19

Itoen CSV 2. 0 Hypothesis 5 Values: physical →mental Ø Ø Ø Nature → Itoen CSV 2. 0 Hypothesis 5 Values: physical →mental Ø Ø Ø Nature → Natural mind(素直な心) Health →Wellness(心の健康) Safety → Peace of mind(心の平安) Good design → Imagined landscape(心の情景) Quality of Taste → Quality of Life Engagement Ø Connectivity, Sharing, Commune(霊的交感), Bonds(絆) Ø Nomad, Ordinary & Extraordinary (日常と非日常)、Legacy of Future(未来の伝統) Ø Serendipity (偶然の出会い) Make world beautiful through Tea Ø Cool Japan:peace of mind (なごみ、やすらぎ) Ø World Tea Producer:herb tea, mint tea, chai, etc. Ø Mindfulness: Yoga, Zen Meditation, Six Sense       Ⓒ 2008. Toro Hitotsubashi

Japanese Best Practice②:First Retailing “Lifewear” <Corporate Statement> Changing Clothes, Changing Conventional Wisdom. Change the Japanese Best Practice②:First Retailing “Lifewear” Changing Clothes, Changing Conventional Wisdom. Change the World       Ⓒ 2008. Toro Hitotsubashi

Grameen UNIQLO Q.Is FR a CSV company?       Ⓒ 2008. Toro Hitotsubashi 22 Grameen UNIQLO Q.Is FR a CSV company?       Ⓒ 2008. Toro Hitotsubashi 22

      Ⓒ 2008. Toro Hitotsubashi Heattech resulting from Tight Collaboration Branding as “Cool Japan”       Ⓒ 2008. Toro Hitotsubashi Heattech resulting from Tight Collaboration Branding as “Cool Japan” “Mega hit” product development skill ________       Open Innovation Virtual Company “High functionality textile” technology development skill 23

New business model through digital transformation Prod/materials development/ MD+prod dev/Production/Distrib+delivery/Marketing/Stores/Guests       Ⓒ 2008. Toro New business model through digital transformation Prod/materials development/ MD+prod dev/Production/Distrib+delivery/Marketing/Stores/Guests       Ⓒ 2008. Toro Hitotsubashi l Put the guest/customer at お客様を中心と the center, solicit して、お客様の their needs. Ensure product creation ニーズをくみ上 and information げて、物づくり、 accumulation is 情報づくりのプ done in parallel ロセスが、全世 across the globe at 界で同時進行 the same time l お客様とユニク Connect the ロがダイレクト customer directly につながること to Uniqlo to ensure で、お客様が 求 that what they want める商品をすぐ is immediately に商品化できる conveyed to Uniqlo サプライチェー who can productize the idea in our ン 24 supply chain

Japanese Best Practice③:Ajinomoto “ASV” Our Philosophy What We Aim for (Our Philosophy): We will Japanese Best Practice③:Ajinomoto “ASV” Our Philosophy What We Aim for (Our Philosophy): We will accomplish our Mission by engaging in businesses that embrace our ASV Corporate Message Eat Well, Live Well. Ajinomoto Group Mission (Mission) Ajinomoto Group Vision (Vision) ASV (The Ajinomoto Group Creating Shared Value) (Value) Our mission is to contribute to the world's food and wellness, and to better lives for the future Our vision is to become a genuine global food company group with specialties guided by our leading-edge bioscience and fine chemical technologies ASV represents our unchanging commitment: With our stakeholders and businesses, we help solve society's issues, leading to the creation of economic value Ajinomoto Group Way       Ⓒ 2008. Toro Hitotsubashi Ajinomoto Group Principles (AGP) Copyright © 2017 Ajinomoto Co. , Inc. All rights reserved. 2

Social Issues to Resolve and Values to Create Contribute to resolve social issues with Social Issues to Resolve and Values to Create Contribute to resolve social issues with our businesses, leading to economic value and sustained growth Healthy Living Physical: • Nutritional inbalance with lack of information (under/over nutrition) Psychological: • Eating alone & lack of spare time due to changes in lifestyle Health and Well-being (all living things) Seasoning Strong Family and Frozen social bonds (Eating together) Creation of spare time (smart cooking) Ajinomoto Group Way Processed food Food tradition and new adventure Food Resources • Depletion of food resources • Food waste       Ⓒ 2008. Toro Hitotsubashi Integrated Food Solution Healthcare by utilizing our leading-edge bioscience and fine chemical technologies which also leads to deliciousness technologies, and by delivering good and healthy food • Produce good and healthy food menus with proteins and 2 We contribute to the development of a society that enables strong family/social bonds and diverse lifestyles through eating well 3 We contribute to the sustainability of the society and the earth, with our customers and local communities, across the value chain from production to consumption Life Support Comfortable lifestyle Living with the society and the Earth 1 We contribute to health and well-being vegetables centered on Umami Beverage food ASV Value Creation Stories Global Sustainability • Global warming • Depletion of water • Increase in waste 4 We co-create value with each region through the perspectives of the customers, with our global, top-class and diverse talents Social issues that we aim to resolve Values that we aim to create 6

An Example of ASV: Value Co-creation with Local Communities (Vietnam) Achieved further value creation An Example of ASV: Value Co-creation with Local Communities (Vietnam) Achieved further value creation through co-creation Provided good and healthy food • e. g. : Provided menus centered on umami that enable children to eat protein & vegetables (School Meal Projects) Schools and companies Government and municipalities       Ⓒ 2008. Toro Hitotsubashi Contributed to the global environment through utilization of co-products • Supported wide range of fruits and vegetables, such as gum trees, sugar cane, pineapple, and coffee Co-creation with local communities Shared channels • Reached to schools and other public facilities by collaborating with the Ministry of Education and local govt. Constructed sustainability cycle • Provided co-products to suppliers (rubber cultivation, coffee beans, etc. ) Consumers Local suppliers Develop social infrastructure (raising awareness of the importance of nutritional balance) • Launched the licensing system for nutritionist with the govt. • Found Vietnam’s first Bachelor of Nutrition Science through an initiative with Hanoi Medical University and the National Institute of Nutrition 41

ICT / Digital Transformation : Reengineer value chains to be powered by R&D leadership ICT / Digital Transformation : Reengineer value chains to be powered by R&D leadership Value offering enhancement Health & Well-being Consumer behavior Advanced customer segmentation Consumer psychology Reveal drivers of happiness & deliciousness       Ⓒ 2008. Toro Hitotsubashi Value chain re-engineering Digitalization of production Improve efficiencies of fermentation processes Automate production plants on a global scale Customer relationships enhancement Re-examine current channels and develop new channels (e-commerce, etc. ) Co-creation with processed food manufacturers and food service companies Drive initiatives with company-wide cross-functional teams collaboratively with external partners 30

Japanese Best Practice④:Mitsubishi Chemical       Ⓒ 2008. Toro Hitotsubashi “KAITEKI” 29 Japanese Best Practice④:Mitsubishi Chemical       Ⓒ 2008. Toro Hitotsubashi “KAITEKI” 29

Japanse Best Practice⑤:Mitsui & Co “Yoishigoto (Good Quality Work) Shoei Utsuda, Chairman Yoishigoto Society Japanse Best Practice⑤:Mitsui & Co “Yoishigoto (Good Quality Work) Shoei Utsuda, Chairman Yoishigoto Society Business HR Compliance Q. How to define Yoi-Shigoto? Q. Yoi-Shigoto=CSV?       Ⓒ 2008. Toro Hitotsubashi 30

Turning Social Issues into New Values       Ⓒ 2008. Toro Hitotsubashi 31 Turning Social Issues into New Values       Ⓒ 2008. Toro Hitotsubashi 31

Japanese Best Practice ⑥: Nikko Asset A difference between general SRI funds and CSV Japanese Best Practice ⑥: Nikko Asset A difference between general SRI funds and CSV funds    - CSV is not an advanced form of SRI p General SRI fund • Has a strong theme • Focuses on a corporate’s CSR value • Evaluates a CSR report • Evaluated by an external specialized agency p CSV fund • Has a new profit-driven model • Focuses on a corporate’s primary value • Evaluates intangible value that will generate profit in the future • Evaluated by an internal analyst Source: Nikko am @ CSV Forum       Ⓒ 2008. Toro Hitotsubashi 32

Value chain of key issue Widely spread e commerc e Efficie nt logisti cs Value chain of key issue Widely spread e commerc e Efficie nt logisti cs Transportation infrastructure Stable financial system Contributi on to emerging countries’ advancem ent Efficie nt agricu lture Living space Crash prevention Rear view camera       Ⓒ 2008. Toro Hitotsubashi Nursi ng home Measures to address the declining birth rate and the aging population Energy saving timeshortenin g home electroni cs Preve ntativ e care Prom oting sports Obesity Safety and security Securit y technol ogy Poor nutrit ion Quality manag ement Support of women's social advance ment Healthcare Minimally invasive treatmen t Nursery items Aging Function al material Eco-car Streamlin ing hospital manage ment Convenience store Drug store Measurin g technolo gy Environment Energy saving Eco city Smart city Employment Diversity Organ ic materi al Altern ative energ y Social efficiency Social infrastructure Convenient ads Environm ental loadreducing technolo gy Efficient househol d duties Efficie nt trainin g 33 Travel Amus ement Spiritual welfare Fitness Proactive employm ent of women Medical care for the elderly Characte r business Support of hobbies Resort facility Medical tourism 33

      Ⓒ 2008. Toro Hitotsubashi Maslow`s Hierarchy Lever Economy Maturing Mind Growing Geed Emerging       Ⓒ 2008. Toro Hitotsubashi Maslow`s Hierarchy Lever Economy Maturing Mind Growing Geed Emerging Fear 34

How should Japanese companies make a big pivot toward J-CSV? — Toyota’s case — How should Japanese companies make a big pivot toward J-CSV? — Toyota’s case — 1. Search for the next-generation (post-singularity) value proposition: What is true abundance? • Safety/Security Peace of Mind • Health  Wellness • Connected Car Connected People 2. Toyota n. 0: What is the continuously renewing Toyota? • Car-manufacturing (the previous market) Building a car-owning lifestyle and society (the actual market) • Product Quality • A car company (TMC) A company beyond a car (Toyota Corporation or Toyota Next) Management Quality 3. TSV Declaration: What is the Toyota version CSV? • Tangible assets Intangible assets (skills, brand, network, human resources) • Pyramid-style ecosystem (10%) Rhizome-style ecosystem (100%) • Agenda 2030 process sheet       Ⓒ 2008. Toro Hitotsubashi Agenda 2050 (Next SDGs) setting 35

Basic Structure of X-Management Model Management Transformation Business Building X Market Development Operation Excellence Basic Structure of X-Management Model Management Transformation Business Building X Market Development Operation Excellence * Economics of Scale, Scope, Skill, Speed       Ⓒ 2008. Toro Hitotsubashi • Driving power for organic and inorganic growths: for example, MA&A and PMI. • Ability to have everyone go ahead toward the same goal and create value that surpasses the total power of each individual • Ability to adapt to changing conditions, seeing “crisis” as “an opportunity” and continuing to evolve the management model • Ability to build a platform that amplifies “S 4 economies” • Ability to build an eco system that amplifies network externalities • Branding and marketing power that amplifies customer franchise • On-site power in technology, production and sales • Perpetual drive for improving QCD • Ability to amplify intangible asset s such as “skillfulness” and “craftsmanship”

Four types of management models Major management models for during time of constant growth Four types of management models Major management models for during time of constant growth Management models for during time of structural change Type J Type X Type W X 12. Manufacturing business 20. 26. 30. 31. 32. 42. 56. 58. 59. (Others) Non-manufacturing business       Ⓒ 2008. Toro Hitotsubashi 34. 60. 89. Aisin Seiki Honda Motor Shin-Etsu Chemical Canon Daihatsu Motor Calsonic Kansei Corporation Suzuki Motor Corporation Nikon Corporation Denso Kao X 1. Nidec Corporation 8. Hoya 17. Eisai 23. Takeda Pharmaceutical Company 45. Kyocera Corporation 55. Nissan Motor 68. Ricoh Company (Out of top 100 list) JT 7. 23. 71. Mitsubishi UFJ Lease & Finance Company Toyota Tsusho Corporation SCSK X X 5. 6. 10. 25. 74. 77. 83. 96. 99. 100. Rinnai Corporation JGC Corporation Tokyo Gas Type Z 19. 31. Keyence Corporation Unicharm Corporation Nitto Denko Corporation Fanuc Corporation Bridgestone Ajinomoto Kikkoman Corporation Toray Industries Yakult Honsha Shimano Secom Yamato Transport (Out of top 100 list) Ryohin Keikaku 等 39. 78. 82. Daikin Industries Komatsu Toyota Motor Corporation 27. Aeon (Out of top 100 list) Fast Retailing 等 The best practices conducted in the companies written in red will be introduced. 等

X management and J-CSV Management Transformation Business Building X Market Develop -ment (4) CSV X management and J-CSV Management Transformation Business Building X Market Develop -ment (4) CSV and corporate value (5) CSV and sustainable management (6) CSV and corporate brand (7) CSV and global management (8) CSV and governance (9) CSV and company-wide reform (3) CSV and innovation (2) CSV and marketing Operation Excellence       Ⓒ 2008. Toro Hitotsubashi (1) CSV and operational excellence (10) CSV and human resource development (11) CSV and communication (12) Japanese style CSV