Corporate Governance Framework

Basic Approach and Framework

Corporate Governance Framework (as of June 25, 2020)

Corporate Governance Framework Corporate Governance Framework

Board of Directors

The Board of Directors makes decisions on matters stipulated by laws, regulations, or the Articles of Incorporation; the medium-term management plan; important matters regarding business execution for the Company and Principal Operating Companies; etc.

Executive Council

The Executive Council has been formed to discuss matters related to operational execution that require the approval of the president. This council is composed of the President, the Executive Vice Presidents, the Senior Vice Presidents who have been appointed by the President, and the President of each Principal Operating Company. Thus, at the Executive Council, through careful deliberation by executive members of the Company and the Principal Operating Companies, appropriate and efficient decisions by the president are secured.

Item Details
Format of institutional design Company with an audit and supervisory committee
Number of directors who are not Audit and Supervisory Committee members 11 (8 inside, 3 outside)
Number of directors who are Audit and Supervisory Committee members 5 (2 inside, 3 outside)
Total number of directors 16 (10 inside, 6 outside)
Ratio of outside (independent) officers 37.5%
Ratio of female officers 18.8%
Term of directors who are not Audit and Supervisory Committee members 1 year
Term of directors who are Audit and Supervisory Committee members 2 years
Adoption of executive officer system Yes
Institution assisting the president's decision making Executive Council
Voluntary advisory institutions for the Board of Directors Establishment of Nomination Advisory Committee and Compensation Advisory Committee

Basic Policy on Corporate Governance

In order to achieve the sustainable growth of the ENEOS Group and increase its corporate value over the medium to long term, the Company established the ENEOS Group Basic Policy on Corporate Governance, with the objective of establishing and operating a corporate governance framework for the conduct of transparent, fair, timely, and decisive decision-making in the Group's management. This policy describes systematically and comprehensively the Group's basic approach to corporate governance as well as its establishment and operation, taking into consideration the Corporate Governance Code created by the Tokyo Stock Exchange. This basic policy is published on the ENEOS Holdings website as our commitment to all stakeholders, including shareholders of ENEOS Holdings along with ENEOS Group customers, business partners and employees, and the local communities where we operate.

Basic Concept for Corporate Governance

By establishing and operating the Corporate Governance appropriately, ENEOS Group shall realize the ENEOS Group Philosophy and achieve its sustainable growth and increase its corporate value over the medium to long term. Based on this recognition, the Company shall establish and operate the Corporate Governance of ENEOS Group as follows:

Basic Matters on the Establishment and Operation of Corporate Governance

1.Business management as the holding company
The Company takes charge of formulating the ENEOS Group Philosophy, ENEOS Group Code of Conduct, basic management policies such as medium to long term management plans and budgets (hereinafter referred to as "Basic Management Policies"), allocating management resources and overseeing the management of each subsidiary from the perspective of optimizing the value of ENEOS Group as a whole.
2.Management structure of the Company and the Principal Operating Companies
In order to establish a group management structure centered on the Energy Business, the Company shall integrate the management of the Company and ENEOS Corporation through such means as concurrently serving as directors/officers, integrated operation of meetings, and merger of administration departments.
JX Nippon Oil & Gas Exploration Corporation and JX Nippon Mining & Metals Corporation shall respectively establish business execution structure where their autonomy, agility, and independence are further enhanced depending on their business characteristics under the Basic Management Policies specified by the Company.
3.Organization
The Company is a company with audit and supervisory committee.
4.Board of Directors
The Board of Directors of the Company consists of the Chairman, the President, more than one full-time directors, and part-time directors concurrently serving as the President of each Principal Operating Company and outside directors. With such composition, the Board of Directors of the Company shall manage the Company in accordance with the following policies.
  1. (1)Focus on deliberation and decision of the Basic Management Policies and oversight of the execution of operations.
  2. (2)As an effort to improve agility of the execution of operations, delegate part of decision-making on the execution of material operations to the President of the Company.
  3. (3)With respect to the material matters such as appraisal of return on investment, risks, progress of execution of material operations of the Company and the Principal Operating Companies, the Board of Directors shall receive reports from persons such as the President of the Company and the President of each Principal Operating Company, verify its consistency with the Basic Management Policies and oversee such matters.
5.Audit and Supervisory Committee
  1. (1)The Audit and Supervisory Committee shall carry out audits with a high degree of effectiveness and objectivity conduct audits in an organized and systematic fashion through appropriate collaboration between the full-time audit and supervisory committee members, who are given the strong power to gather information, and the audit and supervisory committee members who are outside directors, who have a high degree of independence, in addition to a wealth of knowledge and experience.
  2. (2)The Audit and Supervisory Committee shall oversee the execution of operations through each audit and supervisory committee member exercising the voting right that he or she has as a director at the Board of Directors meetings as well as exercising the right to state his or her opinion on personnel affairs and compensation of directors who are not audit and supervisory committee members.
6.Outside directors
To take advantage of a wealth of knowledge and experience of outside directors and to ensure transparency and objectivity in decision-making, the Company shall take the following measures:
  1. (1)In determining the Basic Management Policies at the Board of Directors of the Company, request outside directors to be involved, from the stage of consideration and to fully discuss it from multiple points of view; and in decision-making on and overseeing execution of material operations, fully verify its consistency with the Basic Management Policies, taking opinions of outside directors into account; and
  2. (2)In determining personnel affairs and remuneration of directors at the Board of Directors of the Company, ensure transparency of the decision-making process by consulting with the Nomination Advisory Committee and the Compensation Advisory Committee, a majority of whose members are outside directors, and which are chaired by an outside director.
7.Executive officers and the Executive Council
  1. (1)The Company shall appoint executive officers who execute operations agilely pursuant to a decision of the Board of Directors.
  2. (2)For the President to make decisions on execution of operations as chief operating officer, the Company shall establish the Executive Council as a consultative body for matters to be decided by the President, which shall consist of the President, the Executive Vice Presidents, the Senior Vice Presidents who have been appointed by the President, and the President of each Principal Operating Company, and have the Executive Council make decisions through careful deliberations.
  3. (3)A full-time audit and supervisory committee members shall attend the Executive Council, grasp a process of important decision-making, and the status of execution of operations, and share such process and status with other audit and supervisory committee members.
8.Corporate governance framework of Principal Operating Companies
  1. (1)Each Principal Operating Company is a company with board of corporate auditors (as defined in the Companies Act of Japan). Each Principal Operating Company has a Board of Directors to enable directors to oversee each other’s performance of duties. Each Principal Operating Company shall fully analyze the risk of the business and verify the conformity of the execution of operations performance to the Basic Management Policies. The full-time audit and supervisory committee member of the Company concurrently serves as the full-time corporate auditor of ENEOS corporation. The Company shall also dispatch its full-time audit and supervisory committee member to JX Nippon Oil & Gas Exploration Corporation and JX Nippon Mining & Metals Corporation as a part-time corporate auditor, and cause such corporate auditor to audit the execution of the duties by the directors of the Principal Operating Company.
  2. (2)Any decision-making regarding the matters related to the execution of operations of a Principal Operating Company (including matters on the execution of material operations of a subsidiary of such Principal Operating Company) shall be made by such Principal Operating Company.
  3. (3)Each Principal Operating Company shall report to the Company the status and other matters established by the Company regarding the execution of material operations.

Policy on Dealing with the Corporate Governance Code

The Company adopts all of the principles of the Corporate Governance Code established by the Tokyo Stock Exchange as basic policy, since the Company considers it effective in order to establish and operate the corporate governance framework. The Company implements the Code on a Groupwide basis.

Composition of Nomination Advisory Committee and Compensation Advisory Committee (as of June 25,2020) and Fiscal Year 2019 Results

Advisory Bodies Nomination Advisory Committee Compensation Advisory Committee
Chairperson Outside director (Otsuka)* Outside director (Otsuka)*
Members
(including chairperson)
Representative directors: 2 (Sugimori, Ota Katsuyuki)*
Outside directors: 3 (Ota Hiroko, Otsuka, Miyata)*
Representative directors: 2 (Sugimori, Ota Katsuyuki)*
Outside directors: 3 (Ota Hiroko, Otsuka, Miyata)*
Purpose Ensure the transparency of the process of determining director candidates Ensure the transparency and objectivity of the process of determining the compensation and other benefits for directors and executive officers
Results in fiscal year 2019 The committee met a total of five times and held deliberations on such matters including personnel proposals of candidates for directors of the Company and succession planning. The committee met a total of five times and held deliberations on such matters including the executive compensation plan, the executive compensation level and the Share Remuneration Plan.
  • *Please see Executives for the profiles of officers (Board of Directors and Audit and Supervisory Committee Members)

Nomination Advisory Committee

To ensure the transparency of the process of determining the director candidates of the Company, the Nomination Advisory Committee has been established to provide advice to the Board of Directors. The Nomination Advisory Committee deliberates on the personnel matters of the Company's directors (including appointment and dismissal). The Nomination Advisory Committee consists of three outside directors and two representative directors, and one of the outside directors on the committee acts as chairperson. The Board of Directors requests Nomination Advisory Committee to advise on the issue of succession planning for the Company's chairman and president and for the presidents of the Principal Operating Companies.
Compensation Advisory Committee
To ensure the transparency and objectivity of the process of determining the compensation and other benefits for directors and executive officers, the Compensation Advisory Committee has been established to provide advice to the Board of Directors. The Compensation Advisory Committee comprises three outside directors and two representative directors, and one of the outside directors on the committee acts as chairperson. The Board of Directors requests the Compensation Advisory Committee to advise on the policies for determining the compensation and other benefits for directors and executive officers, and the executive compensation plan and the concrete compensation amount.

Abolition of Senior Executive Advisor and Advisor System

The Company abolished Senior Executive Advisor and Advisor System on June 26, 2019 with an aim to further strengthen corporate governance. The Company may appoint some of the resigned executives as senior corporate adviser/corporate adviser after carrying out necessary procedures including reporting to Nomination Advisory Committee and the Board of Directors' resolutions, if the Company deems it necessary to use such resigned executives' knowledge and to assign them external affairs (activities in business/industry community, assuming public offices).

Evaluation of the Effectiveness of the Board of Directors

Overview of Evaluation of the Effectiveness of the Board of Directors

From November 2019 to January 2020, the Company conducted an evaluation of the effectiveness of the entire Board of Directors. The result of evaluation and analysis was reported to all directors on April 22,2020.
The Company conducted a questionnaire including the following items: (i)Board of Director's Operation, (ii)Board of Directors' Operation, (iii)Board of Directors' Tradition, (iv)Supervision by Board of Directors, (v)Discussion regarding the management strategy, (vi)Communications with shareholders. As shown in the table below, the Board was generally evaluated as effective for each evaluation item.
Especially, it was evaluated as effective for following points; enriching the feedback of investor reactions; having spent a lot of time discussing the Long-Term Vision and second Medium-Term Management Plan; accelerating prior explanations to outside directors based on the evaluation of the effectiveness of the previous term.
On the other hand, some directors pointed out certain issues: (i)separating the role of supervision and business execution, (ii)improvement of monitoring.
Moving forward, the Company will work to make improvements in these areas.

Process for Evaluation of Board Effectiveness

Results of questionnaire

Of all questions(36questions), the majority of opinions were positive.

Items Number of questions (A) Number of questions for which the majority of responses were positive (B) Ratio (B) / (A)
Board of Directors' structure, Governance 6 6 100%
Board of Directors' Operation 13 13 100%
Board of Directors' Tradition 2 2 100%
Supervision by Board of Directors 6 6 100%
Discussion regarding the management strategy 6 6 100%
Communications with shareholders 2 2 100%
Summarization 1 1 100%
Total 36 36 -

Examples of opinions that were given in the questionnaire

  • We held discussions on the long-term vision and medium-term management plan multiple times from an early stage, and evaluate the points that were discussed from various perspectives of outside directors.
  • We rate highly the fact that more detailed reports have been made on investor trends than before.
  • The provision of materials to the outside directors in advance and the explanations from the department in charge helped the outside directors to understand the agenda items at the Board of Directors meeting.

Method of Appointing Director Candidates

The Company strives to appoint independent outside directors* to at least one-third of director positions. As of June 25, 2020, the ratio of outside independent officers was 37.5%.
As directors who are not Audit and Supervisor Committee members, the Company has appointed people who have such characteristics as high standards of business ethics, strategic thinking ability, superior decision-making capabilities, and flexible attitudes toward change, as well as the ability to supervise decision-making and management from the viewpoint of what is best for the Group as a whole. Two or more of the directors are independent outside directors.
As directors who are Audit and Supervisory Committee members, the Company has appointed people who have such characteristics as high standards of business ethics, a certain level of specialist knowledge in legal affairs, finance and accounting, as well as the ability to appropriately audit the execution of duties by directors and the ability to appropriately supervise the execution of business. A majority of these are independent outside directors.

  • *The term "independent outside director" refers to outside directors who have satisfied the Company's "Criteria for Assessing the Independence of Independent Officers."

Support System for Outside Directors

Each of the three outside directors who are not Audit and Supervisory Committee members and the three outside directors who are Audit and Supervisory Committee members meet the independence standards based on the rules of the Tokyo and Nagoya stock exchanges, on which the Company is listed. The Company sends materials regarding the agenda of meetings of the Board of Directors to the outside directors, in principle, three days before the meeting, and the Company provides explanations to the outside directors before the meeting. Furthermore, to enhance the auditing function by all Audit and Supervisory Committee members, including outside directors, the Company has established the Office of Audit and Supervisory Committee, which is clearly independent from the chain of command for divisions responsible for business execution (including personnel evaluations). Full-time staff members have been assigned to the office to assist with the duties of the Audit and Supervisory Committee members. Moreover, to support the outside directors who are not Audit and Supervisory Committee members in business execution, the Board Members' Support Office has been established, and full-time staff members have been assigned.

Training for Directors and the Corporate Auditors of Principal Operating Companies

The directors of the Company and Principal operating companies and the corporate auditors of Principal Operating Companies have the duty of working toward the realization of the Group Philosophy, the sustained growth of the ENEOS Group, and the achievement of increased corporate value over the medium to long term. To that end, to support efforts to enhance necessary knowledge and skills, the Company and its Principal Operating Companies provide opportunities for directors and corporate auditors to receive training related to the Companies Act, internal control systems, accounting and taxes, business strategies, and organizations. In addition, the Company also pays for expenses arising from self-study initiatives. Furthermore, when outside directors are appointed, the Company provides explanations of basic matters regarding the ENEOS Group's businesses, and after their appointment, the Company offers business presentations and worksite tours to deepen their understanding.

Training of Internal Directors (Fiscal 2019)

Theme Intended for Timing (fiscal year) Content of training
Companies Act /
Corporate governance
Newly appointed directors 2019 Basic knowledge regarding the duties and responsibilities of directors, the role of the Board of Directors, corporate governance, etc.
Group training to improve knowledge and ability All directors 2019 Lectures regarding the themes on the left
Internal Control Newly appointed directors 2019 Basic knowledge about internal control
Management framework Newly appointed directors 2019 The Group's frameworks for business management and investment management
Finance / Investor relations Newly appointed directors 2019 Current status and issues regarding the Company’s financial affairs, opinions of institutional investors, etc.

Training of Outside Directors (Fiscal 2019)

Theme Intended for Timing (fiscal year) Content of training
Corporate governance Newly appointed directors 2019 The Group's corporate governance
Internal control Newly appointed directors 2019 The Group's internal control systems
Overview of the holding company and core operating subsidiaries Newly appointed directors 2019 Basic knowledge about the holding and the core operating subsidiaries
Business management Newly appointed directors 2019 The Group's frameworks for business management and investment management
Finance / Investor relations Newly appointed directors 2019 Current status and issues regarding the Company's financial affairs, opinions of institutional investors, etc.
Worksite tours All directors 2019 (Energy) Central Technical Research Laboratory, Negishi refinery

Determination of Director Remuneration

Policy regarding Determinations and Calculation Methods for Director Remuneration

Directors who are Audit and Supervisory Committee members (excluding outside directors)

The remuneration and other benefits of directors who are not Audit and Supervisory Committee members (excluding outside directors) comprise the three components; fixed remuneration paid monthly based on role, a bonus of which amount fluctuates based on performance, and performance-based share remuneration. This is a balanced remuneration system that reflects the Company's business performance for the business year as well as shareholder value over the medium to long term in remuneration amounts.

Outside directors who are not Audit and Supervisory Committee members

Remuneration for outside directors who are not Audit and Supervisory Committee members consists of a monthly remuneration in view of the scope of their roles as advisers and supervisors to management and to the supervisory function in general management through an independent and objective point of view.

Directors who are Audit and Supervisory Committee members (including outside directors)

The remuneration for directors who are Audit and Supervisory Committee members consists of a monthly remuneration in consideration of their independence of the role.

Reference

The policy for determining this remuneration and other benefits is determined by resolution of the Board of Directors after deliberation and recommendation by the Compensation Advisory Committee (comprising three outside directors and two representative directors; and chaired by an outside director).
The Board of Directors of the Company shall allow one Audit and Supervisory Committee member to attend the Compensation Advisory Committee's meetings so that the Audit and Supervisory Committee of the Company adequately exercise the right to state opinions on remuneration of directors who are not Audit and Supervisory Committee members at general meetings of shareholders.

The Upper Limit of the Total Amount of Remuneration

Category Type Upper Limit of Remuneration Resolution at the General Meeting of Shareholders (GMS)
Directors who are not Audit and Supervisory Committee members Monthly remuneration and bonuses No more than 1,100 million yen in one(1) fiscal year (of which 200 million yen is allocated to outside directors who are not Audit and Supervisory Committee members) The 8th ordinary GMS
Share remuneration In every three(3) years,
  • the upper limit the Company put in on reserve for trust: 1,500million yen
  • the upper limit of the number of shares given to eligible person: 6 million shares (6 million points)
The 10th ordinary GMS
Directors who are Audit and Supervisory Committee members Monthly remuneration No more than 200 million yen per one(1) fiscal year The 8th ordinary GMS

Share Remuneration Plan

The Company introduced a share remuneration plan for directors who are not Audit and Supervisory Committee members (excluding outside directors) beginning in fiscal 2017. The Share Remuneration Plan adopts a mechanism called Board Incentive Plan Trust (BIP Trust). The plan covers the period of execution of the duties of the Directors, etc., over three fiscal years and entitles the Directors, etc., to the delivery of the Company's shares based on their roles. 50% of such Company shares may be provided by cash equivalent of the value of the Company's shares upon conversion. 

Revision of Share Remuneration Plan

The Company, at the 10th Ordinary General Meeting of Shareholders held on June 25, 2020, revised the Share Remuneration for the Company's directors who are not Audit and Supervisory Committee members (excluding outside directors) and Executive Officers (hereinafter "Eligible Persons") to the Company's performance linkage with the following purpose:

  • To further raise the linkage between the medium to long-term management strategies and the remuneration plan for the Eligible Persons;
  • To cultivate the Eligible Persons' incentive to contribute to the enhancement of the enterprise value and the awareness for shareholder-oriented management, and;
  • To promote initiatives for building a sustainable society such as preserving the environment.

As a result of this revision, the Shares of the Company delivered to the Eligible Persons will be fluctuated within the range of 0 to 200% based on the level of achievement of performance targets, etc. The indices, targets and component ratios used as the Company's performance targets, etc. in the three fiscal years from fiscal 2020 to fiscal 2023 are operating income,(excluding inventory valuation), free cash flow, net D/E ratio, ROE, total return ratio and volume of reduction in CO2 emissions.

Amount of Remuneration and Other Benefits for Each Category of Executives (Fiscal Year 2019)

Category of Executives Total Remuneration Amount (million yen) Total Remuneration Amount by category (million yen) Number of Executives concerned (person) Total Remuneration Amount by category (million yen) Number of Executives concerned (person)
Monthly Remuneration Bonus Share Remuneration
Directors who are not Audit and Supervisory Committee members
(excluding Outside Directors)
398 285 36 12 77 12
Directors who are Audit and Supervisory Committee members
(excluding Outside Directors)
68 68 - 2 - -
Outside Directors 43 43 - 3 - -
Outside Directors Audit and Supervisory Committee members 40 40 - 4 - -
  • *The amount of share remuneration is the amount accounted for in fiscal year 2019.

Corporate Governance Report

Based on stock exchange rules, ENEOS Holdings submits and discloses a report that describes its approach to corporate governance.

Risk Management

The ENEOS Group has introduced an enterprise risk management (ERM) system to facilitate the appropriate response to management risks.

Enterprise Risk Management (ERM)

In fiscal 2017, the Corporate Planning Department began developing and implementing an ERM structure based on the COSO* ERM framework.
Specifically, through interviews of officers and managers and other means, we determine specific risk events that could affect the ENEOS Group in view of future changes in the social and economic situation and calculate the impact and probability of these risks in accordance with assessment criteria. The Executive Council then selects certain risks as material risk events, and reports are made to the Executive Council and Board of Directors on the status of review and implementation of countermeasures.
The degree of impact and probability are shown below.

Impact

Impact level 3 Could significantly impact the entire Group; immediate implementation of countermeasures required.
Impact level 2 Could impact the entire Group to a certain degree; specific countermeasures to be considered.
Impact level 1 Negligible impact on the Group as a whole; can be managed by the operating company. No Group-wide response required.

Probability

Probability 3 The event has already occurred, or it has occurred at least once over the past two to three years.
It is expected to occur within the next two to three years.
Probability 2 The event occurs at least once every 10 years.
It is expected to occur within the next five to 10 years.
Probability 1 The event has occurred less than one time in the past 10 years or not at all.
It is expected to occur at least 10 years in the future.

In fiscal 2018, we formulated Risk Management Regulations for Group Management and Operational Guidelines, which contain basic matters concerning this ERM process. Both took effect on April 1, 2019.
In fiscal 2019, following these regulations, we will continuously identify, assess and respond to risk events.
Furthermore, the core operating companies, ENEOS, JX Nippon Oil & Gas Exploration, and JX Nippon Mining & Metals, each have established and are operating an ERM system based on their individual business operations and characteristics.
Departments in charge of risk management of the Company and its core operating companies work closely together to share information on risks. If a risk event that could seriously impact the ENEOS Group's management is identified at a core operating company, a system is in place in which both the core operating company responsible for the risk event and the Company will work together to implement contingencies for the risk event.

  • *COSO stands for Committee of Sponsoring Organizations of the Treadway Commission. It refers to a framework for internal control released by the commission and adopted by countries around the world.

Internal Control

Internal Control System

The Company has established and operates an internal control system to ensure appropriate operations based on the ENEOS Group Philosophy and the Code of Conduct. The Board of Directors formulated the Basic Policy on Internal Control System, and monitors the status of operation of this system.
The Internal Control Department of ENEOS Holdings takes the lead in the facilitation for the ENEOS Group to develop and operate the internal control system of each organization.
Internal controls stipulated in the Companies Act and the Financial Instruments and Exchange Act are included in the Company's internal control system.
The Company is building and reinforcing autonomous internal control systems for each organization based on the COSO framework, moving toward a risk-based PDCA cycle that can flexibly respond to the changing business environment.
These internal control systems have been rolled out at ENEOS Holdings and ENEOS since fiscal 2018, and we plan to deploy systems for other Group companies starting in fiscal 2019.
Furthermore, the Company established the ENEOS Holdings Risk Management Regulations for Group Management in April 2019. The internal control activities will be carried out along with risk management activities based on the regulations as well as risk management regulations of each Group company.

Risk Assessment of Business Activities

The ENEOS Group has developed company rules and regulations for combating various kinds of risks in its business activities. For the screening of new investments, in addition to country risks and foreign exchange rate risks, we analyze and evaluate ESG-related risks, including environmental risks such as those related to the scope of response to biodiversity and environmental regulations, risks in the procurement of raw materials including water, and human resources risks including human rights, along with occupational health and safety aspects. Based on this, appropriate actions are taken when necessary.
For example, when reviewing a potential investment, we perform screenings based on the stage-gate system prior to reaching a final decision. The objective of the stage-gate system is to narrow down important projects for the advancement of business strategies in an efficient manner. Under this system, processes from initial review to execution are broken down into stages of review. In turn, gates are set up that must be cleared in each of these stages. During screening, we clarify various risks, including ESG-related risks, using sensitivity analysis and case analysis among other means and take steps to minimize risks. For important investments, follow-up is carried out after a certain period of time has passed to clarify impacts on the initial outlook caused by environmental changes or other factors and determine whether to continue with the project thereafter.
Furthermore, ESG-related risks pertaining to existing businesses are managed and monitored appropriately within the framework of the Company's CSR promotion structure.

Crisis Management

When crises or emergency situations arise that may significantly affect the management of the ENEOS Group, the Company exercises overall control and has prepared the Rules for Responding to Crises and Emergencies, which specifies measures to be taken to minimize any damage that may occur.
The Crisis Management Department of the Company functions as the standing organizational unit in charge of crisis response and management. The general manager of this department acts as head of this crisis response unit, and when such situations arise at the Company and Group companies, operating procedures require that the situation and measures to be taken be reported immediately to the head of the crisis response unit.
In addition, depending on the magnitude of the crisis, the Company may, at its discretion, form a crisis response headquarters headed by the president of the Company or a joint crisis response headquarters with ENEOS Group companies to respond quickly and appropriately to the crisis, thereby fulfilling the social mission of the ENEOS Group.

Information Security

Based on the ENEOS Basic Rules for Information Security, the ENEOS Group works to prevent the improper use or disclosure, including leakage, of company information, which is a corporate asset. The ENEOS Group also strives to maintain the accuracy and reliability of its corporate information as well as prevent falsification or erroneous handling while making it possible for authorized users of information to have constant access to information when they need it.
In addition, in terms of protecting personal information, we work to protect the rights and interests of every individual, having established the Personal Information Protection Guidelines along with rules on the appropriate handling of personal information in compliance with the Personal Information Protection Act and other relevant laws and regulations.

Cyber Security Measures

The ENEOS Group conducts training drills, issues reminders on suspicious email delivered to employees and provides Group-wide security training using curriculum translated into multiple languages in order to protect its important information and systems from cyberattacks, which have become stealthier in recent years.
The IT Security Basic Procedures for ENEOS Group have been established as a set of rules that must be followed by Group companies. The Company is now working to further enhance cyber security countermeasures for the entire ENEOS Group.
Furthermore, ENEOS participates in the Cybersecurity Council, established by the government of Japan in April 2019, as an important infrastructure provider. The council shares information among government institutions, cyber businesses and research institutions, and discusses necessary measures.

Risks and Opportunities Concerning Climate Change

Climate change awareness

The ENEOS Group has identified climate change as a significant source of management strategy risks and opportunities. Climate change risks and opportunities have been incorporated into our strategy formulation processes and are reflected in our mid- to long-term management strategies.
In addition, the Company signed the statement of support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) on May 27, 2019.
The TCFD has published recommendations citing the need for companies to disclose information to investors in an appropriate manner with regard to the various risks and opportunities facing companies resulting from climate change to enable investors to make informed investment decisions.
As a company with a duty to provide a stable supply of energy and materials, the ENEOS Group will continue to actively promote ESG initiatives for the realization of a sustainable society. We will also disclose information on our business activities following the TCFD's recommendations to every extent possible through our integrated report and other means.

Climate change initiatives

Governance

Discussions are held by the Executive Council and Board of Directors on the risks and opportunities of climate change at least quarterly. These discussions are attended by the officer responsible for overseeing the impacts that climate change has on our business operations.
Specifically, these discussions involve reviewing and confirming our mid- to long-term business strategy based on the risks and opportunities of climate change as well as reductions in CO2 emissions, including the progress under the Medium-Term Environmental Management Plan.

Strategy

In formulating the ENEOS Group Long-Term Vision to 2040, we conducted a scenario analysis, based on demand forecasts and other factors, covering the main business fields that are expected to be impacted by climate change.

  • Scenario analysis
    • In the energy segment, we have regularly analyzed the global and long-term outlook for population trends, economic growth and energy demand using the World Energy Outlook (WEO) published by the International Energy Agency (IEA).
    • In the preparation of our Long-Term Vision, we conducted scenario analysis which also covered the Sustainable Development Scenarios (SDS), an extreme scenario where the world rapidly moves away from carbon, based on the goals in the Paris Agreement, following the New Policy Scenario (NPS) in WEO2018.
  • Business initiatives
    • The results of the scenario analysis indicate advancements in a low-carbon, recycling-oriented society, digital transformation, and lifestyle changes as long-term global trends. Based on these trends, we formulated our Long-Term Vision, which includes contribution to a low-carbon, recycling-oriented society.
    • Our diverse business operations entail energy, resources and materials. As such, we face risks related to the transition to a low-carbon society as well as various business opportunities for contributing to a low-carbon society, in the areas of natural gas, electricity, renewable energy, functional materials, and electronic materials, etc.
    • We will focus on developing and strengthening businesses indicated as mainstays of the future in our Medium-Term Management Plan (overseas business, electricity and gas businesses, and technology-based businesses), as they also contribute to the transition to a low-carbon society.

For more information on our Long-Term Vision to 2040, please see pp. 13–16 of the Integrated Report.

Risk Management

The Company's Corporate Planning Department developed and has been implementing an ERM system based on the COSO ERM framework since fiscal 2017.
For details, please see Enterprise Risk Management (ERM).

Indicators and Targets

The ENEOS Group has formulated the Medium-Term Environmental Management Plan (fiscal 2017–2019) and established environmental targets for fiscal 2030, aimed at contributing to the development of a low-carbon, recycling-oriented society.
For details, please see Plan and Targets.

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