Message from the President
Turning a "Lost Decade" into a "Decade of Preparation"
The year 2008 marked a turning point, when the dry bulk market experienced soaring prices. Then, over these past 10 years, despite favorable performance in certain businesses—such as energy transportation and car transportation—the liner trade, air cargo transportation, and dry bulk businesses have struggled to overcome difficulty in raising revenues as supply outstripped demand. Moreover, trust in the Company's level of compliance was also shaken by an infringement of the Antimonopoly Act in the car transportation business and safety issues in the air cargo transportation business, as the Group encountered various issues in Japan and overseas. As we faced these challenges and reflected on these issues seriously, every Group employee used all means possible to achieve results one by one. NYK's share price has recovered from a low point of around ¥1,000 at one stage to approach the ¥6,000 mark. Now, we feel that the business can meet expectations for profit - ability. These past 10 years have not been a "lost decade" but a "decade of preparation," which the NYK Group has seized as an opportunity to work together as one to prepare for a leap forward. Furthermore, the past year has been extremely adverse, with the spread of COVID-19. This has been a year for reaffirming the importance of our mission to be a lifeline for the world and a support for industry at sea, in the air, and on land as well as the necessity of maintaining the safety and health of our employees, who are committed to "keeping the logistics lifeline open" through their work in transportation. In fiscal 2020, we achieved record profits and gained experience through the COVID-19 pandemic, and thus I am pleased to say that we have truly succeeded in preparing for that next leap forward.
Promoting Integrated Thinking In-House to Take ESG Management to the Next Stage
In February 2021, the NYK Group issued the NYK Group ESG Story. Rather than setting out specific strategies and targets in the manner of the medium-term management plan, the ESG Story presents the Group's vision and intended direction for the future. Up until now, our decision-making criteria have been centered mainly on economic viability; however, with the addition of ESG yardsticks, we are working to become a Sustainable Solution Provider that will continue to be the preferred choice of society in the future. By promoting the most advanced ESG management in the maritime shipping and logistics industries, my aim is to position the Group so that customers will consider it an essential component for increasing the competitiveness of their own supply chains. As long as the Group is the preferred choice, our business opportunities will increase and our growth and differentiation strategies will become more sophisticated, thereby enabling us to continuously generate profits. The Group has several resources for generating new value inspired by ESG, such as the Technical Headquarters. I am confident that joining forces with competent partners in Japan and overseas, to make the fullest use of these resources, while also incorporating digital transformation (DX) and technology, we will be sure to produce good results. Each front line and business entity in the Group will have specific discussions about measures to contribute to ESG, centered on the ESG Story. At this stage, we have made full-fledged starts on various new businesses, such as our offshore wind power-related business and MarCoPay Inc. In addition, the Automotive Transportation Headquarters has launched the ESG brand "Sail GREEN" project and extensively sold environmentally friendly, total logistics services as part of a value chain, focusing on the LNG-fueled pure car and truck carrier Sakura Leader. This brand has been highly praised for providing a quantitative visual representation of the environmental impact associated with transportation, enabling information about the amount of CO2 emissions reductions to be shared with customers. Furthermore, when considering ESG management, rather than treating its individual components—"environmental,""social," and "governance"—separately, it is important to consider them as mutually interactive. For example, regarding the issue of conducting crew changes in the face of the COVID-19 pandemic, being highly sensitive to the "social" aspect gave rise to a company culture that avoids asking crews to assume heavy workloads. Doing so enabled us to maintain and increase frontline motivation and, as a result, we ensured crew safety and prevented accidents, which have a major impact on the marine environment, thereby contributing to the "environmental" aspect as well. "Governance" was also involved as encouraging employees to constantly act and make decisions with ESG yardsticks helps prevent compliance infringements, leading to trust from employees and other stakeholders, which in turn contributes to the "social" aspect. Viewed in this light, ESG management can be thought of as nothing less than a reformation of awareness. For example, when business divisions previously provided an explanation of an investment, the main focus was on profitability. Now, however, ESG-related aspects are always considered as well, such as contributions to reducing CO2 emissions. If stage one of the Group's ESG management has been the period up to the formulation of the ESG Story, then we have now moved into stage two, in which our integrated thinking combining economic viability and ESG will take shape in one form after another. We will ensure that Group employees around the world have a firm understanding of ESG in their respective positions and that they demonstrate it through their actions. The accumulation of these actions will produce excellent results in every location where the Group operates, ultimately giving rise to a sustainable society and environment that are truly rich and worth living in.
Ready to Accelerate ESG Management
Our efforts to reform awareness in the NYK Group will not stop at the front lines. Discussions among the management team are gradually beginning to show a greater awareness of the medium- to long-term perspective. In terms of our structure, in April 2021 we established the ESG Management Committee, of which I am the chair that will enhance the effectiveness of ESG management. Currently, we are discussing setting key performance indicators (KPIs) for accelerating ESG management, and an overview thereof is to be prepared during fiscal 2021. In addition, my idea of ESG management does not end with setting KPIs to enhance effectiveness. Before we decide on our current ESG management initiatives, we started preparing our long-term scenarios and worked backward to formulate our next medium-term management plan. Thus, ESG management is thoroughly woven into our plans for every time frame: our vision (long term), our medium-term management plan (medium term), and our business policies (short term). We discuss the vision for the Group under various scenarios envisaging the business environment in 30 years' time, making reference to the latest technological trends and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). After that, in fiscal 2022, we intend to have them work on formulating a proposal for the next medium-term management plan. Simply making environmental adaptations to existing vessels and launching LNG-fueled vessels will not be enough to achieve carbon neutrality and zero emissions by 2050. We need considerable innovation, including the development of vessels fueled by ammonia and hydrogen. We must also acquire a much deeper knowledge of carbon pricing, such as emissions trading schemes. Finally, since LNG-fueled vessels are more expensive than conventional ones, while naturally making every effort to control costs on our side, we must also strive to convince customers to bear some of the increased costs. We are ready to blaze a trail as a front-runner in ESG management while emphasizing constant efforts to gain the understanding of our stakeholders, including customers, and have sincere dialogues with them.
Amid the prolonged aftermath of the collapse of the maritime shipping bubble from 2008 onward, since my appointment as president in June 2019, I have been working hard to transition the Group to a sustainable business structure as quickly as possible by conducting structural reforms in the dry bulk business, rebuilding governance, and thoroughly reinforcing our financial foundation. Even as ESG management continues to advance gradually, I do not intend to relax my efforts targeting these issues by one iota. In addition, diversity and inclusion is an essential part of achieving ESG management. Our workforce in the future needs to have diverse perspectives and values, and to create such a workforce we have started reforming the human resource system so as to provide more opportunities for experiencing demanding jobs and frontline operations to employees. I want our organization to be one where diverse human resources of any nationality or gender can grow in a global context and make full use of their capabilities in their own way. At the beginning of this message, I said that we have completed our preparations. We have finished preparing for full-scale ESG management, and fiscal 2021 is set to be our first official year of ESG management. As we give full play to the strengths and achievements that we have cultivated to date, I expect you will see the NYK Group continue to evolve into a corporate group with an unrivaled presence in ESG, guided by our mission statement, "Bringing value to life." Thank you for your continued support.