Integrating the Power of Our Technical Headquarters to Accelerate Value Creation

Tomoyuki Koyama

Senior Managing Executive Officer
Chief Safety Officer (Marine)
Chief Information Officer
Chairman of Group IT Strategy Committee
Chief Executive of Technical Headquarters
(Executive Chief of Environmental Management, Chairman of Technology Strategy Committee)

At the NYK Group, safety and the environment are the most important challenges when it comes to promoting ESG man-agement. I believe the key to addressing these challenges lies in how much of the power of our Technical Headquarters we can integrate. We have formulated a Vessel Technology and Innovation Road Map, which shows various time frames and research domains toward 2050. This road map includes the NYK SUPER ECO SHIP 2050, a concept ship, factoring in the environment in ESG. In addition, we are progressing R&D to realize safe operations and to develop carbon-free vessels.

Further, we have set medium- to long-term environmental targets that anticipate the reduction of CO₂ emissions from vessels and the ripple effect down to the supply chain. As a first step toward reaching these targets, we are investigating the introduction of LNG-fueled vessels in line with our new building plan. However, LNG fuel is considered as a bridging solution for reducing our carbon footprint, we are extremely keen in developing zero-emission vessels by switching fuels to either Ammonia or hydrogen, which we plan to introduce around 2030. On top of fuel changes, we continue to pursue innovative hull and machinery design to curtail CO₂ emissions. Having said so, dramatic improvements in operational efficiency are needed as the contribution of hardware innovation to decarbonization is limited at least before the zero-emission vessels era. We are confident that through the cooperation of our customers together with our digital transformation, we will be achieve our goals.

The function of Technical headquarters includes New Building, Fleet Safety, Environment, ICT, Digitalization and 130 employees are working for those. NYK also has four R&D arms—MTI Co., Ltd, Japan Marine Science Inc., NYK Business Systems Co., Ltd., and Symphony Creative Solutions Pte. Ltd.– which makes the NYK Group unique and strong. It is because of this organizational strength and our solid track record that we are able to engage in open collaboration with marine equip-ment manufacturers, shipyards, and companies outside the maritime cluster. Moreover, in June 2020 we made the deci-sion to become a founding member of the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping, a research center dedicated to promoting decarbonization within the maritime industry by converting to alternative fuels.

The Technical Headquarters has two major areas of focus: infrastructure technology to support business and cutting-edge technology aimed at differentiating the Group from others. The former refers to technology that supports the foundation of the Group's business, such as new buildings, ship management, and IT infrastructure, including cybersecurity. Without this technology, operations would not continue even for a day. The latter refers to technology directed toward the future, keeping us a half-step ahead of the competition. SIMS, a ship informa-tion management monitoring system introduced in 2008, is one of our trailblazers in cutting-edge technology. This system accumu-lates voyage data and weather and sea conditions as big data, provides engine performance analysis and condition-based maintenance (CBM),^* among other functions, and is leading to the development of manned autonomous ships. The ship management data sharing platform NiBiKi, which went into full-scale operation from 2019, has made it possible to convert the human element of onboard operations into big data as well. I believe that the ability to analyze the data collected by SIMS and NiBiKi by the Group's engineers is what differentiates us and will lead to future business returns.

• *CBM is preventative action that continually monitors the status of equipment anomaly on board so that maintenance can be performed before breakdown. As a result, advanced engine plant operations can be expected.

In March 2018, the Group announced its new medium-term management plan "Staying Ahead 2022 with Digitalization and Green," which is being promoted throughout the Group as the path for survival.

Collaboration with not only other companies in the same industry but also with other industries is crucial. Also investments, which were overly inclined toward hardware in the past, are shifting to the so-called era of software. Digitalization is the embodiment of software, and with the help of software, we will dare to differentiate our company from the rest. SIMS, a system for gathering and analyzing operation data on a real-time basis, is a representative example of our company's drive toward digitalization. We want to be able to analyze massive amounts of accumulated operation data with the help of AI (artificial intelligence), and then use the results in predicting dangers and defects or failures during navigation. We will be able to visualize the future of new ships, such as autonomous ships, once we get there.

Create New Value with Digitalization and Green

Our Green initiative comprises three components.
The first is compliance with rules, including the 2020 sulfur oxide (SO_x) emission regulation.
To bring existing vessels into compliance with SOx regulations, it is necessary to either switch to low-sulfur content fuel oil（compliant fuels）or install exhaust gas cleaning systems（scrubbers）on ships. The NYK Group started a cross-divisional internal promotion project with the president as the project leader, gathered information from numerous related departments within NYK. We finished bringing the Group's entire fleet up to compliance with SOx global cap regulations, allowing full compliance with the regulation from January 1, 2020.

The second is the reduction of GHG emissions.
Achieving zero emissions in oceangoing shipping will require enormous effort to overcome thorny issues. Our duty to ensure safe operations also means protecting the ecosystems in the ocean, a precious resource. The NYK Group has medium- and long-term environmental targets, which have been verified by Science Based Targets (SBT) , identified issues to tackle from a long-term perspective, and is making steady progress on the development of technologies for the future. In September 2021, we established a long-term GHG reduction target related to the Group's oceangoing shipping business: "achieve net zero emissions by 2050."

The third is commercialization in the environment field.
The NYK Group established the Green Business Group in April 2019 with the aim of creating new value for the next generation under the theme of renewable energy.

NYK has launched its new "NYK GREEN EARTH" brand to consolidate its efforts to generate new value for low-carbon and decarbonization through green business. In addition, the company has expanded its "Sail GREEN" brand from solely its Automotive Transportation Division to the company's other business divisions.

Under these two brands, NYK will seek to expand its green-business initiatives and low-environmental-impact services in its logistics business, which is mainly ocean transportation. At the same time, the company will develop both brands so that more stakeholders can know about the company's low-carbonization and decarbonization efforts and services.

• *"NYK GREEN EARTH" and "Sail GREEN" are the trademark or registered trademark of NYK.

NYK GREEN EARTH

<Brand concept>
NYK GREEN EARTH is a brand that targets efforts for new value generation toward low-carbonization and decarbonization through NYK's green business.

<Brand logo>

Sail GREEN

<Brand concept>
Sail GREEN is a brand that emphasizes NYK's efforts to reduce GHG emissions through the transport of goods and contribute to the eco-friendly supply chains of customers, regardless of the mode of transport (e.g., by sea or land, through terminals, etc.).

<Brand logo>

Human resources are the most important driver of sustainable growth in a company.
The NYK Group's business environment is experiencing major changes, such as the
advancement of digital technologies, requiring us to radically revise our conventional business models. We have established the NYK Digital Academy in September 2019 to develop human resources who will lead the Group in the future. A total number of 51 staff members had graduated from the NYK Digital Academy as of the second half of 2021.

NYK participates every year in the Digital Transformation (DX) Survey sponsored by Japan's Ministry of Economy, Trade and Industry (METI) and Tokyo Stock Exchange. NYK was selected as a 2021 Digital Transformation Stock (DX Stock) and a 2022 Noteworthy DX Company, as they highly valued NYK in line with METI's Digital Governance Code for NYK's successful DX implementations which strengthened NYK's corporate value.

NYK received high praise for (1) Advanced DX Infrastructures such as DX HR Training Programs, Integrated Data Lakes, Secured Global Networks and Cloud-centric IT Infrastructures, and (2) Creative Digital Applications such as MarCoPay, a financial platform for seafarers, and Next-generation Ship Developments including next generation fuel vessels and autonomous navigation systems.

We regards DX as an effective enabler to address ESG (environmental, social and governance) challenges. We will continue to steadily strengthen our DX capabilities and to creatively adopt new technologies such as artificial intelligence (AI) and quantum computing so that we fully make use of Power of Data in order to enhance our ESG competence. We will also work hard to resolve social issues by providing accurate supply chain information to customers and reducing GHG emissions as a whole.