Sustainability

Message from the President

Contributing to carbon neutrality and a digital society under the NGK Group Vision

An era of transformation has arrived for the NGK Group. The needs and expectations of society are changing fast. As a corporate group built on pursuing solutions to social issues, we must change too. Guided by the NGK Group Vision announced in April 2021, and equipped with our unique ceramic technologies, the NGK Group is embarking on a journey of new growth.

Picture of Shigeru Kobayashi, President, NGK Insulators, Ltd.
President
Signature of Shigeru Kobayashi, President, NGK Insulators, Ltd.

Inaugural resolutions
Never lose an enterprising spirit

In December 2020, Chairman Taku Oshima—who was then President and Chair of the Nomination and Compensation Advisory Committee—offered me the position of President. I accepted right then and there. I was keen to continue the work of improving our company through the reforms that I had become familiar with during the seven years I worked alongside Chairman Oshima during his tenure as President.

Prior to my appointment, my job was to facilitate business rebuilding as the Group Executive of the Energy Infrastructure Business Group. I never imagined the position of President would be offered to me.

I joined NGK in 1983. I had always dreamed of working outside Japan, and the chance to be posted overseas was a big attraction for me.

My first role in the company was in insulator sales. After eight years, I received my first overseas posting—to Montreal, Canada. This was followed by postings to Indonesia, the United States, and China. In total, I spent nine years working abroad. Even when based in Japan, I’ve spent at least 120 days out of every year overseas on business trips. All this experience has taught me that, while cultures may differ, trust and reliability are universally important to business sustainability.

Upon having been appointed President, I set four resolutions.

The first resolution is to make good on the more than 250 billion yen in investment that we have made over the past three years. This investment—which was primarily focused on automotive-related business and semiconductor manufacturing equipment-related products—ensures that we have enough production capacity to meet future demand. It is my responsibility to make sure that this translates into greater profits.

The second resolution is to create new businesses and new products that will sustain the NGK Group into the future. In line with the NGK Group Vision, which will be described later, we will focus on new products in the two fields of carbon neutrality and the digital society.

The third resolution is to pursue globalization. Japan, where the NGK Head Office is located, accounts for just 28% of total NGK Group sales. We have a diverse array of customers all around the world. We also have an increasingly diverse workforce spread across business sites in 20 different countries. I will engage with our customers and employees around the world to facilitate greater globalization of the NGK Group. In addition, the NGK Group will provide a work environment where all employees, regardless of nationality, have opportunities for advancement on the global stage.

The fourth resolution is to grow the NGK Group as a company that all employees are proud to work for and that all stakeholders can trust. To this end, we will create a pleasant work environment characterized by free and open discussion, where employees are empowered to tackle challenges and are stimulated creatively.

NGK Group Vision
Growing carbon neutrality and digital society-related business into 80% of all sales by 2050

In April 2021, the NGK Group released its 2050 vision in the form of the NGK Group Vision: Road to 2050. This is the first public announcement of specific long-term targets that the Group has made since the K Plan 21 was released in 1989.

The discussions that led to the formulation of this medium-to-long-term vision began immediately after the revised NGK Group Philosophy was released two years ago—at the time of the company’s 100th anniversary. These discussions were centered on the four areas of energy, mobility, ICT and power devices, and industry. They explored such questions as what society will be like in 2050, what kinds of issues society will face, and what the NGK Group can do to help address those issues. Based on this, we came up with an answer to the fundamental question of what we want to be as a company. Our answer, which underlies the NGK Group Vision, was: ‘A company that contributes to carbon neutrality and the digital society with our unique ceramic technologies.’ The discussions involved top management as well as a diverse cross-section of employees.

Picture of representative products of the NGK Group that aim to solve important social issues

Envisioning SDGs from 100 years ago

NGK came into being 100 years ago in response to the challenge of spreading electricity throughout Japan. Since then, our products and technologies have continued to address society-wide issues such as air pollution and increasing digitization. Examples of our technologies include ceramics for purifying automobile exhaust and ceramics for semiconductor manufacturing equipment.
Central to all challenges we have undertaken is the unique ceramic technologies that we have been refining for a century. Now we are working to leverage our three strengths in materials, processes, and mass production to enable the NGK Group to deliver new original products and create new businesses in the two areas of carbon neutrality and digital society.

We see a competitive carbon neutrality market is beginning to emerge around the world. The NGK Group already has an established track record of research into relevant technologies, like storage batteries, subnano-ceramic membranes for CO2 separation, and solid oxide electrolysis cells (SOEC). We see these technologies being used to make products that will drive new growth for the Group. In the future, we aim to establish a carbon cycle that uses CO2 collected through subnano-ceramic membranes—along with renewable energy—to synthesize hydrogen and carbon monoxide via SOEC and then process it into fuel and chemical products using honeycomb structural reactors.

In digital society-related markets, the NGK Group already has competitive strengths. Semiconductor manufacturing equipment incorporates ceramic components, which is an area where the NGK Group and other Japanese corporate groups are strong. We will capitalize on these advantages to continue meeting the needs of customers, while also developing and offering new products.
Our plan is to develop this trend such that 50% of total sales by 2030—and 80% of total sales by 2050—come from products related to carbon neutrality and digital society. Achieving this will require strong, new products that will be the cornerstone of the NGK Group. Therefore, over the next 10 years, we will invest 300 billion yen into research and development, with 80% of that being allocated to research and development related to carbon neutrality and the digital society.
Demand for ceramics used in purifying automobile exhaust, one of our current core businesses, is not going to drop off rapidly. Moving forward, we will use the profitability of this business to fund new product and business development.

In terms of concrete policies to realize this new vision, we have formulated Five Transformations. These are ESG (Environmental, Social, and Governance) Management, Profitability Improvement, Research and Development, Commercialization, and Digital Transformation (DX). We must strive for a major transformation, particularly regarding the speed with which we go from Research and Development to Commercialization. All processes involved between development and commercialization require transformation. Along with working on selection and concentration, we will work to improve the efficiency of materials development through the application of DX—for example, using materials informatics*.

In addition, we recognize the need for greater emphasis on not only tangibles but also intangibles—that is, on providing services and solutions as well as products. One example of this is shifting from our traditional approach of selling products that reduce CO2 to engaging in businesses capable of reducing CO2 emissions. We will provide those customers who want more than physical products with services whose functionality is derived from our unique ceramic technologies. This represents one of the innovative schemes that we must put into action.

The NGK Group is currently undergoing its third foundational period. We will work together as one with all stakeholders, both inside and outside the Group, to bring about the NGK Group Vision.

A method for material development using information processing technologies such as big data, AI, and machine learning.

ESG in the NGK Group
Newly formulated NGK Group Environmental Vision

Within the NGK Group Vision, ESG management plays a central role in Group management. However, in my view, it is the ‘E’ (Environmental) that is most fundamental to the success of ESG management. Thus, when we formulated the NGK Group Vision, we also formulated the NGK Group Environmental Vision. This ambitious vision seeks, among other things, a reduction in our CO2 emissions by fiscal 2030 to levels 50% below those of fiscal 2013. Eventually, our goal is to achieve net zero CO2 emissions in our own activities by 2050.

Although one of the corporate strengths of the NGK Group is its environmentally friendly products, the firing process used to produce ceramics requires large amounts of electricity and fuel. CO2 emissions are an unavoidable byproduct. Therefore, we will reduce our CO2 emissions while pursuing technological innovation and collaborating with society.

The capital investment associated with this needs to begin now if we want to meet our targets for fiscal 2030. That is why I am heading up a Carbon Neutral Project, which will accelerate a changeover to alternative fuel sources, such as hydrogen and ammonia.

Structure of the Carbon Neutral Project

As for the ‘S’ (Social) in ESG, in April we formulated the NGK Group Human Rights Policy. To ensure that the human rights of all people involved in the NGK Group are not violated, we will comply with international standards of human rights and provide opportunities for everyone to play an active role, regardless of their gender or nationality.

And as for the ‘G’ (Governance), a resolution was passed at the General Meeting of Shareholders in June 2021 that increased the ratio of independent outside directors on the Board of Directors to one-third (three out of nine). This also represents an opportunity to further separate our supervisory and executive functions.

We are also working to ensure that assignments to senior management positions are carried out regardless of nationality or gender. We have appointed an American executive officer for 2021, and we also appointed a female executive officer for 2020.

A company that loses the trust of society cannot survive. Compliance is the top operational priority. To boost our operations to world-class standards across the board, we introduced our NGK Group Basic Guidelines for Compliance Activities. Based on the shared values and understanding of the NGK Group presented in these guidelines, we will undertake compliance activities that always conform to the international standards.

Results for the fiscal year ended March 2021
Securing increased revenue from a recovery in automotive and semiconductor-related business

Despite the impact of the COVID-19 pandemic, the fiscal year ended March 2021 saw a quick rebound in automobile sales, centering on China, and strong growth in demand for semiconductor manufacturing equipment. As a result, sales revenue increased and year-on-year operating income declined by only 8%. We were able to continue supplying our products, thanks to stringent infection-control measures taken by employees at our production facilities in and outside Japan.

In the fiscal year ending March 2022, we anticipate a continuation of this automotive and semiconductor-related growth, as well as greater activity associated with new products. Regarding our EnerCera lithium-ion rechargeable batteries, we are already working with more than 300 other companies and expect to see significant growth once the business model is established. As for our zinc rechargeable batteries, this fiscal year we plan to continue demonstration followed by commercialization. And from next fiscal year, we plan to start selling zinc batteries for specific applications to a limited number of customers. Soon we hope to see a successful conclusion to the demonstration testing of our subnano-ceramic membranes, which has been taking place in Texas, U.S.

Towards the future
Converting our business structure in anticipation of a Third Foundation

In conjunction with the formulation of the NGK Group Vision, an organizational restructuring was undertaken this past April. Of particular note is the establishment of the ESG Management Department, which brings together various ESG-related functions that had previously been divided among several different departments. This department will implement ESG-related activities across the entire Group, while also proactively communicating ESG-related efforts. Also, a Digital Transformation and Innovation Department was established, which brings together digital-related IT departments and others, to facilitate DX. These two departments are responsible for handling the question of how employees’ jobs will change. We are working to cultivate leaders who will provide support for this change process.

To bring about the NGK Group Vision, every employee must be motivated to tackle the challenges of transformation without fear of failure. We must all take part in free and open discussion. The NGK Group’s corporate culture is sober, technologically oriented, and at times somewhat risk-averse. But we must remember that trial and error is the only way to break new ground. We come up with a hypothesis; we test it; and, if it is wrong, we redo it. Nothing is ever perfect right from the start. We are building an ambitious company that does not fear failure.

And it is in this context—and in line with our Group slogan of ‘Surprising Ceramics.’—that we are pursuing the Five Transformations and converting our business structure in anticipation of our Third Foundation driven by NGK’s unique ceramic technologies. Expect to see great things in the NGK Group’s future.

Picture of Shigeru Kobayashi, President, NGK Insulators, Ltd.