Integrated Report 2021 (PDF:10.4MB)Download for viewing

Integrated Report 2021

For the year ended March 31, 2021

DENSO Integrated Report 2021

The DENSO Creed

"Be trustworthy and responsible."

"Cherish modesty, sincerity, and cooperation." "Be pioneering, innovative, and creative." "Provide quality products and services."

CONTENTS	PROLOGUE	CEO	DENSOʼs Value		Foundation	Overview	Corporate
Growth Strategy	for Creating	Corporate Data
MESSAGE	Creation Story	by Product	Governance
			New Value

DENSO Philosophy

Contributing to a better world by creating value together with a vision for the future

DENSO Spirit

A spirit of foresight, credibility and collaboration

The DENSO Spirit expresses values and beliefs shared by our employees

around the world that have driven us to contribute to the automotive industry

and society as a whole since our establishment in 1949.

Foresight	Credibility	Collaboration
Providing surprises and	Providing quality and	Achieving the highest
impressions in a way	reliability beyond	results by working
that only DENSO can	customer expectations	as a team
Vision	Quality First	Communication
Creativity	On-site Verification	Teamwork
Challenge	Kaizen,	Human Development
	Continuous Improvement

1

	CONTENTS	PROLOGUE	CEO	DENSOʼs Value		Foundation	Overview	Corporate
	Growth Strategy	for Creating	Corporate Data
DENSO Integrated Report 2021	MESSAGE	Creation Story	by Product	Governance
			New Value

Publication of DENSO Integrated Report 2021

DENSO publishes an integrated report in order to foster a deeper understanding of its initiatives toward sustainable corporate value enhancement.

 DENSO Integrated Report 2021 includes specific information on the strategies and

C O N T E N T S

DENSO Integrated Report 2021

initiatives DENSO is pursuing toward "green" and "peace of mind" with the aim of realizing its Long-term Policy for 2030 of "bringing hope for the future for our planet, society, and all people." In addition, the report introduces the Company's new financial strategies for continuing to create corporate value even under an uncertain business environment.  Going forward, DENSO will continue its efforts to disclose accurate information to its stakeholders in a timely manner. Lastly, I would like to assure the readers that the creation process for this report was done in an appropriate fashion.

Yasushi Matsui

Chief Financial Officer

Director, Senior

Executive Officer

7

page 6

PROLOGUE

Aiming for a Future Overflowing with Smiles

44 Foundation for Creating New Value

• 45 Reinforcing Our Strengths

45	1: Research and Development
46	2: Monozukuri
47	3: Hitozukuri
48	TOPICS: Leveraging DENSO's Comprehensive
	Capabilities toward Inverters
	That Support the Electrification

Editorial Policy

In addition to providing financial information, such as results and sales overviews as well as management strategy, DENSO Integrated Report 2021 is edited as an integrated report that reports, in an easily understood manner, on what value DENSO is providing society and on the process of improving that corporate value. This we achieved by introducing, in an

integrated manner, information of a non-financial nature on intangible assets, including on the environment, society and governance (ESG), that are seen as the foundation underpinning growth.

 DENSO creates long-term corporate value for all of its stakeholders, including shareholders and other investors, and would appreciate their understanding for the efforts the Company is making in aiming to realize a sustainable society.

 In compiling this report, references have been made to the "international integrated reporting framework" that is proposed by the International Integrated Reporting Council (IIRC), as well as the "Guidance for Integrated Corporate Disclosure and Company-Investor Dialogue for Collaborative Value Creation," formulated by the Ministry of Economy, Trade and Industry. In addition, with regard to social reporting and the environment, please refer to the "Sustainability" section of the Company's website.

Scope of Report	DENSO CORPORATION and the DENSO Group
Target Organization
	(In this report, DENSO CORPORATION refers to
	DENSO on a non-consolidated basis.)
Reporting Period	This report covers the activities of the DENSO
	Group during fiscal 2021 (April 1, 2020 to March
	31, 2021). Certain parts of this report include
	content on the Group's activities from April 2021
	onward.
Target Audience	All stakeholders involved with the DENSO Group	8

Cautionary Note: Forward-Looking Statements

Of the content published in this report, what is not historical fact comprises future predictions based on expectations or on plans for the future. As they include contributory factors, such as risks and uncertain elements, the possibility exists that actual achievements and results may differ materially from this report.

page 8

CEO MESSAGE

To Our Stakeholders

page 14

DENSO's Value

Creation Story

of Mobility

50CSwO Message

• 51 Strengthening Our Capitals
  51 Manufacturing Capital
  52 Financial Capital
  53CFO Message
  58 Human Capital
  60 Intellectual Capital
  61 Social and Relationship Capital
  63 Natural Capital
  67 Strengthening Our Organizational Capabilities

68 Overview by Product

	14
Terminology Used in Integrated Report 2021 (Abbreviations for Various Types of Electrified Vehicles)	16
18
BEV: Battery Electric Vehicle
HEV: Hybrid Electric Vehicle	20
PHEV: Plug-in Hybrid Electric Vehicle
FCEV: Fuel-Cell Electric Vehicle	22

Positioning of Integrated Report
Financial Information	Non-Financial Information
DENSO Website	DENSO Website
Investors	Sustainability
Integrated Report		25
Please see DENSO's corporate website for		26
PDF format.		28
https://www.denso.com/global/en/
about-us/investors/annual-report/		30
https://www.denso.com/global/en/about-us/	https://www.denso.com/global/en/about-us/	31
investors/	sustainability/	32
		35
		36

Financial Results/Securities Report, etc.		Initiatives toward Social Responsibility Reporting/
					Initiatives toward Environmental Reporting/
					Corporate Governance, etc.

Past, Present, and Future

Our Three Cultivated Strengths Our Accumulated Capitals

Creating New Value through Our Seven Core Businesses

DENSO's Value Creation Process

page 24

Growth Strategy

Long-term Policy: Our Goal for 2030 Awareness of Business Environment Outline of Management Policies

1 Materiality

2 Long-term Plan

3 Mid-term Plan

DENSO Revolution Plan "Reborn21"

Special Feature: Maximizing the Value of "Green" and "Peace of Mind"

36 "Green"

1. "Peace of Mind"

1. CASE STUDY

• 69 Business Portfolio and Value Creation
• 70 Electrification Systems
• 72 Powertrain Systems
• 74 Thermal Systems
• 76 Mobility Systems
• 78 Sensor Systems & Semiconductors
• 80 Industrial Solutions
• 82 Food Value Chain

84 Corporate Governance

• 85 Corporate Governance
• 92 Dialogue with the Outside Directors
• 96 Directors and Audit & Supervisory Board Members
• 98 Risk Management

1. Compliance
2. Corporate Data
3. Facts & Figures

1. 10-YearData

1. Company Overview and Stock Information

2

3

DENSODENSOIntegratedIntegratedReportReport20212021

TCFD INDEX

DENSO has pledged its support for the Task Force on Climate-related Financial Disclosures (TCFD). For DENSO Integrated Report 2021, we referenced the climate-related disclosure items recommended by the TCFD. The table below shows the correspondence between the TCFD recommended disclosure items within this report and the ones on our corporate website. Furthermore, this integrated report includes sections that disclose opportunities and risks based on scenario analysis and summarize DENSO's initiatives in accordance with the TCFD recommendations. Please see page 64 for details. The table below mainly includes excerpts on these topics from pages other than page 64.

	DENSO Integrated Report 2021	DENSO's Corporate Website
	a) Describe the Board's oversight of climate-related risks and opportunities
	P.66: Efforts to Maximize the Value of "Green">Governance	Who we are>Sustainability>Corporate Governance>Corporate Governance System and Principal Organizations:
	P.86: Corporate Governance>Corporate Governance System	https://www.denso.com/global/en/about-us/sustainability/governance/management/
		Who we are>Sustainability>Sustainability Management>Promotion structure:
		https://www.denso.com/global/en/about-us/sustainability/management/

CONTENTS	PROLOGUE	CEO	DENSOʼs Value		Foundation	Overview	Corporate
Growth Strategy	for Creating	Corporate Data
MESSAGE	Creation Story	by Product	Governance
			New Value

Overall Layout of DENSO Integrated Report 2021

This integrated report is edited based on the layout explained in the chart below.

This layout is used to better explain DENSO's value creation story.

The aim of DENSO Integrated Report 2021 is to have the reader gain a deep understanding of DENSO's value creation process while promoting an opportunity for dialogue. Throughout the entirety of this booklet, we have created a story line that comprehensively communicates our value creation process while encompassing crucial elements that help the reader understand this process (management philosophy, business model, strategy, governance, etc.). The chart below shows the logical layout of these crucial elements based on the story line we have created. Additionally, we have created an index of keywords affiliated with each element so that readers can easily access the information they wish to know.

Governance		Who we are>Sustainability>Commitment to the Environment>EcoVision>Environmental Management
	(Eco-Management)>Promotion Structure:
	https://www.denso.com/global/en/about-us/sustainability/environment/ecovision/eco-management/
b) Describe management's role in assessing and managing climate-related risks and opportunities
P.66: Efforts to Maximize the Value of "Green">Governance	Who we are>Sustainability>Corporate Governance>Corporate Governance System and Principal Organizations:
		P.86: Corporate Governance>Corporate Governance System	https://www.denso.com/global/en/about-us/sustainability/governance/management/
			Who we are>Sustainability>Sustainability Management>Promotion structure:
			https://www.denso.com/global/en/about-us/sustainability/management/
			Who we are>Sustainability>Commitment to the Environment>EcoVision>Environmental Management
			(Eco-Management)>Promotion Structure:
			https://www.denso.com/global/en/about-us/sustainability/environment/ecovision/eco-management/
		a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term
		P.26-27: Awareness of Business Environment	Who we are>Sustainability>Sustainability Management>Materiality:
		P.30: ① Materiality	https://www.denso.com/global/en/about-us/sustainability/management/
		P.64-65: Efforts to Maximize the Value of "Green">Scenario	Who we are>Sustainability>Commitment to the Environment>EcoVision:
		Analysis of Business Opportunities and Risks
		https://www.denso.com/global/en/about-us/sustainability/environment/ecovision/
			Who we are>Sustainability>Commitment to the Environment>Environmental Action Plan:
			https://www.denso.com/global/en/about-us/sustainability/environment/action-plan/
		b) Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning
		P.25: Long-term Policy: Our Goal for 2030	Who we are>Corporate Information>Philosophy>Long-term Policy:
		P.26-27: Awareness of Business Environment	https://www.denso.com/global/en/about-us/corporate-info/philosophy/long-term-policy/
		P.28-29: Outline of Management Policies	Who we are>Sustainability>Sustainability Management>Materiality:
		P.30: ① Materiality

• UniversalThinking Way of

The DENSO Philosophy is our universal way of thinking that will forever remain unchanged. In addition, sustainability management is an ideology that we have passed down since our inception and serves as the core of our management approach.

PhilosophyDENSO		Sustainability
		Management

• Business Environment and Long-term Policies

Centered on A (universal way of think- ing), we have formulatedlong-term policies based on the business environment of each era.

Businessof		Policy
Environment
Awareness		Longterm-

• Strategies for Achieving Our Targets

To realize the targets in our current Long-term Policy, we have formulated material issues (Materiality) that DENSO must prioritize. Also, as a pathway to reaching our Long-term Policy, we have formulated the Long- term Plan under which we have adopted various growth targets.

		Plan
Materiality		Plan
	Long
		term
		term
		-
		Mid-

• Progress of Business Strategies

Based on C (strategies for achieving our targets), we are implementing strategies in each of our seven core businesses and conducting business activities accordingly.

Business Strategy		Overview by Product

Leveraging and enhancing our strengths and capitals

Strategy	P.31: ②Long-term Plan	https://www.denso.com/global/en/about-us/sustainability/management/
P.32-34:③Mid-term Plan	Who we are>Sustainability>DENSO's SDGs
P.35: DENSO Revolution Plan "Reborn21"	https://www.denso.com/global/en/about-us/sustainability/sdgs/
P.40-41: Realizing Carbon-Neutral Factories Promoting	Who we are>Sustainability>Commitment to the Environment>EcoVision:
		Monozukuri (Manufacturing) without CO2	https://www.denso.com/global/en/about-us/sustainability/environment/ecovision/
		P.53-57: CFO Message
		P.64-65: Efforts to Maximize the Value of "Green">Scenario	Who we are>Sustainability>Commitment to the Environment>Environmental Action Plan:
		Analysis of Business Opportunities and Risks, Impact on	https://www.denso.com/global/en/about-us/sustainability/environment/action-plan/
		Management Strategy, Impact on Financial Planning	What we do>Innovation>Biotechnology (Micro Algae) (Japanese only):
			https://www.denso.com/jp/ja/business/products-and-services/other-industries/industry/bio/
			News>Stories>#Carbon neutral
			https://www.denso.com/global/en/news/stories/all?category=Carbon-neutral
		c) Describe the resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a 2℃ or lower scenario
		P.64-65: Efforts to Maximize the Value of "Green">Scenario
		Analysis of Business Opportunities and Risks, Impact on
		Management Strategy, Impact on Financial Planning
		a) Describe the organization's processes for identifying and assessing climate-related risks
		P.30: ① Materiality	Who we are>Sustainability>Sustainability Management>Materiality:

		Strengths That Create Value and the
	D
		Foundation That Supports Growth
	The strengths that we have cultivated since our		DENSO's Strengths
	inception provide us with competitiveness and
Value Creation Process	drive our growth. The capitals that we have accu-
dation for growth and support our business
G	mulated throughout our history serve as our foun-
Grounded in a universal value system, DENSO aims to continue to be a company that	activities. In addition, we are constantly striving to			DENSO's Capitals
inspires society by realizing its Long-term Policy through its business activities. Guided	refine our strengths while working to enhance our
by this aim, we continue to realize growth.	capitals through the growth of our businesses.

F Corporate Governance

We have put in place a governance framework that allows us to steadily execute strategies and continuously improve our corporate value.

		P.66: Efforts to Maximize the Value of "Green">Risk Management	https://www.denso.com/global/en/about-us/sustainability/management/
		P.98-99: Risk Management	Who we are>Sustainability>Commitment to the Environment>Environmental Management (Eco-Management)
			>Promoting Consolidated Environmental Management, Environmental Risk Management:
Management		https://www.denso.com/global/en/about-us/sustainability/environment/ecovision/eco-management/
	Who we are>Sustainability>Corporate Governance>Risk Management:
	https://www.denso.com/global/en/about-us/sustainability/governance/risk/
b) Describe the organization's processes for managing climate-related risks
P.30: ① Materiality	Who we are>Sustainability>Sustainability Management>Materiality:
P.66: Efforts to Maximize the Value of "Green">Risk Management	https://www.denso.com/global/en/about-us/sustainability/management/
Risk	P.98-99: Risk Management	Who we are>Sustainability>Commitment to the Environment>Environmental Management (Eco-Management)
	>Promoting Consolidated Environmental Management, Environmental Risk Management:
	https://www.denso.com/global/en/about-us/sustainability/environment/ecovision/eco-management/
			Who we are>Sustainability>Corporate Governance>Risk Management:
			https://www.denso.com/global/en/about-us/sustainability/governance/risk/
		c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization's overall risk management
		P.66: Efforts to Maximize the Value of "Green">Risk Management	Who we are>Sustainability>Corporate Governance>Risk Management:
			https://www.denso.com/global/en/about-us/sustainability/governance/risk/
		a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process
		P.36-37: Maximizing the Value of "Green" and "Peace of Mind"	Who we are>Sustainability>Commitment to the Environment>EcoVision:
Targets	P.66: Efforts to Maximize the Value of "Green">Risk Management	https://www.denso.com/global/en/about-us/sustainability/environment/ecovision/
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
P.103: Non-Financial Highlights>CO2 Emissions per Unit	Who we are>Sustainability>Commitment to the Environment>Data compilation (Environmental report):
(Non-Consolidated)	https://www.denso.com/global/en/about-us/sustainability/library/environment-data/
and
P.104-105:10-YearData>Non-Financial Data>CO2 Emissions per
Unit (Non-Consolidated), CO2 Emissions per Unit
Metrics	(Domestic and Overseas Group)
c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets
P.36-37: Maximizing the Value of "Green" and "Peace of Mind"	Who we are>Sustainability>Library>Environmental Action Plan:
		P.66: Efforts to Maximize the Value of "Green">Risk Management	https://www.denso.com/global/en/about-us/sustainability/environment/action-plan/
		P.104-105:10-YearData>Non-Financial Data>CO2 Emissions per	Who we are>Sustainability>Library>Data compilation (Environmental report):
		Unit (Non-Consolidated), CO2 Emissions per Unit
		https://www.denso.com/global/en/about-us/sustainability/library/environment-data/
		(Domestic and Overseas Group)

	A		DENSO Philosophy		P.1
			Sustainability Management	P.14-23,25-43
	B
		CEO Approach and Vision Based on		P.8-13
			the Business Environment
			Awareness of the Business		P.26-27
			Environment (PEST Analysis)
			Risks and Opportunities and Response Measures	P.26-27
			Major Issues for DENSO		P.27
			Long-term Policy		P.25
			Scenario Analysis on Climate Change		P.64
			Identification of Climate-related Opportunities	P.65-66
			and Risks and Response Measures
	C		Outline of Management Policies		P.28
			Growth Indicators to Realize the Long-term Policy	P.25
			and Social Issues We Aim to Resolve
			① Materiality		P.30
			Related SDGs		P.25
			②Long-term Plan		P.31
			③Mid-term Plan		P.32-34
			Financial Strategies		P.52-57

	D		DENSO's Strengths (Overview)	P.16-17
			DENSO's Capitals (Overview)	P.18-19
			Reinforcing Our Strengths	P.45-50
			Strengthening Our Capitals	P.51-67
	E		DENSO's Businesses (Overview)	P.20-21
			Business Portfolio and Value Creation	P.69
			Strategies and Outlook for Each Business	P.70-83
			Facts & Figures	P.102-103
	F		Efforts to Improve Corporate Governance	P.85
			Corporate Governance System	P.86-88
			Compensation of Directors	P.88-90
			and Audit & Supervisory Board Members
			Strategic Shareholdings	P.91
			Dialogue with the Outside Directors	P.92-95
			Directors and Audit & Supervisory Board Members	P.96-97
			Risk Management	P.98-99
			Compliance	P.100
	G		DENSO's Value Creation Process	P.22-23
			Crucial Elements of the Value Creation Process	P.14-21

44

5

CONTENTS	PROLOGUE	CEO	DENSOʼs Value		Foundation	Overview	Corporate
Growth Strategy	for Creating	Corporate Data
MESSAGE	Creation Story	by Product	Governance
			New Value

PROLOGUE

Bringing hope for the future for our planet, society, and all people

Aiming for a Future Overflowing with Smiles

Maximizing the Value of "Green" and "Peace of Mind"

to Provide New Kinds of Value

Green	Peace
of Mind

Inspiring

To realize the Long-term Policy's slogan of "bringing hope for the future for our planet, society, and all people," DENSO is promoting strategies and initiatives to maximize the value of "green" and "peace of mind."  In the field of "green," we have been working to contribute to the everlasting preservation of the global environment through technologies that help resolve issues such as global warming and energy- and resource-related issues. Today, as the trend toward carbon neutrality gains traction around the world, we aim to achieve carbon neutrality within our production activities by 2035.

 In the field of "peace of mind," we have been making efforts to realize a safe society without traffic accidents and free and comfortable mobility. In this way, we have been contributing to the creation of a society in which all people can live with peace of mind. With a strong

desire to create such a society as quickly as possible, we will continue to diligently pursue our research and development activities.

 In addition to value creation in the fields of "green" and "peace of mind," our Long-term Policy also adopts the theme of "inspiring." This theme encapsulates our ambition to create a future overflowing with smiles by providing new value that inspires people, even amid a rapidly changing business environment and society.  We often hear that the goals of becoming carbon neutral and realizing a society without traffic accidents are too challenging to achieve. However, to contribute to the happiness of people for generations to come, we will remain committed to the challenge of creating new value that can make these seemingly impossible tasks possible.

6

7