JFE : REPORT 2021 - Integrated Report -

JFE GROUP REPORT 2021

Integrated Report

JFE GROUP REPORT 2021

Corporate Vision

The JFE Group will contribute

to society with the world's most innovative technology.

Koji Kakigi

President and CEO JFE Holdings, Inc.

Publication of JFE GROUP REPORT 2021

Since fiscal 2018, JFE Holdings, Inc. has published an integrated report that combines non- financial information, such as environmental, social, and governance (ESG) initiatives, with financial information including business strategies, with the objective of furthering the understanding of the JFE Group's value creation narratives over the medium to long term among all stakehold- ers, including shareholders and investors.

Fiscal 2021, the first year of the Seventh Medium-term Business Plan, is a pivotal year for JFE Holdings, marking the formulation of the JFE Group Environmental Vision for 2050 that aims for carbon neutrality by 2050 and stronger efforts to address climate change. Our mission is to be essential to society's sustainable development and to create safe, comfortable lives for people everywhere. Ensuring environmental and social sustainability (helping to resolve social issues) and establishing economic sustainability (stable earnings power) will be crucial to making this happen. We aim to be a robust corporate group able to provide value over the long term. We hope this report furthers everyone's understanding of our initiatives on these fronts.

On editing this report, we referred to the Value Reporting Foundation (VRF)'s International Integrated Reporting Framework and the Ministry of Economy, Trade and Industry's Guidance for Collaborative Value Creation. Relevant departments worked earnestly together to prepare this report in accordance with the Company's guidelines. Here, we state that the production process and content of this report is fair and just.

We will continue to engage in dialogues with our stakeholders, and do our utmost to realize sustained environmental value and social value, while also enhancing our corporate value. After reading the JFE GROUP REPORT 2021 integrated report, please share with us your ideas and opinions about JFE Holdings. While building relationships of trust with all of our stakeholders from a long-term perspective, we would like to take a step forward together into a brighter future. We ask for your continued support.

2 2021 REPORT JFEGROUP

Corporate Values

Challenging Spirit, Flexibility & Sincerity

FY2020 (April 1, 2020, to March 31, 2021). Reports on some activities undertaken outside this period are included.

The holding company JFE Holdings, Inc. and its three operating companies JFE Steel Corporation, JFE Engineering Corporation, and JFE Shoji Corporation. Additionally, some reports may include the equity-method affiliate Japan Marine United Corporation and Group companies under the operating companies (consolidated subsidiaries and equity-method affiliates).

Tool map

	Non-financial Information
	JFE Group CSR REPORT
	Corporate Governance Report
	DX REPORT
JFE GROUP REPORT 2021
CSR Report 2021
(Integrated Report)
https://www.jfe-holdings.co.jp/en/csr/
	Corporate Governance Report

Standards of Conduct

All JFE Group personnel are required to faithfully adhere to the following Standards of Conduct in all corporate activities. These standards embody the JFE Group's Corporate Vision and go hand-in-hand with its Corporate Values.

Senior managers are responsible for communicating these standards to employees of Group companies and their supply chain partners, and creating effective systems and mechanisms to ensure adherence to ethical standards.

Senior managers are also responsible for measures to prevent the recurrence of any violation of these standards. Additionally, they must report violations promptly and accurately to internal and external stakeholders, determine the persons of relevant authority and accountability, and resolve matters rigorously.

• 1. Provide quality products and services
• 2. Be open to society
• 3. Work with communities
• 4. Globalize
• 5. Exist harmoniously with the global environment
• 6. Maintain proper relations with governments and political authorities
• 7. Maintain crisis readiness
• 8. Respect human rights
• 9. Provide challenging work environments
  10. Comply with laws and ordinances

Guidelines

• Value Reporting Foundation (VRF): International Integrated Reporting Framework
• Ministry of Economy, Trade and Industry: Guidance for Collaborative Value Creation
• GRI: Sustainability Reporting Guidelines GRI Standards
• Financial Stability Board: The final report of the Task Force on Climate- related Financial Disclosures (TCFD)

Publication Date

Online: December 2021; (Next issue (planned): November 2022)

Disclaimer

All current plans, strategies, and beliefs published in this report that are not historical facts contain forecasts about future performance, which are subject to risks and uncertainties. Actual results may greatly differ from those forecast due to various factors including future trends in the global and Japanese economies, and in related industries. Accordingly, please note that we do not guarantee the reliability of such forward-looking information.

https://www.jfe-holdings.co.jp/en/

company/info/pdf/corporate-­

governance.pdf

DX REPORT

https://www.jfe-holdings.co.jp/en/

investor/library/dxreport/index.html

Financial Information

Financial results

Investors' meeting documents

Securities report

IR Library

https://www.jfe-holdings.co.jp/en/

investor/library/index.html

3 2021 REPORT JFEGROUP

1.

2.

3.

4.

JFE Group's Value Creation Story	5
The Value of Steel		7
History of Value Creation	9
Outline of the JFE Group	11
Process of Value Creation	13
Material Issues of JFE Group Corporate Management	15
Strategy to Create Value	17
Message from the CEO	19
Seventh Medium-term Business Plan (FY2021-2024)	25
Message from the CFO	27
Special Feature	JFE Group Environmental Vision for 2050	29
Business Strategies Business Model (Steel Business
	and Trading Business)	35
	Business Model (Engineering Business)	37
	Business Overview: Steel Business	39
	Business Overview: Engineering Business	43
	Business Overview: Trading Business	47
	Business Overview: Shipbuilding Business	50
Dialogue with Outside Executives	51
Key Issues of JFE Group Corporate Management (Materiality)
Fiscal 2021 Key Issues for Management and KPIs	57
Fiscal 2020 KPI Outcomes and
Evaluations for Priority CSR Issues	59
Sustainability Management	63
Our Contributions to Resolving Climate Change	65
Material Flow		69
Ensuring Occupational Safety and Health	71
Securing and Training Diverse Human Resources	73
Respect for Human Rights	75
Thorough Compliance	77
Corporate Governance	78
Risk Management		85
Stakeholder Relationships	87
Management Organization	89
Financial and Corporate Information	91
Financial Highlights	91
Non-financial Highlights	93
Company Profile / Share Information	95
Annual Highlights		96
Operating and Main Group Companies	97
Financial Information	99

1. 5

1. 17

1. 63

1. 91

JFE Group's Value Creation Story

The JFE Group has contributed to the development of industry and society through the provision of products and services based on steel. In this section, we introduce the value creation story of the JFE Group throughout its history, and touch upon its future aims.

Strategy to Create Value

The JFE Group aims to ensure environmental, social, and economic sustainability through its Seventh Medium-term Business Plan and the JFE Group Environmental Vision for 2050. In this section, we introduce our strategies to create further value by providing solutions for sustainability.

Sustainability Management

The JFE Group is strengthening its responsiveness to changes in the business environment in order to realize sustained growth in corporate value. In this section, we introduce the system behind this and our initiatives on this front.

Financial and Corporate Information

Here, we present a compilation of financial and non-financial data, as well as corporate information.

4 2021 REPORT JFEGROUP

5 2021 REPORT JFEGROUP

1. JFE Group's

Value Creation

Story

The Value of Steel	7
History of Value Creation	9
Outline of the JFE Group	11
Process of Value Creation	13
Material Issues of JFE Group Corporate Management	15

6 2021 REPORT JFEGROUP

The Value of Steel

Steel supports safe and comfortable lives for an abundant world in the future

Steel's Life Cycle Assessment (LCA)

Excellent recyclability

Steel is a material with excellent recyclability, such as its property enabling magnetic separation and retrieval. Even after a final product made of steel ends its life in society, it is reborn over and over again into a high-quality,high-functional product through highly efficient separation and retrieval technolo- gies, thereby reducing environmental load throughout its life cycle.

Steel establishes a highly sophisticated value chain of Produce-Use-Recycle thanks to its excellent recyclability, and is reborn as anything over and over again. Therefore, it is important to evaluate steel's environmental impact by encompassing the entire life cycle including recycling. JFE Steel participated in the initiative to quantify the life cycle environmental impact of steel products, which is led by the Japan Iron and Steel Federation, as one of the core members, and developed an ISO/JIS Standard* for the calculation. The results provided through the use of this standard have shown that the more superior the recyclability of material is, the less environmental impact such as global warming becomes. In Japan, there are 15 blast furnace and electric furnace steelmakers, including JFE Steel, that compile and disclose average data for life cycle inventory (LCI) for each steel product.

• ISO 20915: Life Cycle Inventory Calculation Methodology for Steel Products (2018.11)
  JISQ 20915: Life Cycle Inventory Calculation Methodology for Steel Products (2019.6)

RECYCLE

Efficient separation and retrieval of steel using its magnetic property

Dismantle and collect

Closed-loop recycling of steel

Steel can be recycled many times as the raw material of products made in the same steel material while maintaining the original properties of the iron material itself. Closed-loop recycling is superior to open-loop recycling* that recycles other materials in terms of sustainability. This is due to the fact that it is designed to reduce the amount of natural resources being newly introduced, moreover reduce the discharge of environmentally hazardous substances, and reduce waste.

• A limited form of material recycling that involves application of the heat generated from the incineration of materials as well as recycling where the material may deteriorate or change in quality.

Magnetic

separation Steel New steel

product material recycling ratio

93.1%

Steel scrap

Products

Source: Japan Iron and Steel Federation

7 2021 REPORT

Iron ore makes up 85%

(approx. 180 billion tons)

of the earth's metal

resources

Steel contributes to social developments with its rich resources

0.56 billion	1.55 billion	PRODUCE
Steel scrap used
2015	2050
tons a year	tons a year	Steel can be recycled over
		and over again

Steelworks

Steel can be reborn as anything over

Steel is reborn as	Steel stock
anything	2015	2050
Final product and usage	68.2 billion
29.4 billion tons =
	4.0 tons per person	tons = 7.0 tons
		per person

8 2021 REPORT

GROUP JFE

Approx. 180

billion tons

85%

Source: Mineral Commodity

Summaries (2021)

Natural resources

Blast Converter Electric

furnacefurnace

Pig iron production (Blast furnace)	Crude steel production
2015	2050	2015	2050
1.40 billion	2.68 billion
1.22 billion	1.62 billion
tons a year	tons a year	tons a year	tons a year

and over again

USE

Contributing to sustainable

Cans Automobiles Buildings	Demand for steel
	2015	2050
	2.13 billion
	1.29 billion
	tons a year	tons a year

GROUP JFE

High economic efficiency and low environmental impact

Steel can be reliably produced in large volumes to support our lives and society. Steel is also an environmentally friendly material, emitting far less CO2 than other materials during production. Steel is an essential material for the safe and comfortable lives of people, and it is key to the sustainable development of society.

development of our lives and economy by the world's best energy-saving and environmental technologies

Processing and different manufacturing Automobiles, construction materials, etc.

Foundation for life and society

In our lives, steel helps reduce our burden on the environment. For example, by using high-tensile steel (thinned-down steel sheets that keep their strength) in automobiles, automobile weight can be substantially reduced without sacrificing passenger safety during vehicle collisions, thereby contributing to lower CO emissions in society as a whole.

Mass production at low cost

Extremely low environmental

Japan's steel industry keeps the

2

Steel is a material with rich reserves and a long history of development. It can be stably mass produced at a reasonable price, contributing to the sustainable development of society.

Global demand (2020)  Price*

Approx.			30-100
1.9 billion tons
	Approx.
	65 million tons	Reasonably priced!	5-8
	Approx.
	130,000	1
	tons
Steel	Carbon Aluminum	Steel	Carbon Aluminum
	fiber		fiber
Internal investigation	Internal investigation
		* Comparisons with other
		materials' prices per unit
		weight, with steel as 1

impact at the manufacturing stage when compared to other materials

The functional equivalent of greenhouse gas (GHG) emissions of steel at the manufacturing stage is 1/4 to 1/5 of that of aluminum and carbon fiber.

GHG emissions during material production
(CO2 equivalent)(kg-CO2)	1,106	990
Low
environmental
impact!
230
Steel	Aluminum	Carbon Fiber
		Reinforced Plastic
		(CFRP)

GHG emissions per unit of	2.3	16.5	22.0
weight (CO2 equivalent)
(kg-CO2/kg)
Functionally equivalent	100	67	45
weight (kg)

top energy efficiency in the world

The Japanese steel industry (converter furnace steel) produces steel with the lowest environmental impact when compared to other major countries in the world as a result of its longstanding efforts toward environmental conservation, including developing and spreading the use of energy-saving technologies.

The world's quotient, with Japan as 100 (2015)

	No.1!						123	128	130	140
					122
				119
			116	117			120
		109
	103
100
									100
Japan	Korea South	Germany	China	Kingdom United	France	Brazil	India	Russia	USA	80

The potential to grow on a global level

The world average of the annual consumption of steel currently stands at approximately 230 kg per capita. Going forward, the long-term global demand for steel is expected to keep growing alongside the economic development of emerging countries.

Trends in annual steel consumption per capita by country (kg per capita, year)

(kg)	Standard in		Japan	China	Thailand	India	Vietnam
800	developed countries
600	400‒500kg					633
500				approx.			498
400
		World					265
			average 230 kg
200					252
0								75
1950	1960	1970	1980	1990	2000	2010	2019	(CY)

Source: World Steel Association

Potential for evolution

Steel can be elongated two to three times more than aluminum at the same strength, and is three to five times stronger at the same extended rate, making it the optimal material for the world-class structures of the times, such as Tokyo Skytree. Steel still has considerable potential for evolution. The emerging needs of society will make steel evolve, and contribute to a productive future.

Comparison of strength and elongation between steel, aluminum, and carbon fiber

Elongation (%)

60

		Elongates				Steel
40		2 to 3 times
20					3to 5 times stronger				Carbon fiber
Aluminum alloy
0
400	800	1,200	1,600	Tensile strength

Source: World Auto Steel data	Source: Research Institute of Innovative Technology
	for the Earth (RITE)

(MPa)

Internal investigation