Nippon Express : Integrated Report 2021 (Full Pages)

1-9-3,Higashi-Shimbashi,Minato-ku, Tokyo 105-8322, Japan Phone: [phone]

URL: (Japanese) www.nittsu.co.jp (English) www.nipponexpress.com

Nippon Express Group

Integrated Report 2021 Year ended March 31, 2021

Prole

The Nippon Express Group Corporate Philosophy

Our Mission	Be a Driving Force for Social Development
Our Challenge	Create New Ideas and
	Value that Expand the Field of Logistics
Our Pride	Inspire Trust Every Step of the Way

Since our founding, the Nippon Express Group has employed its logistical strengths to connect people, businesses, and regions throughout the world. In so doing, we have continuously supported social development.

While our mission never changes, we advance continuously to meet the world's changing needs. Making no compromise in safety and maintaining a deep focus on environmental issues, we continuously strive to deliver innovative solutions at the next frontier of logistics.

We will forever take pride in our ability to inspire trust and answer the call of society. Every move we make is aimed at advancing society and bringing

an enriched life to future generations.

The Nippon Express Group Corporate Message

The NIPPON EXPRESS Group brings customers' possibilities to reality. There are often many solutions, but only one way is the way. We use our determination to find the best way to overcome hurdles and take our customers across the finish line.

Our unified strength makes us unique, driving	Every client, project, and task is different, and	Sure, there are many solutions, but there's only
everything we do on the frontline and in the	sometimes we have to innovate to achieve our	one best way. We don't find a way or some way;
background to deliver unparalleled logistics	goals. Our work demands exploration and thinking	we find the best way, and we do it with passion
services. The word "we" speaks to a complex	outside the box. It's how we find the best way. The	and perseverance. Our efforts build connections to
system of individuals with specialized skills that	verb "find" in its present form tells a story of a	and between individuals and businesses.
work together to become an unstoppable force.	company willing to dig deeper for the best results.

Contents

■ Profile	■ Business Plan Progress and Finance	■ Corporate Governance
	The Nippon Express Group Corporate Philosophy	24	Medium-Term Business Plan Progress	50	Governance
01	The Nippon Express Group Corporate Message	25	The Nippon Express Group Business Plan 2023	59	Stakeholder Engagement
02	The Nippon Express Group Approach to ESG Management		~"Dynamic Growth"~
04	Nippon Express and the Logistics Markets of Japan and the World	28	Business Growth Strategy	■ Business Segment Information
05	Competitive Advantages, Risks, and Opportunities	30	Financial and Corporate Planning	63	Results by Reportable Segment
		32	Capital and Dividend Policy
■ Nippon Express ESG	34	Financial and Non-Financial Highlights	■ Financial Information
06	Nippon Express and Logistics Supporting the Advancement of Society			70	11-Year Financial Summary
08	The Nippon Express Group Value Creation Engine	■ Materiality	72	11-YearNon-Financial Summary
10	The Nippon Express Group Value Creation Engine	36	Identifying Materialities	74	Management Discussion and Analysis
	~Solving Social Issues Through Logistics~	38	The Nippon Express Group Creates New Value	76	External Evaluations
12	Nippon Express Group Value Creation	40	Pursuing Business Digitalization and DX	78	Global Network
14	Value Creation Process	42	Improving Quality and Creating New Value	79	Company Information/Share Information
		44	Addressing Climate Change
■ Top message	46	Building a Sustainable and Resilient Logistics Infrastructure
16	Message From Top Management to All Our Stakeholders	48	Improving Employee Engagement

Editorial Policy	Reference Guidelines and Assurances	Scope of This Report
Integrated Report 2021 is the second integrated report to	We used the International Integrated Reporting Framework	This integrated report addresses the Nippon Express
be published by Nippon Express Co., Ltd. In this report, we	of the International Integrated Reporting Council (IIRC) and	Group, including domestic and overseas group
have reformatted our presentation of ESG management,	the Guidance for Collaborative Value Creation of the Ministry	companies. Certain portions of this report reference
which is increasingly important as international trends and	of Economy, Trade and Industry (METI). The information	Nippon Express Co., Ltd. on a non-consolidated basis.
social conditions change dramatically. We have edited this	disclosed in our sustainability report conforms to the Core
report from the perspective of how the group creates value	option of the GRI Standards for Sustainability Reporting.	Reporting Period
through the practice of ESG management and how the	* GRI: Global Reporting Initiative	Fiscal 2020 (April 1, 2020 to March 31, 2021)
group intends to grow.	An organization that aims to create and promulgate	(Certain information references time frames on or prior to
We hope this report helps our stakeholders better	international guidelines for sustainability reporting.	fiscal 2019 and subsequent to fiscal 2021)
understand the Nippon Express Group and our efforts to	The GRI content index is available on our CSR website
continue to grow by creating new value through	(https://www.nittsu.co.jp/corporate/csr/).	Publication Date July 2021
innovation, while staying true to our unchanging vlaues of
safety, compliance, and quality.
For more detailed information regarding Nippon Express
Group CSR, see our CSR website and CSR Data Book.

Reference Guidelines

• GRI Standards for Sustainability Reporting (Core option)
• IIRC International Integrated Reporting Framework
• Ministry of the Environment's Environmental Reporting Guidelines (2018 Edition)
• SASB Standards

Caution Regarding Forward-Looking Statements

The forward-looking statements in this report, including the company's future plans, forecasts, and strategies, are based on certain assumptions that the company considered reasonable at the time of disclosure. Actual business performance may differ significantly from forecasts due to future economic conditions and other factors. See Competitive Advantages, Risks and Opportunities on page 5 of this report for the major factors that may cause such differences.

Information Systems

The Integrated Report is a compilation of financial and non-financial information for the purpose of deepening stakeholder understanding of the Group's medium- to long-term value creation.

In addition, non-financial information that complements the Integrated Report is provided in the CSR Data Book, and more detailed information is available on our website.

Integrated Report

Voluntary Disclosures

			CSR Data Book	https://www.nittsu.co.jp/corporate/csr/report/
			Website (CSR Activities)	https://www.nittsu.co.jp/corporate/csr/
		Legal Disclosures and Timely Disclosures
			Annual Securities Report	https://www.nittsu.co.jp/ir/library/securities/
Nippon Express Group			Corporate Governance Report	https://www.nittsu.co.jp/ir/governance/
Integrated Report 2021	Year ended March 31, 2021

Nippon Express Integrated Report 2021

01

Prole

Integrated Report 2021 Highlights

The Nippon Express Group Approach to ESG Management

The Nippon Express Group Business Plan 2023 addresses ESG-oriented business management to realize sustainable development and improve corporate value as one initiative in our efforts to implement our Long-Term Vision. The group believes that working to solve social issues through our business activities and contributing to a sustainable society ties to sustainable growth and enhancement of corporate value. This is our view of ESG management.

Meanwhile, we are seeing dramatic changes in international trends and social conditions. We find ourselves in a situation in which we face many environmental and social issues directly, and social systems that affect the entire planet are in a deep crisis. Amid these conditions, society expects corporations to behave more responsibly and offer greater value, and we recognize the increasing importance of ESG management in this respect.

In response to these circumstances, we reconfirmed the direction of Nippon Express Group ESG management in the process of publishing our second integrated report. In this process, we organized our understanding and our stance regarding ESG management, clarifying the Nippon Express Group approach to ESG management, which we describe as follows.

Our unchanging philosophy is to advance society and bring an enriched life to future generations. Based on this philosophy, we contribute to sustainable societies through risk mitigation (environmental and social issues) and new value creation (value demanded by society), aiming for business growth. At the same time, we strive to strengthen corporate governance to achieve these contributions and growth.

The Nippon Express Group Business Plan 2023

April 2019- March 2024 Business Plan	After FY2024

Business Growth Strategy

Growth strategy for core businesses

Strategy to enhance domestic businesses in Japan

Efforts to Implement Our Long-Term Vision

Inorganic growth strategy

Reinforcing functions to support challenges

Establishing ESG-oriented business management to realize sustainable development and improve corporate value

Long-Term Vision (2037 Vision)

A logistics company with a strong presence in the global market

Growth Image

5 years from 2018 10 years from 2018 100th anniversary

Sales (Revenue):		Sales (Revenue):			Sales (Revenue): ¥3.5
¥2,400 billion		¥3 trillion			to 4 trillion
Operating income		Operating income			Operating income
ratio: 4%		ratio: 5%			ratio: 5+%
Overseas sales		Overseas sales			Overseas sales ratio:
ratio: 25%		ratio: 40%			50%
ROE 10%			ROE: 10+%			ROE: 10+%

Japan domestic

Overseas

Revenues	12,000
(Billions of yen)

		6,000
4,281
	Overseas	Inorganic growth
		due to M&A
		Enhanced	18,000
17,103	Japan	domestic
		businesses
		18,000
2018		2023	2028	2037

01Point

The Nippon Express Group Value Creation Engine

The Nippon Express Group creates and offers new value based on our corporate philosophy and an understanding of changing social and customer issues. We clarify our unchanging business creation

02Point process as our value creation engine.

Pivoting Business Models to Meet Society

We provide optimized business solutions to industry and society by building business models tailored not only to individual customers, but also to industries and society as a whole.

03Point

Reconfirming Materialities

We leverage past, present, and future initiatives to reconfirm the materialities (key issues) necessary for Nippon Express to answer the demands of society and to grow as a business.

02

Nippon Express Integrated Report 2021

03

Prole

Nippon Express and the Logistics Markets of Japan and the World

Competitive Advantages, Risks, and Opportunities

Domestic and

Overseas

Logistics Markets

The population of Japan is declining, especially in rural areas. We are seeing a particularly large decline in our working-age, which represents the core of consumption. Similarly, the volume of freight forwarding is on a downward trend. Given the declining population and low economic growth prospects, it is difficult to expect future growth in the domestic logistics market.

Nippon Express	We have become the increasing choice of numerous customers due to our ability to
transport anything, anywhere, using every means of transportation in the best possible
Group Strengths	manner. And what has made this possible are the transportation modes, networks, and
	front-line capabilities we have cultivated since our founding.

At the same time, populations are expected to grow among the emerging economies. Including the advanced economies, the global working-age population should increase gradually. Backed by moderate economic and population growth, international freight volume should continue trending upward.

Diverse Transportation Modes

Customers have a variety of requirements, including cargo size, weight, and urgency. The Nippon Express Group offers a full range of transportation modes, including truck, rail, ship,

Vehicles

			(As of March 31, 2021)
	Loading and		Warehousing
Construction Vehicles		Space

Domestic Freight Volumes and Population Trends	World Cargo Volume (Air and Ocean) and Population
		Freight volumes	containers
(Thousand tons)	(Population in thousands)	(Million ton-kilometers)	(Thousand TEU)	(Population in millions)
8,000,000	160,000	300,000	1.400,000	9,000

		250,000	1,200,000	8,500
6,000,000	120,000
	Average GDP Growth Rate	200,000	1,000,000	8,000
4,000,000	80,000	150,000	800,000	7,500

and air. We provide the most suitable method of transportation for shipments requiring special care, such as pharmaceuticals and perishable foods that require strict temperature control, precision instruments that require vibration control, and art works that require humidity control.

A Global Network

In our more than 80-year history, the Nippon Express Group has built a logistics network covering the entire country of Japan. In 1962, we established our first overseas subsidiary in the U.S., and took steps to expand overseas. Today, we deliver goods to anywhere in the world through the world's largest network, when considering group companies and reliable local partners.

Domestic8,940

Overseas

10,294

Overseas

Warehousing

Space

3.57

million m2

Domestic 2,279	Non-consolidated
Overseas 1,322	3.40 million m2

Forwarding Volume (January to December)

Ocean cargo 660,000 TEU Air cargo 720,000 tons

(TEU: Twenty-foot Equivalent Units, equal to the volume of one twenty-foot shipping container)

2,000,000																	40,000	100,000	600,000							7,000
	4.9%	1.5%	1.1%	0.1%	1.0%	1.1%	0.8%	0.7%			50,000	400,000							6,500
0																	0
																0	0							0
1985 1990 1995 2005 2010 2015 2020 2025 2030 2035		2015	2020	2025	2030	(year)

				Domestic freight volumes (left axis)		Air (Million ton-kilometers)		Marine (Thousand TEU)
							Domestic population (right axis)			Population Trends (Population in millions)
Source: National Institute of Population and Social Security Research (Domestic population) Ministry of	Source: world development indicators databank
					Land, Infrastructure, Transport and Tourism White Paper (Domestic freight volumes) World Bank			Figures for 2020 and beyond are estimated based on the CAGR for 2010 to 2017
					Data (Average GDP growth rate for 1985 to 2015) Mitsubishi UFJ Research and Consulting			United Nations Population Division Department of Economic and Social Affairs
					(Average GDP growth rate for 2020 and after) Domestic freight volumes for 2020 and beyond are
					estimated based on the CAGR for 2008 to 2015 (0.9%)

Strong Front-Line Capabilities

How will my precious cargo be handled? This is the single most important question when			Subsidiaries				Overseas Network
customers choose a transportation service. The Nippon Express Group transports and stores	278				47 countries/regions
cargo in the field, strongly committed to safety, compliance, and quality, and always placing the
			314 cities
customer first. At first glance, this approach may seem simplistic and obvious. However,
customers widely varying demands in terms of cargo size, weight, shape, and nature. We must							733 locations
meet every one of these demands, while maintaining strict safety and compliance. We can only
accomplish this task through constant daily training, systems support prompt communications,			Afliates				Employees
an autonomous organization capable of identifying and resolving issues in the field, a sense of	63					72,366
ownership on the part of all employees, and a strong shared will on our front lines to find the		Consolidated
single best way and to accomplish our mission, no matter what the situation.
				Non-consolidated34,766
We have the expertise and groundwork passed down from our predecessors, and we will
continue pressing forward to strengthen our front-line capabilities.

World Cargo Volume

(Air and Ocean)

and Population

Location of

Rank Headquarters

The internationalization of the logistics industry is accelerating with economic globalization. The global rankings are dominated by major logistics companies in advanced economies that have established international logistics networks. Driven by the growth of 3PL and international parcel delivery services, cross-border logistics services will merge at an increasing pace.

Provider	Gross Logistics Revenue	Marine (TEU)	Air (Metric tons)
(Millions of yen)*

Risks and	Risks that may have a significant impact on Nippon Express Group businesses are as
follows. For more on policies related to risks and opportunities, see our latest Annual
Opportunities	Securities Report, as well as Materialities (page 37) for more on sustainability-related
	opportunities and risks.

1					DHL Supply Chain & Global Forwarding	2,973,339	2,862,000	1,667,000
1					Kühne + Nagel	2,694,742	4,529,000	1,433,000
2					DB Schenker	2,169,525	2,052,000	1,094,000
2					DSV Panalpina	1,909,111	2,204,902	1,272,405
3					Sinotrans	1,272,183	3,750,000	532,300
4					Expeditors	1,057,122	1,012,600	926,730
5					Nippon Express	2,021,762	660,152	720,115
6					CEVA Logistics	773,300	1,081,000	363,000
7					C.H. Robinson	1,618,705	1,200,000	225,000
8					Kerry Logistics	717,602	1,019,924	493,903
8					UPS Supply Chain Solutions	1,154,516	620,000	988,880

• Based on the exchange rate as of December 2020 (US$1 = ¥104.50).
  Source: Armstrong & Associates, Inc. A&A's Top 25 Global Freight Forwarders List 2020.
  Rank reflects overall consideration of total revenues, ocean transportation, and air transportation

Changing Business Environments

Contracting domestic logistics markets

Markets Expanding global logistics markets Declining relative position of Japanese companies

Competition	Oligopolies via overseas mega
forwarders
	New entry from different industries
Advanced	Digital revolution through AI/IoT, etc.
Technologies	Rapid business model innovation
	Initiatives for building
Social
a sustainable society
Capital	Market demands for effective use
Markets	of capital and assets
	Changing labor environment
Employees
(labor shortages, work style
	reforms)

Opportunities		Risks
• Global business expansion	• Lost opportunity due to changes in the
markets for the Group's core domestic
		businesses
		• Greater disparity with foreign mega forwarders
• Growth through M&As	• More severe competition due to entry into
logistics by major e-commerce providers
		and those from different industries
• Trigger for greater business	• Obsolescence of existing business
efciency and solutions to social	models
problems	• Loss of competitive advantage
• More opportunities to provide	• Greater disparity between foreign
companies advancing such initiatives
value to customers
• Lower relative standing on the market
• Greater corporate value	• Stock price decline, increased pressure
from the market
• Expectations for industrial	• Shortages of core personnel, major
cost increases, relative decline in
reforms
industry appeal

04	Nippon Express Integrated Report 2021 05

Nippon Express ESG

Nippon Express and Logistics Supporting the Advancement of Society

Historical Background

Initiatives of the Nippon Express Group

1872~ Wartime and Postwar Reconstruction

Establishing a nationwide domestic transport network and land, sea, air intermodal transport

Our company was founded as a consolidation of early modern transportation and communications companies, nationalized to ensure the smooth supply of goods during the war. After the war, the company underwent a reorganization, and in 1950, we listed our shares on the stock exchange, transitioning from a nationalized entity to a private entity.

We began as a railway forwarding company handling items from small carriers. From there, we expanded our truck transportation network throughout Japan. We were among the first to form alliances with shipping companies and airlines in Japan and abroad, establishing an intermodal transportation system that combined land, sea, and air transportation in an organic manner.

1960~	Rapid Economic Growth and
Manufacturing Industry Globalization

Establishing a global supply chain network

As Japan entered a full-scale economic recovery in the 1950s, we launched an international forwarding business in cooperation with Japanese companies expanding overseas. In 1962, we established our first local subsidiary in New York, U.S.A., Nippon Express USA Inc. In the 1970s, Japan's industrial structure shifted to an export-driven economy, while the Asian nations began to emerge, signaling a change in the world situation. In response, we established a policy to strengthen our presence in international transport, solidifying our international transport systems and in 1973, establishing an Asian subsidiary in Singapore, among other measures. Subsequently, we established a firm foothold in the Americas, Europe, and Hong Kong. In the 1990s, we began to expand actively into China, Southeast Asia, and India.

1990~ Growth and Rising Uncertainty in the Service Industry

Maintaining supply chains in Japan and overseas; diversifying our services

At the time of the Great Hanshin-Awaji Earthquake in 1995, we were the only trucking company designated as a public organization under the Basic Act on Disaster Management. In the immediate aftermath, we established a disaster-response headquarters and fulfilled our duties by carrying out emergency transportation of relief supplies and other goods from Japan and overseas in cooperation with relevant government agencies. Since that time, we have endeavored to carry out our mission to support social infrastructure logistics, formulating crisis management regulations and establishing a crisis management committee in preparation for emergencies. In the aftermath of the Great East Japan Earthquake in 2011, we used all available means of transportation by land, sea, and air to cope with the widespread disruption of road and rail networks.

2010~ Environmental and Social Sustainability

Sustainable development of society and business

Global warming and other environmental problems became more prominent in the beginning of the 1990s. As a leading company in the transportation industry--an industry that accounts for 20% of Japan's CO2 emissions, we took the lead in addressing the issue of exhaust gas emissions. We established a dedicated department, and in 1993, we formulated a basic philosophy for global environmental conservation. We pursued environmentally friendly transportation through low pollution vehicles, saving resources used in packaging materials, improving efficiency through joint deliveries, and using modal shifts from truck-based to rail- and ship-based transportation. In addition to environmental conservation activities through our business, we also engaged in resource recycling and ecosystem conservation.

2,500,000

2037 Vision

Major

A logistics company with a strong

presence in the global market

2,000,000

The Nippon Express Group Business Plan 2023

~"Dynamic Growth"~

1,500,000

The Nippon Express Group Corporate Strategy 2018

New Sekai-Nittsu

The Nippon Express Group Corporate Strategy 2015

Innovation and Moving Forward

1,000,000

The Nippon Express Group Corporate Strategy 2012

Towards New Growth

Revenues

* Overseas sales prior to fiscal 1998 have been omitted, since overseas sales accounted for less than 10% of revenues.

1872

1880

1930

1940

1950

1960

1970

							500,000
			Overseas Revenues				0
1980	1990	2000	2010	2013	2016	2019	2020 (FY)

Major Events and Changes in Japan

1872 Riku-un Moto Kaisha established (predecessor of Nippon Express)

1937 Nippon Express Co., Ltd. established

1957 Nippon Express shares are listed on the stock exchange, marking a fresh start as a purely private company

1959 First use of 300-ton trailers for transportation

1964 Transportation for the Tokyo Olympics, Transported the Venus de Milo 1970 Transportation for the Japan World Exposition in Osaka 1972 Transportation for the Sapporo Winter Olympics

1974 Transported the Mona Lisa

1985 Transportation for the International Exposition in Tsukuba, Japan

1990 Transportation for the The International Garden and Greenery Exposition

1995	Transported relief supplies and other items as a designated public	2011	Transported relief supplies and other items in the wake
	institution in the wake of the Great Hanshin-Awaji Earthquake		of the Great East Japan Earthquake
1997	Launched recycling transportation business	2013	Established Nittsu NEC Logistics, Ltd.
1999	Began full-scale operations of internet order deliveries	2014	Established Nittsu Panasonic Logistics Co., Ltd.
2002	Fleet of low-pollution vehicles exceeds 1,000 vehicles	2015	Converted Wanbishi Archives Co., Ltd. to a subsidiary
2009	Transported national treasure Asura statue of the Kofukuji Temple	2017	Opened Tokyo C-NEX
2010	Transferred parcel delivery service business transferred to Japan Post Co., Ltd.	2018	Conducted Tsukiji Market relocation work

andEventsMajor OverseasChanges	1957	Began international air freight forwarding		1962	Established Nippon Express USA. Inc.
		consolidation business		1973	Established NIPPON EXPRESS (SINGAPORE) PTE., LTD.
	1959	Dispatched first representative to New York		1977	Established Nippon Express (Nederland) B.V.
				1981	Established Nippon Express (U.K.) Ltd., and Nippon
					Express (Deutschland) GmbH

1992	Overseas offices exceed 200 locations	2013	Acquired Italian logistics company Franco Vago S.p.A. as a subsidiary
1994	Established Shanghai Express lnternational Co., Ltd.	2014	Overseas offices exceed 500 locations
2001	Overseas workforce exceeds 10,000 employees	2015	Overseas workforce exceeds 20,000 employees
2006	Established Nippon Express (St.Petersburg) LLC	2017	Opened Kenya and Morocco branches in Africa
	Nippon Express (St. Petersburg)	2018	Acquired Italian logistics company Traconf as a subsidiary
2007	Established Nippon Express (India) Private Limited	2020	Acquired MD Logistics, LLC and MD Express, LLC, a
			logistics company in the U.S.

06	Nippon Express Integrated Report 2021 07