Materiality | SUSTAINABILITY

OSG Group's Materiality

In FY2024, OSG Group revamped our materiality, which are the key issues that we seek to address. Because the previous eight had either little relation to changes taking place in the business environment and our Medium-Term Management Plan or had already been realized, we reduced the number to four, amending them to be more relevant to our plans and programs. As we move forward, we will be conscious of how these are linked to our Medium-Term Management Plan KPIs. We will set out key themes and KPIs for each of these four and enhance our efforts to address all of them.
The Sustainability Committee deliberates ESG-related issues, policy and vision consistency, priority measures, and other matters, and regularly reports on its activities to the Board of Directors. Measures for promoting sustainability are implemented by department heads (ESG officers) and facilitators in each organization based on decisions made by the President, who chairs the Sustainability Committee. So that department facilitators maintain consistency in their understanding of what sustainability entails, they regularly provide progress reports on their activities, exchange views with colleagues, and promote initiatives for achieving solutions to key issues.

Process for Identifying Materiality (Key Issues)

STEP1 Identify issues for medium- to long-term enhancement of corporate value: So that we may contribute to the manufacturing industry through our business and help resolve environmental and social challenges in accordance with our corporate philosophy of "Global Presence," we identified issues that are highly likely to have a significant impact on corporate value over the medium to long term. We analyzed previous key issues and applied international guidelines, frameworks, and other standards to identify issues.

STEP2 Evaluate & analyze the significance of issues: These issues were evaluated and analyzed along two axes: importance to stakeholders and importance to OSG. Key issues were reassessed by prioritizing those that have a particularly high impact on the OSG Group's business.

STEP3 Set key issues, initiatives & targets: Our evaluation and analysis of issues in Step 2 identified a total of four new key issues. We also set priority themes for each of the key issues, as well as targets to be reflected in specific activities. Progress made in the initiatives toward reaching these targets will be disclosed in a timely manner.

STEP4 Deliberate & approve key issues: The key issues identified in Step 3 were deliberated and approved by the Sustainability Committee. Because these are also critical issues and metrics for promoting ESG management, as outlined in our Medium-Term Management Plan, they have been discussed and approved as challenges that we must address to grow our business.

Materiality and Specific initiatives

Contributing to the manufacturing industry through our business
Developing an environment where employees are respected and able to flourish
Contributing to a sustainable global environment
Maintaining and strengthening our governance structure so that we may achieve sustainable growth

Contributing to the manufacturing industry through our business

Priority themes	Initiatives	Targets	FY2025 results	FY2026 action plan
Expand the global market share for taps, our core product	Global expansion of high-quality & high-value added product series	Global tap market share of 40% by FY2027	Global tap market share of 34% (OSG estimate)	Proactively launch new products
Optimize our business portfolio	Exploration of markets for micro and precision machining	Micro and precision machining sales percentage of 30% by FY2030	Micro and precision machining sales percentage of 17%	Strengthen activities of our cross-divisional sales organization Proactively launch new products Promote the development of new fields outside of existing industries, starting with diamond tools for the lens industry
Expand new business and after-sales services	Global expansion of reconditioning & coating business	Reconditioning & coating sales percentage of 15% by FY2027	Reconditioning & coating sales percentage of 8%	Expand job coating service targeting various non-tool products

Through its cutting tool business, OSG has contributed to the advancement and sustainable growth of the manufacturing industry. In response to increasingly diverse and sophisticated machining needs, we support improvements in productivity and quality on production floors, as well as the realization of labor-saving and automation, through the development and stable supply of high-quality, high-performance tools.
Among our product offerings, the "A Brand," positioned as the flagship within our catalog products, represents a premium brand that brings together our latest technologies and the extensive machining expertise we have cultivated over many years. It has earned high recognition across a wide range of industrial sectors.
By expanding the lineup of key products such as taps, drills, and end mills, we help reduce the burden of tool selection for users and contribute to the achievement of stable machining quality.

In growth fields such as generative AI, semiconductors, robotics, mobility, and medical technologies, the importance of micro and precision machining technologies is expected to increase further.
OSG is focusing on the development and expansion of products for micro and precision machining, including small-diameter tools. By enabling highly accurate and reliable machining, we support the advancement of leading-edge industries.
Our tools incorporate highly rigid designs and excellent chip evacuation capabilities to reduce the risk of breakage and machining issues in small-diameter applications. These features make it possible to achieve stable machining even in unmanned operations and automated production lines. Such high reliability supports manufacturing sites facing growing demands for labor-saving solutions.

Furthermore, by leveraging our global network for supply and technical support, we deliver value closely aligned with manufacturing sites around the world.
By combining the rapid supply of catalog products with tailored solutions through custom-made products, we comprehensively support improvements in productivity and the enhancement of competitiveness at machining sites.

We will continue to promote technological innovation through its business activities and, by sincerely addressing the challenges faced by the manufacturing industry, contribute to strengthening the foundation of manufacturing and to the development of society.

Medium-term Management Plan

Developing an environment where employees are respected and able to flourish

Priority themes	Initiatives	Targets	FY2025 results	FY2026 action plan
Increase employee engagement	Advancement of a comfortable working environment and related systems	Maintain an annual paid leave usage rate of at least 80% Achieve a male childcare leave usage rate (one month or longer) of 50% by FY2027 and 75% by FY2030 Maintain a female childcare leave usage rate of 100%	Annual paid leave usage rate: 80.7% Male childcare leave usage rate: 38.2% Female childcare leave usage rate: 100% Assessed the usage of male childcare leave and revised targets Amended the regulations for childcare leave and nursing care leave	Survey the usage of male childcare leave and reconsider targets Consider revising in-house regulations, etc.
Increase employee engagement	Promotion of Safety and Health Management	Continue to be recognized as an Excellent Company for Safety and Health Continue to be recognized as an Outstanding Organization of KENKO Investment for Health	Recognized as a 2025 White 500 Outstanding Organization of KENKO Investment for Health	Continue to be recognized as an Excellent Company for Safety and Health Continue to be recognized as an Outstanding Organization of KENKO Investment for Health
Enhance human resource capabilities and strategically assign personnel	Cultivation of next-generation and management leaders	Establish a program for developing next-generation managers	Management training implementation: 2/yr. Designed a program for developing next-generation leaders	Continue to implement management training Establish a system for developing next-generation leaders
	Encouragement of professional, flourishing human resources	Use a human resources data platform to effectively utilize personnel	Collected and visualized human resource data	Clarify definitions for human resource data
Respect for diversity	Promotion of active roles for women and persons with disabilities	Percentage of female managers (assistant manager and above): 7% by FY2026, 10% by FY2030 Percentage of employees with disabilities: maintain statutory quota	Percentage of female managers (assistant manager and above): 5.8% Percentage of employees with disabilities: 2.7% (met statutory quota)	Percentage of female managers (assistant manager and above): 7% Percentage of employees with disabilities: maintain statutory quota
Respect for diversity	Respect for human rights	Provide human rights training in line with the OSG Human Rights Policy and OSG Company Ethics Pledge, and manage relevant risks	Conducted harassment training for all employees Thoroughly spread awareness and conducted educational activities regarding harassment	Spread and raise awareness to create a harassment-free workplace Implement risk assessments for human rights due diligence

Related information（Social）

Contributing to a sustainable global environment

Priority themes	Initiatives	Targets	FY2025 results	FY2026 action plan
Achieve carbon neutrality	Introduction of operation-improvement & energy-saving equipment Implementation of on-site & off-site PPA/purchase of carbon-free electricity	Reduce CO₂ emissions (vs. FY2024) 　2030: 20% reduction 　2040: 50% reduction 　2050: Achieve carbon neutrality	CO₂ emissions: +3% (vs. FY2024)	Reduce CO₂ emissions by 4% (vs. FY2024) Calculate Scope 3 Visualize carbon footprint and consider rules for disclosure Prepare to introduce renewable energy
Reduce users' environmental footprint	Development of new, eco-friendly products	Eco-products* score (OSG criteria): 40 points or higher annually	Eco-products score: 43 points	Eco-products score: 43 points

*Evaluation criteria for Eco-products (highest score: 60 points) are based on standards set by the Japan Cutting & Wear-resistant Tool Association, an industry organization.

Carbon Neutrality Environmentally Conscious Product Development

Maintaining and strengthening our governance structure so that we may achieve sustainable growth

Priority themes	Initiatives	Targets	FY2025 results	FY2026 action plan
Maintain our corporate governance structure	Strengthening of executive supervisory functions Establishment of an effective execution system	Maintain diversity of Board of Directors Continue to evaluate Board of Directors' effectiveness and provide feedback of evaluation results to raise awareness of challenges and resolve them	Maintained diversity of Board of Directors Continued to evaluate Board of Directors' effectiveness; provided feedback to raise awareness of challenges and worked to resolve them	Create opportunities for outside directors to exchange opinions
Construct a group governance structure	Strengthening of OSG Group governance based on relevant business management regulations	Improve reporting and monitoring systems Conduct assessments for improving governance	Improved reporting and monitoring systems Conducted assessments for improving governance	Maintain reporting and monitoring systems Continue assessments for improving governance
Thoroughly manage risk and ensure compliance	Strengthening of information security measures	Eliminate major information security incidents	Conducted cyber-security audits of Group companies Optimized inter-company network communications Implemented measures to prevent connections from uncontrolled terminals	Standardize considerations of risk in planning and design (Security by Design)
Thoroughly manage risk and ensure compliance	Formulation of a business continuity plan & regular conducting of disaster prevention training	Instill the business continuity plan to minimize damage & pursue countermeasures	Continued conducting disaster prevention training to improve employees' disaster preparedness Improved BCP with the goal of minimizing damage at each business site	Reassess BCP Continue regularly conducting disaster prevention training

Corporate Governance