The SG Holdings Group relies on all of its employees to operate independently and in 2012 formulated the SG Holdings Group Personnel Vision with the goal of maximizing the potential capacities and individuality of each employee. The Personnel Vision describes clearly an organizational culture aimed at developing human resources and diversity of work styles and emphasizes the importance of each employee working with autonomy.

We at the SG Holdings Group have instituted a variety of systems aimed at providing fair and equal opportunities for our employees, to create an environment where they feel they can continue to work with peace of mind.

Beginning in September 2012, the SG Holdings Group initiated Group-wide human resources systems aimed at leveraging human resources across the Group's companies in Japan. The goal is to train highly competitive human resources by effectively mobilizing employees in a way that leads to maximum self-development.

We have introduced an appraisal system for the purpose of properly evaluating employees based on their contribution to our business and their performance of the role and action required of their function-based grade level. In addition, we have introduced a results-based bonus system for some employees.

We offer a variety of employee benefit systems over and above the social welfare insurance required by law. Since 2017, the SGH Mutual Aid Society, a general incorporated foundation, has offered benefit services to employees of Group companies in Japan. At the same time, we operate retirement pay systems, including a defined contribution pension system, as well as an employee stock ownership system.
The Mutual Aid Society operates with three concepts: (1) create a workplace where people feel secure, (2) promote healthy environments, and (3) create opportunities for people to enjoy living -- in three categories: benefits, discounts & information, and experiences & participatory events. This creates greater loyalty on the part of employees and their families, creating an environment where employees find greater satisfaction in their work and stronger support for their lives. For retirees and commissioned employees (Shokutaku), the Society also supports OB/OG clubs, publishes club bulletins, and hosts gatherings.

We believe that providing a workplace environment where people want to work is important for our employees, and at the same time, is an indispensable element for our companies to secure their own competitiveness.

Every year since 2013, we have asked Group employees in Japan to participate in a survey regarding their satisfaction with their work and the company. Since fiscal 2018, to strengthen our organization and ensure the growth of our business, we have updated this survey to gauge employees' engagement with the company. This has enabled us to keep in touch with whether our employees understand the company's aims, policies, and strategies, whether they are able to apply these ideas in their own work, and whether we have created an environment where they can be enthusiastic about their work.

Based on the results of these surveys, the CEO of each Group company and the heads of all organizational structures can analyze the strengths of each organizational unit and identify points that need improvement, so we can offer feedback to employees. Our goal here is to be able to formulate action plans for dealing with issues, and to create organizations with greater transparency than before.

This survey was conducted via our website, and covered 67,641 Group employees in Japan (including partner employees). This is a summary of the survey.

Of the 15 total categories, we were most interested in gauging two: "employee engagement," which is a measure of employees' understanding of the company's strategy, their motivation and independence, and desire to contribute to the company; and "environment for making the best of employees," which measures how well we have created the right environment to motivate our employees to do well. In the fiscal 2019 survey, the "employee engagement" measure improved 1% year on year, while the "environment for making the best of employees" measure improved 2%. An external research organization recognized the results as positive, saying that the survey showed a marked improvement considering the research scope.

Since our founding in 1957, we have been in the logistics business, which is a labor-intensive business, and our Group has now grown to approximately 95,000 employees around the world. It is anticipated that technological advances such as drones and AI will greatly change the logistics business in the near future. With that kind of future in mind, "employees" are the most important element of our growth strategy, and we recognize that, as society changes, we will have to change the way we work.

More specifically, our core company, Sagawa Express, has been experiencing greater shortages of labor as the number of packages handled increases due to the growth of e-commerce market. We need to increase productivity for each and every employee. At the same time, one issue we identified was the need to create a culture and systems that allow our employees to work flexibly, with enthusiasm and satisfaction, through the various stages of life. We are making progress in our approach to resolving this issue from multiple perspectives.

We are approaching this issue from a variety of angles: creating a workplace culture that makes it easy for people to do their jobs, and making use of IT to update the routine jobs and personnel systems of the past.

At Sagawa Express, we are not just trying to reduce overtime work. We have organized ourselves to tackle work style reforms by using IT to make operations more efficient, balancing the amount of overtime by closely managing regular work hours, reshaping our organizational culture, and arranging for working styles that meet individual needs.
In fiscal 2018, we established, inside the Human Resources Strategy Department, a "work style reform section," tasked with driving the reform of our corporate culture. We also had the IT Planning Department (now the Sales Department, Business Improvement Section instead) visit our actual workplaces, to examine specific operations up close, gaining some hints on how to improve productivity and take inventory of operations.

The SG Holdings Group conducts groupwide education by sharing Japanese and English versions of the Code of Ethics and Conduct on the company Intranet to ensure all employees understand it and are able to implement it in their duties.

In addition, the Singaporean overseas subsidiary SG Sagawa Ameroid Pte. Ltd. has created a handbook specifying policies on labor standards in accordance with the Ministry of Manpower's requirements. The policies are communicated to all employees, and the handbook has been uploaded to the company Intranet and translated into English and Chinese to enable employees to view it at any time. A system enabling all employees to check the Code of Ethics and Conduct monthly has been adopted.

At present, the SG Holdings Group has not signed the United Nations Global Compact, which is a global framework for realizing sustainable growth. However, by adhering to the ten principles of the United Nations Global Compact and implementing them in business activities, we would like to create a healthy corporate culture and contribute to the sustainable development of society. Major consolidated overseas subsidiary Expolanka signed the United Nations Global Compact in October 2018.

The United Nations Global Compact is a voluntary initiative in which companies and organizations participate to act as good members of society and realize sustainable growth by exhibiting responsible and creative leadership. See the website of the Global Compact Network (https://www.unglobalcompact.org/) for details.

The SG Holdings Group recognizes that "contribution to local communities" is essential for the sustained implementation and expansion of business activities. The Corporate Charter of Business Conduct states that we shall "contribute to the development of those countries; whilst respecting their cultures and customs, and taking into account the concerns of stakeholders." In addition, the Group Code of Ethics and Conduct that describes the specifics of this states "We shall serve toward the development of local communities in Japan and overseas, and aim to coexist with society as a whole." We see local communities to be important stakeholders and believes that creating good relationships is important.

Based on this view, we will conduct economic activities that contribute to the establishment and expansion of local socioeconomic infrastructure, and actively work to contribute to local communities and conduct community investment through business activities to contribute to the development of local communities. We will generate regular local jobs by locally hiring drivers and other staff in business operations in Japan and overseas, and contribute to the stimulation of local economies by procuring goods and services locally whenever possible.

The overseas subsidiary Expolanka Holdings PLC is locally hiring staff in Europe and the United States where it is especially expanding business. Furthermore, the number of local staff members exceeds the number of Japanese staff members in all locations other than the head office in Colombo, Sri Lanka.

The SG Holdings Group complies with labor laws and regulations on the payment of wages to employees, and has set wages at no less than the minimum wages specified by law. Some overseas subsidiaries have also established policies on wages and wage management concerning minimum wages.

The SG Holdings Group is continually proceeding to reduce the total overtime hours of employees by promoting the improvement of efficiency of each employee's work. Furthermore, the Group thoroughly implements time management aimed at the prevention of overwork. Overseas subsidiaries also comply with the labor laws and regulations of their respective countries, and are proceeding to reduce overtime work with the aim of preventing overwork in accordance with policies based on these.

The SG Holdings Group will contribute to the development of society in its business activities and corporate management with the aim of realizing the ten principles outlined in the United Nations Global Compact. Furthermore, the Group will sincerely promote the effective approval of the right of freedom of association of workers and employers and collective bargaining rights.

To flexibly respond to many changes in society, we are developing policies aimed at allowing diverse people to display their talents in the best light. Our reforms are moving us in the direction of a culture where ideas can move from the bottom up, and be vigorously discussed and debated, so that we can offer our customers a wide range of ideas to meet their needs.

Sagawa Official Communications (SOC) refers to our efforts to achieve direct exchanges of opinions by having executives of Sagawa Express visit employees at our many working locations nationwide. We started this program in 2013, so that our management policies would reflect the views of the people working on the front lines.
In fiscal 2019, executives visited 41 business sites and spoke with 661 employees.
By doing this, we deepen mutual understanding, by communicating the company's management strategy to the front-line workers, and engaging in dialogue that helps dispel employees' questions and anxieties about work.
We will continue to promote reform of our corporate culture by listening attentively to the voices of the workplace so that we can proceed with management policies that are better attuned to the way we work.

SG Holdings Group companies are promoting more efficient back-office operations and expanding the scope of efficiency-enhancement initiatives, which include RPA, AI-OCR, voice recognition, Chatbot and other technologies. SG Systems, the IT management company for the Group, is spearheading the efforts.

SG Systems has introduced an AI-OCR* system in which AI replaces and automates manual entry work in the delivery invoice entry operations of Sagawa Express. Conventional OCR had trouble recognizing the "size and weight" section on delivery invoices because the size and weight were handwritten, and there was also a mixture of circled numbers. Approximately 1.5 million data points were used to train the AI in the development of "AI-OCR" able to perform recognition more accurately than humans, and this system has been in full operation since July 2019. AI is now used to automate the input of enormous numbers of delivery orders previously done by hand. As a result, the system has led to significant reductions in workload and cost while maintaining high levels of quality. The AI technology developed through this development program is being deployed gradually through SG Holdings Group companies, and in the future, we expect to utilize AI in various types of operations throughout the Group in coordination with human activities.

In our training functions at SG Holdings Group, we view all of our personnel as an irreplaceable resource. We are striving to develop "problem-solving leaders" who can create new value while solving the problems of customers and society as a whole. More specifically, our aim is to promote growth through hands-on OJT training, while also providing opportunities for individuals to add to their skills and knowledge through OFF-JT. By helping them grow, we are developing leaders who can take responsibility for the future of our business.

We strive to develop both individuals and organizations by maintaining high levels of motivation among all employees and promoting work environments in which employees can thrive with a self of fulfillment. To this end, we have strategically developed systems for reward and commendation to support an atmosphere in which employees are praised, recognized and thanked for their hard work.

Please see the linked ESG Data Book for the following information.

Training hours and total number of training recipients for human resource development P15