Key to Promoting GX: Shaping the Future
through Diversity and Leadership

Over the last 10 years Hitachi's portfolio of companies has dramatically transformed and is now uniquely placed to address the environmental challenge. It is scientifically proven that CO2 emissions are driving global warming and therefore the world must transition away from fossil fuels to cleaner forms of energy to maintain the delicate eco system of the planet. The solution is to use green electricity to replace the burning of fossil fuels and potentially green hydrogen for heavy industrial applications. Governments are addressing this challenge by adding capacity in the form of renewable energy, such as wind and solar, as this is the quickest and cheapest way to generate clean energy and planning more nuclear power in the form of small modular reactors and new gigawatt reactors. Coal and gas fired power plants are being progressively shut down whilst work progresses to deliver carbon capture solutions and other technological breakthroughs.

The big challenge with increasing energy generation capacity through renewables and nuclear is that in most geographical areas, supply is a long way from demand, for example offshore wind farms. Also, the existing electrical grid is not always capable of accepting such an increase in power supply. Hitachi Energy is extremely busy meeting this need supplying High Voltage DC connections to carry huge amounts of generated power over long distances and providing technology to increase grid capacity. Hitachi's digital capability is also required to manage the supply of renewable power. The wind and sun are not constant so balancing supply and demand becomes a complex challenge which can only be managed digitally.

In addition to renewable sources nuclear power is in demand to generate large amounts of clean energy. Small Modular reactors are in development to meet this need as SMR technology is potentially less complex, safer, lower cost and can be delivered quicker than conventional large scale nuclear power plants. Hitachi Nuclear is at the forefront of this exciting market with the first SMR due to be delivered to Canada in 2029.

Replacing conventional power generation is only one part of the solution. The demand for electricity is soaring as mobility moves electric for trains, cars, e-bikes, scooters etc, data centres require ever more clean power, driven by the digital revolution and the growth of Gen AI and industry demands more clean power for growth. So, in summary, Energy, Mobility, Digital and Industry are all engaged in the challenge to decarbonize the planet.

So, what can we do to contribute? It is extremely important that Hitachi becomes a net zero company to remain credible in the market considering our market engagement. This is the strategy of Hitachi, but on an individual level saving energy is helping to save the planet, which has the added advantage of saving costs. So please look around your business and workspace to see how you can help. Every KW of energy saved can add up to a sizable contribution if we all make the effort. I would encourage everyone to take up this challenge, executives, employees and join me in making this change.

It is critically important to the long-term success of Hitachi as a business that we place sustainability at the centre of our decision making and mobilise all our capabilities across the group to realise a sustainable society.

From a market perspective we are starting to see Governments using taxation and incentives to encourage Companies to decarbonize. Companies that can supply clean, green products and services will have a potential competitive advantage as less green, clean products and services will be impacted by carbon taxes and will not attract incentives. This requires longer-term strategic thinking regarding product design and may attract additional costs in the short term, but the alternative would be to be left with a portfolio of non-green products and services that are uncompetitive in the longer-term marketplace.

It is true that some companies are viewing sustainability as a cost and are delaying investment. I am reminded of the example in Hitachi Rail Italy that hesitated to install solar PV at their plants due to the capital cost. Interestingly just after the PV Solar was installed the price of energy soared in Europe due to the Ukraine war and the massive price increase in natural Gas. This placed Hitachi Rail at a competitive advantage as they had their own Energy supply and could make massive savings compared to buying Energy from the grid. The lesson learnt is that Senior level leadership is required to make investments now even if the pay back appears long term.

Finally, we should not underestimate the importance of attracting and retaining talented people into Hitachi. The young generation is very conscious of the climate crisis, so working for a company that is not only acting responsibly but is helping solve the climate crisis is a massive positive. Without talented people Hitachi cannot be successful, so aligning the goals of the corporate with the interests of the people is a win-win scenario.

I would like to propose three main topics required to maximize the opportunity of GX.

First the decarbonization of Hitachi is a key pillar for our credibility and to remain competitive into the future. The leadership of this initiative has come from the very top of the company by ensuring BUs have credible and deliverable decarbonization plans and incentivizing BU leaders to deliver through incorporation of GX targets into annual bonus plans.

Secondly the GX market is not necessarily matched to Hitachi's corporate structure. Individual BUs are having great success such as Energy and Rail but there is a huge further market opportunity that requires collaboration between Business Units, combining OT and IT to solve the Customers GX challenge. Collaboration is easy to say but raises some challenges even within Hitachi. For example, the long experience and domain knowledge within the GEM sector is not easy to understand for digital talent in Global Logic or Vantara. Equally digital methodology, Gen AI etc. can be equally challenging to understand for OT experts. To overcome these barriers to mutual understanding takes colocation, time and a shared purpose. An initiative has been started in the GEM sector collocating Energy OT experts together with Global Logic in India. The project is still adjusting and learning, having been operating for only 6 months but understanding is improving, and we anticipate working on a real-life challenge with Customers in the next 6 months to start to deliver positive results. A further challenge is required to overcome the internal barriers of separate P&L responsibilities and expectations between collaborating BUs. This must be fixed to make progress in the next mid-term management plan.

And finally, innovation. Hitachi must continue to invest in innovation to stay ahead. With respect to innovation, I do not just mean R&D. I include shorter term, 'horizontal' focused innovation teams working across BUs, or 'internal venturing' and of course external corporate venturing to collaborate with the start up community to accelerate our ambitions.

I believe that everyone in Hitachi is a brand ambassador for the company. As Hitachi has aligned its brand as a climate change innovator with the technology to deliver GX it is a source of pride for all of us to know that Hitachi is contributing to solving the biggest challenge of the 21st century. This is something that everyone of us should be proud to promote wherever we work within Hitachi.

The key to promoting GX with our huge Customer base is to understand our customers and their challenges even better than they understand themselves. Gaining customer insight coupled with knowledge of Hitachi's capability is essential to helping our customers to transition to a net zero future. This requires consulting skills, local domain knowledge, digital skills, technology, collaborative mindset and leadership. In other words, agile teams of people with diverse skills and experience working together with a common purpose and goal. This is a major challenge for Hitachi as we often work in silos within business units or lack cultural diversity and devolved responsibility within our teams. Diversity and leadership are critical success factors. We must understand and respect differing skills, knowledge, experience and cultural norms and have exceptional empowered leadership at all levels within the organization to maximize the potential.

Hitachi has made huge progress over the last 10 years and will continue to change at an accelerated pace so we can continue to develop and achieve. I strongly believe that Hitachi is uniquely placed to attract and develop the talent to deliver on this mission and I am confident that we can continue to develop our organization to deliver an exciting and rewarding future for all.