Sustainability Management｜LY Corporation

The LY Corporation Group (the “Group”) strives to fulfill its social responsibilities and aims for a continuous social and environmental development, while maintaining open dialogues with its stakeholders.

Basic Policy on Sustainability

The LY Corporation Group upholds "Create an amazing life platform that brings WOW! to our users." as its mission. The Group will bring positive impact to society through its businesses and promote sustainability management that takes responsibility for future generations by addressing social issues, including the global environment and human rights.

To promote sustainability management, the LY Corporation Group establishes the following Basic Policy on Sustainability and identifies six material issues.

Promote sustainability from the standpoints of both society and business
Work collectively to address sustainability while taking advantage of the unique characteristics of each Group company
Take on challenges without being bound by precedents, and strive to continuously generate innovation

Sustainability Management Structure

LY Corporation (the “Company”) has established the Sustainability Committee as the executive body under the supervision of the Board of Directors, the highest decision-making body, to promote initiatives to address various sustainability issues across the Group companies.

The Sustainability Committee generally meets four times a year and is chaired by the President and Representative Director, with members including the CFO, outside directors, and more. The committee deliberates and makes decisions on the policies and various measures for the Group's material issues and sustainability, and monitors their progress. In FY2023, the Sustainability Committee discussed policies for addressing issues such as climate change and natural capital, as well as strategies for human capital and other ESG issues. Furthermore, the Environment Working Group and the Human Rights Working Group are established under the Sustainability Committee. The persons responsible for the environment and human rights issues in the Group companies serve as members of these working groups. They review policies and measures of the LY Corporation Group and promote these measures at each Group company.

Under the supervisory framework, the Sustainability Committee submits proposals and reports on important matters to the Board of Directors, and reports as appropriate to the Governance Committee, which is composed of independent outside directors.
The Board of Directors supervises the promotion of sustainability through deliberation and resolution of the important matters brought up for discussion.

In addition, in order to ensure that the directors* are committed to promoting sustainability, the Company has incorporated sustainability evaluation as an indicator for determining cash bonuses for their executive remuneration within the range of ±5%. The sustainability evaluation consists of the previous fiscal year's results of each materiality indicator, including progress of achieving carbon neutrality, diversity indicators, and data governance, which were established to realize the Company’s mission and medium- to long-term corporate value enhancement, as well as an external assessment by ESG rating agencies. The sustainability evaluation indicator (±5%) is resolved by the Nominating and Remuneration Committee, of which the majority is composed of independent outside directors.

Please refer to the Corporate Governance page for details on the remuneration policy.

*Excludes directors who are members of the Audit and Supervisory Committee.

Materiality for the LY Corporation Group

Formulation Process

The LY Corporation Group formulates its material issues with the aim of building a sustainable society and realizing its mission, "Create an amazing life platform that brings WOW! to our users."

Evaluation Map

LY Corporation organized its activities in light of social demands, and identified items of high importance to both its stakeholders and the Company based on stakeholder expectations and internal analysis. The GRI standards and major ESG evaluation items were also referred to in this process.

Organization of Identified Materiality

Six materialities have been established for realizing the mission of the LY Corporation Group based on the evaluation map.

Materiality, and the Group’s Mission

The LY Corporation Group established six materialities to realize its mission, "Create an amazing life platform that brings WOW! to our users." By addressing these issues, the Group will build a future with its stakeholders in which everyone can utilize the power of the internet with peace of mind.

Addressing Material issues*¹

The LY Corporation Group has established materiality initiatives and evaluation indicators*² for each materiality it has identified, and continuously monitors the progress of the initiatives. In addition, the Company sequentially reviews issues that are to be prioritized over the medium- to long-term based on its business environment and social conditions. The indicators and targets for such issues are set as top-priority issues upon the resolution of the Sustainability Committee and efforts are made to achieve the targets.

*¹ LY Corporation views the information leakage caused by unauthorized access (announced in November 2023) as a management issue that must be addressed with the highest priority. The Company is therefore promoting the following measures: (1) fundamental review and reinforcement of safety management measures and subcontractor management, (2) essential review and reinforcement of security governance involving the entire Group, including the parent company, and (3) thorough customer support, including the provision of appropriate information. For specific recurrence prevention measures and their progress, please refer to the dedicated webpage.

*² The evaluation indicators include undisclosed information as they were created for the purpose of tracking the progress of initiatives and considering further measures within the Group.

Providing New WOW! Experiences Using Data/AI

Practical and inspiring user experiences are realized not only through new features and excellent UI/UX, but also by adopting approaches that make full use of data/AI.
LY Corporation exists to create new experiences by promoting cross-use among diverse services, improving data quality through data linkage, performing AI analysis, and effectively repeating this cycle.
For this, the Group will work on initiatives such as establishing systems, making technological investments, and promoting education.

Materiality Initiatives	Evaluation indicators and major items disclosed
Promotion of data linkage and cross-use	Evaluation indicators Cumulative no. of users of the Group Yahoo! JAPAN number of monthly logged-in user IDs LINE monthly active users (MAU) Number of PayPay Registered Users (Standalone) Number of users cross-using PayPay and Yahoo! JAPAN Shopping
Promotion of data linkage and cross-use	Major items disclosed (FY2023) Cumulative no. of users of the Group: over 320 million Yahoo! JAPAN number of monthly logged-in user IDs: 55.58 million IDs LINE monthly active users (MAU) (Japan): 97 million Number of PayPay Registered Users (Standalone): 63.04 million
Establishment of data AI utilization policies and systems (UPDATE)	Evaluation indicators Review of appropriateness of Basic Policy on AI Ethics Updating the organizational structure to execute initiatives
	Major items disclosed Z Holdings Hosts "Expert Panel on AI Ethics" (Press release) (June 2021) Formulation of the Basic Policy on AI Ethics (July 2022)
Promotion of technology investment/education to further the development of AI services	Evaluation indicators Patent score (indicator of the degree of attention paid to each patent) Number of patent applications in the AI domain Details of technology investment (amount/overview) Number of AI model releases Number of papers adopted in top conferences Data governance e-learning: completion rate
	Major items disclosed (FY2023) Patent registrations in the AI domain: 392 (cumulative number)
Related Links Growth Strategy Basic Policy on AI Ethics Intellectual Property KPI Trends (Financial Data Sheet)

Operating Safe & Secure Digital Platforms

Safe and secure IT services are demanded by society, and providing such services leads to the building of trust and reputation.
To provide such services, the LY Corporation Group believes it is crucial that it implements Group-wide training programs for achieving zero accidents.
To fulfill the responsibilities of a digital platform operator, the Group will also establish a sound operational framework and disclose the details of its initiatives in a transparent manner.

Materiality Initiatives	Evaluation indicators and major items disclosed
Implementation and enforcement of recurrence prevention measures based on administrative guidance	Evaluation indicators Refer to “Information and Progress on Measures to Prevent a Recurrence of Information Leakage Due to Unauthorized Access”
Establishment and sound operation of privacy & security governance structure	Evaluation indicators Compliance with basic policies (Data Protection/Cybersecurity) Cross-divisional promotion system including the top management (Security Governance Committee, Privacy Committee, Group CISO Board) Reinforcement of privacy and security 　Privacy: 　　・Implementation of PIA 　　・Regular privacy training for all employees 　Security: 　　・Regular review/evaluation of risks 　　・Regular vulnerability assessments and penetration testing 　　・Regular security training for all employees Reinforcement of development governance 　　・Definition of development regulations and compliance therewith 　　・Definition and requirements of critical systems and compliance therewith Promotion of the acquisition of third-party certifications Implementation of internal and external audits Note: examples of third-party certifications include ISMS, PCI DSS Transparent disclosures 　　・Disclosure of transparency reports 　　・Privacy center
	Major items disclosed (FY2023) Information and Progress on Measures to Prevent a Recurrence of Information Leakage Due to Unauthorized Access Privacy Security External Certifications Transparency Report ESG Data
Related Links Basic Policy on Data Protection Cybersecurity Policy Privacy and Security

Building a Resilient Social Infrastructure

In an increasingly uncertain world, societies are required to become more resilient. As a Group that specializes in creating new customer experiences and new business values through digitalization, the LY Corporation Group aims to take a long-term and broader view, and contribute to the building of social infrastructures.
To achieve this, the Group will cooperate with the society in the following focus areas: "disaster prevention/mitigation and reconstruction support," "3R promotion," "DX promotion," and "bridging information disparities."

Materiality Initiatives	Evaluation indicators and major items disclosed
Promotion of disaster prevention/mitigation using information technology and supporting the reconstruction efforts	Evaluation indicators Rate of population covered by disaster alliance agreements concluded with local municipalities Amount/number of donations, amount/number of subsidies Number of services providing information related to disaster prevention
	Major items disclosed Rate of population covered by disaster alliance agreements concluded with local municipalities: 98.3% (FY2022)
Promotion of "3Rs" (Reduce/Reuse/Recycle)	Evaluation indicators Reuse business transaction value Adoption by Ministry of the Environment and other pilot projects Paper recycling
Promotion of "3Rs" (Reduce/Reuse/Recycle)	Major items disclosed (FY2023) Reuse business transaction value: JPY 100.1 billion Paper recycling: reduced deforestation equivalent to 424 trees
Promotion of DX	Evaluation indicators Number of LINE Official Accounts Number of PayPay Registered Users (Standalone) Number of partnerships with municipalities Number of collaborations with academia Number of municipalities that have introduced online administrative processes
Promotion of DX	Major items disclosed (FY2023) Number of PayPay Registered Users (Standalone): 63.04 million
Continuous service delivery and promotion of social approaches to address information disparities	Evaluation indicators Management utilizing BCP-related indicators (BPO, RTO, RLO, etc.) Ratio of schools in the local governments to which information ethics education (for children/students, guardians, teachers, local governments) is provided out of all schools in Japan; no. of local governments to which information ethics education is introduced No. of local governments to which digital divide programs (for the elderly) are provided (no. of downloads of teaching materials by local governments)
	Major items disclosed Business Continuity Planning (BCP)
Related Links Completion of the Business Integration Between Z Holdings and LINE (Press release) Community Investment Preserving Natural Capital KPI Trends (Financial Data Sheet)

Reinforcing Human Capital

Having a competitive advantage in the internet business is essentially derived from the ability to generate innovative services and products, which is underpinned by employees. Therefore, establishing a cycle in which employees can work energetically and create outstanding services and products is one of the top priorities for LY Corporation.

To this end, the Company upholds the concept of "connecting people with business to maximize the performance of human capital and organizations" as the cornerstone of its human resources strategy so that employees can maximize their performance and contribute to improving the organization's growth. Specifically, the two main pillars are "reinforcing human capital" and "fostering a unique culture." The first pillar in particular is also positioned as one of the Company's material issues. In addition, while differences in culture, systems, and the environment among Group companies were a strength before the intra-Group reorganization, it did not generate a sense of unity for the Group. Thus, by also upholding the second pillar, the Company aims to create its own unique culture that will contribute to realizing its mission. To measure the progress of the two pillars, the Company implements a monthly engagement survey for all employees, and it is planning to also conduct a DE&I survey on a regular basis. It aims to maintain and improve these metrics from those measured at the time of the intra-Group reorganization.
For details on the metrics and targets for the Company’s human capital strategy, please refer to Human Capital Strategy (Reinforcing Talent and Fostering a Culture).

Materiality Initiatives	Evaluation indicators and major items disclosed
Facilitating growth	Evaluation indicators Items related to “growth support” in the engagement survey (increase/improve from previous fiscal year)
Creating environments	Evaluation indicators Items related to “environment” in the engagement survey (increase/improve from previous fiscal year) Ratio of females in managerial positions (by 2030, aim to achieve the same level as the gender composition of entire employees)
Creating environments	Major items disclosed (FY2023) Ratio of females in managerial positions: 18.5% (LY Corporation standalone)
Fostering a unique culture	Evaluation indicators Items related to “philosophy strategy” in the engagement survey (increase/improve from previous fiscal year)
Related Links Human Capital Strategy Facilitating Human Capital Growth DE&I, Work Style, Well-Being Fostering a Unique Culture & Monitoring for Better Performance ESG Data

Fulfilling Responsibilities for the Global Environment and Future Generations

One of the LY Corporation Group’s main businesses is the operation of internet media and services, which is heavily reliant on water resources as they are essential for electricity and cooling servers required for data center operations. In addition, as the Group collaborates with a wide variety of companies, the Group's entire supply chain has a tremendous impact on the environment. The Group believes that its responsibility to the global environment for future generations includes reducing greenhouse gas (GHG) emissions from its business activities and being less dependent on water resources. This will also help the Group reduce business risks as it will lead to the enhancement of its own procurement capabilities for raw materials.

Top-Priority Issues

• Carbon neutrality

Indicator:	Amount of GHG emissions
Target:	Reduce LY Corporation Group’s GHG emissions to virtually net-zero by FY2030 (Scope 1 & 2) Reduce LY Corporation’s GHG emissions to virtually net-zero by FY2025 (Scope 1 & 2)
Performance:	94,067 t-CO2 (LY Corporation Group, FY2023) 79,698 t-CO2 (LY Corporation, FY2023)

• Net-zero

Indicator:	Amount of GHG emissions
Target:	Reduce LY Corporation Group’s GHG emissions to virtually net-zero by FY2050 (Scope 3)
Performance:	3,289,809 t-CO2 (FY2023)

• Conservation of water resources

Indicator:	Water consumption (per JPY 1 million in revenue)
Target:	Reduce LY Corporation Group’s water consumption by 10% from FY2022 levels by FY2030
Performance:	0.367 m3 (FY2023)

Materiality Initiatives	Evaluation indicators and major items disclosed
Tackling climate change (decarbonization)	Evaluation indicators Scope 1 & 2 GHG emissions Scope 3 GHG emissions
Tackling climate change (decarbonization)	Major items disclosed (FY2023) Initiatives related to "mitigation" of climate change ESG Data
Initiatives in sustainable use of natural capital	Evaluation indicators Recycling rate Amount of waste per revenue Amount of water consumption per revenue
Initiatives in sustainable use of natural capital	Major items disclosed (FY2023) Preserving Natural Capital ESG Data
Continued investment in environmental domains	Evaluation indicators Environmental investment Investment amount in renewable energy (renewable energy plans, non-fossil fuel certificates, renewable energy certificate expenses)
Continued investment in environmental domains	Major items disclosed (FY2023) ESG Data Initiatives related to "mitigation" of climate change
Related Links Basic Environmental Policy Realizing a Decarbonized Society Preserving Natural Capital ESG Data

Reinforcing Group Governance

One of the top-priority issues for the Group is to establish and improve its own unique Group governance structure that aligns with the speed and growth of its business and the industry. The Sustainability Committee plays a central role in promoting initiatives that require continuous efforts over the medium- to long-term, including areas such as human rights. Furthermore, the effectiveness of the Board of Directors will also be enhanced to strengthen corporate governance and raise the Group's corporate value.