76 Tokyo Gas Group CSR Report 2016

Broadening our business baseEvolution as a global company groupEvolution as a total energy company group

Average for fiscal 2009-2011 Tokyo Gas in 2020Composition of consolidated net profit

Tokyo metropolitan area

Japan

Gas business

50%

Gas business70%

Overseas business

25%

Electric power and other business

25%

Overseas business 10%

Electric power and other business

20%

“Yatsugatake (mountain range with several peaks)

-style of management” with multiple core businesses

“Mount Fuji-style of management” dominated by

city gas business

Transforming our operating structure

Transformation and broadening of operating structure and business base

World

Top Commitment

Transforming our operating structure means continuing to evolve

the city gas business that has formed the core of our operations to

date, while at the same time developing second and then third core

businesses (such as the electricity and engineering businesses) in

order to emerge as a total energy company group. To use a “mountain”

analogy, we will move from a “Mount Fuji-style of management,” in

which our business is dominated by a single core business focused on

gas, to a “Yatsugatake (mountain range with several peaks) -style of

management” with multiple core businesses.

Broadening our business base, meanwhile will involve remaking

ourselves into a global company group by accelerating our domestic

and overseas expansion while still retaining our focus on the Tokyo

metropolitan area. We will also leverage the natural gas-related

technologies and expertise that the Group has cultivated in North

America and Southeast Asia, where energy use is expected to expand

dramatically in the future.

By pursuing these twin goals, we aim to achieve a “2:1:1” profit

structure by 2020, with half of our net profits generated by the gas

business, a quarter by the electricity business and other segments, and

the remaining quarter by overseas business.

Tokyo Gas Group is pursuing action in line with three main policies set in

our “Main Policies FY2015-2017” (“Main Policies”)—namely, evolution of

the total energy business, acceleration of global business development,

and construction of a new group formation—in order to advance us

along the path toward realizing the Vision.

In fiscal 2015, the Hitachi LNG Terminal and Ibaraki-Tochigi Line

entered operation and were connected to our existing three terminals

in the Tokyo Bay area and high-pressure pipeline network, thereby

increasing the supply stability of our entire infrastructure. In the

electricity business, we expanded our competitive power generation

capacity by bringing Unit 3 at the Ohgishima Power Station online,

and we also unveiled rates plans and services designed to improve

the lives of our low-pressure customers and raise our business value in

readiness for full liberalization of the electricity retail sector. Overseas, we

strengthened our U.S. operations by bolstering Tokyo Gas America Ltd. in

Houston and acquiring new prime assets. As regards our midstream and

downstream operations overseas, we established Tokyo Gas Asia Pte.

Ltd. in Singapore to serve as a regional headquarters for our business

and investment activities in Southeast Asia. We further established a new

company, Tokyo Gas Liquid Holdings Co., Ltd., to oversee the liquid gas

business and provide a new formation contributing to our evolution as a

total energy company group.

Fiscal 2016 will usher in an era of mega-competition for the energy

industry, and we will respond by continuing to pursue our Main Policies

for attaining our Vision.

To evolve our total energy business, we will ramp up measures to

ensure the safety and stability of energy supplies. We will also prepare

for the new arrangements that will come into effect when Japan’s gas

retail sector undergoes full liberalization next spring, and will work to

strengthen ties with customers by identifying and reliably meeting

their needs. The launch of our electricity business will be followed

up by steady action to ensure that we remain customers’ first-choice

new entrant electricity supplier. To accelerate our global business

development, we will start participating in overseas projects in earnest

now that the foundations of our overseas network are in place. To

construct a new group formation, we will formulate and put into practice

growth strategies for segments that we intend to grow and cultivate

alongside our city gas and electricity supply businesses, including the

engineering solutions business, liquid gas business, lifestyle services

business, and real estate business. At the same time, we will develop

and strengthen the Group’s management and structures to assist

implementation of these strategies.

Following on the full liberalization of Japan’s electricity retail sector

in April 2016, it will be the gas retail sector’s turn next April. In

recognition of the momentous changes afoot in the industry, Tokyo

Gas has adopted “Supporting you Always and bettering every day” as

our new corporate slogan. This slogan encapsulates our appreciation

for our customers and our unwavering determination to continue to

boldly take on new challenges and fulfill our social responsibilities.

Tokyo Gas Group is committed to using all our resources to contribute

to the sustainable development of society in answer to the needs and

expectations of our customers and all our stakeholders.

In November 2011, we responded to the Great East Japan Earthquake

by formulating a new vision, the “Challenge 2020 Vision,” (“Vision”) that

maps out our public mission as an energy company and our path toward

sustainable growth in the future.

This Vision calls for Tokyo Gas to fur ther step up its existing

commitment to innovation, and to transform its operating structure and

broaden its business base while maintaining its core presence in the gas

business and the Tokyo metropolitan area in order to be better able to

contribute even more to society.

Realizing our “Challenge 2020 Vision”

Progress on Main Policies

Initiatives in Fiscal 2016

Tokyo Gas Group is working to evolve as a total energy business and accelerate its global business development by constructing a new group formation, thereby contributing to the sustainable development of society through CSR management.

Michiaki HirosePresidentTokyo Gas Co., Ltd.

98 Tokyo Gas Group CSR Report 2016

Top Commitment

As an official partner of the Tokyo 2020 Olympic and Paralympic Games*1,

Tokyo Gas will work with the Tokyo Metropolitan Government and other

local governments and authorities to make the Games a success and create

an appealing Tokyo. We will also contribute to society in our role as a public

utility by contributing to the development of Paralympic sports.

For us, corporate social responsibility means both contributing to sustainable

development and growing as a company by winning stakeholders’ trust

through meeting the continually changing needs and expectations of

society.

In fiscal 2014, Tokyo Gas Group identified six key areas of CSR activity and

material aspects on the basis of the Main Policies we had adopted previously.

Sound progress was made on CSR in fiscal 2015 by following PDCA cycles.

Fiscal 2016 saw not only the full liberalization of the electricity retail

sector but also the finishing touches being put to preparations for the full

deregulation of the gas retail sector. As we push ahead with implementation

of our Main Policies, such as by commencing our participation in overseas

projects in earnest and developing and strengthening our group

management structures, compliance in keeping with these changes will

assume even greater importance. We consider it essential to practice fair and

transparent management, while further enhancing communication with

all our stakeholders, sharing knowledge within the Group on customers’

and society’s needs, and incorporating this knowledge into our activities.

In March 2016, we signed the United Nations Global Compact to help us

further improve our CSR activities and approach CSR from a more global

perspective, and we will continue our pursuit of more advanced CSR

management and contributions to the sustainable development of society in

the years ahead.

Social pressure for action to tackle global environmental problems continues

to grow, as exemplified by last year’s COP21 climate summit and its adoption

of an international framework and “Intended Nationally Determined

Contributions (INDC)” for reducing greenhouse gas emissions up to 2030.

For our part, we recognize that our responsibilities as an energy company

will only grow as the Group expands by evolving its total energy business

and accelerating its global business development. In the city gas business,

increased use of cogeneration systems (which are attracting interest for their

contribution to both energy efficiency and security) and the development

and adoption of smart energy networks and other low-carbon systems will

be promoted through the expanded use of natural gas, a low-CO2 emission

source. In the electricity business, we will actively promote generation of

electricity using highly efficient thermal power plants and renewable energy

sources. Globally, we plan to accelerate our rollout of the Group’s world-

beating CO2-reducing, energy-saving technologies as part of our effort to

enhance action against global warming.

We will also put into practice revised Environmental Policies and

Environmental Protection Guidelines in fiscal 2016, strengthen our

environmental management systems, and take even more serious action on

environmental issues in accordance with global standards as we continue

our efforts to raise our corporate value.

To help develop communities that are both environmentally friendly and

disaster resilient, we will promote the adoption of smart energy networks

and work with local residents to raise awareness of energy and the

environmental issues.

Children are a particular focus of our community activities, as our

future will depend on the kids of today. Activities already underway

include school education support, operation of our corporate museums,

and our participatory “HIIKU” fire education program. As regards our

global expansion, we are placing a high premium on building trust with

stakeholders of all nationalities, cultural backgrounds, and legal and business

traditions.

We are committed to building good communications by explaining the

Group’s initiatives and ascertaining what our stakeholders expect from us as

we work to better serve local communities.

Employees are the driving force of any business and are a crucial element

of the Group’s management base. It is essential to create an environment

that allows all employees to maximize their personal potential and approach

their work positively.

Tokyo Gas Group employs a vast range of individuals, including people

who face time constraints due to parental and nursing care or other

responsibilities, women, older people, people with disabilities, mid-career

hires, and foreign nationals. They all bring diverse knowledge, skills, and

experience to the table. We recognize the enormous importance of diversity,

which for us means respecting one another’s individuality, and we also

believe that respect for diversity leads to improvements in productivity. We

consider women’s employment to be an important element of diversity, and

we are working to establish and expand various programs, raise awareness,

and cultivate an organizational culture that allows women to contribute fully

in the workplace. We continue to steadily increase our promotion of women,

and this year appointed our first female executive officer from within the

company.

Looking ahead, we will accelerate development of human resources

within the Group to assist our evolution into a total energy company and

global business, and we will continue to ensure the health and safety of

employees and further strengthen our people-centered business base.

Key CSR Activities of the Tokyo Gas Group

■ Enhancement of Energy Security

We will deliver stable, low-cost energy supplies and provide better products and services to ensure safe, secure, and comfortable energy use by the customer.

■ Contribution to the EnvironmentWe will take more positive action to protect the environment at both the regional and global level in fulfillment of our obligations as an energy company.

■ Contribution to Local Communities

We will value ties with communities and contribute to safe and secure ways of life and urban development and the enrichment of society.

■ Respect for Human Rights

We will respect the dignity and rights of all in our business activities and raise our employees’ awareness of the importance of doing so.

■ Promotion of Compliance

We will pursue more rigorous compliance by our employees and practice business in a fair and transparent manner.

■ Enhancement of People-Centered Management BaseEmployees are the driving force behind our operations, and we will develop programs and strengthen our management base to enable them to make the most of their abilities.

Tokyo Gas Group practices CSR-based management to assist implementation of its Management Philosophy and Corporate Action Philosophy in the course of its daily business activities and to fulfill its social responsibilities and public mission. We have identified six key areas of CSR activity and specific issues (“material aspects”), and are implementing plan-do-check-act (PDCA) cycles to address them.

CSR is crucially important to the implementation of our Main Policies and the attainment of our Vision. Tokyo Gas President Michiaki Hirose explains below in Q&A format how we are practicing CSR activities.

How is the Tokyo Gas Group tackling global environmental problems?

How will the Tokyo Gas Group contribute to local communities?

What does Tokyo Gas hope to achieve through the Tokyo 2020 Olympic and Paralympic Games?

What is your thinking and approach regarding the human resources on which the Tokyo Gas Group depends?

Could you explain the vision of the Tokyo Gas Group’s CSR management?

President

Tokyo Gas Co., Ltd.

Q Q Q

Q

Q

*1 Tokyo Gas is an official partner (in the Gas & Gas Utility Services category) of the Tokyo 2020 Olympic and Paralympic Games.

Michiaki Hirose