Sustainability-Related Risks and Opportunities and the Sustainability Action Plan｜Sustainability

Identification of Sustainability-Related Risks and Opportunities

Advantest has identified sustainability-related risks and opportunities that may have impacts on its financial position, operating results and cash flows, and therefore require monitoring, and that could reasonably be expected to influence investor decision-making. In identifying these sustainability-related risks and opportunities, scenario analysis was partially incorporated in consideration of climate change. As part of the identification process, Advantest reviewed its value chain and compiled a list of sustainability-related risks and opportunities that are potentially material to the group, with reference to various publicly available materials in Japan and overseas, as well as the disclosure practices of companies operating in the same industry. The significance of each compiled risk and opportunity was evaluated based on its likelihood of occurrence and potential financial impact, through engagement with external stakeholders and discussions with relevant CxOs and departments. Advantest classifies the time horizon over which such significance of sustainability-related risks and opportunities are likely to materialize as short, medium, or long term, and evaluates the magnitude of their impact by taking into account the potential effects on its financial position, operating results and cash flows in the event of occurrence. The sustainability-related risks and opportunities determined to be material, along with the process of identifying them, were deliberated upon at the Executive Management Committee Meeting and reported to the Board of Directors. The significance of sustainability-related risks and opportunities is reviewed annually, with specific targets to be reflected in the Sustainability Action Plan as needed.

Sustainability-related Risks and Opportunities

Topic	Risk	Opportunity
Climate change	Significant losses and the loss of business opportunities resulting from adverse impacts on logistics infrastructure and production caused by climate-related disasters Increases in business costs associated with responding to climate-related regulations and the expanded adoption of renewable energy Negative impacts on sales if the energy efficiency of Advantest’s products fails to meet customer requirements or is inferior to that of competitors	Enhancement of customer trust and expansion of business opportunities through the achievement of high energy efficiency of Advantest's products
Pollution	The potential incurrence of costs related to compliance with environmental regulations and responses to environmental incidents, as well as potential damage to Advantest’s reputation	—
Circular economy	—	Creation of sustainability-driven business models, enhancement of brand value, and acquisition of environmentally conscious customers through the promotion of product reuse strategies
Own workforce	Loss of technological competitiveness and labor productivity due to talent outflow and recruitment challenges caused by a decline in corporate attractiveness Disruption to business continuity and risks to employee well-being caused by workplace accidents resulting from inadequate or negligent occupational health and safety management Adverse impacts on business operations and corporate reputation arising from compliance or human rights violations Adverse impacts on business efficiency caused by decreased employee satisfaction, engagement and motivation stemming from insufficient progress in gender equity	Strengthening of long-term competitiveness through continuous training and development, supported by enhanced recruitment opportunities enabled by comprehensive talent development programs and work-life balance initiatives Enhancement of innovation, business performance, and problem-solving capabilities through the utilization of a diverse workforce Strengthening of organizational performance through enhanced employee engagement fostered by a positive workplace environment and open communication between labor and management
Workers in the value chain	Negative impacts on business operations and deterioration of corporate reputation resulting from human rights violations in the supply chain, such as child labor, poor working conditions, or the use of conflict minerals	—

Sustainability Action Plan 2024-2026

The Mid-Term Management Plan is an initiative to achieve our Grand Design and to continue sustainable growth thereafter. In order to contribute to a sustainable future through our business, we made the four strategies in the third Mid-Term Management Plan, which began in fiscal 2024.

One of the four strategies is "Enhance Sustainability". To promote this, we have set up the Sustainability Policy and formulated the Sustainability Action Plan 2024-2026 as the overall picture of our med-term sustainability initiatives and their respective medium-term targets from 2024 onwards in line with this policy.

In developing a new medium-term sustainability action plan, we have completely reorganized the themes to be addressed to be linked to the Grand Design and the third Med-Term Management Plan (MTP3), from the perspective of increasing the value provided to stakeholders, and have set new medium-term targets for each of these themes. New medium-term targets have been set for each of these themes. In conjunction with this, the name of the plan was changed to better reflect the content and scope of future initiatives. We are currently identifying materiality for the entire Advantest Group in line with the priority themes in the new Sustainability Action Plan 2024-2026.

The Sustainability Report describes the new Sustainability Action Plan 2024-2026 and reports on the results of our sustainability initiatives to date, based on the ESG Action Plan 2021-2023. Advantest strategically promotes initiatives to achieve the targets set for each issue in the Sustainability Action Plan. Furthermore, the action items and targets in the Sustainability Action Plan are regularly reviewed in accordance with changes in their importance to Advantest.

We formulated the 'Sustainability Basic Policy' based on the 'Sustainability Basic Policy,' one of our Corporate Philosophy and Policies, and 'Strengthening Sustainability Initiatives,' one of our Materiality (four strategies). Based on this, we formulated the 'Sustainability Action Plan' within the Priority Measures (Corporate).

Sustainability Action Plan 2024-2026 : Targets and Progress

Stakeholders	Priority Themes	Target	CxO in charge^*1	KPIs	KPI Target (FY2026)	Progress (FY2024)	Progress (FY2025)
Shareholders and capital market	Mid-/long-term and sustainable enhancement of corporate value	Aiming further sales growth, improved profitability, and more efficient use of capital	CFO	In accordance with MTP3 Management Indicator	In accordance with MTP3 Management Indicator	Exceeding the target figures for all management indicators set as averages over the three-year period of the medium-term plan	In light of strong progress, the management targets, which had been set as average indicators over the three-year medium-term management plan period, were revised upward. In addition, FY2025 performance exceeded all of the revised targets, demonstrating results that surpassed expectations
Shareholders and capital market	Enhancement of sustainability information disclosure	Timely and appropriate disclosure of financial and non-financial information	CFO	ESG evaluation by rating agencies	Maintaining and improving evaluations by major ESG evaluation by rating agencies	Maintaining high standards of evaluation by major rating agencies	Maintaining high standards of evaluation by major rating agencies
Employees	Respect for diversity	Promoting gender diversity	CHO	Ratio of female managers^*2	11%	9.7%	10.7%
	Respect for diversity	Promoting gender diversity	CHO	Ratio of female employees among candidates (Level6) for executive and managerial positions^*3	16%	15.5%	15.3%
	Employee engagement	Fostering and instilling an attractive corporate culture	CHO	Turnover rate	Voluntary turnover rate is below average of the period of MTP2 (5.9%).	4.4%	4.5%
			CHO	Gallup Survey Scores^*4	3.80	3.76	N/A (The survey was not conducted)
			CHO	The INTEGRITY Award nominations/year^*5	400 activities	465 activities	590 activities
	Investment in human capital	Promoting health and wellbeing management and work-life balance	CHO	Japan: White 500 Certified (Japan)^*6	Japan: Certified as White 500	Certification obtained	Certification obtained
	Investment in human capital	Promoting human capital development based on the Advantest Development Framework	CHO	Education and training expenses	0.8 (Billions of yen)	0.68 (Billions of yen)	0.81 (Billions of yen)
Customers	Providing superior solutions	Provision of new products and integrated solutions that solve customer issues	CTO	Market position	Maintaining 'No.1 position in the focus markets'	Maintaining the status	Maintaining the status
	Customer satisfaction and trust	Provision of more value added and comprehensive customer support quickly and accurately	CCRO	Market position	Maintaining 'No.1 position in the focus markets'	Maintaining the status	Maintaining the status
	Climate change countermeasures and reduction of environmental impact	Improving the environmental performance of our products	CTO	“GHG emission per AT innovations” reduction rate ^*7	86% reduction when comparing Ave. (FY2021-FY2023) and Ave. (FY2024-FY2026)	84% reduction	88% reduction
			CCRO	Market Share of ATE products, including those with enhanced environmental performance	58% or more	58%	65%
			CSRO	Enhanced Product Life Cycle Assessment	Expansion of the life cycle assessment management scope and data refinement	Initiatives for improvement started	In Progress
Suppliers	Respect for human rights and fair deals in the supply chain	Responsible Mineral Procurement	CSCO	Supplier response rate to conflict minerals survey	99%	99%	99%
		Penetrating Sustainability in the Supply Chain	CSCO	Due diligence implementation rate for designated business partners^*8	100%	100%	100%
		Penetrating Sustainability in the Supply Chain	CSCO	Number of designated business partners^*8	50 suppliers (Designated 42 suppliers as business partners in FY2023)^*8	44 companies	44 companies
	Greenhouse Gas Emission Reduction (Scope 3)	Supply chain decarbonization	CSCO	Percentage of main business partners that have introduced renewable energy sources^*9	60%	52%	50%
Partners	Creation of innovation and contribution to local communities and global society	Implementation of activities related to innovation and social good	CSRO	The number of strategic partnerships	Maintain the same level as FY2023	Maintaining the status	Maintaining the status
Partners			CSRO	The number of employees' activities contributing to local communities (both inside and outside of work)	180 (FY2024-FY2026 Cumulative Total)	90 activities	170 activities (FY2024-FY2025 Cumulative Total)
Global Environment	Greenhouse gas emission reductions (Scope 1+2)	Reducing GHG emissions from Scope 1+2	CSRO	GHG emissions reduction rate	65% (vs. FY2018)	76% reduction	76% reduction
		Raising renewable energy usage	CSRO	Renewable energy coverage rate	80%	87%	88%
		Reducing energy consumption by shortening the production period of major products	CSCO	Reduction of production period by reviewing production processes	Reducing production period by 20% (vs. FY2020)	40% reduction	21% reduction
	Contribution to the Circular Economy	Improvement of recycling rate through promotion of 3Rs (Reduce, Reuse and Recycle)	CSRO	Waste recycling rate (Japan and overseas)	Japan:90% or more Other regions: 73% or more	94% 67%	94% 71%
	Contribution to the Circular Economy	Maintaining company-wide water consumption at FY2016 levels	CSRO	Water resource usage	Less than 288,000m³/year	297,771m³/year	286,571m³/year
	Conservation of biodiversity and natural capital	Preservation of biodiversity, promotion of nature conservation activities (protection of endangered species in biotopes, tree planting, beach cleanups, etc.)	CSRO	Total number of participants in social contribution activities related to natural capital	600 (FY2024-FY2026 Cumulative Total)	2,449 participants	3,199 participants (FY2024-FY2025 Cumulative Total)
Governance	Promoting ethical management and business	Compliance with international/industry standards	CSRO	Compliance with business codes of conduct and management system standards	Maintain and recertify ISO certification and pass RBA(Responsible Business Alliance) audit	Maintained and recertified ISO certification, and passed RBA audit	Maintained and recertified ISO certification, and passed RBA audit
		Implementation of Global Compliance Education Program (GCEP) e-learning for all employees	CLO	e-learning participation rate	100%	96.4%	94.9%
		Fair and Transparent Workplace	CLO	Percentage of respondents^11 who answered that 'the convenience of internal reporting channels has improved' in the compliance survey^10	50% or more	82.8%	N/A (The survey was not conducted)
		Maintaining and improving occupational health and safety	CHO	Incidence of serious occupational accidents which result in absence from work (LTIR: Lost Time Incident Rate)	0	0.35	0.34
		Fostering internal understanding of sustainability	CSRO	Implementation of measures for different levels of the organization to promote understanding of sustainability	Implementation of the measures for different levels	Implemented	Implemented
	Continued enhancement of Corporate Governance structure	Enhancement of board structure and governance to increase effectiveness of corporate governance	COO	Ensuring the effectiveness of the Board of Directors	Enhancement of disclosure of effectiveness evaluation results	The results of the effectiveness evaluation will be disclosed in the CG report	The results of the effectiveness evaluation will be disclosed on the Sustainability Website
	Continued enhancement of Corporate Governance structure		COO	The board composition that satisfies the skill set required in line with management strategy and the business environment, and also ensures diversity	Periodic review by the Board of Directors and review and revision as necessary	Reviewed by the Board of Directors	Reviewed by the Board of Directors
	Enhancing risk management	Strengthening internal control	CLO	Risk clarification and response based on twice-yearly risk reviews	Implementation of risk review twice yearly	Implementated the risk review twice a year	Implementated the risk review twice a year

*1

Please see "Directors and Executive Officers" for details on our executives and their respective responsibilities.
*2

The ratio of female managers and the gender pay gap are detailed in the "First: Corporate Overview 5. Employee Status" section of the Securities Report for the fiscal year ending March 2025.
*3

Our Group's qualification system employs a globally standardized 10-tier structure, with Level 6 representing the highest qualification within the general employee tier.
*4

Group-wide surveys are conducted once every three years.
*5

This is an award program recognizing employees who embody INTEGRITY, based on nominations from other employees.
*6

As the White 500 is a certification program in Japan, only the Company and its domestic subsidiaries are eligible for certification.
*7

GHG emissions per AT Innovation represent Scope 3 Category 11 GHG emissions divided by AT Innovation (based on Advantest's share of transistor count, pin count in systems accounting for 80% of annual sales, frequency, DPS current, and system units).
*8

Due diligence is conducted on Tier 1 suppliers accounting for the top 85% of transaction value and their primary Tier 2 suppliers. These suppliers are designated as specified business partners.
*9

Tier 1 suppliers accounting for the top 85% of transaction value are designated as primary business partners.
*10

Group-wide compliance surveys are conducted once every three years.
*11

Recognizing that not all employees wish to use the internal reporting channel, the calculation excludes responses of "unknown" regarding improvements to the reporting channel's convenience.