Third-Party Opinion

Reflections on the J-OIL MILLS REPORT 2025

In 2024, the number of Japanese companies publishing integrated reports exceeded 1,100 for the first time. Among companies listed on the Prime Market of the Tokyo Stock Exchange, those issuing integrated reports now account for 90% of total market capitalization. This growth suggests that integrated reporting helps dismantle internal silos and encourages cross-functional dialogue, driving behavioral change within companies. The result is not only enhanced corporate value, but also accelerated progress on social issues. In this context, an outstanding integrated report should go beyond cataloging information and aligning with disclosure guidelines—it should serve as a “statement of purpose for a future society,” clearly articulating the company’s vision and commitment to value creation.

This report is the result of continuous and dedicated efforts toward that ideal. Over the past year, I have engaged with the company not only by providing this third-party opinion, but also through dialogue sessions with the president and executives, as well as through submitted comments. This year, the company responded with concrete actions and identified remaining challenges in response to five key themes I raised: 1. Enhancing the resolution of the value creation story 2. Disclosure that accounts for information asymmetry 3. Deepening materiality 4. Clarifying links between financial and non-financial information 5. Presenting a DX roadmap The improvements made this year represent a significant leap forward compared to previous editions—so much so that I feel a heightened sense of responsibility in my role as a commentator.

That said, integrated reports are never “complete.” As business environments constantly evolve, companies must regularly revisit their materiality assessments and value creation processes in order to achieve sustainable growth. This demands the ability to think deeply about abstract concepts and translate them into concrete, actionable content. It is equally important to share those results with external stakeholders and ensure that all members of the organization actively use the report as a tool to reflect on their daily work and responsibilities.

Among the improvements this year, I particularly commend the enhanced clarity of the value creation story and the deepening of materiality. The 2024 report presented a value creation model aligned with the so-called “octopus model” of the International Integrated Reporting Framework, but offered little insight into the actual story behind it. In contrast, this year’s model links each element to a specific page with relevant initiatives and data, making the positioning and content of each component in the value creation process much easier to understand. In the PBR Reverse Tree diagram, ESG-related themes—such as the promotion and reinforcement of sustainability management and enhanced disclosure—are clearly articulated. The model also incorporates an “impact” layer based on the double materiality perspective, in response to growing expectations for companies to disclose how their operations affect the environment and society. However, the details of that impact are unclear, as no associated page references are provided. I encourage the company to clearly explain both the positive and negative impacts in the materiality section going forward.
The value creation story is the heart of any integrated report, and efforts to improve its clarity must be ongoing. In the future, developing capital-specific value creation pathways or logic trees for corporate value creation could further improve the report’s resolution and effectiveness.

As for materiality, the report links ESG and business foundation initiatives to four defined material topics, providing a vision for 2030 as well as actual performance for FY2024. This approach connects business environment analysis, strategies, and initiatives directly to materiality. By organizing materiality in this way, the company is able to clearly communicate that it considers materiality to be central to management—something that resonates not only with investors but with all stakeholders. For employees as well, seeing how their daily efforts align with specific material topics will no doubt strengthen internal engagement.

To deepen this approach further, I urge the company to explain the impact elements within the materiality framework more thoroughly, as mentioned earlier. While some resistance remains around this topic, there is growing societal interest in corporate social responsibility, and the financial markets now share a common understanding that these impacts can materially affect medium- to long-term financial performance.

One of the most forward-looking developments in this year’s report is the establishment of a “Human Capital Policy” and the creation of a “Human Resources Committee” as an advisory body to the Management Committee. This marks a clear commitment to advancing human capital management. J-Oil Mills has been undergoing structural reforms to achieve its goals of “revival and growth,” and is now entering its next phase: “growth.” The Human Capital version of the Ito Report points out that the business challenges companies face are closely tied to human capital issues. In this light, the company’s decision to pivot decisively toward human capital management is a wise one.

Looking ahead, I hope to see progress reports on this front. The key perspective in such reporting should be the alignment of management strategy and human resource strategy. This point is emphasized throughout the current report as well—in statements from the CHRO and Director Ikeda, among others. I am confident that by disclosing human capital management through this lens, the company will gain clearer insight into its organizational challenges.

Finally, I would like to express my hope that J-Oil Mills will formulate a long-term management strategy. Recent surveys indicate that while more than 80% of companies recognize the need for such a strategy, only 36% have actually developed one. In today’s volatile, uncertain, complex, and ambiguous (VUCA) environment, long-term forecasting is undoubtedly difficult. Even so, realizing a long-term vision requires a proactive stance—not reactive adaptation, but strategic foresight and deliberate planning. As the CEO himself has noted, “The risk of not having a long-term growth strategy has increased significantly.” With the company now firmly in its growth phase following repeated reforms, and as it prepares for the launch of its Seventh Medium-Term Business Plan in 2027, the time is ripe to build out a comprehensive long-term strategy.

Integrated report