Sustainability
ReportContents
Top Message ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ ２
NFC VISION 2030・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ ３
Performance Highlights ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 4
Topics for FY2021・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 5
History of Nippon Fine Chemical ・・・・・・・・・・・・・・・・・・・・・・・・・・・ ６
Business Locations ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 7
Business Contents・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8
Corporate Governance ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・10
Sustainability Basic Policy for Nippon Fine Chemical ・・・・・・・・・・・・・１1
Initiatives for Compliance ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・１2
Relations with Stakeholders・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・１2
Relations with Shareholders & Investors ・・・・・・・・・・・・・・・・・・・・・・１3
Relations with Suppliers ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・１4
Relations with Employees ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・１５
Relations with Customers ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・16
Initiatives for Diverse Product Development that Meets Customer Needs・・・17
Relations with Local Communities ・・・・・・・・・・・・・・・・・・・・・・・・・・17
Relations with Future Generations ・・・・・・・・・・・・・・・・・・・・・・・・・・１8
Initiatives for the Environment ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・１8
Initiatives in Line with TCFD Recommendations ・・・・・・・・・・・・・・・・・24
Initiatives for Environmentally-Friendly Product Development ・・・・・・・27
Initiatives for Safety and Security ・・・・・・・・・・・・・・・・・・・・・・・・・・・28

Editorial
PolicyThis Report has been published in order to allow our stakeholders tounderstand the sustainability activities of Nippon Fine Chemical Co., Ltd.

Reference
Guidelines

This Report has been created using the GRI
Guidelines Vol. 4 as reference.

Scope of
ReportingFrom April 2021 to March 2022 (including some information from outside
this period.)

Sustainability Reporting

Inquiries

Nippon Fine Chemical Co., Ltd.

4-9, Bingomachi 2-chome, Chuo-ku, Osaka 541-0051 (10F, Nippon Fine Chemical Building)https://www.nipponseika.co.jp/
This Report is conscious of the following.
We use fonts that are easy to read based on the ideas of Universal Design (UD).

1

Top Message

Nippon Fine Chemical iscontributing to society
through chemistry

Corporate
Philosophy
Nippon Fine Chemical iscontributing to
all people connectedwith our company

Nippon Fine Chemical iscontributing to
the self-realizationof our employees

Towards ESG Management by Putting Our Corporate Philosophy into Practice
Nippon Fine Chemical celebrated the centennial of our founding in February 2018, and, looking ahead to the next
hundred years, aims to become a company that grows sustainably by continuing to boost our uniqueness, and creating
further innovations to suit the changing times.
When I was appointed President in June 2020, I offered the following five key items as necessary to achievesustainable growth for our new hundred years.
(1) Compliance and safety(2) Human resources training and working style reforms(3) Formulating a long-term vision(4) Multiplying our core businesses(5) Promoting digitalization
For the long-term vision, one of these key items, we are working towards achieving the NFC VISION 2030, theembodiment of the dreams of our employees (where they want the company to be in 2030).
Our corporate philosophy of "Contributing to Society Through Chemistry" as well as the "Smiles on Faces: The Power of
KIREI" in our long-term vision, the NFC VISION 2030, and our sub-concept of helping to sustain the three "KIREIs" of the
Earth, society, and the future, form the basis of our Basic Policy for Sustainability, which aims to achieve both sustainablecorporate growth and to bring about a sustainable society.
To carry out this basic policy properly, we have established a Sustainability Promotion Committee, which, following
discussions among members, has set KPIs (key performance indicators) and numerical goals for key issues to work on as
management and has begun working towards achieving these.
In addition, in December 2021 we declared our support for the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) based on our recognition that risks and opportunities due to climate change are key
management issues.
We used scenario analysis to assess the risks and opportunities of the impact of climate change on our business, andformulate the countermeasures we need to take as a company.
We promote ESG management, and consider our most important issue to be contributing to all stakeholders throughchemistry, as noted in our corporate philosophy and based on our ambition to contribute to achieving the SDGs and theirgoal of a sustainable society. To that end, we are promoting activities in line with environmental changes.
November 2022

Nippon Fine Chemical Co., Ltd.

Representative Director, President

2

Hiroshi YANONFC VISION 2030
Diversity&Inclusion
Employee
Engagement

Community
BenefitSocialResponsibility

Fearless
Organization

DigitalTransfor-mation

Marketing&Innovation

Smiles on Faces: The Power of KIREI

Sustaining
the KIREIof the Earththrough sustainable
manufacturing

Sustaininng
the KIREIof communities
through compliance,
safety, and actions
that ensure peaceof mindSustaininng
the KIREIof the future

through diversity-driven
innovation

Smiles on Faces:The Power of KIREINFC VISION 2030 is the collectivity of Nippon Fine Chemical s aspirations that we seek to make a reality. The Nippon
Fine Chemical of 2030 will be striding out together as one, all eyes on the goal of showing the world the important rolethat we play.
Our Company Statement, Smiles on Faces: The Power of KIREI, is a declaration that we will assist in making the Earth,society, and the future more KIREI based on the following concept: through contributing to achieving the SDGs andpromoting ESG management, Nippon Fine Chemical wants to see smiles on the faces of everyone connected with us. To
achieve the NFC VISION 2030, we set in place seven goals̶goals that embody the aspirations of all our employees.
Furthermore, to achieve these seven goals, each goal has been assigned separate, specific targets. Moreover, we havewidely announced our determination to achieve NFC VISION 2030 through advertising in newspapers and trains.
From here on out, we will attain those goals, steadily and step by step, aiming for our result: the achievement of NFC
VISION 2030.

3

Performance Highlights
Company Name
Established
URL
Paid in Capital
No. of employees
Listed stock exchange
Representative Director, President

NIPPON FINE CHEMICAL CO., LTD.
February 1918
https://www.nipponseika.co.jp/
5,933.22 million yen
370 (as of March 31, 2022)
Prime Market of the TSE (as of April 4, 2022)
Hiroshi Yano

*Please see our website for the latest information.

■ NFC alone
Operating profit margin (%)

Operating profit (MY)Sales (MY)15,682

15,66014,036

13,233
11,602

11,051
15.2%

11.8%

10.9%

2015

1,207

2016

18.7%

15.5%
12.7%

10.0%

2,931
2,007

1,364

12,864

2,179
1,635

1,561

2017

2018

2019

2020

2021

FY

■ Consolidated
Sales (MY)25,867

9.2%

2,383

2015

Operating profit margin (%)

Operating profit (MY)25,153

9.4%

2,369

2016

27,598

10.0%

2,749

2017

28,084

11.4%

3,199

2018

4

29,047
12.5%

3,641

2019

33,44830,509
14.6%
12.9%

3,939

2020

4,881

2021

FY

Topics for FY2021
The main topics for FY2021 have been announced as follows. For Nippon Fine Chemical to continue sustainablegrowth into the future, we consider it necessary to continue to change to suit changes to the environment. We fulfill oursocial responsibility as a corporation that contributes to creating a sustainable society with continual new businessdevelopment and active investment,

TOP I C S
Announced our endorsement of the Ministry of Economy,
Trade and Industry s GX League Basic Concept
Nippon Fine Chemical has endorsed the Ministry of Economy, Trade and Industry s GX (Green Transformation) League Basic
Concept. The GX League was established as a venue to put into practice ways to create new markets and for debates to reformthe socio-economic system as a whole by corporate groups actively engaging in GX along with players tackling the challenges of
GX in government, academia, and finance.
The GX League Basic Concept lays out the basic directions to move ahead the debate and the verification of initiatives ofdetailed plans in 2022 for implementation of the GX League. The approach to carbon neutrality by 2050 must be seen as anopportunity for growth to increase industrial competitiveness, and that the corporate groups which win international businessmust drive the transformation of the whole socio-economic system including different stakeholders.

Announced our agreement with the Task Forceon Climate-related Financial Disclosures (TCFD) recommendations
Nippon Fine Chemical uses raw materials derived from fossils and fossil fuelas energy sources in manufacturing many of our products, and recognizes thatrisks and opportunities due to climate change are key management issues,
which lead to the declaration of our support for the recommendations of the TCFD in December 2021.
Going forward, we will use scenario analysis to assess the risks and opportunities of the impact of climate change on ourbusiness, and we will recognize the significance of such impact, strengthen the resilience of our strategies by reflecting suchimpact in our management measures and strengthen relationships of trust with our stakeholders.

Switching to 100% renewable energy sources
Our Head Office building and other sites have switched to 100%
renewable energy sources, including from solar or wind power, as ofMarch 2022. Our offices and plants in Takasago, Kakogawa, and Kobe
have also switched to using 100% renewable energy sources as of May
2022.

Successfully developed material used in new solar batteries
Contributed to improving the durability of perovskite solar batteries

In a joint development with the Global Zero Emission Research Center, National Institute of Advanced Industrial Science andTechnology (AIST), Nippon Fine Chemical developed a new organic hole transport material that offers high performance without
requiring the additive known as dopant for use in perovskite solar batteries, which show the most promise as a new renewableenergy source.

Establishment of Sustainability Promotion Organizations
We have established a Sustainability Promotion Committee and a Sustainability Office chaired by the Representative Director
and President. Sustainability Promotion Committee carries on the work on responsible care regarding the environment, safety,
and quality that we have been engaged in previously.

5History of Nippon Fine Chemical
Nippon Fine Chemical was established as Nippon Camphor Co., Ltd.
in 1918, with the goal of integrating camphor businesses in Japan.
Later, the company started manufacturing fatty acids and other oil andfat-related products, and expanded its business lines by forging its own
unique fields within chemistry.

1918

Nippon Camphor Co., Ltd. (Kobe) founded with 6 million yen in capital

1941

Nippon Camphor Chemical Industries Co., Ltd. established1954

Took over the work of Nippon Camphor Chemical Industries Co., Ltd. (Kobe Plant)

1969

Kakogawa Plant [currently Kakogawa-nishi Plant] built

1970

Takasago Plant built

1971

Changed company name to Nippon Fine Chemical Co., Ltd.

1976

Relocated Head Office to Osaka City

1979

Listed in the Second Section of the Osaka Securities Exchange

1992

Listed in the First Section of the Osaka Securities Exchange

1995

Merger with Yoshikawa Oil and Fat Co., Ltd. [now Kakogawa-higashi Plant]

1996

Production of fatty acid mono-amide accredited with ISO 9002

1997

Listed in the First Section of the Tokyo Stock Exchange

1998

Production of cholesterol accredited with ISO 9002

1999

New production line built at Takasago Plant for phospholipid complexes for medical use, full-scale production starts

2000

Kakogawa-higashi Plant accredited with ISO 14001

2001

Takasago Plant accredited with ISO 14001

2012

Built an FPC plant inside the Kakogawa-higashi Plant

2017

Built a plant to manufacture phospholipids for pharmaceutical use in the Takasago Plant

2018

Centennial of founding

2022

Listed on the Prime Market under the new market categories of the Tokyo Stock Exchange
Expanded the plant to manufacture phospholipids for pharmaceutical use in the Takasago Plant

Aiming for sustainable growth for the next hundred years
Nippon Fine Chemical reached our centennial on February 12, 2018, and is now working to expand new businesses
under the slogan, To be a corporate group growing sustainably for the next hundred years.

6

Business Locations
Domestic Business Locations● Head Office541-0051 4-9, Bingomachi 2-chome, Chuo-ku, Osaka [Nippon Fine Chemical Building]● Tokyo Office103-0001 4-9, Kodenma-cho, Nihonbashi, Chuo-ku, Tokyo [Kodenma-cho Shinnihonbashi Building]● Kakogawa-higashi Plant

675-0011 Kitano, Noguchi-cho, Kakogawa, Hyogo● Takasago Plant

676-0074 1-1, Umei 5-chome, Takasago, Hyogo● Kobe Plant

658-0015 4-55, Motoyama Minamimachi 5-chome,Higashinada-ku, Kobe

Offices

The artwork on display in the entrance lobby,
on the 1st floor of our Head Office building,represents the theme of the wind carrying out
message as it travels the world. Its shape
represents the current of the times, from thepast to the present, then continuing on to the
future.
It incorporates our wish to be a breeze thatquietly informs others of what is important to us
at that time, in that era.

Entrance Lobby for Visitors,
Tokyo Branch Oﬃce

Entrance Lobby, 1F, Head Office

Artwork theme: Winds of Time

Entrance Lobby for Visitors, 9F, Head Office

Refresh Room, 10F, Head Office

We have installed refreshrooms as places where customers
can experience comfort while at thesame time, employees can work
there pleasantly.
In addition, updating tohigh-efficiency air conditioning
means we also save energy.

Refresh Room, Tokyo
Branch Office

Production sites

Takasago Plant

Group companies

Kakogawa-higashi Plant● Nissei Kosan Co., Ltd.
● Nissei Bilis Co., Ltd.
● Arbos Co., Ltd.
● Oleotrade International Co., Ltd.
● NISSEI PLAS-TECH CORPORATION● Sichuan Nipo Fine Chemical Co., Ltd.
● Zillion Fine Chemicals International Co., Ltd.

Takasago Plant (new plant for phospholipids for pharmaceutical use)

7

Business Contents
Lanolin Cholesterol Business
Lanolin is a natural oil obtained by purifying the washing liquid generated whenEcolawashing out the lipids adhering to wool taken from sheep each year. It is used as abase ingredient for cosmetics and pharmaceuticals.
The cholesterol obtained from lanolin is the lipid component in human skin andLanohair, so it is used as a raw material for cosmetics and pharmaceuticals, as well as
shrimp feed additives and vitamins.
In addition, the by-products obtained during the processing and refining of lanolincholesterol can also be up-cycled to be effectively used as raw materials forcosmetics or industrial use.
As a recyclable, sustainable material that is people friendly, sheep friendly, andenvironmentally friendly, Nippon Fine Chemical uses it as a raw material for

Nippon Fine Chemical s lanolin mascots

cosmetics in our Ecolano™ and as a raw material for industrial use in our LanoAce™.

Cosmetic Ingredients BusinessWe offer added value to customers through raw materials
used in cosmetics (skin care, hair care, makeup).
In particular, we focus on phospholipid materials that use thetechnologies we developed in the field of pharmaceuticals,
functional oils that provide added value to cosmetics functions,and biologically active substances that help create beautiful,healthy skin from the cellular level.
Our development of environmentally-friendly products actively uses vegetable oil-sourced raw materials. For products
using palm oil as an ingredient in particular, we obtain RSPO (Roundtable on Sustainable Palm Oil) certification andexpand products covered by this, allowing us to promote the use of sustainable palm oil. In addition, our lineup of
products with certification from Ecocert/COSMOS, an international organization for certifying products as organic, we arealso working on developing products that do not use genetically-modified (non-GMO) raw materials for reasons of
biodiversity and the impact on the environment.

Lipids Business (phospholipids for pharmaceutical use)
We provide a range of materials to use in the manufacture ofpharmaceuticals and so on, including liposomes, which are
nano-sized, capsule-shaped particles of phospholipids, and LNP(lipid nanoparticle: nanoparticles composed of lipids) as typified by
the COVID-19 vaccines that have been certified recently. Liposomesand LNP can improve the transport of medicinal ingredients toaffected areas by packing them, increasing therapeutic efficacy andreducing side effects. This helps reduce the burden on patients andcontributes to an improved quality of life for them.
Nippon Fine Chemical supports our customers formulation
development by manufacturing that supports GMP (Standard for manufacturing/quality control of medicinal products)
and supplying Presome™ (a phospholipid complex) that allows easy preparation of liposomes.

8Fine Chemicals Business
Utilizing the organic synthesis technologies
we have developed over many years, we
provide raw materials or intermediates in a

Pharmaceuticals
raw materials/
intermediates

range of industrial fields, including the holetransport materials used in perovskite solar
batteries, which are looked to as a source ofr ene w abl e ener g y , r e sin ma t erial s withfunctions such as high heat resistance used in

Organic synthesis
technologies

Optimization ofsynthesis process

circuit boards or the low dielectric constant

40 years of
results

needed for the next generation of high-speed
communications (5G), and pharmaceuticalintermediates based on specific synthesis
techniques.
In addition, we are rolling out the Neutron™

Electronicmaterials-relatedseries, a fatty acid amide manufactured using

Multipurpose
plant

Functional
resinsnatural fatty acids used for lubricants forsynthetic resins, and have a high share within
Japan. Recently, we are expanding into biodegradable resin uses developed to protect the global environment, and also
expanding uses into powder metallurgy.
We provide fatty acid amides manufactured using highly purified, high-quality fatty acids in the form of lubricants for
s y n t he t i c r e s in s ( p ol y e t h y l ene , p ol y pr o p y l e ne , e t c . ),antiblocking agents, release agents, additives for printing inks,
dispersants for pigment dyes, and so on.
Adding lubricants reduces friction on the contact surfaces ofplastic bags and makes them easier to part. Nippon Fine
Chemical s Neutron™ seriesof amides has a high sharein Japan as a lubricant forsynthetic resins.

Neutron™

Drawing on our more than 30 years of history as a hard coat agent manufacturer, we provide thermosetting andUV-curing hard coat agents. In addition, we are developing coating agents to suit customers requirements andhigh-function coating agents developed using our in-house synthesis technologies. Anti-fog coating agents are also used
for face shields for protection against COVID-19.

9

Corporate Governance
Basic Ideas on Corporate GovernanceNippon Fine Chemical is aware that enhancing corporate governance is a key issue required for improving corporate
value over the mid to long term, and for sustainable growth. We are working to construct a corporate governancesystem and establish a sound, transparent, and highly effective management system, including meeting our management
and explanatory responsibilities towards our shareholders and other stakeholders.

Strengthening the corporate governance system−Outline of corporate governance−
Nippon Fine Chemical established an effective business execution system. The introduced executive officer systemseparates the decision-making/supervisory function and the business executive function. The decision-making process ofthe matters for which business execution decisions are delegated to representative directors and/or other directors/executive
officers, is clarified based on the regulations.
The Board of Directors is made up of six members, including two independent
outside directors who are selected in order to further enhance the audit functions.
As the highest decision-making organization for management, it determines
matters related to laws and regulations and the Articles of Association as well asother key matters, and supervises the business execution of directors andexecutive officers. In addition, the Management Meeting, made up of theRepresentative Director and other full-time directors and executive officers,
deliberates referrals to the Board of Directors of key matters relating tomanagement planning and management policy from multiple perspectives toensure accurate decision-making.

Status of initiatives tostrengthen corporate governance
June

2003

Introduction of
executive officer system

June

2008

Abolition of the retirement
benefit system for directors

June

2010

Appointment of
one independent outside director

December 2019

Establishment of Nomination andRemuneration Committee

June

Increase of outside director
ratio to 1/3

2021

General Meeting of Shareholders
Appointment/Dismissal

Appointment/Dismissal
Nomination and Remuneration Committee

Board of Directors

Audit

Audit &
Supervisory Board

Appointment/
Dismissal

LiaiseAudit

Accounting Auditors

Appointment/Dismissal

Appointment/Dismissal

Representative Director, PresidentManagement Meeting
Disclosure Committee

Internal Committee

Audit

Ethics Committee
Internal Control Committee
Company-wide Risk Management System Committee
Sustainability Committee

ReportingIntellectual Property Oversight Committee

Internal Audit Oﬃce
Audit

Departments and Group companies

Glossary

What is Corporate Governance?

This refers to the mechanism for a company to make transparent, fair, quick and decisive decisions, taking into account the positionof shareholders, customers, employees, local communities, and other stakeholders.

10Sustainability Basic Policy for Nippon Fine Chemical
Our corporate philosophy of "Contributing to Society Through Chemistry" aswell as the "Smiles on Faces: The Power of KIREI" in our long-term vision, the
NFC VISION 2030, and our sub-concept of helping to sustain the three "KIREIs"of the Earth, society, and the future, form the basis of our Basic Policy for
Sustainability, which aims to achieve both sustainable corporate growth and tobring about a sustainable society.
To ensure that this Basic Policy is put into practice, we have established theSustainability Promotion Committee and the Sustainability Office, and set
specific initiatives, KPIs (Key Performance Indicators) and numerical goals. Responsible care activities related to theenvironment, safety, and quality that we have been engaged in for years now will be carried out on an ongoing basis
under the Sustainability Promotion Committee.
We shall ensure sustainability awareness reaches each and every employee, and, through each of our initiatives, brings
about the three "KIREIs" of the Earth, society, and the future, contributing to the smiles of everyone who is part of ourcompany.

Sustainability Organizations
Board of Directors
Representative Director, PresidentManagement Meeting

Sustainability Committee（Membership: Sales, Pirchasing, Production, Research,
Administration Divisions and Committees of Group companies）

Sustainability Committee Secretariat
Sustainability Oﬃce

Administrations

Basic Management Policy on Environment, Safety, and Quality
We have set out our basic policies regarding the environment, safety and quality as follows, and all employees of
Nippon Fine Chemical are constantly and autonomously making sustained improvements and fulfilling their social
responsibility based on these basic policies.

Basic environmental policy

Basic safety policy

Basic Quality Policy

Nippon Fine Chemical is independently
and continuously developing
environmental impact assessment andreduction activities in all processes,
from product development tomanufacturing, use, and disposal, as
well as complying with laws andregulations related to businessactivities, in its effort to protect the
global environment.

Nippon Fine Chemical will continue torun operations without accidents anddisasters to ensure the safety of
employees and local communities.

Nippon Fine Chemical will continue toprovide quality products and services
that satisfy customers and are reliable.

Nippon Fine Chemical specifies theproperties of products and how tohandle them to protect the safety andhealth of all users including customers.

11

Initiatives for Compliance
Compliance
Nippon Fine Chemical positions compliance as one of our key issues, and work
to ensure it. We distribute to all officers and employees our Code of Ethics, which
is made up of our Corporate Code of Conduct, which presents the universal ideas
and is the code of conduct to ensure all officers and employees working at NFC
put into practice our Corporate Philosophy, and our Corporate Standards ofConduct, which present how we should act in order to practice the Corporate

Code of Ethics distributed toall oﬃcers and employees

Code of Conduct in the workplace, and carry out ongoing instruction to ensure that what seems acceptable at Nippon
Fine Chemical does not stray from what is acceptable in society.

Whistle-blower System
Nippon Fine Chemical has an internal whistle-blower system in the event anyone discovers compliance violations or
suspicious actions. In order to maintain and operate a sound whistle-blowing system, the Ethics Committee, Internal
Audit Office and auditors work together to protect whistle-blowers and those who talk with us, investigate the facts of
their reports, and take corrective measures.

Fostering an awareness of compliance
Nippon Fine Chemical carries out training on compliance andethics to fostering an awareness of compliance among officers andemployees.
- Ethics education during on-boarding training- Reading the Code of Ethics when joining the company- Reading the Code of Ethics (annually)- Listing cases of compliance violations on the internal intranet(quarterly)- Workplace discussions on cases of non-compliance (biannually)

Relations with Stakeholders

Shareholders,investors

Respect for stakeholders
Suppliers

Nippon Fine Chemical maintains a good and soundrelationship with all our different stakeholders.

Futuregenerations

The diagram on the left shows some of the main

NipponEmployees
Fine Chemical

stakeholders of NFC. Important information related tocorporate management and business activities isdisclosed to stakeholders as and when appropriate.

Local
communities

Customers

12

Relations with Shareholders & Investors
Transition to the TSE Prime Market
Nippon Fine Chemical transitioned from the First Section of the Tokyo Stock Exchange to thePrime Market on April 4, 2022. We shall use this to actively work to even further strengthen our
corporate governance and internal management systems.

Financial results brieﬁng
We held a financial results briefing for investors
and analysts on May 18, 2022. Due to concerns
about the COVID-19 situation, the briefing washeld online. This was the first such briefing heldat Nippon Fine Chemical, and a large number ofanal y s t s w ere present. The mat erial s andquestions and answers from that briefing areavailable on our website.

English translations of ﬁnancial results for shareholders
Nippon Fine Chemical has published English-language translations of our Financial Summaries, Financial Results
Documents, and Notices of Convocation (agendas only) on our website starting with the March 2022 financial results.
We intend to enhance our information disclosure in English in future.

13

Relations with Suppliers
Nippon Fine Chemical has established the following
Basic Purchasing Policy and the Flow up to the Transaction
Start and published them on our website.
In line with our Basic Policy for Purchasing, while
complying with the relevant laws and regulations, we open
our gates widely to all suppliers, both in Japan and aroundthe world, in the name of equal opportunities. In addition,
our purchasing activities are done with an awareness notjust of economic rationality in the selection of items, but
Green purchasing as well.

Nippon Fine Chemical s Basic Purchasing Policy
Equal opportunities, fairness, impartiality

Economic rationality

We open our gates widely to suppliers both at home
and abroad, striving to ensure equal opportunities,
and engaging in fair and impartial transactions withall our customers.

We select and evaluate our suppliers based on acomprehensive perspective that covers points such as
quality, delivery time, price, service, reliability and safety.

Compliance with laws and regulations;elimination of antisocial forces

Green purchasing

We comply with related laws and regulations, and their
spirit, in our purchasing transactions.

We aim to make our purchasing activities based onprotection of resources and the environment in our
selection of items.

The Flow up to the Transaction Start

Information
provision andassessment

Interviews andnegotiations

Sampleassessment

We assess information provided to us, andmay require interviews depending on theassessment results.

Pilot
assessment

We carry out a test run using the actual
equipment to assess it as a product.

Signing ofspecifications
Signing ofbasic contract

We request a delivery specifications form to
be prepared, and sign it once it is approved.
In addition to the signing of the basic
contract, we ask for necessary documents
such as a list of names and payment terms
to be submitted when dealing with newpartners.

We ask for specific proposals at interviews,
and to be able to check and negotiatequality and price, etc.

If the quality and price meet our expectations,
we will ask for a sample to assess its quality.

Ordering

14

We will place our order once all theseprocedures have been completed.

Relations with Employees
Human resources training and development
Part of the Corporate Philosophy of Nippon Fine Chemical is contributing to the self-realization of our employees. We believe
there is a great deal of sense of worth gained when employees are able to realize the contributions they can make to society,when their goals of trying something new or tackling a range of challenges are fulfilled. In human resources training, our aim is
to develop people who have the ambition to tackle new challenges, think for themselves what is needed, and can use theirdiversity to overcome difficulties.
＜Specific measures for human resources training＞
The pillars of human resources training measures are OJT and OFFJT (level-based training, selective training, external training,correspondence education, etc.). OJT in particular is positioned as key due to the use of the experience-learn cycle, and training
for OJT trainers from the hosting department or management positions is carried out.
For OFFJT, we provide support for the autonomous development of abilities by employees with a focus on assessment
training and level-based training when promoted or moved up. In addition, we provide learning opportunities using external
training such as taking business school classes for management. In addition, our correspondence education and skill
qualification training systems are dynamic learning opportunities where each person can choose and study the skills they need.
We provide support for more than a hundred different types of correspondence education.

Support for balancing child-rearing/
nursing care with work

Work-life balance

We promote an environment where employees can be

It is very important to preserve a work-life balance so

active in both work and child-rearing/nursing care.

what each employee can utilize their abilities suﬃciently.

For our own in-house systems, we have a range of

Along with promoting changes of mindset regarding

systems, starting with the (Short-term) Working Fromw orking hours, w e are introducing ﬂe x - time andHome System for Child-Rearing (Targeted at Employees

teleworking systems to serve as diverse working styles.

Raising Children Until their First Term of School) and theThrough improvements to business tasks by promoting(Short-term) Working From Home System for Nursing

eﬃcient working styles or creating system, we promote

Care (Targeted at Employees Providing Care for Family

initiatives that preserve the work-life balance for each of

Members Who Require Care). We support employees

them so that they might use the time and energy thus

who wish to develop their careers while raising children

gained to growth further as individuals.

or providing nursing care.
■ Total working time per person●Changes in the amount of child-care leave taken
by birthing mothers (spousal birthing mothers)

FY2019FY2020
FY2021

Overall
Of which, female
Overall
Of which, female
Overall
Of which, female

Hours
2100

Take-up rate 16.7％
Take-up rate 100％
Take-up rate 18.1％
Take-up rate 100％
Take-up rate 12.5％
Take-up rate 100％

2000
1900
1700
1600
1500
1400

●Changes in number of users of the working
from home system for child-rearing

0

%
80

FY20212(1 male, 1 female)75●Changes in the number of users of the working
from home system for nursing care

0

FY20212(1 male, 1 female)

2020

2021

FY

15

Take-up rate

DAYS
17

Number of days taken

15

70

13

65

11

60

9

55

7

50

5

2019

2020

2021

FY

Average number of days taken

FY2020

Average take-up rate

0

FY20202019■ Average take-up rate and average number of days taken for annual leave

FY20190Overtime working hours

1800*From FY2019, the ratio of those returning to work after taking
child-care leave has been 100%.

FY2019Actual prescribed working hours

Relations with Customers
Activities for product safety
Improving customer satisfaction is also stated in the ISO Quality Management System, but in addition to quality,
providing safe products is a key part of customer service.
Nippon Fine Chemical prepares Product Safety Data Sheets (SDS) based on the Japanese Industrial Standards (JIS) andprovides them to customers.
In addition, to enhance the contents of these SDSs, in April 2021 we started operating our new chemical substancesmanagement system and expanded it to all our products.

Initiatives for alternatives to animal testing
Cosmetics are used on human skin and hair, so more than anything, they must be safe. At the same time, a move to
avoid animal testing in safety testing for cosmetics raw materials is spreading from Europe to the world.
Nippon Fine Chemical is actively working on a range of alternatives to animal testing from the development stage,striving to provide safe products.

Initiatives for quality assurance
Nippon Fine Chemical works unceasingly to prepare and strengthen our quality assurance system so that we canprovide top-quality products that will satisfy our customers.
We registered with the ISO 9002 Quality Management System, the global standard, in 1996, and since then, throughour transition to ISO 9001, we have been expanding the scope of target products from the initial fatty acid monoamides
and cholesterol to lanolin and functional cosmetics raw materials in general.
At present, we are expanding application to the second stage at our Kakogawa-higashi Plant and to the first stage at
our Takasago Plant, basing our management on ISO 9001 (2015 Edition).
Along with implementing planned employee training based on ISO 9001, we use both internal audits and examinations
by external audit organizations to help us continually improve and increase our level.
In the fields of pharmaceuticals and pharmaceutical intermediates, we assure quality by complying with GMP (GoodManufacturing Practice) standards. The method for improving the pharmacokinetics of pharmaceuticals is called the drugdelivery system (DDS). NFC s Lipids Business, which is particularly in the limelight as a DDS formulation, has passed the
GMP compliance inspections of
the US FDA (Food and Drug
Administration) and otherbodies, and we shall continue
to maintain a high quality
assurance system to provide
high-quality products.

16

Initiatives for Diverse Product Development that Meets Customer Needs
Development of non-GMO products
The development of crops that are disease-resistant, grow quickly, are hardy in cold or heat, or have other features is
becoming commercialized through the use of genetic modification. However, due to concerns about biodiversity andenvironmental impact, many people prefer products that are non-GMO (do not use genetically modified raw materials).
Nippon Fine Chemical is also engaged in the development of non-GMO products to meet our customers needs. We
have already developed and provide a large number of such products.

Development of readily biodegradable products
Nippon Fine Chemical is putting efforts into the development of environmentally-friendly products such as ones that do
not leave any environmental residue when disposed of.
People are paying close attention to the environmental impact of plastic waste. Our amides are used in place ofplastics for scrubbing agents used to remove skin, excess fat and so on for skin cleansers. In addition, they are used as
lubricants in biodegradable resins.

Relations with Local Communities
Initiatives to help us contribute to communities
One yen from every drink bought at
the vending machines inside the
Kakogawa-higashi Plant is donated to the
Hyogo Greening Promotion Association s
Green Donations.
We have been doing this since 2008,
and have donated a total of more than1800 cedar tree seedlings, which converts
to 26 t of carbon dioxide absorbed.
We are continuing our efforts to help
with tree-planting and protecting forests.

We do more business via e-mail, and receive far less postal mail than before,
but we still collect used stamps and meter stamps and send them to volunteer
groups, as we have done since 2006.
While we promote our CSR activities, we will also actively work on
contributing to society.

17

Relations with Future Generations
Initiatives for the Environment■ The social situation of environmental activities and Nippon Fine Chemical s steps
Awareness of environmental conservation socially spiked around the year 2000, with a number of new laws andregulations related to environmental conservation, listed below, promulgated in addition to the existing Water Pollution
Prevention Act, Air Pollution Control Act, Act on the Rational Use of Energy, and Act on Promotion of Global WarmingCountermeasures. In addition, the environmental laws and regulations have also been revised, strengthening theirrestrictions and new legal requirements are being added.

Act on Special Measures against Dioxins
Act on Rational Use and Appropriate Management of Fluorocarbons
Act on the Promotion of Eﬀective Utilization of Resources
Act concerning the Promotion of Utilization of Recyclable Food Waste
Act on the Assessment of Releases of Speciﬁed Chemical Substances in the Environment and the Promotion of Management Improvement
Soil Contamination Countermeasures Act
Home Appliance Recycling Act
Law Concerning the Promotion of Procurement of Eco-Friendly Goods and Services by the State and Other Entities
In this sort of situation, the interest shown by society overall in the environment is increasing. More and more weight isbeing put on environmental management in the assessment of companies, and we are required to carry out initiatives forenvironmental conservation more than ever.
Based on this sort of social situation, Nippon Fine Chemical has been working to bring in energy-efficient equipment aswell as introduce the ISO 14001 Environmental Management System. An outline of our initiatives for environmental
activities follows below.
By being aware of our stakeholders, including local residents
and employees, and developing and producing in ways thatminimize the environmental impact on society, we hope to beable to maintain our business sustainably.
At our main business locations, the Kakogawa-higashi Plant
and the Takasago Plant, we have in place specific environment
policies based on the ISO 14001 Environmental Management
System (ISO 14001:2015)

Environment Policy
Nippon Fine Chemical s Kakogawa-higashi Plant and Takasago Plant manufacture raw materials for cosmetics, forpharmaceuticals, and for industrial use. In carrying out our production activities on an ongoing basis, we have set thefollowing policies regarding the environment and work to improve them steadily.
Our production is designed to understand and comply withWe are reducing the usage of chemical substances thatenvironmentally-related laws and regulations, and ensure

impact the environment and using raw materials that consider

1 there are no serious effects on the environment in or outside 2 sustainability to provide environmentally-friendly products.
our company.

Specific targets, goals, and periods are set, energy-saving

We work to suppress or mitigate the dispersion of bad smells

activities are done in a planned fashion, and we save

(waste water, raw materials, or other bad smells arising from

3 resources and reduce the amount of waste generated.

4 production) to co-exist with the community.

18

Material ﬂow
The material flow due to the production activities of Nippon Fine Chemical in FY2021 have been summarized asfollows. Energy and water for raw materials, fuel and electricity were used to produce products, generating carbon
dioxide, substances subject to the Law concerning Pollutant Release and Transfer Register, as well as waste and waste
water.
We are always striving to produce more products more efficiently using less raw material, energy and water, while
producing less waste.

Carbon dioxide
19,235 t

Energy9,396KL

Materials covered by the Law concerning
Pollutant Release and Transfer Register

FY2021
production
activities

28 t

Waste
2,040 tWater
431,025 t

Waste water
215,960 t

Note: For Energy here, City Gas, electricity and other energy sources are used,
so the energy conversion coeﬃcient as per the Act on the Rational Use of Energy is used and the unit standardized as KL.

Initiatives for preventing atmospheric pollution■ Atmospheric pollution
Changes in the amount of atmospheric pollutants
emitted from the boilers (SOx, NOx) are shown in thegraph (FY1995, FY 2010-2021)■ SOx and NOx emissions
Unit: tons
20

SOx

SOx is generated by the combustion of
sulfur-containing compounds in fuel, but the amount
has dropped as we have been moving ahead with the

NOx

15

transition from heavy oil to City Gas starting in 2016.
NOx is generated not only during the combustion10of nitrogen-containing compounds in fuel, but trace
amounts are also generated in the reaction between
ni t r o g en and o x y g en under hig h t emp er a t ur e
conditions. In FY2021, emissions rose a small amountover FY2020, but we maintained the decline in NOx

50emissions over FY1995.

Glossary

1995 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FY

What is SOx?

Glossary

It is the generic term for sulfur oxides, which cause acid rain.
They are also considered to cause illnesses such as bronchitis
and asthma.

What is NOx?

It is the generic term for nitrogen oxides, which areconsidered to be a cause of photochemical smog.

19

Initiatives for protecting water resources■ Amount of water used
We use the three categories of tap water,industrial-use water, and well water as ourwater resources, and the amount of each

■ Amount of water used
1,000 t1,000

used is shown on the graph.

Industrial-use water

Well water

Tap water

800

FY2021 achieved a major drop, 50%,
compared to FY1995. We have to reduce600

the use of water resources by promoting theappropriate management of water for400

production and bringing in equipment to200

recover and recycle plant cooling water andsteam drain water, resulting in a 49-59%0drop compared to FY1995.

1995 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FY

■ Amount of waste water
The amount is shown on the graph■ Amount of waste water

Plant waste water is cleansed by being

1,000 t600

treated with microbes at treatment facilities

Release into public rivers

within our plants. Each plant has agreed withits municipality to an emissions standard thatis stricter than the legal one, and releases

400

water that meets that standard.

300

FY2021 achieved a major drop, 39%,
compared to FY1995. We have brought in200

equipment to recover and recycle as much

100

cooling water and steam drain water as
possible, and are working to strengthen our0daily water use management, resulting in a
39-52% drop compared to FY1995.

Release into sewerage system

500

1995 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FY

*At Nippon Fine Chemical, we list the various data using FY1995,
the year we merged with former Yoshikawa Oil and Fat Co., Ltd., as our reference year.

Initiatives for the appropriate management of chemical substancesA v er y great number o f regul ations are

Supplier

involved in the manufacture and sale of chemical
substances. These include the Chemical
Health Act, Poisonous and Deleterious
Substances Control Law, Fire Service Act, Air
Pollution Control Act, and Water Pollution
Prevention Act.
At Nippon Fine Chemical, in order to minimize
as much as possible the impact on theManagement of
the Chemical Substances Control Law,
Industrial Safety and Health Act,
Poisonous and Deleterious
Substances Control Law,
Fire Service Act,
overseas legal regulations, etc.

Energy management

environment, harm to humans and hazards during the manufacturing process, we
are w orking on s treng thening manag ement b y initiativ e s such as thecomprehensive management of environmentally-hazardous chemical substances,
creating management standards, and compiling a database of applicable laws
and regulations for the raw materials and products we use.

20

SDS

Raw materials
WorkerChemical
substances
Resources
Products

Clients

Waste

Manufacturing process

Substances Control Law, Industrial Safety and

Health and safety/
occupational health management

Atmospheric,water quality, soil,
waste management

SDS/
Yellow Card
management

Initiatives for the PRTR System
In accordance with the PRTR (Pollutant Release and Transfer Register) system, one of the pillars of the Law concerning
Pollutant Release and Transfer Register, the Nippon Fine Chemical submits to the state annually the amount of target
substances released into the environment and the amount transferred as waste, etc., and is working to reduce theamount of emissions of target chemical substances. In addition, we manage the amount of chemical substances specified
by the Japan Chemical Industry Association that we emitted or transferred to provide more wide-ranging chemical
substance management. The changes in the amount of emissions and transfers of substances covered by the Law
concerning Pollutant Release and Transfer Register is shown below.
The amount of emissions of target substances changes in line with changes in the products we make, but in FY2021
we were able to achieve a drop of 37% over FY2001, the first year of our performance reports. We will strive to reduce
emissions through even greater strengthening of management.
In terms of the amount transferred, we are working on turning waste into valuable resources, but there was an increasein production amount in FY2021 compared to FY2020, so there ended up being an increase of 33% compared to
FY2001. We are working to reduce this still further.
■ Changes in PRTR transfer amount
Unit: tons
300

■ Changes in PRTR emissions amount

PRTR transfer amount

Unit: tons
100

PRTR emissions

80
200

60

40

100

20

0

0

2001 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

FY

2001 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FY

■ Changes in chemical substances with high atmospheric emission amounts
Unit: tons PRTR emissions
80

Toluene

Chloroform

Dichloromethane

Chlorodiﬂuoromethane

60

40

20

0

2001

2010

Glossary

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021
FY

What is the PRTR system?

The PRTR (Pollutant Release and Transfer Register) is a system by which the state uses submitted data and estimates to aggregate
and publish the emitted and transferred amounts of chemical products that contain the risk of damaging human health or the
ecosystem emitted from places of business into the environment (air, water, soil) and the amounts, including waste products,
transferred to outside the place of business, based on submissions regarding what the business owner understands.

21

Initiatives for preventing global warming and saving energy■ Changes in energy consumption
Nippon Fine Chemical is engaged inenergy-saving through our Environmental■ Amount of energy used
10,000 GJ
60Management Program, and to reduce steam

50

losses, we have updated our high-efficiency

40

steam boilers, installed waste heat recovery
devices, optimized our methods for using

Fuels

Electricity

30

steam, strengthening management of steam

20

traps, manage the amount of steam used for10

melting wool grease raw materials, andmanage the maintenance of steam pipes, etc.

01995 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FY

These efforts have led to better results in the
reduction of energy consumption. Moreover,
we promote a number of measures to reduce
the amount of electricity we use, including
actively using low-power, high-efficiency
motors and inverters, updating tohigh-efficiency freezers, and replacing bulbs
with LEDs.

High-eﬃciency
steam boiler【Takasago Plant】

generated from the processing and separating steps ofwool grease. Starting in FY2013, we have aggregated thechanges in the amount of carbon dioxide emissions
including and excluding the amount of biomass fuel used.

High-eﬃciency
refrigerating machine【Kakogawa-higashi Plant】■ Carbon dioxide emissions including biofuel usage■ Changes in carbon dioxide emissions
Nippon Fine Chemical uses byproducts (biofuels)

High-eﬃciency steam
boiler (FT boiler)【Kakogawa-higashi Plant】％ Ratio of carbon dioxide emissions using FY1995 and FY2013 as the base years

160
140

Ratio of emissions using FY1995 (merger year) as the base year
Ratio of emissions using FY2013 as the base year

120
100

The graphs show the changes in the amount of carbon

80

dioxide emissions in FY1995, the year of our merger with60

Yoshikawa Oil and Fat Co., Ltd., and since FY2010. A

40range of energy-saving activities and the switch from fuels20

to City Gas by updating our equipment has had an effect,

1995 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FY

and even if the amount of biofuel used is included, there■ Carbon dioxide emissions excluding the use of biofuelhas been a 42% drop by FY2021 over FY1995.
The ratio of carbon dioxide emissions using FY2013 as
the base year is shown by the green lines.

％ Ratio of carbon dioxide emissions using FY1995 and FY2013 as the base years

160

There has been an increase of 3.5% over FY2013 if we

140

include the emissions of carbon dioxide due to the use of120

biofuels. As biofuels are a type of renewable energy

100source, if we consider Nippon Fine Chemical s carbon

80

dioxide emissions after excluding them, we see that theeffects of promoting a switch to City Gas are a 13%
reduction.

Ratio of emissions using FY2013 as the base year

60
40
20

Glossary

Ratio of emissions using FY1995 (merger year) as the base year

1995 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FY

What are biofuels?

This refers to organic fuels (organic compounds) that do not include fossil fuels. They are categorized as renewable energy as
they can be regenerated through the activities of living creatures, and are considered as not increasing the total carbon dioxide
emissions even when used as fuel. Some typical biofuels are bio-ethanol, bio-diesel, and wood pellets.

22

Initiatives for waste reduction and recycling
Aiming to create a recycling society that values limited resources,
Nippon Fine Chemical carries out the following activities based on theconcept of the 3Rs (Reduce, Reuse, Recycle).
● Improvements to raw materials/solvent recovery rates and reuse as
resources● Promotion of recycling waste products● Promotion of waste paper recovery and recycling
To reduce the amount of waste generated, we have brought inequipment to reuse waste alkalies as neutralizers for waste acids at
the Kakogawa-higashi Plant, which has enabled us to reduce theamount of waste generated by about 430 t annually. In addition,
along with working to reuse waste solvents, and as a result of promoting the recycling of waste into valuable resourcesand our initiatives to recycle that include heat recovery at processing subcontractors, our recycling rate for FY2021 was
64%. In future, we will continue strengthening management while studying improvement measures, and strive to improve
our waste reduction and recycling rate.

■ Waste volume
1,000 t5
Specially-controlled industrial waste

Industrial waste

4
3
2
1
0

1995

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021
FY

Recycling rate
This shows the ratio of recycling from among the industrial waste created at Nippon Fine Chemical.
It was 0% in FY1995.

■ Recycling rate
％
80

60

40

20

0

1995

2010

2011

2012

2013

2014

2015

23

2016

2017

2018

2019

2020

2021
FY

Initiatives in Line with TCFD Recommendations
Nippon Fine Chemical uses raw materials derived from fossils and fossil fuel as energy sources in the manufacture of manyof our products. Based on our recognition that risks and opportunities due to climate change are key management issues, in
December 2021, we declared our support for the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD). Going forward, we will use scenario analysis to assess the risks and opportunities of the impact ofclimate change on our business, and we will recognize the significance of such impact, strengthen the resilience of ourstrategies by reflecting such impact in our management measures and strengthen relationships of trust with our stakeholders.

Sustainability Organizations

Governance

Board of Directors

We have established a Sustainability Committee, chaired by
our Representative Director, President and composed ofRepresentative Director, PresidentManagement Meetingmembers selected from each division.
The Sustainability Committee identifies risks and opportunities
based on scenario analysis of climate-related issues, assesses
their importance, formulates plans for promotional activities, andmanages the progress of such activities.
The Sustainability Committee puts together a promotion action

Sustainability Committee(Membership: Sales, Purchasing, Production, Research,
Administration Divisions and Committees of Group companies)

Sustainability Committee Secretariat
Administration Divisions

Sustainability Oﬃce

plan once a year, which is approved by the Board of Directors following deliberation by the Management Meeting.
The Sustainability Committee checks the state of promotional activities on a quarterly basis, in principle, and reports theresults of such checks to the Management Meeting and the Board of Directors.
Details of external trends and information on climate change are shared with the Management Meeting and the Board of
Directors through the Sustainability Committee by endorsing the TCFD recommendations and joining the TCFD Consortium.

Risk Management
The Company-wide Risk Management System Committee, chaired by the Representative Director, President andcomposed of managers, is the highest decision-making body in our risk management system (RMS). The committee
discusses risk management policies, plans, implementation, RMS improvements, and other general RMS-related matters,
and final decisions on such matters are made by the chairman based on the outcome of such discussions. The
Sustainability Committee identifies risks relating to climate-related issues, with reference to the risk items in the final
TCFD report and examines risk severity based on the impact on our business activities, customers, and suppliers, etc. andthe likelihood of such risks occurring. The Sustainability Committee uses scenario analysis to assess the risks andopportunities of the impact of climate change on our business, conducts business impact assessments, and formulates
measures to be taken with respect to items that are assessed as having a large impact on risks and opportunities. The
Committee manages the progress of promotional activities, and reports such progress to the Management Meeting.
The Management Meeting deliberates management plans and business strategies based on the state of current
initiatives and other factors, and such plans and strategies are then approved by the Board of Directors.

Strategies
We have set 2030 as the time frame for considering the impact of climate change on our business, and we have analyzed
scenarios for risks and opportunities associated with the transition to a low-carbon economy and risks and opportunities
associated with the physical impact of climate change in a 1.5°
C world in which climate change measures have progressed
and the Paris Agreement targets have been realized, and in a 4°
C world in which no new climate change measures are taken
and greenhouse gases have increased. In assessing the impact on our business, we found that under the 1.5°
C scenario, there
will be a significant impact on our business of policies and regulations relating to carbon taxes and emission reductions, while
there will also be opportunities to expand the sale of raw materials for perovskite solar cells. Under the 4°
C scenario, we foundthat there will be a significant impact on our business of soaring crude oil prices and concerns over the procurement of
naturally-derived raw materials, while there will also be opportunities to expand the sale of raw materials for UV care andcooling-related products and for infectious disease-related products. Note that this analysis only covers Nippon Fine Chemical.
Going forward, we will consider whether to conduct analysis for the entire group.

24Results of 1.5°
C and 4°
C Scenario Analysis (Climate Change Risks and Opportunities)

Main
Category

Type

Risk/Opportunity
Envisaged Risks and Opportunities
Sub Category

Importance
Assessment
1.5℃ 4℃
Large

Small

- If emissions are regulated in countries where our raw material suppliers are located, such suppliers
adjustment costs may increase, which could in turn affect purchase prices.
- The replacement of fossil fuels with renewable energy and reductions in GHG emissions are required in the
production process and in distribution, and costs may increase due to reduction of existing assets andinvestment in additional equipment.

Large

MediumMandatory afforestation and changes in land use policies may reduce yields of biological resources, which inturn may make it difficult to obtain naturally-derived raw materials (wool grease, palm oil) or may increase
procurement costs.

Large

Small

- Restrictions on water withdrawal and wastewater discharge in areas where raw material suppliers are locatedIntroduction of water
may affect operations, resulting in it being difficult to obtain raw materials and increased purchasing costs.
withdrawal and wastewater - Water withdrawal Restrictions in areas in which we operate due to climate change will lead to lost sales
discharge restrictions
opportunities due to the suspension of operations.

Small

Small

Energy-saving policies- Restrictions on energy use may increase the cost of changing manufacturing processes, procuring alternative
materials, and installing energy-saving and high-efficiency equipment, and the acquisition of new equipment
or the disposal of existing equipment may result in increased costs and losses, etc.
- Mandatory use of renewable energy following the revision of the Act on the Rational Use of Energy may result in cost increases

MediumMedium

Litigation- There is a possibility of lawsuits against companies that use fossil fuels.
- There is a possibility of reduced demand for products and increased costs due to fines and court rulings.

Small

Small

Soaring price ofraw materials

Soaring crude oil prices will increase the cost of procuring petroleum-derived raw materials

Small

Large

Changes inenergy demand

Manufacturing costs will increase if the cost of procuring energy to operate plants increases. As a result, thecost competitiveness of products may fall, which may affect earnings.

MediumMedium Medium

Policies/Regulations

Carbon emission targets
for each country/Stricter
reporting requirementsfor policy emissions

MediumMediumTransition to low emission technologies may lead to higher research & development costs for climatechange-compliant products, higher investment costs for manufacturing processes, and higher costs fortransitioning to low-carbon-emitting technologies and equipment.

Changes in consumer
preferences

Consumers increased interest in the use of natural materials, packaging recycling, and carbon dioxide
emissions, etc., may lead them to purchase products from companies which engage in proactive climatechange initiatives, which may lead to a fall in sales.

Reputation among
investors- An insufficient response to GHG reduction demands from customers and investors may result in a lower assessment.
- Proactive disclosure of information on how we are addressing climate change will improve our corporate
value and increase opportunities to obtain ESG investments, while securing customer confidence may lead tobusiness expansion.

Medium Medium Medium

Medium Medium Medium

Rising average temperatures may reduce yields of biological resources, which in turn may make it difficult toobtain naturally-derived raw materials (wool grease) or may increase procurement costs.

Small

Large

Increase in averagetemperature/changes
in precipitation andtemperature patterns

Rising average temperatures may result in a deterioration in shrimp farming operations at existing customers,
which may adversely affect sales of our products.

Small

Small

- Rising average temperatures may require enhanced cooling equipment needed during the manufacturing
process, which may result in the need for more equipment and increased energy costs.
- climate change may increase water stress in China, and price increases by suppliers may lead to higher raw
material prices.

Large

Large

Rise in sea level- Rising sea levels may result in flooding, rapid rises in tides, and other water-related damage, which may shut
down operations at plants located in coastal areas vulnerable to disasters and in low-lying areas.
- it may be necessary to relocate bases.

Small

Small

Access to newmarkets (demand)- The increase in the population exposed to infectious diseases and other risks associated with rising temperatures
may lead to an increase in demand for raw materials for our products (sanitizer and pharmaceuticals).
- The rise in average temperatures may increase sales of our functional oil products for UV care andcooling-related products.

MediumLarge

Intensiﬁcation of
extreme weather- Flooding caused by torrential rainfall and drought associated with climate change may shut down production
at some offices and plants.
- Production stoppages and lost sales opportunities may increase due to disruptions, etc. in the supply chain

Small

Small

Reputation

Transition to low
emission technologies

Acute- the introduction of renewable energy, energy-saving equipment, and solar power generation equipment, forMarkets

Products/ Resource
Industry/Market
Technology
Services Eﬃciency

Transition Risks and Opportunities- The development of decarbonized products through the use of non-petrochemically-derived raw materials

Development of new products
will increase our advantage over our competitors and create opportunities to increase earnings.
and services through- The development of energy-saving and low-cost production methods during the manufacturing stage will lead to improved profitability.
R&D and innovation- Opportunities to increase earnings by developing raw materials for renewable energy (such as perovskite solar cells).

Large

Carbon pricing (carbon tax and emissions trading) will be applied mostly to suppliers of raw materials withhigh greenhouse gas (GHG) emissions, which will be passed on by being added to the price of raw materials,
resulting in an increase in procurement costs. Product manufacturing and transportation costs will also
increase and profitability will deteriorate.

Carbon tax andcarbon priceself-consumption may lead to reductions in production costs.
Streamline production
and distribution processes - Organizing and integrating supply chains (sales channels, distribution bases, etc.) may lead to reductions incarbon dioxide emissions and distribution costs.

Chronic

Physical Risks and Opportunities

25Addressing Climate Change Risks and Opportunities
Scenario

1.5°
C
Scenario

Risk/Opportunity

Risks Due to Climate ChangeCountermeasures

Carbon tax andcarbon price

The introduction of carbon pricing, asa policy approach to put a price on
carbon which causes carbon emittersto change their behavior, may increase
procurement and transportation costs
due to the increase in the price added
to carbon emissions by suppliers andtransporters, as well as the direct tax
burden.

- Reduce GHG emissions byreviewing product compositionand production processes- Reduce GHG emissions by introducing
renewable energy, energy-saving
equipment, and solar power generationequipment for self-consumption- Reduce GHG emissions by consolidating
and integrating raw material supply chains

Opportunities

Countermeasures

Introduction of carbon
pricing will encourage
the use of renewableenergy.

Develop raw materials forperovskite solar cells andexpand sales- Increase in the
population
exposed to
infectious
diseases andother risks.
- Demand for UV
care andcooling-related
products willcontinue to grow.

- Establish of a system toincrease production andexpand sales of raw
materials for infectious
disease-related
products (sanitizer andpharmaceuticals)- Establish of a system toincrease production andexpand sales of raw
materials for UV care andcooling-related products(cosmetics, etc.)

Development of
new products
and services throughR&D and innovation

Carbon emission
targets/policies
in each country

Restrictions on new plantation
construction due to mandatory
aﬀorestation and changes in land
use policies and a shortageof feed due to a decrease inpastureland may make it diﬃcult
to procure naturally-derived raw
materials (wool grease, palm oil)and may increase procurement costs

Increase in averagetemperature/changes
in precipitation andtemperature patterns

Poor pasture growth caused bydrought and reduced demand forwool as a result of rising averagetemperatures may make it diﬃcult
to procure naturally-derived raw
materials (wool grease) andprocurement costs may increase

Soaring price ofraw materials

Soaring crude oil prices following
an increase in demand for fossil
energy may increase the cost of
procuring petroleum-derived raw
materials.

4°
C
Scenario- Secure stable suppliers of wool
grease and palm oil- Consider substituting wool
grease and palm oil-derived raw
materials for naturally-derived
raw materials which have less ofan impact on climate change

Consider substitution with
non-petroleum-derived raw
materials

Access to
new markets(demand)

Indicators and Targets
The greenhouse gas emitted by Nippon Fine Chemical
is mostly energy-derived carbon dioxide. In October
2021, the Japanese government published its Plan for■ Changes in Carbon Dioxide Emissions
Unit: tons
30,000

Scope 1

Global Warming Countermeasures for Scope 1 and 2*
which calls for a 46% reduction in Japan's overall GHG

22,500emissions by FY2030 compared to FY2013 levels.
Within this overall goal, the industrial sector s target is a
38% reduction in energy-derived carbon dioxide by
FY2030, and so we are working to reduce our carbon
dioxide emissions by 38% in FY2030 compared to

Scope 2

15,000

5,071

5,375

5,336
5,570

7,500 13,514 15,972 14,601

FY2013. We will also work to achieve carbon neutrality
by 2050.

0

2013

2014

*Scope 1: Direct GHG emissions from an operator s own fuel combustion
Scope 2: Indirect GHG emissions from the use of electricity and heat supplied by other companies

26

2015

5,617

11,641 12,558

2016

2017

6,044

5,834
5,402

13,766 14,104

2018

2019

12,505

2020

5,883

13,3512021
FY

Initiatives for Environmentally-Friendly Product Development
The MATSURI environmentally-sustainable industrial creation project
We are an industry-structuring partner with MATSURI, which is a project
to create environmentally-sustainable industries based on algae, run by
Chitose Laboratory Corp. MATSURI is a project that brings together
companies to create new industries that utilize algae in order to bringabout a carbon-neutral society. Through our participation in MATSURI, we can help create new environmentally-friendly
values, providing values that support the health and beauty of people, and prosperous lifestyles, with the goal of being avital part of society.
In promoting the search and evaluation of algae-based materials and the development and sale of algae-based materials
and products such as sustainable raw materials for cosmetics or distinctive chemical products, we will provide values that
support the health and beauty of people, and prosperous lifestyles, with the goal of being a vital part of society.

Research and development using renewable raw materials with low environmental impact
RSPO certiﬁcation

Lanolin and cholesterol

Nippon Fine Chemical has a strong focus on

Wool grease, the raw material for

research and development of raw materials forlanolin products, is a fat secreted

cosmetics that use plant-derived raw materials, andfrom sheep that has been known toalready provides a large number of such products.

exist since BCE. It is a by-productIn particular, our products made using palm oil

extracted when cleaning sheared

obtained RSPO certification in June 2020, certifying

wool. NFC s lanolin products use

their sustainable production and use, and we arehighly-refined wool grease, and areworking on increasing the number of compliant

provided to customers in a range of

products.

fields as a derivatives.

Product development using plant-derived raw materials
Nippon Fine Chemical is actively engaging in the development of products that use
plant-derived raw materials due to their high reproductivity in order to bring about a sustainable
society. For example, in our Cosmetic Ingredients Business, our Plandool™ and LUSPLAN™ seriesof raw materials for cosmetics are used by a large number of customers. In our Amides Business,
we provide plant-derived amides such as plant-derived fatty acid amides, etc.

Development of next-generation perovskite solar batteries
OMe

OMe

MeO

N

N

OMe

MeO

N

N

OMe

The films for perovskite solar batteries, which are expected to form thenext generation of solar batteries and which are currently being developed,
can be manufactured for low costs. They are expected to be used for
multiple applications due to being both light and very flexible, and not
requiring as much installation space as older types.
Nippon Fine Chemical is working on initiatives for the development andcommercialization of Spiro-MeOTAD, which is used in perovskite solar

OMe

OMe

Spiro-MeOTAD

batteries.

Glossary

What is carbon neutrality?

This refers to when the amount of emissions of greenhouse gases, such as carbon dioxide, is subtracted from the amountabsorbed by trees and forest management and so on, and the total is effectively zero.

27

Initiatives for Safety and Security
Employee safety
Aware that occupational health and safety and accident prevention are key issues for a chemicals company, Nippon
Fine Chemical is engaged in the following activities.
(1) Ensuring safe operation through regular equipment maintenance(2) Specifying emergency situations, creating emergency manuals, and holding regular drills for emergencies(3) Hazard prediction drills using past accidents as reference(4) Regular workplace patrols and elimination of latent risk factors(5) Promoting hazard forecast activities
We aim to be accident-free through these activities.

Lost-time accidents
The changes in lost-time accidents since FY2010 are shown below. In FY2021 there were five occupational accidents
that resulted in at least one day of time taken off. We investigate their causes and consider countermeasures while atthe same time, we carry out internal safety training that looks back at the basics.
■ Lost-time accident rate (number of lost-time accident victims per million working hours)

Lost-time accident rate = 1,000,000 x (number of lost-time accident victims) / (total hours worked)
Nippon Fine Chemical: aggregate of lost-time accidents requiring at least one day off
The lower the number, the lower the lost-time accident rate.
Frequency
9.00
Industry-wide

Chemicals industry

Nippon Fine Chemical

6.75

4.50

2.25

0.00

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021
FY

Statistics from: January to December
Industry-wide: From the occupational accident statistics of the MHLW s Workplace Safety Site page
Chemicals industry: From the Japan Chemical Industry Association s Results of Occupational Healthand Safety Survey Results (edition for FY2021 not yet published)28

Emergency drills (disaster drills, etc.)
We hold annual evacuation drills and disaster drills using
fire extinguishers and so on so that we can act promptly andsmoothly in our initial responses to emergencies such as
major earthquakes and fires. In addition, we also holdplanned drills that assume a leak of combustible raw material
or solvent, etc. on the premises to ensure its impact can be
kept to a minimum.

Disaster drill taking place (Kakogawa-higashi Plant)

Business Continuity Plan (BCP)
Nippon Fine Chemical is formulating a business
continuity plan (BCP), one that prioritizes the safety of
our employees and their families, in order to minimize
the effects on our stakeholders and reduce thelong-term impact of a business stoppage even whenbusiness continuance is difficult due to large-scaledisasters such as major earthquakes or epidemics.

RECPY activities
At our plants, Nippon Fine Chemical carries out environmental beautification (safety) and productivity improvement
through RECPY activities. Improvements are done using small-group activities, and each group reports on what it has
done. By rewarding outstanding activities, we aim to sustainably improve environmental beautification (safety) andproductivity improvement.

Internal proposals
Nippon Fine Chemical makes improvements by having employees offer proposals for methods to improve daily task
efficiency or improve hidden risks through their ideas and creativity as they carry out their work.

Glossary

What are RECPY activities?

RECPY is formed from REformation of Clean and ProductivitY", and refers to activities designed to improve
in-house beauty and productivity.

Ecolano, LanoAce, Presome, Neutron, Plandool, and LUSPLAN are
registered trademarks of Nippon Fine Chemical Co., Ltd.

29