DENKA GROUP CSR REPORT 2014

DENKA GROUPCSR REPORT2014
http://www.denka.co.jp/eng

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Pursuing Lasting Trustas an Outstanding Manufacturer

Corporate Governance

Editorial Policy• The scope of reporting on safety and environmental initiatives, which
had been confined to seven domestic business sites, has been
expanded to encompass all Group members, including overseas
bases and domestic production affiliates.
• Detailed explanations of business strategies are provided by the headsof the four business divisions (see the section entitled “Our Business
Operations”), with particular emphasis on initiatives taken or planned
to promote the DENKA100 new growth strategies as well as examplesof DENKA products aimed at helping to resolve social issues.
• The process of preparing this report was revised. Specifically, inthe editing process of this report we shared information within thecompany on the latest external guidelines and analyses of CSR
reporting trends, thus ensuring that everyone concerned is aware ofchanges in the external environment, with an eye to upgrading ouractivities over medium to long term.

This report generally covers fiscal 2013 (April 1, 2013, through March
31, 2014). It also includes information on subsequent initiatives
undertaken in fiscal 2014 while presenting numerical targets for andperformance statistics from the past several fiscal years.

Scope
Unless stated otherwise, the data in this report is based on informationon the business sites of DENKA and key affiliates listed below.
• Business sites: Six production sites (Omi, Omuta, Chiba,
Shibukawa, Ofuna and Isesaki) and four R&D institutes (theAdvanced Technologies Research Institute, the Life Innovation
Research Institute and the Infrastructure & Solutions Development
Research Institute at the DENKA Innovation Center, as well as thePolymer & Processing Technology Institute)• Key affiliates: Denal Silane Co., Ltd. and Denak Co., Ltd. at theOmi Plant, as well as TOYO STYRENE Co., Ltd., and Taiyo Vinyl
Corporation at the Chiba Plant

Guidelines• The G3.1 Sustainability Reporting Guidelines of the Global Reporting
Initiative• The Environmental Reporting Guidelines 2012 of Japan’s Ministry of
the Environment

Website-Only Contents
For CSR reporting, DENKA utilizes both the printed booklets and online
references that are prepared in PDF format and posted on its website.
While the former presents the latest examples of DENKA’s initiatives
aimed at achieving sustainable growth, the latter covers information on
its long-standing CSR activities.
In addition, the Global Reporting Initiative (GRI) Content Index
is attached to the web-based references to the DENKA Group CSR
Report 2014.

Inquiries:
CSR & Corporate Communications Dept.
DENKI KAGAKU KOGYO KABUSHIKI KAISHATEL. +81-3-5290-5511
FAX. +81-3-5290-5149
Nihonbashi-Mitsui Tower, 1-1, Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8338, Japan
www.denka.co.jp/eng

CONTENTS
DENKA Group’s
CSR

10

Editorial Policy and Corporate Profile

2

To Our Stakeholders

4

Report on Major Accidents at Our Plants

6

DENKA’s Group Operations and CSR

8

DENKA’s Sustainability Management

Our Business
Operations(Six Pillars of the DENKA100 Initiative)
DENKA Group’s CSR

10

12

Our Business Operations

12

Promoting Our R&D Activities

18

Promoting Further Innovation

20

Good Company Program (GCP) Activities

21

Human Resource Development

22

Promoting Our
R&D Activities

18

Corporate GovernanceIn line with its CSR Vision “pursuing lasting trust as an outstanding
manufacturer,” the DENKA Group is striving to practice amanagement approach that brings its business and CSR activities
together. To better realize this CSR Vision, we established the
DENKA100 corporate philosophy, undertaking a Companywide
initiative that encompasses six pillars, namely: “Expansion ofbusiness operations”; “Human resource development”; “R&D
Promotion”; “Good Company Program (GCP)”; “Promote further
innovation”; and “CSR: Corporate Social Responsibility.” Theinitiative looks to achieve sustainable growth beyond fiscal
2015—the year we will mark the centennial of our founding.
With this in mind, the DENKA Group CSR Report 2014
begins by reporting the results of our investigations into two
major accidents occurred during fiscal 2013, namely, a heat blast
accident at the Omi Plant and a fire in the Chiba Plant’s styrene
monomer production facility during its demolition. On pages 6
and 7, we discuss the cause of these accidents as well as thestatus of measures implemented to prevent recurrence.
The structure of the ensuing articles on pages 8 through 23
is designed to outline the status of the DENKA100 initiative in lightof the six aforementioned pillars. In particular, on pages 12 and
13 we highlight our DENKA100 growth strategies, which havebeen reestablished in fiscal 2013, providing detailed information
on how we promoted each strategy during the fiscal year.
In addition, with a view to stepping up our CSR activities, we
focused on improving the process for preparing our CSR report
while changing the scope and content of reporting. Details follow:

Coverage

Corporate Governance24

Promoting Further
Innovation

Corporate Governance20

Our Initiatives to Maintain Safe Operations

26

Environmental Conservation

28

Good Company
Program (GCP)
Activities

Initiatives to Secure Our Electricity Supply

30

Resource Recycling through Cement Production

32

21

With Our Stakeholders

Responsible Care (RC) Activities

Human Resource
Development

22

Supply Chain

34

Shareholders and Investors

35

Employees

36

Local Communities

38

Third-Party Opinion

39

Corporate Profile (as of March 31, 2014)
Name

DENKI KAGAKU KOGYO KABUSHIKI KAISHA

Paid-in Capital¥ 36,998 million

EstablishedMay 1, 1915

Employees

5,249 (consolidated); 2,873 (non-consolidated)

Business Sites■ Head OfficeNihonbashi Mitsui Tower, 1-1, Nihonbashi-Muromachi
2-chome, Chuo-ku, Tokyo 103-8338, Japan
Tel: +81-3-5290-5055■ Branches
Osaka, Nagoya, Fukuoka, Niigata, Hokuriku (Toyama),
Sapporo, Tohoku (Sendai)■ Sales Offices
Nagano, Gunma (Takasaki), Hiroshima, Shikoku (Takamatsu), Akita■ Research Institutes
DENKA Innovation Center [the Advanced Technologies
Research Institute, the Life Innovation Research Institute,the Infrastructure & Solutions Development ResearchInstitute] (Machida, Tokyo)
Polymer & Processing Technology Institute (Ichihara, Chiba)

2

DENKA GROUP CSR REPORT 2014

Net Sales (consolidated)

Ordinary Income (consolidated)

Total Assets/Total Net Assets(consolidated)(Billions of yen)(Billions of yen)

■ Total assets ■ Total net assets

400
357.9 364.7■ Plants

Omi (Itoigawa, Niigata), Omuta, Chiba (Ichihara, Chiba andBibai, Hokkaido), Shibukawa, Ofuna (Kamakura, Kanagawa),
Isesaki (Isesaki and Ota, Gunma)■ Overseas Subsidiaries & Offices
New York, California, Düsseldorf, Singapore, Shanghai,
Beijing, Guangzhou, Suzhou, Hong Kong, Tianjin, Taiwan,
Seoul■ Major Affiliates
DENKA Polymer Co., Ltd. (Koto-ku, Tokyo)
DENKA SEIKEN Co., Ltd. (Chuo-ku, Tokyo)
CRK Corporation (Takasaki, Gunma)
Hinode Kagaku Kogyo (Maizuru, Kyoto)
DENKA Azumin Co., Ltd. (Hanamaki, Iwate)

30

300

323.9

Net assets
per share(Billions of yen)

376.8

(Yen)

500

341.6

500

23.1
20

19.0
16.9

200

20.6

415.4
400 400.4 402.0 402.6

17.8
300

10

321.5

337.4

353.6

377.0

431.3

400

402.8
300

200

200

100
100
0

0
09

10

11

12

13 (FY)160.3 168.2 172.7 180.7 189.5

0

09

10

11

12

13 (FY)

100
0

09

10

11

12

13

(FY)

DENKA GROUP CSR REPORT 20143

Corporate Governance

To Our Stakeholders
3 Initiatives to Ensure Sustainability

President & CEO
DENKI KAGAKU KOGYO KABUSHIKI KAISHA

1 Report on Major Accidents in Fiscal 2013

2 New Growth Strategies

First of all, we would like to extend our sincere apologies for thevictim of the accident that occurred in June 2013 at the Omi
Plant’s calcium carbide production facility, in which a heat blast
blew out from an electrical furnace, resulting in the death of one
person. We also express our condolences to the bereaved
family. In addition, in July 2013, a fire broke out at the Chiba
Plant during the demolition of a non-operational facility. We
would extend our deepest apologies to those living in the areas
near the plants as well as relevant authorities for any trouble
and anxiety caused by these accidents.
Safety and disaster prevention must be integral part ofcorporate activities and are the foremost management issues
throughout DENKA’s business operations. Deeply reflecting onthese major accidents, we will thoroughly investigate to see
what was lacking in our operations to prevent similar eventsfrom occurring. We will strive to regain the trust of society, witheveryone working for the Group rallying their full strengths tofacilitate a safety-oriented corporate culture.
In the next section, we present outlines of the accidents
and measures implemented to prevent reoccurrence. Moreover,examples of DENKA’s Companywide safety initiatives arefeatured on the section entitled “Our Initiatives to Maintain Safe
Operations.”

DENKA has been operating as a chemical company for nearlya century. Beginning with the manufacture of chemicals, suchas calcium carbide, the scope of our operations has
significantly expanded to include the production of electronicmaterials and pharmaceuticals. Throughout our history, we
have augmented our manufacturing technology in line with anunchanging commitment to helping to resolve challenges that
confront society.
Today’s society is beset by a number of challenges,
including a pressing need to preserve the global environment,
the depletion of resources and rising energy demand. Moreover,there is growing need for safer living environments as well as
solutions for disease prevention and health promotion. With
these issues in mind, in April 2013 we formulated new growthstrategies for the DENKA100 Companywide initiative andreallocated our management resources accordingly, positioning
these challenges as opportunities to create new growth drivers.
Specifically, our new growth strategies consist of: “Create
the most optimal production system”; “Scrutinize every costelement”; and “Focus management resources on new growth
drivers and develop next-generation products.” These strategies
are considered critical management issues as we aim to realize
business growth through the provision of solutions forchallenges confronting society. Making full use of ourtechnological strengths in chemical fields, which range frominorganic to organic materials, we will strive to help resolve social
issues in a way only the DENKA Group is capable of.

—Renewing Our Commitment to Safety

4

DENKA GROUP CSR REPORT 2014

—Providing Solutions to Social Issues

4 Developing Next-Generation Products
As a manufacturer, we recognize “Focus management
resources on new growth drivers and develop next-generation
products” as being crucial to achieving continued businessgrowth. In line with this recognition, in April 2014 we completed
the DENKA Innovation Center main building in Machida, Tokyo.
This building comprises three new R&D facilities, allowing us toconsolidate our Groupwide management resources. Moreover,efforts are now under way to accelerate our R&D activities
through proactive collaboration with external corporations,research organizations and public institutions aimed atpursuing open innovation. One such initiative resulted in theestablishment of the NIMS-DENKA Center of Excellence for
Next Generation Materials in June 2013. Although our
initiatives may not yield results overnight, we are determined todevelop an even stronger R&D platform to realize innovations
that will, in turn, help to resolve social issues.

5 Nurturing Human Resources Capable of
Bolstering Growth
We believe our human resources are key to achieving corporate
growth. Therefore, we have adopted systematic employee
training programs while stepping up efforts to nurturecompetitive human resources under the initiative of the Human
Resource Development Center. Specifically, we enhanced the

Corporate Governance

We Will Strive to Become aTruly Competitive
Manufacturer
Deserving the Trust ofSociety.

As part of the new growth strategies, we are striving to “Create
the most optimal production system” and “Scrutinize every
cost element” to ensure the sustainable development of ourcorporate activities.
To create the most optimal production system, in July
2013 we established a new plant in Singapore to produce
TOYOKALON synthetic fiber for wigs and hairpieces. And, in
April 2014, we went on to launch multiple overseas
subsidiaries to expand our operations in the special cement
additive business targeting the Chinese and Southeast Asianmarkets. Moreover, plans call for establishing a new facility in
China to produce food packaging and electronic packaging
materials. We will thereby accelerate the development of a
production network optimized to accommodate needs ofgrowth markets.
Also, we are scrutinizing every cost element, to this end
reviewing our production technologies, energy and raw material
inputs and logistics operations, irrespective of past practices.
At the same time, we are promoting the use of clean
energy. As cement and calcium carbide production are energy
intensive operations, we recognize that ensuring stable energy
supply and high production efficiency is a precondition forsustainable business activities. Currently, approximately 60% of
DENKA’s total electricity use is provided by its in-house power
generation facilities, with hydroelectric power generation
representing roughly half of this figure. Accordingly, we arereinforcing our network of hydroelectric power generation
facilities, augmenting the capacity of existing facilities andpreparing for the construction of a new hydroelectric power plant.
Moreover, we are developing mega solar power generation
facilities, drawing on our know-how in the power generation
business. In these ways, we will pursue the development of alow-carbon society as well as sustainable business operations.

content of an overseas on-the-job training program for younger
employees to get them used to working in diverse businesssettings and multicultural environments. Simultaneously, we
have introduced long-term training in Japan for manager
candidates who have been recruited overseas. Moreover, eachbusiness site is striving to ensure workplace safety and enhance
employees’ technological skills through the provision of the
DENKA Techno School educational programs. Meanwhile, eachdepartment is implementing its own initiatives to enhanceoccupational safety by raising employee awareness and tootherwise improve daily operations.
We are also promoting workforce diversity and striving tocreate a working environment in which employees with diverse
characteristics can realize their full potential. For example, wehave set numerical targets for the recruitment of female
specialists. At the same time, we have abolished the practiceof seniority-based promotion while proactively offering
managerial positions to ambitious employees. As such, we are
adopting new personnel administration practices that drive
employees’ ambitions and motivation to create an even more
inclusive and rewording workplace.

6 Initiatives to Help Develop Local
Communities
We have acquired the naming rights for the Niigata Stadiumand dubbed it the DENKA BIG SWAN STADIUM in January
2014. The name of this stadium represents our intention torevitalize local communities through the promotion of sports
activities. This change is also intended to increase the DENKA
Group’s name recognition among community members.
In addition, each business site is regularly holding
various community events for people living in theirneighborhood. We are also participating in such events as
Summer Holiday Chemical Experiment Show for Children to
facilitate interest in chemistry among children while dispatching
volunteer employees to provide ongoing assistance with thereconstruction of areas affected by the Great East Japan
Earthquake. In these ways, we are striving to deepen our ties
with local communities and make greater social contributions
by revitalizing local economies.

7 Pursuing “Lasting Trust as an
Outstanding Manufacturer”
A business’s ultimate goals should be more than turning ahigher profit. Moreover, a legitimate thriving business cannot
exist outside society. We believe that earning greater profits
from our business activities and fulfilling our responsibilities asa member of society must be realized in tandem—the two are
inextricably linked and together constitute indispensableconditions for our operations.
While staying true to our traditions of maintaining anearnest attitude and being sincere in our dealings, a
cornerstone of DENKA’s existence since its founding, we will
strive to fulfill the expectations of every stakeholder and, by
doing so, become a truly competitive manufacturer deservingof society’s trust.
We thereby ask for your understanding of and ongoingsupport for our Group operations.
August 2014

DENKA GROUP CSR REPORT 20145

Corporate Governance

Report on Major Accidents at Our Plants
The Chiba Plant: A Fire Broke Out in a Distillation Tower

Two Major Accidents at the Omi and Chiba Plants
In June 2013, a worker was struck by heat blast from an electric furnace at the Omi Plant that resulted in death. In July 2013, a fire brokeout in a distillation tower during the demolition of an aged styrene monomer production facility at the Chiba Plant. Once again, we would
like to extend our sincere apologies to the victim of the accident and the bereaved family. We also express our sincere apologies to thoseconcerned for any trouble and anxiety caused by these accidents.

The Omi Plant: Heat Blast from an Electrical Furnace

Facility inquestion

2. Accident Investigation Structure

Electrical furnace (S-4) of a calcium carbide production facility at theOmi Plant

Date ofJune 17, 2013 (Mon.), 09:31 A.M.
occurrence
Damagesituation

Human damage: A worker from a DENKA subcontractor suffered burns
all over his body, resulting in death on August 2 due toseptic shock
Environmental damage: None
Property damage: Slight damage to the electrical furnace

Sequenceof events

Five workers from a DENKA subcontractor were undertaking instrument
installation on the S-4 electrical furnace, which was in operation at thetime. A heat blast suddenly blew through firebricks on the top of thefurnace (the sealant was broken due to excess pressure), striking one of
the five workers.

June 17 09:00 A.M.

The five workers begin working near the entrance to theS-4 furnace operation room on the second floor. At thesame time, another group of workers start transferring
calcium carbide from inside the furnace to a cooling vesselusing a tapping machine.

09:25 A.M.

The first half of tapping work is completed.

09:31 A.M.

A blast of heat suddenly blows out from the upper portionof the furnace and strikes a worker. Immediately, theworker is given emergency burn treatment using a water
spray installed near the furnace.

09:45 A.M.

The ambulance arrives. The victim is taken to the Itoigawa
Sogo Hospital and later transferred to Niigata Prefectural
Central Hospital via helicopter.

Flow of Calcium Carbide Production
Calcium carbide (CaC2) is produced through the reaction of calcined
lime and dried coke at a temperature of approximately 2,000°C.
Limestone
Calcined lime (CaO)
Dried coke (C)Electrical
furnace

CO gasThermal power
generation facility, etc.

Calcium carbide(CaC2)

Calcium cyanamide
fertilizer, chloroprene, etc.

Sectional View of Electrical Furnace
Electrodes

A part from which the heat blast
has blown out(made of firebricks and sealant)

HolderIngredient feed chute

Smokestack

Safety valve

Outlet (second floor)
Tapping aperture

Calcium carbide

Tapping machine(first floor)

Cooling vessel

The Mechanics behind the Heat Blast
The unreacted Raw ingredients(CaO and C)
ingredientsadhered to the Electrodes
furnace ceiling
Fall
Superheated air pocket

6

DENKA GROUP CSR REPORT 2014

Molten calcium carbide

CO gasHeat blast

DENKA established a special committee chaired by the president anda special team led by the executive officer in charge of the Technology
Division to investigate the causes of the accident and implement
countermeasures. With representatives from the Omuta Plant’s
calcium carbide production section participating, the committee has
met five times in the period from June 29 to August 6, 2013, directing
the investigation and the implementation of countermeasures.

3. Cause of the Accident
Direct Cause:A large mass of unreacted ingredients adhering to an upper sector of
the inside walls of the furnace fell at once, causing a sudden blast ofheat blast to be released.
Grounds for Determining the Cause:
There were no indications of explosion. Also, an inspection carriedout immediately after the incident found that a considerable amountof limestone had been fed into the furnace from the ingredient tanks.
Causes Attributable to Facility Characteristics:(1) Inadequate Pressure Resistance of the Furnace’s Firebrick Ceiling
Due to the fall of a massive amount of material at once and an
uncontrolled ingredient flow into the furnace, which dislodged a feedchute, the pressure resistance of the furnace ceiling was weakened,
resulting in the release of the heat blast through a gap between
firebricks that had been filled with sealant.
(2) Insufficient Safeguards Installed around the Electrical Furnace
The victim had to perform his duty in a location where no safeguards(e.g. protection barriers) were installed.
Causes Attributable to Management:(1) Insufficient Workflow Management in Safety Zones
Although the victim was working in an area classified as a low-risk
zone, safety measures anticipating such irregular work were lacking.

4. Countermeasures Implemented to Prevent Recurrence(1) Facility Improvement(i) Systems to Predict and Prevent a Massive Fall of Material
Installed an interlocking system that suspends furnace operation
when a rise in pressure is identified; incorporated a device that
detects massive inflows of ingredients to ensure the more effective
prediction of the fall of material inside the furnace.
(ii) Systems to Ensure Release of Overpressure
Optimized the allocation of safety valves (installed pressure
discharge valves and hydraulic backpressure valves in a smokestackand outlets, respectively); reinforced the furnace’s firebrick ceiling to
improve pressure resistance.
(iii) Safeguards for Workers
Installed additional safeguards, such as protection barriers.
(2) Revisions in Facility Management Rules
Restricted entry into the zone around the electrical furnace during
operation; reclassified working zones and off-limit zones; formulated
new safety standards based on such classification; updated standard
operating procedures and rules regarding mandatory protective
garments for workers; adopted a checklist to ensure the safety of
subcontractors; and provided workers with training on how to operate
electrical furnaces safely.

5. Future Initiatives

2. Accident Investigation Structure

Facility inquestion
Date ofoccurrence
Date ofextinction
Damagesituation

DENKA established headquarters to handle the fire accident with thepresident serving as the head. The headquarters held nine meetings
to address the repercussions of the accident, investigate the causes
and formulate measures to prevent recurrence. In October 2013, theheadquarters reported the results of its investigation to the relevant
authorities and members of the local community.

The AF-202 distillation tower of the Chiba Plant’s CM-3 styrene monomer
production facility, which was being demolished
July 20, 2013 (Sat.) 09:35 A.M.
July 21, 2013 (Sun.) 09:13 A.M.

Human damage: None
Environmental damage: None
Property damage: None (only facility being demolished was affected by
the fire)
Sequence In April 2013, the Chiba Plant began demolishing the CM-3 styreneof events
monomer production facility, which had ceased operations in April 2012.
On July 20, 2013, a fire broke out when a blowtorch was used to create
openings in the side of an approximately 60-meter-tall distillation tower toallow the installation of scaffolds. The fire was extinguished by the next day.
In addition, on August 1, 2013, the work was undertaken to topple the tower
over sideways in a safe manner, as the buckling in the upper portion of thetower could cause a tilt of said section.
July 20 09:35 A.M. A red glow indicating fire is observed inside the distillation
tower in addition to smoke spewing from its top; staff beginattempting to extinguish the fire by water discharge.
14:10 P.M. Deformation and buckling of the tower segment around40 meters above ground level are observed. Consequently,
the top of the tower is seen to incline roughly 20 degrees.
July 21 09:13 A.M. The municipality’s fire department declares the fire
extinguished.
13:36 P.M.: Water discharge ceases.
August 1 13:15 P.M. The distillation tower is deliberately toppled over sideways.

Styrene Monomer Production Process
The process consists of the following two stages:(1) EB process: ethylene + benzene → ethylbenzene (EB)(2) SM process: ethylbenzene (EB) → dehydrogenation → refining →styrene monomer (SM)

Facility in Question
The distillation tower used in the SM process (extracting SM from EB)

EB

Dehydrogenation process

Distillation
tower (AF-202)

SM refining
tower (AS-203)

EB: Ethylbenzene
SM: Styrene monomer

AF-202
distillation tower

The point of ignition
where a blowtorch wasused

Portion where
buckling occurred

SM products

3. Cause of the Accident

Corporate Governance1. Outline of the Accident and Damage Situation

1. Outline of the Accident and Damage Situation

The distillation tower in question ceased operation in April 2012,
and its inside was cleaned using solvents. Since then, it had been
nonoperational for a year. Before initiating demolition, staff performed
both a visual check to ensure that no combustible material was present
and used a gas detector to confirm the absence of flammable gas.
Thus, it was considered safe to perform high-temperature operations
and the blowtorch was used. Despite the precautions, a fire broke out
inside the distillation tower due to the open flame of a blowtorch. The
causes of the fire are as follows.
Direct Causes:(1) While the facility was in operation, a small amount of resinous
material had been generated from styrene monomer and had
adhered to the surface of the stainless steel sheets packing
the distillation tower. This material ignited when a worker usedequipment with an open flame.
(2) Since piping and other components had been removed from thetower before the work in question began, the structure had become
more exposed to the outside air, with greater natural ventilation.
Moreover, the exterior walls of the tower were made of materials
with good heat-retention properties, facilitating the oxidization of
the stainless steel sheets inside the structure.
Causes Attributable to Work Management:(1) The status of the structure had not been checked thoroughly
enough, as the presence of the resinous material generated during
the facility operations adhering to the stainless steel sheets packing
the tower was not anticipated.
(2) Preliminary discussions on demolition methods were insufficient.
Methods to Verify the Causes:(1) A sample of the stainless steel sheets packed inside the tower was
analyzed after the accident, revealing the presence of resinous
material derived from styrene monomer on their surface.
(2) Small-scale fire experiments and other testing using a model ofthe distillation tower showed that resin adhered to stainless steel
sheets can be ignited when heat is not smoothly dispersed fromthe structure as work is performed.
(3) The changes in the thermal status of the tower’s metallic
components were simulated to assess the maximum temperatureof the inside surfaces of the structure during the work. The
temperature was estimated to have reached more than 1,000°C,
the temperature at which stainless steel materials are oxidized.

4. Countermeasures Implemented to Prevent Recurrence
The following rules were established to prevent similar accidents:(1) When high-temperature work has to be carried out to modify
facilities consisting of complex internal structures or thin metallic
sheets components, specially-designed safety countermeasures
must be implemented to ensure absolute safety. For example,
such sheets must be removed beforehand, or a concrete step todisperse heat should be undertaken (e.g. spraying coolant water
while work is being performed).
(2) Sections in charge of facility operations, facility management
and safety must undertake sufficient preliminary evaluations toensure the safety of work undertaken to modify facilities, including
demolition. Moreover, critical information must be shared between
these sections and the subcontractors participating in the work.

Plans call for implementing a third-party safety evaluation by external
specialists.

Reflecting deeply on these major accidents, we will strive to enhance the overall ability of our organization to predict danger
in operations. In addition to measures to prevent recurrence, we will work to build a corporate culture in which everyone
places a priority on safety. For more information on our Companywide safety initiatives, please also see pages 21, 26 and 27.

DENKA GROUP CSR REPORT 20147

Corporate Governance

DENKA’s Group Operations and CSR

Focusing Our Management Resources on the
DENKA100 Initiative, We Will Strive to Help
to Resolve Challenges Confronting Society.

Toward greater
corporate value forthe next 100 years

Contributing to the Sustainable
Development of Society While Enhancing
Corporate Value
Looking toward the next 100 years, the DENKA Group is striving to become a manufacturer thatdeserves people’s trust. Establishing new growth strategies for the DENKA100 management plan,
we have positioned our businesses aimed at helping to resolve social issues as a growth driver.

Reforms in Corporate Culture
and Reorganization

Securing Sustainable Growth
for the Next 100 Years

Reforming our corporate culture andreorganizing business structures tofacilitate the aggressive, speed-oriented
business approach needed to becomea successful global company

Working to reduce the impact ofbusiness activities on the environment
while striving to become a company
that garners the lasting trust of
employees and local communities

Corporate Governance

Since its founding in 1915, DENKA has sought to contribute to society’s development as a manufacturer in the chemicalindustry while always striving to be a company that garners people’s trust. In 1995, we began implementing responsible care(RC) activities, adopting a CSR initiative promoted across the entire chemical industry for the voluntary management ofchemical substances. Since then, we have taken a systematic approach to advancing environmental conservation, productsafety, security and disaster prevention, and communication with local communities.
In 2007, we launched DENKA100, a key management initiative that guides Companywide efforts to fulfill our social
responsibility in six areas, setting goals for fiscal 2015—the year we will mark the centennial of our founding.

DENKA100

DENKA100 New Growth Strategies

New Growth Strategies
1. Create the most optimal production system

Strategies to Achieve Our CSR Vision

Accelerating a shift to local production to ensure
timely product supply to growing overseas markets
while dedicating domestic plants to the production of
specialty and high-performance products

Promoting an Initiative
Encompassing Six Pillars
Our CSR Vision

Pursuing Lasting
Trust as an Outstanding
Manufacturer
Toward its CSR vision, “pursuing lasting trust as
an outstanding manufacturer,” the DENKA Group
promotes CSR activities from the economic,
social and environmental perspectives. The Grouphas established the DENKA Group Guidelines toguide its CSR activities.

2. Scrutinize every cost element

Reviewing every cost element through such steps as
the streamlining of production processes, yield
improvement and the reduction of raw material costs
and maintenance expenses

To realize our CSR vision, we are implementing the DENKA100
Companywide initiative encompassing six pillars, namely:“Expansion of business operations”; “Human resource
development”; “R&D Promotion”; the “Good Company Program(GCP)”; “Promote further innovation”; and “CSR: Corporate
Social Responsibility.”
We are committed to maintaining an earnest attitude andsincere conduct in our dealings, both of which have been our
essential traditions as a manufacturer. By fulfilling our roles andresponsibility as a member of society, we will endeavor togarner its trust, thereby achieving sustainable growth over the
next 100 years.

3. Focus management resources on new growth
drivers and develop next-generation products• Developing solution businesses in such growthfields as the environment, energy, infrastructureand healthcare• Reinforcing open innovation and utilizing the
DENKA Innovation Center

DENKA100 Corporate Philosophy

Concern for the global
environment
Security and disasterprevention

Business
expansion
CSR

EconomySociety

Securing shareholder
returns
Higher customer
satisfaction

Social contribution
Respect for humanrightsEmployee happiness

DENKA Group Guidelines

8

DENKA GROUP CSR REPORT 2014

Growth DriverCreating Valuable Things That Benefit Society
from Resources with Advanced Technologies

Environment

with a Challenging
SpiritCorporate Social
Responsibility

Proactively think,learn, and takeactionPromotefurther innovation
Strengthening capabilities,
pursuing technologicalinnovation and reducing
costs

DENKA is committed to providing solutions for issues confronting society
Humanresource
development

R&D
promotion
GCP
Good Company
ProgramDevelopment of newmarkets and new
products

through our business activities.
Examples of What DENKA Can Do to Resolve Social Issues
Environment

EnergyInfrastructure

Healthcare• Addressing the global
warming issue• Promoting the effective
utilization of resourcesand developing a
recycling-oriented society• Saving energy• Securing a stable supplyof energy and promoting
the use of clean energy• Countering the aging of
infrastructures• Infrastructure developmentin emerging countries• Preventing infectious andlifestyle-related diseases• Securing food safety

DENKA GROUP CSR REPORT 20149

Corporate
Governance
DENKA
Group’s
CSR

Sustainability

Pursuing Lasting Trust as an Outstanding Manufacturer,
We Promote CSR Activities from the Economic, Social andEnvironmental Perspectives.

To promote its CSR activities, DENKA established a CSR
promotion structure spearheaded by the president and consistingof the CSR & Corporate Communications Department andother specialized bodies. When major issues arise, specializedcommittees under the direct control of the president holddiscussions and make decisions on the actions to be taken.
The CSR & Corporate Communications Department has beensystematically developing an in-house structure to promote
CSR, facilitating the understanding of all Group employees toensure their wholehearted engagement in CSR activities andpublishing these activities’ results in the CSR report.

Stakeholders

Corporate
Governance

All Stakeholder Categories

Safety andDisasterPrevention

The
Environment

Executive Officer, General Manager of Corporate

Challenges••Promote complianceeducation••Raise CSR awarenessand promote CSR
activities

Fiscal 2013
Targets••Legal affair education••Nurture a CSR mindset••Major accidents occurred (heat blast from the Omi Plant’s
electric furnace and a fire at the Chiba Plant during thedemolition of CM-3 facility)••Thoroughly inspected high-risk facilities, carried out
structural measures to improve their safety and facilitatedcommunication with subcontractors••Total number of occupational accidents decreased (thanks
to robust worksite communications)••Applied a security capability evaluation system at core
plants••Implement the Fifth Medium-Term
Environmental Plan (systematicallyreduce CO2 emissions, PRTR
substances and other environmental load substances)••Promote RC activities••Launched mega solar power generation facilities (theShibukawa and Isesaki plants)••Decided on the construction of the new hydroelectric
power generation plant for the Omi Plant••Implemented the Fifth Medium-Term Environmental Plan
1) Achieved the target for energy consumption intensity:
0.90 compared with fiscal 1990 level (target: 0.93)
Thanks to the success of each plant’s energysaving activities and the stable output of in-househydroelectric power generation facilities
2) Achieved the target for emissions of PRTR substances:
90t (target: 95t)
A 13% year-on-year decrease due to lower production
volume and the use of aqueous solvents
3) Missed the target for the volume of final waste
disposal: 210t (target: 177t)
Due to the replacement of filters and disposal offlexible containers••Prevention of global
warming (CO2 emissions
reduction), curbing
chemical substanceemissions, waste
reduction, technologicalinnovation for energy
conservation••Inclusive and rewarding
workplaces

As of July 2014

President

Responsible Care (RC) Committee••Step up health promotion
initiatives, including a program toaddress mental health problems••Implement initiatives under the
Action Plan for General Business
Operators (ensure that each
employee takes at least 12 annual
paid leave, streamline operations
and reduce overtime work)••Implemented the Mental Health Promotion Plan••Average number of annual paid leave utilized: 9.2 days
Average annual total of overtime hours: 91 hours(84 hours and 92 in fiscal 2011 and 2012, respectively)••Development and••Disclosure of the CSR
provision of high-quality,
Procurement Policies andeconomic products
Guidelines••Business activities through ••Develop and market products
open and fair tradethat benefit the environment andsociety••Supply reliable and safe products••Disclosed the CSR Procurement Policies and Guidelines
in the CSR report••Promoted product development aimed at facilitatingenergy saving and environmental load reduction (special
cement additives, ultra-pure acetylene black, etc.)••Introduced a system to administrate customer complaints
and requests••Initiatives as a good
corporate citizen andenhanced communication
with local communities••Acquired the naming rights for Niigata Stadium (DENKA BIG
SWAN STADIUM) and supported the ALBIREX NIIGATA aspart of our drive to revitalize local communities••Accepted and recycled waterworks sludge and industrial
waste from Niigata City and other municipal bodies for use
in cement production••Dispatched employee volunteers to Minami Sanriku-cho
through the Disaster Area Volunteer Support Program••Participated in the Summer Holiday Chemical ExperimentShow for Children and hosted experimental science classes••Assisted local students with their pursuit of higher education
through DENKA Scholarship System••Contributed to social welfare through music events (theFureai Trio)••Undertook comprehensive reviews of the status of social
contribution activities being implemented by each businesssite

Employees

Safety Measures Headquarters

CSR & Corporate
Communications Dept.

Product Liability (PL) Committee
Ethics Committee
Security Export Control Committee
Risk Management Committee

Customers andSuppliers

Legal & IP Strategy Committee
CSR Procurement Committee
Internal Auditing Dept.
Investor Relations Dept.
GeneralPublicand Local
Communities

Every year, a special educational program themed on CSR activities is implemented as apart of employee training sessions. With the CSR & Corporate Communications Department
designing its content, this program is mandatory for newly recruited specialists while
welcoming volunteer participants from Group members.
The program started with an explanation of the DENKA Group Guidelines, which containthe ten precepts that govern our CSR activities, and then went on to explain, with actual
examples, our “preventive CSR activities” in such areas as compliance, which is indispensable
to maintaining the trust of society, and “proactive CSR activities” aimed at achieving greater
corporate value by fulfilling stakeholders’ expectations through such initiatives as creating
shared values (CSV). Information was also provided on our volunteer activities in support of
the reconstruction of Minami Sanriku-cho and other areas affected by the Great East Japan
Earthquake, the Summer Holiday Chemical Experiment Show for Children in which DENKA
staff takes part, and other social contribution activities undertaken by the Company.

••Undertake comprehensive reviewsof the status of social contribution
activities being implemented
across the Group••Continue volunteer activities tosupport disaster-stricken areas••Reinforce communication withlocal communities throughexperimental science classes

Society

Topics In-House CSR Educational Programs••Engage in public policies
and activities
Governmental/ExternalInstitutions

Shareholders andInvestors

A training session for newly recruitedspecialists (April 16, 2013)••Gave training sessions on legal affairs at each businesssite••Provided new recruits and other Group employees with an
educational program themed on CSR activities••Ensure facility security and ••Secure occupational safety anddisaster prevention while
health (elimination of occupationalbuilding and maintaining
accidents)
relationships of trust with ••Ensure adherence to basic
local communities
safety rules by on-site••Maintain occupational
workers, facilitating worksite
safety and health while
communication, creating acreating a vibrant andvibrant and lively workplace andcomfortable working
enhancing employee education
environment••Apply a security evaluation system

Junichi Kimura Planning Dept., CSR & Corporate Communications Dept.

CSR Promotion Structure

Results••Secure returns toshareholders throughstable businessperformance••Establishment ofrelationships of trust
through informationexchanges••Utilize subsidy schemes to pursue ••Established the NIMS-DENKA Center of Excellence for
R&D projects and advance energyNext Generation Materials
saving and other environment••Expanded collaboration with the Graduate School offriendly technologies
Science and Engineering at Yamagata University••Completed the DENKA Innovation Center main building asa key R&D base for open innovation••Drew on the public subsidy schemes to conduct R&D and
facility improvements that contribute to energy saving andenvironment conservation••Enhance CSR-related information
disclosure and ensure its reliability••Execute the business plan

DENKA GROUP CSR REPORT 2014

Results

24 to 25B

6 to 7,26 to 27

28 to 3136 to 37

34

32 to 33,38

12 to 13,18 to 19D
Major
accidents
occurredC
Misseda part oftargets

35

B: Observed some results

Major Challenges and Goals in
Fiscal 2014 and Beyond••Promote compliance education••Develop more robust in-house
CSR promotion structure andnurture a CSR mindset••Eliminate occupational
accidents by facilitating worksite
communication, creating a vibrant
and lively workplace and involving
all staff in pursuing safety
initiatives••Horizontally disseminate the useof a security capability evaluation
system and carry out structural
measures to improve the safety ofhigh-risk facilities••Implement the Fifth Medium-Term
Environmental Plan (systematicallyreduce CO2 emissions, PRTR
substances and other environmental load substances)••Promote RC activities
and reinforce Groupwide
environmental management
encompassing affiliates andoverseas subsidiaries

C
Missedtargets••Reduce total working hours andfacilitate the use of annual paid
leave (at least 12 days/fiscal
2016)••Strengthen countermeasuresagainst mental health problems
while pursuing the implementationof the Mental Health Promotion
Plan

B••Continue supplying reliable andsafe products••Explain our CSR Procurement
Policies to suppliers and ask fortheir cooperation in implementing
the Guidelines••Position our products with respect
to environmental and social values

A

A••Promoted new growth strategies••Enhanced the content of the CSR report and the website
while seeking a third-party opinion to secure its reliability

A: Achieved significant results

10

Pages

A

C: No results were observed

DENKA Group’s CSR

CSR Promotion Structure

CSR Promotion Challenges, Targets and Performance
DENKA’s
Corporate
Sustainability
GovernanceManagement

In 2015, DENKA will celebrate the centennial of its founding.
Having started out with the manufacture of calcium cyanamide
fertilizer, DENKA has been developing and applying uniqueproduction technologies as it endeavored to help resolve
social issues that varied with the times. Looking toward thenext 100 years, we have formulated new DENKA100 growthstrategies and are focusing our efforts in solution businesses
in the fields of the environment, energy, infrastructure andhealthcare. Moreover, we are partnering with various externalorganizations to facilitate open innovation. In doing so, we
have remained loyal to the root of our CSR activities, with anunwavering commitment to contributing to society throughmanufacturing in a way that only DENKA is capable of.
In addition, the manufacture of DENKA’s chemical
products consumes both natural resources and energy.
Therefore, we are striving to improve the soundness andsafety of entire product life cycles and to reduce environmental
impact through ongoing Responsible Care (RC) activities,
which we consider indispensible to gaining the trust of society.
In these ways, DENKA is promoting its CSR activities
from the economic, social and environmental perspectives,
thereby pursuing lasting trust as an outstanding manufacturer.

••Help revitalize local communities
by utilizing DENKA BIG SWAN
STADIUM••Undertake comprehensive reviewsof the status of local communityand social contribution activities
being implemented by overseas
subsidiaries••Continuously implement volunteer
activities to support disasterstricken areas••Reinforce educational assistanceprograms and communication
with local communities throughexperimental science classes••Step up collaborative R&D
initiatives leveraging the DENKA
Innovation Center••Continue utilizing subsidy schemes
to pursue R&D and the improvementof energy-saving and other green
technologies••Enhance CSR-related information
disclosure and ensuring its
reliability••Work toward achieving the goals
set forth in the business plan (final
year set at fiscal 2017)

D: The level of activity deteriorated

DENKA GROUP CSR REPORT 201411

Corporate
Our
Business
GovernanceOperations

Sustainability

Actively Promoting Initiatives under New Growth Strategies in Line
with the DENKA100 Management Plan

PeriodTOYOKALON

Jan. 2014

Special cement additives

Entered into a capital alliance with Posco Venture Sdn. Bhd. (Malaysia) and introduced DENKA’s production technologies to Posco

Mar. 2014

Special cement additives

Initiated production at DENKA Inorganic Materials Tianjin Co., Ltd. in China

Apr. 2014

Special cement additives

Launched DENKA Infrastructure Technologies Shanghai Co., Ltd. and DENKA Infrastructure Technologies Private Limited (Singapore)as regional headquarters controlling the Company’s operations in China and Southeast Asia, respectively

May 2014

Performance plastics

Initiated an overhaul of the Chiba Plant’s ABS and specialty resin manufacturing lines(successively rebuilding plant facilities until May 2015)

Jun. 2014

Vinyl acetate monomer

Withdrew from the businessDec. 2014

Functional food packaging
sheetsA new production facility at Denka Advanced Materials (Suzhou) Co., Ltd. scheduled to start operation

2015 first half VINI-TAPE

Focus Management
Resources on New
Growth Drivers

Established the NIMS-DENKA Center of Excellence for Next-Generation Materials

Sep. 2013

Acetylene black, etc.

Oct. 2013

Influenza antigen detection
Obtained approval for sales in China
test kit
Expanded collaboration with the Graduate School of Science and Engineering at Yamagata University
Completed the DENKA Innovation Center main building

Apr. 2014

Established the Advanced Technologies Research Institute, Life Innovation Research Institute, and Infrastructure & Solutions
Development Research Institute within the DENKA Innovation Center
Acetylene black

Numerical Targets (fiscal 2017)❶ Create the most optimal production system❷ Scrutinize every cost element• Consolidated operating income ¥60 billion or more
(doubling operating income from fiscal 2006 level)❸ Focus management resources on new growth drivers
and develop next-generation products• Overseas sales to net sales ratio 50% or greater

DENKA GROUP CSR REPORT 2014

Entered the mega-solar power generation business, establishing DENKA Solar Power Shibukawa and similar facility at the Ota
District of the Isesaki Plant

Jul. 20132018

A new hydroelectric power plant for the Omi Plant scheduled to be completed and start operations

Scrutinize Every Cost Element
As a part of the new growth strategies, we are striving toscrutinize every cost element, with the goal of achieving a¥10 billion cost cut in total. To this end, we are thoroughly
reviewing all cost elements, encompassing production
processes, yield rates, raw materials, utilities, facility
maintenance and upgrading as well as logistics operations,with an eye on international competition.
1 Initiatives in Logistics Operations
We are striving to reduce distribution costs while enhancing
the quality of our overall logistics operations. In 2010, an
automated constant temperature storage facility was installed
within the Omi Plant (Niigata Prefecture). Utilizing this facility,
we initiated full-scale exports of chloroprene rubber fromnearby Naoetsu Port and Fushiki Toyama Port, switchingfrom the more distant Yokohama Port, thereby reducing
both transportation expenses and logistics-related CO2
emissions. We will make greater use of ports near production
sites while promoting modal shift involving a changeover tolarger trucks, rolling stockand marine vessels. In theseways, we will systematicallyreduce distribution costs
and environmental impact
as we optimize our logistics
operations.

DENKA100 New Growth Strategies

12

A new production facility for ultra-pure acetylene black at the Chiba Plant scheduled to be completed and start trial operations

The automated constanttemperature storage facility(the Omi Plant)

New Growth Strategies• Operating income ratio 10% or greater

Our Business Operations

Initiatives for the Next
100 Years

A new production facility at DENKA ADVANCED MATERIALS VIETNAM CO., LTD. scheduled to start operation

Strengthened capital alliance with SEI Corporation, a venture company specializing in battery materials (to develop an LiB electrodematerial with high-conductivity as well as the LiB-related solution business)

Oct. 2013
Develop NextGeneration Products

Launched DENKA Advantech Pte., Ltd.’s Tuas South Plant

Jun. 2013

Apr. 2015

an ultra-pure acetylene black at the Chiba Plant, with theaim of accommodating growth in demand for the lithium ion
batteries (LiBs) used in automobiles. The commencement of
trial operations is scheduled for April 2015.
Furthermore, we strengthened our capital alliance with aventure enterprise specialized in the area of LiB materials. As
a part of initiatives to facilitate open innovation, we establishedthe NIMS-DENKA Center of Excellence for Next Generation
Materials while signing a preliminary agreement with Yamagata
University to enter a comprehensive research partnership. In
April 2014, we completed the DENKA Innovation Centermain building in Machida, Tokyo. The building also houses
three new R&D facilities, namely, the Advanced Technologies
Research Institute, the Life Innovation Research Institute, andthe Infrastructure & Solutions Development Research Institute.
Among initiatives for the next 100 years was the launch ofsolar power generation facilities at the Shibukawa and Isesaki
plants in July 2013. We also decided to construct a newhydroelectric power generation facility for the Omi Plant, withan eye to launching operations in April 2018. We will pursue
the greater utilization of clean energy to fulfill our corporatesocial responsibility as a manufacturer.
Further details on the growth strategies undertaken by
our four business divisions and in the area of R&D are featured
on pages 14 to 19.

Products

Jul. 2013

DENKA’s
Corporate
Sustainability
GovernanceManagement

to increase sales in Japan and overseas, revising productprices and cutting costs. As a result, consolidated net sales
for fiscal 2013 rose ¥35,163 million, up 10.3% year on year,to ¥376,809 million. This was attributable to the Company’sefforts to revise product prices in line with rises in fuel andraw material prices, the effect of the depreciation of the yen
and an increase in the sales volume of mainstay products. On
the earnings front, operating income grew ¥2,412 million, up
12.8% year on year, to ¥21,230 million, despite such negative
factors as the increasing cost of downstream products, which
could not be fully offset due to a delay in the enforcementof price revisions, and rising electricity rates. The operating
income ratio increased 0.1 of a percentage point to 5.6%.

Our Progress on the New Growth Strategies
Under the banner of the DENKA100 initiative, the DENKA
Group is promoting various initiatives in line with new growthstrategies expressed as: “Create the most optimal production
system”; “Scrutinize every cost element”; and “Focus
management resources on new growth drivers and develop
next-generation products.”
Our fiscal 2013 initiatives to create the most optimal
production system included the launch of a new plant in
Singapore in July 2013 to produce TOYOKALON synthetic
fiber for wigs and hairpieces, and the establishment of multiple
subsidiaries and production sites in China and Southeast Asia
to expand our special cement additive business and build
a production network capable of accommodating rapidly
growing demand for infrastructure development in theseregions. Meanwhile, the Company decided to withdraw fromthe vinyl acetate monomer business, terminating the sale ofrelated products on June 30, 2014. Moreover, the Chiba Plant
has resolved to overhaul its production processes, which
includes integrating ABS and specialty resin manufacturinglines. Beginning in May 2014, efforts are under way tosuccessively rebuild plant facilities, with completion scheduled
for May 2015.
To better focus management resources on new growth
drivers and the development of next-generation products,
we initiated the construction of a new production facility for

New Growth Strategies

Create the Most Optimal
Production System

Fiscal 2013 Overview
In fiscal 2013, ended March 31, 2014, the Japanese economy
was supported by overall growth in domestic demand,reflecting firm personal consumption and public-sector
investment in addition to a last-minute surge in demand thatemerged in the second half of the fiscal year in anticipation of
the consumption tax hike. On the other hand, exports weresluggish due to a slowdown of growth in the Chinese andother emerging economies. Because of that, Japan’s overall
economic recovery remained modest.
In the chemical industry, corporate earnings haverecovered because of burgeoning domestic demand and theimproving profitability of exports, despite price hikes for fueland such raw materials as naphtha.
Given these circumstances, the DENKA Group has striven
to expand its businesses and to secure profitability, working

Main Initiatives under New Growth Strategies

2 Initiatives in Engineering
At facilities, we are stepping up checkups performed
simultaneously with periodic maintenance as well as
improvement, putting emphasis on minimizing malfunctions.
We are also training employees on equipment maintenance,such as the appropriate use of lubricants, early detectionof failure and implementationof preventive measures toavoid malfunctions. Suchefforts are aimed at reducing
repair costs while enhancing
facility security. Moreover, weare now working to enhance
training on the appropriate
and effective procurement ofequipment and engineering
services.

Training session on facility
engineering

3 Initiatives in Electric Power Generation
The manufacture of such mainstay products as calcium
carbide and its derivatives requires a considerable amount ofelectricity. DENKA thus owns an in-house power generation
network consisting mainly of hydroelectric and thermal power
plants and seeks to promote the use of clean energy. The
Company strives to reduce its power generation facilities’environmental impact while enhancing their efficiency, whichsignificantly affects production costs.
Specific initiatives include the effective utilizationof waste heat, installation of cogeneration facilities andaugmentation of the overall outputof the in-house hydroelectric power
generation plants by upgrading
turbine runners and increasingwater intake while planning theconstruction of a new plant.

Inside the hydroelectric
power plant

DENKA GROUP CSR REPORT 201413

Corporate
Our
Business
GovernanceOperations

Sustainability

Infrastructure & Inorganic Materials

Employing Our Strengths in Polymer Chemistry,
We Support Technological Innovation in the Fields ofAutomobiles, Home Appliances and Food Packaging.

Building on a Solid Track Record in Inorganic Chemistry
That Dates back to DENKA’s Founding, We Support
Sustainable Rural and Urban Development.

This division handles products in three key categories: acetylene derivatives, including chloroprene rubber and acetylene black;styrene-based functional resins; and acetyl chemicals. Revenues from these products represent 40% of Group sales. Leveraging
a broad range of techniques and experience in synthesizing, compounding and molding polymers, we are bolstering technologicalinnovation in such manufacturing fields as automobiles, home appliances and food packaging.

In addition to the calcium carbide and calcium cyanamide fertilizers that DENKA has been manufacturing for a century, this division
handles cement, special cement additives and other products made by applying inorganic chemistry. Leveraging in-house power
generation facilities and limestone mines owned within plant premises, we provide unique products and solutions that support
agricultural development and social infrastructure.

The Market Environment

Strategies
1 Cultivate potential demand for our flagshipproducts while developing new applications• Further enhance the product value of ourchloroprene rubber, acetylene black and MS and
IP resins, each of which commands a top global
market share, thereby cultivating potential demandand developing new applications• Increase the number of production sites, including
those in countries abroad
2 Improve business structure
Withdraw from the vinyl acetate business while
downsizing ABS resin production facilities
3 Focus management resources on growth drivers• Chloroprene rubber: Reinforce operations in growing
markets in China and India while developing theNorth American markets• SMM and IP resins: Expand sales in China, Europe
and the United States (for use in automobiles andoptical parts)• Ultra-pure acetylene black: Establish a new facility
at the Chiba Plant and build a track record in
producing cathode materials for next-generation
secondary batteries• Performance plastic products: Step up the marketingof super-heat-resistant containers, etc.
An Example of a DENKA ProductThat Helps Address Social Issues

In charge of manufacturing DENKA’s mainstay products, such as chloroprenerubber, acetylene black and styrene-based products, the Elastomers &Performance Plastics Division is striving to improve its operating structureand efficiency and thereby reinforce the Company’s business foundation.
Moreover, the division has developed
unique products tailored to customer
needs, including an ultra-pureacetylene black for next-generation
LiBs as well as an SMM resin, anovel additive for acrylic resinsthat raises their heat-resistance.
Remaining committed to helping toresolve social issues, the division’s
manufacturing, R&D andsales sections will work
as one to maximize its
organizational strengths
and to provide solutions
for challenges that
confront customers.

Shinji Sugiyama• Facilitate prudent use of resources and thereby help
develop a recycling-oriented society• Expand overseas business with a focus on augmenting
local production in Asia
• Maximize profitability by optimizing our production
system• Expand the scope of our solution business to encompass
not only construction but also agriculture, etc.
• Release high-value-added products capable of helping
save energy and reduce environmental burdens

Hideyuki Udagawa

Expected Technological Innovation

Social Issues• Growing calls for lower greenhouse gas emissions• A need to find alternative resources to counter the depletion of fossil resources• Increasing concern about air pollution attributable to automobiles exhaust andfine particulate matter• The creation of high-capacity LiBs
• The development of more compact,
lightweight and reliable EV, HEV andportable electronic devices• Infrastructure aging• Need to reduce environmental burden(waste and CO2 emissions)

DENKA GROUP CSR REPORT 2014

Steel rebar

Electrolyte
solution

Electrode

Alkalete Method
Gripping
agent

Neutralized
concrete

Expected Technological Innovation

Steel rebar

A solution for reclaiming and maintaining concrete
structures’ performance and functions
The DENKA Group’s Technological Solutions

DENKA BLACK

Director, Managing Executive Officer, Infrastructure &Inorganic Materials

The electrochemical repair method for deteriorated concrete structures

Social Issues

Acetylene black (DENKA BLACK) is a unique carbon black that has a chain-like structure and boasts
superior electrical and thermal conductivity. Manufactured through the thermal decomposition ofacetylene gas, DENKA BLACK boasts ultra-high purity and has been widely adopted as a material
for high-voltage power transmission cables as well as various types of batteries. In fiscal 2012, we
marked the 70th anniversary of DENKA BLACK’s release.
To accommodate increasing demand for LiBs for use in electric vehicles and other applications,
DENKA is building a new production facility at its Chiba Plant to manufacture an ultra-pure acetylene
black. Test operation is scheduled to begin in April 2015.

The Infrastructure & Inorganic Materials Division has been developing
innovative materials and engineering solutions that utilize an array of
DENKA’s special cement additives, providing structural diagnostic services,
proposing optimal solutions andundertaking construction. Building on
its track record in these operations,the division’s manufacturing, sales
and R&D sections are now working
together to expand its solution
business in China and Southeast Asia,
where rapid infrastructure development
is under way. We are also applying ouraccumulated know-how
in agriculture-related fields
and the development of
inorganic materials. Paying
a close attention to thelatest customer needs, wewill advance our solution
business to promote energy
and resource saving and to
curb global warming.

Strategies

An Example of a DENKA ProductThat Helps Address Social Issues

The DENKA Group’s Technological Solutions

14• Increased demand associated with reconstruction
since the Great East Japan Earthquake, an upturnin public-sector investment in construction andinfrastructure maintenance projects, and a recovery
of domestic steel demand• Burgeoning demand for infrastructure development
in China and Southeast Asia
• A shrinking farmer population and a shift in the Japanese
government’s agricultural policy toward supporting
automated and large-scale farming• Rising electricity rates as well as fuel and material
costs and a growing labor shortage• Growing need for labor saving and environmentalload reduction solutions

Director, Managing Executive Officer, Elastomers &Performance Plastics

Acetylene black (product name: DENKA BLACK)Tripling Operating Income by Pursuing Overseas
Expansion and a Needs-Oriented Approach

The Market Environment

Our Business Operations• A shift to overseas production in electronics, automotive
and other related industries• Rises in fuel and raw material prices further exacerbatedby foreign exchange rates• Shrinkage in domestic demand due to a graying
population

Streamlining Our Business Structure and Developing
New Markets for Our Unique Products

DENKA’s
Corporate
Sustainability
GovernanceManagement

Elastomers & Performance Plastics

Electrode

Chlorineion
Salt-damaged
concrete

Gripping
agent

Uses electro-osmosis
to re-alkalize concrete
structures that havedeteriorated due toneutralization

Desalination Method
An electrochemical repair
method that applies ion
electrophoresis to remove
salt, which causes steel
rebar to rust

Repair work undertaken on
Osaka Castle’s main tower

Power supply• The alkalete method for once-neutralized concrete• The desalination method for concrete that sufferedsalt damage

DENKA GROUP CSR REPORT 201415

Corporate
Our
Business
GovernanceOperations

SustainabilityLife Science & Environmental Products

We Create Innovative Materials for Electronics by
Fully Leveraging Our Technological Strengths in
Organic, Inorganic and Polymer Chemicals.

With the “Living Environment” and “Lifestyle” as
Keywords, We Are Helping Enhance the Quality ofPeople’s Lives.

Underpinned by strong expertise in functional fine particles and thermally conductive substrates, the Electronics & Innovative Products
Division provides key thermal control solutions for realizing miniaturization and greater reliability and performance. At the same time,
our functional films and adhesives play essential roles in realizing labor-saving, cost-efficient and environment-friendly manufacturing
processes. Providing a variety of products to meet customer needs, we will strive to help resolve social issues.

The division is engaged in wide-ranging businesses concerned with people’s lifestyles and living environments. For example, it handles
materials for construction and civil engineering use, such as rain gutters and corrugated pipes, as well as industrial tapes, foodpackaging and pharmaceuticals. In addition, the division is promoting the overseas production of TOYOKALON, a synthetic wig fiberthat is expected to become popular globally, VINI-TAPE for automobile wire harness and multilayered-food packaging sheets.

The Market Environment

Strategies
Step up the expansion of the solution business andbreak away from a business structure solely dependent
on materials
1 Build an optimal production system and achievea drastic improvement in productivity
Expand production of fused silica, electronic circuit
substrates and films at locations near targetedmarkets (e.g., producing ALSINK in China); andreduce costs by stepping up quality management
2 Develop the seeds of future core business(augment the solution business)• Functional fine particles (for use in lighting,bearings, solar cells, etc.)• Adhesives (for use in the processing of touchscreen glass for smartphones and displays)
3 Step up collaboration with partner companies andother external organizations while strategicallyleveraging our intellectual property rights

As the global market for electronicmaterials is undergoing drastic
structural changes, the Electronics& Innovative Products Division has
launched a new business strategy
entitled “VALUE50” in fiscal 2013
in line with the DENKA100 new
growth strategies. VALUE50 sets
forth a policy of creating new
businesses, in particular building
a novel business model thatpackages together products andsolutions. With “adding value”
and “value creation” as its criticalmission, the division will strive toestablish a business portfolio thatenables us to compete globally.

Manabu Yamamoto
An Example of a DENKA ProductThat Helps Address Social Issues

Among the products handled by the Life Science & Environmental Products
Division are a number of downstream products that play a significant rolein end products, where hints of new
businesses can often be found. With
“the living environment” and “lifestyle”
as keywords, we are taking initiatives
for new business creation, proposing avariety of products that benefit society andfacilitate sustainable living. We are further
streamlining domestic production systems
while developing a robust production
network in countries abroad. Drawing on
accumulated technologicalexpertise, we are proactively
expanding into China and otheremerging countries, as we
recognize the growing need forsolutions related to healthcare,food safety and the everyday
living environment.

Strategies• Enhance cost competitiveness through such steps as
building an optimal production system (for corrugatedpipes)• Promote a shift to local production for products
targeting overseas markets (TOYOKALON, VINITAPE and food packaging)• Explore promising domestic and overseas markets
while nurturing next-generation products andtechnologies (super-heat resistant and multilayered
food packaging materials, influenza virus detection
test kits and macromolecular sodium hyaluronate)

Sanshiro Matsushita
An Example of a DENKA ProductThat Helps Address Social Issues

Managing Executive Officer, Life Science &Environmental Products

QuickNavi-Flu, a quick diagnostic test kit for influenza viruses (produced by DENKA SEIKEN Co., Ltd.)Social Issues

Product Technologies Aimed at Resolving Social Issues

Social Issues

Expected Technological Innovation• Need for a more cost-effective method capable of accelerating
the mass-production of touch-screen glass for smartphones• Need to reduce the volatilization of waxes and organic
solvents at the workplace and the environmental impact of
discarding waste cleaning liquid used in processing

TEMPLOC is a next-generation temporary fixing adhesive thatquickly hardens with a short exposure to ultraviolet light and canbe easily peeled off. It also boasts adhering power no less thanthat of conventional thermoplastic adhesives, such as waxes.
These features help shorten the time required for thehardening and peeling process. This product is also worker- andenvironment-friendly, eliminating the need for organic solventsas it can be peeled off simply by immersing it in hot water.
Advancing these and other technological innovations, we are
striving to satisfy customer needs though the provision of totalsolutions ranging from material development to processing.

• A threat of influenza pandemics• Need to address excessive
burdens laid on medical staff• Development of Point of Care Testing (POCT) device thateliminates the need for bulky equipment• Realization of a more accurate diagnosis method that
requires less time and causes minimum physical burden

Expected Technological Innovation• The development of an adhesive to replace wax-based
temporary fixing agents• Realization of adhesion and removal processes that are
more environment-friendly and suitable for mass-production
The DENKA Group’s Technological Solutions• A material that hardens quickly and evenly with ultraviolet light exposure• An adhesive that can be peeled off easily without polluting the environment

16• A shrinking domestic market and intensifying
competition• Growing market potential in emerging countries,
reflecting burgeoning purchasing power• Widespread awareness of food safety• A graying population

Director, Managing Executive Officer, Electronics &Innovative Products

TEMPLOC for use in the processing of touch-screen glass for smartphones

Stepping up R&D of High-Performance Products;
Rebuilding Competitiveness and Developing
Markets Overseas

The Market Environment

DENKA GROUP CSR REPORT 2014

Our Business Operations• Quantitative shrinkage in market demand forelectronic materials due to miniaturization andcommoditization of devices (e.g., a shift from PCs tosmartphones and tablets)• Burgeoning demand for the development of railway,
communication and IT infrastructure in emerging
countries

Expanding Business Fields with an Emphasis on
Adding and Creating New Value

DENKA’s
Corporate
Sustainability
GovernanceManagement

Electronics & Innovative Products

The DENKA Group’s Technological Solutions
Diagnostic test kit for influenza viruses
With “prevention” as a keyword, DENKA SEIKEN has been working to eliminate infectious andlifestyle-related diseases through the provision of vaccines and diagnostic reagents.
• DENKA SEIKEN owns a library of viruses and bacteria that stands out among private companies in terms of size, as well as a wealthof immunochemistry and antibody technologies.
• Applying the immunochromato-method, which employs a monoclonal antibody, the QuickNavi series can be used to diagnose avariety of infectious diseases.

Product Technologies Aimed at Resolving Social Issues
The QuickNavi-Flu influenza virus detection test kit is simple to use and produces results in just eight minutes. While boasting greater
accuracy, this product poses minimum physical burden on examinees during specimen collection, contributing to the prevention ofpandemics when influenza spreads.

DENKA GROUP CSR REPORT 201417

Corporate Governance
Promoting
Our R&D Activities

Sustainability

Under the Slogan “Open Innovation and Challenge”
We Will Step up R&D Aimed at the Creation of
New Products, Businesses and Value.

Innovation Center

EnergyAdvanced
Technologies
Research Institute

Norihiro Shimizu
Managing Executive Officer Research and Development, Innovation Center,
New Business Planning Dept., Intellectual Property Dept.; Research andDevelopment Dept.

Infrastructure &Solutions Development
Research Institute

InfrastructureLife Innovation
Research InstituteHealthcare

Our R&D Policy and Structure
As a part of the DENKA100 new growth strategies, we are striving to “Focus management resources on new growth drivers anddevelop next-generation products.” Specifically, we are focusing on the four growth fields of the environment, energy, infrastructureand healthcare as we promote product development that is more in step with the market. Simultaneously, we aim to go beyond thescope of a material manufacturer, expanding our product lineups and fields of operation to encompass finished products and solution
businesses. To that end, in addition to in-house R&D activities, we are pursuing collaborative research initiatives with our strategic
partners and other external organizations, to realize open innovation that will, in turn, help us create new value into the future.

The DENKA Innovation Center Main Building Completed
In April 2014, the DENKA Innovation Center main building
was completed in Machida, Tokyo, with the aim of upgrading
our key R&D base. With an emphasis on achieving
innovation, the center will spearhead our R&D activities
aimed at promoting the DENKA100 new growth strategies.
The building also houses three new R&D facilities. First,
the Advanced Technologies Research Institute is intended
to pursue breakthroughs in the development of materials,
components and solutions for use in the environment
and energy fields. Second, the Life Innovation ResearchInstitute is an epoch-making research body that joins
DENKA’s research section in charge of life science and
DENKA SEIKEN’s research section for developing nextgeneration products, such as reagents, virus test kits andvaccines. Lastly, the Infrastructure & Solutions Development
Research Institute handles R&D projects aimed at creating

18

DENKA GROUP CSR REPORT 2014

innovative construction materials and methods, thereby
advancing our solution business.
Also, the center will closely work with our Polymer &Processing Technology Institute (Ichihara, Chiba), another key
R&D base. As such, the DENKA Group is rallying its overall R&D
strengths while proactively partnering with external organizations,
including public and academic institutions, and introducing
external technologies,
thereby accelerating
the development of
new products andbusinesses.

Other Joint R&D Initiatives
DENKA also maintains a proactive approach toward developing
new products and businesses through collaboration withother private companies that may eventually become strategic
partners, in addition to public and academic institutions.
Moreover, DENKA’s recent collaborative R&D initiatives
have come to involve overseas research organizations
and universities. For example, we are engaged in ongoing
joint research with Shanghai Jiao Tong University in China
in the field of elastomers. Also, we launched an R&D
project centered on performance plastics in tandem with
Singapore’s the country’s Institute of Materials Research andEngineering, a research organization operating under the
auspices of Agency for Science, Technology and Research.
There are many other initiatives aimed at applying a global
perspective to developing new products and businesses.

Promoting Our R&D Activities

Environment

NIMS-DENKA Center of Excellence for Next Generation
Materials Established
As a part of our initiatives aimed at facilitating interorganizational joint research with external institutes anduniversities, we established the NIMS*-DENKA Center of
Excellence for Next Generation Materials in June 2013.
Bringing together a variety of technologies and ideas that
NIMS and DENKA have accumulated, this facility will help
us undertake effective and efficient R&D activities aimed atcreating innovative products and solution models that meet
diverse needs.
Prior to establishing this center, NIMS and DENKA
were involved in a co-development project related toa phosphor, which went on to become a successful
material for LED applications. Joint R&D efforts have also
been launched for electronic circuit substrates, thermallyconductive substrates for power devices and other highperformance materials. Moreover, projects now under way
encompass a range of materials, including not only inorganic
but also organic materials, such as organic polymers andbiomaterials. This collaborative approach, which goesbeyond the scope of conventional joint research conducted
on an individual project basis, is drawing attention as a bestpractice model for comprehensive R&D partnerships.

DENKA’s
Corporate
Sustainability
GovernanceManagement

To accelerate the implementation of its new growth strategies, DENKA
is committed to taking on challenges to realize innovation. Completed
in April 2014, the DENKA Innovation Center main building is intended
to embody this commitment. With the center serving as the Group’s
key R&D base for new business creation and open innovation, we
will focus our Groupwide management resources on the four growthfields of the environment, energy, infrastructure and healthcare andpursue collaborative research initiatives with a variety of partners. In
these ways, we will step up the creation of new businesses and nextgeneration products targeting growth fields.

Fiscal 2013 R&D Achievements* National Institute for Materials Science

Launching Comprehensive Collaborative Research with
Yamagata University
In October 2013, we signed an agreement with the
Graduate School of Science and Engineering at Yamagata
University that will ensure a closer collaborative research
partnership. Since then, DENKA has been applying theuniversity’s excellent basic research accomplishments inpolymer synthesis, physical property evaluation, molding andprocessing to the development of next-generation productsthat meet diverse market needs, such as synthetic resins,
elastomers and polymer processing products. Some ongoing
joint R&D projects have already yielded samples for potential
customers. Looking ahead, we will speed up the creation of
new materials in a bid to flexibly accommodate market needs.

NIMS and DENKA presidents at the signing ceremony

Yamagata University and DENKA representatives
at the signing ceremony

Initiatives for Fiscal 2014 and Beyond
With the DENKA Innovation Center serving as its key R&D base, the DENKA Group will realize synergies through the integrationof its core technologies, which encompass a variety of fields, including ceramics, organic polymers and biomaterials. At the sametime, the Group will strive to build closer partnerships with external organizations. We will thereby accelerate the developmentof next-generation products in the four fields that will become our business drivers as we implement the new growth strategies.
Specific initiatives aimed at facilitating open innovation will include ongoing joint research with NIMS and Yamagata
University as well as comprehensive inter-organizational R&D activities that we will ask even more research organizations anduniversities to join. We will also promote business-to-business collaboration with our strategic partners.
Overseas, we will initiate collaborative research with the Indian Institute of Technology to study elastomers. Plans also callfor launching new joint R&D projects in such promising fields as secondary batteries and life science.

The DENKA Innovation Center main building

DENKA GROUP CSR REPORT 201419

Corporate Governance
Promoting
Further Innovation

Good Company Program (GCP) Activities

Sustainability

Enhancing Competitiveness by Improving Production Process andPursuing Technological Innovation.

Every Group Employee Is Participating in GCP Activities
Aimed at Solving Material Issues under the Leadership of Section Heads.

Policies and Structure Aimed at Advancing Our Production Technologies

Our Structure for Promoting GCP Activities

The DENKA100 Companywide initiative, which culminates in
2015, the Company’s centennial year, sets forth six pillars ofactivities, including “Promote further innovation.” This initiative
aims to enhance competitiveness and profitability while
reducing environmental burdens. Specifically, each production
section is responsible for identifying the challenges and goals
it faces, including those related to raw materials, facilities anddistribution, and then formulating and implementing concrete
action plans to improve yield. At the same time, each section
provides DENKA Techno School and other training programs toenhance employee understanding of production technologies

Business units throughout the DENKA Group are engaged
in GCP activities. In fiscal 2013, a total of 142 units, mainly
individual departments, implemented their own GCP activities.
While the DENKA100 Promoting Department supervises these
activities, the DENKA100 Promoting Committee members are
assigned to each section and business site to provide support.

Strengthening Our Companywide Initiatives in Line
with New Growth Strategies
As we promote the DENKA100 new growth strategies, weare striving to scrutinize every cost element irrespective of
past practices in a bid to win over harsh competition.
To that end, each production site is working to
upgrade its manufacturing processes and facilities,
improve operational conditions, raise yields and reduceenergy consumption intensity attributable to utilities whilepursuing labor saving production and distribution.

A Comment from Manager

Specific Initiatives(1) Improved energy consumption intensity per unit ofproduction through the reduction of raw material waste
and product defects (the Omi and Omuta plants)(2) Improved energy consumption intensity attributable tofuels through the upgrading of facilities, enhancement ofoperational efficiency and improved recovery of waste
heat (the Chiba Plant)(3) Promoted labor saving through process automation (theIsesaki Plant)(4) Reviewed raw materials and switched to internal
production from external sourcing (each plant)

Toshiaki Kawanishi General Manager of Production Technology Dept., Technology Div.

The Production Technology Department is in charge of production management and the developmentof manufacturing technologies. The department also works with production sites to develop processes
that are more productive and cost-saving. Under the banner of “scrutinize every cost element” set forthin the DENKA100 new growth strategies, we are systematically promoting energy- and labor-saving aswell as yield improvement.
We are also working with engineers from other companies to resolve challenges. In doing so, weare pursuing greater technological expertise while nurturing the next generation of engineers, who will
inherit our technologies.

Promoting Further Innovation / Good Company Program (GCP) Activities

Fiscal 2013 Achievements

GCP Activity Reports and Commendations
Every business unit that takes part in GCP activities formulates
their own action plan, with their managers spearheading theirefforts to make fundamental improvements in such areas assafety, quality, cleanliness and human resource development.
Once every six months, the results of their initiatives arereported on and shared among Group members via DENKA’s
intranet.

To evaluate their activities, the DENKA100 presentation
meetings are held twice a year for the units judged to haveundertaken outstanding initiatives. The Company president,
officers, general managers of administrative departments andheads of business sites serve as judges and select winners
for GCP Grand Prizes, Excellent Prizes and Special Prizes.
Moreover, the DENKA100
Promoting Committee
members separately review
activity reports submitted
by all business units
Groupwide, and commend
brilliant initiatives with the“GCP Activity Award.”

DENKA’s
Corporate
Sustainability
GovernanceManagement

and to make sure that the Company’s technological heritageis maintained.
Since the launch of DENKA100 in 2007, we have promoted
resource- and energy-saving initiatives, such as the recyclingof waste for use in cement production. We have also raised theoutput of our hydroelectric power generation facilities at the
Otokorogawa Power Plant by obtaining permission to increase
its water intake. Moreover, we conducted a changeover offuels for thermal power generation and manufacturing processfrom heavy oil to natural gas, thereby pursuing environmentfriendly operations.

DENKA100 presentation meeting

Fiscal 2013 Achievements
Safety Initiatives Themed on Communications—From the 18th DENKA100 Presentation Meeting
To ensure the safety of day-to-day operations, each Group
production site strives to enhance communication andfacilitate mutual support among workers. Accordingly,“Communication” was the theme of the 18th DENKA100
presentation meeting, held at Head Office on December
4, 2013, at which representatives of 10 business units,
including overseas business sites and affiliates, gave
presentations.
Staff from the Polyvinyl Chloride Production Departmentof the Chiba Plant reported on an initiative aimed atpreventing accidents that may occur while working in tanks
due to oxygen deprivation. Specifically, the department
revised its safety checklist in close collaboration with otherdepartments and subcontractors, incorporating displaysthat allow one to instantly see conditions inside tanks. They
won the GCP Grand Prize for their ingenious approach
toward safety activities.
To maintain safe and stable operations, DENKA
Azumin Co., Ltd. is facilitating communication among all
workers, including those of subcontractors, on the back of
the changing age distribution of its workforce. The resulting
achievements include the implementation of risk prediction
training and creation of hazard prediction maps.

The Goi Plant of DENKA Polymer Co., Ltd. has
identified maintaining overall technological and safetyrelated skill levels as a critical issue, since it has increased
employee headcount in line with business expansion.
In response, the plant has launched an initiative thatencourages its staff to interact face to face during regularmeetings and while carrying out safety activities.
Denka Advanced Materials (Suzhou) Co., Ltd. isencouraging close teamwork between Japanese and local
staff. To counter national, lingual and cultural differences,efforts are now under way to encourage employees tocommunicate in writing while working to improve Japanese
staff’s Chinese speaking ability. This subsidiary’s report also
included their efforts aimed at raising the sense of unity
throughout organization, such as facilitating the exchangeof courtesies and hosting dinner parties and company trips.

Staff from Denka Advanced Materials (Suzhou)

Topics Facilitating Communication to Enhance Our Sales Capabilities—Niigata Branch

An aerial view of the Omi Plant

20

DENKA GROUP CSR REPORT 2014

The CM-4 styrene monomer production facility
at the Chiba Plant

The Isesaki Plant (Ota District)Among those who gave presentations at the 18th DENKA100 presentation meeting were staff from the Niigata Branch of theSales Division. Niigata City has long been the home of a thriving port, especially in the seventeenth through nineteenth centuries,
when it nurtured a tradition of kindness and hospitality. Noting that such tradition may help staff’s communication skills, thebranch is having employees who are Niigata natives give lectures to colleagues with a view to enhancing their negotiation andsales skills and facilitating day-to-day business operations.

DENKA GROUP CSR REPORT 201421

Corporate
Human
Resource
Governance
Development

Sustainability

While Enhancing Employee Education Programs,
We Are Encouraging Employees to
Proactively Think, Learn and Take Action.

Fiscal 2013 Initiatives

Managing Executive Officer, Representative in China
Secretary Dept., Administrative Dept., Legal Dept., HR Dept., DENKA100
Promoting Dept.

DENKA’s Human Resource Development Policy and Expectations for its Employees
To achieve the DENKA100 corporate philosophy and our
CSR vision, we have established a policy of “Nurturing people
who have the ability, motivation and energy to excel in today’s
highly competitive and rapidly evolving business environment.”
We expect employees to be able to proactively think, learn
and take action. Led by the Human Resource Development
Center, we have formulated human resource development
programs aimed at realizing the above philosophy, vision andideals, while updating and enhancing their content every year.

Specialists

Engineers
New Class-9

New managers(Class-8)

New Class-8

New assistantmanagers (Class-7)

New Class-7

General staff

3rd-year employees

6-month employees

Business unit training

New employees

22

DENKA GROUP CSR REPORT 2014

Technological skills

External training sessions (open seminars)
Career and Life Planning Seminar
Mental health training sessions(group- and self-care)

Overseas study program at
Beijing Language and Culture
University

5th-year employees

2nd year employees

Special-purpose training
Administrative skills

Outcomes of Our Human Resource Development Programs
Among the feedback we received from younger employees
who took mandatory job level-based training, were suchcomments as “this periodic joint training helps us acquireessential knowledge without hindering the accumulationof actual business experience. It also provides a place toinspire each other and share experiences as we interact
with fellow trainees of the same generation but from different
worksites.” Also, since Class-7 and higher programs are

Participating in Leadership Training for Engineers

Content of Human Resource Development Programs (Fiscal 2014)

New generalmanagers (Class-9)

Leadership training for technological
specialists

designed to incorporate e-learning, these programs are
helping busy employees study more efficiently, instilling
program content effectively and thus assisting self-motivatedlearners.
In addition, the DENKA Techno School programs, designed
by each business site, are providing trainees with the opportunity
to absorb the techniques and expertise of experienced engineers
as well as their passionate approach to their work.

Voices of Trainees:

Career and Life Planning Seminar

Mandatory job level-based training programs

Special-Purpose Training(1) Launched leadership training for technological
specialists in assistant manager positions
We introduced a new program that combines management
and on-site training in a three-day boot camp aimed atturning technological specialists into future executives. For
those in assistant manager positions and playing essential
roles in production and R&D sections, this program provides
intensive training aimed at raising job awareness, passing(2) Introduced a mandatory technological specialist
courseAlthough each business site has been providing younger
technological specialists with training on cost control,
intellectual property and plant maintenance techniques,
we have also introduced mandatory joint training onthese subjects for all third- and fifth-year employees.
This ensures thatspecialists’ training
continues without
disruption even if theytransferred to newjobsites.

Human Resource Development

Kenji Nakano(2) Revised the content of program for fifth-year
specialists with the aim of motivating trainees tomove up to Class-7
Having positioned the program as a way of moving up
to Class-7, we revised the program to raise trainees’ job
awareness.

on DENKA’s proprietary technologies, strengthening
worksite leadership and enhancing communication skills.
During fiscal 2013, the Omi and Omuta plants implemented
the program in June 2013 and February 2014, respectively.
DENKA’s
Corporate
Sustainability
GovernanceManagement

We believe our employees are DENKA’s most indispensible asset.
Therefore, we have positioned human resource development as criticalto strengthening our operating base and securing business growth.
To survive amid today’s harsh business environment, people must be
action-oriented and capable of making prompt and accurate decisions.
With this in mind, we have established human resource development
programs aimed at nurturing employees who can proactively think,learn and take action. These programs are frequently updated andenhanced to better realize our human resource development policy.
Among recent initiatives was the introduction of leadershiptraining for technological specialists in fiscal 2013. Specifically, webegan to provide assistant managers working at production andR&D sections with training centered on building up their technologicalexpertise, maintaining our manufacturing traditions and strengthening
their leadership capabilities. Moreover, following the enforcement of
the revised law pertaining to the employment of the elderly, in fiscal
2014 we launched the “Career and Life Planning Seminar,” targeting
specialists who have reached the age of 55. This program provides
them with an opportunity to consider the best way to develop theircareers until they reach age of 65 and how to enhance their lives after
their retirement.

Mandatory Job Level-Based Training(1) Enhanced e-learning programs for those who havecompleted Class-7 to Class-9 programs
In response to individual needs, we expanded the lineupof optional home-learning programs.

Leadership training
Process technology training
Mandatory specialist courses(plant maintenance, cost control
Overseas training program (for and intellectual property)
beginners)
Overseas study program
Overseas training program(for beginners)

DENKA Techno
Schools

In-house academic
meetings

All job categories:
Internal control,
CSR, legal affairs,
accounting, information
technology, quality
management, logistics,
trade administration,
English and various
correspondence
courses

Manufacturing
techniques,
engineering, chemicalengineering, plantmaintenance,
R&D, intellectual
property, SQC, quality
engineering, safety
and the environment

Technological job
categories:
Engineering andanalysis techniques

Legal affairs, labor
management,
accounting, languages(English and Chinese)and mental health(group- and self-care)• DENKA100
presentation
meetings• Results presentation
meetings• Technological
symposia• Analysis researchpresentation
meetings• Quality symposia• Process symposia

Specialist courses

I participated in leadership training for technological
specialists held at the Omuta Plant from February 19
to 21, 2014. A total of 24 employees from each plant
attended and toured the plant on the first day. Then, we
took part in a seminar centered on discussions on thesecond and third days.
In line with a theme set out by
an external lecturer, I engaged in
active discussions with people fromvarious worksites. Although it was
rather difficult to reach a conclusionthat would reflect the consensus of
all and leave everyone satisfied, Irealized that such a conclusion, once
formulated, would be absolutely
Yoshiakibetter than what was figured out
Yamamoto
by one person. I would like to put
Engineering Group,
what I have learned into practice Technologicalto enhance my daily operations as Development Dept.,
Ofuna Plant
much as possible.

I Will Keep in Touch with My Fellow Trainees so We Can
Continue to Inspire Each Other
I was strongly motivated as I participated in a group
work training session for six-month employees, eventhough I was a bit anxious to find myself lagging behind
many other trainees who already seemed to becoming
skilled workers. Also, I was too self-conscious about
making mistakes. However, the session made me more
confident by reminding me of the things I have done wellas we shared stories
about each one’s
success and failure.
Going forward, I will
actively interact withthose who undergone
the training with me
to ensure continued
mutual inspiration.

Emi Kawabata
Head Office HR Dept. (center, front row)

DENKA GROUP CSR REPORT 201423

Corporate GovernanceCorporate Governance

We Will Remain a Company Worthy of Society’s Trust by
Maintaining a Fair and Transparent Corporate Structure.

In addition, DENKA has the following internal control systems.

1 Board of Directors, Audit & Supervisory Board
and Executive Officers
With the aim of enhancing its corporate governance throughmanagement oversight, DENKA has clarified the separationof executive officers’ business execution and the Board of
Directors’ supervisory functions.
The aforementioned two outside directors and two outside
members of the Audit & Supervisory Board are appointed as
independent directors/auditors under the rules of Tokyo Stock
Exchange Inc. They maintain sufficient independence while
retaining extensive knowledge in their areas of specialty. This
ensures that the Company’s management receives supervisionfrom an external viewpoint.

2 Internal Auditing System

The Internal Auditing Department conducts our in-housechecks, with assistance from the Legal, Environment and
Safety, and Quality Control Management departments. It
also works closely with the Product Liability, Responsible
Care and other committees based on their specific functions.
Each department and committee collaborates to educate on
legislation and audit operations. The results are reported to theBoard of Directors as needed. Moreover, we inaugurated theCompliance Hotline System to supplement internal audits byswiftly identifying and addressing any violations.

3 Internal Control Reporting System

In accordance with Japan’s Financial Instruments andExchange Act, DENKA has set up an internal control reporting
system aimed at ensuring the appropriate disclosure offinancial and other corporate information. We conduct checksof Groupwide business procedures to reduce mistakes andpossible risks, swiftly addressing any problems that are
discovered. The status of our internal control is disclosed in
an internal control report after evaluation applying “Standards
for Management Assessment and Audit concerning Internal
Control over Financial Reporting” formulated by the BusinessAccounting Council of the Financial Services Agency.
The fiscal 2013 internal report affirmed the effectiveness of
the DENKA Group’s internal control, while the attached certificate
prepared by the independent accounting firm (ERNST & YOUNG
SHINNIHON LLC) that audited the report concluded that all
significant aspects of disclosure were proper.
The chart below shows our corporate governancestructure, including the Internal Auditing System.

Corporate Governance System
General Stockholders’ Meeting

Directors (Board of Directors)
Supervise

Election/Dismissal

ReportImplementation

Representative Directors
Executive Directors
Executive Officers

Appointment/Dismissal

Appointment/Dismissal

ReportAppointment/
Dismissal

Compliance is essential for sustainable growth. We accordingly
adhere to internal rules and legislation and refrain from actsthat violate moral and ethical norms. The DENKA Group
Ethics Policy was established in 2002 to codify Groupwide
standards of conduct, while the Ethics Committee, chaired bypresident, oversees compliance, thereby ensuring adherence
to this policy. Moreover, the Legal, Environmental and Safety,

Intellectual Property and other departments constantly strive
to secure thorough compliance with an emphasis on matterspertaining to their respective specialties.
DENKA’s in-house training programs, led by the Human
Resource Development Center, also focus on providing
employees with compliance education.

Corporate GovernanceWe adopted an Audit & Supervisory Board System as thebasis of our Corporate Governance System. The said board
includes two outside members assessing our operations andmanagement to ensure that our business properly serves
stakeholders.
The Board of Directors similarly has two outside
members. To ensure solid corporate governance, there are no
hierarchical relationships between directors, allowing each tofreely oversee and supervise business execution.
Moreover, DENKA established the Management
Committee, which is composed of directors, members of the
Audit & Supervisory Board and selected executive officers, tostreamline and accelerate deliberation on important managerial
matters. For such important matters as the drawing up of abudget and capital investment, we set up special committees
or deliberative councils by function.

Compliance

Compliance Hotline System
We have set up and operate the Compliance Hotline in keepingwith the DENKA Group Ethics Policy. This system covers any
shortfalls in our internal control and compliance systems byenabling us to fix organizational problems that may arise.
The hotline accepts calls on actions that may or do violatethat policy. The Ethics Committee quickly addresses reports.
The hotline’s mandate is to be fair and swift. It receives
reports from the Audit & Supervisory Board Members Department

and the labor union, which operate independently, as well asfrom the Ethics Committee Administrative Office and generalaffairs sections within all offices. People can also send reports
to an external law firm. The hotline is accessible via phone oremail, with due consideration given to providing various reporting
channels. During fiscal 2013, we received one report.
The DENKA Group Ethics Policy specifically safeguards
whistleblowers from discrimination and mistreatment.

Risk Management
An essential part of corporate governance is understanding
the diverse and numerous risks inherent in corporate activities
and exerting proper risk control. In general, each business unit
is responsible for identifying and managing its specific risks.
For environmental, safety, product liability and export control
issues that affect the entire Company, we have in place special
sections and permanent committees to handle matters. We
have also appointed a team of specialists to audit our Groupsubsidiaries for their risk management.
We formulated our Risk Management Guidelines tocomprehensively tackle incidents that may have major impact
on corporate activities. In addition to the permanent Risk
Management Committee, we set up the Crisis Measures
Headquarters to act whenever contingencies arise.

Risk Management Overview
President
ReportRisk Management Committee
Proxy Organizations

Order
set upReportRisk-specificcommittees
Report on emergencies

Corporate Governance Structure

Other
risks

Major
crisesBoard ofDirectors

Crisis Measures
Headquarters

ReportEthics Committee
Safety Measures Headquarters
Responsible Care Committee
Product Liability Committee

Audit

Various Business Units

Audit & Supervisory
Board Members(Audit & Supervisory
Board)
AssistAffiliates

Export Control Committee
ReportAppointment/
Dismissal

Audit & Supervisory
Board Members Dept.

Internal Audits

Conduct Audit/Auditing staff

Internal Auditing Dept.

ReportInstruct /monitorReportInstruct /monitorPrime oversight• Businesses (including Sales and Manufacturing divisions)• Administration (including Internal Auditing, Environment and Safety, Legal andAccounting & Finance departments)

Audits within Business Units(Including Administrative Dept., Legal Dept., Environment and Safety Dept.,
and Quality Management Dept.)

Compliance Hotline

24

DENKA GROUP CSR REPORT 2014

Audit

Financial Auditor (Auditing Firm)

DENKA GROUP CSR REPORT 201425

Corporate
Our
Initiatives
Governanceto Maintain Safe Operations

Responsible CareTo Create a Lively and Sound Workplace,
We Are Facilitating Worksite Communication
While Involving All Workers in Safety Activities.

Safety/Responsible Care Management Structure
1. The Safety Measures Headquarters and the RC Committee
each meet at least three times a year.
General Managers(Plant Managers)

General Managers of
HR Dept. andAdministrative Dept.

Head Office’s Environment
and Safety Dept.
(secretariat)

President(supervisingoverall
operations)Chief Technology Officer;
General Manager of Safety
Measures Headquarters;
Responsible Care (RC)Committee Leader

General Managers of
relevant head office
departments
General Managers ofBusiness Promoting
departments ofeach Business Division

2. Each business site in Japan holds annual safety review
meetings to assess the implementation status of occupationalsafety management plans and RC policies. Also, we encourage
the sharing of best practices through safety networking
meetings and other events encompassing all business sites.
3. In fiscal 2013, overseas manufacturing and R&D bases
began holding annual safety review meetings.
4. The DENKA Group’s five mainstay production subsidiaries,
namely, DENKA Polymer Co., Ltd., DENKA SEIKEN Co., Ltd.,CRK Corporation, Hinode Kagaku Kogyo, and DENKA AzuminCo., Ltd., carry out RC activities under the supervision of Head
Office’s Environment and Safety Department, making frequent
reports to and receiving assistance from the department.

Fiscal 2013 Accident Records and Safety Activities
Accident Records
In fiscal 2013, as reported on pages 6 and 7, we experienced theblowout of heat blast from the Omi Plant’s electric furnace anda fire during the demolition of the Chiba Plant’s nonoperational
facility. In addition to these major accidents, some occupational
accidents during the year included a case where a worker
suffered oxygen deprivation while in a tank as well as incidents
in which workers were nearly caught or pinned by machinery,
any of which could have turned into a serious accident.

26

DENKA GROUP CSR REPORT 2014

The number of occupational accidents was 22, including
one fatal accident. Seven accidents resulted in absence fromwork, while 11 accidents required no time off. The remaining
three accidents resulted in minor injuries. The number of facilityrelated incidents totaled six and included three explosion
and fire incidents, two environmental accidents involving
leakage and one facility failure. Since fiscal 2010, when we
began promoting safety activities under the theme “creating
a lively and sound workplace by facilitating communication,”

0.4

DENKA

Subcontractors

Total
Total

2012

6

15

5

0

1

9

6

0

7

24

11

42

2013

1

8

2

1

6

3

1

1

7

11

3

22

Fiscal 2014 Initiatives
Reflecting on our fiscal 2013 accident records, we are stepping
up employee education on safety even further. At the sametime, we are striving to ensure the security of chemical plants
while promoting safety activities in which everyone working
at DENKA plants participates. We are also working to createa lively and sound workplace, following up on our ongoing
efforts since fiscal 2010.
Specifically, a security evaluation system developed by
the Japan Society for Safety Engineering has been applied toevaluate our production lines for such products as styrene andcalcium carbide, with the aim of identifying facilities in needof improvement and formulating countermeasures. Moreover,mutual facility inspections are carried out by plant managers
and safety experts. Safety activities in which every plant worker
participates include near-accident analysis and risk prediction
initiatives to identify potential danger at worksites as well asactivities to create a lively and sound workplace under theleadership of managers. In addition, we are striving to facilitatecommunication between all plant workers, including thosefrom partner companies. (These initiatives are introduced on
page 21 in the section entitled “Good Company Program(GCP) Activities.”)

Subcontractors

1.2
1.0
0.8
0.6
0.2
0

(Calendar Absence No Minor Death Absence No Minor Death Absence No Minor
time-off injury
time-off injury
time-off injury
year)

DENKA

1.4

08

09

10

11

12

13
(Calendar year)
Source: JCIA survey on occupational safety and health* Rates are calculated in accordance with the instruction of the labor
standards inspection office and JCIA guidelines.

Near-Accident Reporting and Analysis
As a part of their safety activities, each business site is
encouraging the reporting and analysis of near-accidents. Ourdata shows that there is an inverse relationship between thenumber of occupational accidents occurring at each site andthe number of reports submitted. We are striving to betterreflect lessons from reported incidents in our safety measures.
Relationship between Near-Accident Reporting Rates and Accident
Frequency Rates(Fiscal 2013: DENKA and its subcontractors)
Frequency rate of accidents
that required no time-off

6Frequency rate of accident
resulting in absence from work

5
(Accident frequency rates)

Representative Director,
Senior Managing Executive Officer,
Chief Technology Officer

The Number of Occupational Accidents (DENKA and Subcontractors)*

Average of Japan Chemical Industry Association (JCIA)
members (excluding their subcontractors)

Our Initiatives to Maintain Safe Operations

Hitoshi Watanabe

Accident Frequency Rates*

Responsible
Corporate
Care
Governance(RC) Activities

Safety is essential to sustainable business
operations. We must spare no effort to attainsafe operations even as we endeavor to
improve our productivity. With this in mind,
DENKA is pursuing safe and stable production
activities in a bid to become a robust “goodcompany.”
As part of efforts to create a lively, soundand rewarding workplace free of occupational
accidents, we are promoting safety activities
under the leadership of heads of each section.
At the same time, we are rallying our full strength
to advance our production technologies withthe aim of eliminating facility-related incidents.

the number of occupational accidents has decreased year
on year. However, accidents resulting from operator actions
due to insufficient on-site experience have occurred on
many occasions, while the number of accidents involving
workers from subcontractors failed to decrease, revealing
the insufficiency of communication among plant workers. We
conclude that our safety level has hardly improved.

4
3
2
1
0

5

10

15

20

(Reporting rates)

Safety Activities Undertaken at Overseas Production Sites
We operate four plants in Singapore, including the Tuas South
Plant, which was launched in fiscal 2013 to manufacture
TOYOKALON synthetic wig fiber. In addition to complying
with local safety standards, each plant holds periodic safety
management conferences to which it invites representatives
from its parent plant in Japan, with the aim of sharing safety
best practices.
Meanwhile, Denka Advanced Materials (Suzhou) Co., Ltd.,a subsidiary that maintains a 24-hour production schedule forelectronic packaging materials, is striving to create a safe andclean workplace. Its 80 national staff are working to prevent
accidents specific to sheet manufacturing lines, such as beingcaught or pinned by machinery or receiving cuts. This subsidiary
has also built a good track record of implementing Four-S

activities* and is stepping up risk prediction activity, resulting
in the acquisition of “Class-III Business Operator” certification
under China’s Production Safety Standards. Efforts are now
under way to acquire “Class-II” certification and above.
Denka Chemicals Development Suzhou Co., Ltd., which
engages in R&D targeting the Chinese market, focuses on
raising researchers’ safety awareness. The researchers follow
a daily routine of safety checks and self-evaluations using a“safety log” in addition to receiving training on the handling of
hazardous substances. Furthermore, monthly safety meetings
are held to update machinery operation manuals, undertake
accident case studies and discuss other safety issues.
* An initiative to ensure the four-S features at the workplace. The four-S’s refer
to Seiri (sort), Seiton (set in order), Seiso (shine) and Seiketsu (standardize).

DENKA GROUP CSR REPORT 201427

Corporate Governance
Environmental
Conservation

Responsible Care

Focusing on Responsible Care Activities, We Seek to Reduce
Energy Consumption and Environmental Burdens
throughout the Life Cycles of Our Products.

From fiscal 2013, data include emissions from some Group affiliates.*Also, we began posting data on emission ratio trends in addition to the amount of final landfill waste.

Our policy

Production Volume and Energy Consumption Intensity(Relative to the Fiscal 1990 Level)

Production Volume and Energy Consumption Intensity(Relative to the Fiscal 2012 Level)

Production(Production;
Energy intensity)

Production(Production;
Energy intensity)

Fiscal 2013

Items

TargetEnergy consumption
intensity (fiscal 1990 base)

General Manager,
Environment and Safety Dept.

Result0.93

0.90

Fiscal 2014

Fiscal 2015

TargetTarget

0.91

1.16

0.90
1.0

Energy consumption
intensity (fiscal 2012 base)

0.99

CO2 emissions intensity(energy derived: fiscal
2012 base)

1.24(0.99)

1.24(0.99)

1.22(0.98)

1.20(0.97)

Emissions of PRTR
substances (tons)

95

90

92

88

Final landfill waste (tons)

177

210

178

176

0.97

0.97

1.20

1.02 1.04
0.90

0.91

0.91 0.94

Products

01.41 billion kWh

PlantsWater

76.75 million t• CO2 (from energy sources)• CO2 (from non-energy sources)
• SOx
• NOx
• Soot and dust
• PRTR substances*

Water discharges

660,000 t

0
90

09

10

11

12

13

This environmental impact data encompasses DENKA’s plants
and main affiliates within those facilities.

0.97

0.97

80

13
Target014 (FY)
Target13
Result

CO2 Emissions

CO2 emissions intensity index(right)(%)

1.6 1.51

1.2

860 t
23 t

• PRTR substances*0t

Waste generated

123,000 t

Waste reduction(water removal and incineration)
Major plants:
Major affiliates:

9,687 t100

120

1.25 1.24

90

71

82

70

Energy derived

103

6

90

92

10

11

12

13

14 (FY)
TargetIn fiscal 2013, total emissions of PRTR substances
decreased approximately 13% (on a nonconsolidated basis) compared with the fiscal 2012
level. This was mainly due to the Chiba Plant’sswitch to an aqueous industrial tape adhesive thatuses less toluene. Although production volume isexpected to rise in fiscal 2014, we will continue
to systematically reduce PRTR substances,
especially from the Chiba Plant.

Group total
DENKA

Non-energy derived

Affiliates* Final landfill waste(Tons)

(%)

1,600

1,200

1.00

1,340

1,380

0.8%

1,420

1,330

1,330

900

1,130

1,200

990

970

80
60

09

(1,000 tons)

1,320

1.22

1.09 1.07 1.06

72

0.8

955

1,010

0.6%

Recycled externally

0.4

30

600

800

400

300

0.5%

0

0

617

Final disposal(as landfill)

210 tOmi, Omuta, Chiba, Shibukawa, Ofuna, Isesaki■ Omi Plant• Denal Silane Co., Ltd.,• Denak Co., Ltd.

■ Chiba Plant• TOYO STYRENE Co., Ltd.,• Taiyo Vinyl Corp.

Explanation of Outputs• Fuels are the sum of all fuels used at each production
site, converted into crude oil equivalents on a calorie
basis. They include fuels for in-house power plants.

• External waste recycling covers materials converted• CO2 emissions from energy sources represents emissions
externally into resources or fuel.
from in-house fuel consumption and from electricity• Final disposal refers to material buried on Company
purchases. CO2 emissions from non-energy sources covermainly the portion that is derived from raw materials.
premises or at external landfill sites.
• COD is the BOD discharge into rivers converted into COD values.

0.2%

90

09

10

11

12

13

09

10

11

12

13

14 (FY)
TargetIn fiscal 2013, the CO2 emissions intensity was 99% of the fiscal 2012 level. Meanwhile, CO2
emissions intensity attributable to purchased electricity deteriorated, offseting a decrease in CO2emissions intensity attributable to the success of our energy-saving measures and stable output
from hydroelectric power generation, which have contributed to the great improvement in energy
consumption intensity. Nevertheless, we will pursue energy-saving measures and increase output from
our in-house power generation facilities while enhancing the efficiency of these facilities.

*C onsisting of nine major affiliates in charge of production:
Denka Singapore Pte. Ltd. (Merbau and Seraya plants), DENKA Advantech Pte., Ltd. (Tuas and TuasSouth plants), Denka Advanced Materials (Suzhou) Co., Ltd., Denka Chemicals Development Suzhou
Co., Ltd., DENKA Polymer Co., Ltd., DENKA SEIKEN Co., Ltd., CRK Corporation, Hinode Kagaku
Kogyo and DENKA Azumin Co., Ltd.

WEB

09

0.25

0.1%
304

0
14 (FY)
Target

0.50

838

508

10,440 t
0

0.75

962

0.3%

Explanation of Inputs

DENKA GROUP CSR REPORT 2014

125

7

Waste Emission Ratio* PRTR substances calculation excludes TOYO STYRENE Co., Ltd. and Taiyo Vinyl Corp. inside the Chiba Plant. Waste emissions calculation excludes TOYO STYRENE Co., Ltd.
* Note: JUZEN Chemical Corporation inside the Omi Plant and Chiba Styrene Monomer Ltd. inside the Chiba Plant were consolidated into DENKA.

28

136
115

In fiscal 2013, the energy consumption intensity was 97% of the fiscal 2012 level, better than our initial
target of 99%. This was mainly attributable to the success of energy-saving measures implemented at
cement, POVAL and styrene monomer production facilities and stable output from our hydroelectric
power generation facilities. Moreover, this figure is equivalent to around 90% of the fiscal 1990 level.
We are continuing to promote energy-saving efforts while enhancing the efficiency of in-house power
generation, aiming for a year-on-year 1% decrease every year until the end of fiscal 2015.

CO2 emissions intensity(left)(t-CO2/t-CaC2)

1.33 million t
1.01 million t
84 t
4,460 t73 t
67 t

Recycled in-house

102,000 t

12

14 (FY)
TargetSoil discharges

Raw materials

0.99

120

40

83

• COD
• PRTR substances*

External waste

1.10

1.02

0.5

0.5

CO2 Emissions Intensity (energy derived)

Air emissions

Electricity

1.0

1.10

OUTPUT

Business Activities

409,000 kl

1.00

1.00

Overview of Environmental Impacts (totals of all production sites for fiscal 2013)
Fuels

1.12

0.90 0.91

Note: Fiscal 1990 figure = 1

INPUT

160

1.25

1.0

0.96

Affiliates*(Tons)

1.5

1.5

DENKA

Energy consumption intensity

Environmental Conservation

Every third year, the DENKA
Group updates its Medium-Term
Environmental Plan and sets new
targets for energy consumption
as well as PRTR substance andwaste emissions.
Under the Fifth Medium-Term
Environmental Plan, we are striving
to decrease energy consumption
intensity 1% per year, with the goalof achieving a 3% cut in fiscal 2015 Yoshihisa
compared with the fiscal 2012 level. Kobayashi

Energy consumption intensity

PRTR Substances

Responsible
Corporate
Care
Governance(RC) Activities

Fifth Medium-Term Environmental Plan

Environmental Conservation

10

228
11

180
12

210

178

13

0.00
14 (FY)
TargetIn fiscal 2013, the amount of final landfill waste
increased approximately 17% compared withfiscal 2012. This was mainly attributable to thereplacement of bag filters used at the Omuta
Plant’s electric furnaces and the disposal of wornout flexible containers used at the Chiba Plant.
In terms of the emission ratio across all Group
members and affiliates, we have maintained
zero emissions. We will strive to further improve
manufacturing processes and yield to minimize
the amount of waste generated by operations.
Note: Emission ratio (%) = amount of final landfill
waste/amount of waste generated X 100 (In DENKA’s
definition, “zero emissions” means the emission ratio
lower than 1%.)

Data on other emissions are posted on page 8 of the web-based CSR Report 2014 references (PDF). Also, please refer to pages 9 and 10 of the site reports (PDF) for emissions
data by each business site, overseas subsidiary and affiliate.

DENKA GROUP CSR REPORT 201429

Corporateto
Initiatives
Governance
Secure Our Electricity Supply

Responsible Care

We Are Promoting the Use of Clean Energy
to Bolster Our Environment-Friendly Operations.
Increasing the Proportion of Clean Energy in Total Energy Use
Power Sources in Fiscal 2013
Total generated in-house

57 %HydroelectricElectricity purchased

43 %

34 %

Total consumption(clean)1.83 billion kWh

Thermal power(natural gas)(clean)Cement waste heat0%

Plans call for starting the construction of a new hydroelectric
power plant in 2015 upstream of the Omigawa Power Plant.
The new plant will boast a maximum output of 8,000kW
and an annual power generation capacity of approximately
26,000,000kWh. All of the plant’s output will be sold to electric
power companies. With an eye on operational kickoff in 2018,
construction will be carried out with due consideration given to
the environment of surrounding area.

2%(clean)Initiatives to Utilize Clean Energy
Since its founding, DENKA has been operating its own
hydroelectric power plants in order to secure a stable electricity
supply. Currently, DENKA owns one hydroelectric power plant
along the Omi River system, five along the Himekawa Riversystem and four along the Umikawa River system. In addition,
Kurobegawa Electric Power Company, which was jointly
established by DENKA and Hokuriku Electric Power Company,
maintains five hydroelectric power plants. The total maximum
output of all these facilities is 114,650kW.
To reduce CO2 emissions from its thermal power plants,
DENKA has been changing over the fuel used from heavy
oil to natural gas. Moreover, the Omi Plant has an in-house
power generation system that utilizes waste heat recoveredfrom cement production as well as a biomass boiler fed byscrap wood.
In response to the enactment of the feed-in-tariff law
for renewable energy, DENKA established mega solar power
generation facilities at its Shibukawa and Isesaki plants. We
commenced the sale of electricity to Tokyo Electric Power
Company in July 2013. With a combined maximum output
of 3.2MW from the two facilities, we expect annual power
generation amounting to 3,600,000kWh.

New Omigawa Power Plant

Itoigawa

Kajiyashiki
Umikawa

Omigawa Omi
Himekawa

Hayakawa

Kubiki-Ono

Oyashirazu

10
9

1

2
12

13

8
7

Nechi

16

14

Increasing the Capacity of Existing HydroelectricPower Plants
In fiscal 2012, DENKA obtained permission to increase its
annual water intake and raised the maximum output of its
Otokorogawa Power Plant from 8,400kW to 9,800kW. Water
intake is increased only during high-water season (from themid-April spring thaw to the end of July) and has no impact
on the river ecosystem. Looking ahead, we are considering
increasing water intake at other plants. Moreover, we will
upgrade existing facilities to enhance their efficiency, withthe aim of augmenting our in-house hydroelectric power
generation capacity.

3

Hiraiwa

In February 2014, DENKA Solar Power Shibukawa suffereddamage to some panel mounts due to heavy snowfall.
Although some panels had to be disconnected, the facility wasable to maintain output almost as planned.

615

Message from the General Manager

Kita-Otari[Hydroelectric]
1
2
3
4
5
6
7
8

Omigawa Power Plant
3,300 kW
Kotakigawa Power Plant
4,200 kW
Oami Power Plant
25,900 kW
Otokorogawa Power Plant
9,800 kW
Yokokawa Power Plant No. 1 10,000 kW
Yokokawa Power Plant No. 2 16,000 kW
Umikawa Power Plant No. 1
3,800 kWUmikawa Power Plant No. 2
4,700 kW2,600 kW
9 Umikawa Power Plant No. 3
900 kW
10 Umikawa Power Plant No. 4
11 Himekawa Power Plant No. 6* 26,000 kW
15,000 kW
12 Takigami Power Plant*
5,000 kW
13 Nagatsuga Power Plant*
14 Sasakura Power Plant No. 2* 10,200 kW
10,700 kW
15 Kita-Otari Power Plant*

Power distribution facilities in
winter* Jointly owned with Hokuriku Electric Power Company

16 New Omigawa Power Plant(8,000 kW)

The total maximum output of hydroelectric
power generation:
114,650 kW

Solar*1

Shibukawa*2
Isesaki(2,200 kW)(1,000 kW)

Gas turbine(cogeneration)

ThermalOmi
Omi cement
Tomi
Chiba

17,000 kW
11,100 kW
25,000 kW
12,000 kW

Tomi
17,760 kW
Chiba
12,720 kW
Ofuna
680 kW
DieselShibukawa
1,000 kWThe total maximum output of thermal
power generation:
97,260 kW
The total maximum output of DENKA’s
in-house power generation: 211,910 kW*1 Output from the New Omigawa Power Plant and solar power generation facilities are not included as thesefacilities’ sole purpose is supplying electricity to external companies.
*2 DENKA Solar Power Shibukawa

DENKA GROUP CSR REPORT 2014

Mega Solar Power Generation

Snow damage at DENKA Solar Power
Shibukawa5

Dam of a hydroelectric power plant30transmission lines

Kotaki(Completion scheduled for 2018)

Mega solar power generation facility
at the Isesaki Plant

The run-of-river type hydropower generation system employedat our in-house hydroelectric power plants utilize strong rivercurrents. These facilities, therefore, are subject to severe
abrasion and occasionally suffer
extensive damage due to mudslides. Because they are located inheavy snowfall areas, regular snow
removal and periodic inspections
have to be carried out in winter (e.g.,checking transmission lines withhelicopters). In sum, maintaining
and managing hydroelectric power
plants requires constant vigilance
A helicopter used to checkagainst the forces of nature.

11

4

*1

The Oami Power Plant(hydroelectric power generation)

Maintenance and Management of HydroelectricPower Plants

Initiatives to Secure Our Electricity Supply

21 %Thermal power(heavy oil)

Because of the energy-intensive nature of the chemical industry,
DENKA considers not only the securing of the electricity supply
but also energy saving and the reduction of environmental
burdens to be essential to ensuring sustainable operations.

Responsible
Corporate
Care
Governance(RC) Activities

DENKA uses electricity generated by 15 hydroelectric power
plants, which include five that are jointly owned, three thermal
power plants and a cement waste heat recovery powersystem as well as purchased electricity. The in-house power
generation ratio is approximately 57% of total electricity use.
Hydroelectric power generation accounts for 34% of
DENKA’s electricity use, making it an essential electricity
source. This clean energy source not only makes a significant
contribution to the reduction of CO2 emissions, it also offers astable electricity supply.
At thermal power plants, we have been changing overthe fuel used to natural gas while improving power generation
efficiency by installing cogeneration facilities.

Initiatives to Secure Electricity Supply and Augment In-House Generation Capacity

In line with the DENKA100
management plan, we madethe decision to construct
a new hydroelectric power
plant. Hydroelectric generation
systems are stable sources of“clean energy,” and are known tolast more than 100 years. We areconfident that the establishmentof the new plant will contribute Shuichi Hirai
to the greater utilization of General Manager, Electricclean energy. We will also duly Power Dept., Technology Div.
consider the environment of thesurrounding area in the course of construction. We will
make the best use of resources available as we strive
to contribute to society through environment-friendly
corporate activities.

DENKA GROUP CSR REPORT 201431

CorporateRecycling
Resource
Governancethrough Cement Production

Responsible Care

As a Cement Producer, We Are Committed to
Fulfilling Our Social Responsibility toContribute to a Recycling-Oriented Society.
Waste Heat Recovery and Biomass Boiler

The waste material recycling business at the Omi Plant involves
the utilization of coal ash from thermal power stations, waste
soil from construction sites, sludge from waterworks facilities
and foundry sand generated from die-casting as raw materials
for cement. The plant also receives recycled oil, waste plastic,
automobile shredder residue (ASR) and scrap wood for use as
fuel sources.
In fiscal 2013, DENKA used 554 kilograms of recycledmaterials for every metric ton of cement produced.
For fiscal 2014, we will promote the ongoing recyclingof ASR and waterworks sludge, both of which were recently
incorporated into our cement production system, in addition to
the utilization of construction soil.
Looking ahead, we will proactively expand our facilities’
waste processing capacities while increasing the type of waste
used in cement production. Simultaneously, we will strengthen
cooperation with diverse businesses that emit waste materials
and other corporations involved in waste collection andtransportation as well as local government bodies in a bid tohelp realize a recycling-oriented society.

The Omi Plant’s cement production system utilizes a waste
heat recovery power system constructed in 1983. Boasting amaximum output of 11,000kW, this facility employs a steamturbine cycle driven by waste heat recovered from the cement
production process.
The Omi Plant has been striving to enhance the thermal
efficiency of its cement kiln. Because of that, the volume ofwaste heat emitted by the kiln fell, resulting in a decline in power
output from waste heat recovery to approximately 7,000kW.
To offset this decline, in 2003 we utilized subsidies fromJapan’s New Energy and Industrial Technology Development
Organization (NEDO) to fund the installation of a biomass
boiler that immediately went into full-scale operation. Thanks
to this boiler feeding the turbine with high-pressure steam, wemanaged to fully utilize the capacity of the power system.

Volume of Waste Accepted
Waste accepted per unit of production

External sources

Amount processed(1,000 tons)
1,200

In-house sources

Waste accepted per unit of production(kg/t)
600
554

500

1,000

285

800

400
300

600

200

660

200

100

0

0

04

05

06

07

08

09

10

11

12

13 (FY)The Omi Plant’s Cement Waste Heat Recovery Power System
Output: 11,000kW (consumed solely in-house)
Of which, 3,500 to 4,000kW: generated using steam produced by
the biomass boiler

Sludge31%

Accepted

945,000 tons
Construction soil
8%

Outline of Biomass Boiler Facility
TurbineSlag andfoundry sand25%

Scrap wood(biomass) storage

High-pressure
steam

Other
9%
Waste oil and plastic
and wood chips
4%

Generator

Feeding water toboilerFly ash24%

CycloneScrap wood feedchute

The Omi Plant’s cement production facility

Fly ash transportation system

Wastes and byproducts

Used tires

Limestone Waterworks sludge

Waste plastic

Sewage sludge

Fly ashGypsum byproducts

Waste oilAsh removal system

Blast furnace slag

Incinerator ash
Construction soil

Raw materials
SilicaFoundry sandIron materials

Slag

Dryer andraw materials
grinder

Note: Waterworks sludge, incinerator ash and construction soil
are used in place of clay.

Rotary kiln

Biomass boiler
for in-house
power generation

Woodchips Waste plastic

32

DENKA GROUP CSR REPORT 2014

Finishing millCementBiomass boiler

generation facility that exclusively burns scrap wood without
the use of any fossil fuel. Operating for over 10 years, thebiomass boiler enhances energy efficiency and contributes
to the reduction of CO2 emissions from the use of fossil fuels
and is developing into a promising countermeasure against the
depletion of natural resources.
Looking ahead, we will further expand the range of
waste materials and byproducts we accept, leveraging ourtechnologies to turn them into resources. By doing so, we willaugment our business operations while contributing to society
in various ways, including by reducing environmental burdens.

Bag filter

Boiler(furnace)

Recycling Process Flowchart

Clay

Power generation
systemGas cooling tower

Breakdown of Waste Accepted in Fiscal 2013

Resource Recycling through Cement Production

400

Responsible
Corporate
Care
Governance(RC) Activities

Recycling Business in Cement Production

Cement kiln

The main fuel used in our biomass boiler is scrap woodfrom construction sites, collected mostly in Niigata, Nagano
and Toyama prefectures. Currently, the volume of scrap woodfrom such sources totals approximately 30,000 tons per year.
Because of the high-temperature incineration, at 1,000
to 1,100 degrees Celsius, the facility generates virtually no
dioxin and thus satisfies Japan’s latest dioxin regulations forrecently installed incinerators, which sets the limit on maximum
dioxin generation volume at 0.1 nanogram per cubic meter of
exhaust gas. In addition, we eliminate secondary waste fromthe boiler by utilizing the resulting ash as a cement ingredient.
With the launch of this biomass boiler, DENKA became
the first chemical manufacturer in Japan to operate a power

A Comment from an Engineer
Eleven years have passed
since we started operating
the biomass boiler. In the
beginning, we faced anumber of troubles, such as
facility failures and imperfectcombustion, that prevented
continuous operation. Thanks
to facility improvements
and the adoption of moresophisticated operating
Makoto Daio
procedures, we are now
Chief Engineer in charge of boiler
turbines, Cement Section, Cement
able to run the facility
Dept., Omi Plant
constantly for longer than six
consecutive months. We will continue to strive to securestable output from the biomass boiler.

DENKA GROUP CSR REPORT 201433

Corporate
SupplyChain
Governance

Shareholders and Investors

We Are Implementing Our CSR Procurement Policies andGuidelines in Cooperation with the Entire Supply Chain.

While Enhancing Communication with Our Shareholders andInvestors, We Strive to Reflect Their Opinions in Business Operations.

CSR Procurement

Our Approach to Information Disclosure
Message from the General Manager

In accordance with Japan’s Financial Instruments and Exchange
Law and timely disclosure rules set forth by the Tokyo Stock
Exchange, DENKA appropriately discloses information withthe aim of ensuring the transparency of its management. It isalso our policy to proactively disclose information that does
not fall under these regulations whenever such information isconsidered helpful to our shareholders and investors.

Moreover, using such opportunities as results briefings,
corporate briefings for individual investors and the General
Stockholder’s Meeting, we are enhancing communication with
our shareholders and investors while reflecting their feedback
in management decisions and business activities.

Results Briefings
DENKA holds periodic results briefings for analysts andinstitutional investors, believing that maintaining a proactive
approach to disclosing the latest corporate information toshareholders and investors can enhance their understandingof our business operations and growth strategies.
A results briefing for the fiscal year ended March 31,
2014, was held on May 9, 2014. During the briefing, we

Supply Chain/Shareholders and Investors

We believe that our pursuitof lasting trust as an
outstanding manufacturer
cannot be achieved without
the cooperation of suppliers,
as we have to work together
to meet our responsibilities
to society all along the
supply chain. With this inmind, DENKA will work
hand in hand with supplierst o re s o l v e c h a l l e n g e s
confronting them through Toyoki Yokoyama
the provision of feedback General Manager, Purchasing Dept.
on questionnaires and theestablishment of robust partnerships founded on mutual
understanding and trust.

Corporate
With Our Stakeholders
Governance

The DENKA Group is striving to build a robust partnershipwith all its business partners along the supply chain to ensurethat we work together to fulfill our social responsibilities. To
that end, in 2013 the Group established CSR Procurement
Policies and CSR Procurement Guidelines* based on the
DENKA Group Guidelines,* thereby clarifying its approach toand standards for CSR procurement.
In 2014, we began distributing questionnaires to our raw
material suppliers in accordance with criteria set forth in the
CSR Procurement Guidelines. We will enhance our partnershipwith them through the provision of feedback on their CSR
initiatives. The questionnaires will be passed out in a periodic
manner as we aim to promote CSR procurement continuously.

Stakeholder

presented our fiscal 2013 financial results and performance
forecasts for fiscal 2014 while providing explanations of our
fiscal 2013 initiatives under the current growth strategies set
forth in the DENKA100 management plan, as well as theoverseas expansion of our special cement additive business.

The CSR Procurement Policies
1.
2.
3.
4.

We will maintain respect for human rights while striving to improve theworkplace environment and occupational safety and health.
We will pursue environment-conscious procurement, striving to securesafety and to reduce our impact on the earth’s environment.
We will undertake procurement activities based on compliance with
relevant laws, regulations and corporate ethics.
We will purchase raw materials and equipment and consign construction
work by comprehensively taking into account such factors as quality,
prices and delivery time as well as suppliers’ technological capabilities,
supply reliability and their environmental conservation initiatives.

5.

6.

7.

8.

We will sincerely engage with our suppliers and treat them as importantbusiness partners, fostering mutual understanding and trustworthy
relationships with them through fair business transactions.
We will not accept from our suppliers nor provide them with any gifts orentertainment of value that are deemed in excess of social norms or of an
inappropriate nature.
We will not divulge any non-public information acquired in confidence
from our suppliers in the course of procurement activities while properly
managing and protecting their intellectual property rights.
We will maintain an equal partnership with all suppliers and provide themwith equal opportunities for competition in a fair manner.

Corporate Briefing for Individual Investors
On August 29, 2013, DENKA held a corporate briefing forindividual investors in Niigata City.
At the briefing, we presented DENKA’s corporate
overview and history as well as an outline of its domestic
business network and introduced our Niigata-based Omi
Plant, which boasts clean hydroelectric power generation
facilities. We also discussed DENKA SEIKEN Co., Ltd. and its
diagnostic reagents, which are expected to play an essential
role as a growth driver under our new growth strategies.
Corporate briefing for individual investors

Green Procurement
We believe that good products are made only from good raw
materials and through appropriately designed and controlled
processes. We also recognize that upstream management isbasic to controlling hazardous substances. With these in mind,
we are clarifying the required characteristics of procurement
items while implementing upstream management aimed atsecuring quality assurance and compliance with laws andregulations.
Prior to procurement, we agree with suppliers onpurchasing specifications that are in conformity with domestic
and international environmental regulations and otherrequirements. We also obtain Safety Data Sheets (SDSs),

Material Safety Data Sheets plus (MSDSplus) and Article
Information Sheets (AISs) while confirming the results ofscreening for substances subject to mandatory management,such as those under EU’s RoHS*1 regulations.
Moreover, with the aim of securing product safety,
we conduct auditing at and give guidance to suppliers asnecessary by using our in-house developed Negative List.*2*1 Restriction of the Use of Certain Hazardous Substances in Electricaland Electronic Equipment*2 A list of chemicals that ranks substances regulated by laws and subject
to reporting obligations under guidelines for the automobile, electric
equipment and electronics industries by their level of hazardousness,based on which their controlling methods are determined

Response to the Conflict Minerals Issue
In the United States, listed companies are obliged to reporton the status of the use of conflict minerals to the Securities
and Exchange Commission (SEC) in accordance with the
Dodd-Frank Wall Street Reform and Consumer Protection Act
enacted in July 2010 and rules issued by the SEC in August

34

DENKA GROUP CSR REPORT 20142012. Although DENKA is not subject to this legislation, theCompany considers it a social responsibility to undertake
tracking surveys when requested by customers to make surethat its products are conflict mineral free.

General Stockholder’s Meeting
DENKA’s annual General Stockholder’s Meeting provides avaluable opportunity for engaging in direct communication
with shareholders. Accordingly, we send out the notice ofconvocation for the General Stockholder’s Meeting as earlyas possible to give shareholders enough time to examine
the reports and items subject to voting. Such notice is also
posted on our website. We try to schedule the meeting at
the earliest possible date to ensure minimal overlap withsimilar meetings held by other companies. (June 21 in 2013
and June 20 in 2014)
At each meeting, we use narrated videos to supplement
our explanations of the issues under discussion and maintainexhibition booths to showcase our operations.

WEB

Since the fiscal 2007 General Stockholder’s Meeting, wehave been using a voting system that allows shareholders touse electronic voting in addition to regular post. DENKA alsojoined the Electronic Voting Platform for institutional investors
run by the Tokyo Stock Exchange. Voting results for eachresolution are posted on our website after the conclusion of
the meeting without delay.

Please also visit our website to see DENKA’s fiscal 2013 consolidated financial statements posted on pages 22 to 23 of the web-based CSR Report 2014 references (PDF).
* The DENKA Group Guidelines and our CSR Procurement Guidelines are posted on page 3 of the web under CSR Report 2014 references (PDF).

DENKA GROUP CSR REPORT 201435

Corporate Governance
Employees

Stakeholder

We Are Striving to Create an Organizational Culture That Allows
Every Employee to Work Vibrantly and Realize Their Full Potential.
Number of Employees Who Participated in
Mental Health Training in Fiscal 2013

Developing Comfortable Workplaces

Business Site

We are pursuing the DENKA100 initiative in line with the belief
that DENKA’s mission is to help create a more affluent society
through our principal business.
To realize this ideal, it is essential that every employee
has a clear idea of their mission and role and maximizes theirpotential and capabilities. Accordingly, we aim to create an
inclusive workplace that motivates employees and spurs themto pursue ambitious goals.

As a part of our DENKA100 human resource strategies, infiscal 2012 we made extensive revisions to our personnel
system. Specifically, seniority-based promotion was abolishedand a system offering greater career opportunities with anemphasis on leadership and the drive to take on challenges
was adopted. Accordingly, we are striving to ensure that
employee evaluations accurately reflect their performance.
Previously, employees were locked into one of three job
categories, namely, specialists, engineers and general staff;
however, the new system allows employees to change theirjob category. We have also incorporated a program aimed
at promoting engineers who proactively strive to acquire
more advanced skills and techniques (the “Engineers’ Skill
Improvement Plan”). Furthermore, we introduced the in-house“Meister Certification System” for outstanding employees,
encouraging them to serve as role models for their juniorcolleagues.

3 Work-Life Balance

Giving due consideration to the need to balance work andprivate life, we are promoting healthy working styles by
eliminating excessive overtime and encouraging the full use ofannual paid leave.
To reduce overtime work, we are streamlining day to day
operations through such initiatives as GCP activities. Moreover,Wednesday is “No Overtime Day” for the Head Office and allbranches and sales offices. Business units whose staff are
found to working excessive overtime are given warning to
improve.
In addition, annual refreshment leave (one day) is available
to employees at any time, from the beginning of fiscal 2014
onward. At the same time, we have raised the number of daysof annual paid leave granted to new recruits and employees
who have served at the Company for fewer than four years,
thereby facilitating the utilization of such leave. Other initiatives
include upgrading childcare and nursing care leave plans
and facilitating the use of such plans, as we recognize that
employers’ assistance to those who struggle with child rearingor nursing care issues ultimately helps to resolve the challenges
confronting society.

36

DENKA GROUP CSR REPORT 2014

Head Office (specialists)

316

Head Office (general staff)

94
21

Fiscal 2011

Fiscal 2012

Fiscal 2013

Osaka Branch

1,913

1,928

1,925

Innovation Center

35

Overtime hours

84

92

91

Total

466

Average number of paid leave
utilized

9.3

9.2

9.2

Ratio of annual paid leave utilized

50%

50%

49%

Number of employees who tookchildcare leave(Of which, male employees)

3

3

4

(0)

(0)

(0)

Number of employees who took
nursing care leave

0

0

1

Number of employees who took
volunteer activity leave

0

2

0

Total working hours

DENKA’s Three-Year Action Plans in line with the national legislation
to support raising children(From April 1, 2014 onward)
1)

Raise the average number of days of annual paid leave utilized per
employee to 12 or greater

2)

Reduce overall working hours by improving the efficiency of operations

3)

Help young people enhance their understanding of working life andseek stable employment through the provision of internship programs
and plant tours; assist college or university students who have grown
up in vicinity of the Company’s domestic plants in their pursuit ofhigher education through the DENKA Scholarship System

4)

Provide educational support by hosting plant tours and experimental
science classes

4 Mental Health Promotion Plan

Given the recent rise in the number of people who suffer
mental illness, DENKA has designated addressing mental
health issues as a critical management task. In addition tomental health seminars provided at each production site, in
fiscal 2013, DENKA established the Mental Health Promotion
Plan to launch comprehensive countermeasures.
The countermeasures include training focused on “selfcare” and “group-care.” In line with this plan, we have launcheda support structure run by in-house staff while setting up a 24hour helpline run by a third party. Furthermore, we formulated
a reinstatement program for those who are on long-term leave
due to mental healthproblems. In fiscal 2013,
employees at Head
Office, branches andsales offices took partin the aforementioned
training. We will expand
the scope of employees
eligible for training.
Mental health training session for general staff

5 Initiatives to Promote Diversity

DENKA recognizes that respecting the individuality of each
person and allowing them to realize their full potential will, in
turn, bolster its own growth and development. Accordingly,
we are actively pursuing diversity promotion initiatives. For
example, we have set a target of making female workers
account for 20% of the new specialists recruited every year.
As a result, 10, or 22% of the 45 specialists hired in fiscal 2014
were female.
We are also focusing on recruiting foreign students who
have international perspectives and the potential to handle
global business. Consequentially, in fiscal 2014 we welcomed
two new graduates from China. Moreover, five university
graduates from Singapore hired by DENKA Chemicals
Holdings Asia Pacific Pte. Ltd. in fiscal 2013, are taking partin a two-year management training program in Japan. This
program is the first initiative to nurture future executives among
employees hired overseas. In this way, we are developing key
human resources who will drive our global expansion.

6 Reemploying Retirees

Fiscal 2011

Fiscal 2012

2,800

2,832

2,873

Male

2,594

2,630

2,660

Female

206

202

213

Permanent

1,983

2,031

2,032

Temporary

817

801

841

Average age

39.9

39.6

39.8

Average years of service

18.1

17.8

18

New recruits

108

122

103

37

38

34
11

Number of employees

Against the backdrop of the rapid graying of Japan’s
population, DENKA introduced a program to rehire retirees
who have superior technological knowledge and skills. By
enabling them to work even after mandatory retirement age,
we encourage them to continue contributing to our business
operations while passing on their know-how and expertise toyounger employees. Reemployment options include both fulltime and part-time contracts.
In response to the enforcement of the revised law
pertaining to the employment of the elderly, in fiscal 2013
we began incrementally raising the age at which rehired
employees are subject to the renewal or termination of theiremployment contracts. Simultaneously, we raised their wages
to assist them with maintaining income levels until they reachpension age. From fiscal 2014, reemployment contracts allow
each rehired employee to retain in full the paid leave days
that they had been entitled to before mandatory retirement.
Moreover, we established the “Career and Life Planning
Seminar,” targeting specialists who have reached the age of
55 with the aim of helping them better prepare for their lives
after reaching 60. As such, efforts are now under way to create
a welcoming environment for retirees who desire to work evenafter retirement age. Consequently, 88% of new retirees were
reemployed in fiscal 2013.

Gender
Employment status

Specialists (hired fromnew graduates)

Male

Fiscal 2013

5

3

Female managers

1

1

1

Retiree reemployment rate

90

88

88

Female

2.21

2.10

2.24

Resignees

36

35

30

Number of people who resigned within
three years after recruitment

11

14

4

Ratio of people with disabilities

Employees

2 Revisions to the Personnel System

Status of Work-Life Balance (non-consolidated basis)

NumberCorporate
With Our Stakeholders
Governance

1 Underlying Policy

Status of Employees (non-consolidated basis) and Diversity Data

7 Employing People with Disabilities

We are creating a workplace in which people with disabilities
can work with confidence and realize their full potential. The HR
Department, which provides systematic support for employeeswith disabilities, is directly involved in selecting assignments forsuch employees and engages in consultation with their supervisors
as needed. In fiscal 2013, the percentage of employees withdisabilities stood at 2.24%, exceeding the statutory quota.

8 Initiatives with Labor Unions

Since fiscal 2011 onward, management and labor unions haveheld regular meetings aimed at comprehensively reviewing
working conditions through broad discussions with an eye tothe future. In addition, both sides co-sponsor events at Head
Office and each business site as they work together to achieve
the goals of the DENKA100 initiative.

Message from the General Manager
To realize the DENKA100 new
growth strategies, it is essentialthat every employee practices a
spirit of innovation and challenge
in their daily operations.
Therefore, we will facilitate
an organizational culture thatrewards those who take onchallenges toward achievingGroupwide goals and targets
assigned to each section. In
doing so, we will strive to createa vibrant workplace in which
employees take pride in theirduties.

Terumitsu Nakano
General Manager, HR Dept.

DENKA GROUP CSR REPORT 201437

Corporate
Local
Communities
Governance

To Maintain the Trust of Society, We Will Contribute to Local
Communities While Helping the Upbringing of Future Generations.

In November 2013, the signing ceremony for a basic agreement
for the transfer of stadium naming rights was held at the
Niigata Prefectural Office with the attendance of Mr. Hirohiko
Izumida, the governor of Niigata Prefecture, Mr. Mitsugu
Tamura, the president of ALBIREX NIIGATA, and Mr. Shinsuke
Yoshitaka, the president of DENKA. Based on this agreement,
the facility was redubbed the “DENKA BIG SWAN STADIUM”
in January 2014.
At the ceremony, Mr. Izumida said, “We would be so
happy if this move could help DENKA become a company
loved by people all around the prefecture and an employer ofchoice for many talented people.”Also, Mr. Tamura expressed his willingness to assist
DENKA in its proactive initiatives aimed at contributing tolocal communities. Mr. Yoshitaka, who expressed his deep
gratitude for support by the prefecture’s officials, residents

and other community members, declared his commitment tohelping revitalize local communities even further.
DENKA BIG SWAN STADIUM (former Niigata Stadium)
Location: 67 Seigoro, Chuo-ku, Niigata City (within Niigata Prefectural Sports Park)
Site area: Approximately 480,000 m2
Capacity: Approximately 42,000 audiences
Built: March 2001
Contract term: Three years from January 2014

DENKA BIG SWAN STADIUM

The signing ceremony for thebasic agreement

Experimental Science Classes and Other Initiatives to Support Local Communities
Facilitating Interest in Chemistry among Children
We proactively hold experimental science classes for children
to provide them with hands-on experience of chemistry. We
hope that, after attending such events, children will go on toshare with their friends, parents and families the wonders andexcitement of chemistry that they experienced at the classes.
This is one way that we nurture interest in chemistry and gain
people’s confidence in our business operations.
Specifically, DENKA participates in the Summer Holiday
Chemical Experiment Show for Children sponsored by the“Dream Chemistry 21”* committee. Moreover, each domestic
plant and the Innovation Center host facility tours and otherchemistry experiment shows to which they invite local children
and students. These sites also provide on-demand lectureson chemistry at local elementary schools while taking part incommunity events that involve demonstrations of chemistry. In
addition, the plants accept interns looking to gain hands-on
vocational experience at production sites. Examples of theseand other local initiatives are featured in the web-based CSR
Report 2014 references.
While supporting the upbringing of next generations,
DENKA staff in charge of these initiatives are often motivatedeven further when they see the unreserved expressions onchildren’s faces of wonder and excitement at seeing what
chemistry can do.
*

38

A campaign launched in Japan in 1993 to facilitate people’s
understanding of chemistry and the role the chemical industry plays insociety.

DENKA GROUP CSR REPORT 2014

Tamio Yamaguchi
Representative of Junkan
Workers Club*The Report Conveys DENKA’s Commitment
to Safety and Communication

Initiatives to Revitalize Community
Becoming a Naming Rights Partner for the
Niigata Stadium

Third-Party Opinion

Chemistry class

Volunteer activity in Minami Sanriku-cho

Ongoing Social Contribution through Volunteer
Initiatives, Scholarship Programs, etc.
With the aim of supporting the reconstruction of areas affectedby the Great East Japan Earthquake, many DENKA employees
have been participating in ongoing volunteer activities. As of
July 2014, DENKA had dispatched a total of 341 employees
on 42 occasions to restore agriculture, fishery and other local
industries in such areas as Minami Sanriku-cho.
DENKA also helps college or university students whogrew up in the vicinity of its domestic plants through the DENKA
Scholarship System, which was established on the occasionof the Company’s 90th anniversary to provide students withrent assistance.
In addition, each production and business site is engaged
in various social contribution activities, participating in local
festivals and other community events, taking part in blood
donation campaigns, cleaning up roads and public spaces
as well as draining ditches in the vicinity and maintaining
hydrangea beds around their premises.

Each year, as it prepares its CSR report, DENKA has invited me to givelectures on CSR and review their first draft. This year, I gave a lecture
on human rights and disclosure of negative information, and then helda dialogue to share my comments on the first draft of this year’s report.
Among those who attended the lecture and dialogues were DENKA’s
staff in charge of preparing the CSR report, full-time Audit & Supervisory
Board members, executive officers and heads of core departments. The
sight of these enthusiastic attendees left me with a strong impression of
their commitment to CSR and ongoing work to improve CSR reporting.
DENKA’s responses to my comments fall into two categories—(i) feedback the Company decided to reflect in the 2014 edition and,(ii) feedback it plans to incorporate in the next or later editions. For
example, the 2014 edition ended up covering such information as thenumber of occupational accidents in which workers at subcontractors
suffered and the number of employees who resigned within three years
after recruitment. Moreover, in response to comments I made regarding
the previous 2013 edition, information on employees’ working hours,
the rate of annual paid leave utilized and the number of resignees wereincorporated to provide quantitative labor-related indicators. I commend
the Company’s sincere approach to incorporating a third-party’s
suggestions in its activities and the content of information disclosure.
I would also like to compliment this report’s well-organized structure.
For example, sections featuring the operations of the four businessdivisions give a concise and balanced view of topics that readers may
want to know about, such as executives’ commitment, the current market
environment and business strategies as well as social issues that theCompany is tackling, expected technological innovation and solutions
DENKA has created. Also, the site reports feature important reporting
matters, including safety, environmental and communication initiatives
undertaken at each business site. This can be considered one effective
approach to preparing a good CSR report.
The report has also impressed me with DENKA’s commitment tomaintaining safety and enhancing communication.
First, the DENKA Group CSR Report 2014 gives detailed information
on two major accidents that occurred during fiscal 2013, just as theCompany has declared it would in the previous edition. The descriptionsof these accidents are well organized and cover matters that may be ofconcern to readers. Furthermore, president’s message begins by stating
his commitment to safe operations, a sentiment echoed elsewhere bya senior managing executive officer who has positioned safety as theessential part of continued business activities. These statements cause me
to have great expectations for safety initiatives that DENKA will undertake
going forward. That said, DENKA also has to face the reality of its accident
frequency rates exceeding the average for JCIA members for the past
several years. The Company is also having difficulty reducing the numberof accidents its subcontractors’ workers suffer. In light of these factors,
I would like to remind DENKA executives that it will require considerable
effort to eliminate such accidents.

Editorial Afterword

Second, the report highlights the Company’s initiatives to enhancecommunication at all levels of safety activities, labor relations, marketing
activities, human resource development, local contributions and investor
relations. Enhancing communication involves reporting, feedback,dialogue, and engagement. I expect DENKA to examine the progressof its initiatives in terms of the above stages and use these initiatives tofurther promote corporate reforms.
In addition, I would offer three suggestions aimed at enhancing
the quality of the Company’s CSR reporting and activities in step with
DENKA’s global expansion.
Firstly, greater emphasis must be put on human rights. The
DENKA Group CSR Report 2014 hardly mentions this issue, except forat the beginning of the Company’s CSR Procurement Policies. It has
been reported through various surveys that awareness of human rights
protection is relatively lagging among Japanese companies. On the other
hand, “soft law” initiatives addressing human rights, such as ISO 26000
and United Nations’ Guiding Principles on Business and Human Rights,
have been announced one after another. Businesses not fully aware of
the growing importance being placed on human rights protection run
the risk of violating human rights in the course of business activities.
Therefore, I recommend DENKA to position human rights as a core CSR
topic and to examine these “soft laws” when formulating policies andaction plans.
Secondly, a global human resource strategy should be established.
The DENKA100 new growth strategies place emphasis on localizing
production. For this, it is indispensible to draw up an overarching strategy
aimed at managing and nurturing human resources throughout theGroup. I also ask DENKA to feature the voices of overseas employees
who lead the Company’s efforts to put down roots overseas.
Thirdly, I would like to see reporting topics selected in accordancewith their materiality.** Although this report addresses the majority of items
set forth in GRI guidelines, and referring to guidelines is helpful whenidentifying areas in need of improvement, insisting on comprehensivenessover all goes against the global trend. It is not easy to select topics bymateriality, but I strongly recommend DENKA to do so by referring to theG4 Sustainability Reporting Guidelines, which will help determine material
issues in a more standardized manner.
* An NPO dedicated to fostering the harmonious coexistence of society andnatural ecosystems through research conducted from a global perspective.
It studies and spearheads local community efforts for creating a recyclingoriented society joining citizens, businesses and governments, presenting
recommendations through CSR workshops and other means.
URL: http://www.nord-ise.com/junkan/ (Japanese only)** A concept to assess the relevance of information that organizations could
include in their reports. An organization’s activity is deemed material if suchactivity makes a significant impact on the economy, the environment, society or
stakeholders’ decision making, whether such impact is negative or positive.

Noriyuki Shimizu General Manager, CSR & Corporate Communications Dept.

First of all, we would like to express our gratitude to the readers of the DENKA Group CSR Report 2014. In the printed brochure of this 2014
edition, we highlight our countermeasures to prevent the recurrence of the two major accidents that occurred during fiscal 2013, top executives’commitment to safety and Companywide initiatives to create a safety-oriented corporate culture. The subsequent content of the report is structured
around the six pillars of the DENKA100 initiative aimed at achieving sustainable growth. In particular, we present explanations by division heads
about initiatives taken or planned to promote our growth strategies, which were newly established in fiscal 2013. Moreover, we have added dataon the environmental performance of Group members while enriching the content of quantitative information related to our initiatives for creating
an inclusive workplace.
We would also like to thank Mr. Yamaguchi, who has provided us with a number of valuable suggestions that helped improve the reportthrough two dialogues and the preparation of the third-party opinion. As we aspire to further enhance our CSR activities and information disclosure
going forward, we would like to ask our readers to give their frank opinions and comments. Listening sincerely to our stakeholders, we will continue
our efforts to contribute to the sustainable development of society while fulfilling our corporate social responsibility.

DENKA GROUP CSR REPORT 201439