Bringing 100 years of technology and trust,
now and to the future

CSR Report 2020

CSR Report

2020

Contents

3

Overview of Koei Chemical

3

Top message

7

Mid-term management plan and capital investment

9

Business Segments

10

Financial Highlights

11

Governance13

Approach on Safety, Environment and Quality Assurance

13

Responsible Care

15

Safety and Health Activities

17

Environmental Preservation Activities

21

Quality Assurance Activities

22

Dialogue with Shareholders and Investors

23

Relationship with Local Communities

25

With Employees

29

Third-party Opinion

30

Company Information

Editorial policy
Editorial policy
This report is intended to provide information to help many
stakeholders understand Koei Chemical’s CSR activities.
We strive to make this material clearer and more reader-friendly
by using graphs and pictures.
Reporting period
April 2019 to March 2020
(information for April 2020 and later is partially included.)Issuance
October 2020

1 ｜ CSR Report 2020

Corporate Philosophy
We treat trust and honesty as our mission, and aim to become a│ 1 │ company where vital talent and knowledge congregate.
Contribute to the growth of society by providing useful products that│ 2 │ are the results of creative technologies.

Contribution to a sustainable
society
CSR Basic Policy
The Koei Chemical Group will enhance
corporate value by providing new value
through business activities based on thetechnology and trust that it has beendeveloping until today in order to contributeto the improvement of the quality of human
lives globally. We will also actively promote
initiatives for global environmental issues
and the development of local communities.
To this end, we will perform businessactivities in compliance with Japanese andoverseas laws and regulations, as well as thecorporate philosophy of the Koei ChemicalGroup, while striving to perform safety,
environment and quality assurance activities
with the aim of realizing a sustainable
society by taking stakeholder’s concerns
into consideration.

Koei Chemical’s policy on SDGs*
Koei Chemical will contribute to a sustainable society byachieving SDGs through diverse business activities.
Operating and R&D activities
Safety and health activities
Environmental preservation activities
Quality assurance activities
Dialogue with shareholders and investors
Relationship with local communities
With employees* Sustainable Development Goals, which are adopted by the United
Nations, are globally shared issues to be achieved by 2030.

CSR Report 2020｜2

Top message

Koei Chemical’s Challenge to Aim
at Creating a New Era

My name is Ray Nishimoto. I was appointed
President as of June 26, 2020. I will devote
every effort to the further development ofour businesses in order to respond to the
expectations of stakeholders.
In the interview below, I will report on thestatus of management based on the mid-term
management plan and discuss initiatives forsustainable growth and creation of social value.
President
Career Summary
April

1980

July

2003

October 2004

Succession and further evolution of
corporate culture

Ｑ│

Please tell us about your profile andambitions as the new President.

Since joining Sumitomo Chemical Co., Ltd. (current
SUMITOMO CHEMICAL COMPANY, LIMITED), our parent
company, I had worked in a variety of fields, mainly
engaged in administrative and planning duties. Over thecourse of my career, I was most deeply engaged with the
Health & Crop Sciences Sector, primarily throughparticipation in overseas agrochemical projects. Given thisbackground and other factors, I served as Outside Directorof Koei Chemical for one year from 2012.
At Sumitomo Chemical, which promotes sustainability
management, I gained a wide range of experiences by also
taking charge of many businesses that would contribute to
3 ｜ CSR Report 2020

June

2006

April
April
June
April

2009
2011
2012
2013

June

2013

April

2015

April

2019

April

2020

June

2020

Joined Sumitomo Chemical Co., Ltd. (current
SUMITOMO CHEMICAL COMPANY, LIMITED)
General Manager, Development Operations
Department, AgroSolutions Division International
General Manager, Business Planning Department,
AgroSolutions Division - International
General Manager, Planning & Coordination
Office, Crop & Chemical Sector
Executive Officer
Managing Executive Officer
Director, the Company (concurrent position)
Managing Executive Officer, SUMITOMOCHEMICAL COMPANY, LIMITED (in charge of
Health & Crop Sciences Sector)
Representative Director, Managing Executive
Officer (same as above) Resigned as Director of
the Company
Representative Director, Senior Managing
Executive Officer (same as above)
Representative Director, Executive Vice President(same as above)
Director
Advisor, the Company
President, the Company (current)

resolving social issues. In recent years, as part of our
response to SDGs, I have taken the leadership of projects
involved in the development and promotion of products
such as Olyset Net, an insecticidal mosquito net, in aneffort to contribute to global activities aimed at preventing
malaria in developing countries. I believe that I can makeuse of such experiences in the management of Koei
Chemical.
Upon assuming the post of President, I have made it mymission “to create a future for Koei Chemical that
promotes the happiness of employees through sustainable
development of the Company, and do my best tocontribute to the realization of a sustainable society
through business activities.” I also intend to steer
management based on an awareness of the following
issues.
First, the top priority issues are full and strict
compliance, safe and stable operations, and business
operation focused on quality. Taking these issues into

Ｑ│

How is the spread of COVID-19 affecting thebusiness of Koei Chemical?

The global spread of COVID-19 has forced people tochange their lifestyles and seriously affected manyindustrial sectors. In our business, we fortunately do notdepend heavily on certain product groups or sectors andare engaged in the supply of a broad range of productsin the upper stream of supply chain. As such, COVID-19
has not had a significant impact for now, with our recent
performance remaining strong.

CSR Report 2020

Company Information

In recent years, we have not only provided products but
also focused on making proposals that support value
creation for client companies using our products as we
make a gradual transition to becoming a research anddevelopment-oriented company. By doing so, we arepromoting the solutions business that also provides custom
synthesis and industrialization technologies. In order toreflect our will to expand our business domains beyond
the framework of the “kagaku kogyo” (chemical industry)in our company name, we changed our company nameThird-party Opinion

Please tell us about the reason for changing
the Company’s name.

With Employees

Ｑ│

The mid-term management plan “Transformation KOEI”
that started in FY2019 proactively invests 15 billion yen
over three years to transform the Company with a view tocreating value for the next 100 years by rebuilding corebusinesses and expanding growth businesses. Specifically,
we will invest in the construction of a multi-purpose plantin the Chiba Plant and the reconstruction of the amine
plant. Along with such capital investment, we will
accelerate development of next-generation products,
strengthen competitiveness in existing businesses, andrenovate the business process with the aim of achieving
net sales of 20 billion yen and operating profit of 2 billion
yen (operating profit margin of 10%) in the final year of
the plan (FY2021).
In the first year of the plan, we got off to a strong startin terms of performance by achieving a 10% operating
profit margin due to an increase in net sales and asignificant improvement in profit. As for the capital
investment plan, we made a decision in May 2020 toconstruct a new multi-purpose plant.
Research and development capability is what drives theCompany’s growth. We will allocate human resources andcapital to research and development to refine thiscapability as a source of value creation. Going forward, we
will focus on strengthening corporation with theSumitomo Chemical Group and utilizing open innovationin order to accelerate and enhance research anddevelopment. (Please also refer to pages 7 and 8 for moredetails.)

Relationship with Local
Communities

Leaping beyond the boundary of thechemical industry based on chemistry

Please tell us about the progress of the midterm management plan.

Dialogue with Shareholders
and Investors

The Company, located higher upstream in the supply chain
than Sumitomo Chemical, engages in businesses especiallyrelated to intermediates, etc. in the fields ofpharmaceuticals and agrochemicals, and electronicmaterials. Although we are not carrying out direct businesswith end users, we are recognized for being extensively
involved in various markets and providing high-added
value. Our strength lies in having many unique products
developed by using proprietary manufacturing
technologies and processes.
Given the large number of competent and highly
motivated employees we have and close cooperation
maintained between divisions, I believe it is fully possible
for us to further advance creative research anddevelopment, thereby achieving sustainable growth.
Meanwhile, we may need to create new technologies tomake the next leap forward by also using outside
knowledge mainly through open innovation going
forward.
I will aim at creating a company where employees arefilled with vitality to tackle issues more proactively while
inheriting a corporate culture based on creativity andtechnological capabilities which have been fosteredthrough its history of more than 100 years.

Ｑ│

Approach on Safety,
Environment
and Quality Assurance

How do you view Koei Chemical as acompany? What will you change and what
will you inherit going forward?

from Koei Kagaku Kogyo (Chemical Industry) Kabushiki
Kaisha to Koei Kagaku (Chemical) Kabushiki Kaisha on
October 1, 2020.
People’s lives and industries are undergoing significant
changes due to advancements in digitalization,
globalization trends, and rising environmental awareness.
Amid this trend, the chemical industry has always
continued to create new materials, technologies, andsolutions required by such changes. With the change of
the Company’s name, we will aim to accurately grasp andmore swiftly respond to the needs of society and trends inthe industry, market and customers.

GovernanceＱ│

Overview of Koei Chemicalaccount, I will promote strategic initiatives to achieve the
mid-term management plan that is now in progress. In
addition, to utilize the group power of the Sumitomo
Chemical Group, I will build a business foundation thatallows us to execute growth strategies, while forging
stronger partnerships with internal divisions and partnercompanies. I am committed to demonstrating leadershipand enhancing the Company’s corporate value whileachieving a balance of management in terms of bothhuman resources and business performance.

｜4Top message

However, since the decline in demand may gradually
spread to the upstream domain as well over the medium
to long term, we will closely watch the trends indurable consumer goods such as automobiles as well as
information and electronic materials, both pertaining toresins and paints, and prepare for any changes.
We supply Pyrrole, a raw material of Remdesivir, andPyridine, a raw material of Avigan®, to the respective
pharmaceutical companies, and sales of these raw
materials are expected to contribute to our performance.
These drugs are expected to be effective against
COVID-19. Since Koei Chemical is the sole manufacturerof Pyrrole and Pyridine in Japan, we recognize that it is an
important social responsibility to supply these materials
stably. We will continue maintaining this supply system tocontribute to the eradication of this infectious disease.

Aiming to realize a sustainable society

Ｑ│

How would you evaluate Koei Chemical fromthe standpoint of CSR/ESG management andwhat kind of initiatives would you promote?

Unlike Sumitomo Chemical, we do not practice CSR/
ESG management by taking an all-around approach ona large scale because the size of our company differsfrom that of Sumitomo Chemical. However, we not only
take initiatives for safety, the environment and productquality that support “Responsible Care” which chemicalcompanies are required to take but also implement various
activities including contributing to the local community.
Through public relations and IR, we will further promotethese activities and disseminate information externallyand spread recognition thereof within the Company inthe hope of making employees, too, feel proud of these
initiatives.
Going forward, we also intend to adopt the sevenmaterial issues (materiality) that the Sumitomo ChemicalGroup addresses, making them as the guideline for our
CSR/ESG management. These material issues consistof four issues related to the creation of social value,
namely “contribution to reducing environmental impact,”“contribution to solving food issues,” “contribution
to solving healthcare issues,” and “contribution to ICT
innovation,” and three issues for the creation of value inthe future, namely “promotion of technology innovation
and research and development,” “initiatives for digital
innovation,” and “promotion of diversity and inclusion.”
These issues aim at continuously creating economic value
and social value through business activities.
We will tackle the seven material issues and contributeto realizing a sustainable society through business whileachieving our own sustainable growth. In order to follow
up on the achievements of these initiatives and evaluate
the status of activities, it would be necessary to establish
specific KPIs to conduct performance management. We

5 ｜ CSR Report 2020

will set up a promotion system for sustainability activities
as a company-wide project, and internally discuss what
KPIs should be used to grasp the achievements related tothe material issues, while linking our business activities
with SDGs (Sustainable Development Goals for 2030
adopted by the United Nations) themes.

Building Relationships with
Stakeholders

Ｑ│

Please explain the measures for employees
who support the Company’s development
and aim to grow together with the Company.

Under the mid-term management plan, we will “renovate
business process” as one of the priority themes forachieving the targets. By enhancing the work efficiencyof each employee and shifting to more high-value-added
operations, we will enhance the Company’s value creation
capabilities while making efforts to create a workplace
where employees can work with a sense of fulfillment
and to promote “work style reform.” Over the past year,
we have identified problems in each workplace and took
company-wide initiatives based on the proposal for items
for improvement. We are intent on adding items for
improvement as appropriate while continuing to put the
improvement proposal into action swiftly.
In my greeting message to employees upon taking
office as President, I called on them to understand thebig picture that their work resolves social issues andcontributes to the realization of a sustainable society, andalso requested them to keep in mind the following fiveitems as action guidelines in their day-to-day work.
First, employees should always pursue the best
performance as professionals in charge of their respective
operations in order to outperform their competitors.
Second, they should proactively tackle issues and actively
recommend improvements and reforms. Third, they shouldhave a broad view by keeping in mind the medium- tolong-term perspective and overall optimization. Fourth,they should conduct thorough time management in aneffort to improve productivity. And fifth, they should
pursue the best performance as an organization throughteamwork based on self-management of these four items.
Based on these action guidelines, I will commit
myself to creating an organization filled with vitality andmotivation to build the next 100 years, while promoting
reformation of each employee’s mindset.

Overview of Koei Chemical
GovernanceApproach on Safety,
Environment
and Quality Assurance
Dialogue with Shareholders
and Investors
Relationship with Local
Communities

What is your message regarding co-existence
and co-prosperity with all stakeholders?

Third-party Opinion
Company Information

The approach of cultivating business with all stakeholders,
including shareholders, investors, clients, business
partners, local communities, and employees who
support the Company and their families, and sharing theresults thereof with them, is a prerequisite for achieving
sustainable growth as a company and provides the reason
for its survival in society. We would like to value two-way
communication to achieve co-existence and co-prosperity
with all such stakeholders.
We will build closer relationships than ever before
with customers through the solutions business which
we will be advancing going forward. We will deepen
communication to solve issues with a view to forging a
win-win partnership based on strong trust.
With regard to co-existence with local communities,
we will take action by always bearing in mind what we
can do and what is required of us as a company in orderto give back and contribute to society extensively while
cooperating with Sodegaura City, Chiba.

We recognize that it is an important management issue
to reward support through enhancement of long-term
corporate value while returning profits to shareholders andinvestors through stable dividend payments.
We will also aim to engage in two-way communication
to listen to the opinions and requests from investors andshareholders and reflect them on corporate management,
while enhancing dissemination of information throughactive IR activities.
It is my hope that you will look forward to thechallenges Koei Chemical will take on as we aim to create
a new era.

With Employees

Ｑ│

CSR Report 2020｜6

Mid-term management plan and capital investment

Progress of Mid-term Management Plan and Capital
Investment Plan
With the impact of the spread of COVID-19 on economic and social activities becoming increasingly
serious, the business environment is expected to become increasingly severe in Japan and overseas
as concerns over a global economic recession are also mounting. Under these circumstances, we willcontinue optimizing sales prices, expanding sales, and securing profit while steadily implementing
the mid-term management plan with the aim to become a company with a strong businessfoundation that is unaffected by the business environment.

1

Mid-term management plan KOEI2021 -Tradition and ChallengeBasic policy of the mid-term management plan1

Accelerate development of next-generation products

2

Strengthen competitiveness in existing businesses

3

Renovate the business process, shift to high-value-added activities, andtransform work style

4

Ensure full and strict compliance and maintain safe and stable operations

5

Make investments proactively to expand businesses

6

Vitalize human resources for business expansion

Performance targets for FY2021
Net sales ..

20billion yen Operating profit .. 2billion yen Operating profit margin .. 10%

Status of progress in the current fiscal year
Koei Chemical has been implementing the mid-term
management plan “KOEI 2021 -Tradition and Challenge-”
for FY2019-2021. In this plan, we aim to transform into a“new Koei Chemical” through the integration of “tradition
without changing” and “challenge for innovation” which
we have fostered through our 100 years of history.

7 ｜ CSR Report 2020

In FY2019, the first year of the plan, although net sales
amounted to 18.5 billion yen compared to the target of
20 billion yen, operating profit increased significantly to 1.8
billion yen compared to the target of 1.4 billion yen due toan improvement in the terms of trade and our response to
the changing business environment.

Overview of Koei Chemical

2

Capital investment plan

Governancenext-generation products, in order to further expand
business.
We are also reconstructing the plant for existingproducts comprising amines, pyridines and formalin. The
plant for existing products is nearly 50 years old, and it is
now time to renew the plant facilities on a large scale. This
reconstruction aims not only to renew facilities but also toenhance competitiveness by installing equipment for theenhancement of productivity, automation, and energy
saving.
By expanding the growth business and next-generation
products through the construction of CMⅣ, and also byenhancing competitiveness through the reconstruction of
the plant for existing products, we will transform into a“new Koei Chemical.”Approach on Safety,
Environment
and Quality Assurance

We plan to invest 8.6 billion yen to build a new series ofmulti-purpose plant (CMⅣ) in the Chiba Plant.
Construction is scheduled to start in April 2021 andscheduled to be completed in August 2022.
We position the custom synthesis business, includingintermediates for pharmaceuticals, metallocene catalysts,
and electronic materials related products at the multipurpose plants (CM series), as a growth business and have
expanded production capacity by constructing CMⅠ, CMⅡ
and CMⅢ within the Chiba Plant due to increased
demand. CMⅣ will be the largest capital investment to
date. At CMⅣ, we will expand the high-value-added
custom synthesis business and manufacture urethanerelated products (URECKO®), which are positioned as

Dialogue with Shareholders
and Investors

Reconstruction of plant for existing products= Strengthening of core business

Reconstruction

Pyridine plant

Formalin plant/utility

Relationship with Local
Communities

Amine plant(co-generation/liquid waste
treatment facility, etc.)

Enhancement of productivity, automation, energy saving

Enhancement ofcompetitivenessWith Employees

Strengthening of multi-purpose plants (CM series)= Expansion of growth business

CMⅠ
1-5m³ series

CMⅡ
10m³series

CMⅢ
10m³ + 3-5m³
seriesThird-party Opinion

New construction

CMⅣ
10m³series

Strengthening of core business (reconstruction)+
Expansion of growth businessCompany Information

Expansion of custom synthesis business and expansion of next-generation products

Becoming a
new Koei Chemical

CSR Report 2020｜8

Business Segments

Fine chemical business (2019)
For pharmaceuticals and agrochemicals, revenue increased due to steady sales of intermediates for pharmaceuticals andagrochemicals. For functional chemicals, revenue increased due to the contribution of sales of new products including opticalmaterials-related products, although catalyst-related products showed sluggish growth. For other fine chemicals, sales ofresin-related products increased.
As a result, net sales of this segment amounted to 15,104 million yen (up 5.0% YoY) and operating profit amounted to
1,846 million yen (up 53.5% YoY).
Net sales (million yen)
■ Pharmaceuticals and agrochemicals■ Functional chemicals ■ Other

14,38015,1042,202

2,007
Rate of change

Proportionof sales

6,253

5.0%

6,394

82%

6,119

6,507

2018

2019

ionic liquids(KOELIQ®)

AminesPyridines

Application

Pharmaceuticals, agrochemicals,solvents, adhesives

Pyrazines

Application

Pharmaceuticals, agrochemicals

AminesApplication

Surfactants, polymers,
photographic agents,
Pharmaceuticals, agrochemicals,
paintsOperating profit (million yen)
1,846
1,203

Rate of change

53.5%

2018

2019

Chemical products business (2019)
For polyol alcohols, revenue decreased as a result of lower sales prices reflecting a decline in raw material prices, in addition toa sharp downturn in domestic related demand. Other chemical products, too, remained sluggish. Profit improved, reflecting
lower fixed costs due to impairment.
As a result, net sales of this segment amounted to 3,423 million yen (down 12.8% YoY) and operating profit amounted to
8 million yen (an operating loss of 33 million in the previous fiscal year).
Net sales (million yen)
■ Polyol alcohols ■ Other

3,928

3,423

756
Rate of change－12.8%

Proportionof sales

18%

3,172

684

2,739
Polyol alcohols

2018

Formalin2019

Formalin

Application

Adhesives, synthetic resins, paints,
inks, lubricants, plasticizers, etc.

Polyol alcohols

Application

Paints, inks, lubricants, plasticizers

Operating profit (million yen)

△ 33

2018

9 ｜ CSR Report 2020

Rate of change

8124.2%

2019

Financial Highlights

Operating income
Operating margin

18,27917,27818,144

18,52818,309

8.1
6.6
1,402

2017

2018

2015

2019

1,703

8.4
6.4

1,527

1,854

1,390

1,361

1,104
1,169

2016

2017

2018

2015

2019

2016

2017

2018

2019

Approach on Safety,
Environment
and Quality Assurance

Net income (Millions of Yen) /Net income per share (%)

2,016

Governance2016

Ordinary profit (Millions of Yen)

10.4

1,210

2015

Overview of Koei Chemical

Operating income (Millions of Yen) /Operating margin (%)

Net sales (Millions of Yen)

Shareholders’ equity ratio (%) /ROE (%)

Total asset (Millions of Yen)

Net income
Net income per share

1,112.47

29,202

29,32329,802
64.5

23,96966.6

Dialogue with Shareholders
and Investors

Shareholders’ equity ratio
ROE

70.5

68.7

60.4

20,740196.45232.03
1,135

435
2015

5,441

2016

2017

960

1,568

2018

2019

3.3
2015

2016

2015

2017

2018

2016

2019

2015

2017

8.1

4.9

2016

2017

2018

2018

7.6

Relationship with Local
Communities

88.92

32.1

320.6020192019

17,27818,14418,30918,528Operating income(Millions of Yen)

1,210

1,402

1,527

1,169

1,854

Ordinary profit(Millions of Yen)

1,104

1,390

1,703

1,361

2,016

Net income(Millions of Yen)

435

1,135

5,441

960

1,568

Total asset(Millions of Yen)

20,74023,96929,202

29,32329,802

Total shareholders’ equity(Millions of Yen)

13,37914,487

19,46020,131

20,997

Free cash flow

(Millions of Yen)

577

△440

5,126

△1,730△1,454

ROE

(%)

3.3

8.1

32.1

4.9

7.6

Payout ratio

(%)

45.0

21.5

6.3

30.5

25.0

CSR Report 2020

Company Information

18,279

Third-party Opinion(Millions of Yen)

With Employees

Net sales｜ 10

GovernanceIn order to respond to the expectations of stakeholders, we strive to establish and operate aneffective corporate governance system and continuously strengthen and improve the system.

Basic policy on corporate
governanceCorporate governancesystemIn order to perform fair corporate activities, we strive to operate an effective
corporate governance system and continuously strengthen and improve thesystem. In terms of our business management system, we have establishedthe Board of Directors and the Audit & Supervisory Committee, as well as theInternal Control Committee, the Risk Control & Compliance Committee andother necessary committees, which are intended to supplement and reinforce
the function of the Board of Directors. Our businesses are being operated
under the supervision of these organizations. We also endeavor to enhance
corporate value through efficient management in pursuit of the best possible
corporate governance.
In accordance with the resolution passed at the 155th Ordinary General
Meeting of Shareholders held on June 24, 2016, Koei Chemical transitioned
from a company with a board of corporate auditors to a company with an audit& supervisory committee. By establishing the Audit & Supervisory Committee,
the majority of which are outside directors, and through the appointment ofseveral outside directors, the supervisory function of the Board of Directors
has been further strengthened, leading to the further enhancement of ourcorporate governance system.
In addition, in order to further strengthen the supervisory function, threeoutside directors are registered as Independent Officers with the Tokyo Stock
Exchange.
Outline chart of corporate governance system

General Meeting of Shareholders

Accounting Auditor

Audit & Supervisory
Committee

Board ofDirectors

Nominating
Committee
Remuneration
Committee(Optional advisorycommittees)<Committees>
Internal Control
Committee
Risk Control &Compliance Committee
Responsible Care
Committee<Business execution system>
Internal Control & Audit Office

11 ｜ CSR Report 2020

Representative Director

Directors

Departments and affiliated companies

Overview of Koei Chemical

We have established a whistle-blowing hotline that allows officers andpersonnel to report compliance violations or the risk thereof if they detect theoccurrence inside Koei Chemical or an affiliated company (speak-up system).
We use sufficient caution with respect to the privacy of whistle-blowers andconsulters so that they will never be treated disadvantageously on the groundsof having made a report/consultation under this system.

Dialogue with Shareholders
and Investors

For the purpose of raising the awareness of officers and personnel regarding
compliance, Compliance News is posted in the Company’s newsletter, which is
published twice a year. This reader-friendly article mainly discusses topics thatare closely related to personnel with the use of illustrations and graphics.

Relationship with Local
Communities

Familiarization with thecompany newsletter

Approach on Safety,
Environment
and Quality Assurance

Speak-up system

Governance“Earning the trust of society as we pursue ourbusiness activities” has been positioned as thebasis of Koei Chemical management. In order toobtain the trust of society, observation of laws,
regulations and social ethics (compliance) is
essential.
We have prepared the Compliance Manual
to familiarize officers and personnel withcompliance. This manual has been revised asneeded in response to the amendment of laws
and regulations.

ComplianceWith Employees

Outside Director(Audit & Supervisory
Committee Member)

Four years have passed since I was appointed outside director of the Company. During
this period, the Company has implemented various measures to strengthen governance,
including transitioning to a company with an audit & supervisory committee, evaluating
the effectiveness of the Board of Directors, introducing the Nominating Committee and theRemuneration Committee, which are optional advisory committees, and establishing theOutside Director Session. I feel that, along with governance reform of Japanese companies
based on the Corporate Governance Code, my role and importance as outside director of
the Company have been increasing every year.
In addition to the basic roles of performing audits of the duties of executive
directors and supervising internal control, I intend to continue making the necessary
recommendations while remembering to appropriately reflect the opinions of stakeholders
including minority shareholders at Board of Directors meetings.

CSR Report 2020

Company Information

Ken Takiguchi

Third-party Opinion

Message from Outside Director｜ 12

Approach on Safety, Environment and Quality Assurance

Responsible Care

The global chemical industry is working voluntarily to protect safety, the environment andproduct quality through every process from the development of chemical substances, their
manufacture, distribution and use to final consumption and disposal, as well as engaging incommunication with the public by openly disclosing performance. These initiatives are known
as “Responsible Care.”
Basic policy regarding safety,
the environment and productquality(Formulated on January 1,
1995)

We treat trust and honesty as our mission, and combine our vital talent andknowledge to contribute to the growth of society through the provision of
useful products that are the results of creative technologies.
We not only place safety above all else in various phases of businessactivities including research and development, production, logistics, and sales
but also give priority to the following activities related to the environment andquality as well.
1

We will continue operations without accidents and injuries to ensure the safetyof our employees and the local community.

2

We will confirm the safety of raw materials, intermediates and products toprevent health problems of the people involved including employees, logistics
staff, customers, and general consumers.

3

We will supply high-quality products and services that satisfy customers’ needs
and ensure safety in their use.

4

We will evaluate and reduce the environment impact throughout the entire
life cycle of a product from development to disposal for the purpose ofenvironmental preservation.

All divisions and all employees will comply with laws and regulations andstandards and constantly make improvements with the recognition of theimportance of this policy.

Responsible care activities(Formulated on January 1,
2009)

In accordance with the Corporate Policy on Safety, Environment and ProductQuality, Koei Chemical will actively strive to promote responsible care activities
in developing our business, and will also do its utmost to achieve sustainable
development and earn the trust of society.
1
2
3
4
5
6
7
8

We will achieve our zero-accident, zero-injury targets to ensure stable
operations.
We will conduct risk management throughout the life cycle of our products,
including development , manufacturing, transport and disposal,and strive to conserve the environment, as well as to ensure the safety andhealth of our employees as well as that of the local community.
We will comply with domestic and international laws and standards relating
to safety and the environment, and strive to meet even stricter targets thanrequired by law.
We will promote the conservation of resources and energy and to minimize
waste emission and strive to conserve the environment.
We will implement the requisite education and training of our employees
relating to safety, the environment and product quality and will promote
effective responsible care activities.
We will promote both risk-reduction and accident-prevention from theperspective of product safety and quality.
We will evaluate the content of our activities and seek to implement
improvements through internal audits pertaining to occupational health andsafety, security and disaster prevention, environmental protection, chemicalsafety, product safety, and quality assurance.
We will keep the external communication among a related government office,the region, and the stake holder, and aim at coexistence with thesociety.

This line of action makes public to all workers and the person with whom
it relates, shall be understood, and assumed to be the one to attempt the
improvement of consideration.

13 ｜ CSR Report 2020

Overview of Koei Chemical
GovernanceWe formulated the basic policy regarding safety, the environment and productquality in 1995 in which the performance of Responsible Care was declared.
Having recognized this policy, officers and personnel are making continuous
efforts to improve the management system in compliance with laws andregulations. In addition, an officer who is in charge of safety, the environment
and product quality oversees all the duties regarding safety and health,environmental protection, security and disaster prevention, quality assurance
and chemical safety.
We have established the Responsible Care Committee, which is chaired by
the President, as the supreme decision-making organization that promotes
Responsible Care activities. The Responsible Care Committee meetings are held
twice a year. The Committee reviews the results of activities performed during
the previous fiscal year and approves plans to be implemented for the current
fiscal year to ensure continuous improvement of the management system. In
addition, we perform internal audits on a regular and as-needed basis to checkthe effectiveness of the activities.
We have acquired ISO certification, which is the international standard
relating to environmental and quality management systems, as one of thetools to promote Responsible Care activities. We also focus on the overall
improvement of system performance.

Efforts for responsible care
activities

Approach on Safety,
Environment
and Quality Assurance
Dialogue with Shareholders
and Investors

Cross correlation chart of major processes

Relationship with Local
Communities

Continuous improvement of management system
Zero-accident and zero-injury operation/product safety/customer satisfaction/
reduction of environmental impact/expansion of business and profit

Requirements ofstakeholders

Product realization

Products

Sales and marketing
Design development
Production plan
Procurement of
raw materials
Manufacturing
Outsourcing
Quality management
Storage and shipment

Measurement, analysis,
improvement
Target management
Management of management system
Management of quality assurance

Input

Third-party Opinion

Satisfaction

Feasibility and profitability
EnergyEnvironmental impact
Provision of personnel
Provision of facilities

Operational
side
Performance

Complaints

Establishment ofpolicies and target

With Employees

Manager’s responsibility

Customerrequirements
and information

Operational managementof resources

Manager’s responsibility

Requirements ofcustomers

Performance
Provision of
resources
Operational
management

Customer satisfaction

Internal audit

Company Information

CSR Report 2020

｜ 14

Approach on Safety, Environment and Quality Assurance

Safety and Health Activities
Based on the basic principle of “placing safety above all else,” we are making concerted
efforts with all employees and all persons concerned including cooperating companies thatwork with us, to ensure worker safety and health so that personnel can work comfortably.

Based on the basic principle of “placing safety above all else,” we strive toensure worker safety and health with the aim of making safety and stable
operation our strength.
More specifically, we perform activities to periodically discuss and consider
issues regarding safety and health, and determine measures mainly throughthe Safety and Health Committee and the safety and environment promotion
members’ meeting.
In addition, we perform concerted safety activities by organizing various
campaigns with the aim of eliminating both minor and major disasters. During
the campaign period, the identification of dangerous sites and theimprovement thereof, the promotion of Hiyari-Hatto (near-accident situations)prevention activities, the strengthening of risk detection, the promotion of thepointing and coding method and other necessary measures are conducted bysafety and environment promotion members, which are representatives
appointed in each workplace.
Moreover, we have established the Safety and Environment Promotion Task
Force for plant reform activities. These activities are being strengthened bypositioning the Task Force as an important pillar of reform activities.
Both the President and Plant Directors, which are the top members of theplant, inspect the relevant workplace and are actively involved in various
initiatives such as ensuring Japanese 5S methodology, raising safety awareness,and eliminating safety issues. In this manner, ensuring safety is treated first andforemost.

Safety, security and disasterprevention

Safety slogan

Safety workshop

With regard to work-related accidents, there were no industrial injuries in
FY2019.
The number of zero-injury days reached 4,054 (as of March 31, 2020),
which is equal to over 10 years. As shown in the following graphs, frequency
rates of industrial injuries and severity rates of industrial injuries remain zero.
Unfortunately, non-lost-time minor injuries occurred. We conduct RC zeroaccident audits even on minor injuries to find the cause and implement
additional measures, while making efforts to undertake horizontal deploymenton the prevention of the occurrence of similar injuries to achieve zero-injuries.

Disaster training

Frequency Rates of Industrial Injuries

Severity Rates of Industrial Injuries

Koei

Koei

Chemical industry in Japan(Calendar year)

Chemical industry in Japan(Calendar year)

0.2

Severity rate

Frequency rate

3

2

0.1

1

0

10

Frequency rate

15 ｜ CSR Report 2020

11

12

13

14

15

16

Number of casualties by industrial
Total actual working hours

17

18

×1,000,000

19

Fiscal
year

0

10

11

Severity rate

12

13

14

15

16

17

Total number of working days lost
Total actual working hours

18

×1,00019

Fiscalyear

Overview of Koei Chemical

TopicsRisk assessment
Risk assessment is a method to identify potential dangers and hazards in theworkplace, and reduce or remove them.
(Step 1) Identification of dangers and hazards(Step 2) Estimation of risk factors caused by dangers and hazards(Step 3) Consideration of contents of risk reduction measures(Step 4) Implementation of risk reduction measures
We identify dangers and hazards of the substances that we handle at thephase of research and experimentation with reference to literature study andtests. For substances produced by trials, data including disaster prevention
properties, toxicity and irritation is added. The data is examined by not only thedepartment in charge of safety, but also in cooperation with the laboratory andthe plant section.
For substances produced officially in a plant, various assessments throughthe evaluation of the magnitude of risks of chemicals and facilities are required.
Reviewing risks and risk mitigation measures are also performed for existingprocesses with the aim of zero-disasters and zero-accidents.
We also perform risk assessment on dangers and hazards of subject
substances in accordance with the amended Industrial Safety and Health Act,
which took effect in June 2016. In particular, in the risk assessment on hazards,
we prevent health problems by comparing the exposure amount estimated foreach work with an exposure limit.

With Employees
Third-party Opinion

Product labels

We provide personnel with necessary training regarding the management ofchemical substances. We offer education regarding laws and regulations, etc.,
relating to the safety of chemicals to researchers who are involved in productdesign so that appropriate management of chemical substances is performed.

Relationship with Local
Communities

Risk reduction of chemicals at
the time of distribution

Chemical safety education

Dialogue with Shareholders
and Investors*GHS: The Globally Harmonized System of Classification andLabelling of Chemicals
GHS was adopted as a recommendation of the United
Nations in July 2003. GHS classifies the dangers andhazards of chemical products based on specific standards,
displays information with visual materials including
pictures and graphics, and reflects the results in labels
and SDS. This system is intended to be utilized for disasterprevention and the protection of human health and theenvironment.

We have prepared GHS*-compliant safety data sheets (SDS) for all products toprovide users with necessary information on dangers and hazards (about 2,000
items as of the end of FY2019).
In Japan, the provision of SDS is mandatory under the Industrial Safety and
Health Act, the Poisonous and Deleterious Substances Control Act, and the Act
on Confirmation, etc., of Release Amounts of Specific Chemical Substances inthe Environment and Promotion of Improvements to the Management Thereof(PRTR Act).

Approach on Safety,
Environment
and Quality Assurance

In 2019, Japanese Industrial
Standards (JIS) Z 7252 and JIS Z
7253, standards for the items to be
included in the SDS, were revised.
In Japan, SDS conforming to the
new JIS is in accordance withthe sixth revised edition of theUnited Nations GHS, the Industrial
Safety and Health Act, the Act
on Confirmation, etc. of Release
Amounts of Specific Chemical
Substances in the Environment
and Promotion of Improvements
to the Management Thereof (thePRTR Act), and the Poisonous andDeleterious Substances Control
Act. Accordingly, the Company isalso preparing to provide new JIScompliant SDS by May 2022, thedeadline for transition.

Provision of SDS
GovernanceRisk management ofchemicals

Safe transportation (product labels and yellow cards)

Yellow cards

CSR Report 2020

Company Information

In order to ensure safety and the environment
when products are used, we attach productlabels that show information on dangers/
hazards and first aid measures to the productcontainer. We affix GHS-compliant labels on
products containing chemical substances
specified in the Industrial Safety and Health Act.
We also ask logistics traders who transport
products to carry a card that contains
information on emergency handling and contact(yellow card).

｜ 16

Approach on Safety, Environment and Quality Assurance

Environmental Preservation Activities
Because Koei Chemical considers the issue of climate change as one of the most important
challenges facing society, we strive to enhance productivity and implement energy efficientfacilities, leading to the lessening of climate change through business activities.

In order to prevent global warming, the world must save energy and control
the emission of CO2 and other greenhouse gases. Koei Chemical started anenergy efficiency project in 2005 with the goal of reducing energy consumption
intensity through the improvement of production processes, the recovery ofheat, fuel conversion and productivity enhancement. We have also introduced
and operated package boilers that enhance heat efficiency, co-generation
systems and photovoltaic generation, and have also shifted to the use of LED
lights.
Actual energy consumption, CO2 emissions and their intensity are shown in
the following graphs. From FY2017 in which the Anegasaki Plant was closed,energy consumption and CO2 emissions have been increasing slightly, resulting
from an increase in production volume due to higher plant utilization rates. In
addition, a new plant will start operation in the future and production volume
is expected to further increase. Although energy consumption and CO2
emissions are expected to increase accordingly, we will work to improve theintensity and achieve operational optimization to save energy and reduce CO2
emissions (prevention of global warming).

Energy saving and theprevention of global
warming

Unit energy consumption
40

120

97.3

96.7

100.0

93.1

92.8

30

90

20

60

25.63225.73117.35917.65218.572

10

0

30

15

Unit energy consumption

16

17

18

19

0

Fiscal year

Energy consumption (crude oil equivalent) kℓ
Production volume (ethylene equivalent) tons

*The above line graph shows the relative value for each fiscal year (FY2017=100)(= Unit energy consumption for the relevant FY / FY2017 unit energy consumption)

Efforts to reduce theemission of fluorocarbons

17 ｜ CSR Report 2020

150

150

CO2 emission
Unit CO2 emission

120

120

100.0
90

80.4

91.8

93.2
90

78.0

60

60

30

0

56

55

46

46

49

15

16

17

18

19

Unit CO2 emission

30

Unit CO2 emission [%]150

Energy consumption(crude oil equivalent)

CO2 emission [thousand of t / year]

50

Trend of unit CO2 emission

Unit energy consumption [%]Energy consumption(crude oil equivalent)[thousand of kℓ / year]

Trend of unit energy consumption

0

Fiscal year

CO2 emission tons
Production volume (ethylene equivalent) tons

*The above line graph shows the relative value for each fiscal year (FY2017=100)(= Unit CO2 emission for the relevant FY / FY2017 unit CO2 emission)

In order to protect the ozone layer and lessen global warming, it is necessary
to take appropriate measures to control the emission of specific fluorocarbons
and alternative fluorocarbons.
We conduct proper management including simple/regular inspectionsin accordance with the Act on Rational Use and Proper Management of
Fluorocarbons, which took effect in June 2015.

Overview of Koei Chemical
GovernanceIn October 2018, Sumitomo Chemical Company, Limited obtained SBT*
certification regarding the targets to reduce group-wide greenhouse gas (GHG)
emissions by 30% and 57% or higher from the emissions volume in FY2013,
by FY2030 and FY2050, respectively, and expressed the policy to actively workon significant reductions that contribute to the “well below 2ºC” target
adopted in the Paris Agreement. Koei Chemical, as a group company, will takeon the challenge of the FY2030 targets to reduce GHG emissions by 15% from
FY2017. It is difficult to achieve this target by simply continuing the current
efforts, thereby indicating the need to introduce new solutions and other active
measures. Going forward, we will aim to reduce the GHG emission volume
through substantial reduction by receiving power from high-efficiency generatorsand through efforts to reduce energy consumption by an annual rate of 1%.

Toward the mitigation ofgreenhouse gas

Approach on Safety,
Environment
and Quality Assurance*SBT (Science Based Targets) are the high-level goals of reducing greenhouse gas emissions that companies establish based on
climate science in order to achieve the “well below 2ºC” target. The “well below 2ºC” target, which was adopted in 2015 in the
Paris Agreement, is an initiative to maintain the increase in global average temperature to well below 2ºC above pre-industrial levels.

Dialogue with Shareholders
and Investors

Koei Chemical introduced environmental accounting in FY2000.

Environmental accounting
report1 Purpose of the introduction

Relationship with Local
Communities(1) To enhance the efficiency of activities by quantifying resources allocatedin environmental preservation(2) To conduct decision-making on environmental measures from mid- andlong-term perspectives(3) To enhance the transparency of companies through information
disclosure
2 Points of environmental accounting

With Employees(1) Scope of calculations: Koei Chemical(2) Period covered: FY2019 (April 1, 2019 to March 31, 2020)(3) Preconditions of calculation• Calculations are based on the Ministry of the Environment’s Guidelines.
• Costs are calculated based on actual results.
• Economic benefits are only actual benefits. Risk avoidance benefits anddeemed benefits are not included.

Environmental accounting (FY2019)
Environmental preservation cost
Category
1

Major items

Investment

Cost

119

Details of effects

980

Amount1

Cost reduction and business income due torecycling

9

Prevention of air pollution, water pollution, badodor, noise, etc.
Prevention of global warming, ozone depletion, andenergy saving, etc.
Resource-saving, efficient water use, rainwater use,etc. Disposal, reduction and elimination of industrial
waste, recycling, etc.

101

520

18

311

2

Effects of resource saving

160

0

150

3

Effects of energy saving

36

Total

205

Upstream/downstream cost

Green purchasing, recycling of products, etc.,
recycling of containers and packaging materials, etc.

0

0

3

Administration activity cost

Environmental training, outsourcing of analysis ofenvironmental impacts, ISO14001 maintenance andmanagement

0

104

4

R&D cost

R&D for products that contribute to environmental
preservation

4

30

5

Social activity cost

Greening, beautification, levy on pollution load,
support of environmental activities performed by
local communities

2

4

6

Environmental deterioration
cost

Land pollution, restoration of the naturalenvironment to its original state

0

0

125

1,118

Company Information

2

Total

Economic effect of environmental(Unit: Millions of yen)preservation measures

Third-party Opinion

Business area cost
(Breakdown)
Environmental measure
cost
Global environment
preservation cost
Resource circulation cost

(Unit: Millions of yen)

Note: Cost amounts are the sum of depreciation costs, repair costs, labor costs, material and service costs and businessconsignment expenses, etc.
CSR Report 2020

｜ 18

Approach on Safety, Environment and Quality Assurance

Environmental Preservation Activities
Koei Chemical reconciles business activities with environmental maintenance andimprovement.
We reduce the emission of chemical substances handled in the course of business activities,
such as PCB and specific chemical substances, and perform proper waste management.
In this manner, we are performing environmental preservation activities to reduce theenvironmental impact.
Approach to zero emissions

Efforts to reduce industrial
waste

Regarding waste generated through business activities, we actively promote
the “3Rs” (reduce, reuse and recycle) to reduce the environmental impact.
The volume of waste discharged for FY2019 is shown in the following chart.
The volume of industrial waste generated increased by 26% compared to theprevious fiscal year, and the recycle rate decreased by 1%.
We will make continuous efforts to reduce environmental impact throughrecycling, such as a method of using incineration residues as cement materials.

Actual results for FY2019
Targets of initiatives········· Zero emissions ·········

Through business activities:• Reduction of industrial waste
amount• Reduction of landfill disposal
amountPromotion of recycling• Increase of effective usage
rate

Industrial waste amount

0.8

26.8

25.7

0.6
22.1

20

0.16

15

16

17

Efforts for PCB waste

19 ｜ CSR Report 2020

0.4

0.28

0.24
10

0

20.5
16.3

0.19

0.20

18

19

0.2

0

Landfill disposal amount[thousand of t / year]

Industrial waste amount[thousand of t / year]

Landfill disposal amount30• Waste generated through business activities:
20,487 tons
(16,310 tons for the previous fiscal year, up by26%)• Landfill disposal amount: 195 tons
(192 tons for the previous fiscal year, up by 2%)
Recycling amount: 5,241tons, recycling rate: 26%(4,890 tons for the previous fiscal year, recycling
rate: 27%)

Trend of industrial waste

Trend of industrial waste by fiscal year

40

Actual results

Although the industrial waste amount is decreasing each year,
the landfill disposal amount fluctuates with the change of
production items.
We will make continuous efforts to promote the reduction ofenvironmental impact by cutting not only the industrial waste
amount but also the landfill disposal amount.
We have disclosed information on the maintenance andmanagement of industrial waste facilities (incinerators) on
our website since 2011 in accordance with the Enforcement
Regulations of the Waste Management Law (URL: https://www.
koeichem.com/company/rc.html).

Fiscal year

We collect all condensers and lamp stabilizers that contain PCB, and replacethem with PCB-free equipment.
We also store the collected PCB-containing equipment properly so that it
does not have any environmental impact. In February 2019, the disposal of all
the collected equipment was completed through Japan Environmental Storage& Safety Corporation (JESCO).

Overview of Koei Chemical

Trend of COD loading dose

Approach on Safety,
Environment
and Quality Assurance

Trend of NOx emission

Governance

The environmental impact on air and water areas is as follows.
For SOx, the volume detected through annual analysis is small and lower
than the emission standards.
For NOx emissions and COD impact volume, we have set agreed values
which are stricter than the requirements under laws with local communities.
Appropriate control is performed based on the agreed values.

Trend of SOx and NOx
emissions and COD impact
volume140
Annualized emissions: 117 tons
(addition of agreed values)

COD loading dose [t / year]

80

100
80
60

52.10

55.63

52.77

51.38

55.78

40
20
0

60
50
40
30
20

12.9

12.1

10

15

16

17

18

19

Fiscal year

0

15

16

8.3

6.9

7.0

17

18

19

Fiscal year

Relationship with Local
Communities

Actual release amount and transferred
amount for FY2019 (tons/year)

Trend of total release amount
10.00

With Employees

The PRTR system is prescribed in Article 5 of the Act on Confirmation, etc.,
of Release Amounts of Specific Chemical Substances in the Environment andPromotion of Improvements to the Management Thereof (generally known as
the “PRTR Act”), which took effect in March 2000. PRTR (Pollutant Release andTransfer Register) is a system for identifying, compiling and publicly disclosing
information on what amount of chemical substances specified by government
ordinance have been emitted into the environment or have been transferredoff-site with waste.
The actual results for FY2019 are as follows.

PRTR reports

Air release
2.77

Third-party Opinion(2.75)
7.50

5.00

Water release
0.00(2.75)(0.00)

Release amount andtransferred amount
2.75
0.96

1.08

1.08

15

16

17

Figures in parentheses show
FY2018 results.

18

Soil release
0.00

2.77

2.50

0.00

Total release amount
2.77

19

Fiscalyear

Transferred amount*140.25(0.00)(135.03)

Internal landfill amount
0.00*The transferred amount is the volume entrusted to intermediate waste treatment service operators(little emission to public sewage system)

Company Information

Total release amount [t / year]

Annualized impact: 65 tons
(addition of agreed values)

70

Dialogue with Shareholders
and Investors

NOx emission [t / year]

120(0.00)CSR Report 2020

｜ 20

Approach on Safety, Environment and Quality Assurance

Quality Assurance Activities
Koei Chemical strives to supply high-quality products and services that satisfy customers’
needs and ensure safety in their use.

Quality assurance systems

Policy regarding quality assurance
We have built the quality management system based on the policy of “supplying
high-quality products and services that satisfy customers’ needs and ensure
safety in their use.” In order to satisfy customers, we find it important to deliverproducts that meet customer demands with quality that provides customer
satisfaction in a timely manner. To this end, quality assurance activities must
be promoted at each stage through the concerted efforts of divisions including
sales, design/development, purchasing, production, quality assurance andlogistics.
The Quality Assurance Division supervises company-wide quality assurance
activities, shares and disseminates the basic policy, and presses ahead withcompany-wide efforts in order to realize the policy.
Quality-related flow chart
Customer(Information) quality issue and request

ReportSales division(Communication) customer information• Initial communication (within 24 hours)• Investigation result• Recurrence prevention measure

Quality assurance manager(Direction)• Cause investigation• Examination of
measures(Report and draft)• Investigation result• Recurrence prevention
measure(Deficiency of measures)
Direction for review

Division in charge, Quality assurance division

Activities for improving thecorporate culture focusing on
quality

21 ｜ CSR Report 2020

We are making efforts to eliminate complaints based on three pillars: 1) zeromajor complaints on product quality, 2) efforts for continuous enhancement toimprove customer satisfaction, and 3) enhancement of the awareness of quality
management. We collect quality information on complaints and Hiyari (nearaccident situations) relating to product quality, share information on cause
investigations and recurrence prevention measures, and undertake horizontal
deployment of said information to enhance customer satisfaction.
In FY2019, during the “quality improvement month,” which is promoted
every November, we conducted quality patrols together with quality
management promotion members, who represent each division, mainly inplaces where complaints were made in the past and ensured the Japanese 5S
methodology, which is the basics of quality management.
In order to strengthen quality management, the Quality Maintenance Task
Force engages in the investigation of the primary cause of quality-related
problems in the plant reform activities by conducting “naze-naze” analysis(causal analysis) and referring to quality hiyari cases, etc., and shares suchinformation.
In addition, in order to enhance the awareness of quality management,
quality management promotion members horizontally deploy the prevention ofquality problems within their respective divisions. Furthermore, they add
important complaints made more than five years ago to the complaintcalendar, which contains a list of complaints for the past five years, and sharethem at meetings of the quality management promotion members to preventthe recurrence thereof.

Dialogue with Shareholders and Investors
Overview of Koei Chemical

We properly disclose information regarding overall management in accordance withapplicable laws and regulations and convey our management policy and contents in an
accurate and precise way in an effort to obtain social trust.

IR policy

GovernanceIR information on financial results, performance
forecasts and general meetings of shareholders, etc., isposted through Tokyo Stock Exchange’s TDnet (Timely
Disclosure Network System) and on the Company’s
website, which was renewed in FY2017.
We will continue to provide information with better
contents in a prompt manner.

Approach on Safety,
Environment
and Quality Assurance

Method of information
disclosure

We disclose IR information swiftly and properly to help shareholders andinvestors accurately understand Koei Chemical. We disclose useful informationin accordance with applicable laws and regulations as well as rules provided by
securities exchanges so that shareholders and investors can accurately
understand our business activities.

Dialogue with Shareholders
and Investors

Please refer to the website for investors.

https://www.koeichem.com/ir.html

Basic policy on profit
distribution

Foreign investors
0.72%
Securities companies
1.91%

Other Japanese
corporations
61.41%

Japanese
individuals, etc.
26.85%

Third-party Opinion

Number ofshares held:
4,900,000
sharesWith Employees

While striving to deliver notices of convocation as early as possible, we post
notices of convocation on websites (websites of stock exchanges and theCompany) prior to the delivery in order to give shareholders adequate time toconsider matters to be resolved.
Moreover, we prepared the notice of convocation of the 158th Ordinary
General Meeting of Shareholders in color in order to make the document morevisual and reader-friendly for shareholders.
Distribution of shareholders

Japanese financial
institutions
9.11%

In order to maintain the fairness and soundness of markets, we take thoroughmeasures to prevent insider trading in advance. We have designated the period
from the end of every quarter term until the day of the announcement of financial
results as the “no-purchase period of Koei Chemical’s shares” and notify officers
and personnel about this period. This measure helps prevent doubts about insider
trading from arising.

CSR Report 2020

Company Information

Approach on the preventionof insider trading

Relationship with Local
Communities

General meeting of
Shareholders

As our basic policy, we determine dividends of surplus and other related
matters in consideration of the balance between 1) the profits to be secured
for shareholders over the long-term and in a stable manner and 2) the statusof our performance in each fiscal year and the enhancement of shareholders’equity to be reserved for future business development.
Based on the above basic policy, in FY2019, we paid an annual dividend of¥80 per share, including an interim dividend of ¥30.

｜ 22

Relationship with Local Communities
Centering on Sodegaura City, Chiba, which is the location of the head office, we work on therevitalization and environmental development of local areas through communication withlocal residents.

Environmental preservation
in local communities

Satoyama volunteers
We dispatch our employees each month to the “Shiinomori” Nature andEnvironmental Preservation Green Center to carry out preservation activities.
Our diverse seasonal activities with local residents include mowing, cleaning,
rice harvesting, and promenade maintenance. The aims of these activities are toprotect the surrounding nature and create an environment in which residents
can enjoy nature.

Number of participants per year･･････････ ･About

60 persons

Collecting volunteers
We are undertaking an initiative to collect and sell used PET drink bottle caps.
The profits earned are used to provide vaccines for children in developing
countries. This initiative is spreading across Japan.
We collect used PET drink bottle caps and sell them to recycling companies
through the Sodegaura City Social Welfare Council to collect money. We thendonate the money earned to the Japan Committee, Vaccines for the World’sChildren.
We also collect second-hand books, CDs and other items from employees
and sell them. We then donate to Sodegaura City the amount obtained fromsuch sale by adding our contributions to it.
PET bottle caps･･････････････････ ･About

47,750 caps

Donation money collected throughsales of second-hand books･･････････････ ･(including matching gift provided by the Company)

30,000 yen

16 tickets
Used pre-paid cards･････････････････････････････ 9 tickets

Used Disney Land tickets･･･････････････････････

Used postal stamps, Bell Marks, etc.

23 ｜ CSR Report 2020

Overview of Koei Chemical

Fostering the next generation

Organization of science experiment volunteer activities

Approach on Safety,
Environment
and Quality Assurance

Number of participants･･････････････････ ･About

Governance

We offer science experiment volunteer activities at Nagaura Elementary Schoolin Sodegaura City located near the Company.
Company researchers conduct chemistry experiments with children in Grade
4. Through these opportunities, we seek to arouse youngsters’ curiosity aboutchemistry and convey its enjoyment.

90 persons

Dialogue with Shareholders
and Investors
Relationship with Local
Communities
With Employees

Dialogue with local society

Support for the shuttle bus to help Chiba Prefectural SodegauraHigh School with community exchange activities

Third-party Opinion

The brass band and the calligraphy club of Chiba Prefectural Sodegaura HighSchool are actively engaged in community exchange activities. The Company
supports their exchange activities by making arrangements for a bus totransport instruments and other equipment and students.

Company Information

CSR Report 2020

｜ 24

With Employees
Koei Chemical believes that developing an environment in which each and every personnel
member can fully utilize and demonstrate his or her abilities is an essential issue to enhance
productivity.
We offer various programs that enable personnel to work energetically and maintain a goodwork-life balance.
Human resources development
1. Human resources development policy(2) –Train V.A.K.!–

We prepare various training programs by objective andjob position and focus on offering technique/expertisetransfer education and globalization support educationin accordance with the basic policy of “development ofprofessional personnel who contribute to the enhancementof corporate performance.”

2. Technique/expertise transfer education for
FY2019（1）Educational training courses implemented
Category

Number of Number ofsessions attendees

Educational training course title
Safety and health/Security and disasterprevention

Skill
improvement

By joblevel

Technical
seminar(gijutsu
dojo)

3

22

2

23

7

49

Equipment
maintenance

11

90

Plant management

3

16

Environmental
preservation
Quality assurance

Basic technical training

3-daycourse1

12Mid-level technician training

3-daycourse16Workplace leader training

3-daycourse1

6Driving simulation training

2-daycourse22

Safety simulation training

1-daycourse4

7Chemical safety simulation training

2 hours/
session

6

63

Autonomous maintenance operators(correspondence education)

−

1

18

FE (fire explosion) simulation training

2-monthcourse12

Safety & prevention disaster theory
training

2-daycourse14

SS training (management
capability development course for
manufacturing supervisor)

5-daycourse12

SV (supervisor) development training

24-daycourse1

1

New OM (operation manager)
development training

22-daycourse1

1

Monozukuri leader training

8-daycourse19CommonSelectedtheme

2 hours/
session25 ｜ CSR Report 2020

Launch of project to establish safety simulation
dojo
We had sent personnel to safety simulation training
provided at external organizations. However, since externalorganizations can only accommodate a limited numberof trainees, the Company currently faced the problem of
not being able to adequately train the growing numberof personnel hired. In order to prevent the recurrenceof Hiyari-Hatto (near-accident situations), problems anderrors, we concluded that we needed a facility within
the Company to have employees experience danger. As
such, we launched a project to consider establishing afacility called the “safety simulation dojo” to have themexperience danger.
(Construction was completed in July 2020)
Purpose
We will develop personnel to realize safe and stable
operations and zero-accident, zero-injury targets throughV (Visual), A (Auditory), K (Kinesthetic) training.
(1) Experience danger and learn the proper basic action forsafety.
(2) Experience danger and train one’s imagination todetermine what is dangerous.
Details of training materials(1) VR simulation facility• Software 1) Forward-facing crash,2) Solvent ignition explosion,3) Residual pressure blow-off,4) Falling down while going down thestairs• CG1) Falling from a crane,2) Caught in a lathe(2) Safety simulation device
1) Caught in V belt,
2) Liquid splash (from flange),3) Electrostatic solvent combustion/explosion,4) Learn pointing and calling out procedure,5) Tank implosion by decompression during pumpingof liquid(3) Original training materials
1) Internal pressure during opening of drum cap,2) Unsafe spots of flange bolt,3) Hose runaway,
4) Valve operation,5) Push button operation,6) Liquid accumulation in flexible hose,Overview of Koei Chemical

7) Glove with coated palm and fingers,
8) Checking of clothes/attire, description of functionsof work clothes,9) Safety shoes electrostatic checker/comparison ofmaterial

Governance

In FY2019, 28 persons participated in this program,exceeding the 20 persons who participated in FY2018.
Going forward, we will continue improving employees’
English skills.
(2) Overseas short-term language training program

3. Globalization support education

Dialogue with Shareholders
and Investors

We offer online English conversation classes with a view todeveloping global human resources. The training period is
six months (24 sessions in total), and a speaking ability test
is conducted before and after training to determine thelevel of class to be taken and to measure the effectivenessof training.
The benefit of online English conversation class is the
one-to-one lesson given to trainees to suit their schedule.
Previously, a foreign teacher was invited to conduct grouptraining. There were problems with this format, such as
trainees not being able to attend classes for reasons ofeveryday work and the short conversation time with theteacher. The online course has improved this situation.

Approach on Safety,
Environment
and Quality Assurance

In order to develop global human resources, it is also
important for personnel to actually visit foreign countries
to interact with the local people and culture. To this end,
in FY2019, two members were selected from among those
who achieved high scores on TOEIC to participate in theoverseas short-term language training program.
This time the selected members were dispatchedto the EC London school for two weeks and engaged
in discussions and other activities with students fromvarious countries including Germany, Brazil and the Czech
Republic. In addition, they stayed at the dormitory of theschool and worked to improve their English skills not only
in business but also in everyday living.

(1) Online English conversation training program

Relationship with Local
Communities

Efforts to reduce long workhours
We also institute “No-Overtime Day” every Friday to reduce
overtime work unless it is urgent. Notification of thisinitiative is made through internal announcements, email
messages and other communication tools. In addition, thesummary of monthly overtime hours of each personnel
member is notified to each section manager, and the work
status has also been checked using a PC management
system and access control system. In this manner, we strive
to ensure proper personnel management.

With Employees

As a result, the overtime hours of daytime workers,
which stood at 26.2 hours/month per person in FY2010,
has currently been reduced to around 15 hours/month perperson.
We will continue to discuss and review diverse measures
to further reduce overtime work.

Average overtime hours (month, person)
Third-party Opinion

Average time (month, person)

30

26.2
21.7

19.7

20

18.3

16.2

15.9

15.9

16.5

2014

2015

2016

2017

15.5

15.5

2018

2019 Fiscal year

Company Information

10

0
2010

2011

2012

2013

CSR Report 2020

｜ 26

With Employees

Flexible work style
Flextime system

Reduce annual scheduled total working hours

Koei Chemical introduced a flextime system with core timein the 1990s to ensure the effective management of timeand efficient work operation.
Today, society has been seeking better balance between
work and private life. In order to further promote theimprovement of an environment in which our personnel
can manage time effectively, we have introduced the super
flextime system that abolished core time in October 2019.

To date labor and management have made efforts to
reduce total actual hours worked, and in 2019, held
discussions to reduce annual scheduled total working
hours, which constitute the foundation of working hours.
As a result of discussions, working hours of daytime
workers were shortened by 16 hours to 1,899 hours per
year, and working hours of shift workers were shortenedby 14 hours to 1,890 hours per year, which have been
implemented since January 2020.

Reemployment program for
retired persons
In 2006, we introduced the reemployment program for
retired persons aged 60 or older in accordance with the
Act on Stabilization of Employment of Elderly Persons.
Today, an elderly person is allowed to work until 65 yearsof age if he/she wishes to be employed, in line with theamendment of the Act in April 2013.
Moreover, for the purpose of encouraging retired
personnel to continuously demonstrate their experience,skills and other strengths, we pay the same amountof wages as that provided at the time of mandatory
retirement to those who assume positions as line
managers/supervisors and manufacturing operators.

Reemployment rate
Fiscal year

FY2017FY2018FY2019Mandatory
retirement

5

8

2

Reemployment
as shokutaku
fixed-term
personne4

62

Reemployment
rate

80%

75%

100%

Active recruitment(women empowerment andutilization of foreign personnel)
Koei Chemical is actively performing recruitment activities
with an eye on a plan of large-scale capital investment
through FY2024. Although our previous focus was hiring
new high school graduates and experienced workers
for the purpose of job creation in local regions as well,
our recruitment targets have broadened to nation-wide
recruitment.
Although Koei Chemical has always hired new personnel
in an equal and fair manner regardless of gender, the ratioof female workers actually remains low. We will makeactive efforts to increase the number of female personnel
in keeping with the Act on Promotion of Women’sParticipation and Advancement in the Workplace.

TargetTo raise the ratio of female workers among total workers
to be employed to 20% or higher.
27 ｜ CSR Report 2020

Actual results
FY2017FY2018FY2019FY2020

Male

16

22

25

22

Female2423Employment
rate of female
workers

11%

15%

7%

12%

*In order to hire foreign personnel, we applied for the
METI Government of JAPAN Japan Internship Programand accepted one foreign intern between October andDecember 2019. The intern is scheduled to join the
Company in 2020.

Overview of Koei Chemical

Health promotion activities

We conduct a stress check, which is performed under thelaw, and offer a mental health seminar every year to help
personnel prevent mental illness in advance.
We have also established Mental Health Improvement
Programs. While general personnel, managerial personnel,
public health nurses, industrial physicians and the humanresources division individually play roles in improving
mental health, the Company strives to prevent the
manifestation of personnel mental health problems
through smooth communication.
For personnel who suffer from mental illness, we haveestablished a program to help them obtain follow-up
care in collaboration with public health nurses, industrial
physicians and external organizations, with the goal ofcomplete reinstatement. More specifically, the program
includes the arrangement of face-to-face interviews
with public health nurses and industrial physicians until
reinstatement, re-working with external organizations andreduced working hour programs after reinstatement.

Dialogue with Shareholders
and Investors
Relationship with Local
Communities

For personnel who are required to undergo a second
examination as a result of a general medical check-up, thepublic health nurse conducts a face-to-face interview andgives daily life guidance. Personal records are also preparedand follow-up is provided for target personnel, with theirconsent.
For those who are required to meet industrial physicians
as a result of the follow-up or wish to do so, a face-to-faceinterview is offered by industrial physicians every month.
For personnel who joined the Company more than threemonths ago, any concerns about daily life and work
operation are checked to provide them with mental andphysical support.

Mental healthApproach on Safety,
Environment
and Quality Assurance

Health guidance

Governance

In FY2019, we held a seminar for female personnel (theme:
women’s diseases that can be detected by medical
examination), in addition to performing annual healthpromotion activities. We received feedback fromparticipants, such as “I once again realized the importanceof medical examination after listening to a detailed
discussion of diseases that are specific to women for the
first time.”

Health promotion activities

With Employees
Third-party Opinion

We hold seminars, fitness tests and other health promotion
activities to help personnel monitor their own healthcondition.
• Stretch class for functional improvement• Measurement of estimated age of blood vessels• In-body measurement (body component analyzer)• Seminar for female personnel• Support for personnel who wish to quit smoking
In order to prevent secondhand smoke, separate areas
are provided to smokers within the office.
• Undergo a complete physical examination
We have personnel aged 40 years and older undergo
a complete physical examination every five years as aperiodic check-up.

Stretch class for functional improvement

Company Information

CSR Report 2020

｜ 28

Third-party Opinion
Kazuhiro Bai, D.B.A.
Specially Appointed Professor,
College of Business & Graduate School of Business, Rikkyo University
ProfileServing at Rikkyo University since 2018. Visiting professor in the Business Administration Program of Bond University (Australia) in2008. His works include Outlook of CSR Accounting, Moriyama Shoten; Introducing CSR Accounting, Japanese Standards
Association; First Step to CSR Management for Corporate Employees, co-author, Dai-Ichi Hoki; “Deployment of Financial Reporting
Theory based on Global Governance”; CSR Management Control; Essentials for a Going Concern: Five Principles to Overcome
Environmental Change; and Corporate Ethics and Sustainability of Society, co-author, Reitaku University Press, and many more.

Koei Chemical Company, Limited (the “Company”)
summarizes its achievements relating to CSR activities from
April 2019 to March 2020 in the CSR Report 2020, with thetarget of contributing to a sustainable society. Here are my
opinions from an independent standpoint specializing in CSR
accounting, which aims to quantify CSR activities, and the
management of going concerns.

Points to be commended
I pointed out in the previous year’s CSR report that themost material issues (materiality) indispensable for realizing
sustainable management should be identified. The point tobe commended in this year’s report is that the Company
explains in a step-by-step manner what measures it will taketo identify materiality and advance to the next stage. First, theCompany organizes future policies on CSR/ESG activities as“contribution to a sustainable society” and “policy on SDGs”(page 2) based on the corporate philosophy and specificallydevelops them into the mid-term management plan (pages
7-8). Second, the Company clearly states its policy of sharing
the Sumitomo Chemical Group’s four issues related to thecreation of social value and three issues for the creation ofvalue in the future as future material issues (page 5). The four
issues comprise “contribution to reducing environmental
impact,” “contribution to solving food issues,” “contribution
to solving healthcare issues,” and “contribution to ICT
innovation,” and the three issues consist of “promotion oftechnology innovation and research and development,”“initiatives for digital innovation,” and “promotion of diversity
and inclusion” as mentioned in the “Top message.” These
initiatives correspond to the points to be improved, playing
a vital role in the Company’s effort to promote CSR/ESG
activities. Specifically, in order to move on to the next step ofsustainable management, it is necessary for the Company toestablish a flow of incorporating the seven material issues in
responsible care activities (pages 13-14), and then developing
them into ongoing safety and health activities (pages 1516), environmental preservation activities (pages 17-20),

Response･to･Third-Party･Opinion
Koichiro Sogawa
Managing Director (in charge ofGeneral Affairs & Personnel
Office, Logistics Managing &Procurement Office and Internal
Control & Audit Office)Koei Chemical Company, Limited

29 ｜ CSR Report 2020

quality assurance activities (page 21), and promotion ofcommunication with local communities and employees that
contributes to comprehensively giving back and contributing
to society (pages 23-28). Furthermore, it is worth mentioningthat the Company is taking the stance of focusing on businessactivities from a mid- and long-term perspective even amid
the ongoing spread of COVID-19 and imposing on itself
the social responsibility of stably supplying raw materials for
drugs that raise hopes in treating infectious diseases (pages
4-5). In summary, I have concluded that an adequate level isachieved on identifying materiality, which is the key element
in assessment, developing an organization to promote CSR/
ESG activities, and responding to various stakeholders. The
Company’s such voluntary and proactive initiatives show great
potential for future development.

Points to be improved
I would like to mention how the actual condition of sustainable
management should be evaluated and reported within andoutside the Company, as it leaves room for improvement.
Once a system to promote CSR/ESG activities is developed
for the achievement of the mid-term management plan
“Transformation KOEI,” the question is what indicators theCompany uses to organize the information generated fromthe series of activities. This is because indicators for CSR/ESG
activity not only show the condition but also plays an importantrole in measuring corporate value and reflecting suchinformation in financial reporting as integrated informationthat links financial information and non-financial information.
My expectation of the Company is to engage in preparing
activity indicators linked to financial information such as Key
Performance Indicators (KPI) and Key Risk Indicators (KRI) thatare closely related to investment decisions and management
decisions taking the opportunity of the Company’s namechange that reflects its aim of expanding its business domainbeyond the framework of chemical industry. I sincerely hopethat the Company parlays this effort into CSR/ESG activities
that contribute to sustainable management.

I deeply appreciate Dr. Kazuhiro Bai’s valuable remark.
On October 1, 2020, we changed our company name from Koei Kagaku
Kogyo to Koei Kagaku. With this change, we intend to not only expand ourbusiness but also promote the further development of sustainable management
by strengthening the organization base for pursuing CSR/ESG activities evenmore. We will also focus on setting activity indicators such as KPI and KRI andestablishing a governance framework that can effectively utilize such indicators.
We will embrace Dr. Bai’s advice and continue to make concerted efforts topromote CSR/ESG activities.

Company Information(As of October 1, 2020)

KOEI CHEMICAL COMPANY, LIMITED

Location of head office:

1-8, Nihonbashi-Koamicho, Chuo-ku, Tokyo 103-0016,
Japan

URL:

https://www.koeichem.com/en.html

Date of establishment:

June, 1917

Capital:2,343 million Yen

Number of employees:

338 (As of March 31, 2020)

Business description:

Manufacture and sales of raw materials and intermediates
for pharmaceutical/agrochemical products, paints, dyes,
and various synthetic resins, etc.

Fiscal year-end:

Stock Information

March 31

Ordinary general meeting of shareholders: Held in June
Authorized number of shares･･････16,000,000
Issued number of shares････････････4,900,000
Number of shareholders･････････････････ 2,211

Stock Data:

Board of Directors

Approach on Safety,
Environment
and Quality Assurance(As of March 31, 2020)

Governance

Company name:

Overview of Koei Chemical

Corporate data

Director(Audit & Supervisory
Committee Member)

Ray Nishimoto

Kenji Kondo

Managing Director

Koichiro Sogawa

Ken Takiguchi

Managing Director

Ikuo Ishizuka

Hideo Higashi

Managing Director

Shuhei Murakami

Shingo Yoro

Director

Keiko Fukahori

Dialogue with Shareholders
and Investors

President

Hidetada Kawai
Hiromitsu Kokami

Relationship with Local
Communities

Yasuaki Sasaki
Tokyo head office
1-8, Nihonbashi-Koamicho, Chuo-ku, Tokyo 103-0016, JapanTEL 81(3)6837-9300 FAX 81(3)6837-9307
Sales & Marketing: TEL 81(3)6837-9290 FAX 81(3)6837-9310

Business locations

Major Shareholders(As of March 31, 2020)

Name

Number of shares(Thousands)

With Employees

Chiba plant · Research laboratory
25, Kitasode, Sodegaura-shi, Chiba 299-0266, Japan
TEL: 81(438)63-5511 FAX: 81(438)63-5546% of total
55.84

Kinki Sangyo Credit Union

240

4.91

Japan Trustee Services Bank Ltd. (Trust account)

123

2.53

Koei Chemical Employee Shareholder Plan

51

1.06

Masahiro Iso

43

0.90

Maruishi Chemical Trading Co.,Ltd.

33

0.69

Shigeharu Sakamoto

30

0.61

Koji Yamazaki

26

0.54

Sumitomo Seika Chemicals Company, Limited

26

0.53

Japan Securities Finance Co., Ltd.

25

0.51

Company Information

2,731

Third-party Opinion

Sumitomo Chemical Co., Ltd.

NOTE: The Company’s treasury shares (8,754 shares) were excluded in the calculation of the percentage of shares held.

CSR Report 2020

｜ 30

Bringing 100 years of technology and trust,
now and to the future

General Affairs and Personnel Office
1-8, Nihonbashi-Koamicho, Chuo-ku, Tokyo 103-0016, JapanTEL 81(3)6837-9300 FAX 81(3)6837-9307
Sales & Marketing: TEL 81(3)6837-9290 FAX 81(3)6837-9310
https://www.koeichem.com/en.html