Leading the Way with Pine Chemicals
Harima Chemicals Group is a chemical manufacturer
built on products developed using pine chemical resources
like rosin, fatty acids, turpentine and other materials
all obtained from pine trees.
We transform these key active ingredients into daily essentials.
Our products are used in a variety of fields,
as resins for printing inks, paints and adhesives,
emulsifiers for synthetic rubber, paper chemicals,
solders used in electronic devices,and flavor and fragrance ingredients.
Indispensable everyday products
derived in some way from pine trees
are all around us:
Printed items such as newspapers, books and catalogues
Paints used to coat buildings and cars
Adhesives used for glues and packing tapes
Synthetic rubber used in car tires
Paper goods including notebooks, books and cardboard
Electronic devices such as computers and mobile phones
Cosmetics and perfumes, etc.
And now with an international network of
manufacturing bases in 11 countries,
we meet the needs of our customers all over the world.

HARIMA PHILOSOPHY
02

Corporate Philosophy
Harima is a company which strives to cooperatewith nature in the utilization of its blessings to enhance
the quality of life.

Corporate Philosophy, Contents

HARIMA at a Glance
03

Value Creation Over the Years

05

Core Competencies for
Sustainable Growth07

Financial and Non-financial
Highlights

Our mission is to help build a productive andhumanistic society, with our goal being the creation ofa truly global company which places a premiumon its people and technology.

Value Creation Story
08

Risks and Opportunities,
Materiality

09

Value Creation Process

Our policy is to provide a cooperative atmosphere in which
we seek mutual understanding and trust, and to intelligently
and responsibly meet all challenges.

11

CEO Message

15

Long-term Vision/ Mid-term Plan

17

Financial Capital Strategy

In the depth of our sincerity, we’re number one.

Business Strategies
18

Research and Development

19

Resins and Tall Oil Products

20

Paper Chemicals

21

Electronics Materials

22

LAWTER

ESG
23

Corporate Governance25

Compliance26

Meet Our Outside Managing
Directors

29

Environmental Protection

32

Human Capital Management

Company Overview andStock Information
33

Company Overview and Stock
Information

This report aims to provide our shareholders, investors
and various other stakeholders with an overview of
the Company’s latest activities and initiatives. The
report covers the activities and performance of Harima
Chemicals Group and its consolidated subsidiaries andaffiliates, during the fiscal year 2022 (April 1, 2022~
March 31, 2023) with some matters pertaining to FY2023
also included.
Descriptions pertaining to the future are based onassumptions, expectations, and views derived fromthe information available at the time of preparing thisreport. These descriptions encompass known andunknown risks, uncertainties and other factors, and theactual financial condition, operating performance andcash flow of our company may potentially differ fromsuch future-oriented statements.

01

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

02

HARIMA at a Glance

HARIMA at a Glance

Value Creation Story

Business Strategies

ESG

Company Overview andStock Information

Value Creation Over the Years
Founded in 1947 in the city of Kakogawa, Japan, we have grown as a chemical manufacturer built on products developed using pine

2014

Established a nanoparticle plant at Kakogawa Plant

chemical resources like rosin, fatty acids, turpentine and other materials all obtained from pine trees. With the opening of Japan’s first2014

Established a solar power plant in Takasago city2016

Affiliated company, SunPine (Sweden) started production of tall

2018

Shandong Hanghua Harima Chemicals started operation (China)

2022

Acquired solder materials business of Henkel (Germany)

distillation plant that utilizes crude tall oil (CTO), a raw material derived from the kraft-pulping process of pine trees, at Kakogawa Plant

1985

Joined the Tsukuba Research Consortium

2000

Established Hasegawa Shorai Foundationin 1958, we expanded our business into the fields of resins and tall oil products, paper chemicals and electronic materials. To increase

1985

Listed at Osaka Stock Exchange 2

2002

global presence, we acquired the rosin business of U.S.A.-based Momentive Specialty Chemicals in 2011, which enabled us to grow into a

1985

Established a dimer acid plant at Harima M.I.D.

1987

Established K.C. Head Office/Plant (polyamide resins)

Established HEM Plant(brazing materials for heat exchangers,functional resins for semiconductors)

1987

Established the Tsukuba Research Laboratory

1987

Developed solder pastes for printed circuit boards

1988

Developed emulsion sizing agents

1988

Yoshihiro Hasegawa appointed as President
Introduced corporate philosophy “Harima Philosophy”

company that operates manufacturing bases in 11 countries. In October 2012, the company name was changed to Harima Chemicals Group,
Inc. and we adopted a holding company structure.

Operating income(million yen)

5,000
LegendJapan
Overseas

4,000

3,000

2,000

1,000

Pine Chemicals
Resins and Tall Oil Products
Paper Chemicals
Electronic Materials
Other

1961

Established Fuji Plant (sizing agents)

1961

Introduced a melamine resin reactor at Noguchi Plant

1962

Introduced management philosophy and corporate motto

1970

Established a paper strengthening agent plant at Fuji Plant

1971

Established a synthetic rubber emulsifier plant at Kakogawa Plant

1989

Established MS Plant (solder pastes) at Kakogawa Plant

1972

Established Harima M.I.D., a Japan-U.S.A. joint venture

1990

Changed company name to Harima Chemicals

1973

Established world's first closed loop CTO distillation plant

1990

Listed at Tokyo Stock Exchange 1 and Osaka Stock Exchange 1

1973

Established Shikoku Plant(sizing agents, paper strengthening agents)

1990

Acquired shares in Plasmine Technology (U.S.A.)

1974

Established Harima do Brasil Indústria Química, as Brazil's firstrosin factory and Harima's first subsidiary outside Japan1990

Established Harima Medical (sterilization of medical equipment)

1991

Established Super Solder Technologies

1975

Established Sakushu-Musashi Country Club1992

Acquired Seven Rivers (detergents)

1976

Established a paper strengthening agent plant at Kakogawa Plant

1993

Established Ibaraki Plant (paint resins)

1977

Joined the U.S.A.-based Pulp Chemicals Association (currently
Pine Chemicals Association International) as its first international
member1994

Developed aromatic-free printing ink resins

1994

Established Guilin Harima Chemicals, a Japan-China joint venture

1994

Developed lead-free solder materials

1947F ounded as Harima Chemicals Industries by
Sueyoshi Hasegawa

1962

Established Hokkaido Plant (sizing agents)
Developed paper strengthening agents

Established Resitec in Brazil

1996

Plasmine Technology (U.S.A.) became a fully-owned subsidiary

Established a rosin distillation plant

1962

1978

1948

Established Harima USA

1997

Began developing secondary products of rosin

Established a dryer (metal soaps) plant at Noguchi Plant

1980

1951

1964

Started trial production of tall oil

Developed acrylic resins for paints

Established SS Development Center (Super Solder)

Relocated to Noguchi Plant (currently Kakogawa Plant)

Established the Central Research Laboratory anda testing facility at Noguchi Plant

1998

1954

1967

Established a new annex to the Central Research Laboratory
at Kakogawa Plant

Established Hangzhou Hanghua Harima Chemicals,
a Japan-China joint venture

1952

1965

1980
1981

Introduced a biomass boiler at Harima M.I.D.

1954

Introduced tall oil distillation equipment

1967

Developed synthetic rubber emulsifiers

1983

Established the Shorai Foundation for Science and Technology

1954

Began developing sizing agents

Developed UV-curable printing ink resins

1956

Established a sizing agent plant at Noguchi Plant

Established Tokyo Plant(rosin-modified resins, paint resins)

1983
1983

Introduced additional equipment for paper strengthening agents

1957

Established a tall oil distillation pilot plant

1957

Established a phthalic aid resin (paint resins) plantat Noguchi Plant

1958

Established Japan’s first CTO distillation plant

1958

Established Harima Foods

1967
1969

Established Sendai Plant(sizing agents, retention aids)

2003

Established Harimatec Hangzhou in China

2003

Established Harimatec in U.S.A.

2003

Established Harimatec Malaysia

2005

Established Nanning Harima(currently LAWTER - Nanning) in China

2005

Established a biomass power plant at Kakogawa Plant

2007

Established Harimatec Czech

2007

Established MP Plant (solder powder) at Kakogawa Plant

2008

Plasmine Technology (U.S.A.) acquired the rosin sizing
agents division of Georgia-Pacific Chemicals

2009

Nippon Filler Metals became a fully-owned subsidiary2011

Acquired ink adhesive resins business of Momentive
Specialty Chemicals (U.S.A.) and established LAWTER

2011

Established Dongguan Hanghua
Harima Paper Chemicals in China

oil rosin

2022

Established HARIMA UK

2022

Established a solar power plant in Kakogawa city2023

Established a myrcene plant at Kakogawa Plant

Net sales

94,510Net sales(million yen)million yen

100,000

80,00060,00040,000at Fuji Plant

Operating income

1,706
million yen

20,000Net sales
Operating income*

0

1947

1960

1947-1950s

1960s

1980

1970s

Finding Rosin, a Natural Resource

Opening New Business Frontiers

Seeking New Opportunities Abroad

The Company was founded under the name Harima
Chemicals Industry in 1947 by Sueyoshi Hasegawa, who
was inspired by the potential of rosin—a material that had
long been used for adhesives, paints, flavors and fragrances,clothes and more —as a valuable resource in post-WWII
Japan. A rosin distillation plant was established in 1948,
and with the technology and experience accumulated duringthat time, we began production of fatty acids. It was thistechnology that eventually laid the foundation for our tall
oil business. In time,extensive researchof pine chemicals led
to the developmentof secondary rosin
products with a
key role in further
business expansion.

Along with tall oil products, we developed paint resins,
sizing agents, synthetic rubber emulsifiers, etc. In 1961,
we expanded into the city of Fuji, an area dubbed as "Asia's
paper-making hub". Following the Fuji Plant, we opened
factories in Hokkaido, Tokyo, and Sendai. In Kakogawa, weestablished our very first R&D center, the Central ResearchLaboratory. In 1962, we introduced our management
philosophy and corporate motto, the concepts of which haveremained the Company's staple to this day.

Economic growth and expanding demand in new fields
presented the challenge of securing stable supplies of
CTO, but we managed to contract several suppliers after
minute evaluation. In 1972, we established Harima M.I.D.,
a joint venture with then-Mead Corporation, a U.S.A.-based
forestry and paper manufacturing company. In 1974, we
set up our first subsidiary in Brazil, a country rich in pine
resources. We have since been contributing to Brazil’s
industry, employment, and foreign currency acquisition.

[Management Philosophy]
Management that is prudent and stable
Management that values people
Management that actively promotes technologicaladvancement[Corporate Motto]
Understanding, Cooperation and Trust

Japan’s First Tall Oil Business
Harima's tall oil business was launched in 1952, inspired by
the black liquor derived as a byproduct of the kraft-pulping
process. We went on to establish the technology of fractional
distillation, and with the assistance of government incentives
and programs, completed the construction of Japan’s firsttall oil distillation plant in 1958. Its construction cost 120
million yen, a staggering amount for a company with a capitalstock of only 8 million yen.

03

1970

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

The World’s First Closed-loop
SystemIn 1973, we established the world’s first non-polluting
closed-loop tall oil distillation plant at Kakogawa Plant. The
plant’s annual capacityof 70,000 tons placed it
among the world’s largest
at the time. A logistics
base was also built at Iho
Port in the nearby city of
Takasago, to store CTO
imported from the U.S.A.
This marked the beginningof stable supplies of
CTO and tall oil-derived
products in Japan.

1991 1991(Non-consolidated) (Consolidated)

1980s
Shifting Away fromPetroleum Energy
Due to the oil crisis and soaring prices,energy-saving initiatives became arequirement of the time. We began joint
development of boilers fueled by tall oil
pitch, a byproduct of CTO distillation, andstarted operation of a large-scale, nonpolluting steam boiler in 1981. The useof byproducts as fuel led to a drastic cut
in energy costs and enabled the shift toalternative energy sources, paving theway for the Company's biomass power
generation business.

2000

2010

In 1988, we introduced the Harima
Philosophy. Building on the principles of the
management philosophy and the corporatemotto, we set out on a challenge to become
a global company under the slogan of“Utilize Nature's Blessings to Enhance theQuality of Life.”

0*FY1947-FY1982: Nov-Oct, FY1983: Nov-Mar, FY1984-present: Apr-Mar
FY1947-FY1989: Non-consolidated Net sales and Ordinary income
FY1990-present: Consolidated Net sales and Operating income

1990s“Utilize the Blessings of
Nature to Enhance theQuality of Life”

2022 (Fiscal year)

2000s

2010s-2020s

New Beginnings

Mitigating CO2 Emissions

Becoming a Global Company

In 1990, our scope of business expanded to cover ninefields: oil chemical products, paper chemicals, synthetic
resins, biotechnology, electronic materials, recording
materials, foods, and everyday items. We entered theelectronic materials field with the launch of electronicmaterials developed through the 1980s in collaboration with
manufacturers of electrical and automotive components.
Also, we continued expansion overseas, by establishingpaper chemical companies in the U.S.A. and China, andresins and tall oil productcompanies in China.

In 2005, we opened a biomass power plant at Kakogawa
Plant. This marked the acceleration of our efforts to reduce
CO2 emissions by generating power using the byproducts oftall oil distillation as a biomass-derived fuel.

In 2011, we acquired the rosin business of U.S.A.-based
Momentive Specialty Chemicals Inc. and establishedLAWTER. With pine chemical operations covering Japan,
China, Asia, Europe, North America, South America andOceania, and expansion of paper chemicals and electronicmaterials outside Japan, overseas-derived Net sales now
topped approx. 60%.

Previous logo

Expansion ofElectronic Materials Business

New logo

For the Advancement of Science and Technology

New Business Areas

The Shorai Foundation for Science and Technology was
founded in 1983 to promote advancement of scienceand technology through encouraging and subsidizing
research, study
and international
exchange.

Our electronic materials business, which started off withsolder materials, expanded its scope with organic synthesis
technology-based brazing materials for automotive
heat exchangers and resist resins for semiconductors.
Meanwhile, we increased businesses in China, the U.S.A.,
Asia and Europe in an effort to accelerate global expansion.

In 2022, we acquired the solder materials business ofGerman manufacturer Henkel. With an expanded customer
base and product lineup, we aim to further build our global
network. We will accelerate growth of solder materials,
functional resins for semiconductors, brazing materials, andother electronic materials that support such applications as
automotive electrification/self-driving systems, 5G, digitaltransformation (DX), etc.

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

04

HARIMA at a Glance

HARIMA at a Glance

Value Creation Story

Business Strategies

Company Overview andStock Information

ESG

Core Competencies for Sustainable Growth
Harima is a pine chemical manufacturer that utilizes natural and renewable resources to their full potential, creating a diverse portfolio of
items used in daily essentials since its founding in 1947. Our innovative lineup, a result of extensive R&D, has been the driving force behind
our reputation as a leading company in the industry. We will continue to strengthen and expand our global network in a broad range ofbusinesses with a focus on future trends.

Diverse Portfolio

Brand Value

To meet ever-changing market needs, we strive to develop new materials
and technologies around our core technologies: pine chemical technologies
that utilize the natural qualities found in pines, resin synthesis technologies,
emulsification and dispersion technologies and metal-joining technologies.

To increase positive recognition from customers in and outside Japan, weare committed to improving R&D capability, manufacturing technologies
and quality management, while delivering products that help solve socialand environmental issues. Our initiatives are evaluated by various ratingorganizations, whose feedback is incorporated into management toimprove corporate value.

Diverse Product Applications

Rating organization

Our products are used in a variety of fields, as resins for printing inks, paints and adhesives, emulsifiers for synthetic rubber, paper chemicals, solders usedin electronic devices, and flavor and fragrance ingredients.
Indispensable everyday products, derived in some way from pine trees, are all around us: printed items such as newspapers, books and catalogues,
paints used to coat buildings and cars, adhesives used for glues and packing tapes, synthetic rubber used in car tires, various paper goods including
notebooks, books and cardboard, electronic devices such as computers and mobile phones, cosmetics and perfumes, etc.

Paint resins Printing ink resins
Synthetic rubber emulsifiers Adhesive resins, etc.

Electronic
Materials

Paper
Chemicals

26.4%

Paper strengthening agents

Sizing agents, etc.

41.1%

LAWTER

Platinum 2022
(Top 1%)Rating of SDGs
contribution and how
they affect corporate
value

SDGs management :(T-score of 50-54)
Smart Work :(T-score of 50-54)

Customer Base

Stable Financial Foundation

Harima's overseas network enables creation of strong connections
with the global market. In FY2022, we expanded our customer baseby acquiring the solder materials business of German manufacturer
Henkel, whose long list of customers spans across automotive, industrial
machinery, and telecommunications equipment industries in Europe andthe world.

We consider having a good balance between assets and liabilities crucial
for financial stability. With funding sourced from around the world
through diverse means and efficient administration of Company-wide
funds, using an international cash management system, we strive tomaintain and improve our financial foundation. In FY2022, free cash flow
was mainly used for strategic investments aimed at business growth,which we will seek to recoup and further improve financial stability.

Net sales by region

9.8%

Silver 2023
(Top 25%)

Rating of ESG initiatives,
Rated AAA in 2022
SMBC ESG/SDGs
information disclosure, and(highest grade)
Evaluation
SDGs contribution
Ranking of SDGs
Toyo Keizai
234th
SDGs Corporate contribution and(Out of 1,702 companies)business performance
Ranking 2023
NikkeiManagement
Survey 2023

20.4%

RatingLAWTER
Sustainability ratings Plasmine
for global supply
chains
SunPine

EcoVadisCore Businesses and Products
Resins andTall Oil
Products

Description

Japan
EuropeBillion yen

Americas
Other

Asia, Oceania

Consolidated Balance Sheet for FY2022 (ended 23/3)

100.0

Billion yen

90.0

100.00

80.0
80.00

70.0

Solder materials Brazing materials for heat exchangers
Functional resins for semiconductors, etc.

Adhesive resins

Printing ink resins, etc.

60.0

*Pie charts: FY2022 Net sales by business(as of March 31, 2023)

60.00

50.0

Fixed assets
'10

'11

Byproducts of the distillation process are effectively used as biomass fuel for power
generation, letting us utilize every bit of the raw material’s value. Water and heat
discharged during production are also reused.

05

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

'12

'13

'14

'15

'16

'17

'18

'19

'20

'21

20.00

42.64

0

AssetsHarima's rosin consumption accounts for 10% of the total amountproduced worldwide. We have factories in 11 countries, and about 60%of the rosin we use is procured within the Group. Two-thirds of ouremployees work outside of Japan, which enhances diversity and expertise.

In-house procurementof raw materials
Production sites in

10%
60%
11

countries

Employees(consolidated)
Employees
outside JapanNet assets

40.82

'22

Global Expansion

Harima’s share in theworld consumption ofrosin
Our legacy dates backto 1958 when we began
operations as the firstcompany in Japan to
specialize in crude talloil (CTO) refinery, further
extending our value in1973 by establishing theworld's first closed-loop
tall oil distillation plant. We
will continue our mission
to further improve ourcircular business model andcontribute to the realizationof a sustainable society.

41.65

Long-term liabilities 9.96

10.0
0Current liabilities

40.00

20.0

Our chemical technologies reduce the impact on the environment andliving organisms and contribute to the achievement of a sustainable
society. Harima was founded as a chemical manufacturer that utilizes
materials obtained from pine trees, a renewable resource that is nurtured
by sunlight and water. Our business has grown while contributing to thesolution of social and environmental issues through our nature-friendly
production systems and manufacturing operations.

49.79

40.0
30.0

Circular Business Model — Harmony Among People, Nature and Technology

Current assets

1,710
2/3

Cash flow from operating
activities
Cash flow from investing
activities
Cash flow from financing
activities

Liabilities and Net Assets

Fixed assets ratio

120%
69%
91%

Shareholder equity
ratio

40.1%

Current ratio
Cash ratio(Unit: Million yen)

FY2020(ended 21/3)

FY2021(ended 22/3)

FY2022(ended 23/3)

3,007

2,833

(466)

(1,858)(3,438)(6,649)(1,564)

2,106

7,657

Quality Management and Environmental Conservation
With a view to improving customer satisfaction, many of our sites inJapan and overseas have acquired ISO 9001 (international standard for
quality management systems) certification to demonstrate competencewith client requirements and compliance with international regulations,as well as increase communication with customers. We are also
committed to ISO 14001 (international standard for environmental
management systems) as part of our continuous efforts for environmental
conservation.

No. of sites certified

Japan

Overseas

ISO 9001 quality management system

13

14

ISO 14001 environmental management system

712HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

06

HARIMA at a Glance

HARIMA at a Glance/ Value Creation Story

Financial and Non-financial Highlights
Net Sales

94,510100,000

78,58980,00076,093

71,799Million yen

3,752

4,000

3,250

62,85060,0003,000

40,0002,000

20,000

1,000

0

19/3

20/3

21/3

22/3

23/3

Overseas-derived Net sales increased compared to the previous fiscal year, mainly
owing to increased sales of adhesive resins in Europe and America, as well as thestable performance of paper chemicals. Net sales in Japan also increased compared tothe previous fiscal year, mainly because of an increase in selling prices set to offset the
impact of high raw material prices.

1,706

1,576

Focus areas

0

19/3

20/3

21/3

22/3

23/3

Consolidated Operating income decreased significantly compared to the previous fiscal
year, mainly due to soaring raw material and energy prices.

Environment

Fossil fuelBillion yen
90.0

75.9

80.0
70.0

82.0

+30%

50.0
40.0

70,00047,08147,099 48,015

Identified risks and opportunities

Company undertakings

Response to
globalwarming

Transition risks (policy and legal risks, technology risks, market risks)
Physical risks (increased severity of extreme weather events, impact
on the habitats of pine trees, our principal raw material, etc.)
Opportunities Expand sales of products that help solve environmental issues
such as decarbonizationR educe emissions, diversify procurement methods, control risks
with non-life insurance, promote operation of the environmental
management system/rigorous internal control
Expansion of sustainable product sales; entry into markets forhigh value-added products

Mitigation ofenvironmental
impactBreach of laws and regulations; impact on the regions and theglobal environment that affect our operations
Opportunities Expansion of sustainable product salesP romote business activities and initiatives that harmonize withthe environment (accurately understand and lower environmental
impact, promote energy savings, reduce discharge of chemical
substances into the environment, reduce waste, conduct R&D,
etc.)

GHG
emissions
reduction

Being a large emitter of GHG affects the sales of our products;
levy of carbon tax and other possible future taxes
Opportunities Differentiate our products as low-emission products once carbon
footprint gains more recognitionD evelop and publish a GHG reduction roadmap
Promote floating solar-power generation business, transition tosustainable energy, etc.
Calculate Scope 1, 2 and 3 emissions and use the data for productcarbon footprints

Supply chain
management

Delays in raw materials procurement, fluctuation in raw material
prices, accidental purchasing of illegal resources/resources that
violate human rights
Opportunities Administration of purchasing costs, improvement in productivity,
fulfillment of social responsibility/supplier responsibilityP romote diversification and strengthening of procurement
methods, develop alternative products
Avoid use of “conflict minerals” that provide funds to armed
groups, publish purchasing policy/guidelines, conduct supply
chain due diligence

Humancapitalmanagement

Insufficient preparation of the organizational structure andhuman resources that suit the business growth plan affecting
business growth, work environment preventing employees fromperforming at the best of their abilities
Opportunities Enhancement of corporate value resulting from the development
and publishing of a human resource strategy that drives our
medium- to long-term corporate growthD evelop and promote human resource strategies linked to our
long-term vision and mid-term planUpgrade the level of employee engagement and talentmanagement

Technologicalinnovation

Loss of profits due to delays in new product development,
increase in investment and R&D expenses on eco-friendly products
Opportunities Opportunities to enter new markets and expanded demandbrought on by eco-friendly products and other newly developed
products

C onduct R&D based on our unique technologies and industryacademia-government collaborative research projects
Develop research talent through training, overseas assignments
and study, exchange programs with various organizations inJapan and overseas, etc.
Allocate resources on strategic R&D investments
Subsidize and encourage activities including research, study andinternational exchanges in science and technology with the aim ofpromoting science and technology as well as world culture (Shorai
Foundation for Science and Technology)

Labor safety

Injury or sickness of employees at manufacturing sites,
accidents due to lack of professional knowledge/skill, damage tocorporate image
Opportunities Maintenance of employees’ good health, enhancement of
productivity, fulfillment of social responsibility, maintenance andimprovement of corporate credibilityI ntroduce chemical substance management system to ensure
appropriate management
Conduct hazard prediction (KY) activities, preventive maintenanceand improvement activities based on risk assessment
Raise safety awareness through disaster drills and hands-on
safety training programs

Riskmanagement

Occurrence of compliance risks and business risks triggeredby non-observance of corporate philosophy, code of conduct, orinternal regulations
Opportunities Evaluation and promotion of business achieved with appropriate
risk analysis, assessment and resilience aintain and enhance readiness within the Company to keepM
misconducts in check; internal training (ongoing)Apply PDCA to make improvements and prevent recurrence,
analyze, quantify and control potential risks

Improvementof corporate
governanceOccurrence of misconduct, deterioration of corporate value, legalrisks, criticism from society
Opportunities Establish credibility as a Prime Market-listed company, andmaintain and strengthen the foundation for sound and continuous
business growth e strive to improve our corporate governance to achieve speedyW
decision-making, better transparency and rationality, which will
enable us to carry out activities that enhance corporate value forall stakeholders

44,050

Risks

Risks

20,00010.0
23/3

32,77730,00020.0

10,0005,568
11,668

4,688
11,507

4,445
11,406

4,240
11,046

3,874
10,487

3,913
11,974

0

2013

2017

2018

2019

2020

2021

27/3 Target

Under our definition, a sustainable product is a product that reduces environmentalload and serves to solve social issues such as SDGs, while taking advantage of ourtechnological strengths. Our FY2026 sales expansion plan stipulates an increase by
30% relative to FY2021 results.

Risks

Risks

37,34340,00030.0

22/3

Biomass fuel50,00060.00Electricity

t-CO2

60,000

63.1

Risks

9,260

8,618

2027

2030
(FY)

Harima is committed to reducing greenhouse gas emissions and, in this regard, opened a biomass power
plant in 2005 that utilizes byproducts of crude tall oil distillation, and in 2023, established a floating solar
power generation business and introduced carbon-neutral LNG and renewable energy promotion programs
at some of our production sites in Japan.
Scope: Harima Chemicals, Harima M.I.D., Seven Rivers, Harima Trading and Nippon Filler Metals

Society

Risks

Employment Rate of People with Disabilities

Rate of Paid Leave Taken

%

%

3.50

100.0

2.92

3.00
2.50

2.63

2.28

2.27

2.19

60.0

1.50

77.1
66.0

72.8

40.0

50.0

Risks

Governance

30.0

1.00

20.0

0.50

10.0
2018

2019

2020

2021

2022

Harima has been long involved in the employment of individuals with disabilities
and will continue initiatives that actively promote the creation of a more diverse andinclusive workplace and society.
Scope: Harima Chemicals Group and Harima Chemicals

07

79.4
69.4

70.0

2.00

0.00

Risks

90.0
80.0

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

0Company Overview andStock Information

Materiality

Greenhouse Gas Emissions

Sales of Sustainable Products

ESG

We analyzed our future business environment and identified core risks and opportunities, taking into consideration changes inenvironment, society and economy. These risks and opportunities are expected to have a significant impact on the continuous growth of theCompany and therefore need to be managed and dealt with appropriately.
Having examined the financial impacts of society and the environment, we determined “Materiality”. Based on the Company’s longterm vision and mid-term plan and taking into consideration assessment indicators and guidelines related to SDGs and ESG, we identified
more than 200 keywords associated with social issues and changes, and organized them as follows: grouped them in 9 materiality themes,
examined and analyzed the details of those social issues and changes expected to arise between now and around 2030, assessed theirimpact on the Company, and their significance from two perspectives: significance for the Company and significance for our stakeholders.
The results were reported and accepted at a Board of Directors’ meeting of the Company.

4,667

5,000

Business Strategies

Risks and Opportunities, Materiality

Operating Income

Million yen

Value Creation Story

2018

2019

2020

2021

2022

We encourage employees to take their designated paid time off and reduce overtime
work for a better work-life balance. We will continue efforts to create a positive work
environment that meets the diverse needs of our employees.
Scope: Harima Chemicals Group and Harima Chemicals

Risks

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

08

HARIMA at a Glance

Value Creation Story

Value Creation Story

Business Strategies

ESG

Company Overview andStock Information

Value Creation Process
Harima operates four main businesses: Resins and Tall Oil Products Business, Paper Chemicals Business, Electronic Materials Business,and LAWTER Business. The Company generates value by providing products that meet customer needs, while contributing to therealization of a sustainable society.
Through this process, we aim to realize our long-term vision, Harima Vision 2030: “Deliver a sustainable future through advanced
technologies and passion for excellence - Pine Chemicals & Beyond”.

Business Model

Input
Financial capital
Total assets (consolidated)

92.4 billion yen
Invested capital

65.0 billion yen

OutputHarima’s
CircularBusiness
Model

OutcomeLong-term Vision

Resins and Tall Oil
Products Business

FY2030 Targets

120.0 billion yen or more
Operating income
8.5 billion yen or more
ROE
10 % or more
Overseas sales ratio
65 % or more
50 % reduction*
Greenhouse gas emissions
Net sales

Manufacturing sites

10 sites
18 sites[ Japan ][ Overseas ]Capital expenditure

Paper Chemicals
Business

8.3 billion yen

P.20

Intellectual capital
R&D sites*Compared with FY2013; in the Japanese operations of Harima
Chemicals, Inc.

Environmental value
Reduction of petrochemicals and hazardous substances

7sitesReduction of plastics, promotion of recycling
Response to natural disasters (weather, earthquakes, etc.)

R&D expenses

2.7billion yen
Human capital
Global workforce

1,710

Long-term Vision

Carbon neutrality

Mid-term Plan

Harima Vision 2030

NEW HARIMA 2026

Awareness of social issues

Electronic Materials
Business
P.21

32,116 kL(FY2021 results; 11 sites in Japan and 20 sites overseas)

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

Wellbeing of employees and their families
Advancement of science and technology

Contribution to the realization of a sustainable society
Provision of sustainable products

Decarbonization initiatives

LAWTER Business

Natural capital
Energy use (crude oil equivalent)

Value creation with local communities

P.08

Social and relationship capital4

Social value

Advancement of digital transformation (DX)

Materiality

Local production andconsumption at our global sites
Subsidiaries(consolidated)
Affiliates

09

Pine Chemicals & Beyond

P.19

Manufactured capital

35

Deliver a sustainable future through advanced technologies
and passion for excellence

P.22

Refine business management to better address ever-changing global business environment

Governance as the foundation of value creation

P.23~24

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

10

HARIMA at a Glance

Value Creation Story

Value Creation Story

Business Strategies

ESG

Company Overview andStock Information

CEO Message
Gratitude for the Chemical Resources Provided by Pine TreesEver since the Company founding in 1947, we have been fortunate enough to have continued operating in the pine chemicals
industry, and in 2022 we celebrated our 75th anniversary. These days, many companies are forced to switch businesses for avariety of reasons, including depletion of resources and declining demand. I therefore believe that Harima has been extremely
lucky to have been able to continue in the same business focused on chemical resources derived from pine trees.
However, there is no guarantee that this good fortune will continue in the future. We need to be aware of the issues that could
impede sustained growth and take a long-term approach to dealing with them.
At one time, when petrochemicals were in their heyday, we were asking ourselves whether it was wise to focus on “oldfashioned” natural products. The question arose because petrochemical technology had made it possible to synthesize a substancewith properties similar to those of rosin. However, rosin has its own exceptional qualities and remains in demand worldwide.
Believing that this business offers future potential and plenty of scope for further growth, we chose to continue on the same path.
Our know-how is world-class, including the R&D and manufacturing technologies we have dedicated ourselves to cultivating over
the years. We believe that developing our strengths in this field will support sustainable growth.
In May 2022, we announced our latest long-term vision, “Harima Vision 2030”, that defines the type of enterprise we want to beby the fiscal year ending March 31, 2031 (FY2030). We will continue to move steadily forward, aiming to remain a top-tier company
within the pine chemicals industry by going beyond short-term targets and picking up on changes in our business environment
promptly.

The Outstanding Properties of Pine Chemicals
Rosin is obtained by refining pine tree resin. It is a little-known fact that people have used rosin in a diverse range of activities eversince the start of human history. Pine trees exist all over the world, and I believe they are among the trees that have played themost useful roles in our lives. One familiar use of rosin is in baseball’s “rosin bag.” When baseball players put a little rosin powder
President

Yoshihiro Hasegawa

on their fingers, it helps them to grip the ball better. This makes the ball spin, enabling them to throw penetrating straight pitches
or a whole variety of breaking pitches.
Another distinctive characteristic of rosin is that its chemical composition is mildly acidic. One application for rosin thatmakes use of this property is soldering. Solder is an alloy of lead and tin that melts when heated and can be used to join metals
together. However, the metal surfaces to be joined are generally oxidized, which causes the solder to be repelled in the form of
droplets like water, making it impossible to join the pieces of metal together. Rosin is well suited for removing this oxide layer.
It melts at around the temperature used for soldering, and the relatively mild acid in the rosin referred to as a carboxyl group
removes the oxide layer, enabling the solder to wet the metal surfaces and join pieces of metal together. Throughout the ages,
rosin has been used in this way as part of soldering technology, and even today, this use of rosin continues to be passed on fromone generation to the next.

Utilizing theblessings of nature
to enhance thequality of life
~Pine Chemicals~
11

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

Thus, the pine tree is an extremely useful resource. It is Harima’s role to use the natural resin provided by pine trees as a raw
material for manufacturing products essential to our daily lives.

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

12

HARIMA at a Glance

Value Creation Story

Value Creation Story

Business Strategies

ESG

Company Overview andStock Information

CEO Message
Pine Chemicals Enter the Spotlight as a Renewable Resource

Acquisition of Henkel’s Solder Materials Business

The pine tree is a renewable resource from which many valuable constituents can be extracted.

The acquisition of the solder materials operations of German manufacturer Henkel also involved a business very similar to ourIn the case of fossil fuels such as coal and oil, reserves are finite, but plant resources such as pine trees can be regenerated
an infinite number of times for as long as they continue to grow in the natural world. Accordingly, pine trees and other plants haveattracted a great deal of attention in recent years as renewable, sustainable resources.
As pine trees have the capacity to absorb carbon dioxide through photosynthesis, they have come to be recognized as carbon-

own, so it was easy for us to understand and evaluate this opportunity. We pursued this acquisition, even if that meant stretching
our expenses to a certain extent.
Harima’s own solder materials business targets the automotive sector, which requires outstanding reliability. Over the years,
we have established ourselves as a truly reliable supplier in Japan, and we expect that our acquisition of Henkel’s solder materials

neutral biomass resources that are outstanding in terms of environmental conservation.

business will enable us to also supply to major automotive component manufacturers overseas.

Focus on Pinewood as a Biomass Fuel

Fostering Businesses We Are Capable of Evaluating

Pinewood used to be burned in the form of torches, but as a company, we have mixed feelings about the current interest in its

It can be challenging to expand business in sectors that impose high demands in terms of quality, price, and other requirements.

potential as a biomass fuel. In recent years, decarbonization initiatives have gained pace, and attention has focused on renewable

However, we have learned a great deal in this regard from our customers, so I intend to leverage that know-how as we expand

energy as a substitute for fossil fuels. The fatty acids derived from pine trees are also now garnering interest as biomass fuels. In

overseas. At the same time, I hope we can repay the customers we learned from by further improving our technologicalthe past, fuel prices were fundamentally linked to oil prices, but I believe that from now on the value of biomass resources as fuels

capabilities.

will increase. Sweden, for example, has a policy of completely eliminating all fossil fuels and replacing them with renewable energy

Moreover, the shift in our outlook that I mentioned earlier in connection with LAWTER occurred again to some extent with ourby 2045. The Swedish government is therefore subsidizing biomass fuels that replace fossil fuels. Europe is leading the way inacquisition of Henkel’s solder materials business. We came to realize that one of the challenges we face is to evolve into a global

introducing regulations specifying the ratio of overall fuel usage to be accounted for by biomass. Government subsidies have madecorporation trusted for embodying the virtues of sincerity, sturdiness and fairness.

it profitable to use even the expensive fatty acids derived from pine trees, and demand for these fatty acids as fuel is growing.

We receive information about a whole array of potential M&As in Japan and overseas, but as the industry to which we belong

The biomass industry is therefore now in competition with the pine chemicals industry, which uses pine trees as a raw material tois itself a niche sector, opportunities that match what we are looking for are few and far between. There was a time when our policy

manufacture chemicals. This constitutes a risk and undoubtedly gives cause for concern going forward.

was diversification and we became involved in sectors with little connection to our core business, but in the end, fostering sectors
we are capable of evaluating has remained our basic policy.

Expanding Our Business from Japan to the World

Creating a Company that Employees Feel Pleased to Have Joined

One application for pine chemical products are rosin-based sizing agents, which are paper chemicals that make paper water-

For more than 30 years since I took over from my father and Harima founder, I have thought constantly in my own way about theresistant. Used in photocopier paper, notepads, and other paper, they prevent ink from bleeding when writing with a fountain pen

purpose of business management. Peter Drucker, who is known as the leading authority in business management studies, proposedor printing newspapers and the like.

that the purpose of a business is to “create a customer.” I personally believe that, in a situation where a company, employees, andPrinting inks also contain rosin-based resins. Consequently, paper and printing ink are the two core usages of rosin. However,customers exist, the purpose of a business is to enhance satisfaction (to use a somewhat hackneyed phrase) among the customers,

information is now increasingly in digital form and less paper is being used, even newspapers are often read on smartphones,

shareholders, employees, and local communities who are the company’s stakeholders, and to “create customers” in the sense of

and as a result, per-capita paper usage is declining. Moreover, Japan’s dwindling population means that paper usage will decline

turning each of these stakeholder groups into fans of the company.

further. In light of these trends, we predict that the Japanese markets for paper and printing ink will continue to contract. On the

In my opinion, of all our stakeholders, employees are especially important. I want to ensure that the employees we areother hand, from a global perspective, demand for paper and printing ink in emerging economies can be expected to continue

fortunate enough to have working at Harima continue to feel pleased to have joined this company. I believe it is important not only

growing as their development progresses. We anticipated some time ago that in the Japanese market Harima would have to vie

that employees feel a moderate amount of pressure to perform in their work, but also that we enhance employee satisfaction bywith its industry peers for market share, eventually leading to price competition. We therefore acted early to turn our attention

offering remuneration commensurate with that pressure to perform and providing employees with a pleasant company to work in.

overseas and expand our business outside Japan. And just as we were looking for overseas markets, the opportunity to acquire

At Harima, we are constantly exploring the best way forward to achieve these aims.

LAWTER B.V. presented itself. LAWTER was engaged primarily in operating a global printing ink resin business. Despite shrinking

In recent years, more people are changing jobs than previously. It seems to me that this is because employees’ ties to theirdemand within this market, we concluded that acquiring LAWTER could be expected to yield benefits for the time being at least,

companies have become weaker than they were in the past. That is why I believe we must ensure that the people who choose to

and that our involvement in the same business domain would generate synergies. We therefore decided to go ahead with thework at Harima remain pleased to be a part of this company.

acquisition of LAWTER. Given that the business we had been operating in Japan was similar to LAWTER’s business in the Americas
and Europe, it was easy to assess the value of the company’s business. After the acquisition, our overseas sales ratio exceeded

To this end, we must of course ensure that Harima continues to operate, and we are also aiming to gradually increase ourbusiness scale and corporate value.

60%, and our outlook on the world changed. I know that a considerable proportion of M&As end in failure, but 12 years after
acquiring LAWTER, I believe that this M&A is one of the success stories.

13

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

14

Value Creation Story

HARIMA at a Glance

Value Creation Story

Long-term Vision: Harima Vision 2030

Pine Chemicals & Beyond

As a milestone to be achieved on the way to realizing Harima Vision 2030, we will aim for sustained growth under our mid-term plan, NEW
HARIMA 2026, in light of the following three core strategies: (1) Strengthen business fundamentals and expand business scope, (2) Conduct
R&D that propels the company into new businesses and growth fields, and (3) Refine business management to better address everchanging global business environment.

Objectives of Harima Vision 2030
Results

Net sales
Operating income
Operating income
marginNet sales

ROE

Net sales

30.0

Environmental value

Products

Renewable raw materials
Reduction of hazardous
substances

Pine chemical products

Reduction of volatile organic
compounds (VOCs)
Promotion of recycling
Reduction of plastics

Water-based resins andsolvent-free resins
Paper strengthening agents
Barrier coatingsI n our sales expansion plan for sustainable products,
we are aiming for a 30% increase in sales by 2026.

Sustainable products sales ratio in FY2021

Paint resins

83%
Sales expansion planfor sustainable products

FY2021 Results

15

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

63.1

30%

FY2026 Targets

Operating income
marginFY2026 Targets

76.0 billion yen

110.0 billion yen

ROE

120.0 billion yen or more
8.5 billion yen or more
7.0 % or more
10.0 % or more

20.0
10.0

17.5

30.0

21.1
6.3

0

1.5

13.2

FY2026 Targets

Billion yen

8.00

8.00

10.0

2.00

0

0

1.65
0.09

0.65

2.42
1.70

6.00

1.72

4.00

10.0

7.0 billion yen

Billion yen

6.00

22.1 24.4

20.0

Resins and Tall Oil Products
Paper Chemicals
Electronic Materials
LAWTER
Other

3.25 billion yen

40.0

29.5

OperatingincomeFY2021 Results

40.3

Billion yen

-0.87

2.44

4.00
2.00

-0.44

0.88

0

Basic Policies
Strengthenbusinessfundamentals andexpand business
scope

Improve competitiveness of the pinechemicals business

Strengthen supply chain operations, develop new applications, pursue new
businesses (alternatives to petrochemicals, infrastructure, flavors andfragrances)

Expand overseas operations

Solder materials, paper chemicals, adhesive resins

Reconfigure product portfolio andbusiness scope

Focus investments on growth areas and eliminate unprofitable products andbusinesses

Conduct R&D
that propels thecompany into new
businesses andgrowth fields

Rubber additives

Polymerization emulsifiers for functional rubber, additives for rubber used inshock-absorbing dampers, additives to improve rubber functionality

Environment and life sciences

Barrier coatings, surface coatings using fluorine alternatives, bioprocessing,
CCS/CCU* (CO2 capture and use)

Refine business
management tobetter address
ever-changing
global businessenvironment

Digital technologies

Upgrade production activities, speed up research, manage information,
reorganize work processes

ESG-oriented management

Strengthen governance, disclose climate change-related risks, disclose nonfinancial information, enhance IR activities

Working practices

Human resource (HR) management, diversity, remote working, HR system

Reducing greenhouse gas emissions

Reduce by 46% by 2027, use renewable energy, increase use of biomass fuels,
save energy

billion yen(Total Net sales 76.0 billion yen)

Operating income

Operating income

FY2021 Results

40.0

We aim to contribute to the realization of a circular society through the development of environment-friendly pine chemical-basedmaterials and expansion of sustainable products.

76.0 billion yen
3.2 billion yen
4.3 %
4.9 %

110.0 billion yen
7.0 billion yen
Operating income
6.4 %
marginROE
10.0 %Net sales

Resins and Tall Oil Products
Paper Chemicals
Electronic Materials
LAWTER
Other

Billion yen

Sales Expansion Plan for Sustainable Products

Net sales

Financial Targets* Compared with FY2013; in the Japanese operations of Harima
Chemicals, Inc.

Offering new technologies
to the world

Mid-term plan

FY2021

FY2030 Targets
yen120.0 billion
or moreyen
Operating income
8.5 billion
or moreROE
10 % or more
Overseas sales ratio
65 % or more
Greenhouse gas emissions
50 % reduction*

FY2030Long-term vision

FY2026

As a company that utilizes the blessings of nature to enhance the quality of life, Harima has grown through its pine chemicals business,
which uses pine chemical resources like rosin, fatty acids, turpentine and other materials all obtained from pine trees to develop products.
Our pine chemicals business employs a circular business model that makes effective use of natural resources. This ensures that thebusiness is highly compatible with the target of achieving a sustainable society. We will continue to explore the potential of the pinechemicals business, striving to develop new applications and strengthen business fundamentals, as we aim to establish a leading position
at global level.

 nder our definition, a sustainable product is aUproduct that reduces environmental load and serves
to solve social issues such as SDGs, while taking
advantage of our technological strengths.

Company Overview andStock Information

ESG

Mid-term Plan: NEW HARIMA 2026

Deliver a sustainable future through advanced technologies andpassion for excellence

Beyond Japan andpine chemicals

Business Strategies

Functional resins for semiconductors (photoresist resins), electronic
Semiconductors, 5G, and the Internet
component processing materials, high-durability solder, materials for LIB
of Things (IoT)
batteries* CCS: Carbon dioxide Capture and Storage
CCU: Carbon dioxide Capture and Utilization

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

16

Value Creation Story

HARIMA at a Glance

Value Creation Story / Business Strategies

Financial Capital Strategy

Business Strategies

Company Overview andStock Information

ESG

Research and Development
Building the Future, Creating New Value

Towards the future of pine chemicals
Expanding into new areas, accelerating business growth

Harima's R&D puts a focus on creating new product value that
contributes to building the future, and on speedily transforming
research results and technologies into marketable products.
We will continue to meet ever-changing market needs,
always ready to challenge new and unexplored realms with aneye on the future.

Shunichiro Taoka
Executive Managing Director
Managing Executive Officer
Global Business Director
Corporate Planning Director
Chairman, LAWTER B.V.

Aiming to Achive Our ROE Target
Our mid-term plan announced in May 2022 indicates a target of 10% for return on equity (ROE). This target is designed to improve Harima’s
evaluation in the stock market by raising ROE to the guideline level for listed companies of 8% or more, thereby restoring our ROE to
its pre-pandemic level. During FY2022 (Apr 1, 2022 ~ Mar 31, 2023), ROE declined to 2.4%, primarily as a result of upfront investments
including the acquisition of German manufacturer Henkel’s solder materials business, combined with lower Operating income, and theposting of extraordinary losses.
Aiming to increase ROE and further enhance business profitability, we will prioritize strategic investments while at the same time
giving due consideration to financial soundness.

Core Strategies of the Mid-term Plan
Harima’s operating environment is subject to major trends including Japan’s declining population, fluctuating raw material availability andprices, advancing digital transformation (DX), and increasing ecological awareness. Taking these trends into consideration, we determined
three core strategies as pillars of the mid-term plan: (1) Strengthen business fundamentals and expand business scope, (2) Conduct R&D
that propels the company into new businesses and growth fields, (3) Refine business management to better address ever-changing global
business environment.
The first of the three core strategies is “Strengthen business fundamentals and expand business scope”. As part of this strategy, in
2023 we opened a facility for the production of myrcene, key ingredient in aroma oils and fragrances, on the premises of our manufacturinghub, Kakogawa Plant. This initiative meets the rising demand for flavors and fragrances in world markets, and is part of a larger strategy
to diversify and create new opportunities for our pine chemicals business, that can successfully support business growth into the future.
Also, the acquisition of Henkel’s solder materials business in June 2022 opened opportunities to expand our customer base outside
Japan, in the industrial and communications equipment fields, particularly in the European automotive industry. We will continue tostrengthen our presence overseas, also through such means as strategic acquisitions.
Moreover, we are in the process of reviewing our businesses and products for which the market has matured, including lithographic ink
resins, paint resins and domestic paper chemicals, and have taken measures to boost the efficiency of their production systems, while overseas
we integrated our production facilities in Malaysia with a view to reinforce operations at the plant acquired during the Henkel acquisition.
The second of the three core strategies is “Conduct R&D that propels the company into new businesses and growth fields”. Harima
spends an annual average of 2.5 billion yen on R&D initiatives, and will look into further expanding this amount with a focus on strategic areas.
Regarding our paper chemicals business, in 2023 we announced the world’s first indirect food additive to be certified by the UnitedStates' FDA, Germany's BfR and China's GB9685 regulations for food packaging materials, and which is expected to highly contribute to thereuse, reduction and recycling of paper in world markets. Other developments include rubber additives for car tires and shock-absorbing
dampers for buildings, as well as barrier coating agents to be applied to paper surfaces in lieu of plastic conventionally used to laminate
paper, thereby improving product sustainability. Our future initiatives will also focus on the development of resins for the promising sectorof semiconductor materials.
The third of the three core strategies is “Refine business management to better address ever-changing global business environment”.
In this area, we will increase use of digital and AI technologies to enhance operations in the production, sales and R&D departments. In
R&D, we are confident that we will be able to speed up development by creating a database of information obtained through the years, andleveraging AI to conduct experiments more efficiently. In production, we will aim to create an optimal manufacturing system and establish
a preventive maintenance system to enhance operations safety. To this end, we will be using sensors to gather data and monitor statusof the production equipment, as well as that of raw materials and semi-finished products during the entire production process. In sales,
we aim for a better customer approach through sharing relevant customer data among related departments, and will further employ DX
technologies to enhance operations.
In light of these three core strategies, we aim to revamp overall operations and management towards sustainable business growth
into the future, together with high levels of profitability and ROE.

Shareholder Return Policy

Ichiro Taninaka
Senior Executive Managing Director
Senior Managing Executive Officer
R&D Company President

Creation of New Technologies through Human Resource Development and Vitalization
We foster a research environment that encourages originality through talent development and corporate vitalization. A number ofeducational training opportunities, international exchanges and overseas dispatch programs are in place to strengthen collaboration withprominent research institutes around the world. We also have an award system that recognizes particularly remarkable company projects,
as a way to stimulate innovation and motivation. In addition, we promote cross-industry and industry-academia-government interaction inan effort to develop talent who lead the way to the next generation of technologies.

R&D with an Eye on the Future
Harima actively incorporates leading-edge technology into the development of new, eco-friendly products with energy and resource-saving
properties. Tireless research efforts bear fruit in the form of patents and a diverse product lineup for which we receive widespread global
recognition.
Our Central Research Laboratory at Kakogawa, and Tsukuba Research Laboratory in the heart of Tsukuba Science City form the
backbone of domestic R&D activities. Using the latest equipment and analytical tools, we conduct research that pushes the boundaries ofour knowledge and our business. With the significant boost of R&D capability in 2011 with the addition of LAWTER and its research facilities
located worldwide, the Company is fully utilizing its diverse network to meet the ever-changing needs of the global market. The passion
and dedication we put into our unique technologies are the driving force behind what enhances the quality of life for all.

R&D in Core Business Fields
Functional Resins

Paint resins

UV-curable resins

Printing ink resins

Adhesive resins

Paper Chemicals

Sizing agents

Paper strengthening
agentsProcess improvement
agents, pitch control agents

Electronic Materials

Lead-free solder
pastesBrazing materials

Coating agents,
barrier coatings
Functional resins forsemiconductors

Surface/Interface Control
Materials
New-age Water-based
Materials
New-age Electronic
Materials

Functional coating agents (optical, scratch-protective, mold releasing, antistatic),
functional nanoparticle dispersions, material recycling technology

Pine Chemical Materials

Rubber additives (for tires, anti-vibration and shock absorbing rubber), rubber softeners,
biotechnology-related products−

R&D in New Business Fields
Additives/coating agents for food packaging materials, secondary battery materials
Conductive pastes, nano pastes

Research PlanningIntellectual property strategy, new business exploration, R&D support

The Company has always strived to return profits to shareholders by maintaining stable dividend distribution and steadily increasing
dividends, as well as by conducting share buybacks. We will continue aiming to improve returns to shareholders, while seeking to balancesuch returns with business performance and the shareholders’ equity ratio.

17

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

18

HARIMA at a Glance

Business Strategies

The Resins and Tall Oil Products business operates production sites around the world forrosin, fatty acids and turpentine, base ingredients in pine chemicals and foundation of ourcircular business model. Core products include printing ink resins, adhesive resins, synthetic
rubber emulsifiers and flavor and fragrance ingredients. We also target new fields that use
resin synthesis technologies and emulsification and dispersion technologies, which we havecultivated through the R&D of pine chemical products, in addition to various eco-friendly paintresins, nanoparticle dispersions-derived functional resins, coating agents for LCDs and films,
and more. Our strengths include eco-friendly manufacturing operations, high-level technologies
and broad product portfolio that reflect our R&D capabilities.

The Paper Chemicals business operates in Japan, China and the U.S.A., and its main
products include paper strengthening agents that add strength to paper such as corrugatedcardboard, sizing agents that improve water resistance and printability while preventing ink
bleed, and other chemicals used in paper manufacturing processes such as surface coating
agents.
Paper strengthening agents play a vital role in environmental protection by enhancing
the strength and quality of recycled paper and a multitude of paper options employed inlieu of single-use plastics and therefore demand is expected to grow. Harima developed
the world's first high molecular weight, amphoteric polyacrylamide (PAM)-based paper
strengthening agent to be certified by all 3 of the world's leading regulations as an indirectfood additive. Core strengths of the Paper Chemicals business include a host of technologies
developed in Japan over the years, the R&D we conduct overseas, as well as our agility torespond to the needs of customers worldwide.

Net sales

Operating income

Billion yen

Billion yen

20.30

18.18

15.00

14.78

17.56

19.25

1.50

Yoshifumi Kajitani

0
-0.50
19/3

20/3

21/3

22/3

23/3

-1.00

Asia/
Oceania

5.7%

1.7%

Europe

0.6%

0.41

0.50

5.00

North andSouth America

1.37

1.00

10.00

0

0.03

0.09

20/3

21/3

22/3

Operating income

Billion yen

Billion yen

25.00

18.92

18.48

21.17

24.93

Executive Managing Director
Managing Executive Officer
Paper Chemicals Company President

1.88

1.83

Asia/
Oceania

1.98

Japan

39.6%

36.6%
1.65

1.50

1.53

Net salesby region

1.00

10.00

0.50

5.00
0

2.50
2.00

15.00

92.0%

23/3

19.94

20.00

Japan

-0.49
19/3

Net sales
30.00

Net salesby region

Eiketsu Ro

Performance

19/3

20/3

21/3

22/3

23/3

0

19/3

20/3

21/3

22/3

North andSouth America

23.8%

23/3

Review of
FY2022

Net sales increased by 1,685 million yen (9.6%) compared to fiscal 2021, to 19,251 million yen, owing to increases in selling prices set tooffset the impact of high raw material prices. Operating income decreased by 55 million yen (61.5%) to 35 million yen, due to higher raw
material prices and other manufacturing costs.

Review of
FY2022

Net sales increased by 3,759 million yen (17.8%) compared to fiscal 2021, to 24,933 million yen, owing to increases in selling prices set
to offset the impact of high raw material prices as well as a weaker yen. Operating income decreased by 116 million yen (7.0%) to 1,534
million yen, due to higher raw material prices and other manufacturing costs.

Tapping Into Growth
Opportunities

As a manufacturer that utilizes natural and renewable resources, we contribute to the realization of carbon neutrality and economic
circularity by developing pine chemical products sourced from biomass materials. In addition to our existing lineup, we aim to develop
new markets, products and services that truly contribute to the creation of a sustainable society.

Tapping Into Growth
Opportunities

We aim to expand business and strengthen supply chain operations in North America, China and Southeast Asia, in addition to meeting
the growing demand in Japan for paper packaging materials, deriving from the ease of pandemic restrictions, and new regulations that
promote better ways for plastic resource circulation. We will also expand lineup of products for food packaging applications, with a viewto accommodating market shifts from plastic to paper products and contributing to the realization of a sustainable society.

Responding
to Risks

We consider drastic fluctuations in the supply and prices of raw materials and fuels as risks for our business. In an effort to stabilize
supply chain operations, we are promoting diversification of procurement methods. For such mature businesses as the lithographic ink
resins business and paint resins business, we will reform and streamline operations and production systems.

Responding
to Risks

We consider the market's maturity and subsequent long-term shrinkage a risk for our domestic business, to which we are reconfiguring
operations and streamlining production systems. Meanwhile, we plan to expand overseas business by capturing growth markets forsuch products as corrugated cardboard and coating agents used in a multitude of paper applications employed in lieu of single-use
plastics.

Social Issues to Be Addressed

NEW HARIMA 2026 Targets

Contributing to achieving a decarbonized society as an extension of our circularbusiness model
Environmental value creation
Reducing hazardous substances and VOCs, expanding sales of solvent-free resins,providing alternatives to plastics and petrochemicals
Creating a DX society through development of ultrafine-particle based high-refractive
index coating agents

Refine basic research on pine chemicals and crude tall oil*¹ distillation technology*²
Develop technologies and create markets for additives to improve rubber functionality
Enter new markets for alternatives to petrochemicals
Develop technologies for eco-friendly water-based and solvent-free resins
Eliminate unprofitable products and businesses

Social Issues to Be AddressedEnvironmental value creation
Reduction of petrochemicals and plastics
Higher percentage of recycled waste paper
Paper production fluctuation by region

Performance During NEW HARIMA 2026 Period (FY2022 Results)
INPUT
Capital expenditure
R&D
expenses

Resins andTall Oil Products
Pine Chemicals

Employees
Manufacturing
sites

19

Company Overview andStock Information

ESG

Paper Chemicals

Performance

20.00

Business Strategies

Resins and Tall Oil Products

Senior Operating Officer
Resins and Tall Oil Products Company President

25.00

Value Creation Story

Japan
South America

OUTPUT

692 million yen
395 million yen
430 million yen
226
51

Production output
Net sales
Operating income

17.34 billion yen
19.25 billion yen
35 million yen

Performance During NEW HARIMA 2026 Period (FY2022 Results)
OUTCOME(+16.3% YOY)(+9.6% YOY)(-61.5% YOY)

Established myrcene (flavor and fragrance ingredient) production facility
Launched additives for rubber used in shock-absorbing dampers and conducted user
evaluation surveys

NEW HARIMA 2026 Targets

Allocateresources to growth areas and expand into new markets with newly
developed products
Expand market for agents certified as indirect food additives through developmentof and market creation for functional coating agents that help reduce plastics
Accelerate business expansion in North America, China and South Asia
Strengthen supply chain operations and support flexible distribution

Promote pine-derived products with highenvironmental value
Mitigate earthquake damage throughdevelopment of additives for rubber used inshock-absorbing dampers
Enhance traceability by performing supply
chain due diligence

Launched a new line of lithographic ink resins with high-printability
Developed and started sales expansion of eco-friendly, weak solvent-based paint resins
for building facades
Promoted acquisition of traceability-related certification to improve value of tall oil
products

INPUT
Capital expenditure
R&D expenses
Employees
Japan
Manufacturing
sites

North America
China

OUTPUT

303 million yen
739 million yen
256
4
1
3

Production output
Net sales
Operating income

21.76 billion yen
24.93 billion yen
1,534 million yen

OUTCOME(+15.4% YOY)(+17.8% YOY)(-7.0% YOY)

Responded to growing market competition by expanding product lineup, increasing sales
and improving profitability through supply chain reconfiguration
Expanded lineup of products compliant with regulations for indirect food additives in
U.S.A., Germany, and China (Rosin-based emulsion sizing agent “NeuRoz” series, PAMbased paper strengthening agent “Harmide C-10,” and Amphoteric PAM-based paper
strengthening agent “Harmide T2”)

Expand lineup of productsthat contribute to the
reduction of petrochemicals
Environmental and plastics
value creation Promote products that
contribute to increasing thepercentage of recycled waste
paper*1 Crude tall oil: A raw material derived from the kraft-pulping process of pine trees*2 Distillation technology: Technology used to distill crude tall oil to extract rosin, fatty acids, biomass fuel, etc.

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

20

HARIMA at a Glance

Business Strategies

The core products of the Electronic Materials business are solder materials that use metaljoining technologies to bond electronic parts. With a rich lineup of products including highdurability solder for cars and environmentally friendly lead-free solder, our main customers
have long been automotive component manufacturers in Japan, however, the acquisition of
the solder materials business of German manufacturer Henkel in June 2022 has accelerated
expansion into the global market. Our strengths also include fields of mobility and electronic
products in the form of aluminum brazing materials, which employ a combination of metaljoining and resin synthesis technologies for devices with heat exchangers such as air
conditioners and radiators for cars, as well as functional resins for semiconductors which apply
technologies of metal-joining, resin synthesis and interface control to serve a variety of growing
applications.

LAWTER primarily engages in the pine chemicals business with operations in sevencountries around the world. Core products include adhesive resins, printing ink resins, paintresins for road marking, synthetic rubber emulsifiers and flavor and fragrance ingredients.
The water-based tackifier resin series SnowtackTM in particular, holds top share in the
global market, and is used for labels and stickers, and more recently for industrial tapes.
In response to the growing demand for alternatives to petrochemicals, we offer a large
number of sustainable products made from plant resources such as rosin-derived waterbased flexographic ink resin series SnowpackTM. With rosin production bases located inSouth America, Oceania and Europe, a high rate of our raw materials are procured in-house.

Seishi Kumamoto
Senior Operating Officer
Electronic Materials Company President

Operating income
Billion yen

9.24

10.00

6.00

5.00

6.30

North andSouth America

0.42
0.15

0.20

2.00
19/3

20/3

21/3

22/3

23/3

0

52.6%

21.9%

0.65

0.40

Japan

Asia/
Oceania

0.80
0.60

4.00

0

Mikio Katayama
Senior Operating Officer
LAWTER President and CEO

0.27

11.0%

0.16

Net salesby region

20/3

21/3

22/3

14.5%

23/3

Operating income

Billion yen

Billion yen

50.00
40.00

38.79
30.97

30.00

27.65

23.06

1.50

19/3

20/3

21/3

1.72

1.65

22/3

23/3

0

19/3

20/3

21/3

1.31

North andSouth
America

22/3

3.5%

16.8%

0.38

0.50

Japan

Asia/
Oceania

1.00

20.00

0

2.00
1.50

29.51

10.00

Europe19/3

Net sales

Net salesby region
Europe

37.2%

23/3

42.5%

Review of
FY2022

Net sales increased by 2,937 million yen (46.6%) compared to fiscal 2021, to 9,241 million yen, owing to the successful integration of the
newly acquired solder materials business. Operating income decreased by 494 million yen (75.1%) to 163 million yen, due to higher raw
material prices and amortization costs of said solder materials business.

Review of
FY2022

Net sales increased by 9,279 million yen (31.4%) compared to fiscal 2021, to 38,797 million yen, despite the declining demand caused byconcern over global recession, owing to increases in selling prices set to offset high raw material prices. Operating income decreased
by 405 million yen (23.6%) to 1,315 million yen, due to increases in manufacturing costs triggered by higher energy prices and global
inflation.

Tapping Into Growth
Opportunities

We are pursuing synergies resulting from the acquisition of Henkel’s solder materials business and its customer base, technology,
manufacturing sites and workforce to further expand business. We are also reinforcing production system to meet the growing demandof functional resins for semiconductors.

Tapping Into Growth
Opportunities

We are expanding share in the growing market of adhesive resins, as well as conducting R&D for the innovation of sustainable products.

Responding
to Risks

We consider the decline in automobile production and high raw material prices as risks for our business. We are steadily expanding
portfolio and sales in the growing market of functional resins for semiconductors as well as high-profit products, and strengthening
production capacity to ensure stable supply.

Responding
to Risks

We consider high raw material prices and the global shrinkage of demand as risks for our business. We are promoting diversification of
procurement methods by utilizing various supply chains, as well as conducting R&D for alternative products.

Social Issues to Be Addressed

NEW HARIMA 2026 Targets

C ontributing to the realization of a mobility society through such technologies as
CASE
Contributing to the realization of a decarbonized society
Developing technologies and expanding markets for products that promote carbon
neutrality

C onsolidate the solder materials business acquired from Henkel and create synergies
with existing businesses
Reinforce production system and develop new products to meet growing demand offunctional resins for semiconductors
Expand markets of eco-friendly brazing materials for heat exchangers

Social Issues to Be AddressedC o-creation of environmental and social values towards the realization of asustainable society

Performance During NEW HARIMA 2026 Period (FY2022 Results)
INPUT
Capital expenditure
R&D expenses
Employees
Japan
North America
Manufacturing
sites

Europe
China
Asia

21

Company Overview andStock Information

Performance

Billion yen

5.29

ESG

LAWTER

Net sales

5.73

Business Strategies

Electronic Materials

Performance

8.00

Value Creation Story

OUTPUT

5.42 billion yen
0.52 billion yen
212
2
1
1
1
1

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

Production output
Net sales
Operating income

7.39 billion yen
9.24 billion yen
163 million yen

Performance During NEW HARIMA 2026 Period (FY2022 Results)
OUTCOME(+22.8% YOY)(+46.6% YOY)(-75.1% YOY)

Promoted post-merger integration (established a site for technical sales in the UK,
integrated plants in Malaysia, increased share in growth markets, integrated/innovatedtechnologies to develop new products and enhance product value)
Reinforced production capacity of functional resins for semiconductors to meet growing
demandPromoted overseas expansion of aluminum brazing materials for automobiles anddeveloped stainless steel brazing materials for water heaters

NEW HARIMA 2026 TargetsF urther expand share in the growing market of adhesive resins
Enter new markets for alternatives to petrochemicals
Conduct R&D of sustainable products and manufacturing methods

Expand into overseas markets technologies
highly recognized for use with Japanese cars,and expand in Japan technologies obtained
through the Henkel solder materials businessacquisition
Expand lineup of products with highenvironmental value (products that help
reduce the weight of heat exchangers,
improve heat efficiency, or reduce energy
consumption in the customers’ production
processes)

INPUT
Capital expenditure
R&D expenses
Employees

Manufacturing
sites

1,327 million yen
645 million yen
594
North America
1South America
1Europe
2
China
3
Asia
1
Oceania
1

OUTPUT
Production output
Net sales
Operating income

56.24 billion yen
38.79 billion yen
1,315 million yen

OUTCOME(+27.4% YOY)(+31.4% YOY)

Promote products with high environmental
value that contribute to decarbonization,energy saving, etc.

(-23.6% YOY)

Maintained large market share of water-based tackifier resins
Expanded application of tackifier resins to the industrial tapes market
Promoted energy
savingDeveloped high-concentration water-based tackifier resins,developed and prepared for mass production of tackifier resins
for no-heat UV adhesives

Our UV-curable printing ink resins adopted by leading printing ink manufacturers to meetgrowing demand for related inks triggered by digitalization and small-batch printing
Introduced and commercialized plant-based inks, coating agents and water-based
flexographic ink resins that contribute to reducing GHG emissions

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

22

HARIMA at a Glance

ESG

Value Creation Story

Business Strategies

ESG

Company Overview andStock Information

Corporate GovernanceManaging Directors (as of July 10, 2023)
Joined the Company
Managing Director
Executive Managing Director
Vice President
Representative Managing Director and Vice
President
President, Harima Shoji, Inc.
May 1988(currently Harima Trading, Inc.) (current position)
June 1988
President, the Company (current position)
November 1994 President, Harima M.I.D., Inc. (current position)
April 2004
Chairman, Shorai Foundation for Science andTechnology (current position)
October 2012
President, Harima Chemicals, Inc.
(current position)
Chairman, LAWTER B.V.
June 2014

Basic Approach to Corporate Governance
April 1973

April 1977
December 1977
August 1983
June 1985
June 1987

Yoshihiro Hasegawa
President

Ichiro Taninaka
Senior Executive Managing Director
Senior Managing Executive Officer
R&D Company President

April 1993
April 2005
June 2008
June 2010
January 2011
October 2012
October 2012
October 2012
June 2014
June 2014
June 2014
June 2020
June 2020
June 2021
June 2021
March 2023
March 2023
June 2023

Eiketsu Ro
Executive Managing Director
Managing Executive Officer
Paper Chemicals Company President

Joined the Company
Development Director, Central Research Laboratory
Operating Officer
Managing Director
Corporate Planning Director
Corporate Planning Director
Information System Director
Auditing Director, Operation Director
Executive Managing Director
Managing Executive Officer
President and CEO, LAWTER B.V.
Senior Executive Managing Director, the Company(current position)
Senior Managing Executive Officer (current position)
Resins & Tall Oil Products Business Exercise
Controller
Managing Director, Harima Chemicals, Inc.
(current position)
R&D Exercise Controller, the Company
R&D Company President (current position)
Chairman, LAWTER B.V.

February 2004
June 2004
June 2009
June 2010
October 2012

Teruo Kaneshiro
Senior Executive Managing Director
Senior Managing Executive Officer

October 2012
June 2014
June 2016
June 2016
April 2020

Joined Kobe Bank
(currently Sumitomo Mitsui Banking Corporation)
Accounting Director, the Company
Managing Director
Management Senior Division Manager
Executive Managing Director
Executive of Accounting, General Affairs, Legal
Affairs, Human Resources, Public Relations
Managing Director, Harima Chemicals, Inc.
Head Office Group Management Control, the Company
Senior Executive Managing Director (current position)
Senior Managing Executive Officer (current position)
Nomination and Remuneration Committee Member(current position)

Effectiveness of the Board of Directors
April 1982
August 2008

Shunichiro Taoka
Executive Managing Director
Managing Executive Officer
Global Business Executive
Corporate Planning Director
Chairman, LAWTER B.V.

October 2012
October 2013
June 2015
June 2017
June 2017
June 2017
June 2017
June 2021
June 2021
July 2023

Joined Taiyo Kobe Bank
(currently Sumitomo Mitsui Banking Corporation)
General Manager attached to Business Audit
Department (New York)
Auditing Director, the Company
Operating Officer
Global Business Director
Managing Director
Senior Operating Officer
Global Business Executive (current position)
Corporate Planning Director (current position)
Executive Managing Director (current position)
Managing Executive Officer (current position)
Chairman, LAWTER B.V. (current position)

The Internal Control department, headed by a Managing Director, collects and inspects monthly internal control reports submitted by divisions and companies,
administrative departments of the holding company, and domestic and overseas subsidiaries, and holds internal control meetings regularly (bimonthly) to monitor theCompany’s enforcement of compliance, status of risk avoidance and management, and status of compliance with the Harima Global Business Code of Conduct.

Policy on Executive Remuneration
The Company's basic policy is to determine remuneration for individual Managing Directors within the limit of the total remuneration amount approved at a General
Meeting of Shareholders, taking into account their position, degree of contribution to the operating results of the Company, and generally accepted standards.
When determining the details of remuneration for individual Managing Directors, the Nomination and Remuneration Committee, a voluntary advisory body, performs
a multifaceted examination of the draft proposal for the fiscal year, including consistency with the Determination Policy, and the Board of Directors respects its report inprinciple.

Managing Directors Serving as Audit & Supervisory Committee Members (as of the end of June 2023)

October 2003
April 2010

Hideo Yamada
Managing Director Serving as Audit &Supervisory Committee Member

June 2011
June 2012
October 2012
June 2014
June 2014
June 2017
June 2017

April 1976
May 1986
October 2003
March 2006
June 2012
February 2016
June 2017

Tsuneo Takahashi
Managing Director Serving as Audit &Supervisory Committee Member (Outside)

23

April 2020

Joined Taiyo Kobe Bank
(currently Sumitomo Mitsui Banking Corporation)
General Manager, Keihankyobashi Branch
Executive Officer, Manager of Financial Group,
Corporate Planning Division, ARRK Corporation
Joined the Company, Global Business Director
Operating Officer
Corporate Planning Director
Corporate Planning Director
Information System Director
Managing Director Serving as Audit & Supervisory
Committee Member (current position)
Corporate Auditor, Harima Chemicals, Inc.
(current position)
Joined Mitsubishi Corporation
Mitsubishi Corporation Finance PLC
President, Mitsubishi Corporation Securities Ltd.
Director, Natsource Japan Co., Ltd.
Full-time Auditor, Mitsubishi Corporation
Plastics Ltd.
Director, Institute of Corporate Governance,
Japan (current position)
Managing Director Serving as Audit &Supervisory Committee Member (current position)
Nomination and Remuneration Committee
Member (current position)

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

The Board of Directors is chaired by President Yoshihiro Hasegawa. The Board consists of nine Managing Directors (four of whom serve as Audit & Supervisory Committee
Members), three of whom are Outside Managing Directors.
In addition to the regular monthly Board meeting, the Company holds irregular Board meetings as needed, and all important management matters stipulated in laws
and regulations, the Articles of Incorporation, and the Rules of the Board of Directors are brought up for discussion.
The Company has introduced an Operating Officer system. Under a management structure comprised of nine Managing Directors and 20 Operating Officers (four ofwhom concurrently serve as Managing Directors), we have segregated the functions of the Board of Directors, namely, creating management strategies, making decisions,and supervising the execution of business, from the function of Operating Officers, that is, execution of business, to establish a system that allows us to respond to changes
in the business environment efficiently and swiftly.
Furthermore, pursuant to Article 399-13, Paragraph 6 of the Companies Act of Japan, we are now able to delegate all or part of the decisions on the execution ofimportant business to Managing Directors by a resolution of the Board of Directors, so that we can execute our business more flexibly than before.
The Articles of Incorporation of the Company stipulate that the number of Managing Directors of the Company (excluding Managing Directors serving as Audit &Supervisory Committee Members) shall be nine or less, and in addition to that, the number of Managing Directors serving as Audit & Supervisory Committee Members
shall be five or less.

Internal Control Activities

April 1998
Joined the Company
September 2012 Vice President, Hangzhou Hanghua Harima
Chemicals Co., Ltd.
June 2017
Operating Officer
April 2018
Vice President, Paper Chemicals Company
June 2018
Senior Operating Officer
June 2018
President, Paper Chemicals Company(current position)
June 2019
Managing Director
June 2022
Resigned as Managing Director
June 2022
Managing Executive Officer (current position)
June 2022
Executive Managing Director (current position)

April 1978

The Company’s basic approach to corporate governance is to continuously increase its corporate value for its stakeholders, including shareholders, customers, employees,
business partners, and local communities, through sound corporate activities. Based on this basic policy and in order to make swift and decisive judgments and increase
the transparency and rationality of management, we strive to enhance the activities of the Board of Directors, the Audit & Supervisory Committee, and the Auditing
department, and develop internal control systems. We also work to strengthen information disclosure, compliance and risk management systems. In accordance with theprovisions of the Articles of Incorporation, the Company has concluded an agreement with three Outside Managing Directors serving as Audit & Supervisory Committee
members that limits their liability for damages pursuant to Article 427, Paragraph 1 of the Companies Act. The maximum amount of liability for damages based on theagreement is the amount stipulated by law. The Company is actively developing its business overseas, with the overseas sales ratio at approximately 60%. As part of our IR
initiatives for overseas investors, we constantly update our corporate website in Japanese, English, and Chinese and enhance its content. We work to improve information
disclosure in line with globalization trends in an effort to increase communication with our investors and various others stakeholders.

April 1984
April 1987
June 1987
June 2015
April 2020

Registered as an attorney
Opened Kitamon General Law Office (to present)
Outside Corporate Auditor, the Company
Managing Director Serving as Audit &Supervisory Committee Member (current position)
Nomination and Remuneration Committee Chair(current position)

Tatsuya Michigami
Managing Director Serving as Audit &Supervisory Committee Member (Outside)

Yuka Hayashi
Managing Director Serving as Audit &Supervisory Committee Member (Outside)

September 1985 Joined Minato Audit Corporation(currently Ernst & Young ShinNihon LLC)
April 1991
Registered as a certified public accountant(to present)
August 1998
Member (currently Partner), Century Audit
Corporation (currently Ernst & Young ShinNihon LLC)
July 2010
Senior Partner (currently Partner), ShinNihon &Co. (currently Ernst & Young ShinNihon LLC)
September 2015 Governance Council member, Ernst & Young
ShinNihon LLC
September 2019 Vice-Chairperson, Governance Council, Member,
Audit Committee
June 2022
Managing Director Serving as Audit & Supervisory
Committee Member (current position)

Process for Electing Managing Directors and Operating Officers, CEO Succession Planning and Its Determination
The Articles of Incorporation of the Company stipulate that the number of Managing Directors of the Company (excluding Managing Directors Serving as Audit &Supervisory Committee Members) shall be nine or less, and the number of Managing Directors Serving as Audit & Supervisory Committee Members shall be five or less.
It also stipulates that a resolution to elect Managing Directors shall be made by a majority of the voting rights of shareholders present at a General Meeting of
Shareholders where shareholders holding one-third or more of the voting rights of shareholders who are entitled to exercise their voting rights are present, and that such
resolution shall not be by cumulative voting.
In electing Outside Managing Directors, we have appointed those who are unlikely to have conflicts of interest with general shareholders, with reference to the
Independent Directors/Auditors systems stipulated by the Tokyo Stock Exchange.
At present, we have not formulated a specific succession plan for the CEO, etc. in consultation with the Board of Directors. Although we have several Representative
Managing Directors, we recognize that succession planning is an issue. We will consider it as appropriate, taking into account the future situation of the Company and theenvironment, also by utilizing the Nomination and Remuneration Committee, which was established as a voluntary advisory body to the Board of Directors in April 2020.

Approach to Independence of Outside Officers
In electing Outside Managing Directors, we have appointed those who are unlikely to have conflicts of interest with general shareholders, with reference to the
Independent Directors/Auditors systems stipulated by the Tokyo Stock Exchange.
The Company has three Outside Managing Directors. After examining the attributes of the independent Officers, etc., we have determined that there is no risk of
conflicts of interest with general shareholders and thus have appointed them as independent Officers. They do not hold any shares of the Company. We have registeredthem as independent Officers with the Tokyo Stock Exchange.
HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

24

HARIMA at a Glance

ESG

Compliance

ESG

Company Overview andStock Information

Tsuneo Takahashi

Yuka Hayashi

Tatsuya Michigami

Outside Managing Director

Outside Managing Director

Outside Managing Director

Value Creation Story

Business Strategies

Meet Our Outside
Managing Directors

Basic Approach to Compliance
We have established the Harima Global Business Code of Conduct as a standard of behavior to be observed by all Group companies and their executives and employees in
implementing business activities under our corporate philosophy. All Group companies and their executives and employees (including non-fulltime employees) understandthe spirit of this Code of Conduct, and will fulfill their social responsibilities with high ethical standards toward the creation of a sustainable society while respecting
human rights and complying with relevant laws and regulations of each country and international rules.
This Code of Conduct does not cover all situations of our corporate activities or all laws and regulations in each country. Therefore, it can be complemented byestablishing additional codes of conduct, policies, etc. in each country or region, based on and not conflicting with this Code of Conduct.
Executives of all Group companies recognize that thorough compliance with this Code of Conduct is essential, and will strive to lead by example to ensure that allconcerned parties are fully aware of compliance, and develop an internal system to ensure compliance. Furthermore, in the event of a violation of this Code of Conduct,
executives themselves will take responsibility for resolving the problems, as well as investigate the causes, strive to make improvements, and prevent recurrence.

Business Ethics Committee and Risk Management Committee
We have established the Harima Global Business Code of Conduct, which serves as the Company’s common code of behavior, in implementing business activities that put
into practice our corporate philosophy of "Utilizing the blessings of nature to enhance the quality of life”.
Observing the Harima Global Business Code of Conduct and ensuring thorough compliance are promoted by the Business Ethics Committee, which consists mainly ofManaging Directors. Risks surrounding Harima Chemicals Group are reviewed and verified by the Risk Management Committee.

Targeting further improvementof the Harima Chemicals
Group’s corporate value
The Company is pursuing various strategies in linewith its long-term vision, “Harima Vision 2030” andmid-term plan, “NEW HARIMA 2026”. Our three
Outside Managing Directors, who play an essential
role in performing the supervisory function of theBoard of Directors, shared their views on how tofurther improve the Company’s corporate value.

Internal and External Compliance Reporting System

What roles do you think are expected ofyou as Outside Managing Directors in lightof your individual fields of expertise?
And what aspects do you focus on whencontributing to meetings of the Board of
Directors or other bodies?

For the improvement of corporate ethics, we have distributed the Harima Global Business Code of Conduct and Business Code of Conduct Handbook to all employees andestablished internal reporting and consultation services. In addition to that, and in order to further strengthen the prevention of illegal acts in our corporate activities
and ensure swift and appropriate responses in the event of the occurrence of such acts, we have established compliance reporting and consultation services outside theCompany so that employees can directly report to or consult with external lawyers.
This internal and external reporting system is operated with the utmost consideration given to the privacy of those who consult with, in accordance with theWhistleblower Protection Act, and it is clearly stated in the Company’s internal regulations that no disadvantages will be inflicted on them.

Internal and External Compliance Reporting System

Michigami

Users (employees and temporary workers)

Internal reporting desk

Email

Telephone

External reporting/consultation services
Letters, etc.
(in writing)

Email

Telephone

FAX

Affiliated law firms

Human Resources
Director of Human Resources/Executive of Human Resources/ Director of Internal Control/Audit & Supervisory Committee(For more severe matters)

Business Ethics Committee/Board of Directors
Hayashi25

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

As an attorney, for a long time, I've worked mainly in corporate
legal affairs and as an external committee member for a range oforganizations. Given that my involvement in Harima Chemicals
Group is as an Outside Audit & Supervisory Committee member,
I think the roles required of me are to assess from a legal
perspective whether the Company Directors are fulfilling their
obligation to faithfully perform their duties, and to check from athird-party perspective whether the interests of the Company arebeing taken fully into account in the management of the business.
My approach at meetings of the Board of Directors is
to check whether all the advantages and disadvantages of a
proposal have been examined to determine a viewpoint, identify
how things might play out in the future, and assess what therisks might be. I also check whether the proposal is presented
using content and materials that are easy to understand from theshareholders’ perspective. After verifying that these steps havebeen taken, I check that proposals are properly discussed anddecided upon.
As a certified public accountant, I have been involved for many
years in auditing numerous listed companies. I believe that,
ultimately, a company’s culture in terms of its management
and organization is of key importance, not only with regard toaccounting and financial matters, but also in relation to otherareas such as risk management and compliance. Around a year
has passed since I took up the position of Outside Managing
Director at Harima, and I have experienced at first handthe organizational culture of “sincerity and sturdiness,” thestrong leadership provided by the President, and the powerof the management philosophy and business strategies topenetrate throughout the Group. The aspects I want to focus
on when contributing to meetings of the Board of Directors
include confirming that the Company has made the most of theadvantages provided by this organizational culture to ensure
full management transparency and objectivity, and ascertaining
how the Company intends to deal with changes in its operating
environment.
Takahashi

I have many years of experience in financial services and financerelated work in a trading company; the last position I held before
starting my role at Harima was as a full-time auditor. I think oneof the most important roles of Outside Managing Directors is toassess how the Company is well managed. For example, whena new business opportunity is identified, we should monitor theway it is managed from the broad perspective of a typical thirdparty observer, focusing on the aspects that those inside theCompany may overlook. This might include verifying how muchprofit the business would generate, checking whether everybody
is keeping an eye on the yardsticks that measure various risks,and considering whether it would be good to take those risks
or not. Of course, it is the President who observes the Company
more closely than anybody else and his continuous feedback isvery helpful for us.

Challenges of the long-term vision andmid-term plan
Takahashi

The duration of the mid-term plan has been extended from its
previous three years to five years. In the current situation, it isextremely difficult to make and implement business plans overa short time span, so I do think the decision to start consideringchanges to the Company over a period of around five years was astep forward. Harima’s determination to improve its performanceand engage with new businesses is very evident. During thecourse of this plan, I would like to see the Company making

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

26

HARIMA at a Glance

ESG

Value Creation Story

Business Strategies

ESG

Company Overview andStock Information

Meet Our Outside Managing Directors
tangible progress in exploiting each of its businesses more fully,
and expanding pine chemicals and associated businesses.
Hayashi

Michigami

Harima’s long-term vision and mid-term plan set out the intention
to expand its business areas overseas. One particular way inwhich the Company demonstrated its determination in thisregard was by challenging itself to scale up its overseas businessthrough the acquisition of the solder materials business ofGerman manufacturer Henkel, thereby breaking into automotive
components and related businesses at global level. The longterm vision sets a target of 10% or more for ROE, but the resultsfor FY2021 and FY2022 were 4.9% and 2.4%, respectively. In
my opinion, therefore, improving profitability remains a key
challenge. In order to tackle this challenge, it will be essential tosteadily implement and further develop the policies created forthe mid-term plan.
Most important of all, I think, is Harima’s founding philosophy,
which advocates a circular business model that makes use ofnatural resources. Harima has maintained the same philosophy
ever since its founding, and I believe this is what has always
underpinned the Company and driven its business results byearning public support. Even in today’s social environment,
where the SDGs are a key topic of discussion, the philosophy
certainly remains relevant; I see it as a long-term ideal that weshould continue to value and appreciate. The question now is
how we go about putting the philosophy into practice during thecurrent mid-term plan. The plan incorporates an impressive corevision for the pine chemicals business, as well as strategies forcultivating associated businesses and taking concrete steps tomove these businesses forward. I think Harima deserves praise
particularly for taking on challenges of all kinds, including its
acquisition of Henkel’s solder materials business. However,
one issue is that this company originally founded in Kakogawa,a regional Japanese city, has now grown to the extent thatoverseas operations account for more than 50% of its totalbusiness. It seems to me that a significant challenge in thisregard will be securing the management resources necessary
to support sustained growth going forward, and in the case ofhuman resources, this also includes ensuring diversity.

Hayashi

Michigami

Business risk management
Takahashi

27

If the Company is to achieve evolutionary growth, I believe itneeds to reorganize its business portfolio, which currently relies
heavily on the pine chemicals business. LAWTER, the company
Harima acquired in 2011, has grown steadily, and the Company
is also putting tremendous effort into developing the solder
materials business it acquired from Henkel in 2022. A major
challenge Harima now faces, however, is identifying how toseek out and grow such new business potential in the future. In
addition, some businesses are achieving sales, but are just notprofitable, so I think that another significant challenge is likely tobe the replacement of certain businesses in the portfolio. During
my time working at a trading company, I was tasked with running

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

to Harima as a manufacturer and improve our understanding of
the business. However, discussions during actual Board meetings
do inevitably tend to focus on specific proposals, so I would
ideally like to see some changes to the meetings, such as slightly
more free-ranging discussions that take place on a regular basis.
I have already suggested this to the secretariat of the Board of
Directors, and they are currently looking into it.

two companies. While doing so, I was constantly thinking about
how to grow the businesses, and about which risks we should
accept, avoid or manage, so I believe I could offer advice in theseregards.
I think that nurturing a successor to run the Company overthe long term is an important issue. The current President
demonstrates leadership, has a keen eye for detail, and takes
risks into account as he manages the business. Moreover, theCompany has an outstanding corporate philosophy, so I think it is
now time to nurture a successor who has the vision to uphold thatphilosophy and tackle new challenges, as well as the capacity toeffect change. In order to cultivate business overseas and in new
areas, it will be essential to make the most of a diverse range ofhuman resources. I intend to support any related initiatives that
seek to increase the value of Harima’s human capital by ensuring
diversity through recruiting global talent or promoting active
participation by women. From a long-term perspective, I want to
do whatever I can to help in pursuing concrete measures suchas positive action to nurture young employees by enabling themto gain experience, provision of the necessary education andguidance regarding female representation, or establishment of amentoring system.
In terms of challenges, I think the biggest one the Company
faces is identifying a successor to the current President.
Harima’s President always puts the Company first, which isvery reassuring, but the question of how to go about finding
his successor presents a huge challenge. And the next biggest
challenge is raw material prices in the core pine chemicals
business. Then there is the issue of securing personnel, giventhat further expansion overseas will necessitate additional
human resources. As was mentioned earlier, for the Company
to enter new businesses, it will need people who can properly
understand, assess and make decisions on those businesses. So,
how should Harima go about nurturing diverse human resources?
Traditionally, the manufacturing industry, that we are a partof, has been dominated by workplace environments focused on
the shop floor and technology, where most employees are men.
Accordingly, an urgent imperative as Harima pursues futurebusiness overseas will be to commit more proactively than everbefore to diversity-aware hiring and training of human resources.
In this regard, I do think that Harima’s current HR strategy
already reflects awareness of these issues.

Hayashi

Michigami

Participation at Board of Directors’
meetings
Takahashi

The atmosphere during meetings allows us to speak frankly
about anything. In addition, provision has been made for us toreceive reports on necessary matters such as progress withinvestment projects or periodic reviews. It is also very helpful for
the Outside Managing Directors that adequate time is allocatedto provide briefing sessions for us prior to the meetings. We use
these sessions to ask questions about technical points in relation

Yes, I agree that the atmosphere at Board meetings is one inwhich it is easy to ask questions and express opinions. I think thecurrent system works extremely well: the Company arranges forvery thorough explanations to be provided ahead of meetings,
so that during the actual meetings we can focus on in-depth
discussions based on our earlier questions and requests forclarification. In addition to this, however, I would be grateful for
opportunities to discuss topics other than proposals, such as
internal deliberations on strategy, or progress in implementing
associated measures. Of course, I am sure that plenty of
discussions are taking place internally, but it would be helpful
if we could monitor these from our perspective as Outside
Managing Directors. For topics that are difficult to resolve, we
could perhaps contribute somehow to finding a way forward bydiscussing them among ourselves.
In the pre-meeting briefing sessions, the three of us make avariety of requests according to our respective areas of expertise,with a view to ensuring that the content of proposals—and therelated proceedings—are easily understandable for shareholders
as well. The materials included in proposals often compriseinternal documentation and there are many instances in which
the wording and technical terminology are not understandable
to outsiders. But when we suggest improvements, the Company
is quick to make changes, and I think progress has been made in
producing materials with explanations that are more immediately
understandable to shareholders than in the past. Although I
expect it is quite a hassle for the departments involved. In my
opinion, the company culture is rooted in a willingness to seek
proper guidance from an external perspective and use that
guidance as the basis for the corporate decision-making process.
It has become clear to me that the Company’s approach is tolisten to external opinion. One way in which it does so is byholding informal shareholder discussions after its annual General
Meetings of Shareholders, although these discussions were
temporarily suspended during the pandemic.

Harima also merits praise for its efforts to seek mutually
beneficial coexistence with society at large, having createda marigold garden in the environs of its manufacturing hub,Kakogawa Plant, where events are held to strengthen community
ties. In addition to initiatives such as these, another focus for
ensuring sustained improvement of Harima’s corporate value
should be human resources. What kind of human resources is
the Company looking for, and how will it nurture these people?
Well, if Harima’s ethos is to create a company that can contributeto the world in general, surely people who want to work in suchan organization will seek employment at Harima, so that is thecourse I think the Company should follow.
Hayashi

As has been pointed out, Harima developed as a hardworking
manufacturer with a culture of “sincerity and sturdiness.” The
President is constantly thinking about how to grow the Company
and ensure mutually beneficial coexistence with society at large,
so in these respects, I feel very reassured. I hope that, as Outside
Managing Directors, we can continue to provide assistance andadvice to facilitate future growth. When all is said and done, I
believe that cultivating human capital and employee diversity,
thereby opening up new strategic possibilities, is what enables
sustained improvement of corporate value. In my opinion, further
corporate growth can be achieved by taking action in multiple
areas including DX and expansion of overseas business, while
establishing a solid foundation of human resources who can guidethe Company toward growth.

Michigami

Increasing the diversity of human resources is also one
strategy for ensuring that risks are not overlooked due tointernal groupthink. I would like Harima to invest effort insuch diversification, and while I believe this is an issue thatwill eventually be resolved anyway, I consider it our role as
Outside Managing Directors to identify risks that are likely to beoverlooked internally. In this regard, all necessary reports on
matters subject to risks and vulnerabilities are presented in the
Company’s internal control meetings. In these meetings, I want
us to continue placing importance on the process of identifying
issues from reports provided in person by those working on thefrontlines, and enabling us as Outside Managing Directors to pointout challenges to be addressed. I myself am available to givestraightforward responses to requests for advice on legal issues
or other matters at all times. I perform my duties in the belief
that our role is to attend various meetings including those of theBoard of Directors and monitor risks within the Company.

Towards sustainable improvement ofcorporate value
Takahashi

I am very impressed by the effort Harima is putting into
addressing corporate governance properly to maintain its
listed status. The Company has taken determined action on a
succession of issues, implementing one change after another. It
is also proactively addressing problems such as global warming
and climate change, as well as the adoption of renewable energy
including the use of biomass fuels and solar power generation.

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

28

HARIMA at a Glance

ESG

Value Creation Story

Company Overview andStock Information

ESG

Business Strategies

Environmental Protection
In light of our corporate philosophy, "Utilizing nature's blessings to enhance the quality of life", we are committed to actively contributing to therealization of a circular society, through provision of indispensable pine chemical products developed using natural and renewable resources.

Initiatives for Environmental Conservation

Environmental Management System

Basic Approach to the Environment
We are actively working to prevent environmental pollution and reduce environmental impact, and are promoting environmental
management throughout the Company.

Harima Chemicals Group Environmental Policy (Revised on September 4, 2017)
In light of our corporate philosophy “Utilizing the blessings of nature to enhance the quality of life”, weurge our employees to actively and continuously promote environmental conservation according to theEnvironmental Policy.

In accordance with our Environmental Policy and ISO 14001, the international standard for environmental management systems, eachdivision and department sets targets for the fiscal year and conducts activities that reduce environmental impact and preserve theenvironment.

Operations

Environmental Targets and Results

We strive to continuously improve the environmental management system andreduce environmental impact by implementing the PDCA cycle based on ourEnvironmental Policy and Targets.

Committees set FY2030 environmental targets and annual targets for eachtheme to track progress and promote implementation.

1 With an awareness that the pine chemical business makes effective use of renewable natural
resources, we strive to develop environmentally friendly products that take into account their life
cycle from production to use and disposal.

Environmental Targets

2 We comply with related laws and regulations, agreements, and other requirements agreed byeach Group company, relating to our business activities, products, and services and work toprevent environmental pollution and accidents.
3 We established environmental targets and aim to continuously improve our environmental
performance and environmental management system.
(1) Reduction of environmental impact (energy, waste, environmental pollution/air and water quality)(2) Appropriate management of hazardous chemicals(3) Conservation and management of greenery4 Through environmental education and awareness-raising activities, we ensure that environmental
management is thoroughly disseminated, and all of those who work at Harima Chemicals Groupwill act in an environmentally conscious manner both internally and externally.
5 Recognizing that biodiversity is an important foundation for a sustainable circular society, we
conduct business activities in harmony with society and nature, taking into consideration natural
ecosystems.
6 This environmental policy is disclosed to stakeholders including related companies and local
residents, as well as to the general public.

Environmental Management System
In order to promote environmental management and tothoroughly conduct environmental management activities,
we established the Harima Chemicals Group Environmental
Committee that oversees the entire Company and environmental
committees at each site.
Harima Chemicals Group Environmental
Committee
Deliberates on and determines the Company’s environmental
policy, targets and plans, and manages their progress.

Plan

Develop strategy

Action

Review atmanagement level

Continuous
improvement

Do

Implement andoperateCheck

Inspect and adjustInternal Environment Audit

In order to improve environmental awareness in the workplace, we conduct
workshops and lectures.
In FY2021, we invited outside speakers to give lectures on confronting
climate change as a company, which was a good opportunity for employees
to learn about global trends. We also hold periodic meetings to reportenvironmental impact at each site, as well as workshops and study sessions forenergy conservation and recycling.

ISO 14001 Certification
We encourage all our sites to commit to ISO 14001 as part of our continuous
effort for environmental conservation.

Inspection is conducted with a focus on whether the measures to achievetargets and plans are clearly defined and verified, whether risk identificationand compliance assessments/procedures of relevant laws and regulations areappropriate, and whether action has been taken to improve issues pointed out
at previous internal and external audits, if any.

Zero-Emissions
Environmental Management System
Board of Directors
ReportSupervise

Harima Chemicals Group Environmental Committee
Chairperson: Environmental Management Executive
Members: Chief Environmental Manager (company-wide)
Site Environmental Manager (each site)
Related Directors
Internal Environment
Supervise
Audit Team

ReportEnvironmental Committee at Each Site
Based on the matters determined by the Harima Chemicals
Group Environmental Committee, develops activities suited
to the environment at each location.

Environmental Education

Environmental Policy

Site Environmental Committee

Landfill use is a less-visible aspect of emission that only occurs at the very
end of a product’s life cycle. In the past, landfill disposal rates were over 2%,
mostly composed of residue from biomass combustion that contain high levelsof Na and K. In FY2005, we started recycling the residue by using it for cement,
gradually shifting landfill use to less than 1% in FY2006.
The rate was further reduced to zero in FY2011 when we establishedmeans to recycle waste glass, accomplishing the zero-emission level we
maintain to this day.
* Zero-emissions: The idea of creating integrated industrial systems in which waste productsof one industry/sector become value-added inputs for another, coined by the United
Nations University. We aim to maintain the “ratio of landfill disposal to the total volume ofwaste generated at our sites” at 1% or less.

Final Landfill Use
%
3.0

2.4
2.5
2.0

1.6

1.5

0.9
1.0

0.5

0.5
0

0.2
2004

2005

2006

2007

2008

0

0

2009

2021
(FY)

Scope: Harima Chemicals and Harima M.I.D.

Chairperson: Director (site/plant)
Members: Division/Dept. Directors, etc.
Collaborate

Committees and projects
Harima Chemicals Group Energy Conservation Committee
Improvement proposals

29

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

30

HARIMA at a Glance

ESG

Environmental Protection

Working with Employees and Their Families

Basic Approach to Climate Action

Initiatives for Reducing GHG Emissions

While energy use is now an indispensable part of everyday life, we continue toexplore energy sources that can successfully replace fossil fuels such as oil,coal and natural gas. Renewable energy is instrumental in achieving this goal,
as it derives from natural sources that are constantly replenished and can beused stably and sustainably. Having worked closely with nature for over 75
years, we are committed to making efficient use of renewable resources andreducing environmental impact.

In 2003 we introduced a plan for more assertive GHG emissions reduction.

Biomass Power Generation
Our biomass power plant at Kakogawa Site was approved by the Japanese Ministry of
Economy, Trade and Industry in FY2003 as a green initiative for the future of energy
production and was established in March 2005. The facility uses byproducts of CTO
distillation, letting us utilize every bit of the raw material’s value.

Solar Power Generation* Renewable energy: energy derived from natural sources that are replenished at a higher
rate than they are consumed, such as sunlight and wind; fossil fuels such as oil or coal are
finite and not as sustainable.

Greenhouse Gas (GHG) Emission Reduction Policy
In June 2021, we announced our GHG Emission Reduction Policy, which
stipulates curbing GHG emissions by 46%, relative to FY2013 levels, by 2027, 3
years ahead of Japan's national target, and further aiming for carbon-neutral
operations by 2050.

National target: 46% reduction in GHG emissions relative to FY2013 by 2030
CO2 reduction

Reduction rate(%)

17,2360

16.7

15,00014,362

10,000

25

46
9,260

50
50

8,618

5,000

75

0

2020

2013

2027

2030

100

Reduction
plan
25,102 tons

CO2 reduction activities
11

Increase renewable energy CO2 reduction of 2,843 tons

2

Increase biomass fuel3

Increase energy efficiency

Introduction of Carbon-Neutral Liquid Natural Gas (LNG),
and Emission Mitigation Programs

GHG Emissions in the Supply Chain

987 tons

Personnel System for Human Resources Development

The Harima Global Business Code of Conduct sets forth the Company’s basic
policy of not discriminating on the grounds of race, religion, nationality, age,gender, and other factors. We provide a wide range of opportunities to apply
for jobs through our corporate website and various public relations media.

Our personnel evaluation system is based on a planned human resources
development system with career development program sheets (CDP sheets)and performance and value evaluations linked to such a system. Under thispersonnel evaluation system, employees can demonstrate their abilities toachieve organizational goals in the context of diversifying values, enhancing
the driving force of corporate value creation.

Human Resources Development
We conduct employee development, training and rigorous follow-up, aiming
to create an environment in which employees can grow and work with a highsense of job satisfaction.

CO2 emissions (FY2021)
Scope1
Scope2
Scope3
Total

Direct emissions from fuel combustion
Indirect emissions from purchased power
Indirect emissions not included in Scope1 and 2

Category 4
Transportationand distribution(Upstream)

22%

6.3
0.8
92.9
100

Downstream
emissions

Other upstream
emissions

5%

5,878
736
86,17092,784

Scope38.6

10,000t-CO2e/year

1%Category 1
Purchased goods
and services

72%

Scope: Kakogawa Plant and Harima M.I.D.

Reskilling/recurrent
education
Basic
training

Personnel
systemRecruitment

Develop competitive new products,
improve technical capabilities
Strengthen
Safedevelopment newCreate
markets manufacturing
capabilities

Information Disclosure Based on the TCFD Recommendations

Global initiatives for decarbonization may cause medium to long-term effects on laws and regulations, as well as raw fuel supply chains. Increased severity of climatechange may also pose threats to business operations.
We analyze risks and opportunities to prepare for such climate change scenarios, and are promoting disclosure of governance, strategy and risk management basedon TCFD recommendations.

31

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

Salary raise
Performance evaluation
Goals and Challenges

Business concept

Degree of theme achievement+

Promotion

Evaluation of degree ofvalue practice

Bonuses

Harima Growth Program System (H-GPS)
Increaseengagement

Manufacturing Organizational
technology
development

DX (MI, AI, IoT, BPR, etc.)
Base skills (philosophy, norms, language,
business/operational knowledge, etc.)
Training by level, selective training,support for self-development, e-learning
Personnel evaluation system(degree of theme achievement degree of value practice)
Career development program
Internal environment(benefits, safety net, consulting services, reporting system)
Recruitment in a wide range of fields

Promotion of Work Style Reforms
To promote Women's Participation and Advancement in the Workplace, we
provide career development training and female manager development. In
addition, we have adopted a two-way conversion system for staff and careertrack positions, promoting measures to expand opportunities for women in theworkplace and introducing more flexible systems tailored to diverse life stages
and circumstances.

Health and Productivity Management
To create a vibrant organization, we have introduced a health management
system to centrally manage data including health checkups and stress checks,
visualize issues, and work to maintain and promote employees’ health, thereby
revitalizing the organization and improving productivity.

Re-Employment System After the Age of 60
Climate Change Response

Personnel
evaluation
systemAchieving the Mid-term Plan Targets
Towards Realizing Long-term Vision

PurposeIn FY2022, we calculated and analyzed the amount of CO2 emissions released
at Kakogawa Site (Harima Chemicals Kakogawa Plant and Harima M.I.D.
Kakogawa Plant). From among Scope 1 (direct emissions from owned orcontrolled sources), Scope 2 (indirect emissions from the purchase of power
supplied by external sources) and Scope 3 (indirect emissions from externalsources in the supply chain), Scope 3 was responsible for more than 90% ofemissions, of which Category 1 (Purchased goods and services) took up themost percentage.
We will expand this analysis to other sites and review calculation
methods to improve accuracy in order to further implement effective measures
to reduce GHG emissions through the supply chain.

CO2 reduction of 1,272 tons
CO2 reduction of

Employment Opportunities

We started use of carbon-neutral LNG at Kakogawa Plant, Harima M.I.D. and Iho Site in
FY2022. We also introduced programs that pair utilization of electricity with non-fossil
fuel energy certificates, to eliminate carbon dioxide emissions from electricity use.

Emissions (t) Percentage (%)

Harima target: Reduction rate of 46% by 2027
3

We established solar power generation facilities at Iho Site in Takasago city, Japan (2014)
and LAWTER - Concordia, Argentina (2018). We also started our first floating solar power
generation business on a reservoir located in the vicinity of Kakogawa Plant (2023).

With the recognition that employees are important stakeholders as well as the greatest asset for the Company, and their growth will lead to the development of theCompany as a whole, we are working to create an environment where each and every employee can thrive and achieve self-fulfillment through work.

Human resources
development(t/year)20,000Company Overview andStock Information

ESG

Business Strategies

Human Capital Management

Initiatives for Climate Action

CO2 emissions

Value Creation Story

CDP (Career Development Program)
CDP sheet 1 (self-evaluation)
CDP sheet 2 (360° evaluation)(1) Review of past career(1) Recognize “strengths/weaknesses”
and “expectations”

Recognize what you can do(2) You at presentYour present situation
Experience, abilities, skills,
strengths/weaknesses
Recognize “strengths/weakness” and“expectations” as perceived by people
surrounding you(3) You after 10 years

If you are in the same situation as now,or
Be aware of what you want to beValue (competency) items are evaluated bysupervisors, peers and junior staff

CDP sheet 3 (self-growth sheet)(junior staff development sheet)(1) Image of what you want to be
Image of you after 10 years, 5 years, 3 years(2) Challenge you tackle to realize
what you want to beSpecific action plan, schedule

GPS (Growth Plan Sheet)(1) Theme achievement target (single year)(2) Value achievement target (single year)(1) Performance evaluation(Degree of theme achievement)(2) Value evaluation

Employment of People with Disabilities
Considering that establishing a workplace where all employees, regardlessof whether with disabilities or not, can work generates positive effects on
management, we continue to employ people with disabilities. They are activein various fields such as office work, assistance for manufacturing, and farmbusiness, depending on their individual characteristics.

Employee Benefits
We have developed an employee benefit system that fosters an environment
where employees can make best use of their unique skills, and a system thatserves as a safety net in the event of an emergency such as when employees
become ill or need to care for their families.

For the purpose of securing competent human resources and stabilizing the
lives of retirees, we have adopted a continued employment system. Employees
can fully utilize their knowledge and experience, and work with a sense of job
satisfaction up to the age of 70. This system also helps to alleviate concerns
about income shortfalls.

Safety Net/Compensation System for Long-term Absence from Work

Wage System for a Diversified Workforce

Health, Medical and Mental Health Consultation Services

To promote diversity in the workplace, we abolished archaic benefits andallowance systems unique to Japan, and instead adopted a global standard
wage system based on performance.

We have consultation services in place for issues of health, medical and mental
health, to maintain and promote the physical and mental health of employees
and their families as well as support each individual’s wellbeing.

A system to cover the loss of income to support the family in the event that an
employee becomes unable to work due to illness or injury. This system covers
employee’s income up to the age of 65.

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

32

HARIMA at a Glance

Value Creation Story

Business Strategies

Company Overview and Stock Information

Company Overview andStock Information

ESG(as of March 31, 2023)

Company Overview

Stock Information

Company name

Harima Chemicals Group, Inc.

Total number of authorized shares

59,500,000 shares

FoundedNovember 18, 1947

Total number of issued shares

26,080,396 shares

Representative

Yoshihiro Hasegawa, President

Total number of shareholders

10,144

Tokyo Head Office

3-8-4 Nihonbashi, Chuo-ku, Tokyo 103-0027, Japan
TEL +81-3-5205-3080

Top 10 Shareholders

Osaka Head Office

4-4-7 Imabashi, Chuo-ku, Osaka 541-0042, Japan
TEL +81-6-6201-2461

Shareholder

Number of shares held(Thousand shares)

Shareholding ratio(%)

Capital stock

10,000 million yen

Hasegawa Kosan, Inc.

2,913

12.03

Listing

Tokyo Stock Exchange (Securities code: 4410)

Matsukawa, Inc.

2,913

12.03

Number of employees(consolidated) 1,710

Business description

Manufacture and sale of products developed using
pine chemical resources such as rosin, fatty acids andturpentine

Harima Chemicals Mutual
Prosperity Association

1,392

5.75

Shorai Ltd.

1,284

5.30

The Master Trust Bank of Japan, Ltd.
(Trust account)

1,263

5.22

Sumitomo Mitsui Banking
Corporation

1,094

4.52

Hyogo Prefectural Credit Federationof Agricultural Cooperatives

1,028

4.24

Shorai Foundation for Science andTechnology

965

3.98

MUFG Bank, Ltd.

476

1.96

Harima Chemicals Employee Stock
Ownership Association

422

1.74

Composition of Shareholders
Treasury stock

Financial institutions

7.20 %
Individuals and others

27.41 %

20.40 %
Securities companies

Shareholding
Ratio by Type of
Shareholder

Overseas corporations, etc.

1.73 %(Notes) 1. In “Number of shares held,” figures less than one thousand are rounded down.
2. The shareholding ratio is determined based on the total number of issued
shares minus the number of treasury stocks (1,878,064 shares), whichamounts to 24,202,332 shares. The numbers shown are rounded down to
two decimal places.

Other corporations in Japan

4.69 %

38.57 %

Global Network

Japan
Harima Chemicals, Inc.

Tokyo Head Office
3-8-4 Nihonbashi, Chuo-ku, Tokyo 103-0027
Head Office TEL +81-3-5205-3080
FAX +81-3-3241-3035
Sales
TEL +81-3-5205-3033
FAX +81-3-5205-3049
Osaka Head Office
4-4-7 Imabashi, Chuo-ku, Osaka 541-0042
Head Office TEL +81-6-6201-2461
FAX +81-6-6227-1030
Sales
TEL +81-6-6201-2464
FAX +81-6-6201-0391
Kakogawa Plant/
Central Research Laboratory
Resins and tall oil products
Paper chemicals
Electronic materials
671-4 Mizuashi, Noguchi-cho, Kakogawa,
Hyogo 675-0019
Kakogawa Plant TEL +81-79-422-3301
FAX +81-79-426-6008
Central Research Laboratory
TEL +81-79-422-3301
FAX +81-79-426-2650
Tsukuba Research Laboratory
Electronic materials
5-9-3 Tokodai, Tsukuba, Ibaraki 300-2635
TEL +81-29-847-5080
FAX +81-29-847-5081
Sendai Plant/Sales Office
Paper chemicals
1-2-1 Suehiro, Iwanuma, Miyagi 989-2426
TEL +81-223-22-1201
FAX +81-223-24-2790
Ibaraki Plant
Resins and tall oil products13-1 Kasuminosato, Ami-machi, Inashiki-gun,Ibaraki 300-0315
TEL +81-29-889-2911
FAX +81-29-889-2880
Tokyo Plant
Resins and tall oil products
6-18-1 Inari, Soka, Saitama 340-0003
TEL +81-48-931-4311
FAX +81-48-935-0664

Business description
Fuji Plant/Sales Office
Paper chemicals
Resins and tall oil products
311-9 Hina, Fuji, Shizuoka 417-0847
TEL +81-545-38-2254
FAX +81-545-38-2151
Shikoku Plant
Paper chemicals
365-1 Muramatsu-cho, Shikokuchuo, Ehime
799-0401
TEL +81-896-24-1001
FAX +81-896-24-1003

Harima M.I.D., Inc.
Resins and tall oil products
Head Office
4-4-7 Imabashi, Chuo-ku, Osaka 541-0042
TEL +81-6-6201-2461
FAX +81-6-6227-1030
Kakogawa Plant
671-4 Mizuashi, Noguchi-cho, Kakogawa,
Hyogo 675-0019
TEL +81-79-424-2312
FAX +81-79-424-2118

Harima Trading, Inc.
Warehouse, hotel, golf course and real estate
management
Head Office
4-4-7 Imabashi, Chuo-ku, Osaka 541-0042
TEL +81-6-6201-2461
FAX +81-6-6227-1030
Kakogawa Sales Office827-6 Mizuashi, Noguchi-cho, Kakogawa,
Hyogo 675-0019
TEL +81-79-425-0300
FAX +81-79-425-0100
Hotel Sakushu-Musashi/Sakushu-Musashi
Country Club
878 Omachi, Mimasaka, Okayama 707-0124
Hotel Sakushu-Musashi
TEL +81-868-77-1380
FAX +81-868-77-0939
Sakushu-Musashi Country ClubTEL +81-868-77-0153
FAX +81-868-77-1381

Nippon Filler Metals, Ltd.
Electronic materials
Head Office/Sekiyado Plant
487 Sekiyadomotomachi, Noda,
Chiba 270-0203
TEL +81-4-7196-2551
FAX +81-4-7196-2553

Seven Rivers, Inc.
Manufacture and sale of industrial detergentsand cleaning equipment
Head Office/Plant
3-5-1 Tomonishi, Asaminami-ku, Hiroshima
731-3169
TEL +81-82-848-9111
FAX +81-82-848-2218
Tokyo Branch
6-17-8 Inari, Soka, Saitama 340-0003
TEL +81-48-931-6468
FAX +81-48-935-1830

Harima Foods, Inc.
Manufacture and sale of business-use foods,
and sale of health foods and functional
ingredients
Osaka Head Office
1-4-22 Kyomachibori, Nishi-ku,
Osaka 550-0003
TEL +81-6-6447-7711
FAX +81-6-6447-7811
Kakogawa Plant
179-12 Mizuashi, Noguchi-cho, Kakogawa,
Hyogo 675-0019
TEL +81-79-426-6462
FAX +81-79-426-8827
Tokyo Sales Office
3-8-4 Nihonbashi,Chuo-ku, Tokyo 103-0027
TEL +81-3-3243-2555
FAX +81-3-3243-2556

Harimatec Czech, s.r.o.
Head Office/Plant

Harimatec Malaysia Sdn. Bhd.

Resins and tall oil productsElectronic materials

Head Office/Plant<The Netherlands><Taiwan>

R&D/Plant

Liaison Office

LAWTER - Maastricht
Resins and tall oil products

Asia and Oceania<China>Harima Chemicals (Shanghai) Co.,Ltd.
Head Office
Management and support of Group
companies in China

Harimatec Hangzhou Co., Ltd.
Head Office/Plant

Electronic materials

Hangzhou Hanghua Harima
Chemicals Co., Ltd.
Head Office/Plant

Paper chemicals

Dongguan Hanghua Harima Paper
Chemicals Co., Ltd.
Head Office/Plant

Paper chemicals

Shandong Hanghua Harima
Chemicals Co., Ltd.
Head Office/Plant

Paper chemicals

LAWTER - Shanghai

Asia Headquarters/Sales Office
LAWTER Asia Headquarters and sales

LAWTER - Nanping
Plant

Resins and tall oil products

LAWTER - Fengkai

Plant<Czech Rep.>

Resins and tall oil products
Resins and tall oil products<Korea>LAWTER - Gunsan
Plant

Resins and tall oil productsElectronic materials

Harima Chemicals, Inc. Taipei Office<India>LAWTER - India
Liaison Office<New Zealand>

LAWTER - Mt. Maunganui
Plant

Resins and tall oil products

North and South Americas<U.S.A.>

Harima USA, Inc.

Head OfficeHolding company of Plasmine Technology,
Inc. and Harimatec Inc.

Harimatec Inc.
Head Office/Plant

Electronic materials

Plasmine Technology, Inc.
Head Office/Bay Minette Plant
Paper chemicals

LAWTER Global Headquarters
LAWTER Global Headquarters

LAWTER - Elgin, IL
R&D

LAWTER - Baxley, GA
Plant

Resins and tall oil products<Brazil>Harima do Brasil Indústria Química
Ltda.
Head Office/Parana Plant/Sao Paulo Office
Resins and tall oil products<Argentina>

LAWTER - Concordia
R&D/Plant

Resins and tall oil products

LAWTER – Buenos Aires<UK>

Head Office/R&D

HARIMA CHEMICALS GROUP INTEGRATED REPORT 2023

R&D/Plant

LAWTER - Nanning

HARIMA UK LTD.

33

LAWTER - Kallo

Plant

Europe<Malaysia><Belgium>

Electronic materials

South America Headquarters/Sales Office
LAWTER South America Headquarters andsales