Integrated
ReportAbout ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

President&

We’re always aware of the purpose of our existence.
So when we hit a wall,
we automatically know which way to go.

PurposeTo continue contributing tobetter living environments
through chemical technologies
01About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Behind Our Purpose

Inheriting the Challenging Spirit and Providing the Indispensable
Vision 2030 and Sustainability Management
We, the ISK Group, have changed the direction to sustainability management with our long-term vision, Vision 2030.

“To continue contributing to better living environments
through chemical technologies”

The world today is facing major issues such as extreme weather events and other effects of climate change, and food problems.

This purpose is the reason our group exists, which inherited Ishihara's challenging spirit.

The United Nations has established the Sustainable Development Goals (SDGs) as a set of goals to resolve these issues. As a

We provide society with the essentials for everyday life.

member of the global community, we support and participate in this initiative in an effort to contribute to the realization of a

Agrochemicals contribute to feeding the world’s population, which will continue to grow. Titanium dioxide is indispensable

prosperous future society through our business.

for a rich, colorful life. Barium titanate is indispensable in capacitors, which is used in computers, smartphones, self-driving

Therefore, we set our purpose, in order to redefine the reason why we exist.

automobiles, and electric vehicles, and it will be used more wide field in the future.
Our strength lies in our unique chemical technology and technological development capabilities. We have outstanding, one-of-

Our Founders Aims and Purpose

a-kind technologies. Our path forward involves utilizing these strengths to provide the value and products society requires, or to

ISK Group’s founder, Hiroichiro Ishihara, started many businesses with a desire to contribute to Japan and society. Despite thecreate new ones if necessary.

impact of wars and politics along the way, he was dauntless in his continued search for new paths and laid the foundations of ourOur raison d'être is to use chemical technology to solve global problems and realize a better living environment.

current inorganic chemicals and organic chemicals businesses.

We base all our business activities on this purpose.

Vision 2030

Corporate Philosophy

Originality. Acceleration. Global Reach.
Transforming Lives Through the Power of Chemistry.

StageⅠ
FY2021-2023

Stage Ⅱ

Materiality
forthe ISK GroupFY2024-2026

Stage ⅢFY2027-2029

Basic
Philosophy• Contribute to social development,
protection of life and environmental preservation• Respect shareholders, customers, suppliers,
local communities and employees• Abide by laws and regulations; maintain transparency
in business activities

Code of
Conduct• At Ishihara Group, we will strictly observe laws,
regulations, social norms and Company rules,
while steadfastly adhering to high ethical standards,
so as to gain social trust in our business.
• In manufacturing activities, we will place the utmost
priority on global environmental protection, as well as
on worker safety, and will work to prevent any
workplace accident or disaster.
• On the basis of respect for human rights,
we will promote mutual understanding and cooperation
among employees,
in order to create an open and friendly workplace.
• To maintain transparency in our business activities,
we will promote communication with local communities
and society, and will disclose corporate information
in a timely and appropriate manner.

PurposeTo continue contributing tobetter living environments
through chemical technologies.

02

Contents

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

About ISK

0 1 Introduction
03 Contents
04 2022 Business in Brief

Message from the President

07
11
12
13

Message from the President
Vision 2030
Progress in Vision 2030 Stage I
Message from the Director of Finance & Accounting Headquarters
Special Feature Commitment to Manufacturing
15 Yokkaichi Plant
18 Agrochemicals Business
20 Value Creation Process
2 1 Input and Output
23 Financial and Non-Financial Highlights
25 Materiality
Overview by Business27 Inorganic Chemicals Business
29 Organic Chemicals Business (Agrochemicals)
3 1 Organic Chemicals Business (Healthcare)

32
34
36
38
43
45

Stakeholder Engagement
Board of Directors and Executive Officers
Interview with Newly Appointed Outside Officer
Corporate GovernanceRisk Management
Compliance
Special Feature Compliance
47 Responsible Care Activities
48 Environment
53 Social
62 Initiatives to Spread ISK Group’s Purpose

63
65
69
70
71
72

Financial and Non-Financial Summaries
Consolidated Financial Statements
History of ISK
Company Profile / Group Bases
Stock Information
Editorial Policy

About ISK

Value Creation Strategies

Foundation for Value Creation

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Corporate Data

Thinking about the Modelfor Future Business
While revenue from our organic chemicals business is steadily increasing, our inorganic chemicals
business is struggling due to factors such as rising raw material and fuel costs, indicating that the time
has come to reconsider the model for our business. However, despite these challenges, we remain acompany possessed of real ability and strength. “Purpose” will be the guiding compass in determining
our future direction, and we will leverage our technological strength, which is our greatest strength, tocontinue providing the world with products which improve people’s lives.
Executive Director and President

Hideo Takahashi

07

Message from the President

Thinking about the Model for Future Business
While revenue from our organic chemicals business is steadily increasing, our inorganic chemicals business is struggling due to factors such as rising raw material and fuel costs,
indicating that the time has come to reconsider the model for our business. However, despite these challenges, we remain a company possessed of real ability and strength. “Purpose”
will be the guiding compass in determining our future direction, and we will leverage our technological strength, which is our greatest strength, to continue providing the world withproducts which improve people’s lives.

Special FeatureSpecial Feature

Commitment to Manufacturing

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Special Feature

Corporate Data

Yokkaichi Plant

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Agrochemicals Business

A Manufacturer’s Responsibility
To Make Exactly What the Market Needs

Manufacturing Centered on Overseas Subcontractors
ISK will establish an Organic Production Technology Research Institute (provisional name; hereafter, “Ono Research Institute”) in Ono City, Hyogo
Prefecture. The aim is to achieve, via advancements in manufacturing technology, the world's lowest cost manufacturing and stable supply. We

The Yokkaichi Plant is the flagship production base of our inorganic chemicals business. It has been the

spoke with three Biosciences Business Headquarters members who are part of the team working to establish the Ono Research Institute about thefoundation of ISK manufacturing for a great many years going all the way back to its establishment inaims and future vision for it.

1941. What is the plant currently committed to, what is it working on? We put these questions to Yoshiyuki
Shimmyo, who, as Director of the Yokkaichi Plant, is the person responsible for its overall operation.

What is the Ono Research Institute?

A Production Technology Research Facility Equipped with Small-scale
Production Equipment

Yokkaichi Plant’s Commitment

Realizing Stable Supply and Stable Operation

Ueda The focus of the Ono Research Institute will be on scaling up new products, such as agrochemicals developed at theCentral Research Institute (in Kusatsu, Shiga Prefecture), and on improving the manufacturing process for existing products in—In terms of manufacturing, what is it that the Yokkaichi Plant is committed to?

order to reduce costs. In manufacturing, various conditions change depending on the scale of manufacturing, and this affects the

A stable supply. Our top priority is to stably provide users what they need, when they need it, and of the quality they need. To do this, it isrelative ease and cost of production. A chemical reaction which is easy to achieve in a laboratory may not be able to be scaled

important that you emphasize a smooth, speedy flow of operations, like a baton pass in track and field, from acquiring information about

up as straightforwardly as you anticipated. Around 2006, we began outsourcing manufacturing overseas, and it was after we‘needs and seeds’ to product development and production. I believe that an outstanding plant is a plant that can do this.

had already completed some degree of investigation into how to scale up production that we brought the basic production data

Naturally, I am talking about plants that work to prevent workplace accidents, disasters and other occupational hazards. Without this, weto the Subcontractors production site. Currently, because we do not have our own process verification facility, we are not able tocannot say we are providing a stable supply. With the exception of an annual maintenance shutdown, the Yokkaichi Plant operates aroundperform simulations in Japan and have run into situations where problems at the Subcontractors site forced manufacturing to be

the clock every day, including the New Year and summer Obon holidays. Plant shutdowns lead directly to increased costs. Our ability tohalted and where we were forced to borrow a Subcontractors small-scale production facilities to perform tests on short notice.

keep production going is where we shine.
Last year, when the COVID-19 pandemic was spreading at one of our workplaces, we faced the threat of a complete production

Nakamura When scaling up the manufacturing process, we start at the scale of a normal laboratory, move to the “kilo-

stoppage, but we were able to keep the production line running by reducing the production facility utilization rate by half and entrustinglaboratory scale,” which is tens of liters, then to “bench scale,” which is hundreds of liters, and then to “pilot scale,” which iseach operator to contribute through his or her own roles and knowledge. I’m proud of this major accomplishment that, thanks to thethousands of liters, closer to full plant scale. These are the stages commonly used to verify the safety, consistency and cost-cooperative efforts of everyone, we were able to ensure a stable supply even during the COVID-19 pandemic.

efficiency of the developed manufacturing process.
At the Ono Research Institute, we plan to construct two buildings. The first is the Technology Research Building, which will have

—What are the concerns facing manufacturing currently?

regular laboratory and kilo-laboratory scale equipment, and the second is the Synthesis Research Building, which will have

The titanium ore which the Yokkaichi Plant uses as the main raw ingredient in producing white pigment titanium dioxide is be-equipment for performing verification of the upscaling process.

coming harder to obtain due to decreasing titanium content at the ore extraction source, as well as due to overseas factors, such
Director of Yokkaichi Plant

Yoshiyuki Shimmyo

as conflict. The ore is not found in Japan and must be procured entirely from overseas. Furthermore, there is tight demand forthe ships that carry the ore, resulting in delays; there was a three-month delay between March and May of last year, forcing us

One of the aims for the Ono Research Institute is to use its aggregated testing data to facilitate a smooth establishment of new

Biosciences Business Headquarters
Production Technology Division
Engineering Group Leader

Biosciences Business Headquarters
Deputy Supply Chain Division
General Manager

Biosciences Business Headquarters
Deputy Production Technology Division
General Manager

product manufacturing system at commercial production facilities. Also, for existing products, this facility will be used to help

Hiroaki Tomita

Takafumi Ueda

Tadashi Nakamura

with cost reduction through the development of new manufacturing processes and the acceleration of technology transfer toto make temporary production adjustments.

contractors.

When this happens, we have no choice but to consider various ores that are more easily obtainable. These raw materials are

15

18

Yokkaichi Plant

Agrochemicals Business

A Manufacturer’s Responsibility To Make Exactly What the Market Needs

Manufacturing Centered on Overseas Subcontractors

The Yokkaichi Plant is the flagship production base of our inorganic chemicals

ISK will establish an Organic Production Technology Research Institute (provisional

business. It has been the foundation of ISK manufacturing for a great many years going

name; hereafter, “Ono Research Institute”) in Ono City, Hyogo Prefecture. The aim is to

all the way back to its establishment in 1941. What is the plant currently committed to,achieve, via advancements in manufacturing technology, the world's lowest costwhat is it working on? We put these questions to Yoshiyuki Shimmyo, who, as Director

manufacturing and stable supply. We spoke with three Biosciences Businessof the Yokkaichi Plant, is the person responsible for its overall operation.

Headquarters members who are part of the team working to establish the Ono
Research Institute about the aims and future vision for it.

03

2022 Business in Brief

About ISKISK is a chemical company. Based on our corporate purpose, “To continue contributing to better living environments throughmaterials using titanium dioxide, and agrochemicals and animal health products made with organic compounds.

Comfortable Living Environment

Innovative Lifestyle Products

Corporate Data

Chemicals Businesschemical technologies” we provide the world comfort, convenience, and health through products such as paints and functional

More convenie

Foundation for Value Creation

Inorganic

ISK Group: Making Each Day Better

More comfort

Value Creation Strategies

nce

Environmentally Friendly Products

More friendlin

In fields such as housing and automotive, high-quality titanium dioxide paint suitable

We’re also making lives more convenient by supporting advances in IT throughOur totally new heat-storage material, HASClay TM, stores heat when dry andfor a range of applications is responding to increasingly advanced needs. ISK is

our products such as highly pure titanium dioxide used as material for thingsemits heat when wet. When used for dehumidifying, heating, or drying processes

making people’s homes more comfortable through high-value-added products such

like condensers, super black material that absorbs more than 99% of light, andin places like factories, it can dramatically reduce CO 2 emissions compared toas heat shield materials that reflect near-infrared rays, and photocatalyst material

highly refractive material that realizes a high light refractive index and highobtaining heat by burning fuel.

with a self-cleaning function.

transparency.

ess

Incorporating HASClayTM to reuse unused low-temperature waste heat

Plant waste heat, etc.
TIPAQUE™ titanium dioxide

Used as a raw material for paint in numerous fields

Highly pure titanium dioxide

Supporting information society through use as electronic component materials

Waste heat
DryingHot water supply
Dehumidifying
Air conditioning

Using heat04

2022 Business in Brief

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Organic

Chemicals Business
HealthierHappier

Ensuring a stable supply of agricultural products

Improving quality of life (QOL)

ISK is a pioneer in chemical pesticides. We distribute a variety of agrochemical products in the domestic andWe make people’s lives happier and livelier through animal health products that protect their precious partners andinternational markets to make people’s lives healthier—protecting their health and lives through food.

through blue phalaenopsis that adds color to their daily life.

Our agrochemical lineup of mainly herbicides, fungicides, insecticides

Contributing to people’s dietary life around world

BRENDA™ (animal health product)Protecting the health ofyour precious animal companions

The world’s first blue phalaenopsis Blue Gene™

Special colors that never fade away05

2022 Business in Brief

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Key Figures Fiscal year ended March 31, 2023
Net Sales

131.2

8.6

billion yen

Capital Adequacy Ratio

48.3

%

EuropeAsia

Net Sales 19.4 billion yen

Net Sales 26.5 billion yen

Sales Composition
Ratio

15 %

Sales Composition
Ratio

20%

Number of Group Bases 2

Number of Group Bases 8

Products

Products• Major countries and regions in each category
Asia
China, Taiwan, South Korea, Thailand, Indonesia, Singapore, India
Americas U.S., Canada, Brazil, Argentina, Mexico
EuropeGermany, Netherlands, France, U.K., Belgium, Italy, Eastern Europe, Middle East
OthersAustralia, New Zealand, Africa• Pictograms representing major products(The product with the highest sales in each region is shown in a larger size.)

Operating Margin

Operating Income

6.6

billion yen

R&D Expenses

9.1

%

ROE

7.3

%

Number of ISK Group Employees

1,768

billion yen

JapanAmericas

Net Sales 50.3 billion yen

Net Sales 28.4 billion yen

Sales Composition
Ratio

Sales Composition
Ratio

43 %

22%

Number of Group Bases 8

Number of Group Bases 10

Products

Products

OthersNet Sales 400 million yen
Products

Titanium
dioxideFunctional Agrochemicals Animal healthBluematerials
products phalaenopsis

06

Message from the President

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Thinking about the Modelfor Future Business
While revenue from our organic chemicals business is steadily increasing, our inorganic chemicals
business is struggling due to factors such as rising raw material and fuel costs, indicating that the time
has come to reconsider the model for our business. However, despite these challenges, we remain acompany possessed of real ability and strength. “Purpose” will be the guiding compass in determining
our future direction, and we will leverage our technological strength, which is our greatest strength, tocontinue providing the world with products which improve people’s lives.
Executive Director and President

Hideo Takahashi

07Message from the President

About ISK

Our Aims
Organic chemicals business

Efficiently scale up production to achieve cost-competitivenessInorganic chemicals business

Perform a ground-up reconsideration of the ideal state for the Yokkaichi Plant

New businessRealize new business led by the Business Creation Committee

Environment

Reduce Group CO2 emissions (Scope 1 and Scope 2)
30% by 2030 compared to fiscal 2019

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Business Environment

Business Management Affected by the Weight of Global Changes
The business landscape for the ISK Group has changed significantly over the past three years. Fiscal 2021 saw the start of arecovery from the stagnation caused by the COVID-19 pandemic, with demand for titanium dioxide recovering particularly in theautomotive and construction sectors. While we hoped this situation would last for a while longer, starting in fiscal 2022/ various
factors appeared which continue to create an extremely difficult business environment; these include a tightening of supply anddemand for semiconductors, production adjustments among automakers, who are major customers of titanium dioxide for paint,
China and Asia’s worsening economic conditions, and rising resource prices caused by the prolonged Russia-Ukraine conflict.
In the midst of all this, other challenges, such as competition with titanium metal manufacturers, have caused raw titanium ore
prices to soar. Although we have raised product prices, this has not been enough to fully absorb the increase in raw material andfuel costs, thus putting pressure on profits. In contrast to this, our organic chemicals business has been growing, particularly insales of fungicides and other flagship agrochemicals to the South American market as grain production centered on the Americas
continues to grow due to stable food demand. As for our highly anticipated upcoming flagship products also, sales of our new

Our Efforts

herbicide expanded in the Americas, while sales of our new insecticide were strong in all countries. Thanks in part to favorable

Ongoing Consideration of Our Future Direction for the Sake ofRealizing Better Living Environments

weather conditions and a weaker yen over the past few years, we have been able to generate significant profits which have

It has been three years since my appointment as president. In that time, ISK Group has undertaken a variety of efforts aimed atallowed our organic chemicals business to fundamentally support our overall performance. However, I believe that achievement of
Vision 2030 will require a fundamental rethinking of our business structure which includes new business.

achieving our long-term vision, Vision 2030, and medium-term business plan, Vision 2030 Stage I (fiscal 2021–2023). Instead ofa traditional, “defensive management” approach, I continue to encourage employees to be proactive, welcoming their ideas andsuggestions. Also, in order to promote widespread awareness of Vision 2030, I visited each of our business sites in Japan where
I held employee orientations. Perhaps as a result of this, I have noticed an increasingly positive and proactive mood taking holdin the company.
I have also worked to instill a widespread importance of “Purpose.” I am continually reminding employees to stay focused on
why our company exists and what we are contributing. This mindset helps us, when they run up against a wall, to stay aware of,and focused on, the direction forward. We are not just about making and selling things for profit. I want us to always be thinking
seriously about what direction we can take in order to improve people’s living environments through chemical technology.
And by spreading to those outside the company that this is the sort of company we are, it will help us in securing higher quality
human resources and to being seen as an attractive investment choice amongst investors.

08

Message from the President

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Medium-term Business Plan, Vision 2030 Stage I

Inorganic Chemicals Business

Expected Failure to Meet Profit Targets Due to Business Environmental Changes,
Despite Achievement of Sales Targets

Struggling with Rising Raw Material and Fuel Costs andTackling the Challenge of Switching to Highly Functional, High-Value-Added Products

In the midst of all this, the ISK Group arrives at the last year of Stage I in fiscal 2023. In the first year, fiscal 2021, we achieved our target

In our inorganic chemicals business, the primary challenge we have is to shift our product lineup from general-purpose products to highly

values in net sales, operating income, ROE and other metrics, but, due to business environmental changes discussed earlier, we did notfunctional, high-value-added products. To achieve this, we are focusing on establishing a mass production system and on developing

meet our profit targets for fiscal 2022. We expect that the business environment will continue to be severe throughout fiscal 2023 as

new products. Our target is for 40% of sales to come from highly functional, high-value-added products. We have been unable to reachwell; nevertheless, we are doing all we can to reach our performance targets.

this target because price revisions caused by the weaker yen and higher cost of raw materials have expanded sales of general-purpose
products. Also, despite an increase in sales, we had negative profit due to soaring raw material and fuel prices which caused cost
increases to exceed price increases.

Organic Chemicals Business

The Americas Tops Regional Sales of Agrochemicals

Electronic component materials including barium titanate and its raw material, high-purity titanium dioxide, are currently undergoinginventory adjustment.
However, as the market for multilayer ceramic capacitors (MLCC), which are the main application for them, is expected to grow steadily

During this time, ISK Group has been focused on priority measures in each of our businesses. For example, in agrochemicals businesswith the anticipated shift to electric vehicles, so that demand for our electronic component materials is expected to steadily increase.

our priority is cost reduction. Due to the nature of this business, it is not possible to continuously bring new agrochemicals to market

For the manufacture of barium titanate, we have established MF Material (Nobeoka City, Miyazaki Prefecture) as a joint venture among

within a short period of time. In fact, because new agrochemicals are expected to be released to the market in several years’ time,

three companies: Murata Manufacturing Co., Ltd., which is the largest manufacturer of MLCC, ISK and subsidiary of ISK, Fuji Titanium

we must work to maintain and grow our market share by creating mixed formulations of existing agrochemicals or changing them toIndustry, barium titanate manufacturer. The new plant is scheduled to start operation in 2027, with the main goals being quality

new, easy-to-use dosage forms, or by expanding the scope of applicable crops or the sales regions. The key to achieving all of this isstabilization and manufacturing cost reduction. We would like to tackle the challenge of process improvement while sharing the know-

cost-competitiveness. Even newly developed agrochemicals will eventually face price competition from generic products; hence, cost

how that have been cultivated in each company up to date.

direction will be fundamentally affected by advancement in production technology and how smoothly you can scale up production. One
measure we have decided upon in order to achieve production innovation is the establishment of the Organic Production Technology
Research Institute (provisional name) in Ono City, Hyogo Prefecture. We are currently preparing for the start of full-scale operations in

Yokkaichi Plant

the fall of 2025.

A Plant with a High Profit Margin Which is Capable of Adapting to Market Changes

In addition, significant changes in regional sales have had an epoch-making impact on our agrochemicals business. Until last year,

I do not believe that the current rise in raw material and fuel prices is a temporary phenomenon. Neither do I believe that titanium ore

Europe had been the region which accounted for the majority of our sales, but, for this fiscal year, there has been an expansion in sales

will return to its previous price, given the structure of the market, which is dominated by major ore companies. In order to ensure stable

centered on new products, namely herbicides in the North American market and fungicides in the South American market, which has

profits within a business environment subject to exchange rate and supply and demand trends, we must reconsider the very model that

put the Americas at the top for regional sales. To achieve this reversal while still increasing sales in Europe is, in my opinion, a significant

we use for inorganic chemicals business, which has been focused on general-purpose products. Thus, in May 2023, we establishedaccomplishment.

the Committee for Inorganic Business Restructuring to begin an unrestricted discussion that left no option off the table about how to

For animal health products, our anti-inflammatory agent for acute canine pancreatitis, BRENDA™, which is well-received in Japan,transform our inorganic chemicals business model and reorganize our mainstay Yokkaichi Plant from the ground up. It just so happens

obtained conditional approval* from the United States’ Food and Drug Administration (FDA) in the fall of 2022 and was released tothat the Yokkaichi Plant has been in operation for more than 80 years and is at a point where it will need updates to its buildings andmarket in America in April 2023 as PANOQUELL™-CA1. It has been well-received since its release and has been steadily growing in

production equipment. I want to make sure that the plant is ready for these changes.

sales. If the ongoing clinical trials confirm the drug’s effectiveness and it becomes fully approved, we can expect to see even greater

At ISK, we have technology which allows us to change the size and shape of titanium dioxide particles, and this has led to the creation

market penetration. In addition, we are moving forward with securing approval and pursuing commercialization in Europe and other major

numerous products which only we can manufacture. One example is a paint that achieves a glossy, pearly white color by changing thecountries and territories; so, looking ahead to the future, we can expect to see billions of yen in sales. I believe this is a great opportunity.

shape of the particles into a plate-like form. Only ISK is able to utilize titanium dioxide to produce such metallic or pearl colors. In addition,*A system whereby new drug candidates for serious diseases for which no effective treatment exists can be approved without waiting for the results ofclinical trials if they meet indicators of predicted therapeutic efficacy.

09Message from the President

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

we successfully manufacture conductive materials necessary for antistatic property and heat shieling pigments that contributes to energy

the perspective of our current business, “enclaves” in completely new areas. What problems does the world face, and what problems

savings by our proprietary technology to make titanium dioxide in rod-like form. The profit margin for these products is high.

people think would be worth paying money to solve? We are out in the field investigating, coming up with hypotheses and then trying toSome are of the opinion that we should also be producing high-value-added products alongside general products, but I think we are atverify those hypotheses.

a serious crossroads in terms of deciding whether we can continue to do both while raw material and fuel prices continue to climb. If

Although we have been doing this for a year now, and although we have come up with a number of proposals, the fact is we have notthat the plant does not have the strength to produce at least somewhat profitable products, it will be difficult to achieve stable growth

yet been able to evaluate their commercial feasibility. During the Stage II period we will examine how to achieve the proposals and willin profits moving forward. The production equipment required at the processing and finishing stages differs between general-purpose

then work to realize them during the subsequent medium-term business plan, Vision 2030 Stage III (fiscal 2027 to 2029). And, looking

products and high-value-added products. We are working to reach a decision within the next six months or so and will incorporate thisahead, We will strengthen our activity by inviting new employees and mid-career hires with a wide range of backgrounds, both organic

direction into Vision 2030 Stage II, the next medium-term business plan (fiscal 2024 to 2026).

and inorganic chemistry, to participate.

ESG

Value of ISK

Considering Joint Action with the Companies of the Yokkaichi Industrial Complex

Fostering Expectations about the Future Potential to Increase Share Price

CO2 emissions reduction will be a major challenge for restructuring of the Yokkaichi Plant. ISK has announced that it will reduce

Looking at the world in recent years often makes me wonder if we have reached a turning point. There may be ups and down, but things

CO2 emissions 30% by 2030 compared to fiscal 2019, and we are proceeding with installation of backup boilers as we look to

return to normal eventually; however, when fundamental changes occur, there is no going back to normal. So, what do you do whenswitch our fuel source from coal to LNG. Further, we are monitoring technological trends as we explore options for equipment

things do not go according to plan? Certainly, it is important to anticipate and prepare for the worst-case scenario.

which emits less CO2 and develop materials capable of CO2 fixation.

But I believe our company has the underlying strength to overcome such a scenario. In our organic chemicals business, we have theAlso, at the Yokkaichi Industrial Complex, where the Yokkaichi Plant is located, a proposal has been put forward for joint action

ability to develop environmentally conscious agrochemicals, as well as the ability to adapt them to different countries’ administrative andto achieve carbon neutrality among the companies there. Starting this fiscal year, the Yokkaichi Petrochemical Complex Carbon

regulatory requirements so that they can be successfully licensed and brought to market. In our inorganic chemicals business, we have

Neutrality Promotion Committee was established to work on facilitating cooperation between the industrial complex companies

the ability to develop materials which perform a variety of different functions. The value of the ISK Group is found in its technologicaland the government to address issues that are difficult for companies to address on their own. ISK is also participating in relevant

capacity for producing things that people want in order to create better living environments. I want all of our employees and stakeholders

subcommittees and contributing to discussions about new fuel sources and infrastructure development.

to recognize us a company possessed of real ability and strength, no matter the challenge.

In addition, with regard to ESG, we are moving forward in stages with initiatives related to human rights due diligence and human

The Tokyo Stock Exchange is asking all companies with a PBR (price book-value ratio) of less than 1x to disclose what improvement

capital management. In March 2023, ISK received certification as a Health & Productivity Management Outstanding Organization

measures they are taking, and, while our PBR is holding at just above 0.5x, I feel that a challenge for us will be fostering expectations(large enterprise category) from the Ministry of Economy, Trade and Industry. We will continue to maintain a grounded approach

about the future potential of ISK, as a company possessed of real ability and strength, which will lead to a higher share price.

as we work to enhance and expand our efforts.

Therefore, as we work to increase our operating margin, I would like to focus more on communicating the growth scenario already laidout in Vision 2030. In addition, we changed our shareholder return policy in November of last year. Aiming for a consolidated payout ratioof 30%, and with a year-end dividend forecast of 50 yen for fiscal 2023, our policy is to utilize flexible share buybacks and other means

New Businessesof achieving a further increase in the total return ratio.

Goals for Realization in Fiscal 2027 and Beyond

Thank you to everyone for your continued support and understanding.

In the previous Integrated Report, I announced that the key priorities during my term as president, in addition to the restructuring of
the Yokkaichi Plant, the launching of new business. It is common practice when launching new business to take stock of company’s
strengths; however, the Business Creation Committee, which I directly oversee, has been tasked with finding business seeds in, from10

Vision 2030

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

To Realize Our Corporate Purpose
Our long-term vision, Vision 2030, has the dual aims of raising our corporate value through business activities and realizing a sustainable society.
In line with the ISK Group’s corporate purpose, we will continue to bring the world products that make people’s lives better.

Vision 2030 Management Targets

Originality. Acceleration. Global Reach.
Transforming Lives Throughthe Power of Chemistry.

• Net sales of greater than 200 billion yen • Operating margin of 15% or more • ROE 10% or more • Continued stable return for shareholders
Contributing to realization of a sustainable society together with improving our corporate value through such business activities.

Preconditions: Megatrends and Stakeholders

Megatrends

Vision 2030 presupposes numerous worldwide changes that will likely arise by 2030, including climate change and food problems.

Climate change
Resource shortages and food problems
Urbanization
Rapid development of IT
Growth and aging of the global population

How will these changes affect our stakeholders such as customers, shareholders, and investors? How can we contribute to ourstakeholders in the face of these changes? After much debate in-house, we have summarized the initiatives that must be taken
in our various businesses.

Value Provided by ISK and Our Initiatives
Inorganic chemicals business

Stakeholders

Shareholders and investors
Local communities
Customers and business partners
Employees

Organic chemicals business

Create new value based on the technologies developed for titanium dioxide products, to support the environment and digital

Supply unique products that directly enhance customer value across the world, and support people’s nutrition, health and life tosociety, and contribute to realizing a sustainable society.

contribute to realizing a sustainable society.

Titanium dioxide
Functional materials
Environmental products

Providing a variety of colors and hues
Creating a range of comfort
Achieving both innovation and environmental protection-> Diversifying the optical propaties of titanium dioxide to realize new value creation-> Contributing to the resolution of social issues such as the adoption of information and communications technologies andthe electrification of automobiles through functional materials-> Reducing environmental impacts while streamlining production through a revolution in production structures

Agrochemicals
Animal health products
Pharmaceuticals

Improving agricultural production stability and quality
Protecting the lives and health of pets
Contributing to medical care-> Pursuing development and commercialization in a way that’s aware of the value chain-> Accelerating the creation of value and restoring our growth trajectory by improving and evolving in-house technologies-> Manufacturing flagship products at the lowest cost in the world and supplying them in a stable manner to customers

New businesses, others-> Building a new business portfolio-> Strengthening development of environmentally friendly products by investing resources (people and money) with an awareness of environmental, social, and corporate governance (ESG) considerations in areas other than titanium dioxide or agrochemicals-> Establishing structures to pursue carbon neutrality by 2050

11

Progress in Vision 2030 Stage Ⅰ

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

To Realize Our Corporate Purpose
We are pursuing numerous initiatives under Vision 2030 Stage I (fiscal 2021 to 2023), the basic policy of which is the creation of sustainable corporate value.
Below are our priority goals and the current state of each.

Inorganic Chemicals Business

Organic Chemicals BusinessPriority goals

Main initiatives

Increasing the sales ratio for highly functional,
high-value-added products

Priority goals

The increased sales ratio for these products, stated in the goals of the medium-term businessplan, was not achieved due to expanded sales of general products. However, sales of highly functional, high-value-added products are steadily increasing with each year.

(Electronic component materials) Sales are increasing for in-vehicle and telecommunications products.
Expanding sales of high-purity materials for electronic(Electro-conductive materials) Performance has been robust, and sales are expected to increase in autocomponents, and electro-conductive materials
motive applications and specialty inks.

Main initiatives

Increasing our share of the global market by manufacturing The new factory of a subcontractor in India (agrochemical active ingredients) has started operation.
agrochemical active ingredients at the lowest cost in the
The Americas has dramatically improved its sales composition ratio and has overtaken Europe to become top
world and supplying them in a stable mannerin the ISK Group.
Reducing costs and increasing demand for upcoming
flagship agrochemical products

Sales are growing steadily, mainly in the Americas.

Accelerating development of new products that willserve as drivers of further growth(High-refractive-index material) We are in the process of providing samples in Japan and having them evaluated.
(Bismuth sulfide pigments) There are increasing requests for samples to use in optical elements, and we are
studying how to scale up production.

Implementing strategic, innovative sales measures,for example by utilizing multiple sales companies

Good progress is being made in the Americas and Europe, for example.

Procuring feedstock ore in stable and favorable terms

We are making progress in favorable procurement of numerous types and quantities of ore while
maintaining product quality.

Acquiring and maintaining agrochemical registrations
in various countries worldwide

We are in the process of acquiring agrochemicals registration for upcoming flagship agrochemical products in various countries.

Reducing waste,
reducing equipment maintenance costs

We are in the process of achieving materiality KPIs.

Developing and commercializing biorational products

Swaru-banker™ Long, a new natural enemies biopesticide, was launched.
ISK’s first biostimulant product (plant-based) went on sale.

Launching a master plan to optimize
manufacturing sites

We are studying a reform of production structure, which includes scrap and build, with the aim ofachieving sustainable plants that save energy, resources, and labor.

Refining and passing on
chemical synthesis technologies

We purchased land for a new ISK pilot plant in Ono City, Hyogo Prefecture.

Creating a roadmap to reduce greenhouse gases

We are drawing a roadmap towards carbon neutrality.

Introducing anti-pancreatitis drug for dogs
to worldwide markets

Our anti-pancreatitis drug for dogs received conditional approval from the Food and Drug
Administration (FDA), in the U.S. and went on sale there.

Organic and Inorganic Chemicals Businesses
Priority goals
Growing our top line (sales)

Main initiatives

Capital policy
Priority goals

Overall management
Main initiatives

Sales are exceeding our initial plan.

A Business Creation Committee, which reports directly to theStrengthening creation ofpresident, was established.
new businesses and new productsBlue phalaenopsis went on sale in Japan.
We established our corporate purpose and are raising awareness
Carrying out internal structural andof it company-wide.
awareness reforms to achieve
Top management is communicating through president briefings
the Vision 2030 goals
and media such as the Integrated Report and in-house magazine.

Strengthening shareholder return(continuing to pay stable dividends)

Aggressively pursuing capital cost management
Realizing improvements throughout
the cash conversion cycle, etc.

Priority goals

Main initiatives

Expanding the business opportunities available to us throughmanagement from the perspective of ESG and the SDGs
In November 2022, we changed our shareholder return policy in consideration of thetotal return ratio.

Identifying materialities (SDGs) and strengthening initiatives toaddress them

By improving our long-term issuer rating, weare improving the environment for procuring
capital.

Continuing and strengthening compliance management

Reforming workstyles by pursuing the digital transformation (DX)and streamlining operations

We are steadily implementing
initiatives, centering on KPIs,
that we have planned relating towhat we consider the mostimportant issues (materiality),such as climate change andhuman capital.

Strengthening risk management

12Message from the Director of Finance & Accounting Headquarters

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Reducing Volatility and Increasing Earning Capacity through Structural Reforms
the unusual step of raising product prices twice in a year for two consecutive years, thistitanium dioxide for ISK; however, exports to the Chinese market continue to be sluggish.

was not enough to pass on the rising raw material and fuel costs, resulting in negative

It is likely that we will struggle for the remainder of this year. There is talk of economic

operating income.

stimulus measures being enacted, but the details and scope of such measures are

Market conditions also worsened. The domestic market was affected by production

unknown, so it is unclear how much we can expect from them.

adjustments in the automobile industry which were implemented because of a shortage

This situation is reflected in the forecast consolidated performance of 147.0 billionof semiconductors. In the overseas market as well, the slowdown in the Chinese

yen in net sales, 11.0 billion yen in operating income and 7.5 billion yen in net income

economy, particularly the declining demand for construction due to a slump in theannounced in May 2023. If nothing tangible is seen with regard to China's economic

real estate industry, has driven down prices for titanium dioxide used in architectural

stimulus measures by the end of the year, a downward revision is possible.

paints, and, with surplus inventory flowing into the Southeast Asian market, the overseas

Fiscal 2023 is the final year of medium-term business plan, Vision 2030 Stage I (fiscal

market as a whole fallen into a low-price war. The ISK Group tried to adapt to this, but

2021 to 2023), and, although consolidated sales are expected to surpass the target of

was not at a price level that would allow it to compete.

125.0 billion yen, it is not expected that we will meet any of our profit targets, including

As a result of all of the preceding factors, our consolidated performance for fiscal 2022

our 16.6 billion yen consolidated operating income target. ROE is also expected to beshows an increase in revenue but a drop in profit.

7.5%, which will unfortunately fall short of the target of 10% or more. However, given

Rising raw material prices are also negatively impacting cash flow through increased

that our organic chemicals business is currently doing well, and given that the yen has

inventory burdens. The 40 - 60% increase in raw material prices has been accompanied

weakened more than expected against the dollar and the euro, we can expect to see

Market Conditions and Performance Results for Fiscal 2022

by an increase in the inventory amount recorded on the balance sheet. This was a large

some degree of improvement.

Strong Organic Business
While Inorganic Chemicals Business Struggled

burden which resulted in negative operating cash flow for fiscal 2022.

Sales were extremely strong for our organic chemicals business. In particular, sales

Outlook for Fiscal 2023

Director of Finance &Accounting Headquarters

Yasunobu Kawazoe

of fungicides and herbicides grew significantly in the Americas, notably becoming theProfit Emphasis and Structural Reform

Prioritizing ROE Improvement and Pursuing “Selection andConcentration” with the Next Medium-term Business Plan

previously been the top region, remained strong, but sales in the Americas exceeded

Failure to Meet Medium-term
Business Plan Profit Targets

I believe that the continued growth of the ISK Group will require greater earning capacity,even that. Sales increased by 15.4 billion yen, boosted in no small part by the weakerIn fiscal 2023, our organic chemicals business, in particular agrochemicals, is continuing

and this is the direction of discussion among the Board of Directors. Rather than net

yen.

to perform well thanks to ongoing market vitality. In Europe, we have also received asales, the indicator to focus on is the absolute value of operating income. Our long-term

Sales in our healthcare business also grew year-on-year. Additionally, PANOQUELL™-

tailwind boost from the expiration of registration of a competing agrochemicals .

vision, Vision 2030, has as a target net sales of more than 200.0 billion yen, but there

CA1, our anti-pancreatitis drug for dogs, received conditional approval and went on

However, in our inorganic chemicals business, despite coal prices dropping from what

is a shared view by the president and every employee within the Group that we shouldsale in America at the end of fiscal 2022. We can expect sales to grow moving forward.

they were, titanium ore prices continue to rise, with the result being net zero in terms

emphasize profits.

On the other hand, however, our inorganic chemicals business struggled due to risingof profit and loss. Domestically, automakers are making a recovery as a result of easing

Coincidentally, the Tokyo Stock Exchange issued a request this spring to low PBR

raw material and fuel costs, particularly the cost of coal used for fuel. Despite taking

semiconductor supply and demand, thus helping ensure a stable shipping volume ofcompanies that they make improvements. PBR (price book-value ratio) is found by

top sales region for these products for the ISK Group. Sales within Europe, which has

13

Message from the Director of Finance & Accounting Headquarters

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

multiplying ROE (return on equity) with PER (price earnings ratio), in other words, pastcaused a change in our fundamental assumptions. At present, we do not know exactly

profits multiplied by future value. Of these, I believe our first priority should be improving

how much will be needed to carry out a restructuring of the Yokkaichi Plant.

ROE, which is an indicator of management efficiency.

At the same time, however, we are deciding on new investments to be made in our

What is required to achieve this is structural reform which lowers the volatility of ourorganic chemicals business. In addition to several billion yen for the construction of an

Dividend Increase Aimed at a Consolidated
Payout Ratio of 30%

inorganic chemicals business, raises earning capacity and increases business value. Up

Organic Production Technology Research Institute (provisional name) in Ono City, Hyogo

In the fall of 2022, we changed our shareholder return policy. We aim to increase

until now, the discussion has been limited to how to switch to highly functional and high-Prefecture, we have established a barium titanate manufacturing joint venture together

the consolidated payout ratio to 30% by fiscal 2023, which is the final year ofvalue-added products, but we are now working from the ground up on measures thatwith Murata Manufacturing Co., Ltd. and our subsidiary, Fuji Titanium Industry.

Stage I. In line with this, we increased dividends by six yen for fiscal 2022, which

will realize a firmly future-focused strategy. We will summarize the results of discussion

To raise funding for these, our policy is to utilize “general syndicated loans,” which areultimately had increased revenue but decreased profits. We did this because, as

over the next six months into the next medium-term business plan, Vision 2030 Stage II

financing arrangements made by a syndicated group comprised of a wide range of

we aim for a consolidated payout ratio of 30%, we wanted to first get something(fiscal 2024 to 2026), and I believe that the next three years will serve as a touchstonefinancial institutions, including new financial institutions. As of September 2023, weclose to it. In addition, we will pursue flexible share buybacks along with solicitingof the extent to which structure reform can feasibly be carried out.

have already raised 13 billion yen under this framework. Fortuitously, in July, the long-

feedback from investors, which we will reflect within Stage II.

At just above 0.5x, our PBR is low, but whether we can get above the 1x level willterm issuer rating from the Japan Credit Rating Agency, Ltd. was raised to “BBB+”

Some companies are taking measures, even in the midst of their medium-term

depend on our structural reform.

(stable), creating an environment in which funding is easier to procure.

business plans, to get their PBR above 1x; in the case of the ISK Group, we are

The Tokyo Stock Exchange has further issued requests relating to “capital cost andIn addition, we will monitor operating cash flow in the latter half of fiscal 2023 as weplanning structural reform of our inorganic chemicals business. In other words, theshare value-minded management”. At ISK, as well, we perform an internal comparison

consider funding procurement for the year. In our organic chemicals business, as sales oflargest puzzle piece has not being fit yet, so we have to have everyone waiting.

of measured capital costs and ROE, and there are some question marks with regard to

agrochemicals based on a long-term account receivable turnover period have increased,

This in no way means that we are not focused on PBR. Even amongst the Board

fiscal 2022 performance and the forecast fiscal 2023 ROE. In general, the target given

the amount of working capital needed has also increased, thus requiring us to have a certainof Directors there is an awareness of share price trends, Tokyo Stock Exchange

for ROE is 8%, but we are still a bit short of that.

level of cash on hand. Also, although it will depend on how much titanium dioxide inventory

requests and other factors that has made “sub-1x PBR” a common phrase used

With regard to PER, we get into a discussion of future value, and this all depends onin our inorganic chemicals business can be cleared, it is difficult from the standpoint of

among the directors. Stage II is scheduled to be announced in May of next year, at

how high we can raise the future potential of our inorganic chemical business throughthose in charge of fundraising to make a prediction due to large, market condition-related

which time the results of discussions amongst the Board of Directors will be madestructural reform. Stage II will show everyone how we have answered the question ofgaps, such as the rapid accumulation of inventory after being depleted in fiscal 2022.

known.

Shareholder Returns

structural reform and will invite assessment.
Million yen

Shareholder Returns
Allocation and Funding

Active Investment in New Research Facilities
and Joint Ventures
In the Integrated Report 2022, I stated that we anticipate the amount of investment
will be 100 billion yen over five years, of which 65 billion yen is expected to be newinvestment. However, the situation has changed since then, and, given the negative
operating cash flow for fiscal 2022, we do not anticipate that the amount of future
investment will reach this level. This amount was originally calculated in anticipation ofa restructuring of the Yokkaichi Plant; however, business-related structural reforms have

Dividends paid

Dividends for FY2022

42

Purchase of treasury share
Consolidated payout ratio

1,999

yen per share

Increasing corporate value along with returning profits to shareholders are our top
management priorities.
Regarding dividends, our basic policy is to continue paying stable dividends in line withbusiness performance while comprehensively considering such factors as performancetrends, financial conditions and the sufficiency of internal reserves for future businessdevelopment.
We will utilize flexible share buybacks and provide shareholder returns with an awarenessof the total return ratio.
For Vision 2030 Stage I, the medium-term business plan, our aim is to achieve a consolidated
payout ratio of 30% by the final year of the plan (fiscal 2023).

23.9

12.3

2021

2022

1,907

2023

(FY)

Predicted

Achieved

36yen

%

1,601

1,438

Annual dividend(yen per share)

25.4

42yen

50yen
14

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Yokkaichi Plant

A Manufacturer’s Responsibility
To Make Exactly What the Market Needs
The Yokkaichi Plant is the flagship production base of our inorganic chemicals business. It has been thefoundation of ISK manufacturing for a great many years going all the way back to its establishment in
1941. What is the plant currently committed to, what is it working on? We put these questions to Yoshiyuki
Shimmyo, who, as Director of the Yokkaichi Plant, is the person responsible for its overall operation.

Yokkaichi Plant’s Commitment

Realizing Stable Supply and Stable Operation—In terms of manufacturing, what is it that the Yokkaichi Plant is committed to?
A stable supply. Our top priority is to stably provide users what they need, when they need it, and of the quality they need. To do this, it isimportant that you emphasize a smooth, speedy flow of operations, like a baton pass in track and field, from acquiring information about‘needs and seeds’ to product development and production. I believe that an outstanding plant is a plant that can do this.
Naturally, I am talking about plants that work to prevent workplace accidents, disasters and other occupational hazards. Without this, wecannot say we are providing a stable supply. With the exception of an annual maintenance shutdown, the Yokkaichi Plant operates aroundthe clock every day, including the New Year and summer Obon holidays. Plant shutdowns lead directly to increased costs. Our ability tokeep production going is where we shine.
Last year, when the COVID-19 pandemic was spreading at one of our workplaces, we faced the threat of a complete production
stoppage, but we were able to keep the production line running by reducing the production facility utilization rate by half and entrustingeach operator to contribute through his or her own roles and knowledge. I’m proud of this major accomplishment that, thanks to thecooperative efforts of everyone, we were able to ensure a stable supply even during the COVID-19 pandemic.
—What are the concerns facing manufacturing currently?
The titanium ore which the Yokkaichi Plant uses as the main raw ingredient in producing white pigment titanium dioxide is becoming harder to obtain due to decreasing titanium content at the ore extraction source, as well as due to overseas factors, such
Director of Yokkaichi Plant

Yoshiyuki Shimmyo

as conflict. The ore is not found in Japan and must be procured entirely from overseas. Furthermore, there is tight demand forthe ships that carry the ore, resulting in delays; there was a three-month delay between March and May of last year, forcing us
to make temporary production adjustments.
When this happens, we have no choice but to consider various ores that are more easily obtainable. These raw materials are15

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Yokkaichi Plant

difficult to use, tending to get stuck to, or clog up, our equipment. They also affect the white coloration which is so important to

Yokkaichi Plant’s Strengths

the product.

A Diversity Array of Quality Products and the Capacity to
Change Is Also Necessary—So how do you address this?
We do the best with what we have, even if it is a low titanium content ore. Leucoxene, for example. When performing the chloride—What are the Yokkaichi Plant’s strengths?

process of titanium dioxide manufacturing, a natural rutile with higher titanium content is the raw material typically used, andWe are able to supply a lineup of products tailored for different applications with a lead time significantly shorter than our com-

leucoxene is a natural rutile with a somewhat low titanium content which we have not used previously. However, by changing

petitors. Another strength is our ability to continuously provide products of consistent quality which meets the quality needs of our

the ore reaction temperature conditions, experimenting with additives or by making improvements to our equipment, such as

customers. We offer a wide variety of quality products. This is because we believe it is incumbent upon manufacturers to producechanging the shape of pipes to make it harder for material adhesion when handling powdered ore, we have mastered using theexactly what the market needs. Our ability to perform multi-product production is the cumulative result of the operators directly

material in order to ensure that we are able to continue providing a stable product supply. As we identify problems, we steadily

responsible for production demonstrating a commitment to ensuring that the baton passes from the first half of the production

make improvements while continuing manufacturing. This, I believe, is the most important aspect of plant management.

process to the latter half, and from one shift’s operator to the next shift’s operator without interruption over the course of a 24hour day, every day.
Our titanium dioxide business has been manufacturing primarily commodities for pigment application for many years, but, moving

Becoming a Plant Which Has Mastered the Use of Ore
I am in charge of the analysis operations connected with mastering theforward, we will expand into functional materials and other products in order to meet the changing needs of the market and ourcustomers. It is important to stay abreast of what the market is demanding in order to provide the exact products that the user islooking for; it is no good manufacturing the same old products in the same old way. It is essential that we, too, change.

use of new titanium ore. Titanium ore has different properties dependingon where it is mined, meaning properties such as reactivity and frangibility—What organizational structure have you adopted to capitalize on your strengths?

are not the same. Because some varieties can have yield and operations-

We have all the necessary departments, staff and equip-

related negative impacts, we use laboratory analysis to predict what

ment together in the Yokkaichi Plant, where everyone canphenomena will occur when they are actually used in production. However,collaborate and share knowledge together.

when it is difficult to make a determination based on lab results alone,

When producing a new product, we scale up gradually

we need to verify the impact on quality and operations through actualfrom laboratory to implementation level, but as the scaleuse in production. It is important to exchange detailed information withgets larger, variations in quality can often emerge. Figur-

operators, such as whether the reaction is progressing normally. I feeling out how to solve the problem in the actual production

rewarding sense of fulfillment whenever we are able to get throughequipment is not an easy task. So, at the Yokkaichi Plant,

production without any problems and I see how all the successive tests

the Development Division and Production Technologies

and experiments we conducted have paid off.

Division work together to create a prototype on the actual

R&D Strategy Headquarters
Production Technology R&D Division
Process Development Group Chief

Shogo Iseya

equipment, and, when issues manifest themselves, eachdivision works on them, changing different parametersand production equipment operating conditions in a process of trial and error until the new product is on track formass production.

GMP-compliant plant for pharmaceutical manufacturing

16

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Yokkaichi Plant

Looking Ahead for the Yokkaichi Plant

Using Equipment Replacement as an Opportunity toBring Widely Sought-after Products to Market—How do you incorporate environmental responsiveness?

ogy capabilities to the test to ensure we do not fall to second or third in line behind our competitors. It is important that we keep

We are in an industry which produces a lot of by-products, so we try to think up ways that they can be reduced. Looking ahead

updating our products with an eye towards, for example, the automobile manufacturers and packaging materials manufacturers

to 2030, which is the culminating year of Vision 2030, we are primarily focused on waste recovery and recycling. Specifically, we

who are end users of titanium dioxide, as well as in view of the increasingly rapid changes in the market.

are pursuing research and development into the collection and recycling of materials with recoverable value, such as titanium

I personally think this will mean we move in the direction of highly functional and high-value-added products which, I feel, meansoxide, that mix with by-products and waste and leave the production line, as well as the collection and product application of rare

the equipment and facilities updates we will make to the Yokkaichi Plant represent an opportunity for us.

metals, such as vanadium.

I also hope to increase employee engagement in their work. Just like we endeavor to keep our homes clean and to improve them,Also, with regard to greenhouse gases, there is no doubt that we need to reduce our use of coal as a boiler fuel. To address this,I want us to take the initiative to improve this plant, where we spend so much of our lives, making it a safe and rewarding place

the first measure we are taking is switching to LNG, and we have started introducing new boilers and taking other initial steps;

to work.

however, this is costly and will not serve as a real solution. In terms of CO2 emissions reduction, we are working towards a 30%
reduction by 2030 (compared with fiscal 2019), with the challenge of achieving carbon neutrality by 2050. It is important that
we pursue this goal in cooperation with the local community. Thus, since last year, we have participated in a study committeeof the Yokkaichi Chamber of Commerce and Industry, and from this year we have taken part in the discussions of the Yokkaichi
Petrochemical Complex Carbon Neutrality Promotion Committee. The governor of Mie Prefecture serves as chair, with the mayor
of Yokkaichi as vice-chair, while the other committee participants are comprised of the various companies within the industrial
complex. Although it is still in the initial examination phase, discussion is becoming increasingly active.
—What does the Yokkaichi Plant of the future look like?
In order to secure the foundation for our inorganic chemicals business amidst worsening profits caused by rising raw material andfuel prices, the Committee for Inorganic Business Restructuring comprised of representatives from sales, development, technology and back office departments, is examining our future direction and business model. Also, given that it has been 70 years since
the installation of our titanium dioxide sulfate processing equipment, and 50 years in the case of chloride process equipment, we
also need to address the issue of aging equipment and updating earthquake resistance.
What we need to be doing is anticipating how our products will be used in the world in the future so that we can be one stepahead in our manufacturing. While recognizing that there are many angles from which to consider this, such as sales strategy,
technology and finance, which means that this discussion cannot be limited to only the Yokkaichi Plant, we should seek to put inplace a system which produces products that appeal to a wider market, rather than simply what customers ask for.
To do this, we need the ability to anticipate the needs of society. This will put our marketing, development and production technol-

17Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Agrochemicals Business

Manufacturing Centered on Overseas Subcontractors
ISK will establish an Organic Production Technology Research Institute (provisional name; hereafter, “Ono Research Institute”) in Ono City, Hyogo
Prefecture. The aim is to achieve, via advancements in manufacturing technology, the world's lowest cost manufacturing and stable supply. We
spoke with three Biosciences Business Headquarters members who are part of the team working to establish the Ono Research Institute about theaims and future vision for it.

What is the Ono Research Institute?

A Production Technology Research Facility Equipped with Small-scale
Production Equipment
Ueda The focus of the Ono Research Institute will be on scaling up new products, such as agrochemicals developed at theCentral Research Institute (in Kusatsu, Shiga Prefecture), and on improving the manufacturing process for existing products inorder to reduce costs. In manufacturing, various conditions change depending on the scale of manufacturing, and this affects therelative ease and cost of production. A chemical reaction which is easy to achieve in a laboratory may not be able to be scaled
up as straightforwardly as you anticipated. Around 2006, we began outsourcing manufacturing overseas, and it was after we
had already completed some degree of investigation into how to scale up production that we brought the basic production data
to the subcontractors production site. Currently, because we do not have our own process verification facility, we are not able toperform simulations in Japan and have run into situations where problems at the subcontractors site forced manufacturing to behalted and where we were forced to borrow a subcontractors small-scale production facilities to perform tests on short notice.
Nakamura When scaling up the manufacturing process, we start at the scale of a normal laboratory, move to the “kilolaboratory scale,” which is tens of liters, then to “bench scale,” which is hundreds of liters, and then to “pilot scale,” which isthousands of liters, closer to full plant scale. These are the stages commonly used to verify the safety, consistency and costefficiency of the developed manufacturing process.
At the Ono Research Institute, we plan to construct two buildings. The first is the Technology Research Building, which will haveregular laboratory and kilo-laboratory scale equipment, and the second is the Synthesis Research Building, which will haveequipment for performing verification of the upscaling process.
One of the aims for the Ono Research Institute is to use its aggregated testing data to facilitate a smooth establishment of new

Biosciences Business Headquarters
Production Technology Division
Engineering Group Leader

Biosciences Business Headquarters
Deputy Supply Chain Division
General Manager

Biosciences Business Headquarters
Deputy Production Technology Division
General Manager

product manufacturing system at commercial production facilities. Also, for existing products, this facility will be used to help

Hiroaki Tomita

Takafumi Ueda

Tadashi Nakamura

with cost reduction through the development of new manufacturing processes and the acceleration of technology transfer tocontractors.

18

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Agrochemicals Business

Areas for ISK to Prioritize

we can perform cumulative verification testing to prevent these sorts of

Production Technology and Data Accumulation,
as Well as Human Resources Development

problems as well.

Tomita In the past, our approach has been to nail down initial production in-house and to hand over manufacturing to a contractor

on-site must, by necessity, be primarily handled by the subcontractor, thus

only after we have finished troubleshooting. Our adoption of contract manufacturing was not because that is what we preferred, but,

keeping us from accumulating sufficient information. When we want to, fordue to factors such as the strict restrictions of the industrial complex, we were unable to flexibly deal with issues, including testing andexample, outsource manufacturing among different subcontractor in order toresearch, at our own plant.

increase production, under the current system, the new subcontractor must

Tomita When we work with subcontractors, small problems which occur

start from square one accumulating data. The Ono Research Institute will
Nakamura After the ferosilt scandal, there was a period where we were unable to secure sufficient new capital investment for ourconsolidate these technical specifications, thereby speeding up production

plant and, ultimately, gave up on in-house manufacturing in favor of outsourcing. Looking back on the circumstances and situation at thestartup, as well as facilitating improved product quality and productivity.

Planned site of the Ono Research Institutetime, I feel that we had no choice but to adopt such a system.
Tomita The biggest problem with this situation is that young employees do not gain experience with actual manufacturing. Those

Future Prospects

like me in our forties are the last generation to have experience with manufacturing at actual production scale. Employees who joined

Envisioning a Flagship Production Base and Information Hub

the company after my generation were focused primarily on process development in the laboratory and did not gain experience in theuse of large-scale equipment. This makes it impossible to build up production technology in-house under conditions close to those of

Ueda For the time being, our main research focus will be the active ingredients in agrochemicals; however, we hope to grow thiscommercial production.

research facility over the next several years to the point where it can handle formulation manufacturing and animal health products’
active pharmaceutical ingredients, as well as organic intermediate products and all of ISK’s organic chemical products. For animal health

Ueda Once the Ono Research Institute is established, young employees will be able to experience manufacturing on a large scale.

products manufacturing includes small-scale manufacturing ranging from tens of liters to hundreds of liters; thus, we are also envisioning

Human resources development is a major aim of the Ono Research Institute. It is scheduled to launch with around 30 employees, but

the possibility of developing the research institute into a GMP-compliant manufacturing base which is capable of manufacturing active

we hope to expand the facility over time, increasing the number of employees to around 100. We will also promote human resources

pharmaceutical ingredients.

exchange with the Central Research Institute and the Yokkaichi Plant, and I expect that the human resources we develop will go
on to work in sales, procurement and other departments throughout ISK.

Nakamura In terms of transferring manufacturing technology overseas, it would also increase the efficiency of technology transfer
if, instead of our employees going to the contractor’s site, their employees came here and worked together with us on the scaling-up

Nakamura Safety is another priority. When you apply the sameprocess at the Ono Research Institute. I would like for us to put a system in place to facilitate that. In addition to cross-border exchange,

approach to the commercial scale as the laboratory level without

I would also like the research institute to take on the role of technology information hub, disseminating and relaying information to ourconsidering well, unforeseen problems can arise. This is something

production sites around the world.

which happened a long time ago, but a chemical reaction during theOn-site guidance at the manufacturing contractor

manufacturing process of a certain fungicide caused an uncontrollable

Tomita Ten to twenty years from now, securing human resources will likely be more of a challenge. In anticipation of that, I would like

temperature increase on the bench scale, whereas it washad been a

us to pursue tie-ups with other research institutes, such as universities. My dream is that we would collaborate on everything from basic

mild temperature increase on the laboratory scale. We were somehow

research to market launch, which would also lead to being better able to secure human resources. I want us to become the hub Mr.

able to get it under control, but, if it had happened in a larger facility, it

Nakamura describes and to develop it into a hub which builds organic connections not only with universities but other companies in thewould have resulted in a major accident. At the Ono Research Institute,same industry as us.

19Value Creation Process

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Creating value through our purpose to achieve Vision 2030
The ISK Group will be continuing to expand its business by taking its corporate purpose as a starting point and leveraging its core competence of chemical technologies; its threeprincipal strengths, in the form of its ability to develop proprietary technologies, accommodate quality and environmental requirements, and collaborate globally; and its management
capability, which underpin those strengths. In this way, we’re striving to achieve Vision 2030, which seeks to balance economic value with sustainability value.

PurposeTo continue contributing tobetter living environments
through chemical technologies

Value Creation Core

Vision 2030 Goal

Providing a comfortable living environment

Originality. Acceleration. Global Reach.
Transforming Lives Throughthe Power of Chemistry.

p14

Research and development

Ability to collaborate
globally

OutcomeAbility to develop proprietary
technologies

Providing innovative lifestyle products

Chemical technologies

Basic Philosophy
p02
Sales and supply

Input
p21

Providing environmentally friendly products• Ultra-fine particle manufacturing• Surface treatment• Organic synthesis• Formulation manufacturing
technologies

Ensuring a stable supply of agricultural products
Procurement andproduction

Improving quality of life (QOL)

Ability to accommodate quality andenvironmental requirements

Management capability

Corporate GovernanceAn era characterized by VUCA (volatility, uncertainty, complexity, ambiguity)in which the future is unpredictable

Megatrends• Net sales of greater than 200 billion yen• Operating margin of 15% or more
• ROE 10% or more
• Continued stable return for shareholders
Contributing to realization ofa sustainable society together withimproving our corporate value
through such business activities.

Outputp21

Management foundation

Climate change

Urbanization Resource shortages and food problems Growth and aging of the global population Rapid development of IT

20

Input and Output

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Promote Value Creation through Continuous Input
ISK Group’s definitions of the inputs and outputs of the six capitals of value creation are given below. We will realize Vision 2030 through ongoing enhancement of inputs.

Financial Capital

Input• Total assets (FY2022 consolidated)• Interest-bearing debt (end of FY2022)• Shareholders’ equity (FY2022 consolidated)

Role in Value Creation

Output201.9 billion yen Total assets from which revenue is generated, as well as interest-bearing debt and shareholders’ equity, which • Forecast performance for FY2023
as the primary means of raising capital in establishing these assets, are set as our main financial inputs.
• Consolidated net sales
56.0 billion yen serve
To realize Vision 2030, our long-term vision, we will efficiently utilize total assets in order to secure market• Consolidated operating income
95.4 billion yen share and thereby increase consolidated net sales. Also, adjusting a balance between interest-bearing debt
and shareholders’ equity will facilitate improved ROE along with greater capacity for future investment.

• ROE

147 billion yen
11 billion yen
7.5 %Manufacturing Capital• Capital investment (FY2022 consolidated)• Titanium dioxide production capacity(No. 1 in Japan)

5.9 billion yen The key manufacturing inputs are production capacity, which underpins our top share of the domestic titanium • Change in the titanium dioxide production
dioxide market, and capital investment sufficient to increase production of highly functional, high-value-added facility utilization rate
168,000 tons
products. We achieve efficient facility operation sufficient to meet demand through the application of our (FY2021 consolidated -> FY2022 consolidated)unique expertise coupled with timely replacement investment in production equipment and facilities. We will • Highly functional, high-value-added products as atake advantage of a new production line for highly functional products to increase the share of inorganic percentage of inorganic chemicals business sales
chemicals business sales accounted for by highly functional, high-value-added products.
(FY2022 consolidated)•Expertise cultivated over many years,
essential to high-quality and stable manufacturing

5.5 % decrease
32 %Human Capitalper
24 hours
person/year

1,768 people• New graduate hires (FY2022 non-consolidated) 23 men, 4 women• Mid-career hires (FY2022 non-consolidated) 44 men, 5 women

Securing and making the most of a diverse group of human resources is one of the key priorities of the
ISK Group. We strive to secure human resources with a challenging spirit and a global mindset, regardless of their gender or nationality, as newly hired graduates or mid-career hires.
We also help newly hired employees develop their careers in order to strengthen their basic skills asworking members of society, raise the awareness of employees at all levels of their roles, and prepare
promising candidates for executive roles. This new system provides all employees with the opportunity totake on high-level job challenges and to get various kinds of training. Through these procedures, wedraw out greater value from our human resources.

Transparency in business activities abiding bylaws and regulations• Number of countries where we sell
our products

In keeping with the Group’s corporate philosophy, we strive for the sustained growth of our business and • Coexistence with local communities
growth in our corporate value through a commitment to compliance and management that is transpar- • Sustainable procurement: Establishment of ISK Group Policy on Procurement
ent, trustworthy, and sound. We promote two-way communication to earn the trust of local residents, for and guidelines governing procurement, pursuit of human rights due diligenceexample through efforts to ensure safety and disaster prevention, environmental activities, and active
TM
communication of information. In addition to undertaking human rights initiatives, we observe the laws • External honors: ISK’s HASClay was awarded in the outstanding
and regulations in every country and region in which we operate, and we ensure our purchasing activi- energy-saving/low-carbon machinery and systems category in 2022
commendations by the Japan Machinery Federation.
ties are characterized by decency and adherence to social ethics.
Our Blue Gene™ won a 2022 Flower of the Year prize in the Japan Flower
Selections competition organized by the Japan Flower Selections Association.

• Employees (FY2022 consolidated)• Training time per person (FY2022 non-consolidated)• Employees who took childcare leave(FY2022 non-consolidated)• Female manager ratio (FY2022 non-consolidated)• Paid leave acquisition rate
(FY2022 non-consolidated)

13 people
7.6 %81.9 %

Social and Relationship Capital

78 countries

21

Input and Output

About ISK

Natural Capital

Input
Yokkaichi Plant FY2022• Energy (heavy fuel oil equivalent)• Industrial water• Seawater• Titanium ore

Value Creation Strategies

Foundation for Value Creation

Corporate Data

OutputWe treat energy, water, and titanium ore consumption at Yokkaichi Plant and our subsidiary, Fuji Titanium
Industry, as key indicators so that we work to reduce the volume of our CO2 emissions, water usage, and140,000 kiloliters industrial
waste disposal. By reducing coal-fired boiler CO2 emissions as part of our efforts to address
16 million m³ global warming, we aim to preserve a comfortable living environment. Through more thorough chemical
10 million m³ substances management, we are reducing the amount, and amount transferred of, our emissions, withthe goal of reducing the impact on humans and the ecosystem to as close to zero as possible.
150,000 tons

Yokkaichi Plant FY2022• CO2 emissions
400,000 tons
• Wastewater emissions into public water areas
26 million m³• Industrial waste
95,000 tons
PRTR-listed substances
1,500 tons

Intellectual Capital
R&D expenses (FY2022 consolidated)(Inorganic chemicals(Organic chemicals• Percentage of R&D employees(FY2022 non-consolidated)

9.1 billion yen Research and development have long been a priority for ISK Group. We ensure that a certain threshold • Number of patents held
R&D expenses is met regardless of fluctuations in business performance. R&D activities at the(end of FY2022 non-consolidated)
1.5 billion yen) for
Central Research Institute and Yokkaichi Plant account for the majority of R&D expenses, while some are(Japan)
7.6 billion yen) used for the registration of agrochemicals in various countries. Drive the development and patenting,
22.2 %(Overseas)
both in Japan and overseas, of new agrochemicals and drugs, highly functional titanium dioxide materials and more, as well as facilitate the creation of new business associated with them.
• Products developed in-house as a percentage
of organic chemicals business sales(FY2022 consolidated)

2,502
242
2,260
88.6 %

To p i c s
Global Intellectual Property Offensive
The illustration on the right shows the number of patents ISK holds, by region.

Europe1,089 (43%)

We hold patents throughout the world, including in Japan, the U.S., Europe, South America, and Africa.

Asia

In order to support ISK’s global business through intellectual property, Intellectual Property division

507 (20%)collaborate our business divisions to acquire patents for products in the regions where we plan toJapan
242 (10%)

North America
216 (9%)market them.
Patent acquisition efforts are conducted based on the laws of the target countries and theembodiment and timing of the patent. In the field of agrochemicals, for example, in addition
to substance patents for active ingredients, we are studying moving on to patent applications
related to manufacture process, formulation, and mixed formulations, as well as patent extension
registration and trademark registration application. Such efforts will expand our portfolio andMiddle East and Africa
169 (7%)
Oceania
83 (3%)South America
196 (8%)maintain our business advantage.

22

Financial and Non-Financial Highlights

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Financial Highlights (Consolidated)
Net Sales

Operating Income

Million yen

131,238

106,441

Operating margin

Million yen%

ROEMillion yen%

R&D Expenses

Ratio of R&D Expenses to net sales

Million yen%

11,69011,557

11,372110,955

Net Income Attributable to Owners of Parent

101,066 101,774

8,631
10.7

12.2

9.1
7.6

7.3

6.6

5,173
6.1

8,070

13.6 6,947

10.4

6,188

9,150

8,683

8,639

9,156
8,165

8.5
7.4

7.0

2021

2022

3,373

5.1
2,359

4.3

3.1

2018

2019

2020

Capital Investment

2021

2022

(FY)

Depreciation expense

Million yen

Million yen

2018

2019

2021

Interest-Bearing Debt

2022

2018

(FY)

D/E ratio

Million yen

%

2019

2020

2021

Dividends per Share

2022

(FY)

Payout ratio
%

Yen

2018

2019

Total Dividends Amount2020

56,081

60,103

7,141
6,092
4,445

5,330
5,225

4,669
4,545
4,542

49,52852,531Million yen

2,710

0.8
0.7

0.7

0.6

36

33.9

50,420

0.6

20

(FY)

Purchase of treasury share

Million yen

42

8,062

4,266

2020

23.9

21.3
18

12

1,438

12.3

722 799 727 719 730

1,601
734

479
5.5

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

23

Financial and Non-Financial Highlights

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Non-Financial Highlights
Environmental

OthersGreenhouse Gas (GHG) Emissions (ISK Group*1)
GHG emissions

GHG emissions year-on-year

Thousand tons CO2

101.3

499

87.0

490

Energy Intensity (Japan, consolidated*2)

Number of Patents Held (non-consolidated)

t

kl/t

Cases

%

119.7
98.2

Industrial Waste (Sludge) (Japan, consolidated*2)

97.5
511 498

80,97080,79874,96277,559

0.82

0.84

2018

2019

0.90

0.85

2,864

0.89

2,714

2,600

2,527

2,502

2020

2021

2022

62,625

427

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

2020

2021

2022

2018

(FY)

2019

(FY)

SocialNumber of Employees

Workplace Accidents (Japan, consolidated*2)
Frequency rate of lost-worktime injuries
%

%

1.01

(non-consolidated)

Persons

%

1,070
1.07

Female employee ratio(non-consolidated)

Severity rate

1,106

1,149

1,144

16.9

16.9

17.1

2018

2019

0.07

2020

0.01

2021

Paid Leave Acquisition Rate
%

%

18

75.6

77.0

2018

2019

73.6

77.0

81.9

15
13

12

16.9

0.50

0.02

(non-consolidated)

Persons

14

16.4

Female manager ratio(non-consolidated)

1,146

0.93

0.56

0.01

Number of Female Managers

7.6

6.0

6.4

5.4

5.1

2018

2019

2020

2021

0.03
2022

(FY)

*1 Entire ISK Group*2 Operated by ISK and Fuji Titanium Industry Co., Ltd. Production facilities only.

2018

2019

2020

2021

2022

(FY)

2022

(FY)

2020

2021

2022

(FY)

24

Materiality

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Materiality for the ISK GroupThe Group has identified materiality (key issues) with the potential to impact its medium- and long-term corporate value. We’ve established medium- and long-term key performanceindicators (KPIs) for eight key issues with an extremely high level of importance for both stakeholders and the ISK Group, which we’ve determined comprise the most important issues,
and will undertake specific initiatives to address them. By addressing these issues, we strive for the sustained development of society and the creation of sustainable corporate value.

Identified Materiality

Materiality

Dealing with climate change,
reducing environmental impacts• In carrying out business activities, we implement load reduction initiatives in the following
environmental domains, including climate change, energy use, and pollutant emissions reduction• Set mitigation targets and take action in response to climate change• Preserve biodiversity• Recycle and reuse water• Reduce energy usage• Reduce greenhouse gas emissions and other initiatives for atmospheric emissions• Reduce industrial waste and pollutants emissions• Procure environmentally friendly resources, improve resource efficiency• Pollution prevention and chemical management

Technological development capabilities• Work to further improve ISK Group’s technological development capabilities, which represent oneof the Group’s strengths, through advancement of core technologies and the pursuit ofinnovation

Supply chain management• Address the environmental, social, and human rights-related issues in the supply chain andimplement fair and impartial procurement• Preserve the quality, cost, and supply stability in order to meet the market need

Occupational health and safety,
operation safety and disaster prevention• Ensure the health and safety of labors at workplace, and make sure operation safety and disasterprevention

Diversity and inclusion• Create workplaces that value the individual, foster mutual respect, and empower all employees,
regardless of gender, age, disability, nationality, lifestyle, work backgrounds, values, or otherattributes• Accommodate individual differences in experience, ability, and thinking, and facilitate skills
development and improvement to help all employees achieve maximum performance

BCP, risk management• Ensure the thoroughness of risk management and BCP (Business Continuity Plan) in order tominimize the impact from external risks

Issue Importance Evaluation

Very
high

Stable supply of crops
Contribution to deepening IPM
for biorational products
Contribution to healthcare
Contribution to a smart society

Dealing with climate change, reducing environmental impacts
Technological development capabilities
Supply chain management
Occupational health and safety, operation safety and disaster prevention
Diversity and inclusion
BCP, risk management
Corporate governance
Reforming workstyles by pursuing digital transformation (DX)and streamlining operations

Level ofimportance tostakeholders

Information security

Addressing
the 8 most important
issues of
the 16 identified topics

Quality

Coexistence withlocal communities

Stakeholder engagement

Very
high

High
Level of importance to ISKProcess for Identifying Materiality and Establishing KPIs
STEP 1

STEP 2

STEP 3

STEP 4

Issue identification

Prioritization

Materiality identification

Establishment of KPIs

• In accordance with GRI, SASB,
and other guidelines,
as well as the ISK Group’s
long-term vision and other resources,
we identified issues that deserve tobe emphasized.

• We carefully reviewed
the importance of issues
for ISK based on their alignment withour corporate purpose and other policies,
and the importance of issues for stakeholders
based on industry issues, key ESG themes,
and other resources.

Outline• Outside experts reviewed
the process and verified its suitability.

• We reviewed materiality-related
indicators highlighted by
ESG evaluation organizations.

Corporate governance• Finalized following deliberation by
the Executive Management Committee
and approval by the Board of Directors.

• We then established KPIs after
conducting interviews with businessdepartments and other entities
as necessary.

• Strengthen governance to improve organizational operation and performance• Ensure compliance and corporate ethics, foster operational transparency

Reforming workstyles by pursuing digitaltransformation (DX) and streamlining operations• Pursue DX to streamline operations and implement work style reform

25

Materiality

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Eight Most Important Issues and KPIs
Materiality

Dealing with climate change,
reducing environmental
impacts

OutlineKPI

FY2022
Target/FY

Achievements

FY2023

Scope

Target updated/FY

Set mitigation targets and take action in response to climate change

CO2 emission reduction rate (Scope 1+2, vs. FY2019)30% or more/2030

1.7% increase(FY2019 levels)

30% or more/2030

ISK Group

Reduce energy usage

Reduction in energy intensity

1% or more/Every year

0.3% decrease(Year-on-year)

1% or more/Every year

Japan, consolidated

Reduce industrial waste and pollutants emissions

Industrial waste emission reduction rate (vs. FY2019)50% or more/2030

22.1% reduction(FY2019 levels)

50% or more/2030

ISK

Pollution prevention and chemical management

Adherence to voluntary control standard values that are stricter thanenvironmental laws (wastewater, waste gas)

Continue/2030

Achieved

Continuing/2023

Japan, consolidated

Technological development
capabilities

Work to further improve ISK Group’s technological development capabilities, which represent one of the Group’s strengths, through advance- Creation of new products and technologies in each business segment
ment of core technologies and the pursuit of innovation

Establish on a perdepartment basis/2023

Working according to the Establish on perplans
department basis/2023

Japan, consolidated

Supply chain management

Address the environmental, social, and human rights-related issues in Establishment of ISK Group Policy on Procurement and guidelines
the supply chain and implement fair and impartial procurement
governing procurement

Announcement/2023

ISK Group Policy on Procurement
has announced and guidelines Establish guidelines/2023
under review.

ISK Group

0 accidents/2023

Frequency rate: 0.56
Severity rate: 0.03

0 accidents/2023

ISK,
Fuji Titanium Industry

100%/2022
Continue/2030

100%100%, continuing/2030

ISK

75% or more/2022
80% or more/2030

81.9%

80% or more/2030

ISK

Create workplaces that value the individual, foster mutual respect, Female manager ratio
10% or more/2030
and empower all employees, regardless of gender, age, disability,
Mid-career hires as percentage of managers (average for last three years) 30% or more/2022
nationality, lifestyle, work backgrounds, values, or other attributes

7.6%

10% or more/2030

ISK

29.3%

30% or more/2023

ISK

Accommodate individual differences in experience, ability, and think- Time spent in training and/or classes per employee
ing, and facilitate skills development and improvement to help all
Cost of training sessions and/or classes per employee
employees achieve maximum performance

24 hours

20 hours or more/2023

ISK

Frequency rate of worktime injuries, severity rate*

Occupational health and safety,
Ensure the health and safety of labors at workplace, and make sure
Percentage of employees undergoing health checkups and stress checks
operation safety and disaster
operation safety and disaster prevention
prevention
Paid leave acquisition rate

Diversity and inclusion

20 hours or more/2022

50,000 yen or more/2022 50,000 yen

50,000 yen or more/2023 ISK

BCP,risk management

Ensure the thoroughness of risk management and BCP (Business
Implemented through Corporate Risk Management Committee initiatives
Continuity Plan) in order to minimize the impact from external risks

Achieve plan/2023

Progressing according to
the plans

Achieve plan/2023

ISK Group

Corporate governance

Ensure compliance and corporate ethics, foster operational transparency

Participation in at least 1 compliance training session

100%, continuing/2022

100%

100%, continuing/2023

Japan, consolidated

Effective contribution to operational streamlining

3 or more/2022

3

3 or more/2023

ISK

DX certification

Acquire/2023

Progressing according to
the plans

Acquire/2023

ISK

Reforming workstyles by pursuing digital transformation (DX) Pursue DX to streamline operations and implement work style reformand streamlining operations

Frequency rate of worktime injuries: Number of employees injured or killed in occupational accidents per 1 million total working hours; indicates the frequency of occupational accidents.
Severity rate: Number of working days lost per 1 thousand total working hours; indicates the severity of occupational accidents.

26

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

• Revenue Trends for Inorganic Chemicals BusinessInorganic Chemicals BusinessNet sales

Operating income

Billion yen

77.5

Titanium dioxide is the flagship product of our inorganic chemicals business. In addition to white pigmentused in paints, industrial products and other applications, we are global suppliers of an electronic

64.4

59.8

Billion yen

63.5

component material for ceramic electronic devices, an electronic component material for ceramicelectronic devices, and high-value-added titanium dioxide used as, among other things, such as in

5.3

4.5

automobiles, and as a pollution prevention catalyst.

1.8

-0.6

Social Issues and Environment

2021• We are tackling the challenge of developing materials intended for devices that will support the next-generation infrastructure

2022

Actual2023

2023

Medium-term

Forecast(FY)

Director of Inorganic Chemicals Sales &Marketing Headquarters

Masaki Shimojo

essential to a smart society adapted to an aging population, declining workforce and changing lifestyles.
• We continue contributing to better living environments by providing materials and solutions that lead to self-driving technology
and remote control technology.
• We are strengthening to develop our environmentally friendly product and to develop manufacturing processes that reduce
environmental impacts. (energy conservation, heat recovery/reuse, waste reduction, recycling)

Risks and Opportunities
Risks• Reduced earnings due to rising costs for energy andraw materials, such as titanium ores

Contributing to Devices Supporting Next-generation Infrastructure
EV (electric vehicles)

Smart glass

Copper particles(sintering material for use in power semiconductors bonding)

Organic solvent dispersion of TiO2
(highly refractive material)

Camera module

High-speed communication equipment

Opportunities
While continuing to monitor market trends, pass costs on to product prices
and increase the sales percentage for high-value-added products.
Also, including technological improvement,
diversify raw materials used to expand the range of options• Accidents and other problems due to aging production
facilities and equipment

Carry out preventative maintenance and study the appropriate
timing for replacing equipment and facilities• Drop in market price and ISK market share as a result of growthamong Chinese titanium dioxide manufacturers

Work towards increased and stable revenue by continuing to provide the market
with high-value-added products based on ISK’s unique technology

Strengths and Competitive Differentiation from Competitors• Our technological strength cultivated over many years, along with our meticulous customer service, allow us to stably bringhigh-quality products to market that meet customer needs.
• Our titanium dioxide business has held the top market share in Japan for many years. We are the only company in Japan with
manufacturing facilities for both sulfate and chloride processing, allowing us to provide a diverse range of products.

AiP
Battery• Super-weatherable titanium dioxide, black heat-shielding pigment, acicular white electro-conductive materials… We’ve been
venturing into a diverse range of applications with these unique product lineups that no other company offers.

AiP

LUSHADETM BLACK(super black light absorption material)

Acicular type titanium dioxide(high dielectric/low dielectric loss tangent material)

27

Overview by Business

About ISK

Strategies
In our inorganic chemicals business, one of the business strategies and initiatives we are pursuing is “increasing the sales ratio

products may have declined, their sales are steadily increasing, even with a softening global market.
In preparation for Vision 2030 Stage II, we are steadily pursuing development and marketing for new highly functional and high-Foundation for Value Creation

SDGs Goal 9

Build resilient infrastructure, promote inclusive and sustainable industrializationand foster innovation

Provide highly functional and high-value-added products which contribute to devices that support next-generation infrastructure

value-added products. Our target market is devices which support next-generation infrastructure through self-driving technology

The copper particles and organic solvent dispersion of TiO2 currently in development are new materials for use in EV (electricand remote control technology, and we are planning to introduce a succession of products to that market, including a highlyvehicle) power semiconductor bonding, AR (augmented reality) device sensors and other applications. Through these, we will

refractive material for smart glass, LUSHADE

offer new possibilities in the areas of the environment, labor efficiency, education, communication and advanced information

BLACK (super black light absorption material) for camera modules and copperTM

particles for use in power semiconductor bonding. During the Stage II period, our aim is to achieve sales of several billion yen forthese new materials collectively.

Corporate Data

Environmentally and Socially Beneficial Materials

for highly functional, high-value-added products.” However, in Stage I, we did not reach our target sales ratios for each fiscal year.
This was due to an increase in sales of general products, and, while the sales ratio for highly functional and high-value-added

Value Creation Strategies

communications.
Bonding Material for Use in Power Semiconductors(copper particles)

Highly Refractive Material(organic solvent dispersion of TiO2)

Sales Ratio for Highly Functional, High-value-Added Products
Net sales

Ratio for highly functional, high-value-added products

Billion yen%

33

Achievements andforecast

Medium-term

37

40.4

16.3

19.4

2020

2021

ActualApplied to glass
Use: AR device sensors, optical filter/anti-reflection coating

34
32

33.4

Powder
Paste
Use: High heat-resistant bonding for power semiconductors used in EVs

40

Actual32

30
General products

43.5

20.8

2022
ActualSDGs Goal 13

Take urgent action to combat climate change and its impacts

Supply new heat storage materials which contribute to energy conservation and CO2 reduction

54.3

Our HASClayTM high-performance heat storage material can
23.1

2023

Forecast

Highly functional,
high-value-added products

more than twice the heat storage capacity of conventional
materials. Additionally, there is no need for heat insulation(FY)[Overview of Adsorption Thermal Storage System]

store low-temperature waste heat of around 100°C and has

when storing heat for a long period of time. Because the heatstorage tank can be transported so that the waste heat canbe used in another location, it is expected that this material
will be used as a “heat battery” which contributes to effectiveenergy utilization and CO2 reduction.
High-performance heat storage material(HASClayTM)
Use: Effective utilization of waste heat fromplants for heating, pool heating, etc.

Air + moisture
Adsorption thermal
storage tank

OUT

Heat storage material

High-temperature
low-humidity air
OUT(Heat)Heat storage material

Desorption (adsorption material)

Adsorption (adsorption material)

IN

IN

High-temperature air

Heat(waste heat)

Air + moisture[Charging][Discharging]

Humid air28

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

• Revenue Trends for Organic Chemicals Business

Organic Chemicals Business (Agrochemicals)

Net sales

Operating income

Billion yen

fungicides, and insecticides. As the industry pioneer that first introduced chemical pesticide technology,

Billion yen

58.7
11.2

48.2

we’re currently one of the leading exporters by value in Japan. We’ve made solid progress in gaining a

9.0

foothold in the European and U.S. markets.

6.6

Social Issues and Environment

2021• There is a need for agrochemicals in order to produce food for the world’s ever-growing population.

66.7

63.7

In our agrochemicals business, we manufacture and distribute agrochemicals such as herbicides,

9.0

2023

2023

Medium-term

Forecast

2022

ActualDirector of Biosciences Business
Headquarters(FY)

Mikiya Horie• We provide safe agrochemicals which satisfy the increasing physical and mental health-consciousness that is being seen worldwide.
• We incorporate environmental considerations for the sake of protecting biodiversity.
• We provide agrochemicals adapted to the climate change-induced changes in the crop production environment.

Global Agrochemical Market(Agbio Crop 2022)

Billion US $14.3

Sales of agrochemicals have steadily increased overthe past five years due to such factors as expanding
acreage for crops like soybean, with particularly notable
increases in Brazil, India and China.

Risks and Opportunities
Risks

Opportunities• Delay in, or failure to achieve,
product approval orregistration

Take proper approach to countries’ registration agencies and authorities; assess other companies’
agrochemicals registration and survey their registration status; secure personnel with expertisein highly specialized fields, ensure handover of registration know-how• Revised and stricter laws
and regulations

Appropriately gather information relating to laws and regulations and registration requirements• New entries andintensifying competition

Lower production costs to strengthen competitiveness; develop new molecule andmixed formulations that will enable ISK to stand out in the agrochemicals market• Crop injury
by agrochemical products

Strengthen safety confirmation by performing growing tests in fields; promote anddisseminate appropriate methods for using agrochemical products

Strengths and Competitive Differentiation from Competitors• Expand market share and improve profitability by launching new formulations and mixed formulations of existing products andby lowering production costs• Ensure a stable supply and cost reduction by having flexibility in procuring active ingredients through integrated manufacturingthat encompasses key raw materials or intermediates and active ingredients, purchasing of active ingredients from othercompanies, and joint procurement with other companies• Leverage ISK manufacturing technology to actively sell organic intermediate products• Shorten the registration schedule (initial registration, label expansion, change of manufacturing site, etc.)• Add other species of blue flowering plants (blue dahlia, large-flowered blue phalaenopsis)

29

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Strategies
Reducing the Manufacturing Cost of Next-Generation Flagship Agrochemicals and Increasing Demand

Agrochemical Products Developed with Food Problems and Biodiversity in Mind
SDGs Goal 2

Tiafenacil is an herbicide jointly developed by ISK and FarmHannong Co., Ltd. (Korea) which is being sold worldwide. Thus far
it has been released to market in South Korea, the U.S, Canada, Brazil and various other countries and has been well received
by farmers. Since it quickly decomposes and becomes ineffective in the soil, it is used for weeding before crops are planted.
This sort of usage is called “burndown.” Compared to previous burndown herbicides, this product stands out for its herbicidal
effect on a wide range of weed species. The size of the burndown herbicide market in the U.S. is approximately 200 billion yen,with inexpensive herbicides being used. Given that this product is inexpensive to manufacture, it was able to be introduced into
the U.S.’ large market for cheap herbicides as a functional and cost-competitive option. This is an example of how reducing
manufacturing costs led to increased demand. In addition to burndown, this product is also used as a withering agent.
Harvesting takes longer if there are leaves left on plants like potatoes and grains. Therefore, certain types of herbicides are used
to kill the above-ground parts of the crop to make harvesting more efficient. Such herbicides are known as “withering agents.”
Another notable feature of this product is that it exhibits a fast-acting herbicidal effect. This fast-acting effect makes it suited
for use as a withering agent. We are aiming to further expand sales of this product by widely marketing as a withering agent inaddition to being a burndown herbicide.

End hunger, achieve food security and improved nutrition and promote sustainable agriculture

Agrochemicals contribute to the stability of food production, which helps in achieving a society without hunger.
Agrochemicals contribute to the stability of food production, which helps inachieving a society without hunger. Farms with large cultivated areas and thesame crops cultivated over long periods of time are more likely to suffer major
damage from pests and diseases. By using agrochemicals, it is possible to control
pest and disease damage, thereby helping to ensure harvest yield and quality
which, in turn, helps ensure the people of the world are supplied with essential
food at a reasonable price.
In order to put an agrochemical on the market, it must be registered in accordance with the laws and regulations of eachcountry. If it cannot be shown, using various data, that it is safe for humans and the environment, that agrochemical will not beregistered. Thus, all of the agrochemicals we sell meet the safety standards of each country.

Agrochemical Sales Plan by Product• Americas steady expansion of upcoming flagship agrochemical products• Continued, strong performance of flagship fungicides
643

619
151
472

552

151

Others98

Next-generation
flagship products

76
68

101

Providing agrochemical products that are developed with biodiversity in mind.

81

Flonicamid

example, we sell the agrochemical fluazinam, which is a highly
Principal Next-Generation Flagship Products

active fungicide used to control various diseases in a wide

14

range of crops. It is not easily taken in by the plant body, has

41
119

72

88

127

25

Cyazofamid

37
87

85
174
99

109

22
161

Fluazinam

4
11

23

29

33

25

2021

2022

2023

2023

Nicosulfuron
(FY)

11

20
16

27

Medium-term

Forecast

Tiafenacil

21

Cyclaniliprole

30

Tolpyralate

2021 2022 2023 2023
Medium-term Predicted

ActualProtect, restore and promote sustainable use of terrestrial ecosystems, sustainably
manage forests, combat desertification, and halt and reverse land degradation andhalt biodiversity loss

The ISK Group sells a variety of agrochemical products. For

147

137

SDGs Goal 15

excellent residual effectiveness and rain resistance, and has astrong preventive effect.
Fluazinam has been confirmed to be highly safe for the natural
enemies of pests and for beneficial organisms. It is used with a variety of crops in a wide range of areas, including to control
soybean Sclerotinia stem rot in Brazil, diseases in turfs in the U.S., and potato late blight and wheat snow mold in Japan. This
agent is difficult for fungi to develop resistance to and is effective against fungi which have developed resistance to other(FY)

fungicides.

30

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

• Revenue Trends for Organic Chemicals Business(Healthcare)Organic Chemicals Business (Healthcare)
The vision for our healthcare business is to sustainably contribute to people’s quality of life through our fine chemical tech-

Net sales
1,784Million yen

nologies and marketing capabilities, and, by capitalizing on the technological strengths which we have cultivated in ourorganic chemicals business to manufacture and sell animal health products and to perform contract manufacturing of active
pharmaceutical ingredients, we are protecting the health of people and animals and contributing to the realization of a fulfill-

1,089

ing life both physically and mentally. We bring to market products that address unmet latent needs in human and veterinary
medicine, and, moving forward, will promote global expansion not only in Japan but also mainly in Europe and the U.S.

Social Issues and Environment

Director of Healthcare Business
Headquarters

2021

2022

(FY)

Hiroyuki Watanabe

As the global pet-related market expands, medical need for companion animals (CA) is also
expanding. However, the supply of therapeutic agents is not sufficient to meet this need.

Markets

SDGs Goal 3

Ensure healthy lives and promote well-being for all at all ages

Use healthcare business to sustainably contribute to improvement in people’s quality of life.

• Animal health products markets in Japan (2021) 123.7 billion yen*1 [including production animals (PA) and CA]• Health products for CA markets in Japan (2021) About 50 billion yen*2

Strategies• Health products for CA markets worldwide (2021) About 2 trillion yen*2• Goal: Global expansion of animal health products*1 Source: Ministry of Agriculture, Forestry and Fisheries “Annual Report of Sales Amount and Sales Volume of Veterinary drugs, Quasi-drugs,
Medical Devices and Regenerative Medicine Products (2021)”*2 Based on in-house research<Management resources>

Risks and Opportunities
Risks

Opportunities• The pharmaceutical regulatory data protection period(i.e., the re-examination period) *,which guarantees exclusive sales, is extremely short

Improve formulations and dosage forms and expand
target diseases in order to strengthen the intellectual
property protection network and diversify opportunities for use*Japan = six years after approval; U.S. = five years after approval; Europe = ten years after approval• The more appealing the product, the greater
the risk of competitors entering the market

Focus on technological development and marketing which leverages ISK assets and strengths to maximize added value.
Accurately tie research and development results with the needs of the end-user market in order to create value

Create business opportunities by matching excellent
existing seed ideas with the plethora of unmet needsin the veterinary medicine market

Strengths and Competitive Differentiation from Competitors• Business development that integrate the various functions of R&D, marketing, and pharmaceutical regulatory affairs management• Access to a global market centered on the U.S. and Europe• Able to develop related products for product lifecycle management; a wealth of seed ideas for new product development• Allocate human resources to ensure effective business development via a synergistic merger of R&D strengths with sales functions.
• Utilize U.S. and European business network-based product development to quickly supply each market.
• Build global alliances with highly specialized partner companies, such as CMOs/CROs and intellectual services companies.
• Utilize our expertise in pharmaceutical manufacturing that conforms to global cGMP (current Good Manufacturing Practices; U.S.
pharmaceutical manufacturing quality standards) to build and expand manufacturing collaborations with CMOs in each market.
<Current>
PANOQUELL™-CA1 obtained conditional approval from the FDA in November 2022 as an anti-pancreatitis drug for dogs. We put
this drug on the U.S. market in May 2023 through Ceva Animal Health, LLC, a leading animal drug manufacturer.
<Future>While we have multiple development focuses for animal health products, human pharmaceuticals products and medical devices which
we are pursuing commercialization of, our first focus is on developing and expanding the global market for PANOQUELL™-CA1.

31

Stakeholder Engagement

Ensuring We Continue to Earn Society’s Trust

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Communication with Shareholders and Investors
We will help realize a sustainable society through our business activities while building trust-based relationships with society by

It is important that ISK Group continue to earn society’s trust so that we can grow in a sustained manner.

communicating with all stakeholders, not just customers, suppliers, and employees.

We established the Multi-Stakeholder Policy on February 1, 2023 to build an even better trust-based

We’ve put in place structures to promote dialog with shareholders, and we are dedicated to providing continued stable return for

relationship with our stakeholders.

shareholders.

We place importance on giving back to our employees and giving consideration to our business partners
from the perspective of both contributing to the realization of a sustainable society and increasing
corporate value through our business. Therefore, we have put into place the following policies to achievethis.

1. We have an IR Committee, which reports directly to the president, as an entity charged with formulating the policies andstrategies that guide our IR activities, studying how information should be disclosed, and implementing associated measures.
2. We’ve appointed a director in charge of public relations to oversee issues related to constructive dialog with shareholders andinvestors.

Trust-Based Relationships with Employees

3. We hold financial result briefings twice a year in spring and fall to provide a forum for communication between top management

We will concentrate on maximizing added value through sustainable growth and productivity improvement by investingand institutional investors. During individual interviews with institutional investors, IR officers engage in lively discussions on

management resources in growth areas, and by developing and boosting our employees’ skills.

growth strategies for each of our businesses, shareholder returns, and other topics. Web-based briefings have replaced face-

We strive to continuously return the earnings and results we generate to our employees by increasing salaries at appropriate times

to-face briefings and become standard since the pandemic, making it possible to flexibly respond to interviews.

and with appropriate methods based on the social conditions and the company’s situation, creating an inspiring, fulfilling work
No. of participants in company orientations(including online participants since FY2020)

environment, and actively nurturing human resources who are innovative and can provide value to society.
Trends in institutional investor IR coverage

Collaboration with Business Partners
We have endorsed the aims of the “the council on promoting
partnership building for cultivating the future” promoted by theGovernment of Japan, The Small and Medium Enterprise Agency,
and other organizations, and have released a Declaration on

FY2018FY2019FY2020

FY2021

FY2022FY2018FY2019FY2020

FY2021

Domestic investors

77

48

39

71

51

May

42

36

call off35

FY202235

Overseas investors

14

19

9

19

21

November

39

32

22

38

34

Total

91

67

48

90

72

Total

81

68

22

73

69

4. We work to provide the materials we disclose in both Japanese and English

Building Partnerships.

to make it convenient for shareholders and investors who don’t speak Japa-

We will strive to ensure all our suppliers and business partners

nese to learn about our operations. Shareholders’ meeting convocations are

related to our products and services understand and comply withtranslated into English in their entirety, including business reports. Those

our initiatives, and we aim to build new partnerships by promoting

materials are made available on our website, the website of the Tokyo Stockcooperation, coexistence, and co-prosperity with all business partners. Thus, we will fulfill our corporate philosophy of contributing

Exchange, and the electronic voting platform used by institutional investors.

to a better society, life and environment through chemical technologies; respecting shareholders, customers, suppliers, local

System for electronic provision of materials for General Meetings of Share-

communities and employees; and abiding by laws and regulations and maintaining transparency in business activities.

holders starting with our 2023 shareholders’ meeting. Related materials areprovided electronically and in print earlier than legally required.

Declaration of Partnership Building (in Japanese)
https://www.iskweb.co.jp/cms_QvjyqMOahIEeY67QUD5y4guNNOnpblYc/wp-content/uploads/2023/01/20221227_f4899c59931190576547cfb6edae0e04.pdf

5. We host an annual roundtable with major shareholders with voting rights

2023 ordinary general meeting of shareholders

about topics such as our business performance and Corporate Governanceinitiatives. In addition to reporting views and information from those events to the Board of Directors and sharing them withdirectors and members of the audit and supervisory board, we use them to improve our governance.

32

Stakeholder Engagement

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Communication with the Local Community
Safety and Disaster Preparedness
Yokkaichi Plant

Central Research InstituteIn preparation for emergencies, Yokkaichi Plant conducts annual joint drills

Comprehensive disaster drills are held for all personnel every September

with the plant’s Self Disaster Team and the local fire department, which are

to raise awareness of disaster preparedness. After the drill, the fireopen to the local residents.

department provides us with feedback so we can conduct more effective

In fiscal 2020 and 2021, due to the impact of COVID-19, we cancelled thedrills. In fiscal 2022, we erected a smoke house to simulate the fear of

joint training with the fire department and the public was, and conductedsmoke and experience evacuation in the event of fire with the cooperation

emergency drills in-house only. But in fiscal 2022, for the first time inof the fire department, and participants learned how to protect themselvesfrom smoke.

three years, we restarted joint drills with the local fire department. We work
to improve our level of disaster preparedness each year by adding newelements (such as the use of drones) to the drills.

Joint drill by ISK’s Self Disaster Team and the local fire
department

Evacuation drill using a smoke experience house

Community Cooperation Activities
Yokkaichi Plant

Central Research Institute

We hold regular plant tours twice a year and special classes for students from local junior high school to build further trust with the

Employees volunteer to clean up the surrounding area and assist the community association where our dormitory is located to actively

local community. In terms of social contribution activities, we voluntarily carry out clean-up activities around the plant, and we also placecommunicate with the local community and promote understanding for our business activities.

importance on local events and participate in various community-organized events.
Family Day 2022 Event

Blood Drives

Japanese Red Cross Society Silver Achievement Award
presentation

Our Head Office in Osaka and the Central Research Institute hold

The Central Research Institute organized a Family Day for its employees andtwo blood drives each year, while the Yokkaichi Plant holds three

their families. The event offered a social gathering with business managers,

blood drives each year. Between the three of them, the sites attract

workplace tours, a lecture on agrochemicals, and chemical experimenta total of about 100 donors for each drive. The blood drives haveworkshops. The day was a valuable opportunity for participants to see theirearned ISK letters of gratitude from the governor and from the local

family members at work, and the event was a great success. The organizers

branch of the Japanese Red Cross Society. In 2023, the Yokkaichi

were confident they especially conveyed the joys of chemistry to the children,

Plant received a Silver Achievement Award from the Society’s Mie

who enthusiastically engaged in the experiments. After having their families

Prefecture Branch, making the site one of just 5 corporations inwatch them at work, the employees are more motivated and more engaged

the prefecture to be recognized with the honor and highlighting thewith their work.

Experiments to experience chemical reactions

extent of its contribution. ISK will continue to hold blood drives aspart of its community service program.

33

Board of Directors and Executive Officers

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Term of office as Director
Number of shares held (as of March 31, 2023)
Attendance at Board of Directors meetings (from June 28, 2022 to June 27, 2023)
Attendance at Audit & Supervisory Board meetings (from June 28, 2022 to June 27, 2023)

Board of Directors (As of June 30, 2023)
Kenichi Tanaka

Hideo Takahashi

Executive Director,
Chairman

Executive Director
President & Chief Executive Officer
Chief Compliance Officer (CCO)

9 years
25,727
20/20 (100%)

Hiroshi Okubo
Director
Managing Executive Officer
Director of Corporate Administration &Planning Headquarters

4 years
14,627
20/20 (100%)

Kiyomitsu Yoshida

Yasunobu Kawazoe

Director, Senior Managing
Executive Officer, in charge ofOrganic Chemicals BusinessDirector
Managing Executive Officer
Director of Finance & Accounting
Headquarters

5 years years
10,963
20/20 (100%)

1 year7,900
19/20 (95%)

Masaki Shimojo
Director
Managing Executive Officer,
Director of Inorganic Chemicals Sales &Marketing R&D Strategy Headquarters
Assistant Director of R&D Strategy Headquarters

4 years
20,814
20/20 (100%)

3 years
8,014
20/20 (100%)

Tatsuo Hanazawa

Satoshi Ando

Akemi Uchida

Outside Director

Outside Director

Outside Director

4 years
3,300
20/20 (100%)

3 years
1,600
19/20 (95%)

New appointment-

Audit & Supervisory Board Members (As of June 30, 2023)
Yoshihito Akiyama

Yoichi Kobayashi

Norihisa Kusumi

Yasuhiro Koike

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member

2 years
5,182
20/20 (100%)
12/12 (100%)

New appointment
10,600-

New appointment-

New appointment-

34

Board of Directors and Executive Officers

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Skills Matrix, Reasons for Appointment (at the 100th Ordinary General Meeting of Shareholders)Name
Position

Skills matrix
Business
Management foundation
foundation

VisionCorporate
Human
Financialmanagement, Environment, R&D,
Global Legal, risk
accounting
management society production business management resource
strategy
strategy

Reasons for appointment

Director
Kenichi Tanaka
Executive Director, Chairman✓✓

Hideo Takahashi
Executive Director
President & Chief Executive Officer
Chief Compliance Officer (CCO)

✓

✓

✓

Hiroshi Okubo
Director
Managing Executive Officer
Director of Corporate Administration &Planning Headquarters

✓

✓

✓

Kiyomitsu Yoshida
Director
Senior Managing Executive Officer
In charge of Organic Chemicals Business

✓

✓

✓

Yasunobu Kawazoe
Director
Managing Executive Officer
Director of Finance & Accounting Headquarters
Masaki Shimojo
Director
Managing Executive Officer, Director of Inorganic
Chemicals Sales & Marketing
R&D Strategy Headquarters
Assistant Director of R&D Strategy Headquarters

✓

✓

✓

✓

Tatsuo Hanazawa
Outside Director

✓

✓

✓

✓

✓

✓

Mr. Kawazoe has carried out important operational responsibilities and demonstrated appropriate decision-making and supervision in the areas of finance, accounting, and governance based on expertise in finance andaccounting that he accumulated over many years at financial institutions, along with his extensive experience and track record. He has also managed corporate communications activities. He was appointed with the
expectation that he would use this experience and expertise in the planning of business strategy and other policies, deliberations, and operational oversight by the Board of Directors.

Mr. Shimojo has worked primarily in sales, research, product development, and manufacturing in ISK’s inorganic chemicals segment. He has carried out important operational responsibilities and demonstrated appropriate
decision-making and supervision in the areas of R&D and domestic and international market expansion based on his extensive experience and track record. He was appointed with the expectation that he would use thisexperience and expertise in the planning of business strategy and other policies, deliberations, and operational oversight by the Board of Directors.

✓✓

Mr. Hanazawa offers appropriate advice and oversight, especially in the areas of domestic and international market expansion and the environment, based on his domestic and international experience, particularly inagricultural policy, and his experience in environmental matters. He also contributes actively as the chairperson of the Compensation Committee and as a member of the Personnel Committee and Evaluation Committee. He
was appointed with the expectation that he would fulfill his role as an outside director from an independent perspective.

✓✓

Mr. Ando draws on his highly specialized knowledge as an attorney and on his extensive experience and expertise in corporate law to offer appropriate advice and oversight of the company’s management from an objective
and legal perspective in the areas of law, risk management, finance, and accounting. He also contributes actively as a member of the company’s Compensation Committee, Personnel Committee, and Evaluation Committee. He
was appointed with the expectation that he would fulfill his role as an outside director from an independent perspective.

✓

✓

✓

✓

Mr. Okubo has worked in the production, environmental, and safety and health departments at our plant, as well as working in management at an affiliate. He is currently Director of Corporate Administration &Planning Headquarters, where he is in charge of furthering human rights due diligence and DX.
He was appointed with the expectation that he would use this experience and expertise in the planning of business strategy and other policies, deliberations, and operational oversight by the Board of Directors.
Mr. Yoshida has worked primarily in areas such as sales, R&D, and research institute operations in ISK’s organic chemicals segment. He has carried out important operational responsibilities and demonstrated
appropriate decision-making and supervision in the company’s management based on his extensive experience and track record. He has been head of ISK’s organic chemicals segment since June 2021. He wasappointed with the expectation that he would lead the planning of business strategy and other policies, deliberations, and oversight of operations in both bioscience and healthcare.

✓

Satoshi Ando
Outside Director
Akemi Uchida
Outside Director

Mr. Takahashi became Executive Director in June 2021 after working in research, product development, and sales and serving as plant director and director of the R&D Strategy Headquarters. Since his appointment, he has carried out important
operational responsibilities and demonstrated appropriate decision-making and supervision in the company’s management based on his extensive experience and track record.
He was appointed Executive Director with the expectation that he would be a driving force in the company’s management through his experience, track record, and leadership towards realizing the Vision 2030 long-term vision.

✓

✓

✓

Mr. Tanaka has exhibited strong leadership since becoming Executive Director in 2015. In addition to formulating medium-term business plans twice and Vision 2030, our long-term vision for 2030 which serves as
the basis for the current medium-term business plan, and managing the entire ISK Group in a precise and efficient manner, he has focused on increasing the effectiveness of the Board of Directors and overseeing
the company’s operations since becoming Executive Director Chairman in June 2021.
He was appointed because of his knowledge in the external environment in which the ISK Group operates and in corporate governance.

✓✓

Ms. Uchida has a wealth of experience in corporate administration and planning, human resources, risk management, finance, and administrative accounting, and has worked as a director of global companies developing, manufacturing,and selling in fields such as pressed car components and refrigeration devices. She was appointed with the expectation that she would support ISK’s management through an outside perspective of objectivity and impartiality.

✓

Mr. Akiyama has worked in administration and sales at ISK and has served as a director and Audit & Supervisory Board member at affiliates in Japan and overseas. He was appointed with the expectation that he would use
this experience and expertise in carrying out appropriate auditing and supervision of ISK’s business in an objective manner.

Audit & Supervisory Board Members
Yoshihito Akiyama
Audit & Supervisory Board Member✓

Yoichi Kobayashi
Audit & Supervisory Board Member
Norihisa Kusumi
Outside Audit & Supervisory Board Member
Yasuhiro Koike
Outside Audit & Supervisory Board Member

✓

✓

✓

✓

✓
✓
✓

Mr. Kobayashi’s experience includes working in organic chemicals and legal at ISK and acting as a director at an overseas affiliate. He was appointed with the expectation that he would use this experience and expertise incarrying out appropriate auditing and supervision of ISK’s business in an objective manner.

✓✓

Mr. Kusumi is well versed in corporate management, having amassed a wealth of knowledge in his many years, including as a director, at financial institutions. He was appointed with the expectation that he would audit ISK’s
business operations from an independent, fair standpoint.
Mr. Koike has amassed expertise and experience through his work as a lawyer, as well as significant knowledge about managing companies. He was appointed with the expectation that he would audit ISK’s business
operations from an independent, fair standpoint.

35

Interview with Newly Appointed Outside Officer

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Dataoccurring but at the expense of any dynamic freedom in conducting corporate activity. Of course, you need to create systems which willhead off potential scandals, but I feel that an important consideration is the sincerity with which problems are addressed when they dooccur. Getting this wrong will impact a company’s fortunes.
To ensure corporate longevity, I believe it is important to reduce these sorts of negative risks as much as possible and, when the occasion
arises during discussions among the Board of Directors meeting, I would like to respond to such risks by stopping whatever needs to be

Risk Management
and Diversity

stopped and promoting whatever needs to be promoted.
Diversity
I am ISK’s first female director, but that does not mean I think we should just go out and get a bunch of female employees for whateverreason. This is because I believe diversity means creating an environment where it is considered normal to have all sorts of different
people with all sorts of different characteristics, including young and old, men and women, LGBTQ, different nationalities, etc.
Why do we even focus on diversity in the first place? Because we want to grow our business, plain and simple. When we consider

Outside Director

Japanese steadily declining working population, and when we think about it from a global business perspective, does it seem like a good

Akemi Uchidaidea to employ only men, only Japanese? In order to expand our business around the world, is it not essential that we incorporate morediverse ways of thinking? I also feel it is important that we give attention to those who are underrepresented.
Nearly all of my corporate life has been a series of firsts as a minority member of a company: the first female manager, the first executiveor the first director who has transferred, etc. Because minorities are sometimes the only ones who are different and have different
opinions to everyone else, they must always be able to explain and persuade others of their view.

CareerNo doubt this is an experience commonly encountered by employees who are posted overseas. Views which are taken for granted in yourI have been involved with corporate planning and management strategy for a long time and, in the course of that, have not only worked

own country may be treated as incomprehensible by those around you while you are posted overseas. Hence, you will regularly need to

on strategy and numbers but also risk management and human resources strategy from a management perspective. In addition, I

explain and persuade others of your views. Personally, I have those sorts of experiences even within my own country. I have found thishave experience with corporate acquisition, both in Japan and overseas, building internal control systems, dealing with scandals andsort of minority experience to be useful when pursuing business globally, capitalizing on it in the course of operations following acquisition

conducting compliance activities. In particular, with regard to risk management, I have been involved with the creation, and subsequentof an American company.

operation, of systems and mechanisms which enable major risks to be addressed properly.

I feel that ISK already has a diversity-friendly foundation in place; so, I would like to focus first on increasing opportunities for meeting

The benefit of all this for me was that, at a young age, I was able to be involved in both offensive and defensive aspects of corporate

and dialoging with a variety of different people.

strategy creation and risk management at the same time, giving me a real sense of what management itself is like.
New Business
Risk Management

At the company I was with most recently, one of the things I was working on as a corporate officer was branding for IT-related equipment.

The most important part of risk management, I believe, is corporate culture.

We had a keyboard with advanced functionality aimed at specialists, namely programmers and researchers, and, although it was a niche

Although I have only just become an outside director for ISK, my first impression has been that, with regard to integrity, which is of utmost

brand, we were attempting to increase awareness among general users about the advantages of the keyboard’s functions.

importance in risk management, all of the directors at ISK, starting with Chairman Tanaka and President Takahashi, demonstrate great

I believe that pursuing new business is an important part of management. I also feel that there is something appealing about creating

integrity in how they handle matters. A substantial range of information is reported to the Board of Directors meeting, which both insidesomething new. Although the business which ISK is involved with differs from that which I was directly involved with previously, I am

and outside directors thoroughly discuss through a free and open exchange of opinions.

interested in digging deeper into problems in marketing. I am keen to put my B to C experience to use in whatever form.

When developing systems to prevent scandals, accidents and other such situations, an overly strict system will prevent problems from36

Interview with Newly Appointed Outside Officer

Building an Effective System
Without Having a False Sense of
Security

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Cultivating a Culture
Inconducive to Compliance
Violations

Outside Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member

Norihisa Kusumi

Yasuhiro Koike

I joined The Daiwa Bank, Limited (now Resona Bank, Limited) in 1987, and after 33 years of working for banks and three years

I have been involved in ISK compliance-related duties as an outside attorney since 2011, including serving as a member of ISK’s

working for a bank-related company, I came to ISK thanks to a connection I have with this company.

Compliance Committee and serving a contact person for the ISK legal hotline. The first time I heard the word “compliance” wasI worked at five group banks and holding companies and gained first-hand experience working as a branch manager at a variety

around 1998 while working in connection with a finance-related organization. My appreciation of how important compliance isof locations in Osaka. At the head office, I worked in various departments, including corporate governance, human resources andfor companies came later as I worked on a criminal case involving food fraud. A quarter of a century has passed since then, and,auditing.

although the meaning of “compliance” may continue to change, its importance only grows.

My impression of ISK as an outsider was that it was a historically trailblazing company. I felt that it was a company possessed of

Up until now I have only ever observed ISK as an outsider, and my impression was that the majority of ISK’s various department

great foresight and the strong determination to stick to its convictions. It was also evident that, following the unfortunate incident

heads and managers were extremely polite, professional, smart, and not pushy with their opinions (although there were, of course,of the past, the company was pulling together as one to restore people’s trust in it.

exceptions). However, since my appointment as an audit and supervisory board member, I have been a witness to the honest and

The company I come from, Resona Holdings, Inc., is a company which has experienced a management crisis.

uncompromising exchange of opinions which takes place during important company meetings, particularly meetings of the Board“Stop thinking that banks are somehow special. You are part of the service industry!” That was the harsh change of mindset whichof Directors and Executive Management Committee. At these meetings I get a real sense of a culture of openness. I would like forthe outside officers appointed to rebuild corporate management brought with them following our acceptance of public funding.

this culture of openness to be pervasive company-wide.

In terms of control system, we transitioned to being a company with a nominating committee. This was done to strengthen andReports of harassment, such as power harassment, made via the ISK legal hotline and other reporting avenues available toensure the thoroughness of our corporate governance. I cannot forget the tension of the Board of Directors, the majority of which

employees are rare compared with other companies; however, that does not mean that there is no power harassment at ISK.

was made up of outside directors.

Power harassment can be factor which leads to employees committing, or being unable to prevent, serious compliance violations,

While many companies in recent years actively pursue corporate governance as an “offensive measure” essential for sustainable

such as when an employee commits an illegal act because his or her superior has imposed an unreasonable quota, or when an

growth and not simply as a means of preventing scandals, the key to achieving this is focusing on the development of systems

employee knows of an illegal activity taking place but is unable to tell anyone about it. Power harassment is something which canwhich are effective without having a false sense of security. I believe this requires, first, “fostering a healthy awareness of crisis,”happen all around us and which is often linked with serious compliance violations.

second, a “shared awareness down to the smallest structural detail,” and, third, a “organizational culture of openness in which

It is from that perspective that I want, first, to eliminate power harassment at ISK in order to facilitate the cultivation of a corporate

people don’t overlook changes.”

culture which is inconducive to compliance violations.

I will do my utmost to use my experience for the benefit of ISK.

37

Corporate Governance

About ISK

Basic Policy

Value Creation Strategies

Foundation for Value Creation

Corporate Data

• Corporate Governance Structure

In addition to making contributions to social development, protection of life and environmental preservation, ISK strives constantly
to respect our shareholders, customers, suppliers, local communities and employees while maintaining transparency in business

General Shareholders’ Meeting

activities abiding by laws and regulations.
In order to enhance corporate value by maintaining steady business growth and securing profitability, efforts to improve business

Selec
tio
dismisn andsaltransparency, reliability and corporate health are among management’s most important concerns, and we have worked hard tostrengthen Corporate Governance through business management and enhanced internal controls founded on compliance.

Corporate Governance Structure
Structurally, we operate as a company with an Audit & Supervisory Board. In addition, we set Executive Management Committee

SuperAvuisdit &or y B

Cooperationo a rdg
Cooperation

progress in important activities and projects. We have also introduced Executive Officer system with the aim of speeding up
decision-making related to business activities.

Cooperation

Furthermore, we have the committees listed on the following page in order to strengthen our Corporate Governance.
The supervision and solving of important issues related to climate change, digital transformation (DX), and human capital are

ditor/
dent Anutants
n
e
p
e
d
In c Accou
Publig

Auditing

Auditinunder the Board of Directors in order to speed up decision-making by the Board of Directors and efficiently monitor and assess

Selection anddismissal

ati
Consult

Board of Directors

Executive
Management
Committeendtion aSelec issal
dism

Opinioon

Auditinns

ittee
tion Comm
Compensa
ittee
el Comm
Personncarried out on a company-wide basis by the Sustainability Promotion Committee, which is chaired by the Executive Director andPresident.

Executive Director and President

Sustainability Promotion Committee Activities

Office o

The committee convened three times in fiscal 2022 and has
met twice so far in fiscal 2023. The following matters have been
deliberated on in the past year.

al AuditInter
auditninalg• Identifying priority risks in human rights measures• Expansion of scope of coverage of TCFD
In addition to existing initiatives [climate change, humanrights due diligence, health and productivity management, ourIntegrated Report, and digital transformation (DX)], we havebegun pursuing human capital-based management.

f Intern

Sustainability Promotion Committee

Ope(Execurating divisi
otive Of
ficers,ns
etc.)

Internal controls

ittee
Comm
e
c
n
lia
e
Comp
Committe
agement
n
a
M
k
is
R
Corporate
ittee
Comm
n
o
i
t
a
E va l u
ittee
Comm
s
n
io
t
Rela
Publicmmitteeotion Co
m
o
r
P
y
it
bil
Sustaina
ttees
ommi
C
r
e
h
Ot
sions
ol divi tc.)
r
t
n
o
c
,e
al
Intern ive Officerst(ExecuAdvice andguidance

Corporate
Lawyers

38

Corporate Governance

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Major Organizational Entities Related to Corporate GovernanceFunctionsBoard ofDirectors

Audit &
Supervisory
Board

Chairperson

Executive Director and President

Members

Directors

Functions

The Executive Management Committee under the Board of Directors in order to speed up decision-making
by the Board of Directors and efficiently monitor and assess progress in important activities and projects.

Times convened

13 times

Composition

Chairperson

Executive Director and President

Members

The chairperson may require the attendance of such personnel as deemednecessary.

FunctionsAudits the Board of Directors’ execution of its responsibilities, for example by attending Board of Directors and other importantbodies and visiting departments regularly to exchange views in accordance with an audit plan adopted by the Audit &Supervisory Board, at least half of whose membership consists of independent Outside Audit & Supervisory Board members.

Times convened

12 times

Composition

Compliance
Committee

18 times

Times convened
Composition

Executive
Management
Committee

The Board of Directors meets at least once a month to make decisions concerning important matters,
report on the progress of operational execution and action plan implementation, review performance, anddiscuss and make decisions about how to deal with related issues.

Chairperson

Inside Audit & Supervisory Board member

Members

Inside Audit & Supervisory Board members, independent Outside Audit &Supervisory Board members

Functions

Develops compliance structures based on the corporate philosophy and promotes corporate management
predicated on compliance, for example by conducting compliance education and responding to the issues
that come from its whistleblowing system.

Times convened

2 times
Chairperson (CCO)

Composition

Members

Executive Director and President
Directors, Audit & Supervisory Board Members, Headquarters Directors, Outside
lawyer, ISK Labor Union chairperson

Functions

Corporate Risk
Management
Committee

Assesses and manages corporate risk incurred in the course of operations, formulates countermeasures,and deals with risks that have manifested themselves

Times convened

2 timesComposition

Chairperson

Executive Director and President

Members

Inside Directors, Headquarters Directors

1 times

Times convened

Evaluation
Committee
Composition

Chairperson

Independent Outside Audit & Supervisory Board member

Members

Independent Outside Directors, Inside Audit & Supervisory Board members,
Independent Outside Audit & Supervisory Board members

Note: Five of seven positions on the committee (71%) are filled by independent Directors and Audit & Supervisory Board members.

Compensation
Committee

Functions

Offers views in response to requests for advice from the President, who is delegated by the Board of
Directors about concerning the remuneration of directors and executive officers.

Times convened

2 timesComposition

Chairperson

Independent Outside Director

Members

Independent Outside Directors, Independent Outside Audit & Supervisory Board
members

Note: All five positions on the committee (100%) are filled by independent officers.

Personnel
Committee

Functions

Responds to inquiries from the President, who is delegated by the Board of Directors about the appointmentof CEO’s successor and candidates for new Director or Audit & Supervisory Board member positions, asadvising the Board of Directors

Times convened

5 timesComposition

Chairperson

Independent Outside Director

Members

Independent Outside Directors, Independent Outside Audit & Supervisory Board
members

Note: All five positions on the committee (100%) are filled by independent Directors and Audit & Supervisory Board members.

Public Relations
Committee

FunctionsComposition

Directors of major subsidiaries
Functions

Analyzes and evaluates the overall effectiveness of the Board of Directors

Sustainability
Promotion
Committee

Ensures transparency by disclosing information to investors in a timely manner, ensures the timely
disclosure of information from Yokkaichi Plant to the local community, and promotes communication
between our stakeholders and the company
Chairperson

Executive Director and President

Members

Directors, Representatives of Branches, Headquarters Directors, and others

Functions

Undertakes initiatives to address climate change, human rights, diversity and inclusion, health andproductivity management, and DX

Times convened

3 timesComposition

Chairperson

Executive Director and President

Members

Inside Directors, Headquarters Directors, and others

39Corporate Governance

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Board of Directors Effectiveness Analysis, Evaluation, and Results
In view of the responsibilities for Boards of Directors stipulated in the Corporate Governance Code, and in order to improve theAwareness of Issues

functioning of the Board of Directors, an Evaluation Committee comprised of Outside Directors and Audit & Supervisory Board

Based on the promise we made to stakeholders in our Integrated Report, we have formulated a strategy to create value in the ISK

members has been established under ISK Board of Directors and in line with Board of Director evaluation-related rules. Every year

Group. To achieve the foundation for this, we are aware that we must continue to raise the viability of the entire Board of Directors.

since fiscal 2016, this committee has analyzed and evaluated the overall effectiveness of the Board of Directors and provided theTo this end, we must focus on issues where there has been low achievement for the past seven years: by strengthening theBoard with its results for deliberation and approval, after which an outline of those results is released publicly. In fiscal 2022, as

practical functions of the internal audit departments, and by strengthening collaboration between internal audit departments andwell, an evaluation of the Board of Directors’ overall effectiveness was carried out in accordance with this policy.

Directors and Audit & Supervisory Board members. The Board of Directors is looking earnestly at these issues and will continue
to ensure that higher evaluation of viability will lead to sustainable growth for the company and increase our medium- and long-

Method of Evaluation

term corporate value.

In fiscal 2022, the number of questions on the evaluation was changed to 38 from 39 in fiscal 2021. Regarding this change, thenumber of issues to deal with in fiscal 2022 decreased, and for one issue each question was divided into three items, with the

Future Initiatives

other 30 items being the same as the questions in fiscal 2021.

Based on the analysis and evaluation results of the overall Board of Directors effectiveness, the Board of Directors has identified

Again this year, we invited participants to freely offer their opinions of the Board of Directors’ overall effectiveness as part of theself-evaluation, and we increased the size of the space for participant comments to better solicit views from directors and Audit& Supervisory Board members.
The Evaluation Committee gave this questionnaire to all Directors and Audit & Supervisory Board members. The responses wereanalyzed and evaluated, after which all 9 Directors were interviewed. Based on the evaluation results report from Evaluation
Committee, our Board of Directors made a determination on the evaluation of the overall effectiveness of the Board of Directors
for fiscal 2022.
Analysis and Evaluation Results of Overall Board of Directors Effectiveness1. Areas, participants’ evaluations and factors(1) Comparing the fiscal 2021 and 2022 assessments of the areas, except for one area (composition of Board of Directors), fiscal
2022 achievement was higher in all seven areas. Of these, achievement level exceeded 90.0% in three areas.
(2) Average overall achievement for participants increased from 76.9% (90-99% for three participants, 80-89% for three, 7079% for two, and 60-69% for five) in fiscal 2021 to 84.4% (90-99% for four participants, 80-89% for six, and 70-79% forthree) in fiscal 2022. Analysis shows that the reason for this increase is that ISK pursued improvement and reform against abackground of higher expectations for boards of directors of companies; for example, satisfying the principles required by thePrime Market (both principles and supplementary principles), and management in line with the SDGs and ESG.
2. Ensuring the Board of Directors’ Overall Effectivenessthe following six priority initiatives for fiscal 2023, which it is proactively pursuing in order to achieve substantial improvement in
its overall effectiveness.
(1) An issue dealt with last year was how the Board of Directors and Executive Management Committee operate in terms of theirpositioning and roles. The Executive Management Committee is where important matters are first deliberated on, and here
directors and Audit & Supervisory Board members put forth opinions upon. This results submitted to the Board of Directors as
the final bill, then the Board of Directors discuss. At the Board of Directors, the Executive Management Committee members
explain their main points, point out effects on business performance and risks that have manifested themselves, make rational
decisions towards formulating a bill, and strive for prompt, effective decision-making. Meetings are also held with Outside
Directors in order to provide them with the comprehensive information they require on important matters.
(2) The ISK Group’s corporate purpose is “To continue contributing to better living environments through chemical technologies.”
This purpose is the starting point for our core competence of chemical technologies, around which we have our three strengths:
the ability to develop proprietary technologies; the ability to accommodate quality and environmental requirements; and theability to collaborate globally. These are supported by our management capabilities, which we leverage to expand our business.
To continue growing, we believe it is crucial to make maximum use of our ability to develop proprietary technologies tofoster new businesses and strengthen our management foundation. The Business Creation Committee, a cross-organizational
committee chaired by the President, studies matters intensively on a short-term basis. However, we will further speed up
processes towards the start of new businesses and new products by engaging in free and vigorous discussion.

While the goal is to ensure overall Board of Directors effectiveness, the results differed significantly for inside directors (90.0%)
and Evaluation Committee members (80.3%). This worked out to an overall average of 84.8%, almost the same as the averagefor participants of 84.4%. This indicates that the Board of Directors’ overall effectiveness is being assured.

40

Corporate Governance

About ISK

(3) We will work to substantively strengthen the functions of our internal audit departments and to ensure collaboration between

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Policy on Cross-Shareholdings

directors and members of the audit and supervisory board. We will also actively use the results of internal audits and other

ISK maintains an amount of cross-shareholdings deemed to build a smooth, stable, and ongoing relationship with business

investigations to inform advice and action so that directors can contribute not only in their own area of responsibility, but also topartners, in line with our business strategy. The status of cross-shareholdings is disclosed in our securities report. Other

management as a whole.

shareholdings have been appropriately reduced.

(4) To ensure active oversight of group companies’ operations, we will require regular reporting on risks and issues while working toensure sufficient oversight of directors’ performance of their responsibilities and contributions to overall management.
(5) In addition to pursuing their own studies, for example to acquire necessary knowledge so that they can fulfill their own roles andresponsibilities, directors must provide sufficient oversight of their peers’ performance of their responsibilities.
(6) We will address issues related to sustainability, ensuring that the state of their progress and matters requiring discussion are

Independence Criteria for Outside Directors
Independence criteria have been established for Outside Directors and Audit & Supervisory Board members. These appear on
the ISK website.

deliberated by the Sustainability Promotion Committee, communicated clearly to outside directors and members of the audit andsupervisory board, and included in the form of general information in the Integrated Report.

About ISK: Corporate Governancehttps://www.iskweb.co.jp/eng/company/governance.html• Evaluation Results of the Effectiveness of the Board of Directors (fiscal 2022)
FY2021

VIII. Ensuring the Board of
Directors’ Overall
Effectiveness

79.1%
84.8%
VII. Progress made on
issues from previous
year that required
improvement

82.1%
I. Composition ofBoard of Directors 82.1%
95.0%
90.0%
85.0%
80.0%
75.0%
70.0%
65.0%
60.0%
55.0%
50.0%

FY2022We are continually working to expand and improve our Group internal control systems in order to ensure the appropriateness of
subsidiary governance as well as the maintenance of compliance systems. For details, please refer to ISK Corporate Governance

II. Management by
Board of Directors

90.6%
94.0%

Report.

83.2%
91.2%

Corporate Governance Report (in Japanese)

III. Agenda of Board of
Directors

https://www.iskweb.co.jp/company/pdf/corporate_governance.pdf?

72.7%
80.5%

67.0%
75.8%

VI. Minutes of Board of
Directors’ meetings

Basic Policy for the Internal Control System

IV. System supporting 76.9%
Board of Directors 85.6%
V. Self-evaluation of 80.8%
each director
90.8%

41

Corporate Governance

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Remuneration of Directors
Policies for Determining Amount and Calculation of Each Director’s Compensation

Policies for Determining the Timing and Conditions of Remuneration andCompensation for ISK directors is stipulated in the Officer Compensation Regulations adopted by the Board of Directors andOther Compensation for Directors

comprises base remuneration, which is based on job position, and performance-based remuneration. Base remuneration is paid

The Officer Compensation Regulations adopted by the Board of Directors stipulate that base remuneration is calculated on aaccording to the Officer Compensation Regulations to directors and executive officers according to their role and position. Outsidemonthly basis and paid on the same day as employees’ monthly salaries, while performance-based remuneration and otherdirectors are paid only base remuneration due to their independent position in executing duties.

compensation is paid on the same day as employees’ summer bonus.

Policies for Determining the Nature of Performance Indicators and for Calculating the Amounts and• Remuneration of Directors in Fiscal 2022

Quantities of Performance-Based Remuneration and Other Compensation
The performance-based portion of directors’ remuneration (excluding Outside Directors) consists of annual performance-based

Director category

remuneration and long-term performance-based remuneration, which are structured to ensure both objectivity and a connection
with corporate performance in line with the Officer Compensation Regulations approved by the Board of Directors. Annual
performance-based remuneration is calculated based on a comprehensive consideration of the company’s performance, forexample in the form of net income attributable to owners of parent, which is the final result of corporate activities, together withindividual performance evaluation.
Policies for Determining Non-Monetary Remuneration and for Calculating Associated Amounts andQuantities
The non-monetary portion of directors’ remuneration (excluding Outside Directors) consists of transfer-restricted shares, and thetotal amount of monetary claims necessary to grant those shares to directors (excluding Outside Directors) may not exceed ¥90

Total remuneration by type (Million yen)
Total
PerformanceTransferremuneration
Base
based
restricted share(Million yen) remuneration
remuneration compensation

Applicable
Directors(Persons)

Directors(excluding Outside Directors)

237

179

51

6

7

Audit & Supervisory Board Members(excluding Outside Audit &Supervisory Board Members)

36

36

ー

ー

2

Outside Directors

55

55

ー

ー

5

Total

329

271

51

6

14

million per year (excluding the employee portion for officers who also serve as employees). In addition, the total number of normal
shares newly issued or disposed by the company may not exceed 95,000 per year. (However, if it becomes necessary to adjust
the total number of normal shares that are issued or disposed of as transfer-restricted shares, for example due to a stock split orreverse split involving normal shares, including any gratis allocations, the total number may be adjusted within reason.) The Boardof Directors is responsible for determining the specific timing and distribution of such awards to directors.
Relative Proportions of Remuneration and Other Compensation for Individual Directors
The relative proportions of base remuneration and performance-based remuneration and other compensation is determined by
the Board of Directors after consultation with the Executive Director and Chairman, taking into account advice sought from theCompensation Committee by the Executive Director and President, to whom the Board delegates the task of considering eachyear’s performance and other factors.

42

Risk Management

About ISK

Basic Policy

Value Creation Strategies

Foundation for Value Creation

Corporate Data

High Priority Risk

We in the ISK Group pursue risk management with the aim of preparing for various risks that could seriously impact the smooth
operation of our business, and in the event of an emergency, appropriately and swiftly addressing it in order not to harm thehealth, safety, or interests of stakeholders, restoring our business operations as soon as possible, protecting our corporate
resources, and minimizing the damage to our business.

Risk Management System
We have “risk management regulations” governing our basic policy on risk management and risk management system. We have

Major Risk

Explanation of Risk

Major Measures

Delay in, or failure
to achieve, productapproval orregistration(agrochemicals andanimal healthproducts)[Agrochemicals]
Risk of postponement, or abandonment, of launch of new
agrochemicals due to stricter agrochemical-related regulations• Take proper approach to countries’ registration agencies andauthorities• Assess other companies’ agrochemicals registration and survey
their registration status• Secure personnel with expertise in highly specialized fields,
ensure handover of registration know-how[Animal health products]
Although PANOQUELL™-CA1 has received conditional
approval from the FDA in the U.S., there is a risk that final
approval will be denied or postponed in the U.S., or thatapproval will be denied or postponed in Europe• Use consultants and other means to gather information on
trends related to the rules and approval of the regulatory
authorities• Team up with contract manufacturers or sales partners

Earthquake,tsunamiRisk of damage to facilities and products, suspension of
production and business operations, and human casualties if
the plant should suffer serious damage due to tsunami,liquefaction, or other factors resulting from a large-scale
earthquake• Provide aging facilities with seismic reinforcement• Step up product storage at multiple bases(at elevated locations,etc.)• Update business continuity plans• Get business interruption insurance to cover business
continuity expenses as a response after earthquake• Sign committed line of credit with financial institutions, which isapplied to earthquake disasters

Difficulty procuring
material, problem at
supplier

Risk of supply shortage for specific raw materials due tooperational accidents, political instability, or stricter
environmental regulations in producing regions or countries.
In the case of overseas toll manufacturers, risk of limitations
on procurement due to stricter regulations in the country or
their operational accidents• Purchase from various suppliers in multiple countries• Closely coordinate with subcontractors and suppliers• Perform rapid planning adjustment and proper inventory control• Expand the range of usable raw materials

Poor governance atgroup company

Risk of accounting fraud, bribery, or quality fraud because oflack of thorough control over overseas group companies• Organize and clearly stipulate the functions and roles of ThreeLines model (business divisions, back-office divisions, internal
audit division)• Make rules for group companies• Refine and publicize internal rules, strengthen internal auditing

Worker shortage,
non-transfer ofskills andtechniques

Risk of not securing human resources, or skills and techniques
not being passed from the experienced to younger employees,
due to fewer young people, an aging population, change in the
supply–demand balance of the labor market, and increased job
mobility• Hire employees through diverse channels• Compile know-how• Train human resources, and study ways to make work environment
more pleasant and expand employee support systems so as toretain employees

also established the Corporate Risk Management Committee, aimed at appropriately managing and preparing for various risks
surrounding our business. The Corporate Risk Management Committee is held twice a year, or whenever necessary, summarizing
risk assessments, selecting major risks with high priority, discussing plans for risk countermeasures, and confirming progress on
those countermeasures.
The Sustainability Promotion Committee’s jurisdiction includes priority issues (Materiality), climate change risk, and human rights
risk, for which it advances their measures in coordination with the Corporate Risk Management Committee.

Board of Directors
Report matters discussed to Board of Directors

Corporate Risk Management
Committee

Chaired by the President,
comprising Directors of each Headquarters

GM of each division

Comprising GM and presidents of subsidiaries

Risk Management Process
Plan

Do

Check

Act

Monitor progress on
implementation ofcountermeasures

Summary andimprovement plan

Implement risk countermeasures
Identify risks from a company-wide perspective
Assess risk impact and probability
Select major risks to address
Formulate countermeasure plans against risk
Allocate risks to each person/division in charge
Decide on risk countermeasure policies
Decide on action plan for countermeasures

Implement risk
countermeasures

Review progress on
implementation

Report to management
Consideration on
countermeasure plans

43Risk Management

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Risk Map
Large

Risks related to major operations such as procurement, manufacturing, etc.
Risks related to functional continuity such as general affairs, HR, etc.
External environment risks
Risks in management strategy
Environmenta risks
such as leakage ofhazardous material

Earthquake,tsunami★

Advent ofinnovativetechnology

Fire, explosion★ ISK Group’s high priority risks

Dependence on
specificcustomer

Lawsuit,
Reversal of
Violation of law
contract(Anti-Monopoly Act)
deferred tax asset
deficiency trouble

Incorrect selection Difficulty
procuring material,of development
material
problem at supplier★
Inadequate
ESG response
Economic
downturn

Impact on
business
Failure of
IP strategy

Cancellation or
erasure of permits,
licenses, or registrations

Abnormal weather(agrochemical sales)

Crop injury by
agrochemical
products

Aging and breakdown of Delay in, or failure
Revised andequipment andto achieve, productstricter laws
machinery
approval or registration★ and regulations

Financial risk(exchange rate, etc.)

Skyrocketingraw material
prices

Stricter environmental
Poor governanceregulations due toat group company★
climate change

Skyrocketing
fuel prices

New entries andintensifying
competition

Change in thecustomer/supplier’s
environment

Quality defect,
recallProblems withcustomers or
suppliers

Breach of confidentiality
by employees
who transfer or quit

Delay in, or stoppage of,product ortechnology development

Technology
drain

Inadequate ESG
responseby supplier

Corruption suchas datafalsification

Mass infection,diseaseSoilcontamination

Customer bankruptcy
and bad debt

Internationaltax risk

Natural disaster(except for earthquake
and tsunami)

Missing tax filing,misrecognition of
tax law

Stranded assets

Cyberattack

Worker shortage,
International
Failure of new
conflict/dispute, terrorism, non-transfer ofbusiness, capitalskyrocketing tariffs
skills and techniques★ investment, M&A

Workplace
accident

Human rights issue(sexual harassment, workplace
power harassment)

Probability of occurrence

Large

Notes:
1: Regarding level of effect on business and probability of occurrence, we set risk scenarios and assess each risk impact or damage in order for assessors to have a common understanding. The risk scenario used here is a worst-case scenario, i.e. the biggest threat among the possibilities.
2: ISK defines risk as any possibility of physical or economic damage to ISK, loss of trust, or others causing disadvantages.

44Compliance

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Basic Philosophy

Fiscal 2022 Compliance-Related Training and Awareness-Raising at ISKISK Group places the utmost importance on compliance. We have formulated a code of conduct in order to carry out business

ISK Group carries out compliance-related training in accordance with an annual plan, which is discussed and approved by therooted in our corporate philosophy, with the aim of thoroughly complying with laws and regulations, conducting fair and equitable

Compliance Committee. Besides job grade-specific training, training on specific topics is planned and carried out according tobusiness practices, and maintaining a high level of corporate ethics.

social conditions. Many ISK Group members joined training.

Because a company cannot exist without society’s trust, we have launched a Compliance Committee towards fulfilling our corporate responsibility and contributing to society. The committee puts compliance front and center and ensures that we promptly

Online learning and e-learning for new employees and other employees

report any compliance violations.

Focus: General compliance-related basic training

ISK Group Code of Conduct

ISK: 60 employees, Affiliates: 13 employees Total: 73

https://www.iskweb.co.jp/eng/compliance/observance.html

Advanced compliance training for newly appointed assistant managers

Compliance Promotion System (Overview)
Based on our reflection on the Ferosilt problem, in November 2005 we appointed a Chief Compliance Officer (CCO) and established the Compliance Committee. This committee operates under the Board of Directors and is chaired by the President (as CCO),
and comprises directors (excluding outside directors), directors of each headquarters, audit and supervisory board members,
affiliate presidents, a labor union representative, an outside lawyer, and the secretariat. In addition, each division has a compliance

Focus: Development of human resources who facilitate compliance-based management
ISK: 8 employees, Affiliates: 1 employees Total: 9Group training for newly appointed managers
Focus: Acquisition of compliance knowledge required by managers
ISK: 11 newly appointed managers

promotion manager and a compliance leader. The Compliance Committee has met about twice a year. It currently meets every

E-learning on personal information protection laws for ISK Group managers

March and September, with March 2023 marking the 34th session.

Focus: Understand what personal information is and learn what rules company employees should abide byHighlights from recent years include the following.
• Discussion and revision of the ISK Group Code of Conduct• Discussion of and response to whistleblowing and requests for consultation in relation to compliance violations• Preparation and monitoring of compliance training plans• Report on and discussion of compliance activities in each division• Training for board members, held every second year, led by outside instructors• Establishment of Whistleblowing Rules
Rules state that any person acting unjustly towards a whistleblower will be subject to disciplinary action.
As for the number of cases of whistleblowing or consultation related to compliance in recent years, there were two in fiscal
2018, four in fiscal 2019, four in fiscal 2020, two in fiscal 2021, and eight in fiscal 2022.

ISK: 364 ISK Group managers
Workplace-specific specialized law seminars• These seminars give participants knowledge on laws covering their particular division with the goal of strengthening adherence to laws, the basis of compliance.
• Managers select specialized laws that relate to their division and about twice a year lead seminars in their division.
• Workplace members take turns being the instructor in sessions in which they explain specialized laws, thus raising workplaceknowledge from the bottom up.
Compliance library training program• Employees watch videos about compliance issues that they face every day at work. Videos format examples include 3-minutedramatizations and instructional videos made in-house.
• Instructors in the program are senior position managers in each workplace in turn.

Video on ISK’s History of Compliance Activities• In fiscal 2022, a cumulative total of 819 sessions were held, including the specialized law seminars and library training, withIn order to keep past instances of compliance violations in mind, a video called “ISK Group Compliance History” was createda cumulative total of 10,483 participants.

and has been viewed by all constituents. The video shows what ISK has been doing to regain the public’s trust and conveys theimportance of being in compliance.

45

Special FeatureCompliance

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Road to Rebuilding Trust as the New Ishihara Sangyo

Working to Regain Lost Trust

It has been fifteen years since the comprehensive compliance audit conducted in March 2008. We have learned much fromIn the wake of the Ferosilt problem, we have worked to improve our corporate structure, company operations and internal culture forreflecting on our response to the series of environmental scandals which began with the Ferosilt problem. As we head towards

the primary purpose of revising our compliance system and building an organizational structure possessing a culture of openness.

Vision 2030 Stage II, we will examine what ISK’s approach will be and what efforts have been made thus far.

(1) Active disclosure of information
With the aim of greater plant transparency, we provide tours of the Yokkaichi Plant to local residents. Also, we have established

The Ferosilt Problem and the Comprehensive Compliance Audit

voluntary emission standards which are stricter than legal and regulatory standards for wastewater, waste gas, wastes and various

Ferosilt, a soil backfilling material developed as means for reducing industrial waste, had been on the market since 2001.

other environmental impact substances, and, in addition to displaying actual values in real-time on an environmental information bulletin

However, when amounts of hexavalent chromium and other substances exceeding environmental standards were detected inboard in front of the Yokkaichi Plant’s main gate, we disclose environmental data on our homepage and elsewhere (in Japanese).

areas where Ferosilt was used, we did our utmost to carry out a voluntary recall of the product. The amount of Ferosilt sold was
720,000 tons in total, but, because it was mixed in with sand and soil at the backfilling sites, the amount of material collected
was more than twice that, approximately 1,880,000 tons. All Ferosilt was collected at a total cost of around 60 billion yen. Finaldisposal of the material was completed in 2015, ten years after collection began.
In 2008, the ISK Group conducted a comprehensive compliance audit based on a questionnaire survey of all Group members.
From the results, we identified seven cases of past misconduct that had a significant external impact, and, after disclosing these,
undertook corrective action and improvement.

(2) Establishment of an Environmental Expert Committee
In 2008, we established an Environmental Expert Committee, chaired by anoutside expert, in response to the identification of contaminated soil andunderground water at the Yokkaichi Plant site. In line with the Committee’s
guidance, we implemented various measures, including ascertaining the statusof contamination on the plant premises, installing barrier wells and pumping
up underground water. We have confirmed that the installation of barrier wells

Completion of Removal of Illegally Buried Waste at the Yokkaichi Plant
In 2017, we began removing to a disposal site waste which was illegally buried at the Yokkaichi Plant (two locations on that grounds

prevents contaminated underground water from spreading beyond the premises via the underground water vein. Also, in 2022, webegan enclosing high-concentration pollution sources with purification agents (hot spot measures) and are monitoring progress.

of the northeastern part of the plant and the plant site embankments) and discovered through a comprehensive compliance audit.

Environmental Expert Committee website (in Japanese)

Under normal circumstance, this illegally buried waste should have been removed immediately, but, given the complications

https://www.iskweb.co.jp/kankyou/

surrounding the Ferosilt problem situation, it took a long time until all the waste was removed.
In March 2022, all removal work was completed, a Completion Report for the Removal of Waste Buried at the Yokkaichi Plant was
submitted to Mie Prefecture, and land leveling work in the area was also completed.

Inspection of barrier wells by the Environmental Expert Committee(3) Conducting compliance education
To ensure that the lessons of past problems are not forgotten, we conduct compliance education aimed at ISK Group members.
In recent years, we have conducted job grade-specific training, online learning, and group training for newly appointed managers.
Also, with regard to health and safety, process safety and disaster prevention, environmental protection, and other topics, weregularly conduct training which is run by outside and in-house instructors.
Tackling the Challenges of a New StageIn fiscal 2019, after a difficult road of addressing scandals and rebuilding trust from society, ISK issued dividends for the first timein fourteen years. After a “defensive” period during which we worked hard to return our company to a state of normalcy, we are

2018
Removal work is underway

2023
Land leveling work is completed

now on the “offensive,” pursuing future-focused business development. All ISK Group members are actively engaged in business,having their eyes set on Vision 2030, and with the absolute imperativeness of our corporate philosophy to “abide by laws andregulations; maintain transparency in business activities” etched in our minds.

46Responsible Care Activities

About ISK

ISK’s Responsible Care
Stakeholders

and safety assurance. In particular, ourEnvironmental
protection

activities encompass chemical productand distribution safety specific to theprevention, and occupational health andCorporate Data

Companies that handle chemicals voluntarily undertake Responsible Care activities to provide

activities aimed at environmental, health,tal protection, process safety and disasterFoundation for Value Creation

What is Responsible Care?

ISK undertakes Responsible Care (RC)chemical industry, as well as environmen-

Value Creation Strategies

Chemicals/
product
safetysafety, along with dialog with society,

Safety anddisasterprevention

Management
Occupational
systemhealth andsafetyLocal residents
Customers
Dialogwithsociety

Distribution
safetyenvironmental, health, and safety assurance covering everything from chemical substance development
to production, distribution, usage, final consumption, disposal, and recycling.
The results of these activities are shared and discussed with stakeholders. Responsible Care originated in
Canada in 1985 and has subsequently spread to companies around the world.

Government
Institutional investors
Shareholders

Responsible Care Achievements in Fiscal 2022 (Summary)

Executive
Employees, others

Category

Achievements

Evaluation

Planned emission reduction of
PRTR-listed materials

The volume of emissions into the air andtransferred off-site was reduced, but thevolume of discharge into public water areas
increased.

−

Reduce energy intensity and electricity demand leveling assessment
intensity by 1% year-on-year

Energy intensity increased by 4.7% year-onyears, thus failing to achieve 1% reduction
target.

−Reduce, reuse, and recycle waste

Continued reducing industrial waste by reusing and recycling materials with recoverable
value.

✓

Process safety anddisaster prevention

Eliminate plant accidents(fire, explosion, leakage)

There were no plant accidents.

✓

Occupational healthand safety

Achieve “zero lost time accidents” ateach ISK site

There was one lost-time accident at the
Yokkaichi Plant.

−

Distribution safety

Implement emergency response card
(so-called Yellow Card),
GHS label, and SDS management

Yellow Cards, GHS labelling, and SDSs wereappropriately implemented.

✓

Chemicals/
product safety

Properly manage chemical substances and provide customers with SDSs

We appropriately notified the authorities
on the use of chemical substances andprovided SDSs.

✓

Dialog with
community

Provide information to community
Interact more with local communities

More two-way communication was carriedout with local citizens.

✓common to many different industries.

ISK Makes Presentation on Safe Handling of Chemicals
at 8th Responsible Care Yokkaichi Forum

Fiscal 2022

Environmental
protection

The Japan Chemical Industry Association (JCIA), of which ISK is a member, carries out responsible care activities
including the holding of discussion forums with local residents in areas where there are chemical plants. After the

Objectives

COVID-19 pandemic forced the temporary stoppage of these gatherings, on October 28, 2022 the JCIA was able tohold the 8th Responsible Care Yokkaichi Forum, the first such meeting in four years.
The approximately 100 attendees included local
residents and participant from local governmentand companies at the venue, with other such representatives taking part online. ISK was one of thecompanies making a presentation, on the topic ofefforts to ensure the safe handling of chemical
substances. With Yoshihito Takeda, a professorat Hokkaido University as the moderator, a question-and-answer session and discussion were
held between corporate representatives and local
residents.

ISK makes a presentation at the forum

47

Environment

About ISK

Dealing with Climate Change

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Strategy
Chosen Climate Change Scenarios

ISK Group has pursued and strengthened sustainable management initiatives from the perspective of SDGs for medium-term

Referencing climate change scenarios published by the IEA (International Energy Agency) and IPCC (Intergovernmental Panel onbusiness plan, Vision 2030 Stage I. In view of emergency and importance, ISK Group is making efforts toward the “Dealing

Climate Change), we selected scenarios of a rise of 1.5–2°C and 4.0°C. Recognizing that climate change’s impact on businesswith climate change, reducing environmental impacts” as an identified priority issues (Materiality). ISK Group strives to analyze,

becomes more evident in the medium- and long-term, we analyzed the impact of climate change until 2050, as the time horizon.

examine, and disclose the information related to the climate change issues under the TCFD recommendations, and in carrying

Analysis of the scenario for fiscal 2023, we extends to the organic chemicals business. All businesses of the ISK Group (inorganicout business activities, ISK Group will contribute to address environmental and social issues to realize a sustainable society andchemicals/organic chemicals) were analyzed under the scenarios.

improve its corporate value.
Sustainability*Referenced climate change scenarios• 1.5–2°C scenario: Scenario with sustainable development and climate policy to keep temperature rise under 2°C compared to pre-industrial levels but
to also aim to keep it to 1.5°C or less (IEA NZE 2050, IEA SDS, SSP1-2.6, RCP2.6)• 4°C scenario:
Maximum emissions scenario with no climate policy and development dependent on fossil fuels(IEA STEPS, SSP2-4.5, RCP8.5)

Dealing with climate change

https://www.iskweb.co.jp/eng/environment/climate.html

Scenario Analysis Process

GovernanceConcrete efforts in response to climate change are carriedout by our Climate Change Team. This team operates under
the Sustainability Promotion Committee, which reports directly to the President.
The team comprises people from factory management,
manufacturing divisions, administrative department, and ISK

Board of Directors
Discuss, report

Decide, supervise

Identify major risks andopportunities

Gather future forecast data

• Gather highly reliable, external future forecast data related to major risks and opportunities.
• Organize the future forecast data for each scenario and, along with relevant personnel at ISK,
examine possible future world outlooks.

Calculate impact on business• Using the collected future forecast data and in-house data, quantitatively assess what possible
impacts the highly important risks and opportunities will have on business for each scenario.

Executive Director President

affiliates.

• Gather information on risks and opportunities in the chemical industry.
• Identify climate change risks and opportunities for ISK, and narrow down the major potential risks
and opportunities that could have a large impact on our business.

The efforts and measures the team comes up with are deliberated on at Sustainability Promotion Committee meetings

Sustainability Promotion Committee

held at least twice a year, and those approved are consulted

Consider responses• Consider ways to deal with climate change risks and opportunities that have a particularly
large impact on business.
• Consider other efforts and ways to implement them when necessary.

on and passed by the Board of Directors.
The progress of activities by the Sustainability Promotion
Committee, including the Climate Change Team, is reported

Climate Change Teamevery three months to the Board of Directors, which supervises these activities.

48

Environment

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Risk Management

Scenario Analysis Results
The ISK Group used external information to analyze the main climate change risks and opportunities in our business, and gathered future forecast data related to

One of the eight priority issues (materiality) that the ISK Group has identified is “dealing witheach risk and opportunity.

climate change and reducing environmental impacts.”

Based on this, we considered the risks and opportunities that arise from the transition to the carbon neutral society under each of the 1.5–2°C and 4°C scenario. We

In recognition of the urgency of climate change, the ISK Group has established the Climate

then analyzed the major risks and opportunities that could impact our business up until 2050.

Change Team under the Sustainability Promotion Committee. This team identified climate

As a result, for the 1.5–2°C scenario, we identified risks such as greatly increased operating costs due to the imposition of a carbon tax on CO2 emissions.

change risks, the results of which are assessed and controlled by the Sustainability Promotion

Therefore, recognizing the importance of reducing CO2 emissions across the entire ISK Group, we will proceed with various planned measures towards achieving

Committee. When necessary, matters are reported to the Corporate Risk Management

carbon neutrality by 2050.

Committee.

Business Risks and Opportunities Identified through Risk Level Assessment and Scenario Analysis

Major Risks and Opportunities

Policies/ Introduction of carbon tax,
regulations stricter CO2 emission regulations

Coveredbusiness

Time horizon: Short term: 2025, medium term: 2030, long term: 2050

Explanation

Increased operating costs due to the imposition of a carbon tax on
Inorganic chemicals
CO2 emissions
Organic chemicals(For 1.5°C: Cost increase of approx. 17.2 billion yen in 2050*)

TimehorizonChronic

Financial
impact(2050)

Medium–long–

Responses aimed at reducing risks and seizing opportunities• Shift boiler fuel away from coal
• Rebuild manufacturing systems• Implement carbon capture and use renewable energy• Expand sales of electronic components (semiconductors etc.), materials (IPM products), and others that
reduce environmental impact• Create new technologies and products (Organic: Develop IPM products with a view to smart agricultureusing AI and IoT, etc.)• Utilize subsidies and subsidy systems for capital investment and product development• Increase yields and reduce waste• Reduce CO2 in procurement through cooperation with suppliers and the industry• Diversify the energy sources• Pursue thorough energy savings• Proactively strive to reduce environmental impact• Pursue thorough information disclosure

Short

Rise in severity of extreme weather
Inorganic chemicals
events such as typhoons and floods
Rise in insurance costs due to higher risks of disaster striking bases
Organic chemicals• Expand and improve BCPs, conduct drills• Increase the number of suppliers• Consider a backup manufacturing system

Short• Revise terms of insurance contracts

Organic chemicals Decrease in sales of agricultural materials due to farmers’ damage from floods

Short• Develop materials that solve new issues arising from extreme weather (rain-resistant materials, biostimulants that counter heat stress, and others)• Select certain countries for priority development and marketing based on predictions of changes in
uncertain ecosystems (pests, weeds, etc.)

Inorganic chemicals
Property damage and lost profits due to disasters
Organic chemicals
Acute

On major risks
Financial impact more than minus one billion yen:
Financial impact less than minus one billion yen:

Explanation of risks and opportunities

Developing low-environmental impact products and strengthening
Shift to meeting consumer needs for Inorganic chemicals manufacturing systems
Technologies
Mediumlow-carbon products
Organic chemicals (Calculation of evaluation of financial impact includes rise in semiTransition
conductor demand)risks
Rising raw material prices
Increased procurement costs, rising material prices due to limited
Inorganic chemicals
Medium(titanium ore, coke, others)
availability
Markets
Inorganic chemicals
Energy cost fluctuations
Sharp price fluctuations in coal, fuel oil, gas, and electricity
Short–medium
Organic chemicals
Greater awareness of environmental Inorganic chemicals Fewer product orders and lower investor ratings due to delay in
Reputation
Mediumconsciousness among customers
Organic chemicals decarbonization

Physicalrisks

On major opportunities
Financial impact more than one billion yen:
Financial impact less than one billion yen:

Rise in average temperature,
extreme change of weather patterns

Organic chemicals

Increasing sales opportunities provided by selling of materials that
Medium–longrespond to ecosystem changes*Financial impact evaluation uses carbon pricing in each country under the 1.5°C scenario (IEA NZE 2050) for the calculation of cost impact (Scope 1, 2). Note that the organic business includes subcontractors (Scope 3).

49

Environment

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Indexes and Targets

ISK Group Aiming for Carbon Neutrality by 2050

For Scope 1 and 2 GHG (greenhouse gas) emissions, in addition to those disclosed last year at ISK Group companies in Japan,

With climate change becoming a major worldwide issue, the ISK Group has identified dealing with climate change and reducing

we also calculated those at overseas group companies so as to understand emissions for the entire ISK Group. Scope 3 (supply

environmental impacts as priority issues (materiality) and aims to become carbon neutral by 2050.

chain) emissions were also calculated in order to grasp the overall state of GHG emissions from ISK Group business activities.
To reduce Scope 2 GHG emissions, the Yokkaichi Plant has begun including renewable energy from biomass in the electricity thatit purchases.

<Reduction Targets>

2030: Target CO2 emissions reduction by 30% (against FY2019)
2050: Challenge carbon neutrality (net zero emissions)

GHG (Greenhouse Gas) Emissions of ISK Group (1,000 t-CO2)• CO2 Emission Reduction Road Map

GHG emissions

FY2019 (base year)

FY2020

FY2021

FY2022

Scope1

471

408

488

476

Scope2

20

19

23

22

Total

490

427

511

498

The ISK Group has set the reduction

strive for reduced emissions andcarbon neutrality in order to promote Climate Change Mitigation
and Adaptation.

Scope3Category

Calculated
Scope

FY2022

Non-consolidated

444.23Purchased goods and services

Category 2

Capital goods

Consolidated

14.55

Category 3

Fuel and energy-related activities
not included in Scope 1 or Scope 2

Consolidated

52.71

Category 4

Upstream transportation and distribution Non-consolidated
Waste generated in operations

Category 6

Business travel

Category 7

Employee commuting

Total of GHG Emissions of Scope3

Shift boiler fuel away from coal
+CO2 Rebuild manufacturing systems
Thoroughly save energy
Use renewable energy,
capture carbon
Improve processes

+CO2

2019

2030

Base year

Carbon neutral
Use innovativetechnologies, other4.33

Consolidated(in Japan)

3.00

Consolidated

0.23

Non-consolidated

0.47

+CO2

Carbon negative -CO2

TargetScope 1, 2, 3 GHG Emissions Share

Category 1

Category 5

30% reduction

targets for CO2 emissions (Scope 1
and Scope 2). We will continue to

GHG emissions calculated based on GHG Protocol

GHG Emissions of Scope3 (1,000 t-CO2)

Approx. 500,000 tons

Net zero

2050
TargetScope 1, 2: ISK Group
Scope 3: Set for each category

Challenge by using developing proprietary technologies
In order for ISK to continue contributing to better living environments through chemical technologies, we strive to develop

Scope1
Scope351 %47 %manufacturing and product technologies that contribute to energy savings and carbon neutrality.
In manufacturing technologies, when aging manufacturing equipment needs to be upgraded or new plants have to bebuilt, we make concrete proposals that realize the installation of equipment that uses minimal energy. For example, forprocesses that require large amounts of energy, such as pulverization and calcination, we gather as much informationas possible about the latest equipment and conduct testing before installing the actual equipment. We are also studying

Scope2

2%

519.52
Scope1,2,3 Total 1,017.43 (1,000 t-CO 2)technologies to make existing equipment more heat efficient and have been obtaining promising results on the effects.
We also offer technical support in the procurement and selection of environmentally friendly raw materials.
On the product technologies side, we are in the process of developing mass-production technologies for highly functional
heat storage material based on HASClayTM, developed by the National Institute of Advanced Industrial Science andTechnology. The aim is to put this heat storage material to effective use in systems that capture waste heat from power
generation facilities and plants and use it for drying, air conditioning, and agriculture climate control.

50

76

1,457
1,600
534
1,200

1,867
1,200

328
1,100

1,639
1,200

5,258
26,00021,000
7,300

2018

7,300

2019

7,700

2020

9,800

2021

7,800

2022 (FY)7,435

53,0002018

44,000

2019

8,000

18,00023,00036,00032,000

2020

2021

2019

67,725

66,1122021

62,1902022 (FY)66,50552,860

2018

2020

2021

2022 (FY)

2019

2020

0.14
0.12

2019

537,990419,645

50,0001,000,000 1,000,000 830,000 1,000,000 970,000

2022 (FY)

2018

4,062

2020

534,114120,000 130,000 410,449 110,000
5,000 100,000 2,900
6,100
2,900

180,930
148,134 146,343

2018

441,449

17,000

2019

2020

2021

120,000
4,900

2022 (FY)291,677

3,404

2018

10,231

385,025
5.173

4,503

8,975

5,500

2021

0.14

0.13
0.11

2022 (FY)42,2772018

39,194201935,1522020

39,189 38,609

2021

2022 (FY)

0.12

0.07

0.07

0.07

0.07

2018

2019

2020

2021 2022 (FY)

0.07

52

SocialAbout ISK

Occupational Safety and Health

Value Creation Strategies

Foundation for Value Creation

Corporate Data

To achieve these goals, the Yokkaichi Plant has formulated, and is implementing, an action plan. Some of the initiatives from this planare presented below.
(1) Implementation of various risk assessments relating to new and existing processes

Basic Policy
ISK’s safety and health policy is to ensure the safety, security, and health of employees and local residents by complying withsafety and health-related laws, preventing accidents and disasters, building a pleasant work environment, and constantly raising
the level of safety and health. Additionally, we have established “occupational safety and health, operation safety, and disasterprevention” as one of our Group’s key issues (materiality) and are promoting initiatives aimed at achieving a lost injury frequency
rate and severity rate of zero.

Because the Yokkaichi Plant handles amount of high pleasure gas, it has been designated as a special disaster prevention areafor petroleum complexes in accordance with the Act on the Prevention of Disaster in Petroleum Industrial Complexes and Other
Petroleum Facilities.
As part of risk management for such important locations, we conduct risk assessments with What-If Scenario Analysis to identify
potential sources of danger.
(2) Normalization of pointing and calling

Safety and Health Management Structures

Pointing and calling involves stopping, observing a target, pointing, calling

In line with our “Basic Policies on Environmental Protection and Safety & Health Promotion,” we have established the Environment,(vocalizing), and listening in order to prevent operational errors. However,

Safety & Health Management Committee under the purview of the Office of President to deliberate on the highest level policy

pointing and calling for every area to be checked is hard to do during operation.

proposals relating to safety and health, the environment and chemical substance management. Below this is the Safety and

Therefore, a checkpoint-specific level system has been adopted.

Health Council which, in addition to the organizations that promote environmental conservation and undertake chemical substanceLevel 1 Visual check

management, promotes occupational safety and health promotion awareness.

Level 2 Visual and pointing check
Level 3 Visual, pointing and calling check

Board ofDirectors

Executive Director
and President

Environment, Safety &Health Management
Committee

Environment, Safety &Health Audit Committee

Level 4 Stopping (adopting proper posture) and performing visual, pointing, and calling check
Level 4 pointing and calling is used at the plant entrance in particular in order to raise awareness.
(3) Promotion of autonomous management of chemical substances

Environmental Council

In response to the stipulations regarding “autonomous management of chemical substances” in the amended Order for Enforcementof the Industrial Safety and Health Act, we are working to prevent health problems through both legally mandated and voluntarily

Executive Management
Committee

Safety & Health Council

adopted management methods, which include appointing chemical substance managers and protective equipment managers,
conducting risk assessments, and implementing measures to reduce exposure, in a systematic way.
(4) Promotion of falling accident prevention

Chemical Substances
Management Council

With employees getting older, falling accidents are becoming more common and can result in lost worktime. As a countermeasure,
we are removing the steps around workers as well as painting them in easily noticeable colors. We have also introduced safety shoes

Safety and Health Management Systemwith increased toe spring (the distance that the tip of the toe rises from the floor when the shoe is placed on a level floor) which makeAt ISK, we have established “president-directed environmental, safety and health goals” which reflect the characteristics ofit harder to trip.

operation at each business location, and, in order to achieve these goals, key initiatives are set at the beginning of each fiscal year.
Here, we will look at the initiatives of our sole plant, the Yokkaichi Plant.
Fiscal 2023 President-directed Environmental, Safety and Health Goals for the Yokkaichi Plant (safety and health-related only)
1. Eliminate plant accidents (fire, explosion, leakage, etc.)
2. Achieve zero workplace accidents (zero lost-time accidents)
3. Improve health awareness and prevent health disorders
4. Promote safety and health and health measures for older workers
5. Achieve zero lost-time accidents involving commuting employees’ vehicles

The progress of these activities is assessed during monthly meetings of the Safety and Health Committee, at which countermeasures andother actions are reviewed and revisions made as needed. In addition, departmental and plant-wide reviews are conducted at the endof each fiscal year; activity summaries for each are created and provided to each other, including ISK Group companies, at the Safety &Health Council; information is shared and issues are sorted out; and then those issues are escalated to the Environment, Safety & HealthManagement Committee for deliberation.
After reflecting on the initiatives of the current fiscal year, the Environment, Safety & Health Management Committee sets goals for the
next fiscal year, and new initiatives are planned at each business location; thus a PDCA cycle is implemented to foster an upward spiralin occupational safety and health and health promotion awareness.

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Respect for Human Rights
ISK Group Policy on Human Rights

Designation of Human Rights Risks to Be Prioritized

We formulated the ISK Group Policy on Human Rights to further our efforts in respecting individuals. Based on international humanPlacing the highest priority on human life, the ISK Group has identified initiatives to address as priority human rights risks. Theserights standards such as the International Bill of Human Rights, the policy proclaims ISK’s dedication to preventing discrimination

include responding to the fact that our major manufacturing sites are located in areas expected to be damaged by a Nankai

and harassment and respecting individual privacy. It also details how we implement education and training to effectively achieve

Trough earthquake, enhancing our response to geopolitical risks, responding to workplace-specific risks like long working hours

these goals and conduct due diligence, as well as disclose pertinent information. The ISK Group Policy on Human Rights will guideand harassment, and responding to increasingly sophisticated information security risks.

our efforts to further respect human rights at all our worldwide bases. The policy, which was formulated with advice from outside

We also believe that it is necessary to understand the current state of human rights at suppliers and business partners andexperts, was approved by the Board of Directors on April 8, 2022.

communicate with them in order to further increase transparency.

Sustainability

Respect for Human Rights

Human Rights Risks to Be Prioritized

Affected Group

Health and safety

Workers at ISK’s groupcompanies

Long working hours

Workers at ISK’s groupcompanies• Normalization of long working hours due to personnel
shortages, diversification of work styles, etc.

Harassment / abuse /corporal punishment

Workers at ISK’s groupcompanies• Occurrence of harassment accompanying thediversification of work and human relationships

Leakage of personal information
or invasion of privacy

Workers at ISK’s groupcompanies Customers• Diversification of risk factors, such as unauthorizedaccess and cyberattacks, accompanying thedevelopment of information technology

Human rights issues at
suppliers and business partners

Workers at suppliers andbusiness partners• Insufficient understanding of the actual state of humanrightshttps://www.iskweb.co.jp/eng/environment/human_rights.html

Implementation of Human Rights Due Diligence
The ISK Group is working to build mechanisms

Steps in Human Rights Due Diligenceto identify and prevent or mitigate human rights
issues negatively impacting society.
In fiscal 2022, with the cooperation of outside
experts, we examined our principal businesses
and associated value chains, identified andevaluated human rights issues that could havea negative impact on human rights through ourbusiness activities, and then designated thosehuman rights risks to be prioritized.

Identification

Processof the adverse impacts ofhuman rights issues

for identifying
the adverse impacts ofhuman rights issues

Prevention and mitigation

Identification ofhuman rights issuesof adverse humanrights-related impacts

Follow-up surveyof the effectiveness of
our actions
Information dissemination andcommunication

with outside stakeholders

Major Human Rights Risks• Large-scale earthquakes, pandemics, etc.
• Protest activities, terrorism and kidnappings in regionswith geopolitical risks and at our overseas sites

Evaluation
Exchange of views withexperts and others
Human rights
risks to be prioritized

Human Rights Education and Training for Employees
In fiscal 2023 we conducted video training aimed at all Group employees in order to ensure their foundation ofknowledge regarding human rights in business, as well as to deepen their understanding of the human rights-related
initiatives undertaken by the ISK Group.
The training was divided into three components: “What are human rights?” “Worldwide Trends Regarding Businessand Human Rights,” “Initiatives of the ISK Group.” This training serves to raise awareness among employees about
respect for human rights, and this, in turn, leads to increased corporate value.

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Disclosure of Human Rights Risks to Be Prioritized

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Corporate Data

Sustainable Procurement
Within the ISK (Ishihara Sangyo Kaisha, Ltd.) Group, we pursue socially responsible procurement activities through our business
operations, in collaboration with suppliers and contractors, as specified in our Code of Conduct and Policy on Human Rights. We

Message from an Outside Expert

hereby adopt the Policy on Procurement in order to promote such socially responsible procurement activities.

I welcome the fact that the ISK Group has begun to undertake human rights due

ISK Group Policy on Procurement

diligence.

1. Legal Compliance

The potential negative impact of business activities on human rights (human rights
risks) is identified with a focus on stakeholders, who are rights holders of human

ISK Group complies with laws and regulations of each country and region and conducts procurement activities sensibly inrights, and is evaluated with the severity of the impact on human rights used as

accordance with social ethics.

a priority indicator. Listing the health and safety of the ISK Group employees as ahuman rights risk to be prioritized is in line with the latest trends in the international
community. The International Labour Organization adopted its core labor standards
in 1998, and added “promoting safe and healthy working environments” to them in

Attorney, New York State-licensed attorney
Member, Steering Committee,
Business and Human Rights Lawyers Network JapanEmi Omura

2022. Thus, the importance of occupational safety and health was reaffirmed as fundamental human rights.
Regarding long working hours and harassment, the protection of the lives and physical and mental health of workers is requiredby domestic laws and regulations. However, the United Nations Guiding Principles on Business and Human Rights require
initiatives which go beyond compliance with domestic laws and regulations. For example, companies are required to confirm
whether work style is being reformed or harassment countermeasures are taken among suppliers or business partners. In
addition, I believe that it is necessary to deal with personal information and privacy in accordance with international standards
in order to prevent serious situations that threaten the lives, bodies, and livelihoods of individuals, while taking into account

2. Fair and Reasonable Transactions
ISK Group provides opportunities openly to both domestic and overseas suppliers and contractors and is committed to fairtransactions. ISK Group conducts reasonable procurement activities by considering multiple elements in a comprehensive
manner, including quality, price competitiveness, supply stability and capacity for technological development.
3. Establishing Partnerships
ISK Group strives to promote mutual understanding with suppliers and contractors and to strengthen partnerships by building
relationships based on trust.
ISK Group will take reasonable and appropriate steps to determine to the best of its knowledge that its suppliers and contractors
practice the values espoused by ISK Group as set forth in the Appendix.
4. Promoting Social Responsibility

differences in the privacy protection laws of the countries where your company operates.

ISK Group respects human right as a member of the international community and conducts procurement activities in

I have understood that the ISK Group will work on future initiatives to identify concrete human rights issues at suppliersconsideration of various aspects of sustainability such as environment and safety.

and business partners and to promote dialogue with stakeholders in the process of human rights due diligence. The ISK

In addition, ISK Group will actively participate in international initiatives such as Responsible Care activities, management ofGroup promotes initiatives related to environmental impact, including waste disposal, and advocates process safety, disasterconflict minerals (3TG, cobalt) and procurement of sustainable palm oil.

prevention, and environmental protection activities in the Multi-Stakeholder Policy that ISK formulated in 2023. A measure to

The ISK Group will publicize initiatives concerning procurement activities pursuant to this Policy via the ISK Group website and/or Integrated Reports.

be taken would be to reconsider environmental issues faced by suppliers and business partners from the perspective of humanrights through dialogue with local communities.
Initiatives on human rights that lead the chemical industry will help increase productivity and secure and maintain excellent

Sustainability

Sustainable Procurement

https://www.iskweb.co.jp/eng/environment/procurement.html

human resources through the improved job satisfaction of employees, gain support from business partners and customers,
and strengthen relationships of trust with them. I believe that such initiatives will bear fruit in the form of an increase in theevaluation of corporate value by domestic and foreign shareholders and investors, and will surely contribute to the further
development of the ISK Group.
I look forward to the progress of human rights due diligence in the future.
Note: The above comments represent the views of Ms. Omura as an individual attorney. They do not reflect the views of any law offices ororganizations to which she belongs, or of any organizations for which she serves as a director or officer.

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Message from the Director of General Affairs & Human Resources Headquarters

Sympathize company's vision andAchieve personal career vision
Within the ISK Group, we have codified, in line with our Vision 2030 long-term vision, the “Purpose” that we want our Group toserve in contributing to society. While maintaining core competitive strength through our chemical technology, we will rely on
our corporate philosophy, the willingness to embrace challenges which is part of our founding DNA, our “Value Creation Core”
including our ability to develop proprietary technologies, our ability to collaborate globally, our ability to accommodate quality,and environmental requirements, and our management capability etc., express our Group’s commitment to delivering better living
environments to the people of the world. It is our purpose, which resonates with all Group employees and provides a more tangible
sense of connection with society, that will serve as the compass indicating the direction of our future efforts.
I believe that by fostering individual contemplation and action about what one can do for society and how to go about realizing
the ISK Group’s purpose, while at the same time aligning the ISK Group’s purpose with each individual’s career vision, a senseof motivation and rewarding challenge is created which will, ultimately, lead every employee to say, “I’m happy I joined the ISKGroup.”– Cultivating Diverse Human Resources to Tackle the Challenge of Value Creation –Management Targets(Vision 2030)[Purpose]
To continue contributing to better
living environments throughchemical technologies
Eight Most Important Issues• Dealing with climate change, reducing
environmental impacts• Technological development capabilities• Supply chain management• Occupational health and safety,
operation safety and disaster prevention• Diversity and inclusion• BCP, risk management• Corporate governance• Reforming workstyles by pursuing digitaltransformation (DX) and streamlining
operations

Value Creation
Core

Related management
challenges

Human capital
items

Ability to develop
proprietary
technologies

New business creation

External knowledge utilization

R&D strength improvement

Development strength index

Individual/organizationa
activation

Engagement improvement

Ability tocollaborate globally

Response toenvironmental
changeHuman resources system reform

Sustainable production activity

Health and safety

Interconnection

Ability to accommodate
quality and environmental
requirements

Management
capability

Diversity andinclusion

Human resources development

Flexible work styles

Empowering women
Organizational strengthening/
driving force enhancement

Within the ISK Group, we consider people to be our greatest asset
and regard human resources as company capital. We believe that“human resources are the source of our competitive strength,” and,thus, invest in human resources is indispensable to increasing our
medium- to long-term corporate value.

Greater corporate
value

Contributing to realization of a sustainable society
together with improving our corporate value
through such business activities.

In order to link human capital with value creation, we foster the growthof the autonomous “individual,” which leads, also, to the growth of the

Director of General Affairs &Human Resources Headquarters

Yoshio Nishiyama

organization and, by extension, the growth of the company as a whole.

and business strategies. We will continue to develop ourselves as an organization in which all employees aspire to addressThis allows each employee to have a sense of his or her contribution

the challenges facing society, which attracts diverse and specialized human resources, and that exists as a group in which all

to increasing corporate value, thereby furthering the growth of theemployees are empowered to demonstrate their individual talents and skills. Towards that end, we will promote training to help

“individual” and creating a virtuous spiral. And, in order to maintainemployees acquire those abilities and qualities that all employees should possess, as well as those abilities required for thethis crucial upward spiral, we believe it is essential to link humanperformance of specific roles, and we will also bolster systems which encourage self-improvement and tackling challenges inresource strategies and personnel measures based on management

order to foster independent skills development and self-growth.

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– Human Capital Investment Initiatives –We will implement five human resources strategies to realize value creation and personal and organizational growth.
1. Optimal placement of human resources

Experiencing Cross-cultural Exchange via Overseas Training

We will secure a necessary and sufficient number of human resources to implement our business strategies and place them in

I made use of the in-house training program to receive language

accordance with our business strategic priorities. We are focusing on mid-career hiring as part of our efforts to acquire highly

training in India for six months.

specialized human resources, such as management personnel and DX personnel, and to strengthen diversity in terms of genderThis training was a valuable opportunity to not only learn the language

and nationality. Mid-career hires utilize the skills and experience they have cultivated externally, while leveraging our corporate

but also to learn about the lives and dispositions of the local people.

resources, to contribute to their own success and that of the company. In fiscal 2022, 64.5% of all hires were mid-career hires.

In particular, I feel that having an understanding of their proactive
approach and attitude towards things will be extremely important

2. Skill acquisition and strengthening
We prepare training programs to help employees acquire the skills and expertise necessary to execute business strategies,
and we provide them with a variety of opportunities for experience, both domestically and internationally, inside and outside thecompany. We have courses to improve their global business skills, such as online courses they can take at home. They can also
go to a language school to learn foreign languages as well as take part in overseas training and other options.
In particular, we engage in active human resources investment to facilitate skill-building among those personnel with the willand desire to grow, and to facilitate acquisition among promoted employees of the skills necessary to produce better results.

for smooth communications with them in the future. Currently, I am
in charge of product development, marketing and sales in the South
Asia region and apply what I learned in language training to my daily
work.

Product Development & Marketing Division,
Biosciences Business Headquarters
Asia Pacific GroupJun Sawano

Specifically, we carried out top leader training (training of next generation of executives), management leader training (middle
management layer), newly appointed manager training, and ISK management school (selective), for each job level, and also
Training independently selected by each department. In fiscal 2022, we invested an average of 50,000 yen for all employees.
• Time and Money Invested in Employee Training Programs (non-consolidated)
Training time per person

Training cost per person

Hour/person

24
21
4.5

10,000 yen/person

3.9

4.6

In 2022, we established an education and training system and launched relevant
initiatives with the aim of cultivating outstanding future personnel and fostering

20
16

Development of an Education and Training System and Launch of
Relevant Initiatives at the Yokkaichi Plant

skill-building for everyone that will ensure the Yokkaichi Plant is a sustainable

5.0

business location. In addition to providing training by job level, hands-on safety
training and other training, we conduct in-house training in “foundational
knowledge” and have introduced e-learning in order to raise the skill level ofyoung personnel, in particular, to foster operational improvement based on
fundamental rules and principles that will ensure we are a sustainable plant.

2019

2020

2021

2022

(FY)

(Included training to improve employee capabilities, annual training by job level, career training, next-generation executive training, etc.)

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Employee Training Programs and Career Development Support
Once employees enter ISK, the company develops their capabilities by holding courses company-wide at certain points in their careers in order to make them aware of their roles in society and the company and to boost various skills.

Training by job level

Training for selected members

Role awareness for managers and chief

Foster executives

Newly appointed Purpose: Rethink the role of managers and improve workplace management abilities.
manager training Content: Through lectures, participants learn management basics, business improvement, assessment methods, finance, and marketing.
Newly appointed
chief training

Selective

Purpose: Make new chief aware of their leadership role in the workplace as a stepping stone towards becoming managers.
Content: Participants learn what chief should know about the state of the organization, their roles and expectations, executing
duties, and running an organization.

Content: Learn the basics of marketing using own company as a theme. Develop presentation skills through public speaking.

Purpose: Train next generation of executives, boost their management abilities, and give them the power to think and act like executives.
Content: Participants take lectures from experts in management strategy, Human Resource (HR) management, leadership, finance,accounting, etc., and discuss issues with members of other companies.

Management Purpose: Cultivate the logical thinking skills necessary for middle management layer to become a future executive.
leade training Content: Participants learn systematically the areas of “people”, “goods”, and “money.”

Improve mid-level employees’ capabilities
Purpose: Teach mid-level employees (new graduate hires in their fifth year at ISK and Mid-Career Hires with about the same years of
Mid-level
experience) how to assess the current state of the company and what it should do in future.
employee training

Top leader
training

Training of core human resources
Selective

Purpose: Candidates in their 30s who appear ready to be managers are selected and learn how to improve their global communica-

ISK Managementtion and other business skills.
SchoolContent: Training includes leadership, finance, marketing, accounting, and English conversation classes.

Strengthening basic skills as working members of society

Encountering Different Business Perspectives Through ISK Management School
3rd yeartraining

Purpose: Employees in their third year reflect on themselves and how they can improve, and build a foundation for becoming
effective leaders who can improve productivity in the workplace.
Content: Participants work on improving self-esteem.

2nd yeartraining

Purpose: Employees in their second year learn to take action independently and proactively, work well with others, and contribute to the organization.
Content: Training covers self-management basics (time management and planning, how to raise and maintain motivation, and work well with others).

1st yeartraining

Purpose: Participants reflect on their first year at ISK and learn about their role in working with and fostering younger employees so that they can
succeed in their second year.
Content: Using a motivation graph, participants reflect on their first year at ISK as well as learn team problem-solving processes through planning meetings.

6-monthtraining

Purpose: Learn the duties of each ISK department. Learn the fundamentals of a working member of society, how to get jobs done, and what type of employee you should be.
Content: Participants take lectures by ISK’s legal and corporate planning departments, build the foundation for becoming a businessperson, and reaffirm the importance ofmaking reports, keeping the lines of communication open, and asking for advice.

intentions underlying our strategies. I also had opportunities
Yokkaichi Plant
Functional Materials
Production Division
Production Group Chief

to engage in discussion with members of other departments
and companies who work in different business sectors to
me. This exposed me to perspectives on a variety of issues,

Takuya Hiramatsu

such as sales, finance and human resources, which I had

The training in the ISK management school involved not only

extremely valuable for a tech-focused person such as myself

the systematic study of business-related knowledge andwho rarely gets to experience such a multitude of different

thinking, I feel it has changed my perspective on my own

perspectives. I will keep the business-related thinking andorganization. During training, we applied business frameworks

knowledge, as well as big-picture and multifaceted perspectives,

and thinking to case studies used to teach about problem

that I gained from this training in mind as I actively participate inanalysis and strategies in a variety of different businessthe building of a future vision for, and the management of, mycontexts, and this has made me more aware of changes in theorganization and, thereby, help improve the capabilities of theexternal environment surrounding our company as well as theentire organization.

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3. Empowering women
We are working from a medium- to long-term perspective to create an environment where women’s participation is commonand expected. Specifically, we are actively recruiting female recent graduates and mid-career hires, as well as promoting female

Tackling the Challenge of the Management Promotion Exammanagers, and, in terms of balancing work with child care, regardless of gender, we are cultivating workplaces where there isworkplace-wide understanding of, and support for, the life events, thereby fostering the development of a corporate culture which

so, last year, I took the management promotion exam.

empowers women to pursue their careers without interruption. In fiscal 2022, childcare leave acquisition late was 36% for male

After returning from childcare leave in 2019, I shifted

employees and 100% for female employees.

to morning work using the flex-time system to be able
to go and pick up my child thank to coordinating with

4. Improving engagement

my husband. Within the department, when it is time

In order to enable individuals to demonstrate their full potential and contribute to increased productivity and corporate value

Central Research InstituteResearch Management Division
Planning Group Manager

amidst an increasingly diverse range of attitudes and needs employees have with regard to lifestyle and career development, it isimportant that we cultivate employee-friendly work environments which improve the motivation of every employee. We hope that,

Sekimi Morino

as we accommodate a diverse workforce with flexible work style options, such as by introducing work-from-home and flex-timesystems to facilitate work-life balance, this will contribute to a greater awareness of individual work efficiency.
• Increasing Support for Work-Life Balance(Non-consolidated)
Childcare leaveacquisition rate

Employees taking shortened
work hours for childcare
Persons

Men (%)
Women (%)

100

100

100

100

• Engagement Survey Results
FY2022
FY2023Business potential

Sense offairness oftreatment

4.50
4.00

Work meaning/
contribution

20

24.0
6.1
2019

2020

15.6

36.0

2021

2022

Diverse work
styles(FY)

Interpersonal relations

the company, such as work-from-home two days a

At the Central Research Institute, my responsibilities

week.

include performing technical surveys prior to patent

My job involves working outside my department as

application and coordinating with external organization

well, and I intend to capitalize upon this to gain a moreregarding contract work. My supervisor always advise me

diverse perspective as I accumulate experience so thatto pursue my work "as if you were in a higher position;”

I can continue working in an ever-broader capacity.

5. Cultivating DX personnel
technology utilization) and X (operational and business model transformation). Although a DX mindset has not yet been cultivated

2.50

14

currently utilizing a variety of systems offered within

The aim of DX is not to introduce IT (information technology) but, rather, to facilitate the co-evolution of D (data and digital

3.00

20

and encourages me with a call of “It’s time!” I am also

5.00

3.50

20

to go home, my superior is considerate of that fact

Sense ofself-growthcompany-wide, we are conducting training for all employees intended to improve their overall skills, and we are working to
improve IT literacy as well as strengthen the development of DX personnel.

Support fromsuperiors

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Digital Transformation (DX) Initiatives

DX Promotion Structures

One of the priority goals for medium-term business plan ,Vision 2030 Stage I, is Reforming workstyles by pursuing digital transformation

In order to realize our DX vision, we have established a DX Promotion Team which is under the purview of the Sustainability(DX) and streamlining operations.

Promotion Committee. We are working to improve labor productivity and achieve workstyle reform by establishing themed

We will promote digital technology-driven, company-wide DX and strengthen our business foundations with the aim of expanding existing

project groups to focus implementation on those areas closely tied to business operations and, thereby, produce results whilebusiness and creating new business adapted to customers’ and society’s changing needs and the changing business environment.

accumulating small success stories.

DX Strategy and Roadmap<Project Groups>

With a vision of utilizing DX to accelerate the realization of better living environments through chemical technologies, we arepromoting DX in accordance with the following strategic policies. While our initial goal is to finish a DX-Ready stage, as wework toward Vision 2030, we will foster increasing maturation over the medium- to long-term to transform ourselves into an

Sustainability
Promotion
Committee

RPA
Paperlessorganization which leverages advanced digital technology.

DX Promotion
Team

1. Expanding existing business and creating new business adapted to customers’ and society’s changing needs
2. Reforming workstyles and strengthening manufacturing systems by pursuing streamlining operations
3. Improving IT literacy of all employees and utilization of digital technology and data

Production System
Strengthening
Program

4. Reforming to the environment and culture where innovative idea can be attempted and implemented easily and swiftlyStage I

Stage II

Stage III

Goal

DX-Prep

DX-Ready

DX-Emerging

DX-Excellent•Establishing a corporate DX
promotion system•Reforming workstyles andstreamlining operations•Strengthening the production
capacity of the Yokkaichi Plant•Accelerating operational reformand digitalization(new fundamental Go-Live)•Going completely paperless•Stimulating interdepartmental
collaboration•Accelerating businesscreation•Organization with aculture of innovation"

2024

Yokkaichi Plant
Problem-Solving
Activities•Establishment of
new business pillars

Workflow/TeamsAI Translations/Meeting Records/AI Contracts
AI Drug Discovery
IT Literacy
Project Management

Cultivating DX personnel•Cultivating DX personnel•DX certification (Ministry of Economy, Trade and Industry)2022

DX-ReadyWith the aim of building a system which makes business departments to independently pursue DX, we first define the necessary
DX personnel our company needs and then provide individually tailored training in order to cultivate human resources who
2027

2030

possess operational knowledge and a certain level of IT skill.
DX Environment Development

New business model creation

DX-Ready stage

In order to promote DX, we need to develop an environment where a shared awareness exists of the importance of moving away

Acceleration of digital innovation
We have developed digital infrastructure tohave business departments to pursue innovation
and become self-sustaining.

We are expanding existing business throughinterdepartmental cooperationand the use of digital technologies.

from existing ways of doing things and of embracing challenge. The DX Promotion Team is responsible for developing a system
We are using DX to accelerate therealization of better living environments
through chemical technologies.

“DX Verification Promotion Plan” to address the provision of consultations and cost-related support when starting DX activity
verification (with a small start), as well as strengthening both the IT infrastructure system and hardware environment.

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Health & Productivity Management Promotion

Introduction of Transfer-restricted Share Incentive System

At ISK, we treat health and productivity management as part of our management strategy and, thus, endeavor to create a

In fiscal 2022, in order to improve employee benefits and facilitate sustained growth in corporate value, we introduced to theworkplace where the individual mental and physical health of employees is promoted, enabling them to work to their full potential.

Ishihara Sangyo Kaisha Employee Stock Ownership Association a transfer-restricted share incentive system aimed at supervisors.

Our Health & Productivity Management Promotion System is overseen by the Human Capital Management Promotion TeamWe believe this will lead to greater “stakeholder-focused management” by facilitating an alignment of interests between

established under the purview of the Sustainability Promotion Committee, where overall health and productivity management

supervisors and stakeholders, such as by fostering a management-participation mindset wherein the supervisors who assist withplanning and operation is primarily handled by human resources departments (including on-staff public health nurses), the healththe running of the company think about corporate value creation from the same perspective as the shareholders and investors andinsurance union and the labor union, jointly. Additionally, the progress of initiatives is regularly reported to the Board of Directors

by ensuring wealth realization through economic benefits derived from the long-term growth in ISK share value.

and Sustainability Promotion Committee, who discuss what further initiatives should be taken.

In fiscal 2023, we also introduced this system for supervisors at our domestic Group companies in order to strengthen the GroupIn fiscal 2022, we promoted health and productivity management from the two perspectives of “improving health literacy” andmanagement mindset and foster a sense of unity. Through this, we will further leverage the Group’s collective strength towards“maintaining and improving physical and mental health.” To improve health literacy, we conducted e-learning aimed at managers

achievement of the Vision 2030 goals and improvement of our corporate value.

(100% participation rate), and survey results showed that it had a helpful impact on how they approach employees’ healthmanagement.
In the future, we will conduct e-learning and other training on the topics of “food” and “sleep.” Additionally, to help employees inmaintaining and improving their mental and physical health, we make use of not only the “Brief Job Stress Questionnaire” but also
the “New Job Stress Questionnaire,” which includes additional questions about work engagement, workplace unity and whether
the workplace is free of harassment. In order to improve psychological safety at workplaces where there are many employees withhigh levels of stress, we contract an external organization to implement a workplace improvement program as part of our efforts
to provide emotional care and better workplaces.

ISK has been recognized as a Health & Productivity Management Outstanding Organization (largescale corporate sector) in 2023
under the Certified Health & Productivity Management Outstanding Organizations Recognition Program overseen by the Ministryof Economy, Trade and Industry (METI) and the Nippon Kenko Kaigi.
The Yokkaichi Plant, which accounts for more than 80% of our employees, wasalso recognized as a “Mie Tokowaka Health Management Company (White Mie)”in 2023.
In the first half of fiscal 2023, our domestic Group companies also formulated
health declarations in the name of each company’s representative director andmade them known to their employees. All of the ISK Group will continue to work
together to promote the health and productivity of its employees.

61Initiatives to Spread ISK Group’s Purpose

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

[Purpose]

Continuing to Contribute to Better Living
Environments through Chemical Technologies

To help employees adopt this purpose as their own, we conduct workshop-style training
which uses employees as facilitators. Participants engage in a voluntary exchangeof opinions about the direction of the company from an internal rather than external– Connecting Our Purpose with Employees’ Aspirations –perspective, as well as share their experiences and aspirations with one another. This is an
opportunity for employees to think deeply about the significance of what they do at ISK, thus

The purpose of the ISK Group encompasses a “willingness to embrace challenge in order to provide the indispensable.”

not only fostering a connection between the company’s purpose and the work employees

We provide opportunities for purpose-related talks amongst the employees themselves to guarantee that this purpose resonatesdo, but also, with the values each employee holds.

with our employees and encourages them to contribute to society through ISK's business activities.

This training has been conducted approximately 60 times company-wide and adopts across-functional format at each business location. Allowing employees to engage in opinion
exchange with members of different departments that they would not normally interact withhelps to give them new insights and awareness.

In-house enlightening poster

Voice of a Training Participant
To be perfectly honest, prior to this training,
Training for managers

I had no idea what relationship ISK Group’s

Choosing managers who have been throughtraining to serve as instructors

purpose has with my day-to-day operations.
After taking the training and thinking about
it for myself, I felt that the best thing I could
do was start by trying to connect this purpose
with my daily duties.
I have also come to understand that in themodern society, companies cannot simply
pursue profit, they need to think deeply about
Yokkaichi Plant
Titanium Dioxide Production Division Finishing Process Group
Assistant Unit Leader

Communicating personal experiences with one
another

Sharing future actions to be taken as a group

their purpose in order to ensure that they areseen by society as essential.

Hisanori Ban

62

Financial and Non-Financial Summaries

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Financial Summary (Consolidated)
Fiscal year

(FY)

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

100,441

105,293

103,330

102,903

101,601

108,001

106,441

101,066

101,774

110,955

131,238

2,792

3,038

11,104

8,314

8,415

10,022

11,372

6,188

5,173

11,557

8,631

719-8,207

6,661

9,151

3,804

3,442

8,683

2,359

3,373

11,6906,947

Profit and loss
Net sales
Operating income
Net income attributable to owners of parent(Million yen)

Financial status(Million yen)

Current assets

103,693

96,321

105,204

109,386

102,565

103,387

107,080

110,324

117,003

121,389

137,499

Property, plant and equipment

55,04647,15944,52538,73339,18340,843

43,167

46,271

47,10746,53546,728Intangible assets, investments and other assets

17,71921,051

17,932

14,935

15,121

15,536

18,442

15,841

15,90917,834

17,685

Total assets

176,459

164,532

167,662

163,056

156,871

159,767

168,689

172,437

180,021

185,758

201,913

Current liabilities

64,71359,49556,892

49,72547,31047,99044,712

43,73742,203

46,731

59,192Long-term liabilities

59,90460,33759,99054,396

46,57944,63848,64252,02958,30247,15745,289Total net assets

51,842

44,69950,77958,93362,981

67,13775,33576,66979,51591,86997,431

Interest-bearing debt

85,77277,65478,73867,68658,781

51,32849,52852,531

60,10350,420Other
Cash flows from operating activities-7,19812,067

6,351

Cash flows from investing activities-5,734-4,125

Free cash flow

-12,932

7,941

5,699

5,271

Depreciation and amortization

56,081(Million yen)

10,268

14,631

16,607

4,907

3,317

4,749

16,501-6,022-3,214

9,656-5,950-6,030-8,590-6,922-6,162-4,319-5,021

3,136

19,925

8,681

10,577-3,682-3,605-1,413

12,182-11,043

4,757

4,458

4,215

4,214

4,266

4,445

4,669

4,545

5,225

Capital investment

6,127

2,758

3,049

4,507

5,407

6,142

7,141

8,062

6,092

4,542

5,330

R&D expenses

8,451

8,965

9,330

8,988

8,173

8,706

8,070

9,150

8,639

8,165

9,156

Per share status
Current net income per share
Dividends per share

(Yen)

17.97

-205.19166.58228.88

95.15

86.12

217.25

59.03

84.41

292.58175.75

-

-

-

-

-

-

12.00

20.00

18.00

36.00

42.00

Financial indicators
Operating margin (ROS, %)

2.78

2.89

10.75

8.08

8.28

9.28

10.68

6.12

5.08

10.42

6.58

Return on equity (ROE, %)1.42-17.00

13.95

16.68

6.24

5.29

12.19

3.10

4.32

13.64

7.34

Return on assets (ROA, %)

1.59

1.78

6.69

5.03

5.26

6.33

6.92

3.63

2.94

6.32

4.45

D/E ratio (double)

1.65

1.74

1.55

1.15

0.93

0.76

0.66

0.69

0.76

0.55

0.58

63

76.3

Consolidated Financial Statements

Consolidated Balance Sheet

Value Creation Strategies(Unit: Million yen)Previous consolidated FY(March 31, 2022)
AssetsCurrent assets
Cash and deposits
Notes receivable – trade
Accounts receivable – trade
Electronically recorded monetary claims – operating
Contract assets
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Software
Software in progress
Leased assets
Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

About ISK

17,662
2,233
35,8891,322
495
37,558
6,897
30,323
6,292(1,175)
137,499

42,395(26,995)
15,400115,277(94,507)
20,7705,359
2,106(1,276)
829
3,327
3,933
(3,086)847
46,53543,265(27,876)
15,389117,078(96,640)
20,437
6,753
1,767
(893)
874
2,419
4,002
(3,149)853
46,728

519
484
3
11
1,018

413
969
1
11
1,396

7,456
8,883
10
550
(85)
16,81564,369185,758

8,106
7,308
23
900
(49)
16,28964,414201,913

Corporate Data

(Unit: Million yen)

Current consolidated FY(March 31, 2023)

27,073
2,768
29,5251,000
441
32,813
4,633
20,051
4,190(1,109)121,389

Foundation for Value Creation

Previous consolidated FY(March 31, 2022)
Liabilities
Current liabilities
Notes and accounts payable – trade
Electronically recorded obligations – operating
Short-term loans payable
Current portion of long-term loans payable
Current portion of bonds
Lease obligations
Accrued income taxes
Contract liabilities
Accrued expenses
Provision for bonuses
Provision for environment and safety improvement
Provision for repairs
Provision for loss on business withdrawal
Other
Total current liabilities
Long-term liabilities
Bonds payable
Long-term loans payable
Lease obligations
Provision for environment and safety improvement
Provision for repairs
Net defined benefit liability
Asset retirement obligations
Other
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

Current consolidated FY(March 31, 2023)

16,680
1,058
7,770
8,298
1,118
355
1,242
20
4,728
851
81
336
169
4,020
46,731

22,682
1,366
13,470
8,956
938
403
403
16
4,529
870
54
5,500
59,192

3,898
24,831555
1,384
83
13,058160
3,185
47,15793,8892,960
25,647
545
1,145
238
12,16682
2,503
45,289104,481

43,42010,62738,592(734)
91,90543,42010,653
44,102(2,710)95,466

405
(297)
(143)
(36)
91,869185,758

384
1,309
271
1,965
97,431201,91365

Consolidated Financial Statements

About ISK

Consolidated Statements of Income

Value Creation Strategies

Foundation for Value Creation

Corporate Data

(Unit: Million yen)

Consolidated Statement of Comprehensive Income(Unit: Million yen)Previous consolidated FY(April 1, 2021 to March 31, 2022)

Current consolidated FY(April 1, 2022 to March 31, 2023)

Previous consolidated FY(April 1, 2021 to March 31, 2022)

Current consolidated FY(April 1, 2022 to March 31, 2023)

Cost of sales

110,955
78,297

131,238
97,973Gross profit

32,65733,265

Valuation difference on available-for-sale securities

714

(21)

Selling, general and administrative expenses

21,10024,633Foreign currency translation adjustment

971

1,422

Operating income

11,557

8,631

(64)

414

Interest income

1640

Dividend income

180

202

Remeasurements of defined benefit plans
Share of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income

Share of profit of entities accounted for using equity method

533

648

1,597

1,452

103

113

Net sales

Non-operating income

Foreign exchange gains
Gain on sales of raw materials
Other
Total non-operating income

288

453

2,720

2,911
481

Net income

11,690

6,947

Other comprehensive income

Comprehensive income

17

185

1,638

2,001

13,328

8,949

13,328

8,949(Comprehensive income attributable to)Comprehensive income attributable to owners of parent

Non-operating expenses
Interest expenses

539

Financial fees

258

421

Other

206

290

Total non-operating expenses
Ordinary income

1,005

1,194

13,272

10,349552-

Extraordinary income
Gain on forgiveness of debts
Gain on change in equity
Gain on sale of investment securities

2,736

-

41

76

129

-

3,459

76

Loss on disposal of noncurrent assets

969

862

Impairment loss

163

63

2,344

-

Other
Total extraordinary income
Extraordinary loss

Loss on valuation of investment securities

162-

Total extraordinary losses

3,640

925

Income before income taxes

13,091

9,499

Income taxes – current

1,533

1,148

Income taxes – deferred

(132)

1,403

Total income taxes

1,401

2,551

Net income

11,6906,947

Profit attributable to owners of parent

11,690

6,947

Other

66

Consolidated Financial Statements

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Consolidated Statement of Changes in Net Assets
Previous consolidated FY (April 1, 2021 to March 31, 2022)(Unit: Million yen)

Shareholders’ equity
Capital stock
Balance at beginning of current period

43,420Capital surplus
10,627

27,872

Treasury share
(730)

(251)

Cumulative effects of changes in accounting policies
Restated balance

Retainedearnings

Accumulated other comprehensive income

43,42010,627

27,621

Total
shareholders’equity81,189Valuation difference on
Foreign
Remeasurements Total accumulated Total net assets
available-for-salecurrency translationof definedother comprehensive
securities
adjustment
benefit plansincome(308)(1,286)(78)(1,674)

(251)
(730)

80,93879,515
(251)

(308)

(1,286)(78)(1,674)

79,263

Changes of items during period
Dividends of surplus
Profit attributable to owners of parent

(719)

(719)

(719)

11,69011,69011,690

(4)

(4)

(4)

0

0

0

Purchase of treasury share0

Disposal of treasury shares714

Net changes of items other than shareholders’ equity
Total changes of items during period
Balance at end of current period

988

(64)

1,638

1,638

-

0

10,970(3)

10,967

714

988

(64)

1,638

12,60543,42010,62738,592(734)

91,905

405

(297)

(143)

(36)

91,869Current consolidated FY (April 1, 2022 to March 31, 2023)(Unit: Million yen)

Shareholders’ equity
Capital stock
Balance at beginning of current period

43,420Capital surplus
10,627Retainedearnings
38,592

Accumulated other comprehensive income
Treasury share
(734)

Total
shareholders’equity91,905

Valuation difference on
Foreign
Remeasurements Total accumulated Total net assets
available-for-salecurrency translationof definedother comprehensive
securities
adjustment
benefit plansincome
405

(297)

(143)

(36)

91,869Changes of items during period
Dividends of surplus(1,438)(1,438)(1,438)

Profit attributable to owners of parent

6,947

6,947

6,947

(2,003)(2,003)(2,003)

28

54

54

Purchase of treasury shares
26

Disposal of treasury shares(21)

Net changes of items other than shareholders’ equity
Total changes of items during period
Balance at end of current period

1,607

414

2,001

2,001

-

26

5,509

(1,975)

3,560

(21)

1,607

414

2,001

5,562

43,42010,653

44,102(2,710)95,466

384

1,309

271

1,965

97,431

67

Consolidated Financial Statements

About ISKStatement of Consolidated Cash Flows

Value Creation Strategies

Foundation for Value Creation(Unit: Million yen)

(Unit: Million yen)Previous consolidated FY
Current consolidated FY(April 1, 2021 to March 31, 2022) (April 1, 2022 to March 31, 2023)

Previous consolidated FY
Current consolidated FY(April 1, 2021 to March 31, 2022) (April 1, 2022 to March 31, 2023)

Cash flows from operating activities

Cash flows from investing activities

Income before income taxes

13,091

9,499

Depreciation and amortization

4,654

5,334

Gain on forgiveness of debts

(552)

-

Impairment loss

163

63

Loss (gain) on change in equity(2,736)-

Loss (gain) on valuation of investment securities

2,344

-

Increase (decrease) in allowance for doubtful accounts

1

23

Increase (decrease) in net defined benefit liability(94)

Increase (decrease) in provision for environment and safety
Increase (decrease) in other provision

(15)

(21)

(4,484)(4,615)

Proceeds from sales of noncurrent assets

77

34

Payments of loans receivable

(61)

(128)

Collection of loans receivable

104

109

(341)

Other

60

(400)

(288)

(320)

Cash flows from investing activities(4,319)(5,021)

352

(277)

Interest and dividend income

(196)

(243)

Interest expenses

539

481

(330)

5,700

Foreign exchange losses (gains)

(30)

(44)

Proceeds from long-term loans payable-

10,000Share of (profit) loss of entities accounted for using equity method

(518)

(510)

Repayments of long-term loans payable(8,323)(8,525)

Loss (gain) on disposal of noncurrent assets

215

221

Decrease (increase) in notes and accounts receivable – trade977(5,492)

Redemption of bonds(1,118)(1,118)(2,339)(15,964)

Repayments of lease obligations

(432)

(396)

Decrease (increase) in other current assets(768)(1,914)

Repayments of installment payables(674)(1,168)

Increase (decrease) in notes and accounts payable – trade

2,823

5,048

Dividends paid

(719)

(1,438)

Increase (decrease) in other current liabilities

201

741

Other

(71)

(92)

(3)

(2,003)

17,769(3,786)(11,601)

1,048

Decrease (increase) in inventories

Subtotal

Purchase of investment securities
Purchase of noncurrent assets

Cash flows from financing activities
Net increase (decrease) in short-term loans payable

Net decrease (increase) in treasury share
Cash flows from financing activities

Interest and dividends income received

196

229

Effect of exchange rate change on cash and cash equivalents

550

584

Interest expenses paid

(536)

(477)

Net increase (decrease) in cash and cash equivalents

1,132(9,410)

30

34

(957)

(2,022)

Cash and cash equivalents at beginning of period

25,941

27,073

16,501(6,022)

Cash and cash equivalents at end of period

27,073

17,662

Proceeds from insurance income
Income taxes paid
Cash flows from operating activities

Corporate Data

68

History of ISK

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

For over a century, embracing challenges
Since foundation in 1920, the ISK Group has continued to grow by overcoming difficulties and flexibly changing its business to meet the needs of the times.
The bedrock has been a willingness to embrace challenges passed down from our founder and carried on to today.

1920
ISK commences operation of an iron-ore mine on
the Malay Peninsula. ISK has been meeting difficult
challenges on the global stage since its founding.

1920
Company
founding

1950
ISK begins producing agrochemicals, a cornerstone of the organic chemicals business, andbecomes a pioneer in selective herbicides.

2010
ISK launches full-scale
sales of super-weatherresistant titanium dioxide,marking a shift fromgeneral products to highly
functional and high valueadded products.

1999
After embarking on pharmaceutical production,
ISK takes on challenges in life sciences, including
the gene therapy business.

1970
ISK focuses its resources on environmental preservation, becoming one of the first industrial companies
to build a comprehensive water treatment facility.

1920-1945

1945-1960

1960-1990

1990-20102010-2020

The origins of our willingness
to embrace challenges

Entering new businesses

Expanding overseas amidst
Japan’s rapid economic growth

Fulfilling social responsibility

Become a strong andtrusted chemical company

2020-2023
Looking ahead
To continue contributing tobetter living environments1920

2018
ISK receives approval for domestic manufacture andsale of the world’s first anti-pancreatitis agent for
dogs.

1924
ISK begins handling its own ore shipping. Ships
flying the company flag ply the oceans.

1934
The opening of the Kishu Mine, and the 1941
launch of operations at the Yokkaichi Plant, lay
the foundations of ISK’s domestic business.

1954
ISK begins producing titanium dioxide, a cornerstone of the inorganic chemicals business, andbecomes a top domestic producer.
1958
ISK’s business focus shifts from mining to chemicals.
It opens a research institute in Yokkaichi and embarks
on extensive R&D efforts.

1974
ISK responds to rapidly rising domestic and international demand for titanium dioxide by expanding its production facilities, becoming a major global producer.
1974
ISK weathers changes in the agrochemicals market
and moves boldly to strengthen its in-house development capabilities. After careful preparation, thecompany sets a course for world markets.

2005
ISK embarks on 100% Ferosilt recovery andprocessing, achieving the goal in 10 years.

2008
ISK publicizes the results of its comprehensive
compliance audit. The company mounts a
unified effort to rebuild trust.

2020
ISK celebrates the 100th
anniversary of its founding. By contributing tosociety through technological development, thecompany aims to help
achieve a sustainable
world and raise corporate value.

69

Company Profile / Group Bases

Company Profile (As of March 31, 2023)

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Network / Group Companies

Company Name

ISHIHARA SANGYO KAISHA, LTD.

Network

Head Office Location

3-15 Edobori 1-chome, Nishi-ku, Osaka
550-0002, Japan
Tel: +81-6-6444-1451

Head Office, Central Research Institute, Yokkaichi Plant, Tokyo Branch, Chubu Branch, Sapporo Sales Office, Sendai Sales Office, Fukuoka Sales Office, Argentina Branch, Singapore BranchFounded

September 10, 1920

Incorporated

June 1, 1949

Representative

Hideo Takahashi, Executive Director & President

Capital43.4 billion yen

Sales(Fiscal year ended March 31, 2023)
Consolidated: 131,238 million yen
Non-consolidated: 110,498 million yen

Group Companies
Japan

Number of Employees Consolidated: 1,768
Non-consolidated: 1,146

TaiwanKorea

ISK BIOSCIENCES K.K.
Sale of agrochemicals
ISHIHARA TECHNO CORPORATION
Trade in organic and inorganic chemical products
FUJI TITANIUM INDUSTRY CO., LTD.
Manufacture and sales of titanium dioxide, functional materials, others
MF MATERIAL CO., LTD.
Manufacture and sale of functional materials
ISK ENGINEERING PARTNERS CORPORATION
Construction
ISHIHARA SANSO KAISHA, LTD.
Manufacture and sale of industrial gases
ISHIHARA KOSAN CO., LTD.
Asset management
GENOMIDEA INC.
Asset management
HOKUSAN CO., LTD.
Manufacture and sale of agrochemicals
ISK TAIWAN CO., LTD.
Sale of inorganic chemical products
ISK KOREA CORPORATION
Sale of inorganic chemical products
ISK BIOSCIENCES KOREA LTD.
Administration of agrochemicals business in South Korea;
manufacture and sale of agrochemicals

Thailand

ISK BIOSCIENCES (THAILAND) LTD.
Registration and market development of agrochemicals in Thailand

India

ISK BIOSCIENCES INDIA PVT. LTD.
Registration, manufacture and sale of agrochemicals

China

Philippines

ZHEJIANG ISK & TAURUS CHEMICAL CO., LTD.
Sale of agrochemicals
ISK (SHANGHAI) CHEMICAL CO., LTD.
Registration and sale of agrochemicals
AVC CHEMICAL CORP.
Sale of agrochemicals

Belgium

The Netherlands
U.S.A.

MexicoBrazil

ISK BIOSCIENCES EUROPE N.V.
Administration of agrochemicals business in Europe; manufactureand sales of agrochemicals
CERTIS BELCHIM B.V.
Sale of agricultural materials
ISK AMERICAS INCORPORATED
Administration of U.S. subsidiaries
ISK BIOSCIENCES CORPORATION
Administration of agrochemicals business in Americas; manufactureand sales of agrochemicals
ISK BIOCIDES, INC.
Sale of wood preservatives
IBC MANUFACTURING COMPANY
Manufacture of wood preservative and agrochemicals
ISK ANIMAL HEALTH, LLC (Ohio)
Manufacture and sales support of animal health products
ISHIHARA CORPORATION (U.S.A.)
Sale of inorganic chemical products
ISK MAGNETICS, INC.
Asset management
SUMMIT AGRO USA, LLC
Sales of agricultural materials and manufacture of agrochemicals
ISK BIOSCIENCES, S.A. DE C.V
Registration and sale of agrochemicals
ISK BIOSCIENCES DO BRASIL DEFENSIVOS AGRICOLAS LTDA.
Registration and market development of agrochemicals in Brazil

Consolidated subsidiary company

Equity method affiliated company

Non-consolidated subsidiary company

Non-equity method affiliated company

70

Stock Information

About ISK

100,000,000 shares

Number of Shareholders

27,672

Stock Exchange Listing

Tokyo Stock Exchange, Prime Market

Stock Code

4028

Shareholder Composition
2.28%

Corporate Data

Treasury
stock

5.56％
Individuals, others

31.29%

Foreign individuals

19.35%

Investment in ISK
Number of shares held
Shareholding ratio (%)(thousands)

Shareholder

Total Number of Shares Outstanding 40,383,943 shares

Securities firms

Foundation for Value Creation

Major Shareholders (As of March 31, 2023)

Stock Information (As of March 31, 2023)
Total Number of Shares Authorized

Value Creation Strategies

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

4,768

12.50

Custody Bank of Japan, Ltd. (trust account)

3,675

9.64

Mitsui & Co., Ltd.

2,019

5.29

Toagosei Co., Ltd.

1,722

4.52

UPL Japan GK

1,170

3.07

Ishihara Sangyo Kaisha Client Stock Ownership Association
BNP PARIBAS PARIS/2S/JASDEC/FBB SEC/BELCHIMMANAGEMENT
Ishihara Sangyo Kaisha Employee Stock Ownership Association

1,039

2.73

960

2.52

830

2.18

DFA INTL SMALL CAP VALUE PORTFOLIO

821

2.15

CREDIT SUISSE AG

537

1.41

Notes:
1: The shareholding ratio is calculated after deducting treasury stock.
2: In addition to the above, the Company owns 2,243 thousand shares of treasury stock.

Number of shareholders

27,672
Total number of shares outstanding

40,383,943

Stock Price and Trading Volume

Other Japanesecorporations

16.27%

Stock Price (Yen)

Financial institutions

Volume (thousand shares)

1,500

15,0001,000

10,000500

5,000

25.25%

Total Shareholder Return(Unit: %)FY2018FY2019FY2020

FY2021

FY2022

ISK

87.6

44.9

73.8

89.3

95.5

TOPIX

95.0

85.9

122.1

124.6

131.8

TOPIX Chemical

96.0

89.1

120.5

110.9

116.2
0

10

11

12

2021

1

2

3

4

5

6

7

2022

8

9

10

11

12

1

2

3

4

5

6

2023

7

8

9

(Month)(Year)

071