INOAC CORPORATION CSR REPORT 2018

Contents

Contents, Editorial policy ···································For improvement in value

Corporate philosophy, Behavioral guidelines ······

Product manufacturing by utilizing customer comments

Greeting ····························································

Supply chain management

Company profile

Communication with society

Company outline

Contributing to society and community (1)Business overview

Contributing to society and community (2)INOAC brands

Producing an employee-friendly workplace

Technological innovation

Promoting work-life balance[Feature story] Work on social issues

Diversified efforts

Improving product quality

Human resource training

Welfare and Nursing care business

Safety and health/disaster prevention

Harmony with the environment

Governance

Environmental management

Corporate governance

Reducing the environmental burden

ComplianceManagement of chemical substance information
Environment-friendly products| Report period |This report is based on the activity results of INOAC Corporation in FY 2017 (January 1 through December 31, 2017).
The contents of FY 2018, FY 2016 and earlier are partly included.

| Coverage || Issued || Referential guidelines |This report is based on the activity results of INOAC Corporation, partially including domestic and overseas INOAC GROUP activities.
August 2018 (Previous issue: August 2017)◎ Environmental Report Guidelines FY 2012, ◎ISO 26000

Corporate Philosophy

INOAC intends to create a beautiful forest, comprised of many trees ofvarying character, rather than merely growing a single tall tree.
In its efforts to achieve a better life, INOAC has specialized in
not only a single business, but has cultivated four business“seeds”: polyurethane, rubber, plastics and composite
materials. Today it has developed into a conglomerate,
supplying diverse products and services, thereby contributing
to society.

Innovation & Globalization
INOAC Corporation is leading the world in polymer chemistry and working to be a more globalorganization with energy and individuality through quick decisions and actions. We will determine
our behavioral guidelines and maintain our brand as one that can be trusted by local society,customers and everyone related to INOAC by implementing and achieving our corporate
philosophy with actions consistent between inside and outside the company.

Action Guideline
Challenge

Take action without fear of failure

Profits

Act to expand business continuously and realize profit growth

C S

Act to enhance customer satisfaction

Teamwork

Exhibit originality and act trustworthy

Honesty and Trust

Be reliable and avoid falsehood

Responsibility

Carry out each duty with responsibility

Greeting

Challenge & Innovation～ To enrich people’s lives with materials ～We would like to thank you greatly for continuing tosupport us.
When we look back at the economy last year, theJapanese economy maintained a stable recovery due tocompanies expanding capital investment and strong
personal consumption. The US economy also continues
to be stable because of expanded consumption due toimproved employment rates. In China, thanks to thegovernment's economic support, the economic downturn
was avoided. In Southeast Asia, many countries
accelerated their economic growth because increased
exports boosted their business.

We will establish our footing for sustainable growth andglobally expand our business with Challenge & Innovation,
which is the theme of the whole company under our spiritof change bringing chance. A determined challenge isnecessary to seize chances, especially when suchvigorous and rapid change is expected.
Our basic policy is considering the material business withmaterial composition and development as a coretechnology to be a foundation as well as our contributing
to society by globally supplying automobile and industrial
materials and parts through new material and processdevelopment.

INOAC CORPORATION
President & COO

In FY 2018, the Japanese economy is expected tomoderately grow, and a once in a century turning point isalso expected because of gasoline-powered vehicles
giving way to electric vehicles, the trend toward
self-driving cars in the automotive industry, andtechnological innovation driving a technology shift byusing AI and IoT. The environment around us remains
uncertain such as the influence of the US policy
reorientation including FAFTA renegotiation, the UK
leaving the EU, and strengthened environmental
regulation in China.

We work, challenging and innovating at all times to create
new materials to contribute to a safe and clean global
environment, to make people's lives rich and comfortable,
and to contribute to a sustainable society.
We will greatly appreciate your continuous guidance andencouragement.

Toyohiko Okina

Company outline

Network
Major domestic bases

Company nameINOAC CORPORATION

Established

1954

Incorporation Capital

720 million yen

Representative

Chairman & CEO Soichi Inoue

Our affiliated, associated and joint venture companies from Hokkaido to Kyushu, in addition to the nationwide network of
INOAC CORPORATION, have established a close production and sales network, enabling us to provide our customers
with the most appropriate solutions.
Constructrelated
facilities

Employees

1,806 (as of December 2017)

Sales

170 billion yen (as of December 2017)

Main Businesses

Development of functional materials based on polyurethane, rubber, plastics, and composites,
as well as the manufacturing of products utilizing these materials contributing to a variety of fields
closely related to daily life, such as automotive, two-wheeled vehicles, information technology
equipment, housing and construction materials, and consumer products.

Inoue Rubber Co., Ltd.
Manufacture,processing
and sale

Export,import and sale

INOAC International Co., Ltd.
INOAC Technical Center Co., Ltd.
<Affiliated Companies>
Hokkaido INOAC Co., Ltd.

R&D

Services

Tohoku INOAC Co., Ltd.

OthersHigashi Nihon INOAC Co., Ltd.
INOAC Elastomer Co., Ltd.
Nishi Nihon INOAC Co., Ltd.
Kyushu INOAC Co., Ltd.

Head Office

2-13-4 Meieki Minami, Nakamura-ku, Nagoya, Aichi, 450-0003

Head Office (Tokyo)

4F Osaki West-city Bldg., 2-9-3 Osaki, Shinagawa-ku, Tokyo, 141-0032

Offices and Plants

Anjyo, Sakurai, Nanno, Shinshiro, Yana, Toyohashi, Ishimaki, Taketoyo, Kira, Ikeda, Ono, Hadano

Main Sales offices(Sales branches) Tokyo, Chubu, Osaka, Kyushu(Sales offices) Sapporo, Tohoku, Hamamatsu, Hiroshima

R & D Center

INOAC Technical Center Co., Ltd.

Overseas Locations

North America, China, Korea, Southeast Asia

<Joint Ventures>
BASF INOAC Polyurethane Co., Ltd.
Rogers Inoac Corporation, and others

We have constructed a system of proposing and supplying
research, development, material processing, molding
technique, and mass production at 13 countries andregions worldwide centering on North America and Asia.

■ Sales by division as of 2017

hundredmillion yen

Fintech & Packaging 4%

2,500

1,500

HUKLA Japan Inc.

Major overseas bases■ Sales trend

1,592

1,700
Foam products
30%

1,000

Automotive
59%<North America 19 companies><Asia 43 companies>

USA 11 companies

Thailand 15 companies

Canada 3 companies

Taiwan 3 companies

Mexico 5 companies

Indonesia 5 companies<China 45 companies>

Vietnam 6 companies

China 43 companies

Korea 1 company

Hong Kong 2 companies

Singapore 5 companies
Philippines 2 companies

500

Malaysia 4 companies
Sri Lanka 2 companies

0
2015

2016

2017

Year

Manufacturing

Export/Import

R&D

Others 4%

Rubber & Elastomer 3%

1,616

INOAC Housing & Construction Materials Co., Ltd.
INOAC Living Co., Ltd., and others

Sales

2,000

<Affiliated companies>

China Japan
Asia

North
America

Sales
serviceBusiness overview ～INOAC materials utilized in a variety of fields～
Fields

Housing & Construction

Indutrial machineryTransportation

Distribution & Packaging

Electric Products

IT equipment

Medical & Welfare

Consumer products

PORON® WA

CELLDAMPERCELLASTO®

Color Foam®

PureCell®

EXROTH®

Moltopren

Kitchen sponge

Seam gasket for houses

Crawler Pad

Track Pad

Rubber Wheels

KsilTM

TransCool

Wheelchair Tires

Latex Sponge Puffs

U-Polypie

Waterflex

Rear Spoiler

P·E-LITE®

VAFTER

FOLEC®

MAPS®

Injection Blow Molding Bottle

THERMAX®

THERMAX®

Lightweight Headliner

Cool System

Rigid Light-Carbon

PureCell®

Rigid Light-Carbon

Garden Tape (INOTACK®)

Composites

Plastic

RubberUrethane

Material

INOAC brands

INOAC brands

We focus on adding functional value by making the most of the ideas and technologies based on the materials we have created. Our original products utilizing various materials
including complete interior items offering both design and function, support our comfortable lives.

IRC Tire was founded in 1926 as a manufacturer of tires
and tubes for bicycles. Since then, we have produced
daily-use tires for comfortable riding and racing tires forworld-class racing, building upon our experience inmanufacturing and business. For the past 30 years, wehave conducted business overseas as well.

We will continue adding value as we meet our customers’
needs through IRC brand products. HUKLA is a total-interior brand focused on beautiful form and comfortable
lifestyle. We produce top-quality furniture with excellent
design and high-grade materials to provide our customers with a pleasant feeling and healing. We believe thatthe HUKLA collection will make your life more comfortable than ever with natural texture and a variety of colors
and patterns.

AEROFLOW is an original series of bedding for women.
It has been newly developed using INOAC’s cutting-edge
materials and processing technologies. It conforms
perfectly to the feminine body and leads to the most
comfortable sleep possible.

Technological innovation
R&D

Research and development system

INOAC Corporation is engaged in R & D, full of creativity, in view of the future under the mottoof making life affluent. We are always providing new materials to a wide range of fields such as
the automotive industry, information and communication industry, electronics industry,
industrial materials and consumer products by fully using compounding, foaming and molding
technologies with various kinds of urethane, plastic and elastomer that are mainly polymericand also by using other techniques for composite materials. Simultaneously, we are advancing
our R & D to reduce environmental burdens, save weight and energy, and provide highly
functional new products and new processes.

We are advancing our original new material development by regarding high-polymer material
technology such as polyurethane, rubber, resin material, and more as our core technology with
INOAC Technical Center Co., Ltd. and Global Technical Division centered. We are also
promoting new material development and applied development research with an eye toward
the future with an arrangement of R&D systems in the USA, China, Thailand and othercountries, emphasizing the importance of collaborative research and technologicaldevelopment with domestic and overseas universities and public research institutions.
The technical division of each department succeeded in commercializing urethane foammasks, TURBOFLEX II, New Ino-Coat and FOLEC food trays by using the molding process
and material composition techniques. They also promote the high functionality of heat andshock resistance with urethane foam and proceed with developing products that satisfy
customer needs. The process development department created and introduced an automatedmanufacturing line that was reduced in size.

Raw materials

SafetyCompounding
Technology
Design(CAD, CAM, Design)

Environment
Foaming
Technology
Molding
Technology

Clean

Evaluation Technology(Evaluation, CAE analysis)

Control Technology(Quality control,
Production control)

Products
Urethane
RubberPlastic
Composites

ITC JAPAN
INOAC Technical Center Co., Ltd.

Urethane

Rubber &Elastomer

Plastic

New materials &composite materials

ITC CHINA
Suzhou INOAC New Polymers Co., Ltd.

Feature story ■ Work on social issues

Our efforts to improve product quality
INOAC GROUP has introduced a comprehensive management system based on ISO 9001 and is working with the product quality assurance system in cooperation with ourcustomers to assure product safety while also supplying excellent products and services to satisfy our customers.
Safety in our products is the beginning of everything. We secure safety in our products in the compliance Code of Conduct and arrange our system in order to implement theCode. We are also working to ensure the design process includes essential safety design.

Basic policy

Critical defects: 0①No critical quality problem②Strict quality review & to strengthen inspection function③To enhance examination of new products

Quality assurance
1. Implement quality audits to monitor quality assurance activities

3. Implement audits to secure quality in production

INOAC GROUP continues to improve process conformity and effectiveness by implementing the
PDCA* cycle of the quality management system, and implements integrated quality audits forbetter quality assurance.

INOAC GROUP implements audits for quality assurance to see whether (1) the quality for receiving
materials and purchases is secured in product manufacturing and (2) products satisfy theperformance and characteristics with respect to the design quality in accordance with ourimportant quality commodity audit at 34 domestic bases and 8 overseas bases.

*PDCA: Plan, Do, Check, and Action

2. Implement product examinations to secure stable quality
INOAC GROUP objectively evaluates if the content and level of the measures to prevent risks
related to products are necessary and sufficient during new product development byimplementing design verification, design review and validation to secure product safety.

4. Implement managing chemicals to secure environmental safety
We quickly respond to customer inquiries through our chemical substance management system
regarding substances that may influence our environment.
The chemicals in purchased materials and parts (domestic and overseas products) are thoroughlymanaged in accordance with our Green Procurement Management Provisions.

Feature story ■ Work on social issues

5. Ongoing quality education to secure quality improvement
We provide ongoing quality education to all our employees from new employees to employees incharge of key positions because the quality of each employee's work is the base for INOAC todetermine product and service quality.
(Key positions are administrative positions including managers and higher positions.)
New employee induction course: Study of basic knowledge about quality, cause investigation, etc.
Quality control education: Introduction to quality control, statistical quality control technique,study of quality engineering, etc.
● Other quality-related training: Training of knowledge about products, compliance education,
chemical management education, etc.
●●

Risk management for quality
1. Response system for early detection and prevention of critical complaints
We are working hard on early detection and prevention of critical quality problems.
We attach great importance to rapid and appropriate response, and have "Quality dial 110
provisions" to prevent critical quality problems from expanding damages.
We center on the functional quality division of our headquarters, cooperating with the functional
quality division of each department, to rapidly respond, detect issues as soon as possible andprevent complaints.

■ Quality risk management flow chart

Within 24 hours

Customers

Contact Division forcustomers

Quality assurance activity

Division
Domestic groupcompanies

Since our company’s basic management policies include developing production bases for local
production and local consumption combined with promoting management localization, theemployment, education and promotion of candidates for executive positions at overseas bases isurgent.
INOAC GROUP has implemented education such as trainer training and teaching quality control
techniques since 2013 in China where many of our overseas bases are located. Last year we
focused on 201 front field managers and candidates, implementing on-site training to improve theirfield capability, implement appropriate process
management and strengthen the capability ofmaintaining processes in a stable manner at 19
bases in total.
We will expand our education overseas inThailand, Indonesia, Vietnam and other countries
by regarding the education in China as a modelfor the future.

Global Quality Assurance
Headquarters

6. Develop global human resources to improve overseas field capability

President (Director)

Countermeasure meeting

Feature story ■ Work on social issues

Welfare and Nursing care business
The rate of the elderly to the total population has accelerated sharply since Japan becamean aging society in 1970; now the rate of the population over 65 years old to the total population exceeds 21 percent, which is a super aging society. The rate of the elderly is expected
to increase in the future; the rate will be approximately 30 percent in 2025 and 40 percent in
2060. Social problems are generated such as an insufficient labor population, medical care,
pensions and nursing care. INOAC is working on such social issues through our business.
Home for the elderly with an attachedclinic in Nagoya

Converting our real estate into nursing care facilities
Insufficient facilities for the elderly who need nursing care have become more and more serious
year after year. INOAC is converting our real estate into facilities for the elderly to respond tosuch social requirements. We started with a home nursing care support center built in Nagoya
City, Aichi Prefecture in 2000, built a home for the elderly with a clinic attached to it in Nagoya
City in 2016, and have built six facilities for the elderly so far. When creating the facilities, weused Thermax, which is INOAC's high-functioning heat-insulating board with excellent heatinsulation and thermal barriers that is moisture-proof, and FoamLight, which is on-site foam
heat insulation with excellent heat insulation, which wraps a building with air foam, in thefoundations, walls and ceilings. We promote energy saving and expand our know-how as a
specialist in air conditioning, hot-water supply and heat insulation. The facilities use our original
nursing care brand, Smile, and Smile products and furniture.

An example of a room

FoamLightⓇ

FuwamoThermax

Feature story ■ Work oan social issues

Smile, the brand of INOAC nursing care goods, to cuddle the heart among smiling faces
We have pursued the gentleness of the parts contacting human body since 1997, and accordingly
started the development of welfare/nursing care goods with especially good quality. We put theReversible PRO Mattress on the market in 2002, which was developed in cooperation with theJapanese Society of Pressure Ulcers. With thinking that originated from our desire to deliver oursmile to the people for whom care is provided and to the people who provide care, we established
Smile, our care product brand, in 2014. "Smile" was named after reading of Roman letters of"smile". We are working to cuddle hearts among smiling faces by manufacturing products on thebasis of softness.

Exhibited at International Home Care andRehabilitation Exhibition

Smile series playing a key role at nursing care fieldsⓇ

Reversible PRO
Mattress

Locomo Mat

INOAC LIVING displayed products at theinternational care apparatus exhibition, H.C.R
2017, held at Tokyo Big Sight in September
2017. The centerpiece in this exhibition was
Swimo, the wheelchair cushion that enables
smoothly standing up. In our exhibition booth,
we held a product introduction seminarconducted by a doctor working for Amakusa
Hospital, who is also an associate developer
and many people came. Swimo utilizing
INOAC's urethane mold technique has realized
an unprecedentedly high-quality cushion, which
has generated much positive feedback.

Posture change
super breathable thirty pad

Message from INOAC LIVING
Toward an aging society accelerating in the future
INOAC LIVING develops extremely useful and required products from the perspective of manufacturers of rubber, urethane and resin materials as well as staff using such products and the elderly forwhom such products are used.
Our soft material group supports the muscles of the elderly to reduce the burdens on their bodies. For
example, Swimo, a wheelchair cushion using automobile seat technology, which has achieved bodypressure dispersion and high durability, stabilizes sitting and supports standing up. This product isutilized in the Soft Wall Cushion to protect only the necessary parts from impact by combining thesuction effect of PureCell and PE foam. We are working to contribute to our aging society through our
products with safety and comfort as the key.
We also promote cooperation with and contribution to local society by presenting our products
including medical and nursing care mats to neighboring hospitals and facilities. This is mainly
conducted by our factories and business offices because we regard medical and nursing care ascommunity-based businesses.

Takashi Ishii, PresidentHarmony withthe environment

Environmental management

Environmental idea
INOAC respects the natural environment of ourirreplaceable earth and contributes to realizing anaffluent society that is comfortable to live in throughtechnology harmonized with our environment andenvironment-friendly corporate activities.

Environmental policy① We comply with environment-related laws and regulations
and other requirements, and implement business activities that society can trust.
② We promote reducing CO2 emission such as energy
saving to prevent global warming.
③ We work on resource conservation, waste reduction andrecycling to contribute to a recycling-oriented society.
④ We appropriately manage chemicals that may influence
the environment and reduce the risk to preserve our environment.
⑤ We actively develop products with less environmental
impacts contributing to conservation of the nature
throughout the lifecycles of the products.
⑥ We promote environmental management, educate
employees about the environment, implement environmental audits and continue to improve.
⑦ We contribute to establishinga sustainable society
through local environmental
preservation work as good
corporate citizens.

Environmental management system
The person responsible for environmental management implements the integrated management of the environment under
the direct control of top management and implements environmental activities for the whole company in the activities of
the Environmental Committee, working to promote environmental activities in an organized fashion. We organized aspecific section committee to handle industrial waste and energy saving to further accelerate reduction and to promote
environmental management in cooperation with each committee.
We also started activities conformable to ISO 14001:2015 in January 2017 and are working to achieve our objectives
under a regime close to our main work by completely reviewing manuals.
■ Environmental preservation promotion

Waste Reduction
Committee

Chairperson

Environmental
preservation
promotion

Management

Person responsible forenvironmental management
Chairperson(energy management control officer)(Department by department)

Waste Reduction Committee(Business office)Environmental Committee

Environmental Committee

Energy Saving Committee

Energy Saving Committee(Business office)Environmental
improvement
activities
by workplace

Internal environmental audits

External environmental examination

We implement internal environmental audits tocheck the operational state of our environmental
management.
The audit team consists of two to three employees
who have completed the auditor training prescribedby the company, and checks if the environmental
management system is appropriately operated,maintained and improved. Regarding organizations
with inappropriate operations, additional audits are
implemented and followed by corrective action.

We ask the Japan Quality Assurance Organization (JQA), which isan external certification registration body, to implement
examinations to check if the environmental management system
is appropriately operating in accordance with ISO 14001:2015.
We also implemented an examination for shifting toISO14001:2015 whose activities started in January in FY 2017.
As the result, no items indicated for improvement were found, andthe system including shifting was determined to be sustained. Asan overall assessment, issues to be considered about influenceon management in expanding objectives and others were listed.

Harmony withthe environment

Environmental management

Summarization of major activities in FY 2017

Compliance with environmental laws and regulations

The results of INOAC's main work for the environment in FY 2017 are shown in thetable below.
We reduced energy consumption compared with the previous fiscal year eventhough we could not reach our reduction objectives due to insulation
countermeasures in our facilities. Although we moved forward on recycling, we did
not reach our objectives for reducing waste disposal because the market standards
for valued resources have become stricter year after year. About the releaseamount of PRTR substances, we introduced CO2 foaming equipment to reduce
methylene chloride as a foaming agent, promoted substituting a cleaning agent
with non-PRTR substances for a cleaning agent with PRTR substances, reachedour objectives and substantially passed it.

INOAC specifies the environmental laws andregulations related to our business and implements daily management. Each business facility
implements environmental risk management
such as preventing environmental pollution bymonitoring and measuring the responses on thebasis of laws and regulations concerning noise
and industrial waste treatment, evaluating themas part of the environmental management
system. We strictly comply with the agreements
about environmental preservation and otheritems with local governments and thoroughly
comply with environmental ordinances.

Items to be worked on

EnergyPolicy and objectives of activities in FY 2017

Factory-related site

Office-related site

Factory-related site

Intensity (used amount/production sum)337.2 and below

Used amount (crude oil equivalent)
28,244 kL (2017 result)

Used amount (crude oil equivalent):
92.9 kL or below

Used amount (crude oil equivalent):
91.6 kL

Intensity (treated amount/production sum)5.45 and below

Intensity
6.48

Treated amount:
4,634 t (2016 results)

PRTR substances
Reduction in release andtransfer amounts

Treated amount: 1,818 kg or below

Intensity (release amount + transfer amount)/production sum)
2.67 and below

Treated amount:
5,254 t (2017 results)
Treated amount: 1,553 kg
Intensity
1.64
Release amount + transfer amount
132,887kg (2017)

Release amount + transfer amount
187,930 kg (2016)

Environmental
improvement work

Environmental improvement cases (total in the entire company):
1,046 cases or more

1,726 cases

Environmental
communication

Issue CSR report

IssuedObjectives reached

Results

Intensity
348.5

Used amount (crude oil equivalent)
28,303 kL (2016 result)

Reduction in waste
Office-related site

Activity results in FY 2017

Objectives not reached but progress made■ Main environment-related laws and regulations in our businessAir

Air Pollution Prevention Law, Automobile NOx/PM Reduction Law,
Law Concerning Special Measures against Dioxins

Water quality and soil

Water Pollution Prevention Law, Purification Tank Law,
Sewerage Law, Soil Contamination Countermeasures Law

Noise, vibration and malodor
Chemicals

Resource conservation and cycle

Noise Control Law, Vibration Regulation Law,
Malodor Prevention Law
PRTR and Promotion of Chemical Management Law,
Poisonous and Deleterious Substances Control Law
Energy Saving Law, Container and Packaging Recycling Law,
Freon Emission Control Law, Law Concerning Special Measures
Against PCB Waste, Waste Management and Public Cleaning Law

Disaster prevention

Fire Service Law, High Pressure Gas Safety Law

General and others

Factory Location Law, Law concerning the Improvement of
Pollution Prevention Systems in Specified Factories(Pollution Prevention Organization Law), Radio Law• Local government ordinances are omitted.
• Some of the laws are described in abbreviated forms.

Training for emergencies
We identify accidents and emergencies in accordance with the characteristics of each business facility,and periodically implement training to prevent environmental pollution such as fires and chemical leakage(oils, solvents, etc.) from facilities.
General disaster training was held on June 2 and November 30, 2017, and individual training is
implemented in accordance with the characters of departments including training for preventing raw
materials from flowing out and evacuation drills at night in the Anjo Plant. In other facilities, trainings for
emergencies are implemented as preparation.

Objectives not reached* Business places from which environment data are collected to summarize major activities are shown below:
INOAC CORPORATION

Anjo Plant, Sakurai Plant, Nanno Plant, Yana Plant, Ishimaki Plant, Ikeda Plant, Ikeda Second Plant,
Ono Plant, Jinno Plant, Ukiha Plant, Headquarters (Nagoya City), Tokyo branch, Osaka branch

INOAC Living Co., Ltd

Ibigawa Plant,

Techno Foam Japan Co., Ltd. Headquarters, Saitama Plant

Kyushu INOAC Co., Ltd. Kikuchi Plant, Ukiha Plant, Kita-Kyushu Plant,
Kyushu Color Foam Co., Ltd.

Anjo Plant: Water drainage by fire-fighting team

Sakurai Plant: Training in early fire extinguishment

Nanno Plant: Measures against raw material leakage

Harmony withthe environment

Reducing the environmental burden[Cases]Reduction of energy consumption

Significant implementation contents for energy saving promotion in 2017
INOAC has promoted reducing CO2 emissions and saving energy toprevent global warming. We implemented efficiency increases indryers and room heating by utilizing waste heat from boilers and fans,heat insulation measures on factory roofs, boiler piping, cure furnaces
and more, and promoted LED use.
The amount of energy used in FY 2017 almost leveled off incomparison with FY 2016, and was reduced by approximately 5
percent (crude oil equivalent) compared with FY 2014.

■Energy consumptionof our plants(crude oil equivalent)Comparison withthe previous fiscal year

Reduction by

Increase in air conditioning efficiency by removing waste
heat from rooms (summer) and bringing waste heat into
rooms (winter)

Curing furnace heat insulation with INOAC’s THERMAX,
a heat insulating material

Countermeasures to prevent air leakage by ultrasonic airleak detectors

Installation of insulation jacket on tank in boiler room

Heat insulation by covering plant roof

LED illumination management by control switch

Enhanced air conditioning efficiency by partition curtains

Power reduction by utilizing waste heat from boiler room

1%
Anjo Plant: Heat insulation cover on plant roofs

Affiliated companies: Installation of insulation
jacket on tanks

Kita-Kyushu Plant: Taking-out and taking-in of
waste heat from fans

Other work for preventing global warming

Year

INOAC is working on preventing global warming from otherperspectives too. We provide our employees with education on
power saving including cool biz, which is our energy-saving
attire campaign, with summer eco-style campaigns. We also
work on cooperative transportation and smooth deliveries, amodal shift to railway and maritime transport, and distribution

base intensiveness. In addition, we participate in the CO2
Reduction and Lights Off Campaign propelled by the Ministry of
the Environment every year, and implemented the campaign at
10 facilities including our group companies on June 21 (summer
solstice) and July 7 (Star Festival) in 2017 too.

Harmony withthe environment

Reducing the environmental burden

Waste reduction

NCV project participation■ Waste treatment amountThe NCV (Nano Cellulose Vehicle) project was launched by
the Ministry of the Environment to improve automobile fuelconsumption by weight and CO2 reduction by applying
cellulose nanofiber (CNF), which is a light-weight andhigh-strength next generation material, to the automotive
field. Kyoto University leads the project and more than 20
industrial, academic and governmental institutions participate.
INOAC CORPORATION has participated in this project fromthe beginning, evaluated moldability, physical properties andmore, and worked to implement practical realization.
http://www.rish.kyoto-u.ac.jp/ncv/

Regarding waste reduction, the companywide waste reduction
committee, as the leader, promotes reports of waste reduction
cases, application of such waste reduction to other facilities,
reductions in loss by detecting the reductions and improvements
in yields and expansion of utilizing recycled resources including
recycling by separating used paper and material recycling at eachbusiness place. However, the criteria for valued resources havebecome stricter; therefore, in many cases we had to disposal
resources as industrial waste.

Year

Reducing environmental burden substances
INOAC uses PRTR substances such as m-tolylene diisocyanate,
which is a raw material of polyurethane foams, xylene or toluene,
which are used in the coating process. We have promoted
increases in using paints with low solvent rates (high solid type)and stopped using 1-bromopropane at the cleaning process of aurethane injection machine as work for reduction in handlingamounts and the releasing amount of such target substances.
Thanks to this work, we achieved remarkable reductions in 2017
by approximately 29% compared with 2016 and by
approximately 50% compared with 2014.

■ Discharged andmoved quantity of
PRTR substances

Comparison withthe previous fiscal year

Reduction by

29%
CNF-contained foaming PP resin molded article(product picture)Year

Microphotograph of CNF-contained foaming PP resin molded article

Business places from which environment data are collected on pages 14 and 15 are shown below.
INOAC CORPORATION/Anjo Plant, Sakurai Plant, Nanno Plant, Yana Plant, Ishimaki Plant, Ikeda Plant, Ikeda Second Plant, Ono Plant, Jinno Plant, Ukiha Plant, Headquarters (Nagoya City), Tokyo branch, Osaka branch◎ Ibigawa Plant, INOAC Living Co., Ltd. ◎ Kikuchi Plant, Ukiha Plant, Kita-Kyushu Plant, Kyushu INOAC Co., Ltd. ◎ Headquarters, Saitama Plant, Techno Foam Japan Co., Ltd. ◎ Kyushu Color Foam Co., Ltd.

Harmony withthe environment

Management of chemical substance information

Promoting IMDS, chemSHERPA*2 and more

Establishment and execution of green procurement criteria

INOAC registers information on chemicals and reports it to our customers through IMDS* 1,
especially in the automotive field, which is our main strength, and has a management system
to obtain the necessary information via our supply chain and to register IMDS.

We list chemical substances regulated by laws and regulations, or customers, and list
chemical substances that we should reduce after understanding their content. We show themas green procurement criteria to suppliers; we use such lists to obtain information on chemical
substances contained in raw materials to be purchased.

■ nformation collection through IMDS in INOAC - reporting process and chemical management system
Component
supplier

INOAC

Components

Components list,
drawings etc.

Communication about chemical substance management

IMDS data
Products
Composition parts
Materials

Material
supplier
Materials

Chemical
substances

Auto manufacturer
etc.

In-house
database

Chemical
substances

Information collection and report to our customers using the chemSHERPA*2 format that has
been widely used in the industry, especially in the electrical machinery industry are supported(The format was changed from the previously used JAMP format to the above).

The global quality assurance headquarters that is a company-wide organization and leader
regarding environmental management gathers the chemical management section in eachdepartment and meets once every two months. At the meetings, they review the green
procurement criteria, check the management system, establish or change operation rules, andexchange opinions concerning the latest trends in chemical regulations such as the REACH
regulation and RoHS Directive, as well as periodically implementing auditing the management
system in each department to maintain and improve an appropriate and reliable management
system.

*1 IMDS (International Material Data System): A database for transmitting and obtaining information onmaterials and chemicals over the internet for the automotive industry, which was developed to comply
with the EU ELV Directive as a start*2 chemSHERPA: A unified format to transmit information on chemicals contained in products in the
supply chain, which the Ministry of Economy, Trade and Industry took the initiative in developing

Establishment of in-house database
The automotive division operates the in-house database through which information on
chemical substances contained in purchased parts and raw materials is managed in an
integrated manner, which contributes to improved work efficiency, the accuracy of thecontents to be reported in the registration with IMDS and the investigation of Substances ofConcern contained in the purchased parts and raw materials.

ing
Hold

of regular meeting
Procurement
division
Automotive
Parts Division

Global Quality
Assurance
Headquarters

Urethane
Products Division
RubberProducts Division
Fintech &Information
Equipment Division

Impl
n
ement
ation of audit at each divisio

Maintenance and improvement ofmanagement system

Environment-friendly products ①

Harmony withthe environment

Energy saving Residential heat insulator that can achieve both heat insulation and incombustibility

Resource saving Interior finishing material with strength and weight reduction“THERMAX SW-G”

Foam injection lightweight deck box

Recently, the demand for heat insulation materials has increased because of increasing interestin energy saving at residences; the demand for heat insulators for residences that can achieveboth heat insulation and incombustibility has also increased due to frequent large-scale fires.
We developed THERMAX SW-G to respond to this demand. THERMAX SW-G is a rigid
polyisocyanurate (PIR) foam board that prevents fire from entering inside due to a surface charlayer formed by the isocyanurate structure; THERMAX SW-G has extremely highincombustibility even when burning on a burner at the temperature of 1200°C for 5 minutes aswell as excellent thermal insulation performance.

■High heat insulation
Reflection

Thermax
Reflection

Hot air

Cool airCool insummer

THERMAX SW-G

The deck is placed on both sides of the automobile luggage area and the part where the tool
kit for repairing flat tires and other tools are stored. This was an injection molded article
previously made of normal resin, but we now use a resin material containing a chemical
foaming agent and have reduced the weight by approximately ten percent while retaining thesame strength with the high foaming method by opening the mold a little after filling gas
generated by the heat inside the cylinder in the mold. The foaming type usually needs coating
due to surface design, but this product does not need any coating and has the same level ofdesign, contributing to improving the operation environment at production.

Cold airWarm airReflection

Warm inwinterReflection■ 他の素材との性能比較

PF: Phenolic foam, XPS: Extruded styrene foam

THERMAX SW-G

General PIR

PF

XPS

Fiber-based heatinsulation material

Thermal conductivity
Fire protection andfireproof
performance

○

○

○

○

△

◎
Carbonization/Shape retaining△
Ignition/Combustion○
Carbonization/Decomposition△
Dissolution○
Shrinkage deformation

Oxygen index

○

△

○

○

◎

Moistureproof
performance

◎

◎

○

◎

△

■Molding process

Foam body

THERMAX SW-G
burning
Impenetrable in 6 minutes
Before burning

15 seconds later

3 minutes later

6 minutes later

Open the mold
Reference: Combustibility of generalheat insulation material
General PIR ... Penetrable in 15 seconds

PF ... Penetrable in 5 minutes 40 seconds

XPS ... Penetrable in 5 seconds

Fill initial amount thinlyEnvironment-friendly products ②

Harmony withthe environment

Clean

Energy saving Composite with excellence in heat insulation, processability and flexibility

Special resin material using clean supercritical foaming technique“TURBOFLEXⅡ”, a lightweight and highresilience material for shoes
TURBOFLEXⅡ is a special resin material with low specific gravity and high impact resiliencethat is manufactured by supercritical injection foam molding without any chemical foaming
agents that generate harmful gas. The material is used for the midsole heel ofhigh-performance sport shoes. For example, this material is used for SKY MID/SKY LO
volleyball shoes manufactured by DESCENTE LTD. and some players in the V Premier League
use these shoes.

“Flexible aerogel”, a next-generation heatinsulating material
Aerogel is a dried porous gel with low density and high porosity, which is notably weak as asimple substance. Therefore, impregnating a nonwoven fabric base material with it or the like isrequired for commercialization, as a heat insulation material, due to weak points such as gel
falling (powder falling) during use and insufficient heat insulation. Aerogel becomes an excellent
product featuring extremely rare powder falling, high heat insulation, processability andflexibility by making a composite (filling in cell) with a special foamed body with a skin layer
having a fine cell structure. Aerogel is expected to be utilized in various fields such as
automobiles and construction materials in the future.
Micro cellular foamed body, simple substance

TURBOLEXⅡ, the material
having both high resilience andimpact absorption capacity

Pore diameter＞50mm

Primary particle＞1mm

MidsoleTURBOFLEXⅡ

Aerogel composite (SEM image Χ200)

TURBOFLEX is a registered trademark of INOAC Corporation.
5~10mm“SKY MID”

Secondary particle,
Aerogel structure

Performance comparison withconventional models■ Impact resilience (ball reboundability)■ Adiabaticity■Thermal conductivity

80%
Item

Unit

Densitykg/cm3

Impactresilience%

C-rigidity°

Compression
permanent strain%

TURBOFLEXⅡ

300
70
53
49

Conventional
material:
EVA

Glass wool

60%

Item

71

* The values shown above are measures of central tendencies andare not guaranteed values.

Unit

40%
Thickness

48

0.050

Micro cellular foamed body,
simple substance130
40(W/m∙K)

20%

0%

TURBOFLEXⅡ Conventional material: EVA

Apparent
densitymm
g/cm3

Thermalconductivity W/m∙K

0.028
0.024

Air (at 20°C)

Foamedbody,
simplesubstance

Aerogelcomposite

1.75

1.75

Flexible aerogel

0.016

Aerogel

0.015

50

200

Vacuum heat insulation material,
general purpose

0.028

0.016

Nonwoven fabric aerogel

0.021

Rigid urethane

0.020

0.010

0.0025
Vacuum heat insulation material,high performance
0.000 0.010

0.020

0.030

As an independent material, thehighest heat insulation capability ofall substances

0.040

0.050

For improvement in value

Product manufacturing by utilizing customer comments

Evaluation and awards from our customers

Quality improvement work

INOAC has flexibly fulfilled these needs as a material process manufacturer by reforming
materials into the shapes needed by markets. In FY 2017, many customers at home andabroad continued to highly regard our work to solve customer issues.
In Japan, the chemical information division has been recognized as a Premium Partner for 7
years, and automobile-related divisions have received the Technological Development Award,Award of Excellence in Promotion of Reducing Old Type Supply Parts, Award of Excellence in
Cost Price Section and Award of Contribution to Tohoku Manufacturing because of the highevaluation of the interior of new models and VA/VE proposal. Vietnam IPV received the Delivery
Award because they could deliver good products without any delays. Thailand IAT was highly
evaluated due to TPS* work on the ceiling assembly process, complete achievement of service
part delivery time and safe improvement activities for the coating process. Taiwan KIC was
highly evaluated due to zero faulty delivery. China IES received the Quality Achievement Award
and Award of Cooperative Cost Price; IHA received the Award of Excellence in Package
Design; DIME received the (Quality) Excellent Supplier Award and the Award of Appreciation
for Environment, Quality, Cost, and Delivery (EQCD); DIME II received the Cooperative Cost
Price Reduction Award and the Cooperative Quality Award; DIP received the Appreciation
Award for the supporting role for a long time.

The quality policy of the INOAC GROUP is manufacturing trusted by customers. We implement
diverse activities for quality improvement by emphasizing work to prevent critical complaints,
raising the level of our quality management system and training all employees.
We use the PDCA* cycle on a daily basis and work to provide customers with satisfactory
quality in the first place.
* PDCA: Plan, Do, Check, and Action[Cases]Work to prevent serious complaints
Our auditing and instruction at domestic and overseas production bases include important quality
commodity audits, official authentication audits and audits of the state of implementing agreements withcustomers to improve the quality capacity in order to prevent quality failure that presents great risks for thecompany such as lost social credibility and large amounts of guarantee money. For new products using
any new techniques, materials, processes and applications, we conduct DR* to prevent serious failure
before putting the products on the market.
*DR: Design Review* TPS: Toyota Production System

Quality innovation (automatization, introduction of IoT)
We are developing automatization at manufacturing sites to establish worker-friendly and highly efficient
product lines with stable quality. We are also working on appearance inspection by using image
processing and laser technology to reduce the burden for inspectors and to enhance quality assurance forcustomers. The introduction of IoT to plants is promoted to understand the state of the production
process on a real-time basis and to enable sign management showing machine failure and defective
products on the basis of the data.
Tohoku Manufacturing Contribution Award
from Toyota Motor East Japan, Inc.

EQCD Appreciation Award from
Nakayama CANON

Delivery Award from
HARADA INDUSTRIES VIETNAM

Quality Excellence Award from
Yulon Nissan Motor Co., Ltd.

VA/VE Proposal Award fromSUZUKI MOTOR CORPORATIONFor improvement in value

Supply chain management

Procurement basic policy❶ Promotion of global procurement
We enhance global procurement and partnerships with ourcustomers by utilizing our domestic and overseas bases.

❷ Compliance with laws, social codes andoffice regulations
We comply with laws, social codes and office regulations,and promote healthy and open procurement.

❸ Promotion of fair, just and sincere procurement
We provide our customers with fair and just competitive
opportunities to promote sincere procurement.

❹ Procurement considering the environment andhuman rights
We conduct procurement while considering our global
environment in accordance with INOAC's environmental
policies. For the raw material use that may cause humanrights issues or social problems such as conflict minerals,
we conduct procurement with much consideration.

❺ Construction of partnership on the basis ofmutual trust with business connections
We construct firm relationships of mutual trust andcooperate with our business connections to maintain andimprove mutual technological capability and quality.

Optimal procurement at global bases
We contribute to countries where our bases are located by procuring local raw materials and components, and build good
partnerships with our business connections by thinking of optimal quality and price, and long-term trade. We promote
higher strategic procurement to respond to global production.

Enhancement of partnership withbusiness connections
We organize the INOAC Cooperative Assembly consisting of our businessconnections of approximately 80 organizations to implement our work.
INOAC and our business connections try to cooperate more. For
example, we invite representatives of our business connections to ourwhole group presentation conference and ask them to give us
presentations about work to promote compliance, risk management, etc.
at lecture meetings.

Promotion of green procurement

Measures for conflict minerals

In order to advance the measures for environmental
regulation that have become stricter from year to year, we
determine the INOAC Green Procurement Criteria andpromote procurement in consideration of our global
environment. We also work on considering theimprovement in loading efficiency to improve procurement
logistics and even reduce the environmental burden.

Regarding the conflict mineral issue that mineralsp r o d u c e d i n e n d l e s s c o n fl i c t a r e a s s u c h a s t h e
Democratic Republic of Congo and adjacent countries
become a source of funds, we work to disclose
information in cooperation with our business connections
under the policy of not using such minerals.

Communication with society

Contributing to society and community①

INOAC GROUP uses various opportunities to promote activities contributing to society and communities through technical support, human resource development, cultural support and more. We also participate in exchange with local residents.

International Polyurethane Technology Foundation

INOAC International Education and Scholarship Foundation

Applications of polyurethane are diversely expanding in many
fields including consumer products, distribution, automotive parts
and information devices.
The polyurethane industry is expected to continue to greatly
contribute to industrial development, and the whole industry
needs to respond to social demand and issues including thepreservation of our global environment in the face ofenvironmental themes such as safety, cleanliness, ecology andenergy saving. This foundation was established with the aim offurther developing the study of polyurethane and fostering humanresources to develop the polyurethane industry in the future.
Since the establishment in 2014, the foundation has supported
assisting research abroad.

INOAC expanding their business globally since the 1950s
established "INOAC International Education and
Scholarship Foundation" in 1987 to foster humanresources who can be actively involved in the world.
The foundation has awarded scholarships to excellent
foreign students studying in Japan and excellent Japanese
students studying overseas, and the number of awarded
students exceeded 300 so far.

INOAC Innovation Support Program
The foundation has implemented cultural support activities,"INOAC Innovation Support" for years. The support
activities range widely such as sponsoring public
performances of ballet and opera and more. Sponsoring
public performances is helpful in culture promotion anddeepens the commitment between society and INOAC.

Communication with society

Contributing to society and community ②Overseas

Domestic

INOAC Polymer Lanka (PVT) Ltd.
INOAC Lanka (PVT) Ltd. (Sri Lanka)

Anjyo Plant

In May 2017, southwest Sri Lanka was attacked by a record-breaking torrential rain which
severely damaged the area. They provided the flooded area with relief supplies and also
provided victims with medical examinations.
In addition, they donated their manufactured mattresses to the hospital near their plant inAugust, which was the second donation.

They hold a bazaar on Tanabata, which isalways on July 7, and at the end of the year
every year to communicate with neighbors
through the on-spot sale of their
manufacturing products and events. They
also sponsor the Anjo Tanabata Festival andreceive a goodwill ambassador. They
participate in cleaning, provide interns withwork experience and implement crime
prevention patrols.

Sakurai Plant

INOAC Polymer Vietnam (Vietnam)
They receive two Japanese undergraduates in the internship program twice a year and provide
them with some training. Through practical work at a Japanese company abroad, they provide
them with the opportunity for intercultural and social experiences.

INOAC Vietnam Co., Ltd. (Vietnam)
They receive Japanese undergraduates in the internship program for two weeks twice a year
and provide them with the opportunity to work with Vietnamese employees. This enables themto think internationally and contributes to fostering human resources who can be globally activein the future.

INOAC Automotive (Thailand) Co., Ltd. (Thailand)
They donated candles and lamps to Waranat
Temple for the lantern festival in July. Theirrepresentative visited an orphans' home inBoon Chu in August and donated money andgoods.
Volunteers among the employees also
donated their blood to the Chonburi Red
Cross in August.

Regarding work experience for junior highschool students and internships for seniorhigh school students, they are provided withthe opportunity to experience picking theparts for assembling an automobile andassembling at the final stage as part of school
events for the purpose of actually realizing thenobility of labor. In addition, they hold abazaar at the end of the year, and clean oncea week, too.

Nanno Plant
They sponsor the firework event in Kaizu Summer Festival in Gifu Prefecture every year where
this plant is located.
They receive junior high school students for work experience and senior high school students
for internships every year and foster a desirable feeling of working and feeling occupations
through experience learning, which helps them to understand cooperativeness.

Producing an employeefriendly workplace

Promoting work-life balance

System for compatibility support

List of compatibility support systems(enforcement year)

We are working to support compatibility between work and family
to have an employee-friendly workplace and promote women's
remarkable work. According to the regulations regarding childcare
leave, childcare leave is provided before the child is two years old.
Five days of sick/injured child care leave are provided if you have
one child and ten days of special (paid) leave are provided if you
have two or more children. We introduced a system of reduced
working hours for childcare by which the period can be extended
to up to three years if the child is a third grade or younger student
in an elementary school. We also institute five days of special paid
leave when a spouse gives birth to a baby.

People■ The number of people who took childcare leave

Maternity leave for spouse (before 1980)
Implementation of flextime system (1990)
Regulations regarding family care leave (1990)
Happy holiday leave (1991)
Regulations regarding childcare leave (1992)
Regulations regarding measures for maternity
health management (1998)
System for paid half days off (2000)
Family support holiday leave (2005)
Sick/injured child care leave (2005)
Regulations regarding childcare leave amended(leave period extension) (2005)
System of reduced work hours for childcare (2008)
Family care leave (2010): Male (men on childcare leave): Female (women on childcare leave): Male (men working reduced hours due to childcare): Female (women working reduced hours due to childcare)

23

17

30

People14

152017 User of childcare leave systemor the like (female)

25

15
20

13

15

16

2

16
14

People

10

1

5

1

1

16

1

8

9

1

2017 User of childcare
leave system or the like(male)

1

1

7

0
2012

2013

2014

2015

2016

2017

Year

Promoting annual paid vacation
While people clamor for work-style reform these days, the obligation oftaking at least 5 days of annual paid vacation in a year seems to belegislated.
Considering this movement, we encourage our employees, including
managers, to plan on and take at least 5 days of annual paid vacation fromFY 2017.

Producing an employeefriendly workplace

Diversified efforts

Promoting female employees

Employment of challenged persons

INOAC positively uses female employees and creates an environment where female employees
can contribute to the company, fully demonstrating their skills and knowledge for their work
after we bring out their potential. We hold a Seminar for promoting women's success at work
every year for female candidates for management positions to encourage female employee
thinking and career enhancement. We also hold a Seminar of promoting women's success atwork every year for male candidates for management positions to make a system by which we
can support female employee success.

In order to realize a society where
everyone's possibility is broadened, wehire challenged persons. Attentivenessto other people is created in employee
minds and consciousness and isenhanced by hiring challenged persons.

■ The number of promotions to female managers (including INOAC Technical Center Co., Ltd.)
2002

2007

2008

2009

2011

2012

1

1

2

2

1

1

2016

2017

0

0

Year

Unit: Number of people

8

PeopleWork regarding enforcement of the Law on
Promoting Women in the Workplace

In connection with enforcing the Law on Promoting Women in the Workplace in April 2016, wework on promoting women's success at work with the three goals below to encourage themto demonstrate their potential and develop their careers in many divisions for the five years
from April 1, 2016 to March 31, 2021.

Goal❶

To raise the proportion of female subsection chiefs to that of male subsection chiefs, wework to promote 10% of female candidates to subsection chief in this term.

❷

To find more female candidates for management positions, we will increase theproportion of female participants to 10% in the training courses for the mid-grade
employees or for subsection chiefs.

❸

We will make the usage rate of managers' annual paid vacation equal to the rate ofgeneral employees'.

■ Change in hiring
challenged persons

3.0
2.5
2.0
1.5

2.43%
2.5

2.43

2.0

2.0

1.92 1.93 2.06 2.12 2.09
1.8

2.0

1.8

2.0

2.0

1.0

PeopleTotal number of promotions
to female managers:%

0

Employment rate: June 1, every year

2011

2012

2013

2014

2015

Statutory employment rate

2016

2017 Year

User of continuous treatment system
Since January 2015, we have been working to create an environment in which senior citizens
can continue their careers with us. We are increasing wages, working positively for them tocontinue as effective and responsible employees.
■ The number of continuous treatment
system users (end of 2016):

Appointed as a manager by
the company:

18

PeopleAppointed as an instructor for
his/her successor by the company:

34

1
12
60

At request ofhimself/herself:

PeoplePeoplePeopleWelcoming international
We move international employees working at overseas local subsidiaries to the mother plant inJapan, and welcome them as trainees to improve their techniques and skills for humanresource development. By bringing back and utilizing their knowledge and experiences learnedin Japan, localization is facilitated and globalized know-how is handed down. We also
welcome technical interns from overseas local subsidiaries. They can contribute to work site
improvement after returning to their own countries through operations at specific production
sites for a certain period of time in Japan. We hope that they will have self-awareness as
members of our group and be fans of INOAC through such experiences.

Producing an employeefriendly workplace

Human resource training

Employee education

Global HR Development

The Global HR & General Affairs Division plans and executes the
Employee Education that enhances the ability of and provides aplace for development for the employees of the INOAC Group.
Regarding employee education, a yearly schedule is drawn up
every year and uploaded on the company's message board; thenall employees can read it at any time. Study and training that
employees would like to take and supervisors would like theirsupervisees to take can be drawn up all year round.

The INOAC Group deploys its factories and offices globally in more than 50 locations. In order to develop the human capitalthat is ready for progress in globalization, INOAC stresses its Global HR Development activities. The Global Mindset
Seminars try to improve the global sense of employees by exposing them to first-hand experiences outside Japan throughOverseas Study Trips and Short Term Overseas Business Trips beginning from their junior years. Candidates for being
stationed in overseas offices or factories are systematically trained through the Pre-Overseas Post Training with multiple
courses including experience from ex-expatriates before actually being sent to overseas business locations.

Stratified education
Both the Humanity Education that provides training that enhances
personal attractiveness, common grounds as working adults andstrength in character as well as the Capability Education thatprovides competence and proficiency expected in the jobs areoffered. Milestone Education is provided for each job title
including managers, newly appointed key positions, subsection
chiefs, group leaders and other mainstay backbone jobs when
they start the position. Employees of the same rank from all overthe country gather together for their Milestone Education to workon common tasks to make networks through training and lodging
together.

Sectional Specialty Education
The Sectional Specialty Education provides the basic knowledge,
domain knowledge and specific skills required for each specialty.
The educational curriculum has been built to reflect the need for
education from each division of the Group.
Sales Division: Trainings
that enhances the sales
skills at the beginner,middle and expert
levels.
Engineering Division:
Trainings that improves
the presentation andcommunication skills of
the backbone mainstay
level employees.

Harassment prevention

Personal development

INOAC implements the following measures against
harassment in the company.
❶Declaration and publication of company policy
INOAC declares the company policy concerning
harassment including sexual and power harassment.

The Distance Learning Program supports employees
who wish to work on their personal development. Afterthe completion of this program, the company refunds
applicable employees with half the cost of the distancelearning. Each year, copies of a Distance Learning
Guidebook that includes more than 100 courses are
distributed to employees. About 100 employees takeadvantage of this program every year.

❷Establishment of consultation desk

The consultation desk to address harassment in theworkplace is established in the personnel and generalaffairs divisions in each area on a nationwide scale.
Consultation desks for women and consultation desks
at the labor union side are also established.

❸In-house research on actual conditions

The Power Harassment Questionnaire is administeredannually to all employees to try to understand theactual conditions.

❹Harassment education

All the managers in INOAC are required to attend theHarassment Lecture.

Producing an employeefriendly workplace

Safety and health/Disaster prevention

Principles and basic policy for safety❶ Safety is the basis of the very existence of the Company.
❷All accidents and hazards are preventable.
❸Safety is achieved through the awareness andresponsible action of each employee.
Based on the safety policy above, safety being prioritizedover everything else is demonstrated and the practice ofstop, call, and wait after risk prediction is being followed.
With an annual activity plan defined incorporating activitiesof the Ministry of Health, Welfare and Labour as well asmonthly focus topics learned from past incidents, the safety
and health management practice is further enhanced
through repeated education/training as well as
improvements in weak spots discovered by safety andhealth evaluations.

Safety Practitioners Conference
1. Summary from the 2017 Conference①Reports from disaster prevention activities②Statistics and analysis of hazards in the INOAC Group

Whole-Company Safety Committee Meeting

Activities toward enhancing employee healthAs the safety activities lead by the top management andparticipated in by the whole company…

Each manager is responsible for leading the effort by showing
examples to improve the knowledge and skill.

◎Central Safety and Health Committee: Held four times a year

◎Consultation for mental health and harassment◎Field inspection by officers: Twice per year

◎Outdoor smoking space to separate smoking◎Safety Practitioners Conference: Six times per year

◎Reduction in road surface temperature as an environmental
measure◎Safety and Health Committee at each location: Monthly

Through these activities, INOAC enhances the company-wideawareness of safety, health and hazard prevention and builds
an organization culture
for preventing hazards
from occurring in the
future.

Heat insulating pavement(reducing road surface temperatureby reflecting infrared rays)
Field safety inspection by top management

Developing safety-conscious workers
with the Safety Dojo (Safety Gym)

③Notices and changes in the Safety and Health Act

2. As education and awareness raising to prevent
occupational accidents①Work hazard prevention• Kyushu and Tohoku (via TV)• Grabbing Karuta (Japanese traditional playing cards) on whichslogans related to safety and health are written

The Safety Dojo lets employees experience work hazards insafe settings using 15 simulators that enable the employees tosee, hear and feel the hazards. The experience helps build aworkplace capable of achieving the zero-hazard standard byenabling the employees to become more sensitive to potential
hazards, able to predict them and ensure safe work practices.

Hazard prevention activities
Acting under the Crisis Management Protocol helps minimize
damage by natural and other disasters and ensures early
restoration
1. Large earthquakes◎Alleviation of earthquake damage to buildings and facilities◎Safety and disaster prevention equipment and stockpiles forearthquakes◎Responses after earthquakes◎Stockpile of mattresses to contributeto the community

2. Measures against fires, storms, andfloods

3. Policy for FY 2018
①Explanation of activities ofsafety, health and disasterprevention in FY 2018
②Proposal from the Work
Union
Safety Conference◎Study and lead sessions byindustrial physicians and thehealth insurance association◎Preventive measures againstheatstroke

Safety dojo

◎Prevention of fires and explosions in
manufacturing facilities◎Preparations for and establishmentof structures against storm andflood damage◎Introduction of W-info, a weather
information distribution system
Introduction of W-infoCorporate governance

Governance[Corporate governance structure]

Board of Directors

Our basic view on corporate governance
INOAC considers enhancing corporate governance as an importantmanagement issue to raise the Group’s performance, value and trustfrom society.
■ Corporate governance structure (management structure)

ComplianceCenter andSectional Leads

CrisisManagement
Committee

Executive
Management
Committee

Affiliatedgroupcompanies

Lines ofbusiness

Accounting auditor[Internal Control System]
Cooperation

Supervision
CCO

President

The Board of Auditors is composed of three auditors including two external auditors. Each
Auditor attends important meetings including the board meetings and supervises the businessexecution of Directors by inquiring about their business execution.

Internal
audit

Control
Board of directors

Appointment andcancellation

Appointment andcancellation
Appointment andcancellation

Shareholders’meeting

Board of Auditors

Audit

Business Auditors’
OfficeExecutive Officer System
In order to separate supervisory and executional responsibilities, INOAC has introduced its
Executive Officer System. Each Executive Officer endowed with his/her own authority from theBoard acts as the head of the business unit, group company or major functional organization
while he/she represents facilitating decision making and business execution.

Auditors’ committee (internal and external auditors)

Cooperation

Comprised of seven members, the Board of Directors decides important issues in INOAC’s
business. Each board member reports the execution, financial and performance statuses ofhis/her division, based on which the Board supervises and controls the business execution of
the Company.

Measures are implemented to ensure the execution of the business complies with applicable laws
as well as the Company’s articles of incorporation.

Compliance

Information management

Compliance promotion structure andemployee education on the Corporate Codeof Conduct.

Control of documents with the Document
C o n t r o l P r o c e d u r e t h a t d e fi n e s t h e
responsible division and storage period foreach document.

Control structure as the corporate group
For affiliated companies, the Affiliated Company Document Control Procedure is developed.
Clarification of the execution rules and auditing by the Auditors as necessary.

Risk management
Accounting auditor

The Executive Management Committee manages each risk with the Crisis Management
Committee being held as necessary. Quickly obtain risk information and establish the response
structure through the permanent Negative Information Hotline.

GovernanceCompliance

Basic views on compliance
INOAC believes the compliancerequirement goes beyond following theapplicable laws to require each
employee act with a high level of ethics.
In order for INOAC to satisfy its
corporate responsibilities andexpectations from customers, only
following the applicable laws is
i n s u f fi c i e n t ; e m p l o y e e s m u s t a l s orecognize their social responsibilities aspart of the corporation.

Compliance education

Consultation support

In addition to the development of the internal regulations, an
educational program aimed to raise awareness of thecompliance requirements is provided to sales reps, people incharge of procurement, new recruits and other new hires in all
business locations. The educational program includes casestudies assuming issues in the actual work environments, taking
hints from compliance issues of other companies anddiscussions on questions raised in the daily work, working toraise the awareness of the people being trained.

In case of any compliance violation, the Company must
immediately respond to the situation. For this purpose, INOAC
has established the Help Line through which anybody may
consult with both the Legal Group and the external law officeabout his/her concern. Internal Reporting and Whistleblower
Protection Regulations are also in place so that whistleblowers
are not subjected to any adverse treatments because of theiractions.

Compliance and Ethics Program

Internal audit

Box for Issues to be Addressed

The Compliance and Ethics Program has been
implemented with the Compliance Centerestablished within the Tokyo Headquarters.
A Chief Compliance Officer (CCO), to lead theCompliance Center, a Compliance Officer for each of
the domestic and overseas areas and businesslocations and a Compliance Leader for each division
have been appointed.
A structure to enhance employee consciousness
toward the compliance is being established withnecessary internal regulations being developed.

Internal audits are conducted on lines of businesses
as well as domestic group companies for the
purposes of compliance, risk management and law
observance. Items found during the audit to need
improvement are tracked regularly to raise thegovernance standards of the whole INOAC Group.

The Box for Issues to be Addressed (consultation contact) has been establishedso that the Company may immediately respond and take measures to prevent
any further damage, going beyond compliance issues alone to also address
issues on product quality, safety and environment, sales, procurement and more.
Quality problem
Global Quality Assurance Headquarters

Box forIssues to be
Addressed

Safety and environmental issues
Safety and health hazard management officeInformation on complianceCorporate Planning Div., Legal Affairs

Information on sales, procurement and more
Corporate Planning Div.

[Inquiries]

INOAC CORPORATION

Corporate Planning Officehttps://www.inoac.co.jp/

2-13-4 Meieki Minami, Nakamura-ku, Nagoya, Aichi, 450-0003
Phone: 052-581-1086 E-Mail: pr@inoac.co.jp

Global Quality Assurance Headquarters
3-1-36 Imaike-cho, Anjo-shi, Aichi, 446-8504
E-Mail: GQ_system@inoac.co.jp