DKS Report 2023

DKS Co. Ltd.

Chemistry Provides a Solution - Creating Value

Contents

16 Philosophy in Practice—The History of DKS Business
Development
18 Review of the Medium-Term Management Plans

19 Overview of the Medium-Term Management Plan“FELIZ 115”
20 Financial/Capital Strategies and Total Shareholder
Return22 Financial and Nonfinancial Highlights

3 Value Creation with a Long-Term View

* In June 2022, IIRC was integrated into ISSB, the IFRS foundation.

28 Research and Development

32 Human Resource Management

36 Consideration for the Environment

38 Initiatives to Tackle Climate Change
40 DX Efforts

42 Contributing to a Collaborative Society

44 Organizational Resilience

56 Discussion with Outside Directors
58 Stakeholder Engagement

59 Dialogue with Stakeholders (Specific Examples)
60 Board of Directors, Audit & Supervisory Board
Members, and Executive Officers

Organizations Covered by this Report

DKS Co. Ltd. (“DKS” or “the Company”) and Group companies(collectively “the DKS Group” or “the Group”)
Period Covered by this Report

In principle, this Report contains our activities and data during fiscal
2022 (from April 1, 2022, to March 31, 2023). The data on the Industrial
Accident Severity Rate (ASR) and the Industrial Accident Frequency
Rate (AFR) were obtained from January to December 2022.


Reference Guidelines

International Integrated Reporting Framework by the IFRSFoundation, “Guidance for Collaborative Value Creation” by the
Ministry of Economy, Trade and Industry, “Environmental Reporting
Guideline 2012” by the Ministry of the Environment, “Environmental
Accounting Guideline 2005” by the Ministry of the Environment,“Environmental Accounting Guideline for Chemical Industries(November 2003)” by the Japan Chemical Industry Association (JCIA)

co
lla
bo

Contributing to the nation andsociety through industry
DKS Mottoes

Quality First, Cost Reduction,
R&D Efforts

Re
a
liza
tio
n

4 To Continue Creating Value

DKS Credo

Realizationof safe
, sec
u
r
e
lifes
tyle
s

24 Message from the President

Chemistry
provides asolution.

m
fro
lue
a
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ith
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12 Message from the CEO

enge respons
te cha
clima
and
tion
rva
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2 Continuous Value Creation

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ty
cie
so
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Drive business operatio
ns sus
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a

8 Risks and Opportunities

10 Material Issuesof view
point
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’
r
e
tom
cus
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6 Explanation of the Value Creation Process

Solutions to S
ocie
ty’s
Cha
llen
ges

ions”
“solutOurtion to technological inn
Contribu
ovation

4 Value Creation Process of the DKS Group

ety
soci

2 DKS’ Raison D’etre and Vision for 2030

DKS Report 2023 Editorial Policy

In 2016, the DKS Group began to publish its integrated annual report(DKS Report), which added information about the Company’s financesand management strategy to what had been in its Environmental andSocial Report. From 2017, we referred to the International Integrated
Reporting Framework promoted by the International Integrated
Reporting Council (IIRC*), which became part of the Value Reporting
Foundation in a June 2021 merger.
We are continuously publishing an English-language edition. As ourbusiness activities become increasingly international in nature, we aim
to communicate to all our stakeholders including those outside
Japan. Starting with the disclosure of environmental, social andgovernance (ESG), and nonfinancial information associated with DKS’
sustainable growth, we will also convey management’s vision,business results, growth strategy, capital policy and other information.
In this Report, by visualizing those “invisible assets” that raise
corporate value, we attempt to describe the Company’s current
conditions and its journey to the future, so as to be able to inform thereaders of the creation of value across the short, medium and longterms. Looking to the future, we will use the DKS Report as acommunication tool with all our stakeholders.
Please refer to our official website for detailed information about
the financial and nonfinancial information of the DKS Group.

Mo
noz
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u
ri (m
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1 DKS’ Identity



ient
ven
con
nt,
da
un
ab
an

Chemistry Provides a Solution - Creating Valueof

1

DKS’ Identity

5 Initiatives by Business
62 Business Activities Report

6 Data Section

Posted on the Website
The Emissions and Transfer Volumes of Notification
Substances under the PRTR Law in Fiscal 2022

68 Proprietary Technologies of DKS

Transition of the Environmental Impact at Branches
and Yokkaichi Chemical Co., Ltd.

72 Glossary

Initiatives for Sustainable Growth - Securing Safety
and Disaster Prevention

70 Fundamental Knowledge of Surfactants
74 Domestic/Overseas Network

76 Financial and Nonfinancial 11-Year Summary
78 Consolidated Financial Statements

81 Environmental Data/Compliance Awareness Survey
Results
83 Corporate Data/On Publishing the DKS Report 2023/
Editor’s Note

[Forward-Looking Statements]
Statements contained in this report regarding the plans, projections andstrategies of DKS that are not historical fact constitute forward-looking
statements about future financial results and are subject to risks anduncertainties. As such, actual results might differ significantly from these forwardlooking statements due to changes in various external environmental factors.
Consequently, DKS hopes for your understanding as it does not guarantee thecertainty of such forward-looking statements.

DKS Group Logo
The DKS Group logo symbolizes “Act for a Leap,” our step for globalization.
It describes the bridge for growth toward “Challenge to 1000.”DKS REPORT 2023

1

Chemistry Provides a Solution - Creating Value

DKS’ Raison D’etre and Vision for 2030
DKS Group Products Around Us

Vision for 2030

DKS Group products support a variety of other products used in our daily lives. Here are some examples found insociety and our living environment.

In the year 2030, Japan will be facing social challenges from major impacts to employment, health care, and social
welfare from a shrinking workforce due to an aging and declining population. Environmental issues such as global
warming, marine debris, biodiversity loss, and climate change are also important issues for companies to address.
DKS Group aims to use the power of chemistry to be a smart chemical partner solving various problems people face.

Additives for food,cosmetics, etc.

P.63

Coatings forbuilding materials
and furniture

P.64

Shampoos

Silicon wafer
detergents

P.62

P.62

Realizing active
lifestyles throughhealth foods

IT & electronics
materials
P.66

Surface modifiers
Flame retardants
P.65

P.67

Employees

Optical fiberconnectors

A smart chemical partnerthat solves various problems
for people

Consideration for
the Environment

P.66

Sealants forelectric insulation

Shareholders

P.36

P.64

Health foods

Environmental
conservation

P.67

P.36

P.64

Rock hardening
agentsRegional
revitalization

P.66

Synthetic
lubricantsFeedbinders

P.62

SocietyP.42

Conductive pastes
for solar cells

Oil spill
treatment agents

Customers

P.64

P.63

Contributing to safe
and secure lifestyles
through the field ofhealth care

DX Efforts
P.40

Precisioncleaning agents
P.62

Net sales for the fiscal year ended
Six Core Business Segments March 31, 2023 ¥65.0 billion
Life Sciences¥497 million (1%)

Electronic Device
Materials¥6,191 million (10%)

Functional
Materials¥22,574 million (35%)

Sales bySegment

Surfactants¥18,976 million (29%)

Amenity Materials¥8,079 million (12%)
Polyurethane Materials¥8,761 million (14%)

2

DKS REPORT 2023

億円未満の数字は有報 P17を参照しました。ご確認下さい。

Surfactants

P.62

Polyurethane Materials

P.64

Electronic Device Materials

P.66

We have been providing highly functionalsurfactants since the Company’s founding
in 1909.

We provide industrial materials andpolyurethane raw materials, for example, paints,
adhesives, civil engineering and construction
materials, and electric insulating materials.

We provide ceramic materials and conductive
pastes for applications in home appliancesand electronics components.

Amenity Materials

Functional Materials

Life Sciences

P.63

We provide materials and peripheral
application technologies necessary for a
comfortable living environment.

P.65

We provide products such as flame
retardants, radcure resins, and waterborne
polyurethanes for applications in home
appliances and daily necessities.

P.67

We provide naturally derived health foods andtechnologies for extraction, concentration,and powdering of natural products.

DKS REPORT 2023

3

Chemistry Provides a Solution - Creating Value

Value Creation Process of the DKS Group
Customers

Shareholders

Based on its technologies and trust accumulated over the past 114 years, the DKS Group applies originality andimagination to limited resources in delivering materials that enrich our way of life.

DKS Credo
DKS Mottoes

Employees

Contributing to the nation and society through industry  Quality First, Cost Reduction, R&D Efforts

Society

A smart chemical partner solving various human challenges
InputsBusiness Model

Outputs

Outcomes

Six core businesssegments

Fiscal year ended March 31, 2023
 Financial capital
Net assets: ¥38,296 million
Interest-bearing debt:¥29,865 million

Fiscal year ended March 31, 2023

SurfactantsMarketneeds

Manufactured capital
Manufacturing bases: 14(including 4 overseas)

P.62

 Financial capital
Net assets: ¥85,025 million
Dividend per Share: ¥80
Free Cash Flows: -¥2,159 million
Total Shareholder Return for the
Past 10 Years:101.2%



Sales
A 114-year history
and technologicalcapabilities able
to respond to
the timesIntellectual capital
Patents held: 982(of which held overseas: 444)
()

Polyurethane Materials

P.64

Functional Materials
ACTUAL (Existing Businesses)

Procurement Social and Relationship capital
Inspiring/Inspired Partners (specificbusiness partners with whom DKS
can keep a mutually-inspiring
relationship)
Cooperation with local
governments & universities

P.65

Electronic Device Materials

Uni-Top strategy

Medium-Term Management
Plan “FELIZ 115”

Providing unique products that do not pursue scale

P.19
P.66



4

DKS REPORT 2023

DKS’ Seven Critical Issues of Importance(management foundation)

Regional Society Contributions

P.42

Research and Development

P.28

DX Efforts

P.40

Human Resource Management

P.32

Organizational Resilience

P.44

Consideration for the Environment

P.36

Tackling NEXT and DREAM Businesses

P.67

ESG-based management initiatives
E: D evelopment and production ofenvironmentally friendly products,
100-million mulberry tree planting campaign
S: Appointment of female officers,
Work-style reform
G: Establishment of an Advisory Board,
Promotion of information disclosureIntellectual capital
Number of patent applications: 95 (ofwhich held overseas: 38)
R&D expenses: ¥3,236 million


Research andtechnology
development

Employment ratio for people withdisabilities: 3.15%

Natural capital
Energy consumption: 22,900 kL/year
Raw materials used: Petroleum,coal, ore minerals, wood, plants,
biological materials

 Manufactured capital
Yokkaichi Chemical Co., Ltd.:
expanded plant facilities
Capital expenditures: ¥3,172 million

P.63

NEXT (Peripheral Businesses)

Broad customer baseInspiring/Inspired Partners

Production
management

Amenity Materials

Diverse productgroups andcombinations

Strengths ofDKSbusinesses

 Human capital
Employees (consolidated): 1,104

 Ratio of female employees: 20.9%
Overseas employees: 198

DREAM (New Businesses)

MarketingLife Sciences

P.67

 Human capital
Ratio of females in managerial
positions: 11.7%
Retention ratio of employees withdisabilities: 90.9%
Percentage of paid leave used: 73.8%
Selected as a Health & Productivity
Stock for the fourth consecutive year

Social and Relationship capital
Regional revitalization, local
community revitalization Natural capital
Contributions to a recycling-oriented
society (CN2050)
Energy reduction rate: 5.2%
GHG emissions: 43,000 tons
(reduction of 5,600 tons)
Generated waste amount: 15,251 tons
(reduction of 1,413 tons)

DKS REPORT 2023

5

Chemistry Provides a Solution - Creating Value

Explanation of the Value Creation Process1

Business Model

DKS strives to be a company praised for our Uni-Top
strategy: providing unique products that do not pursue
scale. Our business development has the fundamental
value-chain cycle of: understanding customer and market
needs marketing strategies that leverage the Company’s
strengths development of products (prototypes, generatingorders) grounded in our R&D prowess efficient procurement
to facilitate production appropriate production andmanagement sales activities with strict adherence to delivery
deadlines further understanding of market needs.
We have developed products with added value and closealignment with customer needs by leveraging expertise fromour diverse technologies (see p.68), our transactions in a
broad spectrum of industrial fields, and our ability to combinerich lineups of product groups that number in the thousands.
Our existing businesses (ACTUAL) encompass a broad
B-to-B customer platform, while our peripheral businesses(NEXT) utilize R&D for specific customers, in addition to
specialized production plants. With our relationships withinspiring/inspired partners in particular, we have built up apartner (customer) base that anticipates the needs of(B-to-B-to-C) end-users and is able to mutually inspire andcollaborate with new approaches.
Furthermore, with regard to new businesses (DREAM) thatare our medium- to long-term growth areas, we will continue
to invest in new growth businesses, such as in life sciences,and pursue product development that enhances QOL andcontributes to society in ways that help solve issues such as
the aging population and environmental conservation.

2

Inputs

The following is an overview of the various types of capitalthat support DKS’ business.
 
Financial capital: Net assets as of the end of fiscal 2022
exceeded ¥38.2 billion. While maintaining a soundfinancial footing resting on a net D/E ratio of 0.5, we
respond to future risks and opportunities fromenvironmental changes (see p.8), and emphasize capitalefficiency, including utilizing interest-bearing debt, that
constantly keeps ROIC above WACC.
 Manufactured capital: With 14 manufacturing bases
inside and outside Japan, we are leveraging our 114 yearsof technology and experience to manufacture products ofvalue. Furthermore, with regard to capital expenditures, wehave stepped up facility upgrades and growth investments
since the fiscal year ended March 2015. In the 10 years
preceding the end of March 2023, we have implemented
cumulative capital expenditures of ¥41,800 million, withtotal depreciation surpassing ¥15,400 million (see p.20).
 Intellectual capital: Utilizing the range of expertise
accumulated since our founding, and with over 1,000 patents
held, we go beyond simply providing materials through ourdiverse product lineup. DKS has technological capabilities
6

DKS REPORT 2023

that allow us to customize the function and performance of
products in line with customer requirements and to makeproposals based on the ideal product combination.
 Human capital: Human capital is the most importantbusiness resource for DKS, and, based on the idea of
valuing people, we have increased our consolidated
workforce by 13%, mainly in Japan, over the past 10 years(see p.76). In order to meet increasingly diverse social
needs, we aim to maintain talented human resources anddiversity, and we strive to improve our human capital.
 Social and Relationship capital: We emphasize theimprovement of our information gathering and R&D
capabilities through trusting relationships built up over many
years with our agencies and inspiring/inspired partners, aswell as through collaboration with local governments anduniversities. We also aim to increase social recognition andestablish our DKS brand through appropriate supply chain
management and public relations activities.
 
Natural capital: As a chemical manufacturer, weconsume a variety of natural raw materials. We havedevised creative approaches to using limited global
resources efficiently and to contributing to a recyclingoriented economy. Through these efforts, and throughcontinuous improvements to energy consumption andwaste product management, we strive for environmental
conservation and biodiversity preservation.

3 Outputs
While the products and services provided by DKS tosociety are quite diverse, they can be grouped into six
core business segments: Surfactants, Amenity Materials,
Polyurethane Materials, Functional Materials, Electronic
Device Materials, and the Life Sciences.
Surfactants, a core business DKS has developed for morethan 100 years, are used in a wide variety of fields andaccount for about 29% of consolidated net sales. The
Amenity Materials business provides materials and peripheraltechnologies necessary for a comfortable living environment,
while Polyurethane Materials business provides industrial
materials such as paints, adhesives, civil engineering andconstruction materials, and electrical insulation materials, aswell as raw materials for polyurethane. Each of thesebusinesses accounts for about 12 to 13% of consolidated net
sales. The Functional Materials business provides flame
retardants, antistatic agents, lubricants, antioxidants, andradiation-curable monomers and oligomers for plastic
materials, which are indispensable in enhancing thefunctionality of rubber and plastics used in PCs, smartphones,
home appliances, and housing. Over the past 10 years, thisbusiness has almost doubled in growth, accounting for over
30% of consolidated sales. The Electronic Devices business,in response to the IT society, develops and manufactures ionconductive polymers, ionic liquids, ceramic materials, lithiumion battery materials, and conductive pastes for solar cells(For details on each business, see p.62-67.).

1

2

3

4 Outcomes
The paragraphs before outline our primary value creation
and returns on capital through business operations andoutputs in the year ended March 31, 2023. We aim to create
more value for our four stakeholders going toward 2030.
 
Financial capital: We are targeting total assets and net
sales of ¥100.0 billion, with plans for aggressive growthinvestments while maintaining the balance of capital anddebt. Although our long-term annual TSR rate is in the
double-digits, we aim to contribute to SDG 9 by leveraging
future investments and technological innovation, building
resilient infrastructure and facilitating sustainableindustrialization, thereby boosting returns on financial capital.
 
Manufactured capital: Although our sales volume forthe fiscal year ended March 31, 2023 has plateaued at¥3.1 billion, we will continue to expand new production
capacity to achieve growth of ¥12.0 billion over five
years, as planned under “FELIZ 115.” In addition, SDG
12 is particularly important for a chemical manufacturer.
By enhancing our manufactured capital, we aim for theefficient use and sustainable management of natural
resources by reducing, recycling, and reusing waste.
 Intellectual capital: From the viewpoint of effective
utilization and proper management of patents, the numberof patents held at the end of the period slightly decreased,
but the number of new registrations during the period
remained high at 95 (see p.30). In our vision for 2030, we
announced as part of our medium-term management plan
“FELIZ 115” our goal of becoming a “technology
developer pursuing progress and innovation.” Throughthis, we will strive to boost our ratio of R&D spending to
net sales to over 5%, so that we can deliver products and4

services with new value. In the Life Sciences business inparticular, we will support economic development and thegood health and well-being of people in order tocontribute to expanding the technological innovation citedin SDGs 3 and 9.
 Human capital: Based on the plans laid out in “FELIZ 115,”
we will adopt a performance evaluation system that rewards
contributions to the Company as we continue employee
happiness-based management in order to help boost
employee enthusiasm and satisfaction, thereby enhancing
human capital and increasing corporate value (SDG 3).
Additionally, as an outcome of efforts toward human assets,
we will further promote diversity and emphasize our
employee’s health and higher satisfaction rates. (see p.32-35).
 Social and Relationship capital: We will strive for regional
revitalization and local community revitalization, which areimportant social issues in Japan, and we would like toachieve collaborative value creation through strong ties withmunicipalities. Within this effort, Sericulture Innovation (seep.42) is one important activity, and we expect theestablishment of effective public-private-civic partnerships
will contribute to improving social value (SDG 8 and 17).
 
Natural capital: Responding to the 2050 carbon neutral
goal (CN2050) and reducing energy consumption areurgent challenges. In addition to promoting the reductionof GHG emissions and waste generation, the DKS Groupwill implement the Life Science business, as well as
Sericulture Innovation, with initiatives in cooperation withlocal governments such as mulberry tree planting and theeffective use of mulberry trees and silkworms. Throughthese initiatives, we promote environmental conservation
and CO2 reductions, contributing to environmental andenergy-related issues (SDG 7 and 13).
DKS REPORT 2023

7

Chemistry Provides a Solution - Creating Value

Identifying Significant Risks

Although a risk event could damage the broad value of a company, risk might also lead to opportunities. While
steadfastly avoiding and mitigating risks, DKS also identifies risks considered to be material and implements
initiatives to transform them into opportunities.

Significant risks

Raw material price fluctuations
1

2(primarily naphtha)

Reliance primarily on external procurement
for raw materials
Environmental and human rights risks

3

4

5

6

Large number of customers
Product composition consists of a large
variety of small-lot products
Intensified competition due to growth inemerging nations(Growth opportunities are hard to seize on a global scale)Strengthened laws and regulations

Aging facilities/equipment
9

IT security
10

Impact on economic activity due to the
spread of infectious diseases
11

Employment diversification; changes in thehuman resources market
12

8

DKS REPORT 2023

Identification of risks that should be recognized at the six business segments

3

Matrix analysis based on the importance of each risk (the degree of impact on
stakeholders) and the probability of risk becoming evident (possibility ofnegative impact due to occurrence/disclosure)

4

Extraction of significant risks from the viewpoint of material issues in the
integrated annual report

5

Analysis of impact and response to those risks when they occur

Easily impacted by raw material and market prices
B CP (Business Continuity Plan) measures become necessary Inventory surpluses and shortages
 Restrictions on procurement, use, and manufacturingof raw materials due to changes in regulations orsocial conditions in each country

Employees

Shareholders

Customers

 urvey trends of raw material and market pricesS Survey trends of other companies Gather information from customers Implement prompt price revisions (securing profit) Introduce pricing formula linked to raw material prices Coordinate with dealers, suppliers, and customers iversify raw material procurement sourcesD
Manufacturing systematically and procuring raw materials accordingly Coordinate with suppliers Promote business continuity plan (BCP) measures ime taken and costs incurred to respond to eachTcustomer Difficulty in narrowing in on target customers

Employees

Shareholders

Customers

Society eclining cost competitiveness due to risingD
production costs T ime required for response from each department(research, sales, and handling of complaints) due tothe wide variety of products

Customers

Employees eplacement by low-cost products from otherRcompanies Risks of losing competitiveness in domestic andoverseas markets due the improving technologicallevel and productivity of neighboring countries Concerns about patent infringements overseas

Employees

Shareholders

Customers

Employees

Shareholders

Customers

Customers

Society anufacturing trouble and quality issues arising fromM
aging equipment
 Rising rate of industrial accidents Decline of productivity

Employees

Shareholders

Customers

SocietyL oss of trust due to leakage of internal information
Interrupted business activity from unauthorized
external access Business delays due to IT system failure Pressure on earnings due to rising IT system operating costs

Customers ather information on legal revisions
GStrengthen internal oversight/checking systems
 Reinforcement of the Company’s compliance tilize PL prevention/management guidelinesUAcquire GMP certification
 Avoid liability risks through PL insurance Ensure safety in the food product field by acquiring HACCP certification Achieve CSR through core tool operations
 Build and operate a quality control system







 onsider structural reforms through digital transformation (DX)CPromote production system enhancements and improved production
efficiency by making the Kasumi Plant a mother plantShareholders

 aving customers in various fields makes it easier to obtain information fromH
each industry
Prioritize important themes Deepen relationships with inspiring/inspired partners
 romote a differentiation strategy through solution proposals, costP
reductions, Japanese quality and customization Open innovation with companies, universities, etc.
 Strengthen the IP Department; strengthen IP asset management (investigate
IP asset rights of other asset holders)

Employees

 xpand initiatives with awareness of society-wide sustainability (strategic GX targets)EDevelop products that contribute to the environment and expand their sales Respect the basic human rights, diversity, personalities, and individuality ofcolleagues working in the Company, and create a rewarding workplace freeof discrimination and harassmentSocietyImplement security literacy education for employees
Create process for responding to serious incidents, such as unauthorized access Confirm costs through IT asset management

 ossessing a lineup of products that can be used in each field enables aPvariety of solutions to be proposed Range of options for product increases Product composition that takes profit performance into account ultivate close relationships with customers and accelerating the shiftCtowards high-profit products through solution proposals, productcustomization, etc.
 Uni-top strategy (pursue uniqueness, not scale) Intellectual property strategies
 hould the same thing happen with another company’s product, it can beSregarded as an opportunity to replace it with a DKS productImprove market share through legally compliant product development Improve trust through rigorous compliance practices Promote the development and supply of environmentally and user-friendly products xpand business opportunities by leverage of certificationEAbility to provide customers with the value of a specialized industry
 Improve the level of trust from customers and deliver the feeling of security
and assurance

 n opportunity to make business continuity decisions, enabling theA
beginning of a portfolio review
 Visualize aging factories with digital technology and improve profitability Perform regular repairs utilizing data and strengthen management ofpreventive maintenance stablish digital infrastructure based on digital road map
EImprove efficiency and profitability by promoting DX
Establish a security system trusted by customers Utilize new technology, such as generative AI













Interrupted business activity from employees
contracting disease Disrupted supply chain from suppliers/distributors
contracting disease Impacts on performance from delays/interruptions in
product supply Development delays due to reduced communication
with customers

Employees

Shareholders

Customers

SocietyIntensifying competition for securing talented humanresources due to a shrinking workforce Increased turnover due to job mobility Diversification of values with increase in number offoreign workers



Employees



Shareholders

Customers romote work-style reform through working from home and telework
PReduce fixed costs by consolidating and reducing bases Increase operational efficiency by utilizing online meetingsSociety trengthen coordination with various associations and educationalS
institutions to help secure human resources Implement a human resources training program Promote Health and Productivity Management Promote diversity and respect human rights Promote work-style reform (develop systems for working from home, childcare leave, reemployment after life events, etc.) Accommodate hiring of senior workers and extension of retirement


Employees

 trengthen measures based on BCPSDecentralize and review manufacturing and distribution bases, anddecentralize inventory holding

10







12



 evise product composition under “FELIZ 115”R
Thorough profit management for each product Raise prices for products with a smaller contribution to earnings
 Boost productivity by discontinuing products ost and time impacts from switching to substituteC
products in order to comply with regulations

L oss of trust from customers and society due tonegligent quality control Particular know-how needed to enter fields that
require a higher level of quality control, such asenergy, automobiles, pharmaceuticals, and food elect and focus on themes
SDeepen market strategies (through “FELIZ 115”) including revenue
management







 ssessment of impact of climate change on business and planning ofA
countermeasures (scenario analysis) Roll-out of initiatives based on green transformation (GX) strategy Promotion of initiatives based on The Ten Principles of the UN Global
Compact7

 educe costs through procurement of low-cost raw materials
RDiversify raw material procurement sources Strengthen BCP measures Strengthen supply chain management




3

8

5

1

 ost reductionC Gradual decrease in costs Optimization of inventory levels
 Pass on prices if self-help efforts are insufficient estriction of business activities due to insufficient orRdelayed responses to environmental and humanrights issues Increase in costs due to introduction of carbon pricing

249Opportunities







11

Risk significance Large(impact on stakeholders)

Customers

6

Small



Employees

High

Low

Responding to risks

Employees

8

Confirmation of risks recognized in the organizational risk management system

2

Impacts from risks/Impacts on stakeholders rofitability changed by the rate of cost fluctuationsP Price negotiations necessary to maintain and improve
profit margin (Sales) price negotiations Decline in market share, lost
ground due to price negotiations


7

Stricter quality controls

1

Prioritization of
the 1 – 12significant risks inthe table below

Probability of arising risk

Risks and Opportunities

 ystem reforms in response to societal changes
SReview and implement personnel system reforms Promote establishment of comfortable work environments Strengthen Health and Productivity Management

DKS REPORT 2023

9

Chemistry Provides a Solution - Creating Value

Material Issues
ESG Basic Policy

Priority themes

We are confronted with a broad range of issues, from environmental problems suchas global warming, resource depletion and a crisis of biodiversity to an increasing
population that causes food resource and energy problems amid rapid globalization
and an increasingly information-based society. We look to take on these challenges
and to protect our environment and way of life while improving safety and levels ofcomfort. To do these things, we believe that “chemistry provides a solution” andshall contribute to the establishment of a sustainable society.

Material Issues for DKS

Research and Development
P.28

1

Human Resource Management

P.32

 uman resourceHdevelopment Empowering profitability

Step 3
Draw a material
issues map

Step 4
Identify the material
issues2

Consideration for theEnvironment

P.36

3

Important Issue Identification Aims
• Environmental issues
Climate change, energy depletion, 
biodiversity, etc.
• Social issuesChanges in social structure due topopulation growth, increased security
risks due to technological advances
and the advent of the informationsociety, public health, food crises,
elimination of disparities, etc.
 orporate Philosophy andC
Management Policy

Importance to stakeholders

Issues for society

Contributing to a
Collaborative Society

1 Research and Development

Extremelyhigh2 Human Resource

Management

3 Consideration for the• Corporate mission stated in thefounding spirit and the Company Credo• Happiness-based management

Collaborative Society

DX Efforts

substances egional revitalization
R

P.42• Appoint female officers and hire overseas employees• Work‑style reforms• Implement personnel system reforms with an emphasis on
outcomes• Employment initiatives for people with disabilities• Implementation of a DX human resource development program• Secure and train global human resources

Employees • Strategic staffing

SocietySociety• Percentage of employees who exceed
abdominal girth standards: 28.8%• Percentage of employees over 40
years at risk for or experiencing
metabolic syndrome: 27.0%• Percentage of absenteeism: 1.0%
• Standard score of work engagement:
50.8• Reduction of 17.1% compared to
FY2013• 15.5% reduction in waste generation
per unit• Final waste disposal rate: 0.2%

• Promotion of initiatives with local governments• Industry-government-academia collaboration• Initiatives for Sericulture Innovation• Switch to renewable resources and natural materials• Effective use of the peeled skins of sudachi (Japanese citrus)• Work to improve added value throughout the supply chain from“Tier N” to “Tier N+1”

C
 o-prosperity with the
supply chain

P.40



 se and promote digitalUtechnology

Employees • Create a digital roadmap to 2030
Shareholders • Promote cross-company DX projects• Acquire DX certification
Society

Cybersecurity measures

Employees • Strengthen security measures based on Information Security
Shareholders Policy
Customers • Security literacy education for employeesDigital literacy education

Employees • Use digital tools (RPA, workflow, BI tools)
Shareholders • Acquire specialist skills
Society horough qualityTassurance system

Customers romoting occupationalP
safety and healthF urther deepening ofcorporate governance evelopment of the Life
D
Science business evelopment of theDNEXT businesses

6 Organizational Resilience
7 Tackling NEXT and DREAM

Businesses

5

Following the principles of our Company Credo and Company Mottoes, and taking
into consideration the technologies and various experiences we have amassed over
114 years as a chemical manufacturer, we have taken the SDGs (17 goals and 169
targets) and linked them with specific themes related to contributions that DKS canmake to solving social issues. From this, we identified five SDGs to which we will
dedicate particular effort.

Five focus SDGs determined from discussions in 2017:

3: Health and Productivity Management, an aging society with a declining birthrate
7: Renewable energy, environmentally conscious raw materials
9: Development and provision of industrial materials for building social
infrastructure
12: Environmental pollution, natural
resource depletion
17: Inspiring/Inspired Partners

DKS REPORT 2023

Employees• Female manager ratio of 11.7%

4 Contributing to a

Priority Themes & Focuses of SDGs

10

Recent performance• R&D expenses to sales ratio of 5.0%

• Streamline productivity improvement• Performance-based personnel evaluation system Health and Productivity
Employees • Improve health awareness by adopting a health information app • Percentage of employees who exceed• Efforts to establish exercise habits (DKS Calisthenics)
abdominal girth standards: 25.0%
Management initiatives
Society• Percentage of employees over 40 years at risk
for or experiencing metabolic syndrome:
22.0%• Reduction of absenteeism ratio to 2.0% or less• Improvement of work engagement score of 51(all targets for FY2024) Responding to• Reduce greenhouse gas (GHG) emissions
Shareholders • Green transformation (GX) initiatives• Expand use of renewable energy(Scope 1, Scope 2) for the entire DKS Group in
decarbonization andSociety• Product development for moving beyond green vehicles
Japan by 30% compared to FY2013 by FY2030
reducing environmental(strengthen the battery cell business)burdens• Promote modal shift (based on Eco Rail Mark criteria)• Study switch to non-petrochemical and renewable raw materials Contributing to a
• Contribution to a recycling-oriented society through• 10% reduction in waste generation per unit
Society
responsible care activities(FY2030 target)
recycling‑oriented• Traceability systems (review inventory volume, product loss
• Final waste disposal rate: 0.1% or less (FY2030
societyrates, product profit margins)
target) Appropriate• Respond to more stringent legal regulations
Society• Reduce emissions of PRTR Regulation-designated substancemanagement of chemical

4

5 DX Efforts

Importance to DKS

KPI• R&D expenses to sales ratio of 5.0% or higher• Strengthen initiatives with inspiring/inspired partners• Promote customer-oriented R&D• Promote product development with lower environmental
impacts, such as additives for biodegradable plastics

EnvironmentHigh

DKS initiatives

Shareholders • Establishment of research centers for each customer andAdvisory Committee
Customers eveloping products that Customers
D
contribute to theSocietyenvironment Promoting an intellectual
Employees • Prompt applications for IP rights and aggressive pursuit of quickproperty strategy
Shareholders IP rights acquisition Diversity• Female manager ratio of 10% or higher
Employees • Provide workplaces and opportunities for the active
participation of female employees
SocietyAt DKS, we are identifying material issues, tackling important issues from a long-term
perspective in management. Based on existing social issues and our corporate
philosophy, we have identified seven important themes from the two perspectives of
their significance to DKS and our stakeholders. At the same time, we have specified
the material issues of challenges toward addressing these themes. In the identificationof those material issues, we have referenced the UN’s Sustainable Development Goals(SDGs), ISO 26000, and other global guidelines, given the important demands theinternational society places on DKS as we work to advance business globally.
Step 2
Identify the importancefor stakeholders

 ustomer-oriented R&D
Cframework aligned with
Uni‑Top strategies

Important Issue Identification Process

Step 1
Identify the importancefor the Company



Relevant
stakeholders

Organizational Resilience
P.44

6

Tackling NEXT and DREAMP.64-65, 67
Businesses
7• Global supply chain management• Food hygiene management initiatives (HACCP certification)• Initiatives towards a management system equivalent to handlingpharmaceuticals
Employees • Continuous improvements through occupational safety andhealth management systems• Implement hands‑on safety education
Employees • Strategies for improving medium‑ to long‑term corporate value
Shareholders • Improve effectiveness of the Board of Directors and establish an
appropriate remuneration scheme
Customers• Strengthening dialogue with shareholders and investors
Society• Create a governance system in line with ESG strategies
Shareholders • Initiatives to extend healthy life expectancy
Customers • Establish B-to-C business• Notification of food products with functional claimsSociety• R&D to improve cognitive function
Shareholders • Open innovation
Customers • Respond to industry reorganization• Execute M&A that contributes to growthSociety• Support diversification of consumer needs• Update digital roadmap and implement action • Started operation of Integrated Work
plan
Management System (library of 1,035• Advance company-wide DX project theme
workflows and schedule monitoring)• Started operation of management(development system operation)• Update DX certification
information platform (data utilization
platform and shortening of document
preparation time equivalent toapprox. 7,000 hours/year)• Review Information Security Rules and incident • Security training by the Risk
response flow
Management Control Committee• Provide security education to new employees • Add security training to DX training• Conduct targeted attack e-mail training
for new employees• Hold in-house study sessions and developer• Number of DX training participants
exchange meetings(cumulative total as of end of FY2022:• Acquire relevant qualifications (Deep Learning503)• Acquisition of relevant certifications
for GENERAL (G-Certificate), Deep Learning(E-certified: 2, G-certified: 18)
for ENGINEER (E-Certificate), Fundamental• Create guidelines for use ofInformation Technology Engineer
generative AI
Examination, etc.)• Zero occupational accidents (lost time)• 10% increase in the number of dialogues
compared to last year

• Sales of ¥1.5 billion in 2025

• Sales in 2025
Solar cell, exhaust gas business: net salesof ¥10.0 billion
5G business: net sales of ¥10.0 billion

DKS REPORT 2023

11

Continuous Value Creation

Message from the CEO

Reflections on the first year of my chairmanship and the role I am
considering as I embark on the second
We have been responding to the upheaval causedby the military conflict in Ukraine, occurring justtwo days after our announcement of the change ofpresident on February 22, 2022. And now, as
COVID-19 is downgraded to Class 5, we seek to‘bottom out’ from an unprecedented crisis.
An unexpected situation arose that was different from thethree risks anticipated in our current mid-term management
plan. First, I will describe my starting point as an executive ofa chemical manufacturer. Next, I will detail our strategies on
how we strive to ‘bottom out’ and rebound from the current
situation. Finally, I will discuss DKS and its future. First, mystarting point. It has been one year since I retired as President
in February 2022. I have been involved in the development ofmanagement plans ever since I joined DKS in 2001. The firstwas named “ADD21.” This was followed by “CHANGE100
Stage I,” “CHANGE100 Stage II,” “REACT1000,” and now“FELIZ 115.” I continued to be in charge of planning thanks
to President UETA Takehiko‘s decision when I joined theCompany. Since I did not know anything about chemistry, hethought that my experience at financial institutions would be
useful in the planning and strategy department .

We continue to create value as a chemical
manufacturer soaring into the future
SAKAMOTO Takashi

The “ADD21” management plan started in 2004. Following
the change of president, work began in May on creating thenext plan for the remaining year of the second phase of the“DKS Rebirth Plan.” I was not initially a member of the teamworking on the plan, but I joined in September that year. This
was the first time I saw the draft put together over theprevious four months. When asked for an opinion on the draftby the new president, TSUDA Akihiro, I instead replied. “I’dlike some direction on creating the plan.” “It’s about how tomake the Company better.” “Quite so. But perhaps weshould give three things you’d like to do to improve things as
the new president.” “Okay, go for it,” he said. The name
“ADD21” was chosen by the president, standing for“Ambitious Dream DKS.” I gave my first opinion.

“I think ‘ADD’ is an appropriate acronym meaning toenhance and emphasize. ‘Dream’ is good, but how about
using ‘Dynamic’ instead to give ‘Ambitious Dynamic DKS’?”“That’s good!” The name of the plan was finalized. “I’ll sort
through the materials we have already created and put
everything in order,” I said. During the next eight years of
OYANAGI Masatoshi‘s presidency, I continued to be incharge of management planning and policy development. In
all, I have been involved in the formulation of five
management plans, but growth potential, which was theprimary concern during the development of the first ADD21plan, is still something I am attentive about today. For thequarter century since the 1980s, total assets remained virtually
the same. Fixed assets did not change, and no capital
investment was made. Our analysis pointed to this as being
the cause of our sluggish performance.
DKS’s total assets at the end of June 2023 exceeded ¥90
billion, 2.25 times that of the 1980s. The details of our fixed
assets have changed, and they have doubled in size. To
maximize profitability, we implemented capital restructuring
by taking measures such as follows. We made Yokkaichi
Chemical Co., Ltd. a wholly owned subsidiary, purchased
100,000 square meters of land in Kasumi in Mie Prefecture,and built a new plant. In addition, we added Ikeda Yakusou
Co., Ltd. and Biococoon Laboratories, Inc., both life sciencesrelated companies, to our portfolio. With an eye on
continued growth, we invested in the fields of electronics andinformation, environment and energy, and life sciences. This
resulted in record profits for three consecutive years during
the five-year REACT1000 plan, which started in 2015. Thencame the current FELIZ 115 plan. Observing the successful
results of the previous REACT1000 plan, I conceived the flowof the next plan. For the first two years, we shall reaffirm ourcurrent situation. Then, with careful preparation, steer backon track for growth starting from the third year.
We anticipated three risk factors that could cause thecurrent five-year plan to falter. One was an increase in theprice of raw materials, a rule of thumb from more than a

Chairman CEO

12

DKS REPORT 2023

DKS REPORT 2023

13

Continuous Value Creation

Message from the CEO

decade ago. Naphtha had continued to climb from ¥20,000
to ¥90,000 over three consecutive years. Second, with thelifting of zero interest rates that followed, interest rates may
rise. Third, we predicted that the economy would deteriorate.
Since we had consolidated our foundation for two years, thegraph of our progress was an inverted L-shape. In the end,
the three risks we anticipated materialized. But more thanthose, the unexpected changes in geopolitical dynamics have
led to an unprecedented situation. We shall overcome thiscrisis! I believe that this situation is a test for DKS in
preparation for a better future. The key to management is to
identify, determine, and forecast issues. These form ourunchanging origin.

Navigating this crucial period and confirming progress
We will shortly overcome the harsh realities of the
new millennium, which we perceive as completely
different from those of the 20th century. We willtake measures to eliminate the deficit. We will
support President YAMAJI and get our business
infrastructure, which we built with an eye to the
future, back on track.
The economy deteriorated as a result of the outbreak of the
COVID-19 pandemic in January 2020. We expected a return
to normal in about 2 or 3 years. Two years after the outbreak,in February 2022, we selected President YAMAJI as the next
to lead. Then, on February 24, just two days after theannouncement of our new president, the military conflict
between Russia and Ukraine erupted. The international
community thought such a thing could not happen in the 21st

We are committed to building a
Company that survives together
with the Earth.

14

DKS REPORT 2023

century because a repeat of the tragedy of atomic bombing
in the 21st century would lead to the extinction of humanity.
But what could not happen, did. This is an unusual situationthat cannot be resolved by economic processes. The
equipment that we thought would be good for five or ten
years of growth investment was turned off. The
unconsolidated financial results for the year ending March 31,
2023, were the worst to date.
We set measures in terms of ultra-short and short- to longterm perspectives. At the time of the previous REACT1000
plan, the variable profit margin (profit after accounting forvariable costs such as raw materials) was at the level ofaround 45%. In the previous fiscal year, this deteriorated to
the level of 35%. As part of our swift efforts to achieve
profitability on an individual basis, we are implementing thefollowing ultra-short-term measures: 30% cut of executive
salaries, pass-on of the increased raw material costs throughprice adjustments, and reduction of non-essential expenses.
We operated with the expectation of a turnaround in the
April to June period of 2023, which is the 160th fiscal periodof DKS. Although ultra-short-term measures are being
implemented, we have not seen a turn-around on aconsolidated or individual basis, and operating income is in
the red. Measures from a short-term perspective are to realize

the next-generation development themes set out in theprevious five-year planning period. As a long-term strategy,
DKS will secure profits by bringing the electronic informationand environmental energy plants in which we have alreadyinvested back on track. In parallel, we aim to turn the Life
Sciences business, which is embarking on a new field, into a
profitable venture, making it a core business by 2030.

A chemical manufacturer soaring into the future
Living in harmony with the Earth through recycling(renewal) or a circular society.
Chemistry seemed to be an area where, unlike otherindustries, we could remain in perpetuity. Automobiles andelectricity are important, and if we can respond to the movesof cutting-edge companies in such fields, we will survive. We
believe that we can survive as a chemical manufacturer thatmakes the right materials for the manufacturing carried out
by the user. Such a corporate structure seemed to beconsistent with the value created by the six kinds of capital in
the International Integrated Reporting Framework’s octopus
model. It is a path of value creation that uses capital toincrease profits and growth. I have been paying attention to
the recent spread of the framework of the Task Force on
Climate-related Financial Disclosures (TCFD). There is a trend
toward carbon neutrality and the reduction of climate change
risk and greenhouse gas emissions to zero. In developed
countries, this trend has evolved into the Taskforce on
Nature-related Financial Disclosures (TNFD).
This is a shift from responding to climate change topreserving nature. The sustainability and survival of the Earthitself is beginning to be recognized as important. The
question is whether a growth-oriented economy can protect
the Earth and its ecosystems. The term ‘Nature-Positive’ hada profound impact on me. During the five years of the“REACT1000” plan, we divided our business areas into three
categories: existing (ACTUAL), peripheral (NEXT), and new(DREAM). In the growth sector classified as NEXT, five plants
and four divisions are in operation and are profitable. Overtime, NEXT will become ACTUAL, the existing businesses.
We have also emphasized second-stage NEXT development.

The question is how quickly we can create second-stage
NEXT businesses even taking into account the long-termsustainability of nature. This depends on the structure andorganization of President YAMAJI, who has a background inresearch, and his approach to resource allocation.
Our Life Sciences business comes under the category ofDREAM. Biococoon Laboratories, Inc. and Ikeda Yakusou Co.,
Ltd. form the cornerstone of these operations. This is a newarea for the Group, and we will proceed with three pillars: salesof goods held, CMO and CDMO contracted business using thefacilities of both companies, and the conversion of intellectual
property into cash. We believe that the more the world moves
toward TCFD and TNFD frameworks, the more a balance
between analog and digital is required. The connection
between the two, that is, human-contrived digitization, makes
sense because of its analog origin in a living organism. The Life
Sciences business is indispensable as long as humans continue
to live. The DKS Group has been conducting business with theprinciples of SDGs in mind for more than half a century. We use
plant resources as recyclable and circulatable materials for our
products. Carboxymethyl cellulose (CMC) is made from pulp.
Cellulose nanofibers (CNF) are also plant-derived materials.
Sucrose fatty acid esters (SE) are made from sugar. Of course,
in the Life Sciences business, the raw materials are mulberry
and other plants, spores, and insects.
The development of our Life Sciences business is essential
to the future of DKS.
We will put our management efforts into restarting thefacilities that we have already invested in and further
investing in facilities for the future as soon as possible, withthe hope that we continue to be a company that meets the
expectations of our stakeholders.

DKS REPORT 2023

15

Continuous Value Creation

Philosophy in Practice—The History of DKS Business Development
2006 R&D labs relocated to Kisshoin, Kyoto,1909 Founded1969 Nippon Levulose Co., Ltd.

(later Shiga Plant of DKS) established1914 General partnership company Ohno

Kogyo Seiyakusho established1959 Yokkaichi Chemical Co., Ltd.

established to manufacture andsell nonionic surfactants(former Nippon Levulose Co., Ltd.)

1986 Kyoto Elex Co., Ltd. established to manufacture
1970 Constructed sucrose fatty acid ester plant(later Shiga Plant)

1960 Ohgata Plant opened

Japan’s first solvent-method
manufacturing of CMC[CELLOGEN] started

1939 Yokkaichi Plant opened

1973 G embu Co., Ltd2015 
 Newly established
the Kasumi Plant in Yokkaichiand sell electronic materials

1988 Dai-ichi Ceramo Co., Ltd.

2009 100th anniversary of

established to strengthen
the electronic materials sector

1978 Capital participation in1918 Dai-ichi Kogyo Seiyaku Co., Ltd. establishedto develop new technologies

1985 Dai-ichi Kagaku Kogyo Co., Ltd. established

Chin Yee Chemical
Industries Co., Ltd.
in Taiwan,
accompanying thetextile industry’s shift
to Southeast Asia

the founding

2011 Yokkaichi ChemicalCo., Ltd. become
wholly owned
subsidiary1996 P.T. Dai-ichi Kimia 2002 

Raya established  Elexcel
in Indonesia
Corporation
established2018 

Net Sales(Billions of yen)

Biococoon Laboratories, Inc.
 
and Ikeda Yakusou Co., Ltd.
become wholly owned
subsidiaries

70
60
50

established40
301949 Listed as a public company

20
10

Product development and business deployment that address global events and expand net sales

01950/3Socialchanges

1960/3

1970/31900s

1930s–1950s

With the advent of World War I, the spinning industry
undergoes dramatic growth. Textile goods exceed
50% of Japanese exports.
1909 SILKREELER cocoon unwinding agent (chemical
agents for spinning)
1915 Gembu Marseille Soap (industrial soap for textile)

Following World War I, the industry undergoes
a period of modernization, during which time
the textile industry sees an accelerating shift
from natural fibers to synthetic alternatives.
1934 MONOGEN higher alcohol-based
detergent1950 CELLOGEN synthetic thickener

Rapid Growth of the Spinning Industry

Industrial Modernization, Shift to Synthetics

Trademarks of the Company (from left: Seiryo, Suzaku, Byakko and Gembu)

Developmentof DKS

16

1980/31909s–1950s
Founded as an Oil Agent Manufacturer, Aimed to Become aComprehensive Chemical Industry Manufacturer
Founded in 1909 based on the “Dai-ichi Kogyo Spirit,” theCompany developed and sold the silkworm cocoon unwinding
agent, a chemical for spinning waste cocoons. The Company
responded to textile industry needs by developing and selling a
number of textile oil agents using sulfation and compounding
technologies.
In 1915, the Company introduced the first domestically produced
soap, Gembu Marseille Soap, into the textile industrial soap
market, which had been completely dependent on imported soap.
The Company strengthened efforts to expand into householdproducts such as shampoo and laundry and bath soap, which
provided a breakthrough contribution to business performance
during wartime and postwar turmoil.
With the development of the textile industry, the Company
established a position as a textile oil agent manufacturer. During
this period, the Company developed the nonionic surfactant
NOIGEN, the cationic surfactant CATIOGEN, and various

Main products of this timeprogenitors for other surfactants, setting the stage for its rise to the
top of the industry.
1960s
Establishing a Foundation for Future Growth
In the 1960s, against the backdrop of intensifying price competition
in industrial fields, the Company expanded the scope of anddiversified its industrial products. In anticipation of the future
potential of the polyurethane market—positioned as a downstream
sector within the petrochemical industry—the Company commenced
its polyether business. Moreover, the Company launched one
business after another that would serve as a foundation for the
future, including flame retardants and sucrose fatty acid esters.
1980s–1990s
Becoming a Leading Highly Functional Chemical Products Company
In the transition to high-value-added products, the Company
enhanced research and development in the priority areas of“Resources and Energy,” “Electronics and IT,” “Food,
Pharmaceuticals and Cosmetics” and new materials. The Company

1990/3

2000/3

2010/32020/31960s–1990s

2000s

Following the oil shocks of the 1970s, the industry transitions to highvalue-added products. In the 1990s, greater interest is placed on
environmental consideration and safety, which accelerates the greater
functionalization of existing materials.
1969 PYROGUARD flame retardant for plastics
1970 DK ESTER food emulsifier
1981 NEW FRONTIER UV/EB-curable monomers and oligomers
1982 SUPERFLEX waterborne polyurethane1990 EIMFLEX polyurethane resins
1992 HITENOL polymerizable surfactant

Japan’s chemical industry begins to see the development of highly
functional sectors that actively create and deliver added value to society.
2005 ELEXCEL IL ionic liquid2013 RHEOCRYSTA cellulose nanofibers
2017 TRIBIO polylactic acid resin modifier
2018 I.
 Japonica-Bombyx Fungus (health food) Sudachin (citrus sudachi
peel extract powder)2021 A nnouncement of Naturido, a new active ingredient expected to
improve cognitive function
2022 TENCHUKASOU (health food)2023 Kainou Tochukasou (food with functional claims)

developed various highly functional surfactants and polyurethane
products. In aiming to become a leader in highly functional
chemicals, the Company began collaborating with other industries
as a way of addressing new needs. Moreover, the Company
developed nonionic surfactants with a low environmental impact incollaboration with an overseas manufacturer.

Company transformed its corporate structure placing emphasis on
the DKS Credo and created a platform for further growth.
In 2015, the Company formulated a five-year plan for new value
creation, and in the same year, the new Kasumi Plant wasconstructed in Yokkaichi of Mie Prefecture, as a mother factory withthe aim of integrating production, sales and development
functions, preparing the foundation for a second renaissance.

Growing Environmental and Safety Concerns Leadto High-Value-Added Materials

2000s
Qualitative Change and Second Renaissance
Since 2004, the Company has constructed a business portfolio for ahighly profitable structure and promoted the development andexpansion of new businesses with high added value. With
electronic and IT materials as the next generation of businesspillars, the Company began to take steps to transition from a
traditional surfactant company to a leading industrial chemical
supplier. In 2009, the 100th anniversary of our founding, theCompany started a six-year management plan with the aim ofqualitative change and promoted the transition to a businessdivision system, management infrastructure development and nonpetrochemicals, thereby strengthening our financial position. The

Highly Functional Chemicals Sector Developments
Resolve Social Issues

Life Sciences Business Launched, Full-Scale Shift to DREAM
Businesses
With its full-scale entry into the business field of life sciences in
2018, the Company acquired Biococoon Laboratories, Inc. and
Ikeda Yakusou Co., Ltd. as wholly owned subsidiaries. As an
initiative that links achieving healthy longevity and revitalizing
communities, this has become the foundation for building thefuture that our company is focusing on, together with theelectronics/information and environment/energy fields.
We completed the notification for a food with functional claims for a
product using I. Japonica Bombyx Fungus, which contains Naturido. It has
been reported to help with maintaining visual memory and cognitive speed.

Dai-ichi Kogyo (DKS) Spirit and DKS Mottoes

Thoughts on Cost Reductions

A Corporate Culture of Respect for Quality

Source of Original Technologies

The Dai-ichi Kogyo (DKS) Spirit states that “We must demonstrate
the traditional spirit of the Japanese people—the Yamato spirit—in our industry, always realize coexistence and co-prosperity
between ourselves and others based on the concept of service,
and maintain sincerity to contribute to the prosperity of thenation, society and mankind.” Sincere efforts to manifest thisspirit continue to be passed down through our three Company
Mottoes: “Quality First,” “Cost Reduction” and “R&D Efforts.

To truly promote the spirit of service as a manufacturer, we must
not only manufacture quality products, but also, as our foundersays, we must “make our existing quality products widely known
to the public,” and at the same time “distribute quality
products so that the public can purchase and consume them
freely and easily.” Since the Company’s founding, the idea of
not only pursuing cost reduction, but also doing business forthe benefit of the world and people, has taken root.

As early as 1922, uniform product standards were developed
and the division of duties clearly stated that research staff were
responsible for quality checks. In 1951, a quality management
committee was established to cultivate a corporate culture ofrespect for quality and engage in organizational development.
In the 1960s, QC circles were actively developed at plants
across Japan led by young engineers, and in 1974, these
activities were unified, and together with research efforts DKS
established a reputation as a technology company.

During the post-World War I recession, the Company
constructed laboratories in 1918, research incentives were
stipulated in 1919 and “inventor award provisions” wereenacted one after another in 1920 to encourage the creation of
new products. The Company created superior new products
and patents and strove to conduct research. In 2002, theCompany implemented a patent incentive system ahead ofother companies, contributing to the development and creationof new businesses such as the current Life Sciences business.

DKS REPORT 2023

2023/3

DKS REPORT 2023

17

Continuous Value Creation

Continuous Value Creation

Review of the Medium-Term Management Plans
CHANGE100 Stage I

Targeted
Figures

CHANGE100 Stage II

REACT1000— Changing the Corporate Culture —— Expansion along with Earnings —— Act for a Leap —April 2009–March 2012

April 2012–March 2015

April 2015–March 2020

Consolidated
net sales¥55 billion
or higher

Consolidated
net sales

Ratio of ordinary
income to sales

4% or higher¥60 billion
or higher

Ratio of ordinary
income to sales

5% or higher		Consolidated net sales¥75 billion

Ratio of ordinary
income to sales“Each of Us Holds the Key to Success” “Each of Us Holds the Key to Success”

VisionBuilding a Business Structure
Necessary as a Leading
Industrial Chemical Company

Staying Ahead of the Times
as a Leading Industrial
Chemical Company

Practicing the concept of “chemistry provides asolution,” we will take up the challenge ofcarrying out our management plan REACT1000

1. Securing a stable profit structure
2. Pursuing greater businessefficiency
3. Developing and strengthening
our foundation to realize the“technology makes theManagement
Company” concept
Policies
4. Accelerating the creation of new
products
5. Enhancing compliancemanagement
6. Improving managerial skills andhuman resource development

1. Expanding peripheral businessfields
2. Enhancing and reinvigorating
domestic production facilities
3. Accelerating the creation of new
businesses
4. Pursuing cost reductions
5. Improving management
capabilities and developing
human resources
6. Enhancing overseas expansion
and strengthening
administration

1. Create new corporate value
2. Create a clear corporate image
3. Ensure more profound corporate governance
4. Maintain and increase optimal ROE levels
5. Create advantages through collaboration
6. Accelerate and enhance mother plant functions

1. Enhancing the enterprise’s power (marketing clout, cost-saving

Plan
Outline

Review

Successes

Issuesability, technical strength and organizational power) = Heightening
our corporate value
2. Promoting selection and concentration = Determining the withdrawal
from underperforming segments based on our exit rule
3. Optimizing the allocation of management resources = Funnelingpeople, goods and capital
4. Seeking more productivity = Seeking more profitability through the
integrated business division approach
5. Creating new businesses and strengthening cooperation with theparties concerned = Developing inorganic materials, dispersion
technology, electronics materials, etc.
6. Focusing on priority business segments = Promptly reaping thebenefits of an existing, ongoing, highly profitable business
The initial year saw lingering impacts
from the financial crisis triggered by
the Lehman Brothers bankruptcy.
With revenues growing over the
next two years, however, DKS
successfully achieved a target of theplan by recording final-fiscal-year(fiscal year ended March 31, 2012)
consolidated net sales of ¥56.2
billion. In contrast, the Company
was unable to reach the plan’s finalfiscal-year operating income target
due to sharp demand drops andongoing high raw materials prices.
 Increased business divisions’profits by instilling a profitability
mind-set Launched and promoted the
Human Resources Development
Project aimed at instilling anawareness of management in all
departments

Improve the corporate culture to
bring a profitability mind-set to theforefront
Realize a balance in three areas(Balance sheet / business portfolio /human resources)

DKS REPORT 2023

Although DKS aimed to increase
net sales from ¥56.2 billion to ¥60
billion, the fiscal year ended March
31, 2015 (the final year of the plan)
ended with net sales at ¥55.5
billion, below the target becauseof delays in investment to raise
production in core businesses andstagnation in the solar cell field.
On the other hand, DKS achieved
its operating margin target given
record-high operating income,ordinary income, and net income.
 pgraded the managementUinfrastructure (e.g., commenced
introducing a new ERP system)
for the future Maintained a healthy balance
sheet (increased the capital
adequacy ratio) Made new investments for
growth (made Yokkaichi ChemicalCo., Ltd. a wholly owned
subsidiary) to expand businessfields, purchased land, began
preparation for a new plant
Maintain a robust and healthybalance sheet to increase earnings
F UTUREE NVIRONMENTL IFE“Act for a Leap”
Net sales

I NNOVATION
Z -FLAG/CHALLENGE

1. RETURN: pursuing profitability = sharing returns withstakeholders (appropriate distribution of profits)

FELIZ 115
Development of focus areas
such as semiconductor-related areas

100,000

Pricerevisions
68,00065,081

62,67259,14040,0004,485

1. Insufficient precision in market forecasting
2. Delays in reorganizing unprofitable businesses
3. Vague customer countermeasures (selection &concentration)
4. Negative effects of the business division system• Flame retardant• Sugar derivatives• Battery materials(Millions of yen)Phase1

Phase2

ProfitMaximize the use ofexisting assets suchas the Kasumi Plant

Total asset turnoverratio = 1.0

20,000100,000

Life Sciences
becoming
profitable

15,00070,00010,000

4,500

4,626

20,00010,000

5,000

2,500

2. EXPORT: improving overseas sales ratio = global

strategies responding to paradigm shifts (overseas
sales ratio of 20%)
3. ADVANCE: moving forward with new plantinvestment = pursuing efficiency for core businesses(restructuring domestic bases)
4. CREATE: establishing new businesses = quickly
commercializing newly developed materials (newbusiness creation fund)
5. TRAIN: systematic human resources training =fostering personnel to pursue ‘leaps’ (coordinatingwith consulting companies)
On the quantitative side, sales were revised downward in
the third year of the plan due to an extreme slump insolar cell sales, but the operating income target was left
unchanged, and in the first half of the plan reached arecord high for the third consecutive year. After that,
however, rising production costs for 5G materials, which
far exceeded expectations, insufficient response tosoaring raw material prices, and the COVID-19 pandemic
led to operating income of ¥4.1 billion in fiscal 2019, thefinal year of the plan, unfortunately resulting in our
falling short of the targets. The 20 items in the matrix,
which are qualitative elements, have all launched or are
in progress. As a result, our view is that the foundation
for creating the future has been laid according to plan.
 Expanded business peripheral areas (NEXT) andefforts to create new businesses (DREAM) Focused on business development with new capital
investment and R&D expenses Changed the balance sheet composition andincreased total assets 1.3 times compared with theend of the final year of the previous plan Brought life sciences-related Biococoon Laboratories
Inc. and Ikeda Yakusou Co., Ltd. into the Group Laid the foundation for realizing business income andprofits commensurate with total assets, including
up-front investment in new businesses(in Japanese only) https://www.dks-web.
co.jp/updata/n_pdf/2023061203.pdf

Next medium-term management plan (tentative)• Profitability improvement of actual business• Expansion of next business • Dream business becomes profitable

120,000

60,000• Semiconductor-related• Display/optical materials• ACTUAL (Existing Businesses) • NEXT (Peripheral Businesses derived from existing technology)• DREAM (New Businesses)

80,000

There are five priority qualitative targets for
implementing the management policy.

“FELIZ 115” revision details

DKS revised its medium-term management plan “FELIZ 115” and its management targets on June 12, 2023, in consideration of the external
environment surrounding the company and the market conditions in our focus areas. The main causes are the following three points.
1) Delays in passing on increases in raw material prices, 2) A decrease in sales volume due to worsening market conditions, mainly in focus
fields (electronics, information, etc.) as well as a decrease in sales volume due to sluggish demand from major customers, 3) Increased
manufacturing costs due to lower factory operating rates outlined above in point 2).

8.0%

SloganBasic Strategies

18

Overview of the Medium-Term Management Plan“FELIZ 115”

1,186
0

0
March 2021
periodMarch 2022
periodMarch 2023
periodTerm 157

Term 158

Term 159

March 2024
March 2025
March 2026
March 2027
March 2028
March 2029
March 2030
period (Forecast) period (Forecast) period (Forecast) period (Forecast) period (Forecast) period (Forecast) period (Forecast)
Term 160

Term 161

Term 162

Term 163

Term 164

Term 165

Term 166

Outline of measures towards FY2025 goals

Improving profitability

Focus area development

Life sciences becoming profitable1) Implementation of cost pass-throughfor raw material and energy2) P romotion of high value-added
product development

1) Expansion of information andcommunication-related material sales2) E arly reaping of battery materials3) P romotion of new development forthe semiconductor market

1) E xpand B-to-C sales of products such as TENCHUKASOU,
Kainou Tochukasou, Sudachin, health foods2) R ealization of B-to-B results through material sales3) E xpand Ikeda Yakusou’s business and acquire contract projects
by taking advantage of GMP certification

Review of the Third Year1

Priority Measures

Results/future goals

Withdraw from noncontributing
businesses• We implemented price revisions in response to soaring raw material prices and worked to build a profit base.
• We restructured our business portfolio through collaboration with parties outside the company.

Realize returns on advanced business• We will increase the Yokkaichi Branch Kasumi Plant operating rate, focus on early reaping of the business, andwill improve profitability.

2 investments in the Kasumi Plant and other areas
Accelerate alliances with partnercompanies and achieve rapid

3 commercialization at the Kasumi Plant
and in the Life Sciences businesses
Reorganize the corporate structurewith an emphasis on customer

4 orientation; shift to Company-wideorganizational sales activities• Kainou Tochukasou, which contains the useful ingredient Naturido contained in I. Japonica Bombyx Fungus,
has been submitted to the Consumer Affairs Agency as a food with functional claims and has been madepublic.
• In order to quickly respond to the diversifying needs of our customers, we have built an organized customer
support system through cross-functional collaboration.
• We have progressed in building the foundation for company-wide data-drive management using DX.

Revise performance evaluation and• To enhance commitment to results and cultivate the foundation of “earning power,” we considered introducing
5 remuneration systems to a system thata goal management system for employees at or below the section manager level and conducted a trial run.
evaluates contributions
Establish SDGs/ESG-based
management objectives; contribute to

6 society through business activities;
aim to enhance corporate value

Continue employee happiness-based
management; conduct activities to maintain

7 the “Health & Productivity Stock” selection;
create comfortable working environments• Expanded the activities of the Sustainability Committee and began strengthening human capital and humanrights due diligence (initiatives to reduce human rights risks in corporate activities) in addition to climate change.
• Obtained the highest rank in Development Bank of Japan Inc. (DBJ) environment ratings.
• Selected as a “Health & Productivity Stock” for four consecutive years.
• Certified as a “White 500 Organization” for the sixth year in a row.
• Certified as a “Sports Yell Company” for four consecutive years.
• Received the highest rank in the DBJ Health Management Ranking Program for sixth year in a row.

DKS REPORT 2023

19

Continuous Value Creation

Financial/Capital Strategies and Total Shareholder Return
Financial Position

Total Shareholder Return for the Past 10 Years

As of the end of the fiscal year ended on March 31, 2023,
our company’s financial status was ¥85.0 billion in total
assets (down 1.7% year on year), ¥38.2 billion in net assets(down 5.2% year on year), and an equity ratio of 40.4%(down 2.1 percentage points year on year.) Due to adecrease in operating cash flow, interest-bearing debt
increased to ¥29.8 billion (up 7.6% year on year), resulting
in a net D/E ratio of 0.54 from 0.38 in the previous period.
Regarding cash flow for the fiscal year ended on March

31, 2023, since operating cash flow was ¥720 million (down
86.9% year on year), and capital investment increased by¥1.2 billion from ¥1.9 billion in the previous period,
investing cash flow was negative ¥2.8 billion, and free cash
flow (FCF) was negative ¥2.1 billion. Financing cash flow
was negative ¥1 billion due to share buy-back (¥1.5
billion.) As a result, the cash balance at the end of theperiod decreased from ¥12.1 billion in the previous period
to ¥9.0 billion.

Total shareholder return (TSR) by dividend and stock priceis shown in the graph and table below. Over the past 10
years, the annual rate of return has been 7.2%, which is a
mid to long-term return that exceeds the shareholder

capital cost (about 6.0-7.0%) that we assume.
Unfortunately, from 2020 onwards, stock prices have been
in a major adjustment phase.

DKS  TOPIX  TOPIX Chemicals Index

2020/32021/32022/3(Index)500

400

Financial Analysis of the Past 10 Years
An analysis and comparison of the performance and financial results of the DKS Group for the period from April 2012 toMarch 2023 are as follows. (Cumulative totals are the totals over the 10-year period from April 2013.)

300

200

April 2012–March 2013

April 2022–March 2023

Net Sales¥51.8 billion¥65.0 billion

Updated record high with +3.8% YoY

Operating Income¥1.75 billion¥1.18 billion

Significant decrease of 74.4% YoY

Operating Margin

3.4%

1.8%

¥0.79 billion(¥0.4 billion)

4.8%(1.1%)

Total Assets¥55.4 billion¥85.0 billion

Increase of 53.4% over 10 years due to growthinvestments, etc.

Net Assets¥18.2 billion¥38.2 billion

Increased by approximately 2.1x in 10 years¥29.8 billion

Increased by ¥2.1 billion from the previous fiscal year
due to FCF (-¥2.1 billion)

0.54

Deterioration of 0.16 percentage points YoY due to anincrease in borrowings, etc.

Net Profit
ROE

Interest-Bearing Debt
Net D/E Ratio¥18.7 billion
0.66

Totals for the Past 10 Years

20

Assessment/Comments

Significantly decreased from the 7.4% in the previous period0

In the red due to the impairment of fixed assets
Aim for continuous capital efficiency improvement

Assessment/Comments

Net Profit Cumulative
Total¥20.4 billion

Capital Investment
Cumulative Total¥41.8 billion

Depreciation Cost
Cumulative Total¥26.4 billion

R&D Expenses
Cumulative Total¥26.5 billion

Proactively promoting R&D, achieving a record high of¥3.2 billion in the fiscal year ended on March 31, 2023

FCF Cumulative Total(¥1.0 billion)

The cumulative total is slightly negative reflecting
growth investment

Dividend Cumulative
Total¥6.3 billion

Dividends per share have increased 2.3 times over the
past 10 years (from ¥35 to ¥80)

Capital Increase¥3.5 billion

Capital increase through public offering in December 2014

Share Buybacks¥2.5 billion

Implemented share buy-back for the first time in six
years (¥1.5 billion)

DKS REPORT 2023

100

Net profit will be negative in March 2023 for the firsttime since March 2009
Since the fiscal year ended March 31, 2015, growthinvestment became more aggressive; implemented
capital investment with cumulative depreciation costs
exceeding ¥15.4 billion over the past 10 years

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32023/3

Note: Share price trends including dividends (closing price data for March 31, 2013 = 100)

Future Financial Strategies/Shareholder Returns
1 year

3 years

5 years

10 years

Cumulative total

Annual rate

Cumulative total

Annual rate

Cumulative total

Annual rate

DKS

(28.8%)(36.8%)(14.2%)(48.5%)(12.4%)

101.2%

7.2%

TOPIX

5.8%

53.4%

15.3%

31.8%

5.7%

142.1%

9.2%

TOPIX
Chemicals Index

4.8%

30.4%

9.3%

16.2%

3.1%

184.9%

11.0%

Note: The annualized conversions are geometric averages of cumulative returns.

Future Financial Strategies/Shareholder Returns
In the medium-term management plan “FELIZ 115,” thegoal was to maximize total assets to grow sales andachieve a total asset turnover ratio of 1.0 times by thefiscal year ending on March 31, 2025. However, harsher
than expected circumstances have put pressure on the
profit structure, including economic stagnation due to the
spread of the novel coronavirus infection and rising raw
material and energy costs triggered by Russia andUkraine’s military conflict, and this resulted a majorcollapse of the assumptions made when formulating theplan. Therefore, we have a revised our aim to achieve a
total asset turnover ratio of 1.0 times in the second phaseof the next medium-term plan (FY2027 to FY2029.) We willcontinue to be conscious of the shareholder capital costand implement financial and capital policies that support
the realization of TSR that exceeds that cost.
Regarding dividends, our company’s basic policy is tomaintain long-term, stable dividends to our shareholders
while ensuring consistency with internal reserves
necessary for future business development. We will strive
to increase our corporate value by actively utilizing
internal reserves for investments necessary for futurebusiness development that will strengthen ourinternational competitiveness and lead to new growth.

DKS REPORT 2023

21

Continuous Value Creation

Financial and Nonfinancial Highlights
Financial Highlights

Nonfinancial Highlights (Group/Non-consolidated)

Net Sales/Overseas Sales Ratio

Operating Income/Operating Margin(Millions of yen)(%)

80,000

60.0

6,000

45.0

4,500

60,00059,57461,456

Number of Patents Held (Group)

営業利益・営業利益率

売上高・海外売上高比率

59,14062,67265,081(Millions of yen)

4,341

4,485

4,154

Amount of Waste Generated (Group)

特許保有件数（グループ）

4,626

廃棄物発生量(%)(Patents)

(t)

20.0

1,200

25,000

15.0

900

453

479

514

483

444

21,65820,00019,605

18,431

16,664

15,2512022/32023/315,00040,00030.0
17.0

20,000

16.8

15.0

0

0

2019/3
 Net Sales  

2020/32021/32022/3

7.3

508

1.8

0

2020/3

 Operating Income  

2021/3

600

7.4

1,186

2019/3

Overseas Sales Ratio

7.6

6.8

1,500

2023/32022/3

5.0

300

0

0

2023/3Operating Margin

533

542

522

538

10,0005,000
02019/32020/32021/32022/32023/3

2019/32020/32021/3

 Domestic    Overseas

Net sales for the fiscal year ended on March 31, 2023 were ¥65,081
million (up 3.8% year on year) due to significant growth in overseas
sales of flame retardants in the Functional Materials segment. The
overseas sales ratio was 23.8% (up 1.3 percentage points year on year.)In the fiscal year ended March 31, 2023, operating income decreased
mainly in the Surfactants and Functional Materials segments due toincreased R&D costs for the future and soaring raw material pricesthat exceeded the price pass-through. Operating income amounted
to ¥1,186 million (down 74.4% year on year.)
The operating margin was 1.8% (down 5.6 percentage points year
on year.)

The number of patents held totaled to 982 (a decrease of 23 patents
year on year). In consideration of future business development, we are
actively promoting the application and acquisition of intellectual
property rights based on the results of research and development.

The amount of waste generated was 15,251 tons (down 1,413 tons
year on year).

Dividend per Share/Dividend on Equity (DOE)

Interest-Bearing Debt

Geenhouse Gas Emissions (Group) umber of Employees to Utilize the Child-Care Leave/Child-CareN
Part-TimeWork Systems (Non-consolidated)
育児休職・育児短時間勤務制度利用者数（単体）

有利子負債

1株当たりの配当金／株主資本配当率（DOE）

(Yen)

80

80

80
70

70

(%)

(Millions of yen)

4.0

40,000

3.0
2.3

2.3

2.2

2.3

2.1

40

20

0

(1,000 t)

2020/3

 Dividend per Share  

2021/32022/329,94628,52927,7631.0

10,000

53.8
49.0

48.6

40

43.0

12
10

11

10

10

7
20

0

2023/315
52.6

29,86523,46620,000(Persons)

60

30,0002.0

02019/3

炭酸ガス排出量（グループ）

70

60

2019/32020/32021/32022/32023/3

5

0

4

3

0

2019/32020/32021/32022/32023/3

Dividend on Equity (DOE)

2019/3

4
2

8

9 9

6

3

1

2020/32021/32022/32023/3

 Male    Female    Child-Care Part-Time Work System

The annual dividend per share was comprehensively set at ¥80 inconsideration of the Company’s financial conditions, future businessdevelopment, and enhanced shareholder returns.

Interest-bearing debt at the end of the fiscal year ended March 31,
2023 increased by ¥2,102 million to ¥29,865 million due to an increasein long-term borrowings.

Greenhouse gas emissions totaled 43,000 tons (down 5,600 tons year
on year). In order to help prevent global warming, we will continue
our efforts such as those for improving our energy efficiency.

The number of employees using the child-care leave system was 20(up 7 from the previous year). The number of employees using thechild-care part-time work system was 9 (up 1 from the previous year).

ROE
ROE

Cash
Flows
キャッシュフローRatio
of Female Employees (Non-consolidated)
女性社員比率（単体）AnnualPaid Leave Rate (Non-consolidated + Assigned Employees)
年休取得率（単体+出向者）(Millions of yen)

(%)
9.0

7.7
6.4

3,236

-3,500

0

2,820
1,150

-1.1
2019/32020/32021/32022/32023/3

ROE fell to minus 1.1% from the previous year. Although net sales
increased in response to a decrease in total capital and the total
capital turnover ratio rose, ROE decreased from the previous year as
the profit margin on sales turned negative due to a decrease in profits.

DKS REPORT 2023

-3,804-7,000-5,694-5,842

2019/32020/3-2,70075.0

19.0-2,883

18.0

18.8

18.9

70.0

2022/32023/3

73.8

73.2
68.5
66.1

65.0

17.8

67.4

60.0

17.0

0

0

2021/3

 Operating Cash Flows    Investing Cash Flows
Free Cash Flows
For more details, see p. 20.

724-2,159-2,076-2,458

80.0

20.3
20.0

3,766

0

-3.0

5,520

4,955

3.0

20.9

21.0

7.0
3,500

(%)

(%)

7,000

8.4

6.0

22

10.0

23.8

22.5

17.1

3,000

2019/32020/32021/32022/32023/3

The ratio of female employees to total employees was 20.9% (up 0.6
percentage points year on year). We will continue to carry out measures
aimed at promoting women’s active participation and advancement.

2019/32020/32021/32022/32023/3The percentage of paid leave used was 73.8% (up 6.4 percentage
points year on year).

DKS REPORT 2023

23

Creating Value with a Long-Term Outlook

Message from the President

Environmental changes beyond expectations, and revision of the targets ofthe medium-term management plan “FELIZ 115”
Fiscal 2022 marked the turning point of our medium-term
management plan “FELIZ 115,” which began in April 2020,
and was also the year I assumed the position of President.
The original plan called for the implementation of three basic
approaches and seven priority measures under our Uni-Top
strategy (providing unique products that do not pursue scale),with plans for business expansion starting in fiscal 2022, thethird year of the plan. However, the profit structure on which
the execution of the plan was premised was severely
disrupted due to unexpected changes in the businessenvironment, including a sharp rise in raw material andenergy prices due to the invasion of Ukraine, in addition to
the fact that the COVID-19 pandemic that started in the firstyear of the plan was not yet over.

overhead costs, so we will continue to work on correcting
prices.

The fiscal 2022 performance saw an increase in profit due
to the significant growth of flame retardants for overseas
markets in the Functional Materials business. However, theimpact of soaring raw material prices was extremely large,
resulting in a significant decrease in profit. The main reasonsfor the deterioration in earnings were raw material priceincreases that exceeded what we could pass on in prices, andalso a drop in sales volume in focus areas, such as Functional
Materials and Electronic Device Materials, especially from thesecond half of the year. These factors also caused a decline infactory utilization rates and higher labor costs, further
impacting profit. To date, we have been able to reflect priceincreases in about 70% of our products, but we have notbeen able to reflect increases in energy, logistics, and otherFor future performance recovery

In response to these major changes in the environment, inJune 2023, we revised the numerical targets of the Plan andset the net sales target at ¥70 billion and the operating
income target at ¥4.5 billion (operating margin of 6.4%) for
fiscal year ending March 31, 2025, the final year of themedium-term management plan. At the same time, we also
revised the numerical targets for fiscal year ending March 31,
2030, which were estimated at the time this plan wasformulated, to ¥100 billion for sales, ¥10 billion for operating
income (operating margin of 10.0%), and an asset rotation
ratio of 1.0.
For performance recovery, we will enhance ourcompetitiveness by first reducing or withdrawing from
unprofitable divisions as well as by correcting prices, andreplacing low profit margin-products with high value-added
products. In addition, we will aim to return the Life Sciencesbusiness to profitability as soon as possible, and have set atarget of achieving sales of ¥1.5 billion by the end or March,
2025. Also, along with expanding B-to-C sales of existing
health food products, we will strengthen B-to-B sales ofingredients by focusing on cognitive function, sleep, andother areas based on accumulated data. Furthermore, we will
streamline processes at our production plants in general andreduce costs by reviewing labor and outsourcing expenses

R&D for medium- to long-term growth

We will work as a unified group to steadily andswiftly implement the measures necessary toachieve a recovery in business performance.

To achieve medium- to long-term growth, we will invest
aggressively and concentrate our management resources inthree promising future markets: electronics and information,
environment and energy, and life sciences. Although theglobal semiconductor market is expected to grow at anegative rate in 2023 compared to the previous year, large
semiconductor-related capital investments are alreadyplanned in many countries. In addition, the use of energysaving devices to address environmental issues, the use of IT
in automobiles and the shift to electric vehicles (EVs) are
increasing, and the semiconductor market is expected to turnto growth in 2024.
We, too, have formulated investment plans to improveexisting facilities and build new facilities for semiconductor
peripheral cleaners, and are already in the stage of starting

construction. In the environment and energy fields, we are
increasing the speed of development to ensure theexpansion of technologies that can be put to good use.
Radcure resin materials in the Functional Materials segment
were promising for use as substrate materials for 5G-related
products, but we believe there is a high possibility thatmaterials will change in the future due to the slow spread of
5G and the problem that the communication speed is not as
fast as had been expected. In preparation for this, we willkeep a close eye on the development of materials, including
peripheral applications and horizontal development. In thelife science field, we will continue our research anddevelopment to promote solutions to social issues bycontinuing to quantify new useful ingredients and look forhigh production conditions.

YAMAJI Naoki
President COO

24

DKS REPORT 2023

DKS REPORT 2023

25

Creating Value with a Long-Term Outlook

Message from the President

Establishing a Strategy Committee to discuss comprehensive company-wide
strategies
Since April 2023, the Strategy Committee has held two
meetings a month. Led by the Strategy Headquarters, which
serves as a bridge between executive general managers anddirectors, and forms project teams across the Company.
Currently, they are studying and reporting on 13 management
issues which include overseas development strategies andhuman resource strategies. We have long consideredoverseas expansion to be an issue, but the fact is that it isquite a hurdle for a company of our size to enter the market
on its own. First, we are selecting partners and regions,
identifying growth areas, and narrowing our focus totechnologies and products that will give us an edge over thecompetition.
Furthermore, with regard to correcting product prices, weused to receive reports from sales staff only on the results,

but we have changed this to a form that requires detailed
reports on causes and countermeasures to explain why costs
have not been passed on in prices and where the issues lie.
This is based on our reconsideration of what we did in 2022:
we tried to respond to the ever-rising raw material prices byraising prices on a case-by-case basis, but were unable tofully cover the costs.
In addition, detailed business plans and policies for eachsegment are also decided at the meetings of the Strategy
Committee. Each Headquarter reports to the director whenits policy is finalized, and implementation begins as soon as it
is approved. By holding strategy meetings, we are building asystem to promptly implement necessary measures while
deepening cooperation between research, production, sales,and management.

Aiming to transform into an organization that increases development speed
and encourages free thinking
DKS is a R&D-oriented company. By establishing research
centers for each customer and assigning head researchers
suited for each customer, we conduct research anddevelopment by setting themes for our inspiring/inspired
partners customers and incorporating the expertise ofoutside specialists as needed. In addition, an Advisory
Committee consisting of research and manufacturing experts
has been established within the R&D Headquarters toprovide monthly progress and status reports. However,currently the speed of development is slow, with less than halfof the themes progressing as planned.
What I feel particularly in recent years, whether in researchor sales, is that communication with customers in the field isdecreasing. The COVID-19 pandemic has of course had an
impact, but the same trend has long been observed not onlyat our Company but also at our customers and distributors,
and it seems that the opportunity to meet directly with themand hear their honest comments is itself being lost. I believethat this weakening of interpersonal relationships is also a

We are building a system to promptly
implement necessary measures while
deepening company-wide
cooperation.

26

DKS REPORT 2023

factor in our sales staff’s inability to flexibly negotiate pricerevisions as raw material prices continue to skyrocket.
I’ve also noticed that the younger R&D staff members are
diligent in completing assigned tasks, but are less likely topresent unconventional ideas. This is due to the fact that, in
addition to a strengthening of the sense of vertical divisions
in the organization, ideas that do not lead to immediate
practical application are often dismissed by superiors, who
might say “now is not the time for such research.” I believethat organizational and cultural reforms are needed. We arenow encouraging our researchers to increase the number of
research topics, even having 15% of their research be
unconventional research.
Since the R&D division is staffed by many young people,
development speed will not increase unless we create asystem to motivate and stimulate them through cooperation
between sales and R&D. To accelerate R&D while getting
new development topics, I plan to implement organizational
and personnel system reforms in fiscal 2024.

Strengthening ESG management with an emphasis on addressing
environmental issues
Environmental responsiveness on both company
and business fronts
In “FELIZ 115,” we set SDG/ESG management targets for eachof our businesses. Although we have revised the quantitative
parts, we are still working to achieve our initiatives. In particular,
we recognize that complying with TCFD and preventing global
warming are the most important social issues for chemical
manufacturers, and we are addressing them both with our own
responses and through our business.
In terms of our own environmental response, we haveestablished material issues corresponding to our Priority
theme 3: Consideration for the Environment, namely,“Responding to decarbonization and reducing environmental
burdens,” “Contributing to a recycling-oriented society,” and“Appropriate management of chemical substances,” andhave set KPIs for each with a deadline of fiscal 2030, which weare working to achieve. For our business response, in the Life
Sciences business, we are focusing on I. Japonica-Bombyx
Fungus, a material that requires mulberry trees and silkworms
as raw materials, which can contribute to the shift away frompetrochemicals. As a bio-based raw material that can beconverted into highly functional materials, we are advancing
research with the aim of commercializing it. Petrochemicals
currently account for about 80% of our raw materials, but
demand for petrochemicals remains strong, and we do notthink that demand will be reduced to zero in the future.
Although it is difficult due to cost issues, we would like toeventually reduce the percentage to about 60.
In recent years, the components of market value haveshifted from tangible to intangible assets, and disclosuresrelated to human capital and respect for human rights havealso been promoted by the working group.

Ensuring transparency of governance through an
Advisory Board
We have already achieved the goal set forth in our medium-term
management plan “FELIZ 115” of having at least one-third of ourboard members be outside directors, and we appointed one
female outside director in 2022. We will continue to promotewomen’s activities by increasing the percentage of women in
management positions. We also voluntarily established an
Advisory Board in June 2021 as a supplementary body to theBoard of Directors. It is composed of four outside directors andtwo outside Audit & Supervisory Board members, plus two internal
directors, namely the chairman and president, so the majority is
independent directors. The Board serves as a forum for receiving
advice and opinions from the outside directors on matter s such as

the selection of successors and officer remuneration, and alsofunctions as a platform for sharing information on management
issues. The Advisory Board, chaired by an outside director, meetsregularly to ensure transparency in governance.
In addition, every year, all directors and Audit & Supervisory
Board members carry out self-evaluations regarding theeffectiveness of the Board of Directors. The results are analyzed
and evaluated by the outside directors and Audit & Supervisory
Board members., In fiscal 2022, the results were judged to begenerally appropriate, so we believe that the effectiveness of theBoard of Directors is secured.
At the Board of Directors meetings, all of the outside
directors are active participants. They look hard at theCompany from a wide range of perspectives: research andtechnology, human resources, labor and human resource
development, finance and accounting, IR and corporate value
creation, and business operations, and they each provide
detailed advice at board meetings from their respective fields
of expertise. Some people argue that non-financial KPIs, suchas environmental KPIs, should be introduced for executive
compensation, but I believe that even if such KPIs are
introduced in the future, they should be less than 10%,because management must first and foremost fulfill its
management responsibility by achieving numerical results.

Motivating young employees with a balanced
evaluation system
We are in the process of formulating a new personnel evaluation
system, including the selection of younger employees for
management positions and the establishment of an expert
course, with the aim of implementing the system from April 2024.
We would like to modify the existing seniority and lifetime
employment system so that it can be balanced with theevaluation of mainly younger employees. With regard to salaries,
we need to set the non-financial and behavioral evaluation
portions higher for younger employees, otherwise the overallsalary level will be reduced. In particular, since it takes three tofour years for research and development to produce results, it isnecessary to evaluate the process itself so that there is no senseof unfairness, since the people who were actually involved in the
research may have changed departments by the time theresearch results are evaluated. The younger the employee, thehigher the process evaluation, and the image is 50:50 withmanagers. For managers, we have already implemented anevaluation system based on setting goals, and we are designing asystem that allows each individual to consider a career path thatsuits his or her aptitude, and to realize a variety of work styles.

To Our Stakeholders
Our most important task at the moment is to quickly restore
our business performance. The TSE has called for
improvements from companies with a P/B ratio below 1, andwhile we recognize the importance of increasing corporate
value, our first priority is to generate stable earnings. In
addition, we have identified the markets and technologies weshould target for future growth, and we will bring these moves
to concrete form.

Market conditions continue to deteriorate, and a rapid
recovery is not expected, so we understand that this situation
is causing concerns among our shareholders and otherstakeholders. The entire group will work together to achieve
our goals and restore our business performance whilesteadily implementing each of the measures set forth in our
medium-term management plan “FELIZ 115.” We lookforward to your continued support.

DKS REPORT 2023

27

Creating Value with a Long-Term Outlook

Research and Development
DKS’ technological strength is that we have the ability to customize the function
and performance of products in line with customer requirements as we makeproposals based on the ideal product combination, and technology is an
important intellectual capital that supports our management strategies forsustainable growth. We are refining our technologies in pursuit of the concept,“chemistry provides a solution.”

Material Issues
 C
 ustomer-oriented R&D frameworkaligned with Uni-Top strategies Developing products that contribute to
the environment Promoting an intellectual property strategy

DKS Proprietary Technologies and Research and Technological-Development Strategy
DKS aims to solve social issues and provide new value tocustomers by creating new technologies through thehybridization and combination of various technologies,

The Strengths and Advantages of DKS’ R&D
As a leading industrial chemical manufacturer, it is ourmanagement philosophy to continue to be a prominentcompany that responds to the expanding chemical
requirements of industries.
To realize this philosophy, we focus on the research andtechnological development, particularly in high value
product sectors such as electronics and information,
environment and energy, and life sciences.
We have diverse and wide-ranging technologies, andwe have the expertise to know how to combine
technologies to create functionality and differentiation,
which leads to our uniqueness.
In pursuit of a sustainable society, we are committed toadding value by leveraging our expertise in technology

R&D
Headquarters

Advisory
Committee
R&D Promotion Department
R&D Administration
Department
Intellectual Property
Department

Life Sciences Headquarters

IT Display Materials R&D
Department
Elexcel R&D Department

R&D Company Department

Value Creation R&D Department
Corporate R&D Department
R&D departments

New Business Development
Department

28

DKS REPORT 2023

Contribution to a decarbonized society

Electronics & Information

Environmental & EnergyLife Sciences

Electric Vehicles (EV)Battery components
Solar panel components
Biomaterials
Environmentally-friendly resins
Recycling

Health foods,
pharmaceuticals & cosmetics
Nutrition
Food additives
Aroma business
Sericulture Innovation
Upcycling

Protect

Emulsification & dispersion

DKS technology

Safety & long life

Customer
Sustainable growthMarket needs

Provision of high value and solutions

Stick

Adhesion & sealing

CleanseCleaning & concentration

Regulate

Modification & extraction

Sales

Research andtechnological-development
Raw material procurement
Production management

Management strategy
Intellectual property strategy

Contribution to a sustainable society

Mix

Realization of a sustainable society

Research and technologicaldevelopment strategy

Customer-oriented R&D framework
DKS aims to manage its business by making the most of its
technology, which is subject to operational profit management.
The Advisory Committee within the R&D Headquarters
is an organization made up of members with expertise inresearch and manufacturing. Optimal allocation ofresearch resources and shortened R&D timeframes willcontribute to generating profit by maximizing ROI fromour research and technology development.
The R&D staff performs their work with a customercentric focus while fostering partnerships with inspiring/inspired partners. As part of this effort, we have establishedresearch centers for each customer. In order to identify
needs more quickly and accurately, the centers assign leadresearchers to target customers to implement research
themes with top priority. Cross-departmental teams areformed as needed, aiming for the shortest schedule while
ensuring flexible and efficient team operations.
We are working on research and technology development ofhigh value-added products in the fields of electronics andContribution to a digital society
High-speed data communication
components (5G, 6G)
Displays
Semiconductor-related
Optoelectronic components
Edge devices
Sensors

integration to formulate innovative solutions. These
solutions are designed to cater for the specific functions andperformance criteria demanded by our customers, all within
the framework of our ESG conscious management strategy.

including surfactant and sugar/cellulose derivatization
technologies (p.68).

We are working to provide environmentally-friendly products and develop technologies in order to contribute and provide value to a sustainable society.
Values we deliver

information, environment and energy, and life sciences as key
areas. We established a new IT Display Materials R&D
Department as an organization specializing in the electronics andinformation fields to strengthen applied technology
development together with the Elexcel R&D Department, whichdevelops battery materials in the environment and energy field.
The Life Sciences Headquarters will accelerate businessdevelopment by building a system tailored to B-to-B and B-to-C.
We aim to speed up research and development byholding study sessions both inside and outside theCompany that incorporate the knowledge of external
experts, such as on the use of fundamental process andanalysis technology and data science, thereby introducing
technology through open innovation.
Toward the realization of a sustainable society, we
contribute to value creation by continuing to combine
technologies, and providing the functions andperformance that our customers need based on
management strategies that take ESG into consideration.
Customer-specificmarketing activities
Customer-specific centers

Reducing CO2, promoting green energy
Limiting ozone destruction (global warming)
Reducing the steps in manufacturing processes(energy-saving)
Extending the useful life of products
Delivering products with low environmental impacts byusing renewable raw materials
Delivering highly biodegradable products, solving the
problem of plastic waste
Limiting health effects, air pollution, and the like bylowering VOCs*
Protecting water environment, reducing waterpollution

Open innovation activities• Universities• Businesses• Ventures• Public institutions

Technologies

Cellulose modification, battery evaluation
Polymer function designing, battery evaluation
Organic-inorganic hybridization
Precision cleaning agents evaluation

Solvent-free UV-curable materials

UV/EB curing, alkylene oxide addition

Sealing materials for circuit boards
Cellulose nanofiber
Sucrose fatty acid esters

Potting, urethanization
Cellulose modification
Sucrose esterification

Polylactic acid (corn derived) resin modifier

Polymer function designing

Reactive surfactants for waterborne coatings
Waterborne polyurethane resin
Solvent-free UV-curable materials
Low aquatic toxicity, easily biodegradable
surfactants
Oil spill treatment agents

Emulsion polymerization, interface / surface control
Urethanization, emulsification / dispersion
UV/EB curing, Alkylene oxide addition
Alkylene oxide function designing
Interface / surface control, emulsification / dispersion* Volatile organic compounds (VOC): A general name for organic compounds that evaporate in air. Volatile organic compounds include toluene, xylene, and ethyl acetate.

TOPICS

Waterborne composite adhesive for anodes
that extends the service life of high-capacity
lithium-ion secondary batteries
ELEXCEL CR seriesInspiring/inspired
partners (customers)

Our product lineup

Binder for lithium-ion batteries
Gel electrolyte polymers
Conductive paste for solar cells
Solvent alternative cleaning agents

Phosphorus flame retardants advantageous
for low-dielectric resins (telecom infrastructure
and millimeter wave radar)
Storage battery

When silicon-based materials are used, lithium-ion secondary
batteries degrade during charging and discharging. To solve thisproblem, we combined our interface control and dispersion
technologies with battery manufacturing and evaluation
technologies. The addition of silicon-based materials results in anegative electrode capacity of more than double and stabilizes theelectrode structure even after more than 1,000 charge-discharge
cycles, extending the service life of high-capacity batteries.

PQ-60

Flame retardant

Conventional halogen flame retardants have come to be
widely used for low-dielectric resins, but against the backdrop
of environmental regulations, there is a strong need for nonhalogen flame retardants. By combining our flame retardant
and application evaluation technologies, we provide flame
retardants that achieve high phosphorus content with low
polarity, as well as low thermal expansion.

DKS REPORT 2023

29

Creating Value with a Long-Term Outlook

Research and Development

DKS’ Intellectual Property Strategy

Sustainability Efforts

Based on the evaluation using the Patent Score provided
by Patent Result Co., Ltd., it is evident that the value of the
DKS Group’s patents is steadily on the rise, signifying theenhancement of our technological assets. Furthermore, incontrast to other companies in our industry, we manage a
Valueof DKS Group patents
DKSグループの特許の価値

more streamlined collection of patents characterized bygreater inherent worth. This strategic approach enables us
to further advance our Uni-Top technology, aligning it withour customer-centric approach to drive technologicalcompetence and profitability.

Value of patents of five Japanese peer companies (average)

競合5社の特許の価値（合計）(Patents)
1,000

4,000

(Patents)
1,000

4,000

3,000

750

3,000

750

2,000

500

2,000

500

250

1,000

0

0

1,000
0

250

(Patents)
100
80

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Latest

 KS Group: Rights holder score (left axis)  
D
DKS Group: No. of active patents (right axis)

 omestic industry peers (five-company average):
D
Rights holder score (left axis)
Domestic industry peers (five-company average):
No. of active patents (right axis)

 Number of patents held by portfolio

43
43

47

60
40

53

33

38

58

57

40

31

20

2019/3 2020/3 2021/3 2022/3 2023/3
 Domestic    Overseas

SurfactantsLife Sciences

16%

23%

26%

Amenity Materials
ACTUAL

12%

10%Electronic Device
Materials

62%

NEXT

1. Provided by PatentSight Japan, LexisNexis Japan
2. Sustainable Development Goals adopted at the UN Summit in 20151) Energy conservation and decarbonizationin manufacturing processes

DKS Group’s SDGs-related patents• Improved product yield and waste reduction• New process development• Recycling rework/reuse (including customer
collaboration)

 Number of domestic patent applications (last five years)

DREAMhigh technical value. We will continue to monitor the
relationship between R&D activities and the SDGs
through analysis using this tool.
DKS Group patents are characterized by their highcontribution to SDGs 9, 12, and 13. This is made possible
by our advanced technological capabilities, particularly inbattery technology. We also hold many SDG-related
technologies and have equal or superior technicalcapabilities with regards to the SDGs compared to ourpeers.

00

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Latest* Five domestic industry peers: Five major companies
belonging to Japan Surfactant Industry Association* Created by BizCruncher® (Patent Result Co., Ltd.)

Number of Patents Held (Group)

特許新規登録件数

In recent years, our emphasis in R&D has been on
sustainability efforts, and having established key themes,
our continued focus has been on the development of new
products and processes to achieve the goals of our
medium-term plan. Sustainability is an area of specialty for
DKS. In the handling of intermediate chemicals, ourproactive approach will contribute to sustainability in awide range of industries.
As a result of analyzing the patents held by the DKSGroup using the LexisNexis® PatentSight®1, an externallyprovided patent analysis tool, more than half were foundto be related to SDGs2. They were also found to be of

16%
16%

• Waterborne polyurethane / functional
polyurethane• Surfactants• Further use of cellulose and polysaccharide
derivatives• Food waste upcycling (collaborative theme)3) Expansion of sugar derivative products
for industrial use and their applications• Sucrose ester derivatives• Sugar derivatives from woody biomass

Polyurethane
Materials

Functional Materials2) Expanded use of renewable raw materials

20%4) Expansion of additives for bioplastics• Polylactic acid modifier, flame retardant, etc.
• Longer service life, improved physical properties5) Natural extracts and high concentration technology• Biococoon Laboratories, Inc. “I. JaponicaBombyx Fungus”• Ikeda Yakusou Co., Ltd. “Sudachin”

R&D Investments
Under our medium-term management plan “FELIZ 115,” which targets an R&D expenses-to-sales ratio of 5.0%, we will engage
in R&D spending focused on key projects.
R&D Costs

 Percentage of SDG-Related Patents Technical Value of SDG-Related Patents

Domestic
industrypeers

Domestic
industrypeers

Research Personnel

研究開発費

研究人員

(Millions of yen)
3,600

(%)
9

2,765

2,748

2,821

2,946

(Persons)
250

3,236
200

196

208

219

215

229

6

2,400
4.6

4.5

4.8

4.7

150

5.0
3

1,200

100
50

0

0
2019/3

 R&D costs (left axis)

2020/32021/32022/3

DKS REPORT 2023

2023/3R&D expenses-to-sales ratio (right axis)

For fiscal 2022, the result was the targeted 5.0%.

30

Sector: UN SDG (ID)   Sector size: No. of patent families

0
2019/32020/32021/32022/32023/3

 R
 &D Personnel

The increase in R&D personnel in fiscal 2022 is due to an increase in
the number of employees to accelerate the company’s R&D.

Percentage of Patent Asset Index

Technology Relevance

DKS REPORT 2023

31

Creating Value with a Long-Term Outlook

Human Resource Management

Human capital is the most important asset for DKS, and we aim to maintaintalented human resources and diversity based on the idea of valuing people. We
recognize the growth of employees to be the driving force for the developmentof the Company, leading to a wide range of enhancements in corporate value.

Material issues Diversity Boosting human resource capabilities Health and Productivity Management initiatives
 Earnings power

Initiatives to Enhance Human Capital
Strategic Personnel Allocation
We are working on the appropriate allocation of
personnel as a measure to utilize our human capital fully.
We have launched a project to look into the optimal
allocation of personnel at each site, business division, andsegment and will work on optimization accordingly.
Results-oriented Personnel Evaluation System
In fiscal 2023, we fully introduced a goal management
system for employees at or below manager level section.
Goal management is set in a top-down manner, and oneon-one interviews are conducted to deepen mutual

understanding of the goal. In addition, in fiscal 2024, weplan to revise our overall personnel system, including
performance evaluation, education, and training. Throughthis system revision, we are also reviewing the compensation
structure to better reward employee contributions.

Target Setting for Human Capital Disclosure Items
This fiscal year, we will set medium- to long-term targets
for the figures disclosed in this DKS Report to establish aneffective action plan. In addition, if we identify indicatorsthat can energize human capital, we will incorporate themflexibly as we strive for enhanced disclosure.

 Employment of People with Disabilities
DKS has been working to assign people with disabilities toworkplaces that leverage their individual personalities andstrengths, and they are currently working as valuable assets
in various departments, such as our Personnel Department,
General Affairs & Legal Department, and Digital Strategy
Department. In February 2022, the DKS Challenge Center
was created as a specialized task force for the employmentof people with disabilities. We are working to ensuresmoother collaboration by sharing the information andexpertise from each business site and centralizing
operations. In September of the same year, we received
recognition from Kyoto prefecture for actively employing
individuals with disabilities, this certification is known as“Kyoto Disability Employment Promotion Company”(commonly referred to as “Kyoto Heartful Company”), andour efforts have been well-received and acknowledged.

Numberof employees with disabilities and their retention rate
障がい者雇用数／定着率(persons)
25

95.5

20

21

32

Human Resource Development and Education

Initiatives to Promote Diversity

Our Company develops human resources who cancontribute to our business and customers. The threepillars of our human resource development and education
programs are in-house on-the-job training, off-site
education to learn technical skills and abilities, andsupport for self-Improvement.
In recent years, we have conducted a fundamental reviewof the training of new employees and have implemented
new methods with a view to making them ready to work
immediately after joining the Company. This fiscal year, weplan to energize existing employees by providing themwith voluntary business contribution training. Goingforward, we will set to work on a two-pronged revampingof our education system consisting of a standardized
education system and selective education system.
In addition, we continue to work on company-wide
digital transformation (DX) for corporate reform that will
revolutionize the way we conduct our business andoperations, and we are developing human resources
through our “DX Human Resource Development Program”
to accelerate DX throughout the Company. By fiscal 2022,
approximately 60% of our employees have received DX
human resource development training. This has contributed
to improving in-house technical skills, including an increasein the number of employees with E-Certification.

Having set up an Employee Participation and Advancement
Promotion Committee chaired by the top management, weare aiming to become a human resource group capable ofsuccessfully contributing to improvements in Company
performance. We are creating environments in which we canmaximize the abilities of diverse employees, and enable
them to take an active part in our Company.
 romotion of Women’s Participation and Advancement
P
In addition to work friendly environments that allow
female employees to remain at work for many years, weare maintaining employment environments that enable
women to develop their careers.
We have implemented measures aimed at having 10.0%
or more of managerial positions occupied by female
employees. As of March 31, 2023, this figure was 11.7%.
Since fiscal 2019, we have created an environment
conducive to the active participation of women at our
manufacturing sites, and female employees are taking
advantage of their diverse skills in various workplaces in the
manufacturing sites, such as the administrative departments,
Quality Control Section, and Production Section.
Annual hours of attendance in educational programs at
hierarchical training courses (FY2022 Results)

 Gender Pay Gap
As of fiscal 2023, we have publicly announced the gender
pay gap. The results are 79.3% for regular workers, 87.4%
for non-regular workers, and 78.7% for all workers.

Courses for employees inmanagerial positions
Courses for employees in
non-managerial positions

Regular workers
Non-regular workers
All workers

DKS REPORT 2023

Number of attendees Hours of attendance
11 attendees

207 hours

32 attendees

480 hours

Women
6,188,104
2,897,330
5,842,776

Men
7,808,053
3,315,058
7,419,982

Pay gap
79.3
87.4
78.7

85.0

17

15

Promoting Diversity, Human Resource Development and Education

77.3

90.9

23

17

(%)
100
80

Retiree Reemployment System
In reemploying retired applicants as Senior Challenge Staff,
DKS conducts monozukuri (manufacturing) by handing down
senior employees’ techniques and skills that make the best useof the experience they have accumulated over many years.
Senior Challenge Staff Employment
FY
2020
2021
2022

To support the balance between work and home life, we
introduced a telecommuting system in fiscal 2019 and a
flextime system in fiscal 2020. DKS is always aiming to
improve the work-life balance of our employees.
Total overtime hours for fiscal 2022 were 124.9 hours per
employee. As one of the priority measures of “FELIZ 115,”
we are also working to reform the personnel system totransform our corporate culture to one that reliably
rewards those who contribute to the business.

10

40

2020

5

20

2021

0
(FY)

0

2019

2020

2021

 Number of employees with disabilities

2022

2022

Number of reemployments Reemployment rate
10
66.7%
6
75.0%
8
88.9%

Promote Work-Style Reform

FY

60

Number of retirees
15
89Annual Overtime
Hours
147.9 hours
per person
151.1 hours
per person
124.9 hours
per person

Rate of Annual
Telecommuting Rate
Paid Leaves(Utilization Rate of
Telecommuting System)* Actually Taken
14.8% (59.7%)

66.1%

14.0% (62.9%)

67.4%

11.8% (62.7%)

73.8%* Telecommuting Rate = total telecommuting days ÷ total work days × total
telecommuting workers × 100
	Utilization Rate of Telecommuting System = system users ÷ total employees × 100

Retention rate

Health and Productivity Management
DKS has a proactive corporate culture toward employee
health management, as evidenced by the fact that in 1919,
the year after its founding, DKS began implementing
health checkups on all employees. Underlying this is our
corporate philosophy that people are our assets and mustbe nurtured and treasured. In 2017, DKS announced its

Healthy Company Declaration and began Health andProductivity Management initiatives. One of the goals of
our medium-term management plan “FELIZ 115” is the
improvement of employee happiness, and we are working
to maintain and improve the health of our employees,
which is essential to achieving this goal.

Healthy Company Declaration: Regarding its employees as Company assets, DKS will strive to maintain and improve their health.
YAMAJI Naoki, President COO, DKS Co. Ltd.

Prevent disease and mental health issues by health management

Work and live in a safe and healthy environmentR egular health checkups, special health checkups, specific healthguidanceM ental care: internal and external EAP, stress checks
 In-house education: e-learning, group training, etc.
 Improve conditions of the Company premises and housing: maintenanceof amenities; implement measures to prevent passive smoking, etc.
 L
 ook into absenteeism, presenteeism, and work engagement
 H
 old events involving athletic activities


Formulate measures to prevent lifestyle-related diseases
Formulate health management targets
 Develop internal company communication
 Improve the workplace environment






Plan

G
 ather results of health checks, management ascertains status of
Actionmental health Share health checkup results data in-house Release both internally and externally an assessment by external
institutions
 E
 xplore routes for improvement based on an assessment by external institutions
 E
 xplore next health management targets based on health checkup results and secondary data Verify the effect on productivity and corporate value


Do

Check

Inspect workplaces; monitor working environments, etc.
Interview after health checkup and summarize results
 Implement workplace improvement activities after stress checks
 R equest third-party assessment by external institutions: DBJ HealthManagement rating, White 500 (certified health and productivity
management organizations) C onduct cross-analysis relating to productivity

DKS REPORT 2023

33

Creating Value with a Long-Term Outlook

Human Resource Management

Concept of Health and Productivity Management
Health and Productivity Management (“Kenko Keiei”) Initiatives
We aim to bolster the Company’s productivity, and thus its corporate value, by maintaining and improving the health of our employees.
Health and Productivity Management (“Kenko Keiei”) is a registered trademark of the NPO Kenkokeiei.

This initiative is reported to meetings attended by officers in charge to obtain approval for plans formulated based on these results.

Efforts in Health and Productivity Management
We believe that efforts to maintain and improve the healthof our employees will enhance our corporate value in the
future. From a managerial perspective, DKS is striving tomaintain and improve the health of its employees under its
Healthy Company Declaration. We have clearly statedspecific healthy actions for employees in our Employee
Healthy Action Guidelines, and have established a Healthand Productivity Management Promotion Committee topromote health across the Company.
Efforts to Establish Exercise Habits
We are working to establish exercise habits by using an
app that registers the number of steps taken on a daily
basis. We hold company-wide walk-a-thons regularly andmotivate employees by establishing rankings for eachindividual and department. In addition, we have
implemented a system to increase physical activity during
the workday, which includes radio calisthenics before workand DKS Calisthenics (a DKS original) at 3:00 p.m., as apreventive measure against illness. As part of efforts toimprove not only exercise habits but also eating habits,
we encourage the use of health guidance to employees
who meet the criteria for metabolic syndrome or premetabolic syndrome and provide support to help themmake improvements (measures to prevent serious illnesses
among those at high risk). In addition, we hold physicalfitness seminars for older employees to help them create
an environment in which they can continue to exercise. As
a result of these efforts, the percentage of employees
aged 40 and over with
exercising habits
increased from 13.6%
in fiscal 2016 to 24.3%
in fiscal 2022.

Practicing DKS Calisthenics

Strategy Map
Results of health investments
Health investments

Health app
Health educatione-learning

Enhancementof regular
health checkups

Quit Smoking
Project

Healthmanagement
systemInternal andexternal EAP

Walk-a-thons
Health guidancefrom professionals

Enhancementof non-statutory
health checkups,
etc.

Vaccination
subsidies

Corporate
cultureEstablishment ofenvironment forworking from home

Philosophy ofHealth andProductivity
Management

Establishment ofsatellite offices
In-houserecreational events

Enhancementof infrastructure
and amenities

Mental healtheducation
One-on-one
meetings

34

DKS REPORT 2023

Indicators regarding thestatus of health investment
policy efforts
Utilization rate ofhealth app
Increase attendance
rate of healtheducation classes
Number ofparticipants in the
Quit Smoking ProjectIncrease
participation rate ofwalk-a-thons
Maintain 100%
secondary checkup
encouragement rate

Indicators related tochanges in awareness andbehavior of employees, etc.
Decrease thenumber of people
with lifestyle-related
illnesses
Decrease rate ofsmoking

Maintain 100%
secondary healthcheckup rate

Increase participation
rate of in-houserecreational events
Increase attendance
rate of mental healtheducation classes
Improvement of
implementation rateof one-on-one
meetings

Social value

Improvement ofwork-life balance

Increase employee
happiness andfurther improve
productivity
Not achieved

Maintain low
number of
employees onmental health leave
Improvement ofrelationships
between supervisorsand subordinates

Achieving a
happy, active
post-retirement
life

Corporate value
Sustainablegrowth throughhappiness-based
management

Improve workplace
relationship metrics

Enjoy Eating Project
Our cafeterias are free for our employees and offer a wellbalanced healthy menu. We also provide nutritional
guidance through a health app. By taking photos of meals
and registering them in the app, employees can receive
nutritional guidance from the AI. Points are awarded foreach meal registered, which can be redeemed for

Health and Productivity Management Targets
Status of three targets (KPIs and results) for sustainable corporate growth through the implementation of happiness-based management
Targets for FY2024

FY2019FY2020

FY2021

FY2022

Reduction of absenteeism1

Maintain at 2.0%
or below

1.6%

0.8%

0.9%

1.0%

Reduction of presenteeism2

Maintain at 2.0%
or below

2.5%

1.3%

1.0%

1.2%

Improvement of work
engagement3

Achieve a normal
distribution T-scoreof 51 or more

49.8

50.8

50.9

50.8

Status of four targets (KPIs and results) regarding employee health issues

Reduction ofpresenteeism

Reduction ofoutbreaks

Prevention of health issues among healthy employees:
Percentage of employees who exceeded abdominal girth standards
Prevention of aggravation among high-risk employees:
Percentage of employees 40 years or older at risk for or experiencing metabolic syndrome
Prevention and early detection of employee mental health issues:
Ratio of leave taken by employees with mental health issues
Creation of environment leading to quitting smoking:
Percentage of employees who smoke

Targets for FY2024 FY2019 FY2020 FY2021 FY2022
25.0%

30.7%

31.6%

29.2%

28.8%

22.0%

26.6%

28.9%

24.7%

27.0%

Maintain at 0.20%
0.16%
or below

0.00%

0.15%

0.45%

20.1%

20.5%

19.2%

11.4%

21.5%

Third-Party Review of Health and Productivity Management
In recognition of its efforts, DKS was selected for the fourth consecutive year as a “Health & Productivity Stock.”
Also, our affiliate Yokkaichi Chemical Co., Ltd. was certified for the third consecutive year as a “Corporation with
Excellent Health Management.”

Improvement ofwork engagement

Mental Health Measures
As a mental health measure, DKS has introduced an
external Employee Assistance Program (EAP), which
provides employees with counseling for their concerns via
e-mail, video call, telephone, and in-person sessions.
Around-the-clock counseling is available to employees
and their relatives up to the second degree of kinship. In
fiscal 2022, EAP services were used in 179 cases.
In addition, the participation rate of employees inhierarchical mental health training, which is conducted atmilestones such as promotions, was 100%, and theparticipation rate of mental health education for all
employees was 84.9% (both fiscal 2022 results).
Health Management Targets

Achieved

Reduction ofabsenteeism

health-related products. The app usage rate for the fiscal
2022 was 81.8%, and is being used to support employee
health management.

1. 2. For measurements, we aggregate data in our labor management system.
3. We use the work engagement measurement values included in the stress check service offered by Advantage Risk Management Co., Ltd.
Please see the glossary p.72-73 for details on terminology

Management issues tobe solved throughHealth and Productivity
Management

Increase rate of
exercise habits

Improvement ofvaccination rate
Adjustment ofattendance rate

Final health-related
target indicators

 DKS Trim Waist Award
After distributing DKS original measuring tape to all
employees and educating them about abdominal
circumference, we have employees self-report changes intheir abdominal measurements over time and give out
Trim Waist Awards. In addition to DKS Calisthenics, which
incorporates movements focused on reducing belly fat,
we also support walk-a-thons, No Snacking Day, andTeetotal Day to raise awareness of the need to reduce
abdominal circumference.

 fforts in Health and Productivity Management
E(In Japanese only)

https://www.dks-web.co.jp/sustainability/employee/ health/index.html okkaichi Chemical’s Efforts in Health and Productivity
YManagement (In Japanese only)

https://yg-chem.co.jp/company/health-management/

DKS REPORT 2023

35

Creating Value with a Long-Term Outlook

Consideration for the Environment
レスポンシブル・ケア

Material issues
 Responding to decarbonization and reducing
environmental burdens Contributing to a recycling‑oriented society Appropriate management of chemical
substances

The Company states its environmental and safety philosophy as“contributing to the sustainable development and realization of happysocieties by considering human health, safety and environmental
preservation throughout the lifecycle of each product, fromdevelopment to scrapping,” and promotes responsible care activities.
For details on the responsible care activities and promotion system, see our website (in Japanese only).

https://www.dks-web.co.jp/sustainability/ecology/

Changes in Greenhouse Gas Emissions

Changes in Final Disposal Amount and Final Disposal Rate

(Yokkaichi, Ohgata, Shiga, Tanagura, administrative departments, domestic
subsidiaries, derived from non-energy)(Yokkaichi, Ohgata, Shiga, Tanagura, Kyoto, domestic subsidiaries)
(t)

(%)

1,600

6.0

(1,000 t)
60
53.8

52.6

49.0

48.6

40

4.8

43.0

5.0

1,200
1,044

GX Strategy Targets

Reduce by

30%(compared tofiscal 2013)

Rate of final
waste disposal
in fiscal 2030

Zero emissions(0.1% or less)

Initiatives Based on GX Strategy
In March 2021, the Company devised green
transformation (GX) strategies for aiming toward carbon
neutrality by 2030 and beyond 2050. Starting in fiscal
2021, we have been shifting to a forecasting and analysis
approach that is informed by these strategies. As westrengthen our current initiatives, we will also expand ourtargets to initiatives that take the sustainability of broader
society into consideration.
In fiscal 2022, we focused on improving process
efficiency in our high-energy consuming plants. We useddata loggers and other tools to gain an understanding of

Improvement of corporate value

2030

Environmentally friendly products

Carbon neutral

2021

Reduction of GHG emissions

Reducing emissions ofenvironmentally
impactful substances
Zero emissions

Energy saving

current conditions, recovered steam condensate,
integrated equipment, and optimized operating hours.
We also introduced energy-saving equipment such as
LED lighting and high-efficiency steam traps. As for
waste, we are systematically advancing efforts to recycle
sludge produced at wastewater treatment plants andworking to reduce the final disposal rate.

2019

2020

2021

2022

0

2018

(FY)

Notes:
1. Administrative departments include fuel for company-owned vehicles.
2. Subsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd.,
Daiichi Ceramo Co., Ltd., as well as Ikeda Yakusou Co., Ltd. as of FY2019 andBiococoon Laboratories, Inc. as of FY2020.

2019

2020

For our GX strategy targets (fiscal 2030), we set numerictargets based on the long-term environmental vision. For
our medium-term environmental targets (fiscal 2024), we
reviewed the progress of our GX strategy in May 2022. We
significantly surpassed the targets set for greenhouse gas
emissions and waste generation per unit within our GXstrategy. While we have not achieved the target final
waste disposal rate yet, we see yearly improvements.

2022

DKS received a rating in March 2023
from the Development Bank of Japan(DBJ) as part of the DBJ Environmentally
Rated Loan Program with DKS judged
to be a “company with excellent
advanced environmental initiatives.”

2022

2021

(FY)

Final disposal rate (right axis)

Notes:
1. The final disposal rate is the ratio of the final disposal amount to the total amount
generated.
2. Subsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd.,
Daiichi Ceramo Co., Ltd., and Ikeda Yakusou Co., Ltd. as of FY2019.

Environmental Targets and Fiscal 2021 Results
Evaluation

Greenhouse gas
emissions1
Energy consumption
per unit2*Based on the standards of the
Act on the Rational Use ofEnergyGenerated waste
amount per unit

A: Significant result

B: Result in line with the target

C: Target unachieved D: Underperformed by a wide margin

Reference years FY2022 targets

Medium-term
GX strategy
Target scope
environmental
targets (FY2030)
targets (FY2024)

FY2013

6% reduction

12% reduction

30% reduction

FY20202% reduction

4% reduction

10% reduction

FY2022 results

Evaluation

Group

17.1% reduction

A

Individual

5.1% reduction

B

Group

5.2% reduction

B

FY20202% reduction

4% reduction

10% reductionGroup

15.5% reduction

A−

0.1% or less

0.1% or less

0.1% or less

Individual

0.2%

C

−

2.8% or less

0.5% or less

0.1% or less

Group

3.6%

D

*To amount produced

Rate of final waste
disposal3
Target parameter

Progress with Environmental Targets

1.5

0

2018

Target parameter

Waste reduction

DKS has strengthened its efforts to combat climate change, including formulating a GX strategy in March
2021, establishing a Sustainability Committee in January 2022, and endorsing the TCFD recommendationsin March 2022. Additionally, we have been disclosing environment-related information based on the TCFD
recommendations, including announcing greenhouse gas reduction targets in May 2022 and analyzing
climate change scenarios. We have been rated to a certain level by environmental rating agencies, andreceived the highest rating in the Development Bank of Japan (DBJ)’s Environmentally Rated Loan
Program 2022. Going forward, we will continue to promote environmental management throughout theCompany based on our basic philosophy regarding the environment and safety.

DKS REPORT 2023

546

 Final disposal amount (left axis)  

CO2 reductions in the supply chain

Biodiversity

0Management items
SOx emissions

Reduction ofenvironmental impact
substance emissions

NOx emissions
Dust emissions

FY2022 targets
Reduce emissions ofenvironmental pollutants into
the air

COD emissions

Reduce emissions ofenvironmental pollutants into
water

PRTR Regulation

Reduce emissions of PRTR

Water discharge

Proper management of-designated substances Regulation-designatedchemical substances
emissions

FY2022 results

Evaluation

Down 47.4% YoY

A

Down 80.5% YoY

A

Up 17.3% YoY

C

Up 5.8% YoY

CUp 30.3% YoY

DUp 41.7% YoY

D

70.2% (improved
by 2.0 percentage
points YoY)

B

Zero accidents

B

No legal/regulatory
violations

B

MaintainedB

substances

Promotion of green procurement

Improve green procurement
ratio for paper and stationery

Elimination of disasters/accidents

Achieve zero environmentrelated accidents
Comply with environmental
laws and regulations

Environmental management system

Promoting our environmental
management system

TOPIC

36

3.0

741

400

Contribution to businesses
Greenhouse gases
in fiscal 2030

3.6

767

20

Environmental Conservation Efforts
To protect lifestyles and increase safety and comfort, DKS
contributes to the realization of a sustainable society
through our belief that “chemistry provides a solution.”
As we look to achieve carbon neutrality by the year
2050, we will reduce the Scope 1 and Scope 2 greenhousegas emissions of the entire DKS Group in Japan by 30%
by fiscal 2030, compared to fiscal 2013. In regard to therate of final waste disposal, we will aim for zero emissions(0.1% or less) over the entire DKS Group in Japan byfiscal 2030.

4.5

972

800

Long-Term Environmental Vision

4.4

4.2

FY2023 targets
Reduce emissions ofenvironmental pollutants inthe air
Reduce emissions ofenvironmental pollutants inwater
Reduce emissions of PRTR
Regulation-designatedsubstances
Improve green procurement
ratio for paper andstationery
Achieve zero environmentrelated accidents
Comply with environmental
laws and regulations
Promoting ourenvironmental management
systemNotes:
1. Derived from energy use in the production and administrative departments
2. Based on the calculation method from the periodical report stipulated by the Act on the Rational Use of Energy
3. The ratio of the final disposal amount to the generated waste amountPlease see environmental data (p. 81–82) for details on energy, waste products, environmental impact substances, and chemicals subject to the PRTR regulation.

DKS REPORT 2023

37

Creating Value with a Long-Term Outlook

Initiatives to Tackle Climate Change

In March 2022, DKS pledged its commitment to the Task Force on Climate
Related Financial Disclosures (TCFD), based on a recognition of how
important the risks and opportunities of climate change are to our business.
We will promote the disclosure of information regarding the impact thatclimate change has on the business activities of the Company, and aim toachieve a sustainable society by striving to realize a decarbonized society
throughout the entire
supply chain.

Risk
Management

Indices andTargets

TargetReducing the Scope 1 andScope 2 greenhouse gas
emissions of the entire DKSGroup in Japan by 30% by fiscal
2030, compared to fiscal 2013

In regard to overall risk management at DKS, we systematically promote activities by periodically holding
Risk Management Control Committee meetings attended by representatives of subsidiaries and eachdepartment, and headed by the executive officer in charge of risk management.

We have defined our long-term goals, including consolidated net sales of ¥100 billion and the reduction ofgreenhouse gas emissions, in a new management plan for the year 2030, called “SMART 2030 (tentative
title).” The process for achieving our long-term goals involves creating a medium-term environmental planfor the years up to fiscal 2024 based on the “FELIZ 115” medium-term management plan, and working tosave energy, reduce greenhouse gas emissions, and reduce waste. We have also formulated long-term
green transformation (GX) strategies that aim to achieve carbon neutrality by the year 2050, and arepromoting efforts for decarbonization. Yokkaichi Chemical has switched to carbon-free electricity at its
Rokuromi Plant from June 2022. Chin Yee Chemical Industries in Taiwan installed 1,328 solar panels at its
Guanyin Plant and began generating electricity at the end of 2022. In addition to conserving energy, we will
expand the use of renewable energy and reduce greenhouse gas emissions.

GHG emissions (Scope 1-3)
(DKS non-consolidated)

FY2022 emissions
15.3
12.0
200.7

Category 1
Category 2

Category 4

Purchased Goods and Services
Capital Goods
Fuel- and Energy-Related Activities Not Included in
Scope 1 or Scope 2
Upstream Transportation and Distribution

Category 5

Waste Generated in Operations

Category 3

38(1,000 t-CO2e)

Scope / Category

Scope 1
Scope 2
Scope 3

173.3
4.7
12.0
5.7
4.8

Category 6

Business Travel

0.1

Category 7

Employee Commuting

0.2

DKS REPORT 2023

https://www.dks-web.co.jp/
english/sustainability/ecology/
climate-change/

Because the impact of climate change is highly likely to become apparent in the medium to long term, we areworking on deepening our understanding of the major risks and opportunities related to climate change,
which are expected to financially impact our business in the medium- to long-term. In regard to the evaluationof climate change risks and opportunities, we refer to the climate change scenarios of the International Energy
Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC) to identify the risks and opportunities
that will affect our entire business. While improving our understanding of the expected risks and opportunities
from a medium- to long-term perspective, we will plan and execute strategies across a timeline.

2 Strategy

4

For details on the disclosure of
information related to climate change,see our company website

DKS has established the Sustainability Committee, comprised of members of the Management Committee,
with sustainability-related committees and meetings falling under its remit. The Sustainability Committee
decides on policies, deliberates on matters to be discussed, makes decisions, and confirms the status ofcompany activities. It also considers and promotes initiatives together with the Climate Change Working
Group, the Human Capital Management Working Group, and the Human Rights Working Group which allcome under the Committee. Findings and progress reports are made to the Board of Directors at least
once a year with strategies, targets, and plans reviewed accordingly.

1 Governance3

Material issue Responding to decarbonization andreducing environmental impact

Scope 1 to Scope 3 emissions were
calculated for DKS on a non-consolidated
basis (Scope 3 is calculated for Categories
1 to 7). Of these, Scope 3 emissions
accounted for the largest share at 88%,
and within that Category 1 (purchased
goods and services) emissions accounted
for 86% of Scope 3 emissions. Goingforward, we will continue to promote
efforts to reduce Scope 3 emissions with afocus on Category 1 emissions.

Scenario Analysis
Impact Evaluation Based on Scenario Analysis
To assess the impact of climate change risks andopportunities on our business activities and strengthen theresilience of our business strategies toward these impacts,
we conduct scenario analysis in line with the TCFD
recommendations. In reference to climate change scenarios
published by the IEA, IPCC and other organizations, we use
a less than 1.5°C/2°C scenario for transition risks, which
presupposes tighter measures such as carbon pricing, and a
4°C scenario for physical risks, which presupposes more
severe disasters. In assessing the impact these scenarios
would have on our business, we evaluate and rank in order
Risk /
Opportunity
Increasing
environmental
Transition awareness(changes indemand)Urgency
Level

Classification

ImpactLevel

Medium Term

MediumTransition

Introduction ofcarbon pricing

Short Term

MediumTransition

Developmentof energysavingtechnology

Long Term

MediumTransition

Rise in raw
Medium Termmaterial prices

High

Transition

Rise in fuelpricesLow

PhysicalMore frequentMedium Term
naturaldisasters

PhysicalRisingtemperatures,rising sea
levelsUrgency Level
Impact Level

Medium TermLong Term

MediumLowof priority the degree of impact on our business and finances
and their degree of urgency for when the impact becomesapparent. As a result of the scenario analysis, we found that
there would be significant impact from policy risks such as
the introduction of carbon pricing, especially a significant
impact from higher prices passed on to raw materials with
the introduction of a carbon tax. Meanwhile, the impact on
factories due to the increasing severity of disasters as aphysical risk is expected to increase over the medium tolong term. In preparation for the transition to a decarbonizedsociety, we will continue to conduct scenario analysis andrespond appropriately to risks and opportunities.

Impact on Business

DKS Countermeasures• Development and wider sales of eco-friendly products• Increase in demand for products with low environmental • Move to non-petrochemical derived and renewable raw
materials
impact• Decrease in demand for petrochemical-derived products • Expansion of life science business centered on natural
materials• Reductions based on GHG emissions plan
• Greater tax burden due to introduction of carbon tax• Securing and utilizing appropriate credit• Increase in costs due to emissions trading• Operation of internal carbon pricing• Planned introduction of energy-saving equipment• Less energy consumption with introduction of new• Expanding the use of renewable energy
technologies• Lower power generation costs with more widespread use • Conversion to new energy (hydrogen, ammonia fuel use,etc.)of renewable energy• Switching to non-petrochemical derived raw materials• Increase in procurement costs due to carbon tax passed• Risk diversification from multiple purchasing channels foron to raw material prices
raw materials• Increase in logistics costs due to carbon tax passed on to • Improving load factor in transportationfuel prices• Promoting modal shift• Strengthening measures based on business continuity• Higher risk of suspended operations at plants and withplans
suppliers• Multiple purchasing channels for raw materials• Higher risk of disruption to logistics network (raw material• Wider range of locations and review of manufacturing
procurement, sales)
sites and logistics bases to spread out inventory holdings• Strengthening measures based on business continuity• Higher risk of flood damage from rising water levels
plans• Changes in the price and quality of plant-based raw• Exploration and development of raw material alternatives
materials• Strengthening work environment and heat
• Higher risk of damage to employee healthcountermeasures

Short Term
High

Long Term within 30 years
within 5 years Medium Term within 10 years
Low
At least ¥3bn impact on profits Medium At least ¥1bn impact on profits

Initiatives for a Decarbonized Society
As a result of scenario analysis, we confirmed that there will
be greater demand for products with a low impact on theenvironment due to increased environmental awareness.
Our products and technologies give us an opportunity
to expand our business by identifying new market needs
for climate change countermeasures. We are mitigating

Less than ¥1bn impact on profits

the progression of climate change related risks throughproducts that contribute to energy-saving by shortening
manufacturing processes and products that contribute to
the realization of clean energy for preventing global
warming. We will respond to market needs by carrying out
research and development in order to contribute tosociety’s efforts to tackle climate change.

Market needs

Value provided

DKS technologies and products

Energy and resource saving

Saving energy by shortening manufacturing
processes

Solvent-free UV-curable materials

Preventing product deterioration

Polyurethane resin sealants for electric insulation

Achieving clean energy

Binder for lithium-ion batteries, gel electrolyte polymers,
conductive paste for solar cells

Reducing greenhouse gas emissions

Environmentally friendly synthetic lubricants related to CFC
regulations

Preventing global warming

DKS REPORT 2023

39

Creating Value with a Long-Term Outlook

DX Efforts
Security management
DX at DKS aims to increase added value, improve work efficiency, and eliminate
inefficiencies. In order to realize these ideas, we are implementing reforms forclient contribution, business contribution, and data-driven management, andpromoting the creation of the foundation for achieving our next medium-term
management plan, with the tentative title of “SMART 2030” (tentative title).

Material issues
 Utilization and promotion ofdigital technology Cybersecurity measures Digital literacy education

Company-wide Project
Aim of DX Project
The goal of the seven priority measures set forth in our
medium-term management plan “FELIZ 115” is to reformthe value chain and build a highly productive, profitable,
and high-speed foundation that is free of inefficiencies,
waste, and irregularities.
We launched a company-wide DX project in 2021 to bringthis about with digital technology. We are pursuing the basic
concept of the DX project “DX from management
perspective: Reform the corporate culture from theperspectives of the customer, profit, and overall
optimization.” To realize this basic concept, we areworking on the following three themes:(1) Digitalization of work(2) Digital monitoring of work progress(3) Building digital data for intra-organizational activities(1) Digitalization of work involves creating workflows foreach department in a unified format in order to visualize
the business operations of the entire company, and saving
them in a library as a type of “expert system.”(2) Digital monitoring of work progress is a way ofunderstanding schedules and progress of all work
operations using the expert system stored in the library.
(3) Building digital data for intra-organizational activities
is a platform for information needed by management
across departments that essentially builds the means toview sales and consultations of each customer.
We will promote value chain reform, which is the goal of themedium-term management plan, by working on these threethemes and tie this into the next medium-term plan for 2030.
Basic Concept of DX Project
1. DX from management perspective: Reform thecorporate culture from the perspectives of thecustomer, profit, and overall optimization

Previous work styles

Management
information site

Information security
measures40

DKS REPORT 2023

DX Certification
In April 2022, the Information-Technology Promotion Agency(IPA) examined and selected the Company as a DX-readybusiness certified by the Ministry of Economy, Trade and Industry.
This recognized our efforts to adopt DX in our managementfoundation, including preventive maintenance of manufacturing
equipment via DX and DX training for all employees. We willcontinue to utilize digital technologies in order to achieve theseven priority measures set forthin our medium-term
management plan, “FELIZ 115.”(1) Build and digitalize a value chain in line with the essence ofa fine chemical manufacturer(2) Digitalize solutions to the problems faced by the Company(3) Promote DX from the five perspectives* that management
wants to focus on* Perspectives of the customer, finance, work processes, human resource
cultivation and reform, and SDGs

(4) Clarify and promote the financial statement improvement
effect of the themes we are working on(5) Minimum required investment (effective utilization of
in-house human resources)

Transform into the Most Valuable Solution Provider
2. Priority of activities: Prioritize the efforts fortransforming the corporate culture
Priority 1 D
 X for solving company-wide issues: Promote intra-

organizational activities as a companywide project
consisting of members of relevant departments
Priority 2 DX for solving unique issues faced by each
Headquarters: Promote in each headquarters
Priority 3 DX for solving unique issues faced by eachdepartment: Promote in each department

Cultivating DX Human Resources
The Company provides a training system to enable all
employees to achieve basic digital literacy and join digitalplatforms. The introductory course is for all managers andteaches basic knowledge on digital technologies and howorganizations operate in the VUCA age. The basic course
teaches the basics of programming, such as RPA, databases,
and Python. We will aim for a more effective systemdevelopment in the future by having the option to utilize thisknowledge to perform in-house development in addition tovendor outsourcing. Many of the trainees are actively
involved in the company-wide DX project. They are in chargeof developing the DKS Integrated Work Management
System and building a management information platform,
putting what they learned in the training course to practicaluse. We have also prepared an advanced course for acquiring
G- and E- certifications as well as mastering cloud technology
to leverage advanced skills and specialist knowledge.

Training DX Human Resources

Advanced
Outside Training
Advanced course(G-Certified human resources: 16 employees,
E-Certified human resources: 2 employees)

Basic course(15 times; 224 selected new employees)
Introductory course(3 times; all 251 managers)* Total recipients as of fiscal 2022

TOPIC
2023

2024

2025

April 2023
Development of DKS Integrated WorkManagement System
Digitalization of work and monitoring of progress“FELIZ 115”
To 2025
Database tools

information security rules based on the policy, and establishedthe flow of our response to various possible incidents, thereby
promoting the “defensive” part of our DX initiatives.

英文ロゴご支給ください

Digital Road Map for 2030
2022

The changes to work and business brought about bydigitalization create relationships with the many stakeholders
that make up our value chain. The COVID-19 pandemic has
also brought major changes to working styles, which led to
the rapid popularization of work at home and remote work.
That is why we need measures that take into accountsituations that cannot be addressed with conventional
information security. We are promoting reviews of theenvisioned flow of our countermeasures for various security
risks, security training for our employees, and the measuresthat we should take if a major incident occurs (such as accesslog analysis, data recovery, and the notification of relevant
parties). We have published our Information Security Policy,
which is our basic policy on information security, revised ourApril 2023
Management Information Platform
Present daily and monthly management
information
June 2023
Information Security Policy
Disclose Basic Security Policy

2026

2027

2028

2029

2030

Digital value chain

Digitalization of work styles(DKS Integrated WorkManagement System)“SMART 2030” (tentative title)
To 2030
Digital ESG
Data utilization(maximization of revenue
and machine learning)
Security management

DKS Integrated Work Management System
This is a system built to carry out two of the themes of the company-wide DX
project, namely (1) digitalization of work and (2) digital monitoring of work
progress.
We have registered the workflow of each department as an “expert
system,” and the managers of each department register their plans on anannual, monthly, weekly, and daily basis.
In addition to routine work, we register non-routine cross-departmental work
to provide visualization of the work plans for achieving departmental results at
a glance. Managers check progress on the daily work plans in the morning andthe afternoon and provide instructions for addressing any work delays.
The system went live in April 2023, and 1,035 operations have beenregistered. According to our evaluation, around 60% of the registered workflows
have achieved the required results. Going forward, we will work on improving
the remaining 40% and registering workflows that have not yet been created.

DKS REPORT 2023

41

Creating Value with a Long-Term Outlook

Contributing to a Collaborative Society
Initiatives to Effectively Utilize Industrial Waste
The population concentration in cities and regional depopulation are major social
problems for Japan. In order to solve these problems, we work to promote
regional revitalization through our business and promote business in alignment
with the philosophy of the SDGs together with all stakeholders in our supply chain.

Material issue Regional revitalization
 Co-prosperity with the supply
chain

Efforts for Regional Revitalization
Efforts for Sericulture Innovation

Japonica-Bombyx Fungus. Furthermore, we aim to
expand into the cutting-edge fields of pharmaceuticals,
foods, cosmetics, and other areas that are currently
receiving attention, with a focus on reducing healthcare
costs through the prevention of dementia and frailty.
In August 2021, the Company signed a comprehensive
partnership agreement with Yabu City of Hyogo Prefecture towork on regional revitalization for the goal of contributing to
the SDGs through Sericulture Innovation. The agreement aims
to create abundant value via the utilization of physicalresources and the mutual interaction of human and intellectual
resources, and promotes the development of regional industry,
sericulture business including the cultivation of mulberry trees,
and research into cognitive functions and dementia.

Biococoon Laboratories Inc., one of our Group
companies, advocates “Sericulture Innovation” that adds
the perspective of chemistry to traditional sericulture. Thisinitiative aims to achieve a healthy long-lived society by
developing together with our primary industry operatorsand local governments. It aims to utilize sericulture
resources such as mulberry trees, silk, cocoons, silkworms,
and pupae to achieve regional revitalization via farmers,
whose numbers have been declining*. Furthermore, the100-million mulberry tree planting campaign aims tocreate a healthy long-lived society by generating a cycleof reducing CO2 emissions by planting trees, effectively
utilizing abandoned fields and rice paddies, creating
regional employment opportunities for seniors, securing
stable incomes, and establishing a supply chain for I.

Cultivate mulberry trees
to feed silkworms

Cultivate silkworms• Create regional employment(income)• Effectively utilize abandoned
fields and rice paddies• Create regional employment(income)• Passing down ancientJapanese sericulture
techniques• Utilize in silk products

Expected effects• Create sense of purpose for senior generation • Vitalize regional community• Reduce medical costs by preventing
dementia and frailty• Reduce CO2• Revitalize the sericulture industry• Reduce medical costs by preventing
dementia and aging frailty• Create sense of purpose for senior generation* Sericulture Innovation is a registered trademark in Japan of Biococoon Laboratories Inc.

Regional Revitalization via Sericulture Innovation
ReduceCO2 emissions

Cultivate mulberry trees

Prevent dementia
Maintain healthCreateregional
employment

Source of income

Collaborate withresearch institutions,
local governments,
and corporations

Effectively utilize
abandoned fields
and rice paddies
Pupae

42

DKS REPORT 2023

Ikeda Yakusou Receives Outstanding Innovative Technology
Award at 26th Shikoku Industrial Technology Awards
In February 2022, Ikeda Yakusou received the Outstanding
Innovative Technology Award at the 26th Shikoku
Industrial Technology Awards, which recognize companies
that have significantly contributed to developing industrial
technology in the Shikoku region. The award was given forthe development of the new product Sudachin (sudachi
peel extract powder), a health food ingredient madeutilizing Ikeda Yakusou’s powdering technology and amethod of extracting functional ingredients from sudachi
peels developed through industry-government-academia
collaboration in Tokushima Prefecture.

Securerawmaterials

Cultivate raw
material for I.
JaponicaBombyx
FungusAs part of efforts to replace petrochemical materials withrenewable resources, DKS reviews natural materials suchas plants and microorganisms and transforms them into
highly functional materials to meet customer needs.
Furthermore, we promote corporate activities together
with all stakeholders in our supply chain to address the
problem of food waste, such as our efforts for effectively
utilizing the residue left over after extracting the juice of
sudachi. We also promote appropriate supply chain
management via our trusted relationships cultivated overlong years with our dealers and inspiring/inspired partners.
In October 2021, we announced our “Building Partnerships
Declaration.” We will aim to build new partnerships bypromoting cooperation and co-prosperity with businesses
working to create value and our partners in the supply chain.
The Company states the following individual actions inthis declaration: Contributing to efforts forregional revitalization
We aim to grow together withthe region by contributing toefforts for regional revitalization.
 Assisting Health and Productivity Management
We will implement and promote Health and Productivity
Management and assist our business partners in theirHealth and Productivity Management activities.

TOPIC

Signing of Comprehensive Technology Exchange Agreement with
Kyoto Institute of Technology to Promote Comprehensive Technical
Exchange and Foster Research and Technological Development
Through technical exchange with the Kyoto Institute of Technology, DKS aims to solve thechallenges communities face by integrating and implementing the technologies and knowledge
possessed by each party. We also hope to improve our mutual capabilities by actively
exchanging engineers. As both parties are located in Kyoto, we will develop this agreement overthe long term by flexibly addressing the changing times while respecting tradition.

Cultivate silkworms

Use cocoons (silk) for pharmaceuticals,
foods, and cosmetics, etc.

1. Stands for Reduce, Reuse, and Recycle
2. Upcycling refers to transforming waste and unused items that would have been
thrown away into new products

Co-Prosperity with the Supply Chain

Silk• Adopt for cutting-edge fields in the pharmaceuticals, foods, and cosmetics industries
Cocoons are
utilized for
Pupae•
Utilizeasrawmaterialfor
I.
Japonica-Bombyx
Fungus manufactured and sold by DKS
various purposes

Reducemedicalcosts(sudachi peels after juice extraction).
In the summer of 2023, the company added essential
oils made from the peels of the Japanese citrus fruits yuzu
and yukou to its product lineup. It will continue to develop
products based on the concept of environmentally friendly
products loved by the community by utilizing unused
resources that would otherwise go to waste.

* Number of sericultural households in Japan decreased from 3,280 households in theyear 2000 to 61 households in 2021
Source: The Dainippon Silk Foundation

Sericulture Innovation and Expected Effects
Description of activity

Tokushima Prefecture considers waste a new resource andhas implemented the Tokushima Prefecture Recycling
Certification System, which certifies recycled products madefrom waste and business sites actively working on the 3Rs1.
Ikeda Yakusou, our subsidiary company located inTokushima Prefecture, is promoting a Sudachi Innovation
Business (sudachi is a Japanese citrus fruit) thatthoroughly utilizes sudachi peels within its industrygovernment-academia collaboration with Tokushima
Prefecture and Tokushima University. In March 2022, it
became a Tokushima Prefecture Certified 3R Model
Business Site in recognition of its work manufacturing andselling Sudachin and sudachi essential oil, which areupcycled2 products that effectively utilize industrial waste

Effectively utilize thecomponents of mulberry

Technical Exchange• Technical consultation, technical research, and utilization of technology• Provision of technical and research information• Promotion of human resources development and exchange and development of new businesses
and products• Collaborative research to promote evaluation, verification, etc.

Signing ceremony for comprehensive collaborationagreement between Kyoto Institute of Technology and DKS
Left: MORISAKO Kiyotaka, President of Kyoto Instituteof Technology
Right: YAMAJI Naoki, President & COO of DKS

DKS REPORT 2023

43

For a Sustainable Creation of Value

Organizational Resilience
Risk Management

Crisis Management
Material issues Further deepening of corporate
governanceRisk Management System
Recognizing that conducting proper risk management is
an important management issue, Our Group established
the Risk Management Control Committee, chaired by the
responsible executive officer and composed ofrepresentatives of related departments and Group
companies, and is methodically moving forward withactivities by regularly holding committee meetings.
The Risk Management Control Committee operates a
PDCA cycle based on our risk management system withthe aim of reducing any risks that may impede theachievement of business objectives to an appropriate
level. Meeting on a regular and ad hoc basis, Committee
members identify, analyze, and evaluate risks by exposing
new risks. A risk matrix is created based on impact andfrequency of occurrence and the identified risks are ranked
in terms of severity. Risks of high severity are designated asrisks to be managed by the Committee, which thendetermines the person in charge of risk response, monitors
the planning and progress of countermeasures, andconducts reviews.
At the same time, we are working to maintain andstrengthen the crisis management system so that in theevent of an emergency, we can promptly communicate risk
information, including to all Group companies in Japanand overseas, to ensure situational awareness andappropriate responses. To deal with potential andactualized risks, we formulated Crisis Management
Regulations, Product Liability (PL) Prevention andManagement Regulations, and Information Security
Regulations. We manage envisioned risks, such as natural
disasters, pandemics, damage from terrorist attacks anddeterioration in safety, leaks and environmental pollution,
accidents that cause damage to facilities and equipment
or result in physical harm, harm to society from problems
such as product liability, security, and information
management related to intellectual property, etc., bylisting these risks and linking them to main internal rules
and regulations.
In fiscal 2022, we have identified and addressed newrisks, such as the contingency involving Taiwan, based on
the risk management system. On the other hand, as risks
already managed by the Committee, we are mitigating therisks of cybersecurity and the threat of infectious diseases
within this structure. In addition, to ensure that appropriate
actions are taken in the event of a disaster, we review andeducate employees on our earthquake BCP, conductdisaster drills envisaging earthquake scenarios, andconduct safety verification drills.

Having positioned implementing countermeasures tocorporate risk as a priority issue, we set Risk Management
Procedures to address the prevention and mitigation ofpotential and manifest risks. We created basic policies and a
Risk Management Manual as supplementary material for
conducting Risk Management Control Committee activities
and managing corporate risks, and operate the system as
stipulated in the Risk Management Procedures.
In the Risk Management Manual, we establish risk
management levels and stipulate that the responsible person
Risk Management Level

Understanding risk possibilities
under normal operation

Level II

Risks to be coped with within
plants, branches, offices andGroup companies

Level III

Risks to be coped with within
departments (including Group
companies)

Level IV

Risks to be managed on a
Company-wide basis

Level V

Unexpected risks

Headquarters executive
general managers, plant
general managers, groupcompany presidents
Head of Crisis
Management Task Force(establishment of Crisis
Management Task Force)

Natural disasters, terrorist attacks, civil
unrest, environmental problems,
accidents, information management
Earthquakes (seismic intensity of 5 ormore), environmental problems,
accidents, nearby fires, typhoons,
torrential rains, floods
Damage from natural disaster,
environmental problems, disease
outbreak, product problems

Expansion of Level II or Level III incident

To fulfill the expectations of customers and society, DKS conducts information security based on the following policy toprotect its information assets and those entrusted by its customers from accidents, disasters, crime, and other threat.

Analyzation of risks

Evaluation of risks

Risk assessment

Monitoring & review

Communication & discussion

Identification of risks

Respond to risks

DKS REPORT 2023

Plant general managers,
central branch managers,
branch and officemanagers, group company
presidents

Case

Information Security Policy

Ascertain the status of the organization

44

Responsible Party

Level I

Basic Process for Risk Management

for the particular risk level is tasked with implementing risk
management. Furthermore, for risks that impact lives andbusiness, we are implementing and strengthening appropriate
responses. There has been an upward trend in the frequency ofearthquakes, water damage due to torrential rains, long heatwaves, and natural disasters accompanying abnormal weather,such as massive snowstorms. To respond to the impact of theseon business, we use information-sharing tools to ensure prompt
information dissemination among all parties involved, enabling
us to respond quickly in accordance with the management level.

(1) Management responsibility(2) Establishment of internal systems(3) Employee engagements

We will work to improve and enhance
information security under the leadershipof management.

We will establish an organization tomaintain and improve information
security, and will work systematically andcontinuously on information security
measures.

Our employees will acquire theknowledge and skills required for
information security and will ensure
information security efforts.

(4) Compliance with laws, regulations
and contractual requirements(5) Response to violations andaccidents

We will comply with all laws, regulations,codes, and contractual obligations
related to information security, and meetthe expectations of its customers.

In the event of violation of laws,
regulations, contracts, or an accident
related to information security, we willtake appropriate action and work toprevent recurrence.

DKS REPORT 2023

45

For a Sustainable Creation of Value

Organizational Resilience

Quality Management

QC System Diagram

Material issues Thorough quality assurance
system Promoting occupational safety
and health

To meet the needs of customers and society and earn their trust, it isessential to improve the quality of the products and services we provide. At
DKS, we consider quality from the four perspectives of “design anddevelopment,” “production,” “sales,” and “customer service,” and we areworking to improve quality in cooperation with our customers and suppliers.
For details on quality and safety management, please visit our website (in Japanese only).

President

Life Sciences Headquarters

Production Headquarters

Procurement
Department

https://www.dks-web.co.jp/sustainability/ecology/

Sales departments

Sales Departments

Quality Assurance/Quality Policy
As a chemical partner conveying the essence of highfunctionality for the future, we will provide customers withsafer, higher-quality products that maximally contribute to
the development of their business. To realize this, we

R&D Headquarters

Sales Headquarters

Production
departments

R&D departments

Customers
R&D Departments

engage in quality control using the PDCA cycle based on
our fundamental quality assurance and quality policy in aneffort to improve quality and customer satisfaction.

Quality Control
Sections
Quality inspection(raw materials, products)
Certificate of analysis
issuance

Customer Support Department

Tanagura Plant

Quality Assurance
Department

Plants(Yokkaichi, Ohgata, Shiga)

Support Group

Quality management(supervision)
Regulatory management
RC promotion activities

Product Quality Review Meeting

Delivery Group

Fundamental Quality Assurance
1. W
 e establish quality-related management standards for eachdepartment that cover the entire process, from product planning tocustomer service through design and development, manufacturing
and sales. Through the appropriate operation of such standards,
we strive to provide high-quality products that are safe and reliable,
maintain and improve product quality, and provide quality
assurance for our customers.
2. T o effectively bring about quality assurance functions throughout
the entire Company, we establish, operate, and maintain a quality
management system and promote initiatives for on-going
improvements.
3. A
 ll our employees must observe this basic concept of quality
assurance and carry out tasks in accordance with the Quality
Assurance Management Regulations.

Product Safety Mechanism (chemical substance management from design development)
At each stage of product development, from research andexploration to prototyping and mass production, DKS
conducts surveys of laws and regulations as well as
evaluations of environmental impact, and carries out
design and development with the utmost consideration
for product safety. In addition, by introducing a chemical
substance management system, we conduct GHS1

classification, perform regulatory compliance checks,
create multilingual SDS2 and labels, investigate
substances contained in items such as our products, andstrive to ensure the appropriate communication of
information regarding our products.
1. Globally Harmonized System (GHS) of Classification and Labeling of Chemicals
2. Safety Data Sheet (SDS): A sheet containing information on the properties andhandling of chemicals when transferring or providing them to other business operators

Product Safety Mechanism

DKS Quality Assurance System
DKS promotes quality assurance activities by eachdepartment in charge of the process of product designand development, manufacturing, sales, and customer
service. With the President serving as the highest
authority for quality assurance, the environment, safety,
and quality assurance staff have the authority to raise
quality assurance issues, formulate solution and makerecommendations, and are responsible for overseeing thequality management system in order to ensure quality
assurance. The QA Department General Manager

Customers & Local Communities

oversees quality assurance in general and establishes andstrengthens a quality assurance system throughcomprehensive coordination between other departments,
and the Quality Assurance (PL) Meetings set the directionof quality assurance and quality control activities.
In line with diversifying customer demands andheightened requirements for product quality from a social
perspective, we remain committed to working to ensure
product safety and quality, as well as trying to prevent
quality-related issues before they arise.

Search & Investigation

Design & Development

Required Quality

Securing of Product Safety
Process Review

PlanningInvestigation of technologicalinformation Investigation of laws andregulations
Product Design

Realization of quality
Safety confirmation Environmental impact assessment Investigation of conformity withapplicable laws and regulations Investigation of raw materials

Quality Control System
As a chemical product manufacturer, DKS uses ISO 9001 as thebasic tool of our quality management system to maintain andimprove quality, and provide products and services that comply
with customer requirements and laws and regulations throughthe PDCA cycle. Furthermore, through careful daily activities(production management, corrective actions for nonconformities
such as complaints and abnormalities, confirmation ofeffectiveness, change management, audits, education andtraining, etc.) and continuous review and improvement of the
management system, we are working to improve customer
satisfaction. In 2019, we reconstructed the customer complaint
database and visualized progress throughout the Company,
including cause investigations, recurrence prevention measures,
46

DKS REPORT 2023

and reports to customers. In 2022, we conducted 5S activities
and work condition patrols with the aim of preventing incidents
in advance. As a result, the number of complaints decreased by
22% in fiscal 2022 compared to fiscal 2017.
Number of complaints (compared to FY2017)
(%)
120

100

109

90

72

60

64
40

30
0

2017

2018

2019

2020

2021

22
2022

Commercial Production(Product Sales)

Research & Preproduction

Process Safety and Disaster Prevention

Commercial Production Review

Stable Supply

Occupational/Process Safety & Disaster Prevention

Technical Service

Production technology review
Product evaluation (safety/
packaging) Compliance with applicable laws
and regulations
 Environmental impact assessment Securing of raw materials Preparation of SDSs, labels, andtechnical documents

Quality control
Response to improvement
requests Provision of product information
 Regulatory compliance Environmental conservation Securing of distribution safety









Provision of Product and Technical Information
Our products are utilized in a variety of industrial fields,
and we provide product and technical information tailoredto the characteristics of each product and service. An SDS
provides information on items such as hazards to ensure
safe handling of the product. For products exported to
the US, EU, and Asian countries, we are promoting
compliance with the laws and regulations of each country,
issuing SDS in compliance with GHS, and displaying
product labels. We are also sequentially revising SDS andlabeling in line with amendments to laws such as the
Chemical Substances Control Law, the Industrial Safety

and Health Act, and the Poisonous and Deleterious
Substances Control Act. In addition, we are providing
information on chemical substances in products by
utilizing chemSHERPA (a common scheme forcommunicating information on chemical substances in
products that can be used throughout the supply chain).
When introducing our products, we strive to maintainclose communication with our customers through daily
business negotiations, and provide information throughproduct pamphlets and technical documents.

DKS REPORT 2023

47

For a Sustainable Creation of Value

Organizational Resilience

Occupational Safety Initiatives

Food Hygiene Management Initiatives

Continuous improvement through occupationalsafety and a health management system
DKS recognizes that ensuring the safety and health of ourworkers is the foundation of our business activities, andwe have established policies in the “Environmental
Conservation, Health and Safety Management
Regulations.” Since August 2018, we have been working
to acquire Occupational Safety and Health Management
System (OSHMS) certification, and by December 2021, we
obtained JIS Q 45100 certification for our three facilities:
the Yokkaichi Branch, Ohgata Branch, and Shiga Branch.
In order to further improve the level of occupational safety
and health, we will continue to revise the OSHMS manualand related regulations, as well as create and revise
manuals on health management.

Industrial Accident Frequency Rate (AFR)

1.00
0.80
0.60

0.94

0.88

0.86

0.68

0.64

0.40

1.16

0.93
0.81
0.62

0.59

0.06
0.58
0.00

2018

2019
DKS  

2020

2021

2022

Chemical Industry* Frequency rate = Accidents resulting in lost work time / Total working hours x 1,000,000
Numerical value indicating the frequency of victims per 1,000,000 working hours

0.07

0(Year)

0.06

0.06

Tanagura Plant

0.04
0.02

0
(Year)(Severity rate)
0.10
0.08

0.77

0.20

DKS Group  

HACCP is an international food hygiene control method
developed in the United States in the 1960s to ensure thesafety of space food. By complying with HACCP,
businesses will be able to manage the most important
processes to eliminate and reduce hazards in all processes
from the arrival of raw materials to product shipment, andwill be able to improve safety. The Food Sanitation Act
was revised in Japan, and from June 2021, hygiene
management in line with HACCP has become mandatory.
The Tanagura Plant has acquired the JFS-B standard,

which includes full implementation of HACCP procedures.
In addition to controlling critical processes to reduce risk
factors, the plant has strict controls from receiving raw
materials to shipping products.
The plant manufactures the raw material for Kainou
Tochukasou, the first such fungus to become a food withfunctional claims, meeting the ever-increasing demand forfood safety and security.
The Shiga Branch, which manufactures products such as
sucrose fatty acid esters (SE), has also acquired HACCP
certification.

XX

1.07
0.90

In 2022, the DKS Group continued to have lost workday
injuries from the previous year, so the occupational
accident frequency rate (lost time) remained almost
unchanged. In addition to taking appropriate corrective
action, we implemented thorough recurrence prevention
measures. In 2023, we will further strengthen safety
activities, including risk assessment, with the aim ofachieving zero occupational accidents (lost time).

Manufacturing Kainou Tochukasou in an HACCP
certified plant in Japan

Industrial Accident Severity Rate (ASR)

XX(Frequency rate)
1.20

Industrial Accident Frequency Rate (AFR) andIndustrial Accident Severity Rate (ASR)(January 2022-December 2022)

0.02
0.00
0.00

2018

DKS Group  

0.05
0.03

0.01
0.01

2019
DKS  

2020

0.00
0.00

2021

0.00
0.00

2022

Chemical Industry*S everity rate = Working days lost / total working hours x 1,000
Numerical value indicating the severity of accidents per 1,000 working hours

Mini-plant

Please refer to our website for “Initiatives for Sustainable Growth – Securing Safety and Disaster Prevention” for FY2022.
https://www.dks-web.co.jp/english/ir/report/index.html

Quality control

0.02

Implement hands‑on safety education
A hands-on training device was installed at the safety
training center opened in February 2017 at the Yokkaichi
Branch Kasumi Plant aimed to raise awareness toabnormalities and dangers. In addition, we haveintroduced a simulated mini-plant, which can actually be
operated, so that employees can understand the basic
principles of equipment and processes. Using thesefacilities, 90 employees got hands-on safety training infiscal 2022.
In the future, we will continue to conduct training toconvey the importance of safety knowledge and stable
operations, and to raise individual safety awareness.

The Shiga Branch, which manufactures sucrose fatty
acid esters (SE) and other products

Initiatives Towards a Management System Equivalent to Pharmaceuticals
Strengths of being a GMP-certified facility
Ikeda Yakusou Co., Ltd. performs consignment work suchas the powdering of items such as health foods andchemical products. Since products that come into directcontact with the human body, such as personal careproducts, are often required to be managed in the samemanner as pharmaceuticals, the company has
established a quality assurance system based on GMP
certification*. In particular, the “extraction area” and“first spray drying area” have acquired GMP certification,and both manufacturing and quality are managed inaccordance with GMP certification in the same way as
pharmaceuticals. In addition, all production areas areequipped with the latest air conditioning equipment thatmaintains thorough temperature and humidity control
and a clean environment. By equipping each major pieceof equipment with a cleaning-in-place (CIP) function toensure thorough and safe cleaning, we have establisheda cleaning system to prevent contamination. Being a
GMP-certified facility has been a major advantage, which
led to an increase in demand.

Ikeda Yakusou’s GMP-certified plant* GMP certification: GMP is an abbreviation for Good Manufacturing Practice, amanufacturing process control standard that ensures that products are manufactured
safely and that a certain level of quality is maintained in all manufacturing processes. GMP
certification is done by a third-party organization that objectively evaluates theimplementation status of manufacturing and quality control in accordance with guidelines.

48

DKS REPORT 2023

DKS REPORT 2023

49

For a Sustainable Creation of Value

Organizational Resilience

Corporate Governance

Organizational composition and roles

 oard of Directors
B
To ensure the implementation of management policies, inJune 2023, we reduced the number of directors by one tofacilitate quick and strategic decision-making. The Boardof Directors currently consists of eight directors, four ofwhom are outside directors. As a rule, the Board of
Directors, which is chaired by the Chairman CEO, meetsonce a month and decides such issues as matters
important for the Group.


Material issues Further deepening of corporate
governanceDeepening DKS’ Corporate Governance and its Distinguishing Features
DKS engages in business based on our Company Credo“contributing to the nation and society through industry,”
along with our three Company Mottoes—"Quality First,”“Cost Reduction” and “R&D Efforts”—which embody thespirit of our founders. Our basic concept on corporate
governance is to establish a management foundation able
to earn and maintain the trust of society, as well as toconduct transparent and fair corporate activities that arerooted in corporate social responsibility (CSR).
Consequently, we pursue higher governance as
management policy and position it as one of our mostimportant tasks.

Further Deepening of Corporate Governance
Year

Month

Details

2014

June

Appointment of independent outside director: 1 person in total
Establishment of new provisions for putting Board of
Directors resolutions in writing

2015

May

Establishment of an Outside Officers Committee

2017

June

Appointment of independent outside directors: 2 people in total

2018

June

Disclosure of shareholder meeting materials over the Internet

May

Online exercising of voting rights made available

June

Partial disclosure of English-version of the notice ofconvocation of general meeting of shareholders

May

Adoption of an online voting platform for institutional investors

June

Establishment of an Advisory Board
Appointment of independent outside directors: 3 people intotal (3 of 8 directors are independent outside directors)

2022

June

Increase in the number of directors by 2, appointment of 4
independent outside directors (1 of the 4 is a woman), anddisclosure of English-translation of the full summary offinancial results

2023

June

2023 June Appointment of independent outside directors(1 of the 4 is a woman)
4 of 8 directors are independent outside directors

2020

2021

 anagement Committee
M
The Management Committee, which is chaired by the
President COO, is comprised of four internal directors, two
fulltime Audit & Supervisory Board members, and six
executive officers, and generally meets twice a month. The
committee reviews and considers items which needapproval prior to the Board of Directors (primarily accounts,
finance, and performance-related matters), as well as
important resolutions and reports based on the Official
Regulations of Administrative Authority and the Official
Regulations of Accounting and Finance. The committee
also undertakes coordination and management for thewhole company. In principle, matters brought before theBoard of Directors are first given careful review by theManagement Committee, which endeavors to check theircompliance with laws, regulations, and the Articles ofIncorporation, in order to facilitate rational decision making.
Advisory Board
The Company voluntarily established an Advisory Board
as a supplementary body with the goal of improving thefairness, objectivity, and transparency of the decisionmaking process of the Board of Directors. The Advisory
Board is comprised of the Chairman CEO, President
COO, and outside officers, and a majority of the Board’s
members are independent officers. An independent
outside director serves as chair. By establishing an
Advisory Board, we are encouraging outside officers togain an understanding of the industry and ensuring
opportunities for them to participate and provide advice.
In fiscal 2022, the Advisory Board met four times. To
contribute to extensive deliberations by the Board of
Directors, each director in charge provided an explanationof DKS’ Green Transformation (GX) and Digital
Transformation (DX) to promote a better understanding ofwhat we are currently working on. The approach of thepersonnel system was also explained.


Expected Skill Matrix
Outline of Structure

Company

OutsideGeneral Meeting of Shareholders
Appoint/Dismiss

Appoint/Dismiss
ReportBoard of Directors
Directors: 8 people

Audit

Company (4)Cooperate

Advisory board

Percentage of female directors
As of June 2023: 12.5%

Company (2)  Outside (6)Select/Dismiss
Supervise

Audit
ReportCEO

Company (2)Outside (2)Check for illegal
activities

Propose/Reportimportant matters

GeneralAffairs & Legal
Department

Decide on resolutions regarding
appointments/ dismissals
Judge on accounting audit
appropriateness

ReportCompliance Control Committee

RC (Environment, Safety &Quality) Promotion Conference

Risk Management Control
Committee

Security Export Control
Committee

Sustainability Committee

Report, etc.

Policies,planning andguidance

Audit

Respective business execution departments/Group companies

50

DKS REPORT 2023

Name of officer

Cooperate

ReportReport,etc.

broad knowledge and experience are appointed.
For Audit & Supervisory Board members, at least one who
has experience in the finance or accounting departments orpossesses equivalent experience is selected.
The following is a matrix of what we expect of ourofficers on the fields of skills and expertise. Up to three foreach officer is listed, but not all the skills and specialized
knowledge possessed by each officer is given.

Fields that directors and Audit & Supervisory Board members are expected to particularly contribute toInternal Audit Department

Executive officers:
9 people(Business execution)

Accounting auditor

ReportAuditorassistant

Audit

Management
Committee

Guide/Supervise

Cooperate

Audit & Supervisory Board
Auditor: 4 people

Outside (4)Deliberate importantmatters

Appoint/Dismiss

To undertake proper decision making and management
supervision at a higher level, the Company appoints
directors and Audit & Supervisory Board members taking
into consideration the balance of such factors as businessrelated extensive experience, performance, and expertise.
For outside directors and outside Audit & Supervisory
Board members, multiple candidates with extensive
experience with management, advanced expertise, andPolicies, planningand guidance

Corporate
management

Chairman CEO

SAKAMOTO Takashi

President COO

YAMAJI Naoki

Senior Managing
Director

OKAMOTO Osami

Accounting andfinance

Legal affairs and risk
management

IR and corporate
value creation







Director

SHIMIZU Shinji
TANIGUCHI Tsutomu

Outside Director

OKUYAMA Kikuo

Outside Director

HASHIMOTO Katsumi

Outside Director

NAKANO HideyoAudit & Supervisory
Board Member

ONISHI Hideaki

Audit & Supervisory
Board Member

KAWAMURA Ichiji

Outside Audit &Supervisory Board
Member

TAKAHASHI ToshitadaOutside Audit &Supervisory Board
Member

NAKA Hideya







Business strategy
and marketing










Researchtechnology, IT, andproductionOutside Director



Personnel and labor
management
Human resource
development























DKS REPORT 2023

51

For a Sustainable Creation of Value

Organizational Resilience

Reasons for Selection of Outside Directors

Methods of Evaluating Effectiveness

Name

Reasons for selection and expected roles of contribution

Questionnaire by the Office of the Board of Directors

TANIGUCHI Tsutomu

Mr. Taniguchi has extensive experience and advanced, specialized knowledge from serving in key
positions at the Labor Standards Inspection Office. Based on his six years of professional
experience serving as an outside director of the Company, he has appropriately fulfilled his role inoverseeing business execution by actively providing his opinions on working conditions andoccupational safety and health, among other subjects. The Company deems that, going forward,
Mr. Taniguchi will continue offering appropriate supervision and valuable advice.

(1) Conduct survey• Questionnaire sent to all directors and Audit & Supervisory Board members• Questionnaire consists of a total of 16 items, and confirms items to be discussed and time fordiscussion, provision of information, and content of statements, etc. (questionnaire items are reviewed
annually, with emphasis on continuity and taking into account performance, social trends, etc.)

OKUYAMA Kikuo

Mr. Okuyama has extensive knowledge and experience particularly in the field of nanotechnology
from his many years involved in research at university. After taking up the position of outside
director of the Company, he has played an appropriate role in overseeing business execution as an
outside director by actively providing his opinions on the Company’s R&D and Life Science fields,
among other subjects. The Company deems that, going forward, he will do his utmost to realize
industry-academia-government collaboration and continue to contribute to sustainable growth andgreater corporate value.

HASHIMOTO Katsumi

NAKANO Hideyo

Mr. Hashimoto has extensive experience and advanced, specialized knowledge of finance andaccounting from his many years as a certified public accountant. Having actively expressed his
opinions regarding matters such as the management strategy at Board of Directors meetings basedon his broad knowledge and experience, the Company deems that he will make useful proposals
related to overall management from a broad perspective.
Ms. Nakano has experience as a member of management of an investor and public relations
support company, whose purpose was to develop investments, and from her many years involved
in investment operations at an asset management company. In particular, she possesses specialized
knowledge related to investor and public relations activities from a global market perspective. Asan outside director, she plays an appropriate role in the Company’s Board of Directors by actively
expressing her opinions on the Company’s IR field and business strategies, as well as supervising
the execution of business operations. The Company deems that she can contribute to sustainablegrowth and greater corporate value of the Company by making uses of her extensive experienceand high expertise.

(2) Aggregation by the Office

Analysis and evaluation by outside directors and full-time Audit & Supervisory Board Members
Analysis and evaluation of the effectiveness of the Board of Directors by outside directors and full-time
Audit & Supervisory Board Members based on the results of the questionnaire

Sharing of evaluation results at Board of Directors’ Meetings
Results of the evaluation are shared and discussed at the Board of Directors’ Meeting by the
independent outside director who chairs the Advisory Board

Consideration of issues for the next year and action

Time spent on deliberations by the Board of Directors andnumber of proposals

Overall Efficacy of the Board of Directors[Summary](proposals)

DKS conducts an annual evaluation of the Board of Directors to verify that the Board is functioning properly and to further
strengthen its effectiveness.

(minutes)

120

240

90

Evaluation(1) The Company deems that the effectiveness of
the Board of Directors in fiscal 2022 was generally
appropriate and that the effectiveness of the Boardof Directors was ensured.
(2) Although there were improvements in“provided material and explanations” and“reflecting advice and reporting the reflection,”
there was evaluated to be room for further
improvements.

52

DKS REPORT 2023

80
7
45

Issues and Main Future Efforts
The issues for fiscal 2023 included “thoroughreporting of activity progress and findings” and“opportunities to provide information outside of
the Board of Directors meetings.”
In response, we will reemphasize the PDCA cycle
for matters to be resolved and increase
opportunities for discussion between executive
officers and outside officers.

89
12
42

91
17
43

60
93

30

96

35
28

104
25

89
14

45

43

43
122

101

31

17

89

180

Main deliberations at the FY2022 Board of
Directors meeting•Medium-Term Management Plan “FELIZ 115”
•Growth Strategy (R&D, new businesses, and capital
expenditures)•Business Base Strategy (personnel system strategy,
digital strategy, risk management, and sustainability
management)

120

108

87
36
27

32

2022/32023/306002018/3

2019/32020/32021/3

 Deliberated Matters    Reported Matters   Operation  
Average deliberation time

DKS REPORT 2023

53

For a Sustainable Creation of Value

Organizational Resilience

Remuneration amount

Officer Remuneration

Officer position

Total remuneration(Millions of yen)

Basic

Performance-linked

Stock-based

Number ofapplicable officers(persons)

Director (excluding outside directors)

273

230

18

24

7

Audit & Supervisory Board Member(excluding outside Audit &Supervisory Board Member)

43

39

–

3

2

Outside Directors

23

21

–

2

5

Outside Audit & Supervisory Board
Members

8

8

–

0

3

349

299

18

30

17

Remuneration decision process
The basic policy regarding director and Audit & Supervisory Board Member remuneration involves a) appropriatecompensation for execution of duties, b) remuneration that encourages actions to improve business performance andmaximize corporate value, and c) remuneration that deepens value-sharing with shareholders. The following are the KPIs
used to determine each type of remuneration and their weight in the amount of remuneration.

Composition of remunerationa. Fixed remuneration: amount set based on the size of the role of each officer and position and paid monthly.
b. Performance-linked remuneration: monthly amount paid based on a once-a-year evaluation of the Company’s
performance for the previous fiscal year and twice-a-year evaluation of the department
the Director is in charge of.
c. Stock remuneration: Restricted shares are granted based on the size of the role of each officer and position.

Items

Percentage

ChairmanPresident

Directors

OutsideDirectors

Audit &
Supervisory
Board
membersa. Fixed
remuneration

–

–











b. Performancelinked
remuneration

Department’s
performance
evaluation

If the fixed remuneration rate is 100%, theamount of remuneration is set between -14%
and +14% depending on the degree thattargets for a fiscal year were achieved.

–

–



–

–

Company’s
performance
evaluation

If the fixed remuneration rate is 100%, theamount of remuneration is set between -14%
and +14% depending on the degree that
improvements were made to net sales andincome compared to the previous fiscal year.







–

–

If the fixed remuneration rate is 100%, theamount of stock remuneration for one fiscal
year is set at approximately 7%–13% of fixed
remuneration for each position.











c. Stock
remuneration

–

100%

Department’s
performance
evaluation-14%~

Company’s
performance
evaluation
Stockremuneration
Total
remuneration

~14%

-14%~

~14%

7%~
79%

~13%
~141%

 Fixed remuneration    Decline    Increase    Fixed amount    Variable amountKPI
The Company has set growth, profitability, and safety as key metrics for evaluating the Company’s performance, and metrics
for performance-linked compensation are consolidated net sales, consolidated ordinary income, and operating cash flow.

54

DKS REPORT 2023

Notes
1. Remuneration was also paid to one internal director, who resigned when their term expired as of the end of the 158th Ordinary General Meeting of Shareholders held on June 24, 2022.
2. This does not include the salary of employees who concurrently serve as directors.
3. AOKI Sunao, who retired from the position of outside director and assumed the position of Director at the end of the 158th Ordinary General Meeting of Shareholders held on June24, 2022, is included in the above total amount and number of Directors for his term as outside director and for his term as director (excluding outside directors), respectively.
4. HASHIMOTO Katsumi, who retired from the position of outside Audit & Supervisory Board member and assumed the position of outside director at the end of the 158th Ordinary
General Meeting of Shareholders held on June 24, 2022, is included in the above total amount and number of employees for his term as outside Audit & Supervisory Board member
and for his term as outside director, respectively.

Succession Plan
The succession plan for officers such as the CEO wasformulated by the CEO. Succession planning for the CEO
is the most important matter for the survival of theCompany, thus it is critical to identify actual and potential
capabilities of management. Therefore, the succession
plan is the exclusive responsibility of the CEO, who isfamiliar with all aspects of the Company. The CEO
proposes successor candidates, and the Board of

Directors, including four independent outside directors,
decides on the successor after fully deliberating the issue.
DKS believes it is desirable to hear the opinions ofoutside officers regarding the qualities and aptitude ofsuccessors, thus our successor training committee and ourAdvisory Board, which include outside officers as members,
provide opportunities to appropriately incorporate theadvice and participation of outside officers.

Cross Shareholdings
The Company holds the shares of customers and financial
institutions for various purposes, including strengthening
the relationship between the two entities. In addition to
conducting a verification of holding the shares from a
medium- to long-term perspective based on such factors
as risk and return, we continue to review whether to holdthe shares (appropriateness of holding the shares) taking
into comprehensive consideration factors such as the
purpose for holding the shares, rationality, and amountComposition of remuneration
Fixed
remuneration

Total

Total remuneration by type (Millions of yen)invested. As for cross shareholdings as of March 31, 2023,
it was judged appropriate to continue holding the sharesbased on the Board of Directors’ verification of holding
the shares.
Number of shares and balance sheet amount
Number of issues
Total amount appearing onbalance sheet

24¥3,623 million

Human Rights and Labor Efforts
In accordance with the Guiding Principles on Business andHuman Rights set forth by the United Nations, we haveestablished the DKS Group Human Rights Policy. DKSGroup supports and respects international human rights
norms, including the International Bill of Human Rights,
ILO Declaration on Fundamental Principles and Rights at
Work of the International Labour Organization, and theten principles set forth by the United Nations Global
Compact (UNGC).
Based on the United Nations Guiding Principles on
Business and Human Rights and the Japanese

Government Guidelines on Respecting Human Rights in
Responsible Supply Chains, we have established thisPolicy and will promote efforts to respect human rights,
including human rights due diligence.

DKS REPORT 2023

55

For a Sustainable Creation of Value

Discussion with Outside Directors
difficult to determine when to withdraw a product. In general,many companies try to branch out and end up doing
everything half-heartedly when their performance
deteriorates, so I think it is good that DKS is going back to its
roots and refocusing on its Surfactants business. I believe that
it is precisely in times of poor performance that each andevery employee, starting with the board members, needs toreturn to the basics, confirm the company’s strengths, andreexamine its raison d’etre. In particular, I would like
employees to value an attitude of creativity in their work,
rather than simply seeking the correct answer to a problem.

Challenges for DKS in
Creating Long-term Value andthe Role of Outside Directors

Q Director Okuyama, from your perspective as a

researcher, how do you see DKS’s strengths andweaknesses in the areas of human resources andtechnology?

OKUYAMA Kikuo

HASHIMOTO Katsumi

Director

Some pastand current
positions• Professor, Department of Chemical Engineering,
Graduate School of Engineering of Hiroshima University• Professor Emeritus of Hiroshima University (current)

Director• Auditor, Hosokawa Powder Technology Foundation (current)• Vice President, The Information Center of Particle
Technology, Japan (current)

Q Please tell us about the changes at DKS since
Mr. Yamaji, the new president, took office.

OKUYAMA President Yamaji set “empowering profitability” as

DKS’s motto for fiscal 2023, and to realize this motto, a Strategy
Committee was established under the president with theparticipation of internal directors and the executive generalmanagers and general managers of each business division. The
committee discusses R&D, production, and sales, and is buildinga system to tackle management issues in an integrated manner,and I feel that the sharing of information within the Company isprogressing. Although DKS is the first company at which I have
served as an outside director, I feel that President Yamaji isactively working on reforms, such as speeding up productdevelopment and improving productivity by optimizing
production planning, by leveraging not only his years of R&D
experience but also his experience in sales and production
management. Furthermore, he is making efforts to visit ourbusiness partners, our factories and affiliated companies, as wellas actively providing opportunities for dialogue with employees.
Through these efforts, I hope that the DKS mottoes of “Quality
First”, “Cost Reduction”, and “R&D Efforts” will spread toyounger employees and motivate them to work harder.
HASHIMOTO Since 2022, the Board of Directors’ discussions
have focused on how to respond to deteriorating profitability
caused by the rapidly changing environment. For this reason,
I believe that President Yamaji’s skills will be demonstrated
starting this fiscal year. DKS is primarily a B-to-B company,
and changes in customer needs are not as rapid as in B-to-C.
For now, we are working steadily in the field to understand56

DKS REPORT 2023

Some pastand current
positions• Osaka Regional Taxation Bureau• Director, Kyoto Office of KPMG AZSA LLC• Representative, Hashimoto Accounting Office (current)

the needs of our customers and I think all we can do is tomake every effort to meet those needs. In 2021, an Advisory
Board was established as a supplementary body to the Boardof Directors, to which I am currently serving as its chairman.
Recently, we have been discussing the progress of themedium-term management plan as well as the content andprogress of the project to resolve management issues thathas been underway since April.

Q The results for fiscal 2022 showed a significant
decrease in profit. What do you think from theperspective of an outside director?

OKUYAMA Looking at the past three years, while net sales haveincreased overall in each segment, operating income has
declined, and there is an urgent need to raise product prices in
response to soaring raw material prices. I hope that westrengthen relationships with customers while customizing
surfactants, which have supported the Company since its
founding more than 100 years ago, and that surfactants continue
to be a core business that generates stable earnings. In the
Amenity Materials and Polyurethane Materials businesses, DKS
has unique products in the fields of environmental materials andfood additives, and I hope these products will attract newcustomers. In the Life Sciences business, we have begun B-to-C
sales of supplements, but I think the issue is how to increase thenumber of customers who become fans of the Company and its
products and continue to purchase them.
HASHIMOTO It is not uncommon for chemical manufacturers’
products to finally show results after many years, so it is very

OKUYAMA DKS’s technological strength is its superior
technology for manufacturing a wide variety of chemical
products derived from the production of surfactants.
Furthermore, DKS retains the know-how to combine theseproducts to develop products with functions requested bycustomers and products that even exceed the performance ofexisting products, making it very superior to other companies inthe same industry. In addition, DKS has a broad customer base,and its products are used in a variety of industries. By leveraging
the knowledge gained from transactions in this broad range ofindustries, and combining it with its synthesis technologies, DKS
is able to develop high-value materials. However, the Company
has not been able to advance to the application stage ofcreating new products., In order to support this, I believe it isnecessary to work on the development of new technologies
while generating stable earnings in the Surfactants and otherbusinesses. In addition, we are currently training humanresources for DX by having employees participate in educational
programs, but I think it is necessary to collaborate with othercompanies in the industry and hire new human resources whoare capable of implementing DX.

would be appropriate based on my experience as an Audit &Supervisory Board member. Both positions have the samerole of supervising management, but since outside Audit &Supervisory Board members see information from accounting
and operational audits, they supervise the Board of Directors
and management from the outside. On the other hand, as an
outside director, there is a difference in that they go in andactually supervise. Having experienced both roles, I believe I
have the advantage of making objective judgements about
the company’s situation.

Q With the increased emphasis on ESG, what do you

feel is expected of chemical manufacturers in termsof the natural environment and society? Also, whatrole do you think you need to play as the impact on
the chemical industry and accounting audits become
more stringent year by year?

OKUYAMA DKS has introduced many environmentallyfriendly products, such as synthetic lubricants related to CFC
regulations and conductive pastes for solar panels, and I.
Japonica-Bombyx Fungus related products from the Life
Sciences business are expected to contribute to theenvironment as a non-petrochemical raw material. In
addition, the Company is also making efforts to improve thework environment for its employees, and was selected as a
Health & Productivity Stock, and I believe it is a company that
attracts a great deal of attention from the perspective of ESG
investment. In terms of human resources, the Company has
introduced a system of evaluation based on ability, an
example of which is the appointment of a person in their 40s
as an Executive General Manager of the Sales Headquarters.
On the other hand, although there are many excellent humanresources in the R&D department, there is room for
improvement in the area of achieving results, such as thecommercialization of new products, which I think is an issue.
HASHIMOTO I believe that, going forward, companies thatare enthusiastic about ESG principles will survive. Since achemical manufacturer’s business inevitably involves
environmental impact, it is necessary to demonstrate how
DKS products contribute to reducing environmental impact
from the perspective of the entire product cycle, and we are
now in an era in which such products must be made. Many of
today’s young employees find it very rewarding to contributeto the environment, and we, as outside directors, would liketo encourage this trend through advice and supervision.

Q Director Hashimoto, what role do you think you are

expected to play after becoming a director from theposition of Audit & Supervisory Board member?
What strengths do you think you have demonstrated?

HASHIMOTO In discussions about what should be done torestore business performance, I always consider what advice

DKS REPORT 2023

57

For a Sustainable Creation of Value

For a Sustainable Creation of Value

Stakeholder Engagement

Dialogue with Stakeholders (Specific Examples)

Communication with Stakeholders
Since the Company’s founding in 1909, we have beencommitted to the DKS mottos of Quality First, Cost
Reduction, and R&D Efforts. Today, as interest in SDGs
and ESG management grows, we always keep in mind
how we can bring happiness to our employees,

shareholders, customers, and society, the four
stakeholders of the Company, under our corporate credoof “Contributing to the nation and society throughindustry.” Through continuous communication, we aim tocreate new value together with our stakeholders.

Employees

Engagement with stakeholders
We are committed to employee happiness-based
management, and our most important asset is humancapital. As such, we aim to secure excellent humanresources and diversity based on a philosophy ofvaluing people. We recognize employee growth to be
the driving force behind the Company’s development,
leading to broad improvements in corporate value. In
addition, under the medium-term management plan
FELIZ 115, we have set the goal of the improvement of
employee happiness and are promoting healthmanagement initiatives to maintain and improve thehealth of our employees.

Shareholders(

P.32 Human Resource Management)

We believe the proper communication of information
to be a prerequisite for constructive dialogue withshareholders. The Public & Investor Relations
Department plays the central role in creating
opportunities for dialogue, as shown on the right.
( P.20 Financial/Capital Strategies and Total
Shareholder Return)Means of dialogue Training for employees (on-the-job training, off-the-job training, new employee training, selfdevelopment support)
 DX human resource development program Health and Productivity Management initiatives(exercise habits, mental health measures, etc.) Publication of in-house portal site, digital in-housemagazine “TUNAG,” and in-house magazine“DKSCOM”

Department in charge
Human Resources
Department
General Affairs
Department
Digital Strategy
Department
Public & Investor
Relations Department

 Whistleblower hotline

 Financial results briefing sessions and small-groupmeetings for institutional investors and securities
analysts Company briefing sessions for retail investors

Public & Investor
Relations Department
General Affairs
Department

 One-on-one meetings General meeting of shareholders, management

briefing sessions
 DKS report (integrated report), shareholder

Customers

newsletter

Society(

We are working to address the social issues of urban
population concentration and depopulation in rural
areas through regional revitalization through ourbusiness. We are also working to build new partnerships
by collaborating with every partner in our supply chain
to promote mutually prosperous co-existence, andtogether we are conducting business that is consistent
with the principles of the SDGs. In addition, we arefocusing efforts on local contribution activities to obtaina greater understanding of our business and to build a
relationship of trust with the local communities in which
our offices and plants are located.
(

58

P.28 Research & Development)

P.42 Contributing to a Collaborative Society)

DKS REPORT 2023

Continuing to treat employees based on the philosophy that people
are our assets and must be nurtured and treasured

We treat employees based on the corporate philosophy thatpeople are our assets and must be nurtured and treasured.
We believe that the maintenance and improvement of
employee health is the foundation for their self-realization,and that the Company can grow together with employees by
supporting them in this endeavor. Since maintaining andimproving employee health is an important management
issue for the Company, we expressed these ideas in our
Healthy Company Declaration in September 2017.
Our approach to health and productivity management
is to prevent illness and mental disorders through healthmanagement, to work and live in a safe and hygienic
environment, and to promote specific operations inaccordance with the PDCA cycle. One key achievement infiscal 2022 was a 0.4 point improvement in the percentage of
people who exceeded standard abdominal circumference asa result of walking events implemented from a preventative
perspective. With
employeescommenting that
their awareness ofhealth has increased,
we will continue topromote the healthof our employees.
Dialogue between the president and employees Compliance awareness survey

 Website (IR & investor information)

We are a chemical materials manufacturer, known
as a leader in industrial chemicals. We are working todevelop technologies and products with the goal of
becoming a Uni-Top, a company recognized for its
distinctive uniqueness. In 2018, we entered the life
science sector in earnest. Through activities such as
those on the right, we strive to build long-term
relationships of trust with our customers by responding
to their requests.

Dialogue with employees Daily sales activities

Sales Department

 Zenkoku Ichi-Ko Kai (exchange meeting with

Department in chargeof each businessagencies) Explanation of research & technology
 Thorough quality assurance system

Research Department

Dialogue with our investors

Dialogue with institutional and retail investors: Creating value together
through constructive dialogue

We strengthened the Public & Investor Relations Department
and put in place a staffing structure that enhances theefficiency and credibility of IR activities. In addition tofinancial information, we endeavor to provide investors withhigh-value-added information on management strategies andissues, risks and opportunities, governance, and other nonfinancial information.
Every year, we hold briefing sessions and small-groupmeetings with institutional investors covering the full-year andfirst-half periods, in June and November, respectively. In fiscal
2022, 90 investors participated. In addition, in fiscal 2023, weplan to continue holding briefing sessions for retail investors,

which we began in fiscal 2022. We believe the proper
communication of information to be a prerequisite forconstructive dialogue. Led by the Public & Investor Relations
Department, we will
disclose necessary
corporate information
in a timely andappropriate manner,
while valuing
opportunities tobroadly communicate
with our stakeholders.
Tokyo management briefing session

Production Department

 Product exhibitions and product press conferences Website Company newsletter “Takuto”

 Efforts in cooperation with local governments Efforts for a healthy and long-lived society “Building Partnerships Declaration” for mutuallyprosperous co-existence with suppliers Presentations and speeches at conferences,forums, and seminars Factory tours
 Science seminars for local children and school

visits Participation in and sponsorship of community

eventsDialogue with local communities

General Affairs
Department
Department in chargeof each businessResearch Department
Production Department

Stimulating interest in science among children, the future leaders of
our society

As part of our community contribution activities, weparticipate in science seminars for children and visit schools
throughout Japan. In fiscal 2022, we held the YokkaichiChildren’s Science Seminar in Yokkaichi City, Mie Prefecture,
where a Group company’s offices are located, and conducted
six classes on surfactants using detergents for a total of ten
students each time. In addition, in our regular school visits,
employees from each plant give age-appropriate lessons
aimed at increasing interest in science and motivation forlearning, such as surfactant experiments at elementary
schools in Niigata and Shiga prefectures, and hands-on

silkworm breeding at a kindergarten in Iwate Prefecture. We
will continue to focus on community contribution activities on
an ongoing basis.

A school visit (Niigata) Community cleanup activities by employees

DKS REPORT 2023

59

For a Sustainable Creation of Value

Board of Directors, Audit & Supervisory Board Members, andExecutive Officers
Board of Directors (as of June 23, 2023)

Audit & Supervisory Board (as of June 23, 2023)

SAKAMOTO
Takashi

YAMAJI
Naoki

OKAMOTO
Osami

ONISHI
Hideaki

KAWAMURA
Ichiji

TAKAHASHI
Toshitada

Chairman CEO

President COO

Senior Managing
Director

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member(outside)

Number of shares held:
41,345 shares

Number of shares held:
12,419 shares

Number of shares held:
12,033 shares

Number of shares held:
14,607 shares

Number of shares held:
6,544 shares

Number of shares held:
366 shares

Career summary

April
1970	Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
February 1991	Manager of Madrid Branch of Fuji Bank
May
1994	Manager of Nihonbashi Branch of Fuji Bank
December 1999	Managing Director of Fuji Asset Management Co., Ltd.
June
2001	Joined DKS Co. Ltd.
June
2001	Director
April2004	Executive General Manager in charge of Corporate Planning
Headquarters
June
2004	Managing DirectorJune2007	Senior Managing DirectorJune2011	Representative Vice President
June2013	Chairman and Executive Director
June2015	Concurrently President
April
2022	Chairman and Executive Director (current)

Career summary
April
April
April
April
April
April
June
April
April
April
April

1991	Joined DKS Co. Ltd.
2013	General Manager in charge of Planning Department,
Yokkaichi Reorganization Division, Production Control
Headquarters
2014	General Manager of COO Office2015	Executive General Manager of Plastic Materials Business
Division, Business Headquarters
2016	Concurrently in charge of Tokyo Headquarters
2017	Executive General Manager in charge of Corporate Planning
Headquarters
2017	Director and in charge of Personnel & General Affairs
Headquarters
2018	Concurrently in charge of Production Control Headquarters
2020	Managing Director
Administrative Supervisor
2021	R&D Supervisor
2022 President COO (current)

SHIMIZU Shinji
Director

Number of shares held:
3,916 shares
Career summary
April
April

1992	Joined DKS Co. Ltd
2014	General Manager of Personnel & General Affairs
Department, Personnel & General Affairs Division
April
2016	General Manager of Shuang Yi Li (Tianjin) New Energy Co., Ltd.
April
2018	Board Director of Shuang Yi Li (Tianjin) New Energy Co., Ltd.
June
2019	General Manager of Financial Division, Financial
Headquarters
April
2020	Executive Officer
		Executive General Manager in charge of Production
Headquarters
April
2022	Administrative Supervisor
June2022	Director (current)

Career summary
April
October
March
May
July
June
July
June
June

60

DKS REPORT 2023

1989	Joined DKS Co. Ltd.
2006	General Manager of Sales Department, Plastic Additive
Materials Business Division
May
2007	General Manager of East Sales Department, Surfactants
Business Division
April
2008	General Manager of Planning Office, Functional Chemicals
Business Division
October 2010	Director of Yokkaichi Chemical Co., Ltd.
April
2013	General Manager of Yokkaichi Reorganization Department,
Production Control Headquarters
April
2014	General Manager in charge of Management Planning
Office, Corporate Planning Headquarters
April
2016	Deputy Executive General Manager in charge of Corporate
Planning Headquarters
April
2017	Executive General Manager of Plastic Materials Business
Division, Business Headquarters
Concurrently in charge of Tokyo Headquarters
June
2017	Director
April2020	Managing Director
Sales Supervisor
April2022	Senior Managing Director (current)
R&D Supervisor

Career summary
April
April

1982	Joined DKS Co. Ltd.
2001	General Manager of Plastic Materials R&D Department,
Plastic Materials Business Division
October 2005	General Manager of Synthesis R&D Supervision
Department, Technological Development Headquarters
March
2006	General Manager of Plastic Additive Materials R&D
Department, Technological Development Headquarters
April
2008	Deputy General Manager of Plastic Materials R&D
Department, Plastic Materials Business Division
April2009	General Manager of Plastic Materials Laboratory, Plastic
Materials Business DivisionJune
2011	Executive General Manager in charge of R&D Headquarters
June
2014	Director
April2017	Managing Director
June2020	Advisor
June
2021	Audit & Supervisory Board Member (current)

OKUYAMA
Kikuo

NAKA
HideyaDirector (outside)

Director (outside)

Audit & Supervisory
Board Member(outside)

Number of shares held:
1,257 shares

Number of shares held:
295 shares

Number of shares held:
366 shares

Career summary

October 1978	Labor Standard Inspector of Labor MinistryApril
2002	Chief of the Sonobe Labor Standards Inspection Office,Kyoto Labor Bureau, Ministry of Health, Labour and Welfare(former Labor Department)
April2004	Senior Officer for Personnel Planning, General Affairs Division
April
2006	Chief of the Kyoto-minami Labor Standards Inspection Office
April2008	Director of the General Affairs Division
April
2010	Chief of the Kyoto-shimo Labor Standards Inspection Office
April2012	Chief of the Kyoto-kami Labor Standards Inspection OfficeJune2014	Executive Director of Kyoto Labor Standards AssociationJune
2017	Registered as Labor and Social Security Attorney (Kyoto
Labor and Social Security Attorney’s Association)
Chief of Tsutomu Taniguchi Labor and Social Security
Attorney’s Office (current)
Director of DKS Co. Ltd. (current)

NAKANO
HideyoDirector (outside)

Director (outside)

Number of shares held:
366 shares

Number of shares held:
184 shares
Career summary

April
April

TANIGUCHI
Tsutomu

HASHIMOTO
Katsumi1981	Joined Osaka Regional Taxation Bureau
1984	Joined Asahi Accounting, LLC. (currently KPMG AZSA LLC)
1987	Registered as a certified public accountant
2007	Representative Partner of Asahi Accounting, LLC. (currently
KPMG AZSA LLC)
2010	Director of Kyoto Office of KPMG AZSA LLC
2019	Left KPMG AZSA
2019	Established Hashimoto Accounting Office as a
Representative (current)
2020	Audit & Supervisory Board Member of DKS Co. Ltd.
2022 Director of DKS Co. Ltd. (current)

Career summary

November 1991	Vice President of Cititrust and Banking Corporation
October 1993	Senior Portfolio Manager and Head of Private Investment
January 2000	Director and Head of Investment Division of FuNNeX AssetManagement Inc.
March
2004	Established Trias Corporation; took up position as CEO(current)
March
2020	External Director of OUTSOURCING Inc.
June
2021	External Director of HOCHIKI CORPORATION (current)June2022	Director of DKS Co. Ltd. (current)June2023	Independent External Director (Audit & Supervisory
Committee Member) of NS TOOL CO., LTD. (current)

Career summary

October 1990	Professor, Department of Chemical Engineering, Cluster 3,
Faculty of Engineering of Hiroshima University
April2001	Professor, Department of Chemical Engineering, Graduate
School of Engineering of Hiroshima University
April2013	Professor Emeritus, Chemical Engineering of Hiroshima
University (current)
Special Appointment Professor of Hiroshima University
June2017	Managing Director of Hosokawa Powder Technology
Foundation
June
2021	Director of DKS Co. Ltd. (current)June2022	Auditor of Hosokawa Powder Technology Foundation(current)
June
2022	Vice President of The Information Center of Particle
Technology, Japan (current)

Career summary

April1985	Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
August 1995	Senior Assistant to Director of London Branch
November 2001	General Manager of Yokohama Branch
April
2002	Assistant Branch Manager, Yokohama-chuo Branch ofMizuho Bank
May
2004	Assistant Branch Manager, Seoul Branch of Mizuho
Corporate Bank, Ltd.
July
2008	Deputy General Manager of Sales Department 6
April
2011	General Manager, International Corporate Sales Department
July
2013	General Manager, International Corporate Sales Departmentof Mizuho Bank
April
2016	Joined DKS Co. Ltd.
Deputy Executive General Manager in charge of Personnel& General Affairs Headquarters
April
2017	Executive General Manager in charge of Personnel &General Affairs Headquarters
April
2018	Executive General Manager in charge of Production Control
Headquarters
June
2018	Director
April2020	Production Supervisor
April
2021	Administrative Supervisor
April2022	Managing Director
Sales Supervisor
Concurrently in charge of Tokyo Headquarters
April
2023	Director
June2023	Audit & Supervisory Board Member (current)

Career summary

April
1982	Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)May
2004	Manager of Urawa Branch of Mizuho Corporate Bank, Ltd.
November 2005	Manager of Maebashi Branch of Mizuho Corporate Bank
April
2008	Manager of Shinagawa Branch of Mizuho Corporate Bank
April
2010	Chief Auditor, Business Audit Department of Mizuho
Corporate Bank
January 2011	Joined UC CARD Co., Ltd.
February 2011	Managing Executive Officer of UC CARD Co. Ltd.
April
2020	Director, Managing Executive Officer of UC CARD Co. Ltd.
June
2020	Independent Outside Director Standing Audit andSupervisory Committee Member of ITmedia Inc. (current)
Audit & Supervisory Board Member of DKS Co. Ltd. (current)

Career summary

April1978	Joined The Bank of Kyoto, Ltd.
June
2001	Manager of Tanabe Branch of Bank of Kyoto
June2003	Manager of Fushimi Branch of Bank of Kyoto
June2005	Manager of Corporate Financial Department of Bank of Kyoto
June2007	Executive Officer of Bank of Kyoto
		Executive General Manager, Hanshin Sales Headquarters,
Sales Administrative DivisionDecember 2010	Chair of Nagoya Branch Opening Committee of Bank of Kyoto
April
2011	General Manager of Nagoya Branch of Bank of Kyoto
June2013	Managing Executive Officer of Bank of Kyoto
June2015	General Manager of Tokyo Branch of Bank of Kyoto
December 2015	General Manager of Tokyo Sales Department of Bank of Kyoto
June2019	President and CEO, Kyoto Credit Assurance Service Co., Ltd.
June
2020	Audit & Supervisory Board Member of DKS Co. Ltd. (current)June2022	Advisor of Kyoto Credit Assurance Service Co., Ltd. (current)

Executive Officers (as of September 1, 2023)
Executive
Officer

SAKAMOTO Mami

General Manager,
Strategy Headquarters

Executive
Officer

HASHIMOTO Masayuki

Executive General Manager,
R&D Headquarters

Executive
Officer

KATAYAMA Toshihiko

General Manager,
New Business Development
Department

Executive
Officer

MORI Yoshiyuki

Executive General Manager,
Production Headquarters

Executive
Officer

NISHIGUCHI Isao

Executive General Manager,
Life Science Headquarters

Executive
Officer

SHUDO Takuya

President and CEO,Yokkaichi Chemical Company
Limited

Executive
Officer

MORISHIMA Kazuto

Executive General Manager,
Administrative Headquarters

Executive
Officer

SHIMIZU Koji

Vice Chairman,
Chin Yee Chemical Industries
Co., Ltd.

Executive
Officer

KITAO Masahiro

Executive General Manager,
Sales Headquarters

DKS REPORT 2023

61

Initiatives by BusinessBusiness Activities Report

Surfactants

Amenity Materials

Since the Company’s founding in 1909, the Surfactants segment has provided core technologies that havesupported DKS for more than 100 years. DKS surfactants provide high added value in a wide variety of fields andapplications, including soap and detergents, IT and electronics, rubber and plastics, paints and coloring materials,
and energy through their emulsifying, dispersing, solubilizing, penetrating, wetting, foaming and defoaming, andsurface modifying functions. In recent years, we have also been promoting the development of products that arecompatible with the globally increasing consideration for the environment. We currently manufacture these productswith petrochemicals and oils/fats as key raw materials primarily at the Yokkaichi Branch (Kasumi Plants), the Shiga
Branch, and Yokkaichi Chemical Co., Ltd.

Review of and issues related to FY2022
During the fiscal year ended March 31, 2023, net sales in thissegment were generally firm.
In Japan, sales of products for IT and electronics material
applications and paints and coloring material applications
remained weak, while those for machinery and metal applications
remained firm. Sales of products for soap and detergent
applications grew substantially. Overseas, sales of products forrubber and plastic applications remained weak, but those for
textile applications were firm. Going forward, we will strengthen
our Uni-Top strategy and continue to focus on delivering
customized products that meet customers’ demand.
Issues facing this segment are as follows:
1. Declining earnings and lower relative value for DKS’ products due tointensifying market competition in soaps and detergent applications
2. D
 elays in developing markets for environmentally friendly products

DKS’ strengths
This segment leverages the Company’s many years of experienceand accumulated technologies. Typical products are widely used
to enhance the performance of polymer dispersion films produced
using reactive surfactants. Growth is expected in the paints andcoatings field as well as adhesives, and other industrial fields. On
the other hand, there are various competitors in this business,such as manufacturers of detergents, emulsifying and dispersing
agents, and other chemicals both in Japan and overseas.
Net Sales+2.2%(Millions of yen)
25,00020,000However, our abundant lineup of products has enabled us to
introduce optimal products that meet customer needs, while weare able to conceive high-value added products through ourunique development approach. Going beyond simply providing
materials, we work closely with customers to find solutions totheir problems and create new added value.

Connection with materiality
To develop products for a more environmentally conscious world,
we have been working in recent years to research and develop
highly-biodegradable environmentally-friendly products that do
not cause water pollution, while taking into consideration their
toxicity to aquatic organisms.
We are developing a reactive surfactant that, after functioning
as an emulsifier for emulsion polymerization, improves the water
resistance and other properties of polymer films. We will focus onmarket development of this product, which is Japanesetechnology, and work to expand the market for environmentallyfriendly water-based resin products for our customers.
The connection between surfactants and materiality (p. 10) is asfollows:
 Strengthening relationships with inspiring/inspired partners andtargeting sales expansion for IT and electronics material
applications (7. tackling NEXT and DREAM businesses) Building a sales framework and strengthening sales forenvironmentally friendly paints and coloring material applications(1. research and development)

Operating Income-29.4%(Millions of yen)
2,476

2,500
21,83818,97017,303

18,564

18,976

2,000
1,558

1. E
 xpanding sales channels in the cellulose nanofiber (CNF) business
2. Further developing energy applications
3. Expanding into the field of high-value-added SEs

DKS’ strengths
With more than 70 years of experience in CMC using pulp, andmore than 50 years of experience in SE using sucrose and fatty
acid esters, the Company has a long history in productdevelopment and is developing markets based on the basic andapplied technologies accumulated to date. Among these, SEs
have the distinguishing characteristic of being an edible
surfactant that contributes to flavor. SEs are used as an emulsifier

Net Sales

8,000

1,500

10,000

1,000

4,000

5,000

500

2,000

1,312

2020/32021/32022/32023/32020/32021/32022/32023/3Chemistry provides a solution.
The typical function of surfactants is to clean (i.e., dirt removal), which is represented insoap, a well-known item. Surfactants act on the surface of substances that do not mix,
such as oil and water, and demonstrate emulsifying and dispersing properties toremove dirt. Recently, however, the functions that the Company’s customers requirefrom surfactants have evolved beyond simply cleaning to more sophisticated andunique applications that reflect advances in the particular industry. The surfactant
synthesis, analysis, and evaluation technologies that we have developed over our morethan 110-year history has enabled the Company to provide performance and functions
tailored to customer needs through our diverse product lines and combinations ofthese products. This technology unifies goods and wisdom, and realizes the
combination of different fields and industries.

DKS REPORT 2023

Connection with materiality
We anticipate continued demand for good tastes and comfort
in Japan and overseas, and will strive to ensure stable sales andprofitability while maintaining our customer base. We willcontinue to unlock new customers in the growth fields of food,personal care, and energy with the aim of expanding productsales and improving lifestyle comfort by providing highfunctional products.
The connection between amenity materials and materiality (p.
10) is as follows: Making social contributions utilizing RSPO certification (4.

contributing to a collaborative society) Actively contributing to carbon neutrality through naturally derived

raw materials (3. consideration for the environment) Developing solution business for the battery field (7. tackling NEXTand DREAM businesses)

Operating Income(Millions of yen)
700

8,031

7,994

8,092

8,079

7,081

600
500
400

6,000

566
465
281

200
100

72

0

-1

-100

0

2019/3for oil/fat and cream and as a texture modifier, for example, in
cookies and snack foods. In addition, we established novel
cellulose technologies to produce a new material called CNF, andare pushing forward with further efforts to use biomass inadvance ways.

300

0

2019/3-0.2%(Millions of yen)

15,000062

Review of and issues related to FY2022
Net sales in this segment for the fiscal year ended March 31, 2023
were generally weak.
In Japan, sales of sucrose fatty acid esters (SE) for foodapplications and vinyl polymer materials for rubber and plastic
applications remained strong. On the other hand, cellulose
polymers (CMCs) for energy and environmental applications
remained weak. Overseas, sales of SE for food and cosmetic
applications remained strong.
Issues facing this business are as follows:

10,000
1,749

1,752

The Amenity Materials segment provides materials and peripheral application technologies necessary for a
comfortable living environment. The Company provides materials suitable to the products of customers in a wide
range of industries including foods, pharmaceuticals, personal care (cosmetics), energy, toiletries, fisheries/
livestock, textiles, pulp/paper, civil engineering, agrochemicals, and agro-materials. In particular, products madefrom naturally derived raw materials, such as sucrose, fatty acids, and pulp, are delivered to our way of life as safeand reliable materials.
In addition to core-technology surfactants, DKS manufactures products made from natural raw materials,
including sugar and pulp, at the Ohgata and Shiga Branches.

2019/32020/32021/32022/32023/3

2019/32020/32021/32022/32023/3Chemistry provides a solution.

➀➁➀ IT and electronics materials➁ Soaps and detergents➂ Paints and coloringmaterials➂

This segment targets industrial fields that place an emphasis on safety, such as food,personal care products, and pharmaceuticals, all of which are end products that areplaced in the mouth, come into contact with skin, or stimulate the five senses.
Recently, we established technologies to produce a new material called cellulose
nanofiber (CNF) by finely dividing naturally derived cellulose fibers using
nanotechnology. On account of its characteristic viscosity and emulsifying, dispersing,and stabilizing properties, CNF is a noteworthy material that can be used in various
ways, such as personal care and general industrial applications.
We have also been expanding into the field of energy, and our proprietary
technologies include methods for manufacturing and testing water-soluble polymers
for conductive pastes in lithium-ion batteries.

➀➁➀ Personal care (cosmetics)➁ Food➂ Energy➂

DKS REPORT 2023

63

Initiatives by BusinessBusiness Activities Report

Polyurethane Materials

Functional Materials

This segment provides a wide range of industrial materials, including paints and adhesives, and raw materials forurethane with a focus on civil engineering and construction, and electrical insulation materials. In addition, we
possess technology to produce high-elasticity urethane elastomers, as well as soft/rigid urethane foam. Leveraging
these technologies in a composite manner, we supply various high-functional urethane products such as sealants forelectronic circuit boards, cushioning, thermal insulation, and coating materials.
Rock hardening agents used for mountain tunnel projects such as roads and railways are an essential product for
upgrading infrastructure. The primary raw material for this segment is petrochemical raw materials, and the
products are primarily manufactured at the Yokkaichi Branch (Kasumi Plants).

Review of and issues related to FY2022
Net sales in this segment for the fiscal year ended March 31, 2023
were generally firm.
Sales of civil engineering chemicals for public works were firm,
while sales of environmentally-friendly synthetic lubricants related
to CFC regulations grew significantly. Sales of functional
polyurethane for applications such as construction were weak,
but those for IT and electronics applications were firm.
Issues in this business segment are as follows:
1. Improving the operation rate of No.3 Plant of the Kasumi Plant
2. P
 romotion of new development
3. S trengthening relationships with inspiring/inspired partners

DKS’ strengths
The Company’s urethane materials are used in civil engineeringand construction, electrical insulation materials, paints, andadhesives. With the recent diversification of electric appliances
and the incorporation of IT in automobiles, electronic
components are being used under increasingly severe
conditions. Meanwhile, there is a need for electronic
components to be lightweight, compact, and to have a longservice life, all of which are challenging performancerequirements. In this context, our electrical insulation materials
are recognized for their superior balance of insulation,

Net Sales+5.6%(Millions of yen)
10,0009,026
8,000

heat-resistant, and flame-retardant properties, as well as for theprotection they offer against physical and chemical influences,
ensuring that strength and durability are not compromised. Our
products are therefore used in a wide range of applications
from home appliances to transport equipment components tomeet the exacting needs of customers.

Connection with materiality
Sales growth for rock hardening agents is expected due to theprogress of construction on the Linear Chuo Shinkansen Line.
Additionally, by further deepening initiatives with inspiring/inspired partners, we will pursue development and expanded
sales of products for IT and electronics materials manufactured atNo.3 Plant. At the same time, we will accelerate activities formeeting the final fiscal year targets of the medium-term
management plan ending in March 2025.
The connection between polyurethane materials andmateriality (p. 10) is as follows: Selling rock hardening agents for the Linear Chuo Shinkansen Line

(3. consideration for the environment) Providing polyurethane materials that can contribute to the carbon
neutrality of electrical components in vehicles, home appliances,
etc. (3. consideration for the environment)

7,484

8,294

8,761

1. E
 xpediting the recovery of capital invested on No.4 Plant of theKasumi Plant
2. E
 xpanding earnings of the waterborne polyurethane resin business3. E
 xpanding earnings of the flame retardants business(Millions of yen)

(Millions of yen)

0-100

10,000

2,000

-200

5,000

0

-300

2021/32022/32023/315,000-235

2019/32020/3-247-282

2021/32022/32023/3Chemistry provides a solution.
No.3 Plant, which manufactures functional polyurethane resin, commenced operationsin December 2019. Against this backdrop, we have redoubled our initiatives with ourinspiring/inspired partners. We are also striving to promote new development of IT andelectronics material applications for the electrification of mobility components
prompted by the spread of EVs. In addition, our rock hardening agents for tunnel
construction have a broad array of uses that include public roads and railways whileboasting a high market share based on their safety and performance.

 Expanding sales of products for IT and electronics materials and21,077

19,92822,574

inspired partners (7. tackling NEXT and DREAM businesses) Contributing to carbon neutrality (3. consideration for theenvironment) Expanding sales of biodegradable polymers (1. research anddevelopment)

Operating Income-79.2%(Millions of yen)
3,000

2,832

2,933

2,404
2,000

16,239

1,355
1,000

0

281

0

2019/32020/32021/32022/32023/3

2019/32020/32021/32022/32023/3Chemistry provides a solution.

➀➁➀ IT and electronics
materials➁ Civil engineering➂ Automotive industrial➂

DKS REPORT 2023

20,84820,000

55

41

4,000

2020/3+13.3%

25,000100

Connection with materiality
Additionally, by further deepening initiatives with inspiring/inspired partners, we will pursue development and expanded
sales of IT and electronics materials. At the same time, we will
accelerate activities for meeting the final fiscal year targets of themedium- term management plan ending in March 2025.
The connection between functional materials and materiality(p. 10) is as follows: Accelerating next-generation product development with inspiring/

Radiation-curable monomer and oligomer technology enables
instantaneous drying and curing of a resin composition byirradiation with ultraviolet light (UV) or an electron beam (EB). It is
used in a wide range of fields and applications, such as in resinmaterials for semiconductors, liquid crystal displays, and the like,Net Sales

as well as in coatings for cell phones, optical fibers, and plastics,
contributing to resource and energy conservation and reduction ofenvironmental impact. Waterborne polyurethane resins are used in
optical film primers, automotive applications, metal surface
treatment agents, inkjet agents, and other applications that
require adhesion, chemical resistance, toughness, and flexibility.
Brominated flame retardants are more stable and highly flame
resistant than phosphorous- or inorganic-based flame retardants
when dealing with materials such as rubber and plastics.

securing profit (7. tackling NEXT and DREAM businesses)

DKS’ strengths

6,000

2019/3

64

Review of and issues related to FY2022
Net sales in this segment for the fiscal year ended March 31, 2023
generally grew significantly.
In Japan, sales of waterborne polyurethanes for IT andelectronics applications fell sharply, but sales of materials forradcure resins for IT and electronics applications grewsignificantly, as did sales of flame retardants for rubber andplastic applications. Overseas, sales of both flame retardants forrubber and plastics and radcure resin materials for IT andelectronics material applications rose significantly. The DKS
brominated flame retardant’s raw material is sourced from a
global bromine production site, and because the raw material
price can fluctuate based on bromine market conditions, it isimportant for DKS to maintain proper controls on product prices.
Issues facing this business are as follows:

Operating Income (Loss)
200

8,470

The Functional Materials segment provides technologies and materials contributing to advanced performance,
including resins used in daily necessities, as well as IT and electronics materials often used in personal computers,
smartphones, and home applications. For example, the segment’s products include plastic flame retardants,
antistatic agents that control static electricity, lubricants, anticlouding agents, antioxidants, and radiation-curable
monomers and oligomers that use radcure (UV- or EB-curing) technology. In recent years, radcure resin and flame
retardants have been used to contribute to high-speed, large-capacity data communications (5G), which arebecoming increasingly popular.
These products are manufactured at the Yokkaichi Branch (the Chitose and Kasumi Plants) and the Ohgata Branch.

While many urethane resins are based on organic solvents, DKS is also researching anddeveloping waterborne polyurethanes, in which the polyurethanes are dispersed in water. Fromthe perspective of reducing emissions of volatile organic compounds (VOCs) and preventing air
pollution, demand continues to increase for waterborne materials for use in adhesives, paints andcoatings due to the need for non-solvents. In addition to being safe for the environment andpeople, these products allow high-performance finishing in a variety of applications, including
paper and metal processing, as well as film processability. As such, this is a field in which we candemonstrate our strength both in Japan and overseas. While there is a need for non-solvents,
there is also a growing social demand for greenhouse gas reduction and carbon neutrality. We
aim to further resolve issues with our unique technologies and proposal capabilities.

➀➁➀ IT and electronics
materials➁ Flame retardants forplastics➂ Film materials➂

DKS REPORT 2023

65

Initiatives by BusinessBusiness Activities ReportElectronic Device Materials

Life Sciences

As the information society continues to advance, as evidenced by the rapid spread of the Internet and smartphones,
the Electronic Device Materials segment is focused on developing and supplying ionic liquids, ceramic materials,
and lithium-ion battery materials, as well as conductive pastes for solar cells.
We intend to further develop our innovative technologies in each area of operation, while also promoting R&D inline with the trends of the times. Mainstay products in the Electronic Device Materials segment are produced at
subsidiary companies, Kyoto Elex Co., Ltd. (Kyoto) and Dai-ichi Ceramo Co., Ltd. (Shiga).

Review of and issues related to FY2022

Connection with materiality

Net sales in this segment for the fiscal year ended March 31, 2023
generally fell sharply.
In particular, ionic liquids for display applications and conductive
pastes for solar cell applications fell sharply.
Issues facing this segment are as follows:
1. Improving profitability of products for ceramic materials applications
2. A
 ggressively expanding conductive pastes to solar cell market
3. C oncerns for risks such as stricter environmental regulations in
China, aggressive pricing by local Chinese manufacturers, and raw
material supply shortages

DKS’ strengths
As for compound technologies that combine high viscosity andspecial conditions, our advanced know-how is a strength thatmakes it possible to supply materials that meet the demands ofcustomers. Conductive pastes, which are primarily made fromprecious metals, also include non-organic fillers and soluble
binders. They provide functionality to electronic devices andcomponents used in items such as solar cells, automobiles, andsmartphones. In addition, materials for ceramic and metal
powder injection molding are used to produce small and difficult
to-process complex three-dimensional ceramics and metal parts.
They often are used in smartphones and other electronic devices,precision components for items such as watches and medical
devices, and automotive and optical communication
components.
Net Sales-15.4%(Millions of yen)

6,191

5,758
4,199

Net Sales-80.6%

715

427

400

435

476

497

Connection with materiality
Currently, we have launched the “food with functional claims”
Kainou Tochukasou in August 2023, as a product containing
Naturido, an ingredient discovered from I. Japonica-Bombyx
Fungus. In addition, we are taking steps to obtain “foods withfunctional claims” certification for Sudachin, a substance
extracted from the peels of sudachi (citrus fruit) with benefits
against diabetes and obesity.
The connection between life sciences and materiality (p. 10) is
as follows: Promoting SDGs by revitalizing local communities through sericulture(Sericulture Innovation) (4. contributing to a collaborative society) Developing health foods and general-use food products (and later,

pharmaceutical products) using Kainou Tochukasou, Naturido, andSudachin (7. tackling NEXT and DREAM businesses) Establishing and promoting of B-to-C business that will be the core of
new businesses (DREAM) (7. tackling NEXT and DREAM businesses)

Operating Income(Millions of yen)
0
-200

600
430

200

335
139

74

2022/32023/3

2019/32020/32021/32022/32023/3Graphite is the main anode material for lithium-ion secondary batteries used in mobile
devices, etc. Recently, a small amount of silicon material (SiO, SiC, Si) has been added tographite to increase capacity. Silicon material can expand up to four times during battery
charging, and when it contracts during discharge, the electrode structure is destroyed
and the battery deteriorates, which was an issue. We are developing adhesives thatsuppress this expansion and contraction and prevent battery deterioration (see p. 29).
We will contribute to the realization of a sustainable society by aiming to expand ourbusiness from small devices to EV, which is expected to be a growth field in future.

-203

-400

239

-370

-421

-600

100
0

0

Chemistry provides a solution.

-543

-800

2019/32020/32021/32022/32023/3

2019/32020/32021/32022/3-734

2023/3Chemistry provides a solution.

➀➁➀ Solar cells➁ Displays➂ Lithium ion battery cells➂

DKS REPORT 2023

(Millions of yen)products from facilities that have acquired GMP certification forpharmaceuticals. Sudachin tablets, an Ikeda Yakusou product, havebeen certified as a Shikoku Health Support Food (commonlyreferred to as “Health Four”). The company also undertakes
contract manufacturing business for products related to drug
substances, cosmetics and chemical products foods based on highquality extracting and powdering technologies. Also, able to handlechemical products, Ikeda Yakusou can provide products with various
levels of performance and functions that match customers’ requests.

300

0

66

4.4%

500

200

2021/3

DKS’ strengths

Operating Income Supporting diversification of consumer needs (7. tackling NEXT and

400

2020/3

1. E
 stablish B-to-B and B-to-C business and quickly generate earnings
2. E
 xpand new contract manufacturing businessDREAM businesses) Accelerating next-generation product development throughcollaboration (7. tackling NEXT and DREAM businesses)

 Expanding business in the solar cell market (3. consideration for the environment)

4,744

2,000

2019/3

During the fiscal year ended March 31, 2023 net sales in thissegment rose ¥20 million (4.4%) year on year to ¥497 million. A
clinical trial on healthy subjects and those with mild cognitive
impairment confirmed the effect of intake of I. Japonica Bombyx
Fungus containing Naturido on cognitive function. In February
2023, we submitted notification of the functional food Kainou
Tochukasou to the Consumer Affairs Agency, and launched the
product in August. The contract manufacturing business for
products such as pharmaceutical raw materials and health foods
based on concentrating and powdering extracts from natural
materials was firm.
Issues facing this business are as follows:

The manufacturing plant for Kainou Tochukasou has acquired
HACCP certification, an international standard for sanitation
management, and we have further enhanced quality control
systems to provide customers with safe and reliable health foodproducts. After publishing a paper in the international journal
PLOS ONE (Neuroscience) in January 2021, we proceeded withhuman clinical studies and published a paper in the Japanese
Journal Brain Supplement in September 2022.
Ikeda Yakusou manufactures and provides safe and reliable

800

7,316

6,000
4,000

Review of and issues related to FY2022

The Company’s surface chemistry, which is its core technology, isused in the mixing techniques of resins and ceramic powders ororganic materials and metal powders.
Kyoto Elex manufactures a variety of high performance
conductive pastes for electronic components, solar cells, and thelike. In particular, our conductive paste for heterojunction
technology (HJT) high-efficiency solar cells has been wellreceived by users. We have also established a local subsidiary in
China, where the solar cell market is expected to continue togrow. Although the improvement of technological capabilities in
Asian countries poses a threat, we will provide our proprietary
technologies, R&D capabilities, and solid quality to drive growth.
Dai-ichi Ceramo has applied its existing compound technology for
injection molding to the development of ceramic and metal powder
3D printer materials for material extrusion (MEX). Two types, a pellet
type and a filament type, are available for use by a wide range ofcustomers. After 3D modeling, relatively large metal and ceramicsintered bodies can be obtained by degreasing and sintering in thesame manner as existing injection molding processes.
The connection between electronic device materials andmateriality (p. 10) is as follows:(Millions of yen)

8,000

With our full-scale entry into the Life Sciences business in September 2018, DKS acquired two companies,
Biococoon Laboratories, Inc. and Ikeda Yakusou Co., Ltd., as wholly owned subsidiaries. Advancing research andproduct development with a focus on natural raw materials, extraction and high concentration technologies fromnatural products, and mass production technology, this segment supplies health food products that include I.
Japonica-Bombyx Fungus and Sudachin (a peel extract powder made from sudachi, a citrus fruit). The company
Biococoon Laboratories is promoting the quantification of a new substance that it is hoped will have an effect on
dementia and the laboratory is proceeding with the search for high production conditions. Having establishedextraction and high concentration technologies from natural products, Ikeda Yakusou is also working to stabilize
product quality and deliver products to customers with the priority being safety and reliability.

I. Japonica-Bombyx Fungus developed by Biococoon Laboratories, a venture company
from Iwate University, is a health food that has the potential to help address the rise indementia patients, a social issue taking hold in Japan.
Developed by making effective use of the peeled skins of sudachi, which is a
representative and previously untapped regional resource of Tokushima Prefecture,
the peel extract Sudachin arose through industry-government-academia collaboration
with Tokushima University and Tokushima Prefecture. Preparations are underway toregister Sudachin as a “food with functional claims.” In addition, we are establishing
B-to-B and B-to-C business and quickly generating earnings for I. Japonica-Bombyx
Fungus, and developing products such as general foods, soft drinks, and alcoholic
beverages using Sudachin.

Kainou Tochukasou [now on sale](I. Japonica-Bombyx Fungus)

SudachinThis is the first “food with functional
claims” that contains a component
derived from I. Japonica-Bombyx
Fungus (Naturido) as a functional
ingredient. (In Japanese only)
https://dkslife.jp/kainoutouchukasou_lp01

DKS REPORT 2023

67

Data Section

Proprietary Technologies of DKS

Technical Road Map: Proprietary Technologies
Electric
equipment

Precisionequipment

Electric
equipment

Potting

Polymer function
designing

Organic-inorganic
hybridization

UV/EB curing

Urethane for civilengineering

Glass

Battery evaluation/assembly

Ionic liquid

Phenolderivatization

Construction

Polymer modification

Polymer synthesis

Interface/surface control

Isocyanate blocking

Alkylene oxide
function designing

Flame retardation

TextileBromination

Electric
equipment

Chemicals

Sucrose esterification technology

Cosmetics
Chemicals

Glycidylation

Transportationequipment

Transportationequipment

Chemicals

Alkylene oxide
addition

Urethanization

TextileSurfactants
Synthesis,
blending,
evaluation,
analysis andapplication
technologies

Cellulose
nanofiberization

Fisheries/
agriculture andforestry

Nano-dispersion
Wet dispersion
Emulsification/
dispersion

Emulsion polymerization
Polymerizable emulsifier
Food application
evaluation

Cellulose
modification

Precision cleaning
agents evaluation

Sucroseesterification

Hard surface
treatment

Steel

Machines

Food
products
Extraction& drying
Fungiculture

Precisionequipment

Technologies are multiplied to produce new technologies
Basic Technologies
Interface/surface control technology

A variety of applications can be achieved with surfactants, forexample, emulsification, dispersion, solubilization, wetting/penetration, surface/interface tension control, foaming/defoaming
and surface modification. The primary applications of surfactants are
emulsification and dispersion for mixing together substances that
normally do not mix together. For example, although water and oils
will separate after being mixed, adding a surfactant as anintermediate between water and oils enables the creation of stableemulsion. When washing dishes to which oil residue has adhered, thesurfactant is first absorbed into the oil residue, where it reduces theinterface tension between the oil and dishwashing liquid. Next, it
enters between the oil residue and dishware via wetting/penetration.
Finally, oil residue is separated from the dishware through physicalforce such as washing by hand. The residue is adsorbed into themicelles formed by the surfactant and then dispersed throughout theliquid, which prevents re-adherence of the residue. Moreover,
improving the wettability of paint and adding various functionality(e.g., leveling,1 water/oil repellent, antifouling, lubricity) can be
included as types of technology for surface modification and interface
control. For example, fluoropolymers are widely used in water- andoil-repellent agents for textiles. Our Company is working to develop
PFOA (perfluorooctanoic acid)-free fluoropolymers through thesynthesis of various surfactants and the use of application technology.
This makes it possible to respond to needs for surface/interface
control, which had been difficult to achieve using conventionalsurfactants.
See p.62
1. To make the surface smooth and even

Alkylene oxide addition technology

This technology adds ethylene oxide (EO) and propylene oxide (PO)to raw materials of higher alcohols derived from natural sources suchas coconut oil or palm oil, as well as phenols and amines.

Alkylene oxide functional design technology

Through the addition of alkylene oxide (AO), in addition to EO andPO sequencing such as random polymerization and block
polymerization, this technology enables desired control for thenumber of added moles. This makes it possible to freely design asurfactant composition, which satisfies the required performance.

68

DKS REPORT 2023

Urethanization technology

This technology synthesizes a urethane resin that is a polymer
compound possessing urethane bonds in the main framework of themolecular structure. Through diverse combinations of the raw
materials polyisocyanate and polyol, it is possible to change the typeand length of the structural chain and to change the structure of bothends, thus creating a variety of physical properties. This makes it
possible to create substances such as elastic urethane rubber andurethane elastomer, as well as soft/hard urethane foam in conjunction
with foaming reaction. By utilizing these properties, these substances
can be used in products such as cushioning, thermal insulation,
molding and coating materials. In addition, waterborne urethane resin
can be obtained by emulsifying urethane resin. Our Company’s
products can be broadly divided into nonreactive and reactive.
Nonreactive waterborne urethane resin is an emulsion product ofurethane resin. Reactive waterborne urethane resin is produced byusing a blocking agent to protect the terminal isocyanate groups
generated by the reaction between polyisocyanate and polyol andemulsification. Reactive waterborne urethane resin is composed of
the two basic structures of a soft segment and a hard segment, and it
undergoes quasi-crystallization during the resin molding process.
Consequently, it combines flexibility, toughness and elasticity andpossesses superior solvent resistance and adhesion. Because thematerial combines safety and high functionality, it is used in a wide
range of processes such as film, metal, paper and textile.

Cellulose modification technology

This technology synthesizes anionic water-soluble polymers withcellulose as the main raw material. The CMC (sodium carboxymethyl
cellulose) synthesized via this technology can be used in various
applications by changing the length of the molecular chain and by theaddition of quantities of the carboxymethyl group. CMC is easily
dissolved in either cold or hot water and becomes a viscous liquidthat is colorless and transparent. It has an extensive record of use as athickening stabilizer in general, and other uses include as a binding
agent for fish feed and pesticides. CMC is also known for functioning
as a high-performance dispersion stabilizer. It is applied to products
seeking an even higher level of functionality, for example, as a binder
for lithium-ion battery cathode paste.

This technology is used to obtain sucrose fatty acid esters (SEs), a
non-ionic surfactant where natural sucrose is part of the hydrophilicgroup and higher fatty acids such as stearic acid and oleic acid arepart of the lipophilic group. The high safety of SEs is recognized byinternational organizations (Joint FAO/WHO Expert Committee on
Food Additives), and SEs are approved as a food additive in Japan
since 1959. In addition to food products, SEs are used in a wide rangeof products such as pharmaceuticals and personal care products.
Examples include emulsifiers, viscosity modifiers, anti-aging agentsfor starches and texture modifiers. Synthesis methods of SEs can bebroadly divided into an esterification reaction method that uses fatty
acid chlorides and fatty acid anhydrides, a transesterification methodwith lower alcohol esters of fatty acids and an enzyme method using
enzymes such as lipase as the catalyst.

Cellulose nanofiberization technology

This technology is used to create the new material cellulose
nanofibers (CNFs) by chemically or physically treating the naturally
derived cellulose fibers to reduce the fiber width to a nano meter size.
Our Company’s CNFs are exceptional for their extremely fine fiber
width on the single nano level. This fineness is achieved via chemical
modification processing. Furthermore, by utilizing its exceptional

characteristics such as viscosity behavior, emulsification anddispersion stability effect, our CNFs can be used in products such as
cosmetics and general industrial products.

Emulsion polymerization technology

This technology conducts polymerization2 by using surfactants toemulsify in water the monomers that do not dissolve in water. This
enables synthesis of high molecular weight polymers that cannot be
obtained via bulk polymerization or solution polymerization.
Furthermore, because the polymer system is surrounded by water, it iseasy to remove polymerization heat and perform stable temperature
management. A polymerizable surfactant is a type of surfactant thatpossesses a radical polymerizable group3. It is used as an emulsifier
for emulsion polymerization. Through copolymerization withmonomers during the process of the emulsion polymerization, it
improves the mechanical stability, chemical stability, freezing/thawing
stability and foaming property of polymer dispersion, and improves
the water resistance of the polymer film.
2. A reaction in which two or more molecular compounds having a simple structure are
combined to form another compound having a large molecular weight. A molecularcompound before polymerization is called a monomer.
3. The production of vinyl polymer is an important reaction and refers to addition
polymerization in which the growth chain is a radical (free group).

Application Technologies
Nano-dispersion technology

This technology stably mixes immiscible substances to bring out thediverse power inherent in materials. This technology is expected tosupport dispersants that enable dispersion in the nano range, various
dispersion methods, and applicability to a wide range of materials
such as inorganic powder, organic powder and oil. Nano materials
can be broadly divided into carbon materials (e.g., fullerene,4 nanotubes, nano fibers, graphene5), metals (e.g., gold, silver, copper) andmetal oxides (e.g., silica, titania, zirconia), all of which possess diverse
characteristics. This technology disperses these nano materials into
mediums such as water, organic solvents and resins. However, as theparticle size of substances is reduced to nano size, the impact of the
Van der Waals force6 becomes stronger, resulting in problems such as
particles being prone to agglomeration and a decrease intransparency. Interface control is required to prevent agglomeration.
Function/usage Electronic and electric equipment (touch panels for
smartphones and tablet PCs), cosmetics (sunscreen),
eyeglass frames, etc.
4. Carbon atom cluster
5. Hexagonal lattice carbon allotropes
6. Attractive and repulsive forces acting between molecules

Radiation curing technology

This technology instantly dries and cures coatings and paints ofradiation-curable resin compounds by irradiating them with ultraviolet(UV) rays or electron beams (EBs). The technology is also calledradcure (UV/EB curing). Radcure technology is used in a wide range ofdiverse fields due to its ability to conserve resources and energy andreduce environmental load. This technology is utilized in our urethane
oligomer, and its uses include clear coatings for construction materials
and furnishings; anti-rust coatings for metal; resistance materials suchas semiconductors, dry film and LCD displays; coatings for items suchas mobile phones, optical fibers, plastics and paper; printing ink;
plate-making materials; and adhesives. Our Company’s monomers are
made from the raw material alcohol using EO precision-addition
technology. We offer a full lineup of products with added functionality(e.g., high hardness, low viscosity, low curling).
Function/usage Adhesives, paints and coatings, printings and markings

Flame retardation technology

This technology adds/disperses compounds containing flameretardant elements such as bromine, phosphorus, nitrogen, boron,

silicon and/or antimony to/in polymer materials to make them flameretardant by a chemical reaction and bonding resulting from it.
Recently, out of consideration for the environment, attention is being
placed on the use of inorganic compounds such as hydrated metalcompounds (Mg hydroxide, Al hydroxide) and nano-composites7(MMT8, CNT9). Flame retardants are broadly divided into halogenatedand halogen-free products that are based on phosphorus or inorganic
substances. Halogenated flame retardants have superior flameretarding efficiency and therefore are most widely used as flame
retardants for plastics. Our Company’s products are brominated flame
retardants that give sufficient flame retardancy with a small amount ofuse. Moreover, the products interfere little with the superior
properties of plastic, namely, heat resistance, heat stability, UV
stability, workability, mechanical strength and electrical properties.
The products are capable of satisfying requirements for the flame
retarding of plastics, which are increasingly diverse and haveincreasingly advanced functions.
Function/usage Electronic and electric equipment, OA equipment,
construction products, automotive products, railway
cars, textile, paper, aircraft, marine vessels, etc.
7. A general term for composite materials in which one material is atomized to a size of
1-100 nm and then kneaded into another material and diffused.
8. Montmorillonite
9. Carbon nanotubes

Ionic liquid

Generally, ionic liquid is an ion pair compound that remains in a liquidstate at/below 100ºC. It has no vapor pressure and is nonflammable.
Because ionic liquid has high safety and ion conductivity, it is used inelectrolyte applications such as lithium-ion batteries and capacitors.10
Ionic liquid also is attracting attention as a next-generation material in
the energy device field and as a green solvent that reduces
environmental impact. Ionic liquid is a salt composed only of ions(anions, cations). It dissolves a variety of organic and inorganic
compounds and can conduct ions.
Function/usage Reactive solvents, extraction solvents; as electrolytes,
dye-sensitized solar cells, lithium-ion batteries, electricbilayer capacitors and actuators; lubricants, dispersantsand antistatic agents, etc.
10. An electronic component that stores and emits electricity (electric charge), also
called a condenser. In addition, there are some electric double layer capacitors thathave an order of magnitude larger capacitance than conventional capacitors.

Special Technology
Glycidylation technology

This technology belongs to Yokkaichi Chemical Co, Ltd. Via synthesis
technology using glycidyl ether, which is a bifunctional aliphatic epoxy
compound possessing a flexible framework in the center of themolecule, the technology generates compounds with improved
flexibility, toughness and water resistance of cured materials.
Function/usage Electronic materials

DKS REPORT 2023

69

Data Section

Fundamental Knowledge of Surfactants
Generally, an “interface” refers to the border area between two materials of different states of solid, liquid or gas.
A surface active agent, or surfactant, is a term for a chemical that exhibits functions and improves the performanceof these interfaces.

Basic Structure of Surfactants(surface) of the solution through a phenomenon called“adsorption.” If the surfactant concentration is increased,
the surfactants form molecular aggregates or micelles(spheres) when they reach what is called “critical micelleconcentration” (see illustrations “c” and “d” below). Once
micelles have formed, if you add non-water-soluble oil tothe solution, the oil can be encircled (solubilized) by the
micelles so that from the outside, it looks like the oil has
dissolved in the water.

Functions of surfactants by reducing surface tension

Surfactant solutions

Water

Water

Add surfactants

Oil / water

Oil / water

Fine powder

Fine powder
Hydrophilic
group

Air
Water

Air
Hydrophobic
Water
group

Emulsifies

Add surfactants

Oil

Surface (interface) tension reduced

Oil

Surface (interface) tension reduced

Surfactants have a unique chemical structure that has bothhydrophilic (water-attracting) and hydrophobic (oilattracting) properties. Using this structure, surfactants canachieve a variety of effects such as emulsification,
dispersion, foaming, and adsorption by weakening
surface tension or forming molecular aggregates or
micelles (spheres). When surfactants are dissolved in waterand the result is a low-concentration solution, theirmolecules can easily gather and assemble on the interface

Emulsifies

Emulsion

Disperses

Hydrophilic
Dispersion
group

Makes
foam

a Extremely thin solution
a Extremely thinb solution
Thin solution

Applications

Emulsifying,dispersing

Mixes
incompatible
substances

Mixes water and oil and makes an emulsion.
Makes a uniform dispersion with fine powders floatingon the water surface.

Ice cream, margarine,
paints, inks

Moistening,permeating

Makes wetting
and permeationeasierSpreads agrochemicals thin and uniform on the leaf
surfaces. Evenly disperses dyestuff and finishing agentson textiles and leathers.

Pesticide spraying,permeation of dyestuff
and finishing agentson textiles

Making,removing
foam

Makes and/or
removes foamTakes in air bubbles in water and stabilizes.
Prevents foaming.

Foam concrete, light
gypsum boards

Cleaning

Removes dirt

Moistens the surface between the fabric and the dirt, thenpenetrates this interface and strips away the dirt. It also
emulsifies and disperses the dirt in order to remove it.

Household detergents,
bath soaps, machineryand metal cleaning
agentsSoftening,smoothing

Softens andsmooths

Creates soft fabric with gentle feel on the skin.
Improves the smoothness of yarns in the spinning and/or
knitting process.

Textile finishing
agents, metal
processing oils

Antistatic

Prevents static
electricity

Prevents static electricity generation by making thesurfaces smooth. Makes static electricity easier to escapeby forming a water-absorptive coating on the surface.

Antistatic anddustproofing
treatment for LCDs
and plastic products

Rustproofing Prevents rust

Adheres to the metal surface and forms a coat to prevent
oxygen (air) and water from contacting the metal andcausing rust.

Metal surface
treatment

Makes the dyestuff gradually be absorbed by the textiles
and brings about uniform dyeing.

Textile processing

Dispersion
Makes
foam

Hydrophobicgroup

c Critical micellec Critical micelled Higherd Higher
Foams
concentration solutionconcentration solution
concentration solutionconcentration solution

Surfactants have four main structural types based on thefunctions they are molecularly designed to achieve. Of
these four types, three are ionic surfactants that transform
into electrolytic dissociation ions (atoms or groups of
atoms bearing an electrical charge) when dissolved inwater, and the remaining type is nonionic surfactants,

which do not form ions. The three ionic surfactants arefurther subdivided based on the type of ion they form
when dissolved in water: anionic (or negative ion)surfactants, cationic (or positive ion) surfactants, andamphoteric (containing both positive and negative ions)surfactants.

Characteristics

Leveling,
fixingPrevents unevendying, enhances
dye fastness

Sterilizing

Negatively charged bacteria is absorbed by positively
Removes bacteria changed surfactant which destroys the bacteria cell
membranes and sterilizes.

Main applications

Anionic surfactants• Superb emulsifying and dispersing properties• Good foaming• Not susceptible to temperature

Laundry detergent / Shampoo / Body wash

Cationic surfactants• Absorbed by textiles, etc.
• Antistatic effect• Sterilizing effectHair conditioner / Fabric softener / Disinfectant

Amphoteric surfactants• Non-irritative to the skin• Superb solubility in water• High compatibility with other surfactants

Body wash / Dishwashing liquid / Shampoo

Nonionic surfactants• Easy to adjust the balance of hydrophilic andhydrophobic properties• Superb emulsifying and solubilizing properties• Low foaming• Susceptible to temperature

Laundry detergent / Emulsifier and solubilizer /Dispersant / Metal processing oil

DKS REPORT 2023

Actions and effectsb Thin solution

Surfactant Types

70

Function

Emulsion
Disperses

Foams

Types of surfactants

Main Actions and Applications

Environmental Impact of Surfactants
Most household wastewater that contains surfactants iscollected and treated at public sewage treatment facilities
and released to the environment, although some may bereleased directly to rivers, oceans, or land.

Hand sanitizer

Because surfactants are biodegradable, even if released
into the environment they eventually degrade to carbon
dioxide and water by bacteria. To preserve the naturalenvironment, products with high biodegradability arebeing developed and proactively used in Japan.

DKS REPORT 2023

71

Data Section

Glossary
Terminology

72

Description

Terminology

Description

Absenteeism

A situation in which, due to mental or physical distress, an employee is frequently absent from work or misses
work without notice.

Naturido

A new and useful ingredient discovered by Biococoon Laboratories, Inc. from medical fungus grown on thepupae of domestic silkworms obtained using sericulture technology.

Antistatic agent

A compound to prevent the electrification of synthetic fibers and plastics caused by static electricity, for whicha surfactant is mainly used. It is applied to the surface of target materials by spraying and lets static electricity
escape.

Organizational Resilience

The capacity, and initiatives related thereto, for adapting to changes in the business environment and forhandling natural disasters.

PPM

BCP

An abbreviation for Business Continuity Plan through which, in the event of a disaster or other crisis,companies do not allow critical operations to go offline. Even if business activities are unavoidablyinterrupted, important functions can be restarted within the targeted recovery time, and strategic
preparations for continuing business are carried out in advance to minimize the risks involved in interrupted
operations.

An abbreviation for Product Portfolio Management, which is a method for determining investment andallocation of management resources by plotting businesses and products on a graph whose axes are market
growth rate and market share.

Presenteeism

The act or state of employees coming to the office and continuing work despite dealing with some type of
disease, disease symptoms, or mental/physical distress.

Carbon neutrality (CN)Balancing greenhouse gas (GHG) emissions and absorption. The Japanese government has pledged to aim
for carbon neutrality by reducing greenhouse gas emissions to net-zero by 2050.

ResistA protective film, or a substance used to create a protective film, against physical or chemical processing,
mainly in industrial applications.

Cellulose Nano Fibers

Very thin nano-sized fibers prepared by detangling cellulose, which makes up the cell walls of plants. The
width of the fibers is about 10 nm (nano = one billionth). They are made from wood-derived pulp, and whenused in plastics and rubbers, they enhance the strength of these materials while reducing thermal expansion/
contraction.

Responsible Care (RC) activities

Voluntary control activities by the companies in the chemical industry that promote the safe handling ofmaterials in every step of the process from manufacturing to distribution, consumption and disposal. First
proposed by the Chemistry Industry Association of Canada in 1985. The Japan Responsible Care Council was
founded in 1995.

Circular economy (CE)A system for eliminating waste and recycling resources to reduce impact on and regenerate nature.

Rock hardening agents

Agents used to prevent structural collapse during tunnel construction for bullet trains, expressways, and the like.

CNF

An abbreviation for cellulose nano fibers.

ROIC

An abbreviation for Return on Invested Capital, which allows for confirming the extent to which funds(invested capital) used for business activities efficiently lead to profit for the company.

Cocoon unwinding agent

An agent to spin silk yarn from silkworm cocoons.

RPA

An abbreviation for Robotic Process Automation, which is technology for automating routine tasks people
perform on computers.

COD emissions

COD is an abbreviation for Chemical Oxygen Demand. The value indicates the oxygen volume needed foroxidizing underwater objects and is one of the major indicators used for water quality.

RSPO

An abbreviation for Roundtable on Sustainable Palm Oil. Founded in 2004, a group of seven organizations,
including the WWF, responding to the global increase in voices calling for sustainable palm oil that takes
environmental impacts into account.

SDS

An abbreviation for Safety Data Sheets. The same materials previously were called Material Safety Data Sheets(MSDS), however, since April 2012, all have been designated as SDS as used in the United Nations’ Globally
Harmonized System of Classification and Labelling of Chemicals (GHS).

Sharing Economy

A new economic trend and form of service referring to consumers providing or sharing vehicles, residences,furniture, clothes, and other things, as well as spaces and skills, to people who need them.

Sucrose fatty acid ester

A nonionic surfactant produced from natural sucrose and fatty acids. It is also known as sugar ester (SE).

*See “Cellulose Nano Fibers.”

Conductive paste

Paste that conducts electrical current and is used in solar cell panels.

Digital transformation (DX)A response by companies to drastic changes in the business environment by transforming their products,
services, and business models through the use of data and digital technologies, based on the needs ofcustomers and society. The objective is to rethink work tasks, organizations, processes, and corporate culture
and climate in order to secure a competitive advantage.

Energy consumption per unit

A figure for expressing energy efficiency. It refers to the overall volume of energy consumption, such as
electrical power and fuel, needed to produce a given unit or amount of goods. Generally, it is used as anindicator showing the progress of energy saving measures.

Fair Trade

A trade practice that makes ongoing purchases of raw materials and products at fair prices in developing
countries and aims to improve the lifestyles and independence of producers and laborers who are in a
disadvantaged position in developing countries.

TCFD

Task Force on Climate-related Financial Disclosures. This was established by the Financial Stability Board (FSB)
at the request of the G20 to consider how to handle climate-related information disclosure and the responsesof financial institutions.

GMP

An abbreviation of Good Manufacturing Practice, which is a set of rules and a system that cover all processes
from stocking raw materials to manufacturing and shipping, and ensure consistent quality and safe
manufacturing of pharmaceutical products, food products, and the like.

United Nations
Global Compact

A global framework for achieving sustainable growth announced by then United Nations Secretary-General
Kofi Annan at the 1999 World Economic Forum (Davos). The framework states 10 principles in the four areas ofhuman rights, labor, the environment and anti-corruption.

Green transformation (GX)

The concept of transforming the global environment by converting to non-greenhouse gas (GHG) emitting
green energy, such as renewable energy.

Uni-Top

DKS’ business strategy, which is to “provide unique products that do not pursue scale.”

HACCPAn abbreviation for Hazard Analysis Critical Control Point, which is a hygiene approach for ensuring the safetyof food products.

VOC

An abbreviation for Volatile Organic Compounds. VOC is a general term for organic compounds that arevolatile and exist in a gaseous form in the air, and the term encompasses a wide variety of compounds such as
toluene, xylene and ethyl acetate.

Health & Productivity Stock

The Ministry of Economy, Trade and Industry, in collaboration with the Tokyo Stock Exchange, selects listedcompanies that take strategic initiatives and carry out efforts with regard to employee health from amanagement perspective, recognizing them as Health and Productivity Stocks. The aim is to encouragecompanies to take health management initiatives by introducing them as attractive companies to investors
who place importance on improving corporate value from a long-term perspective.

VUCA age

A term used to describe a world in which the future is uncertain and difficult to predict. VUCA is an acronym
for Volatility, Uncertainty, Complexity, and Ambiguity, and refers to the chaotic modern environment.

WACC

A popular method for calculating cost of capital that weights and averages the cost of borrowing and the costof procuring stock.

Waterborne polyurethane

Polyurethane resin is an overall term for polymer compounds possessing urethane bonds. Industrially, they
result from a polyaddition reaction between polyisocyanates and polyols, and waterborne polyurethane resin
results from the emulsification of this polyurethane resin.

Work engagement

A term that refers to a positive and fulfilling mental state that one has toward one’s work.

Inspiring/Inspired Partners

Specific business partners of DKS who intuit the needs of end users, collaboratively inspire new approaches,and provide each other with a spark.

Material issues

A term that refers to how essential something is. Originally, it referred to the general rule of importance in theaccounting field for items that could have major effects on financial affairs. Recently, important issues in CSR
activities are also identified as “material issues,” and many companies are using this approach when
conducting CSR activities and reporting the results in integrated reports.

Modal shift

Switching or changing from one mode of transport to another, especially to a means of transport with less
impact on the environment.

DKS REPORT 2023

DKS REPORT 2023

73

Data Section

Domestic/Overseas Network
Domestic Network

Overseas

Ohgata Branch

Headquarters/Laboratory

Sisterna B.V.

Location: 230 Saigata, Ohgata-ku, Joetsu,
Niigata 949-3116, Japan
Area: 87,639 m2
Main products: CMC, waterborne polyurethane
resins, professional detergents, polyvinylpyrrolidone

DKS (Shanghai) International
Trading Co., Ltd.

Biococoon Laboratories, Inc.

Gembu Co., Ltd.
Kyoto Elex Co., Ltd.

Tokyo Headquarters
Dai-ichi Kenkou Co., Ltd.

Ikeda Yakusou Co., Ltd.
Nagoya Office
KyushuOfficeK&D Fine Chemical Corporation

Osaka Branch
KYOTO ELEX (Suzhou) Co., Ltd.
Dai-ichi CeramoCo., Ltd.

Yokkaichi Chemical Co., Ltd.

DDFR Corporation Ltd.
Chin Yee Chemical
Industries Co., Ltd.

Shiga Branch
Location: 427 Gokasho Hiyoshi-cho,Higashi-ohmi, Shiga 529-1403, Japan
Area: 106,805 m2
Main products: Surfactants, sucrose fatty acid
esters, food additive formulations, acrylic
polymers, professional detergents

Yokkaichi Branch Chitose Plant

Yokkaichi Branch Kasumi Plant

Location: 7 Chitose-cho, Yokkaichi, Mie
510-0051, Japan
Area: 16,303 m2
Main products: Functional chemical products

Location: 1-23-5 Kasumi, Yokkaichi, Mie
510-0011, Japan
Area: 101,138 m2
Main products: Functional chemical products,
urethane-related chemicals, plastic additives

Subsidiary and Affiliated Companies (Japan)
Company nameYokkaichi Chemical Co., Ltd.

Kyoto Elex Co., Ltd.

1 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Phone +81-75-326-2883 Fax +81-75-326-2884
432 Gokasho Hiyoshi-cho, Higashiomi, Shiga 529-1403, Japan
Phone +81-748-48-5377 Fax +81-748-48-5322
8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi, Chuo-ku,
Tokyo 104-0031, Japan
Phone +81-3-3275-0583 Fax +81-3-3275-0604
4-3-5 Ueda, Morioka, Iwate 020-8551, Japan
Phone +81-19-613-5564 Fax +81-19-613-5570

Biococoon Laboratories, Inc.

74

2-1 Miyahigashi-cho, Yokkaichi, Mie 510-0843, Japan
Phone +81-59-345-1161 Fax +81-59-345-1159
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Phone +81-75-323-5740 Fax +81-50-3153-1621

Dai-ichi Kenkou Co., Ltd.

Ikeda Yakusou Co., Ltd.

1808-1 Nakazu, Shuzu, Ikeda-cho, Miyoshi, Tokushima 778-0020,
Japan
Phone +81-883-72-5320 Fax +81-883-72-5005

K&D Fine Chemical Corporation

1 Niihamacho, Chuo-ku, Chiba, Chiba 260-0826, Japan
Phone +81-43-262-2039 Fax +81-43-262-4396

DKS REPORT 2023

P.T. Dai-ichi Kimia Raya

Operation Bases (World)
Location

Gembu Co., Ltd.

Dai-ichi Ceramo Co., Ltd.

Chin Yee Chemical Technologies(Wuxi) Co., Ltd.

Business activities
Production and sales of surfactants
Sales of detergents, finishing agents andequipment for professional laundry
Sales of industrial/professional-use deodorants
Production and sales of electronic materials[Partner] DOWA Electronics Materials Co., Ltd.
Production and sales of feedstock for powder
injection molding
Production and sales of agents for civilengineering and construction
R&D regarding drugs and health care ingredients
Production of foods and health care products
Production of drug substances and ingredients forhealth food
Production and sales of life sciences products,
such as drugs and quasi-drugs
Production and sales of surfactants[Partner] JFE Chemical Corporation

OwnershipCompany nameLocation

Business activities

Ownership

100%

Chin Yee Chemical Industries
Co., Ltd.

11F, Lidye Commercial Building, 22 Nanking West Road, Taipei, Taiwan
Phone +886-2-2556-9353 Fax +886-2-2558-6833

Production and sales of surfactants andplastic/electronic materials

51.0%

100%

Sisterna B.V.

Belder 30A 4704 RK Roosendaal, The Netherlands
Phone:+31-165-524730

Application development and sales ofsucrose fatty acid esters

94.9%

50.03%

P.T. Dai-ichi Kimia Raya

Jl. Maligi II Lot. G-2 Kawasan Industri KIIC, Karawang Barat 41361, Jawa
Barat, Indonesia
Phone +62-21-8904574 Fax +62-21-8904576

Production and sales of textile agents, paper
processing agents, plastic additives andsucrose fatty acid esters

91.53%

DKS (Shanghai) International
Trading Co., Ltd.

Room #1104, New Town Center Building, 83 Loushanguan Road.,
Shanghai, P.R. China
Phone +86-21-6236-8080 Fax +86-21-6236-8700

Trading

100%

Chin Yee Chemical Technologies(Wuxi) Co., Ltd.

Plot 88-C, Wuxi National High & New Tech Industrial Development Zone,
214028, Wuxi, Jiangsu, P.R. China
Phone +86-510-8520-0156 Fax +86-510-8520-4878

Production and sales of plastic materials

57.0%

DDFR Corporation Ltd.

25th Floor, One Capital Place, 18 Luard Road, Wanchai, Hong Kong
Phone +852-2827-7761 Fax +852-2824-1502

Sales of plastic additives, e.g., flame
retardants

50.0%

KYOTO ELEX (Suzhou) Co., Ltd.

1F, No.6 Building, New-Tech. Industrial Park, No.98 Hengshan Road,
Suzhou New District, Jiangsu, China
Phone +86-512-6871-2900 Fax 86-512-6871-2901

Production and sales of electronic materials

94.2%

100%
100%
100%

100%

50.00%

DKS REPORT 2023

75

Data Section

Financial and Nonfinancial 11-Year Summary
Financial Data (Millions of yen))
Net Sales
Surfactants
Amenity Materials
Polyurethane Materials
Functional Materials
Electronic Device Materials
Life Sciences

Overseas Sales(relative to net sales ratio %)Operating Income
Ordinary Income
Profit Attributable to Owners of Parent
Capital Expenditures
Depreciation
R&D Expenses
Net Cash Provided by (Used in) Operating Activities
Net Cash Provided by (Used in) Investing Activities
Cash Dividends Paid
Amount of Treasury Shares Acquired
Net Assets
Total Assets
Interest-Bearing Debt1
Per-Share Data (yen)2
Net Profit
Net Assets
Cash Dividend
Major Indices
R&D Expenses to Sales Ratio (%)
Operating Margin (%)
Return on Equity (ROE) (%)
Return on Assets (ROA) (%)
Equity Ratio (%)
Net D/E Ratio (times)
Dividend Payout Ratio (%)
Total Return Ratio (%)
Year-End Stock Price (yen)2
PER (times)
PBR (times)
Dividend Yield (%)

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

51,843
19,486
6,825
8,466
9,666
7,398
–
7,323
(14.1)
1,754
1,544
797
3,664
2,003
2,340
2,477
(3,548)298
018,20055,416
18,712

54,614
20,3597,141
9,564
10,680
6,868
–
8,103
(14.8)
2,477
2,374
1,336
1,512
2,104
2,506
3,553
(1,793)298
019,886
57,57020,68055,597
21,573
6,856
9,442
11,216
6,508
–
8,743
(15.7)
2,944
2,717
1,782
3,948
2,153
2,439
2,322
(3,229)474
026,15664,42021,32252,782
20,7797,208
8,934
11,259
4,600
–
9,131
(17.3)
3,439
3,200
2,198
8,485
2,087
2,380
4,197
(7,687)528
026,74566,05723,22852,254
19,793
6,986
9,093
12,517
3,862
–
8,794
(16.8)
3,944
3,773
2,489
3,786
2,335
2,393
3,750
(3,336)608
1,000
28,044
69,046
24,59456,955
21,416
7,502
9,115
14,070
4,850
–
9,929
(17.4)
5,053
4,725
3,351
2,467
2,473
2,307
5,017
(1,130)710
131,96073,97623,86359,574
21,838
8,031
9,026
16,239
4,199
239
10,139(17.0)
4,341
4,175
2,581
5,802
2,555
2,765
3,236
(5,694)711
033,59175,906
23,46661,456
18,9707,994
8,470
20,8484,744
427
10,350(16.8)
4,154
3,524
2,014
6,138
2,724
2,748
3,766
(5,842)711
034,26581,73629,94659,14017,303
7,081
7,484
21,077
5,758
435
10,135(17.1)
4,485
4,314
2,563
4,617
3,263
2,821
4,955
(3,804)712
037,40485,03328,52962,672
18,564
8,092
8,294
19,9287,316
476
14,076(22.5)
4,626
4,192
2,492
1,925
3,430
2,946
5,520
(2,700)814
040,38386,46927,76365,081
18,976
8,079
8,761
22,574
6,191
497
15,506(23.8)
1,186
1,200
(407)
3,172
3,295
3,236
724
(2,883)840
1,500
38,29685,02529,86593.40
2,021.93
35.00

156.602,200.01
35.00

193.442,362.01
45.00

208.182,425.27
50.00

236.982,649.71
60.00

330.292,970.75
70.00

254.11
3,082.83
70.00

198.17
3,114.97
70.00

251.97
3,405.28
70.00

244.81
3,610.31
80.00(41.87)3,593.49
80.00

4.5
3.4
4.8
1.5
31.1
0.66
37.5
37.5
250
13.4
0.6
2.8

4.6
4.5
7.4
2.4
32.6
0.58
22.4
22.4
322
10.3
0.7
2.2

4.4
5.3
8.2
2.9
38.7
0.36
23.3
26.7
387
10.0
0.8
2.3

4.5
6.5
8.7
3.4
38.8
0.52
24.0
24.1
328
7.9
0.7
3.1

4.6
7.5
9.5
3.7
38.9
0.54
25.3
64.6
427
9.0
0.8
2.8

4.1
8.9
11.8
4.7
40.8
0.39
21.2
21.2
875
13.2
1.5
1.6

4.6
7.3
8.4
3.5
41.3
0.48
27.5
27.6
3,480
13.7
1.1
2.0

4.5
6.8
6.4
4.5
38.8
0.57
35.3
35.4
3,750
18.9
1.2
1.9

4.8
7.6
7.7
3.1
40.7
0.45
27.8
27.8
3,680
14.6
1.1
1.9

4.7
7.4
7.0
2.9
42.5
0.38
32.7
32.7
2,759
11.3
0.8
2.9

5.0
1.8
(1.1)
(0.5)
40.4
0.54
−
−
1,885
(45.0)
0.5
4.2

979
526
172
14.8

969
514
170
16.0

944
508
163
15.9

982
495
219
17.0

967
486
199
17.5

976
497
213
17.5

985
512
170
17.8

1,032
531
177
18.8

1,061
560
178
18.9

1,096
571
197
20.3

1,104
584
198
20.9

10

8

11

9

6

12

7

3

7

13

20

11

8

9

10

13

10

10

12

10

8

9

62.7

63.7

61.0

64.5

62.4

67.4

68.5

73.2

66.1

67.4

73.8

636 (237)
14,42151.9

668 (246)
12,72452.0

735 (297)
13,87651.3

763 (316)
13,19150.4

855 (378)
17,36451.7

924 (427)
20,77953.6

961 (453)
21,65852.6

1,012 (479)
19,60553.8

1,056 (514)
18,43149.0

1,005 (483)
16,66448.6

982 (444)
15,25143.0

Nonfinancial Data
No. of Employees (consolidated) (persons)No. of Employees (non-consolidated) (persons)No. of Employees Outside Japan (persons)Ratio of Female Employees to Total Employees(non-consolidated) (%)
No. of Employees Who Utilized the Child-Care
Leave System (non-consolidated) (persons)No. of Employees Who Utilized the Child-CarePart-Time Work System (non-consolidated) (persons)Annual Paid Leave Rate
(non-consolidated + assigned employees) (%)
No. of Patents Held (outside Japan) (patents)3
Generated Waste Amount (tons)
CO2 Emissions (consolidated) (thousands of tons)

1. Lease liabilities not included in interest-bearing debt.
2. Per share information and period-end share price data have been retroactively adjusted to reflect the consolidation of five shares into one share implemented on October 1, 2018.
3. The collation method was amended to a legal effective date basis from FY2016.

76

DKS REPORT 2023

DKS REPORT 2023

77

Data Section

Consolidated Financial Statements
Consolidated Balance Sheets
Assets(Millions of yen)

FY2021

FY2022

12,224

9,128

526

345

Accounts receivable—trade

14,432

14,759

Electronically recorded monetaryclaims—operating

1,532

2,218

Merchandise and finished goods

11,582

13,131

21

16

3,905

3,489

317

369

1,996

1,956

Current assets
Cash and deposits
Notes receivable—trade

Work in process
Raw materials and supplies
Prepaid expenses
Other
Allowance for doubtful accounts
Total current assets

(4)

(3)

46,53445,411

Notes and accounts
payable—trade

9,972

Electronically recorded
obligations—operating

429

379

Short-term borrowings

6,711

6,516

Lease liabilities

558

474

Accrued expenses

348

308

Income taxes payable

576

232

Accrued business office taxes

41

41

Provision for bonuses

816

712

Other

2,040

2,002

21,726

20,639Corporate bonds

6,000

6,000

Long-term borrowings

15,051

17,348

Lease liabilities

2,551

2,131

Deferred tax liabilities

318

196

Retirement benefit liability

107

79

Asset retirement obligations

74

74

255

259

24,35926,089Total liabilities

46,086

46,729Net assets

FY2021

FY2022

Capital stock

8,895

8,895

Capital surplus

7,278

7,276

Non-current liabilities

30,48630,640

Accumulated depreciation(16,944)(17,805)

Buildings and structures, net

13,541

12,83437,42635,272

Accumulated depreciation(31,870)(30,621)

Machinery, equipment andvehicles, net

5,555

4,650

4,144

4,285

Other

Accumulated depreciation(3,413)(3,484)Tools, furniture and fixtures,net

Total non-current liabilities

730

800

9,638

9,748

Machinery, equipment andvehiclesTools, furniture and fixtures

Land

4,804

4,582

Accumulated depreciation(2,004)(2,244)

Leased assets, net

2,800

2,338

Construction in progress

1,091

2,369

Total property, plant andequipment

33,35832,743

Goodwill

213−

Others405

341

Total intangible fixed assets

618

341

Leased assets

Intangible fixed assets

Investments and other assets
4,004

4,274

Long-term loans receivable16

14Long-term prepaid expenses

231

512

Deferred tax assets

172

299

1,228

1,063

310

371

(6)

(6)

5,958

6,529

39,93539,61486,46985,025Investment securities

Retirement benefit asset
Other
Allowance for doubtful
accounts
Total investments and otherassetsTotal non-current assets
Total assets

DKS REPORT 2023

FY2022

10,204

Total current liabilities

Property, plant and equipment
Buildings and structures

FY2021

Current liabilities

Non-current assets

78

Liabilities

Shareholders’ equity

Retained earnings

20,49819,250Treasury shares(1,021)(2,488)

Total shareholders’ equity

35,65032,933

Valuation difference on
available-for-sale securities

181

467

Foreign currency translation
adjustment

507

765

Remeasurements of defined
benefit plans

427

180

1,116

1,413

3,616

3,949

Total net assets

40,38338,296

Total liabilities and net assets

86,46985,025

Non-controlling interests

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity method
Foreign exchange gains
Rent income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Corporate bond interest
Inactive facility expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Reversal for provision for waste disposal costs
Total extraordinary income
Extraordinary losses
Impairment losses
Amortization of goodwill
Loss on disposal of non-current assets
Loss on valuation of investment securities
Total extraordinary losses
Profit before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
Profit (loss)
Profit attributable to non-controlling interests
Profit attributable to owners of parent(Millions of yen)

FY2021

FY2022

62,67265,081

46,954
15,71852,12012,960

4,173
6,918
11,092
4,626

4,198
7,574
11,773
1,186

7
85
55
55
35
79
319

10
105
36
144
35
89
421

188
37
365
162
753
4,192

199
37
−
170
407
1,200

−
194
194

50
−
50

−
−
173
34
207
4,179
1,087
52
1,139
3,039
546
2,492

786
137
102
−
1,027
224
459
(185)
274
(49)
357
(407)

Consolidated Statements of Comprehensive Income

Accumulated other comprehensive
incomeTotal accumulated othercomprehensive income

Consolidated Statements of Income

Profit (loss)
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted for using equity
methodTotal other comprehensive income
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests(Millions of yen)

FY2021

FY2022

3,039

(49)

(303)
768
142

286
356
(238)

50

21

658
3,697
2,824
872

425
375
(110)
486

DKS REPORT 2023

79

Data Section

Data Section

Environmental Data

Consolidated Financial Statements

Consolidated Statements of Cash Flows(Millions of yen)

FY2021

FY2022

Cash flows from operating activities
Profit before income taxes

4,179

224

Depreciation

3,430

3,295

150

213

Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in retirement benefit liability

(9)

(2)

(417)

(249)

Increase (decrease) in provision for waste disposal costs

(385)

−

Interest and dividend income

(93)

(115)

Interest expenses

188

199

Corporate bond interest

37

37

Share of loss (profit) of entities accounted for using equity method

(55)

(36)

Impairment losses−

786

Loss (gain) on disposal of property, plant and equipment

173

102

Loss (gain) on valuation of investment securities

34−

Loss (gain) on sale of investment securities

−

(50)

Decrease (increase) in trade receivables

519

(722)

Decrease (increase) in inventories(2,016)(1,362)

Increase (decrease) in trade payables

744

(321)

Other

213

(442)

Subtotal

6,693

1,556

Interest and dividend income received

181

240

Interest paid

(227)

(234)

Income taxes paid

(1,127)(838)

Net cash provided by (used in) operating activities

5,520

724

Cash flows from investing activities
Payments into time deposits

Changes in Energy Consumption

Changes in Greenhouse Gas Emissions(Yokkaichi, Ohgata, Shiga, Tanagura, administrative departments, domestic
subsidiaries)(Yokkaichi, Ohgata, Shiga, Tanagura, administrative departments, domestic
subsidiaries, derived from non-energy)(1,000 kL)

68

78(2,661)(2,834)

Proceeds from sales of property, plant and equipment−

10

Purchase of investment securities

(2)

(2)

120
100.5

94.1

30

100.0

26.6

25.9

24.6

24.6

60
52.6

94.9

91.6

0

0

2018

2019

2020

2022

2021

0

2018

(FY)

Changes in Generated Waste Amount, External Recycling
Amount and External Recycling Rate

Changes in Final Disposal Amount and Final Disposal Rate
(Yokkaichi, Ohgata, Shiga, Tanagura, Kyoto, domestic subsidiaries)(Yokkaichi, Ohgata, Shiga, Tanagura, Kyoto, domestic subsidiaries)(t)
30,00024,000

96.7

94.9

99.3

99.0

97.8

91.1
90.5
89.9
88.9
89.9
21,65819,591 19,605
18,431
17,423
16,788 16,664
15,251
14,986

(%)

(t)

(%)

100

1,600

6.0

80

2018

2019

2020

2021

2022

673

174

Proceeds from long-term borrowings

4,890

7,700

(t)

(t)

(1,000 m3)

Repayments of long-term borrowings

30

3.0

5,000

(1,500)

Dividends paid

(712)

(840)

Dividends paid to non-controlling interests

(40)

(152)

Proceeds from share issuance to non-controlling shareholders

20−

Net cash provided by (used in) financing activities(2,336)(1,030)Effect of exchange rate change on cash and cash equivalents

135

89

Net increase (decrease) in cash and cash equivalents

619(3,099)Cash and cash equivalents at beginning of period

11,531

12,151

Cash and cash equivalents at end of period

12,151

9,051

DKS REPORT 2023

3.0

741

546

1.5

0

2018

(2,883)

(0)

767

0

(FY)

Generated waste amount (left axis)  External recycling amount (left axis)
External recycling rate (DKS
DKS Group) (right axis)

4.5

3.6

972

400

(2,700)Purchase of treasury shares

4.4

4.2

800

0

0

5.0

40
20

6,000

1,044

60

13,711

12,000

4.8
1,200

(128)

(531)

(FY)

Notes: 1. The administrative departments includes fuel for Company-owned vehicles.
2. Subsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co.,
Ltd., Dai-ichi Ceramo Co., Ltd., as of FY2019, Ikeda Yakusou Co., Ltd., and asof Fyzozo, Biococoon Laboratories, Inc.

(36)

(5,879)2022

Notes: 1. The index of energy consumption per unit is calculated for DKS non-consolidated,based on the periodical report stipulated by the Act on the Rational Use ofEnergy. FY2020 performance, which is the benchmark in the GX Strategy Targets(FY2030) and Medium-Term Environmental Targets (FY2024) is set at 100.
2. Subsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co.,
Ltd., Dai-ichi Ceramo Co., Ltd., as of FY2019, Ikeda Yakusou Co., Ltd., and asof Fyzozo, Biococoon Laboratories, Inc.

1

(571)

2019

 Energy consumption (left axis)
Index of energy consumption per unit (right axis)

70(6,595)

2021

20

1

Repayments of lease liabilities

2020

43.0

30

10

−

Net increase (decrease) in short-term borrowings

48.6

60

Collection of loans receivable
Net cash provided by (used in) investing activities

49.0

40

Proceeds from sales of investment securities

Cash flows from financing activities

53.8

90

22.9

20

(78)

Purchase of property, plant and equipment(1,000 t)

40

18,000(69)

Proceeds from withdrawal of time deposits

Other

80

Evolution of Environmental Impact

2019

2020

 Final disposal amount (left axis)  

2022

2021

(FY)

Final disposal rate (right axis)

Note: Subsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd.,
Dai-ichi Ceramo Co., Ltd., and as of FY2019, Ikeda Yakusou Co., Ltd.

Notes: 1. The final disposal rate is the ratio of the final disposal amount to thegenerated waste amount.
2. Subsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co.,
Ltd., Dai-ichi Ceramo Co., Ltd., and as of FY2019, Ikeda Yakusou Co., Ltd.

Changes in SOx, NOx and Dust Emissions

Changes in Water Discharge and COD Emission Amounts(Yokkaichi, Ohgata, Shiga)(Yokkaichi, Ohgata, Shiga, Yokkaichi Chemical Co. Ltd.)

4,000
2.0

20

11.7

10.3

10
0.7

0.8
0.6

0.8

1.0

0.8

0.5

0.6
0.2

0

2018

2019

2020

2021

0.3 2.3 0.3
2022

 NOx emissions (left axis)  
 SOx emissions (right axis)    Dust emissions (right axis)

50
4,177

44.4
3,952
3,496

3,000

15.4

13.9

(t)

3,669

30

27.3

2,000

19.1

20.7

20
10

1,000
0
(FY)

40

3,469 34.0

0

0

2018

2019

2020

2021

2022

(FY)

Water discharge (left axis)    COD emissions (right axis)

Note: Yokkaichi Chemical Co. Ltd. possesses no facilities that generate SOx, NOx ordust.

DKS REPORT 2023

81

Data Section

Data Section

Environmental Data / Compliance Awareness Survey Results

Corporate Data

Evolution of Environmental Impact

Corporate NameDKS Co. Ltd

Foundation

April 1909

Changes in Emissions of PRTR Regulation-DesignatedSubstances (atmospheric emissions)

Changes in Emissions of PRTR Regulation-DesignatedSubstances (aquatic emissions)

Incorporation

August 1918
8,895 million yen(DKS, Yokkaichi Chemical Co. Ltd.)(DKS, Yokkaichi Chemical Co. Ltd.)

Paid-in Capital
Number of
Employees

584 (consolidated: 1,104)

Total Number of
Shares Outstanding

10,684,321 shares

Share Unit Number

100 shares

Number of
Shareholders

6,702

Stock Listing

Tokyo Stock Exchange

Securities Code

4461

General Meeting of
Shareholders

Every year in late June

Shareholder Registry
Administrator

Mizuho Trust & Banking Co., Ltd.

(t)

(t)

80

0.8

74.5
60.6

60.4

60

0.6

0.59

48.4
40

0.57
0.45

0.4

0.44

0.43

34.0
20

0.2

0

0

2018

2019

2020

2022

2021

2018

(FY)

Note: The numerical values show the total amount for DKS and Yokkaichi Chemical Co. Ltd.
For the emission and transfer amount of notification substances under the PRTR
Regulation in FY2021 (among all notification coverage substances, those of which theemission or transfer amount was 0.01 tons or more), please visit our website.
https://www.dks-web.co.jp/english/ir/report/index.html

2019

2020

2021

2022

Investments and Costs of Environmental Protection Activities
Category

Main activities

Costs within theplant premises

Investment

Note: The numerical values show the total amount for DKS and Yokkaichi Chemical Co. Ltd.
For the emission and transfer amount of notification substances under the PRTR
Regulation in FY2021 (among all notification coverage substances, those of which theemission or transfer amount was 0.01 tons or more), please visit our website.
https://www.dks-web.co.jp/english/ir/report/index.html

Economic Effects Generated by Environmental Protection Measures

Costs(Millions of yen)

(Millions of yen)

Pollution prevention, air
pollution control,
water pollution prevention

17.4

224.9

Global environment
preservation, energy saving

5.3

56.9

Resource recycling, resourcesaving,waste treatment/disposal

0.0

471.7

Upstream/
downstream
cost

Lowering the environmental
impact in containers/
packaging

0.0

3.0

Administrativecost

ISO acquisition/maintenance,
greening of branch premises

0.0

37.4

R&D cost

Environmentally responsive R&D

0.0

668.6

Social activity
cost

Providing support grants forenvironmental protection toenvironmental preservationgroups or local communities

0.2

1.2

Environmental
damage cost

0.0

0.0

Total

23.0

1,463.8

Category

Main activities

Gain on sale ofvaluables

Gain on sale of metal scrap, waste oil
and waste alkali, etc.

Cost savings throughenergy conservation

Electricity and fuel savings

Cost savings throughresource
conservation

Savings from the reduction of water
and waste

Total

10.4%

27.8%

41.6%

1.2%

30.2%

40.0%

2.7%

0.1%

FY2021

FY2022

21.5%

2.1%

3.5%

 Information management/intellectual property rights    Anti-monopoly act/Subcontract act    Environmental protection   Harassment/respect for the indevidual    Workplace environment/working from home    Other    Unanswered

DKS REPORT 2023

5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Phone: +81-75-323-5911 Fax: +81-75-326-7356

Main Branch

55 Nishishichijo Higashikubo-cho, Shimogyo-ku,
Kyoto 600-8873, JapanTokyo
Headquarters

8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi,
Chuo-ku, Tokyo 104-0031, Japan
Phone: +81-3-3275-0561 Fax: +81-3-3275-0599

Osaka Branch

2nd Floor, Osaka Asahi Seimei Building, 4-2-16 Koraibashi,
Chuo-ku, Osaka 541-0043, Japan
Phone: +81-6-6229-1717 Fax: +81-6-6229-1793

Nagoya Office

11th Floor Dai Nagoya Building, 3-28-12 Meieki, Nakamura-ku,
Nagoya 450-6411, Japan
Phone: +81-52-856-5561 Fax: +81-50-3156-3585

Kyushu Office

4th Floor, Hakata Ekimae Daiichi Building, 1-2-3 Hakata-eki
Minami, Hakata-ku, Fukuoka 812-0016, Japan
Phone: +81-92-472-6353 Fax: +81-92-472-4989(Millions of yen)

10.1
284.6

40.6

Please refer to our website for the list of major shareholders and the distribution of shareholders (in Japanese only).
https://www.dks-web.co.jp/ir/library/library04.html

On Publishing the DKS Report 2023
This year marks the eighth report since publishing the first one in2016. The DKS integrated annual report is an important means ofcommunicating the value created by DKS to our stakeholders.
The purpose is to provide easy-to-understand explanations of our
growth strategies from now into the future from a medium- tolong-term perspective.
The third year of our medium-term management plan “FELIZ
115,” marks the turnaround point of the plan. It was a year of
renewed awareness of the challenges facing our Company interms of financial strength and profit structure. Revenues were up
in fiscal 2022, but profit was down substantially due to soaring
raw material prices, poor sales in focus areas, and other factors.
In response, we revised the plan in June 2023 with numericaltargets more in line with the actual conditions. To establish a newstarting point for the next plan, which will begin in fiscal 2025, wemust get back to the previous profit level by fiscal 2024, the final
year of the plan. We will work to transition into a solid high-profit
structure by having earnings power that is unaffected by external
factors such as the economic environment or market conditions.
This year, there is strong demand for proactive disclosure of ESGrelated information. We are conscious of value creation throughnon-financial means, such as addressing climate change anddecarbonization, promoting health management, and improving
corporate governance. We also launched a new intellectual
property strategy and introduced human capital management. We
are working on an improvement plan that will be well-received by
the market with the aim of improving our corporate value.
In the fiscal 2023 edition, we have maintained consistency withsubsequent content based on the management policy andbusiness strategy communicated in the Message from the
President. Furthermore, for important issues, we have come up withways to create value for the long term. As the person responsiblefor issuing this report, I certifythat the content is true andappropriate. Going forward, we
will strive to further improve ourCompany’s disclosure andtransparency. I welcome yourfrank and constructive feedback.

September 2023
President COO

YAMAJI Naoki

Editor’s Note

These results indicate responses regarding areas in which further compliance awareness activities are desired.
Target audience: DKS Group employees
3.4%

Economic
effects

335.2

Compliance Awareness Survey Results
15.5%

Headquarters /Laboratory(FY)

Environment Accounting82(As of March 31, 2023)

The Company’s integrated annual report is now in its eighth issue. Already three years have passed under medium-term
management plan “FELIZ 115” as well.
Amid global inflation and a weak outlook for economic growth, we went through a lot of trial and error to figure out how to explain thestory of the value creation of DKS to stakeholders under the Uni-Top strategy, which is regarded for its uniqueness without pursuing scale.
In order to tackle social issues related to climate change, respect for human rights, and humancapital, we also rethought the identification of important risks, opportunities, and material issues to
identify challenges for creating new corporate value. This year, we enhanced the disclosure of
information on our intellectual property strategy in research and development and focused on therelationship between our technology and the creation of medium- to long-term value.
We also sought to cooperate with the production company to improve the report’s
appearance and structure, showcasing the content in a more enhanced way. It is our hope that
this integrated report will serve to deepen dialogue with our stakeholders.
We would like to take this opportunity to express our gratitude to all parties concerned fortheir cooperation in the editing of this report. We also welcome frank opinions from readers as
we prepare for the next fiscal year’s publication.
Public & Investor Relations Department

DKS REPORT 2023

83

DKS Co. Ltd.
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
TEL: +81-75-323-5911 FAX: +81-75-326-7356
https://www.dks-web.co.jp/english

Published: January 2024
Printed in Japan