Denka Report 2021
Integrated ReportCorporate Information /Management Resources

Our Corporate Philosophy
Following the celebration of its centennial in 2015, Denka
established The Denka Value, a corporate philosophy.
The Denka Value consists of the Denka Mission and the Denka

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

The Denka Value
Denka Mission
Denka Principles

Principles, a set of precepts aimed at guiding the actions of all
Group employees.

Taking on the challenge of expanding the possibilities of chemistry tocreate new value and contribute to sound social development.
We:• Boldly confront challenges with determination and sincerity.
• Think and take action today with the future in mind.
• Deliver new values, and inspire customers through innovative Monozukuri.*• Respect the environment and create a cheerful workplace that prioritizes safety.
• Contribute to a better society, whilst taking pride in being a trusted corporate citizen.
*Japanese-style craftsmanship

Greetings from the Chairman
First of all, I would like to extend my deepest gratitude to our stakeholders for their continued support.
As part of efforts to realize its corporate philosophy as defined by The Denka Value, the Denka Group has reshaped its Board of Directors,
cutting back on the number of directors from 12 to nine. This move is intended to enhance the effectiveness of the Board’s deliberations andboost its capabilities for swift decision making by adjusting its composition in line with the Group’s policy of clearly separating the roles of theBoard of Directors and the executive team. Also, we increased the proportion of outside directors in the Board’s composition to strengthen theadvisory and supervisory functions afforded by a “Company with an Audit Committee” system. As we embark on our third year since transitioning to said system, we have thus empowered outside directors to step up their contributions to discussions undertaken by the Board. Businesses
today are facing ever stronger social demand regarding robust corporate governance. Accordingly, we will work to secure a more sophisticatedcorporate governance structure that accurately reflects such demand.
Pushing ahead with across-the-board reforms and intragroup collaboration, we will take on the challenge of resolving various social issues
in ways that only Denka is capable of, with the United Nations Sustainable Development Goals (SDGs) as our compass. Through these endeavors, we aim to become a company that is irreplaceable to society and that employees and stakeholders are proud of. We sincerely ask for yourongoing support and encouragement for our endeavors.

Manabu Yamamoto

Representative Director and Chairman of the Board

Denka Report 2021 Integrated Report

01Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Denka Report 2021
Integrated Report

Contents
Corporate Information / Management Resources
01 Our Corporate Philosophy /Greetings from the Chairman
02 Contents / Editorial Policy
03 Business at a Glance
05 Our Value Creation Process
06 Trajectory of Our Operations and Contribution toSocial Development
07 Initiatives to Create Corporate Value（Financial and Non-Financial Highlights）
08 Review of Fiscal 2020 Operating Results
Value Creation
09 A Message from the President
10 An Interview with the President
13 The Denka Value-Up Management Plan
17 The Denka Group’s Priority Management
Materiality Issues
18 Responsible Dialogue with Stakeholders
19 Special Feature:
Our Healthcare-Related Operations
21 Our Vision for 2030:
The Denka Group’s Social Responsibilities andContributions
Environmental Strategies
23 Environmental Management Aimed at Achieving
Carbon Neutrality
25 Ongoing Initiatives to Counter Climate Change
26 Initiatives to Reduce Environmental Burden(Plastic Waste Issue etc.)

Denka Report 2021 Integrated Report

Editorial Policy
27 Our Support for the Task Force on
Climate-Related Financial Disclosures (TCFD)
Employee Happiness /Human Resource-Related Initiatives
29 Human Resource-Related Initiatives
Quality and Safety
31 Quality Assurance Management
32 Placing the Utmost Priority on Safety
Business Strategies
33 Electronics & Innovative Products
35 Life Innovation
37 Elastomers & Infrastructure Solutions
39 Polymer Solutions
Corporate Governance
41 An Interview with Outside Directors
43 Directors
45 Corporate Governance
47 Management Risk Analysis and Response
48 Initiatives Being Undertaken Thus Far to Improve
Corporate GovernanceSocial Contributions
49 Contribution to Local Communities / Fulfilling Our
Responsibilities as a Corporate Citizen
Financial Summary
50 Denka’s 11 Year-Financial Summary

The Denka Report 2021 printed brochure is aimed atproviding our stakeholders, including shareholders andinvestors, with a robust communication tool that focuseson conveying what we have been doing to create newvalue over the medium to long term from the viewpoint ofaddressing environmental, social and governance (ESG)
issues.
In addition, we operate an ESG-themed corporatewebsite to ensure the comprehensive and timely
disclosure of relevant information.

■ Coverage
Fiscal 2020 (April 1 2020 through March 31, 2021) inprinciple; this report includes additional information onsome initiatives undertaken subsequent to the fiscal 2020
year-end while presenting data on numerical targets forand performance statistics from the past several fiscal
years.
Date of publication: September 30, 2021

■ Inquiries
Corporate Planning Dept., Denka Company Limited
TEL. +81-3-5290-5510
FAX. +81-3-5290-5149
Nihonbashi Mitsui Tower, 1-1, Nihonbashi-Muromachi
2-chome, Chuo-ku, Tokyo 103-8338, Japane-mail: denkareport@denka.co.jp
https://www.denka.co.jp/eng/■ Overview of the Denka Report 2021 andOther Supplementary Reporting Tools
Financial information

1 Denka Report 2021 printed brochure(integrated report)

Website■ Scope
In general, this report encompasses topics on the Denka
Group’s business sites within the scope of consolidation.
However, some articles are based on data gleaned outside
the scope of consolidation. These articles individuallyspecify the organizations subject to reporting.

IR information
https://www.denka.co.jp/eng/

2

ESG information
websitehttps://denka_sustainability.disclosure.site/en

1

This report is aimed at providing our stakeholders,
including shareholders and investors, with a robust
communication tool that focuses on conveying what
we have been doing to create new value over the
medium to long term from the viewpoint ofaddressing ESG issues.

2

We maintain the timely and comprehensive
disclosure of our ESG-related corporate information
via our website, updating reporting on relevant
activities and detailed data that has not been
included in the aforementioned editions.

■ Guidelines•The GRI Standards of the Global Reporting Initiative (GRI)•The Environmental Reporting Guidelines 2018 of Japan’s
Ministry of the Environment•The International Integrated Reporting Framework of theInternational Integrated Reporting Council (IIRC)

Non-financial information

02

Corporate Information /Management Resources

Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Business at a GlanceElectronics & Innovative ProductsLife Innovation

Contribute to social development

Contribute to social development

Create a clean andsafe future society
Striving to help create an abundant society, we
provide such cutting-edge materials as conductive
agents for lithium ion batteries, thermal materials
and substrates as well as functional ceramics, films
and tapes, thereby playing an essential role in theadvance of 5G communication infrastructure,electric vehicles (EVs) and renewable energy
generation.

Net sales¥77.7
billionHelp people around the world
enhance their quality of life
In the field of illness prevention, diagnosis andtreatment, we help people around the world
enhance their quality of life by, for example,
supplying influenza vaccines, manufacturing rapid
diagnostic testing kits for detecting antigens of such
infectious diseases as the novel coronavirus anddelivering macromolecular sodium hyaluronate
preparation.

Main Products

Main Products●Functional ceramics(spherical alumina)●Conductive agents for lithium ion
batteries (acetylene black)●Embossed carrier tapes for electronic
components and semiconductors(carrier tape sheets and cover tapes)●Vaccines●POCT* diagnostic reagents
Spherical alumina(an image captured using an electron microscope)

Overview of Business Division ▶P33−34

Acetylene black

Main Group companies
Japan • Denal Silane Co., Ltd.
• Denka Kojundo Gas
Kabushiki Kaisha¥42.9
billion* Point-of-Care Testing: rapid
diagnostic testing kits for detecting
antigens●Joint function improvers(macromolecular sodium
hyaluronate preparation)

Influenza HA vaccine

QuickNavi-Flu+COVID19 Ag

Overview of Business Division ▶P35−36
Main Group companies

Overseas • Denka Taiwan Corporation• Denka Korea Co., Ltd.
• Denka Advanced Materials (Suzhou) Co., Ltd.
• Denka Electronics Materials Dalian Co., Ltd.
• Denka Chemicals Hong Kong Co., Ltd.
• Denka Advantech Pte. Ltd.
• Denka Advanced Materials Vietnam Co., Ltd.

Japan • Denka-KEW Genomics LLC• Denka Cosmetics Limited Company

Company Profile https://www.denka.co.jp/eng/corporate/
Denka Report 2021 Integrated Report

Net sales

Overseas • DENKA SEIKEN (SHANGHAI) Co., Ltd.

• DENKA SEIKEN UK Limited• DENKA SEIKEN USA Incorporated• Denka Life Innovation Research Pte. Ltd.
• Icon Genetics GmbHBusiness Categories https://www.denka.co.jp/eng/business/

03

Corporate Information /Management Resources

Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Business at a Glance

Elastomers & Infrastructure Solutions

Polymer Solutions

Contribute to social development

Contribute to social development

Support infrastructure development
and improve accessibility
To help ensure people’s daily lives are safe and secure,
we employ a wealth of technological capabilities inorganic and inorganic chemistry to supply a range ofofferings from functional elastomers, cement andspecial cement additives—both of which are essential tostrengthening infrastructure—to fertilizers andagricultural corrugated pipes, taking full advantage ofthe calcium carbide chain that we have maintainedsince our founding.

Net sales¥91.8
billionCalcium carbide
Clean energy

Hydroelectric
power plants

NitrogenCalcium cyanamide
fertilizer

Water

Butadiene
Slaked lime

Acetylene
Hydrochloric acid

SM

PVC
Nylon

PS

Toyo Styrene Co., Ltd.

Taiyo Vinyl Corporation

Chloroprene rubber

ABS
IP
SBC
Food packaging sheets

Processed
Resin raw
products
materials

Cement and special
cement additives

Medium andlarge chunks

Resin processing

Pellets

Net sales¥109.9billionStyrene chain and polymer processing products

Resin rawmaterials

Limestone

To help realize a sustainable society, we support
people’s daily lives in a diverse range of fields,
including automobiles, electric and electronic
devices, and food, via the provision ofstyrene-based functional resins, acetyl chemicals
and food packaging sheets as well as synthetic fiber
for wigs and hairpieces.

Resin materials

Calcium carbide chain and main products

Improve the living
environment

Food containers
Denka Polymer
Kabushiki Kaisha

TOYOKALON
Rain gutters
Denka Astec Co., Ltd.

Overview of Business Division ▶P37−38

DENKA NATMIC, a quick-setting agent for
tunnel construction

Main Group companies

Overview of Business Division ▶P39−40

TOYOKALON, a synthetic fiber for wigs andhairpieces used as fashion items

Main Group companies

Main Group companies (other)Japan

Overseas

Japan

Japan

• Denka Renotec Co., Ltd.
• Kanazawa Denka Ready-Mixed Concrete Co., Ltd.
• Kanto Acetylene Industry Co., Ltd.
• Kanbara Ready-Mixed Concrete Co., Ltd.
• Kyusyu Plastic Industry Co., Ltd.
• Sanshin Bussan Kabushiki Kaisha• Denka Azumin Co., Ltd.
• Denka Elastlution Co., Ltd.
• Denka Ready-Mixed Concrete Takayama Co., Ltd.
• Higashi Nihon Koatsu Co., Ltd.
• Hinode Kagaku Kogyo• Nishi-nihon Koatsu Gas Co., Ltd.

• Denka Infrastructure Technologies Shanghai Co., Ltd.
• Denka Inorganic Materials (Tianjin) Co., Ltd.
• Denka Construction Solutions Malaysia Sdn Bhd.
• Denka Infrastructure Technologies Pte. Ltd.
• Denka Performance Elastomer LLC• PT. ESTOP Indonesia• Shonan Sekisui Kogyo Kabushiki Kaisha• Denak Co., Ltd.
• Denka Polymer Kabushiki Kaisha• Denka Astec Co., Ltd.
• Toyo Styrene Co., Ltd.

• Kurobegawa Electric Power Company• Juzen Chemical Corporation• Denka Consultant & Engineering Co., Ltd.
• Akros Trading Co. Ltd.

Denka Report 2021 Integrated Report

Overseas• Denka Chemicals Shanghai Co., Ltd.
• Denka Singapore Pte. Ltd.

Overseas• Denka Chemicals Development Suzhou Co., Ltd.
• Denka Chemicals GmbH• Denka Corporation• Denka Chemicals Holdings Asia Pacific Pte. Ltd.

Company Profile https://www.denka.co.jp/eng/corporate/

Business Categories https://www.denka.co.jp/eng/business/

04

Corporate Information /Management Resources

Corporate Information /Management Resources

Our Value Creation Process

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Corporate Philosophy

The Denka Value
Denka Mission

Denka Principles
The Denka Group’s 13 Materiality Issues

https://denka_sustainability.disclosure.site/en/themes/729【Categories】■ Prioritization of safety ■ Products and technologies ■ Solid corporate governance/Corporate conduct deserving of stakeholder trust ■ Employee happiness ■ Environmental preservation ■ Dialogue with society/Partnership

Primary Social Issues

Six Types of Capital(relevant SDG targets)●Ensure universal access toaffordable, reliable andmodern energy services (7.1)●Substantially increase theshare of renewable energy inthe global energy mix (7.2)●Double the global rate of
improvement in energy
efficiency (7.3)

Healthcare●End the epidemics ofinfectious and communicablediseases (3.3)

Intellectual●High-temperature calcining
technologies developed through ourinorganic chemistry-related endeavors●Organic and inorganic material
composite technologies●Polymer synthesis and resin processing
technologies●Antigen and antibody reaction
technologies for advancing infectious
disease countermeasures●Reduce premature mortality
from non-communicablediseases (3.4)

Natural●Company-owned power generation
facilities, including hydroelectric power
plants●Company-owned limestone mines●Achieve universal healthcoverage (3.8)

High-value-added
infrastructure

Manufacturing●Manufacturing facilities boastingsuperior energy efficiency●Cement production facilities that
contribute to a recycling-oriented
society●Ensure access for all toadequate, safe andaffordable housing and basic
services (11.1)●Provide access to safe,
affordable, accessible andsustainable transportsystems for all (11.2)

SocialAcross-the-board involvement in open
innovation that aims to help resolve
issues society is confronting via
industry-academia-government
collaboration●Enhance inclusive andsustainable urbanization andcapacity for participatory,
integrated and sustainablehuman settlement planningand management (11.3)●Reduce the adverse
environmental impact of cities
by paying special attention to
air quality and municipal andother waste management(11.6)The environment and energy

Human
A corporate culture that sincerely
addresses customer needs and seeks topropose solutions through manufacturing

Financial
Ability to execute strategic investment
and secure robust shareholder returns ina well-balanced manner

We employ such core technologies as cutting-edge
inorganic materials in product development with the aim of
meeting needs arising from mega trends toward high-speed
data communications, the intensive use of car electronics
and the introduction of autonomous driving systems.

Pursuing Growth Strategies
Business portfolio shift

SpecialtyFusion
Company

Introduction of innovative
processes
Three human resource
strategies●Securing human resources withspecialized skills●Work style reforms●Diversity promotion

Placing the utmost
priority on safety
Stepping up
environmental
management

Become a Specialty-Fusion
Company with a Strong
Global Presence

Our
Threefold
GrowthSustained
VisionGrowthMaintain Sustained
Growth by Significantly
Enhancing Productivity
through Innovative
Processes

Incorporating innovative
working styles
Contributing to SDGs

Fulfilling our social responsibilities

Healthcare

Sound
GrowthIn addition to supporting the prevention and early diagnosis
of infectious diseases and lifestyle diseases via the provisionof vaccines and diagnostic reagents, we are expanding intosuch new businesses as cancer-related gene alteration
analysis.

Secure Sound Growththrough Work Style
Reforms

High-value-added infrastructure
As a provider of cutting-edge materials and solutions,
including expansive additives, quick-setting agents andhigh-strength materials, we support the development ofresilient infrastructure while aiding in efforts to repair aged
facilities and lengthen building life.

Contribute to soundsocial development

Aim to become a Specialty-Fusion Company that is irreplaceable to society

The environment
and energy

The Denka Value-Up Management Plan (fiscal 2018 – fiscal 2022)

Create a cleanand safe futuresociety

Help protect
people’shealth andprevent
infectious
diseasepandemics

Supportinfrastructuredevelopment
andimprove
accessibility

ESG information site: List of Products to Contribute to SDGs https://denka_sustainability.disclosure.site/en/themes/635
Denka Report 2021 Integrated Report

05

Corporate Information /Management Resources

Corporate Information /Management Resources

Trajectory of Our Operations andContribution to Social Development
Founding

Turning
Point

1

Initial Period

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Since its founding in 1915, the Denka Group has moved forward in tandem with its stakeholders while delivering new sharedvalue via the use of its strength in chemistry. The Group’s endeavors over the course of a history spanning 106 years havealways been undertaken from the perspective of creating value that meets society’s needs. Here, we introduce the trajectoryof Denka’s five periods of value creation.

Period of Expanding Core Businesses

Turning
Point

2

Period of Expanding Specialty Businesses

Turning
Point

3

Period of Making Strong Businesses Even Stronger

Present

Becoming a Specialty-Fusion Company

1915-1944

1945-1974

1975-2006

2007-2017 (Denka100)

2018-2022 (Denka Value-Up)

Helping to resolve
food supply problems

Delivering a variety ofchemical products

Making entries into petrochemicaland healthcare fields

Contributing to sustainablesocial development

Delivered calcium cyanamide fertilizer tohelp boost crop production in the wakeof a rapid surge in population during the
Meiji and Taisho eras

Supported Japan’s high economic
growth by drawing on advancing
technologies associated with acetylene
chemistry and inorganic chemistry

Began manufacturing styrene-based
resin to contribute to higher living
standards while making entries into thehealthcare field to enhance people’s QOL

Delivering value to society
by employing open
innovation and optimizing
our production network■ Upon our founding in 1915, we began■ In 1962, we became the first in Japan to■ In 1965, we launched the production of

successfully initiate the production ofchloroprene rubber via the use of proprietary
technology based on the carbide-acetylene
method.

manufacturing and marketing calcium
carbide and calcium cyanamide fertilizer
derived from calcium carbide.

An early ad for calcium cyanamide fertilizer■ In 2015, we acquired the chloroprene rubber

business from DuPont via joint investment
with MITSUI & CO., LTD., establishing
Denka Performance Elastomer LLC.

Polystyrene resin

ALONBRIGHT, a β SiAlON phosphor

Value shared with society

Value shared with society

Value shared with society

We continued to support Japan’s agricultural
sector via stable calcium cyanamide fertilizer
production while overcoming a number ofmanagement crises arising in the rapidly
evolving times influenced by World War I and II
as well as major economic recessions.

Over the course of Japan’s reconstruction in
the aftermath of World War II and thesubsequent period of high economic growth,
we leveraged acetylene chemistry andinorganic chemistry to supply various products
while delivering cement and special cement
additives, with the aim of meeting theever-growing demands of society.

To live up to ever higher expectations with regard to
the functional improvement of plastics, we engaged
in product development that rallied the Group’s
overall technological capabilities ranging fromprecision material synthesis to resin processing andmolding.
Moreover, we strove to support the prevention
and early diagnosis of a variety of infectious
diseases via the supply of vaccines and diagnostic
reagents, helping prevent the spread of suchdiseases.

Our ultra-high-temperature control technologies
cultivated in the course of calcium carbide
production, an activity that dates back to our
founding, have enabled us to create a variety of newmaterials ranging from acetylene black to inorganic
powder. Furthermore, our metal and polymer
composite technologies made it possible tocontribute to technological innovation in the field of
thermal solutions for railcars, automobiles andcommunications devices.

Maximum output(kW)

150,000

Having completed the Kotakigawa Power Plant(hydroelectric) in 1921, we initiated calcium
carbide production at the Omi Plant.

Value sharedwith society

・Healthcare
We will strive to enhance people’s quality oflife and, to this end, deliver solutions tocounter infectious diseases and lifestylediseases while providing cancer drugs andcancer remedy information services.

Value shared with society

Trend in the Maximum
Output of Our HydroelectricPower Generation Plants

With our products used for a broad range ofapplications, such as automobiles, railcars,
displays and mobile devices, we will help
customers achieve technologicalinnovation in terms of energy saving,miniaturization, weight reduction andfunctional upgrading.

Phosphor for white LED, contributing to
reduction in energy used by large liquid
crystal display televisions.

(founded in 1950) became a part of the
Denka Group. In 2000, we initiated the
manufacture of macromolecular sodium
hyaluronate preparation for use as a joint
function improver that is categorized as aprescription drug.

Chloroprene rubber

・The environment and energy■ In 2009, we commercialized β SiAlON■ In 1979, the precursor to Denka Seiken

sourced from our own limestone mines, fromwhich we also secured a raw material usedin calcium carbide production.

Value shared with society

Developed a unique product lineup via
the integration of organic and inorganic
chemistrystyrene monomer and polystyrene at the
Chiba Plant, developing a variety of synthetic
resins based on these materials.

■ We began making cement with raw material

Focusing our strength on three priority
fields・High-value-added infrastructure
In addition to helping reduce environmental
burdens, we are taking on infrastructuredevelopment in such regions as Asia while
supporting the resolution of issues
associated with repairing aging concrete
structures and increasing building durability
in Japan.

New Himekawa Power Plant No. 6
Operational kickoff scheduled
for April 2022

Since its founding in 1915, Denka has been proactively engaged in theconstruction of hydroelectric power plants, upholding a policy of utilizing
renewable energy in its manufacturing operations.

(Run by Kurobegawa Electric Power
Company, a joint venture owned by
Denka and Hokuriku Electric Power
Company)

100,000

50,000

A turbine runner installed in the Kotakigawa Power Plant(photo taken at the completion of the plant)

0

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Note: Including half the capacity of the Kurobegawa Electric Power Company’s power plants in the Denka Group’s in-house power generation capacity, the overall maximum output of the Group’s hydroelectric power generation network stood at 126,000 kW in fiscal 2020. Since 1933, output from such
power plants has been calculated in line with the ratio of Denka’s equity in this joint venture. In addition, Denka was required to contribute its Oyodogawa Power plants No. 1 and No. 2. to a government-controlled corporation in 1941.
Denka Report 2021 Integrated Report

Denka’s history: https://www.denka.co.jp/corporate/history/ (Japanese only) The Denka Way https://www.denka.co.jp/eng/corporate/thedenkaway/ ESG information site https://denka_sustainability.disclosure.site/en

06

Corporate Information /Management Resources

Corporate Information /Management Resources

Initiatives to Create Corporate Value(Financial and Non-Financial Highlights)

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

The following diagram indicates key performance indicators (KPIs) for various business activities aimed at yielding outcomesin different time frames and how they translate into financial results.
KPIs

Financial Results

Time frame for yielding outcomesLong term (six to 10 years)

Medium term (three to five years)

R&D

R&D

¥10.4

¥9.7

billionbillion¥10.9
billionInnovative Processes¥11.0
billion

491

cases

440

cases

334

294

1.7 to 2.0 times

Operating income from specialty products(consolidated basis)¥33.7
billion¥34.2
billion

¥31.6

¥22.0

¥23.0

Fiscal2018

Fiscal
2019

Fiscal
2020

Number of researchers (consolidated basis)
850

842

Fiscal2017

Fiscal2018

Fiscal2018

Fiscal
2019

Fiscal
2019

Fiscal
2020

Ofuna
Plant

Optimization andautomation of
TOYOKALON production
process

1.7 times

Shibukawa
Plant

Introduction of a new
system for ELEGRIP
production management

2 times¥16.7
billionFiscal2017

billionbillionbillionFiscal
2020

807

801

Ratio of employees who work from home

Fiscal2017

Fiscal2018

Fiscal2019

18

9Target for thenumber of women in
managerial
positions (managers
or higher:
non-consolidated
basis)

Fiscal2025

60.5%

Fiscal2020

Diversity Promotion

April 1,2020

billion¥33.5

Productivity

Fiscal2017

billion¥34.7(Production capacity per individual)

cases

cases

Growth Indicator

Labor productivity

Number of patent applications(Annual average of Head Office, branch andsales office staffs during fiscal 2020)

Ratio of women among new recruits
to be included in the “G-category”(non-consolidated basis)
33％

Fiscal2017

Strategic investment* undertaken
in fiscal 2020
(investment in the three priority fields)

Ratio of foreign national
employees(non-consolidated basis)
16％

26％

18

Investment Related

34％

39％

Fiscal2018

Fiscal
2019

Fiscal2020

10.9 billion¥

Fiscal
2017

15％

Fiscal
2018

9.8％
8.5％
8.3％

8.3％

Fiscal2018

Fiscal2019

Number of documents authorized electronically15％

Fiscal2019

5 times

15％

Fiscal
2020

Fiscal2020

Efficiency Indicator

Carbon Neutrality Initiatives
Reduction in CO2 emissions in fiscal 2020
From the fiscal 2013 level:
Targets: 50% reduction in fiscal 2030
and 100% reduction (net zero) in fiscal 2050

10.0％

21%

Fiscal 2020 ratio of renewable energy (hydroelectric and solar power generation, etc.)
to overall energy use

40% Fiscal 2020 result

Fiscal2017

2018: 11,200 → 2020: 52,400*Investment in the environment and energy, healthcare and high-value-added infrastructure fields, all of which are specified as priority fields by the Denka Value-Up management plan,
as well as in the specialization of the substrate business and the introduction of innovative processes.

Environment Related

Profitability Indicator
Operating income ratio(non-consolidated basis)

8.2％

10.3％

7.8％

9.1％

8.8％

6.6％

6.8％

Fiscal
2019

Fiscal
2020

ROE
ROIC*
Fiscal2017

Fiscal2018

Create Corporate ValueR&D expenses in the three priority fields(non-consolidated basis)

Short term (one to two years)*ROIC (Return on Invested Capital) = Operating income after
tax / operating income after taxation on invested capital =Operating income × (1 – Tax rate)
Note: Tax rate = Total income taxes /Income before tax

IR Information https://www.denka.co.jp/eng/ir/
Denka Report 2021 Integrated Report

07Corporate Information /Management Resources

Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Review of Fiscal 2020 Operating Results
Non-Financial

Financial

Overview

Overview●We declared our target of reducing greenhouse gas emissions to net zero and thereby achievingcarbon neutrality by the end of 2050.
●With an eye to adapting to the new normal arising from the novel coronavirus pandemic, we havedefined the introduction of innovative work styles as an ongoing issue on which the Company’s
viability depends in the post-pandemic era and, to this end, formulated a Companywide policy forwork style reforms.
●Maintaining a tight focus on truly essential operations as a Specialty-Fusion Company, we
launched initiatives to improve productivity and enhance the competitiveness of the entire
Company by allowing each individual to choose their most efficient work style.
●In response to a government request, we supplied diethyl malonate.

●Although the first-half demand in fiscal 2020 declined due to the novel coronavirus pandemic,
demand recovered thereafter, mainly for automobile- and semiconductor-related products,
enabling the Group to solidly secure overall corporate earnings.
●Profit was stable in the environment and energy field, thanks to the performance of offerings
associated with 5G communications infrastructure and EVs. Moreover, we were able to quickly
and stably meet requests from the public in healthcare, food packaging and other fields where
demand often fluctuates dramatically.

Positive factors●Declared a voluntary target of achieving carbon
neutrality by the end of 2050
●Announced our support for the Task Force on
Climate-related Financial Disclosures (TCFD)●Brought the New Omigawa Power Plant(hydroelectric power plant) on line
●Initiated a chemical recycling business●Practiced remote working●Issued a Health & Productivity Management
Declaration●Contributed to society via the supply of diethyl
malonate●Restrictions on face-to-face customer
services
Countermeasures●Unable to conduct meetings andtraining involving in-person contacts■Utilized online alternatives (meetings, training, sales
and technical services)■Employed web cameras to direct plant operations
and manage construction●Difficulties in carrying out clerical
work requiring paper documentationand personal seals

Countermeasures■Digitized the documentation,authorization and ordering
processes

Countermeasures■Defined in-house security threat levels based on athree-grade system to prevent infection■Made it a rule for daytime shift employees to workfrom home■Employed web cameras to direct plant operations
and manage construction■Stepped up remote operations and information
sharing(Installed additional sensors and electronic whiteboards)●The risk of operational suspension of
production facilities due to novel
coronavirus infection●The risk of overall operations being
suspended●Released QuickNavi-COVID19 Ag, a rapid diagnostic testing kit for detecting novel coronavirus
antigen●Demand grew in the environment and energy field(Accelerated popularization of EVs, 5G devices and a surge in semiconductor demand)●Streamlined administrative costs incurred by headquarters departments and fixed costs at plants
Negative factors●A temporary downturn in chloroprene rubber sales●A decline in sales of diagnostic reagents other than QuickNavi-COVID19 Ag
Breakdown of Factors Affecting Operating Income (year-on-year change) (Billions of yen)

Negative factors●The risk of a novel coronavirus
infection cluster emerging among
employees

Positive factors

Countermeasures■Secured an expanded loan facility and a robust
volume of cash at hand
■Carried out periodic supply chain risk assessments

+21.0

31.6

+ 3.1
− 6.0

+ 0.3

34.7

− 0.8

−14.5

Decreases insales prices
QuickNavi-COVID19 Ag, -19.3
Administrative
Sales prices
Decreases in
EV-related andand-3.1
The pandemic’s semiconductor-related raw material prices,manufacturingRawmaterial
prices,etc.
products, etc.
impactcosts, etc.
etc. +2.3+13.0

Fiscal 2019
results

Changes inChanges insales volume
sales volume(Other)(The pandemic’s impact)

Effect of
spreadEffect offoreign exchange

Other costelements

R&D expenses

Forward-looking
investments

Fiscal 2020
results

In fiscal 2020, we benefited from growth in demand for offerings related to EVs, semiconductors, 5G
communications infrastructure and renewable energy in the environment and energy field. In thehealthcare field, shipments of QuickNavi-COVID19 Ag, which was released in August 2020,
contributed significantly to operating results. As a result, operating income was ￥34.7 billion, up￥3.1 billion year on year and hitting a record high, thanks to earnings from specialty businesses
outweighing the negative impact of the novel coronavirus pandemic.
IR Information https://www.denka.co.jp/eng/ir/

Denka Report 2021 Integrated Report

08Corporate Information /Management Resources

Value Creation

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

A Message from the President
First of all, I would like to extend my deepest
condolences to any who have lost loved ones to theof unprecedented magnitude.
Although the business environment remains

novel coronavirus. At the same time, I pray for theunclear, I believe that such situations can yieldearliest possible recovery of people infected with theopportunities. As we embark on the last two years of

disease. Also, I would like to express my

the Denka Value-Up management plan period, we

wholehearted respect and gratitude to the frontline

are taking a fresh look into our mode of operations

medical practitioners fighting to save lives and otherand organizational structure while striving to become

essential workers who, in the face of the pandemic,

a company that values the aspirations of individual

strive to fulfill their duties to support our daily lives.

employees and helps every one of them achieve

On April 1, 2021, I assumed the office of thepresident of Denka Company Limited. Building on our

personal growth in the course of their duties.
To this end, we will develop a workplace

predecessors’ 106 years of hard-won successes, I

environment in which everyone can work safely while

am determined to help all Group members pullstaying mentally and physically healthy. In thesetogether to achieve the targets of the Denka

ways, Denka aims to become a Specialty-Fusion

Value-Up management plan.

Company that decisively takes on the challenge ofUnder Denka Value-Up, we are pursuing thespecialization of our operations in the three priority
fields, namely, the environment and energy,
healthcare and high-value-added infrastructure, while

delivering solutions for various social issues and is
irreplaceable to society.
We sincerely thank our stakeholders and ask fortheir ongoing support of the Denka Group.

pushing ahead with the business portfolio shift.

Toshio Imai

During the course of these endeavors, we have

Representative Director, President & CEO

seen drastic changes in the operating environment.
In addition to a global trend toward decarbonization,
public awareness of environmental issues, such as

Career Summary

marine plastics, is ever higher. Also, the current pace

April 1982

of digital transformation and other technological

October 2006 General Manager of the Styrene Division

innovation is far faster than expected.

June 2011

General Manager of the Corporate Planning Dept.

April 2013

Executive Officer

June 2019

Director, Managing Executive Officer

April 2020

Director, Senior Managing Executive Officer

April 2021

Representative Director, President & CEO

At the same time, the global community is facing
critical situations on multiple fronts, due to suchfactors as the outbreak of the novel coronavirus andever more frequent occurrences of natural disasters
Denka Report 2021 Integrated Report

Joined the Company

09

Value Creation

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Creation

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Summary

An Interview with the President
Q1. Please share your impression on fiscal 2020, which was heavily influenced by the novel coronavirus pandemic.

A. We made a significant step forward toward becoming aSpecialty-Fusion Company.
■ One-Year Endeavor to Focus on and Identify What Is Truly Essential■ Combating Fallout from the Pandemic with All Employees Working as One

During fiscal 2020, the pandemic placed heavy restrictions on our business activities, while
similar issues affected people all around the world. In this sense, it was an unprecedented
period. We believe that, as a result, the pandemic caused the general public to refresh theirrecognition of the importance of focusing on what is truly essential. To date, Denka has placeda strong emphasis on face-to-face business interactions as it values interpersonalcommunications in line with a sincerity-based corporate culture. However, after being
prompted by the pandemic to introduce remote meeting systems, we found ourselves to beable to secure robust communications online. This suggests that effective communication
does not necessarily depend on particular methods. Rather, the content is of importance.
Accordingly, we have become more open than ever to adopt alternative methods
as long as they are efficient.

Over the course of one year, our business activities were thus confronted by difficulties
due to unfamiliar circumstances like those I have just described. Nevertheless, the outcomesof our ongoing initiatives under Denka Value-Up yielded an operating income of ¥34.7 billion,
albeit lower than the target level set forth by the management plan, hitting a record high.
This is a testament to steady progress we have made thus far in executing Denka Value-Up
growth strategies.
The aforementioned outcomes also included some accomplishments only Denka iscapable of making. For example, as part of our efforts to help combat the pandemic, we
resumed the manufacture of diethyl malonate, upon government request and raised ourcapacity for antigen rapid testing kit production. To achieve this, our employees worked hard as
one to fulfill their missions, together making a significant step forward in fiscal 2020 toward ourgoal of becoming a Specialty-Fusion Company.

Q2. What does “Specialty” actually mean for Denka?

A. “Specialty” means operations in areas where Denka is unsurpassed andthrough which it can contribute to society.
Denka Value-Up’s fundamental concept is to focus on developing specialty businesses totransform our portfolio. Then, what are specialty businesses? These can also be described as“endeavors we are better at doing than anyone else.” We aim to become a company that,through such endeavors, decisively takes on the challenge of delivering solutions for issues
society is now confronting. This is our ideal with regard to what Denka should look like upon theaccomplishment of Denka Value-Up.
Now, I will showcase types of endeavors Denka is better at doing than any other company.
For example, we employ unique high-temperature calcining technologies to produce functional
fillers, which are an essential ingredient of fast-advancing electronic materials used insemiconductors, lithium ion secondary batteries and other products. Also, we help prevent the

Denka Report 2021 Integrated Report

emergence of a new infectious disease pandemic and its resurgence via the supply of antigen
rapid testing kits that take full advantage of a solid technological foundation we earned in thecourse of developing the immunochromato-method and other cutting-edge testing technologies
over many decades. Furthermore, we possess a number of proprietary technologies that lend
us distinctive strengths in such areas as precision polymerization, which improves
functionalities of elastomers and plastics, and special cement additives, which increase
concrete’s added value via the enhancement of its functions and environmental friendliness.
Strengthening our focus on these operations, which allow us to gain significant presence
amidst the megatrends, we will transform our portfolio and thereby become a Specialty-Fusion
Company consisting of specialty businesses.

10Value Creation

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Creation

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Corporate
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Summary

An Interview with the President

Q3. Embarking on the last two years of the Denka Value-Up management plan period, what future outlook do you currently have?

A. We will strive for even higher targets with an eye to the period following
the conclusion of Denka Value-Up.
Having launched Denka Value-Up in April 2018, we completed the first three years of the planand entered its finishing phase. In the course of reviewing the last three years and addressing
newly discovered challenges, we have determined that our focus must be placed on the three“Value-Up” initiatives: Business Value-up; Environmental Value-Up; and HR Value-Up. In linewith this focus, we have established a policy for the plan’s remaining two years, defining thisperiod as a preparatory period in which we accumulate capabilities to achieve even higher
targets to be set forth thereafter in the next management plan. At the same time, for fiscal 2022
we will aim for an operating income of ¥50.0 billion as initially planned.

■ The Three Value-Up Initiatives
Under the banner of three Value-Up initiatives, we will address issues described as follows.
1. Business Value-Up
We will push ahead further with specialization. To this end, we will proactively introduce
technologies for digital transformation (DX). Not only do we digitize our existing operations, wewill take on the challenge of transforming our mode of doing our work. We will also consider
entrusting external companies with types of operations they are better at doing than ourselves.
Thus, we will fix our focus on what we are better at doing than anyone else. By the end of fiscal
2022, we intend to announce a clearly defined roadmap for the business portfolio shift throughthese endeavors.
2. Environmental Value-Up
Recently, we announced an ambitious target of achieving carbon neutrality by the end of 2050
in an effort to step up environmental management. When it comes to achieving carbon
neutrality, conventional modes of emission control, such as energy saving, will not suffice. We
need technological innovation. Accordingly, we will act in proactive collaboration with external
research organizations and business corporations to take on this major challenge. Currently,
the annual volume of CO2 emissions from the entire Denka Group amounts to around 2 million
tons. We also engage in the production of plastics, with their forms ranging from raw materials
to processed products. Strongly conscious of our social responsibilities to promote

Denka Report 2021 Integrated Reportcountermeasures to problems caused by climate change and plastic waste, we will decisively
work to resolve them.
3. HR Value-Up
We believe that an improvement in our corporate value and our success in specialization largely
hinge on our efforts to help each employee raise their value creation capabilities. That is why
we named HR Value-Up as a third, extremely important, Value-Up initiative. Through thisinitiative, we hope to create a company in which employees can find themselves achieving
tangible personal growth through their professional duties. Going forward, Denka is expected toenter an unprecedented phase in the Company’s history. As we do so, everyone at Denka,
whether they are employees or officers, must strive for Value-Up for themselves.

Business
Value-Up

Environmental
Value-UpHR
Value-UpTransform our portfolio by
focusing on operations inareas where Denka isunsurpassed

The volume of GHG
emissions (comparedwith the fiscal 2013 level):
Aim for a 50% reduction
by the end of fiscal 2030
and net zero in fiscal 2050

Create a company in which
employees find their jobs
rewarding and feel thatthey are attaining tangible
personal growth11Value Creation

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Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
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GovernanceSocialContributions

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Summary

An Interview with the President■ Challenges to Be Addressed in the Next Two Years
In the next two years, we also intend to take on a major challenge of envisioning what Denka
should aim to be after the conclusion of Denka Value-Up. Moreover, we must determine
quantitative indicators enabling us to objectively evaluate progress in our initiatives to this end.
It should not be mere a fancy dream. Rather, we must take a down-to-earth approach toformulate a path toward our future ahead. This will, we believe, become the foremost challenge
Denka will have to take on.

Q4. What does ESG-oriented business management mean to Denka?

A. By addressing ESG issues, we aim to become
a company genuinely needed by society.
■ Setting Our Sights Higher Is of the Utmost ImportanceWith United Nations Sustainable Development Goals (SDGs) as its compass, Denka is striving
to become a company that is genuinely needed by society through a variety of initiatives
intended to contribute to the realization of a sustainable society.
To this end, we consider it essential to help each employee discover how relevant theireveryday duties are to social contribution. Also, we need to encourage them to set their sights
high in this regard. I believe that pointing employees in this direction is of the utmost
importance. We will thus deliver solutions to issues society is confronting through types ofoperations we are better at doing than anyone else. This is exactly what Denka should aim to beupon the accomplishment of Denka Value-Up.

■ To Our Stakeholders
So far, we have been able to make steady progress in Denka Value-Up and concluded that our
fiscal 2022 operating income target of ¥50.0 billion is feasible as initially planned. This is also
indicative of assiduous efforts undertaken by each employee. Over the course of the next two
years, we will undertake strategic investment to achieve sustainable growth while maintaining
our stance toward robust shareholder returns in line with a basic policy of aiming for a total
shareholder return ratio of 50%. We hope to ensure that all of our shareholders are proud ofinvesting in Denka. Looking ahead, we ask for your continued support for our endeavors.

Denka Report 2021 Integrated Report

12Corporate Information /Management Resources

Value Creation

Value
CreationManagement Plan

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Denka Value-Up
Fiscal 2018- Fiscal 2022

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Our Ideal with
Regard to What
Denka Must Look Like
A company that is genuinely
needed by society andirreplaceable to the world

Three Value-Up Initiatives

Business
Value-Up

Environmental
Value-Upand that employees andstakeholders are proud ofHR
Value-Up

SpecialtyFusion
Company
Become a Specialty-Fusion
Company with a Strong
Global Presence

Transform our portfolio by
focusing on operations inareas where Denka isunsurpassed

The volume of GHG
emissions (comparedwith the fiscal 2013 level):
Aim for a 50% reduction
by the end of fiscal 2030
and net zero in fiscal 2050

Create a company in which
employees find their jobs
rewarding and feel thatthey are attaining tangible
personal growth

Sustained
GrowthMaintain Sustained
Growth by Significantly
Enhancing Productivity
through Innovative
Processes

Our
Threefold
GrowthVisionSound
GrowthSecure Sound Growththrough Work Style
Reforms

Management plan “Denka Value-Up” https://www.denka.co.jp/eng/ir/plan/
Denka Report 2021 Integrated Report

13Corporate Information /Management Resources

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Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

1. Progress of the Denka Value-Up Management Plan
In fiscal 2020, the third year of Denka Value-Up, growth strategies centered on the environment and energy and healthcare fields yielded steady results despite
lingering uncertainties attributable to the pandemic’s impact on the market environment. Moreover, the shift from existing core businesses to specialty businesses insuch fields as functional resins continued to advance.
Numerical Targets

Financial Strategies

From fiscal 2020 onward, the economic environment remained extremely harsh due to the

While continuing initiatives aimed at maintaining the soundness of our financial base, we intend

enforcement in countries around the world of significant restrictions aimed at limiting economic

to execute strategic investment centered on specialty businesses to secure “Sustained Growth”

activities in order to prevent the spread of the novel coronavirus.

and “Sound Growth.” With regard to shareholder returns, we remain committed to a targeted

Against this backdrop, we were able to steadily progress along the path toward our goal of

total shareholder return ratio of 50% in line with the shareholder return policy we established in

becoming a Specialty-Fusion Company as defined under the Denka Value-Up management

November 2014. In addition to prioritizing dividends, we will flexibly execute share repurchases

plan. As a result, fiscal 2020 operating income stood at ¥34.7 billion, with an operating income

by giving due consideration to funding demand and trends in stock prices.

ratio of 9.8%. The ratio accounted for by specialty businesses on an operating income ratio
basis was 97%, due in part to decreased earnings from core businesses.

Investment and Financing Plan

Shareholder Returns

Estimated total for the five-year period:

We remain committed to a targeted
total shareholder return ratio of 50%.

Expected to surpass the initial plan reflecting theproactive execution of strategic investment in specialty
businesses and process reforms

Total shareholder return ratio = (Dividends paid +treasury stock purchased) / consolidated net income

Breakdown•Strategic investment: ¥85 billion (Planned: ¥75.0 billion)•Regular investment: ¥125 billion (Planned: ¥75.0 billion)

Fiscal2020
Achievements¥210.0 billion

Ratio of specialty businesses

97％

Operatingincome64％
Operating income
from specialty
businesses

73％

Note: Denka has adopted the weighted average cost of capital(WACC) as a criterion for its judgment of strategic investment.

49％

FY2018 results

Results
Operatingincome(operating
income ratio)

In fiscal 2020, we paid an interim
dividend of ¥60 per share and a
year-end dividend of ¥65 per share.
With full-year dividends totaling ¥125
per share, the dividend payout ratio
stood at 47%.

FY2017¥33.7 billion（8.5%）

Results
FY2018¥34.2 billion（8.3%）

Results
FY2019¥31.6 billion（8.3%）

Results
FY2020¥34.7 billion（9.8%）Net income(billion yen)

Dividends per share(yen/share)

Total dividends(billion yen)

Dividend payout ratio
Shares repurchased(billion yen)

Total shareholder returns(billion yen)

Total shareholder return ratio
Depreciation and amortization (billion yen)
Capex, investment and financing (billion yen)
Note: Denka defines a specialty business as one that meets or has the potential to meet the following conditions in the near future:1) being consistent with the Company’s commitment to addressing ESG issues; 2) boasting distinctive strengths and productvalue; 3) possessing resilience to changes in external factors; and 4) commanding an industry-leading market share.

ROE

25.0
120.0
10.5
42%
2.1
12.6
50%
22.9
32.8
10.3%

FY2019 results

22.7
125.0
10.8
48%
10.8
48%
22.5
34.2
9.1%

FY2020 results

22.8
125.0
10.8
47%
10.8
47%
22.9
42.3
8.8%

FY2021 forecasts

29.0
135.0
11.6
40%

23.5
43.0
（10.5%）

Management plan “Denka Value-Up” https://www.denka.co.jp/eng/ir/plan/
Denka Report 2021 Integrated Report

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Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
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Quality and
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Corporate
GovernanceSocialContributions

Financial
Summary

2. Denka Value-Up Achievements and Issues to Be Addressed
Although we have made steady progress thus far in production, R&D and operational process reforms, we are only halfway to achieving our goals regarding the DX-driven businessmodel and organizational reforms, including the recruiting and development of digital specialists to support such reforms. Moreover, as part of human resource (HR) strategies, weneed to continue to develop platforms, systems and training programs and otherwise introduce tangible measures aimed at effectively nurturing individuals with specialized skills.
Furthermore, we consider it essential to accelerate the business portfolio shift over the course of the remaining two years of the Denka Value-Up period in order to achieve the goalsof this management plan.
Business Portfolio ShiftIntroduction of Innovative Processes
1. Achievements

Production process
reforms
R&D process
reforms
Operational process
reforms andwork style reforms● Advanced the digitization and automation of

production processes● Developed an R&D assistance system while

strategically nurturing researchers● Promoted a switchover to e-authorization system

and a shift to online as well as shorter meetings

In the environment and energy field, in which we promote our specialty businesses, we boosted
our production capacity for spherical alumina, silicon nitride powder and other offerings while
releasing spherical magnesium oxide, a cutting-edge functional ceramic material. In this field, it
is hard to forecast demand over the medium to long term and judge the size and timing of
capital expenditure. In the healthcare field, we developed a rapid diagnostic testing kit for
detecting novel coronavirus antigen and resumed the production of diethyl malonate.
On the other hand, we are confronting issues associated with delays in our initiatives to get new
businesses on a profitable track and expand our overseas operations.
Also, in terms of specializing our key operations and redefining the positioning of thecommodity businesses, we need to promote the development of “specialty grade” products
while accelerating the thoroughgoing implementation of countermeasures to improve
low-profitability businesses.

2. Issues to Be Addressed Going Forward

1. DX
●

●

Promote the DX-driven business model andorganizational reforms
Secure digital specialists

1. Accelerate the Growth of Specialty Businesses

2. HR Strategies●●

Enhance operational productivity via theincorporation of flexible work styles

The environment and energy

Hire excellent human resources regardless ofgender, native language or age

Healthcare

Achievements

Issues● Boosted production capacity for electronic● The need to accurately and swiftly respond● Released a rapid diagnostic testing kit for● Delays in achieving profitability for new

materials for use in EVs and 5G devices

detecting novel coronavirus antigen● Decided to increase influenza vaccine

production capacity● Stagnant growth due to delays in overseas

expansion

2. Specialize Our Key Operations●●

businesses and expanding our overseas
operations● Dependence on demand arising from the

spread of influenza virus

High-value-added infrastructure●

to a fast-evolving market environment

Shifted polystyrene production lines in
Singapore to MS (SMMA) resin production
Made entries into the biostimulant market(Issue) Delays in the development of specialty
grade products

3. Redefine the Positioning of theCommodity Businesses●●

Terminated calcium carbide production at the
Omuta Plant(Issue) Accelerated the thoroughgoing
implementation of countermeasures to improve
low-profitability businesses

Management plan “Denka Value-Up” https://www.denka.co.jp/eng/ir/plan/
Denka Report 2021 Integrated Report

15

Corporate Information /Management Resources

Value Creation

3. To Become a Specialty-Fusion Company

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
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Corporate
GovernanceSocialContributions

Financial
Summary

Revision of Numerical Targets

In May 2021, we announced numerical targets for the two fiscal years leading up to fiscal
2022, the final year of the Denka Value-Up management plan, as part of the interim
review of such plan. Although the market environment still remains unclear due to fallout
from the novel coronavirus pandemic, we expect profit from Electronics & Innovative
Products to expand on the back of such megatrends as the popularization of EVs and 5G
devices while forecasting solid growth in earnings from healthcare-related operations.
Moreover, we anticipate the accelerated specialization of key operations and recovery inchloroprene rubber demand to have positive effects. Taking these factors into account,
we aim to achieve operating income of ￥42.0 billion in fiscal 2021 and ￥50.0 billion in
fiscal 2022.

Ratio of specialty businesses
83 ％
89 ％
97 ％

Operatingincome64 ％Operating income
from specialty
businesses
Operatingincome(operating
income ratio)

73 ％

49 ％

Initial plan

¥50 billion to¥60 billion

Results

Results

Results

Results

Forecast

FY2017FY2018FY2019FY2020

FY2021¥33.7 billion（8.5%）¥34.2 billion（8.3%）¥31.6 billion（8.3%）¥34.7 billion¥42.0 billion（9.8%）（11.5%）*

Revised target

FY2022¥50.0 billion（13.0%）*

Record-high operating income*Figures prior to the adoption of the revised Accounting Standard for Revenue
Recognition: Fiscal 2021: 10.6%; Fiscal 2022: 12.0%

Initiatives for the Next Two Years
Here, we elaborate on the three Value-Up initiatives aimed at achieving the numerical targets discussed above and thereby securing our standing as a Specialty-Fusion Company
that is irreplaceable to society.

Three Value-Up Initiatives
Environmental Value-Up

Business Value-Up

The volume of GHG emissions (compared withthe fiscal 2013 level): Aim for a 50% reduction by
the end of fiscal 2030 and net zero in fiscal 2050

Transform our portfolio by focusing on operations in areas where
Denka is unsurpassed

Accelerate growth of specialty businessesThe
environment
and energy● Pursue sales expansion in EV-, 5G-, semiconductor-

and renewable energy-related markets● Focus on developing leading-edge products● Proactively contribute to countermeasures against a

Healthcare

new infectious disease pandemic and its resurgence● Deliver solutions supporting genome-based

diagnosis and digitized medical practices● Promote overseas expansion and new productHigh-value-added
infrastructuredevelopment while thoroughly revamping
low-profitability products● Refresh the growth track for our infrastructurebusiness in line with its ongoing positioning as apriority field

Achieve business model and organizational reforms via
the DX-driven integration of each process
Production
processreforms

R&D process
reforms

HR Value-Up● Focus on the automation of visual inspections, theintroduction of robots and the enhancement ofsensors

Create a company in which employees find theirjobs rewarding and feel that they are attaining
tangible personal growth● Initiate the full-scale utilization of the R&D assistancesystem and material informatics▶P.29-30 Employee Happiness●

Operational
process reforms
and work stylereforms● Shift to online meetings while digitizing

documentation and authorization process● Eliminate dirty, dangerous and physically demanding●

aspects of workplaces

Specialize our key operations and redefine the positioning of the commodity businesses●▶P.23 Initiatives to Achieve Carbon Neutrality

Establish milestones for the portfolio shift in the next two years regarding businesses in need of restructuring●●

Define KPIs with regard to our efforts to secure human resources withspecialized skills, promote diversity and execute work style reforms
Reform HR systems associated with evaluation, hiring and training, andinnovate our working environment
Conduct HR training for the early development of senior management
candidates while decisively refreshing organizational and staff composition
Promote health & productivity management by, for example, developing anenvironment that empowers employees to realize their full potential
Management plan “Denka Value-Up” https://www.denka.co.jp/eng/ir/plan/

Denka Report 2021 Integrated Report

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Value
Creation

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GovernanceSocialContributions

Financial
Summary

The Denka Group’s Priority Management Materiality Issues
In line with the corporate philosophy enshrined in The Denka Value, the Denka Group identified priority CSR materiality issues that, on April 24, 2017, its Management Committee approved.
To clearly define the relationship between Denka’s materiality issues and the Denka Value-Up management plan, at the beginning of fiscal 2020 we changed the terminology used to refer to ourmateriality issues, switching from “priority CSR materiality issues” to “priority management materiality issues.”
These materiality issues consist of 13 items, each of which is a matter of critical importance for a chemical manufacturer committed to fulfilling its social responsibilities. In line with these 13 items,
the chart shown below specifies areas in which we commit ourselves to supporting sustainable social development via the fulfillment of our responsibilities as a manufacturer and the provision ofsolutions. The chart also indicates how our pursuit of these materiality issues relates to the United Nations Sustainable Development Goals (SDGs).
In particular, we expect our product technologies in the environment and energy, healthcare, and high-value-added infrastructure—fields in which the Denka Group boasts strengths—to greatly
contribute to the realization of the SDGs.
With the formulation of our next management plan currently under way, we are engaged in discussion regarding the identification of numerical targets for these materiality issues as part of saidplan, with SDGs as our compass. Looking ahead, the Denka Group will push ahead with ESG-oriented management via the pursuit of materiality issues.

Denka’s Materiality Issues Aimed at Realizing SDGs

Category

Prioritization of safety

Products and technologies

Solid corporate governance /Corporate conduct deservingof stakeholder trust

13 materiality issues

Relevant SDGs
Fulfill manufacturers’ responsibilities

Provide solutions

Reinforce security and disaster prevention measures
Maintain occupational safety and health while creating avibrant and comfortable workplace environment
Create new products and technologies that contribute tosound social development
Ensure product safety
Ensure that our corporate philosophy is embraced by every
employee and transform our corporate culture
Improve corporate governance
Maintain strict compliance with laws, regulations andcorporate ethics
Nurture human resources and pass down our technological
heritage to future generations

Employee happiness

Embrace diversity and offer equal opportunities
Help employees strike a work-life balance and promote
employee healthPrevent air, water, soil and other environmental pollution

Environmental preservation

Promote climate change countermeasures (curb global
warming, reduce GHG emissions and adapt to climatechanges)

Dialogue with society /Partnership

Maintain appropriate and timely disclosure of corporate
information and establish bidirectional communications
ESG information site: Our Materiality Issues https://denka_sustainability.disclosure.site/en/themes/729

Denka Report 2021 Integrated Report

17Corporate Information /Management Resources

Value Creation

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Responsible Dialogue with Stakeholders
The Denka Group considers maintaining responsible dialogue with stakeholders an integral part of the process ofassessing the social responsibilities it is called upon to bear, the degree of its social contributions and stakeholder
Note: Descriptions contained in the diagram are organized in line with the Denka Group CSR Basic
expectations with regard to improvement of its corporate value.
Policies. For more details, please also visit our ESG information website and see the section titled“Denka’s CSR Management.”
The diagram below illustrates our approach to dialogue with each stakeholder group as well as value created via
such dialogue and its significance.
ESG information site: Denka's CSR Management https://denka_sustainability.disclosure.site/en/themes/739

Provision of products
and solution services
and the receipt ofcompensation

Customers

Investment andthe resulting returnof profit

Shareholders
andInvestors

Face-to-face and online customer visits,
technical services and customer
satisfaction surveys

Timely and appropriate information
disclosure and face-to-face and online
engagement with institutional investors■ Be sincere when communicating with customers■ Improve corporate governance■ Be thorough to ensure product safety and keep

■ Secure management transparency and soundness

quality awareness highBusiness
Partners■ Maintain constructive dialogue and earn trust

Sustainable growth
for the entire supply
chain

Face-to-face and online meetings with
suppliers■ Develop a sustainable supply chain while steppingup partnership

Employees

Sustainable
development oflocal communities

Local
Communities

Denka Value-Up initiatives undertaken
at each workplace, business site visitsby management, dialogue withpresident, employee awareness surveys■ Respect diversity, personalities and uniqueness ofeach employee while helping them embrace a work
style that enables them to realize their full potential■ Create a vibrant workplace that gives due
consideration to employee health and safety

Comprehensive emergency drills, interaction and dialogue withfellow community members, participation in local events, social
contribution activities, facility tours, resident briefings andeducational assistance■ Secure worker safety and health while reinforcing security and disaster prevention

measures■ Participate in communities and contribute to regional vitalization

ESG information site: Social Dialogue and Partnership https://denka_sustainability.disclosure.site/en/themes/661
Denka Report 2021 Integrated Report

18

Corporate Information /Management Resources

Value Creation

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Our Healthcare-Related Operations—Taking on the Challenge of Blazing a New Path toward the Future

SpecialFeatureDenka’s healthcare-related operations encompass the fields of disease prevention, diagnosis and treatment. Having completed the business integration with the former Denka
Seiken, our Life Innovation Division made a fresh start in 2020 under a new business structure. In line with a philosophy of “respecting the dignity of life and protecting people’s
health,” we are taking on the ongoing challenge of expanding into new business fields and blazing a path toward the future.

Current Technology
Stably provide influenza vaccines

Prevention

Influenza HA vaccines●Since 1972, we have engaged in the manufacture and sale of influenza HA vaccines, playing our part in the stable provision of vaccines.
●In November 2020, we completed the construction of a new liquid vaccine production facility in which we have invested approximately ¥16.0
billion, with the aim of augmenting our supply capacity in response to growing social needs for vaccination. Operational kickoff is scheduled forthe 2022 flu season after the verification of facilities and other preparatory processes.

Swiftly counter an infectious disease pandemic

QuickNavi-COVID19 Ag, a rapid diagnostic testing kit for detecting novel coronavirus antigen
Diagnosis●Since its founding in 1950, the former Denka Seiken had been a developer and supplier of a variety of infectious disease diagnostic reagents.
Although the development of such reagents usually requires at least two or three years, QuickNavi-COVID19 Ag was deemed eligible for
special regulatory approval. Thanks also to the cooperation of the National Institute of Infectious Diseases, the Japan Agency for Medical
Research and Development (AMED) and other external partners, we succeeded in commercializing this product in only approximately six
months and thus launched its supply in August 2020.
●What distinguishes QuickNavi-COVID19 Ag from PCR testing is the benefit it offers as a rapid diagnostic testing kit. Without the need for any
diagnostic equipment, this product enables frontline medical practitioners to visually confirm test results, with the time required for testing as
short as approximately 15 minutes. Denka is currently engaged in the development of supply of QuickNavi series rapid diagnostic testing kits
encompassing a diverse range of infectious diseases via the use of its proprietary technology. Through these efforts, we are assisting medical
practitioners in their battle against infectious diseases and, by doing so, helping to relieve them of the burden of disease diagnosis.

Contribute to the maintenance and enhancement of quality of life (QOL) in an aging society

Treatment

Macromolecular sodium hyaluronate preparation and joint function improvers●We manufacture SUVENYL joint function improver,* and to this end, take advantage of our unique fermentation method to produce raw material
macromolecular sodium hyaluronate.
●The rapid aging of society entails an increase in the number of people who suffer from knee osteoarthritis and other symptoms causing knee
joint pain. Our offerings help maintain and enhance QOL for such people so that they can lead energetic lives.
* Manufactured by Denka, SUVENYL is marketed by Chugai Pharmaceutical Co., Ltd. as a distributor.

Business Categories: Life Innovation https://www.denka.co.jp/eng/medical/
Denka Report 2021 Integrated Report

19Corporate Information /Management Resources

Value Creation
SpecialFeatureValue
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Denka will continue to develop and manufacture unique products while remaining true to a fundamental businessapproach guided by a respect for the dignity of life.

Philosophy

Protect people around the world from a new infectious disease pandemic
and its resurgence
Help people around the world improve their QOL by delivering products
designed to meet the needs of frontline medical practitioners

Respecting the dignity of life and protecting people’s health

Future Technology
A technological platform for developing next-generation vaccines and diagnostic reagents

Prevention

Development of norovirus vaccines via the use of magnICON●We are currently developing a norovirus vaccine and a new diagnostic reagent via the use of the magnICON technological platform, which is capable ofefficiently manufacturing proteins using genetically modified tobacco plants.
●This technological platform boasts such features as superior cost effectiveness and safety as well as a versatility that enables flexible production.
●Icon Genetics GmbH, a Germany-based Group subsidiary, is engaged in the clinical trial of norovirus vaccine in Europe. It also acquired land for new facility
construction in anticipation of future business expansion.

A new diagnostic testing technology for diagnosing septicemia

Simultaneous multiplex assays backed by innovative genome detection technology
Diagnosis●Septicemia refers to a serious condition involving organ damage caused by the proliferation of bacterial and otherpathogens in the body. The conventional method for diagnosing this disease is dependent on a microbial cultureusing patient blood and therefore requires two days or more until the causative organism is determined. The earlier
detection of the root causes of symptoms will help mitigate fatality risk while enabling physicians to select optimal
antimicrobial drugs and, therefore, better positioning them to counter the emergence of drug resistant bacteria.
●IntelliPlex is a highly sensitive simultaneous multiplex assay technology developed by the Taiwan-based PlexBio,
our strategic partner. Taking advantage of this technology, we are currently developing a diagnostic reagent andequipment with the aim of reducing the time span required for the diagnosis of septicemia to one day or less.

Processes for septicemia diagnosis
Collect blood

Microbial cultureusing blood

Most time-consuming
process requiring humanoperations

Identification
testing
Identifying thehazardousnessof pathologicalmicroorganisms anddetermining thebacterial types
is also time consuming

Drug sensitivity
testing
Testing must be
performed toconfirm whether
each causative
bacterium can be
subdued by
antibacterial drugs

An innovative cure for battling cancer

Treatment

Development of technologies for manufacturing the G47Δ oncolytic virus●G47Δ is an oncolytic virus developed by Dr. Tomoki Todo (a Professor at the Institute of Medical Science, University of Tokyo) using a herpes simplex virus type-1 (HSV-1), a genetically modified virus
designed to selectively proliferate in and destroy cancer cells. Currently, G47Δ is attracting significant attention as an epoch-making cancer drug that is totally different from existing anticancer drugs orradiation therapy.
●Since the formulation of G47Δ is the virus itself, its manufacture requires special techniques. Drawing on its technological strengths and experience in the manufacture of vaccines and virological diagnostic
reagents, Denka has been developing a technology for manufacturing the G47Δ upon the request of Dr. Todo. In June 2021, Daiichi Sankyo Company, Limited, which is expected to manufacture andmarket G47Δ obtained ministerial approval for its manufacture and sale in Japan. This approval is classified as a conditional and time-limited approval given to regenerative medicine products aimed attreating malignant gliomas. Going forward, Denka will be commissioned by Daiichi Sankyo to manufacture this oncolytic virus.
Business Categories: Life Innovation https://www.denka.co.jp/eng/medical/

Denka Report 2021 Integrated Report

20Corporate Information /Management Resources

Value Creation

Our Vision
for 2030
RECYCLING

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

The Denka Group’s Social Responsibilities
and Contributions

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary■：Social responsibilities to be fulfilled via manufacturing■：Responsibilities to the environment, resource preservation and safety■：Business strategies

As a producer of chemical and pharmaceutical products, the Denka Group bears various responsibilities attendant to its
value chain for delivering goods and solutions to society.
Meanwhile, the twelfth of the United Nations Sustainable Development Goals (SDGs), a set of international goals to beachieved by 2030, calls for public awareness of “Responsible consumption and production,” while the seventeenth of theSDGs aims to facilitate “Partnerships for the goals.” Based on the concept of a circular economy, we have identified issues
the Denka Group must address and responsibilities it must assume in support of these goals and, to this end, are focused on
applying the unique strengths of the Denka Group and the areas in which it is best positioned to contribute to society.

Working in tandem with other members of society, we will create manufacturing processes and ecosystems
designed to deliver products that are long-lived or easy to recycle while minimizing their footprints on the naturalenvironment, including on marine, land and other living organisms. For example, we will recycle waste plastics
into raw material monomer for use in the manufacture of new products. We will also produce recycling-oriented
materials that smooth the separation of parts and/or cleansing, while developing highly durable products thatare inherently capable of self-restoration if cut or cracked as well as those that naturally repel stains.
Furthermore, we will incorporate CO2 as a plastic ingredient. In all these pursuits, we remain strongly
committed to lengthening product life and promoting recycling.

Promote a circular economy• Establish a plastic recycling ecosystem• Develop CO2 and carbon circulation technologies
Page 23 Initiatives to Achieve Carbon Neutrality
Page 26 Initiatives to Reduce Environmental Burden

Social issues (risks)●Increasingly serious consequences of climatechange attributable to global warming●Problems arising from marine plastic pollution●Aging of concrete and other buildings andcivil infrastructure

Enhance infrastructure resilience by delivering
technologies to lengthen the durability of and restore
concrete and other structures

RECYCLING• Contribute to the advancement of concrete and special cement additivetechnologies
Page 37 Elastomers & Infrastructure Solutions

USING
Targeting “Generation Z,”* which prizes empathy, sharing economies and respecting the unique attributes
of individuals, as well as people who are highly concerned about ethical consumption, we will deliver
manufacturing proposals for products and solutions that resonate with these sensibilities and help
consumers discover new value while focusing on ensuring functionalities and eco-friendliness of ourofferings. We will also incorporate findings from biomimetics to advance our R&D aimed at creating
eco-friendly products that generate minimal waste. Moreover, we will uphold our commitment to ensuring
the health of product users. In line with these pursuits, we will be deeply involved in the provision of
products and services aimed at assisting health maintenance and disease prevention as well as thoseaddressing pre-symptomatic conditions. Furthermore, we will help reduce the volume of food waste
associated with processes ranging from harvesting through transport, processing and sale. In addition, as
part of efforts to ensure food safety, we will contribute to logistics efficiency and help consumers smoothly
receive fresh food.

Protect people’s lives and well-being• Advance disease prevention, diagnosis and treatment technologies while
helping improve pre-symptomatic conditions• Contribute to the establishment of technologies to prevent, diagnose and treat
diseases arising from the novel coronavirus

Social issues (risks)* From 2030 onward, Generation Z are expected to be in theirearly 30s and become leaders of society around the world.

Support the development and maintenance of resilient
infrastructure and safe transportation methods

Page 19 Special Feature: Our Healthcare-Related Operations

Page 33 Electronics & Innovative Products
Page 37 Elastomers & Infrastructure Solutions

Page 33 Electronics & Innovative Products

Contribute to food safety and the resolution offood problems

Contribute to the popularization of autonomous driving
systems and drones• Help providers adapt to “new norms” in lifestyles, such as the growing trend
toward solitary dining, by delivering food packaging materials that help
preserve freshness and otherwise supporting stable food supply• Contribute to 5G and other communication technologies via the supply ofchemical and electronic materials

Page 37 Elastomers & Infrastructure Solutions

Pursue innovation in electric vehicle technologies• Battery material and high-temperature control technologies• Provide chemical and electronic materials for automotive parts and rolling stock• Provide special cement additives for road and tunnel construction

Page 35 Life Innovation

Page 39 Polymer Solutions●Food shortages arising from growth in global
population●Global warming attributable to greenhousegas emissions●Increasing magnitude of damage caused bynatural disasters due to climate change●Outbreak of a new infectious disease
pandemic and its resurgence●Aging of population and the resulting
diversification of diseases among thegeneral publicPage 33 Electronics & Innovative Products

USING

Develop materials free of fossil resources• Employ naturally derived ingredients from plant-based and other sources as well
as microorganism cultivation

Page 19 Special Feature: Our Healthcare-Related Operations
Page 39 Polymer Solutions

ESG information site: List of Products to Contribute to SDGs https://denka_sustainability.disclosure.site/en/themes/635
Denka Report 2021 Integrated Report

21Corporate Information /Management Resources

Value Creation

Young
Employees’ Vision of
Denka in the Future

I would like to help Denka become capable ofleveraging its second-to-none technologicalcapabilities to develop new markets, tapping
into such fields as aerospace and deep-sea
development. Also, I want Denka to pursue
sustainable manufacturing, to this end
achieving technological innovation in resource
recycling and manufacturing process.

Hirofumi Hara

Denka Chemicals Development Suzhou Co., Ltd.

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyI hope for Denka to become an even better
workplace supported by automatedmanufacturing process as well as digitized
documentation and record-keeping functions,which provide human operators with morerobust safety assurance and fail-proof
assistance. Personally, I would like to contributeto the well-being of people around the world by
delivering Denka’s diagnostic reagents globally.

Business
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

I would like to help Denka become capable ofconstantly delivering the value needed bysociety while creating new value andtechnologies. I also hope that Denka will
become a place that offers an innovative
working environment suited to all employees
regardless of age, gender or nationality andthat helps them achieve ongoing personal
growth through their duties.

Yumiko Ito

Ro Yobai

Chemical Luminescence Reagent Dept.,
Kagamida Plant, Gosen Plant

Advanced Specialty Materials Dept.,
Electronics & Innovative Products

MANUFACTURING
Our factories will be even more worker- and eco-friendly and coexist harmoniously with the people,
flora and fauna of their neighboring communities in addition to consuming less fossil fuel andminimizing the use of fossil-based resources as raw materials. Advances in IoT, robotics, VR/AR andother technologies will help establish labor-saving “smart” manufacturing processes, resulting in alean production system capable of handling the small-lot production of multiple items while ensuringhigh quality. Simultaneously, we will realize a safer labor environment in which everyone can work withconfidence. Thanks to the popularization of AI-based development activities and the use of a “smart”
office/factory, our employees will be empowered to concentrate on tasks only humans can handle,
shifting their focus from simple manufacturing to value creation.

MANUFACTURING

Achieve carbon-neutrality and reduce theenvironmental burden to zero

• Develop CO2 and carbon circulation technologies while
incorporating hydrogen-fired energy• Promote the use of renewable energy
Page 23 Initiatives to Achieve Carbon Neutrality

Ensure occupational safety and health while
creating a lively and sound workplaceenvironment• Reduce intrinsic dangers associated with our operations andimprove the workplace environment
Page 32 Placing the Utmost Priority on Safety

Social issues (risks)●Global warming attributable to greenhousegas emissions●Environmental destruction due to the emissionof hazardous substances●Aging population with a low birth rate, humanresource shortages and the pressing need to
cut excessive working hours

Push ahead with energy-saving measureswhile promoting the use of renewable energy• Enhance energy efficiency while expanding our hydroelectric
power generation capacities• Strive to achieve carbon neutrality

Page 25 Initiatives to Promote the Use of Renewable Energy

Support for the Task Force on Climate-Related Financial
Page 27 Our
Disclosures (TCFD) Recommendations

Page 26 Initiatives to Reduce Environmental Burden

Page 7 Financial and Non-Financial Highlights

Embrace innovative working styles andpromote work style reforms• Employ a “smart” office/factory while nurturing human resources
with specialized skills
Page 13 The Denka Value-Up Management Plan

Launch the full-scale utilization of material
informatics• Utilize a data lake, AI and text mining technologies

Page 13 The Denka Value-Up Management Plan

Drastically improve labor productivity

Promote R&D
focused on utilizing
materials free offossil resources• Develop food packaging
materials made using
biomass ingredients
Page 26

Initiatives to Counter the
Plastic Waste Issue• Introduce robotics, IoT and AI technologies to improve productivity
while securing the ability to handle small lots of multiple
production items
Page 13 The Denka Value-Up Management Plan

Page 29 Employee Happiness
Page 32 Placing the Utmost Priority on Safety

TRANSPORTING
TRANSPORTING

High-speed circulation of digital data encompassing every corner of society will help realize a “smart”
factory and reduce the volume of products that need to be transported or stored. Moreover, thepopularization of working remotely will result in a decrease in traffic and contribute to a reduction in theenvironmental burden. The Denka Group will supply cutting-edge materials and electronic components
for use in high-speed data communication infrastructure, electric vehicles equipped with autonomous
driving systems, automotive fuel cells, drones and other machines.

Social issues (risks)●Environmental burden arising from production
and logistics activities●Deterioration in the working environment andresulting shortage of human resources

Create new value through innovation in logistics and sales processes

Ensure sustainable and stable logistics operations• Help resolve issues confronting society by stepping up collaboration with supply chains• Leverage advanced information networks and create an innovative business model• Pursue the improvement of our working environment and the enhancement of labor efficiency andproductivity by advocating for the “white logistics movement”*• Ceaselessly work to reduce environmental burden via partnership with supply chains

Page 18 Responsible Dialogue with Stakeholders
Page 46 Strengthening Groupwide ICT Governance* An initiative promoted by the Japanese government since 2018 with the aim of achieving a highly productive andefficient logistics process while ensuring better working environments for operators

Page 32 Placing the Utmost Priority on Safety

ESG information site: List of Products to Contribute to SDGs https://denka_sustainability.disclosure.site/en/themes/635
Denka Report 2021 Integrated Report

22Corporate Information /Management Resources

Environmental Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceStrategies
Related Initiatives

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Environmental Management Aimed at Achieving Carbon Neutrality

Aiming to Achieve “Net Zero” in Terms of CO2 Emissions by Fiscal 2050
While Striving to Reduce Emissions by 50% by Fiscal 2030
from the Fiscal 2013 Level
The Denka Group strives to achieve carbon neutrality, that is, “net zero” in terms of greenhouse gas (GHG) emissions, by the end of fiscal 2050, with the aim of contributing to therealization of goals of the Paris Agreement, an international framework agreed upon by major countries to preserve the natural environment so that human society and natural
ecosystems can remain viable into the future. To this end, we will strive to push ahead with energy saving while promoting the use of renewable energy, such as hydroelectric power
generation. In addition, we will take on the challenge of technological innovation in Carbon dioxide Capture, Utilization and Storage (CCUS), which is the separation and collection of
CO2 emitted by plant facilities, as well as in hydrogen-fired power generation and other clean energy technologies. Furthermore, with the aim of curbing the volume of GHG emissions from our business bases and contributing to decarbonization throughout society, we will promote the development and provision of eco-friendly products and technologies
designed to reduce environmental burden while stepping up resource recycling via the introduction of a novel method for plastic recycling.

Message
In line with the Denka Value-Up management plan, we have positioned our operations in the environment and energy field as a strategicpillar helping “create a clean and safe future society.” In line with this positioning, we are pursuing social contribution via the provision of
specialty products in an even broader range of fields. At the same time, we intend to assiduously push ahead with the reduction of GHG
emissions attributable to our corporate activities. As a milestone toward the achievement of carbon neutrality by fiscal 2050, we haveidentified the interim target of reducing our CO2 emissions by 50% by fiscal 2030. Although achieving these targets may not be easy, weare steadfastly determined to promote the reduction of CO2 emissions as one of the important initiatives supporting our environmental
management, which is essential to protecting the global environment.

Shojiro Watanabe

Managing Executive Officer,
Supervisor of Environmental Measures Promotion

A Roadmap toward Achieving Carbon Neutrality

Fiscal 2030

Reduce CO2 emissions fromour own business bases

Develop andutilize CCUS

Separate and recoverUtilize

Shift to hydrogen-fired power generation
Contribute to a reduction in CO2emissions across value chains

Fiscal 2050

Thoroughly pursue energy saving while promoting the use of renewable energy
Ensure preparations forfacility installation

Introduce and utilize cutting-edge
technologies

Synthesis of chemicals using CO2
Ensure preparations for facility installation

Shift to hydrogen fuelDevelop and provide eco-friendly products and technologies
designed to reduce environmental burden

Develop and popularize EV-related products, eco-friendly concrete and other offerings

Recycle and reuse plastics

Promote plastic recycling via the introduction of chemical recycling technology

Review our business management structure

Business portfolio shift

Achievecarbon neutrality

Pursue energy saving while promoting
the use of renewable energy

ESG information site: Environmental Preservation https://denka_sustainability.disclosure.site/en/themes/660
Denka Report 2021 Integrated Report

23Corporate Information /Management Resources

Environmental Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceStrategies
Related Initiatives

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Specific Initiatives Aimed at Achieving Carbon Neutrality
1. Reduction in CO2 emissions from our own business bases
1. Thoroughly pursue energy saving while promoting the use of renewable energy•High-efficiency gas turbine generators were installed and brought on line at the Omi Plant in October 2020, and construction on similar generators is under way at the Chiba Plant. We will continue to take athoroughgoing approach to stepping up energy-saving measures at each business base.
•Currently, our hydroelectric power generation facility network consists of 16 power plants supplying approximately 40% of energy consumed via Denka’s overall operations in the form of renewable energy. Moreover, theconstruction of a new hydroelectric power plant is now under way (New Himekawa Power Plant No. 6). Moving forward, we will promote the use of renewable energy on an ongoing basis via, for example, theconstruction of a new hydroelectric power plant or the expansion of existing hydroelectric power generation facilities.

2. Develop and utilize an innovative CCUS technology for CO2 capture, utilization and storage

CCUS technologies are designed to collect CO2 from exhaust gas emitted by plant facilities and separate it from other exhaust gas content to prevent its release into the atmosphere. Technological development iscurrently under way to sequester collected CO2 in underground or seabed storage, utilize it to harden concrete via carbonization, or reuse it as a raw material in chemical or fuel production.
With the goal of commercializing our CCUS technology by the end of fiscal 2030, we are engaged in joint development with the National Institute of Advanced Industrial Science and Technology.

3. Shift to hydrogen-fired power generation

We will strive to promote a switchover in the fuel we use in our own thermal power generation plants from natural gas, which is a fossil fuel, to hydrogen fuel, which produces clean energy.

2. Contribute to Reduction in CO2 Emissions across Value Chains

3. Review our Business Management Structure

4. Develop and provide eco-friendly products and technologies
deigned to reduce environmental burden

6. Business portfolio shift•Help popularize EV-related products (e.g. thermal and electro-conductive materials)
and eco-friendly concrete

5. Introduce and utilize chemical recycling technology to recycle andreuse plastics

Looking to step up the reduction of CO2 emissions and otherwise strengthen environmental management, we aim tocomplete the business portfolio shift by the end of the current management plan period and, to this end, will utilize ourmanagement resources to the maximum. Moreover, we will identify our targets for product technologies designed tomeet needs for solutions for social issues and concentrate our management resources on such technologies as part ofinitiatives under the upcoming management plan.

•Commercialize the chemical recycling of polystyrene resin

Medium- to Long-Term Reduction Targets for GHG Emissions (Scope 1 & 2)
（%）

100%

100

247

(Unit: 1,000 t-CO2/year)

88%

80

194

60

50%

40

Electronic circuit substrate “SN Plate”

123

20

0%
0

2013

(Benchmark year)

2019

2020

Carbonization agent “LEAF”
Taking advantage of special cement additive technologies we have nurtured over many years, wehave developed “LEAF,” a carbonization agent made using ingredients derived from industrial
waste. “LEAF” vigorously converts CO2 into chemically stable calcium carbonate. When “LEAF”
is mixed into CO2-SUICOM, an eco-friendly concrete co-developed by Denka, the Chugoku
Electric Power Co., Inc., Kajima Corporation and LANDES Co., Ltd., the resulting concrete
absorbs CO2 via carbonization as it hardens. Employing a combination of these products, we will
help reduce net CO2 emissions attributable to cement manufacturing.

79%

218

4. Initiatives Related to Eco-Friendly Products

2030

2050

Note: Figures presented above are on a consolidated basis. From the Denka Report 2021 onward, Denka intends to disclose
the total volume of emissions from all entities within the scope of consolidation, instead of releasing only non-consolidated figures.

Denka’s “SN Plate” is a ceramic substrate boasting superiority in terms of heat conductivity andtoughness. With a heat conductivity approximately four times of that of alumina, SN Plate isbased on Si3N4, a silicon nitride characterized by superior resilience and mechanical properties.
Thanks to improved heat conductivity in addition to its mechanical properties, SN Plate is usedas substrate for lightweight power modules used for EV, railcar and other applications requiringhigh reliability. In anticipation of the accelerated popularization of EVs in the automotive industry,
we will contribute our material technologies to support this trend and thereby help reduce CO2
emissions attributable to this industry.

Road boundary block

Foundational block forerecting a fence

DENKA SN Plate

ESG information site: Environmental Preservation https://denka_sustainability.disclosure.site/en/themes/660
Denka Report 2021 Integrated Report24Corporate Information /Management Resources

Environmental Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceStrategies
Related Initiatives

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Ongoing Initiatives to Counter Climate Change

Initiatives to Promote the Use of Renewable Energy
For more than 100 years, Denka has been promoting the use of renewable energy. Specifically, we have engaged in technological pursuits on two fronts, namely, (1) leveraging hydroelectric
power generation and other technologies to create renewable energy while (2) fully taking advantage of this energy in chemical manufacturing and utilizing it as a valuable energy source.
Toward the realization of a low-carbon society, we are increasing our focus on renewable energy-related initiatives, one of our areas of strength.

Future Outlook for Our
Renewable Energy
Generation Capacity
Building on a solid track record inhydroelectric power generation spanning
the 100 year plus period since ourfounding, we will strive to pass down thisbusiness asset to future generation overthe next century. To this end, we will
promote a variety of initiatives, including
the construction of a new power plant,
thereby contributing to the creation of asustainable society.

In-House Power Generation Output Capacity (1,000 kw)

150
100

153

133

114

Construction of a New Hydroelectric Power Plant

50
0

FY2005

FY2020

FY2030Note: The above figures include 50% of the output of power plants run by Kurobegawa Electric Power
Company (a joint venture co-owned by Denka and Hokuriku Electric Power Company).

Breakdown of Energy Consumption by
Source (non-consolidated)
The Omi Plant, our flagship plant, employs biomass
boilers and waste-heat power generation methods
to feed its cement production process in addition toutilizing hydroelectric power generation facilities.
Renewable energy, including energy generated byco-owned power plants, accounts for approximately
40% of the energy consumed by Denka’s operations(non-consolidated basis).

Purchased energy
40%

Hydroelectric39%

FY2020
Breakdown ofEnergy Consumption
by Source

The Omi Plant is geographically situated amid a web of 16 hydroelectric
power plants, including those under co-ownership. These power plants
boast a combined maximum output of approximately 126,000 kW,
making this the largest private-owned power generation network of its
kind in Japan. All of these facilities employ a natural inflow typehydroelectric power generation system that ushers river water into
turbine runners and returns it to the river as soon as it leaves thegenerator. Thanks to these features, this type of hydroelectric power
plant places a relatively smaller burden on the natural environment.
Moreover, hydroelectric power plants generate virtually nogreenhouse gases while serving as a renewable energy source withsuperior energy efficiency. Thus, these power plants are capable ofharmoniously coexisting with the natural environment while generating
electricity in a sustainable manner.

Biomass1%

Hydroelectric power plants

16

Denka’s New Omigawa Power Plant commenced operations in January 2021. This power plant isequipped with cutting-edge functions enabling remote operations with the aim of securing the ability tomaintain stable operations over the long term and making it resilient against typhoons, concentrated heavy
rains and other natural disasters. We have also striven to ensure that the plant is structurally robust.
Thanks to the cooperation and support of relevant government agencies and representatives of local
communities, the power plant was completed in approximately six years.
Output from this power plant will be sold to external power companies for 20 years in accordance with
the Feed-in-Tariff scheme. Thereafter, we will utilize energy generated by it to feed our own operations. In
addition, the launch of this power plant is expected to result in an annual reduction of approximately 13,000
tons in CO2 emissions. Moreover,the construction is now under way
on the New Himekawa Power
Plant No. 6, which will have an
estimated maximum output
totaling 28,000 kW and be run by
Kurobegawa Electric Power
Company. It is scheduled tocommence operations in April
2022.
Denka’s New Omigawa Power Plant,
which was launched in January 2021

Waste heat
1%

Thermal20%

Denka’s Hydroelectric Power Plants

Denka Report 2021 Integrated Report

COLUMN■Solar ■Biomass ■Hydroelectric

200

Initiatives Related to Solar Power Generation

plantsin Japan(Including facilities owned by a joint venture)

126,340
Maximum output

In 2013, Denka installed solar power generation facilities on thepremises of its Shibukawa and Isesaki plants. The combined
maximum output of these facilities totals approximately 3,000 kWh
and we sell approximately 4 million kW to external powercompanies. With an eye to achieving carbon neutrality by fiscal
2050, we will continue to consider the additional introduction of solar
power generation facilities.

kW** As of April 2021; including Denka’s ownership of output frompower plants owned by a joint venture

DENKA Solar Power Shibukawa

ESG information site: Environmental Preservation https://denka_sustainability.disclosure.site/en/themes/660

25

Corporate Information /Management Resources

Environmental Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceStrategies
Related Initiatives

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Initiatives to Reduce Environmental Burden
To fulfill its social responsibilities as a chemical manufacturer, the Denka Group is striving to reduce the environmental burden attributable to its own operations while helping to resolve suchenvironmental concerns as plastic waste through the provision of products and technologies.

Initiatives to Counter the Plastic Waste Issue
The Denka Group is proactively developing and providing innovative solutions designed to help reduce the many
negative impacts of plastic waste on the global environment and the efficient utilization of such waste. To this end, wetake full advantage of our strengths backed by an integrated manufacturing system that encompasses processes
ranging from the production of synthetic resins and polymer processing to molding as well as our product development
capabilities. In addition, as a participant in the Clean Ocean Material Alliance (CLOMA),* we collaborate in activities
across the industrial sector.
* An alliance founded in 2019 to accelerate innovation through collaboration among a variety of corporations with the aim of preventing marine pollution attributable
to the emission of plastic waste

Chemical Recycling
Toyo Styrene Co., Ltd., an equity method affiliate, has launched initiatives to commercialize the chemical recycling ofpolystyrene resins. The affiliate is currently planning the construction of a verification testing facility for chemical
recycling technologies—the first facility of this kind in Japan—within the premises of Denka’s Chiba Plant that will use
such technologies licensed from U.S.-based Agilyx Corporation. The chemical recycling process Toyo Styrene iscurrently studying is expected to remove restrictions on the usage of recycled plastics and thus serve as anepoch-making alternative to conventional material recycling process. Moreover, the volume of CO2 deriving from thechemical recycling of polystyrene is around half that of regular production.

Eco-Friendly Food Containers
Denka Polymer Kabushiki Kaisha, a subsidiary specializing in the manufacture and sale of plastic-based foodcontainers, is promoting the development of eco-friendly containers. These include PLAPS, a food container material
comprising a combination of polylactic acid (PLA)—a plastic material derived from starch and other plant products—andpolystyrene, as well as CLEALEAD, a new BOPS sheet that is 35% lighter than the usual one made with amorphouspolyethylene terephthalate (A-PET).

Our Policies on the Prevention of Environmental Pollution
Denka strives to properly manage the volume of environmental load substances emitted
from production facilities and R&D bases run by its Group companies while continuously
working to reduce the emission of such substances. In addition to managing GHG
emissions, the Group is striving to control emissions of sulfur oxide (SOx) and nitrogenoxide (NOx) from boilers and heating furnaces; substances emitted from production lines,
including soot and dust; substances that affect biochemical oxygen demand (BOD) andchemical oxygen demand (COD); and substances regulated under the Pollutant Release
and Transfer Register (PRTR) laws.
We strive to comply with relevant laws and national and municipal regulations as wellas to uphold pollution control agreements with local authorities. Having installed wastewater
treatment facilities, bag filters and other equipment to remove harmful substances, we are
enforcing voluntary emission standards that are even more stringent than those mentioned
above in the course of facility operation and maintenance.

Initiatives to Reduce the Emission of Fluorocarbons
Denka is striving to reduce its environmental burden on various fronts, to this end preventing air and water pollution whilecurbing the volume of waste emissions. Among these endeavors, Denka is systematically engaging in the reduction offluorocarbons, which facilitate ozone depletion and global warming, as outlined below. Going forward, we will steadily
implement proper inspections and measures aimed at ensuring the early prevention of leakage.

Resource Recycling in Cement Production
The Omi Plant is promoting the recycling of resources by switchingout a portion of the natural mineral raw materials and conventionallysourced heat energy used in cement production for waste andindustrial byproducts.
Also, the plant is striving to accept waste and byproducts
generated by Denka’s production sites across Japan as raw
materials, with the aim of minimizing the volume of these items
being externally disposed of. This is one way we are working tomaintain an ongoing “zero-emission” status.
Looking ahead, we will proactively introduce and utilize avariety of technological elements supporting our endeavors to raisethe volume and expand the scope of waste and byproducts
accepted by our facilities. We will thereby facilitate resource
recycling and contribute to the creation of a recycling-oriented
society.

Policy on the Prevention of Environmental Pollution

Volume of Waste and Byproducts Accepted andRecycled in Cement Production(Thousand tons)

827 853 853 821
684
In-housesources

External
sources
16

17

18

19

20 FY

1. By April 1, 2020, all equipment containing fluorocarbons had been registered with the Refrigerant Management System(RaMS) developed by the Japan Refrigerants and Environment Conservation Organization (JRECO) and, since then, hasbeen under proper management.
2. With the cooperation of JRECO, since 2019 we have held training for employees in charge of the management of theabove equipment and otherwise provide briefings on the application of RaMS and the Act on Rational Use and Proper
Management of Fluorocarbons.
3. In the course of renewing aged air conditioners and freezers, we promote the switchover to refrigerants with less global
warming potential.
Volume of Fluorocarbons Leaked in the Course of Denka’s Operations(non-consolidated basis; seven business bases and one R&D base)
Fiscal year

2016

2017

2018

2019

2020

Estimated volume ofleakage (t-CO2)*

448

440

414

635

572

* Estimated volume of leakage: CO2 equivalent

ESG information site: Environmental Preservation https://denka_sustainability.disclosure.site/en/themes/660
Denka Report 2021 Integrated Report26

Environmental Strategies

Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human ResourceStrategies
Related Initiatives

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Our Support of the Task Force on Climate-Related Financial Disclosures (TCFD)TOPICESG Financing Extended by Mizuho Bank
Denka signed a loan agreement with Mizuho Bank, Ltd. for a loan product titled “Mizuho
Environmentally Conscious Finance,” or simply “Mizuho Eco Finance.” This loan productwas developed by Mizuho Bank to encourage borrower companies to strive fordecarbonization across society and, to this end, takes into account their status vis-à-vis
environment-related certification and external ratings that are deemed highly trustworthy
by the global business community.
Prior to obtaining this loan product, applicants are scored based on an evaluation
model developed by Mizuho Research & Technologies, Ltd. on the basis of theenvironmental initiatives they undertake and the metrics they have achieved. They arethen given a rating of “AA,” “A,” “B,” “C” or “D” in line with a five-grade rating system, with
only those rated “AA” or “A” being eligible for loans. Denka was awarded the highest “AA”
rating and was able to sign a loan agreement with Mizuho Bank.

In September 2020, Denka announced its support of the TCFD and began participating in the TCFD consortium.
Going forward, we will carry out ongoing assessments focused on risk and opportunities arising from climate change andother relevant factors, including changes in government policies, regulations and market conditions as well as technologicalbreakthroughs in the course of across-the-board initiatives aimed at realizing the low-carbon society and decarbonizedeconomy envisioned by the Paris Agreement. In line with the following process flow suggested by the TCFD recommendations, we will identify the impact our businesses may face going forward.

Governance and Risk Management

Metrics and Targets

With regard to Denka’s response to medium- to long-term concerns arising from climatechange, the Board of Directors determines important policies and supervises the implementation status of these policies. Meanwhile, the Sustainability Promotion Department, which
consists only of dedicated staff, is charged with overseeing Companywide initiatives to counterclimate change under the instruction of the executive officer in charge of supervising thepromotion of environmental countermeasures.
Related matters deemed particularly important, including the formulation of medium- tolong-term Companywide targets, the revision of basic policies and priority measures, thedetermination of management indicators and the evaluation of such indicators, are discussed by
the Board of Directors and other bodies attended by top management members, with therepresentative director making final decisions.

Denka has positioned reducing the volume of CO2 emissions from its operations as a matter ofutmost importance in terms of environmental management. Accordingly, we are engaged inGroupwide efforts to cut back on CO2 emissions from all business bases, including thoselocated overseas. In line with these efforts, we aim to reduce the volume of CO2 emissions to
50% of the fiscal 2013 level by the end of fiscal 2030 and, further, to achieve carbon neutrality
by the end of fiscal 2050.
Moreover, we will push ahead with efforts to reduce the environmental burden attributableto our entire value chain by expanding the scope of our initiatives to address issues associatedwith the total life cycles of our products.

ESG information site: Environmental Preservation https://denka_sustainability.disclosure.site/en/themes/660
Denka Report 2021 Integrated Report27Corporate Information /Management Resources

Environmental Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceStrategies
Related Initiatives

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Our Response to Climate Change-Related Risks and Opportunities
To assess risks and opportunities arising from climate change, we have conducted scenario analyses using the “below 2°C scenario,” which is formulated on the basis that the global
temperature rise in this century will be kept at less than 2°C above pre-industrial levels in line with the goals of the Paris Agreement, and the “4°C scenario,” which assumes that global
temperatures will continue to rise at their current pace. By doing so, we have verified the magnitude of climate change-related impact we can expect to face in 2030 and thecountermeasures we must implement. The scenario analyses revealed that, in the areas of government policy and legal regulation, we will be confronted by risks arising from the introductionof carbon taxation, carbon pricing and carbon-emission trading systems. On the other hand, it is expected that Denka will meet growing sales opportunities for its LEAF carbon agent,electronic materials for use in EVs and other products, reflecting its diverse product and business portfolio.
We will continue to strive to quantitatively assess the business risks and opportunities lying ahead and reflect the results of such assessment in our management planning and businessstrategies. Through these and other initiatives, we will properly take action to counter climate change.

Identification of Risk and Opportunities Based on Analyses of Climate Change Scenarios
Scenario

Category

Government policies
and legal regulations

MarketReputation

Below 2°C
Resource efficiency

Energy sources

Products / services

Physical risks

4°C

Products / services

Item

Business field

Risks
Impact on the business field

Opportunities

Countermeasures

Tightening of carbon taxation

All divisions

Growing costs associated withthe overall volume of CO2 emissions

Introduction of emission-trading systems

All divisions

Growing costs associated with the volume of CO2
emissions in excess of upper limits set by emission quotas

Enforcement of regulations on the ratio of
biomass raw materials used in products

Polymer Solutions and Electronics &Innovative Products
Elastomers & Infrastructure Solutions

Deterioration in product properties and growth inmanufacturing costs due to the mandatory
incorporation of biomass raw materials

Improvement in product properties and a decrease in manufacturing costs

Growing public calls for plastic resource
recycling and waste reduction

Polymer Solutions

Switchover of materials for single-use products from resin
to alternatives

Promotion of resource recycling involving styrene-based resin thanks to theintroduction of chemical recycling technologies and a switchover to plastic
products incorporating bio-polymers

Growing public call for countermeasures against Elastomers & Infrastructure Solutions(cement, calcium carbide and chloroprene rubber)emission-intensive businesses

A trend toward reduction in or divestment of investors’holdings of Denka shares

Development and introduction of CCUS technologies and the construction ofplants employing such technologies

Development of products incorporating CO2 asa raw material

All divisions

Establishment of a carbon recycling system

Popularization of CO2-SUICOM eco-friendly concrete and the promotion of
R&D associated with chemical synthesis technologies underindustry-academia-government collaboration

Emergence of new technologies withadvantages in terms of LCA

Electronics & Innovative Products(thermal materials, etc.)

Growing demand for products designed to contribute to reduction
in CO2 emissions throughout the course of their life cycles

Expansion of production capacities in line with growing demand

Progress in transition to clean energy

All divisions

Growing use of renewable energy and hydrogen-fired energy

Expansion of hydroelectric power generation capacities, the utilization of hydrogen-fired energy and theplanning of a hydrogen production process (electrolysis of water) fed by hydroelectric power generation

Widespread use of EVs

Electronics & Innovative Products(thermal materials, acetylene black, etc.) Growth in product demand for EV-related components

Growing number of offshore wind farms

Electronics & Innovative Products(silicon nitride, etc.)

Growth in demand for components for use in wind power
generation facilities

Expansion of production capacities in line with growing demand andthe development of new products with even more superior functions

Development of renewable energy supply systems

Electronics & Innovative Products(acetylene black, etc.)

Growth in demand for components for use in energy storage
and the development of transmission networks

Expansion of production capacities in line with growing demand andthe development of new products with even more superior functions

All divisions

Loss of profit opportunities due to the suspension of production activities andthe emergence of costs associated with the restoration of production facilities

Strengthening of facility maintenance measures due to the revision of the expectedlevel of disaster damage and an assumption of a disaster of greater magnitude

All divisions

Stagnation in our production and sales activities due to facility damage Diversification of supply chains
incurred by raw material suppliers and product consumers

Increasing frequency of droughts and heavy
rains due to changes in precipitation patterns

All divisions

Growing costs attributable to an increase in energy purchasing
accompanying a decline in output from our hydroelectric power plants

Promotion of energy-saving measures and the diversification of energy sources

Growing number of infectious diseases due torising temperatures

Life Innovation

Growth in demand for diagnostic reagents and vaccines,
including those for novel infectious diseases

Development of new diagnostic reagents and vaccines

Growing number of heat stroke cases due torising temperatures

Polymer Solutions

Growth in demand for materials, films and processing
products boasting heat barrier and insulation properties

Development of new products and the execution of capital expenditure

Changes in influenza epidemic cycles due torising temperatures

Life Innovation

Growing public calls for the development of a stable vaccine supply
structure capable of responding to fluctuations in epidemic cycles

Development of influenza vaccine manufacturing methods andrelevant production systems

Growth in demand for infrastructure-related products (special cement
additives, etc.) and services aimed at promoting disaster prevention
measures and enhancing disaster resilience

Expansion of production capacities in line with growing demand andthe development of new products with even more superior functions

Increasing magnitude of damage arising fromtyphoons, heavy rains and flooding

Growing demand for infrastructure development in step Elastomers & Infrastructure Solutions
with the increasing magnitude of natural disaster damage

Progress in energy-saving measures aimed at reducing CO2 emissions andthe introduction of CCUS technologies

Expansion of production capacities in line with growing demand, the development of
new products with even more superior functions and entries into downstream markets

ESG information site: Environmental Preservation https://denka_sustainability.disclosure.site/en/themes/660
Denka Report 2021 Integrated Report28

Employee Happiness /Human Resource-Related Initiatives

Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Creating a company in which employees find their jobs rewarding andfeel that they are attaining tangible personal growth

Human Resource-Related Initiatives
1. Achievements Made During the Period Leading up to the End of the Fiscal 2020

Denka aims to become a company in which all employees find their jobs rewarding and feel that they are
attaining tangible personal growth. To this end, we promote work style reforms and employee diversity while
implementing training programs designed to nurture human resources with specialized skills. Other humanresource-related initiatives include health & productivity management. In April 2020, we conducted an
employee awareness survey to analyze workplace environment-related issues and problems. Drawing on
findings from this analysis, systematic efforts are currently under way to upgrade our personnel system andhuman resource management platforms and thereby better position employees to pursue career success while
improving productivity.

Diversity-Related Indicators

Establishment of a New Evaluation System
We have thoroughly revised our evaluation system, which constitutes the foundation of our personnel systems,
improving it from the perspectives of transparency, fairness and persuasiveness. Placing emphasis on providing staff
with objective insight in the form of feedback from supervisors in order to secure motivation, the revised evaluation
system is designed to ensure that each employee clearly understands what is expected of them and thereby contributeto human resource development. Furthermore, we have instituted an incentive system that rewards each manager
according to their results and accomplishments vis-à-vis the annual targets they themselves formulate at the
beginning of fiscal year.

Reforms of Job Categories and Manager Systems
In fiscal 2019, we revised our conventional job categories, reclassifying specialists as “G-category” employees andestablishing the “M-category,” which collectively encompasses engineers and general staff. We have also clarified thejob roles employees in each category are expected to fulfill while expanding the scope of tasks to be performed by“M-category” employees and thereby securing career paths for them to pursue managerial positions.
In fiscal 2020, we revised our personnel system for managers, who are expected to take lead in the Company’sbusiness endeavors, to create an environment that allows them to realize their full potential. In line with this revision,
we abolished conventional manager classifications based on in-house certification, stipulating that each manager issubject solely to duty-based classifications. We also introduced a position-based allowance.

2. Diversity Promotion Plan
Promoting Diversity
Under the slogan “Your value is Denka’s value,” we are pursing our mission of helping diverse employees realize theirfull potential. By doing so, we aim to create new value for our organization and contribute to sound and sustainablecorporate growth.

Targets for diversity promotion
Targets

Double the ratio of female managers in four years

Issue

Current ratio of female managers falls significantly short of the average ratio for the chemical
manufacturing industry (8.1%: as of April 2020)

Initiative

Maintain the ratio of women among new recruits to be included in the “G-category” at 30% or higher toincrease the size of the pool of managerial candidates[ Nine female managers (1.6%) as of April 2020; Fiscal 2024 target: 18 (3%) ](Fiscal years)

Non-consolidated basis

2015

2016

2017

2018

2019

2020

● Ratio of women among new recruits to be
included in the “G-category”● Number of women in managerial positions(managers or higher)● Ratio of individuals rehired after reachingretirement age● Ratio of people with disabilities among
employees

17%

18%

26%

33%

34%

39%

2

2

2

5

6

8

93%

93%

95%

94%

87%

86%

2.06%

2.06%

2.17%

2.29%

2.24%

2.19%
(Fiscal years)

Consolidated basis● Ratio of foreign national employees● Number of foreign nationals in managerial
positions (managers or higher)

2015

2016

2017

2018

2019

2020

14%

16%

16%

15%

15%

15%

−
−

−
−

−
−

169

151

146

Note: These indicators have been compiled from fiscal 2018 onward.

３．An Employee Awareness Survey
In April 2020, we conducted an employee awarenesssurvey targeting the entire workforce. Following theprevious survey conducted in fiscal 2017, we strove toimprove our workplace environment for employees byreflecting findings from that survey in the reform ofvarious personnel systems. We will similarly strive tocarry out systematic measures aimed at creating anenvironment that empowers employees to achieve
success by leveraging the results of the latest survey,
including the effect of initiatives undertaken based on
findings from the previous survey, to assess the current
status of the Company and issues to be addressedgoing forward.

Number of
employees
targeted

5,046

Percentage of respondents
compared with the fiscal
2017 survey
Up％

7

Percentage of respondents

88.4％
Number of respondents
4,459

ESG information site: Employee Happiness https://denka_sustainability.disclosure.site/en/themes/659
Denka Report 2021 Integrated Report29Employee Happiness /Human Resource-Related Initiatives

Corporate Information /Management Resources

Comparison of Survey Results (fiscal 2020 / fiscal 2017)
Compared with the previous survey, employees’ overall ratings of the Company’s initiatives have been improving
thanks to the thorough revision of the personnel system and the launch of various measures.

Management structure

Liveliness of workplaces

Workplace management

Motivation

Operational styles

Stakeholder engagement(customer focus)

Workplace communication

Compliance management

Workplace safety

Personnel systems, evaluation and wages

Note: The standard line is based on standards determined by a third-party survey agency.

Improvement required
FY2017

FY2020
Employee feedback on representative questions

Category

Positive feedback

Requests for improvement

Workplace safety

Current status of workplace safety and hygiene and the Company’s
policies

Compliance management

High awareness of compliance at workplaces

Workplace communication

Human relationships at workplaces

Stakeholder engagement(customer focus)

Relationships of trust with business partners and shared commitment
toward social contributions

Operational styles

Efficiency and productivity

Seasonal fluctuations in workload and supervisors’ understanding ofdiverse work styles

Motivation

Awareness of targets

Opportunities for tangible personal growth

Workplace management

Leadership, support, equal opportunities and fair evaluation

Liveliness of workplaces

An atmosphere allowing the frank exchange of opinions andenhancing the unifying power of the organization

Creation of an open-minded workplace that rewards those who take on challenges / A cultureof tolerance toward new endeavors that defy conventional norms or past experience

Management structure

Dialogue with top management, its understanding of the status of frontline employees
and feedback from them and encouragement for those who take on challenges

Delegation of authority and speed of decision making

Persuasiveness of wages and promotion

Fairness of evaluation, human resource development and wages incomparison with industry peers

Personnel systems,
evaluation and wages

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

５．Human Resource-Related TOPICS

4. Issues Identified via the Employee Awareness Survey

Standard
line

Value
Creation

Cross-departmental collaboration

Denka is pushing ahead with a variety of initiatives aimed at creating an attractive workplace for employees. These
initiatives include setting aside an investment budget for improving the workplace environment and publicizing our
Declaration of Health and Productivity Management. In these ways, we strive to improve corporate value.

1. Specialty Human Resource Development Program

Objective
We have formulated the Specialty Human Resource Development Program, with the aim of nurturing humanresources capable of contributing to the realization of The Denka Value, our corporate philosophy. Based on thisprogram, we create educational systems in line with the new evaluation system as well as the redefined job categories
and revised manager systems introduced in the course of the Denka Value-Up management plan. We thereby offer
educational programs designed to help each individual develop robust professional careers while continuing theprovision of practical employee training at manufacturing sites and other workplaces.

Denka’s definition of human resources with specialized skills
Human resources who pursue success on the global stage in their areas of specialty and strive to gain a significant
presence by taking full advantage of their innate competencies (mindset, skills, expertise, professional literacy andpersonality) while acquiring unique skills.

Job Level-Based Training Programs
In fiscal 2021, we renovated our job
level-based training programs.
The renovated programs consist of threecomponents: a “Mandatory program” designed
to enable employees to acquire essential skills
that serve as a foundation for the types ofhuman resources defined above; a “Booster
program” that supplements employees’ skills intheir areas of weakness; and an “Optional
program” aimed at empowering each individual
to autonomously enhance their inherent
competencies and realize their potential.

Objective of education

Booster
programMandatory
programAcquisition of
essential skills

Autonomous
personal
growthSupplementing
employees’ skillsin their areas of
weakness

Optional program

Helping employees autonomously enhance their inherent
competencies and realize their potential

2. Investment for Improving the Workplace Environment
Issues Revealed via the Survey and Measures to Be Undertaken
Results of the fiscal 2020 survey revealed overall improvement in employee ratings of the Company’s initiatives fromresults of the fiscal 2017 survey.
Primary items indicating significant improvement included “workplace safety,” “stakeholder engagement”(customer focus) and “operational styles.” We consider these results to be indicative of the positive effect ofcommunicating strong messages from top management to help employees raise their safety awareness as well as
business execution conscious of addressing ESG issues and SDGs. On the other hand, employee ratings for the“liveliness of workplaces,” “management structure,” and “personnel systems, evaluation and wages” were near the
standard line. These three items were also identified as matters requiring improvement in the course of the fiscal 2017
survey, and human resource strategies were formulated to address relevant issues. (See page 29 and the right side ofpage 30.) Going forward, we will promote various initiatives to provide fundamental solutions to these issues whileconsidering the formulation of numerical targets (KPIs) to enhance the effectiveness of such initiatives. In addition, we
intend to periodically carry out employee awareness surveys.

To promote work style reforms, in fiscal 2021 we have decided to set aside a portion of our capital expenditure budget
to periodically execute investment for improving the workplace environment. This move is intended to facilitate thedevelopment of an inclusive workplace environment at each business base in line with the Companywide policy forwork style reforms, which was formulated in July 2020, with the aim of enhancing employee motivation and improving
productivity.
As a result, approximately ￥1.3 billion is earmarked for investment for this purpose in fiscal 2021.

3. Declaration of Health and Productivity Management
In April 2021, we publicized our Declaration of Health and Productivity Management, clarifying our intention to step up
our ongoing initiatives to assist employees and their families in their pursuit of health maintenance and improvement.
Our plans call for disclosing numerical targets for these initiatives going forward.
ESG information site: Employee Happiness https://denka_sustainability.disclosure.site/en/themes/659

Denka Report 2021 Integrated Report30

Quality and Safety

Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human Resource- Quality and
SafetyRelated Initiatives
Strategies

Business
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Basic Policy
The Denka Group handles a broad range of operations with an extensive product lineup ranging from variousorganic and inorganic materials to electronic materials and pharmaceuticals. Reflecting a quality policy thataligns with the Denka Value-Up management plan, we are engaging in quality assurance activities
encompassing this diversity, striving to satisfy quality requirements in the business fields relevant to our
products and services and to meet customer needs in light of the latest social expectations.

Quality Assurance Management
Regulatory Standards and Certification
Revised Food Sanitation Act
The Denka Group maintains a hygiene control system for food additives, food packaging materials
and other food-related products that conforms with the mandatory Hazard Analysis and CriticalControl Point (HACCP)*food hygiene control method stipulated by the 2018 partial revision of theFood Sanitation Act.
* A food hygiene control method involving the analysis of hazard factors associated with all processes from the acquisition of raw materials to the shipment of finishedproducts. With the goal of eliminating or minimizing said factors, HACCP is used to manage crucially important processes. HACCP also mandates that food business
operators perform hazard analysis and management themselves to ensure product safety.

Our Fiscal 2021
Quality Policy

To achieve the goals of the Denka Value-Up management plan, all employees
must maintain acute quality awareness and strictly comply with legal
regulations and product safety standards while engaging in ongoing quality
improvement activities with the aim of delivering products and services that live
up to the trust placed in them by users and society as a whole.

Developing IT-Based Quality Management System Infrastructure
To enhance customer satisfaction, we are developing an IT-based infrastructure that supports ourquality management. Encompassing an upgrade of the existing customer complaint management
system, the infrastructure is expected to enhance our ability to address customer grievances andcomplaints. Moreover, it will help increase the sophistication of design review undertaken at the
research, design and development stages to ensure that customer needs are promptly andaccurately met while updating our system for managing the functional and quality specification
documents furnished to customers at the time of product delivery. In these ways, we strive toenhance the reliability and efficiency of our operations and facilitate the effective utilization of
accumulated data.
High

Acquiring IATF 16949 Standard Certification

Assessing Risk Issues and Implementing Risk Mitigation

IATF 16949, the international quality management standard for automotive quality systems, includes
certification for vehicle-mounted products. Due to advances in EV-related technologies andautonomous driving systems, market requirements for high-quality products are growing ever more
stringent at an ever faster pace. Accordingly, the Denka Group is engaged in ongoing efforts to meetstandards for certification under IATF 16949 and thus satisfy customer requests for product safety
and quality.

Medium-risk
The Denka Group handles diverse goods ranging from commodities to
products
specialty products and is positioned to handle a similar level of diversity
in the risk arising from each product. Moreover, as the Group is also
affected by changes in social needs, such as the growing public call for
Low-riskproducts
businesses to contribute to the United Nations Sustainable Development
Risk
mitigation
Goals even as they strive to meet customer requests for even higher
initiatives
Low
product quality. Due to these circumstances, the Group needs to
Small
Magnitude
Largemanage the evolving risk associated with each product.
Distribution of Quality Risk from the Market
and Business Environment Aspects
With this in mind, we annually refresh results of the quality risk
assessments we have been undertaking since fiscal 2019 for all products from both the market
environment and the business environment aspects. We also implement systematic initiatives tomitigate various quality risks based on assessments of their characteristics and magnitude.

Chemical Substances
The Denka Group constantly monitors and collects information regarding the status of legal revisions
at home and abroad to ensure it is positioned to swiftly respond appropriately to the latest laws andregulations governing chemical substances. Whenever a new chemical substance-related regulation
comes into effect, we ensure that all the relevant business units are informed about it and weigh our
options regarding the adoption of safer alternatives or otherwise implementing the measuresnecessary to maintain regulatory compliance.

Frequency

Compliance—Responding to Legal and Regulatory Revisions

High-risk
products

Enhancing Customer Communications via Customer Satisfaction Surveys
Data deriving from customer satisfaction surveys, the analysis of customer complaints and requests,
quality audits performed by customers, score cards and other sources is shared among relevant
departments to enhance the effectiveness of their quality improvement activities. We are thus taking
a comprehensive and constant approach to enhancing and promoting quality-related customer
communications.
ESG information site: Products and Technologies https://denka_sustainability.disclosure.site/en/themes/657

Denka Report 2021 Integrated Report

31Corporate Information /Management Resources

Value
Creation

Employee Happiness
Environmental / Human Resource- Quality and
SafetyRelated Initiatives
Strategies

Business
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

TOPICS
1. Stepping up Initiatives to Mitigate Intrinsic Danger

Placing the Utmost Priority on Safety
Employees undergoing safety education at the Omi Plant’s Safety Education CenterWe put the utmost priority on worksite safety andhealth, facility security and disaster prevention in all
aspects of our business activities
Fiscal 2020 Initiatives
Companywide Targets

1. Reduce the number of major accidents and disasters to zero
2. Continually improve the occupational safety record
Priority Initiatives
Facilitate communication to create a lively and sound workplace while promoting safetyassurance activities in which each worker is able to grasp the worth of their efforts
1. Initiatives to reduce the number of major accidents and disasters to zero

• Develop a system for identifying any sign of serious risk and mitigate intrinsic dangers associated with our operations• Thoroughly control residual risks after the implementation of countermeasures as well as newly emerging risks with the aim ofpreventing disasters

2. Initiatives to continually improve the occupational safety record• Inspect existing and new facilities for conformity with our safety design guidelines and, if necessary, make improvements• Strictly comply with rules for facility operations and construction

3. Initiatives to ensure safety for everyone working at Denka business sites• Promote worker education utilizing e-learning• Thoroughly practice the exchange of courtesies, pointing and calling out names and the 3Ss—Seiri (sort), Seiton (set in order)
and Seiso (shine) —while avoiding unsafe behavior

Safety Management Structure

Heads of business bases(plant managers)

President

Heads of relevant head office
departments(Chair of the Safety
Measures Headquarters)

Officer in Charge of theEnvironment and Safety(Chair of the RC Committee)

Safety Measures
Headquarters(Secretariat: Environment and Safety Dept.)

Heads of HR Strategy and
Administrative departments
Heads of Business Promoting
departments at each business division

To eliminate workplace accidents and disasters, ongoing efforts are under way to identify potential worksite
dangers along with the systematic implementation of facility improvement projects related to safety
countermeasures. As we aim to counter an increase in instances of accidents attributable to operator
action, we provide employees with appropriate training and otherwise strive to guide them away fromunsafe behavior in addition to executing the facility improvements described above. In these ways, we aim
to create a workplace environment in which everyone can operate safely.

2. Improving the Facility Security of Our Plants
Each division holds safety management conferences to address relevant issues by product category, withthe aim of maintaining and improving the facility security of each plant. Looking ahead, we intend to begin
holding facility security conferences focused on addressing common operational issues relevant to alldivisions (e.g. firing), with the aim of achieving further improvement in facility safety.

3. Response to the Novel Coronavirus Pandemic
To ensure occupational safety and hygiene for employees, we have established Companywide action
guidelines while thoroughly implementing countermeasures to prevent the risk of novel coronavirus
infection. Furthermore, to minimize the possible impact on our business operations of a case of infection,
we revised our business continuity plans (BCPs) to ensure preparedness. Going forward, we will take aflexible approach to aligning our alert level with the status of infection cases in Japan and update ourcountermeasures.

Occupational Accidents andProduction Process-Related Incidents
Although the number of incidents decreased by three compared withfiscal 2019, we have seen a higher number of incidents involving
absence from work due to a lack of correct understanding ofprocedures or the operator’s careless behavior.
Incidents related to our production process included four
incidents related to a leak or electrical system failure. In response tothese incidents, we have properly updated relevant equipment while
reviewing operational procedures. We will also strive to enhance theresilience of utilities to secure our preparedness to natural disasters.

Trend in the Number of Occupational Accidents
No absence
Death

15
9

Absence

16
10

14
9

6

4

2016

2017

26
19

1

6
2018

7
2019

23
13

10
2020

Securing Transportation Safety
In fiscal 2020, we held web-based reporting meetings attended by all
logistics departments to discuss their safety initiatives. We also invited
our transportation subcontractors to take part in periodic drills in which
they practiced emergency responses, employing the information on“yellow cards” to deal with logistics accidents. Moreover, we thoroughly
implemented safety rule education for truck drivers operating on plantpremises for the first time. These initiatives helped raise employee
safety awareness and provided an opportunity to exchange opinions
on logistics safety.
For fiscal 2021, we will continue with various activities to ensure
logistics safety along with our involvement in the “white logistics
movement,” as we strive to regularly review and improve our logistics
operations and thereby prevent the occurrence of logistics accidents.

A periodic drill employing the “yellow cards”

ESG information site: Prioritization of Safety https://denka_sustainability.disclosure.site/en/themes/656
Denka Report 2021 Integrated Report

32Corporate Information /Management Resources

Business Strategies

Electronics & Innovative
Products

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

Striving to help create an abundant society, we provide such cutting-edge materials as conductive agents for lithium ion
batteries (LiBs), thermal materials and substrates as well as functional ceramics, films and tapes, thereby playing an essential
role in the advance of 5G communications infrastructure, electric vehicles (EVs) and renewable energy generation.

SWOT Analysis*● A diverse product lineup capable of meeting a broad range of customer needs● Intelligence capabilities thanks to outstanding market share commanded by our
products● A broad range of essential technologies, including high-temperature control,
nitriding, spherical shaping and calcining technologies

Strengths S● Growing importance of communications devices on the back of the popularization of IoT and autonomous driving systems and resulting advances inhigh-speed transmission technologies● New business opportunities arising from government policies supporting a shift
to EVs and otherwise addressing environmental concerns

O Opportunities

Weakness W T Threats

Ikuo Ishida● Growing financial burden attributable to capital expenditure due to rapid market
expansion● A major shift in technological development trends due to such factors as thegrowing need for environmental solutions● An increase in the number of competitors due to, for example, the entry of
newcomers from emerging nations

Executive Officer, Electronics & Innovative Products

Taking full advantage of Denka’s proprietary
essential technologies, the Electronics & Innovative
Products Division offers a robust lineup ranging
from functional fillers, thermal solution
components, electronic packaging materials andelectro-conductive materials to functional tapes. In
short, the division delivers products andcomponents that are essential to electronic devices
and other cutting-edge fields. Currently, markets forcommunications devices are expected to grow as
manufacturers pursue higher performance andlarger capacities. Simultaneously, demand for EVs
and renewable energy generation facilities is
expanding in step with a growing public call forenvironmental conservation. With this in mind, we
will fully leverage Denka technologies to deliver
optimal materials for various components for use inthese fields, with the aim of contributing to society.

● Possible emergence of a novel material serving as a game changer

Business Strategies
Establish an unparalleled presence in fields associated with megatrends (EVs, 5G communications,semiconductors and renewable energy)
Contribute to society by delivering products designed to meet market requirements

Create next-generation products

Develop specialty products employing unique technologies* SWOT (strengths, weaknesses, opportunities, and threats) analysis is a method for identifying strengths and weakness based on such internal conditions as owned technologies, pricing and quality, as well as opportunities and threats arising fromexternal conditions, such as competitors and market trends.

Business Categories: Electronics & Innovative Products https://www.denka.co.jp/eng/electronics/
Denka Report 2021 Integrated Report

33Corporate Information /Management Resources

Business Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies15¥12.2 billion ¥12.7 billion

Business
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

R&D Activities

Electronics & Innovative Products¥17.0 billion

Operating Income Trend

Quality and
SafetyIn fiscal 2020, operating income grew year on year. This was attributable to a rise fromthe previous fiscal year in sales of highly functional films for use as embossed carrier
tapes for electronic components and semiconductors, sales of which themselves were
buoyed by solid demand associated with the global introduction of 5G infrastructure
and an increase in data center-related product needs worldwide. Another contributor toincome was annual growth in sales of fused silica fillers for use as semiconductor
encapsulant fillers and in sales of spherical alumina and ultra-high purity
electro-conductive carbon black for use in EV-related applications.
For fiscal 2021, we anticipate further growth in demand for products for use in theenvironment and energy field, including EVs, semiconductors, 5G communications andrenewable energy generation.

¥14.2 billion

10

Fiscal 2020 R&D expenses: ¥4.1 billion●Developed a thermal conductive substrate that can be adhered
to different metals for use in EVs●Developed “Denka Spherical Magnesium Oxide,” acutting-edge functional ceramic for use in 5G communications
devices and EVs

Capital Expenditure

12.9 billion

5

Fiscal 2020 capital expenditure: ¥0●Significantly augmented silicon nitride production capacity (byapproximately 30%)
●Executed facility construction aimed at expanding thespherical alumina production capacity of a subsidiary in
Singapore

FY2018FY2019FY2020

FY2021
forecast

Development of DENKA BLACK (acetylene black)Contribution to the SDGs through Business Operations

AB: Acetylene blackMaterial/Process Innovation*1 Technologies facilitating AB’s dispersion into other materials*2 Technologies controlling the order of atoms

Crystalline structure control technologies:
Improving AB’s durability via high crystallization

Surface structure control technologies:
Modifying the properties of AB’s surface andimproving its compatibility with other materials

High
crystallization*2

DENKA BLACK is used in the high-voltage transmission cables that
efficiently transmit clean energy generated by offshore wind farms toenergy consumers in a broad range of regions. Part of the output fromsuch facilities could be used to charge EVs equipped with LiBs, whichsimilarly incorporate DENKA BLACK, an essential raw material
contributing to improvement in the performance and safety of thesebatteries. As such, DENKA BLACK helps reduce CO2 emissions on
various fronts, exemplifying Denka’s technological contribution toenvironmental conservation.

Control surface
structure

Particle shaping and structure control technologies:
Modifying AB’s dispersibility and electro conductivity
in line with applications

Control particle
diameter andstructure

DENKA BLACK (acetylene black)Control
dispersion*1
Dispersion control technologies:
Enhancing AB’s functionality andperformance by increasing its dispersibility

Particle technologies:
Making AB easier to handle

Thermal decomposition:
Basic reaction process for AB synthesis

High-voltage transmission cablesAB
particlesAB
powderManganese batteries andantistatic materials

LiBs

High-voltage transmission cables

Next-generation battery materials
Help create an even safer LiB with larger capacity and longer product life

Electro-conductive materials

Released in 1942
Denka Report 2021 Integrated Report

Value Shift

Present

DENKA BLACK

Social issues

Source of value• Need for products that help
enhance LiB safety andreliability• Need for products that support
a stable power supply andfacilitate the popularization ofclean energy• Ultra-high purity• Excellent electro
conductivity• Contributes toimprovement in charging
and discharging
performance

Business Categories: Electronics & Innovative Products https://www.denka.co.jp/eng/electronics/

34

Corporate Information /Management Resources

Business Strategies

Life Innovation

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

In the field of illness prevention, diagnosis and treatment, we help people around the world enhance their quality of life by, forexample, supplying influenza vaccines, manufacturing rapid diagnostic testing kits for detecting antigens of such infectious
diseases as the novel coronavirus and delivering macromolecular sodium hyaluronate preparation.

SWOT Analysis● A lineup of various diagnostic reagents developed in-house employing Denka’s
proprietary technologies● Growing need for solutions supporting the prevention and early diagnosis of
disease in countries around the globe● Superior technological capabilities and robust production capacities backed by
cutting-edge vaccine manufacturing facilities● Growing demand for rapid diagnostic testing kits in the face of the novel
coronavirus pandemic● A robust network supporting industry-academia-government collaboration with adiverse range of partners and thereby enhancing Denka’s own R&D capabilities● Growing needs for medical services tailored to the conditions of individual
patients● Innovation arising from the integration of know-how in chemistry and healthcare,
two very different fields, and marketing capabilities deriving from a combinationof customer bases in both fields● Widespread use of IoT and AI

Strengths S● Possible emergence of novel types of business supported by government-led
growth strategies (legal revisions and regulatory relaxation)

O Opportunities

Weakness W T Threats

Hideki Takahashi● Susceptibility of infectious disease-related products to demand fluctuations
attributable to changes in the magnitude of epidemics and types of disease● Acceleration of competitor technologies for vaccine and diagnostic reagents on
the back of global efforts to counter the novel coronavirus pandemic

Executive Officer, Life Innovation Division

Since the outbreak of the novel coronavirus, adisease to which humans have no prior immunity,
the Life Innovation Division has striven to makeevery effort to counter its spread while applying
Denka technologies in the unrelenting pursuit of thebest possible solution it can offer in its businessfields. At the same time, we intend to draw ontakeaways from this crisis so that we are fully
prepared to join and play our part in humanity’s
future battle against any other unknown infectious
disease that may emerge at any time.
The Life Innovation Division is thus determined
to do its utmost to protect the well-being of people
around the world.

Business Strategies
Strengthen and expand existing operations, including influenza vaccines, diagnostic reagents andmacromolecular sodium hyaluronate preparation
Swiftly launch such new businesses as oncolytic virus and simultaneous multiplex assay systems
Push ahead with further open innovation while consolidating the Denka Group’s expertise to create
new business to secure future earnings pillars
Create new products and businesses aligned with changes in the market environment in light of theongoing fallout from the novel coronavirus pandemic and in anticipation of the post-pandemic
periodBusiness Categories: Life Innovation https://www.denka.co.jp/eng/medical/

Denka Report 2021 Integrated Report

35Corporate Information /Management Resources

Business Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Operating Income Trend
15¥14.8 billion

12¥10.5 billion¥6.3 billion¥7.0 billion

6

In fiscal 2020, the volume of influenza virus rapid diagnostic testing kits shipped was
down from the previous fiscal year. On the other hand, the influenza vaccine shipping
volume increased year on year as medical specialists and authorities issued
earlier-than-usual recommendations regarding vaccination. Moreover, the August 2020
release of QuickNavi-COVID19 Ag, a rapid diagnostic testing kit for detecting novel
coronavirus antigen, contributed to segment results. Consequently, operating income
rose significantly from the previous fiscal year.
For fiscal 2021, plans call for releasing a new rapid diagnostic testing kit capable ofsimultaneously detecting novel coronavirus and influenza virus antigens, while demandfor various diagnostic reagents other than those for diagnosing novel coronavirus
infection is expected to recover. In addition, the influenza vaccine shipment volume islikely to remain unchanged from fiscal 2020.

FY2018FY2019FY2020SocialContributions

Financial
Summary

Fiscal 2020 R&D expenses: ¥5.4 billion●Developed QuickNavi-COVID19 Ag●Promoted R&D of G47Δ oncolytic virus

Capital Expenditure
Fiscal 2020 capital expenditure: ¥6.5 billion

FY2021
forecast

Development of POCT Products

Contribution to the SDGs through Business Operations
Available as OTC*
pharmaceutical products* Over-the-counter pharmaceutical productsthat can be purchased at stores without
prescriptions issued by physiciansMaterial/Process Innovation

Corporate
Governance●Augmented influenza vaccine production capacity●Acquired land for the construction of a norovirus vaccine R&D
facility

30Business
Strategies

R&D Activities

Life Innovation

9

Quality and
SafetyFor use at large hospitals
and testing centers

For use at large hospitals,
testing centers and clinics

Colored latex
immunochromatographymethod(one step / eight minutes)

Bacteriologicaldiagnostic
reagents

1952
Denka Report 2021 Integrated Report

Realize ultra-high sensitivity
Make it possible to determine influenza
infection even when fever develops
less than within 24 hours prior to testing

Quick-NaviseriesMake it simpler and quicker to complete
testing procedures while enhancing sensitivity

Gold colloid method(two steps / 12 minutes)

Enzyme antibody method(four steps / 150 minutes)

Make it possible to test for
multiple viruses and pathogenic bacteria(Colored) fluorescent particles foruse with a fluorescent reader

Quick
Ex-FluRapid enzyme
antibody method(four steps / 15 minutes)

Improve operability

Quick S
A/B Influ

Virologicaldiagnostic
reagents

Make it easier to visually
determine testing results

Influ
A/B Quick
Shorten time requiredfor diagnosis

QuickNavi-Flu / QuickNavi-COVID19 Ag(rapid diagnostic testing kits for
detecting antigens)
These testing kits enable medical practitioners operating on the clinicalfrontlines to visually determine test results in 10 minutes without using
specialized testing equipment.
Employing its proprietary technologies, Denka has developed andsupplied the QuickNavi series, which comprises rapid diagnostic testing
kits for detecting the antigens of a variety of infectious diseases. Throughthese efforts, we areassisting medical
practitioners in their battle
against infectious diseases
and, by doing so, helping torelieve them of the burden of
disease diagnosis.

Social issues

Source of value

The emergence of a new
infectious disease pandemic
and its resurgence

Applied technologies that havelong been cultivated throughinvolvement in the diagnostic
reagent business

Identify the virus

Value Shift

Present
Business Categories: Life Innovation https://www.denka.co.jp/eng/medical/

36Corporate Information /Management Resources

Business Strategies

Elastomers & Infrastructure
Solutions

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

To help ensure people’s daily lives are safe and secure, we employ a wealth of technological capabilities in organic andinorganic chemistry to supply a range of offerings from functional elastomers, cement and special cement additives—both ofwhich are essential to strengthening infrastructure—to fertilizers and agricultural corrugated pipes, taking full advantage of thecalcium carbide chain that we have maintained since our founding.

SWOT Analysis● A robust calcium carbide chain created via the use of limestone from nearby
limestone mines and powered by Denka’s own hydroelectric power plant network● Growing demand associated with enhancing the resilience of buildings andcivil infrastructure to mitigate natural disaster damage● A resource recycling system that accepts urban waste, waste plastics and otherwaste as raw materials and fuel for cement production● Growing demand associated with the maintenance and renewal ofdomestic infrastructure, which had been intensively developed in the period ofhigh economic growth and is currently undergoing simultaneous deterioration
due to age● A two-location production system supporting the chloroprene rubber business,with plants in Japan and the United States employing different manufacturingmethods and facilities

Strengths S● Growth in the biostimulant market due to growing food demand in step withexpansion in the global population

O Opportunities

Weakness W T Threats

Koki Tabuchi● Difficulties in securing robust brand recognition in markets overseas (the special
cement additive business)● Shrinkage in the construction- and agriculture-related markets due to a decline indomestic population

Managing Executive Officer, Elastomers & Infrastructure Solutions

The Omi Plant, which serves as the mainstay plant
for the Elastomers & Infrastructure Solutions
Division, has taken full advantage of its limestone
resources to develop a robust calcium carbide
chain—a business asset enabling Denka to secure
a position as a chloroprene rubber producer
boasting the world’s top market share. This asset
has also supported Denka’s fertilizer production,
which spans 106 years, while empowering theCompany to maintain its strength as a cement
manufacturer with significant presence in a broad
swathe of regions along the Sea of Japan side of
the country. Based on technologies nurtured overthe course of many decades, we aim to contributeto the development of infrastructure around theglobe and advances in mobility businesses to help
people enjoy safe, secure and comfortable lives.
Moreover, we proactively strive for carbon neutrality
to reduce environmental burden.

● Expansion in the scope of various environment-related regulations influenced bya growing trend toward carbon neutrality

Business Strategies
Establish a stable business foundation that is resilient against changes in trade conditions while
stepping up the development of highly functional products
Deliver cutting-edge infrastructure-related technologies designed to contribute to climate change
countermeasures and energy saving
Secure even more robust foundations for our special cement additive business bases in Asia
Strengthen and expand resource recycling operations that utilize waste as raw materials and fuelfor cement production
Business Categories: Elastomers & Infrastructure Solutions https://www.denka.co.jp/eng/elastomer_infra/

Denka Report 2021 Integrated Report37Corporate Information /Management Resources

Business Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

In fiscal 2020, operating income decreased despite the positive effects of the Group’s
efforts to maintain product prices after recent upward revisions. This was mainly
attributable to declines from the previous fiscal year in sales of chloroprene rubber,cement, special cement additives, fertilizers, fire-resistant materials and steelmaking
materials due to fallout from the novel coronavirus pandemic and the influence ofunfavorable weather.
For fiscal 2021, demand for chloroprene rubber, special cement additives andother inorganic materials is expected to recover from significant stagnation in theprevious fiscal year because of the novel coronavirus pandemic.

1510¥7.3 billion¥4.0 billion¥3.9 billion

5

Corporate
GovernanceSocialContributions

Financial
Summary

Fiscal 2020 R&D expenses: ¥2.9 billion●Developed board and molded products that boast superior heatinsulation properties and are thus capable of contributing to
reduction in CO2 emissions

Capital Expenditure

17.8 billion

Fiscal 2020 capital expenditure: ¥-¥3.6 billion

0

Business
Strategies

R&D Activities

Elastomers & Infrastructure Solutions
Operating Income Trend

Quality and
SafetyContribution to the SDGs through Business Operations-5

FY2018FY2019FY2020

FY2021
forecast“PRULA” Biostimulant

Agricultural Solution Business

Material/Process Innovation

Crops not using Crops usinga Denka fertilizer a Denka fertilizer

Denka products contribute to robust crop growth

Agricultural
solution business

Global strategic product
PRULA(Humic acid liquid)

Biostimulants are a new technology that aims to enhance the resilienceof plants against abiotic stress attributable to various external conditions
and thereby help realize the full potential of cultivation in terms of crop
yields. Thanks to these positive effects, biostimulants are expected toserve as technological solutions for a food crisis arising from global
population growth, global warming and other factors.

(farmland diagnosis andcultivation management)

Release scheduled for fiscal 2021
AZU Liquid 413
AZUMIN(Humic acid fertilizer) (Humic acid liquid fertilizer)
Released in 1963
Released in 2017

Biostimulants

・Facilitate plant growth・Improve resilience against global
warming, salt damage, dryness andabnormal weather

PRULA is short for “Preserve Your
Landscape” and expresses our aspiration
to continue to help farmers preserve
precious farmland.

Contribute to the sustainabilityof society and agriculture

Calcium cyanamide
1915

Soil erosion
TORETARO
prevention agent(Fused silicate phosphate fertilizer) ・Prevent soil erosion
Released in 2001
on farmland・Prevent the flow ofsoil into the marine
environment

Present
Denka Report 2021 Integrated Report

Our products help improvewater permeability andprevent soil erosion.

Value ShiftWith soil erosion
prevention agent

Without soil
prevention agent

Social issues

Source of value

Food shortages attributable to global
population growth and global warming

Technologies nurtured overthe course of our 106-year
history of functional
fertilizer production

With soil erosion
prevention agent

Business Categories: Elastomers & Infrastructure Solutions https://www.denka.co.jp/eng/elastomer_infra/

38

Corporate Information /Management Resources

Business Strategies

Polymer Solutions

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

Financial
Summary

To help realize a sustainable society, we support people’s daily lives in a diverse range of fields, including automobiles, electricand electronic devices, and food, via the provision of styrene-based functional resins, food packaging sheets and synthetic
fiber for wigs and hairpieces as well as Poval and other chemical products.

SWOT Analysis● An integrated manufacturing and marketing system in Japan that encompasses a
range of styrene-based operations from the production of raw materials to the
manufacture of processed products● Global business capabilities backed by a two-location production systemcomprising bases in Japan and Singapore● A diverse range of resin processing technologies, including those associatedwith polymer structure design and control and the production of sheets, films andsynthetic fiber● Synergies arising from the combination of materials and processed products aswell as solution proposal and development capabilities supported by suchsynergies● Digital transformation currently under way via the use of an integrated businessplanning tool, which our bases in Singapore began
introducing in advance of other facilities

Strengths S● Development of plastic resins and their processed products in a way that
accommodates growing needs for eco-friendly solutions● Establishment of a comprehensive recycling system that takes full advantage ofthe strengths afforded by our integrated production system, which extends fromraw materials to processed products, and thereby meets demand arising from thegrowing trend toward resource recycling

O Opportunities

Weakness W T Threats

Kenjiro Ishizuka
Executive Officer, Polymer Solutions

The Polymer Solutions Division was established via
the 2021 reorganization and is tasked with handling
operations related to styrene-based functional
resins and processed products using such resins(e.g. polyvinyl chloride) as well as Poval and otherchemical products, then delivering these offerings
to markets around the globe. In Japan, we maintaina comprehensive styrene chain encompassing
products ranging from styrene monomer andpolymer products to processed products.
Overseas, we operate manufacturing bases in
Singapore that produce functional resins andpolyvinyl chloride-based processed products foroverseas customers. As a new division, we will
strive to effect synergies between materials andprocessed products in our efforts to develop andmarket eco-friendly solutions, such as those
supporting resource recycling, designed to meetmarket needs while pursuing our Companywide
target of achieving carbon neutrality by the end of
fiscal 2050.

● A time lag between fluctuations in the prices of raw materials (e.g. naphtha andbenzene) and product price revisions reflecting these external conditions● A decline in plastic demand due to environmental problems induced by waste
plastics (especially, single-use packaging containers)● Foreign exchange risks associated with products mainly exported to customers
overseas● Intensification of price competition in step with improvement in the quality of
products manufactured by overseas competitors● Destabilization of the procurement of various raw materials (due to rises in costs,
the abolishment of certain materials, etc.)

Business Strategies
Achieve specialization in each operational area by enhancing the added value of existing products
and developing highly functional product grades in a way that accommodates demand arising frommega trends and the latest market needs
Build a business portfolio that is capable of securing stable profit and resilient against changes inexternal conditions, such as exchange rates and raw material prices
Develop and propose solutions for environmental issues

1. Promote the R&D of resins with low specific gravity and materials incorporating biomass ingredients with smaller environmental
footprints
2. Realize a chemical recycling process for polystyrene resin
Business Categories: Polymer Solutions https://www.denka.co.jp/eng/polymer/

Denka Report 2021 Integrated Report

39Corporate Information /Management Resources

Business Strategies

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
GovernanceSocialContributions

R&D Activities

Polymer Solutions
Operating Income Trend

In fiscal 2020, sales were generally robust for styrene monomer, ABS resin,polystyrene resin (produced by Denka Singapore Pte. Ltd.) and MS resin foruse in light guiding substrates for television and monitors. On the other hand, demandfor plastic rain gutters and TOYOKALON synthetic wig fibers declined due to fallout
from the novel coronavirus pandemic. Although demand for these offerings
subsequently returned to a recovery track, their sales volumes were still down from theprevious fiscal year. However, thanks to growing demand for takeaway food services,
overall sales of food packaging sheets and processed products using such sheets
largely remained firm.
For fiscal 2021, the volume of shipments of MS resin is likely to remain robust,
while the expanded production facilities in Singapore are expected to contribute tooperating results. Moreover, demand for TOYOKALON is expected to recover.

15

10¥7.0 billion ¥7.1 billion¥8.4 billion¥9.5 billion

Fiscal 2020 R&D expenses: ¥Fiscal 2020 capital expenditure: ¥5.0 billion

Contribution to the SDGs through Business Operations
FY2018FY2019FY2020

FY2021
forecast

Pursuit of Eco-Friendly Food Containers

Development of Microwavable Food Containers and Lids
Black font: Technological innovation

Hassle-free unpacking
Easy to dispose of

PS: Polystyrene
PP: polypropylene

PS alloy

HIPS: High impact polystyrene

Released in 1979

Foamed PS

Multi-layer extrusion

multi-layer extrusion

Foamed PP

Stiffness andheat resistance

Improved stretching property

Control of heat contraction

Superior fogging
prevention
Higher transparency

Copolymerizationand stretching of PS

Oil resistanceHeat resistance

Make content
easily visible
Protect content and make it more visible

MicrowavableCompatible with higher
oil content foods

Stronger andthinner
Smaller bulk

Cold-resistant withgas barrier properties
Prevent adhesion
Solutions to food loss problems

Increase the added value of lid materials

Durable in prolonged heating
and compatible with heating
higher oil content foods

Prolonged heating

Value Shift Present
Denka Report 2021 Integrated Report

Surface finishing and ultra-multilayer technologies

Incorporation of biomass ingredients

Environmentally friendly
Growing scope of food packaging applications

Reduction in environmental burden

Biomass resin content
Transparency

Heat andoil resistanceReleased in 1983
Coating material design
Biaxially oriented PS

Material design anddiversified ingredientsHeat insulation andlighter weight

Heat insulation

Biodegradability

In recent years, demand for food containers made using BOPS sheets
has been expanding in such fields as takeaway and delivery foodservices. Among these sheets, Eco Clear boasts higher strength and iseven thinner than its predecessors. Having realized these features tocounter plastic-related environmental issues, which have recently
become the focus of public concerns, we are thus contributing to thecreation of lightweight food containers and a reduction in the volume ofplastics used.

HybridIncorporation ofIncorporation of
biomass ingredients naturally derived
Foamed PP multi-later extrusion
ingredients
Reduction in plastics

Foaming

PP filler

Universal design

Biomass
HIPS

Increase the added value of containers

Use as fillers

New material development

Design

Red font: Value creation

Material/Process Innovation

2.1 billion

Capital Expenditure

50

Financial
Summary

Biaxially oriented polystyrene (BOPS) sheets

Social issues

Source of value

Environmental issues
attributable to waste plastics

Technological development capabilities backed
by a styrene chain
encompassing operations
that range from raw
materials to processed
products

Business Categories: Polymer Solutions https://www.denka.co.jp/eng/polymer/

40

Corporate Information /Management Resources

Corporate Governance

An Interview with
Outside Directors

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
SocialGovernance Contributions

Financial
Summary

We spoke with Mr. Toshio Kinoshita and Mr. Akio Yamamoto, both of whom serve the Company as outside directors, to hear theirviews on Denka’s Board of Directors, their opinions on the role of an outside director and their expectations for Denka’s futureendeavors under the new management team led by Mr. Toshio Imai, the Company’s new president.

■ The Role of an Outside Director
Tanaka: In June 2019, Denka transitioned to a Company with an Audit Committee and, having secured theapproval of its General Meeting of Shareholders, reshaped the composition of the Board of Directors inJune 2021. Today’s businesses are being called to live up to increasing public expectations regarding
robust corporate governance, as reﬂected in the recent updating of Japan’s Corporate Governance Code.
Given these circumstances, could you share your thoughts on the role an outside director should take?

ダミー

ダミー

Kinoshita: Although the Corporate Governance Code requires the appointment of outside directors, weare not here merely so Denka can satisfy a mandate. As a certiﬁed public accountant, I am expected tocontribute my specialist expertise in accounting and ﬁnance to support Denka’s management and help it
determine the direction of the Company’s business by offering my opinions from a multilateral perspective.
Also, the general inclination among executives is to focus on sales and operating proﬁt. However, if thisfocus becomes excessive, the fundamental purposes of business operations and corporate management
can be overlooked. It’s easy to see why individuals who are busy with business execution tend to narrow
their focus, and I believe that outside directors play an essential role in providing intervention whenfundamental issues seem to be being ignored.
Yamamoto: Today, our society is facing a really difﬁcult time. In addition to confronting such major issues as
global warming, widening social divides and the pressing need to uphold respect for human rights, fresh
problems arising from the novel coronavirus pandemic are prompting society to revisit conventionalmodes of operation. As an outside director, I consider it critically important to accurately recognize thechallenges of the present, approach issues from a broad perspective and continually strive to enhance myknowledge and ability to address changes in the environment surrounding our business operations byapplying a robust set of objective indicators. Our role is therefore to employ a medium- to long-term
perspective and contribute to Denka’s efforts to remain a sound and proﬁtable business and increase its
overall corporate value.

June 22, 2021
at Denka’s Head Office

Toshio Kinoshita

Akio Yamamoto

ProfileProfileFacilitator

A certified public accountant in Japan and the UnitedStates, Mr. Kinoshita has enjoyed a long successfulcareer in his field. He was appointed as an outside
member to the Company’s Audit & Supervisory Board in
2015, and took office as an outside director and Audit
Committee member in 2019.

Mr. Yamamoto contributes his insights into generalmanagement matters by taking advantage of his broad
knowledge backed by long experience as a successful
corporate manager overseeing businesses in Japan andabroad. He was appointed as an outside member of theCompany’s Audit & Supervisory Board in 2015, and took
office as an outside director and Audit Committee
member in 2021.

Mr. Nobuyasu Tanaka

Outside Director, Audit Committee Member

Denka Report 2021 Integrated Report

Outside Director, Audit Committee Member

Senior Managing Executive Officer,
Sun Messe Co., Ltd., Representative Director,
Sun Messe Innovative Network Center (Sinc)

ESG information site: Corporate Governance https://denka_sustainability.disclosure.site/en/themes/658

41Corporate Governance

An Interview with Outside Directors■ Our Views Regarding the Role of the Board of Directors
Tanaka: Denka has placed a strong focus on improving corporate governance. In this light, what are
your thoughts as outside directors on the role of the Board of Directors?
Yamamoto: Anticipating the enforcement and revision of Japan’s Corporate Governance Code, Denka
has taken forward-looking measures to improve and strengthen its governance structure, working
assiduously to enhance its effectiveness. In addition, the Company’s outside directors are given
brieﬁngs on long-term strategies undertaken by each division and detailed information regarding
agenda items to be submitted to the Board. These practices, I believe, help invigorate the Board’s
discussions and enhance its effectiveness.
Kinoshita: In my experience, discussions at Denka’s Board of Directors are more vigorous than at theboards of many other companies. However, I have to point out that the proper focus of the Board of
Directors is monitoring and supervision rather than business execution. I believe all members musthave the same awareness about the basic duties of the Board of Directors. Of course, by monitoringand supervision I don’t mean that we must stand by at the president’s ofﬁce and monitor his every
move!
I believe the Board’s principal functions have two aspects. The ﬁrst is thorough deliberation
centered on the Company’s business planning in the medium to long term. The second is accurately
ascertaining and monitoring business risks. In these ways, the Board should assess what part of theCompany’s existing operations should be kept or discarded going forward while determining theideals that constitute its business model. These are, I think, matters truly worthy of intensive discussion
in the Board room. I feel that focusing on discussion of this kind will be one way we can help Denka
become an even better company.

■ The Pandemic Has Prompted a Growing Call for Businesses toEnhance Their Societal Value
Tanaka: Fallout from the novel coronavirus pandemic is having a signiﬁcant effect on mindsets andbusiness activities. What changes did you notice in terms of what deﬁnes businesses’ societal value andtheir reason for being?
Kinoshita: First off, we need to closely analyze what we have learned and what we have lost due to thepandemic. This phenomenon has caused many businesses to realize that there is no way that simply
extending their existing mode of operation will ensure their continued viability. Based on thisrealization, I believe that we, too, must shift our focus to identifying and putting into practice the bestthing we can do next.
Yamamoto: I agree with Mr. Kinoshita. Considering the social signiﬁcance of Denka’s operations in the
post-pandemic era, I think that the Company will be positioned to discover new opportunities.
Moreover, underpinning Denka’s social signiﬁcance are advantages afforded by prevailing practices inJapan’s chemical industry. For example, the industry’s researchers are tireless in addressing research
themes involving numerous rounds of experiments. The majority of its workers in other areas are also
good at doing tasks that require a painstaking approach. It sometimes seems that they do not to mind
doing redundant work. These qualities, largely attributable to the nature of Japanese workers, support

Corporate Information /Management Resources

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Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
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SafetyBusiness
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SocialGovernance Contributions

Financial
Summaryand strengthen domestic chemical manufacturers. If Denka
were to draw on this advantage to enhance its technologicalcapabilities, it would be able to establish its vision regarding
a successful future business model for 2030. Currently,
several Denka products command top global shares, and it
is important for the Company to enhance these products
and increase its market presence. Chemistry is relevant to an
extensive range of ﬁelds, including life science, automobiles,
electronics, food packaging and housing materials. Becauseof this, I would say that it is the kind of industry that constitutes the bedrock for the development of
global society. And, this will be a quite fascinating mission to fulﬁll.
Kinoshita: As I have stated at Board of Directors meetings on several occasions, establishing a vision
for 2030 is of critical importance to any corporation. What will Denka look like in 2030? What products
will the Company be offering to society? What social contributions will it be aiming to make, and willthese be accepted or not? Unless the Company has a clear vision of what it aims to be in the future, itwill end up being constantly forced by circumstances to address one business management issue after
another.

■ What Is Expected of Denka’s New Management Team and President Imai
Tanaka: Lastly, please share your thoughts on what you expect from Denka under the new
management team led by President Imai.
Yamamoto: I expect two things. First, I would like to see the new management team discuss a broad
range of the Company’s business strategies from a medium- to long-term perspective, with the aim ofidentifying those strategies’ future direction. Second, I hope this team will place stronger emphasis on
addressing environmental issues among the various issues to be addressed via an ESG-oriented
management approach. Of course, robust governance is fundamental to resolving all kinds ofmanagement issues, including those associated with business strategies. Accordingly, I expect more
efforts to be undertaken to constantly improve Denka’s governance structure and enhance its
effectiveness. Other individual issues that must be tackled include how to develop human resources
and promote diversity. In particular, accelerating diversity, namely, promoting women, foreign
nationals and other diverse human resources to senior management positions, will lend us a signiﬁcantdriving force and help us forge ahead toward the future.
Kinoshita: As Mr. Imai has long been steadily spearheading Denka’s business operations, my
expectations are high for his leadership. On the other hand, I believe that Denka should increase
diversity among its ofﬁcers and managers, in terms of gender and nationality, at an even faster pace.
Also, digital transformation (DX) is a matter of pressing importance. Denka therefore needs to secure
specialists in the ﬁelds of AI and IoT. I hope that the Company employs a broader perspective in its
effort to enrich its human resource pool in terms of diversity. Breaking free of a conventionalorganizational culture, the Company should and can engage in speed-oriented decision making basedon its Denka Value-Up business strategies. This is an area in which I have strong expectations. To
support this wonderful company, I will do my best and work hand in hand with my fellow Board
members along with the new management team.
ESG information site: Corporate Governance https://denka_sustainability.disclosure.site/en/themes/658

Denka Report 2021 Integrated Report

42Corporate Information /Management Resources

Corporate Governance

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
SocialGovernance Contributions

Financial
Summary

Directors

Photo taken on June 22, 2021 at Denka’s Head Office

Masaharu Suzuki Miyuki Matoba Akio Yamamoto Toshio Kinoshita Manabu Yamamoto
Director(Full-time Audit Committee Member)

Outside Director(Audit Committee Member)

Outside Director(Audit Committee Member)

Outside Director(Audit Committee Member)

Representative Director andChairman of the Board

Toshio Imai

Representative Director,
President & CEO

Yoshiyuki Fukuda Tetsuya Shinmura Kazuo Takahashi
Outside Director

Director

Director

Corporate website: Executives https://www.denka.co.jp/eng/corporate/officers/
Denka Report 2021 Integrated Report

43Corporate Information /Management Resources

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Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
SocialGovernance Contributions

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Summary

Messages to Our Stakeholders

Manabu Yamamoto Representative Director and Chairman(Born March 31, 1956)

Masaharu Suzuki Director (Full-time Audit Committee Member)(Born December 11, 1955)

In addition to striving for more sophisticated corporate governance that accurately reflects society’s
expectations, I will endeavor to enhance the effectiveness of our Company with an Audit Committee
system, currently in its third year, and promote a stronger management advisory and supervisory
function and even swifter decision-making, in order to achieve “Denka Value-Up.”

I intend to engage in audit activities focused on the implementation of growth strategy and response
to internal and external risk, to sustainably boost the corporate value of the Company.

Toshio Imai Representative Director, President & CEO

Toshio Kinoshita Outside Director (Audit Committee Member)(Born January 25, 1959)(Born April 12, 1949)

I will promote the “Denka Value-Up” plan, and realize “sustainable and sound growth” as a “company
that contributes to sound social development through new value creation.”

I will contribute to enhancing corporate governance, aimed at Denka’s sustainable growth as a global
company and the medium- and long-term enhancement of corporate value.

Tetsuya Shinmura Director

Akio Yamamoto Outside Director (Audit Committee Member)(Born January 28, 1958)(Born December 2, 1951)

I will endeavor to enhance corporate value by developing technologies to challenge the possibilities
of chemistry and contributing to the resolution of global issues, to make this a company genuinely
needed by society.

We are entering an era of significant change in the environment and value perceptions that surroundcompanies. I intend to firmly maintain a medium- to long-term perspective and a sincere, fair andupright attitude, and endeavor to further strengthening corporate governance, to contribute to theCompany’s sound growth and the enhancement of its corporate value.

Kazuo Takahashi Director

Miyuki Matoba Outside Director (Audit Committee Member)(Born March 30, 1960)

The new normal and paradigm shift have arisen over an extremely short period of time. Apprehending these dramatic changes in the world as an opportunity to soar, I will endeavor to leverage theCompany’s comprehensive capabilities to enhance corporate value and achieve sound growth.

Yoshiyuki Fukuda Outside Director(Born August 15, 1973)

I will contribute to enhancing corporate value by focusing on the further strengthening of corporate
governance and thorough compliance.

(Born September 8, 1956)

I will focus on creating an open and transparent organizational culture, and hope to contribute tobuilding an organization with a high level of risk management.

Corporate website: Executives https://www.denka.co.jp/eng/corporate/officers/
Denka Report 2021 Integrated Report

44Corporate Information /Management Resources

Corporate Governance

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
SocialGovernance Contributions

Financial
Summary

Basic Approach to Corporate GovernanceCorporate Governance

Based on “The Denka Value” (corporate philosophy), the cornerstone for all the corporate activities
undertaken by the Denka Group, the Company is striving to fulfill the expectations and earn the trust ofits many stakeholders, including shareholders, customers, local communities and employees. To thisend, the Company is strengthening its business foundation by working to enhance its earnings powerand expand its scope of operations. At the same time, it is making every effort to continue being acompany that can win the trust and support of society and thereby improve corporate value.
The Company considers corporate governance to be the bedrock on which the above rests, and so
we have striven to strengthen governance, in order to fulfill the responsibilities we owe to all our
stakeholders and ensure the transparency and soundness of our management.

Concepts on the Appointment of Directors
With the aim of embodying The Denka Value, our corporate philosophy, we are promoting the Denka Value-Up management plan, to this end strengthening our management structure supported by directors
and executive officers while upgrading our governance systems and supervisory functions.
Director candidates are nominated from among individuals who have abundant experience and a strong track record in Denka’s business divisions and are equipped with sufficient knowledge and specialist
expertise for the position. Outside director candidates are nominated from among those who boast extensive knowledge backed by abundant business experience as well as distinctive strengths in their areas of
specialty so that they can bring their insights on how to achieve sustainable growth and enhance corporate value. With regard to the overall composition of board members, we focus on maintaining a diverse
and well-balanced composition in terms of expertise, experience, competency, gender and nationality. We also aim to maintain a sufficient number of independent outside directors to ensure that they accountfor at least one third of director membership. Currently, the proportion of such directors is in excess of the targeted composition.

Director Remuneration

Evaluation of the Effectiveness of the Board of Directors

We have set remuneration for each director based on their roles and responsibilities within the limit of thetotal amount approved by the General Meeting of Shareholders. The Board of Directors decides on thecontent of remuneration after receiving advice and recommendations from the Nomination andRemuneration Advisory Committee.
Remuneration for directors consists of monthly basic compensation set at a fixed amount (paid to all
directors) as well as performance-based compensation and share-based compensation (neither of which
are paid to outside directors or in-house directors with concurrent membership in the Audit Committee).
The value of the performance-based compensation is determined in step with consolidated operating
income for each fiscal year. However, this portion may be decreased or fully withheld in cases whereconsolidated operating income did not reach a certain amount or the Company was found to be involved incompliance violations and other significant misconduct.
Share-based compensation is intended to ensure that directors share shareholders’ interests and risks
regarding stock price fluctuations. By doing so, we aim to instill a strong sense of purposefulness towardachieving medium- to long-term growth in corporate performance and corporate value in our directors.
In addition, remuneration paid to directors with concurrent membership in the Audit Committee consists
only of monthly basic compensation in a fixed amount. Total remuneration paid to such directors isdetermined within the upper limit approved by the General Meeting of Shareholders.

Fiscal 2020 Director Remuneration
Directors

Directors

Basic compensation: ￥285 million for seven recipients(￥24 million for two outside directors)
Variable compensation (in-house directors only)
Performance-based compensation: ￥42 million for five recipients
Share-based compensation: ￥21 million for five recipients

Basic compensation: ￥91 million for five recipients(￥36 million for three outside directors)
Fixed compensation
Variable compensation(excluding those who have concurrent membership in the Audit Committee)(those who have concurrent membership in the Audit Committee)

Method of Evaluation

Summary of Evaluation Results and Future Efforts

As it did in the previous fiscal year, the Company
analyzed and evaluated the effectiveness of the Boardof Directors by having individual directors complete
the “Self Evaluation Questionnaire,” which covers
items related to the effectiveness of the Board of
Directors, such as scale, composition, operation and
20 other items, and discussing the questionnaire
results at Board of Directors meetings.

The Company confirmed the appropriateness of meeting frequency and duration as well as
methods used for holding meetings in light of the risk of COVID-19 infection. It was also
concluded that the Board of Directors made progress in the optimization of its composition (interms of getting the right balance of expertise, experience, competency and diversity).
Moreover, the Company determined that its Board of Directors, which includes independent
outside directors who account for 42% of its membership, is capable of the proper monitoringand supervision of management.
In addition, the Board of Directors evaluated initiatives being undertaken to address issues
identified via the previous fiscal year’s evaluation by employing a PDCA cycle as depicted
below. It also ensured that all directors share a common understanding of initiatives to be
executed going forward.

• Aim to enhance the content of discussions focusing on adjusting long-term Companywide
targets, individual business strategies and other initiatives in light of changes in theoperating environment while placing greater emphasis on the perspective of ESG-oriented
business management• The ongoing review of criteria with regard to matters requiring resolution at the Board of
Directors• Pursue the optimization of the Board of Directors’ operations as Denka embarked on its
third year since the transition to a Company with an Audit Committee

P

D• The need to monitor duties currently undertaken by the executive team, including
long-term, Companywide strategies and individual business strategies, discuss strategic
adjustments where necessary and otherwise take advantage of the time made available to
the Board of Directors via the strict selection of agenda items

AC• Establish an optimal operational structure for the Board of Directors, which has been
reshaped and made smaller, that will allow it to strengthen its focus on monitoringbusiness execution and providing advisory and oversight functions• Step up the utilization of the Nomination & Remuneration Advisory Committee to enable
the Board of Directors to proactively be involved in the formulation and implementation of
succession plans and exercise proper supervision over such activities

ESG information site: Corporate Governance https://denka_sustainability.disclosure.site/en/themes/658
Denka Report 2021 Integrated Report• Revision of criteria with regard to mattersrequiring resolution at the Board of Directors• Further optimization of the Board of Directors’
operations employing the functions of aCompany with an Audit Committee• Confirmed the shared realization that theBoard of Directors is now able to allocate
more time to the discussion of importantmatters thanks to the revision of criteria for
determining matters requiring its resolution• Confirmed the stabilization of Board of
Directors’ operations employing the functionsof a Company with an Audit Committee as
Denka embarked on its third year since thetransition to the current governance system

General Meeting of Shareholders: https://www.denka.co.jp/ir/fact_04/ (Japanese only)45Corporate Information /Management Resources

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Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
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SafetyBusiness
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SocialGovernance Contributions

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Summary

Acceleration of Development of Groupwide Internal Control System

Denka Performance Elastomer’s Environmental Management

The Denka Group’s internal control had been largely dependent on each business division’s autonomous efforts todevelop and maintain internal control systems, with the Internal Auditing Department tasked with assessing the status ofthese activities, reporting issues, if any, to the Board of Directors and providing instructions and advice to audited
business units to help them effectively implement improvements. However, some of our Group companies andorganizations had faced difficulties in promoting improvement measures due to the lack of specialist expertise andhuman resources.
In fiscal 2020, we established a dedicated team charged with supporting and spearheading the development ofinternal control systems for these organizations. The new team was placed under the Internal Auditing Department andbegan providing assistance to overseas subsidiaries and newly established subsidiaries, contributing to the strengtheningof preemptive internal control measures. In April 2021, we upgraded this team into the Internal Control Department andestablished an Internal Control Office under it. Looking ahead, we will endeavor to strengthen internal control for theentire Group, with both Internal Audit and Internal Control departments exercising their functions.

Denka Performance Elastomer LLC (DPE), a Denka Group company based in Louisiana, the United States, manufactures chloroprene rubber (CR).
In 2015, DPE initiated operations upon the acquisition of CR production facilities established by the U.S.-based
DuPont in 1969. Since then, DPE has been engaged in the provision of CR to customers around the world.
Currently, DPE is confronting multiple lawsuits along with DuPont and its affiliates. These lawsuits were filed byresidents of communities around DPE’s Pontchartrain Plant and demand compensation on the grounds that said
residents have sustained physical, financial and emotional damage arising from chloroprene monomer emitted fromthe plant.
However, the December 2020 updates of an epidemiologic study conducted by researchers at University ofPittsburgh under the auspices of the International Institute of Synthetic Rubber Producers has confirmed that nocorrelation between chloroprene monomer exposure and the fatality rate arising from lung and liver cancer can be found.
This study involved follow-up surveys targeting approximately 7,000 people who are ex- or active employees of
U.S.-based facilities handling chloroprene monomer over the course of nearly 70 years. (The follow-up surveys wereintended to confirm a similar conclusion reached in 2007 based on data regarding the health conditions of these people
by the end of 2020. The updates of the study resulted in the collection of additional data encompassing the 17-yeaer
period leading up to 2017.)
Furthermore, according to data publicized by the Louisiana Tumor Registry, region-specific carcinogenic risk in thelocation of the plant is not significantly different from the average risk for the entire state.
In line with the Denka Group’s policies on the reduction of environmental burdens, DPE is constantly striving tomaintain strict compliance with chloroprene monomer emission standards stipulated by environment-related laws andregulations and minimize emissions of substances and waste from its facilities. Accordingly, DPE introduced new facilities
intended to reduce emissions of chloroprene monomer even further, to this end executing a massive investment totaling
more than US$35 million (approximately ￥4 billion). This investment resulted in an 86% reduction in the volume ofchloroprene monomer emissions (fiscal 2020 results; based on a comparison with the fiscal 2014 level).
In addition, as of June 2, 2021, DPE is planning to file an official request to the U.S. Environmental Protection Agency(EPA) for the review of its chloroprene monomer toxicity assessment. Through this request, DPE intends to ask for theincorporation of a physiologically based pharmacokinetic (PBPK) model, a cutting-edge method used in the research ofchloroprene monomer’s impact on human health.
Looking ahead, Denka will continue to assist DPE in its efforts to remain a good neighbor for people living incommunities in which it operates by protecting the environment, ensuring their well-being and working to reduce theiranxieties.
For more details, please refer to news releases* posted on Denka’s corporate website.

Strengthening Groupwide ICT GovernanceIn line with the Denka Value-Up management plan launched in April 2018, we have been promoting operational process
reforms encompassing all aspects of our corporate activities ranging from R&D and manufacturing to sales andadministration, with the aim of enhancing both operational efficiency and corporate governance. These initiatives involvethe utilization and upgrading of information & communication technology (ICT) on a Groupwide basis.
At the same time, we have striven to protect the Denka Group’s informational assets from incidents arising from theuse of ICT, including data leakage and falsification, and to safeguard such assets from cyberattacks, which have become
increasingly sophisticated in recent years. To this end, we pursue the development of security infrastructure for the entire
Group while conducting risk management-based enhancement of our preventive maintenance regimen. The above
activities are guided by a robust set of in-house rules regarding information security.
Going forward, we will help all Group companies at home and abroad strengthen ICT governance supporting theirinternal control systems as we endeavor to avoid loss and improve our corporate value.

*News releases dated June 19, 2019, February 14, 2020, June 8, 2020, June 19, 2020, August 7, 2020, December 17, 2020, March 2, 2021
and June 22, 2021 address related topics.

ESG information site: Corporate Governance https://denka_sustainability.disclosure.site/en/themes/658
Denka Report 2021 Integrated Report

General Meeting of Shareholders: https://www.denka.co.jp/ir/fact_04/ (Japanese only)46

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Financial
Summary

Basic Approach to Risk Management
To achieve the goals of the Denka Value-Up management plan, the Denka Group aims to strengthen
corporate governance and, to this end, strives to accurately assess the diverse and numerous risks
arising from its corporate activities, believing that minimizing damage arising from these risks is a matterof extreme importance. Accordingly, we continuously work to enhance our risk management structure.

Management Risk Analysis and Response
Legal Fields in Which Denka Group Companies Must Maintain Acute Compliance Awareness andExamples of Typical Compliance-Related Misconduct Associated with These Fields

Risk Management Structure
The Denka Group Ethics Policy codifies Groupwide standards of conduct. To ensure that this policy guides the actions ofall, the Ethics Committee chaired by the President oversees the overall compliance structure and reports to managementon compliance matters. Moreover, under the initiative of the Ethics Committee, such key business units as the Legal,Internal Auditing, HR Strategy, Intellectual Property, Environment and Safety, and Quality Assurance departments
ensure thorough legal compliance in their respective areas of specialty.
We also strive to ensure that all Group officers and employees embrace the Standards of Business Conduct, which
provide clear and detailed guidelines on the actions they are expected to take in accordance with the provisions of the
Denka Group Ethics Policy.
Furthermore, we employ a “legal hazard map” to analyze the significance of compliance-related risks that may affecteach Group company with the aim of efficiently developing and operating effective compliance structures.

President
ReportReportOther risks

Major crises

Risk Management Committee
Proxy organizations according to case

• Ethics Committee• Safety Measures Headquarters• Responsible Care (RC) Committee• Product Liability (PL) Committee• Security Export Control Committee
ReportPrime oversight

Instruct/monitor

ReportReport on emergencies

Risk-specific committees

Order HQ set up

Board of Directors

ReportCrisis Measures
Headquarters

Instruct/monitor

Businesses (including Sales and Manufacturing divisions)
Administration (including Internal Control, Environment and Safety, Legal and Accounting & Finance departments)

Utilization of the Legal Hazard Map for the Strengthening of Compliance Structure
Having identified more than dozen legal fields closely associated with the Group business operations, Denka utilizes alegal hazard map designed to assess the magnitude of compliance risks affecting the Group. Employing this map, we
formulate the Denka Global Compliance Program, a Groupwide plan for providing compliance education in an effective
manner. Moreover, we continuously work to enhance our compliance structures via, for example, the development andreview of Group Policies and other in-house rules applicable to all Group members as well as Denka’s Companywide
rules.

Labor laws(e.g. Labor Standards Act)• Excessive overtime without
supervisor approval• Power harassment• The lack of a safe and hygienic
working environment

Foreign Exchange andForeign Trade Act• Illicit acquisition and use ofanother company’s trade secret• Leakage of a Denka trade secretfor illicit use by another company• Unlicensed export of goods namedin the list of regulated items• The provision to non-residents oftechnologies named in the list of
regulated technologies

List of Risks and Locations of Articles Describing Our Response
Category

Detail of risks

Page number of articles

Business management

Risks associated with the execution of the management planand financial strategies

pp. 13-16 Interim Review of the Management Plan
pp. 41-48 Corporate GovernanceCrisis management

The novel coronavirus pandemic

p. 8 Review of Fiscal 2020 Operating Results

Environmental management

Climate change, abnormal weather, marine plastics and otherpressing issues calling for environmental pollution
countermeasures

pp. 23-28 Promotion of Environmental Management, Our
Policies on the Prevention of Environmental Pollution,
Our Carbon Neutrality Target and Response to the TCFD
Recommendations

HR strategy

Risks associated with securing and nurturing humanresources, health & productivity management, labor
management, workplace harassment and other humanrights-related issues

pp. 29-30 Human Resource-Related Initiatives

Accidents and disasters

Risks associated with security and disaster prevention as wellas occupational safety and healthp. 32 Placing the Utmost Priority on Safety

Quality and product liability

Risks associated with product safety and quality management

p. 31 Safety Assurance Management

Legal violation and compliance

Risks associated with Group governancep. 47 Management Risk Analysis and Response

Information systems andsecurity

Risks associated with system security and the promotion of DX

p. 46 Strengthening Groupwide ICT GovernanceIntellectual property (IP)protection and privacy
information

Risks associated with the protection of IP and privacy
information

Denka’s corporate website: Privacy Policy
ESG information website: Protection of Intellectual
Property Rights

Export control

Risks associated with security trade and export control

ESG information website: Security Export Control

Individual businesses

Fluctuations in raw material market prices and exchange rates,
supply chain disruption, the growing need to adapt to changes
in the business environment, delays in R&D activities and a
failure to maintain pace with technological innovation

pp. 33-40 Business Strategies / SWOT Analysis

ESG information site: Corporate Governance https://denka_sustainability.disclosure.site/en/themes/658
Denka Report 2021 Integrated Report

Unfair Competition
Prevention Act

General Meeting of Shareholders: https://www.denka.co.jp/ir/fact_04/ (Japanese only)47

Corporate Information /Management Resources

Corporate Governance

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
SocialGovernance Contributions

Financial
Summary

Initiatives Being Undertaken Thus Far to Improve Corporate Governance
The Denka Group considers robust corporate governance to be fundamental to earning the trust and support of stakeholders and improving its corporate value. Accordingly, we strive to secure management transparency
and soundness and thereby enhance corporate governance.
Purposes

2007

2008

2015

2016

2017

2019

Initiatives

Speed up decision making

Halved the number of directors while introducing an executive officer system

Ensure that all directors who supervise and monitor business execution engage with their peers on equal footing at
Board of Directors meetings

Abolished senior managing and managing director positions

Secure clear functional separation between those charged with business execution and those charged with monitoringand supervision

Delegated executive authorities and positions from directors to executive officers

Flexibly assess the adequacy of each director

Shortened the term of office for directors to one year

Ensure stringent supervision of the Company’s operations by incorporating external perspectives

Appointed two outside directors, securing a total of four external individuals, including the mandatory two outside Audit & Supervisory
Board members, for overseeing Denka’s management

Provide robust opportunities to interact with each other outside Board of Directors meetings to develop a structure
enabling directors to contribute meaningful insights

Made it a rule to hold periodic meetings in which outside directors exchange opinions with top management

Improve authorization process to realize faster decision making by facilitating in-depth discussion focused on importantmanagement matters

Established the Management Committee, consisting of in-house directors and in-house members of the Audit & Supervisory Board aswell as some executive officers

Enhance the governance structure to improve management transparency and soundness

Increased the number of outside directors from two to three while decreasing the prescribed number of overall directors by two

Create opportunities for in-house and outside directors and in-house and outside members of the Audit & Supervisory
Board to engage in constructive discussion, help them freely exchange frank opinions and facilitate information sharing
and closer collaboration

Decided to hold monthly exchange meetings for all directors and Audit & Supervisory Board members, stepping up the previous
practice of holding biannual exchange meetings for these individuals

Optimize corporate governance aimed at securing sustainable growth and a medium- to long-term improvement incorporate value

Established the Denka Corporate Governance Guidelines

Facilitate the understanding of Denka’s operations and invigorate discussion at Board of Directors meetings

Enhanced the content of prior briefings on individual agenda items requiring closer explanation for outside directors and outside Audit &Supervisory Board members

Help outside directors and outside Audit & Supervisory Board members exchange their insights and share theirunderstanding of the status of Denka’s operations

Decided to hold the Outside Director Liaison Meetings on a quarterly basis

Facilitate the understanding of Denka’s short-, medium- and long-term policies on business operations and R&D

Decided to hold the biannual Strategy and R&D Policy Presentation Meetings (now the Policy Presentation Meetings) for outside
directors and outside Audit & Supervisory Board members

Help the Board of Directors ensure robust auditing of and supervision over business operations being executed byexecutive officers

Clarified the content of meeting handouts on agenda items and reporting materials distributed at Board of Directors meetings

Enhance the effectiveness of the Board of Directors

Instituted the annual evaluation of the Board of Directors’ operations to assess their effectiveness with the involvement of all directors
and all Audit & Supervisory Board members while making it a rule to disclose its findings via the Corporate Governance Report

Ensure that outside directors and outside Audit & Supervisory Board members contribute diverse opinions and advice
to the Board of Directors with regard to such governance issues as director nomination and remuneration as well asother important management matters, with the aim of securing the fairness and objectivity of management judgment

Established the Management Advisory Committee attended by all outside directors, all outside Audit & Supervisory Board members,
the Chairman and the President & CEO
Monthly exchange meetings for all directors and Audit & Supervisory Board members were formally named the D&A Round Table
meetings

Appoint directors with concurrent membership in the Audit Committee to speed up decision making while strengthening
the Board of Directors’ supervisory functions, with the aim of improving corporate governance and achieving growth incorporate value

Transitioned from a Company with an Audit & Supervisory Board to a Company with an Audit Committee

The Management Advisory Committee was renamed the Nomination and Remuneration Advisory Committee

2021

Revise conventional in-house rules allowing former Chairmen and Presidents to serve as advisors after retirement

Abolished advisor positions

Clarify roles fulfilled by the Board of Directors and the executive team while further enhancing the effectiveness of theformer’s discussion and its capabilities for speedy decision making

Decreased the number of directors from 12 to nine while increasing outside directors so that they make up more than 44% of the Board
membership

ESG information site: Corporate Governance https://denka_sustainability.disclosure.site/en/themes/658
Denka Report 2021 Integrated Report

General Meeting of Shareholders: https://www.denka.co.jp/ir/fact_04/ (Japanese only)48

Corporate Information /Management Resources

Social Contributions

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

SocialCorporate
Governance Contributions

Financial
Summary

The Denka Group aims to become a company that is genuinely needed by society and, to this end,
proactively works hand in hand with other members of society in various ways to contribute to sound andsustainable social development.
Contribution to Local Communities

Initiatives to Support the Restoration and Reconstruction ofCommunities Hit by the Great East Japan Earthquake
Denka’s Disaster Reconstruction Support Division is engaged in projects aimed at facilitating reconstruction efforts under way inregions affected by the Great East Japan Earthquake. Specifically, the division provides products and solutions to assist in suchendeavors as the resumption of farm operations, the strengthening of expressway infrastructure and the construction of cutting-edge
research facilities.
Main Initiatives

Accomplishments and Spillover Effects● Restoration and reconstruction of roads, tunnels and buildings (viathe provision of special cement additives) as well as farmland (via theprovision of soil improvers, fertilizers and underground drainpipes)● Contribution to the restoration, reconstruction and revitalization plans
led by Japan’s Reconstruction Agency via the provision of Denka
Group products● Recycling of sludge from municipal water supply and sewage
treatment facilities as raw materials and fuel for use in cement
production● Creation of the tsumugu rice wine brand using rice produced in
Minami Sanriku-cho through interaction with local farmers● Dispatching a cumulative total of 900 volunteer employees, for a totalof 82 rounds of relief activities carried out in disaster-hit communities

An elevated bridge made using Denka’s special cement additives supports
the Tohoku Bullet Train Line (Fukushima Prefecture)

Fulfilling Our Responsibilities as a Corporate Citizen

Resumption of Diethyl Malonate Production
Upon the request of the Japanese government, we revived our production lines for diethyl malonate, which had lain dormant forthree years, to provide one of the raw materials for an anti-influenza virus drug expected to help treat novel coronavirus infection. As
a result, we supplied the diethyl malonate needed to increase the stockpile of the medicine by an amount equivalent to dosages forapproximately 2 million patients.

Accomplishments and Spillover Effects● Completed the mission by rallying a cumulative total of 200 in-house project members with the full cooperation of our suppliers and other externalbusiness partners● All those involved in the project, acting upon a shared sense of mission, learned the significance of social contribution that can be made via thepower of chemistry

The first shipment of diethyl malonate after production resumed (the Omi Plant)

ESG information site: Social Dialogue and Partnership https://denka_sustainability.disclosure.site/en/themes/661
Denka Report 2021 Integrated Report

49Corporate Information /Management Resources

Financial Summary

Value
Creation

Employee Happiness
Environmental / Human ResourceRelated Initiatives
Strategies

Quality and
SafetyBusiness
Strategies

Corporate
Governance

Financial
Summary

SocialContributions

Denka’s 11 Year-Financial Summary
Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Summary Statement of Income (Millions of yen)
Net sales

Operating income
Ordinary proﬁt

Proﬁt attributable to owners of parent
Equity in earnings (losses) of afﬁliates

354,391

357,893364,712

341,645376,809

383,978

369,853

362,647

395,629

413,128

380,803

24,61820,713

18,817

21,23024,04730,63425,84433,652

34,22831,587

23,052

18,996

17,82420,60424,28727,022

23,15831,49932,81130,034

14,355

11,330

11,255

13,57319,021

19,472

18,14523,03525,04622,703

1,189

966

530

550

950

1,097

568

1,105

1,384

1,170

933

143,352

153,637

158,595

164,747

170,497

161,876

168,902

184,129

190,730

198,452

200,726

402,046

402,552

415,356

431,347445,569

443,864

454,944473,799483,827

501,448

153,410

160,676

170,752

163,645

160,101

147,537

144,190

158,043

154,047

160,807

168,182

172,737

180,709

189,516

210,798

216,071

227,487242,780

250,481

254,014

114,562

118,049

114,241

120,669

122,536

124,596

113,748

108,269

112,134

134,340

34,72932,14322,785

Financial Position (Millions of yen)
Current assets
Total assets

Current liabilities
Net assets

Interest-bearing debt

526,035
155,062
270,036
138,191

Cash Flows (Millions of yen)
Cash ﬂows from operating activities

33,78028,521

40,21527,24535,55744,01439,557

48,776

32,66041,954

Cash ﬂows from investing activities(23,763)(22,363)(25,864)(26,693)(27,449)(34,979)(22,258)(29,298)(26,176)

Cash and cash equivalents at end of year

(10,554)
6,160(4,050)8,207(12,784)
10,680(3,327)
8,244(7,437)
9,157(7,348)
11,813(19,319)
10,174(15,858)
14,101(8,408)13,889(36,303)
9,544

Cash ﬂows from ﬁnancing activities

29,17040,610(36,976)(6,706)25,909Per share information (Yen)Dividends per share*
Proﬁt per share

Net assets per share

125.0

50.0

50.0

50.0

50.0

62.5

65.0

70.0

105.0

120.0

125.0

146.20116.11

118.13145.16207.40214.71205.05261.80286.18262.62

1,686.73

1,768.20

1,884.96

2,013.84

2,279.70

2,366.74

2,526.42

2,727.94

2,839.16

2,906.95

3,101.92

9.8

264.24

Financial Indices (%)
Operating income ratio

6.9

5.7

5.5

5.6

6.3

8.3

7.1

8.5

8.3

8.3

ROE

8.9

6.7

6.4

7.4

9.6

9.3

8.3

10.0

10.3

9.1

ROA

5.8

4.7

4.4

4.9

5.5

6.1

5.2

6.8

6.9

6.1

Shareholders’ equity ratio

41.2

42.3

43.1

43.5

46.9

47.7

49.1

50.5

51.0

50.0

50.8

Capital investment (millions of yen)

21,32522,87826,96425,73521,30021,19625,731

22,71032,74534,20542,323

Depreciation and amortization (millions of yen)

22,292

23,192

21,58522,25423,032

23,242

24,35924,59922,94622,482R&D expenses (millions of yen)

9,819

10,63910,605

10,828

11,127

11,787

13,026

13,86814,562

15,031

Number of employees at end of year

4,768

4,921

5,206

5,249

5,309

5,788

5,816

5,944

6,133

6,316

8.8
6.3

Other

Management Plans

Denka’s main achievements

Environmental developments

DENKA 100 (fiscal 2007 – fiscal 2012)● Established theShanghai Representative
Office● European debt crisis● Great East Japan Earthquake

Resumption of DENKA 100 (ﬁscal 2013 ‒ ﬁscal 2017)● Completed the

Denka Innovation
Center main building● Changed company name● Established Denka Performance Elastomer LLC● Consumption tax hike (to 8%)

Note: Figures for ﬁscal 2017 and later are modiﬁed in accordance with the Partial Amendments to Accounting Standard for Tax Effect Accounting (Accounting Standards Board of Japan (ASBJ) Statement No. 28 issued in February 2018).
* The Company executed a reverse share split that merged ﬁve shares into one share as of October 1, 2017. As we aim to support easy-to-understand comparisons between performances in each ﬁscal year, the value of dividends per share forpreceding ﬁscal years has been retrospectively converted to reﬂect the value of dividends had the reverse share split already been in effect. In addition, dividends per share for ﬁscal 2014 comprise: (1) full-year dividends per share of ¥52.5 (¥10.5
per share prior to conversion); and (2) commemorative dividends per share of ¥10.0 per share (¥2.0 per share prior to conversion).

Denka Report 2021 Integrated Report● Celebrated the centennial of the Company’s founding

22,911
14,736
6,351

Denka Value-Up● Hit a record

high in profit● Signing of the Paris Agreement● Inauguration of U.S. Trump administration● Achieved record-high profit

for a second consecutive year

● Consumption tax hike (to 10%)
● U.S.-China trade tension● Inauguration of U.S.

Biden administration● Novel coronavirus pandemic

IR Information https://www.denka.co.jp/eng/ir

50

■ Inquiries
Corporate Planning Dept., Denka Company Limited
TEL. +81-3-5290-5510
FAX. +81-3-5290-5149
Nihonbashi Mitsui Tower, 1-1, Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8338, Japane-mail: denkareport@denka.co.jp

https://www.denka.co.jp/eng/