Denka Group CSR REPORT 2016

Denka GroupCSR REPORT

2016
Denka Company Limited

www.denka.co.jp/eng

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Published in November 2016 by Denka Co.‚ Ltd.

Denka’s Corporate Philosophy

CONTENTS

Now in the 101st anniversary year since its founding, Denka has established “The Denka Value,” a corporate
philosophy serving as the cornerstone of its business activities for the next 100 years. Looking ahead, the Denka
Group will take on the challenge of expanding the possibilities of chemistry, thereby living up to the expectations
and earning the trust of society.

Denka’s Corporate Philosophy........................................... 2
To Our Stakeholders.......................................................... 4
Business Overview ........................................................... 6
Special Feature
Denka’s Healthcare-Related Operations ........................ 8
CSR Management
Denka Group’s CSR ..................................................... 10

The Denka Value(Corporate Philosophy)

Local Communities
Engaging with Society................................................. 14
Revitalizing Local Communities by Promoting
Sports Activities .......................................................... 16

The Denka Value consists of the Denka Mission, which represents
our uppermost mission statement, and the Denka Principles, a set ofprecepts guiding actions taken by every Group employee.

SafetyOur Initiatives to Maintain Safe Operations .................. 18

The Denka Mission

The Denka Principles

Environmental Conservation
Caring for the Global Environment ............................... 20
Initiatives to Secure Our Electricity Supply .................. 22
Resource Recycling through Cement Production ......... 23

Taking on the challenge of expanding thepossibilities of chemistry to create new value
and contribute to sound social development.

Engaging with Our Stakeholders
Human Resource Development ................................... 24
Developing Comfortable Workplaces ........................... 26
Quality Management: Working with Our Supply Chain ... 28
Engaging with Shareholders ....................................... 29

We:
1. Boldly confront challenges with determination and sincerity.
2. Think and take action today with the future in mind.

GovernanceCorporate Governance ................................................ 30
Dialogue between Outside Directors ........................... 32

3. Deliver new values, and inspire customers through innovative
monozukuri.*
4. Respect the environment and create a cheerful workplace thatprioritizes safety.

Our Business Strategies
Denka100 New Growth Strategies .............................. 34
Elastomers & Performance Plastics ............................. 36
Infrastructure & Social Solutions ................................. 38
Electronics & Innovative Products ............................... 40
Life Science & Environmental Products ....................... 42
Denka’s R&D Activities ................................................ 44
Creating Shared Value (CSV):How Denka Products Help Resolve Social Issues ......... 46

5. Contribute to a better society, whilst taking pride in being a trusted
corporate citizen.
*Japanese-style craftsmanship

The Corporate Slogan“Possibility of chemistry.”
We established this slogan to summarize our corporate philosophy

Site Reports Summary
Japan ......................................................................... 50
Overseas .................................................................... 52

and to convey it to the general public more effectively.

Our CSR Initiatives Overseas ............................... 54
Third-Party Opinion ................................................. 55

Main Points of the 2016 Edition
1. Healthcare-related operations, one of the Group’s key priority fields, areoutlined in “Special Feature (pages 8 to 9).”
2. Showcasing CSR management, the current status of our CSR
promotion structure, which grew from Responsible Care activities, isdiscussed (pages 10 to 13). Also featured is a dialogue among outside
directors, whose number was increased to three in June 2016 with theaim of enhancing corporate governance (pages 32 to 33).
3. Focusing on communication with local communities, our initiatives
to support the NIIGATA Albirex BB Rabbits are introduced as ademonstration of our commitment to revitalizing local communities
through sports activities. This section features interviews with Mr.
Shunya Nagasaki, the director of NIIGATA Albirex who is in charge of
the BB Rabbits, and Ms. Chikako Umeki, the captain of the team, who
concurrently serves as a Denka Seiken employee (pages 16 to 17).
4. To present the Denka Group’s vision for future business creation, we
have included an interview with the managing executive officer incharge of R&D (pages 44 to 45).

Other Reporting MediaThis CSR Report is issued as a printed brochure and online via our
corporate website (digital book and PDF formats). Also provided online areassociated references and Site Reports (digital book and PDF formats).
Descriptions of “The Denka Group’s Environment-Friendly Products andTechnologies,” which had been included in previous web-based CSR
Report references, have been incorporated into the 2016 edition of printed
CSR Report brochure and re-titled “Creating Shared Value (CSV): How
Denka Products Help Resolve Social Issues” (pages 46 to 49).
The Site Reports, which showcase CSR activities undertaken by theGroup’s production and R&D sites around the world, include the newly
added manufacturing and research facilities: Denka Performance Elastomer
LLC (U.S.A.); Icon Genetics GmbH (Germany); Denka Advanced Materials
Vietnam Co., Ltd. (Vietnam); Denka Infrastructure Malaysia Sdn. Bhd.
(Malaysia); Denka Inorganic Materials (Tianjin) Co., Ltd. (China); and Denka
Electronics Materials Dalian Co., Ltd. (China).

Coverage

Website-Only Content

Fiscal 2015 (April 1, 2015, through March 31, 2016) in principle; this report
includes additional information on some initiatives undertaken subsequent
to the fiscal 2016 year-end while presenting data on numerical targets forand performance statistics from the past several fiscal years.

For CSR reporting, Denka utilizes both printed booklets and online referencesthat are prepared in digital book and PDF formats and posted on its website.
While the former present the latest examples of Denka’s initiatives aimed
at achieving sustainable growth, the latter cover information on its longstanding CSR activities. In addition, the Global Reporting Initiative (GRI)
Content Index is attached to the web-based references to the Denka GroupCSR Report 2016
Please see also Site Reports (posted on the website in digital book and
PDF formats) for detailed information on each business site and affiliate.
http://www.denka.co.jp/eng/sustainability/

Scope
Unless stated otherwise, performance statistics presented in this reportencompass the business sites of Denka and key affiliates listed below.
●Business sites: Six production sites (Omi, Omuta, Chiba, Shibukawa,
Ofuna and Isesaki) and four R&D institutes (the Advanced
Technologies Research Institute, the Life Innovation
Research Institute, the Infrastructure & Solutions
Development Research Institute at the Denka Innovation
Center and the Polymer & Processing Technology Institute)●Key affiliates:
Denal Silane Co., Ltd. and Denak Co., Ltd. at the Omi
Plant as well as TOYO STYRENE Co., Ltd., and Taiyo
Vinyl Corporation at the Chiba Plant

Guidelines●The G4 Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI)

Inquiries:
CSR & Corporate Communications Dept.
Denka Company Limited
TEL. +81-3-5290-5511
FAX. +81-3-5290-5149
Nihonbashi Mitsui Tower, 1-1, Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8338, Japan
www.denka.co.jp/eng●The Environmental Reporting Guidelines 2012 of Japan’s Ministry of the Environment2

Denka Group CSR Report 2016

Denka Group CSR Report 2016

3

To Our Stakeholders

Striving to Realize “The Denka Value”—
Our New Corporate Philosophy—We Are
Furthering the Development of Society
by Delivering the Greater Possibilities ofChemistry

Shinsuke Yoshitaka
President & CEO
Denka Company Limited

1. Initiatives to Support Areas Affected by the
Kumamoto and Great East Japan Earthquakes
We would like to express our deepest condolences to those
who have lost loved ones in the April 2016 Kumamoto
Earthquake in southern Japan while extending our sincere
sympathy to all those affected by the disaster.
At present, Denka is dispatching and supporting
employee volunteers consisting mainly of staff from the Omuta
Plant, which is situated near the area that bore the brunt of
the earthquake. We are truly appreciative of the support local
communities have lent our day-to-day operations over theyears and are determined to do our utmost to reciprocate bysupporting those who have suffered from this disaster.
Up north, we continue to dispatch employee volunteers
to Minami Sanriku-cho, Miyagi Prefecture, which wasdevastated by the 2011 Great East Japan Earthquake.
Having begun dispatching volunteers to the region as soon
as the earthquake struck, we have been strongly backing theefforts of employees who aspire to support the victims of thisunprecedented disaster.
We sincerely wish for the earliest possible recovery ofthese devastated areas.

2. Review of Our Fiscal 2015 Operations
In 2015, Denka celebrated the centennial of its founding. I
would like to once again express my wholehearted gratitude
to our stakeholders because this accomplishment was only
possible due to their support and cooperation.
In fiscal 2015, Denka marked record-high results in termsof operating income, ordinary profit and profit attributable toowners of the parent. This was attributable to the depreciationof the yen, falling oil and raw material prices and othereconomic factors as well as the success of its proactive
marketing efforts and exhaustive scrutiny of cost elements.
As we embarked on fiscal 2016, however, the outlook
grew unclear due to the appreciation of the yen, the slowdownof growth in such emerging economies as China and the
expected fallout from “Brexit”—the U.K.’s decision to leave theEuropean Union.

4

Denka Group CSR Report 2016

Nevertheless, we are striving to achieve further growthover the next 100 years and, to this end, are strengthening
our business foundation by transforming our corporate
culture, executing organizational reforms and implementing
the Denka100 management plan growth strategies. In theseways, we are building a stronger operating base that isresilient to change in the management environment.

New Corporate Culture and Organizational Reforms
We have changed our company name to Denka Company
Limited as part of initiatives to transform our corporate culture
and promote organizational reforms. At the same time, weestablished “The Denka Value,” a corporate philosophy
serving as the cornerstone of all our business activities, while
formulating such principles as the Basic Policy for Workplace
Safety, Health, Security and Disaster Prevention and the
Denka Corporate Governance Guidelines. These reform
initiatives have been of significant importance to our efforts tobuild a more robust business foundation.
In particular, “The Denka Value” is intended to serve thekey driver of our reform initiatives. With the establishment of
this philosophy, we have identified “Taking on the challenge of
expanding the possibilities of chemistry to create new value
and contribute to sound social development” as the Denka
Mission. Moreover, we have laid out the Denka Principles,
a set of precepts every employee should refer to when they
think about what must be done to fulfil this mission and what
constitutes our responsibilities and future vision.
Meanwhile, we formulated the Basic Policy for Workplace
Safety, Health, Security and Disaster Prevention. We havealso created the safety slogan “Placing the utmost priority on
safety, let us strictly comply with rules and decisively makenecessary changes!” in conjunction with the launch of the new
Safety Promotion Meeting. We are thus stepping up our safetyassurance activities on a Groupwide basis. Based on lessons
learned from the two major accidents that emerged at theOmi and Chiba plants in 2013, we are steadily implementing
hazard prediction initiatives at each worksite while addressing
potential points of danger. In this way, we are working together
toward the elimination of all accidents and disasters—ourultimate goal in this pursuit.

New Growth Strategy Initiatives
In line with the Denka100 management plan, the final
year of which has been set at fiscal 2017, we have been
implementing a number of initiatives.
Having carefully scrutinized every cost element, we haverealized significant cost reductions by improving production
efficiency and reducing resource and energy consumption. In
particular, the Chiba Plant was able to streamline its utilities
usage, thereby achieving considerable reductions in theenvironmental impact of its operations.
To create the most optimal production system, we haveestablished a more robust chloroprene rubber production
network based on two locations in Japan and the UnitedStates. We also launched an overseas base for promoting thespecial cement additive business in China and Southeast Asia.
Furthermore, we have downsized the ABS resin production
facilities at the Chiba Plant.
Focusing our management resources on new growth
drivers and the development of next-generation products,
we stepped up healthcare-related operations in Japanand overseas, placing priority on disease prevention andhealth promotion. Simultaneously, we formed a matrixtype organizational structure for the development of nextgeneration automotive materials and relevant solutions.
In addition, efforts are now under way to promote open
innovation to drive R&D undertaken at the Denka Innovation
Center.
These are but some examples of our key initiatives
undertaken as part of our new growth strategies.

3. Our Sustainability Initiatives
In September 2015, the United Nations General Assembly
adopted Sustainable Development Goals (SDGs) toward
2030, while in December, the 21st Conference of the Parties,
or COP21: The 2015 United Nations Climate Change
Conference, agreed to introduce a priority target framework
for countering global warming. As such, 2015 was a milestone
year amid an international trend toward sustainability
strategies.
Because Denka uses resources and energy to manufacturechemical products, the reduction of environmental burdens
attributable to its production activities should be the Company’s
foremost goal. Moreover, Denka’s existence as a going concern
is dependent on its continued ability to contribute to thesustainable development of society through manufacturing
operations. Having positioned the environment, energy,
infrastructure and healthcare as priority areas of focus for
management resources, we are well aware of the fact that manyof society’s pressing challenges lie in these fields, just as theaforementioned SDGs suggest. With this in mind, we will tackle
these challenges by identifying areas where Denka can maximize
its strengths. In this way, we will expand the possibilities ofchemistry and create new value.

4. To Our Shareholders
The enactment of Japan’s Stewardship Code and Corporate
Governance Code has drawn investors’ attention to ESG(environmental, social and governance) investment criteria. To

continue to earn the trust placed in us by our shareholders,investors and all other stakeholders, we will step up corporate
governance and information disclosure while implementing
our Policy on Shareholder Returns, which we established infiscal 2014.

5. Employee Happiness and Diversity Promotion
Corporate growth is dependent on the personal growth ofworkers. Therefore, an essential part of our overall growthstrategy is the creation of a working environment in which
every employee can happily engage in rewarding tasks while
being free to develop his or her potential. Given the low
domestic birth rate and the graying of Japan’s society, Denka
recognizes that there are many things the Company can do
to support those who take on the challenges of child rearing
and providing nursing care for family members. In particular,
we are focusing on developing a workplace where younger
staff and women can achieve success, thereby helping strikea healthy work-life balance and realizing employee happiness.
On the back of an increasingly globalized businessenvironment, we believe that nurturing a diversity-oriented
corporate culture is becoming ever more important.
Understanding the challenges attributable to cultural ororganizational differences, we will undertake the diversity
initiatives that we see as key to successful global expansion.
Specifically, we will recruit a growing number of foreign
nationals while actively dispatching younger employees
overseas. We will thereby nurture a new generation of
Denka staff capable of driving business based on a global
perspective.

6. The Future of Denka
Denka’s corporate culture is centered on being sincere in its
dealings as it strives to fulfill customers’ expectations andmaintaining a determined and unwavering attitude as it tackles
and resolves the challenges before it. This corporate culture
informs our strong awareness of the importance of precise
quality maintenance and stable product supply. And this isexactly the source of Denka’s strength. We believe that thiswill be our key competitive edge enabling us to blaze a newpath in the face of a globalized business environment andrapidly changing market needs.
Drawing on this strength, we will go on to facilitate an
ambitious business approach that takes on challenging targets
by rallying Groupwide efforts. I am confident that Denka’s
technologies, which have been attuned to meet needs ineach of its areas of specialty, will provide the solutions needed
to resolve the challenges society is now confronting. As
our corporate slogan “Possibility of chemistry.” asserts, wehave committed ourselves to meeting society’s expectations
through such pursuit.
Guided by “The Denka Value” corporate philosophy, all
Denka Group members will work as one to contribute to thewell-being of people and sound development of society by
expanding the possibilities of chemistry and creating new value.
We sincerely ask for your ongoing support for our Group
operations.

Denka Group CSR Report 20165

Business Overview

Corporate Profile (as of October 1, 2016)

Denka’s Business Operations

Name

Denka Company Limited

Paid-in Capital ¥ 36,998,436,962 (as of March 31, 2016)

EstablishedMay 1, 1915

Employees

Business
Sites

Head OfficeNihonbashi Mitsui Tower, 1-1, Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8338, Japan
Tel: +81-3-5290-5055

PlantsOmi (Itoigawa, Niigata), Omuta, Chiba (Ichihara, Chiba and Bibai, Hokkaido),
Shibukawa, Ofuna (Kamakura, Kanagawa), Isesaki (Isesaki and Ota, Gunma)

Branches
Osaka, Nagoya, Fukuoka, Niigata, Hokuriku (Toyama), Sapporo,
Tohoku (Sendai)
Sales Offices
Nagano, Gunma (Takasaki), Akita, Hiroshima, Shikoku(Takamatsu)
Research Institutes
Denka Innovation Center [Advanced Technologies ResearchInstitute, Life Innovation Research Institute, Infrastructure &Solutions Development Research Institute] (Machida, Tokyo)
Polymer & Processing Technology Institute (Ichihara, Chiba)
Net Sales (consolidated)/Overseas sales ratio■ Consolidated net sales(Billions of yen)
400

364.7

341.6

384.0

300

36.3

369.9

Major Affiliates
Denka Polymer Co., Ltd. (Koto-ku, Tokyo)
Denka Seiken Co., Ltd. (Chuo-ku, Tokyo)
CRK Co., Ltd. (Takasaki, Gunma)
Hinode Kagaku Kogyo (Maizuru, Kyoto)
Denka Azumin Co., Ltd. (Hanamaki, Iwate)■ Consolidated operating income(Billions of yen)
40

35

30

30

20

0

27.7

25

10

11

12

Denka’s
Overseas Expansion

13

14

15

20
(FY)

● Regional headquarters

0● Manufacturing bases

Operating income ratio
(%)
12

30.6
20.7

18.8

30.3
100

5.7
11

5.5
12

● Sales bases

21.2

24.0
8.3

5.6

Germany

Main products• Electronic circuit substrates • Fused silica• Fine ceramics • Electronic packaging materials• Functional adhesives

Topic

DENKA BLACK Li

13

14Life Science & Environmental Products

Topic

8

● R&D bases

Topic

TOYOKALON

Denka became the first in the world to commercialize
polyvinyl chloride (PVC) synthetic fiber. Having branded
it TOYOKALON, Denka has been supplying this productas a material for wigs and hairpieces, thereby garnering
worldwide reputation for its superior quality, with the
African continent and the United States constituting
primary markets. Employing a manufacturing system
supported by facilities in two locations, namely, Japan andSingapore, Denka will step up the supply of high quality
products targeting the African market, where demand is
expected to grow further.

Denka Inorganic Materials (Tianjin) Co., Ltd.
Denka Electronics Materials Dalian Co., Ltd.

Denka Chemicals Shanghai Co., Ltd. BEIJING BRANCH

Domestic Bases●R&D bases Denka Innovation Center
Polymer & Processing Technology Institute●Plants

Denka China Representative OfficeDenka Chemicals Development Suzhou Co., Ltd.
Denka Advanced Materials (Suzhou) Co., Ltd.
Denka Chemicals Shanghai Co., Ltd. GUANGZHOU BRANCH

An example of products made of TOYOKALON“Film Farming” is the world’s first plant cultivation
technology to utilize hydrogel membrane. In the faceof growing public concerns over food safety, water
shortages and soil contamination, Denka has initiatedthe marketing of a cutting-edge plant cultivation system
based on this technology. Fully leveraging its longexperience in the fertilizer business and accumulated
product development know-how, Denka will strengthen
its agriculture-related operations while pushing forwardwith new business development.

Denka Korea Co., Ltd.

Dubai

All around the world, DENKA Thermo Film is widely used
as a carrier tape for electronic components. Supplying avariety of product grades for various applications, Denka
is striving to capture growing demand in China, Southeast
Asia and other countries overseas. Specifically, having
established a new plant in Vietnam, Denka is promoting
local production and thereby creating an optimal
production system.

Main products• Food packaging materials • Housing materials• Industrial materials • Pharmaceutical products

Film Farming

4
(FY)

15

Topic

DENKA Thermo Film

DENKA BLACK Li is acetylene black used as conductive
aid for lithium-ion secondary batteries (LiBs). Aiming tomeet growing market demand associated with these andsimilar products, Denka is striving to boost its capacity tosupply safe and highly functional conductive materials. To
this end, the Chiba Plant launched a dedicated acetylene
black production facility capable of eradicating foreign
matter content to the greatest possible extent. Denka isthus contributing to the advance of LiB performance.

10

6

6.3

China

Denka Chemicals GmbH
Icon Genetics GmbH

Main products• Chloroprene rubber • Acetylene black• Styrene monomer • ABS resin• SBC resin • Polyvinyl alcohol

Infrastructure & Social Solutions

(%)
40

37.5

Electronics & Innovative Products

Main products• Calcium cyanamide fertilizer • Calcium carbide• Fire resistant materials • Cement • Special cement additives• Water piping for agricultural and civil engineering use

Operating Income (consolidated)/Operating Income Ratio

33.5

200

Consolidated: 5,788 Non-consolidated: 2,974(As of March 31, 2016)

Overseas Subsidiaries & Offices
New York, California, Louisiana, Düsseldorf, Halle (Germany), Singapore,
Malaysia, Indonesia, Vietnam, Shanghai, Beijing, Guangzhou, Suzhou, Hong
Kong, Tianjin, Taiwan, Seoul and Dubai

Overseas sales ratio

376.8

Elastomers & Performance Plastics

Japan

Denka Chemicals Shanghai Co., Ltd.
Denka Infrastructure Technologies Shanghai Co., Ltd.

Omi Plant

Omuta Plant

Chiba Plant

Shibukawa Plant

Ofuna Plant

Isesaki Plant

Major affiliates (manufacturing-related)
Denka Polymer Co., Ltd.

Denka Seiken Co., Ltd.

CRK Co., Ltd.

Hinode Kagaku Kogyo Kaisha Ltd.

USA
Denka Corporation
Denka Corporation-California OfficeDenka Performance Elastomer LLC
Denka Corporation-Louisiana OfficeDenka Azumin Co., Ltd.

Denka Middle East and Africa FZE
Denka Advanced Materials Vietnam Co., Ltd.

Vietnam
Malaysia

Denka Infrastructure Malaysia Sdn. Bhd.

Denka Taiwan Corporation
Denka Chemicals Hong Kong Co., Ltd.

Singapore
Denka Advantech Pte. Ltd. Tuas Plant
Denka Advantech Pte. Ltd. South Plant

PT ESTOP Indonesia

6

Denka Group CSR Report 2016

Denka Chemicals Holdings Asia Pacific Pte. Ltd.
Denka Singapore Pte. Ltd.

Denka Singapore Private Limited Seraya Plant

Denka Advantech Pte. Ltd.

Denka Singapore Private Limited Merbau Plant

Denka Infrastructure Technologies Pte. Ltd.

Denka Group CSR Report 20167

Special
FeatureDenka’s Healthcare-Related Operations

Contributing to the Advance of Medical Technologies as an Innovatorin theShift toward Prevention through Early Diagnosis

As the core Group company in the field of healthcare, Denka
Seiken Co., Ltd. has been manufacturing a variety of vaccinesand diagnostic reagents since the 1950s. Denka itself has
long been producing a macromolecular sodium hyaluronate
preparation through fermentation. Having thus accumulated
strengths in biotechnologies as well as extensive experienceand a strong track record over its more than 65 years in
the healthcare field, the Denka Group is positioned to offer
comprehensive assistance to medical specialists on a numberof fronts ranging from illness prevention, health examinationand disease diagnosis to treatment.
In particular, products utilizing antigen, antibody andenzyme reactions account for more than 90% of Denka
Seiken’s net sales. This is thanks to the subsidiary’s unique
technological strength in the handling of proteins and an
extensive library of infectious bacteria and viruses, which
together place it in an advantageous position over domestic
and overseas competitors with regard to the vaccine anddiagnostic reagent business. In addition, Denka possesses
a unique fermentation technology for producing hyaluronateacid for such medical applications as the improvement of joint
function.
Denka’s Core Competencies in the Healthcare Field
Accumulation ofTechnologies and Resources
Vaccines

Bacteria and virus library

Bacteriological diagnostic reagents
A network of external researchers

Virological diagnostic reagents
Biochemical diagnostic reagents

1950

Technologies to control antigen
and antibody reactions

Immunochemistry diagnostic reagents

Technologies to produce
monoclonal antibodies

Hyaluronate acidTechnologies to cultivate
bacteria and viruses

POCT

Technologies to purify
bacteria and viruses

1960

1970

1980

1990

2000

promotion, have a central role to play in answering the needsof the healthcare industry around the globe. We have thus
positioned providing these solutions as our mission.
Shift in Healthcare Needs around the World from Treatment to Prevention
and Early Diagnosis
Surging medical
expenses and growing
medical inequities(Graying society and increasing
application of sophisticatedmedical technologies)

Growing threat of pandemic(Development of emerging nations
and advances in global transport)

Shift from a conventional treatment-orientation to a focus on infectious disease
countermeasures, including prevention and early diagnosis
Our vaccines and diagnostic reagents play a key role in meeting the latest healthcare needs

Expanding into New Business Fields

3. Strengthening Our Operating Foundation
Our healthcare-related
operations employ wideranging technologies. Due tothe rapid nature of technologicala dv a nc e m e nt i n thi s fi e l d,these operations must be
highly responsive; therefore,
we proactively utilize an open
innovation approach to R&D.

・2 0 1 4 E s t a b l i s h e d t h e L i f eInnovation Research Institute ❶・2016 Signed a comprehensive
partnership agreement with
Niigata University pertaining to
R&D in the healthcare field ❷・2017 Plans call for establishing
Denka Life Innovation Research
Private Limited at Nucleos
i n B i o p o l i s , S i n g a p o r e ’s
premier research hub forbiomedical industry, as a basefor collaborative R&D with
Singapore’s Agency for Science, Technology and Research ❸4. Expanding into New Business Fields

Reflecting the graying of Japan’s society and advances inmedical technologies, national medical expenses have beensteadily growing, amounting to approximately ¥41 trillion in
2015. Given this trend, the healthcare industry is expected
to shift its priorities toward earlier diagnosis and disease
prevention and away from the more conventional treatmentcentric approach. At the same time, burgeoning growth inemerging countries along with advances in global transport
have greatly increased the threat of widespread epidemics.
Because of this, the prevention of infection and the earlier
diagnosis of diseases have become ever more important.
It can therefore be said that our Group operations related
to various vaccines and diagnostic reagents, which provide
solutions for disease prevention, early diagnosis and health8

Denka Group CSR Report 2016B) Combine our know-how in the examination field and gene
analysis technologies; collaborate with the U.S.-based
KEW Group in the clinical sequence* business*A service aimed at providing physicians with information to help selectoptimal remedies for each patient (mainly molecular target drugs). Clinicalsequencing utilizes a gene analysis device called “sequencer” to analyze
alterations in the patient’s cancer cell genes while collating the results witha cancer treatment database.
（年度）

2010

2. Fulfilling Our Mission to Help Resolve Challenges
Confronting the Medical Industry

A) Create a new business basedon the utilization of protein
in vaccine and reagent
development, with theacquisition of Icon Genetics
GmbH providing us with genebased antigen and antibody
Icon Genetics GmbHproduction technologies

In addition to a focus on disease prevention and early
diagnosis, we are striving to acquire new technologies andlaunch new businesses in the fields of cancer treatment andgene-based remedies, both of which are characterized by
rapid spurts of technological advancement.

❶ Meeting New Medical Needs by Applying Existing Technologies
A) Expanding into the health checkup field
Promote lipid panel examinations (sd LDL-C, etc.) aimed
at countering lifestyle diseases and facilitating healthawareness and cancer examinations based on pylorus
reagents
B) Developing cancer remedies
Develop a mass-production method for G47∆ through theapplication of vaccine and reagent technologies while serving
as a manufacturer of this cutting-edge anticancer drug

Keywords
Health checkups
Gene examination
Cancer treatment

5. Nurturing Our Healthcare-Related Operations intoa Key Business Pillar

Special Feature
Denka’s Healthcare-Related Operations

1. Denka’s Core Competencies in the Healthcare Field❷ Introducing New Technologies in Our Areas of Strength

In line with the Denka100 management plan numerical targets,
we are striving to achieve operating income of ¥60 billion or
greater. With this in mind, we have positioned the healthcare
field as a future business pillar, nurturing our core operationsin this field to transform our business portfolio.

・10% of fiscal 2007 consolidated operating income (¥29.9 billion)
was attributable to the healthcare-related business・In fiscal 2015, the proportion of consolidated operating income(¥30.6 billion) attributable to this business grew to approximately
30%
・In the final year of the management plan, we are aiming for
more robust operating income in this field (40% of consolidated
operating income)Transforming Our Business Portfolio
Healthcare

40%

Expanding into new business fields
・Create new vaccines (plant-based protein production technologies developed

The environment
and energy
30%

by Icon)・Provide a reagent to measure sd LDL-C used as a marker todiagnose the potential of developing critical diseases
・Engage in services aimed at providing cancer remedy
information (KEW/gene alteration analysis technologies)
・Produce pylorus diagnostic reagents (examination of cancer and other diseases)
Developa mass-production method for G47∆ (anticancer drug)・Enhance Denka’s Collaborate with
proprietary
external entities
technologies
while executing M&A

Infrastructure 10%
Mainstay operations
Fiscal 2007
Operating income:¥29.9 billion

Fiscal 2015
Operating income:¥30.6 billion

20%

Denka100 Numerical Target
Operating income: ¥60.0 billion

An Interview with the President of Denka Seiken Co., Ltd.

Q.

What are your key themes as you pursue market development?

Let me introduce three key themes. First, we are focusing on health examination. We have what wecall “metabolic syndrome examination,” a set of solutions for diagnosing lifestyle-related diseases. For
instance, our reagents to measure lipoprotein subclasses, such as sd LDL-C—a useful marker for
diagnosing the potential of developing critical diseases—are based on our own proprietary technologies.
Also, other products enable “ABC examination” aimed at classifying and assessing the risk of stomach
cancer through pylorus antibody examination. Our solutions also include the “expectant mother’s
examination” for detecting rubella virus and thus addressing a concern many pregnant women have.
Having positioned these three areas as key priority items, we are striving to promote health examinationrelated solutions to help ensure disease prevention and facilitate early diagnosis.
Secondly, we are enhancing the lineup of our diagnostic test kits for Point of Care Testing,or POCT, for such infectious diseases as influenza. Not only are we stepping up the domestic
marketing of these products, we are striving to popularize them in countries abroad. Although we
often face constraints in overseas markets due to regulatory differences, we believe that our POCT
kits will garner a solid reputation as they enable a user to perform a quick diagnosis using a simple
procedure that does not require any other examination equipment.
Thirdly, we are developing a mass-production method for the G47∆ anticancer virus whilebuilding a manufacturing system for this cancer drug. G47∆ was developed by Dr. Tomoki Todo,
a professor at the Institute of Medical Science of the University of Tokyo, and Denka Seiken wascommissioned to establish a manufacturing method for this virus on the basis of the company’s
significant reputation as a vaccine maker equipped with superior cultivation technologies. This
anticancer virus is expected to be effective in treating types of cancer that previously had been
hard to address. Plans call for the completion of the first production facility in our Niigata Plant in
September 2017. We will strive to commercialize this cancer treatment at the earliest possible date.
Among these three themes, the commercialization of G47∆ in particular will position us tomake a big step forward in the field of disease treatment. In addition to the provision of disease
prevention and early diagnosis solutions, the manufacture of such drugs will be another key field
where Denka Seiken can fully leverage its core competencies in protein utilization technology. I
expect this business to grow into a substantial earnings pillar for the Denka Group. I’m sure that
Denka will have evolved drastically 30 to 50 years from now.

Tetsuro Maeda
President, Denka Seiken Co., Ltd.

A diagnostic reagent for measuring sd LDL-C

Denka Seiken Kagamida Plant

Denka Group CSR Report 2016

9

CSR Management

Denka Group’s CSR
CSR Promotion Structure

In May 2016, the Denka Group established “The Denka Value,” a new corporate
philosophy that serves as a cornerstone of its corporate activities. By doing so, we renewed
our commitment to living up to the expectations and trust of society. This philosophy consistsof the Denka Mission, which represents our uppermost mission statement, namely, “Taking
on the challenge of expanding the possibilities of chemistry to create new value and contributeto sound social development,” as well as the Denka Principles, a set of precepts that all Group
employees should refer to in all they do.
Fulfilling our social responsibilities is a linchpin of our corporate activities aimed at achieving thegoals of the Denka100 management plan. Therefore, CSR is as essential as the plan’s new growthstrategies to the realization of “The Denka Value.” We believe that a clear awareness of the social
responsibilities that each employee should bear is essential to theachievement of sustainable future growth. With this in mind, we
will strive to enhance our structure for promoting Groupwide CSR
Director, Senior Managing Executive Officer,
General Manager of Corporate Planning Dept.,
activities.
in charge of CSR & Corporate Communications Dept.

Manabu Yamamoto

To promote its CSR activities, Denka has establisheda CSR promotion structure consisting of the CSR &Corporate Communications Department and otherspecialized bodies. The CSR & Corporate Communications
Department has been systematically developing an
in-house structure to promote CSR, facilitating theunderstanding of all Group employees to ensure theirwholehearted engagement in CSR activities and publishingthese activities’ results in the CSR report.
For fiscal 2016, we plan to establish a CSR Committee(tentative) that will comprehensively discuss matters

Denka Group’s CSR

Promoting CSR Activities to Realize “The Denka
Value,” Our Corporate Philosophy

pertaining to and approve Groupwide CSR activities.
Furthermore, in order to prioritize our overall corporate
activities based on their materiality, we began utilizing amateriality matrix. This approach enables us to effectively
focus our tangible and intangible resources on vitalmanagement activities while helping us communicate ourinitiatives to stakeholders in an easily understood manner.
We will strive to step up our CSR activities by enhancing
our action plans with a PDCA cycle.

Value Creation Process
The New Growth Strategies: The Denka100 Management Plan

Create the most optimal production system, scrutinize every cost element and focus
management resources on new growth drivers, and develop next-generation products
Major CSR Initiatives Undertaken from Fiscal 2015 to the Present(1) Establishment of “The Denka Value” (May 2016)
With the establishment of “The Denka Value,” we haveidentified “Taking on the challenge of expanding thepossibilities of chemistry to create new value and contribute tosound social development” as the Denka Mission. The Denka
Principles provide a set of precepts guiding the actions of all
employees to realize this mission.

(3) Establishment of the Safety Promotion Meeting and activities
to ensure “safety first” (September 2015)
To ensure that every worksite places the utmost priority on
safety and embraces the Basic Policy for Workplace Safety,
Health, Security and Disaster Prevention, we renamed our“safety review meetings,” aimed at voluntary safety inspection
activities, the Safety Promotion Meetings and strengthened
their functions.

(4) Revisions to personnel systems to promote employee
happiness and development
To promote diversity and help employees strike a healthy
work-life balance, we have been actively developing systems
to support those engaged in child rearing and the nursing careof their families. The revisions executed in April 2016 include
extending the period of nursing care leave granted to eligible
employees; initiating a subsidy program to defray childcare
facility fees for employees whose spouses also work full-time;and letting eligible employees work at home on a trial basis.

(5) Strengthening of information disclosure with regard to ourglobal warming prevention initiatives (CDP initiatives)

Division

Elastomers &Performance Plastics(2) Establishment of the Denka Corporate Governance Guidelines(November 2015)
We established the Denka Corporate Governance Guidelines
to achieve sustainable growth and enhance our corporate
value over the medium to long term.

10

Denka Group CSR Report 2016

Staff at the Omuta Plant has been engaged in volunteer andother activities to help people in areas near the plant that were
impacted by the Kumamoto Earthquake. In addition, ongoing
volunteer activities are under way to respond to requests forassistance from agriculture and fishery industries in areas
devastated by the Great East Japan Earthquake in 2011, withthe aim of helping local people get back to their previous waysof living.

Synthetic rubber,
synthetic resins, acetylchemicals and styrene
monomer

Source of value

Expected socially beneficial effects● Polymer structure design

Infrastructure &Social Solutions

Electronics &Innovative Products

Functional ceramics,
thermally conductive
substrates forelectronic circuits, heatdissipating products,
electronic packaging,
dicing tapes, adhesives
and emitters forelectron microscopes

2. ZERO HUNGER
6. CLEAN WATER AND SANITATION

technologies

hardening, expansion andshrinkage of concrete● Fertilizer technologies toincrease crop yields● Polymer processing
technologies

9. INDUSTRY, INNOVATION AND INFRASTRUCTURE● Curbing waste generation

12. RESPONSIBLE CONSUMPTION AND PRODUCTION● Contributing to the stable supply of food

2. ZERO HUNGER
6. CLEAN WATER AND SANITATION● Facilitating sustainable farming

2. ZERO HUNGER● Enhancing urban areas’ disaster resilience

11. SUSTAINABLE CITIES AND COMMUNITIES● Assisting developing countries with

infrastructure development

inorganic chemistry● High-temperature control andcalcining technologies andparticle control technologies● Resin compounding and film
processing technologies● Database of adhered materials

12. RESPONSIBLE CONSUMPTION AND PRODUCTION● Reducing automobile exhaust emissions

12. RESPONSIBLE CONSUMPTION AND PRODUCTION● Enhancing traffic safety

11. SUSTAINABLE CITIES AND COMMUNITIES● Contributing to the advance of ICT

9. INDUSTRY, INNOVATION AND INFRASTRUCTURE● Advancing energy-saving technologies

9. INDUSTRY, INNOVATION AND INFRASTRUCTURE● Popularizing clean energy

7. AFFORDABLE AND CLEAN ENERGY

diagnosis

Life Science &Environment
Products

Pharmaceuticalproducts, synthetic
fibers, functional films
and food packaging

reagent technologies (e.g.,bacterial and virus libraryand monoclonal antibody
technologies)● Polymer processing
technologies

9. INDUSTRY, INNOVATION AND INFRASTRUCTURE● Facilitating the recycling and reuse of waste● Improving disease prevention and early● Vaccine and diagnostic

7. AFFORDABLE AND CLEAN ENERGY● Contributing to the advance of ICT

and safe water● Technologies to control the● Combination of organic and

11. SUSTAINABLE CITIES AND COMMUNITIES● Contributing to the stable supply of food
● Developing energy storage and transportfacilities and limestone mines

Fertilizers, cement,
special cement
additives, inorganic
materials andcorrugated pipes

Sustainable Development Goals (SDGs)*● Enhancing traffic safety

and safe waterand polymer control andcomposite technologies● Particle control andgranulizing technologies● In-house power generation

In fiscal 2015, we began disclosing information on our
climate change counterstrategies and greenhouse gas (GHG)
emissions employing the Carbon Disclosure Project (CDP), a
scheme operated by a U.K.-based NPO. Moreover, in fiscal
2016 we expanded the scope of operations for which we
calculate Scope 3 indirect emissions.

(6) Activities to support areas affected by the Kumamoto
Earthquake and the Great East Japan Earthquake

Products● Contributing to the stable supply of foodand safe water

3. GOOD HEALTH AND WELL-BEING
6. CLEAN WATER AND SANITATION● Helping women achieve career success

5. GENDER EQUALITY● Contributing to the advance of ICT

9. INDUSTRY, INNOVATION AND INFRASTRUCTURE● Enhancing traffic safety

11. SUSTAINABLE CITIES AND COMMUNITIES● Popularizing clean energy

7. AFFORDABLE AND CLEAN ENERGY● Reducing food waste

12. RESPONSIBLE CONSUMPTION AND PRODUCTION* United Nations SDGs that relate to “Expected socially beneficial effects” listed on the left

Denka Group CSR Report 2016

11

CSR Management

CSR Promotion Challenges, Targets and Performance

A: Achieved significant results B: Observed some results C: No results were observed D: The level of activity deteriorated

Fiscal 2015
Disclosure items

Challenges

Major challenges and goals in fiscal 2016 and beyond
Targets

products and development of
economical products● Raising CSR awareness andCorporate
Governancepromoting CSR activities● Strengthening corporate

governance structure andpromoting compliance education● Supply safe and high-quality

products● Develop and market productsthat benefit the environment andsociety● Strengthen corporate governance● Provide training on corporate

ethics and legal matters● Nurture a CSR mindset●	Focused management resources on such growth drivers as healthcare-related operations Photo 1●	Developed products capable of helping reduce energy consumption and environmental burdens (electronic

circuit substrates, phosphor, etc.)●	Strengthened overseas operations related to special cement additives that contribute to social
infrastructure development (operations in Southeast Asia, etc.)●	Established “The Denka Value,” which lays out our corporate philosophy, principles and strategies●	Established the Denka Corporate Governance Guidelines●	Increased the number of outside directors (from two to three) and decreased the number of in-housedirectors (from seven to five) to enhance management transparency and soundness●	Appointed a Chief Compliance Officer●	Implemented training on corporate ethics, legal matters and CSR activities for employees at each Denka
Group company Photo 2

Pages

Ratingp. 34-49(printed report)

B
Actively developed new
businesses and products

p. 30-33 (printed report)/
p. 4 (web-based CSR
Report references)B
Developed relevant
systems●	Established the Basic Policy for Workplace Safety, Health, Security and Disaster Prevention on April 1, 2015
●	Renamed safety review meetings, which conduct voluntary inspections of safety activities, as the Safety●	Ensuring facility security and

Safety Activities

disaster prevention while building
and maintaining relationshipsof trust with local community
members●	Maintaining occupational safety
and health while creating avibrant and comfortable working
environment

Promotion Meetings●	Promote the Basic Policy for
Formulated the safety slogan “Placing the utmost priority on safety, let us strictly comply with rules anddecisively make necessary changes.”
Workplace Safety, Health, Security●	Held a kickoff ceremony for Safety Promotion Meetings with representatives from all plants and R&D
and Disaster Prevention, which
declares “We put the utmost
bases attending Photo 3●	Worksite safety record (non-consolidated basis): 15 occupational accidents (down seven incidents year
priority on worksite safety andhealth, facility security and disasteron year); two accidents involving absence from work (down one incident year on year)
prevention in all aspects of our
We will identify risk factors to implement countermeasures related to facilities and operational
business activities.”management●	Bring the number of major●	Worksite safety record (domestic and overseas affiliates): 13 occupational accidents (up six incidents
accidents and disasters to zeroyear on year); five accidents involving absence from work (up one incident year on year)●	Continuously improve the number
Facilitating human exchange between Denka and affiliates, we will step up safety activities on aGroupwide basisof occupational accidents●	Facility-related incidents included two fires and one leak
We will swiftly correct current practices related to the handling of combustible materials and forklift
management while taking steps to prevent recurrences●	Prevention of global

Environmental
Activities

warming (CO2 emissions
reduction), curbing chemical
substance emissions, waste
reduction, technological innovationfor energy conservation●	Implement the Fifth Medium-Term

Environmental Plan●	Promote RC activities

p. 18-19(printed report)

C
Need stronger leadershipfrom top management
Safety record at affiliates
and overseas bases
deteriorated

Action Plan for General Business
Operators (ensure that each
employee takes at least 12 daysof annual paid leave, streamline
operations and reduce overtimework)●	Step up health promotion
initiatives, including a program toaddress mental health problems●	Communicate such information●	Sent out questionnaires to the key suppliers who represent 70% of Denka’s raw material supply chain●	Implement initiatives under the

Employees

Stakeholders

Supply Chains●	Inclusive and rewarding

workplaces●	Promotion of CSR in tandem with

supply chainsas the CSR Procurement Policies
and Guidelines to supply chainsand obtained responses from the half of these, with all respondents approving Denka’s CSR Procurement
Policies

p. 20-23(printed report)/
p. 7-21 (web-based CSR
Report references)(tentative name) to handle a CSR activity PDCA cycle under the direct oversight ofmanagement and thereby nurture a CSR mindset

kickoff ceremony)(1) Reduce the number of major accidents and disasters to zero(2) Continually improve the occupational safety record●	Priority initiatives in the fiscal 2016 occupational safety management plan(1) Step up hazard prediction systems to prevent major accidents and facilityrelated incidents (leverage case studies of accidents at Denka and othercompanies and utilize assistance systems developed by industrial associations,etc.)(2) Create a lively and sound workplace (facilitate worksite communication toensure the ongoing reduction of potential dangers and eliminate accidents
attributable to operator action)(3) Step up the planning and management of facility improvement projects related
to safety countermeasures (conduct facility reviews to re-identify those inneed of safety countermeasures, formulate a three-year action plan, set aside
budget and steadily execute said plan)

General Publicand Local
Communities●	Initiatives as a good

corporate citizen, such as
robust communication withlocal communities and social
contribution activities●	Promote interaction with

community members and social
contribution activities●	Continue volunteer activities tosupport disaster-stricken areas

Governmental/
External
Institutions

Shareholders
and Investors●	Proactive engagement in public

policies and activities aimed at
resolving social issues●	Enhancing corporate information

disclosure and ensuring its
reliability

Denka Group CSR Report 2016●	Utilize subsidy schemes topursue R&D projects andadvance energy-saving and otherenvironment-friendly technologies●	Ensure timely and appropriate

information disclosure tostrengthen relationships of trust●	Execute the business plan andreturn profits to shareholders

environmental burdens and conserving energy
Main examples:
Energy-saving technologies: Reduced steam and fuel consumption (the Chiba Plant) while curbing energy
used by cement production facilities
Environmental burden reduction technologies: Promoted the use of CO2-SUICOM
Cutting-edge technologies: Developed SiC power modules and constructed an ultra-pure acetylene black
production facility

A
Targets met

p. 26-27(printed report)

B
Developed programs to
support employees

p. 28 (printed report)/
p. 22 (web-based CSR
Report references)

B
Engaged in dialogue with
suppliers

Photo 2 A legal affairs training session (the Omi Plant)

April 2016: Lengthen the eligibility period for shortened working hours to support
those engaged in nursing care; provide subsidies for those engaged in childrearing whose spouses also work full-time, as well as for single parents, to defray
their childcare facility expenses; create region-specific job positions for those whoneed to stay in a particular region due to marriage, childbirth or nursing care; leteligible employees who are pregnant, raising a small child or engaged in nursing
care work at home on a trial basis●	Promote the Action Plan for General Business Operators: Reduce total working
hours and facilitate the use of annual paid leave●	Assess and improve the status of worksite environments by implementing the
Mental Health Promotion Plan and stress checks●	Secure more foreign student recruits and step up long-term training programs in Japan●	Help women achieve career success (target for the proportion of women among
newly hired specialists: 20% or more in fiscal 2017; target for the proportion of
female managers across all managerial positions: 5% by fiscal 2025)

Photo 3 The Safety Promotion Meeting kickoff ceremony●	Engage in more robust dialogue to promote CSR procurement, mainly with

suppliers who failed to respond the questionnaires

Photo 4 Participating in a summer festival with the

Fujimicho Town Association (the Ofuna Plant)

p. 14-17, 50-54(printed report)

A
Proactively engaged ininitiatives to revitalize andcommunicate with local
communities

p. 23(web-based CSR Reportreferences)A
Achieved goals of
the Medium-Term
Environmental Plan bypromoting energy-saving
initiatives

p. 20-21, 29(printed report)

B
Enhanced information
disclosure●	I mplemented new growth strategies for achieving the goals set forth in the Denka100

management plan●	S ystematically implemented steps to enhance shareholder returns through the payment ofdividends, purchase of treasury stock and execution of growth investments●	Consolidated information on environmental management and proactively disclosed it via such outlets as CDP

delivering a greeting at the facility completion
ceremony (the Kagamida Plant)

global warming countermeasures and the continuous reduction of industrial
waste)●	Reduce emissions of chlorofluorocarbons (comply with the Act for Rationalized
Use and Proper Management of Fluorocarbons; step up management and renewalof air conditioning, refrigeration and freezing equipment)●	Operate wastewater treatment facilities in a more systematic manner and step up
the assessment of water usage status●	Strengthen environmental management encompassing Group companies,
including overseas subsidiaries●	Engaged in interaction and dialogue with local communities by hosting plant tours and participating incommunity events Photo 4●	Provided educational support by hosting experimental science classes; engaged in interaction with local
communities; and raised employee awareness with regard to social contributions●	Helped revitalize local communities through events at DENKA BIG SWAN STADIUM and support for the
NIIGATA Albirex BB Rabbits Photo 5●	Promoted the recycling of industrial waste for use in cement production●	Dispatched employee volunteers to Minami Sanriku-cho through the Disaster Area Volunteer Support Program●	Assisted students who grew up in the vicinity of Denka business sites in their pursuit of higher education
through a scholarship program●	Contributed to youth education and social welfare by sponsoring and assisting the Fureai Trio concerts

Photo 1 Mr. Tetsuro Maeda, the president of Denka Seiken,●	Revisions to the personnel system●	Drew on public subsidy schemes to execute production facility upgrades aimed at reducing

12●	Strengthen corporate governance●	Identify materiality in each business activity; establish a CSR Committee●	Achieve the goals of the Sixth Medium-Term Environmental Plan (priority items:●	Revisions to the personnel system aimed at reducing burdens on employees who engage in such family

duties as child rearing and nursing care while working
April 2015: Lengthened the eligibility period for shortened working hours to support those engaged inchild rearing; made it possible for employees to apply to change work locations when their spouses aretransferred; began granting subsidies for those living separately from their spouses (without children) to
defray their commuting expenses; and implemented the “Career Returner Plan” allowing for the reinstatementof employees who have resigned due to family duties, including nursing care and child rearing●	Implemented the Action Plan for General Business Operators (fiscal 2014 to 2016)
Annual average utilization of paid leave: 9.56 days per individual; reduction in total working hours: 1,931
hours (same as the previous fiscal year)
Increased “No Overtime Days” while sending messages via public address to raise employee awareness●	Number of employees who suffer mental health problems remained virtually unchanged●	Hired four foreign nationals to enhance our responsiveness to globalization (at the beginning of fiscal
2016; including those recruited from external companies)
Provided employees hired in Singapore with long-term training in Japan while having those hired in
China engage in job assignments at the Head Office in Tokyo

development of society●	Promote open innovation via in-house and external collaboration●	Fiscal 2016 Companywide targets (announced at the Safety Promotion Meeting●	Implemented the Fifth Medium-Term Environmental Plan (with fiscal 2015 as the final year)

1) Achieved the target for energy consumption intensity: 0.95 compared with fiscal 2012 level (target: 0.96)
Succeeded thanks to the energy-saving effect of improved processes introduced at each plant2) Achieved the target for CO2 emissions intensity: 0.94 compared with fiscal 2012 level (target: 0.97)
Succeeded thanks to the effect of improved processes introduced at each plant3) Achieved the target for emissions of PRTR substances: 76t (target: 88t)
Made progress in the switchover to aqueous solvents for industrial tape adhesives at the Chiba Plant
4) Achieved the target for the volume of final waste disposal: 153t (target: 176t)
Succeeded thanks to a decrease in overall waste generation and effective utilization through recycling●	Promoted the construction of the New Omigawa Power Plant (hydroelectric power generation) andcarried out preparatory surveys for the construction of the New Himekawa Power Plant No. 6 (Kurobegawa
Electric Power Company)●	Create new technologies and products that contribute to the sustainable

Denka Group’s CSR

Customers● Supply of safe and high-quality

Results●	Maintain robust communications with communities around business sites while

contributing to the revitalization of local society●	Continuously implement volunteer activities to meet the needs of disaster-stricken

areas (Minami Sanriku-cho)●	Support the restoration and reconstruction of areas hit by the Kumamoto

Earthquake with the Omuta Plant serving as a main contributor●	Utilize subsidy schemes to develop and commercialize eco-friendly technologies,

including those aimed at reducing environmental burdens and conserving energy

Photo 5 Supporting the NIIGATA Albirex BB Rabbits●	Promote new growth strategies to achieve the goals set forth in the business plan(final year set at fiscal 2017)●	Step up the disclosure of such non-financial information as environmental activity

data and consider measures to secure its reliability (e.g., receive a third-party
audit to earn accreditation)

Denka Group CSR Report 201613

Local Communities▶ For more details of the Denka Group’s educational support activities,
please see the web-based CSR Report 2016 references (p. 23).

Engaging with Society
Our Social Contribution Activities

Key Activities
Category

Key Activities

Community
revitalization

Supporting events at DENKA BIG SWAN STADIUM (to which Denka
holds the naming rights); supporting the NIIGATA Albirex BB Rabbits;
taking part in local festivals (Itoigawa Omanta Festival, Omuta
Daijayama Festival, Goi Rinkai Festival, Shibukawa Heso Festival,
Ofuna Fujimicho Summer Festival (photo ❶)); and participating inindustrial product exhibitions

Environmental
conservation

Undertaking cleanup activities in areas near business bases,
including streets, beaches, river banks, irrigation channels and side
ditches (photo ❷); maintaining hydrangea beds; and co-sponsoring
J-WAVE Green Casting Day

Educational
supportHosting plant tours and experimental chemical classes;
participating in the Summer Holiday Chemical Experiment Show forChildren (photo ❸); providing internship programs; giving lectures
to support job seekers; operating a scholarship system (to cover the
housing fees of students from rural areas); donating books to the
National University of Singapore; and holding Denka football clinics(Singapore; for elementary and junior high school students)

Culture and art

Supporting Mitsui Bunko archives; and hosting concerts featuring
the Fureai Trio (photo ❹)Humanitarianaid

Engaging in volunteer activities to support the reconstructionof Minami Sanriku-cho as well as areas hit by the Kumamoto
Earthquake; and supporting the Mitsui Volunteer Network Center

We extend our deepest condolences for those who losttheir loved ones in the Kumamoto Earthquake as well as our
sincere sympathy to all those affected by the disaster.
As we have a base of operations near areas affected by
the earthquake, we began supporting victims of this disasterand facilitating the reconstruction of communities immediately
after the earthquake struck in April 2016. With staff at the
Omuta Plant spearheading these humanitarian aid activities,
we distributed drinking water and emergency rations to suchareas as Kumamoto, Aso and Uki cities as well as Mashikicho while operating soup kitchens at Takumabaru andHiroyasu elementary schools, which served as evacuation
shelters. Furthermore, we assisted our business partners with
their efforts to restore factory operations. In addition, Denka
made a monetary donation to the Kumamoto prefectural
government, while many of its officers and employees madeindividual contributions.
In Kumamoto City and Mashiki-cho, both of which sufferedparticularly grave damage, our employees help operate alocal disaster volunteer center, sorting and transporting aid
supplies, cleaning damaged housing and separating debris atcollection sites. As of the end of June 2016, a total of morethan 130 employees had taken part in these activities. We willcontinue these efforts.
Looking ahead, we will do our utmost to continuously meetthe needs of those affected by the disaster. We sincerely hopefor the earliest possible recovery of communities in these areas.

Denka staff who ran the soup kitchen at
Takumabaru elementary school

Setting up tables

14

Denka Group CSR Report 2016

❹ Teaching a person with disabilities how
to play the violin as part of the Fureai TrioconcertMore than five years have passed since the Great East
Japan Earthquake. Since the launch of the Disaster Area
Volunteer Support Program in July 2011, Denka, with theeager participation of many of its employees, has striven to
help reconstruct areas hit by this unprecedented disaster. Our
activities were initially centered on cleaning damaged housing
areas, getting rid of debris from farmland and sorting out
articles left by deceased persons in such heavily-devastatedareas as Minami Sanriku-cho, Miyagi Prefecture.
After seeing progress in the disposal of debris, we shifted
our focus to reconstructing local industry by, for example,
helping oyster farms resume operations through the provisionof sandbags used for aquafarming rafts and re-developing
farmland damaged by tsunami flooding. Before the disaster,
Minami Sanriku-cho was home to thriving fishery andagricultural industries, but the earthquake forced many locals
to leave the area. As a result, these labor-intensive industries
are now facing a severe human resource shortage, to thepoint that a portion of crop yields and fish catches are being
thrown away since there is not the necessary workforce toprocess them. Given this situation, Denka’s volunteers are
striving to help collect and process edible brown seaweed
while also harvesting crops.
In May 2016, the MINAMISANRIKU CHEERING SQUAD,
run by a local sightseeing association, took over the volunteer
reception of the Minami Sanriku-cho volunteer center. This
organization aims to foster ties between people in areas
affected by the disaster and those who want to support them,in line with its belief that such wholehearted collaboration will
speed reconstruction efforts, which will, in turn, bring the area
back to self-reliance. Supporting this organization, we often
hear comments from locals, saying things like “We’re so happy
that you’re here again to help us!” This kind of experience
allows us to truly appreciate the importance of ties between
people, encouraging us to do our best for their sake. Goingforward, we will help reconstruct this and other disaster-stricken
communities so that they can thrive as they once did.

Supporting local farms (May 2016)

Supporting the local fishery industry (June 2016)

Cooking rice

Topic

Meals are ready❶ The Fujimicho Town Association Summer ❷ Cleaning the Nakamura water channel(Shibukawa Plant)
Festival (Ofuna Plant)❸	Summer Holiday Chemical ExperimentShow for Children

Reconstruction Support Initiatives for Areas Hit by the Great East Japan Earthquake:
Marking the Sixth Year

Engaging with Society

In line with Article 9 of the Denka Group Guidelines stating “Wewill contribute to society as a good corporate citizen,” Denka
recognizes that implementing local contribution and culturalactivities in collaboration with other community members isessential to fulfilling its social responsibilities.
Based on this recognition, our key social contribution
initiatives include taking part in festive, sporting and other local
events (community revitalization); undertaking beautification,cleanup and greenery maintenance activities in neighboringareas (environmental conservation); hosting experimental
chemical classes and plant tours and providing internship andscholarship programs (educational support); and dispatching
volunteers to aid in reconstruction efforts in disaster-stricken
areas (humanitarian aid).
Not only do we aim to contribute to society throughthese activities, we also consider them key to facilitating theunderstanding of our operations among the general public andenhancing our relationships of trust with community members.
Moreover, these activities help nurture our employees’ awarenessof social contribution. We are thus building a strong humanresource base. This base is essential to our efforts to achievesustainable growth in tandem with the development of society.

Supporting People Affected by the 2016
Kumamoto Earthquake

Soup kitchen run by Denka staff (Hiroyasu elementary school)

Social Contributions through the Ekomira Koto Recycling Project—Denka Polymer Co., Ltd.
Established in 1966, Denka Polymer Co., Ltd. manufactures and markets plastic
food packaging. In doing so, Denka Polymer actively promotes lightweightpackaging with the aim of helping reduce household waste and curbing
environmental burden, including greenhouse gas emissions.
As a molded plastic food packaging maker headquartered in Koto Ward,
Tokyo, Denka Polymer is a participant in a local formed styrol recycling project
titled the “Ekomira Koto,” launched in April 2010. Under this project, formed
styrol packaging is collected from households and supermarkets in Koto Ward,
processed into pellets at a facility run by environmental NPO Chikyusen Club, andshipped to manufacturers as a raw material for plastic products. Denka Polymer
supports the operation of this NPO on various fronts.
In addition to being a collaborative resource recycling initiative that involves
the local government, an NPO and businesses, the distinguishing feature ofthis project lies in the fact that it creates employment for people with disabilities
while providing educational programs regarding environmental and social welfare
issues for youths. More specifically, intellectually challenged persons are hired at
the aforementioned processing facility to enable them to serve as independent
members of society. This facility is located within the premises of Ekokkuru Koto,a public-run building for providing environmental education that periodically invites
elementary and junior high school students for facility tours and educationalsessions involving hands-on programs.
In these ways, Denka Polymer fosters a recycling-oriented society while
contributing to social welfare and local communities.

Ekomira Koto processing facility

Used food packaging collected fromhouseholds and supermarkets in Koto Ward

Processing collected items into pellets

Denka Group CSR Report 201615

Local Communities

Revitalizing Local Communities by Promoting
Sports Activities
Revitalizing Local Communities by Promoting
Sports Activities

Taking Deep Root in Local Communities to
Become a Beloved Team
Shunya Nagasaki
Director in Charge of Women’s Basketball ClubNIIGATA Albirex, a general incorporated association
In April 2011, the NIIGATA Albirex BB Rabbits was established, carrying
on the legacy of its precursor, the JAL Rabbits, a team that has been
a top domestic women’s basketball team for the past 43 years.
Having freed ourselves from operating under the auspices of a major
corporation like JAL, we became the first team to be run solely with thesupport of local businesses and supporters and are members of the
top league of the Women’s Japan Basketball League Organization.
We believe that, going forward, relationships between local communities and professional sports teams will become ever more
important. As the support of communities is essential for our activities, we would like to become their essential partner, a team thathelps them grow and develop and is loved by many people.
However, we are aware that our team is not yet widely known. Therefore, first and foremost, we are striving to draw the generalpublic’s attention to basketball. We focus on encouraging people to come to the arena, feel the excitement of an intense basketballgame, and become a basketball fan. This will require long, ongoing work, but we know that in order to create more basketball fans,our efforts to publicize the sport’s appeal must be unceasing. And, fortunately, the Denka Group, a major corporate group based in
Niigata Prefecture, is here to help us push forward. To return the favor of our supporters, Denka included, we will do our utmost to
create an even stronger team that the people of Niigata can be proud of.

From left: Shunya Nagasaki, Chikako Umeki and Noriyuki Shimizu

Since 2012, Denka has been a supplier of uniforms for
the NIIGATA Albirex BB Rabbits, a women’s basketballteam based in Niigata. Moreover, in January 2014, Denka
acquired naming rights for Niigata Stadium, which hasserved as a major arena for local sports events and thehome stadium for the professional football team ALBIREXNIIGATA.
For nearly three years since the acquisition of namingrights and subsequent rebranding as the DENKA BIG
S WA N S TA D I U M , t h i s a re n a h a s b e e n a v e n u e f o r
numerous events, including football games in which the J.

I Hope the BB Rabbits Will Create
Opportunities for People to Interact

League team ALBIREX NIIGATA plays. Looking ahead, we
will promote sports activities to foster ties with local people
and create a more vibrant community.

Chikako Umeki
Captain, the NIIGATA Albirex BB Rabbits
General Affairs Department, Denka Seiken Co., Ltd.

We Value Chances to Meet and Interact
with People in Niigata
Noriyuki Shimizu
General Manager, CSR & Corporate Communications Dept.
Our mainstay Omi Plant, established 96 years ago, is locatedin Itoigawa City, Niigata Prefecture. In addition, Denka SeikenCo., Ltd., a producer of influenza vaccines and diagnostic
reagents, operates in Gosen City, while other Group
companies, such as those engaged in the manufacture of raw
concrete, situate their facilities around Niigata City. As such,the Denka Group has deep roots in Niigata as a manufacturer.
Against this background, we became a uniform supplierfor the NIIGATA Albirex BB Rabbits in 2012. This move
was driven by our wish to contribute to and help revitalize
communities surrounding our bases of operations.
Since the beginning of engagement with this team, we
have come to see its supporters’ love for the region. There16

Denka Group CSR Report 2016has been a lot to learn from human interaction through sports.
This experience moved us and prompted us to consider
stepping up our local contribution activities. We then received
an offer pertaining to the acquisition of the naming rights ofNiigata Stadium.
Although the cost of the naming rights was not insignificant,we decided to take the offer. As we were approaching thecentennial of our founding in 2015, we aspired to become acompany that is more familiar to the people of Niigata. We
were determined to continue corporate activities that value
opportunities to meet and interact with members of local
communities.
Having made a new start under the new name in January
2014, the DENKA BIG SWAN STADIUM has helped athletes
and supporters experience inspiring moments and new
encounters. It is our great honor to support and witness
sports events in which history is made. We will continue
to play a role in the revitalization of communities and thepromotion of sports activities as best we can.

It’s been one year since I joined Denka Seiken. My duties in the
General Affairs Department often overwhelmed me at first, as
they involved relations with various other departments and a great
number of colleagues, but I gradually got accustomed to handlingmy tasks. At the same time, I became aware of the important role
Denka Seiken products play in society. The sense of responsibility I
feel toward my work is growing stronger day by day.
Meanwhile, I was nominated as the captain of the BB Rabbits in 2016. The burden that thecaptain bears is heavy, but my teammates, the team staff and my family as well as the people oflocal communities have been helping me so that I can concentrate on playing basketball. I am so
grateful for their support. Moreover, when we are practicing in one of the gymnasiums in Gosen
City, which lies near Denka Seiken and where from this year forward most of our training is taking
place, local residents frequently come to cheer, which we all find heartwarming. Before and after
our practice, we also have opportunities to communicate with kids who play in local junior teams.
These interactions with local people give me joy. For the people of Niigata, I will strive to lead myteam to win as many games as we can. At the same time, I want to become a model for children
who love basketball and dream of one day playing in Japan’s top league or joining the national
team. Finally, although I have yet to come up with a specific idea of how to do it, I’d like to help
facilitate exchange between Denka Seiken—a big supporter of the BB Rabbits along with otherDenka Group members—and the people of Niigata.

Denka Group CSR Report 201617

Safety▶ For more details of occupational safety and health initiatives, please
see the web-based CSR Report 2016 references (p. 18).

Our Initiatives to Maintain Safe Operations

The maintenance of safe operations is essential for Denka’s future operations. We are therefore
determined to foster a safety-oriented corporate culture that faithfully adheres to the lessons wehave learned in the past and passes them on to the future. At the same time, we will remain quick

Fiscal 2016 Occupational Safety Management Plan Companywide Targets❶ Reduce the number of major accidents anddisasters to zero
❷ Continually improve the occupational safety
recordPriority initiatives❶ Step up hazard prediction systems aimed atpreventing major accidents and facility-related
incidents

to change what needs to be changed for the sake of safety. Moreover, we will ensure that everyone
is encouraged to freely share his/her thoughts and insights on safety

Mitsukuni Ayabe
Representative Director, Chief Operating Officer,
Assistant to CEO, RC Committee Chair

・Leverage case studies of accidents at Denka andother companies
・Utilize systems developed by industrial associations
to assist with safety assurance operations

operations and take action. In this way, we will decisively endeavor
to create a vibrant and lively workplace in which all will benefit fromthis collective effort to improve.
Safety inspection conducted by Dr. Masayoshi Nakamura from Tokyo Tech

Basic Policy for Workplace Safety,
Health, Security and Disaster Prevention
We put the utmost priority on worksite safety and health, facility security
and disaster prevention in all aspects of our business activities.
To fulfill our social responsibilities as a chemical company, we put the utmost
priority on safety as our basic stance for operations, thereby working together
to create a lively and sound workplace and becoming a company capable ofeliminating accidents and disasters and worthy of society’s trust.
April 1, 2015
Chair of the Safety Measures Headquarters (President & CEO)

Safety Management Structure
Safety Management Overview (Safety Measures Headquarters, etc.)
President and CEO(Chair of the Safety
Measures Headquarters)

Assistant to CEO(RC Committee Chair)

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

General Manager-level (plant managers)
Relevant head office departments
HR and Administrative departments
Business promoting departments
at each business division❶ Safety Promotion Meetings

・With a dedicated inspection team established under the direct supervisionof the chair of the Safety Measures Headquarters, we carry out annual
safety inspections encompassing every production and R&D base inJapan and overseas.
・In fiscal 2015, we renamed our annual safety review meetings Safety Promotion
Meetings to strengthen their functions regarding objective inspections of activities
undertaken at each business base and discussions about important measures.

❷ Safety management conferences

・These conferences are convened for each manufacturing process, reviewing
technological standards for facility security and disaster prevention andinspecting the status of facility maintenance, the processes for managing
facility changes and countermeasures against facility accidents and failures.
・Departments in charge of manufacturing, facility maintenance andsecurity at each business base hold safety management conferences asnecessary. In addition, representatives from the Head Office’s Technology
and Audit divisions attend regular annual meetings.

❸ Safety networking meetings and othergatherings by theme

・Frontline leaders from each plant and affiliate gather to exchange ideas
about preventing accidents attributable to operator actions. They also
conduct mutual on-site inspections. These gatherings help them inspire one
another by sharing best practices while identifying potential danger spots.

18

Denka Group CSR Report 2016

Building a More Robust Foundation for Safety Assurance Operations
and Fostering a Safety-Oriented Corporate Culture
Since the 2013 heat blast accident at the Omi Plant, which
was due to the failure of an electrical furnace, we have steadily
implemented action plans aimed at preventing the recurrenceof similar accidents. On December 15, 2015, we invited Dr.
Masayoshi Nakamura, a professor at Tokyo Institute of Technology(Tokyo Tech), to inspect our accident countermeasures
undertaken at cement and special cement additive production
facilities and asked him to examine our recurrence prevention
measures for electrical furnaces in the Omi Plant. Following on
the guidance he gave in fiscal 2013 and 2014, Dr. Nakamura❷ Create a lively and sound workplace

・Facilitate worksite communication to ensure theongoing reduction of potential dangers and eliminate
accidents attributable to operator action
・Promote safety assurance activities in which eachworker is able to grasp the worth of their efforts

Fiscal 2016 Occupational Safety Management Plan and
New Initiatives to Realize Continuous Improvement

Fiscal 2015 Accident Record and Safety
Assurance
In fiscal 2015, the number of occupational accidents recorded
at Denka and its subcontractors totaled 15 (down sevenincidents year on year), with two accidents involving absencefrom work (down one incident year on year). Thus, we saw
a second consecutive annual improvement in the accident
record. However, some of these incidents may have been
made more serious due to workers’ failing to comply with thebasics of safety by, for example, getting caught in a machine
after reaching a hand toward it while it was moving.
Meanwhile, our affiliates in Japan and overseas recorded
13 accidents (up six incidents year on year), with five accidents
involving absence from work (up one incident year on year).
A turnaround from the previously favorable record, the fiscal
2015 accident record shows overall growth in the number ofincidents. Moreover, the ratio of accidents involving absencefrom work is higher than that for Denka and its subcontractors.
In fiscal 2015, facility-related incidents included two fires: The
driver’s seat of a backhoe used at the Omi Plant burned out, andconstruction equipment suffered fire damage at the Omuta Plant.
There was also a water leak at an electrical furnace work section of
the Omi Plant. None of these three incidents caused human injury
or had any environmental impact.
The two fires were attributable to the presence of
combustible materials in a building that houses calcium
carbide production lines, from which hot substances may
occasionally fly. We quickly removed such materials from thesite. The leakage incident was due to the breakage of coolant
water piping, which was damaged by contact with a forklift
operating in a zone where water was prohibited. To prevent
recurrences, we have installed safeguard walls and alteredpiping routes. Furthermore, we inspected other production
sites that are similar to the locations of these incidents.

Our Initiatives to Maintain Safe Operations

Remaining true to our motto “Safety first,” we will eliminate
accidents and disasters by strictly complying with rules anddecisively making necessary changes.

provided valuable recommendations regarding thesecountermeasures. In addition, in fiscal 2015 we invited examiners
from the Japan Society for Safety Engineering (JSSE) to performa safety-level diagnosis of the Omi Plant. This diagnosis, executedfrom November 30 to December 1, 2015, helped us obtain anumber of insights from an external perspective.
We will draw on all of this objective input and advice
to build a more robust foundation for safety assurance
operations and foster a safety-oriented corporate culture.

For fiscal 2016, we have set aside a dedicated budget for
facility improvements related to safety countermeasures. This
move is expected to ensure the steady execution of hazard
prediction activities aimed at preventing major accidents
and facility-related incidents as well as initiatives to address
potential dangers identified by employees through worksite
communication. We also stepped up the management ofeach improvement project.

❸ Step up the planning and management offacility improvement projects related to safety
countermeasures

・Conduct facility reviews to re-identify those in needof safety countermeasures and formulate a threeyear action plan・Set aside a budget and steadily execute the action
plan

Number of Occupational Accidents*1
Denka
Directly managed sites

Affiliates

Subcontractors

Total

Absence No absence Absence No absence Absence No absence
Fiscal 2014

2

Fiscal 2015

12

1

1

7

7

1

3

6

19

2

13

Total

Overseas

Absence No absence

Total

Absence No absence

Denka
Subcontractors
Industry average (JCIA members, excluding their subcontractors)

22

2

6

0

1

1

15

4

5

9

1

3

4

No absence

Absence

20

20

15

15

Manufacturing
Loading/unloading
Construction

1.0
0.8
0.6

10

10

5

5

0.4
5

0.2

6

0.0

0
08

09

10

11

Total

4

Reference:
Number of Occupational Accidents at Subcontractors*1

Accident Frequency Rates*2
1.2

Japan

12

13

14

15

(CY)

13

7

6

5

1

1

0

14

15

(FY)

2

7

6

4

1
0

1
0

13

14

15

(FY)

*1 Number is calculated on a fiscal year basis.
*2 Rates are calculated on a calendar year basis in accordance with the instruction of the Labour Standards Inspection Office and JCIA guidelines.

Topic

Safety Promotion Meeting Kickoff Ceremony
On July 11, 2016, a total of 800 employees took part in the Safety Promotion
Meeting via a teleconference system connecting the Denka Head Office andGroup business bases in Japan and overseas. As a kickoff event for Safety
Promotion Meetings that will be convened annually at each domestic andoverseas business base, this general meeting entailed an address by Denka
President Shinsuke Yoshitaka (concurrently serving as chair of the Safety
Measures Headquarters), who communicated his strong commitment toenforcing the motto of “safety first” and executing new safety-related priority
measures to all Group employees. Moreover, representatives from eachbusiness base shared their determination to achieve the Companywide targets.
Denka Group CSR Report 201619

Environmental Conservation▶ For details of environmental conservation activities and environment data,
please see the web-based CSR Report 2016 references (p. 8-11, etc.).

Caring for the Global Environment

We have positioned “taking on the challenge of expanding the possibilities of chemistry tocreate new value and contribute to sound social development” as our mission. Our foundation
for fulfilling this mission is the pursuit of CSR activities from economic, social and environmental
perspectives. As part of such activities, we actively disclose information on environmental impacts
attributable to our business activities—including those undertaken throughout our value chain—that may affect climate change by utilizing the CDP (Carbon Disclosure Project) scheme. In thisway, we promote environmental management aimed at ensuring thesustainable use of resources and energy and thereby enhance ourcorporate value.
Furthermore, we will systematically implement countermeasures
Executive Officer, Technology Div.,against global warming in line with the concept of “Decarbonization
Leader of CDP Task Force
Pathways” suggested at the COP21.

Denka is striving to assess and reduce the environmental impact of its business activities. We especially focus on improving theefficiency of our energy-intensive plants while curbing waste emissions from our facilities by enhancing yield ratios and promoting
resource recycling. Moreover, we proactively accept waste from in-house and external sources, effectively utilizing it as fuel and raw
material for cement production.
INPUT

Promote global warming countermeasures by achieving technologicaladvancement in such areas as energy saving while exploring new
development themes❷ Continuously reducing industrial waste

Promote initiatives to improve yield ratios, sell recycling waste and utilize
such waste in ways that complement the exhaustive scrutiny of eachbusiness base’s cost elements

To promote its environmental activities, Denka formulates annual
plans through its Responsible Care (RC) Committee. Afterbeing discussed and approved by the Board of Directors, theseplans are translated into Companywide policies and reflected inbusiness plans. The RC Committee, which operates directly under
the CEO, is attended by directors in charge of relevant matters,
general managers of the relevant head office departments andplant managers, with the assistant to the CEO serving as the chair.

Energy consumption intensity(fiscal 2012 base)CO2 emissions intensity* (from energy
sources: fiscal 2012 base)Targets

Develop

Manufacture

Transport

Use

Consume

In particular, the RC Committee formulates countermeasuresagainst such critical issues as climate change that have thepotential to alter the course of our overall operations. Afterthe Board of Directors deliberates and gives approval to thesecountermeasures, we incorporate them into our businessplans.

0.96

0.91

1.20
（0.97）

1.17（0.93）

Fiscal2016

Fiscal2017

Fiscal2018

Targets

Targets

Targets

0.97

0.95

0.94

1.18
（1.01）

1.14（0.97）

1.13（0.97）

Emissions of PRTR substances (tons)

88

74

Emissions of PRTR substances (tons)

73

73

71

Final landfill waste (tons)

176

153

Final landfill waste (tons)

151

123

111

* Calculated based on the converted production volume of benchmark products

We were able to achieve the targets set forth in our Fifth Medium-Term Environmental Plan (fiscal 2013 to 2015). Specifically, initiatives
to improve the production processes of the Omi, Chiba and Omuta plants, all of which are energy-intensive compared with otherfacilities, yielded greater energy savings than expected. In the Sixth Medium-Term Environmental Plan (fiscal 2016 to 2018), we willcontinue to strive to reduce energy consumption intensity by 1% every year. To this end, we will endeavor to produce concrete resultsfrom our key energy-saving initiatives as quickly as possible.

20

Denka Group CSR Report 2016

Denka Plants

NOx
Soot and dust

66.54 million t

PRTR substances*(70.36 million t)

Water discharges

External waste

COD

548,000 t

PRTR substances*(660,000t)

Soil discharges
PRTR substances*

Waste generated*

54 t
4,148 t88 t
51 t

(1.32 million t)(0.97 million t)(65t)(4,252t)
(72t)
(52t)

578 t
23 t

(760t)

0t(0t)

120,000 t(119,000t)

7,292 t(8,363t)(24t)

98,000t(98,000t)

Waste reduction(water removal and incineration)

Recycled
externally

13,968 t(12,439t)

Recycled in-house

Final disposal(as landfill)

153 t(156t)

Major affiliates

Omi Plant▶・Denal Silane Co., Ltd., Denak Co., Ltd. Chiba Plant▶・TOYO STYRENE Co., Ltd., Taiyo Vinyl Corp.

Domestic plants

Omi, Omuta, Chiba, Shibukawa, Ofuna, Isesaki

Explanation of Inputs●Fuels are the sum of all fuels used at each production site, converted into calorific crude oil equivalents. They include fuels for in-house power plants.

Explanation of
Outputs●The figures for CO2 emissions from energy sources represent emissions from in-house fuel consumption and from electricity purchases. Those for CO2 emissions from non-energy sources
cover mainly the portion that is derived from raw materials. ●COD is the BOD discharge into rivers converted into COD values. ●External waste recycling covers materials converted externally
into resources or fuel. ●Final disposal refers to material buried on Company premises or at external landfill sites.

Greenhouse Gas Emissions(1,000 tons-CO2e) 3,493

3,276 （-6%）

1,856

1,735 （-7%）

1,000

558

0

1,079

483 （-13%）
1,058 （-2%）

14

15

3,000
2,000

Energy consumption intensity(fiscal 2015 base)CO2 emissions intensity (from energy
sources: fiscal 2015 base)

SOx

Water

Dispose/RecycleEnvironmental conservation; security and disaster prevention;
occupational safety and health; logistics safety; chemical andproduct safety; and worksite communication

Items

1.2 million t
CO2 (from non-energy sources) 0.9 million t

This environmental impact data encompasses Denka’s domestic plants and main affiliates within those facilities.

Sixth Medium-Term Environmental Plan

Results

Air emissions* PRTR substances calculation excludes TOYO STYRENE Co., Ltd. and Taiyo Vinyl Corp. inside the Chiba Plant.
Waste emissions calculation excludes TOYO STYRENE Co., Ltd.

Life Cycle of Our Chemical Products

Fifth Medium-Term Environmental Plan (the final year)
Fiscal2015

CO2 (from energy sources)

The RC Committee engages in the review of the entire life
cycles of our chemical products to assess their safety andpotential impact on the environment and human health andthereby make systematic improvements.

Sixth Medium-Term Environmental Plan

Items

(373,000kl)

Raw materials

RC Implementation Themes

Structure for Promoting Environmental
Activities

Products(1.43 billion kWh)

Chair (Assistant to CEO)
Members (relevant directors, general❸ Key themes

Promote resource recycling in cement production (the Omi Plant);
step up measures aimed at reducing BOD and odor from wastewater
treatment facilities and systematically renew freezers (the Omi Plant); andsystematically reduce VOC emissions (the Chiba Plant)

Fuels

1.35 billion kWhmanagers and plant managers)❶ Global warming countermeasures

OUTPUT

Electricity

RC Committee
CEO

Business Activities

362,000kl

Tetsuya Shinmura

Fiscal 2016 Responsible Care (RC)Activity Policies

Caring for the Global Environment

Promoting Environmental Management Aimed at Ensuring
the Sustainable Use of Resources and Energy

Overview of Environmental Impacts (totals for all production sites in fiscal 2015; fiscal 2014 figures areprovided in parentheses for comparison)

SCOPE1(Direct emissions from Denka facilities)
SCOPE2(Attributable to electricity purchases, etc.)
SCOPE3 (Indirect emissions)

(FY)

Unit:

1,000 tons-CO2e (each GHG item is converted to CO2 emissions
equivalent to its estimated greenhouse gas effect)
Scope of calculation: All Denka business sites and main affiliates in Japan and overseas
production bases in Singapore, China and Vietnam
Scope 3:Seven categories (excluding processing, use and disposal by customers)
for fiscal 2014; all categories are calculated for fiscal 2015
Figures in parentheses are year-on-year changes

Our Response to the Revised Act for Rationalized
Use and Proper Management of Fluorocarbons
In accordance with the Act for Rationalized Use and Proper Management of Fluorocarbons(put into force in April 2015), we are stepping up the management of our equipment thatuses fluorocarbons as refrigerants. With the revision of this act, business operators are
obliged to submit a report to relevant authorities whenever their annual emissions volume
exceeds a specified statutory limit. In fiscal 2015, our fluorocarbon emissions were below
this limit. Looking ahead, we will keep emissions below the limit by steadily implementing
facility inspection and maintenance.
In addition, we are promoting the systematic renewal of such equipment, replacing itwith alternatives that use refrigerants with a smaller GWP (global warming potential). In thisway, we are working to make fundamental improvements.

Utilization of the CDP Scheme
In 2015, we began disclosing information on our businessactivities, including those undertaken by the entire value chain,that may affect climate change, utilizing the CDP (Carbon
Disclosure Project)* scheme. As such, we are stepping up
our Groupwide initiatives to counter global warming while
consolidating data about such initiatives.

Denka’s Score and Rating under CDP2015
Disclosure: 94; Performance: B* A London-based NPO run by an association of institutional investors from around the world
with the aim of encouraging businesses to reduce GHG emissions and mitigate the risk ofclimate change. Once a year, CDP compiles and publishes a report on participating companies’
strategies to counter climate change as well as the volume of their GHG emissions.

Establishing Our Target for Total GHG
Emissions for 2020
Giving due consideration to the conclusions of the COP21(November to December 2015, Paris), which included anagreement to promote international initiatives to achieve“Decarbonization,” we established an entirely new target forour total GHG emissions. In addition to pursuing ongoing
initiatives to achieve our CO2 emissions intensity targets, wewill strive to curb total GHG emissions over the medium term,with end targets set for 2020.

GHG Reduction Targets
Total GHG Emissions: Achieve a 12 % reduction by 2020 fromthe 2013 level
CO2 emissions intensity from energy sources: Achieve a 10%
reduction by 2020 from the 2013 level
Denka Group CSR Report 201621

Environmental Conservation

Initiatives to Secure Our Electricity Supply

Resource Recycling through Cement Production

Initiatives to Utilize Clean Energy
Itoigawa
Omigawa Omi

Kajiyashiki
Hayakawa

Umikawa
Himekawa

Kubiki-Ono

Oyashirazu

7

Nechi

16

12

2

14

10
9
8

1

Kotaki

11
17

13

4

3

Hiraiwa5
6
15

Kita-Otari

Hydroelectric
1 Omigawa2 Kotakigawa
3 Oami4 Otokorogawa
5 Yokokawa No. 1
6 Yokokawa No. 2
7 Umikawa No. 1
8 Umikawa No. 2

3,300kW
5,200kW
28,400kW9,800kW
10,000kW
16,000kW3,800kW
4,700kW

9 Umikawa No. 3

10 Umikawa No. 4
11 Himekawa No. 6*
12 Takigami*
13 Nagatoga*
14 Sasakura No. 2*
15 Kita-otari*

2,600kW900kW
26,000kW
15,000kW
5,000kW
10,200kW
10,700kW（8,000kW） The total maximum output ofhydroelectric power generation:
118,150kW
17 New Himekawa No. 6*1, 2（27,500kW）(Completion scheduled for 2018)

Solar*1
Thermal

Rotary kiln

Recycling Process Flowchart

Note: Figures represent the amount of electricity that
Denka is entitled to based on its proportion offacility ownership.

Shibukawa*3 （2,200kW） Gas turbine
Tomi
17,760kW
Isesaki（1,200kW） (cogeneration) Chiba 12,720kW
Omi
17,000kW
Ofuna
680kW
Omi cement 11,100kW Diesel
Shibukawa1,000kW
Tomi
25,000kW Total maximum output of thermal power
94,260kW
Chiba
9,000kW generation:
Total maximum output of Denka’s
in-house power generation:

Waste and byproducts

Used tires

Sewage sludge

Limestone Waterworks sludge

Waste plastic

Waste oil

Clay

SilicaFoundry sandIron materials

Slag

Rotary kiln
Biomass boiler for
in-house power
generation

Note: Waterworks sludge, incinerator ash and construction
soil are used in place of clay.

Electricity purchased
Total consumption

1.72 billion kWh

36% (clean)

Thermal power(natural gas)

19% (clean)

Thermal power (heavy oil)Oami Power Plant concurrently serves as Denka’s hydroelectric power generation plant
management center

22

Denka Group CSR Report 2016

0%

Cement waste heat

2% (clean)Finishing mill

Woodchips
Waste plastic

Breakdown of Waste Accepted in Fiscal 2015
Other

Total generated in-house

Hydroelectric

Blast furnace slag

CementDryer and raw
materials
grinder

Volume of Waste Accepted(total and per unit of production)

57%

Gypsum byproducts

Incinerator ash

Raw materials*1 Output from the New Omigawa Power Plant, New Himekawa Power Plant No. 6 andsolar power generation facilities are not included as these facilities’ sole purpose issupplying electricity to external companies.
*2 Jointly owned with Hokuriku Electric Power Company*3 Denka Solar Power Shibukawa

Power Sources in Fiscal 2015

Fly ashConstruction soil

212,410kW

43%

being disposed of in landfills or incinerated. Not only does thisinitiative reduce environmental burdens attributable to such
waste disposal methods, our cement production helps curb
the use of such mineral resources as coal.

* Jointly owned with Hokuriku Electric Power Company

16 New Omigawa*1(Completion scheduled for 2022)

The cement production operations at Denka’s Omi Plant
accept and recycle a large amount of waste and byproducts
as fuels and raw materials.
The process utilizes coal ash from thermal power stations
and contaminated waste soil from construction sites as well
as sludge from water supply and sewage systems—all ofwhich are result from processes that are integral to people’s
daily lives—as raw materials. Our cement also utilizes foundrysand that has been used for casting molds by automakers
and machine parts makers as well as other waste from avariety of industries. As for fuels, we accept waste plastic
separated from general waste as well as automobile shredder
residue, tires recovered after automobile disassembly andwaste oil.
The Omi Plant has a biomass thermal power facility fed
by scrap wood, thereby reusing wooden materials collectedfrom demolished houses. This facility also accepts byproducts
from chemical production facilities within the plant, aiming tominimize external emissions. In fiscal 2015, Denka used 541
kilograms of waste and byproducts for every metric ton of
cement produced.
In sum, Denka’s cement production utilizes recycled fuels
and raw materials and thereby prevents various types of waste
and byproducts emitted by businesses and households from

Initiatives to Secure Our Electricity Supply/
Resource Recycling through Cement Production

Since its founding, Denka has been stepping up its use ofhydroelectric power and constructing new hydroelectric
power plants. Today, the network of our hydroelectric power
plants includes one location in the Omi river system, fivelocations in the Himekawa river system and four locations in
the Umikawa river system. Meanwhile, Kurobegawa ElectricPower Company, a joint venture owned half by Denka andhalf by Hokuriku Electric Power Company, has facilities in fivelocations. Together, the maximum output of these plants totals
approximately 120,000kW.
We also have thermal power plants, which are being
converted to run on natural gas instead of heavy oil with theaim of reducing CO2 emissions. In addition, the Omi Plant
has a biomass power generation facility fed by scrap woodand utilizes waste heat from cement production for power
generation.
In response to the enactment of the feed-in-tariff (FIT) law
for renewable energy, the Shibukawa and Isesaki plants haveestablished mega solar power generation facilities, commencing
sales of electricity to Tokyo Electric Power Company in July
2013. In November 2014, the Isesaki Plant increased thecapacity of its mega solar facility by 200kW. The combined
maximum output of the solar power generation facilities atthese two locations now amounts to 3,400kW, with estimatedannual power generation totaling approximately 3,800,000kWh.
Looking toward the next 100 years of our operations,
we are striving to develop new hydroelectric power plants.
Construction of the New Omigawa Power Plant (maximum
output: approximately 8,000 kW; operational kickoff: 2018)
upstream of the Omigawa Power Plant has been being
steadily advancing since fiscal 2014. Also, Kurobegawa
Electric Power Company is undertaking surveys to assess thepotential environmental impact of the planned constructionof its New Himekawa Power Plant No. 6 (maximum output:
approximately 27,500kW; operational kickoff: 2022). Denka iscomprehensively cooperating on this construction project aspart of its ongoing effort to promote the effective utilization ofclean energy.
The output from these two new facilities will be sold throughthe FIT scheme for 20 years after their completion. Once thisperiod expires, plans call for utilizing the facilities as in-houseelectricity sources, thereby increasing the ratio of clean energy
in our overall electricity use by around four percentage points.

Recycling Business in Cement Production

Waste accepted per unit of production
Amount processed(1,000 tons)

External sources

In-house sources

Waste accepted per unit of production(kg/t)

600

1,200
1,000

541

500

800

400

600

264 300

400

200

200

548 100
0

0
06

07

08

09

10

11

12

13

14

15

(FY)

10%

Sludge33%

Waste oil and plastic andwood chips

5%

Construction soil

10%

Accepted

812,000 tons
Slag andfoundry sand22%

Fly ash20%

Denka Group CSR Report 201623

Engaging with Our Stakeholders

Human Resource Development
Basic Policy

Participant’s Perspective
Overseas Training for Technological Specialists
My recent overseas training allowed me to take aclose look at such overseas production sites as the
Seraya Plant. I was able to see that collaboration
between the “mother plant” in Japan, with its wealth oftechnological strengths in manufacturing built up overtime, and these overseas sites, which endeavor toenhance productivity and labor efficiency, is providing
our overseas production network with advantages overother companies even in the increasingly competitivemarket environment. On the other hand, this training
made me more aware of the fact that communication
with locals and differences in customs and diets canbe a challenge during overseas assignments.
My experience in overseas training was quite
stimulating and exposed me to diverse concepts andperspectives.
Hiroyuki Shiotsuki

Fiscal 2015 Human Resource
Development Initiatives and Results
1. Mandatory Job Level-Based Training❶ We implemented training programs aimed at imparting essential
competencies for employees at all levels (basic business skills as wellas communication, management and leadership skills) while raising
employees’ awareness of level-specific job requirements.
❷ For younger employees who are in their first to third years with Denka,
we provided programs to enhance their calculation, presentation anddocument preparation skills so that they are fully equipped with theskills they will need as businesspeople.
❸ In the face of an increasingly globalized business environment, we
implemented overseas training programs to instill in our humanresources superior communication skills and the ability to accurately
assess diverse customer needs. More specifically, administrative
specialists in their second year underwent such training to enhance theirlanguage skills and acquire intercultural experience, while technological
specialists in their fifth year took part in a program aimed at broadening
their perspectives as engineers working abroad.

Ceramic Research Dept., Omuta Plant

2. Special-Purpose Training❶ To deliver products that our customers really want, we provided oursalespeople, who strive to closely accommodate market needs, with a
specialized training program to enhance their marketing skills.
❷ In response to the enforcement of the revised law pertaining to theemployment of the elderly, we held a Career and Life Planning Seminar,targeting specialists who had reached the age of 55 in fiscal 2015. This
program was intended to provide these employees with options regarding
career development up to the age of 65 and ways to ensure satisfactory
lives post retirement.

Commemorative picture of technological specialists who participated inoverseas training

Specialists

Engineers

New generalmanagers(Class-9)

New
Class-9New managers(Class-8)

New
Class-8

New assistantmanagers (Class-7)

New
Class-7

General staff

Technological skills

External training sessions (open seminars)
Marketing training
Career and Life Planning Seminar
Mental health training sessions (group- and self-care)

5th-year employees
3rd-year employees
2nd-year employees Business unit training
6-month employees
New employees

24

Denka Group CSR Report 2016

Overseas training
program (Overseas
study program at Beijing
Language and Culture
University)

Accounting & Business Administration Dept. of the Omi Plant

Fiscal 2015 GCP Activities and Results
To review overall GCP activities, we hold the biannual
Denka100 presentation meetings, in which selected
departments and teams share the results of their initiatives.
Marking the 22nd such occasion, the latest meeting washeld on December 9, 2015 at the Head Office, with ten
departments and teams giving presentations under the theme“applying a new point of view.” Each presenter highlighted
their creative, worksite-driven efforts to step up the creation ofa better company applying a new point of view.
At the meeting, six departments and teams were chosen
to receive prizes for their activities. Among these prize-winningparticipants were the Accounting & Business Administration
Dept. of the Omi Plant, which made a notable improvement
in its equipment purchasing activities; the Administrative
Department of the Omuta Plant, which raised the capabilitiesof the overall production sites; and the Performance Plastics
Dept. of the Head Office, the staff of which contributed theirideas about next-generation products; as well as Denka
Electronic Materials Dalian Co., Ltd., Denka Singapore Pte. Ltd.
(Seraya Plant), and Denka Corporation (U.S.A.), all of which
demonstrated outstanding team strength in global expansion
through collaboration between Japanese and local staff.

GCP
Excellent
Prize“Taking on the challenge ofdriving Denka’s operations forthe next 100 years”

GCP
Excellent
Prize“Redefining administrative
affairs from a new point of view”

Denka Electronics Materials Dalian Co., Ltd. Administrative Department of the Omuta Plant
GCP
SpecialPrize“Incorporating everyone’s ideas
to create a next-generation
product”

Performance Plastics Dept. of the Head Office
GCP
SpecialPrize

GCP
SpecialPrize“Overcoming culturaldifferences between Japan andthe United States”

Denka Corporation (U.S.A.)“Improving logistics operations
at the Seraya Plant”

Denka Singapore Pte. Ltd.
ExcellentPrize

Special-purpose training
Administrative skills“Improving equipment purchasing activities”

Under the leadership of managers, our Good Company
Program (GCP) activities aim to identify issues and challenges
confronting each worksite, with specific activity themes
established to reach solutions through teamwork. The
DENKA100 Promoting Department supervises these activities
while DENKA100 Promoting Committee members are
assigned to individual sections and business sites to provide
support. In fiscal 2015, a total of 152 departments and teams
implemented their own GCP activities.

Our GCP Activities Overseas

Content of Human Resource Development Programs (Fiscal 2016)
Mandatory job level-based training programs

GCP
Grand
Prize

Human Resource Development

Denka has positioned human resource development as a
key activity for strengthening its business foundation andfacilitating corporate growth. With this in mind, we haveestablished a program to nurture human resources capable offlexibly adapting to changes and taking action with a strong
sense of commitment. Implementing this program, we are
striving to ensure that all Denka employees can realize theirmaximum potential.
Guided by these concepts, we annually review and enhance
the content of employee education programs. In these ways,
we help each employee, department and division embody our
corporate slogan “Possibility of chemistry.” and better play theirroles in achieving the goals of the Denka100 management plan.

Our Structure for Promoting GCP Activities

SQC and process
technology training
Overseas training
program (technological
specialists)

Specialist courses
All job categories:
Internal control, CSR,
legal affairs, accounting,information technology,
quality management,
logistics, intellectual
property, tradeadministration, English
language and various
correspondence courses
Technological job
categories:
Compliance withchemical-related
regulations
Engineering and analysis
techniques

In-house academic meetings• Denka100 presentation
meetings• Results presentation
meetings• Technological symposia• Analytical researchpresentation meetings• Quality symposia• Process symposia

On April 15, 2015, the “Denka100 presentation meeting in
China,” the first overseas meeting of its kind, was held at thepremises of Denka Chemicals Development Suzhou Co., Ltd,
with the Denka China Representative Office serving as themain organizer.
Among Denka Group members, human exchange
between our subsidiaries in China is particularly active. With
this in mind, we focus on nurturing a greater sense of unity
among staff at these organizations through the pursuit of GCP
activities.
At the event, representatives from each participating
subsidiary gave briefings on their safety assurance activities
and presented employee education and other initiatives aimed
at raising awareness and improving each company. Moreover,they shared their best practices related to R&D, production
technologies and sales activities. Teams and individuals that
implemented outstanding activities were commended at asocial gathering held after the presentations.

Denka Inorganic Materials (Tianjin) Co., Ltd.
Individual
Prize

Individual
Prize(Right) Mr. Cui Dong
(Right) Mr. Jinyi Min
General Manager, Denka Infrastructure Manufacturing Manager, Denka Inorganic
Materials (Tianjin) Co., Ltd.
Technologies Shanghai Co., Ltd.

Denka Group CSR Report 201625

Engaging with Our Stakeholders

Developing Comfortable Workplaces
Underlying Policy

Helping Women Succeed

Work-Life Balance
We constantly strive to realize a comfortable workplace
where all employees feel rewarded and professionally fulfilled.
Simultaneously, we endeavor to ensure that employees enjoy
sufficient time with their families and are able to engage incommunity activities and self-motivated learning or to commit
themselves to such family duties as child rearing and nursing
care. Our ongoing initiatives to achieve these two aims include
reducing excessive overtime and encouraging the full use ofannual paid leave. In fiscal 2016, we increased our designated“No Overtime Days,” which had been Wednesdays only,
to include Fridays as well. This move has prompted many
employees to reconsider their weekly work schedules. To
make sure that they need not put in overtime on either day,efforts are now under way to streamline individual work
schedules as well as to encourage employees to set aside
more time for recreation.
Other initiatives include upgrading childcare and nursing
care leave plans and facilitating the use of such plans, as we
recognize that employers’ assistance to those who struggle
with child rearing or nursing care issues ultimately helps toresolve the challenges confronting society.
Status of Work-Life Balance (non-consolidated basis)
Fiscal 2013 Fiscal 2014 Fiscal 2015
Total working hours

1,925

1,931

1,931

Overtime hours

91

100

104

Average number of days of paid leave utilized

9.2

9.05

9.56

Ratio of annual paid leave utilized

49%

48%

50%

Number of employees who took childcare
leave (Of which, male employees)

4
(0)

6
(0)

11
(0)

Number of employees who took nursing care leave

1

1

0

Number of employees who took volunteer activity leave

0

0

0

Denka’s Three-Year Action Plans
Three-Year Action Plans in line with national legislation
to support raising children (non-consolidated basis;launched in April 1, 2014)
1 Raise the average number of days of annual paid leave utilized per
employee to 12 or greater
2 Reduce overall working hours by improving the efficiency ofoperations
3 Help young people enhance their understanding of working lifeand seek stable employment through the provision of hands-on
vocational experience via internship programs and plant tours;
assist college or university students who have grown up in thevicinity of the Company’s domestic plants in their pursuit of higher
education through the provision of scholarships
4 Provide educational support by hosting plant tours andexperimental science classes

26

Denka Group CSR Report 2016

In response to Japan’s Act for Facilitation of Women’s Career
Development, enforced on April 1, 2016, Denka carried out anassessment and analysis of its workforce status and as partof its action plans set the target for the proportion of women
hired for specialist positions in fiscal 2017 at 20%. Moreover,
we are drawing on input from women representing a broad
range of age groups to improve recruitment activities while
proactively welcoming female workers and managers fromexternal sources.
Our initiatives to help women succeed are publicized inhouse and externally via such media as our corporate website.
For details, please visit the “Sustainability” section on thepage entitled “Our Employees.”
http://www.denka.co.jp/eng/sustainability/approach/employee/index.html

Initiatives to Promote Diversity
To secure sustainable corporate growth over the next 100
years, Denka is actively promoting human resource diversity.
Following on our fiscal 2014 initiatives, we continued toenhance personnel systems relevant to those engaged inchild rearing and nursing care. For example, we lengthened
the period of nursing care leave from 93 days to one year. We
also made it possible for employees to work shorter hours fora period of up to one year when they need to provide nursing
care. This arrangement is handled separately from nursing
care leave.
Moreover, our new programs included defraying apart of childcare-facility fees for those with children underelementary-school age and whose spouses also work fulltime; creating region-specific positions for those who needto stay in a particular region for a certain period of time
due to child rearing or nursing care demands; and letting
eligible employees work at home on a trial basis with an eye
to facilitating a healthier work-life balance for employees
engaging child rearing and nursing care. All of these programs
came into effect in April 2016.
Status of Employees (non-consolidated basis) and Diversity
Data * Including people with disabilities

Employment status

Fiscal 2014

Fiscal 2015

2,873

2,934

2,974

Male

2,660

2,718

2,743

Female

213

216

231

Permanent

2,032

2,152

Temporary

841
39.8

Number of employees
GenderFiscal 2013

Average age

Number of Employees Participating in Mental Health Training
in Fiscal 2013 through 2015
Business site

NumberHead Office (specialists)

316

132

2,317

Head Office (general staff)

94

-

-

782

657

Branches (five locations)

21

131

20

39.7

39.9

Innovation Center

35

133

-

Total

466

396

110

18

18

18

103

100

75

Male

34

36

32

Female1197Female managers

1

1

2

Retiree reemployment rate

88

89

93

2.24

2.14

2.06

Resignees

30

40

39

Ratio of resignees

3.5

4.3

6.6

4

3

3

Number of people who resigned within
three years of recruitment

Given the recent rise in the number of people who suffer
mental illness, Denka has made addressing mental healthissues a critical management task. In fiscal 2013, weestablished the Mental Health Promotion Plan to launch
comprehensive countermeasures, including training focusedon “self-care” and “group-care.” In line with this plan, we
have launched a support structure run by in-house staff whilesetting up a 24-hour helpline run by a third party. Furthermore,
we formulated a reinstatement program for those who are on
long-term leave due to mental health problems. The numberof employees who suffer mental health problems as of April
2015 decreased 4% compared with April 2013. However, as
of April 2016, the number slightly increased, getting back to
the April 2013 level.
With the enforcement of new regulations regarding
employee stress checks in fiscal 2016, we implemented
mandatory stress checks in July 2016. We will assess andimprove the status of our workplace environment by swiftly
analyzing feedback.

Fiscal 2014

Average years of service

Ratio of people with disabilities

Mental Health Promotion Plan

Fiscal 2013

New recruits
Specialists (hired fromnew graduates)

In line with the Denka100 management plan targets, we aim
to raise our overseas sales ratio to 50% or greater in fiscal
2017. To achieve this aim, we are continuously striving tosecure and nurture human resources with diverse values
and competencies. Among new recruits in fiscal 2016, there
were two foreign nationals (one Chinese and one Malaysian).
Moreover, we recruited one Indian national and one U.S.
national from external companies. The latter was introduced
to Denka at a job-hunting fair in the United States, where theCompany participated in events of this kind for the first time.
We have also stepped up human resource exchanges
between Group members. New recruits hired by Denka
Chemicals Holdings Asia Pacific Pte. Ltd. (Singapore) areparticipating in a training program in Japan as manager
candidates. Meanwhile, national staff hired by our Chinese
subsidiaries have been seconded to the Head Office in Japanand are playing a key role in sales activities targeting overseas
customers. As such, we are implementing Groupwide
initiatives to secure our preparedness for globalization.

Fiscal 201590

▶For details of occupational safety and health initiatives,
please see the web-based CSR Report 2016 references.

Our Initiatives to Protect Human Rights

favorable human relationships at workplaces.” Guided bythis policy, the Denka Group is striving to ensure that all
employees are well-versed in the significance of humanresource protection by, for example, providing corporate
ethics education.

Developing Comfortable Workplaces

Denka strives toward the creation of a better society
through its business activities. In doing so, we have placeda fundamental emphasis on ensuring that all employees cantake pride in being a part of a company deserving of society’s
trust while enjoying fulfilling lives. As we believe that theseconcepts are key to achieving the goals of our Denka 100
management plan, we consider the creation of a vibrant andlively environment in which everyone can realize their potential,
to be essential.

Securing Our Preparedness for
Globalization

Facilitating a Corporate Culture That
Encourages the Free Exchange of Ideas
In conjunction with the change of company name in October
2015, we abolished the previous in-house practice ofaddressing individuals by their job title, replacing this with thepractice of addressing people by name and the honorific “san.”We also began hosting a weekly “Wednesday Bar,” a social
gathering that takes place after the close of the workday atthe Head Office and Innovation Center.
The adoption of the less formal form of address isintended to enhance worksite communication and help lay
a psychological foundation for transforming our corporate
culture into one that encourages diverse individuals to achieve
success in global operations regardless of age, gender or
nationality. The “Wednesday Bar” is a venue for mingling withcolleagues without the restrictions of departmental boundaries
and age differences and allows for the exchange of ideas in amore open atmosphere.

Wednesday Bar

Businesses’ Action for Promoting Cancer
Control Measures
In December 2014, Denka was registered as a partnercompany for Businesses’ Action for Promoting Cancer Control
Measures, a national project sponsored by Japan’s Ministry of
Health, Labour and Welfare. A loss of human resources, whichconstitute a corporations’ greatest asset, is a critical issue that
may undermine its entire business foundation. Since the best
way to counter cancer is early detection and treatment, we
encourage all employees to submit to testing for cancer anddistribute a booklet to raise their cancer awareness.

Initiatives with Labor Unions
Denka holds periodic conferences, negotiations and othergatherings with the Denka Labor Union and Denka Employees’
Union, maintaining favorable and mutual relationships of trust.
In particular, we hold quarterly meetings to resolve ongoingissues and discuss potential future challenges with regard toworking conditions, actively exchanging various views on thismatter.

The Denka Group Ethics Policy declares “we will respectindividual’s human rights while helping employees maintain

Denka Group CSR Report 201627

Engaging with Our Stakeholders

Quality Management: Working with Our Supply Chain
Our Policies on Quality Management❶ Improve quality assurance levels Companywide❷ Strengthen compliance with laws and regulations
and enhance customer satisfaction❸ Raise awareness of employees engaged in
manufacturing❹ Enhance technologies to ensure built-in quality❺ Facilitate the adoption and utilization of quality
control technologies and methods at eachproduction site

To decrease environmental burdens attributable to theraw materials it purchases, Denka implements chemical
substance management based on the Negative List that takes
into consideration environmental regulations in Japan andoverseas. Moreover, in addition to acquiring such documents
as SDS, MSDSplus and AIS pertaining to procured materials,
we issue purchasing specifications to clarify materials’
compliance with Japanese and international environmental
management regulations as well as relevant industrial
guidelines. We also visit suppliers of some key raw materials,
performing on-site inspections of their manufacturing facilities.

・We experienced no major quality problems, with the number of complaints
decreasing from 496 in fiscal 2014 to 359 in fiscal 2015, thanks to such
exhaustive recurrence prevention measures as facility improvements.

Response to the Conflict Minerals Issue

・In the face of a global trend toward the tightening of regulations on chemical
substances, we strengthened our management structure for such substances.
In addition, we are developing a more solid production assurance system byadopting the upgraded version of ISO standards.

In the United States, listed companies are obliged to reporton the status of the use of conflict minerals to the Securities
and Exchange Commission (SEC) in accordance with the
Dodd-Frank Wall Street Reform and Consumer Protection Act
enacted in July 2010 and rules issued by the SEC in August
2012. Although Denka is not subject to this legislation, theCompany considers it a social responsibility to follow suit. With
this in mind, we undertake tracking surveys when requested
by customers to affirm that our products are conflict mineral
free.

・One document failure was found with regard to the reporting of chemicals
obtained from exporters. Following the instruction of relevant authorities,
we strove to make improvements. We also carried out thorough productby-product checks to ascertain whether there were similar shortcomings in
documentation.
▶For details on our quality management, please see the
web-based CSR Report 2016 references.

Message from the General Manager

CSR Procurement
The Denka Group recognizes that all of its suppliers are
essential partners in its pursuit of initiatives aimed at fulfilling
its social responsibilities. In line with this recognition,
the Group works hand in hand with its supply chain topromote CSR procurement while clarifying its approach andstandards through the CSR Procurement Policies and CSR
Procurement Guidelines that it formulated based on the
Denka Group Guidelines. In fiscal 2014, we began sendingout questionnaires with regard to our CSR Procurement
Guidelines to key suppliers.
For fiscal 2016, plans call for expanding the scope ofrecipients of these questionnaires, with the aim of facilitating
communication with a greater number of suppliers andencouraging them to embrace CSR Procurement.

We have transactions with more than 2,000 suppliers
and are aware of the fact that their cooperation isessential to our corporate activities. Therefore, we
aim to fulfill our social responsibilities in tandem with
suppliers. Looking ahead, we will strive to enhancecommunication with each supplier through CSR
activities while working with them to resolve challenges
and build favorable partnerships. I sincerely ask fortheir continued support of and cooperation with ouroperations.
Masataka Yoshitomi
General Manager, Purchasing Dept.

Life Cycle Assessment (LCA) Initiative
With an eye to promoting sustainability through its corporate
activities, Denka is implementing LCA initiatives aimed atsaving energy and reducing CO2 emissions. These initiatives
also help us identify risk and business opportunities pertaining
to the entire supply chain.

LCA environmental education (the Isesaki Plant)

28

Denka Group CSR Report 2016

Major Initiatives❶ Completed LCA for 47 mainstay products(resin-based and inorganic products, electronicmaterials, etc.)❷ Identifying environment-friendly products andassessing reduction in environmental burdens via
the use of such products❸ Participating in the carbon-Life Cycle Analysis(c-LCA) Committee hosted by the Japan
Chemical Industry Association❹ Providing LCA-related information in response tocustomers’ requests❺ Conducting relevant environmental educationfor employees (global warming, the latest LCA
trends, etc.)

Denka’s Policies on Shareholder Returns
In November 2014, Denka established its Policy on
Shareholder Returns and Budget for Growth Investments.
Guided by the principles set out in these documents, Denka
aims to return profits yielded by initiatives executed under
the Denka100 management plan to its shareholders while
implementing such strategic investments as M&A for further
growth.

Policy on Shareholder Returns and Budget for Growth Investments

1. Policies on Shareholder Returns
Total payout ratio target : 50%* (Dividends paid + treasury stock purchased) / consolidated net income

2. Methods for Shareholder Returns❶Cash dividends: Maintain steady cash dividends,
with a minimum payout ratio set at 30%❷Purchase of treasury stock: Flexibly purchasetreasury stock in step with trends in stock prices andthe market environment

3. Budget for Forward-Looking Strategic
Investments
After paying out shareholder returns, Denka willappropriate funds from retained earnings as well as
cash inflows to finance such investments. The total
amount budgeted for is approximately ¥50 billion.
(Over the four years from fiscal 2014 to 2017)

4. Term
Four years ending with fiscal 2017, the target year of
the Denka100 management plan

Results Briefings
Denka holds periodic results briefings for analysts andinstitutional investors, believing that maintaining a proactive
approach to disclosing the latest corporate information toshareholders and investors can enhance their understandingof our business operations and growth strategies.
One such briefing held on May 11, 2016, included apresentation on operating results and forecasts as wellas an overview of our business expansion initiatives in thehealthcare field—the most prominent priority field under the
Denka100 management plan growth strategy that aims to“focus management resources on new growth drivers anddevelop next-generation products.” In particular, we explained
an initiative entitled “Global Strategy for ‘sd-LDL-C’ and Other
Diagnostic Reagents That Measure Lipoprotein Subclasses”
being executed by Denka Seiken Co., Ltd.

a report of progress under the Denka100 management planand the content of the plan’s strategies to create an optimal
production system in Japan and overseas. Furthermore, we
detailed initiatives undertaken by Denka Seiken, such as those
aimed at expanding operations related to rapid diagnostic
test kits and promoting the development and applicationof new technologies. As such, it was an opportunity toelaborate on key healthcare-related operations that bolster the
aforementioned strategy to focus management resources on
growth drivers and develop next-generation products.
At the venue, panels were exhibited to display Denka’s
history from its founding to the centennial celebration as wellas its Policy on Shareholder Returns and Budget for Growth
Investments, drawing investors’ attention.

Quality Management: Working with Our Supply Chain/
Engaging with Shareholders

In fiscal 2015, we implemented ongoing quality improvement
activities in line with the following Companywide Quality
Policies.

Green Procurement

Engaging with Shareholders

General Meeting of Shareholders
Denka’s annual General Meeting of Shareholders provides avaluable opportunity for engaging in direct communication
with shareholders. Accordingly, we work to give shareholders
enough time to confirm and examine the reports and items up
for vote. To this end, we send the notice of convocation for
the General Meeting of Shareholders three weeks prior to thedate of the meeting. For the fiscal 2015 meeting, we posted
such notice along with its English translation one week prior tosending it out in print, via the Company’s and the Tokyo Stock
Exchange’s websites. As for the print version, we print thisnotice on large B5-sized (182 x 257 mm) paper, with the aimof enhancing readability.
Moreover, we try to schedule the meeting at the earliest
possible date to avoid overlaps with similar meetings held byother companies, thereby making it easier for shareholders toattend (June 19 in 2015 and June 22 in 2016).
At each meeting, we use narrated videos to supplement
our explanations of reported items while maintaining exhibitionbooths to showcase our initiatives and products and gain
greater recognition of our operations.
We h a v e a d o p t e d a v o t i n g s y s t e m t h a t a l l o w sshareholders to use on-line voting via personal computersand cellular phones in addition to regular post. Denka alsojoined the Electronic Voting Platform for institutional investors
run by the Tokyo Stock Exchange. As such, we are striving
to improve shareholders’ convenience with regard to theexercise of voting rights.

Corporate Briefing for Individual
Investors
On August 19, 2015, Denka held a corporate briefing forindividual investors at Niigata Convention Center “TOKI
MESSE” in Niigata City. The 13th of its kind, this briefing
welcomed more than 100 attendees and provided them with
The 157th ordinary General Meeting of Shareholders

Denka Group CSR Report 201629

GovernanceWebsite: The Denka Corporate Governance Guidelines and the Corporate Governance Report.
http://www.denka.co.jp/eng/sustainability/management/governance/pdf/cgreport.pdf

Corporate GovernanceKenji Nakano

Dept., Legal Dept., HR Dept., DENKA100 Promoting Dept.

We have adopted an Audit & Supervisory Board System as
the basis of our Corporate Governance System. Said board
includes two outside members to assess operations andmanagement, thereby ensuring that our business properly
serves stakeholders.
Similarly, the Board of Directors has three independent
outside members. Moreover, there are no hierarchicalrelationships between directors, so each is free to overseeand supervise business execution.
Moreover, we have in place a Management Committee,
composed of directors, members of the Audit & Supervisory
Board and selected executive officers, to streamline andaccelerate deliberation on important managerial matters.
For individual items entailing budget planning and capital
investment, we set up special committees or deliberative
councils by function.

Internal Control Reporting System▶ Board of Directors and Executive Officers
With the aim of enhancing its corporate governance, Denka
has clarified the separation of executive officers’ businessexecution and the Board of Directors’ supervisory functions. To
further enhance management transparency and soundness,
we increased the number of outside directors (from two to
three) while reducing the total number of Board members (from12 to 10) based on a resolution passed at the annual General
Meeting of Shareholders held on June 19, 2015.
The three outside directors and two outside Audit &Supervisory Board members are all registered as independent
directors/auditors under the rules of Tokyo Stock ExchangeInc. Sufficiently independent from management, they leverage
extensive knowledge in their areas of specialty to ensure thestringent supervision of the Company’s business operations.
The abovementioned management structure is designed
to allow adaptability in the face of a globalizing operating
environment and the advance of information communication
technologies. Looking ahead, we will strengthen this structure
to drive aggressive expansion while introducing robust
preventive initiatives.

Corporate Governance System
General Meeting of Shareholders
Directors (Board of Directors)
Supervision

Election/Dismissal

Operation

ReportRepresentative Directors
Executive Directors
Executive Officers
Business Units

Appointment/Dismissal

Appointment/Dismissal

ReportAudit

Affiliates

ReportAppointment/
Dismissal

Audit & Supervisory
Board Members Dept.

Internal Auditing Dept.
Audits within Business Units

Conduct Audit/Auditing Staff(Including Administrative Dept., Legal Dept., Environment and Safety Dept., and Quality Management Dept.)

Compliance Hotline

30

Denka Group CSR Report 2016

Audit

An essential part of corporate governance is understanding
the diverse and numerous risks inherent in corporate activities
and exerting proper risk control. In general, each business unit
is responsible for identifying and managing its specific risks.
For environmental, safety, product liability and export control
issues that affect the entire Company, we have in place special
sections and permanent committees to handle matters.

President

AssistInternal Audits

Risk Management

Risk Management Overview

Appointment/
Dismissal

Audit & Supervisory
Board Members(Audit & Supervisory
Board)

Denka strives to secure the reliability of its financial statements
and, to this end, has set up an internal control reporting
system that complies with Japan’s Financial Instruments
and Exchange Act while conducting audits in line withthe “Standards for Management Assessment and Audit
concerning Internal Control Over Financial Reporting”
formulated by the Business Accounting Council of the
Financial Services Agency.
Based on the results of fiscal 2015 assessments andaudits, our internal control report declared that the Denka
Group’s internal control was effective. Moreover, the attachedcertificate prepared by the independent accounting firm that
audited the report (ERNST & YOUNG SHINNIHON LLC)
concluded that all significant aspects of disclosure were proper.

Financial Auditor (Auditing Firm)

ReportRisk-specificcommittees
Report on emergencies

Corporate Governance Structure

In November 2015, we established the Denka Corporate
Governance Guidelines. Giving due consideration to the spiritof Japan’s Corporate Governance Code, formulated by the
Tokyo Stock Exchange in June 2015, our guidelines stipulate
principles governing the relationship between the Company
and its shareholders, measures aimed at ensuring appropriate
information disclosure and corporate transparency and the
responsibilities of the Board of Directors. Under the new
guidelines, we are endeavoring to realize the best possible
corporate governance practices in order to maintain the trustof shareholders and other stakeholders and thereby achievesustainable business expansion and medium- to long-term
growth in corporate value.

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

ReportReportOrder set up

Other risks

Major crises

Board ofDirectors

CrisisMeasures
Headquarters

ReportInstruct/monitor
Instruct/monitor• Businesses (including Sales and Manufacturing divisions)
Prime oversight • Administration (including Internal Auditing, Environment and
Safety, Legal and Accounting & Finance departments)
ReportWe have also appointed a team of specialists to audit ourGroup subsidiaries for their risk management. We formulated
our Risk Management Guidelines to comprehensively tackle
incidents that may have major impact on corporate activities.
In addition to the permanent Risk Management Committee,
we set up the Crisis Measures Headquarters to act whenevercontingencies arise.

Corporate Governance

Striving to live up to the expectations and trust of its shareholders and other stakeholders,
including customers, suppliers and local communities as well as its employees, Denka
believes that in addition to building a stronger business foundation through profit increase andbusiness growth, the Company must remain worthy of society’s respect and support.
Guided by this belief, we constantly endeavor to realize robust corporate governance as we
consider it key to ensuring a corporation’s management transparency and soundness, factors
that, in turn, support stable business activities over the long term.
Moreover, compliance with laws, regulations, internal rules and moral and ethical norms isessential to maintaining the trust of stakeholders and society as
a whole. We have therefore established and strictly enforce theDenka Group Ethics Policy, which clarifies our commitment to
Director, Managing Executive Officer, Chief Compliance Officer
refraining from violating any of these principles.
(CCO), Representative in China; Secretary Dept., Administrative

Establishment of Denka Corporate
Governance Guidelines

Compliance
Compliance is essential for sustainable growth. We accordingly
adhere to internal rules and government legislation and refrainfrom acts that violate moral and ethical norms. The Denka
Group Ethics Policy was established to codify Groupwide
standards of conduct, while the Ethics Committee, chairedby the president, oversees the overall compliance structure
and reports to management, thereby ensuring adherence
to this policy. Moreover, the Legal, Environment and Safety,
Intellectual Property and other departments ensure thoroughcompliance in their respective areas of specialty. In July 2015,
we newly appointed a Chief Compliance Officer (CCO) to step
up collaboration between relevant departments. We also focus
on providing employees with compliance education under
an initiative promoted by the Human Resource Development
Center.
▶For details of compliance initiatives, please see the webbased CSR Report 2016 references (p. 4).

Compliance Hotline System
We have set up and operate the Compliance Hotline in keepingwith the Denka Group Ethics Policy. This system is intended toaddress circumstances that may not be spotted by our internal
control and compliance systems and to facilitate the selfcorrection of any organizational problems. The hotline accepts
calls on actions that may or do violate the ethics policy andthrough relevant education programs, employees are awareof its availability and purpose. Once a report is submitted, theEthics Committee, chaired by the president, quickly takes
appropriate steps to resolve the situation.
The hotline’s mandate is to be fair and swift anddesignated contacts are in place at the Audit & Supervisory
Board Members Department and the labor union, which
maintain neutral stances, as well as at the Ethics Committee
Administrative Office and general affairs sections within all
offices. People can also send reports to an external law firm
functioning as a totally independent reporting channel.
Moreover, overseas subsidiaries have set up their own
hotlines, reflecting our policy of providing various reporting
channels. We also maintain specified multiple dedicated e-mailaddresses within and outside the Group, so that reporters canfreely make contact without facing burdens. In addition, withthe aim of securing the effectiveness of the system, this policy
specifically safeguards whistleblowers from discrimination andmistreatment. During fiscal 2015, we registered three reports,
which were handled appropriately.

Denka Group CSR Report 201631

GovernanceWebsite: NOTICE OF CONVOCATION OF THE 157TH ORDINARY GENERAL MEETING OF
SHAREHOLDERS▶ For the backgrounds of Denka’s outside directors, please see the web-based CSR Report2016 references (p. 25) and the notice of convocation.

Dialogue between Outside Directors

What are your beliefs with regard to the role of outside
directors in the Group’s pursuit of sustainable businessexpansion and long-term growth in corporate value?
Yamamoto: I think our most important role is to check
whether the Company has put in place the appropriate key
management systems and functions and that its management
activities are consistent with intended strategies and plans.
Not only do we oversee these aspects and advise top
management thereto, we sometimes may have to challengemanagement decisions, especially when failing to do so could
undermine sound corporate growth.
With regard to the agenda submitted to the Board of
Directors, I am striving to leverage my long experience incorporate management, which helped me acquire a global
perspective, as well my historical expertise regarding theindustry while maintaining a fair and impartial standpoint. In
doing so, I present my opinions based on my conception ofwhat corporate management really should be.
The ultimate success or failure of management decisions
can be judged only in hindsight. Therefore, I try to remain
humble and pay close attention to the latest industrial trends
and what is happening on the frontlines, where workers tackle
their day-to-day tasks.
Sato: Denka aims to raise its overseas sales ratio to 50% or
greater as a management plan target. Accordingly, I see myrole as one of providing opinions and advice, employing an
external perspective based on my management knowledge
and experience accumulated in foreign-capital corporations aswell as in the pharmaceutical industry, where I have served as
an executive. Recently, the Company established “The Denka
Value,” a corporate philosophy serving as the cornerstoneof its business activities and determining its future direction.
Constantly keeping this philosophy at the forefront of my mind,
I will contribute to the Board’s discussions from an objective
standpoint, giving due consideration to the perspectives ofshareholders and all other stakeholders.
Fujihara: If outside directors are to effectively contribute tostable growth in corporate value and sustainable businessexpansion, it is important that they share the same purposesand directions and maintain cooperative relationships withother directors and employees. However, outside directors
are also expected to bring to bear the perspective of various

external stakeholders into discussions. This is our most crucial
duty and can only be achieved when we avoid being content
with cozy relationships with top management and act as its
equal in discussions, providing harsh criticism when called for.

Please tell us about future challenges that Denka should
address to enhance its corporate governance.
Yamamoto: Recently, governance systems modeled after thoseof U.S. corporations are becoming mainstream in Japan.
However, Japan’s business sector has a different culture,
history and context. Accordingly, I believe that we should
develop Japan-specific governance styles while incorporating
strengths of a U.S.-based approach.
Just like an individual citizen, a corporation plays animportant role as part of sound civil society. Corporate
managers are therefore being asked to embrace an evenstronger awareness of the public good. Moreover, striking
a balance between the interests of various stakeholders,
ranging from shareholders and suppliers to employees andlocal communities, will become ever more important.
Sato: Although some aspects of Japan’s traditional Audit &Supervisory Board system may have to be reviewed, it has
been working very well in general. In addition to ensuring
stringent and structural management oversight, I would
suggest creating more opportunities and new methodologies
for communicating the Company’s transparency toshareholders and other stakeholders. It goes without
mentioning, of course, that external information disclosure
should be enhanced, as should transparency within ourorganizations.
Fujihara: The principal purpose of developing a corporate
governance structure is to secure systems and functions
to ensure robust internal control. When such corporate
governance is in place, it enables the self-correction oforganizational problems unforced by external pressures. I
would even dare to say that the ideal company needs no
outside directors. However, corporations are composed ofpeople. And cozy relationships and outdated conventions
that may emerge over the course of time can lead to a failureof ethics or a biased corporate culture. In other words, anorganization run by an unchanging group of people can, overtime, become deficient with regard to transparency, fairness
and soundness. This is why outside directors are there; weprovide a constant monitoring of such factors as the functionof internal control systems.

aggressive and speed-oriented business approach andencourages employees’ ambitions as key to achieving its
management goals. I totally agree with the idea that such a
corporate culture is essential to success on the global stage.
Factors shaping corporate culture include people, customs
and rules. That being said, customs and rules are humanconcepts. Therefore, promoting diversity, that is, accepting
people of different nationalities and race, as well as values
and concepts, will be a crucial part of future corporate growthstrategy. Of course, listening to the voices of women andyounger generations must be included in this pursuit. AlthoughDenka has been working hard on this matter, it should be notedthat there is much to be done to promote diversity from thedirectorial levels to frontline business units. Today, a numberof Denka employees directly engage in business with locals
in countries around the world. Given this, we should steadily
foster a corporate culture that accepts diversity, whether it be
about values, concepts or types of people. I believe such effort
will helps us grow into a truly competitive global company.
Fujihara: Global expansion entails greater risk than dodomestic operations. It is therefore important to establish arobust governance system capable of addressing such risk. At
the same time, we need to actively address how we are goingto create a diversity-oriented corporate culture. Organizing ourapproach to this issue, let us work on challenges attributable
to differences in cultures, business customs and various otherfactors with constant awareness of embracing diversity. This
will eventually enhance our risk management and enable us
to take a significant step toward our transformation into astronger global player.
Yamamoto: It is often said that the key to success abroad is“When in Rome, do as the Romans do.” But I would also stressthe significance of having a clear perception of “What we value
most.” At the core of operations at the Omi and Omuta plants
lies a longstanding drive to contribute to local society and ensure
mutual development. Moreover, “The Denka Value” emphasizes
being sincere in one’s dealings, willing to take on challenges,
adopting an uncompromising approach to manufacturing andmaintaining a strong awareness of occupational safety andfacility security. These values are exactly what Denka has always
treasured for more than a century.
The more Denka expands globally, the more it faces
challenges attributable to differences in cultures or religions.
The course of industrial development might also be totallydifferent in countries other than Japan. Nevertheless, I’mconvinced that Denka can succeed by communicating the
aforementioned values to local communities, employees andbusiness partners and by embodying such values through its
business conduct, products and services.

For Denka to grow sustainably into the future, securing
our preparedness for globalization will be of importance.
Please share your insights on necessary measures to betaken to become a truly competitive global player.
Yasuo Sato

32

Denka Group CSR Report 2016

Sato: Denka’s current management plan has positioned
transforming into an organization that embraces a more

Dialogue between Outside Directors

To obtain their insights on the Denka Group’s initiatives aimed at achieving
sustainable business expansion and medium- to long-term growth incorporate value, we talked to three outside directors, asking questions
about a variety of subjects.

Tatsutsugu Fujihara
Lastly, please share your views on Denka’s role insociety and your expectations regarding the Company’s
future growth.
Yamamoto: I think Denka will be called upon to take onchallenges and yield results in a variety of business fields that
go beyond the bounds of a traditional commodity-producing
petrochemical business. Among such new fields are highly
functional materials, healthcare products and products withenvironment and energy saving applications, areas that all
boast considerable growth potential. In the face of the drastic
industrial transformation transpiring in countries around theworld, Denka is steadily pushing forward with structuralreforms and global expansion under the strong leadership of
its president, Shinsuke Yoshitaka. The pain Denka might suffer
over the course of its current initiatives aimed at reaching thenext growth stage is similar to the “growing pains” of youth.
As an outside director, I will commit myself to helping ensurethat Denka’s growth is sound, strong and sustainable.
Fujihara: Mr. Yoshitaka often stresses that “A fair andtransparent management foundation is essential to growthin corporate value” and “Earning greater profit and fulfillingsocial responsibilities must be realized in tandem.” In addition,
he has positioned a “spirit of taking on challenges” as an
essential qualification for Denka staff. These remarks correlatewith the Company’s recent shift to corporate governanceaimed at driving aggressive expansion and corporate growth.
As I believe that Denka has great potential on its own, thekey is translating this potential into performance. Against
this backdrop, I’m determined to take on the increasingly
important duties that outside directors must fulfill.
Sato: I feel that Denka’s top management is eager to make themost of the experience and knowledge of its outside directors.
In contrast to this forward-leaning mindset, however, themajority of companies seem to be content with conventional
ways of doing business, thinking and so forth. This is also
an issue Japan’s chemical industry as a whole must tackle.
Society is changing at an ever faster pace. I think therefore,that while re-identifying its unchangeable core values, Denka
should decisively move forward as a business innovator. I
expect Denka to make a smooth shift from its conventionalrole to a more creative organization as it is capable of playing
a significant role in society to create a better future for theworld.

Akio Yamamoto

Denka Group CSR Report 201633

Our Business Strategies

Denka100 New Growth Strategies

Outline of the Denka100 Management Plan

New Growth Strategies❶ Create the most optimal production network❷ Scrutinize every cost element❸ Focus management resources on new growth
drivers and develop next-generation products

Numerical Targets (fiscal 2017)
Consolidated operating income: ¥60 billion or more
Operating income ratio: 10% or greater
Overseas sales to net sales ratio: 50% or greater
Immediately after the milestone celebration of ourcentennial in 2015, we changed our company name to Denka
Company Limited. This move was intended to renew ourcommitment to achieving further growth as a global company,
marking our fresh start as we move forward and embark
on the next 100 years of operations. In addition, our fiscal
2015 initiatives included the steady execution of a number ofconcrete measures in line with three new growth strategies
stipulated in the Denka100 management plan.
To create the most optimal production system, weestablished production facilities for VINI-TAPE and cover tapes
in Vietnam while launching a new ALSINK production facility
in Dalian, China. We have also made a Malaysian construction
material maker our subsidiary, with the aim of accelerating
our operations related to special cement additives in theSoutheast Asian region. Moreover, we acquired operations
related to chloroprene rubber from the U.S.-based DuPont
and thus secured a robust production network supported
by facilities in two locations sited in Japan and the UnitedStates. Using this acquisition as a springboard, we expect the

Photo 1 Celebrating the first VINI-TAPE shipment at Denka

Advanced Materials Vietnam Co., Ltd.

34

Denka Group CSR Report 2016

Photo 2 Celebrating the first ALSINK shipment at Denka

Electronics Materials Dalian Co., Ltd.

Photo 3 Establishment ceremony of Denka Performance

Elastomer LLC

Create the most optimal
production network

In 2013, we established the three new growth strategies
under the Denka100 management plan, with the target year
set at fiscal 2017. In line with these strategies, we have taken
an aggressive business approach involving concrete initiatives.

Group to gain greater market presence in the latter country
especially.
Our efforts to scrutinize every cost element, have yielded
steady results, with successful ongoing cost reduction
initiatives under way at each business base. In particular,
the Chiba Plant has succeeded in optimizing its steam andpower supply structures with regard to other facilities within
the industrial complex in which it is located, improving its
competitiveness considerably.
Focusing our management resources on new growth
drivers and the development of next-generation products,
the acquisition of Icon Genetics GmbH enabled us to tap
its novel vaccine manufacturing technologies and apply its
antibody production technologies in our diagnostic reagent
development. Furthermore, we have initiated the developmentof a mass-production method for an anticancer virus thatwill enable the commercialization of oncolytic virotherapy.
In addition, efforts are now under way to promote surveys
to launch a cancer remedy information service employing asystem for analyzing gene alteration.
Denka Seiken Co., Ltd., one of our core Group subsidiaries,
has commenced clinical trials aimed at commercializing an
intradermal influenza vaccine in an effort to strengthen andexpand its vaccine-related operations. At the same time,
we completed a new production facility at Denka Seiken’s
Kagamida Plant, located in Gosen City, Niigata Prefecture. As
a result, Denka Seiken’s Niigata and Kagamida plants are now
equipped with integrated production systems for vaccinesand diagnostic reagents, respectively. Looking ahead, we will
pursue aggressive expansion in the field of healthcare, where
we expect significant future market growth.
Lastly, we established “The Denka Value” in May 2015.
Announced in conjunction with the 101st anniversary of theCompany’s founding, “The Denka Value” represents a newcorporate philosophy that will serve as the cornerstone for
all Group activities. With this philosophy guiding our efforts
as we embark on our next 100 years of operations, we willcontribute to society’s sound development and strive to live
up to the expectations and trust our stakeholders place in
us by taking on the challenge of expanding the possibility ofchemistry and creating new value.

Growth strategy

Focus management resources on new growth drivers and develop
next‑generation products

Fiscal 2015 Overview

Fiscal 2015 Main Initiatives under the Denka100 New Growth Strategy
Field
Elastomers &Performance Plastics
Life Science &Environmental ProductsElectronics &Innovative ProductsElectronics &Innovative Products
Elastomers &Performance Plastics
Elastomers &Performance Plastics

Time

Product or business
Functional resins

Downsized ABS and specialty resin production lines at the Chiba Plant

July 2015

VINI-TAPE

Completed a new production base in Vietnam (Denka Advanced Materials Vietnam Co., Ltd.) Photo 1

ALSINK

Completed a new production base in China to manufacture ALSINK thermal conductive plate for power modulesof high-speed rolling stock (Denka Electronics Materials Dalian Co., Ltd.) Photo 2

September 2015 Electronic packaging sheets
November 2015 Chloroprene rubber
February 2016 Chiba Plant
April 2015

Acetylene black

Infrastructure

April 2015

Special cement additives

Healthcare

May 2015

Oncolytic virotherapy

The environment andinfrastructure
Healthcare
Healthcare
Healthcare
Healthcare
Healthcare
Infrastructure

Rapid diagnostic test kits for
infectious diseases
Ultrahigh-strength fiberJune 2015
reinforced concrete
R&D of bio pharmaceuticalAugust 2015
products
Cancer remedy information
October 2015serviceCutting-edge farming
November 2015
technology
Kagamida Plant (Denka
March 2016
Seiken)Reagent for measuring sd
March 2016
LDL-C
May 2016
July 2016

Overall (healthcare)

July 2016

Acquired DuPont’s the chloroprene rubber business and thereby established Denka Performance Elastomer LLC
Photo 3Completed an ultra-pure acetylene black production facility at the Chiba Plant Photo 4

June 2015

The environment andenergyCompleted a new electronic packaging sheet plant at Denka Advanced Materials Vietnam Co., Ltd.

The Chiba Plant entered an agreement with Maruzen Petrochemical Co., Ltd. pertaining to the receipt of steam
supply from the latter’s ethylene production facility in an effort to optimize the utility network within the industrial
complex (the agreement came into effect in June 2016)

The environment andenergyHealthcare

Details

May 2015

August 2015

Special cement additives
Automobile-related
operations
R&D based on an industryacademia partnership

Made POSCO (Malaysia) a subsidiary of Denka Chemicals Holdings Asia Pacific Pte. Ltd. (DCHA), renaming it
Denka Infrastructure Malaysia Sdn Bhd.
Denka Seiken initiated the development of large-scale production methods for the “G47Δ” oncolytic virus as aproject commissioned by Dr. Tomoki Todo, a professor at the Institute of Medical Science of the University of Tokyo
Denka Seiken signed an agency contract with Sinopharm Group Beijing Huahong Co., Ltd. (China) for marketing
the QuickNaviTM-Flu influenza antigen detection test kit
Received the Japan Prestressed Concrete Institute 2014 Award for Outstanding Engineering Innovations for thedevelopment of SUQCEM ultrahigh-strength fiber-reinforced concrete
Acquired Icon Genetics GmbH, a Germany-based bio-pharmaceutical R&D venture
Announced the launch of a cancer remedy information service in Japan through collaboration with KEW Group
Inc., a U.S.-based company specializing in genetic tests for cancer diagnosis
Initiated the marketing of plant cultivation systems employing cutting-edge farming technologies
Denka Seiken completed a new production facility at its Kagamida Plant Photo 5
BEIJING STRONG BIOTECHNOLOGIES, INC. obtained Beijing FDA approval regarding the marketing of Denka
Seiken’s reagent for measuring “sd LDL-C” (a marker for heart diseases)
Made PT ESTOP Indonesia, an Indonesia-based construction material maker, a subsidiary of DCHA
Established the Automotive Materials & Solutions Dept.
Signed a comprehensive partnership agreement with Niigata University to promote industry-academia joint R&D
Photo 6

Denka Seiken decided to construct a production facility for “G47Δ” oncolytic virus at its Niigata Plant (completion
scheduled for September 2017)
Decided to open Denka Life Innovation Research Private Limited at Biopolis in Singapore, with the aim of securing
our first overseas R&D base in the healthcare and life science fields (launch scheduled for February 2017)
Established the Basic Policy for Workplace Safety, Health, Security and Disaster Prevention, which declares “We
put the utmost priority on worksite safety and health, facility security and disaster prevention in all aspects of ourbusiness activities.”

Healthcare

July 2016

Oncolytic virotherapy

Healthcare

July 2016

R&D of pharmaceuticalproducts

April 2015

Safe operations

April 2015

Corporate identity

Renewed corporate logo while formulating new corporate slogan “Possibility of chemistry.”

May 2015

Limestone mining

Completed construction to develop a new working face in the eastern section of the Omi limestone mine (Itoigawa
City, Niigata Prefecture)

October 2015

Change of company name

Changed company name to Denka Co., Ltd. (Denka Company Limited)

October 2015

Safe operations

Established the Safety Promotion Meeting to step up voluntary inspections of safety assurance activities

Initiatives for the next
100 years

November 2015 Corporate governanceMay 2016

Corporate philosophy

The environment and energy 2018 (scheduled) New Omigawa Power Plant
The environment and energy 2022 (scheduled)

New Himekawa Power Plant
No. 6

Photo 4 An ultra-pure acetylene black production facility

completed at the Chiba Plant

Denka100 New Growth Strategies

We Actively Promote Initiatives under New Growth Strategies in Line with the Denka100
Management Plan.

Established the Denka Corporate Governance Guidelines
Established “The Denka Value,” a new corporate philosophy encompassing the Denka Mission and Denka Principles
A new hydroelectric power plant is under construction (operational kickoff scheduled for 2018)
Kurobegawa Electric Power Company, a joint venture of Hokuriku Electric Power Company and Denka, isconducting surveys in preparation for an upcoming hydroelectric power plant construction project (operational
kickoff scheduled for 2022)

Photo 5 A facility completion ceremony at the Kagamida

Plant, with Mr. Tetsuro Maeda, president of
Denka Seiken, delivering the greeting

Photo 6 A signing ceremony for a comprehensive R&D

partnership agreement between Denka andNiigata University

Denka Group CSR Report 201635

Our Business Strategies

Elastomers & Performance Plastics
Elastomers & Performance Plastics

Denka Aims to Develop Distinctive Products and Sustainable
Solutions to Meet Emerging Global Demands
The Elastomers & Performance Plastic Division deals with products such as chloroprenerubber, which enjoys the largest market share globally, and other specialty products,
including styrenic resins, SBR resin, MS resin, acetylene black and acetyl chemicals.
The overseas sales ratio in fiscal 2015 exceeded 60%. While accommodating evergrowing demand for these products in markets around the world, the division is
striving to improve its operating structure and efficiency and thereby reinforce theCompany’s business foundation. Moreover, the division has developed productswith superior functionalities tailored to customer needs, including an ultra-pureacetylene black for next-generation LiBs. Going forward, its manufacturing, R&D
and sales sections will work as one to maximize overall organizational strengths,
thereby creating innovative products capable of helping to resolve issues
Executive Officer,
Elastomers & Performance Plastics
confronting society.

Business Models (Value Creation Flows)Business

Product

Source of value

Value created

DENKA Chloroprene
DENKA ER• Polymer structure design technologies tailoredto specific applications• Polymer composite technologies to achievetargeted functionalities• Provide products with superior performance, including
high-heat resistance and high durability and longer productlives

Special Conductive
Materials

DENKA BLACK
DENKA BLACK Li• Technologies to precisely control the diameterand maintain the high purity and crystalline
properties of particles• Technologies to produce uniformly granulized
particles that boast high bulk density and canbe easily dispersed into such materials as resins• Activation technologies that form pores onparticle surfaces, significantly increasing
specific surface area

• Provide conductive materials for LiBs to increase theirreliability, capacity and output• Provide a conductive material for use in high-voltage powertransmission cables to help extend its useful life and reducetransmission loss

Performance
Plastics

DENKA ABS
Transparent resins
Heat resistant resins
CLEAREN• Technologies to control polymer structures
combining various polymerization methods• Sophisticated manufacturing and quality
management technologies capable of curbing
the formation of and removing insoluble polymer• Supply products with superior transparency, heat resistanceand hinge performance• Realize superior amenability to molding, printability andshrink property

Acetyl Chemicals

DENKA POVAL• Polymer structure design technologies based oncompositing tailored to specific applications• Powder control technologies to produce resin
particles• Provide a dispersant for the polymerization of vinyl chloride
and a vinyl acetate emulsifier with stable dispersibility• Provide raw materials for glass interlayer films with thermal
stability and excellent transparency

Elastomers

Toshio ImaiBusiness Overview
This division handles products in three key categories: acetylene
derivatives, including chloroprene rubber and acetylene black;styrene-based functional resins; and acetyl chemicals. Revenues fromthese products represent 40% of the overall Group sales. Leveraging
a broad range of techniques and experience in synthesizing,
compounding and molding polymers, we are bolstering technologicalinnovation in such manufacturing fields as automobiles, home
appliances and food packaging.

1

The Market Environment

・A shift to overseas production inelectronics, automotive and other related
markets on the back of demand growth inemerging economies
・Increasing market presence of commodity
manufacturers based in emerging
economies
・Burgeoning demand for performanceplastics and the shortening of product life
cycles32

1. Create the most optimal production system
・Develop a more robust global supply structure for our flagship products to solidify their top global market shares
2. Improve business structure
・Enhance our resilience against risks attributable to changes in foreign exchange rates, rawmaterial and fuel prices and other factors in the trade environment by scrutinizing every costelement and optimizing all processes from production to sales
3. Develop new businesses
・Focus further management resources on growth drivers and promote external collaboration todevelop new businesses for the next generation

Main Achievements in Fiscal 2015

Denka Group CSR Report 2016

Enhancing the Competitiveness of the Chiba Plant through the Optimization of Utilities
In line with two of the Denka100 management plan growth strategies, namely, “Create the most optimal production system” and “Scrutinize
every cost element,” the Chiba Plant decided to receive steam supplied by a neighboring ethylene production facility run by Maruzen
Petrochemical Co., Ltd. This will allow the plant to suspend the operation of one of its two boilers. Having thus optimized its utilities usage,
the plant is expected to see a considerable reduction in costs thanks to lower expenses related to steam production as well as boiler
maintenance and renewal. Looking ahead, we will collaborate with other companies operating within the same industrial complex to enhancethe overall competitiveness of facilities at the site. Moreover, such moves will reduce total CO2 emissions.

Strategies

1. Created the most optimal production system
・Began operating the chloroprene rubber business acquired from DuPont (the UnitedStates)・Brought a new ultra-pure acetylene black production facility on line (Chiba Plant)
2. Improved business structure
・Downsized ABS production lines by consolidating deposition processes following the
integration of finishing processes in 2014
3. Developed new businesses
・Explored R&D themes employing open innovation
・Commenced the construction of a new facility for the semi-commercial production of“DENKA SE POLYMER” styrene based-elastomer

36

Topic

4

Challenges

・Step up initiatives to develop new businesses targeting
growth fields
・Create greater synergies with a two-location production
system (Japan and the United States) for chloroprene rubber
・Establish an ultra-pure acetylene black supply structure
supported by three locations (Omuta, Chiba andSingapore) to serve broader markets around the world・Continue scrutinizing every cost element to enhancecompetitiveness of domestic production bases
・Better respond to changes in the trade environment,such as the appreciation of the yen and rising crude oil
pricesCreating Shared Value (CSV); Helping Resolve Social Issues

Social Issues
Urgent need for the reduction ofemissions of hazardous particles andgreenhouse gases from automobiles
through the popularization of EVs, HVs
and other eco-friendly vehicles

Society’s Technological
Expectations
Development of safer automotive
secondary batteries with superior
functions

DENKA BLACK Li

The Denka Group’s Technological Solutions
DENKA BLACK Li is carbon black manufactured
through the thermal decomposition of acetylenegas. Boasting a unique structure, the productis used as a conductive material in lithium ion
secondary batteries (LiBs).
The most prominent features of DENKA
BLACK Li are its chain-like structure andextreme purity. Consisting of fine carbon
particles connected in a series like a chain,even a tiny amount of DENKA BLACK Li
confers high electric conductivity. Moreover,this product boasts extreme purity as we have
eradicated the metallic foreign matter content
that commonly compromises battery safety,
making it optimal for producing reliable cells.
To ensure the supply of safe and highly
functional conductive materials for LiB

applications, we launched a dedicatedproduction facility at the Chiba Plant thataims to ensure the most thorough possible
eradication of foreign matter content from our
output. DENKA BLACK Li is now contributing to
the popularization of eco-friendly
vehicles.

DENKA BLACK Li (right above: Magnified view)

Denka Group CSR Report 201637

Our Business Strategies

Infrastructure & Social Solutions

The Infrastructure & Social Solutions Division handles cement and special cement
additives, both of which are essential for infrastructure development; corrugated pipes
for water catchment and discharge systems used to manage ground- and river water;
chemical fertilizers that help improve crop yields; fire resistant materials; desulfurizing
agents; and other materials for use at such facilities as steelworks. Moreover, anarray of special cement additives support the division’s capability to offer optimal
solutions, including novel materials and innovative construction methods.
Working together, the division’s manufacturing, sales and R&D sections serve
markets in China and Southeast Asia, where rapid infrastructure development
is under way. Paying close attention to the latest customer needs, we are
Executive Officer,
promoting these and other solutions to help advance energy and resource
Infrastructure & Social Solutions Div.;
Deputy General Manager,saving as well as global warming countermeasures.

Business Models (Value Creation Flows)Business

Product

CementSpecial cement
additives

Special Cement
Additives

Toyoki Yokoyama

Disaster Reconstruction Support Div.

1

The Market Environment

・Trend toward demand growth reflecting an increase in construction
and infrastructure projects associated with the recovery from the Great
East Japan Earthquake and an upturn in public-sector investment
・Ongoing firm market demand for infrastructure development in
China and Southeast Asia
・A shift toward automated and large-scale farming aimed atstrengthening the agricultural industry’s foundation
・Growing need for ecological solutions

3

Main Achievements in Fiscal 2015

・The cement business
Steadily operated a process that recycles various waste and byproducts
・The special cement additive business
Expanded into the Southeast Asian market by stepping up collaboration with
Denka Infrastructure Malaysia Sdn. Bhd. and utilizing its sales channels
・The agri-products business
Developed a humic acid liquid fertilizer tailored for use in plant cultivation
facilities that employ nutriculture systems to accommodate recent growth indemand; Developed a weed-preventing soil solidifier by applying rapid hardening
technologies for special cement additives
・The inorganic products business
Developed high-value-added products with superior thermal insulation properties
・The environmental materials businessContributed to underground drainage construction in areas affected by the Great
East Japan Earthquake in Miyagi Prefecture in an effort to help restore farmland

38

Denka Group CSR Report 2016

Strategies

・Maximize profitability by optimizing our production system
・Facilitate the prudent use of resources and thereby help develop a
recycling-oriented society
・Step up overseas expansion with a focus on augmenting local production in
Asia
・Promote our solution business through the development of farming materials
・Help create energy-saving steel and industrial furnaces employing our fire
resistant products

4

Challenges

・The cement business
Develop new recycling technologies
・The special cement additive business
Achieve our annual overseas sales target (¥15 billion) as early as possible
・The agri-products businessIn addition to developing humic acid liquid fertilizers, a weedpreventing soil solidifier and cutting-edge farming methods, pursue
new businesses that support agricultural infrastructure, such as themarketing of appliances for horticulture facilities
・The inorganic products business
Make proposals for fire-resistant materials and thermal insulation
products to meet customer needs
・The environmental materials business
Create a farmland development model that fully leverages Denka’s
unique strengths

Value created• Develop social infrastructure while strengthening national
land• Assist infrastructure development in emerging nations(roads, railways and concrete buildings)• Provide technologies for repairing aged concrete structuresand facilitating reconstruction following disasters

Agri-Products

Fertilizers• Fertilizer technologies accumulated over
100 years of experience in providing solutions
tailored to varying climates and soil qualities inregions throughout Japan

Inorganic Materials

ALUMINA CEMENTSULFEXFIRELEN• An array of inorganic material manufacturing
technologies that enable the production of highquality fire-resistant materials and desulfurizing
agents with superior functionalities• Contribute to the reduction of environmental burdens
as well as improvements in product quality and costcompetitiveness by supplying inorganic materials tosteelworks in Japan, already the world leader in terms of
quality and production efficiency

Environmental
materials

Corrugated pipes• Polymer processing technologies accumulated
over years• Provide drainage solutions for land development, tunnel
construction and roads while supplying water management
systems for farmland

Topic

2

Source of value• Competitive advantages backed by in-house
power generation facilities and ownership oflimestone mines• Unique solution technologies capable of controllingvarious characteristics of concrete, such as
hardening, expansion and shrinkage rates• Robust R&D structure backed by diverse
collaboration involving partnerships between
industry, academia and the government• Provide fertilizers and fertilizer application technologies best
suited to specific regions and types of crop while enhancing
our products’ responsiveness to growing requirements forclimate change countermeasures• Supply safe and ecological products that minimize soil andatmospheric pollution• Contribute to the restoration of farmland damaged by suchnatural disasters as high winds and flooding

Business Overview
In addition to the calcium carbide and calcium cyanamide fertilizers
that Denka has been manufacturing for a century, this division handles
cement, special cement additives and other products made by
applying inorganic chemistry as well as corrugated pipes. Leveraging
the competitive advantages provided by in-house power generation
capabilities and ownership of limestone mines, we provide uniqueproducts and solutions that support agricultural development andsocial infrastructure.

Infrastructure & Social Solutions

Pursuing a Needs-Oriented Approach and Developing a
Local Network to Provide Optimal Solutions

Expanding into Markets Overseas with Special Cement Additives
Toward the goal of achieving annual overseas sales of special cement additives amounting to ¥15 billion, we are striving to develop a morerobust local business network. In Southeast Asia, we made Denka Infrastructure Malaysia Sdn. Bhd. (DISB) a subsidiary in April 2015,
stepping up collaboration with this company through human exchanges and mutually utilizing one another’s sales channels. In July 2016,
we signed an agreement with PT ESTOP Indonesia, an affiliate of DISB, with regard to the additional acquisition of its equity stake, making it
a subsidiary as well. In this way, we will solidify our foothold and further penetrate the Indonesian market.
Moreover, efforts are now under way to step up collaboration with major cement makers in China, with Denka Infrastructure Technologies
Shanghai Co., Ltd. serving as regional headquarters. In particular, some key local construction material manufacturers have been cooperatingwith our sales channel development initiative, thanks to the solid reputation we have earned for our technological strengths.

Creating Shared Value (CSV); Helping Resolve Social Issues

Social Issues
An aging social infrastructure due to concrete degradationand emerging as problems ranging from cracking andsurface delamination and the development of internal
defects to salt damage and neutralization, all of which
now plague roads, bridges, tunnels and other structures
built during Japan’s high economic growth period, poses
the risk of potential disaster

Society’s Technological Expectations
Safe and cost-effective repair technologies that require
shorter periods to apply and that ensure long-lasting
endurance by employing the diagnosis of structure
degradation using non-destructive inspection methods(infrared light, supersonic, etc.) and broad-view
inspections (such as those using drones, etc.)

DENKA RENOTEC

The Denka Group’s Technological Solutions
・We provide solutions to repair
aged concrete structures thathave surface delamination due tocracking or internal damage. Our
solutions include injecting resins
with superior hardening properties
and applying mortar with superiorwaterproof properties. Moreover, withan eye to enhancing the life cycle
costs of structures, we develop andemploy cutting-edge materials andtechnologies that ensure long-lasting
repair effectiveness.
・Concrete durability can be compromisedby such causes as salt damage andneutralization due to acid rain. We
perform non-destructive inspections
to assess and analyze the external
and internal soundness of concrete,

detecting the causes of degradationand identifying optimal repair methods.
One such method is the DENKA
TECHNOCRETE System, which iscapable of restoring the strength ofaged structures through electrochemical
technologies. In these ways, we arehelping maintain the soundness ofsocial infrastructure.

Desalination technology was applied to
the Oyashirazu beach elevated bridge,
which is part of the Hokuriku expressway

Denka Group CSR Report 201639

Our Business Strategies

Electronics & Innovative ProductsElectronics & Innovative Products

Developing New Businesses with an Emphasis on Adding andCreating New ValueThe Electronics & Innovative Products Division boasts an array of products that are
essential to the field of electronics. Its offerings include electronic parts materials,
packaging materials for transporting electronic components, thermal solution
components, and structural adhesives. In July 2016, we established the Automotive
Materials & Solutions Department to capture a wide ranging needs for automobile
parts-related solutions. Also, in line with the Denka100 management plan, thedivision has implemented the “VALUE 50” business strategy aimed at achieving
stable business growth. In the face of today’s diversifying customer needs, it isimportant to adapt to drastically changing market conditions. To maximize the“Possibility of chemistry,” we will pursue a speed-oriented, forward-looking
Managing Executive Officer,
business approach while fully leveraging our creativity in order to provide
Electronics & Innovative Products
markets with cutting-edge products and technologies.

Business Models (Value Creation Flows)Business

Product
Fused silica
Spherical fusedsilicaSpherical alumina• Technologies that employ the flame spraypyrolysis method to shape spherical oxide
ceramic particles and technologies to precisely
control particle diameters

Boron nitrate
Silicon nitride
Aluminum nitride
Phosphor• High-temperature calcining technologies in anitrogen atmosphere

Heat Dissipating
Products

Highly heat-conducting
substrates (DENKA AN
PLATE and HITTPLATE)
Thermally conductive
sheets and thermal
grease-type dissipationmaterials• Technologies for calcining highly heatconducting fillers and those for designingelectrical insulation and thermal dissipationmaterials

Functional Films

Electronic packaging
materials(DENKA Thermosheet
and DENKA ThermoFilm)• Technologies to produce resin compounds withsuch functionalities as electrical conductivity inaddition to multilayered film technologies

Adhesives

HARDLOCELEGRIP• Adhesive compounding technologies and awealth of data with regard to various adhesive
and adherent materials

Functional Fine
Particles

Sanshiro Matsushita

Business Overview
Supporting progress in electronics and technologies, the Electronics& Innovative Products Division provides functional fine particles andthermally conductive substrates, which achieve key thermal control
for realizing miniaturization and greater reliability and performance.
At the same time, our functional films and adhesives play essential
roles in realizing labor-saving, cost-efficient and environment-friendly
manufacturing processes. Providing a variety of products to meetcustomer needs, we will strive to help resolve social issues.

1

The Market
Environment

・Quantitative shrinkage in market
demand for electronic materials
due to the miniaturization ofdevices・Growing requirements for costcompetitive products due to rapid
commoditization
・Formation of new markets due
to growth in demand for EVs and
HEVs

3

2

• Create a variety of heat-dissipation and other solution
technologies→Contributed to the miniaturization of rolling stock andautomotive components, industrial instruments andhome appliances as well as mobile devices while
improving their energy efficiency• Provide carrier tapes, cover tapes and other packaging
materials with superior functionalities for transporting
electronic components and thereby helped accelerate
production process and miniaturization→Contributed to the creation of better-performing, morecost-competitive electronic components• Realize adhesive products for various materials that havegreater reliability with regard to both permanent andtemporary applications→Helped enhance product design and quality while
reducing semiconductor production processes and costs

Topics Establishing the Automotive Materials & Solutions Department

Strategies

Adopting New Global Strategies

1. Shift our focus to high-value-added products as we develop mainstay offerings
・Differentiate ourselves in terms of product performance and quality by continuously improving technologies
2. Build an optimal production system and thoroughly reduce costs
・Leverage our domestic and overseas production networks more efficiently (spherical fused silica andelectronic packaging materials)
・Launch new overseas production sites (ALSINK and electronic packaging materials)
3. Enter promising next-generation business areas early・Nurture and expand operations related to phosphor and spherical alumina, both of which are on a growth
track
・Enter the OLED and peripheral fields, where demand growth is expected, by employing our adhesive
technologies
4. Create new businesses
・Identify the latest needs for automotive materials and commercialize products to meet such needs
・Participate in industrial-government-academia partnerships to create new businesses where we canleverage our technological strengths and thereby go beyond the production of electronic materials

Main Achievements in Fiscal 2015

Denka Group CSR Report 2016

Value created• Enabled extremely close packing into semiconductor
sealants, realized greater stability in sizes thanks to a
reduced thermal expansion property and improved safety
due to a cut in fire retardant content→Contributed to the miniaturization of semiconductors andelectronic devices as well as the reliability of these products• Create ceramics with unique characteristics, including
superior heat conductivity, strength, lubricity and colorrendering→Contributed to the realization of smaller, thinner andmore energy-saving electronic devices as well as
improved high-resolution displays

The automotive industry is undergoing a drastic change due to emerging demand for such environment-friendly technologies as HVs, EVs and
FCVs as well as the upcoming commercialization of autonomous driving systems. Given the circumstances, in July 2016 we established thisdepartment to collectively take on R&D projects that address needs related to next-generation automobiles and automotive parts. By bringing tobear a range of materials and core Denka technologies, we will provide products and solutions capable of realizing unprecedented performance.

・Initiated the production and sales of ALSINK at Denka Electronics Materials
Dalian Co., Ltd. in China
・Initiated the production and sales of electronic packaging materials at Denka
Advanced Materials Vietnam Co., Ltd. in Greater Hanoi City, Vietnam
・Denka’s phosphor was chosen for smartphones, following success in 4K
televisions

40

Source of value

4・We are developing a HITTPLATE (aluminum-based circuit substrate) production structure supported by subcontractors in the Philippines, inaddition to those operating in China.
・We are building an overseas supply structure for our mainstay adhesive SGA (a two-component type second-generation acrylic adhesive).
Since the commencement of sales in China, we have kicked off efforts to release our products in Southeast Asia, Europe and the UnitedStates. Once the marketing structure is established, we will be able to shorten delivery times and lengthen our products’ durable life.

Creating Shared Value (CSV): Helping Resolve Social Issues

Social Issues
・A need to popularize HEVs and EVs in order to curb vehicle
emissions・Demand for HEVs and EVs with greater energy efficiency

Challenges

・Promote the local production of adhesives to better serve local markets
while developing new applications
・Step up marketing in the automotive field with thermal solution
products based on our functional fine particle technologies
・Augment production facilities for nitride-type ceramics in preparation
for future sales growthSociety’s Technological Expectations
・Thermal solutions for facilitating the weight reduction andminiaturization of ECUs for motor control

Silicon Nitride and SN Plate

The Denka Group’s Technological
Solutions
DENKA SN PLATE, a silicon nitridebased substrate, boasts superior thermal
conductivity as well as high strengthand reliability. It is used as a thermal
conductive substrate for the power
modules used in inverters installed in
HEV and EV motor control units, providing
protection from heat degradation andensuring that performance is maintained
while prolonging durability.

DENKA SN PLATE

Denka Group CSR Report 201641

Our Business Strategies

Life Science & Environmental Products

Business Models (Value Creation Flows)

The Life Science & Environmental Products Division is in charge of products closely
related to people’s lifestyles and living environments and serves such industries
as healthcare, foodstuffs and housing. In recent years, maturing markets and aconcomitant rise in demand for higher product quality have driven worldwide
recognition of the technological strengths of Japanese manufacturers. Accordingly,
we will strive to improve quality and productivity even further while developing
our overseas business network. It is expected that changes in people’s lifestyleneeds will fuel the constant creation of new demand. Staying vigilant to market
trends, we will continue to work to enhance the quality of people’s lives
Executive Officer,
through the provision of environment-friendly and safe products.

Business

Product

TOYOKALON

Functional Films

DENKA DX FILM

• A comprehensive R&D structure encompassing
technologies for resin composite, multilayer coextrusion and other film production
techniques• Superior weather- and chemical-resistant properties as wellas anti-pollution properties• Superior adhesiveness to materials that previous
conventional fluorine-based films found difficult to stick to• Flexible, abrasion resistant and electrical insulating
properties

Functional Films

TEFKA• Film production technologies (plant maintenancetechniques and thin-film production, crystalstructure control technologies )• High transparency• Fire resistance and flame retardant properties• Weather and chemical resistance properties

Food Packaging

DENKA Thermosheet
NB• Sheet production and multi-layer membrane
production technologies (lamination technology)• Realized a moisture-barrier property in addition to being
easy to mold and strong like conventional products• Used as a material for creamer containers, it prevents
evaporation, thereby stabilizing and ensuring the quality of
the content over a longer period of time

Life Science & Environmental Products

Business Overview

The Market Environment

・The maturation of the domestic market andintensifying competition
・Growth in market potential reflecting the burgeoning
purchasing power of emerging economies
・Growing interest in food safety
・Rapid aging of society
・Proliferation of multilateral trade agreements
・Growing interest in environmental protection
・Diversification of people’s lifestyles and values

32Strategies

・Enhance cost competitiveness through such steps as the creation of an optimal production
system (rain gutters and food packaging)・Promote a shift to local production for products targeting overseas markets (TOYOKALON,VINI-TAPE and food packaging materials)
・Explore promising domestic and overseas markets while nurturing next-generation products
and technologies (technological development related to the creation of multi-layer, oil-resistantfood packaging capable of enduring high heat; the stepped up marketing of fluorine-based
film, synthetic fiber, rain gutters and influenza virus detection test kits; R&D of macromolecularsodium hyaluronate preparation; the development of an intradermal influenza vaccine; andthe development of manufacturing technologies aimed at commercializing oncolytic virus)

Main Achievements in Fiscal 2015

・Established overseas production network
Synthetic fiber: Launched a new facility (the South Plant of Denka Advantech Pte. Ltd.) in Singapore in June 2013
VINI-TAPE: Launched a new facility (Denka Advanced Materials Vietnam Co., Ltd.) in Vietnam in May 2015
Food packaging: Launched a new facility (Denka Advanced Materials (Suzhou) Co., Ltd.) in March 2015
・Gained footholds in overseas markets
Established a local sales subsidiary in Dubai in January 2015; plans call for utilizing this subsidiary topenetrate emerging markets in the Middle East, CIS and Africa
・Developed and released new products
・Developed and marketed a highly oil resistant sheet for use in food containers
・Developed and released a variation of fluorine-based film (TEFKA) that boasts greater transparency andflame retardant property
・Developed and released a new synthetic fiber for hairpieces specially designed for women of African origin
・Developed and released rain gutter parts that enable labor-saving installation in response to the shortage of workers
・Developed a rapid diagnostic test kit capable of detecting Ebola virus in just 15 minutes

42

Denka Group CSR Report 2016

4

Challenges

・Establish a more flexible production
system capable of accommodating
diversifying needs (synthetic fiberand food packaging materials)
・Build a supply structure tobetter serve emerging markets(synthetic fiber, VINI-TAPE and foodpackaging materials)
・Reduce waste through thedevelopment of strong but
lightweight materials with smaller
bulk (food packaging materials,
VINI-TAPE and fluorine-based films)
・Establish a production structure
capable of accommodating growing
demand (fluorine-based films)

Value created• Polymer processing technologies that enabled
for the world’s first commercialization of
polyvinyl chloride fiber in 1952
• Two production bases in Japan and Singapore
as well as marketing and technical service
bases in New York and Dubai, which together
serve the global market

Synthetic Fibers

The division is engaged in wide-ranging businesses that directly affect people’s lifestyles
and living environments. For example, it handles materials for construction use, such as rain
gutters, as well as industrial tapes, food packaging materials and pharmaceuticals. Moreover,the division produces TOYOKALON, a material for wigs and hairpieces that is expected
to become popular globally, VINI-TAPE for such applications as electrical insulation andautomotive wire harnesses, and multi-layer food packaging sheets. In addition, Denka SeikenCo., Ltd., a Group company serving as a key business driver in the healthcare field, boasts the QuickNaviTM series rapid diagnostic test
kits. Commanding a considerable share of the domestic market for diagnostic reagents for influenza, norovirus and other infectious
diseases, these test kits can provide diagnoses without using any special equipment or electric devices. Going forward, we will expand
into Asian and African markets while developing diagnostic test kits for Ebola virus and other tropical infectious diseases.

Source of value

Functionality• Tangle resistant even after being worn for long periods• Soft lifelike feel, evocative of silk
• Flame resistant
Design• Unique glossiness and superior curling property• Versatility to fit various hairstyles
Service capability• Service structure for painstakingly accommodating theneeds of individual customers

Junichi Kimura

1Life Science & Environmental Products

Helping Enhance the Quality of People’s Lives while Tailoring
Solutions in Step with Changing Lifestyles

Topic

Establishing a New Business Base to Serve the Middle Eastern and African Markets
In January 2015, we established Denka Middle East and Africa FZE in Dubai, securing a local subsidiary in United Arab Emirates. In Aprilof that year, we began marketing synthetic fibers for wig and hairpiece applications targeting Africa as well as polyvinyl chloride electricalinsulation tapes targeting both the Middle East and Africa.
Not only does Dubai boast significant potential for economic growth, it provides us with easier access to elsewhere in the Middle Eastas well as Africa. Having acquired a strategically advantageous sales base, we will push forward with business expansion by employing
unique Denka Group products and technologies to meet growing demand in infrastructure development and healthcare fields.

Creating Shared Value (CSV); Helping Resolve Social Issues

Social Issues
・Growing concerns over food safety
・A growing need for quick and easy cooking
・Aging of society and an increase in households
in which families rarely eat together

Society’s Technological Expectations
・Highly transparent containers that allow
consumers to view content
・Heat-resistant containers with adaptability to
microwave cooking as well as oil resistance・High-strength, lightweight containers thatfacilitate resource saving and CO2 reduction

DENKA Thermosheet Special BOPS

The Denka Group’s Technological Solutions
On the back of a growing reliance on take-out food,
which is usually microwaved before consumption, weare seeing increasing demand for highly functional
plastic food containers with greater heat- and oilresistant properties. In response, we developed a
special BOPS, a food container sheet that incorporates
a new polymer. Boasting superior resistance to heatand oil, this product is also highly transparent andlightweight, just like its conventional counterparts.
Moreover, efforts are now under way to boost its heatand oil-resistance even further.
These and other functional BOPS products
will contribute to the convenience of consumers bybroadening the range of foods that can be microwaved
within the container.

Denka Group CSR Report 201643

Our Business Strategies

Denka’s R&D Activities

To showcase current R&D activities that are providing powerful support to theaforementioned four business divisions, we spoke with Mr. Norihiro Shimizu,Managing Executive Officer of Research and Development, about the Denka Group’s
medium- and long-term R&D activities.

2. Transforming Our R&D Organizations

Norihiro Shimizu
Managing Executive Officer,
Research and Development, Innovation Center,
New Business Planning Dept.,
R&D Promoting Dept., Intellectual Property Dept.

1. Denka’s Manufacturing Strength
Denka boasts a wealth of technological assets, including
expertise in both organic and inorganic chemistry, which
together constitute its core manufacturing competencies.
Since its beginnings as a producer of calcium carbide, Denka
has been accumulating high-temperature and calcining control
technologies through the operation of electrical furnaces. This
experience has, in turn, helped us create highly functional ceramic,
fused silica, phosphor and other electronic materials as well as
acetylene black, a next-generation material for battery cells.
Moreover, our organic polymer-related technologies, which
encompass precise synthesis, polymerization and composite
techniques, enhance the functionality of synthetic resins andelastomers. We are able to combine these technologies withthose we have developed for resin design and processing,
thereby contributing to the creation of new value in the fields
of automotive parts and food packaging.
In addition, we have applied a combination of organicand inorganic technologies to electronic circuit substrates,
thermally conductive materials and adhesives. This approach
has also enabled us to provide cutting-edge construction andcivil engineering solutions that employ such new materials as
special cement additives.
Meanwhile, we have been active in the biotechnology field
for 65 years. For example, we have leveraged our proprietary
fermenting technologies to manufacture macromolecular sodium
hyaluronate preparations. Furthermore, our subsidiary, Denka
Seiken Co., Ltd., boasts an array of vaccines, diagnostic reagentsand other innovative pharmaceutical products developed using
antigen and antibody reaction technologies in its possession.
We will step up
the developmentof these and otherDenka technologies
supporting our corecompetencies,
thereby creating nextgeneration products
while enhancing our
key operations.
Denka Innovation Center

44

Denka Group CSR Report 2016

A key to a manufacturing innovation often lies in challenging
the perceived “boundaries” separating different fields. With
this in mind, we introduced a matrix-type R&D organizational
structure two and a half years ago. This movement was
intended to consolidate Groupwide research-relatedresources, which ranged from our in-house research institutes
to R&D departments within plants, with the Denka Innovation
Center serving as a core. Employing this structure, we havebeen tackling the creation of new R&D themes. These efforts
have begun to yield results in the fields of life science and foodpackaging that, in turn, are leading to the commercializationof new products. We believe that going forward, thisorganizational transformation will bring even greater benefits.
Also, we launched a project team consisting of younger
researchers working to devise new R&D themes, developing
them from scratch through the free exchange of ideas. In
addition to encouraging our young colleagues to apply theirflexible ways of thinking in R&D, this project is expected todevelop their potential and instill independent-mindedness,thereby nurturing key researchers who will lead the next
generation. Moreover, our external partners, including businesscorporations and research organizations, have expressed theirappreciation of thisproject’s purpose, andwe are expanding thescope of participants
to welcome thosefrom outside entities.

3. Innovation Comes from Dialogue
As an officer in charge of R&D management, I engage in faceto-face dialogue with customers and partners in Japan andoverseas. Although asking our researchers to do the same
may make them feel exposed and pressured with regard
to the success or failure of particular development themes,
I believe this type of dialogue can trigger deeper and moreconstructive explorations of themes as we reach acrossthe barriers separating disciplines. We are committed toaccurately understanding our customers’ technologies andresolving challenges they are confronting, knowing that this isexactly how technological advancements in chemistry will beachieved.
In July 2016, we established the Automotive Materials &Solutions Department as a dedicated body for collectively
handling new R&D themes in the automotive field andrelevant technological input. The global automotive industry
is now undergoing drastic change, with manufacturers
facing high expectations for breakthroughs in EVs, FCVs,
autonomous driving and other cutting-edge technologies.

Since the development of new materials and components
may well provide the key technologies that help realize suchbreakthroughs, we have stepped up our ongoing dialogue withrepresentatives from Automotive parts makers and are fielding
a growing number of consultations from automobile makers. I
am well aware of our customers growing expectations of us.

4. Driving Open Innovation Forward
Active technological exchange with corporations, academia
and other external partners that boast strengths in basic
and peripheral technologies helps raise the success ratio
of development themes while significantly shortening thetimespan of R&D projects. Well aware of this fact, Denka isactively driving open innovation forward in tandem with morethan 200 business corporations and research institutions,
including the NIMS-DENKA Center of Excellence for Next
Generation Materials.
In July 2016, we signed a comprehensive partnershipagreement with Niigata University. Having initiated industryacademia joint research in the life science field, where theCompany has been operating for many years, Denka andNiigata University will go on to expand the scope of R&D to
include fertilizers and food packaging.
Denka is also engaging in active exchange with venturecompanies—including “early stage ventures”—that boast
unique cutting-edge technologies. One such company is the
U.S.-based KEW Group specializing in genomic alteration

analysis for cancer treatment application. Partnering with thiscompany, Denka will launch a cancer remedy information
service in Japan. We are also developing a norovirus vaccine,to this end utilizing a platform for producing high molecular
proteins that has been created by Icon Genetics GmbH,
which became a Group subsidiary in 2015 and is based inHalle, Germany.

Denka’s R&D Activities

Actively Promoting Open Innovation to Meet Diversifying Needs,
We Will Lead Technological Advancement in a Globalized Business
Environment.

5. Diversity Is Key to the Future Success of R&D
I believe that diversity
will be a key driver ofour success in R&D.
Global operations
in particular require
the understandingof different cultures,
lifestyles and legal
systems along withinsights into local DLIR will be in the Nucleos building in Singapore’s Biopolis
needs and concept- research park (photo courtesy of Ascendas-Singbridge)
building capabilities that give appropriate consideration to
local circumstances. Accordingly, we will endeavor to develop
our overseas R&D organizations while promoting diversity
among our researchers in terms of nationality and race.
As part of such endeavors, we decided to establish Denka
Life Innovation Research Private Limited (DLIR) in the Biopolis
research park, with operational kickoff scheduled for February
2017. We will thus secure a second overseas R&D base after
Denka Chemicals Development Suzhou Co., Ltd. (China).
Since excellent researchers are attracted to Singapore fromcountries and regions all around the world, we expect that thisfacility will serve as a hub for international research projects.
All Denka Group researchers are strongly committed tocontributing to society’s sustainable development throughtheir R&D activities. Looking ahead, we will strive to meetcustomers’ expectations by reaping a stable stream of resultsfrom our day-to-day research operations.

Icon Genetics GmbHR&D Policy
Having positioned “Open Innovation and Challenge” asour underlying R&D slogan, we have stepped up joint
research with external partners in Japan and overseas while
participating in industry-academia-government collaboration.
At the same time, we are working in tandem with the fourbusiness divisions to carefully assess customer requirements
for the next-generation products in an effort to deliver
solutions for unmet needs as earlier as possible.

Fiscal 2015 R&D Achievements● Proactively Utilized the Denka Innovation Center
During the year the Denka Innovation Center hosted a totalof more than 1,000 visitors from external corporations,
universities and research bodies, and it is continuing to serve
as a hub for technological exchange and joint research ina variety of fields, including inorganic ceramics, organic
polymers and biomaterials.

● Results from Inter-Organizational R&D
R&D undertaken with the NIMS-DENKA Center of Excellence
for Next Generation Materials is resulting in the creation of
innovative products, including novel functional ceramics anda next-generation material for power devices. Denka andthe center have also taken on the development of various
materials and components for the next generation, ranging
from organic polymers to biomaterials.
We maintain a comprehensive research partnership with
Yamagata University. Pursuing joint research, we incorporate
our basic accomplishments regarding polymer synthesis andmolding processing into new
R&D themes that have beenaligned with the latest market
needs to develop nextgeneration products. Goingforward, we will step up
multi-faceted collaboration,
working to realize greater
benefits from this and otherA lecture provided by NIMS researchers at thecollaborative R&D activities.
Denka Innovation Center
Denka Group CSR Report 201645

Our Business Strategies

Creating Shared Value (CSV):How Denka Products Help Resolve Social Issues
Category

Product Name

Application

Electronic
Products Dept.

DENKA AN Plate
DENKA SN Plate
ALSINK

Rolling stock, industrial
instruments, electric andhybrid vehicles

Ceramic-based electronic circuit substrates with superior heatdispersion capabilities that, when used in such components asinverters and drive transistors, facilitate downsizing while ensuring
greater reliability and superior energy efficiency

ALONBRIGHT

Phosphor for LEDs

A phosphor for white LEDs used in LCD TV backlights and various
types of LED lighting that helps to significantly reduce energy
consumption and greenhousegas emissions

Electronic circuit
substrates for air
conditioners andautomotive parts

An electronic circuit substrate used in invertors that effectively
disperses the heat emitted by drive transistors to protect electronic
circuits and facilitates their downsizing while enhancing energy
efficiency

Electronic circuit
substrates for LEDs

Electronic circuit substrates that help improve LED luminous efficiency
by effectively dissipating the heat generated during use

Thermally
Conductive Sheets

Automotive parts,
smartphones and tablets

Silicon nitride

Bearings for wind power
turbines, mold-releaseagents for manufacturing
silicon ingots for solar
cellsElectronic
Products Dept.
HITT PLATE
Electronic
Products Dept.

Electronic
Products Dept.

Advanced
Specialty
Materials Dept.

Benefits

46

High-strength ceramic material used in the bearings of wind power
turbines to enhance durability while significantly reducing facility
maintenance workload. It is also used as a mold-release agent in the
manufacture of silicon ingots being processed into solar cells.

Special Cement
Additives Dept.

Clear shot method(NATMIC LSA,
USS, HSS)

Shotcrete for tunnels

Shotcrete with outstanding performance and low dust generation.
Employing quick-hardening cement with a low alkaline content, theshotcrete method improves tunnel construction work conditions.
By reducing dust and concrete splash, it also helps to cut sprayingrelated material loss.

Special Cement
Additives Dept.

Electrochemical
repairCountermeasure against
concrete deterioration due
to neutralization and salt
damage, etc.

Desalination (electrochemical repair) is an environment-friendly repair
method capable of reducing CO2 emissions by approximately 30%
compared with conventional surface repair methods. Moreover, asurface coating applied after a repair reduces the need for future
repairs as well as CO2 emissions over a structure’s useful life.

Advanced
Specialty
Materials Dept.

Spherical alumina

LEDsAdded to a resin matrix as a heat-conducting filler for the purpose ofdissipating the heat generated by LED chips and thereby enhancing
LED’s luminous efficiency

Denka Group CSR Report 2016

Additive used for vibratingcompaction

・F-DAC effectively utilizes the industrial byproducts of steelworks
and thermal power generation plants as raw materials.
・F-DAC and Fine CSA shorten the time required for the pre-curing
and steam curing processes, helping to reduce CO2 emissions.
These products also perform well when used in blast furnace
cement made from recycled steel slag. Concrete produced using
blast furnace cement and F-DAC has a CO2 emissions intensity
approximately 40% lower than that of steam-cured concrete.

Shotcrete with low dust generation. This product produces lessdust and concrete splash during the spraying process for a better
workplace environment and decreased material loss.

An incombustible filler with form- and size-modified particles that ismixed into the encapsulant used for semiconductors. Capable ofprotecting circuits from temperature fluctuations, it can be used toreduce the need for hazardous flame retardants.

HARDLOC (SGA)

Metal adhesive (substitutefor welding)

A room-temperature hardening adhesive that can be substituted forconventional metal welding, reducing energy consumption significantly
while eliminating the need to reshape heat-deformed metal

TEMPLOC

Temporary adhesives forthe processing of glass insmartphones

A temporary UV-curing fixing adhesive that can be removed with hotwater rather than solvents, thereby reducing environmental burdens
attributable to wastewater treatment and heat processing while
facilitating cost reductions by enabling “laminated-glass cutting”

DENKA Σ1000,2000,
80N

Benefits

Shotcrete for tunnels

Semiconductor
encapsulant
fillers

Special Cement
Additives Dept.

F-DAC
Fine CSA

Application

DENKA slurry shot
method(NATMIC US-50)

Spherical fusedsilica filler

EIEN/SUICOMSpecial Cement
Additives Dept.

Product Name

Special Cement
Additives Dept.

Advanced
Specialty
Materials Dept.

Special Cement
Additives Dept.

Department

Silicon materials packed with ceramic filler that boast high thermal
conductivity for use in hybrid and electric vehicles as power
semiconductor heat dissipaters, facilitating the downsizing of
automotive parts and enhancing their energy efficiency

Used in LED chip manufacturing equipment as an excellent, easy tocast insulation material

Product Name

Category

Shotcrete (high strengthand low dust generation)

LED manufacturing
equipment

Department

Contribute tosociety

NATMIC

Infrastructure & Social Solutions Division
Category

Save resources andenergy•GHG emissions

Special Cement
Additives Dept.

Molded BN
products

Adhesives &Solutions Dept.

Reduce weight of finished
goods・This product effectively utilizes industrial byproducts emitted fromsteelworks and thermal power generation plants as raw materials.
・NATMIC hardens quickly and thus is used as a shotcrete for tunnel
construction. It also performs well with blast furnace cement madewith recycled steel slag. When this product is added into blast
furnace cement, the resulting concrete’s CO2 emissions intensity
is approximately 50% lower than that of other types of concrete
supplemented with the product.

Advanced
Specialty
Materials Dept.

Adhesives &Solutions Dept.

Improve the operational
environment

Infrastructure & Social Solutions Division

Department

Advanced
Specialty
Materials Dept.

Environment-friendly
technologies

Application

Benefits

EIEN: Embedded concretemolds, radioactive waste
containers
SUICOM: Vegetation
blocks, foundation blocks

Incorporating special cement additives, EIEN can densify the internal
structure of concrete by reacting with carbonate ions. In addition
to absorbing CO2 during production, by helping prolong the livesof buildings it reduces the need for CO2-emitting demolition andconstruction processes.
During production, SUICOM absorbs CO2, working to harden
concrete through the carbonization of a special cement additive madeusing slaked lime, which generates no CO2 even at the raw material
stage. SUICOM thus contributes significantly to CO2 reduction
throughout its life cycle.

Concrete piles, propulsive
pipes, box culverts, highstrength piles, pillars
for buildings, concrete
secondary products,
cast-in-place concrete

・These products effectively utilize industrial byproducts emitted fromsteelworks and thermal power generation plants as raw materials.
・When supplemented with Σ1000 and 2000, high-strength
concrete can be made through steam curing. These products
also perform well with blast furnace cement made of recycledsteel slag. Concrete made of blast furnace cement supplemented
with Σ1000 realizes approximately 40% or lower CO2 emissions
intensity than autoclave cured cement.
・Σ80N reduces high-strength concrete’s CO2 emissions intensity bymore than 30%. Moreover, the concrete produced boasts superiorabrasion resistance and durability and can be recycled multiple times.

CementDepartment

DENKA Cement

Utilization of industrial
wasteWith the aim of contributing to a recycling-oriented, low-carbon
society, Denka makes cement that uses waste from a variety of fields,such as general waste from nearby municipalities, coal ash fromthermal power plants and waste soil from construction sites as wellas industrial byproducts from in-house and external sources, as raw
materials and fuel. It also utilizes scrap wood in a biomass boiler thatpowers its production system.

Special Cement
Additives Dept.

Super Cement

Emergency repair ofroads, railways andairports

This ultraquick-hardening concrete gains practical strength over ashort time period, helping to restore the transportation infrastructure
quickly at times of emergency.

Special Cement
Additives Dept.

F-DAC, B-FORM

Concrete secondary
products

Facilitating the hardening and solidification of concrete, this cement
additive shortens curing time while reducing fuel use, thereby
enhancing production efficiency and cost effectiveness.

Special Cement
Additives Dept.

SUQCEM

Concrete precast
products

An ultrahigh-strength fiber-reinforced concrete that significantly
reduces construction expenses and life cycle costs by facilitating theconstruction of lighter, stronger structures

CementDepartment

DENKA SOIL PACK
SP20, SP2000

Soil liquefaction
countermeasures

Soil stabilization materials that strengthen soft ground by causing
dehydration when mixed directly into the soil.

Special Cement
Additives Dept.

ES, ES-L

Terrestrial grouting workand soil liquefaction
countermeasures

Boasting high durability, these cement-based quick-hardening
materials accelerate the solidification and hardening of cement interrestrial grouting work performed during construction.

Special Cement
Additives Dept.

DENKA Colloidal
Super

Terrestrial grouting workand soil liquefaction
countermeasures

Boasting high strength and durability as well as excellent permeability,
this superfine powder cement additive is used in terrestrial groutingwork.

Special Cement
Additives Dept.

DENKA S pack

Terrestrial grouting workand soil liquefaction
countermeasures

A grout additive used as the primary injection material in the dualtube double packer grouting method aimed at stabilizing ground,
preventing water intrusion and countering soil liquefaction

Denka Group CSR Report 2016

Creating Shared Value (CSV):How Denka Products Help Resolve Social Issues

Electronics & Innovative Products Division

Category47

Our Business Strategies

Creating Shared Value (CSV):How Denka Products Help Resolve Social Issues
Category

Product Name

Application

Benefits

Special Cement
Additives Dept.

CG1000, CG2000
SR-LG method

Backing injection material
for tunnel construction

Hardening materials used as cavity sealants in soil improvement workand tunnel construction. Boasting superior plasticity, these materials
can be injected into distant spots using a pressure feed.

Performance
Plastics Dept.

Agri-Products
Dept.

AZUMIN(Magnesium
humate soil
fertilizer)

Fertilizer, soil improver

AZUMIN humic acid fertilizer provides a key solution for improving
salt-damaged farmland after desalinization. Mixed into the desalinizedsoil, AZUMIN enhances agricultural yields, helping restore farmland
damaged by tsunami.

Performance
Plastics Dept.

Fertilizer, agrochemical,
soil improver

Calcium cyanamide was certified under the Japanese government’s
J-Credit Scheme for its ability to cut more than 39% off of emissionsof N2O attributable to the use of nitrogen fertilizers when employed asa fertilizer supplement (24% or greater ratio).** A study conducted by the National Agriculture and Food Research
Organization has estimated that the use of supplemented fertilizer
in tea plantations countrywide would have a GHG reduction effectequivalent to the planting of 200 million cedar trees. (The global
warming potential of N2O is approximately 300 times greater thanthat of CO2)

Inorganic
Products Dept.

Inorganic
Products Dept.

Calcium cyanamide

Synthetic FLUXCOMPOUND

DENKA ALCEN

Desulfurizing agent,deoxidizing agent

Product lineup includes Eco FLUX, which contains no fluorine.

Automobile parts (catalyst
holder), materials forheating furnaces andindustrial furnaces

Automotive applications: This product is used to hold ceramic
catalysts that purify automobile exhaust. It is also used in support
mats that protect exhaust gas filters from high temperatures andvibration. In these ways it helps reduce the environmental burden
attributable to exhaust gas.
Applications as a fire resistant material: It is used as a thermal
insulator for furnaces. Boasting lower density, lighter weight and lower
thermal conductivity compared with such materials as firebricks, thisproduct helps reduce the overall weight of furnaces while curbing
energy consumption.

Save resources andenergy•GHG emissions

Contribute tosocietyCategory

Department

Product Name

Application

Benefits

CLEAREN

Food packaging materials

CLEAREN can be processed at a temperature 50C° lower than thatof its competitor PET-G, while also being 20% lighter than PET-G,
thereby reducing energy use in processing and transportation.

MS Polymer

Transparent molded resin
products

Incorporating PS as an ingredient, MS Polymer is 6% lighter thanresins used for the same applications that consist only of PMMA, andtherefore requires less energy for transportation.

Life Science & Environment Products Division
Category

Department

Product Name

Application

Benefits

HouseholdPackaging
Materials Dept.

DENKA
Thermosheet FB(oxygen barrier
sheet)

Food packaging materials

Used in food containers, this sheet acts as an oxygen barrier toconsiderably prolong the shelf life of foodstuffs, thus helping to reducefood waste.

Food Packaging
Dept.

NB sheet

Food packaging materials

Used to make creamer containers, this sheet acts as a moisturebarrier that prevents evaporation and thereby prolongs food expiration
dates to enhance consumer convenience.

Food Packaging
Dept.

BOPS oil-resistant
sheet

Food packaging materials

Used to make food containers, this sheet boasts superior oil
resistance, transparency and fitting compatibility while helping
enhance sanitation. Improving the ability of containers to hold high-oilcontent food, this product enhances consumer convenience.

Food Packaging
Dept.

BOPS heatresistant sheet

Food packaging materials

Used to make food containers, this sheet boasts superior heat
resistance, transparency and fitting compatibility while helping
enhance sanitation. Thanks to its greater heat resistance, it allows
a wider range of foods to be microwaved without removing the
packaging, thereby enhancing consumer convenience.

Alumina cement

Steelmaking and refiningof non-ferrous metals

Boasting superior heat resistance, this product is used in fire-resistantmaterials for such equipment as steel ladles, helping enhance theirheat insulating properties.

Environmental
Film Dept.

DENKA DX Film

Back sheets for solar
panelsA fluorine-based film that boasts superior weather-resistance andthus helps enhance the durability of back sheets for solar panels

Environmental
Materials Dept.

TOYODRAIN

Corrugated pipes
for construction andagricultural use

Used in construction and farmland development, TOYODRAIN
contributes to the effective utilization of water resources.

Social Life
Products Dept.

VINI-TAPE

Electrically insulating
adhesive tape

Adopting a low VOC content adhesive, VINI-TAPE significantly
reduces environmental burdens and hazardous substances affecting
working environments.

Social Life
Products Dept.

TOYOKALON

Material for hairpieces

As a material for wigs and hairpieces, TOYOKALON meets a variety
of fashion needs, thereby enhancing the quality of people’s lives.

Social Life
Products Dept.

Calalyan Y

Food packaging andpharmaceutical packaging
materials

Using their hands, consumers can easily open packaging made using
this product by tearing it across, making it highly convenient.

Department

SpecialConductive
Materials Dept.

Product Name

DENKA BLACK

Application

Benefits

Lithium-ion secondary
cells (conductive aid,
activating agents forelectrodes)

Ultra-pure electro-conductive carbon black used as a conductive aid
for electrodes to enhance battery performance

Social Life
Products Dept.

Calalyan Tape
(Packaging
tapes for various
purposes)

Packaging

Using a rubber-based hot melt adhesive free of organic solvents,
this tape helps reduce the environmental burden while improving theworking environment.

Housing
Materials Dept.

GUTTERS

Rain gutters for housing
and other buildings

Protecting structures while contributing to the effective utilization of
rainwater

Medical Science
Dept.

Macromolecularsodium hyaluronate
preparation

Joint function
improvement agent

Helping maintain quality of life by improving joint function

SpecialConductive
Materials Dept.

DENKA BLACK

Tire bladders

Incorporated into bladders* used in the manufacture (vulcanization) oftires to improve heat conductivity and thus shorten vulcanization timeand contribute to energy savings* A balloon-like device that inflates and applies pressure to hold therubber against the tire mold

Elastomers
Dept.

DENKA
chloroprene

Gaskets for solar cells,
vibration insulation
rubber for wind power
generation, charging
cables for electric vehicles

Due to its flame resistance and ability to control vibrations, thisproduct is used in gaskets for solar cells installed on housing
rooftops and charging cables for electric vehicles in addition to as
vibration insulation rubber for wind turbine nacelles (covers for power
generation components).

Aqueous adhesives

This product facilitates a changeover in chloroprene-based adhesive
solvents from volatile organic compounds (VOCs) to aqueous
solutions, thereby helping reduce environmental burdens and improve
the workplace environment.

Elastomers
Dept.

48

Reduce weight of finished
goods

Inorganic
Products Dept.

Elastomers & Performance Plastics Division
Category

Improve the operational
environment

Elastomers & Performance Plastics Division

Department

Agri-Products
Dept.

Environment-friendly
technologies

Denka Group CSR Report 2016

Chloroprene latex

Creating Shared Value (CSV):How Denka Products Help Resolve Social Issues

Infrastructure & Social Solutions Division

Category

Denka Group CSR Report 201649

Site Reports Summary▶ For a corporate overview as well as data on policies, activities and other items
pertaining to overseas business sites, please see Site Reports (PDF format).

Japan

Denka Innovation Center

Itoigawa Omanta Festival

Summer Holiday Chemical Experiment Show for Children

Every year, a number of plant employees take part in the local summer
festival held in Itoigawa City.

We took part in the Summer Holiday Chemical Experiment Show forChildren, sponsored by the “Dream Chemistry 21” committee, for the fourthconsecutive year. This was an opportunity for the children who will lead thenext generation as well as their parents to experience the excitement andwonder of chemistry.

Site Reports Summary

Omi Plant

Denka Polymer Co., Ltd.
Sakura Monozukuri Festa 2016

Omuta Plant

On May 14 and 15, 2016 at Sakura City Gymnasium we participated in a
local industrial exhibition aimed at improving the vitality of the local community.
With representatives from local manufacturing, agricultural, commerce andservice industries gathering at the event, we gained valuable opportunities tointroduce our products and operations to people of Sakura City.

Chemistry Classes for Children
We hosted special one-day chemistry classes at community centers andlocal schools to provide a fun learning experience for elementary school
students and their parents.

Chiba Plant

Denka Seiken Co., Ltd.

Comprehensive Emergency Drills

Supporting the NIIGATA Albirex BB Rabbits

We perform emergency drills in tandem with the local municipal fire
department as well as a joint fire brigade put together by companies
based in the same industrial complex to ensure readiness to swiftly andappropriately respond in the event of a natural disaster or other emergency.
The latest drill centered on handling a leak.

As a healthcare company, Denka Seiken is proactively supporting local
sports events. As part of this initiative, we entered sponsorship contracts
with the two members of the NIIGATA Albirex BB Rabbits, a top-tierprofessional team in the Women’s Japan Basketball League.

CRK Co., Ltd.

Shibukawa Plant

Workplace Meetings

Plant Tours

 e discuss the status of our 5S activities as well as the causes of near-missW
incidents at monthly workplace meetings, thereby soliciting suggestions for
improvement.

We hosted plant tours for students from local high schools and nursing
schools as well as members of neighboring community associations, withthe aim of enhancing their understanding of our operations.

Hinode Kagaku Kogyo Kaisha Ltd.

Ofuna Plant

Safety Education

Rice Cake Making

We hold daily meetings to promote KY (hazard prediction) activities andaddress worksite risk before work begins, thereby ensuring that measures toprevent operational risk are in place. We marked the third year of an ongoingproject aimed at improving issues found onsite involving frontline operators.

With the plant’s labor union serving as the organizer, we hosted a rice cakemaking event at a town association facility, interacting with community
residents and children.

Denka Azumin Co., Ltd.
Isesaki Plant
Participating in the “Made in Isesaki” Exhibition
We participate in Isesaki City’s initiatives to enhance the recognition of theregion’s handicrafts and industrial products by, for example, participating in
manufacturer exhibitions.

50

Denka Group CSR Report 2016

A Lecture on Risk Assessment
With lecturers from Head Office and the Environment and Safety Dept. of
the Chiba Plant, we held a risk assessment themed training session for all
employees as well as subcontractors.

Denka Group CSR Report 2016

51

Site Reports Summary▶ For a corporate overview as well as data on policies, activities and other items
pertaining to overseas business sites, please see Site Reports (PDF format).

Overseas

Denka Inorganic Materials (Tianjin) Co., Ltd.

Safety Assurance Activities

Safety Assurance Activities

We hold quarterly emergency drills in tandem with Petrochemical Corporationof Singapore. We are also stepping up employee education and make roundsof the entire worksite to call attention to safety before and during operation.

As we use alkaline substances as raw materials, we provided hands-on
training sessions to learn about dangers associated with mishandling thesesubstances.

Site Reports Summary

Denka Singapore Pte. Ltd. Merbau Plant

Denka Electronics Materials Dalian Co., Ltd.

Denka Singapore Pte. Ltd. Seraya Plant

Worksite Communication

Receiving an Inspection on Fire Drills

We apply a “bottom up approach,” drawing on employee suggestions
to improve our workplace environment and hazard prediction systems.
To encourage participation, employees who submit suggestions arecommended at general meetings. In addition, we host such social events as
New Year’s celebrations and cherry-blossom viewing parties with the aim ofcreating a workplace in which all workers feel free to share their opinions.

The Singapore Civil Defense Force conducted an inspection of our fire
drill procedures. Having obtained valuable input from this inspection, we
renewed our commitment to relentlessly pursuing occupational safety andfacility security.

Denka Advantech Pte. Ltd. Tuas Plant

Denka Advanced Materials Vietnam Co., Ltd.

Safety Assurance Activities

Participating in a Marathon Relay Race

In addition to workplace patrols, emergency response drills and other regularsafety activities, since 2015 we have been periodically providing mandatory
safety training to raise employee awareness, with safety specialists serving
as lecturers.

Denka Advantech Pte. Ltd. South Plant

We created marathon uniforms using VINI-TAPE waste products, aiming
to enhance the general public’s recognition of Denka and foster a sense ofunity among employees.

Denka Infrastructure Malaysia Sdn. Bhd.

Promoting Worksite Communication

Communication Activities

We hold various regular meetings while hosting dinner events to deepen ties
among the plant staff.

In 2015, we organized a company trip to Ho Chi Minh City and hosted such
sporting events as bowling games. Denka employees from business basesin Singapore, Indonesia and Hong Kong also took part in these events.

Denka Advanced Materials (Suzhou) Co., Ltd.
Denka Performance Elastomer LLC

Fire Drills at Branch

Near Neighbors Meeting

Along with fire drills, our manufacturing section managers, frontline operators
and administrative department staff conduct 5S patrols.

Once in every two months, we invite local residents to report on the statusof plant operations and exchange opinions.

Denka Chemicals Development Suzhou Co., Ltd
A Study Session Focused on China’s Intellectual Property
Rights Regulations
To deepen employee understanding of IP, which is vital to our research
activities, we held three study sessions focused on Chinese patent law,
inviting an external lecturer (Mr. Yu Xia, the president of KingTen ShanghaiIntellectual Property Agency Co., Ltd.) to participate.

52

Denka Group CSR Report 2016

Icon Genetics GmbH
Safety Assurance Activities (Education, Training andCompliance)
To ensure compliance with Germany’s legal regulations as well asinternational requirements, we stepped up the development of standard
operational procedures related to GMP (good manufacturing practice) while
enhancing our quality assurance systems.

Denka Group CSR Report 201653

Our CSR Initiatives Overseas

Third-Party Opinion Close Attention Paid to Social Trends and Stakeholder Concerns
Tamio Yamaguchi
Director of Junkan Workers Club*

Singapore—Promoting Interaction with Local Communities
Denka Chemicals Holdings Asia Pacific Pte. Ltd.

We expanded into Singapore in 1980 and established Denka Chemicals Holdings Asia Pacific Pte. Ltd. (DCHA) in
2009. DCHA is a holding company that oversees other Group companies based in Singapore as well as a number ofother subsidiaries in other ASEAN nations, including Malaysia, Vietnam and Indonesia.
In 2015, we celebrated our 35th anniversary in Singapore in conjunction with Denka’s centennial. Coincidentally,
2015 was also a landmark year for Singapore, which celebrated the 50th anniversary of its founding. We haveembarked on several initiatives to give back to the local communities in an effort to express our gratitude for the
support given to our operations. The following are examples of our initiatives in this regard.

(1) Support for the Department of Japanese Studiesof the National University of Singapore (NUS)
NUS’s Department of Japanese Studies is thepreeminent research organization in this field inSoutheast Asia. We have sent several Japaneseand Singaporean staff from DCHA to conduct guest
lectures and share with students from NUS the
operations of Japanese companies in this region.
In addition, our staff from DCHA participated invarious seminars that involved active discussions
with other researchers and students on global issues
Japanese corporations face. In 2015, DCHA donated
SGD$10,000 worth of Japanese Studies related
books and DVDs to NUS’s library.
In 2016, Japan and Singapore marked the 50th
anniversary of diplomatic relations. We sincerely hopethat our initiatives will continue to strengthen thefoundation of a close relationship between the twocountries over the next generation.

Mr. Muneatsu Miida (second from left), Deputy Managing Director of DCHA,
answering a question from the audience(Left) Dr. Thang Leng Leng, Associate Professor at NUS, posing for a picturewith her staff and DCHA representatives in NUS’s library(Right) Some of the books donated by DCHA

(2) Football Clinics Featuring Athletes from ALBIREXNIIGATA Singapore
In recent years, the ALBIREX NIIGATA Singapore, aprofessional football team affiliated with the ALBIREXNIIGATA in Japan, has gained prominence as amember of S League, the country’s top footballleague.
As a CSR sponsor for this team, we have been
assisting them in providing football clinics at public
elementary and secondary schools since 2015. By
providing the students with the opportunity to have
fun learning football directly from professional athletes,
we believe it can help them build confidence in theirsporting abilities.

The happy young participants at the football clinic

Denka representatives attending a dialogue with Mr. Tamio Yamaguchi (September 8, 2016)

As we consider Singapore as our “second home country,” we will continue to work hand in hand with the local
communities to ensure mutual support and continued development of our operations in the region.

Denka Group CSR Report 2016

All in all, I found the Denka Group CSR Report 2016 to be a highly
credible report. That said, today’s stakeholders are calling on businesses
to deliver on a growing portfolio of issues. Among their demands, I
would like to point out two matters that I hope Denka will address infuture editions of its CSR report.
First, materiality should be identified and quantified. The G4
Sustainable Reporting Guidelines stress that placing a focus onmateriality will “enhance the conformance, reliability and usability ofreporting while helping improve information provided to market andsociety with regard to sustainability issues.” With regard to Denka,
it was concluded in the aforementioned dialogue that I participatedin that the Company will feature the process and content of its
discussions on materiality in the next edition of its CSR report. Whenit comes to descriptions of specific processes, I recommend theCompany to put great emphasis on transparency and objectivity.
Second, connections between financial and non-financial data
should be mapped out. These days, a corporation’s environmental,social and corporate governance (ESG) initiatives are considered to
be a determining factor regarding its future management performanceand financial results. However, I’ve seen only a few reports that
disclose such connections. This is, I believe, is because “integrated
thinking,” an approach that acknowledges the intertwined nature of
key financial and non-financial elements, has yet to be embraced by
the majority of domestic corporations. Nevertheless, such ways ofthinking will become ever more vital when businesspeople discuss thecreation of corporate value.
* An NPO dedicated to fostering the harmonious coexistence of society and natural
ecosystems through research conducted from a global perspective. It studies andspearheads local community efforts for creating a recycling-oriented society joining
citizens, businesses and governments, presenting recommendations through CSR
workshops and other means.
URL: URL:http://junkanken.com/ (Japanese only)

Editorial Afterword
Mr. Masaharu Suzuki, Chairman (Left) of DCHA, and Mr. Daisuke Korenaga,
Chairman of ALBIREX NIIGATA football club Singapore, shaking hands at thesigning ceremony of the CSR sponsorship contract

54

Each time I’ve prepared my “third party opinion”
for the annual Denka Group CSR Report, I’ve
not based it on a cursory examination of that
document’s final draft; rather, I’ve taken the time to read the first draft
and then submitted questions, asking for certain points to be clarified
and pointing out items I appreciate or expect to be developed further.
For its part, Denka sincerely considers my questions and the points
I raise, making some changes in the report being prepared while
earmarking other recommendations to be addressed in subsequentor later editions. Moreover, Denka has invited me to participate indialogues where I may converse with as many as 25 people from theCompany, including a senior managing executive officer and managing
executive officers, to discuss how the Company intends to address
my concerns. It is evident from this that Denka has focused significant
resources on the preparation of these reports, and I believe that this is
the reason why the Company has been able to significantly improve its
reporting year after year.
As for information disclosure aimed at communicating how thecorporation is working to fulfill its social responsibilities, ISO 26000
stipulates that such information be “complete,” “easy to understand,”“sensitive to trends,” “well-balanced,” “timely” and “readily available.”Given the recent enactment of a number of relevant domestic andinternational regulations, ranging from “hard” to “soft,” I think thatbeing sensitive to trends has become particularly important for thosein charge of CSR reporting.
The year 2015 was a landmark year for businesses that proactively
take on CSR initiatives. Among other things, the United Nations
adopted the “2030 Agenda for Sustainable Development” (2030
Agenda) in September while in December the signatories to the Paris
Agreement at COP21 agreed to contribute to the collective effort to
reduce GHG emissions. On the domestic front, Japan’s Corporate
Governance Code came into force in June. In my estimation, Denka
is to be commended for its sensitivity to trends in CSR and the qualityof disclosing countermeasures it has put in place, including changes
in its management systems. In particular, the following three points
communicate Denka’s sensitivity very well.
(1) Response to the 2030 Agenda: In the section entitled “To Our
Stakeholders (pages 4 to 5),” the president communicates hisstrong commitment to tackling the challenges suggested by the
UN Sustainable Development Goals, which comprise 17 targets,that society is and will soon come to face. In statements outlining
the Company’s CSR goals he declares, “…we will tackle thesechallenges by identifying areas where Denka can maximize its
strengths. In this way, we will expand the possibilities of chemistry
and create new value.” Moreover, under “Value Creation Process(page 11), presented as part of “The Denka Group’s CSR,” theCompany clearly explains the relationships between the UN’s
Sustainable Development Goals (SDGs) and the next-generation
products being developed by its individual business divisions. In

addition, it is stated in the 2030 Agenda that “All countries and all
stakeholders, acting in collaborative partnership, will implement
this plan,” emphasizing the importance of collaboration. Denka’s
response to this statement is notable and described in “Denka’s
R&D Activities (pages 44 to 45).” This section describes Denka’sfocus on encouraging dialogue among engineers, promoting open
innovation and engaging in collaborative research with academia
overseas. I’m truly looking forward to seeing Denka’s joint researchyield concrete results embodying the spirit of the 2030 Agenda—“leaving no one behind.”(2) Response to the Paris Agreement: Denka has committed itself
to medium-term total CO2 emission targets it has set for 2020
in addition to continuing initiatives to reduce emissions intensity.
Comprising separate targets for domestic and overseas operations,the Company’s newly established targets incorporate reduction
targets that will be met in part through the utilization of a carbon
offset scheme. I highly commend this move. However, the Paris
Agreement mandates that reduction targets must be reviewed every
five years. This means that Japan’s target for CO2 emissions for2030 can be altered, maybe upwardly. To keep the projected change
in global temperature to two degrees or less, however, achieving aneven greater reduction is essential. Therefore, I hope that Denka setsa more ambitious reduction target for itself for 2030.
(3) Response to the recent trend in corporate reporting: Over the past
several years, I have seen an increasing number of corporations
stepping up their emphasis on presenting their strategic focus andforward-looking initiatives in their reporting. This content is often
supplemented by conventional articles featuring historical data on
the reporting company’s initiatives to ensure corporate and social
sustainability. Quick to incorporate this trend, Denka discloses suchinformation in its “Special Feature” and “Our Business Strategies”
sections, thereby meeting the expectations of its stakeholders.

First of all, we would like to express our gratitude to the readers of the Denka
Group CSR Report 2016. In this edition, we highlighted our operations
related to the healthcare field, a priority area on which we are focusing
Groupwide resources. At the same time, we featured our global warming
countermeasures and a dialogue between our outside directors as well asinterviews with stakeholders involved in initiatives to revitalize communities
through sports activities.
We would also like to thank Mr. Yamaguchi, who has provided us with anumber of suggestions and insights. His valuable input brought home therelevance of SDGs and the Paris Agreement in terms of the corporation’ssustainability initiatives, the need for identifying and quantifying materialityand disclosing the process employed when discussing it—a key factor he
expects us to address in the future edition—and the importance of facilitating“integrated thinking” that takes into account the intertwined nature of financial
and non-financial elements. In addition, after submitting the first draft, we
invited him to attend a dialogue in which Denka officers and managers incharge of relevant activities were given the opportunity to exchange ideas
with him and benefit from the meaningful insights he afforded with regard to
improving our CSR activities.
We would like to ask our readers to furnish us with their frank opinions andcomments as we aspire to live up to the expectations of and trust placed in
us by all our stakeholders. Looking ahead, we sincerely ask for your guidanceand encouragement.

Noriyuki Shimizu
General Manager, CSR & Corporate Communications Dept.

Denka Group CSR Report 201655