Hodogaya Chemical Group Report

Integrated Report 2023

Introduction

Management Philosophy

Your Dream is Our Business

PURPOSE– Management Philosophy –Through constant innovation of chemical
technology, we will provide high‑quality
products and services throughout theworld and contribute to the creation of anenvironmentally conscious society.

VISION– Target Corporate Image –A corporation that contributes toestablish a sustainable society bymeans of our original portfolio andenvironmentally friendly manufacturing,with a focus on specialty products.

Editorial Policy (at the time of publication)
We have published the Hodogaya Chemical Group
Integrated Report since FY2017 to deepen understanding of
our efforts toward value creation over the medium- and longterm. We have engaged in dialogue with all our stakeholders,
including our shareholders and investors, customers, partnercompanies, people from the local communities and society as
well as our personnel.
This report presents our corporate value creation system andthe materiality that the Hodogaya Chemical Group should
address for medium- to long-term corporate growth. In light of
the increasing demand for the disclosure of information inrecent years, we have also improved the disclosure of ESG
information, including our environmental and climate change
initiatives, our approach to human resources, and corporate
governance.
Also, detailed information regarding products, financial
matters and ESG, as well as the details of the group companies,
which could not be included in this report, are available on our
website. To easily access the applicable reference informationon our website, please use the QR codes or the addresses(URLs) provided in this report.
We hope that this report will help our stakeholders better
understand the Hodogaya Chemical Group. We will continue
to make efforts to further improve the contents of this reportand use it to facilitate dialogue with our stakeholders.

CONTENTS

1 Overall Picture of the Hodogaya Chemical GroupAt a Glance ����������������������������������������������������������������������������������������������������������������������������������� 3
Products of Hodogaya Chemical Group Around You ����������� 5
The Hodogaya Chemical Group’s History of Innovation ������� 7

2 The Hodogaya Chemical Group’s Vision for the Future
Message from the President ��������������������������������������������������������������������������������� 9
Hodogaya Chemical Group Value Creation Process �������������� 13
Explanation of Value Creation Process ���������������������������������������������������� 15
Risks and Opportunities ��������������������������������������������������������������������������������������������� 17
Materiality ������������������������������������������������������������������������������������������������������������������������������������� 19

3 How We Create the Future
Looking back at Mid‑term Management Plans ���������������������������� 21
Progress of the Mid‑term Management Plan
SPEED 25/30 (FY2021–FY2030) ������������������������������������������������������������������������� 22
Financial Strategy ���������������������������������������������������������������������������������������������������������������� 25
Financial and Non‑Financial Highlights(Consolidated) ������������������������������������������������������������������������������������������������������������������������� 27
Research & Development ����������������������������������������������������������������������������������������� 29
Environmentally Friendly Products and Technologies
that Contribute to a Sustainable Future ������������������������������������������������ 31
Business Overview of the Hodogaya Chemical Group ������������� 32
Functional Colorants Segment ���������������������������������������������������������������������������������������� 32
Specialty Polymers Segment ���������������������������������������������������������������������������������������������� 33
Basic Chemicals Segment �������������������������������������������������������������������������������������������������������� 34
Agro‑Science Segment ���������������������������������������������������������������������������������������������������������������� 35
Logistics Segment ������������������������������������������������������������������������������������������������������������������������������� 36* T he QR code trademark is a registered trademark of DENSO WAVE
INCORPORATED.

Global Expansion of the Hodogaya Chemical Group ����������� 37

Period Covered

4 Guaranteeing Our FutureThis Report generally covers the period from April 2022 toMarch 2023, but also contains reports on activities before andafter said period.

Hodogaya Chemical Group’s Sustainability �������������������������������������� 38
Disclosure of Information Related to Climate Change
Based on TCFD ������������������������������������������������������������������������������������������������������������������������ 39
Responsible Care ������������������������������������������������������������������������������������������������������������������� 41
Responsible Care Management ������������������������������������������������������������������������������������� 41
Environment ������������������������������������������������������������������������������������������������������������������������������������������������ 41
Quality Assurance �������������������������������������������������������������������������������������������������������������������������������� 43
Chemicals and Product Safety ������������������������������������������������������������������������������������������ 44
Workplace Safety and Health, Security and Disaster Prevention ������ 45
Procurement Activities ����������������������������������������������������������������������������������������������������������������� 46

Scope of Report
Hodogaya Chemical Co., Ltd. and its group companies

Publication Date

Human Resources ��������������������������������������������������������������������������������������������������������������� 47

October 2023

Respect for Human Rights ��������������������������������������������������������������������������������������� 49
Community and Society �������������������������������������������������������������������������������������������� 50

Major Guidelines Referenced

5 Mechanisms to Support Sustainable Value Creation
Corporate Governance�������������������������������������������������������������������������������������������������� 51

Ministry of Economy, Trade and Industry
Guidance for Collaborative Value Creation

The Hodogaya Chemical Group actively promotes sustainability activities based on the concept of balancing
the pursuit of economic value and solutions to social issues and providing value to all stakeholders to fulfill
its responsibility to realize a sustainable world and society in the medium- and long- term in line with the
PURPOSE (Management Philosophy) and VISION (Target Corporate Image).

IFRS Foundation Integrated Repor ting
Framework

Board of Directors ��������������������������������������������������������������������������������������������������������������� 57

ISO 26000: 2010 Guidance on Social Responsibility

Risk Management ��������������������������������������������������������������������������������������������������������������� 59

GRI Sustainability Reporting Standards
Ministry of the Environment Environmental Reporting
Guidelines 2018
Recommendations by the Task Force on Climate‑related
Financial Disclosures

1

Outside Director Dialogue/Message from the Newly
Appointed Outside Director����������������������������������������������������������������������������������� 55
Compliance ��������������������������������������������������������������������������������������������������������������������������������� 58

6

Data
6-Year Financial Summary/Statement of Responsibility ���������� 60
Primary ESG Data ����������������������������������������������������������������������������������������������������������������� 61
Corporate Data ����������������������������������������������������������������������������������������������������������������������� 62

Hodogaya Chemical Co., Ltd.

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Overall Picture of the Hodogaya Chemical GroupAt a Glance“Five Core Segments” of the Hodogaya Chemical Group
P.32

Functional Colorants Segment

P.34

Basic Chemicals Segment

7.1 billion JPY
Operating Profit -0.5 billion JPY
Net sales

17.9 billion JPY
Operating Profit
2.6 billion JPY
Net sales(Operating margin -%)(Operating margin 14.5%)

Strength

16.5%
Strength

Ability to embody the needs of customers in the global arena bymaking full use of the DNA of the Group including our organic
composite technology

Creativity to explore new applications basedon the hydrogen peroxide production
technology accumulated over many years

Peroxide Business● Hydrogen peroxide ● Sodium percarbonate● Peracetic acid (disinfectant, food additive) ● Industrial chemicals

P.35
OLED Materials and Advanced Device
Materials Businesses● Emitting materials, transport materials,
capping layer materials● Biochemical materials (oligo synthesis)● Dyes for color filters● Materials for copier toner● Materials for Perovskite solar cell

Agro‑Science Segment

Colorants Business● Aluminum coloring dyes
● Stationery dyes
● Dyes for hair color treatment● Natural dyes(for food and industrial use)

Net sales

41.6 %FY2022

43.3

10.7%

4.6 billion JPY
Operating Profit 0.4 billion JPY

billion JPY

Net sales

Operating Profit

3.7

Specialty Polymers Segment

billion JPY(Operating margin 9.9%)

4.3%
Strength

Ability to develop attractive products based on ourformulation techniques

Agrochemicals and Agricultural
Materials Businesses

Net sales

11.5 billion JPY

Operating Profit

0.8 billion JPY

26.7%

Logistics Segment

1.8 billion JPY
Operating Profit 0.3 billion JPY(Operating margin 7.4%)

Strength

Net sales

Ability to deliver specialty products to global markets by making fulluse of our phosgenation technology, etc.

Functional Polymers & Specialty Chemicals Business● Waterproof materials for civil● Adhesives● Release agents● Waterproofing and leak‑plugging work

electronics(Operating margin 18.2%)

Strength

Construction Materials Business● Urethane materials (PTG, BIO-PTG, PTG‑ SOFTENA, etc.)● Intermediates for pharmaceutical, functional polymers andengineering and construction(urethane based)● Herbicides ● Pesticides● Fungicides ● Agricultural materials (oxygen supply materials)

P.33

P.36

Ability to transport security and safety based on its
expertise on handling hazardous substances and chemicals

Logistics Business● Warehousing (hazardous substances and chemicals / general goods) Yokohama Branch,
Koriyama Branch, Nanyo Branch● Consigned freight forwarding● ISO tank container storage services* Sales ratio of the Other segment was 0.2%.

3

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

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Overall Picture of the Hodogaya Chemical Group

Products of Hodogaya Chemical Group Around You
Materials produced using technologies of the Hodogaya Chemical Group are used in many products in your day‑to‑day lives. Let’s lookat some of the products around you that you may not have noticed.

Functional Colorants Segment

Specialty Polymers Segment

Basic Chemicals Segment

Agro‑Science Segment

LCD TV

Logistics Segment

Watches

Our dyes are used in color filters
for display.

Our urethane materials are used inwristbands.

Ice creamSportswear

Our natural food dyes are used
for coloring.

Our urethane materials are used inspandex.

Copiers and laser printers

Processed foods

Audio players

Our natural food dyes are usedin various food products.

Our dyes are used in the aluminumbodies.

Smartphones, tablets

Our imaging materials are used in an
additive of toners.

Our OLED materials are used in OLED displays.
Our dyes are used in the aluminum bodies.

Inner/outer wear

Meat, vegetables, fruit

Our urethane materials are used inspandex.

Our peracetic acid products
are used for disinfecting.

Plastic bottles
Our disinfectant agents are used forcleaning bottles.

Adhesive tape
Railway

Agricultural Land and Facilities

Our herbicides are used toremove weeds from rail tracks.

Our oxygen supply materials for agriculture are used to
improve soil fertility and prevent moisture damage.

Our release agents are used on the backof tape for easy release.

Mega solar power plants
Our herbicides are used to remove
weeds from mega solar sites.

Golf courses, athletic fields, parks
Our herbicides are used for lawn weed
removal.

Dishwashing detergents
Our cleaning agents are used in
powder detergents for dishwasher.

Aquafarms
Laundry detergents
Our bleaching agents are used inlaundry detergents.

Hair coloring products
Our dyes are used in hair coloringproducts.

5Pharmaceuticals

Our veterinary medicines are used forfish parasite removal.

Our specialty chemicals are used for
production of pharmaceutical products.

Endoscopes
Our disinfectant agents are used forcleaning.

Hair dryers

Materials for PCR diagnostic kits

Our urethane materials are used inhair dryer brushes.

Materials that bond to synthetic DNA areused in the virus detection process.

Automobile tires

Buildings

Our adhesives are usedin tires.

Our waterproofing materials areused for rooftops and balconies.

Automotive parts

Warehouses

Our urethane materials
are used for various
parts of automobiles.

Hodogaya Chemical Co., Ltd.

Our Logistics Segment has been
providing storage and transportation
services for hazardous substancesand chemicals.

Integrated Report 2023

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Overall Picture of the Hodogaya Chemical GroupThe Hodogaya Chemical Group’s History of Innovation
1978

Hodogaya Chemical was founded in 1916 as the first company in Japan to manufacture caustic soda using an electrolysis method.
For over 100 years, Hodogaya Chemical has responded to the needs of the times by applying technologies developed over the long years,
and through continuous innovation, created a wide range of products from dyes and agricultural chemicals to pharmaceutical intermediates,
polyurethane materials and OLED materials, which support people’s lifestyles and society.
All members of the Hodogaya Chemical Group are committed to launching SPEED 25/30 as a corporate group that contributes to thedevelopment of society through the creation of products and services that benefit people for the next 100 years.

1993

Hodogaya Vandex
Construction Products Co., Ltd.
established. (changed its nameto Hodogaya Construction
Products Co., Ltd. in 2017).

1991
Tsukuba Research Laboratory
was established.

1967
1916

1915
Hodogaya Soda Works
founded in present‑day
Hodogaya Ward,
Yokohama City, Kanagawa.

1994
HODOGAYA AGROTECH Co., Ltd. founded.
(Changed its name to HODOGAYA AGROTECH
Co., Ltd. in 2011.)

1997
Hodogaya Logistics Co., Ltd. founded.
Shanghai Office opened.(Incorporated in 2014)

New York Office opened.
(incorporated in 1986)

1939

Toyo Soda Co., Ltd.
(present‑day Koriyama
Plant) opened.

2006

Hodogaya Contract Laboratory Co., Ltd. founded.

Tsurumi Plant (current Yokohama
Plant) was established.
Name changed to Hodogaya
Chemical Co., Ltd.

Some of the shares of Nippon Polyurethane
Industry Co., Ltd. sold.
(all shares sold off in 2012.)

Net sales
Operating profit

2008
Office in Korea opened (incorporated in 2011).
HODOGAYA UPL Co., Ltd. established.

2010
Düsseldorf Office opened.(incorporated in 2018)
Taipei Office opened.
Shares of SFC Co. Ltd. (Korea) acquired.

Operating profit(Billion JPY)

Net sales(Billion JPY)

12.0

120.0

8.0

80.0

4.0

40.0

0

0

2015
Company transitioned to one with Audit & Supervisory
Committee.

1971
Nanyo Plant opened.

2016

Celebrated its 100th anniversary

2022
Transition to the Prime Market of
the Tokyo Stock Exchange.

* Non‑consolidated figures through 1976, but consolidated figures since 1977.
* The figures for 1946–1950 are unknown because of postwar disposal.

(March 31 each year)

1920

1930

1920

1930

1940

1950

1940

1960

1950

1970

1960

1980

1970

1990

1980

2000

1990

2010

2000

2022

2010

-2.0

2020

Products developed

1915

Production of caustic sodausing an electrolysis method
launched (first for Japan).

1950

1926

Production of phosgene started.

1927

Dye production launched.

Production of
agrochemicals
started.

1963

1978

Production of urethane materials (PTG)
launched.

Production of charge control
agents (CCA) for toners
launched.

1966

1984

2001

Charge transport materials(CTM) production
launched.

Production of OLED
materials and holetransport materials (HTM)
launched.

Hydrogen peroxide production started.

2004

OLED materials and electrontransport materials (ETM)
developed.

1967

2017

Production of OXYATTACK (disinfectant
agent for food products), a peracetic
acid formulation, started.
Urethane waterproof material
Sugomaku production launched.

2020

Production of urethane waterproof
materials started (first in Japan).

Mass production of materials for PCR
diagnostic kits launched.

Needs of society
Broke free of chemical industry’s relianceon imports
Founder Otosuke Isomura

1914

World War I

1923

The Great Kanto Earthquake

Became an integrated chemicals
manufacturer as society
industrialized and modernized

Developed various products that supported
post‑war recovery

1939

1950s

World War II

Postwarrebuilding

1960s

Rapid economic
growth1973

Oil crises

Expanded business fields to electronicmaterials with an eye toward the advent of
an electronics era

1985

Plaza Accord

Created an environmentally conscious
society through new materials and productswith a light environmental burden

1991

2008

Economic bubble
burst

The collapse of
LehmanBrothers

Technological roots and change

Original products (1916–)
Caustic soda

Salt electrolysis

Raw materials and intermediates
Aromatic or organic compounds

Organic and optical devicematerials

Natural materials

Various dyes

Organic compounds

Urethane materials–2000

Materials for copiersGreat EastJapan
Earthquake

2020

Novel coronavirus disease(COVID‑19)

Present day
OLED materials
Bio BusinessAluminum coloring dyes

Color filter dyes
Stationery dyes

Raw materials of spandex
Raw materials for release agents

Urethane waterproof materials

Construction materials

Aromatic or organic compounds

Various herbicides

Herbicides

HydrogenHydrogen peroxide and its
derivatives

Hydrogen peroxide

Phosgene

7–1980

Pharmaceutical/ agrochemical raw
materials Industrial chemical raw
materials

Chlorine

Hydrogen

Major product groups

2011

Dyes for hair color treatment

Pharmaceutical intermediates

Technical grade active ingredients(in‑house and in‑licensed)
Sodium percarbonate

Agricultural materials
Peracetic acid

Hodogaya Chemical Co., Ltd.

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The Hodogaya Chemical Group’s Vision for the Future

Message from the President

In the spirit of “Changing Together,”we will become a company
that is essential to the realizationof a sustainable society
over the next 100 years.

center under construction near SFC’s headquarters will becompleted. We anticipate this will contribute to the expansionof our bio business.
Furthermore, REXCEL CO., LTD. (Chungcheongbuk-do,
South Korea), in which we have maintained an equity interest
since 2018, will be included in the scope of the Company’s
consolidation as a subsidiary from FY2023. REXCEL, which haslargely specialized in the refining of OLED materials, hasdecided to apply this expertise to engage in the ultra-highpurity refining of cutting-edge semiconductor resist
materials. The latest semiconductors require extremely levelsof resist material purity to produce ultra-fine circuits.
Recognizing this as an opportunity, REXCEL is currently
working to expand its facilities.
In July 2023, we established the Korea Business Strategy

Department as an organization under the direct control of the
President in order to flexibly and promptly consider and promotebusiness strategies for further growth of our business in South
Korea, where expectations of a significant leap forward are high.
In addition to the aforementioned, we will take steps tobuild a new business portfolio by accelerating thedevelopment of products that are essential to therealization of a sustainable society in the fields of theenvironment and energy as well as agriculture and food in
our core and strategic businesses.
Mid-term Management Plan   

P.22*1 Perovskite solar cells: Solar cells made from perovskite, which has a crystal structure thatconverts light into electricity. Expectations of reduced costs through coating and printing
technologies that enable mass production.

Yuto Matsumoto
President and CEO

Contribution to Help Realize a Sustainable Society through Our Business

Progress, Evaluation, and Pending Issues in the Second Year of the Mid-termManagement Plan SPEED 25/30
Despite the increase in economic activity as the spread of
COVID-19 began to subside, conditions throughout FY2022
were significantly impacted by the surge in energy prices
owing to such factors as the prolonged conflict between
Russia and Ukraine. In the fiscal year under review, net sales
increased 3.5% year on year, to 43.3 billion JPY, due to higher
sales in the Company’s mainstay businesses and the effectsof the weak yen. In contrast, operating profit decreased 42.4%
year on year, to 3.7 billion JPY. In addition to the substantial
decline in materials for PCR diagnostic kit demand, thisdownturn in profit was attributable to a variety of factors,

including the surge in raw material and fuel prices as well as
the increase in research and development expenses.
Under its Mid-term Management Plan SPEED 25/30, the
Hodogaya Chemical Group has set net sales of 50.0 billion JPY,
operating profit of 7.5 billion JPY, and an operating margin of
15.0% as its management targets in FY2025. While achieving
this operating margin target in FY2021, our operating margin
fell below the target at 8.5% in FY2022 owing to the decline
in PCR-related sales. In order to achieve our targets for
FY2025, we recognize the need to strengthen existing
businesses while building a new business portfolio.

Building a New Business Portfolio
The Hodogaya Chemical Group restructured certain businessdivisions and established the Advanced Device Materials
Department in April 2023. Reporting to the Organic & Optical
Materials Device Division, the Advanced Device Materials
Department is responsible for expanding sales of dyes for color
filters and promptly commercializing new products, including
near-infrared absorption materials and perovskite solar cells*1.
Meanwhile, the Group’s business in Korea is becoming
increasingly important with each passing year. In addition to
9

South Korea’s growth potential and importance as a market
for the OLED material business, our subsidiary SFC CO., LTD.
develops materials for PCR diagnostic kits as an extension of
the OLED material business, which contributed significantly
to earnings through to FY2021.
Looking ahead, we will apply proprietary technologies tothe development of Oligonucleotide medicine, whileconsidering entry into the biopharmaceutical field fromdiagnostic pharmaceuticals. In the fall of 2023, a Biotechnology

The Group’s vision is to contribute to a sustainable society
through its business. The Hodogaya Chemical Group placed
considerable emphasis on Responsible Care (RC) activities wellbefore environmental issues became a major issue. We position
sustainability management as an extension of these activities.
Meanwhile, we established the Sustainability Development
Committee in 2021 to fulfill functions and roles that differ from
RC activities. Activities of this committee are conducted
through an organization structure that includes the TCFD*2
Subcommittee and the Global Environment Subcommittee.
In addition to our RC activities since 1997, our FTSE Russell*3score has improved each year on the back of our proactive
information disclosure efforts under our sustainability
promotion system. In FY2022, we were selected as a constituentof the FTSE Blossom Japan Sector Relative Index*4 and received
the Silver Medal presented by EcoVadis*5. We see this as proof
that the Group’s ESG management has received a certain

level of recognition. Our environmentally friendly and otherproducts that use environmentally friendly raw materials haveattracted considerable attention. As an example, our soil
improvement oxygen supply materials, bio-based urethanematerials, and release agents have been included in the FTSE
Green Revenues Data Model*6. These products accounted forabout 3% of Hodogaya Chemical’s (non-consolidated) sales in
FY2015. With this figure climbing to 12% in FY2022, we are
becoming increasingly aware of the contributions that ourbusinesses make to realizing a sustainable society.
Hodogaya Chemical Group’s Sustainability   

P.38*2 TCFD: Task Force on Climate-related Financial Disclosures*3 FTSE Russel: UK-based company that provides indexes.
*4 FTSE Blossom Japan Sector Relative Index: An index provided by FTSE Russell that reflect theperformance of Japanese companies that excel in responding to environmental, social andgovernance (ESG) concerns in their respective sectors.
*5 EcoVadis: A platform for evaluating corporate social responsibility and sustainable procurement.
*6 Green Revenues Data Model: A model that identifies companies that derive revenue fromgreen products and services and classifies the greenness of their products.

Addressing Environmental Issues
The Hodogaya Chemical Group expressed its support for the
TCFD recommendations in November 2022. We are now
required to report the carbon footprint of individual products,
including differences in raw materials, and will work toproactively disclose information, including our Scope 3 efforts
going forward. We have already introduced CO2-free electricity
at several plants and offices. In FY2022, we introduced Internal
Carbon Pricing (ICP) as a method for estimating carbon pricewithin the Group to promote low-carbon investments andmeasures as well as energy conservation.
The Group nevertheless continues to face some issues. For
example, CO2 is generated in the process of producing hydrogenfrom natural gas, which is necessary for the manufacture ofhydrogen peroxide and its derivatives, one of our core businesses.
Should green hydrogen*7 and blue hydrogen*8 become readily
available at a low cost in the near future, we are confident we will
be able to reduce CO2 emissions. Moreover, the use of ourhydrogen infrastructure will significantly contribute to thehydrogen society advocated by the government.
TCFD Disclosure   P.39*7 Green hydrogen: Hydrogen produced using renewable energy sources.
*8 Blue hydrogen: Hydrogen produced from such fossil resources as petroleum or natural gasthat has been treated so that no CO2 is emitted into the atmosphere during production.

Hodogaya Chemical Co., Ltd.

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The Hodogaya Chemical Group’s Vision for the Future

Message from the President

Human Capital Initiatives
I believe that our personnel are the most importantresource, or capital, to achieve sustainable growth.
B a s e d o n t h i s u n d e r s t a n d i n g, I h ave p l a ce dconsiderable emphasis on promoting human capitalmanagement, since my appointment as President in
2016, in the belief that it will lead to the Company’s
growth. In my initial address as President, I stated that wehave a legacy to carry forward as a company that hascelebrated its 100th anniversary. Over and above suchtangible capital as the Group’s businesses, products,
technologies, production bases, customers, and business
partners, we are also charged with the responsibility offine-tuning our legacy by incorporating the intangible
and important contributions born from our personnel,
including the joy of developing and selling products as amanufacturer, the vision set forth in our Mid-termManagement Plan, and the gratitude we feel toward ourcustomers and all other stakeholders. Recently, we havetaken steps to put in place a flexible workstyle framework
to provide all officers and personnel with a greater senseof fulfillment in their work. This framework includes
further entrenching the Group’s teleworking system, theCome-back Entry Program, a reemployment registration
system, the ability to take annual paid holidays on anhourly basis, refreshment leave, and allowing personnel
to dress more freely. As a result, Hodogaya Chemical has
been certified as a Health & Productivity Management
Outstanding Organization since FY2021. In order toimprove personnel satisfaction, we have also endeavoredto gauge the level of engagement from both thequalitative and quantitative perspectives by regularly
measuring engagement scores from FY2021.
With overseas sales accounting for half of the Group’s
total sales, we recognize that the development of global
talent is a pressing issue. Hodogaya Chemical introduced
an overseas trainee program in 1989 and has worked
diligently to develop personnel on a continuous basis. Asa member of the first batch of personnel to participate inthis program, I was dispatched to the United States. On a
personal note, this initiative helped highlight theimportance of not only learning a new language, but also
experiencing first hand local business practices andcultural differences. In addition to Europe and the U.S., weare currently expanding this dispatch program to Chineseand Korean-speaking countries.
New initiatives are underway in the areas of personnel
evaluation and remuneration. We began providing
performance-linked bonuses from FY2019. We also
introduced a multifaceted evaluation system for certain
department general managers, including evaluations
from peers and subordinates. More recently, we launcheda personnel stock compensation plan for management
personnel in April 2023 to realize the sustainableimprovement and growth of both corporate value andpersonnel.
Human Resources   

dialogue with Outside Directors so that Board members
can gain an insight into the next generation of candidates.
Corporate Governance   

P.51

Green Innovation to Realize a Sustainable Society
An issue that I believe the Group must definitively address
over the long term is Green Transformation (GX).
In addition to the development and manufacture ofbatter y materials, we are undertaking research on
perovskite solar cells as part of our technologicaldevelopment activities to promote GX. Perovskite solar
cells use organic compounds as an alternative to silicon,
an area in which the Japanese government is also focusing
its research efforts. Hodogaya Chemical is endeavoring tocontribute to early commercialization by providing highly
durable and highly efficient materials.
Moreover, we will focus on the promotion of digitaltransformation (DX), an important issue under SPEED
25/30, as we believe that the accelerated promotion of GX
will help secure our competitiveness by promoting
innovation through the use of digital technology.
Our goals are also to develop sustainable products that
reduce the environmental impact, especially in the

agricultural and food fields as an extension of ourtechnologies. Building on our collaboration with ASAHIAGRIA CO., LTD. announced in February 2023, we will focus
on the similarities between our soil preparation and soil
improvement technologies to develop a composite
material of compost and oxygen supply materials that is
expected to generate fertilizer effects, prevent moisturedamage, and improve efficiency. We believe this initiative
will contribute to the efficiency and stability of crop
cultivation. We also see this as a significant step toward the
reduction of chemical pesticides and fertilizers. More thanjust a pipe dream, we strongly believe that this businesswill help address the global social issue of food shortages
attributable to population growth as it gets off the groundand expands through Asia to the rest of the world.
Research & Development   

P.29

P.47

The Mission and Purpose of the Hodogaya Chemical GroupStrengthening Corporate
Governance
Hodogaya Chemical was quick to reform its corporate
governance structure and systems. We transitioned to a
Company with an Audit & Supervisory committee in 2015
and introduced a stock-based compensation plan for
officers in 2016. A female Outside Director with expertisein personnel strategies was appointed in June 2023,
increasing the diversity of the Board of Directors andbroadening its skill set. Moving forward, we will look to
appoint female Directors from within the Company aswell to further increase the diversity of the Board of
Directors.
Succession planning is another important issue. I
believe that a person who understands Hodogaya
Chemical’s corporate culture and has a strong desire to
manage the Company would be a suitable successor. In
addition to conducting executive training for selected
members, we also have General Managers of departments

11

attend Management Committee meetings where theycan explain the operations of their own departments,
learn about the kind of information management requires,a nd g a in an u nd e rs ta nd in g o f the co mm ittee’s
deliberations. In addition, we provide opportunities for

Guided by its PURPOSE – Management Philosophy -, the
Hodogaya Chemical Group aims to contribute to asustainable society by making chemical technology useful.
Our catchphrase, Your Dream is Our Business, encapsulates
not only the development of products that meet theneeds of customers, but also the continuous development
and provision of products and services that help realize asustainable society from a social perspective. The value ofany company is ultimately determined by its personnel. In
order to realize our management philosophy andensure the Company’s profitability, we are committed
to maximizing the potential of our personnel and thenchanneling this potential toward the sustainablegrowth of our corporate value. At the same time, we
w i l l r e t u r n p r o f i t s t o s h a re h o l d e r s t h r o u g himprovements in PBR*9 on the back of a higher ROE*10
and efforts to lift DOE*11.
The role of the organization’s leaders is to clarify theGroup’s vision and targets and to then exert their influence
to promote increased awareness in a bid to foster a
corporate climate and culture in which all officers andpersonnel work passionately to achieve established goals.
In the spirit of “Changing Together,” we will become acompany that is essential to the realization of a sustainable
society over the next 100 years. Moving forward, we will
ensure our harmonious coexistence with all stakeholders,
including customers, investors, personnel, and local
c o m m u n i t i e s. I t h a n k a l l s t a k e h o l d e r s fo r t h e i runderstanding and look forward to their support for the
Hodogaya Chemical Group.
*9 Price book-value ratio (PBR): An indicator that measures the number of times the stock priceis equal to net assets per share (PBR = Stock price / Net assets per share).
*10 Return on equity (ROE): An indicator that measures a company’s ability to efficiently utilize
its capital and generate profits (ROE = Earnings / Equity).
*11 Dividend on equity ratio (DOE): An indicator that measures how much a company pays out
in dividends to shareholders’ equity (DOE = Total annual dividends / Shareholders’ equity x100%).

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

12

The Hodogaya Chemical Group’s Vision for the Future

Hodogaya Chemical Group Value Creation Process

VISION– Target Corporate Image –The Hodogaya Chemical Group, based on changes in the internal and external environment aswell as the demands of our stakeholders, has established a corporate image that we aspire to be:
A corporation that contributes to establish a sustainable society by means of our original
portfolio and environmentally friendly manufacturing, with a focus on specialty products. We willcontinue to solve social issues and contribute to the realization of a sustainable society throughthe value created by our business activities under the catchphrase Your Dream is Our Business.

Inputs (FY2022)

Strengths

Financial capitalStrengths
accumulated overmany years

Financial foundation and investments that
underpin value creation• Net assets• Net assets per share• Equity• Interest-bearing debt

49,897million JPY
5,405.73 JPY
42,835million JPY
10,521million JPY

A solid foundationof three coretechnologies

Globalenvironment

Society

External Environment

PeopleGlobal production base network• Global production base network(3 domestic, 1 overseas)• Capital expenditures
3,100 million JPY• Ratio of capital expenditures to net sales 7.2%
• Use of environment‑friendly materials

Social andrelationship capital
Governance

Risks and Opportunities

 P.17-18

chemical technology, we will provide
throughout the world and contribute to theconscious society.

Long-term customer base and relationships of trust
through co-creation with various stakeholders• Purchasing policy for both Hodogaya
Chemical and partners• Sales subsidiaries (6 domestic, 4 overseas)• Development and production of secure, safe
products• Trust and the HCC brand built up over a 106year history

Efficient use of resources• Energy use (crude oil equivalent)
27,562kl• Water use
10,680 kt

A corporation that contributes toestablish a sustainable society bymeans of our original portfolio andenvironmentally friendly manufacturing,with a focus on specialty products.

Outputs (FY2022)
Sales by segment

43,324

million JPY

R&D
function

Production
function

Cutting-edge researchtargeting thetechnologies of thenext generation

Development
capability infunctional
materials

High-quality
manufacturing withthe greatest attention
to the environment
and safety

Functional
Colorants
17,990 million JPY
41.6%

Specialty Polymers
11,580 million JPY
26.7%

Evaluation
technology for
functional
materials

Sales
functionEver-evolving threecompetitive
advantages

Value is generated
through solutions
for customers’
problems

Basic Chemicals
7,152 million JPY
16.5%

Leverage unique
technology andnetwork to
respond to diverse
needs

Value creation

Manufacturing
technology

Strengths  P.16

Economic Value• DOE• 1 0-year TSR

1.4%
+78.8% (annual +6.0%)

Intellectual Value
Generate new innovation and raise
corporate value• Increase percentage of sales
accounted for by new products

Manufacturing
Value
Increase competitive advantage forbusiness expansion

Agro‑Science
4,628 million JPY
10.7%

Social Value
Consideration for the local environment
through our business activities

Mid-term Management
Plan SPEED 25/30

Strengthening operations/Creating new products/
Improve productivity/Stronger managementfoundation/Execute strategic investments/Promotesustainability/Promote DX P.22-24

Responsible Human
Respect for
care
Resources Human Rights

Corporate
GovernanceCompliance and Risk
Management

 P.41

 P.51

 P.58-59

 P.47

 P.49Foundation to   Support Value Creation

1,874 million JPY
4.3%•C omply with global‑level purchasing policy•Z ero statutory and regulatory 
violations, zero lost-time injuries• Social contribution activities 14 million JPY

IT andTelecommunications• Contributing to therealization of a prosperous
smart life

Medicine and
Healthcare• Maintaining people’s
health and safety andcontributing to theprovision of safe andsecure medical services

Building andInfrastructure• Improving the safety anddurability of buildings
through the provision ofbuilding materials

Food Production• Contributing to therealization of a safe, secure,and prosperous dietary
lifestyle

Daily Necessities• Supporting safe, secure,and comfortable living

Environmental
Value
Consideration of global
environmental issues• E nergy intensity
0.636 kl/million JPY of net sales• CO2 emissions (Scope 1 + Scope 2)
45.7 thousand tons (1.055 tons/million JPY of net sales)• Water discharge volume
10,684 kt• Industrial waste volumes 
3,477 tBusiness Overview  P.32-36

Impacts

Human Value
Create a pleasant environment, active
contributions from diverse personnel• Improve employee engagement•P ercentage of overseas sales
51%• Percentage of female managers  11%• Certified as a Health & Productivity
Management Outstanding Organization
for three consecutive years• Percentage of personnel taking childcare
leave
Male 83%Female 100%
• Percentage of personnel taking paid
holidays71%• Percentage of personnel who acquired
Compliance Proficiency qualification (Japan)

99.2% (management)•C onstruction of a new biotechnology
building (SFC CO., LTD. in Korea)• Expansion of environmentally friendly
products

Logistics
Research anddevelopment

Outcomes

Capital policy to enhance
corporate value

Always provide
high‑quality
products andservice

Highpurification
technology

Natural capital

13

Through constant innovation ofhigh‑quality products and services
creation of an environmentallyIntellectual capital
Technology and collaborative foundation that
underpins global competitiveness• Participate in industry‑academia collaborations(development of new materials)• R&D expenses
4,939 million JPY• Ratio of R&D expenses to net sales
11.4%• Know‑how regarding protecting intellectual property

Manufactured capital(society andorganization)

ment Philosophy –Business  Model

Human capital
Personnel who can learn, think,
and act on their own• Number of employees
890• Percentage of overseas personnel
30.6%• Labor costs 
2,505 million JPY• Investment in education per employee(non-consolidated)
72 thousand JPY• Average training hours per employee
106.6 hours

PURPOSE – Manage‑Transportationand Logistics• Providing safe logistics
functions

Materiality  P.19-20

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

14

The Hodogaya Chemical Group’s Vision for the Future

Explanation of Value Creation Process
Business Model

Strengths

A Solid Foundation of Three Core Technologies

The Hodogaya Chemical Group has built a three-pronged business model in which the R&D, production, and sales functions all
collaborate to quickly ascertain the diversifying needs of society and respond quickly to the differing needs of its various customers.
Utilizing the Company intranet, the R&D, production, and sales functions share information efficiently and quickly regardless of location,
leading to product development. In addition to working to improve efficiency by holding monthly production and sales meetings, we

1. High-purification technology

2. D evelopment capability in

3. Evaluation technology for

Leveraging advanced refining
technologies that achieve a higher
level of purification

Developing materials with new
functionality that leads to
comfortable and abundant lifestyles

Knowledge, experience, and skill.
Evaluation technology that
supports materials of the future

Highly purified raw materials that can beused in new fields and are always indemand for constantly evolving
applications. The Hodogaya ChemicalGroup’s advanced refining technology
solves the most stringent demands andmeets customer expectations.

The goal is to fulfill dreams – abundant
lifestyles that are safe, secure, andcomfortable. The Hodogaya ChemicalGroup will open up all kinds of fresh
possibilities for its technology while
offering new materials that feature awide array of functions.

The responses to the Hodogaya ChemicalGroup’s products, which are finishedwith a high degree of sophistication, arereflected in the trust our customers
place in us. We transform the resultsfrom evaluations into new designs andcutting-edge materials ahead of others.

share customer requests and needs obtained by sales departments with business divisions and production bases. We also have in place

functional materials

functional materials

a system that allows us to quickly select the systems necessary for product improvement and new R&D themes.

R&D Function
Relevant
capitalHuman capitalIntellectual
capitalSocial andrelationship capital

Financial
capitalFeatures / What We Are Appreciated For

Issues to be Addressed for Deepening ActivitiesT echnical personnel who develop new materials
that contribute to comfortable and abundant
lifestyles
Ability to select cutting-edge research themes
Intellectual property activities to ensure protectionof elemental technologies
Good relationships with universities and research
institutes

S ecurement and development of highly skilled technicalpersonnel by expanding and upgrading training systems
and improving engagement
Acceleration of product development by strengthening
cooperation between domestic and overseas R&D bases
Strengthening of new material development capabilities bypromoting industry-academia joint research
Aggressive investment in R&D expenses

Ever-evolving Three Competitive Advantages

Sales Function
Relevant
capitalHumancapitalFinancial
capitalIntellectual Social andrelationshipcapitalcapitalFeatures / What We Are Appreciated For lobal customer base and relationships of trust built throughGbusiness established more than 100 years ago
Passion and planning ability to accurately identify and fulfill
social and customer needsImprovement of brand recognition by building a productlineup full of originality with a focus on specialty products

Issues to be Addressed for Deepening Activities
Strengthening of communications with customers to
improve customer satisfaction
Review of business division structure to strengthen sales
capabilities (specialization in sales by further strengthening
sales support organization)
Sales channel diversification and overseas sales increase bystrengthening of internal and external collaboration15

1. Value creation

2. R esearch and development

3. Manufacturing technology

Creating new value that leads tosolutions for all of our customers’issuesCutting-edge research targetingthe technologies of the next
generation

High-quality manufacturing withthe greatest attention given to theenvironment and safety

The Hodogaya Chemical Groupaccurately identifies the needs of society
and its customers, and then respondswith passion and innovation, creatingproducts with high added-value
underpinned by its technologicalexpertise and know-how.

Leveraging state-of-the-art researchfacilities and advanced researchcapabilities honed over its long history,
the Hodogaya Chemical Group carries
out cutting-edge research projects thatlead to the creation of entirely newvalue.

Having built a reputation for dependably
supplying high-quality products while
ensuring excellent cost competitiveness,
the Hodogaya Chemical Group has put
in place a manufacturing system that isbased on high standards for safety andthe environment.

Production Function
Relevant
capitalHumancapitalManufactured
capitalSocial andrelationshipcapitalFinancial
capitalNaturalcapitalFeatures / What We Are Appreciated For eductions of GHG emissions, water discharge volume, andR
industrial waste volumes
Optimization of multiple manufacturing base locations
Strengthening of BCP measures

Issues to be Addressed for Deepening Activities
 eduction of GHG emissions, industrial waste volumes
RManufacturing base optimization
Strengthening of BCP measures
DX-based efficient productionImprovement in speed of new product launches by improving
process development capabilities
Securement and development of highly skilled technicalpersonnel by expanding and upgrading training and improving
engagement

Outcomes / Impacts
As a chemical manufacturer, the Hodogaya Chemical Group aims to be a company that can contribute to the creation of an environmentallyconscious society by leveraging its high levels of specialty and originality. To be growing for the next 100 years, we believe that we must
realize, in a variety of ways, the Hodogaya Chemical Group’s corporate message: Your Dream Is Our Business. By rapidly responding to
global social issues and meeting the expectations of all stakeholders, we aim to increase corporate value and achieve sustainable growth.

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

16

The Hodogaya Chemical Group’s Vision for the Future

Risks and Opportunities
Based on changes in the external environment, the Hodogaya Chemical Group has identified key social issues that will affect ourhave identified material issues (materiality) that must be addressed. We will address social problems by responding appropriately tomedium- and long-term value creation, as well as the associated risks and opportunities. By clarifying these risks and opportunities, werisks and taking advantage of opportunities, leading to the realization of further value creation.

External environment

Response to risks

Opportunities

Response to opportunities

Materiality• Conduct inspections of facilities andequipment and make repairs• Provide education related to operation
standards, etc.
• Conduct various types of training andmake use of safety confirmation system• Expanding demand for climate change
mitigation/adaptation products• Develop and sell climate change mitigation/
adaptation products• Increase in conservation costs• Supply chain having less trust in theGroup due to lack of consideration for theenvironment• Achieve environmental targets forenergy savings and reducing
environmentally hazardous substances• Promote environment management,such as obtaining ISO 14001 certification
throughout the company• Expanding demand for products that contribute tolighter environmental impact• Expand businesses related to purifying water, etc.
• Promoting green chemistry• Economic losses due to violations ofregulations in Japan and abroad• Less trust in the company• Create a regulation compliance system• Regularly check revisions to overseas
regulations• Expanding demand for products that conform toregulations in various countries• Develop and sell products that are compliant
with regulations in various countries• Loss of social trust or interruption inbusiness due to decline in quality/safety,etc.

• Strengthen functions related to educating,thoroughly informing people of, andchecking rules related to quality and safety
performance• Expanding demand for products that offer thevalue of quality and safety performance• Develop and sell products that offer the value ofquality and safety performance• Major impact of the spread of infectious
diseases on the economy and businessactivities• Establish relationships with multiple
suppliers• Thoroughly implement measures toprevent infectious diseases• Expanding demand for products that help
maintain health• Develop and sell products that help maintainhealth• Loss of ability to continue businessactivities due to less trust from regions inwhich business is conducted• Continue and strengthen activities that
contribute to the sustainable developmentof regions where business is conducted• Increase corporate value by winning the trust ofcommunities in which business is conducted
and stabilizing business• Actively undertake exchanges with andcontribute to communities in which businessis conducted• Contributing tocommunities• Undermining of organizational
performance due to a decline in the
feeling of motivation by and ease of workfor officers and personnel• Develop and implement measures toincrease engagement throughengagement pulse surveys• Increase the feeling of motivation and ease of workof officers and personnel as well as increaseorganizational performance• Continually implement measures to increase
engagement and verify effectiveness throughpulse survey• Improving feeling of
motivation to work

• Not promoting diversity management
resulting in the stagnation oforganizational capabilities and corporatevalue• Make use of personnel in a manner thatstresses capabilities and skills• Improve organization capabilities and increase
corporate value by appropriately conducting
diversity management• Actively recruit and promote people withcapabilities and skills regardless of sex, where
they are from, or other attributes, and create
an environment in which people candemonstrate their capabilities and skills to thegreatest extent possible• Not promoting health and productivity
management and workplace safety andhealth resulting in the stagnation oforganizational capabilities and corporatevalue• Create an environment in which it ispossible for officers and personnel tocontribute in a healthy and safe manner• Improve organization capabilities and increase
corporate value by appropriately conducting
health and productivity management andensuring workplace safety and health• Implement a wide range of measures toimprove the health and vitality of officers andpersonnel, raise productivity, and invigorate theorganization• Greater concern that a lack of interest inissues related to business and humanrights will result in lawsuits, administrative
disciplinary actions, deterioration in
reputation, loss of personnel, and otherproblems• Ascertain issues related to business andhuman rights and appropriately respond• Increase corporate value by appropriately
responding to issues related to business andhuman rights• Ascertain and evaluate human rights violation
risks and establish processes for making
improvements. Keep in mind the risk of humanrights violations in the supply chain.

Governance• Not being able to quickly and flexibly
respond to more sophisticatedcorporate governance and thus harming
corporate value in the medium term

• Improve and expand governance as acompany listed in the Tokyo Stock
Exchange’s Prime Market• Increase corporate value by continuing to promote
corporate governance compatible with themonitoring model• Expanding corporate
governanceWe recognize that continually working to reinforce
the corporate governance, compliance, and risk
management functions within the corporation is
an important issue.

• Further increase effectiveness through theappropriate division of duties related tosupervision responsibilities of directors and thedecision, implementation, and accountabilities ofexecutive officers• Sustaining major losses or undermining
the survival of the Company as a result oflegal violations, scandals, etc.

• Thoroughly implement compliance toprevent legal violations, scandals, defects,
etc.

• Increase corporate value by thoroughly
implementing compliance, preventing legal
violations, scandals, and defects• Continue to provide education to spreadcompliance and impose disciplinary measures in
the case of compliance violations• Spreading compliance 2021 revisions to Corporate Governance Code Continuing quality‑related scandals and serious
defects in internal controls at listed companies Risks of pandemic and disasters• Sustaining major losses or undermining
the survival of the Company as a result of
not implementing measures to properly
reduce risks due to insufficient risk
awareness and evaluation• Implement appropriate measures toreduce risks through extensive but
detailed risk awareness/evaluations• Expand business and profit opportunities by
uncovering opportunities from related risks while
minimizing losses in that risk field• Discover business and profit opportunities
through extensive but detailed risk awareness/evaluations and risk reduction measures

Global environment ncertainty regarding the global environment has
Ubecome a major business issue. We recognize that it isnecessary to envision multiple scenarios regarding
increases in temperatures and strengthen resilienceas part of our management strategy.

Adoption of Paris Accord by COP21

Society e recognize that responding to the advent ofWsocial value is an important issue for corporate
management.

 SDGs adopted by UN PRI signed by GPIF Japan Business Federation’s Charter of Corporate

Behavior revised

People (society and organization) e recognize that appropriately responding to theWmassive changes in the environment that companies
and personnel operate in and continually working
to increase organization capabilities are important
issues.

 Falling birth rates, graying of society, and shrinking

working‑age population in advanced countries Women playing a more active role in society andgreater diversity Greater interest in health, such as recent measures tocombat COVID‑19
 Continuing demands of workplace safety and healthmanagement system More diverse lifestyles
 Greater respect for human rights and fairer labor
practices



17

Risks
• Major impact on production activities due
to severe natural disasters (human andfacilities)• Responding to climatechange• Maintaining air, water,
soil environments• Ensuring the safety of
products and chemical
substances• Improving value andreliability of products• Helping maintainhealth• Promoting diversity• Promoting health andproductivity
management andworkplace safety andhealth• Respecting humanrights• Thoroughly spreadingrisk manage

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

18

The Hodogaya Chemical Group’s Vision for the Future

Materiality
In the process of formulating SPEED 25/30, the Hodogaya Chemical Group identified issues of materiality from its management

strategy of SPEED 25/30. We are committed to addressing them as a medium- to long-term business issues on a company-wide basis,

philosophy‑based business activities and set concrete numerical targets. The materiality we have identified are the premise for the basic

together with the FY2030 ideal figure formulated under SPEED 25/30.

External
environment

Materiality

STEP1.

Identify changes
in the external
environmentthat will have amajor impact onsociety• Responding to climatechangeGlobalenvironment• Maintaining air, water, soil
environments• Ensuring the safety of
products and chemical
substances

STEP2.

Identify the
impact of thosechanges in theexternal
environment on
business• I mproving value andreliability of productsSociety

People(society andorganization)
STEP3.

Identify issues
that Hodogaya
Chemical should
give priority tosolving
Governance19

FY2030 ideal figure

FY2025 KPIs

Initiatives

SDGs
contributed
to

FY2022 results• Contributing to greater agricultural productivity and soil
improvement—• Expand into peroxide agricultural materials•D eveloped a market for soil improvement agents(including joint development)• Contributing to aquaculture as a way to combat the decline inmarine resources—• Expand sales and dissemination of veterinary
medicines•C ontinue sales expansion and dissemination• Promoting green chemistry—• Expand Bio‑PTGs• S ales expansion of Bio-PTGs• Contributing to society by reducing water resources use andenergy use in terms of intensity and total emissions• Energy intensity: 0.606 kl/million JPY of
net sales• CO2 emissions: 43,400 tons or
intensity: 0.868 tons/million JPY of net sales•P romotion of energy‑saving and resource‑saving• Switched to CO2-free electric power• Internal Carbon Pricing (ICP): Secured investment
results• Winning high praise from society by reducing environmental
impact (reduce CO2 emission, limit chemical substancedischarges, reduce waste, etc.)• SOx emissions: zero continuing• Volume of industrial waste produced: lessthan previous year

• Promote reduction of environmental impact• S Ox emissions: zero emissions on an ongoingbasis  Achieved• Volume of industrial waste produced: Less thanthe previous fiscal year  Not achieved• Contributing to insuring drinking water using treated inland
waters—• Introduce new uses of hydrogen peroxide• E xamination of application development in new
fields• Enhance the management of chemical
substances•C ontinue zero violations through legal andregulatory management• Develop new products and next‑generation
topics• E stablishment of next-generation coretechnologies and creation of new businesses• Supply safe, high‑quality products•A chieving zero quality problems• Complying with laws and regulations on chemical substances,
and appropriately managing chemical substances• Zero regulation violations• Developing and propagating products that contribute to theenvironment and society, the Group is regarded by partnercompanies—• Continuing to supply safe, high‑quality products, the Group isregarded by partner companies• Zero quality problems• Supporting DX and providing environment‑friendly
infrastructure material—• Expand electronic device materials and electronic
device equipment materials•D evelopment of new materials• Working with clients to conduct purchasing that promotes CSR
activities in line with Procurement Guidelines—• Promote CSR in the supply chain• Implementation of the “Procurement Guidelines
Implementation Status Survey”• Helping maintain health• Extensively using Group’s products to respond to infectious
diseases—• Introduce hydrogen peroxide derivatives,
phosgene derivatives, etc.

• E xpansion of beverage bottle cleaning andendoscope sterilization• Contributing tocommunities• Having promoted social contribution activities in the offices, theGroup is acknowledged and regarded in the community• Number of contribution activities: morethan previous year

• Promote community contribution activities•R esumption of visiting classes at nearby
elementary schools, and resumption ofenvironmental support activities• Improving feeling of
motivation to work

• All officers and personnel feeling job satisfaction• Increase engagement score• Continue to implement measures to increase
engagement• Implementation of engagement surveys andreturn of results• Promoting diversity• Promoting diversity, fair, and just treatment of personnel toinvigorate the workplace and foster a global workforce• Percentage of female managers: 13%• Promote human resource development andvitalization programs•C onducted training for female personnel /Conducted training for department generalmanagers• Promoting health andproductivity management
and workplace safety andhealth• Having promoted work‑life balance, personnel are successfully
combining work and daily living (including child‑raising andnursing care)• Health & Productivity Management
Outstanding Organization: certified• Increase percentage of personnel taking
paid holidays• Increase percentage of personnel taking
refreshment leave• Promote health and productivity management•C ontinued certification as a Health & Productivity
Management Outstanding Organization• Continuing to achieve accident‑free, disaster‑free operation, theGroup is trusted by society• Zero lost‑time injuries• Thoroughly implement workplace safety andhealth and disaster prevention•A chieved zero lost-time injuries• Respecting human rights• Thorough awareness of human rights and respect, no incidentsof harassment, etc.

• FTSE Russell score (Human Rights &Community: 4.0)

• Promote human rights enlightenment activities•C ontinuous implementation of human rights
education•R eceived an FTSE Russell score (Human Rights &Community: 3.0)

• Expanding corporate
governance• Sustained growth through “defensive governance” to avoid risksand “offensive governance” to capture upside opportunities—• Improve corporate governance•P ublic disclosure of Corporate Governance Report• Spreading compliance• Compliance awareness is widespread, and the Group is capableof responding to the changing social norms—• Spread compliance•O ngoing compliance training sessions (four times
per year)• Thoroughly spreading risk
manage• Discovering opportunities from related risks while minimizing
losses in that area and tying that to business and profit
opportunities—• Broadly recognize and evaluate detailed risks andimplement appropriate risk reduction measures•D iscussions at Risk Management Committee
meetings

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

20

How We Create the Future

How We Create the Future

Looking Back at Mid-term Management Plans

Mid‑term Management Plan SPEED 25/30 (FY2021–FY2030)

Vision andpositioning

HONKI 2013 (FY2011 - FY2013)
HONKI 2020
Year of Reconstruction (FY2014)(FY2015 - FY2020)
We aim to become a corporation that steadily supplies “Only One and We aim to become a corporation that steadily creates “Only One andNumber One” materials in the global and niche markets in 2016 (Year Number One” specialty products in the global and niche markets inof 100th anniversary) and to achieve this, we will prepare ourselves for FY2020, and to achieve this, we will prepare ourselves for future growth.
future growth by FY2013.
FY2013 targets: Consolidated net sales of 50 billion JPY; Consolidated operating profitof 5 billion JPY; Operating margin of 10.0%

VISIONA corporation that contributes to establishing a sustainable society by means of our original portfolio
and environmentally friendly manufacturing, with a focus on specialty products

FY2020 targets: C onsolidated net sales of 50 billion JPY; Consolidated operating profitof 5 billion JPY; Operating margin of 10.0%

The Hodogaya Chemical Group will speedily transform itself to our “target figure” in FY2025
and to our “ideal figure” in FY2030, by means of:

OutlineOutline Each business is classified into one of the four stages of growth, and we focus on Each business is classified into one of the four stages of growth, and we focus on
strengthening core businesses while enhancing and cultivating the businesses of thestrengthening core businesses while enhancing and cultivating the businesses of the
future.
future.
Measures
Measures Strengthening of core businesses that support the Company
 Regaining competitiveness and securing a stable revenue base – core businesses Business expansion for future growth/promotion of new business creation Establishing the Pillars of the Next Generation – growth businesses Further reinforcing the global operating system Expanding business areas by creating new added value – cultivation businesses, Reinforcement of Corporate Social Responsibility (CSR) initiatives
creation of new products Further reinforcing the global operating system and developing human resources Strengthening CSR initiatives

Project
outline Core Businesses

Nippon Peroxide Co., Ltd. merged with the Company to strengthen hydrogen peroxide
and related products, and promoted cost reduction at the Koriyama Plant.
 Growth businesses
We strengthened the production system of SFC CO., LTD. (Korea) to further develop the
OLED material business.
 Cultivation businesses
Developed CCA for color, toner peripheral materials, and new polyol through the project
as a business development utilizing the knowledge gained from existing products.
 New product development
Launched the New Product Exploration Project and while exchanging information withindustry, government and academia, we worked on a variety of research themes basedon the keywords: environment and energy.
 Major capital investment
Made capital investment of approx. 10 billion JPY, mainly in the OLED field.
 Reinforcement of the global operating system
In May 2012, the Group consolidated its head office functions to promote integrated
Group operations. The Group has enhanced its sales capabilities through theestablishment of local subsidiaries in Shanghai and Korea.

Progress was made in preparations for future expansion of aluminum coloring dyes andphosgene derivatives, including creating new facilities.
 Cultivation Businesses
Cultivation for next-generation pillars continued, including dyes for color filters. Sales ofperoxide agricultural materials grew due to extreme weather.
 Growth Businesses
OLED materials grew into a top business as a result of higher sales and profit.
 New product development
New products sales reached 3.4 billion JPY in FY2020, mainly in OLED materials and agroscience businesses (excluding those at SFC).
 Major capital investments• Made Company-wide 10.1 billion JPY of capital investment• Opened new aluminum coloring dye facilities• Enhanced production and research facilities for OLEDs (at SFC), etc.
 Further reinforced the global operating system• Newly established development bases and manufacturing bases in South Korea, aleading OLED market, advanced our globalization in terms of R&D and production• Established a local subsidiary in Düsseldorf, Germany, to strengthen our sales activities
in Europe• Promoted the global procurement of raw materials; strengthened efforts to address
such issues as China risk
 Reinforcement of CSR initiatives• Committed to CSR by taking into account support for ESG management andcontribution to achieving SDGs. External evaluation also improved Consolidated net sales

sales volume and unit prices, etc., caused severe problems for the Hodogaya ChemicalGroup’s core businesses and its earnings base deteriorated significantly. In FY2012 andFY2013, in particular, the Company posted two consecutive fiscal years of consolidated
net losses, and the situation became critical.
 F Y2014 was positioned as a Year of Reconstruction, with the goal of achieving
profitability in all profit categories, which was achieved as a result of the concerted
efforts of all personnel.

Although annual growth rate was 4% during the period due to expansion of OLED
business and other factors, the target of 50 billion JPY was not achieved.
 Consolidated operating profit
Profit increased due to special demand for materials for PCR diagnostic kits, and thetarget was achieved.
 Consolidated operating margin
Target achieved with contributions from OLED business and materials for PCR diagnostickits Expand sales, reduce costs, and launch products that meet customer needs to secure Searching for and quickly cultivating new growth drivers following the OLED materials Expand business and reap the benefits of new product creation

 Building a business portfolio that will be able to accommodate the changes that take Changing business environment, a sharp rise in raw material and fuel costs, declining

Achievements

a stable revenue baseIssuesE
E
D

Reinforced business Further strengthening the combined three functions of R&D, production, and sales

38,69333,826

34,73930,00037,5480.1 34
2013

796

14.0

8.5

7.7

2014

2015

2,129
2016

HONKI2013

 Operating profit (left) Complete system to quickly launchboth strategic businesses and corebusinesses Moving forward with concentrationand creating new portfolio

strategic businesses and contributing
to business expansion
 Quickly commercializing
development themes Continually generating R&D topics inorder to expand into new fields

new products Conducting secure, safe productionof environmentally friendly productswith extremely high productivity Greater motivation to work Responding to advent of corporatevalue Even stronger finances Improved operational efficiency

Strengthening operations

A well‑constructed business portfolio

Expanding our sphere of activity

Continuing to create new products for the global market

Higher efficiency

Achieving a high productivity

Employees’ point of view

Improving job satisfaction

Social point of view

Contributing to the achievement of SDGs and realizing environmental friendliness

Shareholders’ point of view

Maintaining a stable dividend for a long term

PromotingDX Progress of the management targets

10.0
8.0
6.0

2.5
828

 Promoting technical innovation for

Ideal figures in FY2030

3,903

3,028

2,902

5,444

6,421

4.0

3,701

2.0
0.0

2017
HONKI2020

2018

2019

2020

2021
SPEED25/30

2022

(FY)

Non-financial targets

2.3

5,000

21

16.0

6.1

10,000

(%)

18.0

12.0

8.1

15,000 Net sales (left)

43,32413.2

25,000037,771

41,87915.3

10.1

20,000 Generating sustainable growth inPromote sustainability and DX

Financial targets

41,19945,00034,688Stronger management foundation Greater organizational capabilities

Undertake strategic investments that contribute to growth, including business investments (M&A, etc.), IT, and infrastructurebusiness(Millions of yen)

35,687

Strengthening operations

Business Strategy Roadmap

Performance trends

35,000Creating new products

place in a future environment Further utilization and expansion of overseas business bases

40,000Specialty products that construct a
Portfolio built up with great originality;
Engagement improvement that contributes to
ESG management promotion;
Digital transformation‑led competitiveness enhancement

Hodogaya Chemical Group’s “target figure to be achieved by FY2025”

Phase II

 Expanded business for future growth and planted seeds for new product creation

MessagePhase I

Lookingback Core businessesS
P

FY2021 results

FY2022 results

FY2025 targets

Net sales

41.8 billion JPY

43.3 billion JPY

50 billion JPY

Operating profit

6.4 billion JPY

3.7 billion JPY

7.5 billion JPY

Operating margin

15.3%

8.5%

15%

ROE

8.1%

5.3%

9%

CO2 emissions (CO2 emission intensity)
Energy intensity (per million JPY of net sales)

49,247t-CO2

45,722t-CO2

43,400t-CO2(1.1759t-CO2/million JPY of net sales)(1.055t-CO2/million JPY of net sales)(0.868t-CO2/million JPY of net sales)

0.698kl

0.636kl

0.606klSame level or less thanprevious FY

Industrial waste volumes

2,746 t3,477tESG evaluation score (FTSE Russell score)

2.7

3.0

3.7

Engagement score--

Gradually raise score

Percentage of female managers

11%

11%

13%

Operating margin (right)

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

22

How We Create the Future

Mid-term Management Plan SPEED 25/30 (FY2021-FY2030)
Progress of SPEED 25/30 in FY2022

SPEED 25/30 Initiatives from FY2023 Onward

Although some signs of a recovery in economic activity were seen due to the relaxation of the movement restrictions that had been causedby the COVID-19 pandemic, there were many causes for concern in FY2022, the second year of the Mid-term Management Plan SPEED 25/30.
Those causes for concern included the protracted Russia-Ukraine conflict, soaring raw material and fuel prices, rising commodity prices, anda weak yen, all of which led to business activities being conducted in the face of an uncertain future. In contrast, the Company made significant
progress in projects such as the joint development of a new agricultural material with ASAHI AGRIA CO., LTD. and the construction of a new
biotechnology building (for advancing into the field of nucleic acid medicine) at SFC CO., LTD. in South Korea.

Effective April 1, 2023, Hodogaya Chemical reorganized its OLED Materials Business Department and Color & Imaging Materials Department
as the Organic & Optical Device Materials Division and Coloring Materials Division, respectively. Accelerating the building of our new
business portfolio, we will respond promptly to customer requests on such matters as quality, supply, and sustainability with more advanced
knowledge and detailed responses. To flexibly and efficiently execute business strategies for the further growth of our OLED-centered businessin South Korea, we also newly established a Korea Business Strategy Department on July 1, 2023. We will further promote global
collaboration through our three-pronged (R&D, production, and sales) system.
Continuing to steadily implement initiatives to reduce our environmental impact, such as reducing greenhouse gas (GHG) emissions andcreating environmentally friendly products through technological innovation, we aim for sustainable growth with a product lineup that is fullof originality and environmentally friendly manufacturing.

FY2022 Progress in Business Terms
Segment

Specialty
Polymers
Basic
Chemicals

Logistics

Creating new products

Results
Operating Profit
Sales by Segment
by Segment

Strengthening operations•C onsideration given to the• Promoting development of OLED
establishment of technical service bases • P romoting research of new ideas:
OLED Materials(Strengthening relationships with
– Organic cathode materials
Businesscustomers, introduction of technologies) – Organic solar cell materials– Near-infrared absorption materials• L aunch of environmentally friendly• Promoting development ofColorants Materials
aluminum coloring dyes into the market
environmentally friendly aluminum
Businesscoloring dyes
Functional Polymers • M arket launch/sales expansion of new•D evelopment of special products (PTG)& Specialty
Bio-PTG into the market
Chemicals Business
Construction• Sales expansion of next-generation
Materials Businesswaterproofing materials• E xpansion of uses of peracetic acid (foodPeroxide Business
additive)
Agrochemical• Expansion of the peroxide agriculturalBusinessmaterials business• Installation of special equipment fortrial production which contributes to
new product development• Establishing an increase inproduction of aluminum coloringdyes• Expansion and promotion ofphosgene derivative production
facilities• Reinforce production capabilities for
agricultural material products

Logistics BusinessBusiness Initiatives
Segment

41.6%(17.9 billion JPY)

OLED Advanced
Materials Business-15.5%(-0.57 billion JPY)
12.3%
(0.45 billion JPY)
9.2%
(0.34 billion JPY)

Stronger management foundation• SFC CO., LTD. in South Korea
Construction of a new
biotechnology building• Promotion of health andproductivity management
Improve• Utilization of diverse humanEngagement
resources• Reduce CO2 emissions• Reduce energy intensity• Reduce industrial waste volumes• Reduce power consumption• Promote ESG• Promoting business reforms andPromotion ofvarious considerations for
DX/Improved renewal of core systems
Operational
Efficiency

Promotesustainability23• Planned equipment renewal• Expansion of color filter material sales• Promoting research of new ideas– Lithium-ion battery materials (organic cathodematerials)– Near-infrared absorption materials– Organic solar cell materials (perovskites)• Installation of special equipment for trial
production which contributes to new productdevelopment• Market launch/sales expansion of environmentallyfriendly aluminum coloring dyes

• Promoting development of environmentallyfriendly aluminum coloring dyes

• Establishing an increase in production of aluminumcoloring dyes
• Establishment of a supply system forenvironmentally friendly aluminum coloring dyes

• Development of special products (PTG)• Installation of phosgene derivative trial production
equipment• Expansion of phosgene derivative production
facilities

Coloring Material
Business

FY2025 non-financial targets—•C ertified as a Health & Productivity Management Outstanding
Organization for three consecutive years• P rocess to make telecommuting system permanent• E xpansion and upgrading of diversity training sessions•D ecision to introduce employee stock benefit plan
• R educe CO2 emissions: 45,722t-CO2 (1.055t- CO2/million JPY of net sales)• Reduction of energy intensity: 0.636kl• Reduction in industrial waste volumes: 3,477t• C O2-free power consumption (Yokohama Plant, Tsukuba Research Institute)• Adoption of ICP (Koriyama Plant)• R PA personnel development• E RP system renewal plan formulation• P romotion of paperless operations• B uilding of remote work infrastructure facilities• S treamlining of expense settlement tasks• S treamlining of seal affixing operations

Hodogaya Chemical having signed a joint development agreementwith ASAHI AGRIA CO., LTD. covering the R&D of new agricultural
materials, the two companies decided to develop a new composite
material—comprising an oxygen supply material and a compost, inwhich the focus is on commonality in areas such as soil preparation andsoil improvement—and will work together toward its commercialization.
A composite material that is expected to have the effect of a fertilizer insoil preparation and soil improvement, prevent moisture damage,increase aerobic microorganisms (biostimulant effect), and improve
work efficiency, the two companies aim to make its use morewidespread in the years to come. In the belief that this will contributeto the reduction of chemical pesticides and fertilizers under the Green
Food System Strategy advocated by Japan’s Ministry of Agriculture,
Forestry and Fisheries, both companies will continue to work on
developing materials that contribute to sustainable and environmentallyfriendly agricultural production and supplying them to the market.

Strengthening operations• Installation of special equipment (ensuring a stableproduction base)• Developing uses (other than food) for natural dyes
• Expanding sales of halal products

FY2022 results• S FC CO., LTD. in South Korea
Construction of a new biotechnology building begins

 P romotion of Jointly Developed New Composite
Agricultural Materials

Creating new products• Response to next-generation technologies• Promoting development of OLED• Strengthening of the global sales expansion ofimaging materials

Functional
Colorants

Progress of Major Measures in FY2022
Strategic
Investments

Reinforced business• Optimization of global technical service bases(Introduction of technologies/strengthening ofrelationships with customers)• Development and securing of personnel that willcontribute to global business• New developments in the bio business

26.7%
23.3%
(11.5 billion JPY) (0.86 billion JPY)
16.5%
(7.1 billion JPY)
10.7%
(4.6 billion JPY)
4.3%
(1.8 billion JPY)

Subsegment

70.3%(2.6 billion JPY)

Specialty
Polymers• Gradually raise engagement score• Percentage of female managers: 13%• Reduce CO2 emissions: 43,400t-CO2 (0.868t-CO2/million JPY of net sales)• Reduction of energy intensity: 0.606kl• Reduce industrial waste volumes: Less than the amount generated in theprevious FY• ESG evaluation score (FTSE Russell score): 3.7

Functional Polymers &Specialty Chemicals
Business• Market launch/sales expansion of new Bio-PTG• Strengthen global sales expansion of phosgenederivatives

Construction Materials
Business• Expanding sales of next-generation waterproofing
materials

Basic
Chemicals

Peroxide Business• Expanding sales in the industrial chemicals field• Expanding sales of peracetic acid (disinfectant, foodadditive)• Developing uses for agricultural and livestock
materials• Planned equipment renewal• Business expansion through the introduction of newactive ingredients• Expanding the peroxide agricultural materials
business• Cultivate demand in new green space business• Strengthening relationships with customers indevelopment and sales• Development of the composite agricultural
materials of compost and oxygen supply
materials• Increasing production capacity of oxygen supply
materials

Agro-Science

Agrochemical &Agricultural Material
Business

Logistics

Logistics Business• Early expansion of the ISO tank container storage
business—

Cost-cutting to reduce intensity

Agro-Science

Reinforced business

Cost-cutting to reduce intensity

Functional
Colorants

Subsegment• Consider automation and operational efficiency
through IT utilization

Major Measure Initiatives
Graphic Representation of Collaboration

Strengthen theManagement Base
Strategic investments• Completion and operation of the new biotechnology building at SFC CO., LTD. in South Korea• Phosgene, agro-science (oxygen supply materials) production facility expansion

Increase engagement• Implementation of various new measures, such as encouraging men to take childcare leave, office casual attire, Employee Stock Ownership Plan (J-ESOP), multiassessment program, etc.
• Promote health and productivity management • Utilization of diverse human resources • Strengthening of human capital investment

Agro-Science Segment

Herbicide

Oxygen supply
material

CompostOrganic fertilizer

Moisture damage
prevention
 Soil improvement
Soil improvement
 Fertilizer effectChemicalfertilizer

Content

Promote sustainability• Reduce CO2 emissions

Promotion of DX/Improvement of
Operational Efficiency• Utilization of data accumulated by the Hodogaya Chemical Group• Promotion of RPA, DX education, and leader development• Reduce power consumption• Reduce industrial waste volumes• Promote ESG

This joint
development

Composite agricultural materials

Compost+Oxygen supply
material

Fertilizer effect Moisture damage prevention/soil
improvement Increase in aerobic microorganisms
 Improvement in work efficiency, etc.
Toward Achieving the Mid-term Management Plan SPEED 25/30
FY2023 being the halfway point of SPEED 25/30 Phase 1, this will be an important year for achieving the management target of FY2025 andrealizing our target figure to be achieved by FY2025. In addition to steadily implementing the abovementioned important measures andinvesting in R&D, which we have been focusing on until now, we will appropriately invest in personnel (human capital) that will support the
Hodogaya Chemical Group. Despite the rapid changes in the environment, we will once again return to the FY2030 ideal figure adopted forSPEED 25/30 and work together as a Group to implement the various measures.

Agricultural market

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

24

How We Create the Future

Financial Strategy
Hodogaya Chemical GroupROIC TreeWe will practice value creation management with
Net sales tooperating profit

the goal of realizing highly efficient operations

Sale of environmentallyfriendly products

Building a well-constructed businessportfolio

Reduction in raw material
costs

Continuous creation of new
products for the global market

Lower SG&A ratio

Productivity improvement

S trategic business sales/core business sales
Sales of new products (including
environmentally friendly products)
 Overseas sales Capital investment amount R&D expenses Number of patent applications
that can achieve a high ROE.

 mount of cost reduction (reduction ofA
intensity) Reduced time by improving work efficiency
Kenji Tsujitsugu

Director and Managing Executive Officer

 O2 reductionCEnergy intensity reduction Industrial waste volume reduction Internal Carbon Pricing (ICP) Engagement score Percentage of female managers



ROIC




Promote sustainability
Improve job satisfaction

Toward Greater Corporate Value –Initiatives to Improve PBR–
The Hodogaya Chemical Group aims to achieve a high ROE, a management target under the Group’s Mid-term Management
Plan SPEED 25/30, with an emphasis on growth investments, interest-bearing debt control, and shareholder returns. At thesame time, we will practice value creation management in line with highly strategic balance sheet management.
Taking into consideration the Group’s net interest-bearing debt, shareholders’ equity, and shareholders’ equity ratio in
FY2022, Hodogaya Chemical’s financial health and security currently stands at a high level. We will therefore pursue efforts tofurther bolster profitability, as well as those to enhance the ability to generate cash that coincides with greater profitability.
We will create new value by selecting investment areas with our sights set on the coming future, engaging in the required
degree of risk-taking, and executing appropriate resource allocations in a timely manner. Similarly, we aim to connect theoutcomes of these efforts to greater corporate value in the future.
In addition, we remain conscious of our shareholders’ equity as a risk buffer that allows us to invest in future growth while
simultaneously promoting the policy of upgrading and expanding shareholder returns. As far as the return of profits toshareholders is concerned, we will work to provide shareholder returns in a stable, continuous manner, while reducing shortterm performance volatility. Similarly, we will execute returns with an awareness of the Dividend on Equity Ratio (DOE). Our
goal is to firmly maintain a balance between the three aspects of growth investments, interest-bearing debt control, andshareholder returns as part of our efforts to engage in highly efficient operations in a bid to realize a high ROE. In order toachieve this goal, we also recognize the importance of implementing financial and capital strategies in an ongoing mannerthat enable consistent growth in earnings per share (EPS).

Growth Investments and Financial Strategies under the Mid-term Management Plan
We will undertake the various types of investments outlined in
our ideal figure for FY2030 as part of the Group’s Mid-termManagement Plan SPEED 25/30 in an appropriate manner. At
the same time, we will grasp and manage the KGIs and KPIs set
for these investments by the Company. In specific terms, wewill invest in existing businesses to build a well-constructedbusiness portfolio, intellectual property, including R&D todevelop new products for the global market, other areas toimprove efficiency in various ways to achieve high productivity,and human capital to enrich our personnel. Regarding funds
necessary for investment, we ensure the liquidity of funds
through cash flows from operating activities and financing
through borrowing from financial institutions. In principle,
consolidated subsidiaries do not procure funds from outside
sources, and centralize funding within the parent company to25

improve the efficiency of funding for the entire group.
M o re ove r, H o d o g ay a C h e m i c a l G ro u p’s M i d - te r mManagement Plan SPEED 25/30 includes even stronger finances
in target figure through FY2025, we have also set targets for
ROE, in addition to net sales, operating profit and operating
margin. While aiming to improve sales and profits by promoting
business strategies, we also aim to achieve our targets bypromoting even stronger finances by improving capitalefficiency and maintaining a sound financial position.
Regarding the improvement of capital efficiency, we calculate
the weighted average cost of capital (WACC). We have also set
targets related to earnings plans and capital policies based on
the interest-bearing debt costs and cost of capital (using thecapital asset pricing model: CAPM), and we will steadily allocate
management resources to achieve these targets.



DX promotion umber of DX personnelNDX-related investment amountS tock value
ROE Equity ratio Free cash flow Net D/E ratio

Invested capitalturnoverImprove working capitalturnover

Build a stable financial base tosupport strategic investment

Improve fixed asset turnover

Appropriate shareholder returns



DOE

Capital Policy and Shareholder Return Policy
The Hodogaya Chemical Group builds a sound and stable
management foundation and continuously improves corporate
value through appropriate cooperation with various
stakeholders such as shareholders, investors, customers,
business partners, local communities, society, and personnel.
Regarding profits earned, we will strive to maintain an
appropriate balance between, our basic policy, which is to useinternal reserves for investment and other activities that willlead to the growth of the Hodogaya Chemical Group, andreturning profits to shareholders. Moreover, in our Mid-termManagement Plan SPEED 25/30, we have set a goal of achieving
stable dividends over the long term as part of our ideal figure
in FY2030. Regarding shareholder returns, we will pay dividends
to shareholders, while keeping DOE in mind and premised on
improving profitability by promoting various measures set out
in SPEED 25/30.

TSR

Dividends per share
(yen)

300.0

75

70

250.0

60

60

200.0

50

30

25
1.3

1.2

1.3

25

25

25

2018

2019

2020

50

50

150.0

40
30

100.0

20

50.0

50

25

1.4

25

65

3

37.5

32.5

2

1.4

30

32.5

2021

2022

37.5

1

10

0.0
Mar.
2013

(%)

80

0
Mar.
2014

Hodogaya Chemical

Mar.
2015

Mar.
2016

TOPIX

Mar.
2017

Mar.
2018

Mar.
2019

Mar.
2020

Mar.
2021

Mar.
2022

Mar.
2023

0

 Interim Year-end

2023(plan)(FY)

DOE (%)* Total Shareholder Return (TSR): Total return on investment combining capital gains and dividends* TSR is calculated based on cumulative dividends and stock price fluctuations for Hodogaya Chemical, and TOPIX based on stock price index including dividends (prepared by Hodogaya Chemical based on
Bloomberg data, etc.)* The graph value is the market price index by TSR with the closing price data as of the end of March 2013 as 100 (the holding period is until the end of March 2023)

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

26

How We Create the Future

Financial and Non‑Financial Highlights (Consolidated)
Net sales, Operating profit, Operating margin
売上高、営業利益、営業利益率(millions of yen)

(%)

15.3

50,00015

13.2
41,879 43,324
41,19940,00038,693 37,548 37,771
10.1
34,7398.5
30,000
8.1
7.7
6.1
20,00010,000
0

2,129

3,903

3,028

2,902

2016

2017

2018

2019

 Net sales (left)

 Operating profit (left)

5,444

6,421

2020

2021

12

3,701
2022

ROE, ROA

Capital expenditures, R&D expenditures

CO2 emissions, CO2 emission intensity (Japan)

ROE、ROA

設備投資金額、研究開発費

CO2排出量、CO2排出原単位（国内）(%)(millions of yen)

10

8.8

8.6

8

9

6

6

4

3

2

0

0

6.4

5.6

5.3
3.4

3.3

2018

2019

4,000
3,000

5.3

3.2

1,000

ROE*1

2017

2020

2021

2022

Net sales totaled 43,324 million JPY, up 3.5% year on year. In contrast, operating
profit was 3,701 million JPY, down 42.4% year on year on an operating marginof 8.5%. While demand for OLED materials increased in the Functional Colorants
segment, demand for materials for PCR diagnostic kits declined substantially.

In FY2022, ROE and ROA declined owing to the downturn in profit. Moving
forward, we will endeavor to make more efficient use of our assets while
continuing to increase profits.

Equity, Equity ratio

Dividend per Share, DOE
1株当たり配当金、DOE

59.8
40,000

75

60.8

59.5

61.8

31,796 33,270 33,976 33,941

61.8
38,67662.3
41,41542,83520,000

50

25

0

0
2016

 Equity (left)

2017

2018

2019

2020

2021

2022

60.0 (including commemorative dividend of 10 yen)
50.0

50

50.0

50.0

60.0

65.0

50.0

3.0

20

2.0
1.5

30

(%)

1.4

1.3

20

1.2

1.3

1.4

1.5
1.0

10,000
8,000
6,000

7,430
0.28

4,000

0.22

8,603
7,153
0.25

0.21

7,425
0.19

6,365

0.25

0.15

2,000
0
2016

2017

 Interest‑bearing debt (left)

27

2018

2019

2020

2021

2022

0.5

2022

 R&D expenditures

0
2017

(FY)

2018

 CO2 emissions (left)

2019

2020

2021

2022

(FY)

 CO2 emission intensity (right)

SOx emissions, NOx emissions (Japan)
SOx排出量、NOx排出量（国内）

(t)

7

24
17.7

18.4

17.9

18.6

18.0

6

19.5

8

8.9

11.2

10.8

11.2

10.8

2016

2017

2018

2019

2020

2021

2022

DOE* (right)

4.92

4.72

4.99

4.94

4

11.0

3.17

3
2

2017

(FY)

6.54

5

16
12

Most of the greenhouse gases (GHG) emitted by Hodogaya Chemical areenergy-derived CO2. In FY2022, CO2 emissions were less than in FY2021 due
to lower energy use in line with the decrease in production and thepurchase of CO2-free electric power.

1
2018

2019

2020

2021

2022

(FY)

0
2017

0
2018

0
2019

 SOx (sulfur oxide) emissions volume

Percentage of female employees
Percentage of female managers

0
2020

0
2022

0
2021

(FY)

 NOx (nitrous oxide) emissions volume

The Hodogaya Chemical Group promotes the active participation of
women as one of the Group’s key measures. We have achieved the targetof 10% or more for female managers since FY2018, and we aim to increase
this to 13% or more by FY2025. We are implementing various measures toincrease the percentage of female managers.

The Hodogaya Chemical Group has promoted the use of city gas as a fuelsource for the Group’s factories. The Group has continued to maintain zeroSOx emissions since FY2012, having completed the switchover in FY2011.
We also implement measures to limit NOx emissions into the atmosphere.

Industrial waste generated, Final disposal amount (Japan)

フリーキャッシュ・フロー

Percentage of personnel taking paid holidays,
refreshment leave, and childcare leave
有給休暇取得率、リフレッシュ休暇取得率、育児休暇取得率(millions of yen)

(%)

6,000
4,000
2,000

0.3

0

0.2

-2,0000.1-4,0000-6,000Debt-to-equity ratio* (right)

2021

0

0.4

(FY)

2020

0

Free cash flow

10,521
9,112

2019

0

* The Hodogaya Chemical Group conducted a 10‑1 reverse stock split of common shares effective
October 1, 2016.

0.6

2018

0

* Total dividends ÷ shareholders’ equity (consolidated)

12,0000.3

4

We will consider earnings trends, future business expansion, unforeseenrisks and other factors and pay a stable, sustainable and appropriate returnto shareholders while being particularly aware of the Dividend on Equity
Ratio (DOE).

(times)

10,0000.5* Equity ÷ total assets(millions of yen)

0.6

10

The equity ratio has remained stable at around 60% in recent years. We willcontinue to increase equity, mainly from profits generated from ourbusinesses, and further stabilize the Group’s management foundation.

有利子負債額、D/Eレシオ

20,0000
2017

Our focus is primarily on capital expenditure and R&D in the Functional
Colorants segment, which is the Hodogaya Chemical Group’s growth driver.
We will continue investments and undertake activities that contribute tofuture growth.

(%)

3.5
2.5

1.9

40

 Dividend per share (left)

Interest‑bearing Debt, Debt-to-equity ratio

1,956

Percentage of female employees,
Percentage of female managers

70

(FY)

Equity ratio* (right)

772

30,00040,0003,100

女性従業員比率、女性管理職比率

(yen)

60

59.5

3,099
2,877

*2 Earnings ÷ total assets

自己資本、自己資本比率

(%)

2,899

(t-CO2/million yen of net sales)

1.8
51,55350,531 48,826
1.5
49,24748,03045,722
1.34581.33241.29271.2
1.17591.16581.05540.9

50,000

3,859

1,234

 Capital expenditures

ROA*2*1 Earnings ÷ equity

60,000

3,013

3,384
3,120

2,199

2016

(FY)

* Operating profit ÷ net sales (single year)(millions of yen)

2,747

2,000

5.0

60,000

4,939

0
2016

(FY)

Operating margin* (right)

8.1

5.5

5.3
3.7

(t-CO2)

5,000

2,593

100
3,255
1,537

2,691

100

100

100

100

100

94
68

93

66

95
68

93
69

80

2,574

60

174

65

24

20
-5,977
2017

2018

2019

2020

2021

2022

0
(FY)

 Free cash flow** Interest bearing debt ÷ equity* Cash flows from operating activities + cash flows from investing activities

The D/E ratio came in at 0.25 times owing to the increase in interest-bearing
debt to support such activities as investments in strategic businesses in the
Mid-term Management Plan.

In FY2022, free cash flow declined substantially owing to investments for
future growth and increased inventories. Moving forward, we will continue
to maintain sound balance between operating and investing activities toprepare for future growth.

(t)

3,500

71

2,100

2,800

56

40

2016

産業廃棄物発生量、最終処分量（国内）

100
95
83

0

0

2017

2018

3,477
440
2,569

430
2,452

2,753

3,017

300
200

700

14

400

2,746

257

1,400

200
52

85

100

2022

(FY)

0
2019

2020

2021

2022

(FY)

Percentage of personnel taking paid holidays (Hodogaya non-consolidated)
Percentage of personnel taking refreshment leave (Hodogaya non-consolidated)
Percentage of male personnel taking childcare leave
Percentage of female personnel taking childcare leave

In addition to maintaining a percentage of personnel taking paid holidays inexcess of 60% for the past six years, the Hodogaya Chemical Group has put inplace a system of refreshment leave, which can be taken for five consecutive
business days, since FY2018, so that personnel can physically and psychologicallyrefresh themselves. Moreover, we have conducted internal awareness-raising
activities to increase the percentage of male personnel taking childcare leave.
The percentage of male personnel taking childcare leave was 83% in FY2022.

(t)

500

0
2017

2018

 Industrial waste generated (left)

2019

2020

2021

 Final disposal amount (right)

The Hodogaya Chemical Group has set a target of generating less industrial
waste than the previous fiscal year as a KPI in its Mid-term Management
Plan. The total amount of waste generated and final disposal in FY2022
increased 27% and 63%, respectively, compared to the previous fiscal year.
Notwithstanding the impact of certain factors, including differences in thecomposition of items produced, we take these increases very seriously andwill strengthen efforts to reduce industrial waste.

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

28

How We Create the Future

Related Materiality

Research & Development Responding to climate change Ensuring the safety of products andchemical substances Improving value and reliability of

products

three-pronged effort to respond speedily to the needs ofMessage from the Director of Research & Development
Kaoru Kasahara

Director and Senior Managing Executive Officer

In its business strategy roadmap, the Company has set Electronics & Information, Mobility,
Environment & Energy, Life Sciences, and Agriculture & Food Products as its target fields andwill develop new products for these five fields. Under the Mid-term Management Plan SPEED
25/30, we will engage in R&D using a flexible approach while determining what 2030 will look
like with a view to society in 2050 in the following specific business fields: cutting-edge
electronic device materials, environmentally friendly dyes and polyols, bio-medical materials,
and environmentally aware agricultural materials.

Building

Organic & Optical Device Materials Department to strengthen

SFC CO., LTD. (HQ; Korea, Hereafter SFC) is currently constructing

our activities in the Electronics and Information field, and wea new biotechnology building with R&D and production

aim to expand the biotechnology field in Life Sciences.

facilities, which includes some head office functions, inWe are also actively promoting joint frameworks withindustry, government, and academia and working to buildnext-generation basic technologies and create new businesses.

The Hodogaya Chemical Group promotes cutting-edge R&D for

1 9 v a r i a n t s. D i a gn o s t i c o l i g o p ro d u c t s d e ve l o p e d,the future with a global R&D system that extends from Japan

manufactured, and marketed by SFC are expected to expand

to overseas.

in the future while shifting to the pharmaceutical Oligo sector.

With the Tsukuba Research Laboratory in Japan as the main

Specifically, applying the technology cultivated in the R&D andcenter, the R&D departments of each plant and Korean groupmanufacture of diagnostic oligo products, we aim to produce

companies, SFC CO., LTD. and HODOGAYA CHEMICAL KOREA

products in the sector of nucleic acid medicine, the next
generation of pharmaceuticals.

specialty products. We will encourage innovation by creatingCO., LTD., work together to promote R&D and quickly respondspecialty products to help achieve SDG goal 9 (Industry,

to customer requests.

intermediate goal up to FY2025 is to develop and expand ourInnovation and Infrastructure).

of various customers.
The Hodogaya Chemical Group gives form to the skills andknow-how from the technology we have cultivated over ourlong history to develop products and production technology

R&D expenses(millions of yen)
5,000

3,013

2,000

7.8

with all-new functions. We also engage in research anddevelopment to become a corporation that contributes to0and environmentally friendly manufacturing, with a focus on

3,859

3,000

1,000

establish a sustainable society by means of our original portfolio

4,939

4,000

3,384
2,899
7.7

8.2

(%)
20.0

16.0
11.4

2,877
7.6

9.2

12.0
8.0

 Promoting an Intellectual Property Strategy

develop it as a second pillar after the OLED business so that it

As far as our future business portfolio is concerned, we arecontributes to the growth of the Hodogaya Chemical Group.

promoting the prompt filing and acquisition of intellectual
property rights based on R&D results. Based on information
searches and patent analyses, we are also currently focusing on
improving the quality of patents by using patent maps andintellectual property education. Going forward, we willcontinue to secure patent rights in Japan and overseas toaccommodate global business expansion.

4.0

2017

2018

 R&D expenses (left)

2019

2020

2021

2022

0
(FY)

Ratio of R&D expenses to net sales (right)

VOICE

Progress of the Mid-term Management Plan
Basic Strategies in SPEED 25/30
Further development of strategic products while fostering new ideas Expand our sustainable creation of new research projects Take new research projects into—and beyond—the development Establish an organizational structure able to swiftly move from Further Development of Strategic Products
while Fostering New Ideas

research to mass production

Contributing to Business Development by Steadily Securing Intellectual Property Rights

The Intellectual Property Office is mainly responsible for carrying out application procedures and work to acquire
rights to ensure that the technologies, products, and brands developed benefit the Company.
My areas of responsibility encompass the practical application of patents and trademarks. Practical patentapplication gives me access to new technologies and products within the Company. Practical trademark
application allows me to be involved in the selection of product names for market launches.
In addition, my position requires not only technical and legal expertise, but also communication skills because
the Intellectual Property Department has many opportunities to coordinate with internal and external parties,
including technical departments, business departments, and patent offices. For this reason, I strive daily to explain
specialized legal systems and techniques in an easy-to-understand manner.
Obtaining rights to patents and trademarks is often not easy, but I intend to make every effort to achieve
patent rights and, in turn, contribute to business development.

Mari Toriya
Research & Development
Department

R&D strategies based on a long-term perspective with the
keywords Electronics & information, Mobility, Environment &By applying the technology we have accumulated over the past 100

energy, Life sciences, and Agricultural & food products centeredyears, we aim to continue expanding and developing our strategicon the New Product Exploration Project. The goal is to create

products under our Mid-term Management Plan SPEED 25/30.

new businesses for the next generation, put in place a system

We will also conduct research and investigations to establish
29

Strengthen our R&D structure New business creation and growth for functional colorants

stage

The market for pharmaceutical oligos (nucleic acidmedicines) is expected to expand globally, and we intend tocurrent business areas by implementing necessary measuresdevelopment that can quickly respond to the different needs

Sales of diagnostic oligo products (materials for PCR
following their PCR diagnostic kit application for several COVID-

and a target figure for FY2025 as an intermediate point. Ourchanging needs of society and promote research andbiotechnology business.

 Strengthen Our R&D Structure

We have formulated a 10-year scenario ideal figure for FY2030

areas. To achieve the goal, we will quickly identify the constantly

Chungbuk, Korea, for the purpose of further expanding its

diagnostic kits) provided by SFC substantially increased,

Basic Policy

for OLEDs and expand and develop our business into new Newly Constructed SFC Biotechnology

customers. We will collaborate with the newly reorganizedin which R&D, production, and sales functions make a

Relevant Group company: Hodogaya Contract Laboratory Co., Ltd.
Description of business: Contract based custom synthesis, analysis and development

Location: 45 Miyukigaoka Tsukuba City Ibaraki Pref. 305-0841 Japan
TEL: +81-29-858-6886 (Main switchboard)
Webpage: http://www.h-contractlabo.co.jp/index-e.html

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

30

How We Create the Future

How We Create the Future

Environmentally Friendly Products and Technologies thatContribute to a Sustainable Future

Business Overview of the Hodogaya Chemical Group

Food dyes add color to food products and enrich our dietary
life. Our natural food dyes are the products made fromnaturally‑derived ingredients that come from nature.
Demand for these is growing steadily, driven by their safety
for human consumption and their environmentally friendly
nature. Some of our products have acquired Halal certification,
enabling us to meetthe expec tations ofcustomers in Islamic
countries.

In addition to its traditional uses as a paper pulp bleach andindustrial chemical, hydrogen peroxide is used as an oxidizing
agent in the chemical oxidative decomposition method fordecontaminating soil. It is possible to directly decompose oils
in the soil through oxidation by injecting an oxidizing agent
into or stirring it into contaminated soil.
H yd ro g e n p e rox i d e,which breaks down into
water and oxygen, is a clean,environmentally friendly
oxidizing agent, and it isexpected that broader
application of it will bemade in the future.

Bio‑PTG (Polymer materials)

Peracetic acid formulation

PTG, one type of polyol that is a polyurethane raw material, isan indispensable raw material for spandex and other products.
With a proven track record of over 10 years, Hodogaya
Chemical was the first company in Japan to develop and sell
Bio‑PTG, which possesses the same quality as traditional PTG
but is environmentally friendly because the main raw materials
were switched frompetroleum-derived ones
to plant-derived ones.
I n addition, we aredeveloping a special
grade of plant-derived
products.

The peracetic acid formulation OXYATTACK (disinfectant agent
for food products), a hydrogen peroxide derivative, wasintroduced into the market in 2017.
While having powerfulanti‑bacterial effects onvegetables, fruit and meat, itis broken down into acetic
acid and water after use,and does not generate
chlorine either, making it anenvironmentally friendly
product that has won theapproval of customers.

https://www.hodogaya.co.jp/english/products/segment01/

 OLED Materials

Ability to embody the needs of customers
in the global arena by making full use of
the DNA of the Group including ourorganic composite technology

Lineup that makes it possible for totalsolutions via all the various types of OLED
materials

Aluminum coloring dyes leading global
market share

Description of BusinessHydrogen peroxide

Three Strengths

Natural food dyes

Functional Colorants Segment

The world’s “Only One” hair dyes

Basic Strategies
in SPEED 25/30

OLED materials

Expand sales through new product development
and further globalize operations by establishing
new overseas bases

Demand for OLED materials is growing because of their use indisplays for smartphones, tablets and smartwatches, and they
are also expected to be introduced for TVs and automotive
applications. The materials for PCR diagnostic kits have been
rated highly, including reporter, quencher dyes, and probes. The
materials were developed independently by the Hodogaya
Chemical Group as an application of OLED material technology,
and the Group is expanding into new fields.
 Imaging materials

They are essential for copiers and printers to function, helping
to enhance precision in the office automation environment.
 Dyes and colors

Our products, developed with unique technologies, are highly
regarded as high‑quality products in Japan and worldwide.
(Mainly used for aluminum coloring, stationery ink, hair dyes,
color filters, etc.)
 Natural food dyes

Play an important role in making food appear more appetizing
by adding color to food products. As a pioneer in this field, the
Hodogaya Chemical Group contributes to culinary performancesthat enhance the enjoyment and deliciousness of food. Naturaldyes are also used for coloring mainly home appliances,
expanding its environmentally friendly applications.

Aluminum coloring dyes

Progress of the Mid-term Management PlanODI (Phosgene derivative)
Octadecylisocyanate (ODI), a raw material for release agents,
paints, and coating materials, is made from vegetable oil andfat, and meets the needs of customers from all over the world.
Because it is derived from vegetables, it helps control theoccurrence of environmental CO2, which is said to be a causeof climate change.

31

Oxygen supply materials (agricultural materials)
In recent years, extreme weather conditions, including torrential
rains and typhoons have become more frequent with each passing
year. In addition to the direct damage that these events cause tofarmland, crop yield are also affected due to moisture damage. Asan application of hydrogen peroxide
derivatives in the agricultural field, we
provide customers with oxygen supply
materials that promote healthy growthby supplying oxygen to soil harmed by
bad weather and other factors, thereby
improving the growing environment
for crops as a countermeasure against
moisture damage. These are also
environmentally friendly products that
do not contaminate farm land.







 hile demand fell for the materials for PCR diagnostic kits, developed as anWapplication technology for OLED materials, we will work to expand fromdiagnostic pharmaceuticals to other medical fields.
 e are stepping up efforts to bring environmentally friendly products forWaluminum coloring dyes to the market.
In this segment, we will reorganize certain product lines and accelerate efforts
to build a new portfolio.

Description of business: Manufacturing and sales of OLED materials and bio materials

Expand from diagnostics
applications to therapeutic
applications

Net sales / Operating profitS ales of OLED materials are increasing due to the expansion of applications for
OLED displays and their adoption in new products. We will work to further
enhance our research and development as competition with competingcompanies is highly intense, and high performance and low cost are required.

Related Group company: SFC CO., LTD.

Bio business expansion

Expand sales throughdevelopment of environmentallyfriendly products(millions of yen)(millions of yen)

20,000

4,598
4,028

5,000
17,9904,000

15,00010,0005,000

10,997 10,912

17,581

11,855
16,503

1,413

966

3,000
2,602

2,000
1,000

1,182

0

0
2017

 Net sales (left)

2018

2019

2020

2021

2022

(FY)

Operating profit (right)

Location: 8
 9, Gwahaksaneop 5‑ro, Ochang‑eup, Cheongwon‑gu
Cheongju‑si, Chungcheongbuk‑do, Korea 28122
Webpage: https://sfc-dye.com/?page_id=18997

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

32

How We Create the Future

Business Overview of the Hodogaya Chemical GroupSpecialty Polymers Segment

Basic Chemicals Segment

https://www.hodogaya.co.jp/english/products/segment02/

https://www.hodogaya.co.jp/english/products/segment03/

 Polymer materials

Ability to deliver specialty products to
global markets by making full use of
our phosgenation technology, etc.

Basic Strategies
in SPEED 25/30

Launch new polyols
into the market

The mainstay of construction materials is urethane
waterproofing. Our urethane waterproofing materials are usedwidely to waterproof the roofs of office buildings, schools, andmulti‑story parking buildings of large‑scale retail facilities.
 Specialty chemicals

Specialty chemicals include intermediates and additives, fully using
our organic composite technology and unique phosgenation
technology accumulated over many years. We supply products
tailored to customers’ specific requests in various fields such as
pharmaceuticals and cosmetics.

Progress of the Mid-term Management PlanS ales of materials are performing well in the construction materials business. We
will aim to increase sales of the products launched in 2019.
T he specialty chemicals business saw robust sales of products for pharmaceuticals
and release agents. We are planning to increase the capacity of our facilities.

(millions of yen)

1,500

15,00012,000 12,046 12,327 11,717
10,255
9,000
6,000

653

587

10,760888

11,580

1,200

861

900
600

531

0

 Net sales (left)

Description of business: Manufacturing and sales of construction products

33

2019

2020

2021

2022

Peracetic acid

Hydrogen

Expand food additive uses

Conduct basic studies in preparation for
the advent of a hydrogen societyNet sales / Operating profit

 ydrogen peroxide sales increased mainly owing to price pass-throughs,Halthough demand for pulp and paper and industrial chemicals applications
declined.
 e believe the impact of soaring raw material and fuel prices will continue.
W
However, we aim to improve business earnings by promoting various cost
reductions and to acquire new customers and increase sales of peracetic acid forfood additives, potentially opening up new markets.

(millions of yen)

8,000
6,000
4,000

(millions of yen)

7,024 6,799 7,156 6,866 6,753 7,152
805
545

589

2,000

436

400

291

0

-2,000-400

 Net sales (left)

Description of business: Sales and marketing of chemical products

1,200

0

2017

Related Group company: KATSURA SANGYO CO., LTD.

1,600

800

-4,000(FY)

Operating profit (right)

Location: 1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo 105-0021 Japan
TEL: +81‑3‑6852‑0478 (Main switchboard)
Webpage: http://www.hodogaya.co.jp/hcp/ (Japanese only)

percarbonate and peracetic acid. Sodium percarbonate isused for bleaching agents and detergents. As for peracetic
acid, we were the first in Japan to obtain approval for the
production for use in food production applications, and weare working to accelerate its use.

Expand for semiconductors and new fields

02018 D erivatives of hydrogen peroxide include sodium

Hydrogen peroxide

300

359

2017

this property supports our everyday lives as clean andenvironmentally friendly products for a variety of uses.
Hydrogen peroxide has been used for paper pulp bleaching
and industrial chemicals, but in recent years, we haveaggressively expanded the sales into new fields such as
veterinary medicines.

Progress of the Mid-term Management Plan(millions of yen)

3,000

Related Group company: Hodogaya Construction Products Co., Ltd.

Basic Strategies
in SPEED 25/30

Net sales / Operating profitF or polymer materials, we will promote green chemistry, such as further
development of environmentally-conscious biobased PTG, which is a raw materialof urethane, and launch new polyols.

R&D expertise to produce peracetic acid,veterinary medicines, and various derivatives

 Hydrogen peroxide decomposes into water and oxygen, andCreativity to explore new applications such as
soil improvement to protect the global
environment

Develop and capture orders for
new customized products usingphosgene derivatives

Promote green chemistry byswitching all PTGs to plant-derived

Experience and knowledge on hydrogen
peroxide production accumulated over 50
years

manufacturing and sales of hydrogen peroxide and its
derivatives for over 50 years.

Description of Business

Polymer materials, pharmaceuticalintermediates and specialty fiber materials
leading global market share Construction materials

Creativity to explore new applications
based on the hydrogen peroxide
production technology accumulated
over many years
Three Strengths

Environmentally friendly waterproofing
materials free of specified chemical
substances

Description of Business

Three Strengths

Urethane materials that make full use ofworld‑leading organic composite technology Hodogaya Chemical has been engaged in the development,

Polymer materials consist mainly of a material called PTG, whichis required to give urethane ductility and elasticity (characteristics
like those of rubber). Urethane is used in many fields, including
clothing, automotive parts and leisure products. In addition, we
are focusing on Bio‑PTG, whose main raw materials were
switched from petroleum‑derived to plant‑derived, as a productthat possesses a quality similar that of the traditional PTG but isenvironmentally friendly.

2018

2019

2020

2021

-575

-800

2022

(FY)

Operating profit (right)

Location: 1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo 105-0021 Japan
TEL: +81‑3-6852-0490 (Main switchboard)
Webpage: http://www.katsura-ks.co.jp/ (Japanese only)

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

34

How We Create the Future

Business Overview of the Hodogaya Chemical GroupAgro‑Science Segment

Logistics Segment

https://www.hodogaya.co.jp/english/products/segment04/

https://www.hodogaya.co.jp/english/products/segment05/

T he products offered by the Agro‑Science segment are usedT he logistics business of the Hodogaya Chemical Group hasin a wide range of fields, from controlling weeds to insect pest
management and environmental conservation for cropland,
living environments, railways, forests, and golf courses.

Ability to develop attractive products
based on our formulation techniques

U sing a variety of intermediates, primarily those developed

as a result of weather conditions, and other factors, we are
manufacturing oxidizers for use as soil improvement agentsthat can lead to stable production of crops, and working on
developing this market.

R&D expertise to develop areas other thanherbicides such as agricultural oxidizers

Basic Strategies
in SPEED 25/30

Reinforce expansion into
the field of herbicides fornon‑croplands

Expand use to the field of agricultural
materials made from hydrogen
peroxide and its derivatives

Reinforce production
capabilities for agricultural
material products

Basic Strategies
in SPEED 25/30

Nanyo. In particular, the Yokohama Branch is conveniently
located close to Japan’s leading port of Yokohama and is usedby many customers as a base for imports and exports. Our
Koriyama and Nanyo distribution sites also offer storage andtransportation services optimized for chemical products,
heavy cargo, machinery and plants.
 I n October 2021, the Nanyo Branch launched a business

Sales declined due to a drop in demand for herbicides for home gardening, but
we will work to introduce attractive products to regain market share while
maintaining profitability.
In the field spanning the Basic Chemicals and Agro-Science segment, we will
jointly develop a new composite agricultural materials involving oxygen supply
materials using hydrogen peroxide from Hodogaya Chemical and compost from
Asahi Agria Co., Ltd., and will be looking into commercialization going forward
as important measures for new business areas: environmentally friendly
agricultural materials in the business strategy roadmap of the Mid-termManagement Plan SPEED 25/30.

(millions of yen)

6,000

5,580

(millions of yen)

5,288

800



600



5,554
4,951

4,838

4,628

4,000

457

409
350

400

330

2,000

Provide and reinforce storage
services in a wide range of fields

involving the storage and heating business handling ISO tankcontainers for hazardous and toxic materials, which is unique inJapan.

Further expand theinternational logistics business

Progress of the Mid-term Management Plan

Net sales / Operating profitExpand ISO tank container
storage, heating businessNet sales / Operating profitT he volume of exports handled remained solid with the resumption of economic
activities in Japan and overseas.
 s a logistics business for chemical manufacturers, we started operating an ISO
A
tank container storage business in October 2021, utilizing our expertise inhandling hazardous and toxic materials. We are taking the initiative to acquire
more customers.

(millions of yen)

3,000

(millions of yen)

800

2,820
631
2,035

2,000

487
1,000

222

600
1,932 1,848
1,780 1,874
397
361
341
298

200

400

200

205
0

0
2017

 Net sales (left)

35

Storing and transporting services that draw
on the locational advantages of Yokohama,Koriyama, and Nanyo We have large-scale facilities in Yokohama, Koriyama andProvide door‑to‑door services tailored to ourcustomers’ needs

Progress of the Mid-term Management Plan

Hazardous substance handling know‑how
accumulated as Japan’s first manufacturer of
caustic soda

Description of Business In order to improve soil environments that have deteriorated

Three Strengths

Strength to constantly propose new products
to the market

Description of Business

Three Strengths

Herbicides for home gardening leading
market share in Japanin‑house, we have continued to develop new formulations thatcombine ease of use with safety and that are tailored to theneeds of the location and the customer. In particular, we havea world‑leading market share in herbicides used for homegardening and in green space management.

been handling hazardous substances and chemicals for overa century. Drawing on this extensive expertise, it offers
services highly regarded by customers in various fields
beyond the chemical industry.

Ability to transport security and safety
based on its expertise on handlinghazardous substances and chemicals

2018

2019

2020

2021

2022

0

0
2017

(FY)

Operating profit (right)

 Net sales (left)Related Group company: HODOGAYA UPL Co., Ltd.

Related group company: HODOGAYA AGROTECH Co., Ltd.

Related Group company: Hodogaya Logistics Co., Ltd.

Description of business: Manufacturing and sales of agricultural chemicals

Description of business: Manufacturing and sales of agricultural chemicals

Description of business: Warehousing and logistics

Location: 1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo 105-0021 Japan
TEL: +81‑3-6852-0500 (Main switchboard)
Webpage: http://www.hodogaya-upl.com/ (Japanese only)

Location: 1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo 105-0021 Japan
TEL: +82‑3‑6852-0510 (Main switchboard)
Webpage: http://www.hodogaya-agrotech.co.jp/ (Japanese only)

2018

2019

2020

2021

2022

(FY)

Operating profit (right)

Location: 1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo 105-0021 Japan
TEL: +81 3-6852-0520 (Main switchboard)
Webpage: http://www.hodogaya.co.jp/hlc/ (Japanese only)

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

36

How We Create the Future

Guaranteeing Our Future

Global Expansion of the Hodogaya Chemical Group

Hodogaya Chemical Group’s Sustainability

We constantly strive to meet global customer needs through the expansion of our overseas
network

Basic approach

The Hodogaya Chemical Group is enhancing its overseas bases
to respond to the diverse needs of global customers. We havealready established our subsidiaries in North America, Europe,and China, which are our primary markets. In the field of OLED
materials, we invested in a South Korean company with a highlevel of technical expertise, and we have put in place a system
in which the R&D, production, and sales functions make athree-pronged effort to respond speedily to the needs in the
Asian regions with high potential.
As a result of expanding exports from Japan and working on
expanding our overseas network, our overseas sales of imaging
materials, such as charge control agents for toners and dyes foraluminum coloring of mobile devices, have increased steadily.
Hodogaya Chemicals’ sales of OLED materials remained robust

along with the expansion of applications for OLED products.
Also, sales of materials for PCR diagnostic kits, developed
independently by a Korean subsidiary as an application
technology for OLED materials from FY2020 under the COVID19 pandemic, increased. In addition, the overseas sales ratio for
the Hodogaya Chemical Group rose to 51% because of strong
sales of urethane materials that we focus on as anenvironmentally friendly products using bio-based raw
materials, release agents and other polymer materials, andspecialty chemicals, including phosgene derivatives.
The Group will respond to customer needs in Japan andoverseas by constantly providing high-quality products andser vices, taking advantage of its unique technologicalcapabilities and global networks in all fields.

[Korea Business Strategy Office]With the growing importance of the Korea business to the entire Group, we established the Korea Business Strategy Office on July 1, 2023 to flexibly and efficiently
consider and promote business strategies for further growth of our business in Korea.

Trends in the Hodogaya Chemical Group’s net sales by region
 Japan  Asia (from FY2020  Korea
 North America  Europe  Others China Rest of Asia)*

Percentage of overseas sales

51%(millions of yen)

45,000Percentage of overseas sales

12%

40,00028%

42% 51%35,00030,000 North America

3.9%

10,000As an organization working on sustainability-related issues, weview sustainability as an overarching concept that encompasses
CSR, ESG, and the SDGs. Therefore, we established theSustainability Development Committee. In addition to the RC& QM Subcommittee, which deliberates on such issues as theenvironment, safety, and quality assurance, the Sustainability
Development Committee established the Global Environment
Subcommittee and the TCFD Subcommittee to address specificissues. Details of Committee agenda items are regularly
reported to and deliberated by the Board of Directors and theManagement Committee for approval.

Philosophy Structure
PURPOSE [Management Philosophy]
VISION [Target Corporate Image]
Sustainability policy

 Rest of Asia

2.3%

Total overseas sales

15,000 Sustainability Promotion Structure

The Hodogaya Chemical Group has for mulated theSustainability Policy as a comprehensive policy on issues
surrounding sustainability. This policy outlines our basic
approach as well as related policies to each issue.
As a chemical company, we declared our commitment toengaging in responsible care (RC) in 1997 and have been
actively and continuously working to protect and improve theglobal environment. At the same time, the Group has also beenaddressing with considerable resolve such issues as risk
management for natural disasters, etc., the establishment of fairand proper supply chains, human resources management thatenhances job satisfaction, and respect for human rights
through the established policies and regulations.

9.7%

Initiatives to protect and improve the global environment Japan

49.1%

12.0%

20,000 Sustainability policy

 Europe China

25,000

Risk management for natural disasters, etc.

Net sales51%

43.3 billion JPY

Establishment of fair and proper supply chains

FY2022

Human resource management that enhances job satisfaction

 Korea

In addition to its shareholders, investors, customers, partnercompanies, personnel, local communities and society, the
Hodogaya Chemical Group considers the global environment
as one of its stakeholders. We are engaging in a variety of
initiatives to promotecollaborative creation of
Globalenvironment
value with all stakeholders,which we recognize isCommunity
Shareholders
and society
indispensable for corporate
and investors
activities based on our
The Hodogaya
management philosophy
Chemical Group
as well as contributions to
Personnel
Customers
the resolution of social
issues.
Partnercompanies

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 (FY)The Hodogaya Chemical Group’s Stakeholders* Sales in Korea and China, which were included in Asia until FY2019, are now listed independently as these markets have increased in importance.

Stakeholder

VOICE

Contributing to the Hodogaya Chemical Group from the cutting edge of sustainability

Involved in analyzing business profitability as well as project management in the Business Promotion
Department, I am currently working for HODOGAYA CHEMICAL EUROPE GmbH, based in Düsseldorf, Germany.
Sales activities are of course important, but with Europe at the forefront of efforts to address sustainability
concerns, including the environment and SDGs, I make it a point to provide useful information to our head officein Japan in a timely manner. In recognition of our efforts to address customer requests, we received the Silver
Medal from EcoVadis, an external evaluation organization, in FY2022. In addition to this evaluation, recognition
by EcoVadis has been extremely well received by customers, which in turn is contributing to increased sales. I
will continue to provide cutting-edge information from Europe and work to improve the sustainability of the
Hodogaya Chemical Group.

37 Collaborative Value Creation with Stakeholders

Respect for human rights

23.0%

5,000
0

Net sales composition by region of the Hodogaya
Chemical GroupThe Hodogaya Chemical Group actively promotes sustainability activities based on the concept of balancing the pursuit ofeconomic value and solutions to social issues and providing value to all stakeholders to fulfill its responsibility to realize asustainable world and society in the medium- to long-term in line with the PURPOSE (Management Philosophy) and VISION(Target Corporate Image).

Jun Ebisui
HODOGAYA CHEMICALEUROPE GmbH

Basic approach

Globalenvironment

We are committed to continuous improvement and regard it as an important responsibility of a chemical manufacturer to continuously reduce theamount of all chemical substances discharged into the earth and the amount of waste generated during our business activities.

Shareholders andinvestors

In order to maintain and improve the trust of all of our stakeholder groups in the future, we have positioned ourselves to ensure the soundness andlegality of management, improving efficiency as one of the most important management issues. We are working to enhance and strengthen corporate
governance.

Customers

In addition to providing a stable supply of safe and reliable products, we are committed to providing new products and services that meet ourcustomers’ expectations for a safe, secure, comfortable, and prosperous life.

Partner companies

As a good partner of the Hodogaya Chemical Group, we work together to address social issues, not only in the purchase of raw materials, products, andconsignment goods, but also in the purchase of facilities and equipment.

Personnel

In order to achieve the Hodogaya Chemical Group PURPOSE (Management Philosophy) and VISION (Target Corporate Image) while also boosting
corporate value, we aim to facilitate job satisfaction (feeling motivated and enjoying a comfortable work environment) for all officers and personnel.

Community andsocietyIn the course of the Hodogaya Chemical Group’s business activities, we consider contribution to the sustainable development of communities an important
activity as a corporate citizen, and are engaged in various community contribution activities.

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

38

Guaranteeing Our Future

Disclosure of Information Related to Climate Change Based on TCFD

Details on TCFD can be found on our website.
https://www.hodogaya.co.jp/english/csr/eco/tcfd/

 Targets and Indicators

Basic approach
The Hodogaya Chemical Group will actively move forward based on the idea of balancing the pursuit of economic value andsolutions to social issues and providing value to all stakeholders to fulfil its responsibilities related to creating a sustainable world/society as given in the VISION (Target Corporate Image) appearing in the Mid-term Management Plan SPEED 25/30, which started
from FY2021.
As a chemical company, Hodogaya Chemical is resolutely confronting climate change inaccordance with the guidance by the TCFD, while proactively striving for information disclosure.

 Governance and Risk Management
The Sustainability Development Committee is a committeeorganization that actively promotes responsibility toward therealization of a sustainable earth and society in accordance with
the Management Philosophy and Corporate Action Guidelines.
We established the Global Environment Subcommittee, which
promotes activities related to preservation and improvement of
the global environment, and the TCFD Subcommittee, which
promotes disclosure activities in response to guidance from the
TCFD, in addition to the conventional RC/QM Subcommittee.
The Risk Management Committee discusses Companywide risk
recognition, evaluation and mitigation measures. The Risk
Management Committee also discuss environmental risks, such as

climate-related risks, opportunities and countermeasures
recognized by the TCFD Subcommittee.
The content of discussions
Board of Directors
in each committee andsubcommittee is submitted
President
and reported to the Board ofManagement Committee
Directors and Management
Sustainability Development Committee
Committee.
RC & QM Subcommittee

Global Environment Subcommittee
TCFD Subcommittee
Risk Management Committee
Crisis Management Committee Responding to Climate Change
Most of the greenhouse gases (GHG) emitted by Hodogaya
Chemical are energy-derived CO2. GHG emissions in FY2022 areapproximately 46,000 t-CO2 (Scope 1*1 + Scope 2*2). As production
is expected to increase in the future, we will address climatechange from both mitigation and adaptation perspectives andfrom a long-term perspective looking toward FY2030.
CO2 emissions trend

In pursuing the Mid-term Management Plan SPEED 25/30 businessstrategy of developing a new portfolio, we expect production
volume to increase. We have classified the risks projected from along-term perspective, looking ahead to 2030, into TCFD risk
categories, are proceeding with climate scenario analysis, andfrom the results of our analysis, we are promoting new initiatives
and opportunities for transition risks and physical risks.

Risks and Opportunities

Policy/Regulation

Transitional risk
1.5ºC scenario

Technology

MarketPhysical risk
4ºC scenario

Risks

Opportunities

Measures

Impact on business• Strengthening energy-related laws
and regulations• CO2 reduction• Promoting energy saving• Use of renewable energy• Review of manufacturing process

Increase in energy costs and raw material
procurement costs due to the introduction of acarbon tax, etc.

Strengthening environment
management

Strengthen the internal structure byleveraging the knowledge gained thus far

Increased cost burden for maintenance andimprovement of management system

Creation of new technologies forenvironmental friendliness• Strengthen R&D to meet demands• Strengthen production technology
capabilities by reviewing manufacturing
processes, etc.

[Risk] Increase in R&D and manufacturing costs[Opportunity] Maintain and expand market share byproviding products and services that meet demandEco-friendly market formation



Revise and strengthen business strategies bydeepening market and customer needs, andimprove R&D and manufacturing technology
capabilities corresponding to them

[Risk] Increase in R&D and manufacturing costs[Opportunity] Maintain and expand market share byproviding products and services that meet demand

Reputation

Stakeholders making environment
as important mattersEnhancing dialogue with local communities,
personnel, and shareholders and securing asystemChronic

Rise in average temperatureLabor saving and automation of
manufacturing equipment[Risks and Opportunities] Response to market
changes, especially in the agrochemicals business

Acute

Increase in earthquakes, typhoons,and floods

Promote multiple purchases, strengthen BCP

Shutting down of factories and inability to procure
raw materials—

40,000FY2013(base year)
50,700 tons

FY2022-9.9%
45,700 tons

Functional Colorants Segment
Specialty Polymers Segment

39

CO2 emissions(CO2 emission
intensity)

49,200 t-CO2(1.176 tons/net
sales million JPY)

45,700 t-CO2(1.055 tons/net
sales million JPY)

43,400 t-CO2(0.868 tons/net
sales million JPY)

Reduction ofenergyintensity

0.698 kl/net
sales million JPY

0.636 kl/net
sales million JPY

0.606 kl/net
sales million JPY

Reduction ofindustrial
waste volumes

2,746 t3,477 tLess than theamount generated
in the previous year

To promote CO2 reduction, we began introducing Internal
Carbon Pricing (ICP) in FY2021, which allows us to price our own
carbon emission.
We have created a system that can support investment as a
response to climate change toward a low-carbon society.
*1 Scope 1: Direct emissions*2 Scope 2: Energy-originated indirect emissions

 Scope 1
 Scope 2
 Scope 1+Scope 2(t-CO2)60,000

FY2030-38%
31,400 tons

50,00040,000*2

FY201751,600 tons

20,000

FY2025-14.4%
43,400 tons

30,00020,000*1

10,00002022 2025 2030

2050 (FY)

2018

2019

2020

2021

2022

(FY)

*1 The dotted line after FY2030 is an unconfirmed value.
*2 The solid line after FY2025 is the expected decrease of 1% from the previous year.

 Roadmap for Reducing CO2 Emissions
2030

Toward achieving future goals

Promotion oftechnologicalinnovation

Process• E fforts to save energy—P romotion of high efficiency through process
improvement— Promotion of waste heat recovery (heat pump)

2050

Development of hydrogen society and challenge to carbon neutrality• Study of hydrogenplant CO2 recovery
and use• E xternal procurement of green hydrogen• E xternal procurement of green hydrogen
Emissions from own
production activities(Scope 1)

Steamboiler• E fforts to save energy— Active use of waste heat

• I mprovement ofelectrification rate ofheat source• F uel conversion (LNG  hydrogen)— Hydrogen-fired boilers introduced at
all plants• I ntroduction of cogeneration (hydrogenmixture  hydrogen-only combustion)• Efforts to create energy— Introduction of renewable energy

Expansion of use ofrenewable energy
Electricity

Segment

FY2025 managementtargets

CO2 emissions

Externally purchased
energy (Scope 2)

Major business opportunities in transition

FY2022 results

80,0000
2013

Scenario Analysis

FY2021 results

CO2 emissions (t)60,000 Strategies and Risk Analysis

Non-financial Targets

The Hodogaya Chemical Group has set the following non-financial
targets (climate change-related) in its Mid-term Management Plan
SPEED 25/30.
• Reduction of CO2 emissions• Reduction of energy intensity• Industrial waste volume reduction
These are examined by the Global Environment Subcommittee,
discussed by the Sustainability Development Committee, andprogress is confirmed by the Board of Directors and Management
Committee.

• Efforts to save energy— Promotion of high efficiency• Gradual switch to CO2-free power sources using
renewable energy

Opportunities• Aluminum coloring dyes Expand sales by developing eco-friendly products• Bio business Expansion from materials for PCR diagnostic kits to medical use• PTG (urethane materials)• Hydrogen

Agro-Science Segment• Hydrogen peroxide and derivatives

Expanding business opportunities due to the advent of the hydrogen society
Expanding applications to the field of agricultural materials• Continue switching to LED lighting equipment—

Promoting green chemistry through biotechnology

Basic Chemicals Segment• Promoting ICP system

Utilizing the ICP
systemDaily improvement
through energy saving• Continue to introduce top-runner equipment• Reduction of heat loss through appropriate
management of heat insulating materials and traps• Efficient operation

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

40

Guaranteeing Our Future

Related Materiality

Responsible Care (RC)

Details on PRTR can be found on our website.
https://www.hodogaya.co.jp/english/csr/eco/environmental_data/#a21

 Responding to climate change Maintaining air, water, soil environments

Responsible Care Management

 Initiatives to Lower Environmental Impacts

Responsible care (RC) is a voluntary management initiative intended for companies involved in the production and handling of chemical

The water resources consumed, and the chemical substances released into the air, water, and soil during the course of business operations
by the Hodogaya Chemical Group have the potential to impact the global environment. Taking into consideration the global environment
and each of its stakeholders, the Hodogaya Chemical Group strives to lessen the environmental burden accompanying its business activities.

substances to implement and improve their environmental, safety and health measures across the product lifecycle, from development
to disposal. The Hodogaya Chemical Group conducts its operation
Details on Responsible Care can be foundon our website.
https://www.hodogaya.co.jp/english/csr/
eco/safety_responsible/

based on the principle that ensuring environmental conservation,
safety and health, and product quality is fundamental to corporate
management and the basis for all business activities.

Environment

Basic approach

In protecting the environment, the Hodogaya ChemicalGroup continuously reduces the emission volumes of all
chemical substances released into the air, water, and soil,
and the volume of waste discharged in the course of its
business operations. As its implementation structure,under the Basic Philosophy of Responsible Care (RC) theGroup obtained integrated certification for the ISO 14001
environmental management system covering all
Hodogaya Chemical offices and Group company offices
located in Japan.

ISO 14001: 2015 Environmental management systems
Certification
body
Registration no.
Compatible 
standards
Date of acquisition

Japan Chemical Quality Assurance
JCQA-E-0330
JIS Q 14001:2015/ISO 14001:2015
December 25, 2001

Details of environmental data from the past 10 years canbe found on our website.
https://www.hodogaya.co.jp/english/csr/eco/environmental_data/

Hodogaya Chemical Group material flow
INPUTSOUTPUTS

Business activities

Air emission

Raw materials

CO2: 45,722t-CO2
NOx: 3.17 t
SOx: zero

Products
Electricity: 43,564 thousand kWh
Energy: 27,562kl(crude oil equivalent) Fuel: 645,862GJ

Water resources:
10,680 kt

Industrial water supply: 10,560 kt
Public water supply: 121 kt

Business activities of
Hodogaya Chemical Group

Water discharge:

Industrial waste volumes: 3,477t

10,684 kt
Rivers: 5,965 kt
Ocean: 4,719 kt

Outside recycle volume: 2,190t
Industrial waste final disposal
volume: 85t
Industrial waste from plastic
products, etc. : 126t

Prevention of air pollution

Industrial waste reduction

SOx (sulfur oxides), NOx (nitrogen oxides), and dust are discharged
from our factories from the burning of fuel and other aspects ofchemical manufacturing.
In FY2011, Hodogaya Chemical completed a switch to city gas
for the raw fuel used in our plants, which has allowed us tocontinue to achieve zero emission of SOx since FY2012. We arealso achieving significant reduction of NOx and dust emissions
through measures such as adopting dust collectors and scrubbing
towers, and using catalyzers. This has allowed us to mitigate
discharge of these substances into the atmosphere.

The Hodogaya Chemical Group promotes the 3R+Renewable
initiative (reduce, reuse, recycle, renewable) and we have set atarget to reduce the volume of industrial waste generated
compared with the previous fiscal year, with initiatives underway.
In FY2022, total emissions and final disposal volumes increased by
27% and 63%, respectively, compared with the previous year.
Although there is also the impact of differences in the compositionof production items and other factors, we take the facts of theincreases seriously and will redouble our efforts as we strive to
reduce industrial waste.

Protection of water resources and prevention of waterpollution

PRTR

Hodogaya Chemical considers the securing of high-quality water
resources and the prevention of water pollution from wastewater
important for business continuity. 99% of the industrial water usedby Hodogaya Chemical is procured from rivers and streams andonly a small amount of public water (tap water) is used as drinking
water. Furthermore, the Company does not use water from othersources, such as groundwater, which could cause land subsidence,or seawater.
Water released during the manufacturing process is treated in
an advanced manner at the on‑site wastewater treatment facility
within the plant, and released into the public water bodies after
the water quality clears regulatory values. Going forward, we willcontinue to thoroughly manage wastewater treatment facilities
and work to reduce the environmental impact risks to oceans andrivers where wastewater is discharged.

Emissions

The Hodogaya Chemical Group considers responding to climatechange to be a crucial management challenge. We have been
actively promoting initiatives to reduce greenhouse gas (GHG)
emissions, in order to fulfill our responsibilities toward therealization of a sustainable planet and society as set forth in the
VISION of our Mid-term Management Plan.
Nearly all of GHG emitted by Hodogaya Chemical are CO2 fromenergy‑related sources. Total GHG (Scopes 1*1 and 2*2) emitted in
FY2022 were approximately 45,722 t-CO2.
In FY2022, we made investments utilizing Internal Carbon
Pricing (ICP), which had been introduced in FY2021. Going

41

forward, we will continue our efforts to reduce emissions byadopting energy-saving equipment and switching to renewableenergy sources through decarbonization investment from a longterm perspective to continuously improve energy intensity. With
respect to Scope 3*3, we are currently at the stage of gathering
information on the status of other companies’ initiatives.
While ascertaining all Scope categories for GHG emissions andformulating reduction plans through analysis of the results, we will
strive to reduce GHG emissions in accordance with the plans.
*1 Scope 1: direct emissions*2 Scope 2: energy‑originated indirect emissions*3 Scope 3: other indirect emissions; separated into 15 categories

FY2022 release amounts
and transfer amountsof PRTR listed
substances

Air Emission

5.19t

Waste

Water Bodies

106.64t

1.16t*

Environmental accounting initiatives
Of the major expenditures related to environmental conservation
in FY2022, the largest expense was resource circulation cost,which amounted to 189 million JPY.
Environmental accounting data 2023

 Initiatives to Reduce Greenhouse Gas (GHG)

Based on the Act on Confirmation, etc. of Release Amounts ofSpecific Chemical Substances in the Environment and Promotionof Improvements to the Management Thereof (PRTR Act), whichis the legal regulation of chemical substances, Hodogaya Chemical
manages the release and transfer of PRTR-listed substances thatare manufactured or used and reports them to the national
authorities. From the perspective of environmental conservation,
we will ascertain the actual status of chemical substance emissions
and transfers as waste, while continuing to strive to work to reduce
the amounts of such substances released and transferred.

VOICE

P.61

Land

Sewage

0.00t

0.00t
Landfills

0.00t* Of which 1.15 tons have been sent tothe adjacent wastewater treatment
facility and released into the public
water bodies after being treated.

Energy Conservation Efforts at Koriyama Plant

Energy forms an essential element in our lives. However, global warming brought about by energy consumption has
become a serious problem, and energy conservation is now an important issue on a global scale. As an energy saving
initiative at the Koriyama Plant, we installed an ICP system-based heat pump in December 2022 to make effective useof the waste hot water, which had not previously been used, after the heat exchange process. Using this waste water
as a heat source and efficiently heating boiler feed water is expected to reduce emissions by 171t-CO2/year and city gas
consumption by 113,000Nm3/year. There are many other energy-saving initiatives we can usefully do ourselves, suchas saving electricity and water, rather than by installing equipment. Aware of the need to mitigate the effects of global
warming, each and every person working at the Koriyama Plant will continue to engage in energy-saving activities.

Hodogaya Chemical Co., Ltd.

Takahiro Okoshi
Koriyama Plant

Integrated Report 2023

42

Guaranteeing Our Future

Related Materiality

Responsible Care (RC) Improving value and reliability of products Ensuring the safety of products andchemical substances

Quality Assurance

management and workplace safety andhealthBasic approach

Chemicals and Product Safety

The Hodogaya Chemical Group’s quality policy is commitment to quality‑first, quality from our customer’s perspective. The aim
is to meet the demands of our customers and partner companies through our products, commercial goods, and OEM products,
through which we contribute to society and business growth.

 Initiatives for Quality Assurance

 Quality Day

The Hodogaya Chemical Group is committed to; understanding
facts, assessing the facts, and acting based on facts to maintain aquality‑oriented principle and provide highly functional products
and services with high added value to meet the trust andsatisfaction of its customers.
To ensure customer satisfaction with respect to quality, thequality assurance activities relating to the products handled by the
Hodogaya Chemical Group are divided into four systems bypurpose at all stages, from planning and R&D to production andsales. We are working on quality assurance activities through thenecessary screening, audit, and management systems required foreach system, such as the creation of annual plans aimed at
improving the level, and the reporting and discussion of results in
RC/QM subcommittees. As a result, in FY2022 we achieved zero
quality problems.
November of each year is Quality Month, and during the month
we hold the All Company QC Presentation Meeting for the whole
Hodogaya Chemical Group. We continue to manage and improve
the quality of products, services, work, and other elements
through QC circle activities. We tie the results of these circle
activities to personal development, mutual development, andworkplace vitalization by having reports and Q&A sessions at the
All Company QC Presentation Meetings.

November has traditionally been Quality Improvement Month at
Hodogaya Chemical, and the Company has generally designatedthe third Friday of November as Quality Day since 2020 so as tofurther improve quality management.
The Hodogaya Chemical Group takes to heart the idea that
quality is the source of trust. From the perspective of clarifying
related roles and responsibilities, in October 2018 the Company
restructured the Environment and Safety & Quality Assurance
Department into the Quality Assurance Department andEnvironment and Safety Department to strengthen quality
management functions.
As part of these initiatives, Hodogaya Chemical established a
Quality Day, and on that day, all group executives and personnel
gather together to read aloud the Quality Pledge. By doing so, wewill raise awareness of improving quality and provide satisfaction
to customers.

Four quality assurance activity system
1. Quality assurance activity system from the planning stage tostable production of products
2. Quality assurance activity system for the steady production
operation of products
3. Quality assurance activity system for commercial goods andOEM products
4. Activity system to review the quality assurance activities

Details can be found on our website.
https://www.hodogaya.co.jp/english/csr/eco/chemical_product_safety/ Promoting health and productivity

 Quality Management
Today, corporate quality management systems with international
qualities and standards have come to be recognized as the norm.
Each of the Hodogaya Chemical offices have acquired ISO 9001
certification, the international standard for quality management
systems. Then in 2010, the Group integrated the individual
management systems of each office and successfully achieved an
integrated certification as the Hodogaya Chemical Group that
expanded the scope of certification to include domestic affiliatedcompanies. Furthermore, a Group company, SFC CO., LTD. in South
Korea, also obtained ISO certification from the South Koreancertification body. In 2019, when the Hodogaya Chemical Group’s
integrated certification was renewed, its scope was again
expanded, and HODOGAYA CHEMICAL KOREA Co., LTD., anoverseas research base, also obtained ISO certification.
Under a more stringent quality management system, the
Hodogaya Chemical Group has united to undertake quality
improvement activities.

ISO 9001: 2015 Quality management systems
Certification
body
Registrationno.
Compatible
standards
Date ofacquisition

Japan Chemical Quality Assurance
JCQA-0184
JIS Q 9001:2015/ISO 9001:2015
December 25, 1996

Basic approach

The Hodogaya Chemical Group sets forth a set of internal rules on the use of chemical substances and measures to control thecontent in products, etc. based on the Basic Philosophy of Responsible Care (RC) to ensure environmental conservation, safety
and health, and product quality, which forms the basis for all business activities. The aim of these rules is to voluntarily manage
chemical substances that are likely to injure human health or impact the global environment in each process, from development,
manufacturing, transportation, and use to disposal.

 Chemical Substance Management

 Risk Assessment of Chemicals

From the perspectives of environmental conservation, security
and disaster prevention, workplace safety and health, and productsafety, the Hodogaya Chemical Group manages chemical
substances in all phases, from development, raw materials
procurement, manufacturing, and use to disposal.
To the controlled chemical substances designated undernational laws and regulations have been added those requested
under customers’ RoHS and REACH directive as well as green
procurement policies.
The substances are categorized into three groups: prohibited
substances, the manufacture, import and use of which areprohibited in principle under domestic law; release-restricted
substances, on which domestic laws require that restrictions beplaced on their release into the environment or that theirenvironmental impact be reduced; and controlled substances in
products, those that customers have requested either not bepresent in products or that the amounts contained be controlled.
Having been made into a database, this system provides integrated
management of information on all products, raw materials, andchemical substances handled by the Hodogaya Chemical Group.
We also ensure that information is provided to our customers ina standardized format, including confirmation of legal complianceswith national and foreign laws and regulations, the automatedproduction of safety data sheets (SDSs) and product labels in
multiple languages as well as the compiling of safety informationon the chemicals contained in our products.

The Hodogaya Chemical Group formulates procedures for risk
assessments to prevent accidents and disasters, and measures toreduce risks based on the assessment results. The Group also sets
forth the Risk Assessment Guidelines to clearly identify risks andtake precise measures, and implements them on a regular basis.
The substances to be subjected to risk assessments are divided
into two categories—the risk assessment of operations and therisk assessment of handling chemical substances—to enable theclearer identification of risks and more precise measures to betaken.

VOICE

 Compliance with Global Laws and Regulations
In addition to the conventional regulations such as TSCA (USA)and REACH (Europe), Asian countries including China, South Korea
and Taiwan are actively enforcing new laws and regulations.
With an eye on expanding its business globally, the Hodogaya
Chemical Group not only works in close collaboration with foreign
affiliate companies and representative offices, but also takes active
part in various industry activities to keep track of the latest trends
in chemical substance management policies and legislation ofother countries to be prepared to respond in a timely manner.
We share this legislative information and responses from othercountries with the entire Hodogaya Chemical Group.

My Duty to Protect: Hodogaya Brand

Quality inspection work covers a wide range of tasks, including inspections of raw materials and products
based on prescribed test methods, the issuance of test reports, the maintenance and management ofinspection equipment as well as the storage of records.
Of all these tasks, the one that I am particularly mindful of in my eighth year with the Company is always
to conduct product inspections from the customer’s point of view, so that they are able to purchase
Hodogaya Chemical products with peace of mind. So that I am able to quickly notice any minor differences
and changes in inspection values, I carefully check the product status and inspection values on a regularbasis. Also, when a question comes up with regard to the maintenance and how to handle the inspection
equipment, I always try to find the answer by doing my own research or by seeking advice from someone
with a lot more experience.
To continue to protect the quality of the Hodogaya brand in the years to come, I would like to fulfill myrole as the last bastion of quality management in a responsible manner.

Maika Yoshino
Nanyo Plant

FY2022 All Company QC Presentation Meeting

43

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

44

Guaranteeing Our Future

Details can be found on our website.
https://www.hodogaya.co.jp/english/csr/eco/safety_health_logistics/

Responsible Care (RC)Workplace Safety and Health, Security and Disaster Prevention

Basic approach

Procurement Activities

The Hodogaya Chemical Group places highest priority on ensuring workplace safety and health as the basis of its production
activities, and ensures thorough compliance with laws and regulations related to safety and health, to achieve disaster‑freeoperation. In order to promote workplace safety and health, and security and disaster prevention, we spell out the basic rules on
actions to be taken by the Hodogaya Chemical Group based on relevant laws and regulations in the Safety and HealthManagement Rules, the Disaster Prevention Rules, and the Logistic Safety Management Rules.

The Hodogaya Chemical Group specifies its commitment to the realization of a fair and appropriate supply chain in the
Sustainability Policy, and implements the activities of procurement based on the Compliance Action Policy and the Procurement
Policy. We have a fair deal with all partner companies in good faith when purchasing raw materials, products/consigned products,
and facilities/equipment. We regard them as our good business partners in jointly addressing social issues.

 Initiatives for Workplace Safety and Health Initiatives for Disaster Prevention

 Procurement policies

The Safety and Health Management Rules set forth the basic ruleson safety and health management to prevent occupational
disasters and health disorders of all personnel. The aim is toengage both personnel and employers to collaborate in ensuring
the safety and health of all personnel in the workplace, and topromote creating a more comfortable work environment, while
streamlining operations and contributing to improving
productivity.
Furthermore, the Group has designated February 3 as theGroup’s annual Safety Day to prevent personnel forgetting the fire
accident at the Yokohama Plant on February 3, 2012, and thelessons learned from it, to enhance the culture of safety, and to
spread among all personnel of the Group the efforts in structurally
establishing safety in the business operation.
In FY2022, as a result ofcontinuing to strengthen
initiatives for eachmeasure, the Hodogaya
Chemical Group andsubcontracting companies
achieved zero lost-time
injuries.

The Group conducts its activities in accordance with its basic
principle to deliver security and safety, including environmental
conservation to the local communities and society. The Disaster
Prevention Rules stipulate that education and training be carriedout on a regular basis in preparation for an accident or otheremergency. In addition to conducting disaster drills, fire
extinguisher training, emergency lifesaving drills jointly with fire
departments and other first responders, we are striving to instill anawareness of safety and disaster prevention among all personnel
and enhance their ability to sense danger.
We are continuing the conventional KYT (Kiken Yochi Training,risk prediction training) and PYT (process error prediction training)
activities, and conduct safety patrols, 3S (Sort, Set in Order, Shine)
and inspection visits among offices. In internal audits of RC
activities, the basis of activities was expanded to the five actuals(place, thing, fact, principle, rule) to implement safety measuresand safety education that include mechanism and law principles,and rules such as routines and orders.
Personnel from plants are active participants in competitions inwhich teams pit their firefighting and disaster prevention skills
against teams from other plants located in the same area.

The Hodogaya Chemical Group has established the Procurement
Policy and Procurement Guidelines. In addition to having a fairdeal in good faith, the concept of sustainable procurement, thatis, giving consideration to the environment while deepening
mutual communication was incorporated into the Procurement
Policy. The Hodogaya Chemical Group conducts procurement inline with this policy
In the basic purchasing contract concluded when doing
business with the Hodogaya Chemical Group, there is a clause thatcovers compliance with the Procurement Guidelines. By having
them comply with the terms of these guidelines, we work with ourpartner companies to conform with environmental, social, andgovernance needs, such as reducing the environmental impacts
from raw material quality and the management and manufactureof chemical substances as well as respecting human rights
throughout the supply chain, health and safety management, andethics. Thus, the Hodogaya Chemical Group promotes compliance
together with its partner companies.

Hodogaya Chemical GroupFY occurred
Number of accidents / incidents
Number of work‑related fatalities and injuries

Procurement Policy
1. C ompliance with Laws and Regulations and Social Norms
2. Implementation of Environmentally Conscious Procurement
Activities

Occurrence of Lost‑time Injuries
Subcontracting companies

3. P rovision of Fair Transaction Opportunities

2020

2021

2022

2020

2021

2022

1

0

0

0

0

0

1

0

0

0

0

0

Frequency rate

0.92

0.00

0.00

0.00

0.00

0.00

Severity rate

0.001

0.00

0.00

0.00

0.00

0.00

Frequency rate = Number of work‑related fatalities and injuries / Total work hours x 1,000,000
Severity rate = Total number of working days lost / Total work hours x 1,000

 Initiatives for Logistic Safety
Hodogaya Chemical endorsed the spirit of the White Logistics
Promotion Campaign* advocated by the Ministry of Land,
Infrastructure, Transport and Tourism, Ministry of Economy, Tradeand Industry, and Ministry of Agriculture, Forestry and Fisheries inJanuary 2021 and submitted a voluntary action declaration to theWhite Logistics Promotion Campaign Secretariat. In the voluntaryaction declaration, we reviewed the content of transportation,
including greater logistics efficiency and modal shift, and listed
our efforts to standardize contracts and ensure safety.
For the purpose of ensuring safety, we help maintain the safety
and health of all local residents, including those involved in45

Basic approach

logistics, and protect the local environment by following Logistic
Safety Management Rules, which stipulate basic items concerning
preventing accidents and disasters in logistics related to Group
products and other items and measures in the case of an accident
or disaster.
* White Logistics Promotion CampaignThis is a campaign to realize not only greater
productivity and more efficient logistics,
particularly in truck transportation, but alsoa work environment welcoming to female
and older drivers so as to ensure stable
logistics, which are necessary for the lives ofJapanese and industrial activities, in
response to the shortage of drivers that is
growing more serious and to contribute toeconomic growth.

 Promotion of Sustainable Procurement

When procuring raw materials, facilities and equipment as well asother items, we endeavor to establish robust supply chains. Froma global perspective, we search for financially sound partnercompanies that are capable of continuous transactions, including
respect for human rights and compliance with society’s ESG
requirements. In particular, we work to secure multiple suppliers
for each raw material and to diversify the countries from which we
procure.
For those business partner companies whose purchasingtransactions exceed a certain amount, we regularly use a
Procurement Guidelines Implementation Status Survey Sheet toconfirm whether the compliance items listed in the Procurement
Guidelines are being properly implemented. In parallel withconfirmation by means of the survey sheet, we also conduct
visiting audits of business partner companies and work to deepen
mutual understanding and establish relationships of trust withthem while conducting improvement activities.
The personnel of the Purchasing Department are provided withthe training necessary to put sustainable procurement activities
into practice.
The Hodogaya Chemical Group does not handle conflictminerals such as, tin, tantalum, tungsten, or gold. Conflict minerals
are minerals that are mined in African countries and other regions
affected by conflict and serve as sources of funds for armed
groups.

4. Deepening of Communications with Supply Chain

 etails on the Procurement Policy can be found on ourDwebsite.
https://www.hodogaya.co.jp/english/company/
philosophy/#a8

VOICE

Details on Procurement Guidelines can be found on our
website.
https://www.hodogaya.co.jp/english/wp/wp-content/
uploads/2018/09/procurement_guidelines_20180918.pdf

To Create Safe and Secure Workplaces

In its meetings held monthly at the Yokohama Plant, the Health and Safety Committee deliberates on
measures to prevent industrial accidents and health disorders, workplace inspections and advice on healthpromotion by industrial physicians, risk assessments, and near-miss incidents. The content of the meetings
is shared with promoters at each workplace, and workplace health and safety meetings chaired by thepromoters are held. During these meetings, we conduct health and safety-related education, discuss nearmisses and case studies of past incidents, find dangers lurking in the workplace, and notify other peopleof dangerous areas, all of which helps to raise safety awareness and to prevent occupational accidents. We
will continue to work toward building safe and secure work environments and achieving zero accidents
and injuries.

Yoshiaki Iwano
Manufacturing Department,
Yokohama Plant

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

46

Guaranteeing Our Future

Related Materiality

Human Resources Improving feeling of motivation to work Promoting diversity Promoting the health and productivity

management and workplace safety andhealthPromoting Health and Productivity Management

A Message from the HR Manager

Shinichi SatoManaging Executive Officer

Labor market conditions led by work styles are changing significantly amid major structuralchanges worldwide, including the first inflation seen in almost 40 years, instability in the international
political order, and changes in people’s behavior following COVID-19. Against this backdrop, humancapital management is in the spotlight as it regards human resources as capital for creating
corporate value. Traditionally, the Hodogaya Chemical Group has been deeply aware that humanresources are indeed the driving force behind value creation. We will work to achieve the Mid-termManagement Plan SPEED 25/30 by engaging in human resources investment and initiatives.

 Mid‑term Management Plan SPEED 25/30 HR
Strategy

From the standpoint of maximizing the use of human resources,
who are the driving forces behind value creation, we believe it isimportant to enhance human capital in order to increase corporate
value over the medium to long term. Specifically, the Hodogaya
Chemical Group is steadily implementing the personnel planning

Employment

Personnel
planning

Education-Training

Improvingengagement

Evaluation
Utilization of diverse human resources (promoting diversity)
Promotion of health management and support for work-life balance

Executives andpersonnel havejob satisfaction

Enhance corporate value formedium to long term

Human resources needed toachieve the SPEED 25/30 targets

Placement-Transfer

KPI Improve engagement scores* Conducted almost every month. Return results to the manager in eachorganization and encourage dialogue with subordinates Improve the percentage of female managers
 Improve the percentage of personnel taking

paid holidays Continue to be certified as a Health & Productivity

SPEED 25/30

Improving engagement set out in SPEED 25/30  To provide all
executives and personnel with a greater sense of fulfillment intheir work, we will undertake the following initiatives.

Utilizing Diverse Personnel (Diversity Promotion)
The Hodogaya Chemical Group recognizes that the purpose ofpromoting diversity is to enhance corporate value by promoting
innovation in a highly competitive environment, flexibly
reconfiguring businesses, and strengthening the ability to respondto change. In particular, we are working to promote women, nonJapanese people, and mid-career hires to management positions
as described in (1) and (2) as follows. (1) This report discloses
targets and results for the promotion of female managers. (2) We
will maintain at least the current percentage of non-Japanesepeople and mid-career hires, which is disclosed in this report,
while promoting Japanese and non-Japanese people as well as

Work-life Balance Initiatives
The Hodogaya Chemical Group is proactively implementing suchwork-life balance initiatives as increasing the percentage of personnel
taking paid holidays, increasing the rate of male personnel taking
childcare leave (both rates are disclosed in this report), establishinga five-day consecutive refreshment leave system separate fromannual paid leave, and establishing telework regulations that makeworking from home a permanent feature of the Group’s operations.
These measures promote health and productivity management
mentioned earlier, and we will continue
our efforts to enable all personnel todemonstrate their capabilities and skills
to the greatest extent possible byachieving harmony between theirwork and private lives.
Details on the system can be found on our website.
https://www.hodogaya.co.jp/english/csr/
stakeholder/employee#a9

Human Risk Management
To preserve the corporate value of the Hodogaya Chemical Group,
the occurrence of human risks (violation of labor laws, harassment,
outflow of personnel, individual troubles, etc.) is a serious obstacle
to the continued and stable growth of the Hodogaya ChemicalGroup. Recognizing that there is a risk, we strive to appropriately
and adequately manage human risk, prevent, avoid, and mitigate
future losses.

Key Human Resources Investments and Initiatives through FY2022• Revision of personnel evaluation system (restructuring of
behavior and ability assessment)• Transition to performance-linked bonuses (introduction ofa transparent reward method)• Establishment of a new education system for managers(improvement of management literacy)• Revision of retirement benefit system (full transition todefined contribution (DC) pension plan)• Introduction of a new personnel front system (utilization of
HR technology)• Introduction of the Come-back entry System(Reemployment Applicants Registration)• Implementation of engagement score measurement(conducted almost monthly)• Formulation of telework regulations (compatible withdiverse work styles)• Introduction of training for next-generation management
personnel• Introduction of a multi-assessment system (multifaceted
evaluation system)• Introduction of employee stock benefit trust (J-ESOP)Management Outstanding Organization

Appropriate human risk management

 Main Policies in the Mid-term Management Plan47

linked to enhancement of corporate value as shown in the following
diagram to promote the hiring and development of personnel who
can learn, think and act on their own with a desire to grow, take onchallenges, and innovate. We have set the goal of improving
engagement, also shown in the diagram that follows. Our strategic
goal in the SPEED 25/30 is to ensure that all officers and personnel
are provided with a greater sense of fulfillment in their work.

The Hodogaya Chemical Group considers the physical and mental
health of its executives and personnel a top priority. We promotehealth as a management issue and strategically implement healthmanagement. The President is the person responsible for
personnel health management and works with the Hodogaya
Chemical Health Insurance Society to actively support andpromote personnel health. We have achieved 100% consultation
rates for health checkups and a participation rate in mental stresscheckups of 99% or higher. We strive to improve health conditions,or prevent deterioration, by having our industrial physicians share
the health conditions of personnel with the Company. The Groupfurther conducts health enhancement training for all personnel
with the aim to deepen their understanding of health management.
These activities have received recognition and in FY2022 we werecertified as a Health & Productivity Management Outstanding
Organization for a third consecutive year. Going forward, one of
our targets is to continue improving our evaluation in this area.

 Future Challenges and Countermeasures

new graduates and mid-career hires based on a comprehensive
assessment of their experience, abilities, and skills, without making
any distinction between them. At the same time, we are working
to create an environment in which personnel can maximize theirindividual talents and skills. The appointment of a female Outside
Director was approved at the Annual General Meeting of
Shareholders in June 2023. In addition, promoting diversity will
increase the number of personnel with diverse personalities andvalues to help expand the diversity of the organization; hence, it
is important to unify the organization and personnel. We believethat the Hodogaya Chemical Group’s PURPOSE (Management
Philosophy) and VISION (Target Corporate Image) can fully unify
the organization and personnel.

Details can be found on our website.
https://www.hodogaya.co.jp/english/csr/
stakeholder/employee/#a41

As mentioned above, the Hodogaya Chemical Group has set
enhancement of engagement that: all executives and personnel canfeel job satisfaction as a strategic goal and are planning measures totackle it. Amid major global structural changes, however, it is possiblethat values regarding human resources will change. By keeping ourantennas high to collect information, we can grasp changes in humanresource management trends in a timely manner, and respond tochanges based on the Hodogaya Chemical Group’s PURPOSE

VOICE(Management Philosophy) and VISION (Target Corporate Image).
The Human Resources department is the driving force behindthese measures. They carefully grasp the operational issues of eachdepartment and company of the Hodogaya Chemical Group, thecharacteristics of the organization, and the engagement status of
officers and personnel. We recognize that it is necessary to provide
solutions and support for solving problems in the field. As the
Human Resources department, we will work together with eachdepartment and company to meet these expectations.

Creating Workplaces and Work Styles Where Everyone Can Play Active Roles

Using the head office relocation in 2022 as an opportunity, Hodogaya Chemical is implementing various
measures to improve the feeling of motivation and ease of work. Among a host of initiatives, we consolidated
all departments (including officers) to a single floor, introduced an office system where employees are free tochange desks at all work stations, eliminated fixed-line phones, and made telework a regular practice. Thisapproach to workplaces and work styles directly enables those in their child-rearing years and female employees
to play an active role. With this in mind, we believe a bright and open atmosphere is also very important. The
new head office features minimal walls and pillars, large open spaces and a lounge area, and a system thatallows personnel to connect with anyone at any time. However, there are still many issues to consider, such as
better communication and the appropriate scale for each area.
I want to continue helping to improve engagement from a woman’s perspective.

Hodogaya Chemical Co., Ltd.

Kazumi Omae
General Affairs Department

Integrated Report 2023

48

Guaranteeing Our Future

Respect for Human Rights

Related Materiality
 Respecting human rights

Guaranteeing Our Future

Community and Society

Related Materiality

 etails can be found on our website.
Dhttps://www.hodogaya.co.jp/english/
csr/stakeholder/community/ Contributing to communities

Basic approach

Basic approach

The Hodogaya Chemical Group believes that respect for human rights as stipulated in the Constitution of Japan is a fundamental
matter in carrying out its business activities. Identifying respect for human rights in our Sustainability Policy, we comply with laws
and regulations as well as highly ethical and normed behavior, respect the diversity, personality, and individuality of everyone
working at the Hodogaya Chemical Group, and ensure a sound and pleasant working environment free of discrimination andharassment, while also paying close attention to respect for human rights regarding partner companies in accordance with the
Corporate Action Guidelines and the Compliance Action Policy, which include items described in the United Nations “Guiding
Principles on Business and Human Rights.

The Hodogaya Chemical Group believes that as corporate citizens contributing to the sustainable development of the community
is an important activity in carrying out its business. We are engaged in various community contributions including the nurturingof children through chemistry, environmental conservation activities in the regions where the Group’s plants are located, andthe provision of tangible and intangible objects that are useful for the rich lifestyles of people.
In addition, if a disaster is designated as a major disaster by the Cabinet Office, where one of our key bases is located, and thedamage to the area around the base is severe, we donate a certain percentage of the previous fiscal year’s earnings to theimpacted prefecture. Most recently, when the damage sustained by Koriyama City from Typhoon Hagibis was designated a majordisaster in October 2019, we donated money to Fukushima Prefecture to support reconstruction.

Corporate Action Guidelines
https://www.hodogaya.co.jp/english/company/
philosophy/#a7

 Human Rights Policy
The Hodogaya Chemical Group formulated the Human Rights
Policy as part of its Sustainability Policy.
The Hodogaya Chemical Group regards respect for humanrights as the basis of its business activities and ensures thefollowing listed items in accordance with the Corporate Action
Guidelines, Compliance Action Policy, and Procurement Policy,
while also paying close attention to respect for human rights
regarding partner companies.
1. Complying with laws and regulations, highly ethical andnormed behavior
2. Respect for diversity, personality, and individuality of
everyone working at the Hodogaya Chemical Group
3. Creation of a sound and pleasant working environment free of
discrimination and harassment

Procurement Policy
https://www.hodogaya.co.jp/english/company/
philosophy/#a8

 Human Rights due Diligence Initiatives

The Hodogaya Chemical Group identifies human rights risks that
may arise through its operations.
We are conducting education and training, upgrading
workplace environments and systems, and engaging in supply
chain management to address human rights risks and as
preventative measures against identified risks.
We also closely monitor these activities to ascertain theeffectiveness of preventive measures and to promote
improvements on a continuous basis. We regularly conduct
surveys of partner companies using the Procurement Guidelines
Implementation Status Survey Sheet as part of efforts to monitor
the supply chain and to confirm whether compliance items areproperly implemented. In addition, we work to improve activities
to deepen mutual understanding while building mutual trust with
our partner companies.
A grievance mechanism is in place to detect and address risks
related to human rights.

49

Details can be found on our website.
https://www.hodogaya.co.jp/english/
csr/stakeholder/humanrights/

Compliance Action Policy
https://www.hodogaya.co.jp/english/company/
governance/compliance/ Initiatives to Tackle Human Rights Issues in the
Supply Chain

The Hodogaya Chemical Group has formulated the Procurement
Policy and the Procurement Guidelines and has included clauses
on compliance with the Procurement Guidelines in basic contracts
with partner companies. In addition to understanding the content
of these clauses, we also ask partner companies to undertake
initiatives to tackle human rights issues that are similar to those of
the Group. The Procurement Guidelines spell out the prohibitionof forced labor, prohibition of inhumane treatment, prohibition ofchild labor, prohibition of discrimination, proper wages, and work
hours as items to be complied with for the Human Rights andLabor Standards.
In line with these policies, we do not tolerate forced labor orchild labor in the supply chain.
Procurement Guidelines
https://www.hodogaya.co.jp/english/wp/wp-content/
uploads/2018/09/procurement_guidelines_20180918.pdf

 Establishment of a System to Prevent All Formsof Harassment

The Hodogaya Chemical Group established a system tocomprehensively prevent all forms of harassment that could beconsidered as violations of human rights. This includes workplacebullying, sexual harassment, pregnancy‑related harassment, or
harassment related to leave taken for childcare or other long‑term
nursing care. After clearly stipulating in our business policies andWork Rules that harassment is prohibited, we created harassment
prevention regulations and a manual in order to implement a
range of measures, including establishing a consultation desk andestablishing internal human rights due diligence. During
Compliance Training, personnel are regularly educated on theprevention of various types of harassment and about consultation
desks, and by continuing to do so, we will ensure a work
environment that respects human rights.
Inquiries from partner companies
https://www.hodogaya.co.jp/english/eng_cntct/

 Volunteer Weeding for Niida Honke

Koriyama Plant

Asuka Hara

Starting this year, Koriyama Plant personnel volunteered to takepart in volunteer weeding for Niida Honke.
A sake (rice wine) brewery in Koriyama City, Fukushima Prefecture,
Niida Honke brews and sells sake and fermented foods that include
Niida Shizenshu, a 100% pure sake made from brewer’s rice grownwithout the use of any pesticides or chemical fertilizers.
On the day of the volunteer event, 21 people from the Koriyama
Plant took part and borrowed Nakano-type weeding implements
to weed three rice fields.
A Niida Honke staff member taught us directly how to use theweeding implements and provided us with details of how sake ismade. It was very refreshing and fun to work in a rice field for the
first time and talk directly with local people. Through this volunteer
work, we were able to interact with local people. It was also a valuable
opportunity to experience nature
and Japanese culture. I would liketo continue to actively participate
in activities that are of benefit to
the local community and tosociety as a whole.

Column— Protecting forests with the power of chemistry —HODOGAYA AGROTECH Co., Ltd.’s role in smart forestry*
Accounting for two-thirds of Japan’s land area, forests contribute greatly to people’s lives, including by recharging sources of water, conserving
the country’s land, mitigating the effects of global warming, and supplying timber and forest products. Cyclic use is made of man-made forests
in a cut, use, and plant sequence, but there is a serious shortage of forestry workers to take on this work, and securing a workforce is becoming
a major problem. For several years after planting, it is a battle against weeds and trees that hinder the growth of the seedlings. Mechanization
having not progressed that far, clearing weeds under the scorching sun in midsummer can be said to be the most difficult task.
Engaged in the manufacture and sale of agricultural chemicals, HODOGAYA AGROTECH Co.,
Ltd. has established a new technology that sprays herbicides developed for use in forests bydrone. Devised to save labor, this development has led to an improvement in the working
environment by freeing workers from a sweaty, physically draining task. Also protecting seedlings
from wild animals by supplying repellents and seedling protection materials, we are working tosupport sustainable forestry with the power of chemistry.
* The term smart forestry refers to forestry that utilizes digital management and/or information and communication technologies (ICT)as well as to forestry by means of safer, more efficient automated machinery. (Forestry Agency)­— Collaborating and co-creating with local communities, connecting to the future —Contributing to regional revitalization through corporate hometown tax donations
With the aim of returning to society a portion of the profits earned by its OLED materials business, the Hodogaya Chemical Group has
donated to a corporate hometown tax program. Manufacturing those OLED materials, our Koriyama Plant is located at the east exit of JR
Koriyama Station in Fukushima Prefecture, and donating to the prefecture’s corporate version of the hometown tax—named Project tocreate a sustainable local agricultural model in collaboration with Fukushima University—aids in
its recovery. The decision was made for two other reasons: In the hope of countering themisinformation surrounding agricultural products and to thereby contribute to their promotion
and, as stated under Hodogaya Chemical’s management philosophy, to contribute to thecreation of an environmentally conscious society.
To contribute to the regional revitalization of Fukushima Prefecture, to which we are indebted
on a daily basis, the Hodogaya Chemical Group will continue to collaborate with all local
residents while striving for sustainable regional development.

Hodogaya Chemical Co., Ltd.

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50

Mechanisms to Support Sustainable Value Creation

Related Materiality

Corporate Governance

Details can be found on our website.
https://www.hodogaya.co.jp/english/company/
governance/ Enhance and strengthen corporate governance

General Meeting of Shareholders

Basic approach
By means of our original portfolio and environmentally friendly manufacturing with a focus on specialty products, the Hodogaya
Chemical Group aims to be a company that contributes to achieving a sustainable society and remains cognizant of value creation
for a wide range of stakeholders — including shareholders, customers, partner companies, local communities, and personnel. At
the same time, we consider top priority management objectives to include: developing economies and industries at home andabroad, contributing to the prosperity of society, ensuring the soundness and legality of business management, and achieving
gains in efficiency. In the process, we strive to enhance and strengthen our corporate governance system.

List of Corporate Governance Systems*1

Initiatives to strengthen corporate governance

Organizational Design

Company with an Audit & Supervisory Committee

Chairperson of the Board of Directors*2

President

Number of Directors

7

Number of Outside Directors
Number of female Directors
Number of Directors who are Audit & Supervisory Committee Members

3 (42.9%)
1
4

Chairperson of the Audit & Supervisory Committee

Internal Directors

Number of Audit & Supervisory Committee Members

4

Number of Outside Directors

3

Voluntary Committee

Nominating and Compensation Committee

Chairperson of the Nominating and Compensation Committee

Outside Director

Number of Nominating and Compensation Committee Members 5

June 2003

Introduction of executive officer system

March 2004

Abolishment of directors’ retirement benefits programMay 2006

Formulation of Basic Policy on Internal Control

November 2006

Establishment of Internal Control Department

June 2013

Start of appointment of Outside Directors

June 2015

Transition to a Company with an Audit & Supervisory Committee

July 2016

Introduction of stock‑based compensation plan

Board of Directors

Number of Outside Directors

3

January 2018

Shift into new management structure

Directors’Term of Office

1 year (2 years for Directors who are Audit &Supervisory Committee Members)

June 2019

Establishment of a Nominating and Compensation Committee

Adoption of an executive officer system

AdoptedMarch 2021

Respond to the revised Companies Act

Introduction of a performance‑linked compensation system

Compensation linked to short‑term performanceand compensation linked to mid‑ to long‑term
performance

May 2021

Release the Board of Directors skills matrix

May 2023

Review of the Board of Directors skills matrix

Financial Auditor

Grant Thornton Taiyo LLC*1 As of June 27, 2023
*2 To increase the speed and agility of corporate management, the Board of Directors entrusts the decision‑making
on important business operations to the Representative Director and President, excluding matters statutorilyprescribed to be exclusively deliberated by the Board of Directors.

Link to the Corporate Governance Report(In Japanese only)
https://www.hodogaya.co.jp/wp/wp-content/
uploads/2023/06/corporate_governance_20230628.pdf

Structure of corporate governance system

General Meeting of Shareholders
Election/Dismissal(excluding Directors who are Audit & Supervisory
Committee Members)
Consultation

Election/Dismissal

Board of Directors

Three Directors(including three Outside Directors)

Audit/Supervision

Recommendation
Appointment/Removal

Nominating andCompensation Committee

Supervision/Audit

Instruction

Delegate

Executive Officer in charge
Instruction/Supervision

Departments and group companies

51

Collaboration

Collaboration
Audit

Management Committee

ReportInstruction/Supervision

Election

ReportInternal Auditors
Department
Internal Control
Department

Instruction

President

Audit of financial statements
Audit of internal control
AdviceHeld 12 times in FY2022

As a general rule, the Board of Directors is held regularly once permonth, and on an ad hoc basis as necessary. To enable thoroughdiscussions based on diverse opinions and prompt, rational
decision‑making, the Board of Directors consists of members thatsatisfy the extensive level of experience and education requiredby Hodogaya Chemical.
In FY2022, the Board of Directors deliberated on authorizing theestablishment of a system for electronically providing materials for
the General Meeting of Shareholders (presented as an agenda
item at the 164th Annual General Meeting of Shareholders) andon authorizing quarterly financial results, financial summaries, andyear-end reports.
Moreover, the Board received regular reports on monitoringoutcomes regarding the progress status of the Mid-termManagement Plan SPEED 25/30 from the executive departments,
as well as reports on the status of progress regarding sustainability,
reports summarizing large-scale capital investments, and reports
on financing and investment in affiliated companies.
The Outside Directors also expressed useful comments andopinions from an objective and expert standpoint based on theirextensive experience, while the Board of Directors as a wholeappropriately shared information in a timely manner and discussed
such information from various perspectives.

Audit & Supervisory CommitteeHeld 11 times in FY2022

Audit & Supervisory Committee
Four Directors who are Audit & Supervisory Committee Members* Percentage of Outside Directors:
42.9%

In addition to the appropriate statutory disclosure and timely
disclosure, Hodogaya Chemical strives to proactively provide
shareholders and investors with relevant information, such as its
management strategies, in order to gain understanding of its
business activities. It engages in constructive bilateral dialogue
with shareholders in an effort to achieve effective corporate
governance that can contribute to sustainable growth andincrease its corporate value.
Hodogaya Chemical also establishes measures to ensure
shareholders can more easily attend the General Meeting of
Shareholders, such as avoiding dates on which many companies
hold meetings, early mailing of the Notice of Annual General
Meeting of Shareholders, provision of the Notice of Annual
General Meeting of Shareholders in English, and use of electronic
voting (smart voting) and an electronic voting platform.

Financial Auditor
Attorneys/certified public tax accountants

The Audit & Supervisory Committee audits the legality of businessexecution by Directors and Officers, appropriateness of theCompany’s business operations, internal control, and financial
status, etc., through attendance at important meetings andthrough timely and appropriate reporting.
The Audit & Supervisory Committee also maintains close
relations with the Financial Auditor to take necessary measures inrelation to the audit work.
In FY2022, the Audit & Supervisory Committee discussed audit
plans, the division of duties among the Audit & Supervisory
Committee members, approval for audit compensation for the
Financial Auditor, and audit reports from the Financial Auditor.
Moreover, the Committee also reported on the status of internal

control and internal audits, the Risk Management Committee, andthe audit status of affiliated companies.

Nominating and Compensation CommitteeHeld 14 times in FY2022
In order to strengthen the independence, objectivity, andaccountability of the Board of Directors’ functions on matters of
nomination and compensation, the Nominating andCompensation Committee serves as an advisory body to theBoard of Directors and deliberates and submits reports to theBoard of Directors on the election and dismissal of Directors andcompensation of Directors. The Board of Directors respects thecontent of such reports. An Outside Director serves as chairperson.
In FY2022, the Nominating and Compensation Committee
primarily reported and expressed opinions on the following matters.
The Committee confirmed the backgrounds and skills of eachcandidate in regard to the Director appointment proposals madeat the General Meeting of Shareholders, and found that the
proposal details were reasonable. Upon making a comparative
investigation of major companies in Japan, the Committee foundthat the compensation of Directors who are not Audit &Supervisory Committee members was in line with the detailed
policy and reasonable.
When appointing Executive Officers, General Managers of
departments, and Presidents of affiliated companies, theCommittee confirmed the detailed background of each candidate
and conducted interviews, leading the Committee to express theopinion that the proposal details were reasonable.

Executive Officers
The executive officer system was introduced to(1) promote management efficiency(2) enable quicker decision-making(3) specialize functions(4) strengthen supervisory and monitoring functions(5) strengthen our business management
Executive Officers who can fulfill these goals have been elected byPresident to execute the business of our core departments.

Outside Director Activity Status
In FY2022, the Outside Directors attended every Board of Directors,
Audit & Super visor y Committee, and Nominating andCompensation Committee meeting. The Outside Directors also
engaged in other activities, including:• Attendance at management and executive meetings (October
2022 and March 2023)• Attendance at executive compliance training (February 2023)• Communication with the Financial Auditor (August 2022)• Support for business activities (ongoing)

Appointment of Directors
Hodogaya Chemical positions the appointment of Directors as
one of the most important matters for the company, where theBoard of Directors determines the selection criteria for candidates
for Internal and Outside directors, and determines the selection ofcandidates for directors, including the next CEO, based on
deliberations by the Nominating and Compensation Committee.
Hodogaya Chemical Co., Ltd.

Integrated Report 2023

52

Mechanisms to Support Sustainable Value Creation

Corporate GovernanceTraining Plan for Successors

Training for Directors

 Director Compensation Plan

Hodogaya Chemical has established a policy on the election anddismissal of Directors and the election and dismissal of a
Representative Director and of Directors with special titles. In
regard to the selection of the Representative Director, theCompany emphasizes specific facts, including the qualities
required of Director candidates and that the candidates possess adignified presence as part of upper management. In addition, theCompany requires candidates to possess the ability to engage inmanagement from a commanding perspective and managementthat captures the trends and changes of the times, where theBoard of Directors makes a final decision following deliberations
by the Nominating and Compensation Committee.

Upon assuming office, the Internal Directors of Hodogaya
Chemical are provided with training to acquire knowledge of theroles and responsibilities expected of directors, laws andregulations, as well as compliance.
Independent Outside Directors are also provided explanationsof Hodogaya Chemical’s business, finances, organization, andother aspects, so that they can fulfill the roles and responsibilities
expected of them when they assume office. Thereafter, they
deepen their understanding of the company by visiting offices inJapan and overseas to check on the situation.
Additionally, training sessions for directors by outside attorneys
are held on a regular basis.

Hodogaya Chemical positions its Directors’ compensation plan
as a priority item for corporate governance. The basic requirements
in determining the compensation of Directors include: 1.
Compensation linked to performance; 2. Incentives to improve
corporate value; 3. Linkage to shareholder interests; and 4.
Securing and retaining talented personnel.
In consideration of the above, individual director compensation
is paid to directors within the range approved at the General
Meeting of Shareholders.
Determinations on the individual compensation of directors(excluding directors who are Audit & Supervisory Committee
members) are made by resolution of the Board of Directors at thediscretion of representative directors; however, bylaws stipulate that
representative directors shall determine compensation amounts
after deliberations by the Nominating and Compensation Committee.
Specifically, in order to appropriately incentivize contributions
to the Company’s sustainable growth, since FY2016, the Company
has adopted a stock‑based compensation plan for directors that,in addition to the existing compensation linked to short‑term Evaluation of Effectiveness of Board of Directors
Hodogaya Chemical has transitioned to a company with an Audit &Supervisory Committee in June 2015 and delegates decisions on
matters other than those specified in the Companies Act to the
President. In other words, the Hodogaya Chemical Board of Directors

focuses on a monitoring model that emphasizes supervision.
In order to verify whether the Board of Directors is fulfilling thismonitoring function, the Audit & Supervisory Committee and theBoard of Directors conduct evaluations every year based on thefollowing nine evaluation criteria.

performance, adds compensation linked to mid-to long‑term
performance.
As a result, the ratio of performance‑linked compensation to
overall director compensation has been approximately 40%, while,
within this 40%, the ratio of compensation linked to short‑term
performance versus compensation linked to mid‑ to long‑term
performance has been approximately 25% vs. 15%.
Compensation linked to medium- and long-term performance willtransition to a Board Benefit Trust system starting in October 2023.
Directors who are Audit & Supervisory Committee members
receive only a fixed‑amount base compensation in considerationof the fact that they are not involved with executive functions.
Composition of Director Compensation
Performance-linked
compensation

Fixed compensation

Short-term
25%

60%

Medium- tolong-term
15%

Evaluation Process
Corporate Planning Department and Audit& Supervisory Committee Secretariat

Total Director Compensation, etc. (FY2022)
Management Committee

Audit & Supervisory Committee

Board of Directors

Evaluation Results for FY2022
Evaluation Standards
1. A ppointment of multiple independent Outside Directors
2. N arrowing down matters for resolution

3. E
 stablishment of appropriate reporting matters

Status of Initiatives• Implemented. 3 out of 7 directors are independent Outside Directors (42.9%)• Deliberated on authorizing the establishment of a system for electronically providing materials
for the General Meeting of Shareholders (presented as an agenda item at the 164th Annual
General Meeting of Shareholders) and on authorizing quarterly financial results, financialsummaries, and year-end reports• Received regular reports on monitoring results regarding the progress status of the Mid-termManagement Plan SPEED 25/30 from the executive departments, as well as reports on the statusof progress regarding sustainability, reports summarizing large-scale capital investments, andreports on financing and investment in affiliated companies• Summarized reports on the execution of duties as the Mid-term Management Plan Progress Reporton Execution of Duties based on the individual reports

4. D eliberation on agenda items related to personnel affairs• Based on the reports of the Nominating and Compensation Committee, deliberated proposals forthe appointment of Directors to be submitted to the Annual General Meeting of Shareholders
and remuneration of Directors
5. P rovision of proper explanations beforehand to independent • M ailed agenda materials several days prior to the Board of Director meetings and offeredpreliminary explanations prior to the meetings
Outside Directors
6. P reparation of informative and easy-to-understand materials• Efforts are currently being made to create materials with attention to the comprehensiveness andease of understanding of the information so that Outside Directors can make accurate management
decisions.

7. A ppropriate time management (meeting frequency, time fordeliberations, etc.)• Held 12 times in FY2022, with approximately 2.5 hours for each meeting

8. I mplementation of effective and efficient organizational
audits9. F
 ollow up and respond to new trends in corporate
governance and the best way to operate the Board of
Directors

Overall Evaluation for FY2022

Future Initiatives

53• Implemented an organizational audit as a Company with an Audit & Supervisory Committee• The Audit & Supervisory Committee Secretariat was established as a system to assist the Audit &Supervisory Committee.
• The Audit & Supervisory Committee was held 11 times in FY2022, with approximately 1 hour foreach meeting• Considered the appointment of a female Outside Director (appointed at the June 2023 Annual
General Meeting of Shareholders)• Reviewed and considered the Board of Directors skills matrix (added Human Resource Strategy in
May 2023)• Conducted a Board of Directors report regarding sustainability promotion in order to strengthen
the involvement of management
As outlined in the table above, the Board of Directors satisfies the evaluation standards and achieves
the following two items, allowing for the conclusion that the Board of Directors functions as
intended(1) Expedited managerial decision-making and business execution(2) Enhanced the Board of Directors’ monitoring function• M ake a thorough investigation of monitoring activities intended to achieve the Mid-termManagement Plan SPEED 25/30• Provide more accurate, concise, and understandable Board of Directors’ meeting materials

Totals of different types of compensation (millions of yen)

Total
compensation(millions of yen)

Base compensation(cash)

Performance‑linked
compensation (cash)

Non‑monetarycompensation(Company stock)

No. of applicable
Directors

74

64

20

(10)

4

15

15

—

—

1

Outside Directors

22

22

—

—

3

Total

112

102

20

(10)

8

Type of Director

Directors (excluding Audit & Supervisory Committee
Members) (excluding Outside Directors)
Directors who are Audit & Supervisory Committee
Members (excluding Outside Directors)

 Stakeholder Communications

Hodogaya Chemical distributes the BUSINESS REPORT annually to
our shareholders as a means of communicating with them, and of
explaining the progress of Hodogaya Chemical’s Mid-termManagement Plan SPEED 25/30 to our shareholders.
Hodogaya Chemical streams videos on the website to explain
the Company’s financial results (first-half and year-end) andprogress of the Mid-term Management Plan to our shareholders
and investors. In addition, the Company makes individual visits toinstitutional investors.
Hodogaya Chemical has also established and disclosed ourpolicy for the return of profit to stakeholders.
Regarding profits earned, the Policy aims to maintain an
appropr iate balance bet ween
allocating profits to internal reserves
for investment and other activities
that will lead to the growth of the
Hodogaya Chemical Group, andreturning profits to shareholders.
For the year ended March 31, 2022,
the Company raised the annual

dividend per share from the existing 50 JPY to 60 JPY, and willfurther increase the dividend to 65 JPY for the year ended March
31, 2023. Moreover, in aims of increasing the dividend for threeconsecutive fiscal periods, the Company plans to raise thedividend to 75 JPY for the year ending March 31, 2024 (as disclosed
in the financial summary for the year ended March 31, 2023).

 Cross-shareholdings

When maintaining and strengthening stable transactional
relationships with suppliers and partners has been deemed tocontribute to greater corporate value for the Hodogaya ChemicalGroup, the Company will in some cases hold shares of theassociated company for the purpose of maintaining andstrengthening the transactional relationship.
The Board of Directors carefully examines and verifies the
purpose of each holding, as well as the relative standing between
benefits/risks and capital costs coinciding with the holding.
As a result of making a careful examination and verification fromthis perspective, the Board has determined that current holdings
are appropriate.

Hodogaya Chemical Co., Ltd.

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Mechanisms to Support Sustainable Value Creation

Outside Director Dialogue

Bringing new perspectives
to the table and contributing
to lively discussions as
Outside Directors

Director (Audit & Supervisory
Shuji Kato Outside
Committee Member)

How would you evaluate efforts by the Company
to strengthen the governance function?
Kato: I was appointed as Hodogaya Chemical’s first
Outside Director in 2013. The number of Outside Directors was
subsequently increased, and Hodogaya Chemical transitioned
to a Company with an Audit and Supervisory Committee.
Currently, the percentage of Outside Directors is 42.9% (see P.
51). Looking only at the current status of the Board of Directors,
I believe that the Company’s governance has been steadilystrengthened.
Sakai: I believe that the ideal form of governance is one
in which a company’s personnel, who are its stakeholders’representatives, can be brought up correctly and kept happy.
To do so, it is essential that a company ensures a sense ofawareness that fraud will not be tolerated and also ensures
psychological safety that enables personnel to express theiropinions in the case of questionable incidents from theviewpoint of company’s governance, while bringing about
improvements in the compliance awareness of each and every
member of personnel. The Company is repeatedly conducting
compliance training for all officers and personnel, andsuggestions for improvements and feedback regarding thetraining content are being provided. I believe that persistently
continuing these kinds of two-way initiatives will lead to thestrengthening of governance.

What is the state of discussions at Board of
Directors’ meetings?
Sakai: I recognize that the revitalization of Board of
Directors’ meetings is an important role for Outside Directors.
As much as possible, I review the materials to be submitted at
Board of Directors’ meetings and try to ask questions from new
perspectives while making specific suggestions and proposals.
Kato: The matters discussed at Board of Directors’
meetings are thoroughly discussed internally by the55

Director (Audit & Supervisory
Masaki Sakai Outside
Committee Member)Management Committee. Outside Directors have a
responsibility to bring up issues, ask questions, and to lead thediscussions. As the number of Outside Directors has increased,
we have reached the point at which opinions from different
standpoints emerge, and thus discussions at Board of Directors’
meetings have become extremely lively. Previously, a lot oftime would be spent reporting, but now most of the 2.5-3hours of a Board meeting is devoted to discussion. Remarks
from different points of view help broaden and deepen
discussions, while also uncovering new directions as well as
pitfalls that would not have been thought of within the
Company alone.

What do you regard as the challenges facing
the Hodogaya Chemical Group’s Board of
Directors?
Kato: One Outside Director was replaced in June 2023. Aschairman of the Nominating and Compensation Committee, I
was given the opportunity to exchange opinions with the
newly appointed replacement. Impressed by this person’s
career, experience, and knowledge in new fields, I was pleased
to make the nomination as an Outside Director. The nomineeon this occasion happened to be a woman who offers new
perspectives, and thus in line with the global trend of
promoting the appointment of female Directors, the diversityof the Board of Directors has been further expanded.
Sakai: Ms. Fujino, who was newly appointed as Outside
Director in this instance, also has experience as an Outside
Director at other companies. I would like to see her make useof that experience to add new perspectives, such as proposing
improvements to the method of operating the Board of
Directors. In terms of diversity, I think there is still a long way togo when it comes to racial diversity, but we need to firmly
promote the active participation of women, not only as Outside
Directors but also in officer and management positions.
Scandals such as cases of fraudulent inspections continue
to occur in Japanese companies. Based on the recognition thatfraud can occur in any organization at any time, I believe it isimportant to thoroughly check whether a company’s systems
for strengthening governance are constructed as they shouldbe, and whether internal controls and internal audits arefunctioning properly through questions and discussions at
Board of Directors’ meetings.

What do you consider will be necessary toachieve sustainable growth over the next 100
years?

Kato: At Hodogaya Chemical, we are disseminating
information on global, sustainability-related trends and theCompany’s efforts to all personnel in the form of “SUSTAINA
NEWS.” It is important for everyone—officer, including thePresident, department general managers, and all personnel—
to work with an awareness of sustainability issues. I would likethe Sustainability Development Committee to promote
activities that each and every member of our personnel canreadily understand.

Sakai: The future of a company is shaped by the creativityof each and every member of its personnel. We cannot hopefor the growth of a company without the creativity that stems
from personnel working in pleasant environments anddemonstrating their abilities. To enhance the creativity of its
personnel, Hodogaya Chemical needs to advance moredetailed human development programs, including examining
a development policy for each and every member of its
personnel, and create an environment that facilitates personnel
self-improvement. It is important to make the Company aplace where personnel can acquire skills and grow, a place
where they can achieve self-fulfillment, and a place where they
can gain a real sense of growth.
To promote personnel development, it is also necessary toenable managers to focus more on developing theirsubordinates by emphasizing human development skills intraining sessions for managers and by utilizing the results ofengagement surveys.
Furthermore, to respond to the labor shortage, I believe it isnecessary to expand and upgrade training sessions for seniorpersonnel and reskilling training, and to promote the utilization
and activation of senior personnel.

Sakai: Including the manufacture of OLED materials andintermediate products for smartphones and the developmentof materials for solar cells, the Company’s businesses are in fields
in which they can contribute to the sustainability of society
through energy and resource savings. Meanwhile, as far as CO2
emissions are concerned, there will be demand for measuresthat include Scope 3, which covers the entire supply chain, andthere are some issues that are incomprehensible by numbers
alone. The most important thing is to raise the awareness ofeach and every member of our personnel, based on thediscussions of the Sustainability Development Committee.

Kato: When formulating the Mid-term Management Plan
SPEED 25/30, we analyzed environmental changes up to 2050,
considered where the Company wants to be in 2030, andestablished numerical targets for 2025 through backcasting.
Since looking 100 years hence would involve a repetition ofthis, we are constantly thinking about what we should do toadapt to changes in the world and develop the Company’sbusiness. Personnel are the basis for this, and I am looking
forward to seeing how Hodogaya Chemical’s personnel
perceive the future and what they think the Company willcontinue to grow sustainably for the next 100 years.

Kato: To find new directions and have discussions, anattitude that emphasizes constant study is required. It is also
important to broadly monitor and learn about changes insociety, the economy, international affairs and other subject
areas on a daily basis and to reflect the findings of these studies
in discussions at Board of Director’s meetings.

Please tell us the expectations you have for the
Sustainability Development Committee.

Message from the Newly Appointed Outside Director
Drawing on the experience I have gained, I will devote my efforts to improving
the Hodogaya Chemical Group’s corporate value.
Up to now, corporate value tended to be biased toward financial information represented by numbers,so I think it was difficult to ascertain the overall picture of a company. Recently, however, it has been said that
non-financial information has a significant impact on corporate value, and as someone who has been
involved in personnel development for many years, I feel pleased about that.
The two Es in SPEED 25/30 stand for engagement and ESG. I have heard that Hodogaya Chemical has
begun to check engagement scores almost every month and to work to improve the percentage of female
managers, and the results are already beginning to appear. Going forward, I will continue to create anenvironment in which each and every officer and member of personnel can fully demonstrate their abilities
through their efforts toward SPEED 25/30. At the same time, I would like to draw on the experience I havegained and do my best so that both financial and non-financial aspects grow even more in value.

Shinobu Fujino
Outside Director (Audit & Supervisory
Committee Member)

Hodogaya Chemical Co., Ltd.

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Mechanisms to Support Sustainable Value Creation

Mechanisms to Support Sustainable Value Creation

Board of Directors

Compliance

Related Materiality Spreading compliance

Basic approach
In addition to fully recognizing and consistently applying compliance’s basic meaning of adhering to laws and regulations, the
Hodogaya Chemical Group conducts corporate activities keeping in mind its meaning of ensuring behavior in line with whatsociety demands of the Group.
As a result of earnestly implementing compliance and conducting fair, non‑discriminatory business activities, there have been
no personnel who have been fired and the Group has not had to pay fines or other penalties due to behavior that goes against
the legitimate interests of the Group or behavior that undermines trust in and the reputation of the Group.
The Group will also meet the social demands and expectations by fulfilling its responsibility to properly pay taxes in countries
and regions throughout the world.

Yuto Matsumoto

Kaoru Kasahara

Kenji Tsujitsugu

Representative Director, President and CEO

Director and Senior Managing Executive Officer

Director and Managing Executive Officer

Number of Company shares held 8,400 shares
Number of Board of Directors meetings
attended in FY2022
12/12

Number of Company shares held 5,500 shares
Number of Board of Directors meetings
attended in FY2022
12/12

Number of Company shares held 1,000 shares
Number of Board of Directors meetings attended
9/9
in FY2022 (after appointed as a Director)

Brief personal record
Mr. Matsumoto joined the Company in April
1983 and worked in the R&D department,
followed by the sales department, which
included overseas. He was appointed as theCompany’s Representative Director, President
and CEO in November 2016.

Brief personal record
Mr. Kasahara joined the Company in April
1981 and worked in the R&D and production
department operations. He was appointed a
Director and Senior Managing Executive
Officer of the Company in June 2020,
overseeing the Group’s R&D and Production
Departments.

Brief personal record
Mr. Tsujitsugu joined the Company in April
2021. Mr. Tsujitsugu utilized his extensive
experience and knowledge gained from his
previous experience in banking and securities
and worked in the Group’s corporate
planning and accounting operations. He wasappointed as Director in June 2022.

Satoshi Ebisui

Shuji Kato

Masaki Sakai

Shinobu Fujino

Director (Audit & Supervisory Committee
Member)Outside Director (Audit & Supervisory
Committee Member)

Outside Director (Audit & Supervisory
Committee Member)

Outside Director (Audit & Supervisory
Committee Member)

Number of Company shares held 8,600 shares
Number of Board of Directors meetings
attended in FY2022
12/12

Number of Company shares held 1,900 shares
Number of Board of Directors meetings
attended in FY2022
12/12

Number of Company shares held 500 shares
Number of Board of Directors meetings
attended in FY2022
12/12

Number of Company shares held
Number of Board of Directors meetings
attended in FY2022
-

Number of Audit & Supervisory Committee
meetings attended in FY2022
11/11

Number of Audit & Supervisory Committee
meetings attended in FY2022
11/11

Number of Audit & Supervisory Committee
meetings attended in FY2022
-

Brief personal record
Mr. Ebisui joined the Company in April 1973
and worked in the Corporate Planning andSales Departments. He served as a Director
and Senior Managing Executive Officer sinceJune 2010 and was appointed a Director(Audit & Supervisory Committee Member) in
June 2015.

Brief personal record
Mr. Kato joined the Ministry of International Tradeand Industry (now Ministry of Economy, Tradeand Industry) in April 1975. He was extensively
involved in the administration of trade andindustry and international affairs in the same
ministry and served on the board of directors ofa private company before he was appointed a
Director (Audit & Supervisory Committee
Member) of our Company in June 2015.

Number of Audit & Supervisory Committee
meetings attended in FY2022
11/11
Brief personal record
Mr. Sakai joined the Ministry of Agriculture,
Forestry and Fisheries in 1981. He was
extensively involved in the administration ofagriculture, forestry and fisheries, andinternational affairs in the same ministry. He
was appointed as a Director (Audit &Supervisory Committee Member) of ourCompany in June 2019.

Brief personal record
Ms. Fujino began career counseling business(private practice) in January 2002. She has
extensive experience in personnel andorganizational development and diversity
promotion and was appointed as a Director(Audit & Supervisory Committee Member) of
our Company in June 2023.

 Promotion Structure Compliance Education

The Hodogaya Chemical Group formulates various rules andregulations based on the Basic Policy on Internal Control, andstrives to achieve compliance through organized andcross‑sectional initiatives led by the Internal Control Department.
The Internal Auditors Department audits the status ofcompliance and provides advice and guidance for improvements
as required.
Over and above these activities, we have published the
Hodogaya Chemical Group Compliance Handbook, whichcontains data that is closely aligned to the Group’s operations. This
Handbook is distributed to all officers and personnel in a bid toraise awareness toward compliance.

In terms of cultivating and improving
compliance awareness, the Hodogaya
Chemical Group continuously offers all
Group officers and personnel training
and independent education usinge‑Learning as means to thoroughly
ensure compliance.
In addition, officers and management
personnel (including personnel one step prior to their appointment
to management) of the Group are required to take the Examinationof Compliance Proficiency for Practical Business (Primary Level) togain knowledge and increase understanding of compliance. The
percentage of qualified management personnel currently stands
at 99.2% (as of March 31, 2023).

 Internal Reporting System
As for the internal reporting system, the Hodogaya ChemicalGroup has not only designated an outside attorney and theInternal Control Department as contact points but also created asystem that clearly stipulates whistleblower protection and otherelements so as to prevent and quickly detect violations of laws,
regulations, rules, and corporate ethics, based on the Internal
Reporting Rules.
In addition, the status of internal reporting, and other matters
are reported to the Audit & Supervisory Committee.

 Board of Directors Skills Matrix
The following seven skills were selected for the Board of Directors Skill Matrix for achieving the SPEED 25/30 Mid-term Management Plan.
• Four skills to perform the basic functions as a Company: “Corporate management”, “Law & risk management”, “Finance & accounting” and“Human resources strategy”• Two skills to support the three pillars (Research and Development, Production and Sales) of our Company: “Business strategy” and “R&D,
technology and production”• One skill to support the Company’s business field that extends beyond borders: “International business”
Name

Corporate
management

Yuto MatsumotoKaoru KasaharaKenji Tsujitsugu

Satoshi EbisuiShuji Kato (Outside)



Law &
risk management



Masaki Sakai (Outside)
Shinobu Fujino (Outside)Finance &accounting

Human resources
strategy

Businessstrategy

R&D, technology
and production

International
business





































 Efforts Aimed at Eliminating Antisocial Forces
The Hodogaya Chemical Group has put in place specific guidelines
to ensure that it avoids forming any kind of relationship with
antisocial forces. The Group’s approach toward antisocial forces iscentralized in and managed by the General Affairs Department.
In addition, we have established a structure and systems to address
the issue of antisocial forces. This includes closely collaborating andexchanging information with such outside professionals as the police
and lawyers and to disseminate relevant information to each Group
office and company.

Compliance Training Calendar (FY2022)

Training

July
General training (1)AugustIssue-based training (1)DecemberGroup company officer
General training (2)training

February
Issue-based training (2)Officer training

Directors (including
Eligible
All officers and personnel All officers and personnel All officers and personnel Group company officers All officers and personnel Outside Directors)
participants
Executive officers

Content•C ompliance basics•Q uestions from theassigned materials and• F amiliarization with
the Compliancerules and regulations
Handbook•J-SOX• Information security•R espect for humanrights•Q uality‑related scandals•C ontract examination
and review•C ompliance basics• F amiliarization withrules and regulations•J-SOX•P
 ersonal information
management•H arassment education•A ntisocial forces
education•C ontract examination
and review•C GS Guidelines(Published by Japan’s
Ministry of Economy,
Trade and Industry)•Q uestions fromassigned materials• Revision of Disclosure
Office ordinances• General Meeting of
Shareholders-related
training, etc.

* Compliance basics and J-SOX training include information on the prevention of insider trading and whistleblowing.

 etails can be found on our website.
Dhttps://www.hodogaya.co.jp/english/company/governance/compliance/* The skill matrix includes the areas expected for each individual. It is not meant to be a comprehensive list of all forms of expertise and experience they may possess.

57

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

58

Mechanisms to Support Sustainable Value Creation

Risk Management

Related Materiality Thoroughly spreading risk

management

Details can be found on our website.
https://www.hodogaya.co.jp/english/company/governance/management/Data

6-year Financial Summary(millions of yen)

FY2017

Basic approach

Net sales

As for risks that harm the Hodogaya Chemical Group, including illegal conduct, poor quality, natural disasters, infectious diseases,
and information leaks, the Group has created its own risk management system to minimize damages.
In order to maintain and increase corporate value, fulfill its social responsibilities as a company, and generate sustainablegrowth for the Group, efforts are made to raise the risk awareness of all officers and personnel and promote risk managementby all personnel.

 Risk Management Committee
The Hodogaya Chemical Group has a Risk Management
Committee in place, in accordance with the Risk Management
Committee Rules.
The Committee holds regular meetings to share risk awareness,develop measures to reduce risks, review the progress of suchmeasures, and take initiatives to minimize damages based on the
Crisis Management Regulations, across the Hodogaya ChemicalGroup as a whole.
The Committee provides and reports on the details of their
discussions to the Board of Directors and the Management
Committee.

President
Management Committee
Risk Management Committee
Executive Officer in charge of the Internal Control Department
All Executive Officers in charge
General Managers of departments
Presidents of group companies

Secretariat
Internal Control Department
Departments and group companies
Risk Classification
No.
1
2
3
4
5
6
7

Classification
Sales risk
Purchasing and procurement risk
Manufacturing risk
Research & Development and intellectual
property risk
Environmental risk
Strategic risk
Financial risk

VOICE

• Extract risks identified through risk classification byeach department and Group company• Score each risk based on monetary importance andfrequency of occurrence• Formulate risk mitigation measures against
extracted risks• Implement measures to reduce risks

Risk Management Cycle• Report the details of reviews to the Board of
Directors and the Management Committee• Feed back the suggestions from these bodies toeach department and Group company• Secretariat selects risks with high scores• Risk Management Committee reviews progress of risk
mitigation measures* In particular, risks that impede KGI/KPI are recognized as Key Risk Factors (KRFs)

 Overall Risk Awareness for FY2023
For the current fiscal year, the Risk Management Committee
recognizes the following as overall risks.

Risk management structure

Committee chairperson
Committee members:

Risk Evaluation Procedures

No. Classification
8 Compliance risk
9 Legal, regulatory, and system revision risk
10 Operational risk
Information system and information leak
11risk
12 Human risk
13 Tangible asset risk–

[1] C oncern over an economic slowdown under an inflationary environment[2] F inancial tightening and interest rate hikes by national central banks,financial instability[3] C onflict between democracies and autocracies, economic decoupling

FY2019FY2020

FY2021

FY2022

38,69337,54837,771

41,19941,87943,324

Functional Colorants

10,997

10,912

11,855

16,503

17,581

17,990Specialty Polymers

12,046

12,327

11,717

10,255

10,760

11,580

Basic Chemicals

7,024

6,799

7,156

6,866

6,753

7,152

Agro‑Science

5,580

5,288

4,951

5,554

4,838

4,628

Logistics

2,820

2,035

1,932

1,848

1,780

1,874

Operating profit

3,903

3,028

2,902

5,444

6,421

3,701

Functional Colorants

1,413

966

1,182

4,028

4,598

2,602

Specialty Polymers

653

587

531

359

888

861

Basic Chemicals

805

545

589

436

291

(575)

Agro‑Science

350

409

205

222

330

457

Logistics

631

487

397

361

298

341

Ordinary profit

4,169

3,104

3,058

5,841

6,914

4,211

Profit attributable to owners of parent

2,862

1,883

1,858

3,119

3,251

2,223

Total assets

54,737

57,14054,90362,60966,44872,051

Net assets

35,86936,86037,04043,65447,91249,897

Net assets per share(yen)

4,210.82

4,299.75

4,294.69

4,885.72

5,230.81

5,405.73

Earnings per share(yen)

362.29238.40235.15394.25410.69280.65

(%)

60.8

59.5

61.8

61.8

62.3

59.5

8.8

5.6

5.5

8.6

8.1

5.3

Equity ratio
ROE

[4] C
 hanges in behavior due to COVID-19 (consumer, labor, and corporate)

Cash flows from operating activities

4,215

2,525

3,597

5,380

6,143

1,058

[5] A
 ction on the global environment

Cash flows from investing activities(960)(2,351)(2,060)(2,689)(3,569)(7,036)

Cash flows from financing activities(3,210)668(2,049)(424)(1,848)

2,288

50.0

50.0

50.0

50.0

60.0

65.0

1.5

1.4

1.3

1.2

1.3

1.4

13.8

20.9

21.2

12.6

14.6

23.1

1.14

0.75

0.72

0.99

0.84

0.56

 Information Security

Dividends per share

The Hodogaya Chemical Group recognizes that keeping company
information classified and ensuring information security are thebasics in business and one of our social responsibilities.
We have established Information Security Policy in which theappropriate acquisition, use, disclosure, and management of
information, information protection activities, security measures,and compliance with applicable laws and regulations, including
Unfair Competition Prevention Act and regulations on insider
trading, are specified.
Also, we conduct training for all personnel to increase theirawareness of information security.

(yen)

DOE
Dividend payout ratio

(%)

PBR

Statement of Responsibility
The Hodogaya Chemical Group has been publishing an integrated report since FY2017 in order to enable all our stakeholders to better understand our
mid- to long-term growth and improvement of corporate value.
The Hodogaya Chemical Group Integrated Report 2023 introduces the financial and non-financial initiatives aimed at realizing the vision of the

Toward Greater Legal Awareness at the Hodogaya Chemical GroupAs a member of the Legal Department, I conduct internal awareness-raising activities regarding laws and other rules
through internal training and publishing pamphlets. Yet I do not believe it is easy to attain a concrete image of themeaning and purpose of these rules. I therefore strive to convey the meaning and purpose of these rules to everyone
in each department and Group company in an easy-to-understand manner. Specifically, as part of my awarenessraising activities, I use everyday examples as the subject matter, as well as suitable figures and tables, to minimize thevolume of materials and to maintain simplicity. Moreover, I make improvements to ensure that everyone understands
the importance of these rules as part of their regular business activities in a concrete manner, for example byencouraging personnel to go back to the basic meaning and purpose as they think about these rules when considering
contracts and engaging in everyday work.
I will continue to promote these efforts with the goal of raising legal awareness at the Hodogaya Chemical Group.

59

FY2018Hodogaya Chemical Group, based on the progress of the third year of our Mid-term Management Plan. In addition to explaining the issues that the
Hodogaya Chemical Group is currently prioritizing in order to follow our corporate motto of Your Dream is Our Business for the next 100 years, we havepresented a value creation story that links sustainability initiatives and other measures to financial value and expanded our disclosure of information inline with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) to fulfill our responsibilities as a chemical manufacturer.
As the officer charged with overall responsibility for the production of this report, I hereby declare that the production process is legitimate, and theinformation contained herein is accurate.
We hope that this report will help all our stakeholders, including shareholders and investors, to understand the Hodogaya Chemical Group’s efforts
to achieve sustainable growth and a realize a sustainable society.

Daiki Nishioka

Shinichi SatoManaging Executive Officer

Legal Department

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

60

Data

Primary ESG Data

Corporate Data
FY2017

FTSE Russell score (published in June of each year)
E
Energy consumption
(kl)Energy intensity
(kl/millions of yen in sales)
Greenhouse gas emissions
Greenhouse gas emissions Scope 1
(t‑CO2)
Greenhouse gas emissions Scope 2
(t‑CO2)
Scope 1 + Scope 2
(t‑CO2)
Greenhouse gas emission intensity
(t‑CO2/millions of yen in sales)
Prevention of air pollution
SOx (sulfur oxide) emissions(t)NOx (nitrogen oxide) emissions(t)
Dust emissions(t)Prevention of water pollution
Water usage
(kt)
Water discharge volume(kt)
COD (chemical oxygen demand) emissions(t)Industrial waste
Industrial waste volumes (t)Industrial waste from plastic products
(t)Industrial waste recycle volume(t)
Industrial waste final disposal volume(t)
S
Employees(persons)
Percentage of female managers
(%)
Percentage of female employees
(%)
Percentage of non-Japanese employees
(%)
Percentage of mid-career hires*
(%)
Percentage of disability employment*
(%)
Female personnel taking long‑term childcare leave*
(persons)
Percentage of female personnel taking long‑term childcare leave*
(%)
Male personnel taking long‑term childcare leave*
(persons)
Percentage of male personnel taking long‑term childcare leave*
(%)
Long‑term nursing care leave(persons)
Gender wage gap*
(%)
Average monthly overtime per employee*
(hours)Percentage of personnel taking paid holidays*
(%)
Percentage of personnel taking refreshment leave*
(%)
Average annual training hours per employee*
(hours)Separation rate (calculated using number of regular employees
who leave the company during the year and excluding
employees who joined the company during the year)*
(%)
G
Percentage of Outside Directors
(%)
Number of Board of Directors meetings
Number of Nominating and Compensation Committee meetings
Number of anticorruption violations
Total amount of political donations
(yen)

-

FY20182.2

FY20192.3

FY20202.4

FY2021
2.7

FY20223.0

28,5100.737928,1290.7491

27,4400.726527,312
0.662929,2150.6976

27,562
0.636225,55425,99951,553
1.3342

25,794
24,73750,531
1.345824,99923,827
48,8261.2927

24,72923,301
48,0301.165826,09323,15449,247
1.175925,064
20,65845,722
1.0554

0
6.54
0.08

0
4.92
0.08

0
4.72
0.04

0
4.99
0.03

0
4.94
0.02

0
3.17
0.00

10,794
10,51955.0

10,505
10,162
54.3

10,334
9,858
46.3

10,552
10,13054.4

10,781
10,64350.8

10,68010,684
64.2

2,569

2,452
2,753
3,017
Started calculating from FY2022
1,471
1,090
1,736
430
257
200

2,746

3,477
126
2,190
85

976
440
719
8.9
17.7
17
32
1.3
2
100
0
0
0

731
739
789
11.0
10.8
11.2
17.9
18.4
18.6
18
21
23
33
32
33
1.5
1.9
2.3
1
3
1
100
100
100
0
4
1
0
24
14
0
0
0
Started calculating from FY2022
11.2
11.9
12.0
10.3
66
68
68
65
—
95
94
93
Started calculating from FY2021

1,615
52
834
10.8
18.0
26
34
2.5
6
100
9
56
0
11.6
69
93
109.0

890
11.0
19.5
31
35
2.6
1
100
10
83
0
84.8
11.3
71
95
106.6

0.7

1.5

3.2

1.5

3.3

1.6

37.8
16
—
0
0

42.9
15
—
0
0

42.9
17
7
0
0

42.9
16
10
0
0

42.9
16
12
0
0

42.9
12
14
0
0

Investment

ExpenseInvestment

Expense

120
20
100
120

179
43
16
120
5
2
92
13
291

125
38
87
4
129

230
30
11
189
9
4
46
15
304

* Data available for Hodogaya Chemical only

Corporate data (As of March 31, 2023)
Company Name	Hodogaya Chemical Co., Ltd.
Head Office	1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo
105-0021 Japan
TEL +81-3-6852-0300 (Main Switchboard)
Foundation 	
December 11, 1916
Paid‑in Capital 	11,196 million yen
Employees	890 (Consolidated),
471 (Hodogaya non‑consolidated)

Stock information (as of March 31, 2023)

Description of businessPrimarily producing and selling organic industrial chemicals and conducting
various related businesses, including logistics and commissioned research anddevelopment.
OfficesHead Office (Minato‑Ku, Tokyo), Osaka Branch Office (Osaka City, Osaka Prefecture),
Koriyama Plant (Koriyama City, Fukushima Prefecture), Yokohama Plant (Yokohama
City, Kanagawa Prefecture), Nanyo Plant/Nanyo Branch Plant (Shunan City,
Yamaguchi Prefecture), Tsukuba Research Laboratory (Tsukuba City, Ibaraki
Prefecture), Taipei Office (Taipei, Taiwan)

Main shareholders (Top 10 Companies)(1) Total number of authorized shares 20,000,000(2) Total number of shares issued 8,413,726(including 409,635 treasury shares)(3) Number of shareholders 7,130 (+588 year over year)

Distribution of shares by shareholder
Treasury shares

4.9%
Non‑Japanese
corporations, etc.

Number ofshares held

Percentage ofshares held

The Master Trust Bank of Japan, Ltd. (Trust Account)934,300

11.7

Tosoh Corporation

700,000

8.7

Custody Bank of Japan, Ltd. (Trust Account)516,700

6.5

Mizuho Bank, Ltd.

298,704

3.7

Name of shareholder

The Norinchukin Bank

227,430

2.8

Financial instruments
business operator

Meiji Yasuda Life Insurance Company

164,535

2.1

2.1%

The Toho Bank, Ltd.

148,399

1.9

Mitsui Sumitomo Insurance Company, Limited

141,400

1.8

The Yamaguchi Bank, Ltd.

130,000

1.6

MUFG Bank, Ltd.

120,107

1.5

Financial institutions

40.1%

11.8%

* The Company holds treasury shares (409,635 shares), which are excluded from the major shareholders mentioned
above. Treasury shares (409,635 shares) do not include shares held in trust under our Japanese-Employee Stock
Ownership Plan (J-ESOP) (80,000 shares).
* The shareholding ratio is calculated by excluding the number of treasury shares.

Individuals and others

Other corporations

19.3%

21.8%

Main independent evaluations
Health & Productivity
Management Outstanding
Organization 2023

FTSE Russel score: 3.0 (FY2022)(FTSE Blossom Japan Sector Relative Index constituent)

Environmental Accounting* (Unit: Million JPY)
FY2021Business area cost
(1) Pollution prevention cost(2) Global environmental conservation cost(3) Resource circulation cost
Upstream/downstream costs
Administration cost
R&D cost
Social activity cost
Environmental remediation cost
Total

FY2022

FTSE Russell confirms that Hodogaya Chemical Co., Ltd. has been independently assessed according
to the index criteria, and has satisfied the requirements to become a constituent of the FTSE Blossom
Japan Sector Relative Index. The FTSE Blossom Japan Sector Relative Index is used by a wide variety
of market participants to create and assess responsible investment funds and other products.

Eco Rail Mark•Received Eco Mark Certification
Hodogaya Chemical Co., Ltd.

EcoVadis

Hodogaya Construction Products Co., Ltd.
•Certified Products
Sakana Guard, Peracetic acid, Sodium percarbonate,
Charge control agent TP‑415, Chloro‑IPC, Eco Proof* Based on the “Environmental Accounting Guidelines 2005” of the Ministry of the Environment

61

Hodogaya Chemical Co., Ltd.

Integrated Report 2023

62

Overseas Network
HODOGAYA CHEMICAL (U.S.A.), INC.

HODOGAYA CHEMICAL EUROPE GmbH

●●●

●●●

[Description of business]
Purchase and sales of chemical products
andtheir raw materials
HODOGAYACHEMICAL EUROPE GmbH
[Location][Description of business]Düsseldorf, Germany
Purchase and sales of chemical products
and their raw materials[Location]
Düsseldorf, Germany[Description of business]
Purchase and sales of chemical
products
HODOGAYA CHEMICAL (U.S.A.), INC.
[Location][Description of business]
New York State, U.S.A.
Purchase and sales of chemical
products[Location]
New York State, U.S.A.

●●●

●●●

HODOGAYA (SHANGHAI)
TRADING CO., LTD.

HODOGAYA CHEMICAL KOREA CO., LTD.
Head office and research facilities●●[Description of business]
HODOGAYA(SHANGHAI)
Purchaseand salesof chemical products andtheir
raw materials
TRADING
CO., LTD.
[Location][Description of business]
Shanghai, China
Purchase and sales of chemical products andtheir raw materials[Location]
Shanghai, China●[Description of business]
HODOGAYACHEMICAL
KOREA
CO., LTD.
Purchase,sales andR&D of chemical
products[Location]
Head office and research facilities
Chungcheongbuk-do, South Korea[Description of business]
Purchase, sales and R&D of chemical products[Location]
SFC
CO., LTD.
Chungcheongbuk-do, South Korea[Description of business]
Manufacturing and sales of OLED materials andBiomaterials
SFCraw
CO.,LTD.
[Location][Description of business]
Chungcheongbuk-do, South Korea
Manufacturing and sales of OLED materials andBio raw materials
REXCEL
CO., LTD.
[Location][Descriptionof business]
Chungcheongbuk-do,
South Korea
Manufacturing and sales of organic materials and electronic materials[Location]
Chungcheongbuk-do,
South Korea
REXCEL CO.,
LTD.

●●

●

●

Taipei Office[Location] Taipei, Taiwan●

Taipei Office[Location] Taipei, Taiwan●

Distribution Centers (Antwerp, Shanghai, New Jersey)● Functional Colorants● Specialty Polymers● Agro-Science●

Distribution Centers (Antwerp, Shanghai, New Jersey)● Functional Colorants● Specialty Polymers[Description of business]
Manufacturing and sales of organic materials and electronic materials
Major DomesticSouthGroup
Companies[Location] Chungcheongbuk-do,
Korea● Agro-Science

Domestic
Osaka Branch Office Network[Location] Osaka City,
Osaka Prefecture

Osaka Branch Office
Nanyo Plant/Nanyo
BranchPlant[Location]
Osaka
City,
Osaka Prefecture[Location] Shunan City,
Yamaguchi Prefecture

Nanyo Plant/Nanyo Branch Plant

Polymer materials, Construction
materials,
chemicals[Location]Specialty
Shunan City,
Yamaguchi Prefecture
Yokohama Plant
Polymer materials, Construction
materials,
Specialty chemicals[Location] Yokohama
City,
Kanagawa Prefecture
Yokohama Plant
Dyes and colors[Location] Yokohama City,
Kanagawa Prefecture
Dyes and colors

Koriyama Plant[Location] Koriyama City,
Fukushima Prefecture
OLEDKoriyama
materials,Plant
Imaging
materials, Dyes and colors,[Location] Koriyama City,
Hydrogen peroxide,
Fukushima Prefecture
Agricultural materials
OLED materials, Imaging
materials, Dyes and colors,
Tsukuba Research Laboratory
Hydrogen peroxide,
Agricultural
materials[Location] Tsukuba
City,
Ibaraki Prefecture

Tsukuba Research Laboratory

HeadTsukuba
Office City,[Location]
Ibaraki Prefecture[Location] Minato-Ku, Tokyo
Head Office[Location] Minato-Ku, Tokyo

1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo 105-0021 Japan
TEL +81-3-6852-0300 (Main Switchboard)
https://www.hodogaya.co.jp/english/▶ KATSURA SANGYO CO., LTD.
Purchase and sales of chemical products

Major Domestic Group Companies▶ Hodogaya Construction Products Co., Ltd.
and salesof construction▶Manufacturing
KATSURA SANGYO
CO.,
LTD.
products
Purchase and sales of chemical products▶
Laboratory
Co.,Co.,Ltd.Ltd.
▶ Hodogaya
Hodogaya Contract
Construction
Products
Contract-based
analysisdevelopment
Manufacturing andsalesandof constructionofchemical products
products▶
Logistics
Co., Ltd.
▶ Hodogaya
Hodogaya Contract
LaboratoryCo., Ltd.
Warehousing
andlogistics
Contract-based
analysisand developmentof chemical products▶ HODOGAYAUPL Co., Ltd.
and salesCo.,of agricultural▶Manufacturing
Hodogaya Logistics
Ltd.
chemicals
Warehousing and logistics▶
▶ HODOGAYAHODOGAYA AGROTECHUPL Co., Ltd.Co., Ltd.
Manufacturing
Manufacturing andand sales
sales ofof agricultural
agriculturalchemicals
chemicals▶ HODOGAYA AGROTECH Co., Ltd.
Manufacturing and sales of agriculturalchemicals* As of March 31, 2023