Denka
DenkaReport
ReportIntegrated
IntegratedReport
Report0002ⓢ0010
0002ⓢ0010
SM SM
PrintedPrintedin Japan,in Japan,Published
Publishedin January
in January
20212021
by Denka
by DenkaCompany
Company
LimitedLimitedOur Management Resources■ Editorial Policy

The Denka Report 2020 printed brochure is
aimed at providing our stakeholders,
including shareholders and investors, with arobust communication tool that focuses on
conveying what we have been doing to create
new value over the medium to long term fromthe viewpoint of addressing environmental,social and governance (ESG) issues.
In addition, we operate an ESG-themed
corporate website to ensure thecomprehensive and timely disclosure of
relevant information.

Our Corporate Philosophy
Following the celebration of its centennial in 2015,
Denka established The Denka Value, a corporate philosophy.
The Denka Value consists of the Denka Mission and the Denka Principles,
a set of precepts aimed at guiding the actions of all Group employees.

(Corporate philosophy)■ Coverage

The Denka Value
Denka Mission

Fiscal 2019 (April 1 2019 through March 31,2020) in principle; this report includes
additional information on some initiatives
undertaken subsequent to the fiscal 2019
year-end while presenting data on numericaltargets for and performance statistics from thepast several fiscal years.
Date of publication: January 29, 2021

Taking on the challenge of expanding the■ Scopepossibilities of chemistry to create new value andIn general, this report encompasses topics on
the Denka Group’s business sites within thescope of consolidation. However, somearticles are based on data gleaned outside
the scope of consolidation. These articles
individually specify the organizations subject
to reporting.

contribute to sound social development.

Denka Principles

We:• Boldly confront challenges with determination and■ Guidelines

SDGs

sincerity.

・The GRI Standards of the Global Reporting
Initiative (GRI)
・The Environmental Reporting Guidelines
2018 of Japan’s Ministry of the Environment
・The International Integrated Reporting
Framework of the International Integrated
Reporting Council (IIRC)• Think and take action today with the future in mind.
• Deliver new values, and inspire customers throughinnovative Monozukuri.*• Respect the environment and create a cheerful workplacethat prioritizes safety.

■ Inquiries

Corporate Planning Dept., Denka Company Limited
TEL. +81-3-5290-5510
FAX. +81-3-5290-5149
Nihonbashi Mitsui Tower, 1-1, Nihonbashi-Muromachi
2-chome, Chuo-ku, Tokyo 103-8338, Japan• Contribute to a better society, whilst taking pride in being atrusted corporate citizen.
*Japanese-style craftsmanship

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

Environmental Strategies

CONTENTS

23 Initiatives to Achieve Carbon-Neutral Status

Our Management Resources
01
03
05
07
09

Growth Strategies

Our Corporate Philosophy

27 Progress of the Denka Value-Up Management Plan
33 Introduction of Innovative Processes
37 Nurturing and Better Utilizing Human Resources

Business at a Glance
Financial and Non-Financial Highlights
Trajectory of Denka’s Growthwith Specialized Skills

Our Strengths

39 Placing the Utmost Priority on Safety
41 Quality Assurance Management

Value Creation

11 A Message from the President
13 Our Value Creation Process
15 The Denka Group’s Vision for 2030 regarding Its
Social Responsibilities and Contributions

17 Dialogue with an External Specialist
21 Special Feature: Our Healthcare-Related Operations

01

Business Strategies
43
45
47
49
51

Life Innovation
Electronics & Innovative Products
Infrastructure & Social Solutions

Corporate Governance
53
55
56
57
59
61
62

■ Overview of the Denka Report 2020 and

Other Supplementary Reporting Tools

Basic Approach to Corporate GovernanceConcepts on the Appointment of Directors

Financial information

The Denka Group’s Internal Control
A Message from an Outside Director

1

Directors

Non-financial information

Denka Report 2020 printed brochure(integrated report)

Promoting Thorough Compliance

WebsiteRisk Management
IR information

Financial Information

65 Consolidated Financial Statements

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

Corporate Information

70 Corporate Information

Elastomers & Performance Plastics
Living & Environment Products

02

2

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

1

This report is aimed at providing our stakeholders, including shareholders andinvestors, with a robust communication tool that focuses on conveying what wehave been doing to create new value over the medium to long term from theviewpoint of addressing ESG issues.

2

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

Our Management Resources

Business at a Glance
Others andintersegment
elimination¥36.2 billion

Elastomers &Performance Plastics¥149.3 billion

Life Innovation¥35.5 billion
Healthcare

The environment and energy

High-value-added infrastructure

Create a clean and safe futuresociety

Support infrastructure development
and improve accessibility

Fiscal 2019
Consolidated Net Sales
by Segment

Addressing needs for such products as expansive additives,
quick-setting agents and high-strength materials, we provide
cutting-edge materials and solutions for infrastructuredevelopment while aiding in efforts to repair aged facilities andlengthen building life.

billionHelp people around the world
enhance their quality of life
In addition to illness prevention and early diagnosis via theprovision of vaccines and diagnostic reagents, we are
expanding into cancer remedies and gene alteration analysis.

We employ such core technologies as cutting-edge inorganic
materials in product development with the aim of better
satisfying the latest needs for solutions that help achieve zero
emissions and support autonomous driving systems.

Life Innovation

Electronics &Innovative Products

Vaccines¥380.8

Infrastructure &Social Solutions

Diagnostic reagents

Spherical alumina

NATMICDENKA BLACKTOYODRAIN(underground drainpipes for
agriculture and construction use)

¥37.0 billion

Key Operations
We are increasing the “specialty grade” ratio in our productlineup to secure resilience in the face of changes in external
conditions as we shift our focus to the solution business.

Elastomers &Performance Plastics

Living &Environment
Products

Examples of chloroprene Examples of products
rubber-based
made using DENKA
automobile parts
TRANSPARENT POLYMER(styrene-based functional resin)

Main Group Companies

Living &Environment
Products

Infrastructure &Social Solutions¥54.8 billion
Electronics &Innovative Products¥68.0 billion

A food container

TOYOKALON(synthetic fiber for wigs
and hairpieces)

Japan

Worldwide• Kanazawa Denka Ready-Mixed Concrete Co., Ltd.

• Denak Co., Ltd.

• Denka Renotec Co., Ltd.

• Denka Advanced Materials (Suzhou) Co., Ltd.

• Denka Corporation• DENKA SEIKEN (SHANGHAI) Co., Ltd.

• Kanto Acetylene Industry Co., Ltd.

• Denka Azumin Co., Ltd.

• Toyo Styrene Co., Ltd.

• Denka Advanced Materials Vietnam Co., Ltd.

• Denka Electronics Materials Dalian Co., Ltd.

• DENKA SEIKEN UK Limited• Kanbara Ready-Mixed Concrete Co., Ltd.

• Denka Elastlution Co., Ltd.

• NAKAGAWA CO., LTD.

• Denka Advantech Pte Ltd• Denka Infrastructure Technologies Pte Ltd• DENKA SEIKEN USA Incorporated• Kyusyu Plastic Industry Co., Ltd.

• Denka Consultant & Engineering Co., Ltd.

• Nishi-nihon Koatsu Gas Co., Ltd.

• Denka Chemicals Development Suzhou Co., Ltd.

• Denka Infrastructure Technologies Shanghai Co., Ltd.

• Denka Singapore Pte Ltd• Kurobegawa Electric Power Company• Denka-KEW Genomics LLC• Higashi Nihon Koatsu Co., Ltd.

• Denka Chemicals GmbH• Denka Inorganic Materials (Tianjin) Co., Ltd.

• Denka Taiwan Corporation• Sanshin Bussan Kabushiki Kaisha• Denka Kojundo Gas Kabushiki Kaisha• Hinode Kagaku Kogyo Kaisha. Ltd.

• Denka Chemicals Holdings Asia Pacific Pte Ltd• Denka Korea Co., Ltd.

• Icon Genetics GmbH

• Juzen Chemical Corporation• Denka Cosmetics Limited Company• Akros Trading Co. Ltd.

• Denka Chemicals Hong Kong Co., Ltd.

• Denka Life Innovation Research Pte Ltd• PT. ESTOP Indonesia• Shonan Sekisui Kogyo Kabushiki Kaisha• Denka Ready-Mixed Concrete Takayama Co., Ltd.

• Denka Chemicals Shanghai Co., Ltd.

• Denka Middle East and Africa FZCO

• Denal Silane Co., Ltd.

• Denka Polymer Kabushiki Kaisha• Denka Construction Solutions Malaysia Sdn Bhd• Denka Performance Elastomer LLC

03

04

Our Management Resources

Financial and Non-Financial Highlights(Fiscal 2019)

Financial
Overseas sales /overseas sales ratio

Net sales

380.8

156.3 /
41.0%

Net sales(Billion yen)369.9 362.6

395.6

31.6 /
8.3%

Billionyen

Billionyen

413.1

Operating income /operating income ratio

Overseas sales(Billion yen)

Operating income(Billion yen)Overseas sales ratio(%)

Operating income ratio(%)

168.7

380.8

Billionyen

176.1

138.7 141.5
42.6
37.5

39.0

156.3

33.7

30.6

34.2

8.5

41.0

8.2

8.3

FY 2015 2016 2017 2018 201922.7 /
9.1%

31.6

25.0

23.0
19.5

501.4 /
6.1%
473.8
443.9 454.9

10.3

10.0

6.8
9.1

8.3

FY 2015 2016 2017 2018 2019

41,954-36,303
9,544

Operating CF

Investment CF

Financial CF

ROA（%）

483.8 501.4

Operating CF
Financial CF
Million yen

44,014

Millionyen
Millionyen
Millionyen

Investment CF

48,776

41,95439,55732,660

6.9

6.1

9.3

FY 2015 2016 2017 2018 201922.7

Total assets(Billion yen)

18.1

8.3

Cash flow (CF)Billionyen

ROE（%）

Profit attributableto owners of the parent(Billion yen)

7.1

FY 2015 2016 2017 2018 2019

Total assets / ROA

Billion
yen

25.8

42.6

Profit attributable toowners of the parent / ROE

9,544

6.1
5.2

-7,348-19,319-22,258-34,979

FY 2015 2016 2017 2018 2019-15,858-29,298-8,408-26,176-36,303

FY 2015 2016 2017 2018 2019

Non-Financial

Development

Power generation

Promoting open innovation, we are developing new
products and technologies that contribute to asustainable society.

Offices

To produce clean energy, we are employing a total of
15 hydroelectric power plants in addition to operatingcogeneration systems fueled by natural gas.

Production and sale

We are promoting work style reforms and workforce
diversity at our business bases at home andabroad.

Giving due consideration to our environmental footprint,
we pursue sustainable manufacturing operations todeliver safe and reliable products.

Purchasedenergy40％
Hydroelectric
power generation

R&D expenses

15.0

40%

Billion
yen

13.0

13.9

14.6

Breakdown
by energy
sourceWaste heat

40％

Thermal(natural gas)

18％

2％

Trend in energy consumption intensity
Trend in production volume

R&D expenses (billion yen)

11.8

Hydroelectric

15.0

0.95
0.95

0.95
0.92

1.00

0.91

0.94
0.94

12.7

days

Average number of annual
paid leave days utilized

10.5
9.6 9.7

0.94
0.90

Average number ofannual paid leavedays utilized

11.8

Ratio of female
employees(non-consolidated basis)

14.4% 393

kg/t-Cement

Ratio of female employees(non-consolidated basis)（%）

14.1 14.4

12.7

Note:
The fiscal 2013 level = 1

Volume of waste and industrial
byproducts accepted fromexternal sources and used to
produce one ton of cement

7.8 8.2 8.7

Volume of waste and industrial
byproducts accepted fromexternal sources and used to
produce one ton of cement（kg/t-Cement）

Volume of CO2 emissions
from energy sources andnon-energy sources

1,950

Final disposal
amount of waste

42

thousand
tons

Volume of CO2 emissions(thousand tons)

365 393 367 401 393

tons

Final disposal amount (tons)

153

119

88
49 42

FY 2015 2016 2017 2018 2019

FY 2015 2016 2017 2018 201905

FY 2015 2016 2017 2018 2019

FY 2015 2016 2017 2018 2019

FY 2015 2016 2017 2018 201906

FY 2015 2016 2017 2018 2019

FY 2015 2016 2017 2018 2019

Our Management Resources

Trajectory of Denka’s Growth
Taking on the Challenge of Expanding the Possibilities
of Chemistry for More than a Century
The Denka Group has striven to create a wealth of products ever since its founding, beginning with
the innovative application of calcium carbide production technologies and expanding into
operating a pharmaceutical business that today boasts an established track record spanning morethan 70 years. Reflecting the needs of the times in our output, we have thus pursued the ultimate in
Monozukuri (Japanese-style craftsmanship).
Made an entry into the pharmaceutical field
Dr. Tsuneichi Fujiyama, the pioneerof the carbide industry in JapanIn 1902, at a plant in Sankyozawa, near Sendai city, Dr.
Fujiyama became the first in Japan to successfully
manufacture calcium carbide. This was only about ten
years after the world’s first trial production of calcium
carbide by a Canadian chemist. He also introduced
technology for the manufacture of calcium cyanamide(nitrogenous limestone) from calcium carbide to Japan.
Moreover, he himself developed a steady stream of
new technologies and opened the Hokkai Carbide
Plant in the city of Tomakomai, Hokkaido, in 1912. His
achievements greatly influenced the subsequent
growth of Japan’s chemical industry.

In 1915, Denki Kagaku Kogyo Kabushiki Kaisha(now Denka Company Limited) was establishedas the successor to the Hokkai Carbide Plant. It
started off producing calcium carbide and a
calcium cyanamide fertilizer derived from
calcium carbide, with hydroelectric power
plants providing the production facilities withelectricity to sinter limestone and coke.

Made an entry into
the fine ceramics field

1985

2000

Diagnostic
reagents

Influenza antigen
detection test kits

HARDLOChigh-performa
nce adhesive

Thermally
conductive
sheets1963

1967

AZUMIN

1962 1965
Successfully initiated the domestic
production of chloroprene rubber

1977

Leveraging its arsenal of unique technologies, which are backed
by a long track record spanning more than 70 years, former
Denka Seiken has created epoch-making pharmaceuticalMade
products, such as vaccines and diagnostic reagents. Looking
Germany-based
ahead, the Denka Group will strive to help enhance people’squality of life and, to this end, deliver solutions to counter
Icon Genetics
GmbH a subsidiary infectious diseases and lifestyle diseases while providing cancer
drugs and cancer remedy information services.

Point-of-Care Testing(POCT)The environment and energy
1985

1989

1998

2004

HITTPLATE

Spherical
fused silica
filler

DENKA SN
Plate

Spherical
alumina2009

Launched the
ALONBRIGHT
phosphorEntered the petrochemicals field
Styrene monomer and polystyrene

Organic polymer-related technologies,
including precise synthesis,
polymerization and composite techniques

1949

1955

TOYO
VINI-TAPE Rain gutters
KAGAKU Co.,Ltd.
established

1967

Made Malaysia-based
POSCO a subsidiary

1945-1974

Initial Period

Period of Expanding Core Businesses

Launched the calcium
cyanamide business

350

2001

Denka TECHNOCRETE TORETARO
System2006

2012

SUQCEM

Commercialized
CO2-SUICOMTechnologies for repairing andenhancing the durability of buildings

1987

1997

2007

Maleimide-modified
resin

Launched polystyrene
production in Singapore

Became the world’s biggest
chloroprene rubber producer

2015

Established Denka
Performance Elastomer

Our special cement additive business began with the releaseof DENKA CSA in 1967. Since then, we have been serving
markets at home and abroad to meet needs for expansive
additives, quick-setting agents, high-strength materials andother cutting-edge solutions in construction and civilengineering fields. In addition to helping reduce
environmental burdens, we are taking on infrastructuredevelopment in such regions as Southeast Asia while
supporting the resolution of issues associated with the repairof aged concrete structures and increasing building
durability in Japan.

The specialization of key operations

2003

1983
Biaxially-oriented
polystyrene sheet(BOPS)Polymer design andprocessing technologies

Having merged with TOYO KAGAKU Co., Ltd., the Company
launched the Living & Environment Products Business,
introducing a lineup of unique products made via resin
processing and designed to help enhance people’s
well-being and preserve the global environment.

1975-2006

We are increasing the “specialty grade” ratio in our productlineup to secure resilience in the face of changes in external
conditions as we shift our focus to the solution business.

2015

Initiated the productionof VINI-TAPE in Vietnam

2015

Centennial of Denka’s founding
Rebranded to “Denka Company Limited”

2007-2017

Period of Expanding Specialty Businesses
Created a series of leading-edge products via a combination oforganic and inorganic chemistryEntered the field of acetylene chemistry

400

1993

High-value-added infrastructure

DENKA ER

1970

Corrugated TOYOKALON
pipes

Initiated the
production of
ALSINK in China

1985

1970

1951

Our research into high-temperature control and nitride technologies led
to the creation of fine ceramics that, in turn, helped us develop an arrayof unique solutions in the field of electronic materials, including
insulation as well as thermally and electrically conductive andheat-resistant materials. Today, our products are used for a broad range
of applications, such as automobiles, railcars, displays and mobile
devices, to help achieve technological innovation in terms of energy
saving, miniaturization, weight reduction and functional upgrading.

2015

2015

1980

Σ1000
Launched CSA production
NATOMIC
as well as the special
Technologies Quick-setting
cement additive businessto enhance
agent
Cracking prevention technologies concrete
technologies(e.g., nonshrink grouting materials) strength

Healthcare

2020

2015

Application of synthesis, calcining
and sintering technologies

1915-1944

Note: Figures for the period leading up to fiscal
1976 represent the Company’s operating
results on a non-consolidated basis.
Figures for fiscal 1977 and later
represent consolidated operating results.

1981

ABS resin / EVA TEXThe Company entered the acetylene chemicals field
via the application of technologies that utilize
acetylene derived from calcium carbide. After the
release of acetylene black in 1942, the Company
succeeded in commercializing such products asacetic acid, vinyl acetate and vinyl chloride.

ー Operating income(right axis)
ー Net income

1976

2016
Established an R&D
base in Singapore

1996

Technologies tocombine multiple
technologies different materials

1971

In 1971, the Company
initiated the marketing of
fused silica and boron nitrate(BN) and developed various
fine ceramics materials
thereafter.

Entered the cement businesson a full-scale basis
Entered the field ofacetylene chemistry

1942

Commercialized acetylene black(left axis)

Antigen andantibody
reactiontechnologies

Having acquired shares in the Research Institute for Biology,
Physics and Chemistry, which was established in 1950
(subsequently renamed Toshiba Kagaku Kogyo in 1951 andthen Denka Seiken Co., Ltd. in 1982), the Company made an
entry into pharmaceutical-related fields, including vaccinesand diagnostic reagents.
Adhesion

1954

Launched the manufacture of calcium
carbide and calcium cyanamide

Net sales

Immunochemistry
diagnostic reagents

Novel coronavirus antigen rapid test kits

Technological pursuit aimed atfunctionally upgrading concrete

1915

Trend in Operating
Results

1986

1979

Merged with Denka Seiken via an absorption merger

Macromolecular sodium
hyaluronate preparation
Biotechnology research

2018-2022

DENKA100Developed a robust foundation for
the next 100 years while focusing
management resources on growth fields

Denka Value-Up

To become a specialty-fusion company capable ofachieving sound and sustained growth50

Net sales(Billions of yen)

40

300
250

30

200
20

150
100

10

50
0

0

1950

1960
07

1970

1980

1990

2000

2010
08

2019

Profit(Billions of yen)

Our Management Resources

Denka Value-Up Challenges

Infrastructure & Social Solutions

Our Strengths

In line with the Denka Value-Up management plan, we are striving to becomea “Specialty-Fusion Company with a Strong Global Presence.” Here, we introduce
some notable topics associated with distinctive strengths we are currently honing
as we take on the challenge of expanding the possibilities of chemistry.

Hydroelectric Power Generation

15
118,240

Biostimulants

Overseas Network (Singapore)

power plants in Japan40(including those underco-ownership via a joint venture)

Maximum output:

The

kW

th

anniversary of expansion into Singapore

In 1980, we established Denka Singapore Private Limited (DSPL) to accommodate
growing demand for acetylene black for use in dry batteries and power transmission
cables. Having reached a new landmark in our expansion into Singapore, where wecurrently produce a number of offerings, including acetylene black, spherical fusedsilica fillers, styrene-based synthetic resins and vinyl chloride resin fibers, throughour own local plants. Right now, efforts are underway to upgrade these facilities intoa smart factory employing cutting-edge AI and IoT.

The world’s

market share

DENKA CHLOROPRENE(chloroprene rubber (CR))
A type of rubber that is extremely easy to process, CR boasts
all-weather superiority, ozone and oil resistance and isequipped with other excellent and well-balanced properties.

Living & Environment Products

15Time necessary for
diagnosis

15

minutesDenka became the first in Japan tosuccessfully commercialize a vinyl
tape.
Today, our VINI-TAPE is used inapproximately 60 countries
worldwide.

Cold-resistant, thin harness tape

Novel coronavirus antigen
rapid diagnostic testing kits
Released in August 2020 for use by healthcare
institutions.

Electronics & Innovative Products

DENKA BLACK

years

years since Denka’s founding

No.1

We command the world’s No.
1 share in various productcategories.
Employing production
facilities at home and abroad,we deliver a stable supply ofhigh-quality products tocustomers around the globe.

Life Innovation
Our rapid diagnostic testing kits detect
the existence of novel coronavirus
antigen in approximately 15 minutes
without using special measurement
equipment.
Thus, these testing kits serve as ahassle-free solution enabling
healthcare institutions in general toquickly conduct examinations.
By using specimens collectedfrom the examinee’s nasopharynx or
nasal cavity, our testing kits arecapable of executing the simultaneous
testing for the novel coronavirus,
influenza virus and RS virus.

105

A track record spanning

Elastomers & Performance Plastics

Note: As of April 2020; output from power plants owned by
the joint venture is calculated based on Denka’s equity ratio.

Since its founding in 1915, Denka has been proactively engaged in the constructionof hydroelectric power plants.
Output from 15 hydroelectric power plants, including those under co-ownership
via a joint venture, accounts for approximately 40% of Denka’s energy consumption.
Currently, construction projects are under way to build the New Omigawa Power
Plant (maximum output: 8,100kW; planned operational kickoff: December 2020) andthe New Himekawa Power Plant No. 6 (maximum output: 28,000kW; planned
operational kickoff: April 2022; owned by the joint venture).

Biostimulants are a new technology that aims to control
abiotic stresses imposed on plants, reducing damage
inflicted by shifts in climate or soil conditions and thus
helping cultivate healthy crops.
Denka provides a humic acid liquid fertilizer that serves
as a biostimulant and contributes to higher crop quality andlarger crop yields.

Building on a track record in
the functional fertilizer
business spanning 105 years,
Denka develops and delivers
solutions supporting
agricultural production and asteady food supply.

Spherical alumina

We offer a diverse product lineup employing fineceramics, organic fine chemicals and technologies for
combining these materials. In particular, we boast theworld’s No. 1 market share of DENKA BLACK andspherical alumina.

We command the world’s
No. 1 market share ofultra-pure acetylene black,which boasts robust electro
and thermal conductivity,and spherical alumina,
which was developed via
the use of unique
technologies to achieve
superior sphericity.

09

No.1
The world’s

market sharecountries worldwide

A vinyl tape for bundling wire harnesses, essential
automobile components, our harness tape is theindustry’s thinnest and contributes to reduction in
vehicle weight.

TOPIC

Taro Kamiya

Automotive Materials &Solutions (AMS) Dept.

60

Used in approximately

Contributing to industry efforts aimed at adapting to a revolutionary changethat has been accelerating in the face of a post-pandemic world
According to input from automakers and industry specialist magazines at home and abroad, the automotive industry is currently
facing an urgent need to disperse supply chain risks and to take a more selective approach when determining R&D themes inorder to counter sluggish financial results in the wake of undeniable changes in the business environment due to the influence ofthe novel coronavirus pandemic.
On the other hand, since before the pandemic four technological trends—Connected, Autonomous, Shared & Services andElectric—summarized as CASE have been precipitating a once-in-a-century revolutionary change that has been picking up
momentum throughout the global automotive industry. Among these four technological trends, Shared & Services is expected to
face difficulties due to anxiety about the risk of infection. However, automobiles themselves are once again garnering public
support as they represent optimal vehicles for individual mobility. Accordingly, the Connected, Autonomous and Electric trends are
expected to accelerate the pace of development industrywide. Moreover, the current surge in the popularity of online shopping is
driving the vigorous movement of goods via parcel delivery and other services. Despite the expected stagnation of Shared &Services technologies, the ongoing megatrend toward Mobility as a Service (MaaS) will thus continue.
Aiming to meet needs for solutions supporting the post-pandemic trends discussed above, we are striving to ensure thesteady supply of acetylene black, spherical alumina, ceramics-based electronic circuit substrates and other EV-related products,
all of which have gained growing popularity. Simultaneously, we are endeavoring to release new products for use in connectedcars and autonomous driving systems (LCP film and low dielectric loss tangent fillers) at an even faster pace.
Looking ahead, we will cultivate even closer ties with automakers and automobile parts manufacturers as we strive to flexibly
and accurately accommodate the evolving needs of society. In these ways, we will develop new materials and components withthe aim of contributing to the realization of a sustainable society as a chemical manufacturer.
10

Value Creation

A Message from the President

Fulfilling Denka’s Social Responsibilities
In April 2020, the Denka Group executed two reorganization

contributing to the enhancement of the latter’s diagnostic

measures. First, Denka Company Limited merged with Denka

examination capacities.

Seiken Co., Ltd. with the aim of strengthening the healthcare

In addition, we have rallied the Group’s overall strengths tobusiness. Second, the merger of the Group’s two trading

resume the production of diethyl malonate, the raw material forcompanies resulted in the inauguration of Akros Trading Co. Ltd.
Through the integration of Group entities equipped with different

Avigan , an anti-virus drug expected to help treat novel
coronavirus infection, to fulfill our responsibilities as the only

cultures and strengths, we will push ahead with across-the-domestic manufacturer of this substance. In the short span ofboard reforms and facilitate intragroup collaboration, thereby

six weeks since receiving a request from the government, we

maximizing synergies.

were able to restart our production lines, which had lain dormant

When it comes to making social contributions through ourfor three years, and have begun once more supplying an

business operations, we can point to a number of accomplishments,
some of which we have listed below, achieved through theessential ingredient for Avigan , thus supporting the buildup of
the drug’s stockpiles. It is our sincere hope that our efforts asstrengthening of our approach to reforms and collaboration on a

discussed above will contribute to the delivery of remedies to asGroupwide basis.

many patients as possible and the restoration of their health.

Since the beginning of fiscal 2020, we have been placing

We aim to serve as a contributor to the technologicalparticular emphasis on delivering solutions enabling the swift

sophistication of the post-pandemic society. Accordingly, we are

diagnosis of the novel coronavirus as well as supporting aproviding customers around the globe with a number ofremedy for the disease.

products supporting the introduction of 5G infrastructure andTo this end, we developed a rapid diagnostic testing kit for

Manabu Yamamoto
Representative Director,
President & CEO

the intensive use of car electronics. In particular, we commanddetecting the novel coronavirus antigen. Thanks to thethe world’s largest market share for acetylene black, spherical

dedication of our staff and cooperation of external partners, thealumina and other essential materials for use in communication

testing kit was completed amazingly quickly and successfullybase stations as well as those used in lithium ion batteries.

released in August 2020. This testing kit detects the existence of

Demand for these materials is expected to grow rapidly. In

the antigen in quite a short period of time without using specificaddition to maintaining the stable supply of these offerings, we

diagnostic equipment. In October, we also released a newwill continue to develop new products in an effort to secure ourversion capable of performing simultaneous examinations for theability to meet future needs arising from the growing popularity

novel coronavirus, influenza virus and RS virus as well asof high-speed communications and the widespread use ofaccommodating a specimen collected from the examinee’s

high-performance electric vehicles (EVs) with the aim of fulfilling

nasal cavity. The latter feature is expected to help medical

our social responsibilities.

practitioners avoid the risk of infection in the course of collecting
specimens. Our solutions are thus helping reduce burdens

Note: Avigan is the registered trademark of FUJIFILM Toyama

placed on both examinees and healthcare institutions while

Chemical Co., Ltd.

Becoming a Company That Is Genuinely Needed by Society by
Striving to Achieve Carbon-Neutral Status
Reshaping Our Vision Amid the Novel Coronavirus Crisis

Even in the midst of drastic changes in the businessanswer lies in our ongoing efforts to pursue our goal, which I

environment like those seen today, our corporate philosophy

mentioned earlier, of becoming a company that is genuinely

First of all, I would like to express my deepest condolences to

aimed at achieving sustainable growth in a way that fulfills ourneeded by society. To that end, we will steadily promote theWith this in mind, we consider the imminent management

any who have lost loved ones to the novel coronavirus. At thechallenges we are currently confronting to be twofold:social responsibilities remains unchanged. In line with this, weDenka Value-Up management plan, pushing ahead further withsame time, I pray for the earliest possible recovery of people(1) securing a foundation for boosting our business expansion

have positioned the SDGs as our compass for the execution of

the specialization of our business structure while accelerating

infected with the disease. Also, I would like to extend myand achieving sustainable growth in ways that accommodate

an ESG-oriented management approach. Moreover, ouracross-the-board operational reforms aimed at improving

wholehearted respect and gratitude to the frontline medical

changes in social structure in the post-pandemic period as well

corporate philosophy is shared by all Group members, withproductivity via the introduction of the cutting-edge technologies

practitioners who combat the novel coronavirus to save lives andas needs arising in people’s lifestyles due to the new normal and

Denka Value-Up, our current management plan, being executedand digital transformation (DX). Simultaneously, we will strive toother essential workers who, despite the pandemic, strive to fulfill(2) contributing to the resolution of issues society is now

to support the realization of this philosophy.

help employees embrace innovative working styles as they learn

their duties to support our daily lives.

confronting in regions around the world through our businessIn 2020, the global economy has seen a crisis greater thanoperations.

the worldwide recessions triggered by Lehman Brothers

Meanwhile, the United Nations Sustainable Development

Looking at concrete initiatives under this plan, we areto adapt to the new normal in the post-pandemic period. Our

responding to issues arising from global warming by promoting

Companywide policy on work style reforms was formulated forenergy-saving measures at production front lines andthat purpose. In line with this policy, we will empower eachbankruptcy. Many industries at home and abroad have been hit

Goals (SDGs) have become more important than ever before instrengthening our network of hydroelectric power plants via theemployee to choose the most efficient working style that enables

hard by a rapid decline in demand. In the short term, we mustterms of determining the immediate direction of our businessexpansion of their output and the construction of new plants.

them to realize their full potential and strike an optimal work-life

focus on overcoming economic fluctuations and continuing ouractivities centered on addressing environmental, social andFurthermore, we have formulated a new target of achievingbalance. In these ways, we will improve productivity for the entire

business activities while acting swiftly to meet the pressing need

governance (ESG) issues. We have thus positioned the SDGs as“carbon neutral” status, that is, reducing our net emissions of

Denka Group.

for infection countermeasures. We must also work to secure ourour compass in line with our aim to take a consistent approachgreenhouse gases to zero, by 2050. To achieve this target, weresilience against natural disasters, which have been hitting thisto both business operations and social contribution activities andwill pursue innovation employing our unique strengths as a

aspiration to uphold Denka’s corporate philosophy, I also

nation one after another. In the long term, we are called upon torealize our goal of becoming a company that is genuinely

chemical manufacturer.

consider the trust of our stakeholders who support thistackle the fundamental challenge of reshaping our vision as aneeded by society.

Lastly, while I am proud of Group employees who share an

In the face of changes in social structure brought about by

philosophy to be among the Company’s most valuable assets.

business, just as individuals and society as a whole are being

the novel coronavirus pandemic, many businesses are looking

As we strive to realize our corporate philosophy, we

asked to figure out how to adapt to the irreversible lifestyle

for answers as they seek to secure their continued operations

sincerely ask for your ongoing support for our endeavors.

changes brought about by the novel coronavirus pandemic.

and corporate growth going forward. For Denka, I believe, the1112Value Creation

Our Value Creation Process

Corporate
企業理念 Philosophy

The
The Denka
Denka Value
Denka Mission
Denka Principles
The Denka Group’s 13 Materiality Issues【Categories】■ Prioritization
Prioritization ofof safety
safety【Categories】 ■社会的課題
Social Issues■■ Products
Products andand technologies
technologies■■ Solid
Solid corporate
corporate governance/Corporate
governance Corporate conduct
conduct deserving
deserving ofof stakeholder
stakeholder trust
trust

https://denka_sustainability.disclosure.site/en/themes/729■■ Employee
Employee happinesshappiness

The Denka Value-Up Management Plan

6つの資本
Six Types of Capital

防止 pandemics● Improvement ofpeople’s quality of life in※
QOL
an の向上increasingly graying
society※クオリティ オブ ライフ● 高齢化が進む社会の

ヘルスケア
Healthcare● High-temperature calcining
無機化学で培った高温焼成技術、
technologies
developed through our
無機・有機の複合技術、
inorganic chemistry-related endeavors
高分子合成・
樹脂加工技術、● Organic and inorganic material
感染症領域の抗原抗体反応技術
composite technologies

technologies

Business portfolio shift● Antigen and antibody reaction

technologies for advancing infectious
自然資本
disease countermeasures

事業ポートフォリオの変革
Introductionof innovative
processes
Three human resource
strategies
3つの人財戦略

Natural● Soil, air and marine● 陸上・海洋汚染
pollution

Need for resource● 資源循環への対応●

recycling solutions● 輸送システムの●The safety oftransportation
安全確保

・ 働き方改革

systems

環境・Theエネルギー
environment
and energy

・Work style reforms

ダイバーシティ推進
Diversity
promotion
・・

Manufacturing
エネルギー効率の高い製造設備、循環型社会に貢献する● Manufacturing facilities boasting
セメントプラント
superior energy efficiency● Cement production facilities that
contribute to a recycling-oriented society

人的資本

Sustained
GrowthHuman

お客様のニーズに真摯に応え、A りを通じてソリュー
corporate culture that sincerely
モノづく
addresses customer needs and seeks to
ションを提案する企業文化

Placing the utmost
priorityon safety
安全最優先

propose solutions through manufacturing

Stepping up
環境経営の強化environmental
management

Incorporating innovative
workingstylesSDGsへの貢献

Across-the-board involvement in open
産官学で社会課題解決を目指す
innovation that aims to help resolve
オープンイノベーションの文化
issues society is confronting via
industry-academia-government
collaboration

Contributing to SDGs

● 持続可能な農業と● Need to secure the

安全で栄養のある
sustainability ofagriculture and a safe
食糧の確保
and nutritious foodsupply

高付加価値
High-value-added
infrastructure
インフラ

Maintain Sustained
Growth by Significantly
Enhancing Productivity
through Innovative
Processes

新しい働き方の追求

Social
社会関係資本
● Need forcountermeasuresagainst aging● インフラ整備と老朽化
infrastructure and new
infrastructureへの対応
development

Become a Specialty-Fusion
Company with a Strong
Global Presence

Securing
human resources with・・
スペシャリティー人財の確保
specialized skills

製造資本● 地球温暖化

SpecialtyFusion
Company

革新的プロセス

水力等の自社発電所

Company-owned power generation
facilities, including hydroelectric power
plants● Global warming

In addition to supporting the prevention and early diagnosis
of infectious diseases and lifestyle diseases via theprovision of vaccines and diagnostic reagents, we are
expanding into such new businesses as cancer-related genealteration analysis.

Pursuing 成長戦略
Growth Strategies● Polymer synthesis and resin processing

Fulfilling 社会的責任の遂行
our social responsibilities

財務資本Financial

Our
Threefold
GrowthVisionThe environment
and energy

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

Secure Sound Growththrough Work Style
Reforms

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

Ability
to execute strategic investment
バランスのとれたand secure robust shareholder returns in
戦略投資と株主還元
a well-balanced manner

13

Contribute to soundsocial development(fiscal 2018 – fiscal 2022)

14

Contribute to sustainable social development as a company genuinely needed by society● Prevention of■■ Dialogue
Dialogue with
with society/Partnershipsociety/Partnership

Healthcare

知的資本Intellectual● 感染症流行拡大の
infectious disease■■ Environmental
Environmental preservation
preservation

Help protect
people’s health andprevent infectious
disease pandemics

Create a clean andsafe future society

Support infrastructure development
and improveaccessibility

Value Creation

The Denka Group’s Vision for 2030 regarding
Its Social Responsibilities and Contributions

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

As a producer of chemical and pharmaceutical products, the Denka Group bears various responsibilities attendant to its value chain fordelivering goods and solutions to society.
Meanwhile, the twelfth of the United Nations Sustainable Development Goals (SDGs), a set of international goals to be achieved by
2030, calls for public awareness of “Responsible consumption and production.”
Based on the concept of a circular economy, we have identified issues the Denka Group must address and responsibilities it must
assume in support of this goal. Aiming to be a company that is genuinely needed by society, we will focus on applying the uniquestrengths of the Denka Group and the areas in which it is best positioned to contribute to society.

■：Social responsibilities to be fulfilled via manufacturing ■：Responsibilities to the environment, resource preservation and safety■：Strategies

Develop materials free of fossil
resources

RECYCLING•Employ naturally derived ingredientsfrom plant-based and other sources aswell as microorganism cultivation

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

Page 49 Elastomers & Performance

Plastics
Page 51 Living & Environment
Products

Pursue clean energy
technologies•Battery material and high-temperature
control technologies
Page 45 Electronics & Innovative

Products

Promote a circular economy•Develop CO2 and carbon circulation
technologies•Achieve “zero emission” status in termsof waste disposal
Page 23 Initiatives to Achieve
Carbon-Neutral Status

Ensure occupational safety andhealth while creating a lively andsound workplace environment•Reduce intrinsic dangers associated with
our operations and improve theworkplace environment
Page 39 Placing the Utmost
Priority on Safety

Push ahead with energy-saving
measures while promoting theuse of renewable energy•Establish a plastic recycling ecosystem•Develop CO2 and carbon circulation technologies
Page 23 Initiatives to Achieve Carbon-Neutral Status

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

Achieve carbon-neutral status andreduce the environmental burden
to zeroRECYCLING•Enhance energy efficiency while
expanding our hydroelectric power
generation capacities

MANUFACTURING

Page 5

Non-Financial Highlights

Embrace innovative working styles
and promote work style reforms•Employ a “smart” office/factory while
nurturing human resources withspecialized skills
Page 29 Work Style Reforms

Page 33 Introduction of Innovative

Processes

Page 39 Placing the Utmost

Priority on Safety

Launch the full-scale utilizationof material informatics•Utilize a data lake, AI and text mining
technologies
Page 35 R&D Process Reforms

Drastically improve laborproductivity•Introduce robotics, IoT and AI
technologies to improve productivity
while securing the ability to handle
small lots of multiple production items
Page 33 Introduction of Innovative

Processes

Page 23 Initiatives to Achieve

Carbon-Neutral Status

Contribute to the advancement of concrete and special
cement additive technologies

TRANSPORTING

Page 47 Infrastructure & Social Solutions

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

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

USING

TRANSPORTING
Create new value throughinnovation in logistics and sales
processes•Help resolve issues confronting society bystepping up collaboration with supply
chains•Leverage advanced information networks
and create an innovative business model

Protect people’s lives and well-being•Advance disease prevention, diagnosis andtreatment technologies while helping improvepre-symptomatic conditions•Contribute to the establishment of technologies
to prevent, diagnose and treat diseases arisingfrom the novel coronavirus* From 2030 onward, Generation Z are expected to be in theirearly 30s and become leaders of society around the world.

Page 17 Dialogue with an External Specialist
Page 21 Special Feature: Our

Healthcare-Related Operations
Page 43 Life Innovation

15

Contribute to food safety
and the resolution of foodproblems•Help providers adapt to “newnorms” in lifestyles, such as thegrowing trend toward solitarydining, by delivering foodpackaging materials that help
preserve freshness and otherwise
supporting stable food supply
Page 51 Living & Environment

Assist women around theworld in their pursuit ofsuccess via the provision of
fashion items•Supply TOYOKALON (synthetic fiber
for wigs and hairpieces)
Page 51 Living & Environment

Products

Ensure sustainable and stable logistics operations•Pursue the improvement of our working environment and the enhancement oflabor efficiency and productivity by advocating for the “white logistics movement”*•Ceaselessly work to reduce environmental burden via partnership with supply
chains*An initiative promoted by the Japanese government since 2018 with the aim of achieving ahighly productive and efficient logistics process while ensuring better working environments for
operators
Page 39 Placing the Utmost Priority on Safety

Support the development andmaintenance of resilient infrastructureand safe transportation methods•Provide chemical and electronic materials forautomotive parts and rolling stock•Provide special cement additives for road andtunnel construction
Page 45 Electronics & Innovative Products
Page 47 Infrastructure & Social Solutions
Page 49 Elastomers & Performance Plastics

Products

16

Contribute to the
popularization of autonomous
driving systems and drones•Contribute to 5G and othercommunication technologies via the
supply of chemical and electronicmaterials
Page 45 Electronics & Innovative

Products

Value Creation

Dialogue with an External Specialist
Becoming a Truly Resilient Company by Preparing for New Risks

Taking advantage of in-house and external collaboration,
we will deliver genuinely meaningful changes
in society to fulfill our responsibilities
in light of the coming new normal.
Dr. Kazuhiro Tateda
Professor, Department of Microbiology
and Infectious Diseases,
Toho University School of Medicine

Manabu Yamamoto
Representative Director, President & CEO,
Denka Company Limited

Hideki Takahashi
Executive Officer, Life Innovation Division,
Denka Company Limited■ Facilitator: Mr. Nobuyasu Tanaka

Senior Managing Executive Officer and Chief of Corporate Planning Division, Sun Messe Co.,Ltd.
Representative Director, Sun Messe Innovative Network Center (Sinc)

Tateda: The pandemic revealed two weak points in Japanesesociety. First is the country’s less than robust ability to carry out
Polymerase Chain Reaction (PCR) testing, with the required
equipment in extremely low stock at domestic healthcare
institutions. Given the considerable risk of another infectious
disease emerging, building up testing capacity is essential toensuring our preparedness.
Second, although the obedient nature of Japanesecitizens is believed to be helping prop up a medical system on
the verge of collapse as the vast majority of citizens have beenremarkably willing to respect the voluntary “Stay Home”
protocols during the state of emergency, this trait has also
created a negative effect, such as excessive peer pressure.
Because of that, lamentable incidents of discrimination andprejudice have also been reported from some corners ofsociety.

Tateda: The risk of a global infectious disease pandemic haslong been considered inevitable by many specialists. The
recent emergence of the novel coronavirus saw their warnings
becoming a reality, with an outbreak quickly developing into aworldwide pandemic.
A variety of factors have been put forward as allegedly
facilitating a pandemic. For example, the separation of humandevelopment and the natural world has grown too narrow. It isbelieved that the excessive bulldozing of forests has led to a
growing number of opportunities for direct interactions between
humans and wild animals, where previously habitats had been
segregated. The resulting exchange of the infectious viruses
they host has allegedly caused certain types of viruses to
evolve to acquire human-to-human transmission capabilities.
Also, global warming serves as a major risk factor. There isan undeniable possibility that the viable habitat of pathologicalorganisms responsible for tropical and subtropical infectious
diseases will expand going forward. We cannot know when thenext pandemic will occur, nor can we determine if or whenanother novel pathological organism will emerge. Due to theincreasing globalization of our society, a regional outbreak of
an infectious disease can quickly spread globally, just as wehave witnessed. Therefore, I consider ensuring thoroughgoingpandemic countermeasures to be a matter of crucial
importance. As the spread of the novel coronavirus is stillongoing in regions around the world, human society will beforced to continue the grueling battle against this infectious
disease for the time being.

Yamamoto: So, the pandemic has revealed both positive andnegative aspects of the unique Japanese character, has it?
Tateda: That’s right. It is important to learn lessons from what
we have experienced during the pandemic, be it success or
failure, to ensure our preparedness for the next crisis. We
should not be content with merely getting through the current
crisis. Rather, we should be focusing on how to upgrade ourstructure going forward. This will, in turn, help us acquire
genuine resilience. Also, an endeavor of this kind must be
carried out via collaboration involving industry, the government
and academia.

Yamamoto: Dr. Tateda, could you elaborate on your thoughts on
how we should counter this situation?

Rebuilding the Business Portfolio
Tateda: When the novel coronavirus first emerged, people had
been overly afraid of it as it was a totally unknown virus. Since
then, however, specialist insights about the virus have become
ever more robust. Accordingly, it is time to consider how tosustain economic activities while simultaneously preventing the
spread of infection. Due to the drastic deterioration of the economy,a growing number of people are losing their jobs and struggling
to maintain their livelihoods. We must face this harsh reality, too.

In order to genuinely protect the well-being of citizens,
economic activities and infection countermeasures must go
hand in hand. I consider it a matter of the utmost importance.
I assume that, in the midst of the pandemic crisis,business corporations are similarly being called upon to identify
a business model capable of simultaneously achieving
profitability and contributing to people and society as a whole.
This seems to be an important challenge they are currently

Dr. Kazuhiro Tateda

In this section, we present excerpts from a discussion
with Dr. Kazuhiro Tateda, a professor at Toho University
School of Medicine who also serves as president of theJapanese Association for Infectious Diseases and is amember of the government-led Expert Meeting on theNovel Coronavirus Disease Control. We invited Dr.
Tateda to join us in dialogue in order to glean his
insights into the role Denka should fulfill in a society
undergoing drastic changes influenced by the novel
coronavirus pandemic.

・Professor, Department of Microbiology and Infectious
Diseases, Toho University School of Medicine
・President, the Japanese Association for Infectious
Diseases
・President, the Japanese Society for Clinical Microbiology
・Member of the Expert Meeting on the Novel Coronavirus
Disease Control under the auspices of Cabinet
Secretariat Headquarters for Novel Coronavirus Disease
Control
In his efforts to disseminate accurate knowledge of
infectious diseases and countermeasures against
them, Dr. Tateda has appeared on television on anumber of occasions and contributes to newspaper
articles.

17

18

Value Creation

Dialogue with an External Specialist
Speaking in general of the nature of Japanese people,
they can be extremely sensitive to risk; but they also tend toquickly stop being vigilant once a crisis has passed. I think
Japanese people are not so good at changing their mode of
behavior based on takeaways from a crisis.
Tateda: In the field of medicine, a great number of papers havebeen issued right after major crises by specialists in countries
abroad. This phenomenon is typically accompanied by a
growing momentum of technological advances and theintroduction of more sophisticated methodologies. In contrast,
Japanese specialists seem to focus mainly on implementing
robust countermeasures during crises.
By the way, business contribution to the preservation of
the global environment is becoming the subject of growing
public expectation. This issue is also relevant to the preventionof infectious disease pandemics. In this context, what are Mr.
Yamamoto’s views on the positioning of Japanese corporations
among their global peers in terms of technological capabilities?
I have heard about Denka’s R&D efforts aimed at creating avariety of environment-friendly products, such as bioplastics.

Manabu Yamamoto, Representative Director, President & CEO

expected to tackle. Is it correct?

Yamamoto: Many Japanese corporations boast a high level ofenvironmental technologies even compared with their global
peers. While the pandemic has revealed the weakness ofglobalized economic activities, businesses today are facing a
growing shift in customer requirements from quantity to quality.
To adapt to this change amid times like these, we need torebuild our product portfolio by raising the proportion of
specialty grades that are resilient against changes in theexternal environment.

Yamamoto: Exactly. If we were to suspend our production andsales activities altogether, we may be able to completely
eliminate the possibility of the spread of infection within ourorganization. However, such a precipitous move would amountto stopping the Company’s breath. It would simply cause
Denka’s operations to cease. Instead, we are striving toembrace innovative working styles while redefining our mode ofoperations in a way that focuses on what is truly essential, as
we seek to adapt to the new lifestyle and social norms brought
about by the pandemic.

Responding to the Pandemic Crisis in Ways That Fulfill Denka’s
Responsibilities and Live up to Its Pride in Manufacturing
Yamamoto: We have positioned our healthcare-related
operations as one of the three priority fields that are subject tofocused management resource allocations. To strengthen andexpand these operations, in April 2020 we merged Denka
Seiken Co., Ltd., a subsidiary, into Denka Company Limited.
Although this move was already determined prior to theemergence of the novel coronavirus pandemic, the merger
helped us swiftly make decisions and respond to the pandemic.

Yamamoto: To date, the Denka Group has responded to
infectious disease pandemics by delivering a timely and steadysupply of vaccines and diagnostic reagents. In doing so, we
have been helping the general public prevent the spread of
infectious diseases for 70 years. Thanks to our involvement inthese operations, our colleagues across the Group are wellaware of their responsibilities to “protect people’s lives andwell-being.” This is one reason why I am proud of them.
Recently, we restarted shipping diethyl malonate, reviving
our production lines, which had lain dormant for three years,
upon a government request to supply the raw material for
Avigan , an anti-virus drug expected to help treat novel
coronavirus infection. Although we had only six weeks until thescheduled date of first shipment, none of frontline operators
were opposed to the Company’s decision or balked at thischallenge. As Denka is only domestic manufacturer capable ofproducing this substance, everyone knew that this task was
uniquely bestowed upon it.

Takahashi: Amid the pandemic, Denka’s Life Innovation Division
has been operating with a strong sense of mission to practice a
policy of “respecting the dignity of life and protecting people’s
health to remain a company deserving of society’s trust.” This
also represents a mission upheld by and taken over from Denka
Seiken.
The development of our rapid diagnostic testing kit for
detecting the novel coronavirus antigen was launched in
February 2020, several months before we obtained official
approval for manufacture and sale in August. As this testing kit
is intended to support doctors in private practice who have noaccess to costly diagnostic equipment but are often asked toquickly perform clinical diagnoses of patients with fevers, weemployed the immunochromato-method, a popular method

Tateda: That sounds wonderful. I think that employee
aspirations supporting Denka’s concerted efforts to contributeto society should be known to a broader range of the generalpublic.

19

used for detecting such viruses as influenza virus, to develop
the testing kit.
In the healthcare field, there must be considerable latentneed for innovative pharmaceuticals and medical equipment. I

believe that our ongoing efforts to assist medical practitioners
and to support the well-being of patients will naturally position
us to simultaneously achieve profit while contributing to society.

Identifying New Value to Be Delivered to Society
through Our Existing Operations
Yamamoto: Denka believes that corporate growth matters only
if it also entails the fulfillment of the Company’s social
responsibilities. In line with this belief, we have positioned theUnited Nations Sustainable Development Goals (SDGs) as thecompass guiding our management approach centered on
addressing ESG issues. Furthermore, the third of the SDGs,“Good Health and Well-Being,” coincides with our mission,
which, as Mr. Takahashi discussed, has been upheld by Group
employees for many years, even before the formulation of the
SDGs. Because of this, I consider the shared sense of mission
among them to constitute an extremely valuable asset andexpect it to support our efforts to become a company that isgenuinely capable of fulfilling its social responsibilities.
Tateda: I understand why you are proud of Group employees
and what they have accomplished. I also assume that a senseof mission has significantly helped them realize their potential
whether they engage in research, development or other duties.

Hideki Takahashi, Executive Officer, Life Innovation Division

Yamamoto: Not only do I give credit to employees for their
dedication, I also appreciate the cooperation and support
offered by external specialists like Mr. Tateda and others fromacademia and government agencies. Denka has been able toachieve the growth it has thanks to long-cultivated ties andlasting collaboration with people it has worked hand in handwith in R&D activities. In addition to meeting the expectations of
our shareholders, we will continuously strive to live up to thetrust of the aforementioned stakeholders in the course of
corporate activities. In these ways, we will play our part inindustry-government-academia collaboration aimed at creating
and delivering solutions in the fields of medicine and infectious
disease prevention.

Takahashi: Specifically, the formulation of a “Health TechWorking Group” to be charged with interdepartmental
assignments is now under way. Pharmaceuticals and medical
equipment, which require official approval, are not the only
things needed by frontline medical practitioners. We assume
that there must be other areas in which Denka can bringsolutions via the use of its materials, technologies and sales
channels. Based on this assumption, we engage in information
sharing with and proposals targeting medical practitioners.
Tateda: If you take a close look at medical front lines, you will
come up with good ideas based on an accurate understandingof what is needed. Although a growing trend towardcross-sector collaboration and interdisciplinary research issimilarly affecting the medical field, succeeding in theseendeavors is, in reality, not easy at all. Collaboration of this kind
does not occur naturally. Rather, it needs someone actively
working to facilitate it. I have great expectations regarding
Denka’s spontaneous efforts to facilitate chemistry arising fromcollaboration. As a medical specialist, I find Denka’s initiative tobe quite promising and will gladly offer my endorsement.
Lastly, I have only one request of Denka. I would like theCompany to keep working with medical specialists like me andplay its part in contributing to the well-being of patients. I hope
to deliver new solutions at the earliest possible date by working
in tandem with Denka and other businesses as well as
governmental agencies. I believe that by doing so, we will beable to see a breakthrough greater than what can be achievedby academia alone. Looking ahead, I expect the Company tomake even greater social contributions by taking full advantage
of its abundant potential in the fields of medicine and infectious
disease prevention.

Tateda: It is important to have a partner with whom you canwork toward a shared goal. Moreover, working in tandem withpartners from a broad range of sectors will help you speed up
your endeavor. In addition, chemistry arising from external
collaboration may help to generate unconventional ideas. Basedon my experience as a researcher, inspirational insights often
spring from teams of individuals who have differing ways ofthinking, rather than homogeneous teams in which everyone
thinks in the same way.
Yamamoto: In line with the Denka Value-Up management plan,we aim to become a “Specialty-Fusion Company.” In thisregard, the merger of Denka Seiken is expected to better
position us to utilize an even broader range of technologies andrealize innovation. In addition, vigorous engagement in in-houseand external collaboration is a requirement for a company
aiming to grow sustainably. This approach is essential to swiftly
effecting changes. To this end, we are currently developing a
new framework supporting collaboration.

(September 17, 2020 at Denka’s Head Office)20

Value Creation

Special Feature:

Our Healthcare-Related Operations

Overview of the Life Innovation Division

In April 2020, our Life Innovation Division made a fresh start via the merger of Denka Seiken Co., Ltd. and Denka Company Limited.
Since the founding of the Research Institute for Biology, Physics and Chemistry—the precursor of Denka Seiken—in 1950, we
have long been contributing to infectious disease prevention in countries around the globe, including Japan, via the manufacture andsale of vaccines and diagnostic reagents. Having integrated these operations with those handling Denka’s macromolecular sodium
hyaluronate preparation, cancer-related gene alteration analysis and other businesses relevant to healthcare, we have refreshed ourLife Innovation Division and are poised to bring together technologies that have been cultivated by both companies to contribute to thewell-being of people around the world.

History of the Life Innovation Division
and Denka Seiken
Research Institute for Biology, Physics andChemistry (Toshiba Seiken) established by
Tokyo Shibaura Electric Co., Ltd. to contribute to
the prevention of infectious diseases
immediately after World War II

Philosophy

Respecting the dignity of lifeand protecting people’s healthResearch Institute for Biology, Physics andChemistry inaugurated as an independent stockcompany (the precursor of Denka Seiken)

Became the first in Japan to release abacteriological diagnostic reagent

Succeeded in commercializing a virologicaldiagnostic reagent
Succeeded in developing a highly purified
influenza HA vaccine with a lower possibility ofadverse effects and bringing it on the market in
SeptemberProtecting people from infectious disease pandemics
Today, the development of the global economy and the international transportation network is
causing the pandemic risk associated with various infectious diseases to grow.
In response, Denka aims to help protect people from infectious diseases via its operations in
the fields of prevention and diagnosis.

Supporting people’s
daily lives throughdisease prevention

Helping improve thespeed and efficiency of
influenza diagnosis

Supplying rapid diagnostic
testing kits for detecting
novel coronavirus antigen

Taking over the influenza vaccine
business from Denka Seiken, which
has been one of the few domestic
vaccine manufacturers, Denka is
striving to ensure its vaccines’
safety and effectiveness as well asa stable supply.

With our testing kits requiring onlyaround five minutes for diagnosis,
we are helping frontline medical
practitioners to quickly diagnose thedisease.

Denka released a rapid diagnostic testing
kit that employs the immunochromato-method
and is capable of detecting the existenceof novel coronavirus antigen inapproximately 15 minutes without specificexamination equipment.

LegacyA track record of taking on infectious
disease prevention since the post-war
social turmoil
Strength

Specialty in the field of healthcare as an
R&D-driven business innovator

Released a clinical chemical diagnostic reagent
for use in automated analyzers

Renamed Denka Seiken Co., Ltd.

The Life Innovation Division produces vaccines, diagnostic reagents and sodium hyaluronate preparation, which
together constitute its mainstay operations, and has taken on such new businesses as a genome-based panel
examination method expected to serve as a next-generation solution for cancer diagnosis.

Social mission

Protecting the well-being of people fromthe pandemic of life-threatening infectious
diseases

Released a diagnostic reagent for detecting
O157 (enterohemorrhagic Escherichia coli )Released HDL-EX, a reagent for use inautomated analyzers for measuring HDLcholesterol

approx.

Released macromolecular sodium hyaluronate
preparation

Human
resources

Became the first in the world to create a reagent
for measuring sd LDL

250+

Creating a healthcare team of nearly

1,000

Released Quick Ex-Flu, a rapid diagnostic testing
kit for influenza viruses, achieving drastic
improvement in detection sensitivity and capabilities
to enable users to easily perform diagnoses

people• Influenza vaccines
Prevention

Relocated the Niigata Plant’s diagnostic reagent
production facilities to the Kagamida Plant, thereby
establishing integrated production systems for
vaccines and diagnostic reagents at Niigata andKagamida plants, respectively• Norovirus vaccines (currently in theprocess of development)

Influenza HA vaccines

Influenza virus rapid diagnostic testing kits

Rapid diagnostic test kits
for detecting novel coronavirus antigen

Helping people lead fulfilling lives despite the coming of
an ultra-aging society
The rapid aging of society entails an increase in the number of people who suffer from cancer and/or
such health problems as knee osteoarthritis, which causes knee joint pain.
Denka is striving to help improve people’s quality of life in the fields of cancer treatment andjoint function improvement.

Taking on the challenge of advancing
cancer-related gene alteration analysis
Currently, we are developing a genome-based panel examination methodtargeting more than 400 cancerassociated genes to realize a solution
capable of analyzing gene alteration
attributable to a solid tumor. In thisway, we are striving to contribute to
the provision of optimal medical
services designed to meet needs
related to the conditions of individual
patients.

Alleviating knee joint pain
We manufacture joint function improvers,
and to this end, take advantage of ourunique fermentation method to produce
raw material macromolecular sodium
hyaluronate.

Contributing to the enhancement of everyday skincare
experience
Due to rapidly diversifying and evolving lifestyles in today’s social environment, many people feelconstrained in terms of how much time they can spend for skincare.
Denka aims to help people enhance their daily lives by providing skincare products.

Helping moisturize sensitive skin that is prone to dryness andpromote the maintenance of good skin condition
We released the uruoi skincare brand, which incorporates Denka Pure Hyaluronate Acid
(DPHA), an ingredient made using the Company’s unique fermentation technology.
Completely free of fragrances or pigments, the uruoi skincare products help moisturize
the skin and promote the maintenance of good skin condition.

• Diagnostic reagents
Diagnosis

The Life Innovation Division established by
Denka Company Limited

Strengths
Treatment

Denka Seiken merged into Denka
Company Limited, with the Life
Innovation Division making a fresh start
21• Genome-based panel examination
method for cancer diagnosis(currently in the process ofdevelopment)• Macromolecular sodium hyaluronate
preparation for treating knee joint
pains

The uruoi skincare products

Pushing ahead with forward-looking R&D
We are engaged in forward-looking R&D aimed at blazing a new trail in the healthcare field. Our current themes include the development of anorovirus vaccine via the use of the magnICON technological platform, which is capable of efficiently manufacturing proteins using geneticallymodified tobacco plants. At the same time, we act in collaboration with PlexBio to create solutions for diagnosing septicemia and respiratory
tract infections based on simultaneous multiplex assays.

22

Environmental Strategies

Initiatives to Achieve Carbon-Neutral Status
Initiatives to Protect the Environment
1 Reducing the Volume of GHG Emissions to Eventually Achieve Carbon-Neutral Status
To contribute to the realization of the “well-below 2°C target” of the Paris Agreement, in fiscal 2019, we formulated medium- and long-term targets
for the reduction of GHG emission volumes (Scope 1 and 2). In line with these targets, our previous efforts have focused on reducing GHG
emissions by 26% by fiscal 2030 and by 85% by fiscal 2050 in comparison with the fiscal 2013 levels. However, with the Japanese government
declaring its intention to pursue carbon-neutral status in October 2020 amid the growing trend toward the acceleration of international initiatives
aimed at countering climate change, we have updated our GHG emission volume reduction targets and decided to strive for the achievement ofcarbon-neutral status by the end of 2050. To this end, we will step up and accelerate the initiatives listed below.

Examples of Initiatives
Employing our unique resources and technologies, we will promote the following global warming countermeasures from the perspective of
optimizing entire product life cycles.

a Raise the ratio of renewable energy to overall energy consumption, mainly by taking advantage of our hydroelectric power

generation facility network while introducing new gas turbine generators that boast high efficiency and lower environmental
footprints

A Message from the Executive
Officer in Charge of the Environment

Having Set a 2050 Target for Achieving
Carbon-Neutral Status, We Are Strengthening
Our Focus on Environmental Management.
●

Hideki Hirano
Managing Executive Officer
Supervisor of Environmental
Measures Promotion●●

In 2019, parts of the Japanese archipelago were hit hard by a string of mega typhoons
and sustained considerable damage. These events were not only natural disasters but
exemplars of what to expect from the looming threat of climate change. As a chemical
manufacturer, we are being called to bear a profound level of responsibility for addressing
environmental concerns and, therefore, are determined to reduce the environmental
footprint of our business activities, to this end focusing on reducing emissions ofgreenhouse gasses (GHGs) and waste from our operations.
With regard to GHG emissions, we updated medium- and long-term reduction targets
formulated in 2019, and decided to strive for the achievement of carbon-neutral status by
the end of 2050. To this end, we are accelerating various initiatives, including a number
aimed at overcoming technological challenges. Furthermore, in addition to reducing GHG
emissions from our manufacturing front lines, we have been striving to reduce our environmental
footprint from an even broader perspective that encompasses entire product life cycles
ranging from the purchase of raw materials to the consumption of finished products.
In October 2019, we established a dedicated department charged with tackling mediumto long-term environmental issues as part of our efforts to develop a more robust structure
for executing environmental countermeasures and achieving solid results at an even fasterpace. Looking ahead, we will announce the progress of initiatives discussed above in atimely manner via our corporate website, financial reporting and other outlets.

Denka’s Stance on Environmental Management to Contribute to
the Realization of the Paris Agreement’s 2050 Target●●

b Create innovative technologies supporting CO2 capture, utilization and storage (CCUS)* and commercialize themc Develop and deliver eco-friendly products and environmental load reduction technologies employing Denka’s unique strengths
d Commercialize chemical recycling technologies enabling the effective utilization of waste plastics

Since the Paris Agreement came into effect in 2016, the international
community has been beefing up initiatives to reduce GHG emissions.
With global efforts under way to reduce emissions to zero by the latter
half of the 21st century to meet the agreement’s long-term target, there
is a major shift from initiatives aimed at merely contributing to a“low-carbon” transition to those aimed at achieving “decarbonization”
and “carbon neutral” status.

●

In order to secure the future sustainability of society, tacklingenvironmental problems, which are universal issues for humanity, has becomea matter of growing importance. Acutely aware of our responsibilities asa chemical manufacturer handling energy-intensive business operations,
we have positioned addressing environmental concerns as a major
management issue and an integral part of ESG-oriented management.

23

Accordingly, we will strive to reduce GHG emissions and thus contributeto the realization of the Paris Agreement’s target by promoting the useof renewable energy and developing technologies associated with CO2
capture, utilization and storage. Moreover, we will facilitate efforts
undertaken by individual production bases to maintain zero emissions
while developing a system to utilize waste plastics via chemical
recycling. Furthermore, we will step up our contribution to environmental
preservation via the provision of products and technologies that employ
our unique strengths, including electronic materials designed to help
realize an energy-saving society and solutions aimed at contributing to
the restoration and reinforcement of social infrastructure of disaster-hit
communities.

*A technology aimed at collecting CO² from exhaust gas emitted by plant facilities and separating it from other exhaust gas content to prevent its release into theatmosphere. Discussions are now under way to identify methods to sequester collected CO² in underground or seabed storage or to reuse it as a raw material ofchemical or fuel production. Acting in collaboration with external organizations, we are currently studying CCUS, with a goal of commercializing this technology by theend of 2030.

（%）

100

100%

(Unit: Thousand t-CO2/year)

370,000

Cat. 9: Downstream
transportationand distribution

2,350
80

86%

2,030
60

83%

1,960

30,00074%

1,740Cat. 4: Upstream
transportationand distribution

100,000
40

Cat. 3: Energy-related
activities not includedin Scope 1 or 2

20

0

（FY）

140,000

0%
2013

2018

2019

2030

(Unit: t-CO2 /year)

Cat. 12: End-of-life treatment of soldproducts

Our Medium- and Long-Term Targets for Reduction
in GHG Emissions (Scope 1 and Scope 2)0

Other*

Scope3EmissionsFiscal 201910,000Cat. 1: Purchased
goods andservices

630,000

1,340,000
Cat. 2: Capital goods

60,000Note: GHG emissions associated with “Category 10: Processing of sold products” and “Category
11: Use of sold products” have been excluded due to difficulties in performing accurate
and reliable calculations.
* GHG emissions attributable to waste emissions associated with business operations as well as
those attributable to transportation, distribution and employees’ business trips and commuting

2050

Scope1: Direct emissions from the reporting company's factories, offices, vehicles, etc.
Scope2: Indirect energy-derived emissions from electric power and other energy consumed by the reporting company.
Scope3: Indirect emissions other than Scope1 and Scope2 (Emissions by others related to the company's activities).

2 Initiatives to Maintain Zero Emissions
We have reduced the volume of industrial waste generated by our facilities via the utilization of such waste as alternative fuel for cement kilns andthe improvement of various production processes. We have thus achieved “zero emission”* status and are concentrating on maintaining it. Goingforward, we will consider measures to achieve an even greater reduction in the volume of waste currently being disposed of by landfill.
In addition, as our cement kilns accept waste from both in-house and external sources, we are helping regional communities curb the volume
of waste they dispose of.
* In Denka’s definition, “zero emissions” means an emission ratio (amount of landfill waste/ amount of waste generated x 100) lower than 1%.); the “zero emission” statusapplies only to Denka’s domestic production bases, including its affiliates.

3 Initiatives to Enhance Information Disclosure
Today, ESG investment—an investment approach that emphasizes investees’ efforts to fulfill their corporate social responsibilities—has become asubject of public interest. In step with this trend, the disclosure of information associated with business efforts that address environmental
concerns has become a matter of growing importance. With this in mind, we are proactively disclosing information on our initiatives aimed at
reducing environmental burdens via financial and other reporting outlets while releasing such information through external frameworks, including
the CDP.
We have been responding to climate change-related and water-related questions from the CDP since fiscal 2015 and fiscal 2019,respectively. As a result, we were granted “A-” and “B” ratings under the CDP2019 scoring program for our climate change-related andwater-related initiatives. Moreover, in fiscal 2020 we announced our support of the Task Force on Climate-related Financial Disclosures (TCFD).
Looking ahead, we will also strive to practice appropriate information disclosure in conformity with guidelines issued by the TCFD.

24

Environmental Strategies

Initiatives to Achieve Carbon-Neutral Status
Responding to the TCFD Recommendations

Addressing Issues Arising from the Use of Plastics

Declaring Our Support of the TCFD Recommendations
In September 2020, Denka announced its support of the TCFD and beganparticipating in the TCFD consortium. A taskforce established by the Financial
Stability Board in 2015 upon the request of the G20, the TCFD issued
guidelines on the disclosure of information associated with climate change’s
financial impact on businesses with the aim of ensuring a smooth transition to a
low-carbon society and stabilizing the financial market. In response, a numberof business corporations and other organizations around the globe (1,669
entities, including 332 domestic entities as of December 24, 2020) havedeclared their support of these guidelines.

Denka’s Policies on the Recycling of Plastic Resources

Going forward, we will carry out ongoing assessments focused on risk
and opportunities arising from climate change and other relevant factors,
including changes in government policies, regulations and market conditions
as well as technological breakthroughs in the course of across-the-board
initiatives aimed at realizing a low-carbon society and the decarbonized society
envisioned by the Paris Agreement. In line with the following process flow
suggested by the TCFD recommendations, we will thereby identify what impact
our businesses would face going forward.

Chemical Recycling in Tandem with Toyo Styrene

Overview of the Process Flow Suggested by the TCFD
Policy and legal

Climate changerelated risks

Technology
Transition risk

MarketReputation

Climatechange-related
opportunities

Resource efficiency

Energy sources
Reflection in management strategy
and risk management

Products / Services

Assessing the financial impact

MarketDisclosure via financial reporting, etc.

Resilience

Acute
Physical risk
Chronic

Taking advantage of an integrated management approach involving companies under the Denka Group umbrella, our production system is supported by extensive
range of facilities and robust product development capabilities enabling a range of endeavors from the design of synthetic resin materials to the processing andmolding of polymers. We are leveraging these strengths to proactively deliver new solutions capable of popularizing the effective utilization of plastics in a way thathelps reduce their footprints on the global environment.
In addition, we have been a participant in the Clean Ocean Material Alliance (CLOMA) since 2019.

To help popularize the recycling of plastic resources, Toyo Styrene Co., Ltd., an equity method affiliate of Denka, has initiated a project aimed at commercializing
chemical recycling technologies for processing polystyrene (PS) resin.
As part of these initiatives, Toyo Styrene signed a technology licensing agreement with Agilyx Corporation, a company headquartered in Portland, in the
U.S.State of Oregon, that is striving to commercialize chemical recycling technologies. Following the lead of Agilyx, which launched a pioneering verification testing
facility in the United States, Toyo Styrene is promoting the construction of the first domestic verification testing facility of this kind on the premises of Denka’s Chiba
Plant. With the expected annual processing capacity totaling approximately 3,000 tons, the facility’s operational kickoff is scheduled for the end of fiscal 2022.
To date, the material recycling process conventionally used for plastic recycling has entailed certain restrictions on the recycling of food-related containers.
However, the chemical recycling method being tested by the aforementioned facilities is expected to serve as an innovative solution to remove such restrictions as it
employs the thermal decomposition of PS into raw material styrene monomer (SM) , which, in turn, can be used to manufacture PS for use in any application.
Moreover, the volume of CO2 deriving from the chemical recycling of polystyrene is far smaller than that deriving from regular PS production process.
Along with extending comprehensive support to Toyo Styrene’s chemical recycling business, we will help it act in collaboration with government agencies andother related organizations to establish afull-scale plastic resource recycling system.

Verifying Risks and Opportunities via Scenario Analysis
The TCFD calls for businesses to verify risks and opportunities arising fromclimate change over the medium to long term and affecting their activities, asking
for the incorporation of the results of such verification in their business strategies
and risk management and the disclosure of information regarding the financial
impact of these risks and opportunities.
As the first step of our initiatives acting upon the TCFD recommendations,
we performed the identification and analysis of climate change-related risks andopportunities based on the “2°C scenario” and “4°C scenario” with the aim ofcontributing to the goal of the Paris Agreement, namely, keeping the global
temperature rise in this century to less than 2°C above pre-industrial levels. While
the former scenario assumes the acceleration of technological advancement
associated with reduction in GHG emission volumes and the strengthening of
relevant government regulations, the latter scenario assumes that these initiatives
will remain unchanged from the current level. Based on the 2°C scenario, we
have determined that, in the course of the transition to a low-carbon economy,
we will confront such risks as the introduction of environmental taxation backed
by governmental policies placing emphasis on global warming countermeasures;
surges in carbon pricing due to the strengthened regulations on GHG emissions;and a decline in demand for plastic-based products in the wake of a social trend
breaking away from the use of plastics. At the same time, we anticipate
opportunities arising from demand for products and technologies employing
Denka’s unique strengths in step with the popularization of solutions capable ofhelping curb GHG emissions and global warming.
Based on the 4°C scenario, on the other hand, we forecast a growing
threat attributable to physical risk as a growing number of natural disasters
induced by global warming will inflict damage on our production facilities andforce us to suspend business operations. Simultaneously, we expect to be called
upon to offer products and technologies designed to help enhancecountermeasures against abnormal weather and protect social infrastructure andpeople’s well-being in the growing scope of business fields.
Toward the realization of a “decarbonized society,” we need to accelerate
initiatives to raise the ratio of renewable energy to overall energy consumption,
introduce CO2 separation and recovery technologies, and establish a plastic
recycling system while pushing ahead with the review of our business operation
structure and the reform of our business portfolio in an effort to expand ouroperations associated with eco-friendly products. As we believe that robustly
responding to risks will position us to meet major business opportunities via, forexample, the creation of new technologies, we will strive to secure medium- tolong-term improvement in our corporate value through our response to theserisks and opportunities.
Looking ahead, we will also increase the sophistication of scenario
analysis as explained above as we maintain information disclosure in line with the
TCFD recommendations.

Scenario

Assumed developments

Risks

Opportunities

2°C scenario

・The volume of global GHG emissions
decreases in line with the goals under
the Paris Agreement thanks to advancesin energy-saving and decarbonizing
technologies and the strengthening of
relevant government policies(Carbon pricing: ¥11,000/t-CO2; basedon the World Energy Outlook 2019 issued
by the International Energy Agency)

・Rises in raw material and fuel costs due to thestrengthening of environmental taxation and theresulting rise in carbon pricing
・Growing costs attributable to the need to introduce
technologies aimed at securing responsiveness tothe strengthened regulations on GHG emissions
・A decline in product demand due to the introductionof regulations on plastics and a growing trend
breaking away from the use of these materials

・Growing demand for electronic materials used incomponents for EVs, which will become
increasingly sought after on a global basis
・Growing demand for heat-resistant materials andperformance plastics
・The popularization of eco-friendly concrete(which absorbs CO2) due to advances in carbon
recycling technologies

・A growing number of natural disasters inflicting
damage on our facilities and forcing us to suspend
business operations

・Growing demand for pharmaceutical products in theface of the spread of infectious diseases due torises in global temperatures
・Growing demand for construction materials andenvironmental issue countermeasure-related
products due to the need for solutions designed tosupport the restoration of communities hit by natural
disasters induced by abnormal weather
・Expansion of the biostimulant business aimed atcontributing to countermeasures against crop stress

4°C scenario

・The volume of global GHG emissions
remains unchanged from the current level(Carbon pricing: ¥289/t-CO2; based on
the current pricing)25

PS resinSM
Denka
NIPPON STEEL Chemical &Material CO., LTD.

Toyo Styrene

ChemicalRecycling ofPS

SM refineries(Toyo Styrene)

Recycled SM

PS food containerand sheet manufacturers

Used PS

Chemical recycling facilities(Toyo Styrene)

3R Initiatives Undertaken by Denka Polymer

PLAPS

To contribute to the reduction of environmental burdens and industrial waste, Denka Polymer Co., Ltd., a Denka
subsidiary, aims to push ahead with the development of environment-friendly products and materials, such as
bioplastics, via the use of a development approach based on eco-friendly product design.
For example, this subsidiary makes PLAPS, a food container material comprising a combination ofpolylactic acid (PLA)—a plastic material derived from starch and other plant products—and polystyrene, as wellas CLEALEAD, a new BOPS sheet that is 35% lighter than the usual one made with amorphous polyethylene
terephthalate (A-PET). Having developed and released these offerings to promote resource saving, Denka
Polymer aims to help its customers reduce environmental burden arising from the use of its products.
Furthermore, in addition to deploying proactive energy-saving measures at its production bases, Denka
Polymer is striving to reuse plastic scraps derived from its manufacturing facilities as container materials, withthe ultimate aim of achieving the recycle of virtually all waste plastics.

BOPS sheet

26

Growth Strategies

Progress of the Denka Value-Up Management Plan
Management Plan

Denka Value-Up
2018-2022

Numerical Targets under Denka Value-Up
In fiscal 2020, the economic environment remains harsh due to the repercussions of U.S.-China trade friction as well as significant restrictions placed on economic
activities in countries around the globe with the aim of preventing the spread of novel coronavirus.
Denka’s numerical targets for fiscal 2020 under the Denka Value-Up management plan initially included consolidated operating income of ¥42.0 billion and an
operating income ratio of 10% or more. Also, we had originally aimed to raise the ratio of specialty businesses to 75% or more (on an operating income ratio basis).
However, we have temporarily relinquished these targets and, assuming that the effect of the novel coronavirus pandemic will gradually taper off from the second
quarter and economic activity will be largely normalized some time in the third quarter, and have formulated performance forecasts instead. Our performance
forecasts are: net sales of ¥350.0 billion, operating income of ¥33.0 billion and an operating income ratio of 9.4%. We will also aim to raise the ratio of specialty
businesses to 88% on the same basis.
Given the difficult environment discussed above, we will remain attentive to economic fluctuations that reflect fallout from the novel coronavirus pandemic evenas we continue accelerating growth of specialty businesses with an eye to seizing opportunities arising from megatrends. At the same time, we will push ahead withongoing process reforms via the introduction of cutting-edge digital technologies. In these ways, we will promote Denka Value-Up in an even more vigorous manner.
In addition, our original plans called for announcing numerical targets for fiscal 2022 under this management plan in conjunction with financial resultspresentations for the second quarter of fiscal 2020 and also featuring such targets in this integrated report. However, we have decided to postpone theannouncement of these targets as the Group’s operating results may be significantly affected by the timing of the containment of novel coronavirus and trends in theeconomic environment. Nevertheless, we still strive to finalize these numerical targets by the end of fiscal 2020 and intend to disclose them through such outlets as
our corporate website.
Specialty businesses

Become a company that boasts outstanding global
competitiveness backed by a robust portfolio of specialty
businesses and products along with its technological

Operating income ¥33.7 billion

Operating income ¥34.2 billion

Operating income ratio 8.5%

Operating income ratio 8.3%

Operating income ¥31.6 billion
Operating income ratio 8.3%

Operating income ¥33.0 billion
Operating income ratio 9.4%

strengths and human resource capabilities

Specialty-Fusion
Company

Strive to achieve a drastic improvement inproductivity and, to this end, focus on truly

inclusive of diverse working styles

innovative processes through the utilizationof IoT, AI and other cutting-edge digital

Ratio of specialty
businesses

corporate growth

FY2017 (results)

technologies, thereby securing theability to secure sustained growth

Ratio of specialty
businesses

Ratio of specialty
businesses

FY2018 (results)

FY2019 (results)

While continuing initiatives aimed at maintaining the soundness of our financial base, we intend to execute strategic investment centered on specialty businesses tosecure “Sustained Growth” and “Sound Growth.” In addition, we have adopted the weighted average cost of capital (WACC) as a criterion for our judgment ofstrategic investment.
With regard to shareholder returns, we remain committed to a targeted total shareholder return ratio of 50% in line with the shareholder return policy weestablished in November 2014. In addition to prioritizing dividends, we will also flexibly execute share repurchases by giving due consideration to funding demand
and trends in stock prices.

Our Threefold
Growth Vision

Sustained
GrowthSound
GrowthMaintain Sustained Growthby Significantly Enhancing
Productivity throughInnovative Processes

Secure Sound Growththrough Work Style
Reforms

Investment and Financing Plan

Policy● Strategic investment: ¥75 billion ( ¥15billion/year)
Of which, investment in specialty
businesses:¥60 billion
Process reforms: ¥15 billion● Regular investment: ¥125 billion ( ¥25billion/year)

specialty
businesses

our key
operations

Net income

Introduction of Innovative Processes(billion yen)

Dividends per share(yen/share)

Total dividends(billion yen)

Operational

Shares repurchased(billion yen)positioning of

Production

R&D

process reforms

Total shareholder returns(billion yen)

the commodity

process reforms

process reforms

Work style reforms/

Total shareholder return ratio

Redefine thebusinesses

Diversity promotion

Depreciation and amortization(billion yen)

Capex, investment and financing (billion yen)

Fulfilling Our Social responsibilities
27

PolicyIn addition to prioritizing cash dividends, we will
flexibly execute share repurchases by giving due
consideration to funding demand, stock prices andother factors.
Note: Total payout ratio = (Dividends paid + treasury stock
purchased) / consolidated net income

Fiscal2019
Achievements

In fiscal 2019, we paid an interim dividend of ¥60
per share and a year-end dividend of ¥65 pershare. With full-year dividends totaling ¥125 pershare, the dividend payout ratio stood at 48%.

Results of Shareholder Returns and Investment

Dividend payout ratio
Specialize● We will remain committed to a targeted total
shareholder return ratio of 50%.

Breakdown

Two Growth Strategies
Business Portfolio Shift

Shareholder Returns● Extend a total of ¥200.0 billion over a
five-year period

Materiality Issues

growth of

FY2020 (forecasts)

Financial Strategies

regardless of external conditions

Accelerate

88%

63%

54%

50%

happiness and to ensure soundRatio of specialty
businesses¥20.0 billion¥18.5 billion¥16.7 billion

with employees to pursue stakeholder¥29.0 billion

Operating income from
specialty businesses

Operating income from
specialty businesses

Operating income from
specialty businesses

with the aim of better collaborating

Become a Specialty-Fusion
Company with a Strong
Global Presence

essential operations and introduce

Operating income from
specialty businesses

Develop a working environment that is

ROE

FY2017 (results)

FY2018 (results)

FY2019 (results)

230
105.0
92
40%
23
115
50%
246
270
10.0%

250
120.0
105
42%
21
126
50%
229
328
10.3%

227
125.0
108
48%
108
48%
225
369
9.1%

Full-year forecasts for FY2020

220
125.0
108
49%
108
49%
230
450

Note: The Company executed a reverse share split that merged five shares into one share as of October 1, 2017. As we aim to support easy-to-understand comparisons between
performances in each fiscal year, the value of dividends per share for fiscal 2017 has been retrospectively converted to reflect the value of dividends had the reverse share
split already been in effect.

28

Growth Strategies

Initiatives under Denka Value-Up
Establishing a Companywide Policy for Work Style Reforms
Pursuing innovative working styles even as we strive to become
a company that is genuinely needed by society
The novel coronavirus pandemic has brought about the greatest economic crisis since the worldwide recessions triggered by Lehman Brothers

Priority Management Materiality Issues

Denka’s Materiality Issues Aimed at Realizing SDGs
In line with the corporate philosophy enshrined in The Denka Value, the Denka Group identified priority CSR materiality issues that, on April 24,
2017, its Management Committee narrowed down to 13 items, each of which is a matter of critical importance for a chemical manufacturer
committed to fulfilling its social responsibilities. Through the pursuit of these 13 items, we aim to help realize the United Nations Sustainable
Development Goals (SDGs) in ways that fulfill our responsibilities as a manufacturer and provide solutions to issues society is confronting.
In particular, we expect our product technologies in three priority fields (healthcare, the environment and energy, and high-value-added
infrastructure) specified by Denka Value-Up management plan growth strategies, to greatly contribute to the realization of SDGs.

bankruptcy. Moreover, the crisis is accelerating a paradigm shift and triggering the redefinition of lifestyle norms and value systems. With a strong

Relevant SDGs

sense of urgency, we believe that in this time of crisis, an enterprise’s continued operation depends on whether or not it is genuinely needed bysociety. To adapt to the new normal being brought about by the pandemic, we are thus determined to pursue innovative working styles.

Category

13 materiality issues

Fulfill manufacturers’
responsibilities

In line with the Denka Value-Up management plan, which was launched in fiscal 2018, we have been tightly focusing on operations that are
truly essential as we promote operational process reforms as part of the plan’s growth strategies. Amid the fallout from the pandemic, we are moreacutely aware than ever of the importance of these reforms. In addition, once the virus is contained there will remain the risk of resurgence and wemust stay prepared. With this in mind, we formulated a Companywide policy for work style reforms in July 2020. This policy is intended to support
ongoing initiatives to protect the health of employees and their families. Looking ahead, we will steadily push ahead with work style reforms in

Prioritization ofsafetyaccordance with this policy.

Companywide Policy for Work Style Reforms

Provide solutions

Reinforce security and disaster prevention
measures
Maintain occupational safety and health while creating
a vibrant and comfortable workplace environment

Create new products and technologies that
contribute to sound social development

To remain a company that is genuinely needed by society, we will tightly focus on tasks that are truly essential while protecting the health of
employees and their families by eliminating non-urgent business trips and eliminating close contact among personnel. We will also increase theoptions available to employees, empowering them to adopt more efficient working styles. By doing so, we will improve productivity and enhancethe overall competitiveness of the Company.

Products andtechnologies

Sales and administrative departments will be the first to implement this policy. At the same time, we will pursue innovative working styles for those

Ensure product safety

working on the manufacturing and R&D front lines.

1 Offer flexible options regarding working
hours and locations

2 Promote the use of online meetings while
enhancing the efficiency of face-to-facemeetings; modify methods used for visits
to business partners with an eye toeliminating non-urgent business trips andavoiding close contact

・Allow staff of sales and administrative departments towork remotely for around two days a week while
confirming issues associated with and/or the effects ofproductivity improvement to determine whether or not toincrease the proportion of remote workers; give
appropriate consideration to the needs of employees
providing nursing care or rearing children while providing
proper training for new recruits regardless of their work
location

3 Digitize all documents and eliminate the needto stamp papers with personal seals while
promoting the use of electronic authorization
systems for all procedures requiring
authorization

・Optimize office layouts to adapt to new working styles andaccommodate online meetings while establishing satellite
offices(Innovation Center, Ofuna Plant and Chiba Plant)

4 Push ahead with production process reforms
at manufacturing front lines to empower staff
to allocate more resources to intellectualtasks

Corporate conduct deserving ofstakeholder trust

Corporate governance

Ensure that our corporate philosophy is embraced byevery employee and transform our corporate culture
Improve corporate governance
Maintain strict compliance with laws, regulations
and corporate ethics
Nurture human resources

Employee happiness

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

Environmental
preservation

Dialogue with society
Partnership

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

Maintain appropriate and timely disclosure ofcorporate information and establish bidirectional
communications

Initiatives to Be Undertaken to Help Realize SDGs from Fiscal 2020 Onward
To clearly define the relationship between Denka’s materiality issues and the Denka Value-Up management plan, we changed the terminology
used to refer to our materiality issues, switching from “priority CSR materiality issues” to “priority management materiality issues.” With thepositioning of materiality issues thus clarified as focused on supporting the realization of the SDGs, we will ramp up our ESG-centered
management approach, rallying the entire strength of the Denka Group.

29

30

Growth Strategies

Achievements under the Denka Value-Up
Management Plan
Main Achievements in Business Portfolio Shift

Main Achievements in the Introduction of Innovative Processes(Fiscal 2018 – 2020)(Fiscal 2018 – 2020)

1. Accelerate Growth of Specialty Businesses

1. Production Process Reforms

In addition to establishing a structure for long-term business development associated with operations related to healthcare, the environment andenergy, we implemented initiatives aimed at accelerating the growth of these businesses.

We are improving labor productivity via, for example, digital transformation (DX) and automation while striving to create a next-generation factorythat allows people to realize their full potential.

Main initiatives accomplished (or scheduled)

Main initiatives accomplishedTime frame▶ Introduction of real-time operational status

Omi Plant

monitoring systems

Healthcare▶ Automation of product inspection employing▶ Merger with Denka Seiken

April 2020

▶ Construction of a new influenza vaccine production facility

Launch of vaccine supply scheduled
for the 2022 influenza season▶ Release of novel coronavirus antigen rapid test kits

August 2020

AI-based judgment

Omuta Plant, etc.

▶ Introduction of systems for detecting signs ofSingapore andChiba Plants

operational abnormalities▶ Introduction of novel production process boastinghigh efficiency

Shibukawa Plant▶ Transition to seamless production process and the

The environment and energy▶ Expansion of spherical alumina production facilities at Denka Advantech Pte Ltd

in Singapore and Denka’s Omuta Plant (for vehicle-mounted device and 5G applications)▶ Expansion of production facilities for silicon nitride and ceramics-based circuit

substrates (for vehicle-mounted device applications)▶ Extension of the duration of acetylene black production at the Omuta Plant(for use in vehicle-mounted LiBs)

automation of facility operations that had previously
been handled by veteran operators

Operational kickoff scheduled forthe first half of fiscal 2021

▶ Automation of in-house transportation

Operational kickoff scheduled forthe second half of fiscal 2020

2. R&D Process Reforms

Decision scheduled for
October 2019

Ofuna Plant
Suzhou (China) andIsesaki Plants

Assiduously working to commercialize as many seeds as possible at the earliest possible date, we are promoting theme reforms, information
reforms and human resource reforms to enhance R&D efficiency.

Main initiatives accomplished (or scheduled)

2. Specialize Our Key Operations

Theme
reforms

We are strengthening the production of MS resin, a specialty functional resin product, in Singapore while consolidating management resources forand upgrading our solution capabilities in the housing material and agri-product businesses.

Main initiatives accomplished (or scheduled)▶ Augmentation of MS resin production facilities at Denka Singapore Private

Limited(DSPL) (for use in LCD televisions)▶ Establishment of a subsidiary specializing in housing material solutions▶ Full-scale entries into biostimulant markets

Time frame
Operational kickoff scheduled forthe first half of fiscal 2021
Establishment scheduled forApril 2021

February 2019

3. Redefine the Positioning of the Commodity Businesses
We are shifting our focus to expanding the production of specialty products as we withdraw from low-profitability commodity businesses by, forexample, terminating the Omuta Plant’s calcium carbide production as well as the Group’s polystyrene production in Singapore.

Main initiatives accomplished (or scheduled)▶ Termination of calcium carbide and calcium cyanamide production at the Omuta

Plant▶ Withdrawal from the FIRELEN and β silicon nitride businesses

Information
reforms

Time frame
Scheduled for December 2020
March 2020

▶ Termination of polystyrene production at DSPL

Scheduled for the end of 2020

▶ Withdrawal from the vinyl acetate monomer (VAM) and EVA emulsion businesses

Withdrawal from VAM and EVA scheduled forMarch and December 2021, respectively

Human resource
reforms▶ Clarification of our vision for specialty businesses via the use of value-shift diagrams *definition of numerical indicators for measuring research results and strengthening of researchcapabilities via the evaluation of research output indicators▶ Use of electronic laboratory notes by frontline researchers, establishment of a data lake forconsolidating and sharing research and sales information across the board, development of research
assistance systems employing text mining, material informatics and other cutting-edge ICT solutions▶ Provision of assistance to researchers who seek to take doctoral courses or study abroad, appointment ofyoung researchers to open innovation projects involving industry-government-academia collaboration andpromotion of human resource development via, for example, English-language technological symposia* With the horizontal axis and vertical axis representing social issues/needs and advances in our technological development, respectively, the value-shiftdiagram indicates the characteristics of each product and solution as well as how they will contribute to future value creation.

3. Operational Process Reforms
In line with the implementation of a Companywide policy on work style reforms with an eye to adapting to the coming “new normal” influenced by
the novel coronavirus pandemic, we are allowing employees to choose from among various working styles to maximize efficiency and productivity.
We are also promoting digitization aimed at eliminating the need for non-urgent business trips and helping employees avoid close contact.
Prioritizing the safety and health of frontline employees, we are thus enabling them to embrace innovative working styles and helping them focus onwhat is truly essential as part of our human resource strategies.

Main initiatives accomplished (or scheduled)▶ Establishment of a Companywide policy on work style reforms (the pursuit of improved

productivity via the introduction of innovative working styles designed to maximize individual
efficiency)▶ Launch of HR Strategy Dept. and acceleration of three HR strategies (securing humanresources with specialized skills, pushing ahead with work style reforms and promoting diversity)▶ Development of ICT infrastructure and introduction of remote work scheme▶ Introduction of electronic authorization systems

July 2020

October 2020
March 2020
April 2018

▶ Renovation of Head Office facilities and completion of new comprehensive office buildings

at Omi and Omuta plants

31

Time frame

32

July 2018 (Head Office)October 2018 (Omi)
March 2020 (Omuta)

Growth Strategies

Examples of Initiatives

Introduction of Innovative Processes
Production Process Reforms

Singapore

Digitizing Analogue Operations

We have upgraded remote surveillance functions attached to production facilities and their instrument panels to ensure the early detection ofabnormalities. This move allowed a reduction in the number of inspection patrols to monitor dangerous processes, helping reduce the workload
while ensuring operator safety. Moreover, thanks to the upgrade of these functions, we were able to smoothly continue facility operations despite
the enforcement of novel coronavirus-related movement restrictions.

Seraya Plant

Via the use of remote surveillance and diagnosis
systems, the plant continued its operations with a limited
workforce consisting only of Denka employees and staff
from regularly-hired maintenance subcontractors. By
doing so, the plant avoided a loss of business
opportunities.

The plant has succeeded in enhancing the efficiency of frontline
tasks, which had involved the visual confirmation of gas flow
indicators, by 10% via the introduction of an automated measuringsystem. This move enabled the constant monitoring of facilities andresulted in more stable operations. Even when plant staff commuting
from Malaysia were not allowed to enter Singapore, the plant wasable to continue operations thanks to automated monitoring andother measures to enhance operational efficiency.

Tuas Plant

Aiming to Create a “Smart Factory”
That Allows People to Realize Their Full Potential
We are currently pushing ahead with production process reforms to achieve a drastic improvement in productivity. This is paramount to realizing“Sustained Growth,” one of our objectives under the Denka Value-Up management plan.
To this end, we will promote automation while reducing the burdens placed on human operators with the aim of creating an even safer and morestable working environment in which no one is tasked with back-breaking, dirty or dangerous work. Moreover, we will implement digital transformation(DX) and improve our process via the use of IT technologies. In these ways, we aim to improve the stability of our facility operations and product quality
while enhancing productivity.

Ceramics-Based
Circuit Substrate Production Facilities

TargetAutomation of Visual Inspection

Doubling laborproductivity

Visual inspections of the exterior aspects of ceramics-based circuit
substrates, a type of product that requires a high degree of
reliability, has traditionally been carried out by large numbers ofveteran inspectors. Because of this, we have been confronted byissues arising from the need to pass down skills to young
employees and improve the efficiency of inspections. Moreover, alack of trained human resources had often been an obstacle when
we received a request for an increase in production volume.
To address these issues, we developed AI-driven image
processing and automatic inspection systems that are being
gradually deployed on the production front lines.
Looking ahead, we aim to enhance inspection accuracy byemploying AI-based machine learning while horizontally rolling out
this automated inspection technology throughout Denka
production sites.

BeforeAfter

Visualchecking byhuman inspectors(defective products
only)

Image analysis

Polymer Processing
Product Manufacturing Facilities

BeforeMaking It Easier to Assess Operational Skills
While Utilizing Soft Sensor Technologies

Examples of Automation

Boxing and stacking of goods(25kg per box; 70 times/day)

As our production facilities often require operational conditions to be
confirmed and adjusted in addition to product quality checks, humanoperators engaging in these tasks need to regularly patrol production
sites. In addition to ensuring the safety of these operators, we aim to
reduce the burdens placed on them while helping them pass down
skills to younger employees and automating onerous tasks.

Bend down topick up a box

We digitized process-related data to facilitate the consolidation,
accumulation and analysis of this data. Efforts are currently
under way to make it easier to visually assess the skills ofveteran facility operators.
As we promote the use of soft sensor technologies enabling theprediction of quality based on process-related data, we will
reduce workload associated with quality checking while ensuring
the safety of workers involved in this task. Moreover, we aim toautomate the adjustment of operational conditions.

After

Average number of resignations
stood at 6.6 in six months

Carry the box for a
distance of 1.5 meters

Stack the box

Automation employing proposals fromfrontline operators resulted in a significant
reduction in the physical burden

PS

The productivity of inspections increased 2.5 times via
the use of automated solutions replacing visual checking

Automated packing
and stacking◆ (Simulated Value)

Succeeded in operational automation that reduces dependence on human skills;
our plans call for rolling out these solutions at other production lines

No resignations;productivity per operator doubled

Operational Process Reforms
Operational process reforms are positioned as another key initiative under the banner ofinnovative processes. These reforms have been steadily under way, with the Digital
Promotion Department spearheading efforts to improve productivity via the use of
cutting-edge ICT solutions.
As part of reform measures being undertaken since fiscal 2018, we havedeveloped ICT infrastructure while digitizing workflows and introducing groupware andweb-conferencing systems. Furthermore, we were able to smoothly introduce the remote
work scheme when the “Stay Home” protocols were enforced following the emergence ofthe novel coronavirus outbreak. The ease of doing so was also attributable to the fiscal
2020 revisions in the personnel system to expand the scope of employees who can workfrom home and other measures aimed at helping employees avoid the use ofovercrowded public transport systems during the period of the Tokyo Olympic games.
The introduction of web-conferencing systems and groupware, which are essentialfunctions enabling employees to work from home, also helps facilitate information sharing
and reduce time spent in meetings.
On the other hand, these endeavors help us clarify issues associated with “newnorms” in working styles. Taking on these issues, we are steadily promoting the reform ofordering processes used by sales departments to enable their staff to work fully remotely
while digitizing procedures for dealing with bills and other forms used in accounting.

33

1.Development of ICT Infrastructure and Remote Work Platforms● Increased the number of mobile devices (laptops and smartphones) being

furnished for use in remote work
● Established a location-free working environment by promoting the use of

web-conferencing (strengthening our mobile communication network via theintroduction of VPN, WiFi and other infrastructure)● Upgraded cybersecurity measures (installed protective measures against

cyberattacks, such as those exploiting e-mail)2.Introduction of Electronic Authorization Systems● Efforts are under way to digitize various in-house application procedures, such as

those seeking supervisor approval on budget.
● Expanded the scope of procedures processed via the Denka Electronic

Authorization System while strengthening its functions

34

Main Issues to Be Addressed Going Forward
Expand the scope of digital innovation● Establish a data lake for the
consolidated management of data
gleaned from business units
across the board and utilize it toimprove operations● Thoroughly reform our legacy
operational processes while
pushing ahead with DX by setting
our sights far above merely
accomplishing “office automation,”that is, automating only someback-office operations

Growth Strategies

Introduction of Innovative Processes

R&D Process Reforms

2

A given R&D project will notnecessarily yield a useful or eventangible product. Accordingly, we
focus our R&D on enhancing ourcompetitiveness by working
assiduously to commercialize as
many seeds as possible at theearliest possible date.
For top efficiency, we have identified
1 theme reforms,
2 information reforms and3 human resource reforms as key
initiatives supporting our R&D
process reforms.
Information reforms involve thedevelopment of an R&D assistancesystem and provision of tools that
support efficiency. To this end, we willconsolidate all information that had been
managed separately based on its
relevant business or technological field
and build a data lake with the aim offacilitating information sharing andutilization on a Companywide basis. Thisis expected to help us accelerate R&D
activities and identify new applications
for existing technologies.

2

Currently, we are engaged in the development of a centralized
information management system supported by a “data lake” that
consolidates research-related information on a Companywide basis.
Although a number of research units at Denka operate in different fields
and possess unique information (e.g. research reports and records ofcustomer visits), we are aiming to share such information on an
across-the-board basis to expand the possibility of using existing
technologies in new applications. Looking ahead, we will also
incorporate sales information into our data lake, thereby bringing
together existing technologies and customer and market information in a
way that transcends the boundaries between business fields. As these
inputs are expected to be stored in the data lake and effectively utilized,

Theme reforms aim to ensure the selection ofpromising R&D themes and the optimal
allocation of research resources alongside theperiodic refreshment of existing themes withthe aim of realizing efficiency.

1
Themereforms

R&D
processreforms

Human resource reforms aim to, fromthe perspective of nurturing those withspecialized skills in line with Denka’s
policy, identify the ideal traits
distinguishing Denka researchers, whoare expected to gain outstanding
presence vis-à-vis the global standard,
and develop training programs intandem with the HR department.

Theme reforms

To date, we have been utilizing the “value-shift diagram” * as a tool for
promoting the specialization of various products and technologies;
clarifying our vision regarding specialty businesses; and identifying how
these businesses contribute to the United Nations Sustainable
Development Goals (SDGs). This approach helps us clearly define
milestones and select promising themes.
In terms of R&D management, we also consider it important tomake the numerical evaluation and assessment of research results
smoother as we aim to ensure the optimal allocation of resources andmaximize the contributions of each research project. As most research
results are in themselves hard to evaluate numerically, we havedesignated operating income and other financial results earned by new

products and technologies commercialized in the last five years as
quantitative indicators of success. In addition to utilizing these
indicators in R&D management undertaken by individual research units,
we will promote more efficient resource allocation. We also define thenumber of patent applications filed, external presentations provided,
in-house technological reports issued and other relevant activities as
research output. Based on this definition, we are able to numericallyassess output per researcher, making this another indicator ofaccomplishment. We are thus nurturing awareness of intellectual
property and creating a corporate culture that supports the successionof technologies with the aim of improving our research capabilities.

* With the horizontal axis and vertical axis representing social issues/needs and advances in our technological development, respectively, the value-shift diagram indicates thecharacteristics of each product and solution as well as how they will contribute to future value creation.

35

3

we anticipate that theme reforms and information reforms will yield
results in a synergetic manner. In addition, we are encouraging the useof “electronic laboratory notes” by frontline researchers to accumulate
digitized research records supporting the data lake. Moreover, we aredeveloping a “text mining” tool to secure the ability to quickly cull useful
information from an enormous volume of text data. We are also engaged
in forward-looking discussions regarding the introduction of material
informatics. Breaking free of our conventional approach to material
development, which had been dependent on individual experience andintuition, we will realize a new approach employing the material
database and AI that is capable of completing projects in a shorter
period of time.

Human Resource Reforms

Human resources are the most essential component supporting Denka’sbusiness development and its social contribution activities. Therefore,
we recognize our human resources as invaluable assets. Reflecting thisrecognition, we encourage our researchers to take doctoral courses,
study the latest technologies and refresh their expertise. By doing so,
we are endeavoring to nurture human resources who can take on novel
R&D challenges by setting their sights higher and employing a broader
perspective.
With the close cooperation of the HR Department, we arereviewing our educational subsidy programs to make studying abroador taking advantage of other educational opportunities more attractive
and accessible. In this way, we will vitalize our human resources.
We assign young researchers to R&D missions associated with
open innovation involving industry-government-academia collaboration

with the aim of raising their levels of competence. As part ofeducational programs for young researchers, we launched the “NEXT”
program. The first of its kind, “NEXT” is planned, organized and hosted
by young researchers themselves on a completely voluntary basis withthe objective of delving into the subjects they themselves haveproposed as areas of study.
In addition, we hold the Technology Symposia, an in-houseacademic conference that serves as a venue for sharing the latest
technological information and nurturing young researchers. To nurture
globally capable human resources, we also hold English-based
technological symposia and have done so regularly over the course of
the three years since its inception. Although the 2020 round of this
symposia was held remotely using web-conferencing systems, theexchange of opinions between participants was more vigorous than ever.

3
Humanresource
reforms

Information
reforms

1

Information reforms

Topic

Developing Novel Coronavirus Antigen Rapid Diagnostic Test Kits

Amid the global outbreak of the novel coronavirus (SARS-CoV-2), the Denka
Group obtained approval for the domestic manufacture and sale of rapid
diagnostic test kits for this disease in August 2020, initiating their marketing.
Although the development of test kits of this kind normally takes 18 to 24
months at the shortest to complete all phases ranging from development to theobtainment of approval for manufacture and sale, we have made it possible toobtain said approval in just six months or so thanks to the cooperation andsupport of relevant government agencies, public organizations and external
research institutions at home and abroad. These institutions included the
National Institute of Infectious Diseases, which acted as our joint research
partner, and the Japan Agency for Medical Research and Development(AMED), which welcomed our researchers into its research team.
These test kits do not require specific diagnostic equipment, and theantigen is detected in approximately 15 minutes. Because of this, they are
expected to enable any healthcare institution to easily and quickly perform
diagnosis and contribute to the enhancement of Japan’s novel coronavirus testing structure.
In October 2020, we also released a new version capable of simultaneously testing for the novel coronavirus, influenza virus and RS virus
using a single specimen collected from the examinee’s nasopharynx or nasal cavity.
Taking advantage of our R&D bases specializing in life science, namely, the Denka Innovation Center (Machida, Tokyo), the Gosen Plant(Gosen, Niigata), Icon Genetics (Germany) and Denka Life Innovation Research (Singapore), we will continue to take on challenges in an evenbroader scope of healthcare fields that go far beyond the development of diagnostic reagents and vaccines for infectious diseases.

36

Growth Strategies

Operational Process
Reforms

Nurturing and Better Utilizing Human Resources
with Specialized Skills

Promoting Three Human Resource Strategies

1

In the face of a paradigm shift affecting society as awhole and changing conventional lifestyle norms andvalue systems, we are implementing various measures
aimed at empowering our human resources to embraceinnovative working styles while accelerating threehuman resource strategies—“securing humanresources with specialized skills (via recruiting andnurturing),” “pushing ahead with work style reforms”
and “promoting diversity”—in line with the Denka
Value-Up management plan.

Securing Human Resources with Specialized Skills (via recruiting and nurturing)

What Are the Ideal Traits Possessed by the Specialty Human Resources Denka Seeks?
Denka is looking for individuals who will contribute to the realization of The Denka Value, its corporate philosophy. Such individuals
take full advantage of their innate competencies (mindset, skills, expertise, literacy, personal capabilities) while striving to acquire
unique skills, thereby gaining outstanding presence in their respective fields vis-à-vis global standards.

The Ideal Traits Possessed by Denka Employees—Human Resources with Specialized Skills

Human resources capable of gaining an outstanding presenceon the global stage in their respective fields
Specialty

Specialty

Specialty

Specialty

Innate competencies
Denka’s DNA

Launching the HR
Strategy Department
In October 2020, we launched the HR
Department to accelerate the executionof and yield solid results from the threehuman resource strategies under the
Denka Value-Up management plan. In
addition to empowering our humanresources to embrace innovative working
styles, we are promoting health-oriented
corporate management with the aim of
invigorating our organization andimproving productivity. In these ways, weare striving to become a company that is
capable of achieving sustained andsound growth and is genuinely neededby society.

Hiring Human Resources with Specialized Skills

Reviewing Various Personnel Systems

We systematically hire excellent human resources regardless of gender or nationality
based on their potential to become specialty human resources supporting Denka. We
also give due consideration to maintaining an optimal balance of new graduates andmid-career hires, the latter of whom are expected to immediately become active
workforce components.

In fiscal 2019, we revised our conventional job categories, reclassifying specialists as“G-category” employees and establishing the “M-category,” which collectively
encompasses engineers and general staff. We have also clarified the job roles
employees in each category are expected to fulfill while expanding the scope of tasks
to be performed by “M-category” employees and thereby securing career paths forthem to pursue managerial positions.
In addition, we have thoroughly revised our evaluation system, whichconstitutes the foundation of our personnel systems, improving it from the perspectiveof transparency, fairness and persuasiveness. Placing emphasis on providing staff
with objective insight in the form of feedback from supervisors in order to secure
motivation, the revised evaluation system is designed to ensure that each employee
clearly understands what is expected of them and thereby contribute to humanresource development.
In fiscal 2020, we revised our personnel system for managers, who are
expected to take lead in the Company’s business endeavors, to create anenvironment that allows them to realize their full potential. In line with this revision, we
abolished conventional manager classifications based on in-house certification,
stipulating that each manager is subject solely to duty-based classifications. We also
introduced a position-based allowance. Furthermore, we have instituted an incentive
system that rewards each manager according to their results and accomplishments
vis-à-vis the annual targets they themselves formulate at the beginning of fiscal year.
Other initiatives include the development of on-the-job-training (OJT) methods
for those working from home in response to the growing trend toward remote work in
the face of the novel coronavirus pandemic. As such, we are addressing issues
associated with human resource development in a timely manner through these andother personnel system reform initiatives.

Initiatives to Nurture Specialty Human Resources
In fiscal 2018, we established the Career Value-Up Center (CVC) within the HR
Department. Acting as a dedicated body tasked with nurturing human resources withspecialized skills, the CVC prepares human resource development programs, which
consists of job level-based training and purpose-specific training, through which wehelp each employee raise their skills and competencies.
Employing these programs, we hold joint training sessions aimed at providing
job level-based training for officers, general managers, managers, young employees
and new recruits. We also provide purpose-specific training focused on areas of
specialty. Moreover, we strive to enhance the content of such programs ascorrespondence courses, which support self-motivated learning, as well as e-learning
resources that can be utilized at any time regardless of location.
In addition, as we strive to provide highly spirited and skilled employees with
opportunities to step up their careers, we have in place an in-house examination
system for employees wishing to change their job categories, for example, those who
aim to become career track employees. In such ways we are working to identify
excellent human resources throughout the Denka Group, both at home and abroad
and to assist them in their career development efforts.

37

2

Work Style Reforms Empowering Each Individual to Choose the Most Efficient Working Style to Improve Productivity

In line with Denka Value-Up, we are also focused on pushing ahead with work stylereforms in ways that address issues specific to each business unit—from Head Office
to sales offices to production bases—to allow every Denka employee to realize theirfull potential. In response to the outbreak of the novel coronavirus that emerged in
February 2020, we formulated in-house guidelines aimed at protecting employee
health and thoroughly preventing infection by rallying the entire strength of theCompany. Moreover, we continued the distribution of PCs and other devices to enable
employees to work from home, an ongoing activity since 2019, while encouraging aswitchover to online meetings. As a result, the ratio of employees who work remotely
surpassed 80% as of April 2020.
In July 2020, we formulated a Companywide policy for work style reforms (alsosee page 29), with an eye to securing our responsiveness to the “new normal” in the
post-pandemic period. In line with this policy, we are striving to update our working
styles to focus on truly essential operations and protect the health of employees andtheir families. At the same time, we are addressing various issues arising fromdecreasing opportunities for face-to-face meetings, to this end seeking out alternative
methods for conducting employee evaluations, OJT, mental health counselingsessions and other operations that cannot be executed remotely.

previous survey undertaken in fiscal 2017. Drawing on survey results, we will analyze
issues and problems in our workplaces to systematically promote the review ofvarious programs aimed at helping diverse employees achieve success as well as thedevelopment of working environments to improve productivity.

In addition, as part of initiatives to improve employee engagement, we
conducted an employee awareness survey in April 2020 for the first time since the3Promoting Diversity Improving Organizational Flexibility by Diversifying Our Workforce

In October 2017, we established the Diversity Promotion Section and, under theslogan “Your value is Denka’s value,” we have been creating a workplace environment
in which each employee can realize their full potential and work energetically whilestaying healthy.
Specifically, our diversity initiatives are focused on improving organizational
flexibility supported by a diverse workforce and, to this end, encouraging employeesto (1) accept and (2) better utilize each other’s differences and thereby (3) enhanceteam strength. Until fiscal 2019, our initiatives emphasized (1) and (2) andRecent Track Record in Diversity
Promotion Initiatives

Diversity Promotion Target

Fiscal 2017–2019

Raised employee
awareness accept

Updated personnel systems and otherconditions to promote diversity(Reviewed job category and evaluation
systems, expanded career promotion
paths for employees, and enhanced thecontent of programs aimed at helping
strike an optimal work-life balance)

TargetDouble the ratio of female managers in four years

Issue

The current ratio of female managers amounts to 1.6%, falling short of the 8.1%
average ratio for the chemical manufacturing industry(raise the ratio to 3% and the number to 18 by the end of fiscal 2024)(as of April 2020)

Implemented job level- and job
category-based training sessions to raise
employee awareness and ensure theshared understanding of issues

Reviewed personnel
systems better utilize

encompassed such activities as issuing messages from top management and similar
employee-awareness raising efforts, introducing systems and programs designed tofacilitate the better utilization of diverse human resources, and implementing trainingthat addressed differing needs among various employee groups. In fiscal 2020, we
shifted that focus to (3) in an effort to move on to a new stage. Having thus adjusted
our approach, we are implementing various measures, including the development of
workplace environment, in a way that addresses issues specific to each business unit.

Initiative

Maintain the ratio of women among new recruits to be included in the “G-category”
at 30% or higher to increase the size of the pool of managerial candidates

Diversity-Related Indicators
Non-consolidated basis

FY2014FY2015FY2016FY2017FY2018FY2019●Ratio of women among new recruits to be
included in the “G-category”

22%

17%

18%

26%

33%

34%

●

Number of women in managerial positions(managers or higher)

1

2

2

2

5

6

●

Ratio of individuals rehired after reachingretirement age

89%

93%

93%

95%

94%

87%

●

Ratio of people with disabilities among
employees

2.14%

2.06%

2.06%

2.17%

2.29%

2.24%

FY2014FY2015FY2016FY2017FY2018FY2019Fiscal 2020 Initiatives

Enhance team strength
Enhance team strength via measures
aimed at addressing issues specific toeach business unit and leveraging diverse
workforce components

Consolidated basis●

Ratio of foreign national employees

7%

12%

14%

14%

13%

13%

●

Ratio of foreign nationals in managerial
positions (managers or higher)

−
−

−
−

−
−

−
−

169

151

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

38

Growth Strategies

Placing the Utmost Priority on Safety
Follow-Up Report on Initiatives Being Undertaken
Since the Major Accident in March 2018
Following a fatal accident involving the collapse of a bulk bag pile at its worksite in March 2018, the Omuta Plant has implemented various
countermeasures, for example, setting up racks at its warehouses, reviewing the allocation of cargo stored in these warehouses andrevising operational rules to ensure that conditions are in line with the guidance of the labor standards inspection office. The Omuta Plant
has thus enhanced its safety measures from the aspects of operational rules, facilities and technologies and, in March 2020, it completed
the introduction of all measures required as a “business operator under the special guidance on safety and health management”
stipulated by relevant regulations. In addition, initiatives undertaken by the Omuta Plant are being rolled out at other production bases.
These bases completed the review and documentation of procedures for treating a broken bulk bag as well as for other cargo stacking
and unstacking operations undertaken at their warehouses while implementing follow-up education for frontline operators.
Looking ahead, the Denka Group will provide its affiliates with briefings on its cargo loading procedures, including rules on how totreat a broken bulk bag, at the earliest possible date. By doing so, the Group will ensure that all worksites are furnished with clearly
defined rules and well-documented procedures and that their employees are properly educated to operate safely in accordance with said
rules and procedures.
Moreover, the Group will accelerate the execution of facility improvement projects related to safety countermeasures scheduled foreach production base while strengthening its focus on risk assessment vis-à-vis cargo loading, the treatment of broken bulk bags andother frontline operations. In these ways, the Group will continuously improve its occupational safety record.

TopicsExample of installing a safety fence to prevent machine entanglement

Basic Policy for Workplace Safety, Health, Security and Disaster Prevention

We put the utmost priority on worksite safety and health, facility security anddisaster prevention in all aspects of our business activities.
To fulfill our social responsibilities as a chemical company, we put the utmost priority on safety as our basic stance for operations,working together to create a lively and sound workplace and thereby becoming a company capable of eliminating accidents anddisasters and worthy of society’s trust.

Safety Management Structure
Safety Management Structure Overview

Annual Safety Promotion Meeting
Heads of business bases(plant managers)

President(Chair of the Safety Measures
Headquarters)

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

Heads of relevant head
office departments
Heads of HR and
Administrative departments

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

Heads of Business Promoting
departments at each business division

An annual one-day event aimed atpromoting the inspection of andfacilitating discussion about priority
safety initiatives undertaken at eachbusiness site

Safety management conferences
Conferences aimed at identifying
potential dangers related to
explosion, fire and leakage posedby each manufacturing process andformulating countermeasures

Fiscal 2019 Initiatives
Companywide Targets

1

Reduce the number of major
accidents and disasters to zero2

Continually improve
the occupational safety record

Priority Initiatives

Facilitate communication to create a lively and sound workplace while promoting safetyassurance activities in which each worker is able to grasp the worth of their efforts

1・Develop a system for identifying any signs of serious risks and mitigate intrinsic

Initiatives to reduce thedanger associated with our operations
number of major accidents ・Thoroughly control residual risks after the implementation of countermeasures as
and disasters to zero
well as newly emerging risks with the aim of preventing disasters
・Take full advantage of hazard prediction systems to spot workplace danger
・Create a workplace in which everyone is capable of conducting on-site hazard
prediction activities before operations begin

2

Initiatives to continually
improve the occupationalsafety record

3

Initiatives to ensure safety
the avoidance of unsafe behavior and discouraging others from engaging in such behavior
for everyone working at・Thoroughly practice the 3Ss—Seiri (sort), Seiton (set in order) and Seiso (shine) to
Denka business sites
facilitate efforts to identify workplace danger

・Promote the exchange of courtesies (saying “Goanzen-ni!” or “Stay safe!”), encouraging

39

1

Declaration of a “State of Emergency” due tothe Occurrence of Multiple Occupational Accidents

refrain from such activities as taking business trips, dining in groups andparticipating in trade shows while encouraging them to opt for shorter
meetings or, better yet, employ web-conferencing systems.
Furthermore, the number of participants in on-site meetings
regularly held at each production base is now limited so as to avoid the“3Cs” (closed spaces, crowded places and close-contact settings). Thesebases have also installed partitions on desks and vinyl curtains in doorways
as part of thoroughgoing countermeasures against virus transmission.
Meanwhile, the Head Office and sales offices introduced astaggered commuting system in addition to operating a full-scale remote
work scheme, in which laptops and other necessary devices are furnishedto their employees, from March 31, 2020 onward.

Beginning with the August–September 2019 period, the Denka Groupdeclared a “state of emergency” at the direction of the Chair of the Safety
Measures Headquarters (President) due to the occurrence of multiple
occupational accidents. In response, all plant managers distributed
messages aimed at communicating to plant employees the need to place
the utmost priority on safety. In addition, the schedule for facility improvement projects, the aim of which is to mitigate intrinsic dangers associatedwith plant operations, was accelerated. Moreover, worksite leaders steppedup the practice of on-site patrols and the exchange of courtesies.
In January 2020, the Group lifted the “state of emergency” as thenumber of occupational accidents had been stabilized at a low level.
However, as we strongly believe that there is much more to do to achieve an
ideal level of occupational safety, we are engaging in an ongoing effort toestablish a safety-oriented workplace culture that tolerates no violation of
the rules. At the same time, we are accelerating the execution of measures
to mitigate the intrinsic dangers associated with our operations while striving
to ensure that the utmost priority is placed on safety at all worksites.

2

3

Facility Improvement Projects related to
Safety Countermeasures

To eliminate potential worksite dangers, we have been executing ongoingfacility improvement projects related to safety countermeasures. As a result,the number of major accidents decreased. Currently, we are striving to spot
unidentified worksite dangers by, for example, employing third-party
viewpoints and enforcing “Safety Design Guidelines,” as we accelerate theexecution of facility improvement. In addition, although there are types offacilities that must be kept running during the course of adjustments andthose with residual risks even after improvement, we will properly counter
risks arising from them by clearly defining our risk handling methods andensuring that all employees involved in on-site operations are well-versed insuch methods. By doing so, we aim to reduce the number of major
accidents to zero.

Measures to Prevent the Spread of
the Novel Coronavirus (as of June 2020)

As we aim to prevent the virus from being introduced from the outside
and then spreading within our premises, we request that all employees andvisitors wear masks and sanitize their hands with alcohol-based sanitizers
upon entering our facilities. For employees, we also ask them to voluntarily

Securing Transportation Safety
In fiscal 2019, our initiatives included safety patrols undertaken by staff from the logistics departments of
Denka’s Isesaki, Ota and Chiba plants. We also invited our transportation subcontractors to take part in periodic
drills in which they practiced emergency responses, employing the information on “yellow cards” to deal withlogistics accidents. Moreover, we implemented training sessions for on-site fork lift operators to enhance theirsafe driving techniques. These initiatives helped raise employee safety awareness and provided an opportunity
to exchange opinions on logistics safety.
As Denka supports the objective of the “white logistics movement,” an industry-wide campaign promoted
by a number of business corporations to mitigate the burdens placed on logistics operators, the Company
issued a declaration of voluntary action aimed at the realization of sustainable logistics operations. In line withthis declaration, we strove to upgrade measures to ensure logistics safety and improve the working environment
for our logistics operators, for example, by enhancing safety measures in place at each production base(enforcing heat stroke countermeasures, beefing up the rule requiring drivers to take sufficient breaks, etc.),
mitigating the burdens placed on operators (the use of pallets and material handling equipment, etc.) andreviewing on-premises driving lanes for trucks.
For fiscal 2020, we will continue with various activities to ensure logistics safety along with our involvementin the “white logistics movement,” as we strive to regularly review and improve our logistics operations andthereby prevent the occurrence of logistics accidents.

Production Process-Related Incidents and Occupational Accidents
The Safety Study Center completed on
the Chiba Plant’s premises in April
2020

A safe-driving training session for forklift operators

Safety patrol

Trend in the Number ofOccupational Accidents

We experienced five incidents related to our production process, including a leak, breakage and a fire as well asNo
AbsenceDeathan incident arising from electrical systems’ failure. In response, we have upgraded detection devices andabsenceotherwise strengthened surveillance functions installed at incident sites. None of these incidents involved human
16
15
15
injury or environmental damage.
14
10
9
13
However, the number of incidents increased by 10 compared with fiscal 2018. Although there was no9
major accident, we have seen a higher number of incidents attributable to operator action, such as those arisingfrom the lack of the correct understanding of procedures or the operator‘s careless behavior (see also Topics 1,
above).
Going forward, we will rally the Denka Group’ s entire workforce, from production worksite leaders and664
operators to employees at Head Office business departments as well as those at subcontractors and affiliates, to1
2
mitigate intrinsic dangers associated to our facility operations while striving to create a workplace environment in2016 20172018
which the “Safety First” principle is firmly embraced and acted upon by all.
(FY) 2015

40

26
19

7
2019

Growth Strategies

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

Quality Management Education
Quality management education at Denka starts with basic quality management training for new recruits. Moreover, we provide ongoing employee
education on relevant laws, regulations and internal rules as well as statistical quality management, reliability management, quality management system
operations and other quality management-related topics based on employees’ job ranks and duties. With assistance from departments charged withquality management and external specialist organizations, we are thus helping employees raise their awareness of quality assurance activities andacquire relevant knowledge and skills
In addition, we proactively incorporate e-learning programs into quality management education that starts with the education of new recruits. These
programs help enhance the effectiveness of education while promoting a shift to remote work.

Our Fiscal 2020 Quality Policy

Assessing Risk Issues and Responding Systematically1

To achieve the goals of the Denka Value-Up management plan, we arestrengthening our quality assurance capabilities via quality risk
management. The Denka Group handles diverse goods ranging from
commodities to specialty products and is positioned to handle a similarlevel of diversity in the risk arising from each product and influenced bychanges in both internal and external factors. Accordingly, a“one-size-fits-all” approach will not suffice to secure robust employee
awareness regarding quality management and maintain effective quality
assurance activities.
With this in mind, in fiscal 2019 we introduced a new initiative toassess and manage the quality risks associated with each product fromboth the market environment and the business environment aspects. We
will continue implementing quality assurance activities that accurately
address various quality risks based on the assessment of theircharacteristics and magnitude.

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

Compliance—Securing Responsiveness to Revisions of Laws and Regulations
Revised Food
Sanitation Act

In June 2018, the partial revision of the Food Sanitation Act came into effect, mandating all domestic food-related
businesses to undertake hygiene control in conformity with the Hazard Analysis and Critical Control Point(HACCP).* In response, the Denka Group introduced an HACCP-conformant hygiene control system for foodadditives, food packaging materials and other food-related products. Our food hygiene control thus accurately
meets customer requests with regard to food safety.
* A food hygiene control method involving the analysis of hazard factors associated with all processes from the acquisition of raw
materials to the shipment of finished products. With the goal of eliminating or minimizing said factors, HACCP is used to manage
crucially important processes. HACCP also mandates that food business operators perform hazard analysis and management
themselves to ensure product safety.

Chemical SubstanceRelated Regulations

In accordance with the Poisonous and Deleterious Substances Control Act, the Ministry of Health, Labour andWelfare annually discusses and specifies new items to be added to the list of regulated poisonous and deleterious
substances. We promptly communicate this information to our customers while making proposals regarding
alternative products free of substances that are expected to be included into said list of regulated substances.
Furthermore, we implement thoroughgoing inventory management to ensure that our product stockpiles neverviolate chemical substance-related regulations.
In addition, we have in place a chemical substance management system that confirms legal and regulatorycompliance in the course of developing new products, launching fresh exports and switching raw materials.

ISO 9001 Quality Management System Standard Certification and IATF 16949
Automotive Quality Management System Standard Certification
Acquiring IATF 16949
standard certiﬁcation

All of Denka’ s production bases and its main subsidiaries are certified under the ISO 9001 quality management
system standard. Furthermore, ongoing efforts are under way to acquire certification under IATF 16949, aninternational quality management system for the automotive industry, in order to accommodate requests from
customers handling the manufacture of vehicle-mounted products.

41

Quality Risk Assessments for All Products andQuality Assurance Activities

2

Distribution of Quality Risk from the Market andBusiness Environment Aspects
High

High-risk
products
Frequency

The Denka Group handles a broad range of operations with an extensive product lineup ranging from various organic and inorganic
materials to electronic materials and pharmaceuticals. Reflecting a quality policy that aligns with our management plan, we areengaging in quality assurance activities encompassing this diversity, striving to satisfy quality requirements in the business fields
relevant to our products and services and to meet customer needs in light of the latest social expectations.

Middle-risk
products
Low-riskproducts

Low
Small

Magnitude

Large

Employing Business Environment Analysis in
Quality Management for Vehicle-Mounted Products
Striving to address quality risks associated with vehicle-mounted products, each business division is engaged in the comprehensive analysis of therisks and opportunities as well as the strengths and weakness associated with each product from the aspects of the market environment andquality assurance. Results of this analysis are utilized to formulate quality targets and improvement plans under which relevant departments
promote across-the-board quality assurance activities.

Enhancing Customer Communications via Customer Satisfaction Surveys
With the aim of accurately satisfying requests from customers and utilizing their feedback in quality assurance activities, annual customer satisfaction
surveys are undertaken by the Electronics & Innovative Products Division and the Household Packaging Materials Department of the Living &Environment Products Division. Through these surveys, we analyze customer reviews and opinions from the aspects of product reliability, our response
capabilities and partnerships with customers, thereby pushing ahead with systematic improvements.
Also, data deriving from the analysis of customer complaints and requests, quality audits performed by customers, score cards and other sources
is systematically managed and shared among relevant departments to enhance the effectiveness of their quality management activities. This helps us
take a comprehensive and constant approach to quality-related customer communications as we strive to improve customer satisfaction.

42

Business
Strategies

Note: With the horizontal axis and vertical axis representing social issues/needs and advances in our technologicaldevelopment, respectively, the value-shift diagram indicates the characteristics of each product and solution as
well as how they will contribute to future value creation.

Life Innovation

Value-Shift Diagram

Creating New Value via a Combination ofTechnologies Accumulated over Many Years

Executive Officer,
Life Innovation Division

Since the founding of Denka Seiken, which had been a core subsidiary supporting the Denka Group’s healthcare-related operations,
we have contributed to infectious disease countermeasures through the manufacture and sale of diagnostic reagents. Today, ourproducts, including influenza virus rapid diagnostic testing kits, are widely used by frontline medical practitioners. Moreover, we provide
healthcare institutions with timely supplies of diagnostic testing kits whenever the threat of an infectious disease pandemic emerges.

On April 1, 2020, Denka Seiken Co., Ltd. and Denka Company Limited
merged with the aim of strengthening and expanding the Denka
Group’s healthcare-related operations. Rallying the entire strength of
the Group, we will accelerate the development of these operations.
As we consider contributing to countermeasures against thenovel coronavirus pandemic to be one of our social responsibilities, weare currently striving to meet the need for various diagnostic
examinations on the medical frontlines, to this end, for example,
developing rapid diagnostic testing kits and new examinationequipment. With acute awareness of the social significance of these
operations, we will continuously contribute to the healthcare of people
around the world and support their well-being.

Customers
Healthcare institutions, examination institutions, research institutions, pharmaceuticalcompanies, etc.

Vaccines

Diagnostic reagentsThe division handles vaccines and diagnostic reagents taken over from Denka Seiken,
and a macromolecular sodium hyaluronate preparation manufactured employing Denka’s
biotechnologies. With these products serving as the core, the division is also engaged in
the development of vaccines via the application of plant-based gene modification
technologies possessed by Germany-based Icon Genetics GmbH while providing panel
examination aimed at identifying cancer-associated genes. In short, the division is developing
specialty businesses in the fields of disease prevention, diagnosis and treatment.

Business Strategies under Denka Value-Up
Risks and Opportunities

Risks

Strategies

・Drastic changes in the market environment due tothe novel coronavirus pandemic and other factors
・Revision of pharmaceutical prices under
government-led policies aimed at curbing
healthcare expenses

Automation

Use of latex and micro plates

Large-volume cultivation
technologies
Neutralization reaction method
Virus isolation culture

Serums byblood type
Complement
fixation test

Animal breeding
Bacteria and virus cultivation

Antiserums• Salmonella, etc.

Antiserums

LA*1 reagents
EIA*2 reagents

POCT*3 reagents
EIA reagents
Automated
LA reagents

Next-generation
POCT reagentsIntelliPlex
π-code technology

Multiplex
assays• Ultra-high speed• Ultra-high sensitivity• Diagnosis of multiple
items• Even more rapid diagnosis• Higher sensitivity• Capabilities to diagnose multiple diseases• Improvement in versatility
as well as specificity• Improvement in operability
and sensitivity• Bacillus
dysenteriae, etc.

• Expand our lineup andthe scope of solutions

Strengths
Macromolecular sodium
hyaluronate preparation

Innovative combinations ofspecimens anddetection methods
Rapid diagnostic technologies Use of high-affinity
antibodies
Digitalization*1 LA: Latex agglutination*2 EIA: Enzyme immunoassay*3 POCT: Point of care testing

Material / Process Innovation

Hideki Takahashi

Relevant
SDGs

Business development in the field of
infectious disease diagnosis

Value Shift

1950

Present

IntelliPlex

QuickNavi-COVID19 Ag

The Denka Group is engaged in R&D aimed at creating a diagnostic
testing system comprising a new set of equipment and reagents byapplying π-code technology licensed from Taiwan-based PlexBio in
September 2016 that is expected to help realize highly sensitive andsimultaneous detection of multiple targeted items. In particular, we are
striving for the swift detection of the nucleic acid of pathologicalmicroorganisms, addressing a major issue medical practitioners are now
confronting in the field of infectious diseases. This project also aims torealize hassle-free, highly convenient diagnostic testing systems.

On August 11, 2020, we obtained approval for the domestic
manufacture and sale of QuickNavi-COVID19 Ag, a rapid diagnostic
testing kit for detecting novel coronavirus (SARS-CoV-2) antigen,successfully releasing this product on August 13 of the same year.
Without the use of specific examination equipment, this testing kit
helps detect the existence of the antigen within 15 minutes of thespecimen being collected from the nasopharynx and pretreated.

Develop new products aimed at contributing to the prevention of
the novel coronavirus pandemic
Strengthen and expand the core businesses (influenza vaccines,
diagnostic reagents, macromolecular sodium hyaluronate
preparation, etc.)

・Growing need for solutions supporting theprevention and early diagnosis of disease incountries around the globe
Opportunities
・Growing demand for rapid diagnostic testing kitsin the face of the infectious disease pandemic

Ensure the smooth launch of new businesses (oncolytic virus,
genome-based panel examination method for cancer diagnosis, etc.)
Promote open innovation for the creation of products andtechnologies capable of meeting future needs (Denka Innovation
Center, Icon Genetics, Denka Life Innovation Research, etc.)

Contribution to the SDGs through Business Operations

CANCERPLEX (panel examination service for identifying cancer-associated genes and delivering cancer remedy information)
Main Achievements(Billions of yen)

Operating income

Operating income ratio（%）

15

60

10

40

Achieved growth in sales of diagnostic reagents and influenza
vaccines, contributing to the Group’s profit
Made steady progress in the development of new businesses(norovirus vaccines, gene-based diagnostics, etc.)
Contributed to countermeasures against the novel coronavirus

520

Resumed the production of diethyl malonate, the raw material for
Avigan , an anti-virus drug
0
(FY)

2017
Result2018
Result2019
Result2020

0Forecast

Three-Year Divisional Performance Summary and FY2020 Forecast
43

CANCERPLEX is a comprehensive examination system for identifying cancer-associated genes via the combination of a next-generation sequencer*1and bioinformatics technology.*2 This system is capable of detecting more than 400 cancer-associated genes by carrying out the accurate and detailed
analysis of gene alteration attributable to a solid tumor. To contribute to the enhancement of people’s QOL, we will assist each patient in the optimal
selection of treatment methods through the commercialization of CANCERPLEX.

Social issues

High cancer
mortality

Source of value

Applied technologies thathave been cultivatedthrough the involvementin the diagnostic reagent
business*1 Examination equipment that reads genome sequences at an extremely high speed*2 A type of informatics technology that analyzes such data as genome sequences identified by the sequencer to overcome the complexities of genomic information and acquire
useful insights in the life science and medical fields

44

Business Strategies

Electronics & Innovative Products

Value-Shift Diagram

Taking Advantage of Denka’s Unique Technologies to
Support the Development of Innovative Products

Executive Officer,
Electronics &Innovative Products

Spherical fillers

The Electronics & Innovative Products Division offers a robust lineup
ranging from functional fillers, thermal solution components andelectronic packaging materials to electro-conductive materials for use
in vehicle-mounted batteries. In short, the division delivers productsthat are essential to the field of electronic materials. Pushing ahead
with the specialization of our operations, we will pursue advances inessential technologies covering a broad range of materials. In theseways, we will develop unique products that will contribute to theintroduction of next-generation communication technologies andautonomous driving systems as well as the creation of even smaller
electronics devices boasting superiority in functions, high-speed
processing capabilities, safety and reliability.

Customers’ Products
Automobiles, electric and electronic devices, aircraft and spacecraft, rollingstock, marine vessels, the environment and energy, communication, power, etc.

In step with the popularization of highly functional and compact electronic devices, which have become ever lighter, thinner andsmaller, manufacturers of ceramic powder spherical fillers are being called upon to supply products equipped with superior
functionalities. We offer a robust lineup of spherical alumina and spherical fused silica, both of which boast superior sphericity andencompass a broad range of particle diameters. Moreover, we have been focused on accurately meeting customer needs via productdesign and development. These are ways we contribute to the enhancement of electronic device functions.

Thermally conductive
sheetsMaterial / Process Innovation

Ikuo Ishida

Relevant
SDGs

DENKA THERMALLYCONDUCTIVE SHEET

Packaging materials fortransporting
electronic components(Applications: Carrier tapes, etc.)

Spherical alumina
・Smaller diameters

Released in 1971

Flame
spheroidization Spherical fused silica

Crushed silica

Risks

・Growing demand for electronic materials for use
in fields representing megatrends, including EVs,
5G communication systems and renewable
Opportunities
energy infrastructure
・Rapid growth of the communications-related
market due to the widespread use of non
face-to-face services

Main Achievements

Combustion
synthesis

・Mix of particles withdifferent diameters
・Smaller diameters(thermal expansion control aid)
Chip size package

Products in development process

Spherical alumina
Combustion ・Ultra-fine powder

Precise separation andgrouping of particles

1989

For use in 5G
antenna chips

2006

2005

Spherical alumina
・Mix of particles with
Fire-resistantdifferent diameters
materials

New material
Spherical fused silica
with high thermal(superior dielectric property) expansion property

synthesis

New material
Spherical fused silica withlow dielectric loss tangent(low transmission loss)

Improved abrasion

Spherical fused silica
resistance
2003
Minimized foreign
Spherical fused silica
content
・Ultra-fine powder Minimized steel

Substrates made of copper foilcontent
Products for use inautonomous
driving systems

Value ShiftBusiness Strategies under Denka Value-Up

・Shift of materials and components driven bytechnological breakthroughs as well as thedecline of product value due to commoditization
・Insufficiency of product supply capabilities tomeet rapid growth in demand

Next-generationﬁller with superior
heat dissipation
property for use in 5G
high-speed communication devices

Semiconductor encapsulant

Ceramics sintering and calcining, particle manufacturing, nitride synthesis,
precision processing and machining, material composite, sheet and film
lamination, thermal conductive, heat and light curing, static electricity control,
coating and painting and adhesive technologies as well as optical property
control technologies, including those associated with controlling the refractive
index

Risks and Opportunities

Vehicle-mounted batteries

2004

Strengths
Phosphor

New material
New material
Spherical magnesium oxide Spherical barium(highly heat conductive)
titanate

Strategies

Expand our operations targeting the vehicle-mounted device market
Deliver products associated with eco-friendly vehicles andautonomous driving systems to meet emerging needs in theautomotive field

Spherical alumina

Spherical fused silica (ultra-fine powder)

Spherical magnesium oxide

This product is used as an additivethat gives resins and elastomers
superior heat conductivity. With theapplication of Denka’s uniquehigh-temperature fusing technologies,
the filler boasts superior purity,
liquidity and sphericity and is used asa key thermal solution material
capable of supporting the creation ofminiaturized electronic devices withgreater capacity.

Employing its unique manufacturing
technologies, Denka developed sphericalfused silica in the form of ultra-fine powder,with its lineup encompassing particles whose
diameters are measured at the sub-micron oreven the nano-levels. Having thus realized ahigher filling density, this product is expected
to help various types of resins curb thermal
expansion or achieve high dimensional
precision. In addition to applications inelectronic material and engineering fields, ourspherical fusedsilica is used
as a filler invarious surface
finishing andmodification
processes.

Denka’s spherical magnesium oxide boasts robust
thermal conductivity 1.5 times higher than that ofalumina. In step with the introduction of next-generation
communications infrastructure and the popularization ofEVs, securing thermal solutions has become a matter ofgrowing importance for electronic device manufacturers
as they strive to achieve the ever-greater datatransmission capacities and higher transmission speeds
required of communications devices, or otherwise meetincreasingly stringent performance requirements forvehicle-mounted components. In
response, we will contribute to theenhancement of electronic device
functions by taking full advantageof the particle diameter control
and other core technologies wehave accumulated in the field of
inorganic materials as a producerof spherical fused silica andspherical alumina.

Boost production capacity to meet needs of growth markets
Execute timely capital investment to enhance our ability to serve
growth markets as we expect burgeoning demand in such fields as
semiconductors and next-generation communications infrastructure

Launch new businesses at the earliest possible date

Contribution to the SDGs through Business Operations

Swiftly commercialize new specialty products(Billions of yen)

Promoted the specialization of our operations via the upgrading ofexisting products to increase their added value and the developmentof highly functional products, thereby securing stable businessprofitStepped up marketing in the field of next-generation
communications infrastructure
Proactively executed capital investment as we expect growth indemand for such products as silicon nitride-based ceramic
substrates, spherical alumina, spherical fused silica fillers andacetylene black

Operating income

Operating income ratio（%）

20

20

15

15

10

10

5

5

0

(FY)

2017
Result2018
Result2019
Result2020

0Forecast

DENKA BLACK Li (acetylene black)Specialty carbon black made via the thermal decomposition of acetylene gas in a high-temperature environment, DENKA BLACK Li boasts a foreign
matter content, such as sulfur or metal, that is extremely low and serves as an essential raw material for lithium ion secondary batteries (LiBs) and theinner and outer semi-conductive layers of transmission cables. Thanks to its ultra-high purity, it contributes to the safety of LiBs and helps prolong the
lifetime of high-voltage cables. Moreover, due to its unique structure, DENKA BLACK Li is capable of curbing changes in the cubic volume of batteries
that occur in the course of charging and discharging, a feature that helps lengthen the batteries’ product life.

Social issues
・Need for products supporting
the enhancement of LiB
safety and reliability
・Need for products supporting
safe power transmission via
high-voltage cables to ensurestable power supply andfacilitate the popularization ofclean energy

Source of value
Contribution to the safety of
eco-friendly vehicles andthe lengthening of their
lifetimes thanks to distinctive
product features supported byultra-high purity carbon

Three-Year Divisional Performance Summary and FY2020 Forecast
45

46

Business Strategies

Infrastructure & Social Solutions

Value-Shift Diagram

Delivering Even Better Solutions toSatisfy the Needs of the Times

Managing Executive Officer,
Infrastructure &Social Solutions

Special Cement Additive BusinessWe offer our solid technological capabilities and extensive product lineup to accommodate wide-ranging social needs for solutions
capable of enhancing the functions of concrete structures, lengthening their durability and reducing the need for intensive labor inconstruction. By doing so, we are contributing to the development of robust social infrastructure at home and abroad.

The Infrastructure & Social Solutions Division is pursuing thespecialization of its operations via structural reforms of the commodity
businesses, which have supported Denka for 100 years, and thecreation of high-value-added products and businesses that yieldsolutions that meet the needs of the times. The latter pursuit focuses on
employing Denka’s unique technologies to address environmental
concerns, promote labor saving and deliver people-friendly productswith the aim of contributing to the realization of the United Nations
SDGs and other universal goals related to ESG issues. In addition, weare developing a working environment that facilitates employee
creativity via work style reforms. By doing so, we are becoming anorganization that encourages all employees to take on challenging
goals and helps them work vibrantly and achieve success.

Customers’ Products
Civil engineering, construction, agriculture, automobiles, iron-making, ceramics, etc.

Business Strategies under Denka Value-Up

Risks

Main Achievements

Step up the proposal of materials that mitigate the impact ofclimate change on farming and the provision of solutions
designed to improve farmland

Operating income ratio（%）

2

4

1.5

3

1

2

0.5

1

0

0

-0.5

-1

Agri-products: Made entries into biostimulant markets worldwide
Inorganic materials: Reviewed and augmented production facilities
to meet growing demand for automobile-related products(FY)

Environmental materials: Initiated expansion into overseas markets
for agricultural irrigation systems

2017
Result2018
ResultGrouting
Infrastructure
Highways, roads

Weed-preventing
soil solidifier

・CO2-SUICOM

Repair materials

High-strength
additive

Quick setting
agent

Infrastructure
Harbor facilities

Building

Value Shift

Present

Contribution to the SDGs through Business Operations
New method

Conventional
methodVolume of CO2 emissions (kg/t)
1,000

2019
Result2020

Quick-setting agents
created in the course ofdeveloping NATMIC andconstruction systemtechnologies optimized
for these agents

Approx. 60%
reduction

600

Source of value

400
200
0

Comparisons of concrete samples
immersed in sulfuric acidfor eight weeks

Cementcontaining
blast furnace slag
Comparisons of the volume of CO2
emissions from conventional cement
and cement containing blast furnace slag
Conventional
cementForecast

Carbonization Agent “LEAF”
Social issues
Need to realize acarbon-free society bybalancing the volumesof CO2 emitted andabsorbed

Source of value
Effective utilization of
byproduct slaked lime
and clinker manufacturing technologies+CO2

Changes in concrete ingredients via carbonization induced by LEAF
Left: Before carbonization (gray: LEAF; black: airspace)
Right: After carbonization (gray: calcium carbonate and amorphous silica)

LEAF is a carbonization agent developed by Denka that vigorously converts CO2 into chemically stable calcium carbonate. Used as a cement additive, itcauses carbonization and helps densify the resulting concrete, thereby improving strength and durability. Instead of limestone, which emits CO2 in thecourse of high-temperature calcination, LEAF is made using slaked lime, making it an effectively use of this byproduct. By thus offering a way of
curbing the volume of CO2 emissions from its manufacturing onward, LEAF is expected to contribute to the realization of carbon neutrality.

Three-Year Divisional Performance Summary and FY2020 Forecast
47

PCa
concrete

Denka’s eco-friendly shotcrete method takes advantage of a powdered quick-setting agent that delivers greater strength faster. In addition, this method
not only helps to ensure worker safety during construction, by employing cement concrete containing a large amount of blast furnace slag fine powder(approximately 290kg/m3), an industrial byproduct, this method contributes greatly to the reduction in greenhouse gas emissions. Moreover, the highcontent of blast furnace slag gives the shotcrete superior acid resistance. Denka’s shotcrete method is thus expected to improve the overall quality ofconcrete and lengthen its lifetime.

Propose solutions utilizing functional fire-resistant materials to
promote energy-saving measures and to cultivate new
applications in the construction fieldSpecial cement additives: Seized opportunities arising from growing
demand associated with natural energy development projects (e.g.,
supplied products for hydroelectric power station conduits) while
making a full-scale entry into the overseas road repair business andthe European market for tunnel construction solutions

Ultrahigh-strength Carbonization
fiber-reinforced agent
concrete・LEAF

urbanization driven by
rapid economic growth・Increasing seriousnessof the consequencesof climate change

Maximize profitability by optimizing our production system

Cement: Promoted the recycling of industrial waste in collaboration
with neighboring communities via the effective utilization of
resource recycling facilities

Noncontracting Quick hardening
additive
agent

・Issues arising from

Step up overseas expansion by developing our local network forspecial cement additives in Asia

Operating income

3D printing
technologies

Constant mortar
kneading system

TunnelNATMIC

Social issues

Facilitate the utilization of recycled waste and thereby help
develop a recycling-oriented society(Billions of yen)

3D-digital measurement
technologies

800

Develop and release products designed to help adapt to climatechange in the field of infrastructure maintenance・Growing demand for solutions supporting
infrastructure maintenance and upgrading aimed atcountering the aging of facilities
Opportunities ・Full-scale market expansion for biostimulants,
which are expected to help address issues arisingfrom surging food demand as a result of global
population growth

Labor-saving
Electrochemical Shotcrete method
mortar-basedwith low dust
shotcrete construction repair method
generation
systemHighly functional
materials

Eco-Friendly Shotcrete Method

Strategies

・Changes in the business environment reflecting
global warming
・Shrinkage of the domestic market due to a declining
population

Use of drones instructural researchSocial infrastructure(concrete)
Enhanced functions
Prolonged durability
Labor-saving
construction

BridgeAbundant in-house power generation capacity, mining operations, the ability to
AZUMINTOYODRAIN
recycle waste as fuel and as raw material for cement production, concrete-related(humic acid fertilizer) (underground drainpipes
technologies that control the pace of hardening and prevent cracking, material
for agriculture anddesign technologies, construction and repair technologies, and soil improvement andconstruction use)
fertilization technologies as well as high-temperature calcining technologies forinorganic materials and polymer processing technologies

Risks and Opportunities

Nondestructive inspection
technologies

Construction methods
and systems

Expansive
additive

Strengths
DENKA CSA
(expansive additive
for concrete)

Research anddiagnosis

Material / Process Innovation

Toyoki Yokoyama

Relevant
SDGs

48

Business Strategies

Value-Shift Diagram

Elastomers & Performance Plastics

Business Development Centered on Functional Resin

Managing Executive Officer,
Elastomers &Performance Plastics

The Elastomers & Performance Plastic Division is in charge of threebusiness categories: the elastomer business, which includes global
market-leading chloroprene rubber (CR) operations; the performanceplastics business, which boasts highly functional styrene-based products
in an array of grades; and the styrene and chemicals business, whichcenters on styrene monomer and acetyl chemicals and is backed by
Denka production facilities that boast the largest capacity in the east
Japan. Currently, the division’s overseas sales ratio is holding stable atover 60%. In addition to our production bases in Japan, we operate
overseas plants in the United States and Singapore to meet global market
needs. Although the business environment remains harsh in fiscal 2020
due to the novel coronavirus pandemic, we are acutely aware of our
mission to support Denka’s largest flagship business segment in terms ofsales and profit. Accordingly, we will strive to maintain stable operations
while promoting specialization with the aim of achieving the goals of the
Denka Value-Up management plan.

Customers’ Products
Automobile parts, transmission belts, adhesives, civil engineering products(soil erosion prevention agents), home appliances, office equipment, foodpackaging materials, household goods for daily use, etc.

In 1965, we launched styrene monomer (SM) and polystyrene (PS) production facilities in the Chiba Plant. Since then, we have expanded our scope of
production items to include ABS resin (1970), SBC resin (1973) and other styrene based functional resins. In 1997, we commercialized PS production in
Singapore, and, in 2006, initiated the production of SBC resin and transparent resin in that country. Moreover, our base in Singapore began
manufacturing DENKA IP thermal resin in 2012. Our optimal production system supported by multiple locations helps us deliver highly functional grades
and contribute to society.

Polymer structure design andcontrol technologies
Material compound technologies

CLEAREN
Resin property
Shrinkage property improver
MBS resin

Examples of products made using A slope that has been sprayed
DENKA TRANSPARENT POLYMER with DENKA COAT soil erosion(styrene-based functional resin)prevention agent

TX
ABS resin

General-purpose resin
PS

AS

Business Strategies under Denka Value-Up
Risks and Opportunities
Risk

Strategies

High transparency

environmental problems•Growing global appetite for CR and functional resins,both representing product categories for which we boast
international supply chains•Emerging needs for novel automobile-related materials,
Opportunities the focus of our vigorous R&D efforts, in the wake of arevolutionary change in the industry•Potential competitive advantages arising from ourunique technologies as a plastic manufacturer, including
chemical recycling, biomass-related products andothers that support environmental countermeasures

Main Achievements

Operating income

Made progress in the strengthening of an integrated operational
structure for the CR business employing production facilities inJapan and the United States
Decided on the execution of measures to double the capacity of our
MS resin production facilities in Singapore via the conversion ofpolystyrene manufacturing facilities in response to ongoing growthin demand for products for use in optical and other applications

9

10

6

3

(FY)

2017
Result2018
Result2019
Result2020

ABS

Decompose PS into
SM for use asa raw material

AS

Value Shift

Present

Initiating PS Chemical Recycling BusinessCurrently, discussions are under way regarding how to addressenvironmental concerns associated with our SBC resin, a styrene-based
shrink film material. With the purpose of establishing a product lineup
capable of contributing to society, we are carrying out surveys ofcandidate film materials with lower specific weight, a property that will
facilitate the smooth separation of labels from bottles. We are also
exploring the possibility of providing shrink films made using recycledmaterials while looking into the possible combination of conventional
materials with biomass resin and the incorporation of biomass-based
styrene and butadiene.

Toyo Styrene Co., Ltd., an equity method affiliate of Denka, signed atechnology licensing agreement with Agilyx Corporation, a global
company specializing in plastic recycling, and is currently licensed touse Agilyx technology in the domestic market. Employing thisagreement, Toyo Styrene aims to commercialize the chemical recyclingof used PS. To this end, the construction of a verification testing facility
is now under way on the premises of Denka’s Chiba Plant. With an
expected annual processing capacity totaling approximately 3,000 tons,
the facility is scheduled for operational kickoff at the end of fiscal 2022.

SBC
resin-based
foaming film

PET film
Photo provided by Agilyx

Functional film that combines
SBC resin and biomass resin

A BOPS sheet that has undergone
the blanking process to produce container lids

0

Forecast

Novel Functional Resin: DENKA IPX SeriesOver the years, we have cultivated styrene-based precision polymerization technologies in the course of polymer design. The creation of DENKA IPX isa result of our efforts to increase the sophistication of these technologies. This product boasts improved performance in terms of heat and chemical
resistance as well as coating retention in addition to reduced VOC content and is capable of acting as a thermal resistance improver. It is expected toaccommodate wide-ranging needs for automotive interior materials and other applications with stringent requirements.

Social issues
The need for material
development capabilities
that help accommodate
wide-ranging needs forhigh-performance productswith multiple functions interms of, for example, heatand chemical resistance aswell as coating retention

Source of value

Increased sophisticationof styrene-based
precision polymerization
technologies cultivatedin the course of polymer
designDENKA IP and IPX series

Three-Year Divisional Performance Summary and FY2020 Forecast
49

Chemical recycling

Good
color
phase

Chemical and•Enhance color phaseshock resistanceContribution to the SDGs through Business Operations

15

0

MS

Highlyfunctional

Ongoing Discussions about SBC Resin Recycling

PET film+
SBC resin-based foaming
film immersed in water

125

Initiated a project involving the commercialization of Toyo Styrene’s
chemical recycling technology targeting polystyrene resin•Enhance transparency•Enhance light resistance

Opticaluse

ChemicalresistanceApprox.
2 seconds

Operating income ratio（%）

20

Heat-resistance
improverHeat-resistance
improverfor PVC

remove labels from PET bottles

existing products, increasing their added value and developing
highly functional grades with the aim of establishing abusiness portfolio that is capable of securing stable proﬁt andresilient against changes in trade conditions■ Fully take advantage of our production bases at home andabroad to secure an optimal structure for business operations■ Expand sales of rubber for highly heat-resistant hose
applications in response to the growing need for gasoline
vehicles with turbo functions on the back of an ongoing shift
away from diesel engines■ Address plastic-related environmental issues by focusing on(1) promoting R&D aimed at reducing the speciﬁc weight ofplastics and creating environment-friendly materials incorporating
biomass plastics while (2) striving to commercialize apolystyrene chemical recycling process(Billions of yen)

IPX

Eco-friendly
shrink labelmaterial● Facilitating gravity separation to■ Promote the specialization of our operations by upgrading•A decrease in demand because of plastic-induced

Transparency andshock resistance•Enhance coating
retention property,
fluidity andcompatibility

IP

ABS

AS resinPS
Transparency andlow specific weight• A two-location production system for flagship products (CR produced in Japanand the United States; functional resins produced in Japan and Singapore)• Polymer structure design and control technologies, polymer composite
technologies and material compounding technologies that aid in the creationof products for a variety of applications in line with customer intentions

TH

MS resin

Strengths
Examples of CR-based
automobile parts•Enable quick separation from bottles•Made using naturally derived ingredients•Incorporating recycled materials

SBC resin

Material / Process Innovation

Contributing to Technological Innovation and Social Development by Employing
a Variety of Technologies and a Wealth of Know-How

Koki Tabuchi

Relevant
SDGs

50

An example of finished products
made using these materials

Business Strategies

Living & Environment Products

Value-Shift Diagram

Business Development Centered on Plastic
Food Containers and Lids Compatible with Microwaving

Jinichi Osuga
Executive Officer,
Living &Environment Products

The Living & Environment Products Division will take on the pursuitof new value without insisting on limiting the search to a particularmaterial or field and, to this end, fully take advantage of its
strengths in the areas of technology and quality with the aim ofsupporting the entire Group in its role as a chemical engineering
division. In these ways, we will create and deliver products thatsatisfy market needs. Currently, the division is accelerating global
expansion via the development of unique chemical engineering
products aimed at supporting people’s lifestyles and improving
living environments. At the same time, we are striving to develop
and deliver solutions aimed at helping reduce environmental
burdens and thereby creating shared value toward resolving
issues society is confronting.

Customers’ Products
Automobiles, electric and electronics equipment, civil engineering andconstruction, food, aircraft and aerospace, rolling stock, medical andnursing care, the environment and energy, agriculture, logistics, etc.

Strengths
An example of housing madeTOYOKALON
using TOYO GUTTERS(synthetic fiber for wigs
(hard polyvinyl chloride
and hairpieces)rain gutters)

VINI-TAPE(vinyl chloride-based
insulated adhesive tape)

Increase the added value of containers
PS: Polystyrene
PP: Polypropylene

Foaming of PP

Use as fillers
Multi-layer extrusion

FoamingPP
fillerCoating material design
Biaxially oriented PS

Superiority interms of fogging
prevention andtransparency
Make content
easily visible

Heat insulation
Copolymerization andstretching of PS

OilresistanceNew material
development

Biomass
HIPS

Foamed PP
multi-later extrusion

Foamed PS
Multi-layer extrusion

Stiffness andheat resistanceDesignSurface finishing and
Hassle-freeultra-multilayer technologies

PS alloy

Incorporate biomass
ingredients

Biomass
resin
content

Strongerandthinner

Enhancing the added value of lid materials

Transparency

microwaving
Prolonged
heatingReleased in 1979 Released in 1983

Environmentallyfriendly

Reduce foodwaste

Meet needs arising froma graying population

Value Shift

Present

Mighty Guard

Business Strategies under Denka Value-Upthe elderly
Solutions to food loss problems(for use in freezing andReduceother processing toenvironmental
preserve freshness)burdenMaterial design anddiversified ingredientsHeat insulation and lighter weight(reduction in CO2 emissions)Improved ductility
Control ofheat contraction

Heatand oil
resistance

Biodegradability

unpackingCold-resistantEasy towith gas barrier
dispose ofproperties
Prevent adhesion Meet needs among

Lighter weight(reduction in
Durable in prolonged
heating and compatible CO2 emissions)Compatible with food with higher
with food oil content being heatedCompatible with higher
oil content
with

Heat
resistanceProtect content
Growing scope ofand enhancefood packaging
outward appearance
applications

Sheet film manufacturing technologies, adhesive manufacturing andadhesion coating technologies, resin compounding technologies,
plastic ejection processing technologies, etc.

Risks and Opportunities

BOPS as a Solution
Today, there is a growing need for products supporting hassle-free cooking due to the aging of Japanese society and the increasing
number of double-income households. Containers made using our BOPS sheets are compatible with a variety of food even whenmicrowaved. In addition, we are striving to develop products designed to help address issues arising from waste plastics.

Material / Process Innovation

Pursuing Value Creation while Delivering
Products Designed to Meet Market Needs

Relevant
SDGs

Eco Clear

Boasting superior performance in terms of heat and oil resistance, thisproduct was developed to contribute to a rich dietary life.

This product helps reduce the weight of food containers, thereby
contributing to reduction in the volume of CO2 emissions and plastic
waste.

Strategies

Housing materials (rain gutters)

Risk• Develop products with anti-bacterial and virus functions• Develop products that support labor-saving, hassle-freeinstallation and are environmentally friendly• Unfavorable market changes that make existing

Advanced tapes (industrial tapes)• Maintain stable supply by taking advantage of a two-location
production system• Seize opportunities arising from growing demand for e-commerce• Develop products for use in air conditioners in a way that meetsdemand for materials supporting ventilating functions

products obsolete• Demand for the supply of resin processing
Opportunity

Contribution to the SDGs through Business Operations

TOYOKALON (synthetic fiber for wigs and hairpieces)• Improve existing fiber materials and create those with new color
in anticipation of the future trend• Develop products that genuinely satisfy customer needs

products capable of meeting evolving
requirements amid the global trend toward
eco-friendliness and growing need for infectious
disease countermeasures as well as diversifying
consumer preferences

BOPS Sheets

Household packaging materials (plastic materials for food packaging)• Step up efforts to develop eco-friendly products and promote
recycling• Cultivate new markets in response to changes in consumer
lifestyles(Billions of yen)

Operating income

Operating income ratio （%）

Main Achievements

2

4

Promoted the development of specialty products in the commodity
businesses

1.5

3

1

2

0.5

1

Pushed ahead with marketing activities aimed at getting our
specialty products on track as materials chosen by major
manufacturers
Stepped up other sales and marketing activities in a way that fully
takes advantage of our strengths in the areas of technology andquality
Proactively Reduce, Recycle, Reuse and Renew measures to create
new value

0

(FY)

2017
Result2018
Result2019
Result2020

Food containers made using BOPS sheets are being used for a
growing scope of applications, such as supermarket foodpackaging and the lids of convenience store boxed lunches,
while supporting the recent boom in takeaway and delivery
services.
To address plastic-related environmental concerns thathave recently been brought to light by public attention, we took
advantage of our long-accumulated technologies in the BOPS
sheet business to develop Eco Clear. With this product, we havesucceeded in realizing superior strength that allows for the
production of even thinner sheets.
The use of Eco Clear will thus contribute to reduction in theweight of food containers and the volume of plastic materials
used.
Going forward, we will deliver this and other products
designed to contribute to society and, to this end, continue topursue better solutions capable addressing environmental
concerns.

Social issues

Source of value・Container lids often hinder shoppers’・Technologies that improve
the transparency of plastic
lids and prevent them from
fogging up
・Enhanced heat resistancethat withstands microwaving
・Provision of stronger andthinner container lids withthe aim of reducing thevolume of plastic waste andCO2 emissions

view of what is inside・Conventional plastic containers andlids are incapable of withstanding theheat produced during microwaving
・The volume of plastic waste
continues to grow0

Forecast

Three-Year Divisional Performance Summary and FY2020 Forecast
51

52

Corporate GovernanceInitiatives Being Undertaken Thus Far to Improve Corporate GovernanceCorporate GovernancePurposes2007

Halved the number of directors while introducing an executive officer system

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

Abolished senior managing and managing director positions

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

Delegated executive authorities and positions from directors to executive officers

Flexibly assess the adequacy of each director

Shortened the term of office for directors to one year

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

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

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

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

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

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

Enhance the governance structure to improve management transparency andsoundness

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

Create opportunities for in-house and outside directors and in-house and outside
members of the Audit & Supervisory Board to engage in constructive discussion, help
them freely exchange frank opinions and facilitate information sharing and closer
collaboration
Optimize corporate governance aimed at securing sustainable growth and a mediumto long-term improvement in corporate value

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

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

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

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

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

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

Decided to hold the biannual Strategy and R&D Policy Presentation Meetings foroutside directors and outside Audit & Supervisory Board members

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

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

Enhance the effectiveness of the Board of Directors

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

2017

Ensure that outside directors and outside Audit & Supervisory Board members
contribute diverse opinions and advice to the Board of Directors with regard to suchgovernance issues as director nomination and remuneration as well as otherimportant management matters with the aim of securing the fairness and objectivityof management judgment

Established the Management Advisory Committee attended by all outside
directors, all outside Audit & Supervisory Board members, the Chairman and thePresident & CEO

2019

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

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

2008

2015

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

Initiatives

Speed up decision making

2016

General Meeting of Shareholders
Appointment/Dismissal

Report

Audit(Directors who are Audit Committee Members)

Consult

Directors (Excluding Directors who are Audit Committee Members)

Appointment/Dismissal

ReportDirectors

Board of Directors

ReportAdviseOperation

Supervision

Election/Dismissal

AssistRepresentative Directors

Audit
Committee
Dept.

Executive Officers
Appointment/
Dismissal

Business Units

Cooperation

Executive Directors

Monthly exchange meetings for all directors and Audit & Supervisory Board
members were formally named the D&A Round Table meetings

The Management Advisory Committee was renamed the Nomination andRemuneration Advisory Committee

Transition to a Company with an Audit Committee

Appointment/Dismissal

Audit Committee

Established the Denka Corporate Governance Guidelines

Nomination &Remuneration
Advisory
Committee

Full-time
staff ofthe Audit
Committee
Department

Affiliates

Acutely aware of the importance of securing solid corporate governance, Denka has introduced an executive officer system aimed atensuring functional separation between personnel charged with supervision and decision making and those charged with businessexecution. Moreover, Denka appointed three outside directors and two outside members of the Audit & Supervisory Board. As such,
Denka has strengthened the functions of the Board of Directors and the Audit & Supervisory Board in terms of supervision andauditing, respectively, with the aim of establishing a robust foundation for fair and transparent business management.
In June 2019, Denka transitioned to a Company with an Audit Committee, another move aimed at strengthening the Company’s
corporate governance and enhancing its corporate value. In addition to supporting speedier decision making, this transition was
intended to enhance the supervisory functions of the Board of Directors and, to this end, entailed appointing individuals to serve as
Audit Committee members and authorized to vote at Board of Directors meetings.
Currently, Denka’s Audit Committee is engaged in audits of such subjects as the development of internal control systems andtheir practical application. To this end, members of the Audit Committee attend key meetings, study reports from directors and review
important documents. Throughout these endeavors, the Audit Committee audits directors’ business execution from an independent
standpoint.
Moreover, Denka’s Audit Committee Department maintains a full-time staff tasked with assisting the Audit Committee in the proper
execution of its duties and otherwise supporting the committee’s activities.
In August 2020, the Company revised criteria for agenda items to be submitted to its Board of Directors meetings. As weembarked on our second year since the transition to a Company with an Audit Committee, the revision was intended to optimize
governance operations as a whole in line with purposes of transition. Thanks to this move, the Board of Directors is now empowered tomake even swifter decisions and to allocate more time to important deliberations.

Internal Audits

Purposes of Transition to a Company with an Audit Committee

Internal Auditing Dept.

■ Step up the separation of supervisory and execution functions

Audits within Business Units(Including Administrative Dept., Legal Dept., Environment and Safety Dept., and Quality Assurance Dept.)

Improve the transparency and fairness of management while realizing speedier and dynamic decision making■ Increase the number of outside directors

Compliance Hotline System
Audit

Accounting Auditor

The number of outside directors grew from three to five, one of whom is female■ Promote diversity

Ensure that the composition of Board members is diverse and well-balanced in terms of their expertise, experience, competency,
gender and nationality
53

54

Corporate GovernanceConcepts on the Appointment of Directors

The Denka Group’s Internal Control

With the aim of embodying The Denka Value, our corporate philosophy, we are promoting the Denka Value-Up management plan,
to this end strengthening our management structure supported by directors and executive officers while upgrading ourgovernance systems and supervisory functions.
Director candidates are nominated from among individuals who have abundant experience and a strong track record in
Denka’s business divisions and are equipped with sufficient knowledge and specialist expertise for the position. Outside director
candidates are nominated from among those who boast extensive knowledge backed by abundant business experience as well
as distinctive strengths in their areas of specialty so that they can bring their insights on how to achieve sustainable growth andenhance corporate value. With regard to the overall composition of board members, we focus on maintaining a diverse andwell-balanced composition in terms of expertise, experience, competency, gender and nationality. We also aim to maintain asufficient number of independent outside directors to ensure that they account for at least one third of director membership.
Currently, such directors account for 42% of the Company’s Board of Directors, well in excess of the targeted composition.

Our Philosophy and Principles

Director Remuneration
to such directors is determined within the upper limit approvedby the General Meeting of Shareholders.

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

Variablecompensation

18%¥38 million +¥16 million¥5 million

①

②

①

Fiscal 2019
Director
Remuneration

Excluding remuneration for
directors who haveconcurrent membershipin the Audit
Committee②¥68 million
Fixedcompensation

82%¥198 million

Remuneration (paid during the period from April 1, 2019 to the close of
the 160th Ordinary General Meeting of Shareholders (June 20, 2019)• Directors
Total amount of remuneration: ¥74 million
Basic compensation: ¥68 million for eight recipients① Breakdown:(¥9 million for three outside directors)
Share-based compensation: ¥5 million for five recipients• Corporate auditors
Basic compensation: ¥19 million for four recipients(¥6 million for two outside corporate auditors)

Remuneration paid during the period from the close of the 160th Ordinary
General Meeting of Shareholders (June 20, 2019) to March 31, 2020
• Directors (excluding those who have concurrent membership in the Audit Committee)
Total amount of remuneration: ¥253 million② Breakdown: Basic compensation: ¥198 million for seven recipients(¥18 million for two outside directors)
Performance-based compensation: ¥38 million for five recipients;
share-based compensation: ¥16 million for five recipients• Directors (those who have concurrent membership in the Audit Committee)
Basic compensation: ¥68 million for five recipients(¥27 million for three outside directors)

Evaluation of the Effectiveness of the Board of Directors
Method of Evaluation
As it did in the previous fiscal year, theCompany analyzed and evaluated theeffectiveness of the Board of Directors byhaving individual directors complete the“Self Evaluation Questionnaire,” which
covers items related to the effectivenessof the Board of Directors, such as scale,composition, operation and 20 otheritems, and discussing the questionnaire
results at Board of Directors meetings.

Summary of Evaluation Results and Future Efforts
The Company confirmed the appropriateness of Board size and composition (interms of getting the right balance of expertise, experience, competency anddiversity) in addition to concluding that meetings were of an appropriate frequency
and duration. The Company also determined that its Board of Directors, which
includes independent outside directors who account for 42% of its membership, iscapable of the proper monitoring and supervision of management.
In addition, the Board of Directors evaluated initiatives being undertaken toaddress issues identified via the previous fiscal year’s evaluation by employing a
PDCA cycle as depicted below. It also ensured that all directors share a common
understanding of initiatives to be executed in fiscal 2020.

In the course of the evaluation in the previous fiscal year,
it was suggested that the Board of Directors’ operations
be optimized in light of the recent transition to a
Company with an Audit Committee.

PD

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

A

C
55

Agenda items to be submitted to the Board of Directors
were reviewed.

The agenda items were narrowed down to include only
those essential to the monitoring and supervision ofbusiness execution. As a result, it was confirmed thatthe Board of Directors was better positioned to allocate
more time to in-depth discussions on importantmatters.

Based on “The Denka Value” (corporate philosophy), which serves as the cornerstone for all the corporate activities
undertaken by the Denka Group, we are committed to fulfilling the expectations and trust of many stakeholders, including
shareholders, customers, local society and employees. Accordingly, we consider the fulfillment of our social responsibilities,
especially those related to compliance, to be essential to sustainable corporate development. With this in mind, we are striving
to ensure that all officers and employees within the Group abide by laws, regulations and in-house rules as well as social andethical norms.
Aiming to secure conformity with laws, regulations and the Articles of Incorporation in all activities undertaken by the
Denka Group as a whole and to improve corporate value via appropriate and efficient business operations, the Company
established a basic policy on the development of internal control systems. In line with this policy, we made it a rule toperiodically assess the operational status of internal control systems and constantly improve and strengthen these systems.
Moreover, we established the Denka Group Ethics Policy to provide action principles for all Group members.

Efforts to Raise Awareness among Group Members
To convey the philosophies discussed above, Denka’s President takes advantage of various opportunities and methods todeliver his message to all Group officers and employees, communicating the importance of a shared sense of crisis withregard to the consequences of corporate misconduct, which can damage the Group’s credibility from the perspective ofsocial responsibility, put it in position to draw harsh criticism from the general public and endanger the continuity of its
business operations. Furthermore, representatives of the main Group companies meet twice a year with Denka’s directors andheads of corporate departments to ensure a shared understanding of the corporate philosophy and management policies aswell as of current issues before the Group. These meetings also address material risks associated with internal control anddiscuss policies on how to handle such risks.
In fiscal 2019, the Legal Department prepared the Denka Global Compliance Program, a compliance education program
designed to ensure the Group measures up to the global standard in terms of guiding employee conduct to maintaincompliance with laws, regulations and corporate ethics. Via this program, we have systematically provided all Group officers
and employees at home and abroad with compliance education so that they are properly educated about the Group Ethics
Policy and other compliance matters.

Monitoring, Internal Auditing and the Compliance Hotline System
To ensure the appropriateness of business operations undertaken by the Denka Group as a whole, the Audit Committee
performs audits targeting Denka and its main subsidiaries.
The Internal Auditing Department consists of general managers and 10 staff members and maintains an independent
status to fulfill its one and only role, namely, monitoring business operations. In addition to assessing the status of internal
control in accordance with Japan’s Financial Instruments and Exchange Law, the department is tasked with audits aimed at
identifying operational and management risks. The Internal Auditing Department not only reports findings from such audits tothe heads of the business execution departments it audits, it also shares its insights with the Audit Committee and otherwise
acts in close collaboration with the committee. Moreover, the department provides the President and the Board of Directors
with periodic reports on audit plans and results.
In addition to targeting Denka and its subsidiaries, the aforementioned operational and management risk audits
encompass some affiliates led by individuals dispatched from Denka to assume representative director or other positions withsignificant management responsibilities. As a large number of business units are subject to these audits, we strive to enhancethe effectiveness and efficiency of auditing by narrowing down material risks via the self-evaluation of compliance status. With
regard to on-site audits, we focus on assessing the status of internal control related to risk management within the Group,
legal compliance, asset management and operational management. By doing so, we seek to identify risks inherent in andissues associated with these matters while monitoring the effectiveness and appropriateness of each process. Addressing
issues identified via audits, the Internal Auditing Department provides executives of audited entities with advice on how toresolve these issues or make improvements in a way that respects said entities’ autonomous management. As necessary, thedepartment acts in collaboration with Denka’s relevant business units to resolve such issues. In these ways, it is endeavoring
to help each Group entity reduce operational and management risk while contributing to improvement in their corporate value.
In addition, the Accounting & Finance Department separately performs accounting audits of main subsidiaries, while theLegal, Environment and Safety, Quality Assurance and other departments likewise undertake audits on a standalone basis orin collaboration with the Internal Auditing Department to secure legal compliance in their areas of specialty.
Also, we began monitoring internal control systems in place at local business units in Southeast Asia in response to the
expansion of our operations in the region. In fiscal 2019, a dedicated department was established for this purpose within alocal subsidiary serving as regional headquarters and it is currently conducting monitoring in collaboration with Denka’sInternal Auditing Department.
To supplement the internal audits discussed above, we maintain the Group Compliance Hotline System, which isdesigned to ensure the early detection of incidents involving the violation of laws, regulations and in-house rules while
supporting the swift implementation of correction measures.

56

Corporate Governance

A Message from an Outside Director

In order to address such typical governance-related problems, outside directors must continuously strive to explicitly provide
external insight while unceasingly monitoring management. Obviously, for outside directors to fulfill their duties, it is essentialthat they share with top management a broad range of information and an accurate understanding of the actual status ofbusiness operations. As Denka’s top management is firmly determined to employ the insight offered by outside directors andbacked by their experience and expertise, the Company has developed a structure enabling outside directors to be deeply
involved in business management.

We Will Fully Exercise
Our Check-and-Balance
Functions to Secure
Organizational Transparency
and Maintain Fairness.
Tatsutsugu Fujihara

For example, they receive prior briefings on agenda items to be submitted to the Board of Directors and discuss these items in
the course of such briefings. They also attend “Strategy and R&D Policy Presentation Meetings” to deliberate on such mattersas strategies implemented by each division from the medium- to long-term perspective. Moreover, they join the D&A Round
Table meetings in which attendees freely exchange their opinions on important management matters. Outside directors alsooffer their views and opinions to top management by participating in such key meetings as Nomination and Remuneration
Advisory Committee meetings attended by top management as well as Outside Director Liaison Meetings in which five outside
directors (including Audit Committee members) discuss issues Denka is now confronting. In addition, outside directors
occasionally propose a subject to be discussed among directors. One such proposal resulted in the revision of criteria withregard to matters requiring resolution by the Board of Directors. Thanks to this revision, Board members are currently
positioned to allocate more time to intensively discuss important themes. As such, outside directors are helping Denka’s Boardof Directors to proactively update its mode of operation to ensure that each meeting results in meaningful conclusions.

Denka’s founding dates back more than 100 years. Having started out with the manufacture of calcium carbide and calcium
cyanamide fertilizers, Denka has long been pushing ahead with the vigorous reform of its business structure. As a result, theCompany has successfully secured the ability to manufacture a wide range of products from chloroprene rubber (a synthetic
rubber) and synthetic resins to cement and special cement additives to electronic component materials to vaccines. Over thecourse of these pursuits, Denka has also nurtured a distinctively unique corporate culture. Specifically, a culture that cherishes
sincerity in business conduct while encouraging proactive efforts to take on challenges in new fields even as the Company
stays prudently vigilant against changes in the business environment. Also, the Denka Mission—Taking on the challenge of
expanding the possibilities of chemistry to create new value and contribute to sound social development—which is integral to
the Company’s corporate philosophy, encapsulates this corporate culture. Furthermore, I personally consider this mission
statement to carry within it an unchanging belief that no business can improve its corporate value without a robust platform
supporting fair and transparent management. Despite its longstanding business track record, I am highly appreciative ofDenka’s unlimited potential, which most resembles that of a growing startup venture.

The fallout from the novel coronavirus has led tomany businesses being called upon to take on
irreversible business management reforms.
Against this backdrop, Denka’s Board of Directors
is engaged in the formulation of performancetargets for 2030 as part of discussions aboutclarifying the Company’s focus on an ESG-oriented
management approach guided by the United
Nations Sustainable Development Goals (SDGs).
With this in mind, the Company aims tocontinuously nurture employees who canspontaneously take on challenging tasks even as it
assiduously promotes workforce diversity invarious ways. We expect that by succeeding increating a corporate culture that firmly embraces
diverse people, Denka will be strengthened by alegacy of sincerity and vigorousness arising fromsaid diversity. I am convinced that upon the
success of this endeavor, Denka will grow into a
genuine global company.

Outside directors like myself are in position to play various important roles in supporting Denka’s pursuit of medium- tolong-term improvement in corporate value and sustainable business growth. Personally, I am particularly conscious of my duty
to provide management with the benefit of external insight. I am determined to be staunch in performing this duty. It is wellknown that an organization with a leadership that doesn’t change for long periods naturally tends to devolve into an overly
homogeneous culture in which people refrain from criticizing each other. Such conditions often give rise to “normalcy bias” and“unconscious bias” affecting value systems and causing the leadership to underestimate or ignore unfavorable opinions. The
organization’s transparency, fairness and soundness are thus undermined. Even if the organization has in place a robustinternal control system designed to strengthen corporate governance, such a system may fail to be fully effective as thehomogeneity of the corporate culture can hinder the functioning of check-and-balance mechanisms.

As an outside director, I will continuously do mybest to supervise and support the Company’sbusiness operations and not fall into contentment
with cozy relationships among Board members. To
this end, I will remain acutely aware of various
stakeholder perspectives and continuously
exercise an objective standpoint with a strong
sense of ownership regarding my duties vis-à-vis
management.

Outside Director

57

Profile of Tatsutsugu Fujihara
April 1976

Joined The Dai-Ichi Kangyo Bank, Ltd.

March 2003 Executive Officer, General Manager of Corporate Department IIof Mizuho Corporate Bank, Ltd. (until April 2003)
June 2003

Managing Executive Officer of Orient Corporation(until March 2005)

April 2005

Managing Executive Officer of Mizuho Corporate Bank, Ltd.
(until March 2007)

June 2007

Director and President of Mizuho Marketing Exper ts Co., Ltd.
(until March 2013)

June 2013

Representative Director and President of KSO Corporation

June 2014

Representative Director and Chairman of KSO Corporation

June 2016

Chairman and Executive Officer of KSO Corporation(until June 2018)

June 2016

Outside Director of Denka Company Limited (current position)

58

Corporate GovernanceDirectors

Directors (photo taken on July 8, 2019)

Shinsuke Yoshitaka

Manabu Yamamoto

Chairman

Akio Yamamoto

Representative Director, President & CEO(Born February 1, 1951)(Born March 31, 1956)

Outside Director

Tatsutsugu Fujihara
Outside Director(Born December 2, 1951)(Born November 23, 1952)

As a chemical manufacturer, the Company has a corporate

I will endeavor to promote our management plan, “Denka

As the business environment surrounding companies undergoes

I intend to contribute to the creation of an organization thatphilosophy of createing new value and contribute to social

Value-Up,” while enhancing the specialization of our businessmajor changes, an age is approaching when all companies must

approaches matters with a fair stance, not affected by opinions

development. As Chairman of the Board of Directors, I will

structure and productivity in order for the Company to becomereexamine their own raison d'être and mission. While earnestlyof others easily, and has a diversity that enables such organiza-

consistently take the perspective of all our stakeholders asa sound company that grows continuously even amidst rapidly

taking on the Company’s future vision and a variety of issues, I

tion to purge itself of negative influences.

I endeavor to ensure that we contribute to society throughchanging markets and fulfills our social responsibility based on

have a renewed desire to contribute to the sound development

sound and fair management.

the SDGs as our guide.

of the Company and boost the corporate value of the Company.

Norihiro Shimizu

Masaharu Suzuki

Toshio Imai

Director

Director

Director(Born October 2, 1955)

Through continuous innovation leveraging
the comprehensive capabilities of the(Born December 11, 1955)

I will endeavor to continuously boost thecorporate value of the Company byGroup, I am committed to ensuringpromoting ESG-oriented management

sustainable growth and improvingfrom a global perspective.

Mitsukuni Ayabe(Born January 25, 1959)

As our society is beset by frequent unexpected developments, I

rapidly, I will consider the actions we

Company so that it becomes more trusted by stakeholders

intend to prioritize the appropriateness of the Company’s risk

should take to achieve “sustained

through audits and other operations conducted fairly andmanagement function with regard to various types of risk in mygrowth” and “sound growth” in order towithout bias.

audits.

meet the expectations of our stakeholders regarding the future.

long-term perspective.
Mitsukuni Ayabe

Masaharu Suzuki
Toshio Imai

Yasuo Sato

Tatsutsugu Fujihara
Toshio Kinoshita

Hiroko Yamamoto

Shinsuke Yoshitaka

Manabu Yamamoto

59(Born August 12, 1958)

I am committed to further improving the corporate value of thebusiness strategy from a medium- to

Junichi Kimura

Director (Audit Committee Member)

As the business environment changes

corporate value by implementing

Norihiro Shimizu

Director (Audit Committee Member)

Junichi Kimura(Born September 23, 1952)

Akio Yamamoto

Yasuo Sato

Toshio Kinoshita

Hiroko Yamamoto(Born September 30, 1942)
Outside Director(Audit Committee Member)(Born April 12, 1949)
Outside Director(Audit Committee Member)

Outside Director(Audit Committee Member)

In a spirit of rationality and fairness, I am

I will identify potential risks andI intend to contribute to enhancing

determined to contribute to the medium- tocontribute to enhancing corporate

corporate value while focusing on thelong-term growth of the Company andgovernance at the Company in order tofullest compliance and the effective-

boosting its corporate value as I focus on

ensure Denka’s sustainable growth andness of corporate governance in afurther strengthening corporate governanceenhance corporate value over the

spirit of diversity.

and enhancing awareness of compliancemedium- to long-term.

as an Audit Committee member.

60(Born February 16, 1956)

Corporate Governance

Promoting Thorough Compliance

Risk Management

Basic Policy

Basic Policy

The Denka Group Ethics Policy codifies Groupwide standards of conduct. To ensure that this policy guides the actions ofall, the Ethics Committee chaired by the President oversees the overall compliance structure and reports to management oncompliance matters. Moreover, under the initiative of the Ethics Committee, such key business units as the Legal, Internal
Auditing, HR Strategy, Intellectual Property, Environment and Safety, and Quality Assurance departments ensure thoroughlegal compliance in their respective areas of specialty.
In October 2019, we also formulated the Standards of Business Conduct. Aiming to live up to the global standard, thismove is intended to provide all Group officers and employees at home and abroad with clear and detailed guidelines on theactions they are expected to take in accordance with the provisions of the Denka Group Ethics Policy.
Furthermore, we employ a “legal hazard map” to analyze the significance of compliance-related risks that may affecteach Group company with the aim of enhancing the effectiveness and efficiency of compliance structures being developed
and operated within the Denka Group.

To achieve the goals of the Denka Value-Up management plan, we aim to strengthen corporate governance and, to this end,
strive to accurately assess the diverse and numerous risks arising from the Denka Group’s corporate activities, believingthat minimizing damage arising from these risks is a matter of extreme importance. While risks inherent in specificoperations are addressed by the pertinent business divisions, the Company also has in place dedicated departments
tasked with addressing compliance, information security, environmental and occupational safety risks related to overall
Denka Group operations. To this end, these departments implement employee education while monitoring risks in theirareas of specialty. Furthermore, among risks related to the Group’s overall operations, product liability, export control andother key risks deemed particularly important are handled by dedicated committees.

Compliance Structure in Place at Each Department

Internal Auditing Dept.

(Secretariat for the Ethics Committee)

HR Dept.

Audit Committee Dept.
Legal Dept.

Intellectual Property Dept.

Having identified more than dozen legal fields closely associated with the Denka Group’s business operations, the Legal
Department has analyzed the magnitude of compliance risk in each field and prepared a legal hazard map for each Group
company. Employing this map, we provide compliance education in an effective manner consistent with the Denka Global
Compliance Program, a Groupwide plan for ensuring thorough legal compliance, while strengthening our compliancestructures via, for example, the development and review of Group Policies and other in-house rules applicable to all Group
members as well as Denka’s Companywide rules.
Taking advantage of input from legal hazard maps, during fiscal 2019 we focused on implementing compliance education
addressing topics associated with the Standards of Business Conduct and labor laws, targeting employees at sales offices
and production bases as well as those at Denka Group companies at home and abroad. Currently, we are engaged in thedevelopment and review of in-house rules regarding information security and ICT governance intended to secure conformity
with ISO 27001, an international standard for information security management.
Legal Fields in Which Denka Group Companies Must Maintain Acute Compliance Awareness and Examples of
Typical Compliance-Related Misconduct Associated with These Fields
Labor laws (e.g. Labor Standards Act)

Unfair Competition Prevention Act

Foreign Exchange and Foreign Trade Act•Excessive overtime without supervisor
approval•Power harassment•The lack of a safe and hygienic working
environment•Illicit acquisition and use of anothercompany’s trade secret•Leakage of a Denka trade secret for illicit
use by other company•Unlicensed export of goods named in
the list of regulated items•The provision to non-residents oftechnologies named in the list of
regulated technologies

Compliance education

The United States

Singapore

VietnamJapan

61

Order HQ set up

Other risks

Major crises

Board of Directors

Crisis Measures
Headquarters

Risk Management Committee
Proxy organizations according to case
•Ethics Committee•Safety Measures Headquarters

ReportUtilization of the Legal Hazard Map and Strengthening of Compliance StructureStandards of Business Conduct (excerpt)

Risk-specific committees

Environment and Safety Dept.
Quality Assurance Dept.

ReportReportReport on emergencies

Ethics Committee

President•Responsible Care (RC) Committee•Product Liability (PL) Committee•Security Export Control Committee
ReportInstruct/monitor

ReportInstruct/monitor

Prime oversight Businesses (including Sales and Manufacturing divisions)
Administration (including Internal Auditing, Environment and Safety, Legal andAccounting & Finance departments)

Information Security
Striving to adapt to the times, the Denka Group is currently promoting the restructuring and updating of its in-house
ICT-related rules in step with progress in the Denka Value-Up management plan and recent advances in ICT.
Denka defines informational assets as consisting of two components: business-related information and systems for
managing and utilizing this information. As part of initiatives to ensure information security, the Denka Group is striving toestablish Group policies that align with currently prevailing standards for corporate conduct in line with public expectations
regarding the protection of informational assets. At the same time, the Group is promoting the development of rules thatprovide clear guidance for employees based on said policies.
With the ongoing trend toward embracing novel working styles helping to popularize remote working, worksites are nolonger limited to employers’ premises. This trend applies to the Denka Group as well, which is increasing opportunities for its
employees to utilize informational assets, especially business-related digital information, via the use of off-premises mobile
devices. In light of the growing volume of operations dependent on digital data, the Denka Group is developing rules for the
management of digital documents to ensure information security while allowing employees to smoothly utilize such documents.
Also, the Group is striving to realign its existing employee action standards regarding the use of information systems by giving
due consideration to recent information security circumstances. Employee action standards and the rules discussed above areposted on the intranet portal to ensure that they are observed by all. Moreover, as part of human resource development, weare stepping up efforts to raise information security awareness by offering e-learning programs designed to deepen employee
understanding of these topics.

62

C orporate GovernanceRisk Management
Compliance Hotline System

Our Policies on the Prevention of Environmental Pollution

In October 2018, Denka established rules on whistleblowing based on guidelines formulated by the Consumer Affairs Agency.
In line with these rules, we exhaustively updated the Group’s conventional compliance hotline system to create the Denka
Group Helpline. To encourage the proactive use of this helpline, in fiscal 2018 we sent out a message from the President to all
Denka Group officers and employees while distributing a handbook and displaying a poster at business sites to let them know
about how to use it. In fiscal 2019, we stepped up efforts to raise employee awareness of the hotline via the intranet. In
addition, we addressed topics related to the compliance hotline system in the course of employee education based on the
Denka Global Compliance Program. Thanks to these efforts, the awareness of the hotline system among employees grewstronger, with the number of reports received via the system showing a remarkable increase. (For the trend in the number ofreports, please visit the “ESG Information Site” of Denka’s corporate website.)

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

Compliance Hotline System Flow
❶Whistleblowing

Eligible individuals❶Whistleblowing❼Feedback❷Report(the whistleblower’s
identity is kept secret)External contacts
Helpline

Officers and employees(including temporary
workers) serving Denka
Group companies inJapan and overseas andtheir cohabiting families○External law firms○Specialist organization

for handling harassment
incidents

Secretariat for
the Ethics
Committee❻FeedbackInternal contacts❸Report(the whistleblower’s
identity is kept secret)

EthicsCommittee❹Instruction❺Investigation and correction○Audit Committee Dept. andLegal Dept.

Business units andindividuals subject toinvestigation○Administrative departments

at each production bases○Labor union

Response to Human Rights Violation Risk
We have been encouraging the “maintenance of favorable human relationships” in line with the Denka Group Ethics Policy.
Accordingly, all Denka Group officers and employees are called upon to respect individual human rights. Moreover, theStandards of Business Conduct provide clear and detailed guidelines regarding what practices must be observed and what
constitutes prohibited action with the aim of living up to our commitment to complying with labor laws, ensuring equal
employment and career opportunities without discrimination, and preventing workplace harassment. In particular, thesestandards feature case studies of actual workplace incidents involving power harassment and sexual harassment being dealt
with in a way conformant to guidelines issued by relevant ministries and government agencies. Thus, these standards include
elaborative provisions designed to prevent harassment incidents from occurring within the Denka Group.
In fiscal 2019, we implemented employee education optimized in a way that takes advantage of input from legal hazard
maps. Using case studies of power harassment and other incidents, we have thus raised the awareness of Denka Group
members at home and abroad and offered them insights on preventive measures. We have also invited external lawyers toprovide training sessions involving role-playing to raise the capabilities of employees in charge of in-house consultation
regarding harassment incidents.
Excerpts from a textbook
used for employee educationon labor laws

Denka Performance Elastomer’s Environmental Management
Denka Performance Elastomer LLC (DPE), a Denka Group company based in Louisiana, the United States, manufactures chloroprene rubber(CR).
In 2015, DPE initiated operations upon the acquisition of CR production facilities established by the U.S.-based DuPont in 1969. Since then,DPE has been engaged in the provision of CR to customers around the world.
Currently, DPE is confronting multiple lawsuits along with DuPont and its affiliates. These lawsuits were filed by residents of communities
around DPE’s Pontchartrain Plant and demand compensation on the grounds that said residents have sustained physical, financial andemotional damage arising from chloroprene monomer emitted from the plant.
However, research undertaken by external epidemiologists has revealed that, after studying the health conditions of more than 12,000
people with work experience at multiple chloroprene monomer production sites, including more than 2,000 people who are ex-workers or active
employees of the plant, the rate of fatalities due to cancer among the subject group was lower than average. The research thus concluded thatno correlation between chloroprene monomer exposure and carcinogenic risk can be found. Furthermore, according to data publicized by the
Louisiana Tumor Registry, region-specific carcinogenic risk in the location of the plant is not significantly different from the average risk for theentire state.
In addition to complying with chloroprene monomer emission standards stipulated by environment-related laws and regulations, DPE
constantly strives to minimize emissions of substances and waste from its facilities in line with the Denka Group’s policies on the reduction ofenvironmental burdens.
Accordingly, DPE introduced new facilities intended to reduce emissions of chloroprene monomer even further, to this end executing a
massive investment totaling more than US$35 million (approximately \4 billion). This investment resulted in an 85% reduction in the volume ofchloroprene monomer emissions (fiscal 2019 results; based on a comparison with the fiscal 2014 level). In addition, DPE has requested the U.S.
Environmental Protection Agency (EPA) to carry out a review of its chloroprene monomer toxicity assessment. The EPA responded by accepting
DPE’s suggestions regarding the incorporation of assessment methods based on the latest scientific evidence and is currently engaged in thereverification of its toxicity assessment. Looking ahead, Denka will continue to assist DPE in its efforts to remain a good neighbor for people
living in communities in which it operates by protecting the environment, ensuring their well-being and working to reduce their anxieties.
For more details, please refer to news releases* posted on Denka’s corporate website.
*News releases dated June 19, 2019, February 14, 2020, June 8, 2020, June 19, 2020, August 7, 2020 and December 17, 2020 address related topics.

Initiatives to Reduce the Emissions of Fluorocarbons
In fiscal 2019, the volume of fluorocarbon emissions increased 54% year on year as leakage from the Omi Plant’s air
conditioning systems was in excess of the usual levels. We will step up daily inspections for these systems to prevent anincrease in emission volume.
In response to the revised Act on Rational Use and Proper Management of Fluorocarbons that took effect in April 2020,
Denka aims to fulfill its management responsibilities as a company in possession of equipment*1 regulated by said act. To thisend, we are steadily implementing facility maintenance and inspections while systematically executing facility renewal. We also
introduced refrigerants with a smaller global warming potential in an effort to remove inherent risks arising from the use offluorocarbons. In April 1, 2020, we initiated the use of the Refrigerant Management System (RaMS) developed by the Japan
Refrigerants and Environment Conservation Organization at all of Denka’s business sites. In addition to complying with relevantlaws and regulations, we are thus stepping up initiatives to curb global warming.

The volume of fluorocarbon emissions from Denka’s business sites (six plants and one R&D base)
FY

Emission volume

2015

812t-CO2*2

2016

2017

448t-CO2

440t-CO2

2018

415t-CO2

2019

640t-CO2*1 Class I Specified Products defined under said act (air conditioners, refrigerators and freezers for industrial use)
*2 Representing the carbon dioxide equivalent

Number of units of regulated equipment possessed by Denka’s business sites and registered with RaMS
(a total of seven plants, including the Gosen Plant, and one R&D base)Category

Industrial-use air conditioners

Industrial-use refrigerators or freezers

Total

Number of units

3,606

2,094

5,700
As of June 2020

63

64

Financial
Information

Consolidated Financial Statements

Denka’s 11 Year-Financial Summary
Fiscal 2009

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Net sales

323,875

357,893364,712

341,645376,809

383,978

369,853

362,647

395,629

413,128

Operating income

21,655

24,61820,713

18,817

21,23024,04730,63425,84433,652

34,228

Ordinary profit

16,88823,052

18,996

17,82420,60424,28727,022

23,15831,49932,811

Profit attributable to owners of parent

10,474

14,355

11,330

11,255

13,57319,021

19,472

18,14523,03525,046Equity in earnings (losses) of affiliates

223

1,189

966

530

550

950

1,097

568

1,105

1,384

1,170

Current assets

138,360

143,352

153,637

158,595

164,747

170,497

161,876

168,902

184,129

190,730

198,452

Total assets

400,407402,046

402,552

415,356

431,347445,569

443,864

454,944473,799483,827

Current liabilities

150,689

153,410

160,676

170,752

163,645

160,101

147,537

144,190

158,043

154,047

Net assets

160,316

168,182

172,737

180,709

189,516

210,798

216,071

227,487242,780

250,481Interest-bearing debt

120,576

114,562

118,049

114,241

120,669

122,536

124,596

113,748

108,269

112,134

134,340

46,41833,78028,521

40,21527,24535,55744,01439,557

48,776

32,66041,954

Summary Statement of Income (Millions of yen)
380,803
31,58730,03422,703Financial Position (Millions of yen)
501,448
160,807
254,014

Cash Flows(Millions of yen)
Cash flows from operating activities（28,377）

Cash flows from investing activities（17,262）
6,815

Cash flows from financing activities
Cash and cash equivalents at end of year

（22,363）（23,763）（4,050）8,207（10,554）
6,160（25,864）（12,784）
10,680（26,693）（3,327）
8,244（27,449）（7,437）
9,157（22,258）（34,979）（19,319）
10,174（7,348）
11,813（29,298）（15,858）
14,101（26,176）（8,408）13,889（36,303）
9,544
29,170Per share information(Yen)Dividends per share*

125.0

40.0

50.0

50.0

50.0

50.0

62.5

65.0

70.0

105.0

120.0

106.67146.20116.11

118.13145.16207.40214.71205.05261.80286.181,607.32

1,686.73

1,768.20

1,884.96

2,013.84

2,279.70

2,366.74

2,526.42

2,727.94

2,839.16

2,906.95

Operating income ratio

6.7

6.9

5.7

5.5

5.6

6.3

8.3

7.1

8.5

8.3

8.3

ROE

6.9

8.9

6.7

6.4

7.4

9.6

9.3

8.3

10.0

10.3

Profit per share
Net assets per share

262.62Financial Indices (%)
9.1
6.1

ROA

4.3

5.8

4.7

4.4

4.9

5.5

6.1

5.2

6.8

6.9

Shareholders’ equity ratio

39.4

41.2

42.3

43.1

43.5

46.9

47.7

49.1

50.5

51.0

50.0

Capital investment (millions of yen)

26,92821,32522,87826,96425,73521,30021,19625,731

22,71032,74534,205

Depreciation and amortization (millions of yen)

20,932

22,292

23,192

21,58522,25423,032

23,242

24,35924,59922,946R&D expenses (millions of yen)

9,615

9,819

10,63910,605

10,828

11,127

11,787

13,026

13,86814,562

Number of employees at end of year

4,742

4,768

4,921

5,206

5,249

5,309

5,788

5,816

5,944

6,133

Other

Denka 100

Management Plans

Denka’s main achievements

Environmental developments● Established Denka
Chemicals Holdings
Asia Pacific Pte Ltd.

● Recessions triggered by

Lehman Brothers bankruptcy(fiscal 2007 – fiscal 2012)● Established theShanghai Representative
Office● European debt crisis● Great East Japan Earthquake

Resumption of Denka 100● Completed the

Denka Innovation
Center main building(fiscal 2013 – fiscal 2017)● Celebrated the centennial of the Company’s founding● Changed company name● Established Denka Performance Elastomer LLC● Consumption tax hike (to 8%)● Hit a record

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

22,482
15,031

6,316

Denka Value-Up● Achieved record-high profit

for a second consecutive year
● Consumption tax hike (to 10%)
● U.S.-China trade tension● Novel coronavirus pandemic

Note: Figures for fiscal 2017 and later are modified in accordance with the Partial Amendments to Accounting Standard for Tax Effect Accounting (Accounting Standards Board ofJapan (ASBJ) Statement No. 28 issued in February 2018).

* The Company executed a reverse share split that merged five shares into one share as of October 1, 2017. As we aim to support easy-to-understand comparisons between
performances in each fiscal year, the value of dividends per share for preceding fiscal years has been retrospectively converted to reflect the value of dividends had the reverse
share split already been in effect. In addition, dividends per share for fiscal 2014 comprise: (1) full-year dividends per share of ¥52.5 (¥10.5 per share prior to conversion); and(2) commemorative dividends per share of ¥10.0 per share (¥2.0 per share prior to conversion).

65

66

Financial Information(Millions of yen)

Consolidated Statements of Income

Consolidated Balance Sheets
Assets(Millions of yen)

Fiscal 2018 Fiscal 2019
(March31,2019)(March31,2020)

Liabilities

190,730

198,452

Current liabilities

Current assets

Fiscal 2018 Fiscal 2019
(March31,2019)(March31,2020)

154,047

160,807

Notes and accounts payable—trade 52,924

43,005

Short-term loans payable

43,101

51,929Commercial paper

2,000

9,000

Current portion of long-term loans payable

5,062

10,01013,902

29,172

Notes and accounts receivable—trade 95,780

85,637

Merchandise and finished goods

47,45552,159Work in process

4,389

4,037

Current portion of bonds

5,000

ー

Raw materials and supplies

19,911

19,582

Accounts payable—other

18,504

18,0798,156

Income taxes payable

3,010

3,550

（293）

Accrued consumption taxes

487

1,431

Accrued expenses

10,881

11,194

Provision for bonuses

3,122

2,992

Other

9,953

9,613

Noncurrent liabilities

79,29886,626

Bonds payable

22,00037,000Long-term loans payable

34,96926,400

Deferred tax liabilities

4,961

3,245

Deferred tax liabilities for land revaluation

8,403

8,403

Net defined benefit liability

7,269

7,874

Provision for stock benefits

44

58

1,650

3,644

233,346

247,434

Shareholders’ equity

225,498

235,628

Capital stock

36,99836,998

Capital surplus

49,35349,365Retained earnings

144,638

156,857

Treasury stock（5,492）（7,593）21,362

15,092

Valuation difference on available-for-sale 15,182
securities

10,691

10,260

10,259Cash and deposits

9,802

Other
Allowance for doubtful accounts

Noncurrent assets
Property, plant and equipment
Buildings（511）

293,097

302,995

218,677

231,815

40,49740,733Structures

21,895

21,770Machinery and equipment

70,35969,098

VehiclesTools, furniture and fixtures
Land
Lease assets
Construction in progress

796

691

3,820

4,146

63,366

63,370307

2,260

17,63429,745

Other
Total liabilities

Net assets
12,415

11,808

Software

978

1,002

Goodwill

8,312

7,544

Right of using patent

3,124

3,261

Intangible assets

Investments and other assets
Investment securities
Long-term loans receivable

62,00459,37155,02851,200236

178

Accumulated other comprehensive
incomeDeferred gains or losses on hedges （345）
Revaluation reserve for land（551）

Long-term prepaid expenses

1,699

2,423

Foreign currency translation adjustment （120）（876）

Deferred tax assets

2,736

3,160

Remeasurements of defined benefit plans（3,614）（4,429）

Other

2,422

2,526

Allowance for doubtful accounts

（118）

（117）

Total assets

Changes in
Disclosure
Methods

483,827

3,620

3,294

Total net assets

250,481

254,014

Total

483,827

501,448

Non-controlling interests

501,448At the beginning of fiscal 2019, Denka adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, dated February 16, 2018). In linewith this standard, the Company revised relevant disclosure methods, with deferred tax assets being classified under investments and other assets, and deferred tax liabilities beingclassified under noncurrent liabilities.
The adoption of these amendments resulted in changes in consolidated balance sheet items for the previous fiscal year, namely, a ¥2,338 million decrease in deferred tax assets
classified under current assets, a ¥1,052 million increase in deferred tax assets classified under investments and other assets and a ¥1,286 million decrease in deferred tax liabilities
classified under noncurrent liabilities.
Moreover, Denka has offset its deferred tax assets and liabilities as a single taxable entity. This resulted in a ¥1,286 million decrease from the end of the previous fiscal year.

67

Fiscal 2018

(From April 1, 2019 to March 31, 2020)

413,128
310,839102,289
68,06034,228

380,803
281,465
99,33867,75031,587

Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Operating income
Non-operating income
Interest and dividend income
Equity in earnings of affiliates
Other
Non-operating expenses
Interest expenses
Other
Ordinary income
Extraordinary income
Loss on sales of investment securities
Extraordinary loss
Loss on liquidation of business
Loss on disaster
Other
Income before income taxes
Income taxes—current
Income taxes—deferred
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

Consolidated Statement of
Changes in Net Assets
Balance at beginning of the fiscal year
Cumulative effect of changes in accounting policies
Restated balance
Changes of items during the fiscal year
Dividends from surplus
Profit attributable to owners of parent
Change of scope of consolidation
Change in ownership interest of parent due totransactions with non-controlling interest
Purchase of treasury stock
Disposal of treasury stockReversal of revaluation reserve for land
Net changes of items other than shareholders’ equity
Total changes of items during the fiscal year
Balance at end of the fiscal year

Fiscal 2019

(From April 1, 2018 to March 31, 2019)

2,313
1,384
495

4,193

762
4,849

5,611
32,811

689

1,552
1,170
822
866
4,231

689

389
718
ー

7,459
24,933（112）
25,046

5,098
30,034

280

280

940
249
113

1,108
32,392

6,480
978

3,545

1,303
29,011

6,344
131

6,475
22,535（167）
22,703

From April 1, 2019 to March 31, 2020 (Millions of yen)
Shareholdersʼ equity
Capital stock

Capital surplus

36,99849,35336,99849,353Retained earnings

144,638（306）
144,332

Treasury stock

Total shareholders’ equity（5,492）（5,492）（10,396）
22,703217
11（10,396）
22,703217（2,108）7（0）
0−36,99811
49,365

12,525
156,857

225,498（306）
225,192（2,101）（7,593）11（2,108）7
0−
10,435
235,628

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning of the ﬁscal year
Cumulative effect of changes in accounting policies
Restated balance

15,182（345）

10,26015,182（345）

10,260Changes of items during the ﬁscal year
Dividends from surplus
Quarterly profit attributable to owners of parent
Change of scope of consolidation
Change in ownership interest of parent due totransactions with non-controlling interests
Purchase of treasury stock
Disposal of treasury stockReversal of revaluation reserve for land
Net changes of items other than shareholders’ equity
Total changes of items during the fiscal year
Balance at end of the fiscal year

Revaluation
reserve forland

Foreign currencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total valuationand translation
adjustments

Non-controllinginterests（120） （3,614） 21,362−（120） （3,614） 21,362−−−−（4,491）（4,491）
10,691

（206）
（206）
（551）

68

（0）
（0）
10,259−−−（755） （815） （6,270）（755） （815） （6,270）（876） （4,429） 15,092

3,620
3,620

Total net
assets

250,481（306）
250,175（10,396）
22,703217
11（2,108）70（326） （6,596）（326） 3,839
3,294 254,014

Corporate
Information

Financial Information

Consolidated Statements of Cash Flows

Company Overview

Fiscal 2018

(From April 1, 2018 to March 31, 2019)

Fiscal 2019

(From April 1, 2019 to March 31, 2020)

Cash flows from operating activities
Income before income taxes

32,392

Depreciation

21,972
510

Increase (decrease) in provision for bonuses

123

（130）

28

（218）

（814）

Interest and dividend income
Interest expenses(Gains) losses on valuation of investment securities

940（3,036）（4,513）

Other（1,674）763

Subtotal

39,72045,991

Interest and dividends received

3,128

2,627

（2,132）（767）

Interest paid

May 1, 1915

（5,812）

Net cash provided by (used in) operating activities

32,66041,954

Proceeds from sale of property, plant and equipment

50

（185）

Purchase of intangible assets（58）

Purchase of investment securities
Proceeds from sale of investment securities

946

（92）

Purchase of investments in subsidiaries
Other

435

（26,176）

Net cash provided by (used in) investing activities

（777）
342

2.76

16,202

1.88

JP MORGAN CHASE BANK 385151

15,886

1.84

Japan Trustee Service Bank, Ltd.

14,602

1.69

13,832

1.60

13,336

1.55

Note: Percentage of shares held is calculated after excluding treasury stock.

Composition of shareholders by category• Living & Environment Products(Food packaging materials, housing materials,
industrial tapes, synthetic fiber for wigs, etc.)

1.8%

6.5%

(Joint function improvers, vaccines, and diagnostic
reagents, etc.)

Individual andother shareholders

Financial
institutions

18.7%(Plant engineering etc.)
Employees

Securities
firms

Other domestic
corporations• Life Innovation

47.7%

Foreignshareholders

6,316 (consolidated basis);
3,349 (non-consolidated basis)

25.3%（2,738）（31）

23,816

STATE STREET BANK AND TRUST(Investment Trust Account)(Fused silica, electronic circuit substrates, fineceramics, electronic packaging materials andacetylene black, etc.)（33,062）25

TAIJU LIFE INSURANCE COMPANY LIMITEDThe Nomura Trust and Banking Co., Ltd.

• Others（27,273）

3.36

Mitsui Sumitomo Insurance Company, Limited• Electronics & Innovative Products

Cash flows from investing activities
Purchases of property, plant and equipment

29,007(Trust Account 5)(Cement, special cement additives, fertilizers,
calcium carbide, fire resistant materials, environmental materials, etc.)（851）（9,420）

3.73

COMPANY 505001• Infrastructure & Social Solutions（9,609）

Income taxes (paid) refunded

32,158Agricultural Cooperatives(Chloroprene rubber, styrene monomer, polystyrene
resin, ABS resin, CLEAREN, heat-resistant resin,transparent resin, POVAL, etc. )9,769（5,501）

9.39

National Mutual Insurance Federation of

Established−

202

Increase (decrease) in notes and accounts payable

FAX: +81-3-5290-5059• Elastomers & Performance Plastics

389(Increase) decrease in inventories

TEL: +81-3-5290-5055

Main
business

412

81,008Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement
Benefit Trust Account re-entrusted by
Mizuho Trust & Banking Co., Ltd.)103-8338, JAPAN¥36,998 million

Losses on business restructuring

11.80(Trust Account）

Paid-in
Capital(Gains) losses on sales and disposals of property, plant and equipment

101,817

Japan Trustee Service Bank, Ltd.

866

（280）

(Increase) decrease in notes and accounts receivable

1-1,（1,552）211

Percentage ofshares held (%)(Trust Account）

762（1,170）

Number of shares held
(thousand shares)

The Master Trust Bank of Japan, Ltd.

（570）

（689）

(Gains) losses on sales of investments in securities

Nihonbashi Mitsui Tower,(as of March 31, 2020)

Shareholder name（2,313）（1,384）(Gains) losses on equity in affiliates

Head
OfficeChuo-ku, Tokyo

511

Increase (decrease) in allowance for doubtful accounts

Denka Company Limited

Nihonbashi-Muromachi 2-chome,

22,434

Increase (decrease) in net defined benefit liabilities

Name

29,011

Amortization of goodwill

Stock Information(as of March 31, 2020)

Global Network (as of April 1, 2020)（61）（36,303）

Cash flows from financing activities

DENKA SEIKEN UK

Increase (decrease) in short-term loans payable
Proceeds from long-term loans payable

4,148

16,007

496

1,439

（616）

Repayment of long-term loans payable
Cash dividends paid by the Company
Proceeds from issuance of bonds
Payment for redemption of bonds（10,082）（10,396）

15,00015,000（15,000）（5,000）（2,311）（2,108）（44）

Cash dividends paid to non-controlling interests
Payment for purchase of treasury stock
Other

2

（8,408）Net cash provided by (used in) financing activities（252）

Effect of exchange rate changes on cash and cash equivalents（5,063）

（74）

（259）
9,544
（123）

Net increase (decrease) in cash and cash equivalents（2,176）

15,071

Cash and cash equivalents at beginning of year

14,101

13,889

Increase (decrease) in cash and cash equivalents from newly consolidated subsidiaries

1,964

209

Cash and cash equivalents at end of year

13,88929,17069

Denka Chemicals(Düsseldorf, Germany)

12 business sites
38 business sites
Denka Corporation
DENKA SEIKEN USA(New York)

Icon Genetics (Halle, Germany)Japan
Denka Corporation
DENKA SEIKEN USA(California)

East Asia
Denka Middle East andAfrica FZCO (Dubai)SoutheastAsia

12 business sites

70

Denka Performance
Elastomer LLC
Denka Corporation(Louisiana)