Possibilityofchemistry

Denka Report 2023
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Making the world a better placeas specialists in chemistry
Possibilityofchemistry

2030

What Denka is Aiming for towards a New Future
Increase the value of human resources andmanagement, and we will focus on creating
business value that combines the threeelements of speciality, megatrends, andsustainability.

In April 2023, the Denka Group embarked on a new challenge.
The young employees who form the core of our Group over the years to comehave created a "new vision" that incorporates the thoughts of the management
team into a concept created based on future global predictions. Based on this“vision”, we have launched, “Mission 2030“ our new management plan.
Harnessing the unknown possibilities of chemistry, we will continue to take on thechallenge of changing society and the world for the better.

2026
550 billion yen
Operating income: 60 billion yen
Operating income ratio: 10% or higher
Net Sales:

600 billion yen
Operating income: 100 billion yen
Operating income ratio: 15% or higher
Net Sales:

April

2023

Launch of our new vision and management plan “Mission2030”

Launch of the Vision Formulation Project2022

44 young employees from various
departments participated in the project

Analysis of data to help forecast future
global events

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What Denka can contribute to the world of the future
World of the future
Increase in renewable energy
Electrification of automobiles

Megatrends

Conversion to
renewable energy

The issue of ocean plastic



Increase in natural disasters

Expansion of DX,




   

World No. 1


Providing cutting-edge materials
for a better society

Acetylene black

Growing demand
for semiconductors
and devices

Fused silica

Silicon nitride

Spherical
alumina

Semiconductor
carrier tape

AI and 5G markets

Diversification of
medical needs

Global population growth
Food and water shortages

Advances ininnovative medical
technologies

・Heightened political and militarytension・Uneven distribution of wealth andentrenched inequality
・Regional conflict and terrorism
・Supply chain disruption

World No. 1



Reagent for measuring
C-reactive protein (CRP)

Japan No. 1

Improving the quality of life of people
around the world in the areas ofprevention, diagnosis and treatment

Antigen rapid diagnostic kits

World No. 1

Increased demand forinfrastructure

Widespread social anxiety  

Mobility
revolution

Three focus areas and market share

Depletion offood and water
resources    Increased demandfor infrastructure

Realization of a safe, secure,and comfortable life

ChloroprenerubberMS resinHeat resistantagent for ABS

Japan No. 1
Liquid humic Humic acidacid fertilizer manganesefertilizer

Underground Special cement
drainpipes for additive
agriculture

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Denka Report 2023

PossibilityofchemistryIntegrated Report

Contents

Editorial Policy
Innovation (R&D, Intellectual Property) …………… 33

PrologueRound-Table Discussion: Enhancing Our Ability to Create
What Denka is Aiming for towards a New Future …… 01

New Business Ideas and the Establishment of CVC … 37

Report story

Electronics & Innovative Products ………………… 43

Technology (Process reforms, Digital Strategy) …… 41
Life Innovation ………………………………………… 45
Logical Breakdown of the Denka Report 2023 …… 04

The Denka Report 2023 aims to communicate to stakeholders,
including shareholders and investors, about what we havebeen doing to create new value over the medium to long termfrom the viewpoint of addressing environmental, social, andgovernance (ESG) issues.
We also have an ESG-themed corporate website to ensurethat relevant information is disclosed in a comprehensive andtimely manner.

Elastomer & Infrastructure Solutions ……………… 47
Polymer Solutions …………………………………… 49

VisionESG management
Denka’s Vision ………………………………………… 05
Message from the President ………………………… 06

Environment …………………………………………… 51

Talk with the President ……………………………… 10

Social (Human Resources Value Creation Initiatives)

Vision project

Governance …………………………………………… 61~ How our vision was created ~ …………………… 15

Message from the Chairman………………………… 61

Our Vision: Messages from Young Employees …… 16

Round-Table Discussion with Our Outside Directors… 62

57

17

Place the Utmost Priority on Safety………………… 72

Our Value Creation Process ………………………… 19

Risk Management …………………………………… 73

Important Management Issues (Materialities)……… 21

Denka Group’s Compliance ………………………… 77

Denka’s Trajectory: Contributing to Social Development

Report story

Quality Assurance Management …………………… 80

Management Plan “Mission2030” ………………… 25■ Coverage
This report covers FY2022 (April 1, 2022 through March 31,2023) in principle. It also includes additional information onsome initiatives under t aken subsequent to the F Y202 2
year-end while presenting data on numerical targets for andperformance statistics from the past several fiscal years.
Date of publication: September 29, 2023

In general, this repor t covers topics related to the Denka
Group’s business sites within the scope of consolidation.
However, some articles are based on data gleaned outside thescope of consolidation. These articles individually specify theorganizations subject to reporting.

Dialogue with Stakeholders ………………………… 81• The 2021 GRI Standards of the Global Reporting Initiative (GRI)The Portfolio Transformation Committee & the Sustainability Committee 28
Key Financial and Non-Financial Data …………… 29

Denka’s Financial Summary (11 Years) …………… 83

Financial Strategy …………………………………… 31

Corporate Information ……………………………… 84■ Overview of the Denka Report■ Scope■ Guidelines

Financial Information

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

Possibilityofchemistry

Stakeholders

Business Value Creation …………………………… 26
Human Resources Value Creation & Management Value Creation 27

Corporate Planning Dept., Denka Company Limited
Nihonbashi Mitsui Tower
2-1-1 Nihonbashi Muromachi, Chuo-ku. Tokyo, 103-8338
Tel.: +81-3-5290-5510
Fax: +81-3-5290-5149

E-mail:denkareport @denka.co.jp

Strategy
Reviewing "Denka Value-up" ………………………… 23■ Inquiries• The 2018 Environmental Repor ting Guidelines of Japan’s
Ministry of the Environment• T h e 2 0 21 I n t e r n a t i o n a l I n t e g r a t e d Fr a m e w o r k o f t h e
International Integrated Reporting Council (IIRC)

Denka Report 2023
Integrated Report

Denka Report
This report compiles key financial
and non-financial information andaims to convey the story of value
creation at the Denka Group to awide range of stakeholders in aneasily comprehensible manner.

ESG information site

Sustainability Book

Non-financial information updated
in real time.

The Sustainability Book provides
comprehensive information on sustainability
at t h e D e n k a G r o u p t o c o m p l e m e nt t h econtent of the Denka Report from an ESG
perspective.

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Logical Breakdown of the Denka Report 2023

VisionStrategy

ESG
management(P5-P22)(P23-P50)(P51-80)

The Vision Project was a project involving our young
employees, employees who will play a key role in building thefuture of Denka, who came together to develop our corevalues, purpose, and mission, while discussing the future of
Denka. In formulating our new management plan "Mission2030" management plan, we reviewed the corporate
philosophy we have had up to now and formulated a new
vision to serve as the basis for the plan.
In formulating our new management plan ”Mission 2030”.

“Mission 2030” is the management plan for realizing
our new vision. It introduces the basic policy andstrategies for finance, innovation, technology, andeach division.

Based on the Denka Group ESG Basic Policy, this reportintroduces our efforts to incorporate sustainability issues into
our management and explains the foundations that support
our growth.

Key contents

・Message from the President
・Vision Project・Our Vision, etc.

Key contents・Mission 2030
・Financial strategy
・Innovation

Key contents

・Technology
・Divisional strategies, etc.

・Environment■Carbon neutrality■Biodiversity
・Social■Nurture humanresources■D, E & I

Stakeholders(P81-P82)

・Governance■Message from the Chairman■Round-table discussion with
our Outside Directors■Corporate governance■Human rights initiatives■Place the utmost priority on safety■Risk management■Quality assurance management, etc.

Financial information(P83-P84)

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Denka’s Vision

Denka's vision was created through discussions among 44 young employees and management based on our analysis of the "envisaged world of the future”.
This is the new corporate philosophy of the Denka Group, comprised of our “core value,” “purpose” and “mission.”Core Value

MissionOur “core value” is what form Denka's DNA. They also serve as a basis for decision making.
Initiative, integrity, and empathy are verbalizations of the culture Denka has inherited fromgeneration to generation for over 100 years.
It is a creed that lives within us and that we should continue to uphold into the future.

Our “mission” is our mandate, our bold, compelling and ambitious targets. It is our mountain to climb with clear goals andtime limits. In order to reach the summit in 2030, we have set forth specific strategies in our management plan, “Mission2030”.

PurposeOur “purpose" also serves as Denka’s guiding principle that guides us. It is our reason tocontinue to exist into the future.

Corporate message
It expresses our desire to become an unrivaled presence, or specialist and to make the world a better place through thepower of chemistry.

OUR VISION

Denka's commitment

MISSION

By 2030 we will increase the value of human resources andmanagement, and we will focus on creating business value thatcombines the three elements of specialty, megatrends andsustainability.

PURPOSE

Make the world a better place as
specialists in chemistry.

CORE VALUE

Initiative: We will continue to challenge the possibilities of chemistry.
Integrity: We will engage in our work with sincerity and dedication.
Empathy: We will respect diversity and create a safe and secure society.

MISSION

Denka's guiding principle

PURPOSE

CORE VALUE

Denka’s DNA

C o r p o r a t e m e s s a g e P o s s i b i l i t y o f c h e m i s t r y.
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Message from the President
First of all, I would like to express my deepest regrets for the victim who lost his life in a
fatal accident at Omi Plant in June. I would also like to extend my deepest condolences to
his family and loved ones and to offer my most sincere apologies to related stakeholders
for all the concerns and difficulties caused by this accident and for the inappropriate
conduct in relation to UL certification that was uncovered in May this year.
I recognize that both of these incidents threaten the principles of “assuring the quality ofour products” and “maintaining safe work environments,” which are the very foundation of
our continued existence as a manufacturer. I perceive these events as a serious crisis in
our 108-year history. We are engaging the help of a third-party investigation committee
so that we can thoroughly investigate their causes, develop preventive measures, andsteadily take steps to prevent such incidents from recurring. Once again, I would like tooffer most my sincere apologies for the concerns and difficulties suffered by related
stakeholders.
Denka launched our new management plan, “Mission 2030”, under a new vision “Core
Value, Purpose, Mission” from this fiscal year. The visions and missions announced byvarious companies in recent years have become more or less similar, showing signs of"commoditization.” It could also be said, however, that all of the inherently important
things like love and friendship are commodities. I believe that the power of a vision
depends on the ability of each employee to create a story that leads to that vision.

Toshio Imai

Representative Director, President

CareerSummary

April 1982 Joined the Company
October 2006 General Manager, Styrene Div. of the Company
June 2011 General Manager, Corporate Planning Dept. of the Company
April 2013 Executive Officer
June 2019 Director Senior Managing Executive Officer of the Company
April 2020 Director and Senior Managing Executive Officer of the Company
April 2021 Representative Director, President and Chief Executive Officer of the Company

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Initiative

Integrity

The core values that form the basis of our new vision are "Initiative," "Integrity," andOur second “Value” is “Integrity.” The concept of "Upholding a sincere attitude and"Empathy."

providing a sincere response" has been passed down throughout our 108-year history,

The first “Value” is “Initiative.” Denka was established 108 years ago as a company thatand it was a phrase I often heard from my seniors. The recent discovery of

produced lime nitrogen using our unique state-of-the-art technology to respond to social

inappropriate conduct in relation to UL certification casts a significant shadow overdemand amid food shortages during the chaotic period of World War I. This was a major

this history. However, I believe that the value of “Upholding a sincere attitude andchallenge in itself to begin with. Following World War II, we expanded our business into

providing a sincere response” is still, inscribed certainly in our employees’ minds.

the fields of cement, synthetic resins, synthetic rubber, and resin processing, and in the
1980s, we also ventured into completely unknown fields, such as electronic materials

Acetylene black, one of our flagship products,

and pharmaceuticals. The "Value" of "Initiative” has been passed down from generation

was first produced in 1942 during World War II

to generation at Denka.

when oil shortages made it difficult to continue
producing carbon black from oil, and acetylene

In 1931, the chloroprene rubber produced at our Omi Plant was commercialized byblack was manufactured as a substitute, but

DuPont in the United States under the name Neoprene as the world's first synthetic

following the resumption of oil imports after therubber. In the 1960s, Denka and other companies planned to produce Neoprene inwar, our acetylene black started to lose its

Japan and started negotiations with DuPont for licensing DuPont’s manufacturing

competitive advantage. After that, however,patents, but DuPont chose anotherdemand for our acetylene black emerged for use in manganese dry batteries, but fellcompany. For this reason, Denka

again. However we discovered new uses such as a use for a special conductive

started working on developing its

compound in cables, and now our acetylene black has become the world's de facto

own manufacturing technology, andstandard for use as a positive electrode conductive material for LiBs. I believe that the

finally succeeded in manufacturing

driving force behind our success in finding these new uses has been our ability tothem domestically using its own“uphold a sincere attitude and provide a sincere response” to customer needs

technology, and it is now the world's

throughout the ages.

Acetylene black manufacturing facility

largest supplier.
Members of the Omi Plant involved in chloroprene rubber development.
Front row, center: Senior Researcher Ryuichi Kobayashi

Fused silica and silicon nitride, materials produced using our proprietary technology ofWe have also recently begun commercial manufacturing of an oncolytic virus

high-temperature sintering, were originally used as refractory materials in steel mills.

pharmaceutical for the treatment of malignant glioma, a type of brain tumor which is the

By refining this process to control the purity and particle size, we are now operating infirst oncolytic virus product approved in Japan, the second even in all the developed

the field of electronic materials, including encapsulants and precision molding

countries. These products are the result of initiative that has been passed down over thematerials such as ball bearings. This is yet another example of our ability to “uphold agenerations.

sincere attitude and provide a sincere response to customer needs.”
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Message from the President

Empathybusiness on our specialty that we do best as we did in our previous management plan,

Our last “Value” is “Empathy”. I believe that diversity is what gives an organization a

We use the term "specialist" because we want each and every one of our employees

competitive edge, but “Empathy" is an essential concept for achieving that diversity. In

to form some kind of connection to this purpose with their own story. I consider aorder to work with people from various backgrounds, we need empathy for mutual

specialist to be someone who can do a job better than anyone else. And to do

understanding. I sometimes feel that our human resources may be very similar to one

something better than anyone else is to be the best we can be in the moment. Jim

another. This is not always a bad thing, but it is important for us as an organization to

Collins wrote in his book, “Creativity is inherent in every one of us.” I believe that if we,

strengthen our competitive advantage by working with diverse human resources while

as all of us are creative people, strive to be the best we can be in each place, we will

also maintaining a good balance. I believe that empathy is an important foundation forsurely become specialists there.

“Denka Value-up.”this. I also believe that this ability to empathize is an essential element in creating “asecure workplace where we can protect the mental and physical safety of ourcolleagues.”

Mission (Management Plan "Mission 2030")
Now, next I would like to talk about our “Mission.”

Purpose (reason for existence)

Our Mission is “By 2030, we will increase the value of our human resources andOur purpose, namely our compass or the reason for our existence, is to “Make theelements of Specialty, Megatrends, and Sustainability.”

management, and we will focus on creating business value that combines the three

world a better place as specialists in chemistry.” There are two key phrases in thispurpose and one of them is "making the world a better place." Currently, developed“Business Value Creation” is one of the three growth strategies in this Mission, and it

countries are experiencing a "happiness plateau," a situation of economic well-being

defines "3-Star Businesses" as businesses combining "Specialty," "Megatrends," andunprecedented in the history of mankind. Although inequality at home and abroad is"Sustainability." We have defined what

widening, life satisfaction in advanced countries, including Japan, is on the rise. In

business value means to us by setting

such a world, we are not only required to contribute to sales, profits and other financial

specific KPI criteria for each. The Portfolio

areas of our business. In order for companies to continue to survive, it is important

Transformation Committee reviews eachthat they provide some other “form of value.” "Making the world a better place" is anbusiness for its 3-Star rating, and by 2030,

abstract and comprehensive expression, but I believe that regardless of what we are

we aim to create a portfolio that is comprisedin charge of at the workplace, the question of whether that job is “making the world a

100% of 3-Star Businesses.

<Three Growth Strategies>

Business Value
Creation
Human Resources Value
Creation

better place” and each individual’s answer to that question has great significance.
Another keyword is "specialist." Given the scale and development of business that
Denka has seen over the years, it is only natural that we continue to focus ourManagement Value
Creation

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Message from the President“Human Resources Value Creation” and “Management Value Creation” in “Three
Growth Strategies" are important growth strategies. This is because, while the results

Strive to be our best selfof "Business Value Creation" are influenced by external factors, these two are largely

I believe that each of us, as "creative people," will strive to become the best version ofachievable through our own efforts and are important elements that provide "meaningourselves in our respective fields, and as a result, create “Denka specialists” where we arefor our work" in the “happiness plateau” society described above.

the best at what we do in order to achieve "Mission 2030." As part of my management
efforts, I will create a strong foundation for our success through the creation of “Human“Human Resources Value Creation” aims to achieve our goal of becoming an organization

Resource Value” and “Management Value.”

where employees can experience growth and become their “best selves”. We will continue
to promote diversity, equity and inclusion in the workplace, upgrade our training andI would like to conclude this message by thanking our stakeholders in advance for theirpersonnel evaluation systems, and implement career and succession plans.

understanding and support of the Denka Group.

Further, “Management Value Creation” is a measure to enhance our sustainability, and it
establishes KPIs for process reform, safety, quality, and supply chain improvements.
In our "Mission 2030" management plan, we will invest 540 billion yen over eight years,
aim to achieve operating income of 100 billion yen and ROE of 15% by 2030. As
non-financial indicators, we have set KPIs to reduce CO₂ emissions by 60%, from thecurrent level of over 2 million tons per year to 1 million tons, and to promote diversity byincreasing the percentage of females, foreign nationals and experienced employees inmanagement positions to over 50%. The Sustainability Committee, newly established in
April, will be responsible for the management of these targets and efforts.
I hope to achieve “Mission 2030” through the promotion of “Three Growth Strategies” ofour business, human resources, and management value creation.

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Talk with the President
Introduction
Okabe: I would like you to talk about three topics today. The first is Denka's "New Vision" formulated in April
2023, the second is the new management plan to drive that vision, and the third is about creating
innovation.

■ VisionFirst of all, I would like to ask President Imai about his thoughts on the new "Vision" and Mr. Yamaguchi
about how corporations should seek to best utilize their vision.

Vision is a commodity, but also a truth. It is something that is necessary to create ourindividual stories.

Shu Yamaguchi

Independent researcher/author/public speaker

Toshio Imai

Representative Director &President Denka Company Limited[Facilitator]Mr. Takahiro Okabe, Sun Messe Co., Ltd./Sun Messe Research Institute
In April 2023, Denka Company Limited transformed "The Denka Value" (Corporate Philosophy), theDenka mission, and Denka's Code of Conduct into a new "Vision" to take Denka into the future. How
can we use this vision to achieve sustainable growth? Shu Yamaguchi, an independent researcher,author, and public speaker whose book "Dawn of the New Type" suggests ways of thinking andbehaving in the aftermath of COVID-19, was invited to speak with Toshio Imai, President and CEO of
Denka, about the perspectives needed by corporations and Denka for the future.

Shu Yamaguchi Profile
Independent researcher/author/public speaker
Born in Tokyo in 1970. Independent researcher, author and public speaker. Involved in strategy formulation, cultural policy andorganizational development at Dentsu, BCG, etc. His books include "The Future of Business," "Dawn of the New Type," "Why Do
Global Elites Improve Their Aesthetics?" and "Philosophy as a Weapon." Graduated from the Department of Philosophy, Faculty of
Letters, Keio University, and from the Graduate School of Letters.

Imai: Denka has always had the “Denka Mission and Code of Conduct” as our corporate philosophy, but informulating our long-term management plan, we have completely overhauled these to create our "Vision"consisting of our "Core Value," "Purpose," and "Mission." At first glance, this vision may not seem all thatdifferent to that of other companies, and as Mr. Yamaguchi describes in his book, this may be seen as"commoditization." But because this vision is right, I think it is becoming a commodity. It is like saying love istrue. I believe the most important thing is creating a connection between this vision and the company andeach and every employee.

Vision penetration: True intentions and superficial intentions, short-term and long-term
perspectives
Yamaguchi: There are what we can call our superficial intentions and true intentions and I believe that these
two must come together in order to achieve true penetration of a vision. Superficial intentions tend to cometo the fore in the case of a mission or value while true intentions can be seen on the front line and inpersonnel.
If you think about it in terms of sports, for example, there are athletes who have achieved great things andhold great influence. However, if they find themselves in a situation where it is absolutely necessary to
make a substitution, they can do it without hesitation. I've heard it said before that a quality required byleaders is the ability to make these decisions.
I believe this kind of scenario occurs regularly in companies. Management tend to look at things over thelong term. The president creates a vision and value because they feel these are necessary to survive. On
the other hand, people working on the front line look at things over the short term. "I'm producing results
this term and next." I’m producing results and I’m influential and popular. But I don't care about a vision. If
you want to remove me from a project based on a vision, try it. Corporations cannot blame employees fortaking such a stance. This is what makes trying to change corporate values or judgement criteria over thelong term so difficult.

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Vision penetration: Specialty■ Our Management Plan

Okabe: Changing the mindset of frontline workers and frontline leaders is likely to be a major factor. What

OKABE: Now, let's move on to the topic of your management plan.

do you think, President Imai?
Imai: We created this "core value" by listening to a wide range of opinions from our employees, ranging fromour young to elder employees, and we ensured that they resonated with us. As for the “purpose” of our new"Mission 2030" - The creation of value in business, human resources, and management

vision, to “make the world a better place as specialists in chemistry”, we are continuing the core concept of

Imai: Our management plan, "Mission 2030" is divided into three strategies: business value creation, humanour previous management plan, "Denka Value-Up", to become a fusion of specialty businesses. I think of a

resource value creation, and management value creation. Prior to the previous plan, our definition of

specialist as someone who can do a job better than anyone else. How to instill this mentality in each andspecialty inferred an overwhelming presence and competitiveness. However, in our current plan, in an

every employee and ensure they make it their own is a challenge that we continue to face.

attempt to be more specific, we have made it our mission to make all of our businesses “3-star businesses”,

Vision is also a management criterion
Yamaguchi: Specialty doesn't mean seeking scale or competing on cost. If your motivation is to be number
one in terms of quantity, you will inevitably pander to the market, and when the market becomes tired ofyour product, you will quickly fall into decline. President Imai's desire to remain unique and become a
specialist refers to becoming someone who cannot be replaced by anyone. I believe this purpose will
become the standard and the starting point for how we compete. However, I feel that some people may
have difficulty deciding where they should specialize. What are your thoughts on this, President Imai?
Imai: Everyone has different abilities and skill sets. I believe that everyone has something that they can dobetter than anyone else. It is my hope that person takes advantage of the abilities and skill set they havecultivated over their lifetime.
Yamaguchi: So, you have to find what you are good at. Surprisingly, people tend not to know what they aregood at when everyone else around them can see it.

or in other words, business segments that satisfy the elements of being specialty, in line with megatrends,
and sustainable, by 2030. The newly established Portfolio Transformation Committee will be responsible forlooking at each of our business segments and making the decision to withdraw from or sell off segmentsthat do not have a "three-star" story.
Yamaguchi: What you have just talked about reminds me of the Balanced Scorecard approach from the
1990s.
The Balanced Scorecard approach was a concept developed by Robert Kaplan, then a professor at
Harvard Business School, and David Norton, a consultancy firm employee, in the early 1990s, which lookedat management scoring not only in terms of financial value, but also in combination with several otherfactors. At the time, it was common for U.S. companies to temporarily increase their financial value by
reducing labor costs, freezing R&D investment, and lowering manufacturing costs by lowering quality,
thereby doubling their profits instantaneously and then selling them off. It was a harbinger of thevulture-fund like practices of the 2000s, which resulted in companies being ruined. Caplan and Norton

Imai: That is why communication is so important. To recognize and further refine our abilities. This concept
is linked to our core value of "empathy". When this starts to gain momentum, I believe we will start to seeboth personal and corporate growth.

Vision Management Issues
Okabe: Could you talk about the key factors for B to B companies in effectively using their vision in
management?
Yamaguchi: I don't see an essential difference between B to B and B to C, but in the case of an organization
with a broad range of business areas, the vision has to be comprehensive and abstract, and there can besome conflict. However, a vision can not be motivating unless it is somewhat concrete. Therefore I believe it
should be established at the business unit level, one level down, and similar to a strategy.
Imai: In the case of Denka, the scope of our business operations is relatively wide in relation to our size, but
our value is all connected to and integrated by chemistry. Each business segment is niche and special in away. However, I feel we have established a concrete purpose and core value.

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stated that financial and non-financial indicators represent the past and future, and that making a profit in

the way that we know. It was when I visited an industrial waste disposal company in Japan that I started tothe short term is like pawning the future. They said that value is provided not only to shareholders, but also

think about this issue of true and superficial intentions. The company's mission is to rid the world of theto customers, society, and employees, and that management is about scoring and managing the balance

concept of trash, and when I visited their office they didn’t have any trash cans. As a result, there were

between how to give each of these growth opportunities. I believe it was a sound concept, very visionary

messages posted around the office telling employees to take their trash home with them. Indeed, it would

and ahead of its time, but regrettably, it was an elaborate system that was difficult to manage. There were abe strange for a company that claims to eliminate the concept of trash around the world to have trash cans.

lot of companies that tried to implement it, but with the IT and information gathering technologies of theThis company had succeeded in aligning their objective with the details or otherwise, doing what theytime, it was too costly and time consuming, so the methodology died out. I feel that the concept of "businessknow . I think this is one of the keys to ensuring effective penetration of a vision throughout an organization.

value, human resource value, and management value" raised by President Imai is identical to the concept of

Imai: Exactly. True intentions and superficial intentions, “to know is to do”. The biggest challenge is how to

the Balanced Scorecard, made in the past by leading American management scholar.

eliminate the difference.

Imai: No, I’m 20 years too late (laughs).
Yamaguchi: But if you think it through, you end up there.

Making more meaningful products than useful products /Things that are more important
than KPIs
Okabe: In Japan, there is a culture and history of providing2value to society, which some say is a three-way
or even a four-way street. As a material manufacturer, Denka has developed a corporate culture that has
provided value to society over many years.
Imai: We have included the phrase "make the world a better place" in our newly formulated purpose. This isa reflection of the voices of our young employees, but I feel this is shared by all our employees. As Mr.
Yamaguchi states in his book, it is important that our work has purpose. Denka has always been in the
pursuit of creating something of value to the world, but it also has to have meaning. That's what a three-starbusiness should be.

Penetration of our KPIs
Okabe: Mr. Yamaguchi stated in his book that the significance of KPIs is more important than their numbers.
Denka has just launched a management plan that has included management targets in its KPIs, do you
have any advice for them?
Yamaguchi: I would suggest getting rid of the distinction between true intentions and superficial intention. At
a Danish company I visited in the past, they worked without heating even when it was cold. The reason
being that your CO 2 emissions will increase if you are using the air conditioning.
The company’s CO 2 emissions were displayed in real time on the wall of the cafeteria and were visible to all
employees to make them all more aware of whether they were achieving their targets. When I asked them ifthey weren’t cold, they simply replied that if they were cold they could put on a sweater. I was amazed bytheir level of commitment.
Imai: This is a true representation of true intentions and superficial intentions coming together as one.
Yamaguchi: If they all make the decision to reduce CO 2 emissions, they will all stick to it. It is both essential
and radical. This company's shared mindset about information and issues suggests one way of aligning true
intentions with superficial intentions. There is a saying, "to know is to do." This means that we should act inDenka Report 2023 Integrated Report12Vision

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Talk with the President

Engagement & Corporate Spirit
Yamaguchi: One of the things that surprised me was President Imai's story. It is ok for some things to
become a commodity. The story talks about how a vision can become a commodity, just as love is true.
When the management of an Internet company in the United States wanted to start an artificial intelligencebusiness with the military, there was an internal petition against the project. Employees felt it went against
their values and vision. Ultimately, they were able to secure a majority of signatures, and management
formally apologized to the employees. I think it was their love for the company that drove them. When acompany you love is trying to move in a direction that is contrary to its vision, it is because of the strength ofthe company that the employees choose to oppose it. I think they spoke out because they shared the values
the company stood for and the people that identify with them, and felt that those values were in jeopardy.
Corporate spirit is a very Japanese concept, but I feel it was definitely one of the driving forces that moved
them.
Okabe: In terms of a sense of belonging to a company, I always believed this concept was stronger in Japan
than in the United States.
Yamaguchi: The concept of engagement is still very weak in Japan. Whether you work for a particularcompany because you love it or because you are comfortable there is different.

■ Creating new businesses
Organizational reforms to take on new challenges
Okabe: The final topic I would like to discuss today. One challenge facing Denka is the creation of new
businesses. President Imai, can you tell us your thoughts on the concept of “3-star businesses” that form
the cornerstone of your vision, including the growth of the organic businesses?
Imai: Our core value of “initiative” will serve as the driving force behind new business development. In April
2022, we launched a new business development division to establish an integrated framework responsible
for basic research, incubation, and product commercialization. Respective business divisions will be
responsible for further research and development surrounding existing products and oversight of the plantresearch division. On the other hand, we have established a corporate venture capital fund with a company
in Silicon Valley with the aim of investing in startups. Our challenge now is how we will go about driving new
business development.

Multifaceted evaluation is the key

Imai: Ultimately, the most important thing is that there is purpose to our work. It is important that people

Yamaguchi: Business will continue to change with the times. I believe we have to make a very multifacetedworking on the front lines, leaders and everyone that you work with share that same purpose. To that end, I

assessment of what form business will take in the future. How this assessment is made will vary greatly

hope to propose a company-wide purpose and vision. I feel that is the real challenge.

depending on where you stand. For this reason, a supplier may view a product as unmarketable, however,there may actually be demand for such a product on the market. We need to generate a lot of ideas, create
opportunities and sometimes wait for the right time.

Quantity is more important than quality
Imai: We need to be encouraging in order to generate a lot of ideas. After all, the best ideas are born when
there is a large variety to choose from. But there will always be a lot of ideas that are not so great.
Yamaguchi: That is what “initiative” is all about. The more ideas you generate, the more you will have tothrow out. From the standpoint of research into creativity and organizational theory, which are my researchareas, you cannot create a winning idea without coming up with a certain amount of ideas to choose from.
In saying that, the more ideas you generate, the more you will have to throw out. Ultimately, it is about
whether the necessary framework is available as a financial strategy. The rest comes down to how quickly
we can choose the winning ideas. Over the long term, this will require a great deal of resources. Therefore,
in order to test a lot of ideas, it is also necessary to decide quickly which ideas to throw out.

Denka Report 2023 Integrated Report13

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VisionStrategy

ESG
management

Stakeholders

Financialinformation

Talk with the President

The challenges to generate new ideas (need for encouragement, financial impact, positive
evaluation)
Yamaguchi: There is an online shopping site in the U.S. that has undergone rapid growth on the back of aconsiderable amount of failure. In the 20 plus years since it went public, it has launched nearly 100 large
businesses, with one third failing in 3 to 4 years. In an economic climate with so much uncertainty, I believe
it is impossible to hit every ball into the stands. When you have a globally diverse business, it's difficult tounderstand everything the customer wants. It is all about bringing a variety of products to market, testingthem and enduring the failures while limiting the financial impact on your business. There will also be thechallenge of creating a corporate culture and evaluation systems that tolerates failure to a certain degree.
Japanese people, in particular, tend to view withdrawal, setbacks and failure in a very negative way. We
tend to keep fighting a losing battle even though defeat is inevitable. Trying new things is what is important,and it is essential for the creation of new businesses to change our personnel and evaluation systems sothat failure and setbacks do not carry such a negative connotation.
Imai: That’s right. We must never evaluate everything solely on the basis of failure, because there are also
many things that can be learned through failure. And I firmly believe that in order to do something new,there will be times where you will have to make the decision to abandon some ideas that should beabandoned, and this is the job and responsibility of top management.

Expectations & Message
Okabe: Finally, Mr. Yamaguchi, what are your expectations of Denka and do you have any final messages?
Yamaguchi: In today's world, where people are forced to work in jobs that they do not find rewarding or incompanies that are focused on control and mistrust, I would like to convey to employees and stakeholders
that it is a rare thing that the president of Denka is serious about the mission, purpose, and core value, andspeaks from the heart rather than simply adopting to try to please everyone.
Imai: Denka has faced quality issues and experienced serious accidents, bringing inconvenience anddistress to many people. We have established a third-party committee and are doing our best to investigate
the causes and prevent similar incidents from occurring. Despite our long history, we are now facing a very
serious problem. In light of this reality, it is precisely now that we need to adopt a management approachthat is guided by our vision and rebuild
the company.
Yamaguchi: I have had the opportunity to
speak with Mr. Imai at executive training
sessions at Denka, and I realize that heis accelerating investment in humancapital. What struck me again today is
the seriousness with which you are
addressing it. The most important factor
governing the success of initiatives suchas vision and management strategy is
the commitment of top management.
Today, I have once again been remindedof the strength of Mr. Imai's commitment,
and I feel strong that this initiative willproduce great results.
Imai: Thank you. I will do my best.

Date: June 29, 2023 Location: Denka Head OfficeDenka Report 2023 Integrated Report14

Vision

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Vision project ~ How our vision was created ~The Vision Project was a project involving our young employees, employees who will play a key role in building the future of Denka, who came
together to develop our core value, purpose and mission, and to discuss the future of Denka.
We have reviewed our corporate philosophy and formulated a new vision to serve as the basis for our Management plan “Mission 2030.”

Timeline leading up
to the creation of
our new vision

April

2022

February 16

Kick Off

Analysis of data to help
forecast future global
eventsLaunch of the Vision
Formulation Project

April 13First joint
session44 young employees
participated in the project

VisionFormulation
Project

Workshop 1

Workshop 2

Workshop 3

What are Denka's corevalues (principles andbeliefs)?

What is Denka's purpose(reason for existence)?

What is Denka's mission?

Final joint session &presentation to
management

November 8

Discussion
withmanagement

Decision

Visionannouncement2023
New vision
launch■ Project overview
44 young employees were divided into 3 groups to discuss the formulation of our core values, purpose and mission. After the first joint session, three workshops were held andthe results of discussions were presented to management, including the President, at the final joint session. The results of this project came to fruition in the form of “Mission2030”, a management plan launched in fiscal 2023, and a vision that serves as the cornerstone of Denka's vision for the future.

Workshop 1

Workshop 2

Workshop 3

Final joint session"What is Denka's core value?""What is Denka's purpose (reason
for existence)?"

What is Denka's mission (our goals)?

Presentation to management

We summarized the opinions about our
mission put forth by each group. We had alively discussion led by our leaders.

Each group presented its core values,
purpose, and mission to management anddiscussed them. Management then held
discussions based on these presentations
and Denka's vision was born.

Discussion on the theme of "What is Denka's
core value?" We listed a number of keywords,
such as "chemistry," "future," "society and theenvironment," "sincerity and trust," "the powerof chemistry," and "happiness".

Individual groups discussed our purpose.
"What is our reason for existence?" This led toa deeper discussion that transcended theworkplace environment and hierarchy.

The vision is not just symbolic words, but is interlinked with next management plan "Mission 2030" withthe aim of instilling them in our daily activities, work practices and goal setting.
Denka Report 2023 Integrated Report15

Vision

Prologue

Report story

VisionESG
management

Strategy

Stakeholders

Financialinformation

I want to systematize the idea of“carving out a new future” andpush forward to reach my goals.

What is your vision
for yourself?

I want to be a person who cansincerely face what is really neededin society.

Yuta Takahashi

Kensuke Irie

Tape Section,
Third Manufacturing Department,
Chiba Plant

Digital Strategy & Innovation Department

I want to continue changing andbecome the person that I need
to be, without stopping to think
about whether or not I am growing.

I want us to be a company full of
human resources whose jobs are
driven by satisfaction and fun.

Yuka Seki

Takumi Maeda

Kagamida Plant, Gosen OfficeChemical Luminescence
Reagent Department,

Elastomer & Infrastructure Solutions
Omi Infrastructure Technology
Research Department

As a Denka employee,
I want to keep improving as
the company grows.

My vision is to become a specialist
in risk hedging and a person
who can provide the greatest peaceof mind to all members of
the Denka Group.

I want to make it possible for all
kinds of people to encounter
Denka products on a daily basis,and to spread Denka throughout
the world.

Kaoru Osawa
Advanced Specialty Materials Department

I want to contribute to improving
people’s quality of life
by flooding society
with Denka products.

Mai Tomiyama

Jessica Liu

Akros Trading Co., Ltd.
Chemicals & Consumers
Insurance Service Section

Denka Taiwan

OU R VISIO N

Our Vision

Yuka MurataLife Innovation
New Business Exploration Department

I want us to create sustainable
manufacturing plants and becomea chemical manufacturer thatremains globally valuable 100 years
from now.

I want to stay ambitious. I want toface my own challenges from time
to time and be a human resourcethat never goes stale.

Shun Utagawa

Natsuki Okuno

Production Technology Department,
Omuta Plant

Polymer Solutions,
Performance Plastics Department

Denka Report 2023 Integrated Report16

Vision

Prologue

Denka’s Trajectory- Contributing to social development -Report story

VisionESG
management

Stakeholders

Financialinformation

Since our founding in 1915, Denka has been wrestling with the issue of how much of the value required by society
can be created through chemistry.
Here, we will introduce the history of Denka's corporate value creation and change in our portfolio over six eras.
Turning
Point

Turning
Point

Turning
Point

Turning
Point

Initial Phase

Core Business Expansion Phase

Specialty Business Expansion Phase

1915-1944

1945-1974

1975-2006

2007-2017 Denka100

2018-2022 Denka Value-Up

Helping to resolve foodsupply problems

Technologies supporting
high economic growth

Entry into the petrochemicaland healthcare fields

Advancing intofunctional ceramics

Contributing to sustainable social
development with the uniquenessthat sets us apart

Founding

Strategy

Making Strong Business
Even Stronger

Becoming aSpecialty-FusionCompany

Make the world a better place as specialists in chemistry2023-2030 Mission2030



Achievement of carbon neutrality[Policy]
Create a better society with the
supply of cutting-edge
materials[Field]Next-generation high-speed
telecommunications, xEV andrenewable energy

Portfolio reform
includingestablishment of
low-carbon
acetylene chain

Development andimplementationof CO ₂ capture,storage andutilization
technologies

Expansion of green
energy byincreasinghydroelectric power
generation andestablishing new
solar power plant

Environment and energy

・High-speed data communication (5G)・Shift to xEVs in automobiles
・Renewable energy
[Policy]
Improve quality of life forpeople around the world inareas of prevention, diagnosis,
and treatment[Field]We continued to support Japan’s
agricultural sector through stable
calcium cyanamide fertilizer
production while overcoming a
number of management crisesthat arose in the rapidly evolving
era of World War I and II and amajor economic recession.
We also began operating our own
hydroelectric power plants tosecure a stable supply ofelectricity.

Over the course of Japan’sreconstruction in the aftermath ofWorld War II and the subsequent
period of high economic growth,
we leveraged carbide acetylene
chemistry and inorganic
chemistry to supply a variety of
products while delivering cement
and special cement additives,with the aim of meeting theever-growing demands ofsociety.

To live up to ever higher
expectations with regard to thefunctional improvement of plastics,
we engaged in product developmentthat rallied the Group’s overall
technological capabilities, ranging
from precision material synthesis toresin processing and molding.
Moreover, we strove to support theprevention and early diagnosis of avariety of infectious diseases via the
supply of vaccines and diagnostic
reagents, helping prevent the
spread of such diseases.

Our ultra-high-temperature control
technologies cultivated in the courseof calcium carbide production, an
activity that dates back to our
founding, have enabled us to createa variety of new materials ranging
from acetylene black to inorganic
powders. Furthermore, our metaland polymer composite
technologies allowed us tocontribute to technologicalinnovation in the field of thermal
solutions for railways, automobiles,
and communications devices.

Healthcare

・Developing new preventive anddiagnostic technologies
・Innovative treatments

Preventive medicine, diagnosis
and treatment
[Policy]
Realize safe, secure, andcomfortable daily lives[Field]High-value-added infrastructure

・Developing resilient infrastructure
・Repairing aged facilities andlengthening building life

Food, Infrastructure and Daily
necessities

Sustainable cities andfulfilling daily lives

Promotion of circular
economy for styrene-based
packaging materials

Establishment of CO ₂
sequestration technology

Environmental conservation andminimization of environmental footprintContinuation of zero waste
emissions

Response to natural-relatedrisks, such as biodiversity
and water resource
conservation, based on theTaskforce on Nature-related
Financial Disclosures(TNFD)

Social changes
Instability in global affairs● - 1918: World War I● 1929 -: The Great Depression● 1939 -: World War II

Period of high economic growth

The acceleration of globalization and IT

Toward a Sustainable Society● Nov. 2022: Global population exceeds 8 billion● 2008: Subprime Mortgage Crisis● 1973: The First Oil Crisis● 1955: Japan starts construction on
national expressways● Feb. 2023: Great Turkey-Syria Earthquake● 2011: Great East Japan Earthquake● 1979: The Second Oil Crisis(Chuo Expressway, Tohoku Expressway, etc.)● May 2023: G7 Hiroshima Summit● 2015: Adoption of SDGs and the Paris Agreement● 1990: The Cold War ends, spread of the Internet● May 2023: COVID-19 reclassified to "Class 5● 2019: Start of the COVID-19 pandemic● 1991: The Japanese asset price bubble bursts● 1964: The Tokaido Shinkansen line
Infectious Disease"starts operation● 2022: Russian invasion of Ukraine● 1993: The EU is formed● 1971: The Nixon ShockDenka Report 2023 Integrated Report17

VisionFounding

Report story

Prologue

Turning
Point

Initial Phase

1915-1944■ Trends in operating results(Unit: billions of yen)

Turning
Point

Core Business Expansion Phase

Turning
Point

Specialty Business Expansion Phase

1945-1974

Turning
Point

Making Strong Business
Even Stronger

2007-2017 Denka100

1975-2006

VisionStrategy

ESG
management

Becoming a Specialty-Fusion
Company

Stakeholders

Present

2018-2022 Denka Value-Up

Financialinformation

Make the world a better place as
specialists in chemistry2023-2030 Mission2030

Net sales

Income(billions of yen)

600

100
500

Net sales

90(scale on left)

80

Operating income(scale on right)
Net income

400
300

70
60
50

Non-consolidated figures are used for FY1976 andearlier, and consolidated figures for FY1977 onwards.

200

40
30

100

20
10

0

   ■ Trends in core businesses (% of operating income)

2%
15%
15%

11%

12%

2%
18%

2003

1999
59%

■ Petrochemical business■ Functional products business■ Cement & building materials business■ Medical Products + Other Business

2%

18%

16%

2007

21%

2%

■ Organic materials business■ Inorganic materials business■ Electronic materials business■ Functional & processed products business■ Other■ Trends in maximum output of hydroelectric power plants (including joint ventures) (Unit: kW)
150,000■ Elastomers & functional resins■ Infrastructure & social solutions■ Advanced electronic products■ Living & environmental products■ Life innovation ■ Other

7%

17%

2022

46%

32%

10%

■ Plastics & chemicals business■ Organic & inorganic chemicals business■ Functional & processed products business■ Cement & building materials business■ Other

2017

44%

26%

48%

-7%

1%

2026

56%

0

15%

2030

50%

48%

33%

40%

■ ICT & energy■ Healthcare■ Sustainable living■ Other■ ICT & energy■ Healthcare■ Sustainable living■ ICT & energy■ Healthcare■ Sustainable living

45%

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

100,000

50,0000  





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







 *Since 1933, the output from Kurobegawa Electric Power Company’s power plants has been calculated in line with the ratio of Denka’s equity (50%) in the joint venture. In 2022, the power generation capacity totaled 140,000 kW due to the start ofoperations of the Kurobegawa Electric Power Company’s New Himekawa No. 6 Power Plant.
Denka Report 2023 Integrated Report18

Vision

Prologue

Our Value Creation Process

International and diverse humanresources

・Number of employees (Consolidated) 6,406(As of March 31, 2022)
・FY2022 ratio of women in managerial positions 3.5%
・FY2022 ratio of foreign national employees 16%

VisionStrategy

ESG
management

Stakeholders

Financialinformation

In response to the world we envision for the future, we are working to create corporate value and realize asustainable society by leveraging our six management resources backed by over 100 years of history.

 (6 management resources)
Human capital

Report story
Vision (Core Value, Purpose, and Mission)

Management Plan "Mission 2030" ▶Page 23-28
Business value creation

Intellectual capital

A broad range of essential
technologies that capture megatrends
・R&D bases 1 domestic and 3 overseas
・FY2022 number of researchers 853
・Global market share No. 1 over 13 products

Specialty

Natural capital

Effective use of natural resources
・FY2022 renewable energy ratio 32%
・Hydroelectric power plants 17

Envisaged World of the Future

Manufacturing capital

Megatrends

A production system that facilitates
global competition

Sustainability

・Production bases 13 domestic and 9 overseas
・FY2022 capital expenditure ¥39.3 billion

Human Resources Value Creation

Social capitalPartnerships with stakeholders

・Partnership Building Declaration( https://denka̲sustainability.disclosure.site/en/themes/758 )Financial capital

Financial base and investments forvalue creation
・Total assets ¥592.2 billion
・FY2022 strategic investment ¥15.6 billion

Management Value Creation
Materiality ▶Page 21-22
Responsibility and contributing to a sustainable society

Strengthening our business foundation

Denka Report 2023 Integrated Report19

Vision

PrologueNew Business
Development▶ Page 33-34

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation (Contribution to Society)
Make the world a better place as specialists in chemistry
Sustainability/enhancement of corporate value
Operating income(FY2030)¥ 100 billion or more

Electronics & Innovative
Products(operating income ration 15% or higher)▶ Page 43-44

ROE (FY2030)

Contributing to a sustainable society●Ensure universal access to affordable, reliable
and modern energy services (7.1)●Increase substantially the share of renewableenergy in the global energy mix (7.2)●Double the global rate of improvement inenergy efficiency (7.3)

15% or higher●End the epidemics of infectious andcommunicable diseases (3.3)

ROIC (FY2030)

Life Innovation

10% or higher●Reduce premature mortality from non-communicable diseases (3.4)●Achieve universal health coverage (3.8)▶ Page 45-46
Specialty, Megatrends, Sustainability,

Elastomer & Infrastructure
Solutions▶ Page 47-48

100% Three-Star Businesses

Strategic Investment (Growth, Process, Environment, M&A)

8-year total: ¥ 360 billion

Polymer Solutions▶ Page 49-50●Ensure access for all to adequate, safe andaffordable housing and basic services (11.1)●Provide access to safe, affordable, accessible
and sustainable transport systems for all (11.2)●Enhance inclusive and sustainable urbanization and capacity for participatory, integrated
and sustainable human settlement planningand management (11.3)●Reduce the adverse environmental impact of
cities by paying special attention to air quality
and municipal and other waste management(11.6)

R&D expenses (including basic research of 50 billion yen)

8-year total: ¥ 180 billion

Denka Report 2023 Integrated Report20

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Prologue

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ESG
management

Stakeholders

Financialinformation

Important Management Issues (Materiality)
In formulating our Management Plan "Mission 2030," the Denka Group analyzed and evaluated ESG issues over the medium-to-long term up to 2030 and reviewed materiality.

1 ESG management promotion framework

2 Materiality review process

The Sustainability Committee (chaired by the President) has been established within the Executive Division tosupervise the proactive and active efforts of the Executive Division to address issues related to sustainability(medium- to long-term sustainability). The committee meets five times a year with the President serving aschairperson, the Executive Officer in charge of the Corporate Planning Department as vice chairperson, andthe Executive Officer in charge of the Management Department as a committee member, with Directors,
excluding committee members, present as observers.

・In formulating our Management Plan "Mission 2030," the Denka Group analyzed and evaluated ESG issues
over the medium-to-long term for the 8 years leading up to 2030, and reviewed materiality.
・The new materiality serves to clarify management issues that are important in fulfilling our social
responsibility in the "envisaged world" and "megatrends" analyzed at the time our "Mission 2030"
management plan was formulated, and to connect them to individual business goals. With the support ofexternal experts, we evaluated and analyzed the population (Note 2) list of social issues, selected them using
the Materiality Map (Materiality Matrix) method, and through the process of formulating a management plan,
we identified 14 materiality issues which were finalized by the Board of Directors meeting in November 2022.

The committee deliberates and makes recommendations on sustainability initiatives implemented by the
Executive Division and the achievement of non-financial target KPIs (Key Performance Indicators). In theimplementation of deliberations and recommendations, from the perspective of ensuring transparency andfairness in corporate decision-making and the realization of effective corporate governance, the committee
will consider the impact of risks and profit opportunities on our business activities, taking into account the levelof consistency between our efforts to address sustainability issues and our management strategies andissues. The results of these deliberations will be reported to the Board of Directors.
The Portfolio Transformation Committee (chaired by the
President) was established to further promote a change toour business portfolio based on three elements: specialty,
megatrends, and sustainability. By incorporating indicatorssuch as CO 2 emissions and labor productivity, we aim toachieve our target of 100% three-star businesses by 2030.

(Note 2: Population of social issues: Survey items of ESG assessment organizations such as the World Economic Forum(WEF) Global Risk Report (2022 edition), Sustainable Development Goals (SDGs), the SASB Standard, and the CDP wereanalyzed and classified into 23 categories/333 items.)

Denka Group materiality analysis map

General Meeting of Shareholders
Audit Committee

Business Execution
Management Committee

Sustainability Committee

Portfolio Transformation Committee

Other committees and business execution divisions

Nomination andRemuneration Advisory Committee

Very highImportance to Denka

Materiality (14 items)

Strengthening our business foundation

Board of Directors

・Climate change/environmental
pollution
・Diversity
・Human rights/gender・Medicine/health/healthcare
・Safety/labor/employment
・Biodiversity
・Water/public health・Governance・Technological advances
・Quality/supply chain
management
・Human resource
development/education
・Energy/resources
・Urbanization
・Infrastructure
・Marine pollution
・Circular economy
・Population
・Poverty/hunger
・National/social/geopolitics
・Fishery resources
・Forest resources
・Changing lifestyles
・Economic growth

Responsibility andcontributing to a sustainable society

Very highImportance to stakeholders

First Sustainability Committee Meeting (July 10, 2023)

Issue theme

Identified
material
issues・Sustainable growth through thecreation of new business・Increasing healthy life expectancy
and correcting health disparity

・Sustainable cities and fulfilling daily
lives・Achievement of carbon neutrality

・Environmental conservation andminimization environmental footprint・Strengthening of Hrdevelopment
systems
・Promotion of Diversity, Equity &Inclusion・Health and Productivity Management
and work style reform
・Process reforms

・Respect for human rights

・Place the utmost priority on safety・Supply chain management

・Improving product safety and quality
・Enhancement of corporate
governanceDenka Report 2023 Integrated Report21

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Prologue

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VisionStrategy

ESG
management

Stakeholders

Financialinformation

3 New material issues (important management issues)
Materiality (14 items)

Relationship between the Denka Group ESG Basic Policy and Materiality

The Denka Group ESG Basic Policy
Promote climate change
countermeasures

E

Reduce environmental impact andpreserve/protect biodiversity

E/S

Sustainable economic growth andsolving social issues

S

Respect for human rights

S/G

Promote diversity and inclusion, nurture
human resource development, andreform working styles

S

Develop inclusive workplaceenvironments with the utmost priority on
safetyS

Participate in, contribute to, and build
trust toward creating better local
communities

S

Build relationships of trust withcustomers

G

Fair corporate activities

G

Information disclosure and constructive
dialogue with stakeholders

G

Risk management

G

Protect and manage our tangible andintangible assets

G

Ensure the role of top management andthe implementation of this policy

Strengthening our business foundation (9 items)

E

Materiality (14 items)
Responsibility and contribution toa sustainable society (5 items)

・We have classified materiality issues into
two categories, “responsibility andcontributing to a sustainable society”, inwhich we contribute to society throughour business activities, and“strengthening our business foundation”,
which is a requirement for corporate
survival and sustainable growth.
・Responsibility and contribution to asustainable society (5 items) consists ofitems that the Denka Group should
address in order to resolve social issues
through its business operations, such as
global warming countermeasures,
healthcare, and sustainable cities andlifestyles.
・Strengthening our business foundation (9items) is based on the Denka Group ESG
Basic Policy, and issues related to humanresources, a source of sustainablegrowth, and initiatives to fulfill social
responsibilities through supply chaininteraction.

・Sustainable growth through thecreation of new businesses

Issue resolution for each materiality issue
Materiality

Issue resolution

Sustainable growth through the creation
new business creation

Creating new businesses by enhancing our core technologies, strong productdevelopment and open innovation

・Increasing healthy life expectancy
and correcting health disparity

Increasing healthy life expectancy andcorrection of health disparity

・Sustainable cities and fulfilling
daily lives

Sustainable cities and fulfilling daily lives

・Achievement of carbon neutrality
・Environmental conservation andminimization of environmental
footprint
・Strengthening of HR development
systems
・Promotion of Diversity, Equity &Inclusion
・Increasing healthy life expectancy
and correcting health disparity
・Process reforms
・Respect for human rights
・Place the utmost priority on safety・Supply chain management
・Improving product safety andquality・Enhancement of corporate
governanceAccelerating decarbonization and achieving carbon neutrality, mitigating theintensification of natural disasters caused by climate change, preventing the
spread of emerging and re-emerging infectious diseases, and improving QOL

Achieve of carbon neutrality
Environmental conservation andminimization of environmental footprint

Address waste problems, conservation and restoring natural capital(biodiversity, etc.)

Strengthening of HR development
systems

Nurturing future management personnel, building a company-wide education
system and fostering a culture of self-learning

Promotion of Diversity, Equity & Inclusion

Fostering a workplace environment, framework, and culture in which people
with diverse ideas can thrive

Health and Productivity Management andwork style reform

Promote institutional reforms to create workplaces that will make people wantto come back tomorrow

Process reforms

Transforming business models and organizations, improving productivity, anddeveloping in-house digital talent

Respect for human rights

Absolute respect for human rights based on the UN Guiding Principles on
Business and Human Rights and the UN Global Compact

Place the utmost priority on Safety

Creating absolute safety, establishing rules and a safe work environment

Supply chain management

Working with business partners to increase sustainable value in the supply
chain

Improving product safety and quality

Provision of reliable products and services

Enhancement of corporate governance

Ensuring transparency and fairness based on high ethical standards andbuilding an advanced and effective corporate governance system

4 Incorporating sustainability issues into management
Setting management strategies and KPIs
・Materiality is an essential element to address the risks and opportunities connected to issues of sustainability in our management base from a medium- to long-term perspective and aiming to realize our vision. It should form thecornerstone of our business activities.
・Under our new management plan, "Mission 2030," the entire Denka Group will work to resolve global issues, such as climate change and contribute to the realization of a sustainable society by establishing management strategies that arelinked to materiality.
・The new materiality was reflected in each of the individual policies and measures in our management strategy, and KPIs were formulated with an awareness of visualizing progress management. We aim to achieve sustainable growth byresolving ESG issues and improving earnings, and accelerating this virtuous cycle.

5 Future materiality reviews
In response to changes in sustainability issues, social needs, and stakeholder expectations, we will review materiality issues and non-financial indicators (KPI) as appropriate to reflect our business activities and their mutual impact on theeconomy, environment, and society in our management approach.

Denka Report 2023 Integrated Report22Strategy

Prologue   

Review of the Previous Management Plan
“Denka Value-Up” (FY2018–FY2022)

Report story

VisionESG
management

Strategy

Our Threefold Growth Vision

Stakeholders

Financialinformation

Two growth strategies
Business portfolio shift
・Accelerate growth of specialty businesses

SpecialtyFusion
Company“Denka Value-Up”, a five-year management plan that began in FY2018, set forth

The environment
and energy

three growth visions; “specialty-fusion company”, “sustained growth”, and “soundSustained
Growth

growth”, and promoted two growth strategies; “business portfolio shift” and“implementing innovative processes.” In the two years since FY2021, we have

Healthcare

High-value-added
infrastructure

・Specialize our key operations
・Redefine the positioning of the commodity businesses

Sound
GrowthIntroduction of innovative processes
・Productivity improvements through production, R&D,
and business process reforms

been working on the three “Value-Up” related to business, the environment, andFY2021–

human resources. However, we are still only halfway to becoming a
specialty-fusion company, and we need to further shift our business portfolio. Our

Visionnext management plan will require us to develop a growth strategy that goes a

To be a company that is truly neededby society and is indispensable forthe world and that Denka’s employees
can be proud of.

step further than “Denka Value-Up”.

Business

Environment

Human Resources

Concentration inbusinesses in which
we outperform others

Achieve net zero
greenhouse gas
emissions by FY2050

Become a company
where all employees
can feel growthBusiness Value-Up

Trajectory of our business portfolio shift
2018

2019

413.1 billion¥

34.2 billion¥

Net sales¥

Operatingincome¥2020

380.8 billion¥

31.6 billion

¥

2021

354.4 billion¥

34.7 billion

¥

2022

384.8 billion¥

407.6 billion

40.1 billion¥

32.3 billion

Operatingincome ratio

8.3％

8.3％

9.8％

10.4％

7.9%

Specialization
rate

64%

73%

97%

92%

99%

●Decided on strategic investment inthermal conductive for automotive use(spherical silica, SN plates / ¥8.0
billion)●Capital participation in Plex Bio Co.,
Ltd. (genetic testing technology)●Significantly augmented silicon
nitride production capacity●Acquired approval for the domestic
manufacturing and marketing of rapid
COVID-19 antigen diagnostic testing kits
●Augmented influenza vaccine
production capacity●Increased production of MS in
Singapore●Decided to build a PS resin chemical
recycling plant●Launch of “DELYTACT®”, G47Δ oncolytic
virus as a regenerative medicine productfor treatment of malignant glioma●New production facility for spherical alumina(Singapore, approximately quintupled production capacity)●Augmented spherical silica production facilities(Singapore, approximately 30% increase in production
capacity)●Augmented production capacity of diagnostic reagents(Kagamida Plant, strategic investment of ¥11 billion)●Established Denka Astec Co., Ltd.
(housing business)●Restructuring of carbide chain and withdrawal from
cement business●Established a Corporate Venture Capital (CVC) fund●End of commissioned manufacturing of macromolecularsodium hyaluronate●Brought the New Omigawa
Hydroelectric Power Plant on line
●Started joint research on
next-generation technology toachieve carbon-negative concrete●Brought the New Himekawa No. 6 Hydroelectric Power
Plant on line
●Started operation of new, high-efficiency gas turbine generators(Chiba Plant, capital expenditure of ¥3.7 billion)●Developed sustainable plastic “PLATIECO ®”, whichcontains natural eggshells

Shift of business portfolio
Growthpolicies●Made entry into the bio stimulant
market●Completed the Omi Innovation Hub

Structuralreforms

Environmental
strategies●Merged DENKA SEIKEN Co., Ltd.
and consolidated group trading
companies●Withdrew from the FIRELEN and
β-silicon nitride business●Withdrew from the EVA emulsion
and polyvinyl acetate resin
business●Declared carbon neutrality by 2050
●Started operation of new,high-efficiency gas turbine generators(Omi Plant, capital expenditure of ¥4.0
billion)Business portfolio shift
Field

Issues

The environment and energy

New business (Icon, IntelliPlex, etc.) plan delays

Healthcare

Timely development of products for emerging andre-emerging infectious diseases

High-value-added infrastructure

Delays in overseas expansion and fundamental reformof low-profit products

Specialize our key operations

Response to natural disasters that hinder stable production of DPE (CR)

Redefine the positioningof the commodity businesses

Studying and implementing new business review themes

Implementing innovative processes
Field

Issues

Production

Technological innovation is needed due to an aging anddeclining workforce

R&D activities

Insufficient creation of new businesses and products

Business

Organizing and effectively utilizing vast amounts of data,
including production and R&D (data lakes, etc.)

Denka Report 2023 Integrated Report23Strategy

Prologue

Report story

VisionEnvironment Value-Up

Field

Achievements

Carbon neutrality

Energy-saving andrenewable energy initiatives

Chemical recycling

Strategy

ESG
management

Stakeholders

Financialinformation

Human resources Value-Up

Field

IssuesAnnouncing the net zero target
and roadmap

Review of each CCUS process

Declaration of support for TCFD
and disclosure of information

Practical application of carbon
cement additive LEAF®

Operation of New Omigawa, New
Himekawa No. 6 Hydroelectric Power
Plant, and high-efficiency gas turbines

Shift to non-carbide manufacturingmethods and fuels with lower
environmental impact

Began construction of a plant for
implementing PS resin chemical
recycling

Consortium establishment andimplementation of PS chemical
recycling society

Achievements

IssuesEstablished of new personnel evaluation system

Secure andnurture specialists

Review of CO２ emission products

Improvement and review of human resource
evaluation systems

Commencement of succession plans(officers and general managers)

Revision of the wage structure for M-category employees

Lack of female managerial personal andglobal human resources

Increase the number of female managerial personnel

Diversity promotion

Health and productivity
management initiatives

Strengthening human resource development
systems (expanding succession plans, etc.)

Introduction of paid nursing care leave andtelecommuting

Further reduction of dirty, dangerous, andphysically demanding workplaces

Declaration of health and productivity
management and KPIs

Strengthening mental and physicalhealth care (prevention and response)

Investment and shareholder returns
Capex, investment and financing

Shareholder Returns

As a result of aggressive investment and financing inorder to realize the goals of the previous management
plan “Denka Value-Up”, the cumulative capital investment
for the five-year period from FY2018 to FY2022 was ¥187
billion.

During the period of theprevious management plan
“Denka Value-Up”(FY2018–FY2022), we
returned funds toshareholders in line with
our policy of a total return
ratio of 50%.

（hundred million yen）

2,000

1,870
1,476

1,500

1,120
1,000

697
500

0

328

2018

2019

2020

2021

2022

FY2018results

FY2019results

FY2020results

FY2021
results

FY2022
results

FY2023full-year forecast（hundred million yen）

250

227

228

260

128

（yen/share）

120.0

125.0

125.0

145.0

100.0

（hundred million yen）

105

108

108

125

86

104

42%

48%

47%

48%

68%

47%

Shares repurchased （hundred million yen）

21

-

-

-

-

-

Total shareholder returns （hundred million yen）

126

108

108

125

86

104

Total shareholder return ratio

50%

48%

47%

48%

68%

47%

Depreciation andamortization（hundred million yen）

229

225

229

239

270

275

Capex, investment andﬁnancing（hundred million yen）

328

369

423

356

394

470

Remaining interest-bearing（hundred million yen）
debt

1,121

1,343

1,382

1,370

1,697

1,770

Net DE ratio

0.40

0.42

0.42

0.40

0.50

0.51

ROIC

7.8%

6.6%

6.8%

7.3%

6.7%

5.6%

ROE

10.3%

9.1%

8.8%

9.4%

4.4%

7.3％

Net income
Dividends
per share
Total dividends

Dividend payout ratio

220
120.0

60.0,
year-end: 60.0 ）（ interim:Denka Report 2023 Integrated Report24Strategy

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Management Plan "Mission 2030""Mission 2030" is our new management plan that aims to help us achieve our new vision by 2030. We will work to improve corporate value through three growth strategies: business value
creation, human resources value creation, and management value creation. To create business value, we aim to make all of Denka's businesses "three-star businesses" that fulfill the threeelements of Specialty, Megatrends and Sustainability.

<Three Growth Strategies>

Business Value
Creation

By 2030, we will increase the value of our humanresources and management, and we will focus on
creating business value that combines
the three elements of specialty,
megatrends, and sustainability.

Net sales
ICT & Energy
Healthcare
Sustainable Living<Three Elements>

Specialty

Three-star businesses"that fulfill
the three elements

Human Resources
Value Creation
Management
Value Creation

Megatrends

Sustainability

Operating income

550

600

billion yen or morebillion yen

100

ICT & Energy
Healthcare

billion yen or more

Sustainable Living

Other

Operating income ratio:
15% or higher

Other

407.6

billion yen

Strategic investment over 8 years(Growth, Process, Environment, M&A)¥

60

billion yen

32.3

360 billion

R&D spending

billion yen(Including basic research 50 billion yen)¥2022 Results

2026 Plan

2030 Plan

2022 Results

2026 Plan

180 billion

2030 Plan
Denka Report 2023 Integrated Report25Strategy

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Business value creation
With regard to business value creation, we will focus on ICT&Energy, Healthcare, and Sustainable Living, the three areas of focus derived from the envisioned future world and megatrends.
By 2030, we aim to have 100% of our businesses be “3-star businesses” that incorporate the three elements of specialty, megatrends, and sustainability. For businesses that are difficult toconvert into “3-star businesses,” we will proceed with portfolio shifts, including divestment and withdrawal. At the same time, we will pursue sustainability by investing a total of ¥85 billion in
the environment over eight years with the aim of contributing to the earth and further enhancing the social value of our company.

Three areas of focus

Pursuing sustainability

Megatrends

45 billion

Policy

Megatrends

2030 operating income target:¥

2030 operating income target:¥

40 billion    

2030 operating income target:¥

15 billion

PolicyMegatrends
PolicyWhat is a 3-starbusiness?
Businesses
incorporating the threeelements of specialty,
megatrends, andsustainability. A star isgiven when eachcriteria is met.

Shift to renewable energy, mobility revolution
Expanded demand for semiconductors and devices

Achievement ofcarbon neutrality

Create a better society with the supply of
cutting-edge materials
Sophisticated medical needs
Innovative medical technology
Improve the quality of life of people aroundthe world in areas of prevention, diagnosis, andtreatment

・Portfolio reform including establishment of
low-carbon acetylene chain
・Development and implementation of CO2 capture,storage and utilization technologies
・Expansion of green energy by increasing hydroelectric
power generation and establishing new solar power plant

PolicyFoods and water resources depletion
Increased infrastructure demand
Realize safe, secure, and comfortable daily lives

Sustainable cities
and fulfilling daily
lives

Environmental
conservation andminimization ofenvironmental
footprint

Measures・Promotion of circular economy for styrene-based
packaging materials
・Establishment of CO2 sequestration technology

・Continuation of zero waste emissions
・Response to nature-related risks, such as biodiversity
and water resource conservation, based on the Task Forceon Nature-related Financial Disclosures (TNFD)

Representative 3-star products

Increase profits by doing businessbetter than anyone else
ROIC by product > 10%(average for the past 3 years)

Focus on three areasof promising growth
Applicable to the three focus areas(ICT&Energy, Healthcare, Sustainable Living)

Spherical silica/
spherical alumina

Rapid antigen diagnostic
testing kits for COVID-19

Transparent resin“CLEAREN ®”
Measure the sustainabilityof a business by two metrics»CO2 emissions by product less than 10,000 tons
»Labor productivity by product > ¥5 million
Example of use for PET bottle labels

Denka Report 2023 Integrated Report26Strategy

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Human Resources Value Creation
We will invest in human resources and undertake system reforms with the aim of being a company that enables each individual employee to feel self-realization and growth.
PolicyStrategyStrengthening of humanresources development systems

Cultivation of future executive manager candidates, building of company-wide, integrated education framework, and fostering of a selfdirected
learning culture

Promotion of Diversity, Equity& Inclusion

Fostering of workplace environments, systems, and culture that empowersindividuals with diverse ways of thinking to demonstrate theircapabilities

Health and Productivity
Management and work style reform

Promotion of system reforms to create workplaces that employees will “want to come to work again tomorrow”

Management Value Creation
From the perspective of ESG management, we will work to strengthen our management foundation, on which Denka’s corporate survival is premised.
PolicyStrategy

Process reforms

Transformation of business model and organization, productivity improvements, and development of in-house digital workforce

Respect for human rights

Establishment of human rights policy and thorough respect for human rights based on the United Nations Guiding Principles on Business andHuman Rights and the Global Compact

Place the Utmost Priority on
SafetyGroup-wide efforts toward essential safety, establishment of rules, and promotion of safe workplace environments

Supply chain management

Sustained improvement of added value across entire supply chain

Product safety

Contribution to sustained growth of society and the environment through the provision of trusted products and services

Enhancement of corporate
governance

Building of highly sophisticated and effective corporate governance structure that ensures transparency and fairness based on high ethicalstandards

Denka Report 2023 Integrated Report27Strategy

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Portfolio Transformation Committee
The Portfolio Transformation Committee, chaired by the President, was launched in FY2023 in order to increase the number of 3-star businesses to 100%.
We will periodically review and confirm the policies of our 1- and 2-star business.













Consider measures toconvert 1-star and 2-starbusinesses into 3-starbusinesses in each division.

The Portfolio Transformation
Committee secretariat
reviews policies and selects
products for the committee

Explanation, deliberation,
and approval of measuresby the Portfolio
Transformation Committee

Review progressof approved measures

Star rating andcertification

Identify current issues within eachdivision. Formulate a path andconcrete measures to solve said
issues.

The secretariat of the Portfolio
Transformation Committee reviews
the details of the measuressubmitted by each division,summarizes the appropriate
products for the committee, andsubmits them to the chairperson.

At the Portfolio Transformation
Committee meeting, representatives for each division explain
speciﬁc measures for the
products discussed. The Portfolio
Transformation Committee
members deliberate. Approved
measures move into theimplementation phase for eachdivision.

The Portfolio Transformation
Committee reviews the progressof the measures taken by eachdivision within a span of timethat matches the situation for thetarget product. The effectivenessand schedule of measures areevaluated, and instructions andsupport are provided for the
implementation of additional
measures as necessary.

Once a year, the Portfolio
Transformation Committee assesses
and certifies whether each productmeets the criteria for earning eachstar. For products that do not reachthe 3-star rating, the viability of thebusiness is discussed, and for
products that are deemed to havepotential, each division reconsiders
its measures to achieve the 3-starrating.

Sustainability Committee

Result 1

Certified as a 3-starbusiness
If all star rating criteria arepassed, a 3-star businesscertification is given.

Result 2

Consideration of sale,withdrawal, etc.
After careful deliberation,businesses for which
achieving a 3-star rating isdeemed difficult are subject
to the next action, such as
sale or withdrawal.

▶P21 ESG management promotion framework

The Sustainability Committee was launched in July 2023 to manage the progress of non-financial targets set forth in the management plan “Mission 2030”. The committee was established
as an organization within the Executive Division. It is chaired by the President, and the committee members are made up of the officers in charge of each management division. Directors
also participate as observers. The committee meets in April, July, October, January, and March to report to the Board of Directors and make recommendations.

■ Management divisions: Report on the status of activities and non-financial KPI progress twice a year
■ Business divisions: Report on responses to risks and opportunities related to sustainability issues yearly in March
Denka Report 2023 Integrated Report28Strategy

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Major Financial and Non-Financial Data (2030 Targets and FY2022 Results)
Financial

Operatingincome2030
KPI Targets

ROE

Approved
investment
amount¥billion or more
(FY2022: ¥32.3 billion)

% or higher(FY2022: 4.4%)

8 years from FY2023 to FY2030:(FY2022: 7.9%)

ROIC

% or higher

Total
shareholder
return ratiobillion¥(FY2022: ¥47 billion)

% or higher

Operatingincomeratio(FY2022: 6.7%)

% level(FY2022: 68%)

Business value creation
PolicyAchievement of carbon neutrality

Sustainable cities and fulfilling daily lives
Environmental conservation andminimization of environmental
footprint

Non-financial KPIs

FY2022 results

2030 Targets

Reduction of group-wide CO2 emissions

2.04 million t-CO2

60% reduction compared to FY2013 (1 million tons)

Maximizing renewable energy generation

146MW

150MW

Renewable energy+ electricity mix with non-fossil fuel certificates

33％

76％

Group-wide promotion of energy conservation

101% YoY

Continue 1% reduction from previous year

Contribute to decarbonization and arecycling-oriented society throughthe chemical recycling of styrene resins

・Began construction of PS resin chemical recycling plant・Started building a demonstration project with Ichihara City

Establishment of social implementation
consortium for PS chemical recycling

Continue zero waste emissions

Continue zero waste emissions

Continue zero waste emissions

Address biodiversity, water and othernature-related risks in accordance with TNFD・Formulated biodiversity assessment plan for main office・Conducted preliminary survey using Omi Plant as a model

Implement a response plan for biodiversity
conservation in compliance with TNFD

Denka Report 2023 Integrated Report29Strategy

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Human Resources Value Creation
PolicyFY2022 results

Non-financial KPIs

2030 Targets

Strengthening of HR development systems

Average training costs (per person)¥ 66 thousand/person/year

Promotion of diversity, equity &inclusion

Ratio of female/foreign/experoenced hires in management positions

19%

50％

Percentage of males taking parental leave

44%

85％

Percentage of mid-career hires

47%

50％

Health and productivity
management and work style reform

Double amount compared to FY2021

Improve employee engagement

The third employee awareness survey conducted

Visualizing engagement and making ongoing improvements

Overtime hours

160 hours/person/year

30 hours or less/person/year

Taking annual paid leave
Introduction of shift breakers
Working-from-home rate80%
7persons recruited as shift breakers
27%

100％

Employees within appropriate weight limits

65%

80％

Employees with high stress levels

14%

10% or less

Employees with good exercise habits

33%

40％

Smokers

27%

12% or less2 days/week

Management Value Creation
PolicyProcess reforms
Place the utmost priority on safety
Respect for human rights

Supply chain management
Improving product safety and quality

Enhancement of corporate governanceNon-financial KPIs
Investment in process reforms

Occupational accident frequency rate ※Denka (including partner companies)and consolidated subsidiaries with domestic or overseas offices

FY2022 results¥ 2.7 billion

2030 Targets¥ 50 billion

0.7

The Company and affliates 0.2 or less

Online training for occupational safety and security

77%

All group employees

Establishment of human rights policy and through respect forhuman rights based on the United Nations Guiding Pronciples
on Business and Human Rights and the Global Compact

Signed the UNGC (June,2023)

BCP measures based on raw material
risk assessment

Conducted a risk assessment regarding raw material to secure BCP, and analyzed the result.
The number of raw materials categorized in “high risk” group was reduced by 30%(October 2022
vs April 2020)

Zero

Procurement questionnaire implementation rate

Conducted SAQ for upstream suppliers

Conduct questionnaire for suppliers covering 90%
of total procurement cost

Acquisition of high ESG rating

Ecovadis Bronze

Ecovadis Gold

Integration of quality control systems, raising of control standards

Zero

Zero

Ongoing improvement of effectiveness of Board of Directors――

Thorough risk management across the global Group

Zero

Zero

Introduction of compliance training

Implementation E-lerning about standardsof conducts for all Group employees
Attendance rate : About 80%

All group employees

Disclose FY2021 results on ESG information site

Disclosure on ESG information sites

Dissemination of Denka’s Vision and management plan・Published the video about Vision & the management plan
・Considerating internal penetration measures

Implemention of measures to ensure disseminationof corporate vision and management plan

Group-wide establishment of internal control framework

・Completed : 5 companies
・On-going : 8 companies

Establish internal control framework for
all Group companies

Appropriate operation of the whistle-blowing system and disclosureof responses to whistle-blowing

On-going

Denka Report 2023 Integrated Report30Strategy

Prologue

Report story

VisionStrategy

ESG
management

Financialinformation

Stakeholders

Financial Strategy
Message from the Accounting & Finance Officer

Supporting the growth strategy of our management plan, "Mission 2030" with a financial strategy thatbalances offensive and defensive measures
We recognize that the role of the Finance Department is to support the three growth strategies in our management plan, “Mission 2030”. In
addition to strategic investments and investments designed to provide sustainability, portfolio transformation also requires financial backing, andwe intend to play a role in balancing offensive and defensive measures. The Financial Department was established when formulating ourmanagement plan, "Mission 2030", and we thoroughly discussed the "optimal capital structure" (financial discipline), which is the basis forconsidering both growth strategy and financial security. We are now equipped

2030 KPI Targets

to respond flexibly to possible changes in the financial and businessenvironment. In terms of business operations and evaluation, we aim toManaging Executive Officer,
Chief Financial Strategy Officer

capital efficiency. ROIC management was introduced to promote awarenessof how to efficiently link invested capital to earnings at the level of individual

Financial

Rimiru Hayashidapursue not only profit, but also return on capital that combines profitability withOperatingincomebusinesses and operations. We aim to increase corporate value by improving

ROE

Approved
investment
amount

100 billion yen or more

15% or higher

Operatingincome ratio(FY2022: 32.3 billion yen)

15% or higher(FY2018 – FY2022 average 8.4%)

8 years from FY2023 to FY2030:¥ 540 billion(5 years from FY2018 to FY2022:¥221.7 billion)(FY2018 - FY2022 average 8.9%)

10% or higher

ROIC(FY2018 – FY2022 average 7.0%)

Total
shareholder
return ratio

50% level(FY2018 to FY2022 total 50.6%)

ROIC and ROE.

Review of the previous Management Plan “Denka Value-Up”

Changes in ROE and P/B ratio over the period of
the previous management plan

Under our previous management plan, "Denka Value-Up," launched in 2018, we promoted a business portfolio shift and continued the

13.0％

steady growth of our specialty business. As a result, in fiscal 2021, we achieved operating income of 40.1 billion yen, exceeding 40 billion
yen for the first time since our founding. However, in fiscal 2022, the final year of the "Denka Value-Up" plan, operating income fell 19.4%

10.5％

year on year to 32.3 billion yen due to the impact of the global economic slowdown, and we recognize that our shift to specialty
businesses is still only half complete.

1.50
1.42
10.3％
1.12

9.1％

8.8％

1.00

8.0％
1.02

In terms of return on capital, the average return on equity (ROE) for the four years from fiscal 2018 to fiscal 2021 was 9.4%, which
exceeded our estimated cost of shareholders' equity*. P/B ratio was also generally above 1 times except in fiscal 2019, when stock prices

0.80

0.78

5.5％

plunged due to the impact of COVID-19.
However, in fiscal 2022, we recorded a temporary extraordinary loss due to the withdrawal from the cement business and therestructuring of the carbide chain, resulting in a decline in ROE to 4.4% and a P/B ratio (price-to-book ratio) of less than 1 times as of theend of fiscal 2022. Therefore, we believe it is necessary to continue working to improve ROE.

1.25

9.4％

0.75

4.4％
0.50

3.0％
FY 18

FY 19
ROE

FY 20

FY 21

FY 22

PB ratio (right axis)*Calculated using the Capital Asset Pricing Model (CAPM), commonly used in practice. We regularly obtain information on the cost of capital from several outside experts to confirm ranges.
Denka Report 2023 Integrated Report31Strategy

Prologue

Enhancing corporate value by improving return on capital through our management
plant “Mission 2030”
In our management plan, "Mission 2030" launched in April 2023, we set ROE and ROIC (return on invested capital) as
KPIs to further promote cost-conscious management and enhance corporate value. Our aim is to increase ROE to 15% orhigher and ROIC to 10% or higher by fiscal 2030. In addition to enhancing profitability and capital efficiency andtransforming our portfolio by applying ROIC as an indicator to evaluate business performance, we aim to pursue an
optimal capital structure and improve ROE by utilizing financial leverage under financial discipline that is conscious of
ratings.
In creating business value, which is one of our three growth strategies, we aim to make all of Denka’s businesses "3-starbusinesses" that satisfy the three elements of specialty, megatrends and sustainability. Of these three elements, wedefined specialty as ROIC > 10% (average for the past three years). The Portfolio Transformation Committee (P. 28) will
deliberate on measures to achieve 3-star status, and will be responsible for determining which business segments to sell
off or withdraw from, and transforming our portfolio in order to achieve essential improvement in ROE over the medium- tolong- term.
In addition, we will break down ROIC into its components to understand the issues facing individual products and promote
initiatives to improve the return on capital for each product. In fiscal 2023, the first year of the introduction of ROIC-based
management, we will focus on improving the cash conversion cycle (CCC) and spreading an awareness of capital costand return on capital within the company. KPIs related to ROIC have been factored into the organizational goals of eachdepartment head, and each employee's individual goals will be reflected in evaluations to enhance performance.
We will also actively pursue ESG management (ESG Management P 51-80) and engage in responsible dialogue with our
stakeholders (Stakeholders P 81-82).

Report story

VisionFinancialinformation

Stakeholders

Financial Targets of our Management Plan, "Mission 2030"
FY2018 – FY2022 average

FY2030ROE

8.4％

15% or higher

ROIC

7.0%

10 % or higher

Measures
・Improvement of profitability andefficiency with creation of three types ofvalue
・Selection and concentration ofbusinesses through evaluation of ROIC
・Pursuit of optimal capital structure (useof financial leveraging)

Trends in ROIC by business division（ROIC : %）Electronics & Innovative Products

20.0

15.0

10.0

Appropriate cash allocation to achieve management plan "Mission 2030" targets

Elastomer & Infrastructure Solutions

15.3

Total Consolidated(including common and other assets)

10.5

9.6

9.4

9.4

6.7

6.6

Polymer Solutions

12.1

11.4

9.7

5.0

0.0

14.7

13.4

13.2

Life Innovation

17.8

17.0

-5.0

Over the total eight year period of our management plan, "Mission 2030", we plan to invest 570 billion yen, consisting of360 billion yen in strategic investments and 210 billion yen in general investments. Strategic investments include growthinvestments and mergers and acquisitions in 3 focus areas, as well as 85 billion yen in environmental investments aimed
at achieving carbon neutrality and creating more sustainable cities and livelihoods. We believe that the firm
implementation of these investments will lead to a sustainable increase in corporate value. We will also utilize debt fromthe viewpoint of optimal capital structure to raise any necessary capital.
During the period of the previous management plan, "Denka Value-Up" (FY 2018 to FY 2022), we returned funds in linewith our shareholder return policy with a total return ratio of 50%. We will continue our policy of a total return ratio of 50%
in our new management plan, "Mission 2030".

ESG
management

Strategy

5.6

7.3

6.8

5.3

2.5

-0.3
-2.5

FY2019(results)-2.5

FY2020(results)

Cash allocation

FY2021(results)

2.3

-1.3

FY2022(results)

FY2023(forecast)(hundred millions of yen)

Total Cash Inflow (annual average)
Denka Value-Up
5 years

Mission2030
8 years

Operating
CF

1,717
(343)

6,500
(813)

Sale ofassets

121

100

Loans

554

800

Total

2,392
(478)

7,400
(925)

(hundred millions of yen)

Total Cash Outflow (annual average)

Strategic
Cashflow
Generalfrominvestingactivities
Sub-total
Shareholder Returns(Total shareholder return ratio :50% level)

Total

Denka Value-Up
5 years

Mission2030
8 years

700
(140)

3,600
(450)

1,093
(219)

2,100
(263)

1,793
(359)

5,700
(713)

599
(120)

1,700
(213)

2,392
(478)

7,400
(925)

Sustainable FinanceDenka is also looking to raise funds through ESG and SDGs initiatives. In the last three years (FY 2020 to FY 2022), approximately 60% of our long-term funds were procured through sustainable finance, which
we will continue to actively utilize in the future.

Denka Report 2023 Integrated Report32Strategy

Prologue

Report story

VisionStrategyInnovation

ESG
management

Stakeholders

Financialinformation

・Research & development：https://www.denka.co.jp/rd/

Message from the Chief Scientific Officer (CSO)
The management plan “Mission 2030” has finally begun. Our mission is to contribute to the transformation of Denka’s portfolio through the development of
new businesses, fulfilling Denka needs with 3-star businesses and products that have the three elements of specialty, megatrends, and sustainability. In
addition to our conventional open innovation activities, we established a Corporate Venture Capital (CVC) fund in the form of a two-party partnership withPegasus to strengthen collaboration with startups around the world. Keeping DX promotion in mind, we are also aiming to develop into fields and areas
where Denka can generate innovation.
New business development is about the creation of both business value and human resource value, and so we will also focus on nurturing world-classhuman resources with a wide range of technological capabilities, commercialization ideas, management sense, diversity, equity, and inclusion sensitivity.
The results of these activities will lead to the creation of management value.
In addition, in order to contribute to the development of new businesses and promote the organic growth of each business as a corporate function, theR&D Management Department, Intellectual Property Department, and Analysis Technology Research Department will promote activities to make the mostof Denka’s assets, including the development of synergies within and outside the company.

Nobuyuki Yoshino
Research & development policy
The Denka Group is accelerating the creation of attractive new
businesses and products that create new value by expanding ourrange of “technologies that we do best” and promoting thedevelopment of products unique to Denka that can contribute to asustainable society. To this end, we will promote research anddevelopment that leverages the Group’s collective strengths tointegrate multiple disparate technologies and generate synergies
across the entire Denka Group that transcend organizationalboundaries and domains.

Strategy for the “Mission 2030”
management plan

R&D Management
Department
Chief ScientiﬁcOfﬁcer (CSO)

New Business Incubation Department

Denka Value-Up（ Five-year cumulative）

Five-year
Annualcumulative average

Mission 2030

（ Eight-year cumulative）¥ 73.6billionAnalysis Technology
Research Department

The R&D expenditure forthe “Denka Value-Up”
management plan from
FY2018 to FY2022 was¥14.7 billion/year on
average, due in part to theimpact of COVID-19, andthere were no significant
changes over the five-year
period.

R&D spending (consolidated)（millions of yen）
20,00015,00014,562 15,031 14,736 14,231 14,931

10,0005,000
0FY2018 FY2019 FY2020 FY2021 FY2022

New Business Creation Department

Denka Innovation Center

Research and development spending

Researchenhancementof approx.
¥ 8 billion/year(approx. 1.5×)

Corporatefunctions

New Business
Development¥ 22.5 billion/year¥ 14.7 billion/year

R&D spending (consolidated)

Promotion system

Intellectual Property
Department

Managing Executive Officer
Chief Scientific Officer (CSO), New Business Development¥ 14.7billion/year 
Eight-year Annual
cumulative average¥ 180billion¥ 22.5billion/year

Business
DivisionR&D sites

Number of researchers (consolidated)
The number of researchers
averaged 842 from FY2018
to FY2022, with an increaseof about 50 over the
five-year period.

Number of researchers (consolidated)（persons）
1,000

807

842

850

858

853

750
500
250
0

FY2018 FY2019 FY2020 FY2021 FY2022

Denka Report 2023 Integrated Report33Strategy

Prologue

Activities Related to Intellectual Property
１ Policy
Denka will advance the acquisition of intellectual property, improve the value of intangible assets of theGroup and utilize intellectual property information in decision-making situations (IP landscape*) increating new businesses with the three elements of Specialty, Megatrends, and Sustainability throughbusiness portfolio transformation, and in developing new markets through co-creation with othercompanies.
*An integrated analysis of a company’s and its peers’ intellectual property and markets. The information gleaned fromthis analysis can be used for the advantage of management strategies.

2 Intellectual Property Approach to Business Value Creation
During the period of the previous management plan “Denka Value-Up” (2018–2022), Denka increased
its overseas patent ratio in line with the globalization of its operations and proceeded to build theintellectual property portfolio necessary for each business.
Furthermore, to contribute to the transformation of its business portfolio, Denka introduced IP
landscape activities in 2021 to make more efficient use of acquired intellectual assets.
To achieve the goals of the management plan “Mission 2030”, Denka will strengthen its managementfoundation and promote the following intellectual property activities to contribute to business value
creation.
① Acquiring and utilizing intangible assets to promote business② Providing information useful for selecting collaborative partners and M&A candidates③ Implementing IP landscape activities for new business creation

3 Status of intellectual property holdings■ Patents held in Japan

70

2,687

2,873

2,920

3,004

3,272

3,079

60
50
40
30
20

2,857

2,688

2,625

2,513

2,485

2,446

FY2017FY2018FY2019FY2020

FY2021

FY2022100Strategy

ESG
management

Stakeholders

Financialinformation

Figure 2 shows the number of domestic and overseas patents held in each business. The Elastomers &Infrastructure Solutions Department has a high percentage of domestic patents because it operates
primarily in the domestic market for infrastructure-related businesses. On the other hand, theElectronics & Innovative Products and Life Innovation Departments are expanding their businessglobally and are thus have an increasing ratio of overseas patents.
Additionally, the number of overseas patents we hold for research that is expected to yield results froma long-term perspective, such as basic research and next-generation research themes, is increasing in
anticipation of future markets. Going forward, we will use our IP landscape initiatives to differentiate
ourselves by utilizing intangible assets and actively seek partners who can take advantage of Denka’s
strengths, with the aim of creating new markets and expanding existing ones.

Number of rights held (Japan)

Number of rights held (Overseas)
253

172
247

369

903

Total number: 1,342

Total number:

2,431

940

3,033

575
169

494
■ Life Innovation■ Elastomers & Infrastructure Solutions■ Polymer Solutions ■ Basic research and next-generation research themes
Figure 2. Number of domestic and overseas patents held by business segment■ Patents held overseas

90
80

Vision■ Electronics & Innovative Products

Figure 1 shows the number and ratio of patents held at Denka in Japan and overseas. Overseas
patents accounted for 55.7% of Denka’s patents at the end of March 2022 (48.5% at the end of March2017).
（%）
100

Report story

Figure 1. Number and ratio of domestic and overseas patents held at Denka

4 Activities as a partner in WIPO GREEN,
a global platform forenvironmental technologies
WIPO GREEN is a platform to promote the use of environment-related technologies established by theWorld Intellectual Property Organization. Denka focus not only on reducing CO 2 emissions within ourcompany, but also on developing and providing products that contribute to the environment andtechnologies that reduce environmental impact. By participating in WIPO GREEN and inviting partners
to participate in WIPO GREEN, we will create innovation through interaction with other partners whoare interested in our environment-related products and technologies, and contribute to decarbonizationof society as a whole.

Denka Report 2023 Integrated Report34Strategy

PrologueTechnology platform diagram

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Denka is focusing R&D resources on three focus areas that capture megatrends. Here are some of the technologies we are
currently developing.





SiAlON Phosphor
Phosphor Material
for Lighting

Spherical Silica/ Alumina
Low Thermal Expansion
and High Thermal
Conductivity Filler

Boron Nitride Shapes
Thermal ShockResistant Ceramic
Shapes
Silicon Nitride High
Thermal Reliable Substrate
Metal Matrix Composite
Heatsink for Power
ModuleSilicon Nitride High
Purity Raw material
for Sintering

Single Crystal
Processing
Infiltration

Inorganic
Composite

Biotechnology

Anionic
Polymerization

Polymer
synthesis

Polymer
processing

RadicalPolymerization

SuraceDecoration

Control of
Polymerization

ProfileExtrusion

Virus test reagent(Rubella, measles, andinfluenza)

Nucleic acid / protein
simultaneous
multi-parameter
detection system

Clinicalchemistry test
reagent(T-CHO、TG、
LDC-C、HDL-C)

Genetic
Analysis

Coating/
Spinning

BiaxialStretchinig

Filler × Silicone
Heat Dissipation
Sheet / Grease

2-Component TypeDenatured
Acrylic
Adhesive

VaccinGenetic
Recombination
Genetic
analysis

Formulation
DesignResin
Compunding

Purification and
Formulation
CultureInorganic
Material
processing

Organic andResin
Hybridization
UV Hardening
Adhesive

Rapid Diagnostic Kit for Infectious
Diseases (Influenza, COVID-19,
mycoplasma)

Antigen-antibody
Reaction

Inorganic Powder
Synthesis

Cutting

EmitterHigh Reliability
Electron Source

Cancer Therapy Viral
Preparations

Acetylene BlackHigh Purity
Conductive Agent

Composition
Atmosphere
Control
ControlMorphology
High-temperature
Control
Control

Circuit
Formation
Sintering

HITT PLATE
Metal Substrate

Boron Nitride
Powder Release
Agent for Thermal
Conductive Filler

Multi-layer
Extrusion

Humic/Fulvic
Acid Fertilizer

Rain Gutter

Corrugated
Pipe

Plastic Sheet for
Carrier Tape
Cover Tape

Chloroprene
RubberPolyvinyl Alcohol
Water-Soluble Polymer

CO 2 fixing
admixtures “LEAF® ”

Special Cement
Additive

Electrical Tape
Packing Tape

Transparent
Polymer
Acrylic Special
RubberPVC Yarn for
Hairpiece
Heat Resistant resin    
Denka Report 2023 Integrated Report35Strategy

Prologue

Denka technology supporting

renewable energy

Technologies that support the development of renewable energy include acetylene
black, used as a raw material for ultra-high voltage cables that efficiently transport
electricity generated by clean offshore wind power to various locations, and silicon
nitride, which is used in bearing balls for wind power generation.
Silicon nitride assistsin the transmissionof clean wind power
Acetylene black efficiently
carries clean energy

Denka Technologies - Contributing
to a Sustainable Society
Denka is vigorously pursuing various initiatives that contributeto sustainability in order to become a company with a superior
competitive edge that is consistent with ESG initiatives.

Denka technology

improving QOL

There are many technologies that support the three areas of prevention, diagnosis, andtreatment, including the development of manufacturing technology for G47Δ oncolytic
virus, a new treatment to combat cancer; influenza vaccine production and stablesupply to meet society’s needs for immunization; and rapid antigen diagnostic testing
kits that enable rapid response to pandemics.
G47Δ oncolytic virus
is meeting unmet medical needs*Unmet medical needs refers to medical needs forwhich there is no effective treatment available

Influenza vaccinesprotect your healthand wellbeing

Rapid antigen diagnostic
testing kits help
protect society

Report story

VisionDenka technology supporting

Strategy

5G

There are many technologies that support
high-speed data communications required in
an advanced information society, such astechnology to protect semiconductors fromheat, technology to reduce energy loss, andtechnologies to prevent static electricity andcontamination of semiconductors by foreign
matter during transport to ensure absolute
quality.

Denka technology supporting

ESG
management

Stakeholders

Financialinformation

Carrier tape sheets and top cover tapes
protect against static electricity andforeign matter contamination
Spherical silica
reduces energy loss

Spherical alumina
protects against heatcarbon neutrality

In addition to promoting energy conservation andexpanding renewable energy sources, namelyhydroelectric power generation, we are also
studying the introduction of innovativetechnologies such as CCUS, which separates,
recovers, utilizes, and stores CO 2 from plants atthe source, as well as the use of hydrogen.
Moreover, we will push ahead with efforts to
reduce the environmental burden attributable toour entire value chain by expanding the scope of
our initiatives to address issues associated withthe total life cycles of our products.

LEAF
PS chemical
recycling

Denka technology supporting next generation
There are many technologies that
support the electrification of
automobiles, including the circuitboards for CPUs that control the powerof xEVs that run on motors, heat
resistance modifiers that makeautomotive components lighter andpaint-free, and high-purity special
carbon black used in lithium-ion
batteries.

xEVs

Hydroelectric
power plants*Photo courtesy of Agilyx

Heat resistancemodifiers enhanceheat resistanceAluminum nitride andsilicon nitride substrate
conduct heat toenhance vehicle safety

Acetylene black increases
the storage capacity of lithium-ion batteries

Denka Report 2023 Integrated Report36Strategy

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Strengthening New Business Creation:
Establishment of CVC with Pegasus Tech Ventures
On January 16, 2023, we established a Corporate Venture Capital (CVC) fund with Pegasus Tech Ventures with the aim of creating new businesses and acquiring new technologies. As one
measure to make 100% of businesses “three-star businesses (, businesses which satisfy the three elements of specialty, megatrends, and sustainability) set forth in the “Mission 2030”
management plan, we will continue to create new businesses and acquire new technologies in the three focus areas of ICT&Energy, Healthcare, and Sustainable Living. Additionally, by
establishing the CVC fund, we will accelerate the creation of new businesses in addition to strengthening and expanding existing businesses through investments in and business allianceswith venture companies with cutting-edge technologies, products, business models, and business ideas. We plan to invest up to around $100 million USD by FY2030. We aim to createbusinesses that contribute to solving social issues by combining the technologies and businesses owned by promising venture companies in Japan and overseas with Denka’s proprietary
technology and other management capital.

1 History of the establishment of the CVC fund (Denka must be reborn)■
Yoshino: Denka celebrated its 100th anniversary in 2015. The Denka Innovation Center was
established the previous year, in 2014, to serve as a base for the Group’s core R&D activities basedaround the aim of continuing our corporate activities for the next 100 years and the need to reinvent
ourselves. As part of open innovation, we have invited potential customers and strategic partners,
mainly in downstream fields such as automotive products, to develop new products and businesses
while envisioning new needs 5 or 10 years down the line. Unfortunately, we have not achieved
sufficient results.
On the other hand, with seed research, we are collaborating with industry, government, andacademia, working together with the National Institute for Materials Science and the National Instituteof Advanced Industrial Science and Technology to explore research that is likely to blossom and bear
fruit in the future. The probability of success is not high, but we are only halfway through. Our
company, which focuses on materials and components, is removed from the final product (market
needs), and we once again realized the difficulty of activities to fill that gap.
As such, the main reason for establishing the CVC (Corporate Venture Capital) fund is that we
believe that working with startups who are honing their technology while having an image of social
implementation (market needs) will increase the probability of commercialization for our company andbe a shortcut to success.

2 Reasons for selecting Pegasus and expectations■

Hideaki Takase

Anis Uzzaman

Nobuyuki Yoshino

Facilitator
Denka Company Limited
New Business Development,
General Manager of
New Business Creation Department

General Partner and CEO,Pegasus Tech Ventures

Denka Company Limited
Managing Executive Officer,
Chief Scientific Officer (CSO)
Head of New Business Development

Takase: We chose CVC as a way to meet startups, but what was the reason for choosing Pegasus
Tech Ventures (hereinafter, Pegasus) as our partner for the fund?
Yoshino: While we do have some experience in M&A, we believe that our organized activities tocreate new businesses are insufficient. This time, we decided to take the form a CVC fund, a
two-party partnership with venture capital (VC). With the support of the VC, we will make investments
Denka Report 2023 Integrated Report37Strategy

and business alliances with startups reflecting our intentions. Through investment, we thought we

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

require the spread of a global perspective.

could acquire startups’ unique technologies, ideas, know-how, and paths to social implementation,
allowing us to launch new businesses. First, I had to study investing in startups. Pegasus is a VC,

Finally, there are cultural barriers between Japan and overseas and between operating companies

and hearing about their CVC 4.0 I reached out and asked if they would be interested in working

and startups, as well as national risks and regulations at the government level such as CFIUS*. In

together.

addition, there are differences in the way business is conducted between operating companies andI believe that the development of a new business means the creation of new business value, and instartups. I think the biggest challenge is the lack of skills and knowledge to start sourcing (findingorder to do so, it is necessary to increase the value of human resources. On the technical side, westartups to invest in) and to execute the process leading to business alliances and investments.

need to integrating technologies from multiple fields, while on the business side we need the ability
to commercialize and monetize ideas related to tangible and intangible products, the management
sense to promote cooperation with startups, and we are cultivating a sensitivity to diversity, equity,* The Committee on Foreign Investment in the United States (CFIUS), which is chairedby the Secretary of the Treasury and composed of several related departments and agencies,
examines foreign investment in U.S. companies, businesses, and technologies from the perspective of U.S. national security.

value creation, which are the growth strategies of the “Mission 2030” management plan, are the two

4 What is the new “CVC 4.0” method?
■pillars of new business development, and the results will lead to management value creation.

Takase: Anis, you have proposed “CVC 4.0” or “Venture Capital as a Service”. Can you tell us more

Therefore, we believe that this CVC activity will play an important role.

about that?

and inclusion that will allow us to succeed worldwide. Business value creation and human resources

3 Issues regarding CVC for Japanese companies■

Anis: Currently, we are focusing on CVC 4.0, or an approach of Venture Capital as a Service. What
we saw in the early days of CVC was what is called LP (Limited Partnership) investment, in which
multiple operating companies deposited money with a single VC, and professional investors thenTakase: Anis, you have been involved in CVC for many Japanese companies. How do you feel about

invested that money in startups. This was the world of CVC 1.0. The problem here is that the goal of

the challenges related to CVC for Japanese companies?

the VC investors is capital gains (gains on the sale of assets held such as stocks and bonds), so they

Anis: There are many cases of Japanese companies engaging in CVC internally without establishingmay invest in areas that are not the business domain of the operating company, or in areas other thana fund. It is still rare to find an operating company that directly invests in a startup and conducts CVC

those the company are interested in.

activities with a third party like us.

This led to the idea that investments should only be made in the areas of interest of the business

As for the problems faced by Japanese companies in CVC, I think the first problem is that there arecompany from which the investment was made. CVC 2.0 is a form of investing in startups in areas offew networks between Japanese companies and startups. As a Japanese company, even if you wantinterest by creating a CVC oneself or by creating a similar structure within a company. The problem

to form a business or capital alliance with a startup with high technological capabilities and ahere is the lack of investment experience and knowledge, so its easy to make bad investment

business model, in many cases you will not be able to do so because you do not have a network withdecisions or difficult to invest in the desired startups.

the startup. In addition, there are many excellent startups with advanced technology that are located

CVC 3.0 was created in order to solve these problems, wherein a subsidiary VC firm is created in theoverseas, and overseas startups currently can’t be reached due to a lack of networks. In addition,

operating company and experts with investment knowledge are recruited from outside. However, thelimited ability to source and find good startups is also a barrier.

problem was that it was difficult to cover global areas and the CVC had a strong operating company

The second problem is a lack of knowledge about startups. Because of this, most Japanesefeel, so they did not attract many talented startups.

companies fail to do their due diligence (research the value and risk of the startup they are investingin), which often leads to failure after investment. Lack of knowledge regarding startups also makes it
difficult to have a good relationship with them. If companies lack the knowledge to properly support a
startup, they won’t be favored even by promising startups. Knowledge to survive in the innovationindustry is essential for large companies.
Third, most Japanese companies are still focused on innovation internally. However, there is nomindshare for innovation within a company, and there is a great need for a change in mindset toward

The challenge is the lack of skills
and knowledge regarding sourcing
and partnering

innovation. In Japan, both the number of startups and the possibilities for partnerships are limited.
The concept of “starting domestically” is a major barrier and limitation to innovation. Innovations

Denka Report 2023 Integrated Report38Strategy

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startup’s technology can be used within their own company. Since we can be the ones to assess the

Human resource development
is essential for creating a systemthat can create new businesses
on a regular basis and for creatinga corporate structure

management status and human resources of startups, I think we can find good projects by assessing
the feasibility of Denka’s business and technology.
Yoshino: Thank you. Another concern is that, for example, if there is a startup thinking of aninteresting business with resin processing as a key element, is it assembled with high level resin
processing? Do you dig deeper into the elements before assembling? Digging too deep might causethat interest to wane. I would like advice on what stage we should decide to invest in a startup when
expecting the creation of an interesting product or solution.
Anis: Looking at other companies’ cases, it’s often difficult to discern at first. To solve this problem,
many companies set their investment criteria step by step through a proof of concept. It is best toproceed in stages. For example, at this stage you can spend engineering costs, and if you pass thisOur company proposed CVC 4.0 to solve all these problems. With CVC 4.0, our company bears thestage, you can consider commercialization and implementation. If, for example, you set investment

brunt of the startups and refer them to operating companies that we believe are trustworthy, so thatcriteria in four stages from A through D, you could invest 50 million yen in stages A and B and invest

both operating companies and startups can safely form alliances and make investments with peace

an additional 100 million yen after completing stages C and D. Even if failure occurs in stages C or D,

of mind.

you will only lose 50 million yen. Moreover, in reality, the shares acquired during stages A and B can

CVC 4.0 is attracting attention as a model that solves all the problems that have been considered

be sold to a third party investor, so there isn’t even that 50 million yen loss.

issues in the past, such as due diligence and cultural barriers.

As you set these criteria and select startups, the number of potential startups to partner with andTakase: Pegasus has already worked with more than 30 operating companies using the CVC 4.0

invest in will increase, and eventually investment and partnerships will go smoothly. Building a scheme

approach. Based on this experience, what do successful operating companies have in common?

to make good investments naturally takes time, so you shouldn’t rush. Moreover, it’s better to handle a

Anis: Each company that has implemented Pegasus University (See 7. “Pegasus University”

small number of projects smartly at first. It is natural to increase investment projects over two or threeeducational program), a program to learn the know-how from startup discovery to businessyears. Investing in the first company is especially important, so it’s best to approach it without haste.

partnerships, has been successful. At the end of the day, the big difference between doing CVC

Takase: Four months have passed since we started CVC. How do our efforts look from your point of

yourself and CVC 4.0 is the difference in knowledge. By using the Pegasus University classroom andview?

learning about investment standards, you develop an eye for where to invest. However, the important

Anis: I think you’re off to a good start. As the number of people involved in CVC increases in thething here is to continue CVC. Increase the number of partnerships and investments with startups

future, you’ll become even more active.

from the first year to the second year and from the second year to the third year, and increase thenumber of people involved in CVC. The commitment to study together and work hard is important. A
top-down approach from the president is a major factor in success.

5 Current status of Denka’s CVC activities■

6 Expectations for human resource development through CVC■
Takase: With the establishment of the CVC fund, you’re also looking to developing human resources,aren’t you?
Yoshino: Right. As President Imai said, new business development and human resource

Takase: Denka’s CVC activities started in January 2023, and it has been about six months. What kinddevelopment are equal for Denka. It is no exaggeration to say that new businesses will be developedof initiatives and activities are you currently engaged in?

along with human resources.

Yoshino: We have started sourcing startups from the ICT&Energy field, one of our focus areas, andAlthough we have grown organically since our inception through the repeated application and

we are currently in the process of selecting candidates for business alliances and investment fromdevelopment of technology, not many so-called “new businesses” have emerged. Areas between

the startup sourcing list together with our business divisions. One of the things I find difficult in this isbusinesses that could have been explored more deeply may remain untouched. Human resource

due diligence. I am concerned that there will be too little, or that there will be too much and the period

development is essential for creating a system that can create new businesses on a regular basis andwill become longer.

for creating a corporate structure. I have high hopes that our human resources will grow throughAnis: During the due diligence process, we want operating companies to focus on whether the

CVC.

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7 “Pegasus University” educational program■

possible to invest in good startups at a low price, and I think there are great financial benefits for the

Takase: In Silicon Valley, where Pegasus is based, pitching events (where startups present theirTakase: Is Silicon Valley still the place where most startups are born?

technologies and services to investors) are held almost daily. We will continue to focus on sourcing

Anis: In my experience, technology startups tend to be in Silicon Valley. The largest number ofactivities by participating in such events.

startups are from North America, but there are also more companies appearing from Germany andBy the way, one of the reasons why we chose Pegasus as our CVC partner is that they are focused

Israel. We also introduce Asian startups, and hope that Denka will get a feel for how startup culture

on human resource development, which is very attractive. Could you tell us about the human

differs from country to country.

resource development support for operating companies that are Pegasus LPs?

Yoshino: I heard that Japanese startups account for 1 to 2% of the total. Is there any reason for thisAnis: We have an educational program for business companies called “Pegasus University,” and wesmall number?

deliver regular webinars from Silicon Valley. We lecture on logical points to consider, such as due

Anis: The reason for the small number of startups in Japan is that they don’t raise a lot of money.

diligence. Other opportunities include training for interviews with startups, workshops with outside

Though this actually increases the likelihood that you’ll be able to acquire a startup with superior

instructors, and a variety of third-party events. We can also connect operating companies that aretechnology in its early stages.

LPs.

operating companies.

Pegasus employee and receive all of our programs, resulting in a huge amount of knowledge (one9 Pegasus’ future aims■

person is currently being dispatched from the New Business Creation Department).

Takase: Anis, could you tell us what Pegasus is aiming for in the future?

If you send someone to Silicon Valley, where we are based, they will be treated the same as a

8 Environment for future investment■

Anis: We have a few things we are aiming for, but first we want to expand the Pegasus network andcreate an environment where people can consult with Pegasus if they have a technology-related
investment project. To expand this network, we host the Startup World Cup, one of the world’s largest

Takase: On a slightly different note, Silicon Valley Bank went bankrupt the other day. How does that

global pitch competition conferences, where entrepreneurs make presentations to investors. We willaffect startups?

also further enhance the curriculum at Pegasus University and make it more accessible to outsiders.

Anis: After Silicon Valley Bank, First Republic Bank also went bankrupt, and investors are becoming

Furthermore, we are working to automate our due diligence processes. Specifically, we want it somore cautious about investing. On the other hand, when it comes to CVC, we manage a lot of funds,

that when startup information is entered, a due diligence score appears that helps makes work more

but we haven’t received any requests from any of our operating companies to slow down theirefficient. Development has progressed and prototype software has been completed. If this caninvestments. Rather, the startups that survive in this situation are often well-managed andbecome commonplace and expanded globally, I expect that more operating companies will be able totechnologically advanced, and cannot be ignored by investors. In the last two to three years, it will be

participate in investments more easily.

10 Denka’s aims through CVC■
Takase: Finally, Mr. Yoshino, please tell us about Denka’s goals with CVC.
Yoshino: In order for our company to continue its corporate activities into the next 100 years, it isessential not only to grow its existing businesses organically, but also to create businesses thatmatch the times, to search for potential future businesses, and to create new businesses.
We will engage in CVC activities that are filled with the wisdom and ideas of numerous startups, andwhile I think there will be many challenges in the future, under the partnership with Pegasus, wewould like to create a system that can efficiently produce results and accelerate the creation of new
businesses as well as the development of human resources.
(Date: May 25, 2023, Location: Denka Head Office)Denka Report 2023 Integrated Report40Strategy

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Technology
Message from the Chief Technical Officer

Accelerate process reforms by transforming business models and organizations, increasing productivity,and nurturing in-house digital talent
The world population is projected to increase from 8 billion in 2022 to 8.5 billion in 2030, while the Japanese population, on the contrary, will decrease from
125 million in 2022 to 119 million in 2030. In particular, the working age population will significantly decline by 8%, from 75 million in 2022 to 68.75 million in
2030, while society itself is also aging. On the other hand, recent advances in ICT and AI have given rise to social changes that have led to a rethinking
and questioning of work styles. Denka has a history spanning over 100 years, and I believe that only by adapting to these major changes in society will webe able to further increase our reason for existence and continue to survive.
The way people work will continue to change significantly in the future and we must also learn to adapt. What is needed is process reforms through theintroduction of comprehensive technologies, such as robots, automation, ICT and AI. As outlined in our management plan, “Mission 2030", we will invest

Kazuo Takahashi

50 billion yen over the next eight years to ensure that we can adapt to the new social structure that is coming.

Senior Managing Executive Officer,
Chief Technical Officer

PolicyStrategy

KPI (FY2030 target)

Process Reforms

Business model/organizational reforms, productivity improvement, anddevelopment of in-house digital talent

Process reforms investment: 50 billion yen over eight years(DVU: 14.6 billion yen over five years)

Process Reforms Initiatives
The Denka Group is committed to organizational change
and the improvement of labor productivity by making thebest use of digital and robotic technologies and bysignificantly reforming existing processes.
These include optimizing operating conditions byanalyzing accumulated process data, automating
inspections using AI technology, and automating material

Examples of initiatives
1

Quality improvement by data analysis:Using statistical analysis software
based on big data obtained frommanufacturing processes, weanalyzed factors causing defects inthe manufacturing process of ceramic
substrates, and improved the defectrate by more than 10%.

２

Labor saving and quality improvementby automating visual inspection of
circuit boards: We aim to reduce laborby 65% by automating the visualinspection of circuit boards throughthe use of image-based analysis androbots for other processes.

3

Productivity improvement through theautomation of material handling
operations: AGVs* were introduced toeliminate the manual transportation oflarge volumes of eggs required for the
manufacture of vaccines, andproductivity was improved by reducing
labor and improving work efficiency inthe handling of heavy materials.

handling operations (robotization). We will further evolvethese initiatives and aim to achieve the targets outlined in
our management plan, “Mission 2030”.
*AGV: Abbreviation for Automatic Guided Vehicle, unmanned ground vehicle

Denka Report 2023 Integrated Report41Strategy

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Digital Strategy for our Management Plan “Mission 2030”
Our new management plan, "Mission 2030" sets forth a variety of measures aimed atenhancing corporate value through three mission-based growth strategies. The Digital

Four Pillars of DX by DX

Strategy Department will work to clarify what systems can be used and how for each ofthese measures, and formulate concrete measures to achieve them.

level of contribution that can be made to each measure.
Under the theme of "DX by DX" (Denka Transformation by Digital Transformation), theDigital Strategy Department aims to make a concrete contribution to the financial targets
set out in “Mission 2030“ by 2030 by achieving the "Four Pillars" (see right).

Developing secure
cloud infrastructure

restructure core systems that we plan to update in the near future, taking into account the

Building easy-to-use
data lakes

ROIC calculation system that contributes to data-driven management. Further, we will

Improving the skill
levels of
IT professionals

Nurturing in-housedigital talent

As one measure that has already been implemented, we are providing a product-specific

Nurturing in-house digital talent

Development of data lakes andinfrastructure

In order to carry out measures to achieve our “Mission 2030”

The Digital Strategy Department aims to build the data environment andtargets, we believe it is essential for all employees to acquire
digital literacy and to utilize the available digital technology intheir respective workplaces.

DX human
resource pool

Each department requires DX human resources with theknowledge and skills to actively promote DX. However, rather
than recruiting these from within our current resource pool, we

infrastructure necessary to promote DX. By creating an environment inwhich all employees can access the data they need from anywhere, we

Performance-based
selectionand education program to raise the level of digital literacy for all
employees. By establishing a company-wide "DX humanresource pool," we aim to achieve our "Mission 2030" targets
through "DX by DX" in each department, starting with process
reforms.

utilizing the latest technologies, including cloud computing and data

Assessment

Improved IT literacy
Introductory training(all employees)

think more about data utilization in their respective workplaces.
To this end, we aim to realize faster and smoother data distribution by

DX training

aim to build a pyramidal "DX human resource" development

believe we can accelerate the progress of DX by enabling employees to

G category
employees undermanager level

platforms, while also taking security into consideration.
We are also actively developing the tools and systems necessary for datautilization, and are working to innovate internal business processes. As aresult of these initiatives, we aim to establish an environment in which
every employee can play a role in contributing to DX.

Denka Report 2023 Integrated Report42Strategy

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Electronics & Innovative Products

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

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

Message from the Division Head
Achieving a sustainable society and reducing environmental impacts have become pressing issues for the entire world. while digital technology continues
to advance. Our division is utilizing our distinctive proprietary technologies, thermal countermeasure technologies, and high-frequency response
technologies in the fields of xEV, renewable energy, high-speed high-frequency communications, and semiconductor fields to contribute to the realizationof a better society. We are doing this through cutting-edge materials such as conductive materials for xEV batteries, thermal countermeasure materials forvarious power modules, electronic component transport materials, and high performance fillers.
As a leading company in each product group, we will continue to introduce new products to the market on time with the three elements of specialty,
megatrends, and sustainability set forth in the “Mission 2030” management plan.

Hiroto Horiuchi

Executive Officer
Head of Electronics & Innovative Products

Strategies for achieving the “Mission 2030” management plan targets
Key products

Operating income trends and forecasts

Trends in operating income

Growth image up to 2030
(operating income)

500¥45.0 billion

400●Low dielectric silica

Next-generation
high-speed
communication●Low dielectric organic
insulating resin●LCP film (in development)¥30.0
billion

300

200
¥12.2
billion¥12.7
billion

2018

2019

¥14.2
billion¥18.7
billion¥18.0
billion●Acetylene blackxEVs andrenewable energy

2020

2021

2022

Divisional vision (ideal form in 2030)●Full-scale operation of sphericalalumina production facility at
Denka Advantech Pte. Ltd.

●Overwhelming presencein the field of megatrends andour products becoming de facto●Decided to invest in Denka
Advantech Pte. Ltd. to increase
spherical silica capacity●“On-time development anddelivery of optimum materials”
in line with megatrends●Entered into a joint ventureagreement for the manufactureand sale of acetylene blackin Thailand●ESG-conscious business
management and contributing
to the SDGs

●Decided to increase silicon nitride
production capacity
by 50% at Omuta Plant●Strengthening the quality
assurance system●Spherical alumina

1000●Spherical silica/spherical alumina

2022 results

2026●Silicon nitride●Silicon nitride substrates

2030

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VisionSWOT analysis● A diverse product lineup capable of meeting a broad
range of customer needs● Growing importance of communications devices on
the back of the spread of IoT and autonomous driving
systems and resulting advances in high-speedtransmission technologies● Intelligence capabilities stemming from strong market
share commanded by our products

Strengths 

Weaknesses 

Stakeholders

Financialinformation

Electronics & Innovative
Products R&D

FY2022 results:

FY2022 results:

11.4 billion ¥ 4.9 billion

M30 strategic investment(8-year total) percentage

 Opportunities Threats● Growing ﬁnancial burden attributable to capital
expenditure due to rapid market expansion

ESG
management

ICT&Energy
strategic investment¥● New business opportunities arising from government
policies supporting a shift to xEVs and addressing
environmental concerns● A broad range of essential technologies, including
high-temperature control, nitriding, spherical shaping,and calcining technologies

Strategy¥ 80.0billion● Possible emergence of novel material serving as agame changer

33％● A major shift in technological development trends due tofactors such as the growing need for environmental solutions● An increase in the number of competitors due tothe entry of newcomers from emerging nations

Contributing to society through business

Development of spherical silica
2021

Spherical silica

Material/Process Innovation

2003
1989

1971

Crushed silica

Spherical silica
・Particle size
compounding
・Reduction
in diameter・Reduced foreign
matterSpherical silica

・Ultraﬁne powder
Combustion
synthesis

Enhanced ironremoval toprevent wear

Next-generation
low dielectric
tangent silica

Low dielectric
tangent silica

・Low transmission
loss
5G
communication

FusionFlamespheroidization

Past

Value Shift
Development of low dielectric curable resin

6G

Low dielectric communication
resin/silica(composite)

Present

Low dielectricorganic
insulating resin(LDM-03)

Styrene ethylene
copolymer

ALONBRIGHTIn addition to being used as a phosphor for white LEDs
in LED backlights for LCD TVs, it is also being
developed for use in various LED lighting applications.
LEDs have significantly reduced power consumption
and GHG emissions compared to conventional
systems.

FutureNext-generation
low dielectricorganic
insulating resin(LDM-X)

SEBS**Styrene butadiene block copolymer hydride

Past

Value Shift

Present

FutureAcetylene black
It is used as a high-purity conductive material for the
inner and outer semiconductive layers that make upburied cables and submarine cables. This has theeffect of transmitting electricity more safely andcontributes to the stable supply of electricity and the
spread of clean energy.
Silicon nitride
Because of its high strength and excellent lubricity,using it in bearings eliminates the need for lubricating
oil and greatly reduces the burden of maintenance.
Becoming increasingly popular for bearings installed inplaces where maintenance is difficult, such as offshore
wind power generation.
Spherical alumina
Filling the resin as a heat-conducting filler has theeffect dissipating heat from automotive LiBs, etc.,
reducing the loss due to electrical resistance.
Thermal materials
Materials with high thermal conductivity (low thermal
resistance) made by highly filling silicone with ceramicfiller. These products are used for heat dissipation
measures for power semiconductors in hybrid andelectric vehicles, contributing to miniaturization andenergy conservation for automobile components.

Denka Report 2023 Integrated Report44Strategy

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We are working to improve the quality of life of people around the world in the areas of prevention, diagnosis, and treatment,
including influenza vaccines and test reagents such as rapid antigen diagnostic testing kits for the novel coronavirus.

Life Innovation

Message from the Division Head
Now that we have fought the battle against the novel coronavirus, medical needs have changed significantly and are becoming increasingly sophisticated.
Along with this, innovative technologies are being created one after another, and we strive to create new value in each of our business areas of prevention,
diagnosis, and treatment, which are our core operations. . With quality safety as our top priority, we will continue to contribute to improving the QoL ofpeople around the world through the provision of final products and services by bringing together the fundamental technologies we have cultivated throughvaccines and testing reagents from contract development and manufacturing of the pharmaceuticals required by society.

Hideki Takahashi

Managing Executive Officer
Head of Life Innovation

Strategies for achieving the “Mission 2030” management plan targets
Key products

Operating income trends and forecasts
Growth image up to 2030
(operating income)¥40.0 billion

Trends in operating income
400

2022 results

Divisional vision (ideal form in 2030)●Influenza vaccines●Began operation of new facility
for production of undiluted
vaccine stock solutions toenable earlier and more stablesupply of influenza vaccines●Advance the development ofsafer and more effective vaccines
in addition to early stable supply
of existing vaccines●Reagents for autoanalyzers●Launched rapid norovirus
antigen diagnostic test kit
QuickNavi™- Noro3●Provide a variety of diagnostic
agents and systems that arequick, simple, inexpensive, andmulti-diagnostic.

Prevention

350
300
250

¥20.0
billion200¥14.8
billion150
100●Antigen testing kits

¥6.3
billion¥15.5
billionDiagnosis●G47Δ oncolytic virus
for the treatment of cancer¥7.0
billionTreatment

50
0

2018

2019

●Launched Japan's First In-vitro
Diagnostic Product to Measure"Ugly Lipoprotein" Cholesterol¥14.4
billion

2020

2021

2022

2026

2030

●Decided to Invest in Production
Capacity Reinforcement of G47Δ,
Oncolytic Herpes Simplex Virus
Type 1 Product (April 12, 2023)●Aim for CMOs and CDMOs basedon cancer treatment viruses●Terminated commissioned
manufacturing of macromolecularsodium hyaluronate

Denka Report 2023 Integrated Report45Strategy

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SWOT analysis● A lineup of various diagnostic reagents developed in-house
employing Denka s proprietary technologies● Growing need for solutions supporting the prevention and early
diagnosis of disease in countries around the globe● Superior technological capabilities and robust production
capacities backed by cutting-edge vaccine manufacturing facilities● Growing demand for rapid diagnostic testing kits in the face of the
COVID-19 pandemic● A robust network of industry-academia-government collaboration
with a diverse range of partners to enhance Denka s own R&D
capabilities● Growing demand for medical services tailored to the needs ofindividual patients● Widespread use of IoT and AI● Innovation arising from the integration of know-how in the ﬁelds ofchemistry and healthcare, two very diﬀerent ﬁelds, and marketing
capabilities derived from a combination of customer bases in bothﬁelds

● Possible emergence of novel types of business supported bygovernment-led growth strategies (legal revisions and regulatory
relaxation)

Strengths 

VisionStrategy

ESG
management

Financialinformation

Healthcare
strategic investment

Life Innovation R&D

FY2022 results:

FY2022 results:¥

1.1 billion¥

3.8 billion

M30 strategic investment(8-year total) percentage¥ 80.0billion Opportunities

Weaknesses 

Stakeholders

26％ Threats● Acceleration of competitor technologies for vaccine and diagnostic
reagents on the back of global eﬀorts to counter the COVID-19
pandemic● Susceptibility of infectious disease-related products to demand
ﬂuctuations attributable to changes in the magnitude of epidemics
and types of disease

Contributing to society through business

Development of POCT Products
Wide

Available as OTC
pharmaceutical products*OTC:Over-the-counter pharmaceuticalproducts that can be purchased at storeswithout a prescription

For use at large hospitals,
testings centers, and clinics

For use at large hospitals
and testings centers

Inspection range

Colored latex
immunochromatographymethod (1 step/8 mins)

Gold colloidal
method(2 steps/12 mins)

Narrow

Virologicaldiagnostic
reagents

Societal
event

Past

Ultra-high sensitivity
Possible to test for inﬂuenza
when fever develops lessthan 24 hours prior to testing

Simpler and quicker to complete tests
while enhancing sensibility
Possible to test for various viruses
and oathogens

Virus identiﬁcation
2009

1952

New inﬂuenza
global outbreak

O157 food poisoning incident

Time

Rapid influenza diagnostic testing kit
Quickly detects influenza virus antigens through a simple
procedure and assists in diagnosis in a clinical setting.
Reagent for measuring C-reactive protein (CRP)
In many inflammatory diseases, the concentration of
C-reactive protein (CRP) appearing in the blood can bemeasured and used as an index for determining the severityof the disease, treatment effectiveness, etc.
Used as a risk marker for heart disease and coronary arterydisease, which cannot be fully evaluated by conventional
LDL cholesterol.

Easier to visually
determine test results
Less time required for diagnosis

Influenza prevention

Small dense LDL cholesterol measuring reagent

Easier to use

Quick S,
Inﬂu A/B
Inﬂu A/B
Quick

QuickNavi
SeriesQuick
Ex-FluRapid enzyme
antibody method(4 steps/15 mins)

Enzyme antibody
method(4 steps/150 mins)

Bacteriologicaldiagnosti
reagents

Make it possible totest for multiple viruses andpathogenic bacteria (colored)
ﬂuorescent particles for use
with a ﬂuorescent reader

Influenza vaccines

Rapid COVID-19 (SARS-CoV-2) diagnostic testing kit
・POCT products
https://www.denka.co.jp/product/
medical/detail̲00336/
March 2020

Quickly detects COVID-19(SARS-CoV-2) antigens througha simple procedure and assists
in diagnosis in a clinical setting.

COVID-19 global outbreak

Present

FutureDenka Report 2023 Integrated Report46Strategy

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

Elastomer & Infrastructure
Solutions

Message from the Division HeadUsing our own hydroelectric power, our division produces chloroprene rubber, of which we have the world’s top share, and calcium cyanamide , which is afertilizer that also has pesticide effects. We also provide a wide range of materials that are essential for building the foundation of social infrastructure,such as special admixtures that make concrete highly functional, fire-resistant and thermal-insulation materials for industrial furnaces, and corrugatedpipes for underdrainage for agriculture and civil engineering.
We are also proceeding with the full-scale development of biostimulants to contribute to solving global food problems, and conducting research anddevelopment of carbon-negative concrete that aims to reduce the burden on the environment.
As the core division of Sustainable Living, a focus area of the “Mission 2030” management plan, we aim to realize safe, secure, and comfortable daily life.

Masahiro Omata

Executive Officer
Head of Elastomer & Infrastructure Solutions

Strategies for achieving the “Mission 2030” management plan targets
Key products

Operating income trends and forecasts
Growth image up to 2030
(operating income)Trends in operating income
150“RECOLTE”①Distribution of online content②Direct promotion to farmers
via YouTube Denka Channel●We will select what businesses
can and can’t be executed
well using the keywords
specialty, megatrends, andsustainability, and proceedwith a shift in our businessportfolio.

carbon-neutral society
by 2050, we are looking to
expand our product lineup,
including the carbon cement
additive LEAF®.

¥15.0
billion¥3.9
billion¥10.0
billion●Special cement additives

30●Toyo Drain●“LEAF ” carbon cement®

0

Infrastructure¥ -1.1billion-30

2018

Divisional vision (ideal form in 2030)●Aiming to realize a¥7.3
billion60-60●Digital marketing

Food

120
90

●Biostimulants “PRULA” and2022 results

2019¥ -3.6billion¥ -3.5billion

2020

2021

2022

2026

additive for carbon negative
concrete●reconstruction of the carbide
chain Withdrawal from cement
sales business●On-site application ofcarbon negative concrete(results of the Green
Innovation Fund Project)

2030*Operating income estimates for 2026 and 2030 are combined with Polymer Solutions.

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SWOT analysis● Growing demand associated with enhancing the resilience ofbuildings and civil infrastructure to mitigate natural disasterdamage● Technology for absorbing and immobilizing CO2 in concrete● A two-location production system supporting the chloroprenerubber business, with plants in Japan and the United States
employing diﬀerent manufacturing methods and facilities● Growing demand associated with the maintenance and renewal ofdomestic infrastructure constructed mainly during the period ofhigh economic growth in Japan that is currently deteriorating● A robust carbide chain created via use of the limestone fromnearby limestone mines and powered by Denka s own
hydroelectric power plant network● Growth in the biostimulant market due to growing food demand instep with the growing global population● A resource recycling system that accepts urban waste, waste
plastic, and other waste as raw materials and fuel for cement
production

Strengths 

Weaknesses 

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Sustainable Living
strategic investment

Elastomer &Infrastructure Solutions R&D

FY2022 results:

FY2022 results:¥

0.3 billion¥

3.5 billion

M30 strategic investment(8-year total) percentage¥ 30.0billion Opportunities23％ Threats● Expansion in the scope of various environment-related regulations
inﬂuenced by a growing trend toward carbon neutrality● Diﬃculty in securing robust brand recognition in markets overseas(special cement additive business)● Shrinking in the construction and agricultural markets due to a
decline in the domestic population● Soaring global raw material and fuel prices*The strategic investment ratio is the sum combined with Polymer Solutions.

Contributing to society through businessSpecial cement additive business
The carbon cement additive LEAF® is made from slaked lime, aMaterial/Process Innovation

Responding to the diverse needs of society, such as low-carbon concrete structures,
labor-saving construction, enhanced functionality, and ultra-long life, we will contribute to theenhancement of social infrastructure both in Japan and overseas with reliable technologies
and a wide range of products.
Highly functional
materials

Construction methods/
systems

Social infrastructure (concrete)
Low-carbon
Labor-saving
High functionality
Ultra-long life

Quick hardening
material

Repairmaterial

Expansionmaterial

High-strength
material

Fast-binding
material

by-product of the manufacturing process of chemical products,
and can reduce CO2 emissions by approximately 80% compared
to conventional cement production. It also improves the strengthand durability of concrete by not reacting with water but

Survey and diagnostic
technology

3D printing

Ultra-highstrength fiber
reinforcedconcrete

preferentially reacting with CO2 to form calcium carbonate.
CO2-SUICOM ®, a concrete product using LEAF®, is attracting
attention as a carbon capture and utilization technology (CCU) for

Fiber adhesive
reinforcement
methodSprayed mortar
labor-saving
construction system
Groutmaterial

Carbonatedadmixtures/
concretes

Low dust
spraying
systemElectrochemical
repairmethodQuick hardening
material for low
environmentalload typeconcreterealizing a decarbonized society.

Condensation
accelerator for
improving
concreteconstruction
productivity

reducing environmental impact and contributing to the

In May 2023, we were awarded the 55th Japan Chemical Industry
Association Technology Award for outstanding performance inadvancement of science and technology.

3D digital
measurement

Drone surveys

Past

Non-destructive
testing technology

Technology history

Present

FutureDenka Report 2023 Integrated Report48

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VisionStrategy

ESG
management

Stakeholders

Financialinformation

Through a wide range of products, including styrene-based functional resins, food packaging sheets, synthetic fibers for wigs andhairpieces, and chemical products such as Poval, we are working to realize a sustainable society by supporting people’s lives
through various applications, such as in automobiles, electrical equipment, electronics, and food packaging containers.

Polymer Solutions

Message from the Division HeadIn May of this year, our company and its equity-method affiliates were found to have engaged in inappropriate conduct, such as with regard to third-party
certification of resin products. We believe that compliance is the most important foundation of management, and we have worked to ensure that everyone
is well aware of that. We sincerely apologize for the great deal of concern and inconvenience that we have caused our customers and stakeholders. After
deep reflection, we will make every effort to further strengthen compliance, prevent recurrence, and restore trust.
Although the current business environment surrounding plastic products is extremely challenging, our aim is to realize a futuristic recycling-oriented
society, and as such we are preparing a styrene chemical recycling plant with Toyo Styrene, an equity-method affiliate, for operation in the second half of2023. In addition, we will work on new projects that can contribute to the construction of a circular economy system on a global scale, with a wide
perspective and an eye to the future, taking full advantage of Denka’s elemental technologies.

Kei Hara

Executive Officer
Head of Polymer Solutions

Strategies for achieving the “Mission 2030” management plan targets
Key products

Operating income trends and forecasts
Growth image up to 2030
(operating income)Trends in operating income
150●Highly functional styrene resins(MS, IP, ABS)

120

¥7.0
billion¥7.1
billion¥7.9
billion¥15.0
billion60¥10.0
billion30¥ -1.2 billion
2018

2019

2020

2021

2022

2026

gas field drilling, building
materials, etc. (Poval)●Construction materials,

flexible air conditioning materials
Gutters, aluminum ducts(Denka Astec)●Highly functional styrene resins(Clear Alene, MS, AS)

Food packaging
materials
Cosmetics andhair products

0-30

Daily necessities

90

¥8.4
billionAutomotive
Energy industry
Housing andhome appliances●Special additives for oil and●Oil-resistant, heat-resistant,high-strength thin sheets (BOPS)●Functional barrier sheets●Raw yarn for wigs and2022 results

Divisional vision (ideal form in 2030)●Decided to construct a●Portfolio transformation:●Developed “MS” to maintain●Sustainable & disruptive innovation:●Launched Eco Clear ®, which●Ahead to green:chemical recycling plant andstarted building a demonstration
project with Ichihara City,
Chiba Prefecture(Toyo Styrene, Denka)
long-term durability

reduces weight by reducing
container thickness

Improving corporate value
through portfolio transformation,
increasing added value, newbusiness creation, and alliancebuilding
Create new three-star businesses
through innovation utilizing thestyrene chain and Denka’selemental technologies, andinnovation through M&A and theutilization of external resources
Promote chemical recycling andother environmentally friendly
items, and establish circular
economy models involving local
community networks
from upstream to downstream

hairpieces (Toyokalon)

2030*Operating income estimates for 2026 and 2030 are combined with Elastomer & Infrastructure Solutions .

Denka Report 2023 Integrated Report49Strategy

Prologue

Report story

SWOT analysis● Development of plastic resins and processed products in a waythat accommodates growing needs for eco-friendly solutions● An integrated manufacturing and marketing system in Japan thatencompasses a range of styrene-based operations from theproduction of raw materials to the manufacture of processed
products● Establishment of a comprehensive recycling system that takes fulladvantage of the strengths aﬀorded by our integrated production
system, extending from raw materials to processed products, andthereby meeting demand arising from the growing trend towards
resource recycling● Global business capabilities backed by a two-location production
system comprising of bases in Japan and Singapore● A diverse range of resin processing technologies, including those
associated with polymer structure design and control and the
production of sheets, ﬁlms, and synthetic ﬁber

● Versatile expansion stemming from our diverse product lineup● Synergies arising from the combination of materials and processed
products as well as solution proposal and development capabilities
supported by such synergies

Strengths 

Weaknesses ● Intensiﬁcation of price competition in step with the improvement in
the quality of products manufactured by overseas competitors● Unstable procurement of various raw materials (due to rises incosts, the abolishment of certain materials, etc.)

Material/Process Innovation

The
Past

nal,
h
functio
cts witHighly
produ
endly
ri
-f
o
value
e
ec
Th
added
d
se
sent increa

Pre

Food
containers

Chemical recycling

Foodcontainers(Toyo Styrene Co., Ltd., Denka)

SM

SM

Resin-based
processed
products

BOPS

PS

Functional
resin

Functional
resin
透明樹脂

Transparent resin

Op

en

in

novation, partne

rsh

Reduceips

Technology for extending thephysical life of products and parts

BOPS

PS

Past

And
FutureWeight reduction of packaging containers
Thinning of packaging containers

RecycleChemical recycling
Material recycling technology
Recycling consortium

So

cia

l im

Bioplastics
Biomass raw
materials
Biodegradable raw
materials

a
plem
ac k
entatioal pn andtechnicgtrochemn-pe aw mat ical-de
r
eria
No
ls rivedFood packaging
containersnalfunctio
Highly with
cts
produ
ded
ad
d
se
increavalue

Sustainable Living
strategic investment

Polymer Solutions R&D

FY2022 results:

FY2022 results:¥

0.3 billion¥

2.7 billion

M30 strategic investment(8-year total) percentage

18％● A decline in the need for plastic due to environmental problems
induced by waste plastics (especially single-packaging containers)

er processing anlymtePo ynthesis chnolog dys

SM: Styrene monomer
PS: Polystyrene resin
BOPS: Biaxially oriented
polystyrene sheet
Functional resins: Transparent resin,
CLEAREN

Styrene monomers

Financialinformation*The strategic investment ratio is the sum combined with Elastomer & Infrastructure Solutions.

Contributing to society through business①Denka IP

Black: Technology (innovation)
Green: Value

Polystyrene

Stakeholders¥ 30.0billionValue shift across polymer solutions: Environmental
response

ESG
management

 Threats● Foreign exchange risks and the risk of changes in market conditions
associated with products mainly exported to customers overseas: Raw material

Strategy

 Opportunities● Time lag between ﬂuctuations in the prices of raw materials (e.g.
naptha and benzene) and product price revisions reﬂecting theseexternal conditions: Product

VisionPresent

Value Shift②PovalA unique synthetic resin that dissolves inwater. We are contributing to theimprovement of productivity in the energy
industry by improving efficiency, such aswith excellent emulsifying/dispersing
power and excellent adhesion.

③Eco Clear ®

es

By increasing strength to reduce
thickness , food containers using thesesheets are lighter, contributing to the
reduction of CO 2 emissions and waste.

Realization of a circular economy

Heatresistantresin

We are contributing to the reduction of ourenvironmental impact by reducing theweight of automotive parts and eliminating
the use of paint, improving theenvironment of car interiors by reducing
VOCs, and reusing heat-resistant ABS
made from recycled ABS materials for thesame applications.

FutureDenka Report 2023 Integrated Report50

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management

Stakeholders

Financialinformation     

Message from the Supervisor of Environmental Measures Promotion

Contributing to Climate Change and Global Environmental Conservation

Masanobu Kosaka
Executive Officer,
Supervisor of Environmental
Measures Promotion

Following COP26 in 2021, COP27 in Sharm el-Sheikh, Egypt, in 2022 highlighted the challenges involved in achieving the 1.5 °C target. In
addition to climate change issues tied to CO2 emissions, the United Nations Conference on the Protection of Biodiversity was held in thesame year as COP27, increasing the importance of global environmental conservation. Denka views these circumstances as an opportunity
to consider and promote more effective environmental measures and contribute to society through the products and services we provide.
In November 2020, the Denka Group announced its plan to achieve carbon neutrality by fiscal 2050, and in May 2021, the interim target for
fiscal 2030 was raised from 26% to 50%. We have accelerated our efforts to achieve carbon neutrality by establishing a new reduction
target of 60% in our management plan, “Mission 2030” launched in fiscal 2023.
More specifically, we aim to afford more consideration to and promote the reduction of supply chain emissions through the development
and introduction of technologies for processes that generate emissions, further promote energy conservation, increase our use ofrenewable energy, and to make changes to the type of fuel used in our thermal power plants. One of the most distinctive initiatives is thestart of consideration to introduce and implement new technologies to generate acetylene and hydrogen from methane using plasma inorder to reduce non-energy-derived CO2 emissions from the carbide chain, which is a challenge unique to Denka. We will also be focusing
on reducing emissions not only from our own production, but also from raw materials used in our products and when our products are usedand enhance the development of products and technologies that can contribute to these reductions.
Further, in addition to measures to combat climate change, we have initiated measures to conserve biodiversity in accordance with the
TNFD (P. 56), whose guidelines were published in September 2023, as part of our global environmental conservation activities. Last fiscal
year, we commenced full-scale field studies of Omi Plant's contact points with nature, and over the next several years, will assess all of oursites in order to formulate the necessary conservation policies.
Denka aims to make a significant contribution to combating climate change and addressing other global environmental issues bydeveloping and providing unique technologies and products.

Participation in GX League
The GX League aims to promote discussion and practice for the creation of new markets in industry and government by agroup of companies that will lead the transformation of the entire economic and social system, including stakeholders, toquickly transition to carbon neutrality. Denka has participated in this initiative since its full-scale launch in April 2023.

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ESG management

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VisionESG
management

Strategy

Stakeholders

Financialinformation

Carbon neutrality
We aim to be carbon neutral by 2050 with respect to our own CO2 emissions (Scope 1 and 2), which can be directly reduced through our own activities. We aim to reduce the environmental
impact of raw materials and processes, and to increase energy conservation and our use of renewable energy. Because there are limits to what individual companies can do to help
contribute to carbon neutrality, in addition to our own efforts, we are actively seeking collaboration with surrounding companies and local governments to improve social infrastructure.

Medium- and long-term targets for reducing greenhouse gas emissions (Scope 1 + 2)

Roadmap toward carbon neutrality
2030

2050

（%）

100%
88%

100
Business portfolio shift

Review our business management structure
Promote the reduction of environmental impact of products
based on carbon footprint (CFP) evaluation
Develop and provide eco-friendly
products and technologies designed toreduce environmental impact
Recycle and reuse plastics(promotion of PS chemical recycling)
Pursue energy savings while promoting
the use of renewable energy

Reduceemissions atbusiness sites

Develop andutilize CCUS

Reduce environmental impact including
the supply chain based on evaluations

Develop and popularize xEV-related products andeco-friendly concrete, etc.
Establish testing facilities andimplementation schemes

Promote social implementation

Thorough promotion of energy conservation and further use ofrenewable energy

Separate and recover

Ensure preparations for facility
installation

Introduce and utilize
cutting-edge technologies

Utilize

Explore chemical synthesis
technologies using CO 2

Introduce and utilize
cutting-edge technologies

Explore and test newtechnologies

Improve processes andintroduce new processes

Introduction of innovative technologies
and measures to reduce CO 2 emissions
Making the switch to hydrogen as
a fuel in power plants

Ensure preparations for facility installation

Shift to hydrogen fuel79%

80
Achieve carbon neutrality

Contribute to a
reduction inemissions acrossthe value chain

Introduce and evaluate CFP
calculation system(Unit: 10,000 t-CO 2/year)

87%

250

83%

60

247

218

40

215

194

204
98

20

0

125

40%

2013

(base year)

2019

2020

2021

2022

0%

2050

2030

0

*Denka Group (consolidated)

Introduction of innovative technologies and measures to reduce CO2 emissions
Denka manufactures acetylene, the main raw material used in our flagship products, chloroprene and acetylene black, using the carbide

Conceptual diagram of acetylene production technology from methaneH

method (hereafter “conventional method”). However, this method poses the problem in that a large amount of CO2 is emitted fromlimestone, the starting material. Denka has begun commercializing a technology to produce acetylene from methane using a plasma
process, an innovative technology, as a measure to reduce CO2 emissions generated from conventional methods. This technology was
originally developed by Transform Materials (TM), a US venture company and we have adopted their acetylene production facility (acetylene
production capacity: approx. 1,600 t/yr, hydrogen max. 400 t/yr by-product) as a test facility and will collaborate on joint research using thefacility with TM for future implementation. The test facility is scheduled to start operation in the first half of 2026. By using this technology,
we can not only avoid CO2 emissions from the above raw materials, but also make a significant contribution to our carbon neutrality targets
by effectively utilizing the by-product, hydrogen. We aim to achieve early social implementation as a result of the joint research with TM.

C

H
H

Power

H

H

C
H

C

H

Acetylene (C2H 2)

H
H

C

H

Microwaves
Plasmatization

Hydrocarbons such as methane (CH4)

H

H

H H

H

H

Hydrogen (H 2)Denka Report 2023 Integrated Report52

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Expansion of Renewable Energy Sources and Introduction of Power Generation Technologies with Low Environmental Impact
Denka has been working on the use of renewable energy for more than 100 years. Specifically, we have engaged in technological pursuits on two fronts, namely (1) leveraging hydroelectric power generationand other technologies to create renewable energy while (2) fully taking advantage of this energy in chemical manufacturing and utilizing it as a valuable energy source. In order to contribute to the preservationof the global environment through the use of these technologies, we will further focus our efforts on the use of renewable energy, one of our strengths.

１ Future Outlook for Our Renewable Energy Generation Capacity

2 Denka Hydroelectric Power

In order to achieve carbon neutrality by 2050, we have begun efforts to achieve "maximum renewable energy
generation output: 150 MW" by increasing hydroelectric power generation and increasing our use of green
energy through new solar power generation as part of "Mission 2030". Currently, we are promoting
improvements in power generation efficiency through the renewal of existing hydroelectric power plants and theintroduction of new solar power generation facilities at each plant. Further, as a medium- to long-term response,
we are working to accelerate our efforts to increase our use of renewable energy, focusing on the constructionof new hydroelectric power plants, as well as examining the possibility of introducing wind and geothermal
power generation.

The Omi Plant is geographically situated amid a web of 17 hydroelectric power plants, including power plansco-owned together with Kurobegawa Electric Power Company, which boast a combined maximum output ofapproximately 140,000 kW, making this one of the largest private-owned power generation networks of its kindin Japan. All of these facilities employ a natural inflow type hydroelectric power generation system that ushers
river water into the turbine runners and returns it to the river as soon it leaves the generator. Thanks to thesefeatures, this type of hydroelectric power plant places a relatively smaller burden on the natural environment.
Moreover, hydroelectric power plants generate virtually no greenhouse gases while serving as a renewableenergy source with superior energy efficiency. Thus, these power plants are capable of harmoniously coexistingwith the natural environment while generating electricity in a sustainable manner. We aim to make effective useof these resources to contribute to the realization of a sustainable society.

Future Outlook for Our Renewable Energy
Generation Capacity

Hydroelectric
Solar, etc.
Total

(Power generation capacity MW)

FY2005

FY2022

FY2030

111

140

141

3

6

13

114

146

154

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

3 Energy Conservation Initiatives
Rationalizing the use of energy is aneffective means of achieving carbon
neutrality. To date, we have been making
efforts to efficiently utilize energy byswitching to alternative fuels at our thermal
power plants, introducing high-efficiency
gas turbine power generators, andpromoting waste heat power generation at
our cement plants. Most recently, ahigh-efficiency gas turbine power generator
was put into operation at the Omi Plant in
2020, and a similar gas turbine started
operation at the Chiba Plant in 2022.

Purchasedenergy45%

Hydroelectric
32%

Breakdown ofEnergyConsumption by
Source17
140,290

FY2022 Results

Thermal21%

plants *Includes co-owned plants

Power generation capacity

Biomass
1%
Waste heat1%

Gas turbine power
generation facilities at
the Omi Plant, whichbegan operation in2020

Gas turbine power
generation facilities at
the Chiba Plant, whichbegan operation in
2022

Hydroelectric power plants

Japan

kW

*As of August 2023, including Denka’sownership of output from power plants
owned by a joint venture

New Omigawa Hydroelectric Power Plant(started operation in 2021)

New Himekawa No.6 Hydroelectric Power Plant(started operation in 2022)

4 Solar Power Generation Initiatives
We began installing solar power generation facilities
at our Shibukawa and Isesaki plants in Gunma
Prefecture in 2013.
We are currently considering new candidate sites foreach of our domestic plants and group companies. In
order to quickly achieve and further increase themaximum renewable energy output of 150MW, one
the non-financial KPIs in our management plan,"Mission 2030", we will promote the introduction ofsolar power generation facilities at the Chiba Plant
and overseas offices (Singapore, etc.) and study thepossibility of introducing such facilities at all ourbusiness sites.

DENKA Solar Power Shibukawa

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Initiatives to reduce CO2 emissions across the entire supply chain
In addition to managing supply chain emissions, Denka is also looking to reduce CO 2 emissions by evaluating and using the Carbon Footprint of Products (CFP) for each product. We are also focusing on
providing products that contribute to the environment and reduce environmental impact through the use of our own products and technologies. Further, in addition to our own emissions (Scope 1 and 2), we will
explore the possibility of collaboration across the entire supply chain for Scope 3, which is indirect emissions caused by raw material procurement, distribution, and sales, and will establish specific reduction
targets and then promote countermeasures.

Addressing our Carbon Footprint
Reducing CO 2 emissions is an important step toward solving the global issue of climate change. This requires understanding the CO 2 emissions (Carbon
Footprint of Products, hereinafter CFP) generated through the manufacture of our products and sharing information across the supply chain. In October
2022, Denka joined the Green × Digital Consortium, established by the Japan Electronics and Information Technology Industries Association (JEITA), toestablish a CFP calculation system using digital technology and to achieve the efficient linkage of data across supply chains. Through the activities of thisconsortium, we will promote visualization of CO 2 data, such as supply chain emissions (Scope 1-3) and CFP, and aim to promote cooperation among
business operators and improve the global competitiveness of our products.

Initiatives for Environmentally Conscious Products and Technologies
Plastic containing natural materials PLATIECO ®
(Polystyrene Containing Eggshell)

Carbon Negative Concrete "CUCO" Project

Acetylene Black

CUCO is a consortium of 55 companies led by Denka, Kajima

Acetylene black is a variety of carbon black, a conductive

Advanced Materials Research Department at the Denka Innovation Center

Corporation, and Takenaka Corporation implementing the "Green

material and is produced by the thermal decomposition ofhas developed a sustainable plastic called “PLATIECO ®”, made through aInnovation Fund Project/Project for Development of Concrete andacetylene gas. Our unique thermal decomposition technology

process of dispersing and combining egg shells with polystyrene-based

Other Manufacturing Technologies Using CO 2,", adopted by the New

provides extremely low levels of metallic foreign matter,resin, with the aim of reducing the amount of plastic used and utilizing

Energy and Industrial Technology Development Organization

ultra-high purity, and excellent conductivity. Acetylene blacknatural waste. This product has the same durability and moldability as(NEDO).

is used to increase the capacity of lithium-ion batteries inexisting polystyrene resin and contains more than 50 wt% * of eggshell. In

Through this project, we aim to develop highly versatile carbon

xEVs and as a raw material for ultra-high voltage cables that

2022, it was put into practical use in the plastic model (Gunpla) Mobile Suit

negative concrete, construction technologies, establish quality

efficiently transport electricity generated by clean energy

Gundam series made by BANDAI SPIRITS. In the future, we will contributeassessment technologies, and promote its use around the world. In

offshore wind turbines, thereby contributing to a sustainable

to the reduction of CO 2 emissions in society as a whole by deploying ouraddition, through active CO 2 fixation in concrete, which will besociety.

products in a wide range of applications, such as daily necessities, foodaddressed through this technological development, we will promote

containers, and home appliances.

the transition from decarbonization to "active
carbon" to play our role in the reduction ofgreenhouse gases.

CUCO Homepage
https://www.cuco-2030.jp/*wt% (weight percent): Unitof concentration measured
in weight (Example: When
50 g of PS resin is mixed
with 50 g of eggshell, 50
wt%)

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Our Support of the Task Force on Climate-Related Financial Disclosure (TCFD)
In September 2020, Denka announced its support of the TCFD and began participating in the TCFD Consortium.
Going forward, we will carry out ongoing assessments focused on risk and opportunities arising from climate change and other relevant
factors, including changes in government policies, regulations and market conditions as well as technological breakthroughs in the course ofacross-the-board initiatives aimed at realizing the low-carbon society and decarbonized economy envisioned by the Paris Agreement.

Governance and Risk Management

Metrics and Targets

With regard to Denka’s response to medium- to long-term concerns arising from climate change, the Boardof Directors supervises these policies. Meanwhile, the Sustainability Promotion Department is charged
with overseeing company-wide initiatives to counter climate change under the instruction of the executive
officer responsible for supervising the promotion of environmental countermeasures. Related mattersdeemed particularly important, including the formulation of medium- to long-term targets, the revision ofbasic policies and priority measures and the determination and evaluation of management indicators are
discussed by the Sustainability Committee, with the representative director making final decisions.

The Denka Group has positioned reducing the volume of CO 2 emissions from its operations as a matter of utmost importance in terms of environmental
management in order to achieve a 60% reduction from FY2013 levels by FY2030 and achieve carbon neutrality by FY2050. In addition to promoting energy
conservation and expanding renewable energy sources, namely hydroelectric power generation, we are also studying the introduction of innovativetechnologies, including making changes to manufacturing processes that do not emit CO 2 and the use of hydrogen. Denka is also currently working on joint
development with external research institutions with the aim of adopting such technologies by FY2030. Moreover, we will push ahead with efforts to reduce
the environmental burden attributable to our entire value chain by expanding the scope of our initiatives to address issues associated with the total life
cycles of our products.

Responding to Risks and Opportunities
To assess risks and opportunities arising from climate change, we have conducted scenario analysis using the “below 1.5°C scenario” (Glasgow Climate Pact), and the “below 4°C scenario”, which assumes that global temperatures will continue to rise at their current pace andwill continue to review the impact we expect to face in FY2030 and the countermeasures we must implement. The scenario analysis revealed that, in areas of government policy and legal regulation, we will be confronted by risks arising from the introduction of carbon taxes,
carbon pricing, European battery regulations and carbon border adjustment measures. On the other hand, it is expected that Denka will meet growing sales opportunities for its LEAF carbon agent and electronic materials for use in xEVs and other products, reflecting its
diverse product and business portfolio. We will continue to strive to quantitatively assess the business risks and opportunities lying ahead and reflect the results in our management planning and business strategies based on appropriate courses of action in line with TCFD.

Identification of Climate Change-Related Risks and Opportunities Based on Scenario Analysis
Scenario

TCFD classification

Expected impact

Applicable Division (expected applicable products)■Risks ■Opportunities
Impact on the business field

Countermeasures

Introduction of carbon tax and emission trading
systemLarge

All divisions

・Growing costs associated with overall volume of CO 2 emissions and/or
emissions in excess of upper limits set by emissions quotas

・Progress in energy-saving measures to reduce CO 2 emissions andreduction of non-energy derived CO 2 through the introduction of newtechnologies

Establishment of new ratios for the introduction of
biomass-derived fuels and increased demand for
mandatory plastic resource recycling (waste reduction)

Small

Polymer Solutions, Electronic & Innovative Products, Elastomer &Infrastructure Solutions

・Deterioration in product properties and increased costs due to the moveaway from single-use plastics and the increased use of alternative biomassderived raw materials

・Promotion of resource recycling involving styrene-based resin byintroduction of chemical recycling technologies, switchover to plastic
products incorporating bio-polymers, improvement of physical properties,
cost reduction

Technology &Reputation

Decarbonization requirements for products that emit
large amounts of CO2 during production and global
promotion of CCUS

Large

Elastomer & Infrastructure Solutions(cement, special blends, calcium carbide, chloroprene)・Increased manufacturing costs
・Promotion of alternative materials if no action is taken

・Information disclosure following early introduction of CFP assessment
・Progress in energy-saving measures to reduce CO 2 emissions andreduction of non-energy derived CO 2 through the introduction of newtechnologies
・Seeking opportunities for collaboration with surrounding companies andlocal government for each business site

Resource
efficiency

Emergence of new technologies with advantages interms of LCA (CFP)

MediumElectronic & Innovative Products (thermal materials, etc.)

・Failure to disclose CFP calculations may hinder exports of alternative
materials to EU countries

・Expansion of production capacity in line with growing demand・Promotion and disclosure of CFP calculations, reduction of CO 2
emissions during product manufacturing

Energysources

Progress in transition to clean energy

Large

All divisions

・Growing use of renewable energy and hydrogen-fired energy

・E xpansion of hydroelectric power generation capacity, the utilizationof hydrogen-fired energy, and the planning of a hydrogen production
process (electrolysis of water) fed by hydroelectric power

Expansion of existing products and development ofrelated parts in line with the increased use of EVs

MediumElectronics & Innovative Products(power control units installed in xEVs, ceramic substrates used as thermalmaterials in batteries, spherical alumina, thermal materials, acetylene black, etc.)
Elastomer & Infrastructure Solutions(DENKA ALCEN , amorphous silica paper for thermal insulation and fire
prevention for lithium ion batteries)

・Growth in product demand for EV-related components
・Determining feasibility for application, mass production, sales expansion
・Decrease in demand for internal combustion engine components

・Expansion of production capacity in line with growing demand・Verification of performance requirements through user work, promotionof trial production through collaboration with other companies, anddetermination of business feasibility to meet these needs, including price・Capital investment and new product development
・Development of products for new xEV applications

Development of renewable energy power supply
systems

MediumElectronics & Innovative Products (acetylene black)
Elastomer (high-voltage cable)

・Increased demand for components for use in storage batteries and thedevelopment of transmission networks

・E xpansion of production capacity in line with growing demand and thedevelopment of new products with superior functions

Damage to production facilities due to drought caused bychanges in rain patterns, severe flood damage causedby typhoons, heavy rains, floods, etc., shutdown ofplants, and disruption of supply chains (supply network)

MediumAll divisions

・Loss of profit due to the suspension of production activities and theemergence of costs associated with the restoration of production facilities
・Stagnation in our production and sales activities due to facility damage
incurred by raw material suppliers and product consumers

・Strengthening of facility maintenance measures due to the revision of
the expected level of disaster damage and an assumption of a disaster ofgreater magnitude
・Diversification of supply chains

Growing number of heat stroke cases due to risingtemperatures and infectious diseases (outbreaks of
new infectious diseases）

MediumLife Innovation

・Growth in demand for diagnostic reagents and vaccines, including those fornovel infectious diseases

・Development of new diagnostic reagents and vaccines

Growing demand for infrastructure development
in line with the increasing magnitude of natural
disaster damage

MediumElastomer & Infrastructure Solutions・Growth in demand for infrastructure-related products and services aimed atpromoting disaster prevention measures and enhancing disaster resilience・E xpansion of production capacity in line with growing demand and thedevelopment of new products with superior functions

Government
policies
and legal
regulations

1.5℃

Item

Products/
services

Physical risks

４℃
Products/
services

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Our domestic plants and the surrounding natural environment (ecosystems)
Our Support of the Taskforce on
Nature-Related Financial Disclosures (TNFD)
Bibai
Ecosystem surrounding
Miyajima Marshlands

・Geese, etc. that flock here during migration

Along with measures to combat climate change, coexistence with the natural environment is
becoming increasingly important to establish a sustainable society, and the creation of a framework
for international information disclosure is in full swing.
The Denka Group has set forth “Reduction of environmental burden and the preservation of
biodiversity” in our ESG Basic Policy. Based on this policy, we have commenced measures inaccordance with the beta guidelines issued by the TNFD(*), a biodiversity information disclosure
framework, with the aim of understanding the environmental impact of our business activities andmaintaining and improving them.

Faddy fields
Fields and meadows

Gosen

Paddy field ecosystems

・Overwintering swans, waterfowl, etc.

Omi

We expect that it will take some time to collect, organize, review, and make decisions on naturalenvironmental information. Using the LEAP approach* recommended in the TNFD guidelines, Denka
began taking action in September 2022 with a view to finding contact points between our businessactivities and biodiversity and identifying priority issues.
More specifically, after conducting a surveys of the natural environment surrounding seven businesssites in Japan using public data and literature, we have begun extracting and assessing points ofcontact with nature, focusing first on our Omi Plant (Itoigawa, Niigata), which has 17 hydroelectric
power plants in the nearby mountains and has the greatest contact with the natural environment.
Based on these surveys, we will analyze the risks and opportunities that face us in relation to thenatural environment and take concrete measures to conserve biodiversity. In the near future, we will
gradually expand the scope of our activities to other business sites and continue the cycle of theabove activities with the aim of maintaining and improving the natural environment from a long-term
perspective.

Subalpine forest ecosystem

Omuta

Power plants

Umikawa No. 1, No.2, No.3 , No.4,
Sasakura No.2

Gosen Site, Niigata Plant

Gosen Site, Kagamida Plant
Kita-otari, Yokokawa No.1,
No.2, Otokorogawa, Oami,
Himekawa No.6, Nagatsuga,
Takigami, Kotakigawa

Omi Plant

Denka Elastolution G
Isesaki Plant (Ota)

Power plants

Isesaki Plant

New Omigawa,
Omigawa

Kanetsu Medical Branch
Denka Company Limited
Head Office (Tokyo)
Chiba Plant

Tidal flat ecosystem

Shibukawa

Denka Polymer G

Denka Astec Co., Ltd. G
Tokyo Medical Branch
Ofuna Plant

Omuta Plant

Denka Innovation Center

G Kyushu Plastic Industry Co., Ltd.

Estuarine ecosystem of the
Yoro River

River ecosystem of theAgatsuma River

Chiba

・River organisms, etc.

・Various benthic animals in estuarine tidal flats

Our offices and facilities are scattered across Japan, and the surrounding natural environment varies. We will conduct
surveys on the points of contact with the natural environment at each of these sites and facilities and evaluate them forbiodiversity.

Relations between business operations and nature

Processing/
manufacturing

Shibukawa Plant

Hokushinetsu
OfficeFukuoka Medical Sales Office
Fukuoka
Branch・Tidal flat organisms endemic to Ariake Sea, rare birds, etc.

*The process of systematic, evidence-based assessment advocated by TNFD for companies to disclose nature-related risks andopportunities. It consists of four phases (Locate, Evaluate, Assess and Prepare).

Raw material
procurement

Urban areas

Power plants

Initiatives to conserve biodiversity

A preliminary survey was conducted at Omi Plant
from September to November 2022. We evaluatedbiodiversity at each point of contact while confirming
the relationship between our business activities andnature in terms of whether they are dependent on or
have an impact on nature. In the future, we willcontinue to expand the number of target sites andconduct surveys and formulate countermeasures
where necessary.

Along rivers andestuarine tidal flats

G Group companies

・Rare birds of prey, plants, amphibians, butterflies, etc.

Value chain

ForestSapporo Medical Sales Office

Sapporo Branch*TNFD: Taskforce on Nature-related Financial Disclosures
The official guidelines for biodiversity-related disclosure are scheduled to be released in the fall of 2023.

Understanding priority issues throughpreliminary biodiversity surveys at Omi Plant

Example of survey results

Bibai Plant

Name of site/facility

Business
activity

Target Area, etc.

Water conservation
forests

Water
conservation

Upper and middle reachesof the Himekawa

WeirIntake waterTransmission linePowertransmission

Plant,
manufacturing
facility

Processing/
manufacturing

Hydroelectric power
plant

Power
generation

Dependence/impact on nature
Dependent

ImpactEcosystem
integrity

Importance of
biodiversity

Water stress

Water sources used for hydroelectric power and industrial water are also
important biological habitats

〇

―

High

High

―

Himekawa, Omigawa,Umikawa and Hayakawa

Intake weirs are installed in rivers such as the Himekawa.

〇

〇

High

High

High

Around the power line

Power transmission lines run through bird habitats

―

―

Small

Large

―

Secondary forests and the Omigawa are located around the waste storage
area

―

〇

―

High

―

Omigawa is used as a water source and drainage

○

〇

High

High

High

The plant's green space faces a secondary forest, and part of it is also used
as green space.

〇―

Medium――Power is generated using river water sourced from Himekawa, etc.

〇

―

Small

Small

Small

Plant & surrounding area

Area surrounding thepower plant

Relationship with the natural environment

・Ecosystem integrity: assessment of the number of species, extinction risk, and ecological natural capital of the natural environment (region)
・Biodiversity Importance: Assessment of the importance of an area as a legal or internationally protected area, endemic ecology or endangered species habitat, etc.
・Water stress: evaluation of the amount of water (fresh water) used in relation to the amount of water (fresh water) supplied by the natural environment (region)
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Message from the Chief Human Resource Officer
Our management plan “Mission 2030” has begun. There are various KPIs in this plan, and we will be carrying out various
activities to achieve them, and we recognize the need to strengthen the link between the management plan and the humanresources strategy more than ever. Furthermore, in order for our company to enhance its corporate value, we would like tocreate an environment in which a diverse range of human resources can respect each other and fully demonstrate their abilities.
As a result, I believe that the most important theme, and my mission, is to create a corporate culture in which each employee
thinks about the purpose of our work and how to build their own career. I also believe that good internal communication is thebasis for promoting these activities, and would like to promote effective initiatives in various ways.

Ikuo Ishida
Human resources
value creation

Denka’s core values of “initiative”, “integrity”, and “empathy” make it
a company where each individual can realize personal growth

Our management plan, “Mission 2030”, sets out three policies, which are, strengthening thehuman resources development systems, promotion of diversity, equity, and inclusion, andhealth and productivity management and work style reform. We set strategies and 2030
targets based on these policies. As for investment in human resources, we plan to invest¥500 billion over eight years, aiming to become a company where each person can feel theirown personal growth through Denka’s core values of “initiative”, “integrity”, and “empathy”.
We are also proactively working on system reforms with the aim of becoming a company
PolicyManaging Executive Officer
Chief Human Resource Officer

where each employee can experience personal growth. In April 2023, we conducted the 3rd
Employee Awareness Survey to serve as a guideline for future human resource policies. By
analyzing the results of this survey, we will identify issues that hinder the achievement ofgoals and the development of a corporate culture based on initiative, empathy, and integrity,
formulating and implementing improvement measures.

StrategyStrengthening of human resources
development systems

Cultivation of future executive manager candidates, building of company-wide,
integrated education framework, and fostering of a selfdirected learning culture

Promotion of diversity, equity & inclusion

Fostering of workplace environments, systems, and culture that empowers
individuals with diverse ways of thinking to demonstrate their capabilities

Health and productivity management andworkstyle reform

Promotion of system reforms to create workplaces that employees will
“want to come to work again tomorrow”¥ 500.0 billion
Investment
in human resources¥ 260.4 billion

Denka Value-Up (5 years)

Mission 2030 (8 years)

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Previous human resources initiatives and KPIs (2030 targets)
In the creation of human resources value under the “Mission 2030” management plan, we set medium- to long-term KPIs linked to our policies of strengthening of humanresources development system, promotion of diversity, equity and inclusion, and health and productivity management and work style reform.
PolicyStrengtheninghuman
resourcesdevelopment
systems

Measures
Improve personnel systems
and evaluations

Improve employee
treatment
Improve management

2018

2019

2020

●Established new personnel
evaluation system●Reformed job groups andmanagement systems●Abolished qualiﬁcation levels●Integrated into job levels●Established new job allowance

2021

2022

2023

2030 Targets●Conducted study of job-based employment system●Launched strategic personnel changes●Reviewed human resource development programs●Improved pay●Increased starting salaryscale and bonuses●Abolished associate employee system●Revised wages for M-category employees●Established conversion system from S-category to M-category employees●Commenced training courses for managers●Launched succession plan

Average training
costs 2 times thatof FY2021●Established Career Planning Committee●Launched project to facilitate the hiring and promotion of females for managerial positions●Conducted workshops for women●Established new investment limits to improve the workplace environment●Held seminars to raise awareness on issues related to diversity●Acquired Kurumin certiﬁcation●Provided career training●Developed support measures for balancing work and●Expanded recruitment portfolio
nursing care commitments (help desk and handbook) ●Started providing support to balance workand nursing care commitments, developed●Launched the Global Promotion Task Forceseminars and video viewing programs●Conducted employee surveys on diversity●Released video learning material to promote a further understanding of diversity ●Held seminars to provide support for balancing work and childcare commitments

Promotion ofdiversity, equity &inclusion

Ratio of women/foreign
nationals/mid-career hires
in managerial positions
Percentage of male
employees to takechildcare leave

Ratio of mid-career hires●Systemized innovative working styles (telework, etc.)●Established investment limits for workplace●Introduced
environment improvement
telework system●Expanded shift breakers●Introduced staggered●Relaxed requirements for employees to take childcare and nursing care leave
working hours system (revised)●Introduced Shinkansen commuter passes

SystemWork style reform●Hourly paid leave trials began at all production sites
Employee engagement

Promotion ofhealth andproductivity
management●President begins visiting and greetings
at work sites in person●Conducted 2nd Employee Awareness Survey●Conducted 3rd Employee Awareness Survey●Recognized as a Certiﬁed Health & Productivity Management●Started payment of nursing/nursing care leave (revised)●Established Health Promoting Section
Organization 2023 and part of the White 500●Introduced ﬂexible measures to shorten working hours●Announced Declaration of Health and Productivity Management
for the purpose of providing child and nursing care (revised)●Held Denkaʼs Health Week (seminars)●Held gait measurement sessions to prevent falls●Introduced Health Support App (&well)(all production sites)●Decided on future policies aimed at a workplace free
●Recognized as an Certiﬁed Health &Productivity Management Organization 2022 of passive smoking●Began offering support to quit smoking●The 1st labor and management jointly
sponsored walking contest●The 2nd labor and management jointly sponsoredwalking contest

Overtimehours

50％

85％
50％

30 hours or less/person/year

Percentage of
employees taking
annual paid leave

100％

Working-from-rate

2 days/week*Head Ofﬁce

Employees withinappropriate weight limits
Employees withhigh stress levels

80％

10％ or less
40％
12％ or less

Employees withgood exercise habits
Smokers

Reflecting employee awareness survey results on human resources strategies
Our company has been conducting employee awareness surveys on a regular basis since FY2017. Results for the FY2017 survey were reflected in various institutional reforms,
such as reforms to the personnel evaluation system and the job categories system, in an effort to improve the working environment of our employees. With the FY2020 survey, wereassessed the current situation and issues of the company, including the effects of the previous measures, and implemented planned measures to create an environment in which
employees could thrive, such as investing in improving the workplace environment (page60). The third survey was conducted in April 2023, and we are currently analyzing theresults and identifying issues.

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Strengthening of human resources development system
Future initiatives

FY2022 initiatives
1. Effectiveness verification and refinement of the personnel evaluation system• In FY2022, we confirmed the effectiveness of the promotion and incentive system.

2. Implementation of succession plans, including training for officers and general managers and training foroutside directors
3. Refinements of training• All of the job level-based programs planned for the first half of FY2022 have been implemented. Outsourcing was also
effectively used for training operations.
• Training was enhanced prior to oversea assignments (training on compliance, management, and cross-cultural
understanding for expatriates).

4. Recruitment and human resource utilization• In order to expand our recruitment portfolio, we hired recent graduates looking to change jobs
(young job seekers that had graduated from university within the last three years).
• In principle, we consolidated personnel changes in April, and strategic personnel changes were implemented inconsideration of long-term human resource development.

Promotion of diversity, equity & inclusion

4000

3,319

3000

453

2000
1000
0

2,866

FY20194,166
746

Current ratio and number of women in managerial positions(main offices)

4,081

4,198

745

779

（persons） ■Number
25

●

Ratio

3.5

20

2

15

3,420

3,336

3,419

5

FY2020

FY2021

FY2022

2. Support for balancing work andchildcare commitments• Dissemination of systems to support the dual-income
generation internally and carrying out awareness activities• Development of seminar implementation plans
for managers/involved parties• Case studies of employees taking childcare leave oninternal portal site

19

0FY20199FY2020

FY2021

FY2022

Percentage of employees taking childcare leave(main offices)
（％）
100
80

●

Women

96

●

100

Men

44

40
20
0

100

100

60

5

9

FY2019FY202020

FY2021

2

I took a month off for childcare leave right after
the birth of my first child. Because I was able toconcentrate on raising my child during mychildcare leave, I naturally became more involvedin the process, which persisted even after myleave period ended. This gave me a base tobalance work with raising my child. I am grateful
to my boss and colleagues for following up on mywork while I was away, and I want to do my best
to help out everyone else with whatever theyneed.

Yuhei Gonda

Electronic Materials ResearchDepartment, Shibukawa Plant

1

8

6

（％）
4
3

2

1

10

• Measures to support employee career plans and establishment of career
counseling centers• Maintaining succession plans(officer and general manager training/evaluation/human resource selection
system, career plan implementation)■

1. Active employment and promotion of female managers
Number of men and women employed (main offices)*A recruitment method in which employees of the company, external business partners,
and others who are trusted internally and externally introduce people who are appropriate
for the company

Column Promotion of men taking childcare leave

FY2022 initiatives（persons） ■Women ■Men
5000

• Conduct study of job-based employment system• Expand recruitment channels (career recruitment, referral recruitment*, etc.)

FY20220

Future initiatives• Formulating an action plan to promote diversity• Developing inclusive leaders• Conducting events for related parties concerned about balancing work and childcare• Developing diversity, equity, and inclusion policies• Continued expansion of recruitment of women, foreign nationals, and mid-career hires• Operating and thoroughly disseminating the new system based on
the Revised Child and Family Care Leaves Act(creating a workplace that allows for a balance between work andchildcare through training and dissemination of information)

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Health and productivity management and workstyle reform
FY2022 initiatives

1. Implementation of investments to improve the workplace environment
In accordance with the company-wide policy for work style reforms issued in July 2020, we established a
new capital expenditure budget from FY2021 with the aim of creating a more comfortable working
environment at each business office, motivating employees and improving productivity. We decided toinvest approximately ¥1.3 billion of the FY2022 capital expenditure budget in the improvement of theworkplace environment, and made investments of approximately ¥1.6 billion.

¥ 0.9 billion
2021¥ 1.6 billion

Major projects in FY2022• Renovation of rest
area/bathrooms in DENKA
Singapore Pte Ltd central
control building2022¥ 2.5 billion

2023 forecast

2. Conducting stress checks and holding results debriefing sessions

Recognized as a Certified Health & Productivity Management Organization 2023
and part of the White 500
For the first time, our company has been recognized as a Certified Health & Productivity Management
Organization 2023 “White 500” company, a certification jointly administered by the Ministry of Economy,
Trade and Industry (METI) and Nippon Kenko Kaigi.
This is the second consecutive year we have been recognized as a Certified Health & Productivity
Management Organization. This recognition honors corporations that practice particularly good health andproductivity management based on initiatives that address local health issues and health promotion
initiatives promoted by Nippon Kenko Kaigi. And the top 500 corporations certified as Certified Health &Productivity Management Organizations receive the even more distinguishing White 500 certification. In
January 2021, we established the Health Support Office as the executing organization for this initiative,
and in April of the same year formulated the Declaration of Health and Productivity Management, whichspells out the philosophy and action guidelines for health and productivity management. We began
centralized management of employee medical exam data, established KPIs based on analyses of these
data, collaborated with industrial health staff and health insurance associations, introduced remotesmoking cessation guidance and health support apps, strengthened specific health guidance, andregularly held health promotion seminars. In the future, we will continue to promote health in order tocreate a company where employees can work actively and in good physical and mental health,experiencing their own personal growth.

Stress check results debriefing sessions were held at all business offices, and afterwards, workplace
improvement training was conducted by a third party at those sites that requested it.

3. Implementation of collaborative measures with health insurance association① Strengthening anti-smoking measures(subsidies for smoking cessation clinics and aids)② Considerations for dental examinations③ Conducting measurement sessions for fall prevention(muscle mass measurement sessions and walking guidance)■

Column Health and productivity management
Health and productivity management is the strategic implementation by companies
from a managerial perspective to improve the health of their employees. By promoting
health and productivity management, we can contribute to society by eliminating
managerial risks (securing workers and stable operation in the face of a declining
workforce), improving corporate performance and brand strength, and reducing social
security expenses. Because each and every employee is healthy, we can realize aworkplace that places the utmost priority on safety, and each workplace is coming up
with various ideas. The health of our employees is the key to achieving the goals of the“Mission 2030” management plan.

Future initiatives• Creating a safe work environment free from passive smoking(establishing anti-smoking guidelines and strengthening anti-smoking support in collaboration with healthinsurance associations)

Daisuke Akatsuka

Deputy Director of the HR Dept. and Headof the Health Support Office• Holding feedback meetings on the results of medical exam data analyses to develop health measures
tailored to the characteristics of the health issues unique to each site
• Continue gate measurement sessions to prevent falls

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Message from the Chairman
In order for companies to continuously increase their corporate value in modern society, they are required to not only pursue profit, but also expand their perspective to the social
needs of shareholders, customers, employees, local communities and the world, thus contributing to the increase of the happiness for a wide range of stakeholders.
Achieving carbon neutrality and pursuing sustainability such as environmental preservation, promoting diversity and health management, respecting human rights and ensuringsafety are now the minimum conditions for a company to survive.
In fiscal 2023, we launched “Mission 2030”, a new management plan targeting fiscal 2030. The base for this will be our “New Vision” where we aim to respond firmly to these social
demands, with "Initiative," "Integrity," and "Empathy" as our core values, and "making the world a better place as specialists in chemistry" as our purpose. The pursuit of ESG
management and the achievement of SDGs over the medium term will form the basis of the non-financial objectives factored into the “Mission 2030” management plan.
In recent years, the company has taken various measures to strengthen its governance structure. In order to respond appropriately to changes in society, we are constantly
implementing reforms that are one step ahead of the curve, such as making the Board of Directors more compact and increasing the ratio of outside directors, introducing a skills
matrix, further strengthening supervisory functions through the introduction of an audit and supervisory committee system, and strengthening the sense of ownership through areview of the executive compensation system.
Through the promotion of the management plan "Mission 2030," we will continue to contribute to the sustainable growth of corporate value of the Denka Group by improving theeffectiveness of the supervisory and advisory functions through further activation of the Board of Directors and further upgrading of corporate governance, such as speeding up
decision-making, so that the management team can pursue activities to realize the social demands described above.

■Corporate Governance System
General Meeting of Shareholders
Appointment/dismissal

Board ofDirectors

Business Divisions
ReportSustainability
Committee

ManabuYamamoto
Chairman and Director

Advise/proposeAssistCollaborate

Executive Officers

Appointment/dismissal

Executive
Division

ReportExecutive Directors

Consult

Audit
Committee
OfficeNomination andRemuneration Advisory
Committee

Full-time staff
in the Audit
Committee
OfficeAppointment/dismissal

Appointment/removal

Representative Director

Recommending/Proposing

Audit

Directors(Audit Committee Members)

ReportReportAppointment/dismissal

Audit Committee

Directors (excluding Audit
Committee Members)

Supervise

ReportAffiliatedCompanies

Internal Audit

Audit

Accounting Auditor

nternal Control DivisionInternal Audit Division(Administration Department / Legal Department /Environmental & Safety Department /Quality Assurance Department, etc.)

Whistle-blowing System

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Round-table discussion with our Outside Directors
1 Recommendations for creating the Denka Vision and Mission 2030■

"Formulation of the vision and management plan started with discussions
among our young employees."

Achieving "Mission 2030" withan eye toward the future

Yamamoto: In the process of creating "Mission 2030", we first organized a vision project to serve as
the basis for our management plan. I believe this process was very important in terms of involving
the whole company. The vision painstakingly created by our young employees who will lead the next
generation was fed back to management, including Outside Directors, and there was a goodconnection from the perspective of further developing the aspirations of our younger employees.
Fukuda: The targets outlined in "Mission 2030" are very ambitious and cannot be achieved by mereextension. I think it is admirable that these new targets came up in discussions involving our young
employees.
Matoba: I believe it is wonderful that "Mission 2030" was devised from the bottom up from thedrafting stage. However, with the limited amount of time available at board meetings, the talks
tended to become more a case of stating opinions rather than a detailed discussion. It would havebeen more productive if there was a form of free discussion with the employees who made the initial
draft, even if it was in the form of a brainstorming session.

Recommendations for "Mission 2030"■Importance of the concept
Yamamoto: I suggested the importance of having a concept in management planning. "The future iswords, the future is systems." Where will the global chemical industry be in three, five and ten years?
Where should Japan and Denka position ourselves? The most important part of implementing astrategy is translating the concept into words and sharing it. Because the future is created by words.
And, the future is systems. It is important to create the necessary systems and offer the rightToshio Kinoshita

Akio Yamamoto

Miyuki Matoba

Yoshiyuki Fukuda

Director,
Audit Committee Member

Director,
Audit Committee Member

Director,
Audit Committee Member

Director

incentives to achieve our goals. It is necessary to ensure the right systems are in place to reach yourobjective. Simply setting a goal and encouraging one will not help an organization achieve its goals.
The system may not be perfect at first, but I have often suggested the importance of continuously
maintaining that mindset.

Denka’s new management plan “Mission 2030 (M30)” was launched this April. We
asked our Outside Directors for their objective opinions on the plan, including theirthoughts and appraisal, and about issues standing in the way of achieving
sustainable corporate growth.

■Portfolio transformation
Kinoshita: The medium- to long-term business plan is based on discussions about current businesssustainability and the establishment of new business models. Can we continue along the same lines
until 2030, and what kind of business models do we need to create to survive? This is true of every
company. And in a company like Denka with more than 100 years of history, it is needless to say that
there is value in what we are doing now or have done up to this point, but it is not necessarily the
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We need to make objective
recommendations on what to stop,
what to strengthen, and what new
things to start.

case that all of our business areas are contributing to overall profit. Sometimes it is necessary tosemiconductors, batteries, and healthcare. In order to achieve the high goals set forth in themake the hard decisions. I suggested that in formulating "Mission 2030" it would be beneficial to"Mission 2030", we need to actively engage in strategic investment, including M&As. M&As havediscuss our portfolio.

proven to be difficult for us in the past and we don’t have a good track record.

Fukuda: In our previous management plan, "Denka Value-Up," we decided to withdraw from the cement

Kinoshita: Organic growth can be difficult for any company, and trying something new will not always

business, and we will not be able to achieve the targets set out in "Mission 2030" unless we continue towork out. This is why we have established Corporate Venture Capital (CVC) funds with Pegasus

transform our business portfolio. In order to achieve our lofty goals in fiscal 2030, we must act quickly.

Tech Ventures in California, USA.

Matoba: In today’s rapidly changing business environment, everything may not go as planned. There

The important thing to keep in mind in going forward with CVC is to get involved from the stage of

may be times where you become too pre occupied on seeing things through. As an Outside Director,

considering investment to think about how much risk we can take on. Otherwise, it won’t be a

I am aware that I have a role to express a more objective opinion when it is time for change.

business for Denka. However, our employees do not have the experience and knowledge to create
new business models from an investment perspective. That's why it's important to take advantage of■Financial Strategies & KPIs

this opportunity to gain experience even if we make a few mistakes along the way. I believe that the

Fukuda: As Outside Directors, we made various recommendations regarding the establishment ofBoard of Directors has an important role to play in focusing on human resource development while

the Financial Strategy Department (May 2022) and including ROIC as one of our KPIs. Denka is areviewing the progress of each of our business areas.

blue-chip company with an equity ratio of 50%. As a result, I believe the idea of using outside capitaland borrowings to leverage and cultivate new businesses will spread within the company.
Kinoshita: KPI targets are absolutely necessary. A plan without numerical targets cannot be properly
evaluated. In our new financial indices, segment divided ROIC was included, together with ROE in
our KPIs. The important thing, is each personnel of each business division actively thinking about
what is needed to achieve the ROIC goals, and taking necessary actions.
Matoba: That’s right. It is important that everyone knows why we are aiming for those numbers anddoes everything they can to achieve them. We would also like to sit down with executives and think

Human resource development and utilization
Yamamoto: I think there are two issues to be addressed in order to ensure "Mission 2030" isimplemented as planned. The first is creating a healthy business portfolio. As we mentioned before, weneed to think about what business areas we need to withdraw from and what areas we need tostrengthen. The second is how to go about creating new businesses. People who work on the front line
have a special attachment to the work they do, so they have a role to offer objective recommendations.
Another important point is the development and utilization of human resources. The domestic

about it.

employment environment is completely changing, and we need to spend more resources on bringing

2 Challenges associated with "Mission 2030"■

necessary human resources. Initiatives to achieve diversity, equity and inclusion (D, E & I), such as

M&A and venture capital

proposal from a new perspective on what it is we should be doing.

Fukuda: Four of our business divisions, excluding New Business Development, have clearly

Matoba: We mentioned earlier that the "Mission 2030" growth strategy is ambitious, but the goals

identified priority areas and issues. For example, there are clear issues in the fields ofand specific initiatives set out in the creation of human resource value are still somewhat lacking.

in people from outside the company, designing human resource systems, and developing theemploying more female employees and foreign nationals are still in their infancy. I feel we need

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Strengthen corporate communications toconvey the diverse capabilities of Denka

Yamamoto: Management is aware of the need to increase the number of female and foreign

improvement of our company. I think we could have more opportunities to talk with the people thatmanagers. But it will take time to achieve our human capital goals. I don't think D E & I will be able towork on the front lines, as Outside Directors. I hope that this gesture would lead to conveying a

move forward without consciously thinking about what we can do to speed up our efforts.

message that we see and acknowledge them.

Matoba: You have to be brave enough to try something completely different. I think it's going to be a
big challenge not only for top management, but also for managers and workers on the front lines.

What we can achieve by sharing information and increasing communication

Enhancing corporate governanceto gain understanding about what we do rather than just doing it. We have to communicate more withKinoshita: I think we need more external communication. We are now in an age where it is important

Yamamoto: I believe Denka has worked hard to improve its governance framework over the past 10

the outside world. We need to take a more proactive approach to communication and use a variety

years or so. We have established a variety of corporate governance bodies in response to requests

of tools, not just the Internet. Ultimately, it is my hope that we can link this to SDGs and improvefrom Outside Directors. The way in which information is shared between outside officers, Executive

communication not only with our shareholders, but with all our stakeholders.

Officers, and the bodies under them has changed significantly.

Fukuda: I couldn't agree more. Denka still has a strong image as a cement and fertilizer

Kinoshita: This has greatly increased our work load (laughs). Discussions have become a lot moremanufacturer. We are not well known in the health care industry. Denka has a lot of outstanding

detailed and focused on the heart of the matter. When auditing our business divisions, the Audit

qualities and should be recognized more. We need to further enhance our external communication. I

Committee visits the factories and domestic and overseas subsidiaries and listens to theirfeel we need to talk more about what we hope to achieve through "Mission 2030".

perceptions of the issues they face, often resulting in heated discussions. I believe this is a very

Kinoshita: I think we need to have more of a sense that we should not just deliver information, but

good opportunity for us and for personnel working on the front lines.

need to involve and engage with stakeholders. It is important to establish a trusting relationshipthrough two-way communication. This will serve to raise Denka’s profile and attract talented

3 What we hope to achieve with "Mission 2030" and how we can make it better■

Corporate culture
Matoba: This is what I feel when I talk to people on the front line when I visit a business site for an
audit. Everyone is serious about their work and I believe there is a good corporate culture, but on theother hand, people feel that they can’t talk about things unless it goes through the proper channels. I
believe it would be beneficial to work on further improving our corporate culture and creating anenvironment where employees feel they can speak up.
Fukuda: Maybe it's tradition.
Matoba: We don’t have to do things as before. In my opinion, removing barriers for communicatingwith each other, leading to not adding, but multiplying each individuals’ abilities could lead topersonnel.
Matoba: I believe Denka has a strong foundation. We have told, not only to our institutional investors,
but also to our employees to spread this fact.
Yamamoto: Yes, that’s right. ESG management is attracting attention and corporate social
responsibility is being repeatedly questioned. I believe the essence of ESG management is how eachbusiness research division can contribute to a healthy and sustainable society through friendly
competition and the creation of new and profitable businesses. It is important to instill "Mission 2030"
in our employees. I hope that this will help each employee achieve growth and create an atmosphere inwhich they are happy to work.
(Date: May 11, 2023, Location: Denka Head Office)Denka Report 2023 Integrated Report64

ESG management

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Directors

Photo taken on July 10, 2023

Mizuhiro Uchida

Miyuki Matoba

Akio Yamamoto

Toshio Kinoshita

Manabu Yamamoto

Toshio Imai

Yoshiyuki Fukuda

Kazuo Takahashi

Ikuo Ishida

Director

Outside Director

Outside Director

Outside Director

Chairperson of the Board

Representative Director,
President & CEO

Outside Director

Representative Director

Director(Full-time Audit Committee Member)(Audit Committee Member)(Audit Committee Member)(Audit Committee Member)・See here for Director profiles. https://denka_sustainability.disclosure.site/en/themes/673
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Financialinformation

Our View on the Appointment of Directors
Under the new vision, in order to achieve the eight-year management plan “Mission 2030” through fiscal 2030, the Company aims to strengthen the management structure with Directors and Executive Officers,
while enriching the governance structure and supervisory function. In electing Directors, internal Directors are chosen from persons who possess a wealth of experience and achievements in various divisions
within the Company, while also possessing insights and adequate specialized knowledge as Director, and Outside Directors are chosen from persons who possess specialization required for continuous growthand improvement in corporate value of the Company and wide insights based on a wealth of business experience and management experience at other companies. The Company believes that it is important for
the Board of Directors as a whole to elect a good balance of personnel with a variety of knowledge, experience, and abilities, and ensure that the composition of theBoard of Directors is diverse in terms of gender, international background, work history, and other factors. Additionally, the Company believes that Independent Outside Directors should comprise at least one
third of Directors. The present ratio is approximately 44%.

Skills Matrix of the Board of
Directors
Chairman and Director

Manabu Yamamoto

Representative Director, President & CEO

Toshio Imai

Representative Director Kazuo Takahashi

Skills
スキル

Attributes
Independent
outsideAge

Number ofyears in office

○

67
64
63
61
66
61
74
71
49

10
4
2
0
2
0
8
8
2

President and Chief Executive Officer
Senior Managing Executive Officer

Director

Ikuo Ishida

Managing Executive Officer

Director

Yoshiyuki Fukuda

Director

Mizuhiro Uchida

Full-time Audit Committee Member

Director

Toshio Kinoshita

Audit Committee Member

Director

Akio Yamamoto

Audit Committee Member

Director

Miyuki Matoba

Audit Committee Member○○○

GenderCorporate Managing/ Human Resources
Corporate Planningvalue creation

○
○
○
○
○

○

*The matrix above shows the skills that the Board of Directors expects from them among knowledge and experience they possess.

○

○
○
○
○
○

○

Globalbusiness

Financial strategy/
accounting

○
○
○
○

○
○

Legal/
compliance

ESG/sustainability
E (Environment)

○
○
○
○

○

S (Society)

G (Governance)

○

○
○

○

○

○
○

○

○

○

Business value
creation/marketing

○
○

○
○

Research/
Intellectual
property

Technology/
manufacturing

DX

○

○

○

○

○

○

*Age and years of service are shown as of June 22, 2023.

(Skill matrix for managing executive officers who do not concurrently serve as directors)
Nobuyuki Yoshino Managing Executive Officer
Kazuya Tokumoto Managing Executive Officer
Hideki Takahashi

Managing Executive Officer

Rimiru Hayashida Managing Executive Officer

65
64
63
61

○
○

○

○
○

○
○

○
○
○

○

○
○

○

○
○

Necessary skills for the Directors and the reason they were selected
The skills considered necessary for the Company’s Board of Directors to make important decisions and supervise management under the new vision to reach the goals of the Company’s eight-year management
plan “Mission 2030” through fiscal 2030, and to promote ESG management through the priority management materiality issues are as follows.
SkillsReason for the selection of the skills

Corporate management / Corporate planning
Human Resources value creation
Global business
Financial strategy/Accounting
Legal/compliance

ESG/sustainability

Directors are needed who have extensive management experience and achievements to establish and review management plans aimed at realizing the Denka’s Vision and supervise the execution of duties to achieve these plans.
Directors are needed who have extensive knowledge and experience related to human resources value creation in order to realize human resource investment and system reforms, aiming to become a company where each and every
employee can gain experience self-realization and personal growth.
Directors are needed who have extensive experience in global business to fulfill our Purpose to “making the world a better place as specialists in chemistry” with an awareness of global megatrends.
Directors are needed who have extensive knowledge and experience in the financial strategy and the accounting field not only to ensure the accurate disclosure of financial information, but also to drive selection and concentration ofbusinesses, pursue optimal capital structure and improve profitability and efficiency.
Directors are needed who have robust knowledge and experience in the legal and compliance fields to ensure fair and trustworthy corporate activities appropriately responding to increasingly complex legal systems and regulations in Japanand abroad.

E (environment)

Directors with extensive knowledge and experience in E (Environment) are needed to fulfill corporate social responsibility working on the precondition for continuation of business, “Achievement of carbon neutrality,” “Sustainable cities andfulfilling daily lives,” and “Environmental conservation and minimization of environmental footprint.”

S (Society)Directors with solid knowledge and experience in S (Society) are needed to fulfill corporate social responsibility through the provision of safe and highquality products, respect for human rights, and participation in the effort to build a better
community.

G (Governance)

Directors with solid knowledge and experience in G (Governance) are needed to fulfill corporate social responsibility building a more advanced and effective corporate governance system that ensures transparency and fairness based on highethical standards.

Business value creation & marketing

Directors are needed who have market insight based on a broad perspective, as well as extensive business experience to ensure that all the three focus areas, ICT & Energy, Healthcare, and Sustainable Living, will be fully made up of“three-star businesses” that incorporate the three elements of specialty, megatrends, and sustainability, while promoting the transformation of business portfolio, considering also selling or exiting a business that is difficult to convert to a“three-star business.”

R&D/Intellectual Property

Directors are needed who have a track record of promotion of innovation, as well as deep knowledge in science and technology and a wealth of experience in proprietary technologies and intellectual property, in order to create businessvalue in the three focus areas of ICT & Energy, Healthcare, and Sustainable Living.

Technology/Manufacturing

Directors are needed who are deeply familiar with technology, and who have extensive practical experience and robust insight into manufacturing in order to create management values through process reforms to improve productivity,
ensure trustworthiness in manufacturing, and establish a safe work environment.
Directors are needed with a profound knowledge and extensive experience related to digital technologies and data utilization, as well as the ability to understand and analyze the nature of the Group’s business, and use this insight totransform it, in order to promote transformation of business model and organization through process reforms.

DX

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Basic Approach to Corporate GovernanceIn order to fulfill the expectations and trust of its many stakeholders, including shareholders, customers, local society, and employees, based on the Denka’s Vision (a vision of the future)comprising the Core Value that is the Company’s DNA to serve as the foundation to support the tiers above, Purpose that serves as the North Star to guide the Company, and the Missionthat the Company aspires to accomplish by 2030, the Company strives to strengthen its business foundation by improving its earnings power and expanding the scope of operations, while
also working to improve corporate value by making every effort to continue being a company that can win the trust and sympathy of society.
The Company considers corporate governance as the foundation for the above, and so we have striven to strengthen governance, in order to fulfill the responsibilities we owe to all our
stakeholders, and ensure the transparency and soundness of our management.

Governance chronology

Initiatives to Corporate Governance Thus Far

2007
To speed up decision-making▶ Cut the number of Directors by half
and introduce an Executive Officer
system2015

2008
Ensure that Directors monitor and supervise the execution of business on an equal footing

Improve the governance framework and raise standards of transparency and soundness of management▶ Abolition of executive titles (such as Senior Managing Director, Managing Director)▶ Increasing the number of Outside Directors (from two to three) and reducing the number of members of the Board of Directors (by two)

Clear separation of monitoring and supervisory functions from the execution of business

Create venues for free, vigorous and constructive deliberations, exchange of opinions and information and strengtheningof cooperation among Internal and Outside Directors and Auditors▶ Reassigning the authority of business execution and executive titles from Directors to Executive Officers

Flexibly perform checks on Directors▶ To step up round-table meetings of Outside Directors and Audit & Supervisory Board Members formerly held twice per year, hold around-table conference of Directors and Audit & Supervisory Board Members (current D&A Round Table)

Step up checks on management from an external perspective

Achieve optimum standards of corporate governance to ensure sustainable growth and improve medium to long-term
corporate value▶ Shortening the length of Directors’ appointments to one year
▶ By appointing two Outside Directors, the number of appointments of outside officers rises to four, including two
Outside Audit & Supervisory Board Members (per statutory requirements)▶ Compilation of the Denka Corporate Governance Guidelines

Create system enabling appropriate advice giving even outside of meetings of the Board of Directors,
by arranging ample exchange of opinions▶ Enhance the provision of advance explanation for outside officers regarding specific agenda items that require adequate explanation▶ Implement regular opportunities for outside officers to exchange opinions with top management

Speed up decision-making by deepening discussions of important management matters

Outside Directors freely discuss board meeting agendas and operations, the Company's medium- to long-term issues
and their solutions, and share them with Internal Directors from an independent standpoint▶ Establishment of a “Management Committee” comprising Directors, Audit & Supervisory Board Members (internal),
and some Executive Officers

Foster greater transparency and objectivity in business decision-making, with theBoard of Directors accepting diverse opinions and advice from the outside officers
with regard to major business topics including appointments, remuneration andother governance matters▶ Establishment of the Management Advisory Committee comprising all Outside Directors, all
Outside Audit Board Members, the Chairman and the President (currently the Nomination andRemuneration Advisory Committee)

2016

2017

Promote understanding of the Company’s medium- to long-term andshort-term business and research objectives▶ Holding business and research objective briefings (currently referred to as objective
briefings) for Outside Officers twice a year

Ensure adequate auditing and supervision of business execution by
Executive Officers▶ Clarification of the details of agenda and report materials at the Board of Directors meetings

Step up the effectiveness of the Board of Directors▶ Annual analysis and evaluation of the effectiveness of the Board of Directors by all
Directors and Auditors, and disclosure of the results in the Corporate Governance Report

Deepen understanding of the Company’s business, and stimulate debate at meetings of the Board of Directors▶ Holding “Outside Officer Liaison Committee” four times per year

Review of regulations regarding the appointment of retirees from the office of Chairman and President as
Counselors and Advisors.

▶ Abolish the office of Counselor

Clarify the roles of the Board of Directors and the executive structure, further enhance the effectiveness of
discussions at Board of Directors meetings, and further expedite its decision-making process▶ Reduce the number of Directors from 12 to 9, and raise the proportion of Outside Directors on the Board of Directors to over 44%

2019
Further strengthen corporate governance and improve corporate value by
further strengthening the supervisory role of the Board of Directors, byenabling more rapid decision making and vesting Directors who aremembers of the Audit Committee with voting rights at the Board of Directors
meeting▶ Shift from the “Company with Audit & Supervisory Board” model to that of a “Company
with Audit Committee”

2021

2023

Effective management of committees by strengthening independence and objectivity▶ Appoint an Outside Director as chair of the Nomination & Remuneration Advisory Committee

Strengthening of incentives▶ Revise the executive remuneration system
・Revision of compensation mix and enhancement of short-term incentives
・Introduction of an individual performance evaluation system
・Introduction of stock remuneration to Executive Officers

Sustainability-related activities, progress with achievement of non-financial targets and KPIs, and responses
to risks and earning opportunities▶ Established of Sustainability Committee, with Outside Directors and Full-time Audit Committee Members as observers

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Financialinformation

Director Remuneration
FY2022 Director Remuneration

We have set the remuneration for each Director (excluding Audit Committee
Members) based on their roles and responsibilities within the limit of the total
amount approved by the General Meeting of Shareholders. In order toenhance objectivity and transparency, remuneration is determined by the
Board of Directors after receiving advice and recommendations from theNomination and Remuneration Advisory Committee and this process is set
forth in our internal regulations. Remuneration for Directors consists of abasic remuneration set at a fixed amount as well as performance-linked
remuneration and stock remuneration. The performance-linked remuneration
is designed to increase awareness of Directors of their responsibility to work
to improve business and individual performance each fiscal year so as tofunction as an incentive, while the stock remuneration aims to instill a strong
sense of purposefulness toward achieving medium- to long-term growth incorporate performance and corporate value in our Directors. However,Outside Directors and Non-Executive Directors receive only basic
remuneration in light of their duties.

BreakdownAmountNumberofof
remuneration,
persons
etc.

Category

Directors(excluding Directors who
are Audit Committee
Members)(of which Outside Directors)

Cash remuneration
Basic remuneration
Number of
persons

279

5

（1）

（12）

5

million yen

Total

Performance-linked compensation
Number of
persons

231

4

（1）

（12）

million yen

Total

Stock remuneration
Number of
persons

Total

21

25

4

（―）

（―）

（―）

（―）

million yen

million yen

Directors(Audit Committee Members)(of which Outside Directors)

4

74

4

74

―

―

―

―

（3）

（36）

（3）

（36）

（―）

（―）

（―）

（―）

Total
(Of which Outside Directors)

9
（4）

353
（48）

9
（4）

306
（48）

4
（―）

25
（―）

4
（―）

21
（―）

*Remuneration for fiscal 2022 will be an amount determined based on policy under the system before the review described below.

■

Topics Outline of the revision of officer remuneration system (overview)
In response to the report and recommendations of the Nomination & Remuneration Advisory Committee, the Board of Directors resolved at its meeting held on March 13, 2023 torevise the officer remuneration as the following, with a focus on strengthening incentives, in order to make the system more conducive to the achievement of the “Mission 2030”
management plan.

① Revision of Remuneration Composition Ratio / Strengthening of Short-term Incentives② Introduction of an individual performance evaluation system

Increase variable remuneration for each officer to be strongly mindful of achieving profit targets of the management plan.

Introduce an individual target management and evaluation system toencourage each officer to strongly commit to achieving thefinancial/non-financial targets of the division under his/her control, andreflect the evaluations in the remuneration.

＜Image of the ratio of each remuneration paid to Directors (excluding Outside Directors)＞
Beforethe revisionAfter
the revision

Basic remuneration (cash, fixed)

Performance-linked
remuneration(cash, variable)Stockremuneration

7

2

1

Basic remuneration (cash, fixed)

Performance-linked
remuneration(cash, variable)Stockremuneration

6

3

1

③ Introduction of stock remuneration for Executive Officers
Introduce a new stock-based remuneration system to raise awareness of theneed to contribute to medium- and long-term performance improvement andincrease in corporate value in the same manner as Directors.

*The above chart shows the approximate ratio when operating profit is achieved based on the management plan and the evaluation for individual performance-linked remuneration is standard.

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Evaluation of the Effectiveness of the Board of Directors
1 Method of Evaluation
As we did in the previous fiscal year, Denka analyzed and evaluated theeffectiveness of the Board of Directors by having individual Directors
complete the “Self Evaluation Questionnaire”, which covers items related
to the effectiveness of the Board of Directors, such as scale, composition,
operation and 27 other items, and discusses the questionnaire results at
Board of Directors meetings.

2 Summary of Evaluation Results and Future Efforts
Results confirmed that the frequency and time of meetings of the Board of
Directors and its composition (balance and diversity of knowledge,
experience and abilities) are appropriate, and due to the further efforts of
the Nomination and Remuneration Advisory Committee and the D&A
Roundtable Meeting, it has also been confirmed that management
oversight and supervision is being properly implemented by the Board of
Directors, of which 44% are Independent Outside Directors.
While there have been improvements in monitoring and following up on
long-term business strategies and large-scale investment projects, there
was an opinion that the Board of Directors should continue to makeefforts to provide timely information and increase the number ofopportunities for free discussion, which was last year’s issue ofenhancing discussion of board of directors meetings. With respect tofurther utilization of the Nomination and Remuneration Advisory
Committee, the frequency of its meetings was increased and explanations
and materials were enhanced to further invigorate discussions. As aresult, we have seen a steady increase in its effectiveness, including areview of the executive remuneration system and the establishment of a
new training system for candidates for management positions. In order toensure the reliable operation of these systems in the future, we are awareof the need to continue discussions and make recommendations.
It was also pointed out that further careful selection of agenda items for
the Board of Directors and more efficient reporting would requirecontinued review and consideration, with an eye to speeding up thedecision-making process.
In light of these constructive opinions, the Board of Directors will continue
its efforts to improve its effectiveness, thereby enhancing corporate value
over the medium and long term and meeting the expectations and trust ofshareholders and other stakeholders.

Issues in fiscal 2023

Initiatives from Fiscal 2022
PLAN

Enhance monitoring
and follow-up of
long-term businessstrategies andlarge-scale
investments

Improving theeffectiveness of theNomination andRemuneration
Advisory Committee

Careful selection of
agenda items andconsideration of
more efficientreporting

DO

CHECK

ACTION

Confirmation of
improvements by
establishingregulations for periodic
monitoring andreview

Enhance monitoring
and follow-up of
long-term businessstrategies andlarge-scale
investments

Implementation ofregular reviews at D&A
Round Table meetings

Further utilize theNomination andRemuneration
Advisory Committee

Increasing the frequency of
meetings of the Nomination
and Remuneration
Advisory
CommitteeEnhancing thequality of explanations andmaterialsConducting
discussions on the reviewof the Board of Directors'
skills matrix and executive
compensation in line with
the new medium-term
management plan

Ensuring a steadyincrease ineffectiveness throughthe revision of theexecutive remuneration
system and theestablishment of a new
management personnel
development system,
etc.

More detailed
explanation of agenda
items and reports

Avoid repetition of
information provided
at Management
Committee meetings
and at the
pre-session briefings
on agenda items, andmake information
more concise

Provision of concise
and to the point
information

Creating more
opportunities for free
discussion to facilitate
the timely sharing of
information

Increasing thefrequency of D&A
Roundtable Meeting

Ensuring theappropriate
management of newly
established systems
Continued discussions
on the ideal role of theNomination andRemuneration
Advisory Committee
and the skills matrix

Careful selection of
agenda items andmore efficientreporting to speed up
the decision-making
process

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Management Status of Each Committee

Board of Directors and optional committees, etc.
Board of Directors (Met 15 times in fiscal 2022)

Nomination and Remuneration Advisory Committee (convened 4 times in FY 2022)

To accomplish the Company’s Mission in the Vision, the Board of Directors monitorsand supervises major operational decision-making and execution of business duties
by executive officers, based on strategic and management planning. The Board of
Directors as a whole appoints candidates to be Directors in line with the standards
for the appointment of both internal and Outside Directors, based on the belief that it
is important to appoint a good balance of people with a variety of expertise,
experiences, and skills.( For further details of our approach in appointing members of
the Board of Directors, please see page 60.)
In addition, in principle, the Company has discontinued the use of executive titles,(such as Senior Managing Director, Managing Director) for Directors, such that all
Directors may focus on monitoring and supervising the execution of business duties
from an equal standpoint. Also, the Company has set the length of Directors’(excluding Audit Committee Members) terms to one year, in order to facilitate flexible
checks on them at the General Meeting of Shareholders.

For major management matters such as nomination, remuneration and other elements ofgovernance, the Board of Directors has set up the Nomination & Remuneration Advisory
Committee, comprising all Outside Directors, the Chairman and the President, to fostertransparency and objectivity in management decision-making, informed by a wide range of
opinion and advice from Outside Directors. In the last fiscal year, this committee received
inquiries from the Board of Directors regarding the review of the executive structure, thedevelopment of the skills matrix, succession plans, and the executive remuneration system
and made recommendations and proposals following deliberations among the Committee.
Further, an Outside Director has served as chairperson of the Committee since FY2023.

Objective briefings (convened 2 times in FY 2022)
Briefings are held in order to enable Outside Directors understand our medium- tolong-term and short-term business and research policies.

D&A Round Table (convened 7 times in FY2022)
In order to facilitate in-depth discussions regarding management matters that are of particularimportance, the D&A Round Table is organized as a forum for free, open-minded,
constructive discussions, exchange of opinions and information, and strengthening ofcooperation between Internal and Outside Directors.

Outside Officer Liaison Committee (convened 4 times in FY2022)
Outside officers frankly discuss the nature of agenda and operation of the Board of Directors,
as well as the Company’s medium- to long-term issues and their solutions, from an
independent standpoint and share the results of the discussions with internal Directors, so as
to contribute to management.

Audit Committee (convened 14 times in FY2022)
In accordance with their fiduciary responsibilities to shareholders, Audit Committee Members and the Audit Committee work with the support of the full-time staff of the Audit Committee
Dept., whose independence from management is ensured, to conduct audits of the execution of Directors’ duties, internal control, business duties, and accounting, by exercising statutory
rights that include requesting reports on the businesses of the Company, investigations pertaining to business duties and accounting, and the appointment, dismissal, non-reappointment,
and remuneration of an auditing firm. In addition, the Audit Committee forms views on matters related to the election, etc. and compensation, etc. of Directors (excluding Directors who are
Audit Committee Members), including matters to be put forward at the General Meeting of Shareholders. Furthermore, the Company appoints candidates for Directors who are Audit
Committee Members based on its judgment that, in order for the Audit Committee to fulfill its roles and responsibilities, Audit Committee Members should possess appropriate experienceand ability as required for their duties, and that in particular, there should be at least one person with expertise in finance and accounting.
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Financialinformation

Policy on strategic shareholdings

Human rights initiatives

The Company will hold such shareholdings if it judges that they will contribute toWe, the Denka Group, share a common understanding of the importance of human rights throughout our businessbuilding a stable business relationship and maintaining and strengthening

activities. Based on the Denka Group ESG Basic Policy and the Denka Group Ethics Policy, we work to fulfill ourbusiness alliances in accordance with its growth strategy, thereby enhancing thehuman rights responsibility.

Company’s corporate value over the medium to long term. The Company will sell

We value diversity in terms of race, religion, gender, age, nationality, and disability, and will increase corporateshareholdings that are not in line with this policy. In accordance with the above

value by fulfilling such responsibility.

policy, the Company’s Board of Directors conducts a comprehensive annual
review of such shares from various perspectives, including the financial conditionof the issuing company, the volume of transactions with the Company and the

Denka Group Human Rights Policy

economic rationality of such transactions, and a comparison with the Company’s

The Denka Group Human Rights Policy was approved by the Board of Directors and enacted on

cost of capital. The number of issues of strategic shareholdings as of March 31,

September 11, 2023. This human rights policy applies to all Group executives and employees, and its

2023 decreased by 20 from the end of the previous fiscal year to 70, and the ratio

business partners and suppliers are urged to support and respect it. Furthermore, we have sent a

to consolidated net assets decreased by 1.68 percentage points to 9.97% from the

Self-Assessment Questionnaire (SAQ) to major suppliers regarding various risks, including human rights

end of the previous fiscal year.

risks, asking for their responses.
We will continue to promote awareness of and disseminate the Denka Group Human Rights Policy to all
Group employees and work systematically together with expert third parties on human rights due

Trends in strategic shareholdings

diligence and redress mechanisms.

FY2018FY2019FY2020

FY2021

FY2022

102

97

93

90

70

32,665

26,46833,24334,03429,956

Total net assets(Millions of yen)

250,481

254,014270,036

292,094

300,351

Percentage ofconsolidated net assets

13.04%

10.42%

12.31%

11.65%

9.97%

Number of issues
Amount on balance
sheet (Millions of yen)・The Denka Group Human Rights Policy

https://denka_sustainability.disclosure.site/en/themes/779

Signatory to the UN Global Compact
The Denka Group signed a petition expressing its endorsement of the United Nations Global Compact(UNGC) and was registered as a participating company on June 8, 2023.
UNGC is the world’s largest sustainability initiative that aims to build a sound global society through thecollaboration among the United Nations and companies and organizations. Companies and organizations

Number of issues of strategic shareholdings at the end of
March 2023 and the amount on the balance sheet
Number of issues

that sign the UNGC are required to support the 10 principles of human rights, labor, environment, andAmount on balance sheet

Unlisted issues

58 issues

3,551 million yen

Listed issues

12 issues

26,404 million yen

Denka has set forth the Denka Group ESG Basic Policy to address issues related to sustainability. In
addition, the Company has promoted three growth strategies in its “Mission 2030” management plan:business value creation, human resources value creation, and management value creation. The Company

Issues with declining number of shares held in FY2022
Number of issues

anti-corruption advocated by the UNGC, and strive to realize them through their business activities.

Total amount of gains related tothe decrease in the number of shares

Unlisted issues

2 issues

8 million yen

Listed issues

23 issues

7,412 million yen

is working to pursue sustainability in its business activities and strengthen its management foundation. By
signing the UNGC, we will clarify our corporate stance toward the realization of a sustainable society andput the 10 principles advocated by the UNGC into practice in our business activities.

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3 ■ Occupational and Process Accidents

Place the Utmost Priority on Safety
We put the utmost priority on worksite safety and health,facility security and disaster prevention in all aspects of our business activities

１ ■ Fiscal 2023 Activities
Companywide Targets
of initiatives to achieve an occupational
1 Promotion
accident frequency rate of 0.2 or less

Report storyof2 Achievement
zero serious accidents

Priority Initiatives
1 Creating Absolute Safety

A penetrative series of activities, from identifying the source of danger and construction of safety measures to establishing rules

2 Strengthening of Process Safety

Simulation of explosion leakage and response to natural disasters

Trends in the Number ofOccupational Accidents

Omi Plant Pipe Burst Accident

Absence

No absence

On June 14, 2023, at our Omi Plant, one employee from our partner company died andtwo others sustained injuries in an accident in which a pipe had burst during
maintenance work at. We prays for the deceased and extend our condolences to thebereaved family. We also take this opportunity to express our sympathies to the injured.
We sincerely apologize for the inconvenience and concern we have caused to local
residents, our many business partners and other persons involved. In addition to fully
cooperating with the investigation by the relevant authorities, we have established an
Accident Investigative Committee by inviting outside experts and professionals tothoroughly investigate the cause of the accident and formulate measures to prevent
recurrence.
In fiscal 2022, the number of occupational accidents was 24 (16 less than the previous
fiscal year) and the occupational accident frequency rate was 0.7 (0.3 points less thanthe previous fiscal year), giving a reduction in both measurements.
As in the previous year, one noticeable cause of accidents was a lack of due attention,such as the belief of workers in the safety of their surroundings. Therefore, we have not
only invested in safety measures to make our facilities inherently safer, we have also
promoted education to improve safety awareness (non-technical skills) and initiatives
to ensure compliance with and enhance awareness of basic actions.

3 Enhancing Education

Financialinformation

40

40
31

23

30

24

20

13

15
8

10

11

24

16

11

2018 2019 2020 2021 2022
NB: Number of occupational accidents at
Denka (including partner companies) andconsolidated subsidiaries with domestic
or overseas offices

Improved education system to bring about a training environment that enhances both hard and soft safety measures

4 Support for Affiliated and Partner Companies

Develop safety management system and promote activities for the whole group

5 Enhancement of Horizontal Functions

4 ■ Topics

Corporate Division to take the lead in horizontal development of good practices within the Group2 ■ Strategy to Achieve Objectives of Management Plan “Mission 2030”
In order to achieve an occupational accident frequency rate of 0.2 or less and 0 serious accidents by 2030, we
have introduced a strategy of "Creating absolute safety, establishing rules and a safe work environment throughout
the Group" and we are systematically working on the following strategies.

①"Equipment": Elimination of unsafe conditions by creating absolute safety
By utilizing capital investment limits for safety measures, we will reduce the risk of accidents caused by equipment.

②"People": Elimination of unsafe behavior by enhancing safety education
We will nurture human resources from both technical and non-technical perspectives, improve security technologies,
and eliminate accidents caused by employee behavior.

③"Management": Ensuring the effectiveness of safety activities through the review ofsafety management mechanisms
We will use IT to analyze strengths and weaknesses in safety and security and promote highly effective safety
activities throughout the Group.

■Safety staff are trained in all environment and safety, manufacturing, andengineering departments within the company, and measures are taken to
ensure both safety and operability by improving processes that workers
find difficult.
■In order for inexperienced workers and foreign workers to understand, we
have created an environment where everyone can work safely by using
pictograms and operating procedures in video media.

２．Prevention of Safety Accidents

Example of Pictogram Display■We are working to prevent safety accidents and automate monitoring by
introducing exemplary cases of ‘smart’ safety (inspection by drones,
installation of leak detection cameras, etc.) throughout the company.
■As a response to natural disasters such as earthquakes and heavy rain, weare endeavoring to avoid damage by promoting countermeasures that havebeen formulated from the results of damage simulations.

３．Activities of the Entire Denka Group"Equipment"
Elimination of unsafe
conditions

Safety diagnosis‘Smart’ security
Investment in safety measures

１．Fostering a Culture of Safety

Establishment of Group-wide systems“Management”
Review of safety management
systemReview of education system

Safety Promotion Meetings
Experience training

Safety staff training
Awareness education“People”
Elimination of unsafe
behavior■In order to accelerate the absolute safety measures of each groupcompany, we have set up a "mother plant" within Denka itself which
supports the safety activities of affiliated companies, thereby promoting
safety activities with a sense of unity.
■We are working to improve safety knowledge and awareness through theuse of e-learning to educate the entire group on laws, regulations, internal
rules, and safety awareness, as well as risk assessment.

Examples of Utilization of Leakage
Detection Cameras*Colored area indicates simulated leakage

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Risk management
Message from the Executive Officer in charge of the Internal Control Dept.,
Legal Dept., Administrative Dept., and Secretary Dept.
In order to provide high value to all stakeholders, including shareholders, the Denka Group has constructed an internal control system for the
corporate group and reports the results of the internal control to the Board of Directors, and is also developing and strengthening a group-wide
compliance system. Denka provides officers and employees of Denka Group companies, both in Japan and overseas, with compliance training
based on the Group’s common rules, such as the Basic ESG Policy, the Denka Group Ethics Policy, and the Standards of Business Conduct, toensure thorough compliance with social ethics and laws. Denka also operates a Group whistle-blowing system for early detection and earlycorrection of problems. Furthermore, in order to reduce capital costs, Denka will identify, evaluate, and manage risks in terms of both uncertainty
and business opportunities, and will continue efforts to make use of such risk management for Group management.

Ken Watanabe Executive Officer
Denka’s approach to sustainability andrisk management

Risk
evaluation

Changes in the business environment surrounding the Denka Group
Changes in politics, laws, economy, society, or the global natural environments

Common tools

Recurrence prevention

Management resources andcorporate culture within the Denka Group

Crisis response

Examples of crises in Denka Group companies,
other companies, industries, and international markets

Switching between the system fornormal times and emergency response

Risk
analysis

Early crisis detection

The Denka Group is working to strengthen its risk management system in order tominimize capital costs in the face of increasing uncertainty surrounding its business,
including rapid changes in the business environment and the full-scale transformationof its business portfolio. Specifically, in order to strengthen our risk management
activities in normal times, Denka is working to construct an integrated risk
management process based upon COSO Enterprise Risk Management frameworkthat provides advance prediction, assessment and analysis, visualization, planning ofrisk countermeasures, and monitoring of risks that may have significant impacts on
Group management. By doing so, Denka will strive to improve corporate value forstakeholders over the medium to long term by reducing impacts of risk exposure on its
business performance and minimizing its capital costs.

Risk
identiﬁcation

Risk countermeasures

Enterprise Risk Management initiatives

Risk management
Risk assessment

Risk management process

Denka’s Board of Directors recognizes that responding to the changing businessenvironment and various social issues is an important management issue that leads
to reductions of risks and to profit opportunities. The Board of Directors has
established The Denka Group Basic ESG Policy as Denka’s basic policy toproactively address these issues, and is working to improve the corporate value of
the Denka Group over the medium to long term by appropriately responding to eachrisk, such as by strengthening compliance systems at the corporate group level andby transforming our business portfolio, challenging ourselves to create new
businesses to solve social issues.

Emergency
system orcrisismanagement

System for normal times: Enterprise Risk Management

Annual targets and plans for Group risk management
Systems, authority, responsibility, intergroup communication training,monitoring, and overall structure PDCA

Initialcommunicationin case of crisis

Initial response
in case of crisis

Response to businessinterruption in theevent of a crisis, or
supply responsibility

Recovery
response
in the event ofa crisis

Denka Group policies and other group-wide rules such as basic policies,
principles, procedures, manuals, checklists, etc.

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Denka’s risk management structure
Denka’s Board of Directors is working to develop and improve anenvironment in which each executive officer can take risks, while atthe same time developing and improving Denka’s risk management
structure for the entire Group. In order to achieve these purposes, theManagement Committee and the Business Issues Reporting
Meeting, both of which are held monthly, discuss risk management inlight of economic values such as profitability, by identifying andevaluating various risks that may affect the Group’s management,
preventing the materialization of such risks, and devisingcountermeasures to minimize their adverse effects. In addition, theBusiness Issues Reporting Meeting monitors various risks, including
the status of achievement of the business plan.

Risk management structure during normal times

Board of Directors
ReportManagement Committee

ReportBusiness Issues Reporting
MeetingAlso, each of cross-organizational committees conducts
comprehensive and specialized risk management depending on thetype of risk, such as legal matters, capital investment, theenvironment, health and safety, quality control, startup investment,
and more.
Furthermore, Denka’s management divisions, including the Legal
Department, Quality Assurance Department, and Environment &Safety Department, is striving to manage Group’s risks of which eachof the departments is in charge based on the Group’s common rules.
In addition, with respect to risks specific to business divisions, therelevant divisions not only carry out risk management, but also,
especially with respect to those risks at each of the Denka Group
companies, directors and officers dispatched to the Group
companies from the division of the parent company carry out risk
management with support from the specialized departments of theparent company such as the Legal Department, Environment &Safety Department, and Quality Assurance Department.
Denka is working to further strengthen the risk management systemof the entire Group based on the concept of Enterprise Risk
Management, enhancing the functions of risk identification,assessment, and planning of countermeasures.

ReportRisk management:
Identification, analysis, and evaluation of risks,
formulation of response plans, instructions,monitoring, etc.

Enterprise Risk Management: Denka Group risk management committee
Risk management for specific risks: Each committee

Management Division
Risk management

Risk management

Business Division
Risk management

Group companies

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Denka’s risk management activities
Denka has established the Basic Guideline for Crisis Management
as basic rules for responding to emergencies in the event that a riskthat could have a significant impact on the management of the
Denka Group materializes. Based on this guideline, allmanagement departments, including the Administrative
Department, Environment & Safety Department, Corporate
Communications Department, Quality Assurance Department, andLegal Department, develop appropriate initial response rules,
including early detection and response to risks, rules for thecentralized aggregation of information, and rules for communication
with management team and external stakeholders. In order tominimize risks that could affect business continuity, such as
information leaks caused by cyber-attacks, Denka has establishedcommon Group policies such as the Denka Group Information
Security Policy, and Denka is implementing various initiatives
related to information security, including the protection of personal
information.
Also, with regard to risks in connection with product quality which isimportant for a manufacturer, to minimize risks that may affectbusiness continuity, Denka has established the Denka Group
Quality Issue Response Policy, and is implementing various
initiatives across the entire Group.
If, in a case of misfortune, a crisis does take place, CEO is todecide whether to establish a crisis task force in accordance withthe seriousness of the incident based on the Basic Guidelines for
Crisis Management. The relevant departments, including the Legal
Department, Environment & Safety Department, Quality Assurance
Department, and Internal Control Department, work closely
together and, when necessary, obtain the advice of outside experts
to conduct various investigations, analyze causes, and formulate
various countermeasures in an effort to prevent recurrence.
Based on the concept and framework of Enterprise Risk
Management, Denka is working to strengthen the risk management
system of the entire Group by conducting various activities toenhance its functionalities regarding risk management, such as risk
identification, risk evaluation, devising countermeasures, and drills.

Prologue

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management

Stakeholders

Financialinformation

List of risks and locations of articles describing our response
Category

Summary of major risks

Page number of articles

Awareness of social and sustainability
issues

P6- Message from the President, P10- Talk with the President,
P21- Important Management Issues (Materiality)

Execution of management plans andfinancial strategies

P24- Management Plan “Mission 2030”
P31- Financial strategy

Corporate governanceP61- Governance[ESG Information Site] “Solid corporate governance/Corporate conduct
deserving of stakeholder trust”
Improve corporate governanceRisk management &compliance

Risk management

P73- Risk management[ESG Information Site] “Solid corporate governance/Corporate conduct
deserving of stakeholder trust”
Maintain strict compliance with laws, regulations and corporate ethics,
risk management

Environmental
management

Climate change, abnormal weather, reductionof environmental impact, and biodiversity

P51- Environment

HR strategy

Recruitment, nurturing humanresources, health management,
diversity, workplace harassment andother human rights issues

P57- Social[ESG Information Site] “Solid corporate governance/Corporate conduct
deserving of stakeholder trust”
Whistle-blowing system, Denka Group Helpline, response to human rights risks

Quality & productliability

Product safety & quality control, andchemical substance control

P80 Quality assurance management

Accidents & disasters

Safety, health and disaster prevention

P72 Place the utmost priority on safety

Communication

Responsible dialogue with stakeholders

P81- Dialogue with stakeholders[ESG Information Site] “Products and technologies” Customer
satisfaction improvement activities

Information systems& security

System security maintenance andpromotion of DX

P75 Denka’s risk management activities[ESG Information Site] “Solid corporate governance/Corporate conduct
deserving of stakeholder trust”
Information asset management

Protection ofIntellectual
property & privacy
information

Protection of intellectual property &privacy information

P34 Activities related to intellectual property
Denka website: Privacy policy, [ESG Information Site] “Solid corporate
governance/Corporate conduct deserving of stakeholder trust”
Initiatives related to protecting intellectual property

Supply chain

BCP, export trade management[ESG Information Site] “Improvement of safety and quality of products” BCP
measures based on risk assessments of conflict minerals and raw materials“Solid corporate governance/Corporate conduct deserving ofstakeholder trust”, export trade management
P73 Enterprise Risk Management initiatives

Individual
businesses

Responding to changes in the businessenvironment

P36 Contributing to a sustainable society through technology,
P43- Message from division heads, business strategies, SWOT analyses

Businessmanagement

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Denka Group Internal Control (Mission, Vision, Value)
Our company is committed to improving the non-financial value of the entire group by enhancing internal control, improving business processes, reduce risks, and preventing
fraud. The Internal Control Department is organized to lead the force, and we envision of becoming a professional team that is trusted by stakeholders inside and outside thecompany by carrying out three activities : implementing assurance, giving advice, and assistance activities, all on a PDCA basis.
As one of the non-financial KPIs in management plan “Mission 2030” , we have set a goal of completing the establishment of a structure of internal controls (Internal Control
Framework) within the group by 2030, which packages standardized internal control initiatives.

Overview of internal control

１ Risk owners (sales, manufauturing,etc.)

Overseas corporate internal control regional management structure

Our company’s internal control system is composed of three lines of defense: the first line is the risk owners(sales and manufacturing sites, etc.), the second line is the management department that provides control
support and monitoring to the first line, and the third line is the internal audit departments that evaluate andassure the effectiveness of controls.

Internal control functions have also been organized within regional headquarters companies in Singapore andChina, and are working with the Internal Control Department to strengthen Group’s control.

2 The Internal Control Department as the third line
The Internal Control Department as the third line of defense has two independent organizations, the Internal
Control Steering Office and the Internal Audit Office. In addition to evaluation and assurance activities suchas the Management Assessment and Audit concerning Internal Control Over Financial Reporting (J-SOX)
and voluntary audits, the Internal Control Department also supports and assists the establishment of internal
control while effectively utilizing the Internal Control Framework, working together closely with risk owners
who lack knowledge and know-how.

3 Achievements (number of audits and support for internal control development)
In FY2022, we conducted 40 voluntary audits, 10 group companies for Company-level Control (CLC) and 2group companies for internal control related to Process-level Controls (PLC) under J-SOX,. In addition, 13
group companies, mainly overseas, have started to establish internal controls using the Internal Control
Framework, and the evaluation of 5 companies has been completed.

4 Reporting lines
The Internal Control Department reports directly to the president (solid line report) for audit results, etc., butalso shares the results with the Audit and Supervisory Committee (dot line report), which is another audit
function, to improve the efficiency and comprehensiveness of audits.

5 Awareness and dissemination of internal controls
The results of internal control evaluations and audits are also shared with relevant management departments(second line) and major group company executives, and a wide range of items are discussed and reported,
such as significant findings, specific actions to be taken, and good examples of control.

Overseas corporate internal control regional management structureInternal control regional management function(DCHA/Shanghai Representative Office)1 to 2 supervisors

Provision and sharing of internal Control Frameworks
Control supervisor supervision,
guidance, and direction
Internal Control Department
Operational andevaluation reports

Porting and Establishing Internal Control Frameworks
Internal Control Evaluation・Auditing
Various Improvements(Cooperation with the Internal Control Dept.)

Internal audit
Various remediations(collaboration with regional
management functions)

Financial audit/
Fraud investigation
Report and consultation(internal control)

Financial audit report
Overseas corporations(operating companies)

Local auditing firms

Financial audit
Fraud investigation(on a irregular-basis)

Organizational chart of Internal Control Department
The Internal Control Department is composed of two organizations: the Internal audit Office, which is
responsible for assurance activities such as control evaluation, auditing, and advice; and the Internal Control
Steering Office, which supports and assists the construction of internal controls by the first line. The Internal
Control Department is also actively promoting career hiring and transforming into an organization with diverse
values that are not bound by gender, age, or nationality.

Internal Control Department

Internal Control Steering Office (Assistance)
5 members

Internal Audit Office (Assurance & Advisory)
9 members

Personnel structure: 6 career recruits, 3 women(As of August 31, 2023)

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Denka’s Group compliance
I sincerely apologize for the inconvenience and concern caused to all parties involved due to the quality irregularities at Denka corporation and its equity-method companies. Also, I offer my deepest
condolences and sympathy to the person who lost their life as well as to those who suffered from the explosion at the Omi Plant. The Denka Group will work to determine the cause and prevent this fromhappening again.
The Group broadly defines “compliance” as compliance with laws, internal regulations, and social norms. The Denka Group Ethics Committee, established by the Board of Directors and chaired by the CEO,oversees compliance efforts across the entire Group. In response to various compliance risks related to corporate ethics, general laws and regulations, the environment, quality, occupational health and safety,
human rights, etc., each department of our Management Division is working hard to devise and implement various preventive measures, gathering information on the latest laws and regulations, legal
precedents, and case examples from other companies, establishing and revising various rules, including the Group’s common rules and common company-wide rules, carrying out various compliance training,monitoring, auditing, and more. In addition to the activities of the Head Office Management Division, each of business offices, plant and Group company strives to reduce compliance risks in each field during
normal times, including collaborative activities with outside experts.
In response to current problems, the Group is enhancing the Group-wide activities of each department of the management divisions. Furthermore, Denka is also working diligently to ensure that all employees
throughout the Group comply with laws and regulations as though they were their own responsibilities based on Denka’s core values of “initiative”, “empathy”, and “integrity”.

Denka Group Standards of Business Conduct
The Board of Directors established the “Denka Group Code of Ethics” toensure compliance by officers and employees of Denka Group companies
both in Japan and overseas, and to gain the trust of stakeholders.
Furthermore, the Legal Department, as secretariat of the Ethics Committee,
has established the “Denka Group Standards of Business Conduct”, whichfurther embodies the content of the “Denka Group Code of Ethics”. These set
forth global standards of ethical conduct, as guidelines, including respect forhuman rights and anti-corruption, which Denka Group’s executives andemployees should follow to put the Group’s management principles andvalues into practice.

Denka Group’s compliance promotion system
Denka is striving to ensure thorough compliance at the Group level based on
the common Group rules established by the Board of Directors, such as the“Denka Group Code of Ethics”, the “Denka Group Information Security
Policy”, as well as the “Allocation of Duties and Job Standards”. The Board of
Directors established the Denka Group Ethics Committee to realize
compliance throughout the Denka Group. The committee deliberates on
overall compliance, including compliance promotion plans. At the same time,
the Board of Directors has appointed an executive officer to oversee
compliance as the Chief Compliance Officer (CCO), as well as an executive
officer in charge of legal affairs, internal control, general affairs, andsecretarial affairs. The CCO oversees Denka Group compliance issues, while
the executive officer in charge of legal affairs, internal control, general affairs,
and secretarial affairs promotes the strengthening and improvement of the
Denka Group compliance system in Japan and overseas through the activitiesof the Legal Department, Administrative Department and the Internal Control
Department.

President

Audit
Committee

Board ofDirectors

Supervision ofbusiness execution

Supervision obusiness execution

Director

Each executive officer

Each management division of
Denka Company Limited

Denka Group Ethics Committee
Chairperson: President and CEO
Standing members:Executive Officer in charge of
Administration and General Affairs, Executive Officer incharge of Human Resources, Director who is a full-time
Audit and Supervisory Committee Member,
General Manager of the Legal Department,
General Manager of the Internal Control Department,
General Manager of HR Strategy Department,
General Manager of the Corporate Communications
Department, etc.

Chief Compliance
Officer

Secretariat: General Manager of the Legal
Department and General Manager ofthe Audit Committee Office

Legal Dept., Internal Control Dept.,
HR Strategy Dept., Environment & Safety Dept.,
Quality Assurance Dept., etc.

Supervision ofbusiness execution

Denka Group Helpline

Group complianceDenka Company Limited employees

Report complianceviolations

Directors and employees ofsubsidiaries

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Trend in the number of reports

The Denka Group Ethics Committee operates the Denka Group Helpline, a group whistle-blowing system in25compliance with the guideline of Consumer Affairs Agency of Japana, to detect and correct compliance

20

20

21

22

Misconduct:
11%

15

Officers and employees of domestic and overseas group companies, regardless of the contract type, such as

10

temporary employees, etc., their family members within the second degree of kinship living with them, and5

retirees as stipulated by the Whistleblower Protection Act of Japan, can report compliance violations to the
Denka Group Ethics Committee at any time using the Denka Group Helpline, either anonymously or withidentifying information, whichever whistleblower prefers, in Japanese, English, or Chinese language.
The Denka Group Ethics Committee not only has multiple contact points for receiving reports, the committee
secretariat serves as an internal contact point while Nishimura & Asahi and specialized businesses serve as
external contact points, but also has stipulated the obligations by the group-wide rules for officers and0250

whistleblowers, and the strict punishment for violations of these obligations. The Legal Department is also

200

working to maintain trust in and promote the use of the whistle-blowing system by emphasizing these150

information for officers and employees through various compliance training programs. As a result, the Denka

100Group Helpline is actively being used, contributing to improving the effectiveness of compliance efforts made50

by the Denka Group.

0Mari Muramatsu
Legal Department

The Legal Department conducts compliancetraining at Denka Group sites both in Japan andoverseas with the aim of ensuring compliance withlaws and regulations and the Denka Group’s“Standards of Business Conduct”. Training consistsof lectures on the “Standards of Business Conduct”
by members of the Legal Department and on local
laws by local law firms, tailored to meet the risk
situation of each location.

2019

350
300

Other:
7%

Personnel,
labor,
serviceregulations:
46%
2020

2021

2022

Trend in the number ofconsolidated employees per report

employees to keep the identity of the whistleblower confidential and to prohibit retaliatory actions against

Group Training for the Denka Group in
Denka’s Global Compliance Program

25

Financialinformation

Stakeholders

Breakdown of internal reports(cumulative from FY2019–FY2022)

30

violations at the early stages in domestic and overseas Group companies.

Column ■ESG
management

Strategy

318

303

291

253

2019

2020

2021

Implementing E-Learning forthe Denka Group

Harassment:
36%*Classification is based on the content of therepor t at the time of rec eipt, and does notnecessarily reflect the recognized facts.

2022

Aoi Takeichi
Legal Department

As a member of the Legal Department, I conduct
compliance e-learning trainings for executives andemployees of the Denka Group both in Japan andoverseas to improve the non-financial value of the
Denka Group. I will continue to carry out trainings
on the “Standards of Business Conduct” and on
specific legal fields, while continuing to devise ways
to disseminate compliance throughout the Groupefficiently and effectively.

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Denka Performance Elastomer’s Environmental Management
Denka Performance Elastomer LLC (DPE) a Denka Group company based inLouisiana, the United States manufactures chloroprene rubber (CR). In 2015, DPE
started 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 all around the world.
Under Denka Group’s environmental load reduction policy, DPE is committed tocomplying with the chemical emission standards established by environmental laws
and regulations and to reduce emissions and waste.
Currently DPE is facing multiple lawsuits along with DuPont and its affiliates. These
lawsuits were filed by residents of communities around the plant and demandcompensation on the grounds that said residents have sustained physical, financial andemotional damage arising from chloroprene monomers emitted from the plant.
In connection with these lawsuits, in December 2015, the U.S. Environmental
Protection Agency (EPA) published the National Air Toxics Assessment (NATA), whichshowed that the area around DPE’s CR plant in LaPlace, Louisiana, was classified ashaving high carcinogenic risk.
The NATA assessment used data from EPA’s 2010 toxicity assessment of chloroprenemonomer based on the Integrated Risk Information System (IRIS/Integrated Risk
Information System). DPE believes that toxicity is overestimated in the data.
However, the December 2020 updates of an epidemiologic study conducted byresearchers at a University of Pittsburgh under the auspices of the International
Institute of Synthetic Rubber Producers has confirmed that no correlation between
chloroprene monomer exposure and the fatality rate arising from lung and liver cancer
could be found. This study involved follow-up surveys targeting approximately 7,000
people who are ex- or active employees of U.S.-based facilities handling chloroprenemonomers over the course of nearly 70 years. The study follows up on similar findings
obtained in 2007, based on data up to the end of 2000, with additional data on worker
health surveys for the 17 years up to 2017.
Furthermore, according to data publicized by the Louisiana Tumor Registry,
region-specific carcinogenic risk in the location of the plant does not significantly differ
from the average risk for the entire state.
In addition, DPE has consistently complied with emission standards for chloroprenemonomer since acquiring the plant from DuPont. In order to further reduce emissions

under Denka Group’s environmental impact reduction policy, DPE invested more than US$35 million inequipment to reduce chloroprene monomer emissions, achieving an 85% reduction (comparison with
FY2014). DPE continue to reduce emissions through various improvements.
DPE has also submitted a formal Request for Correction/RfC to the U.S. Environmental Protection
Agency (EPA) on July 15, 2021 to review the aforementioned toxicity assessment of chloroprenemonomers conducted in 2010, requesting to consider an advanced physiological pharmacokinetic(PBPK) model. In response, the EPA announced on March 14, 2022 that it would reject the RfC
because the conclusions in the carcinogenic risk assessment of the Integrated Risk Information
System and its supplementary materials, which formed the basis for the EPA’s toxicity assessment ofchloroprene monomer, were consistent with the EPA’s Information Quality Guidelines (created in the
United States, 2002) and would not immediately review the toxicity assessment values even if thescientific information was updated.
For this reason, DPE submitted a Request for Reconsideration (RfR) to the EPA on June 10, 2022 in
response to the EPA denying the request. However, the EPA published a letter denying the RfR on
October 19, 2022 on its official website. In response, DPE filed a lawsuit against the EPA on January
11, 2023, requesting a “fair correction of a chloroprene monomer toxicity assessment.”
Subsequently, DPE saw a lawsuit filed against it by the United States Department of Justice (DOJ) on
behalf of the EPA on February 28, 2023 seeking “to eliminate the hazards resulting from discharges ofchloroprene monomer,” which was followed by a motion for a preliminary injunction in the same matter,
filed on March 20,2023.
In light of the lawsuit and preliminary injunction by the DOJ, DPE withdrew its lawsuit against the EPA
on April 11, 2023 in order to consolidate multiple lawsuits that are disputing the same issues, and toproperly respond to the two lawsuits filed by the DOJ to seek a fair correction of the toxicity
assessment based on the best available science.
Under the Denka Group ESG Basic Policies, Denka Group conducts its activities while respecting thehuman rights of all people, striving to protect the environment, and observing laws and regulations andculture in each region. Denka Co., Ltd. will continue to support DPE’s activities aiming to reduce
environmental impacts based on the best available science. For details, please refer to the news
releases* posted on the corporate website of Denka Co., Ltd.

*News releases dated June 19, 2019, February 14, June 8, June 19, August 7, December 17, 2020, March 2, June 22, July 20, 2021,
April 28 and June 17, October 28, 2022, and January 13, March 6, April 21, 2023.

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Report story

Quality Assurance Management
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, and by
establishing a quality policy that aligns with our management plan “Mission 2030”, we are engaging
in quality assurance activities regarding our various products.

Strategies for the provision of trusted products
and services

Quality
Policy(Fiscal 2023)

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Recognizing that quality assurance of products and services is an
important management issue, the Denka Group undertakes compliance,
thorough product safety, and continuous quality improvement activities toprovide superior products and services through technologies that can be
performed better than anyone else, thereby contributing to customer
satisfaction and trust, problem resolution, and sustainable growth.

Chemical Substance Management/Product Safety
We routinely collect and monitor information on the revision of domestic and international laws concerningchemical substances. We strive to respond promptly and appropriately when changes are required in thechemical composition of products or chemicals used in production processes to ensure compliance with legal

Enhancing quality compliance across the Denka Groupamendments and further safety.

We have identified inappropriate conduct in the manufacture of resin products which we and ourequity-method affiliate manufacture and sell, related to third-party certification and parts registration. We takethis situation seriously and will conduct thorough investigations and measures to prevent recurrence under theguidance of an external investigation committee consisting of outside experts. We will also review the Denka
Group Quality Assurance Policy and other company regulations, and strive to further strengthen quality
compliance in the entire group and to make every effort to restore trust.

Improvement of Quality Management System and Management Level
We are promoting the development of quality management systems to provide trustworthy products andservices.
We are working to further improve the quality of our products and ensure product safety by improving the levelof management through our Customer Complaint Management System, which integrates and manages
customer complaint information and leads to continuous quality improvement, and our Chemical SubstanceManagement System, which coordinates information on chemical substances with product safety.

Quality Assurance Framework Comprisingof Alignment of Three Divisions

Plants
Quality Assurance
Dept.

quality assurance divisions work together organicallyto improve the overall quality level of the Denka
Group.

Quality Risk Assessment/Risk Reductionneeds, such as the growing public call for businesses tocontribute to the SDGs even as they strive to meetcustomer requirements for even higher product quality.

Frequency

The risk arising from each product is changing by social

High

With this in mind, we annually review results of the quality
both the market environment and business environment.
quality risks based on assessments of their characteristics
and magnitude.

Analysis of content, frequency, and severity of complaints and designing
optimal measures for quality improvement

Integration with prevention activities

Identification of similar problems and trends and horizontal introduction of
measures to prevent recurrence

Improvement of Communication

Unified management of complaint information, facilitation of information sharing,and rapid decision-making and collaboration

Improvement of Customer Satisfaction

Improvement of speed and accuracy of complaint processing to improvecustomer satisfaction

Medium-risk
products■Chemical Substance Management System
Inventory

Latest legal information by country

Low-riskproducts

risk assessments for all products from the perspective ofWe also perform systematic initiatives to mitigate various

High-risk
products

Customer Complaint
Management System

plants (incl. group companies). These three types ofDevelopment of quality improvement activities

Customer Claim
Information

divisions within its head office, business divisions andHead Office
Quality Assurance
Dept.

■Customer Complaint Management System

Risk mitigation
initiatives

Low
Small

Magnitude

Provision oftrustworthy products
and services

The company has established quality assurance

Business Divisions
Quality Assurance
Dept. (Office)Legal Review
SystemInformation on chemical
substances in raw materials

SDS and Label
Preparation System

Information on
chemical substances

Chemical Substance
Document Management
SystemChemical Substance Management System

Large

Distribution of quality risk of products from the market
and business environment

Information on chemical
substances in products

SDS

GHS label

Chemical substance information
submitted by customers

Denka Report 2023 Integrated Report80Stakeholders

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Dialogue with Stakeholders
1. Creating value through dialogue with our stakeholders
The Denka Group considers maintaining responsible dialogue with stakeholders and integral part of the process of assessing our social responsibilities, the degree of our social
contributions and stakeholder expectations with regard to improving our corporate value. It also forms part of the Denka Group ESG Basic Policy, "Information disclosure stakeholder
dialogue". The diagram below illustrates the significance of dialogue with our various stakeholders and the value it creates.

Customers

Provision of products
and solution services
and the receipt ofcompensation

Investment andthe return of profit

・Automotive parts
manufacturers
・Pharmaceutical trading
companies
・Construction material
trading companies
・Food processing
manufacturers, etc.

Local
Communities

・Local residents/
environment
・Government/
administrative bodies
・NPOs/NGOs, etc.

Sustainable
development of local
communities

Denka Group Employees

Sustainable growthacross the entire
supply chain

Shareholders
andInvestors

Business
Partners

・Suppliers ofmaterials/raw materials
・External productprocessors
・Logistics companies
・Research
institutes/universities,
etc.

Participation in the Summer Vacation Children's Chemical Experiment Show 2023
On August 5 and 6, 2023, Denka participated in the "Children's Chemistry Experiment Show 2023" organized by Yume Kagaku 21 (Chemical
Society of Japan, etc.). Denka has been participating in the Summer Vacation Chemistry Experiment Show since 2013. The purpose of the event
is to encourage children to experience the wonders and joy of chemistry in society and life through chemical experiments to have interest inchemistry. (Due to COVID-19, the event was canceled in fiscal 2020 and 2021, and in fiscal 2022, a video was distributed on the Children's
Chemical Channel.)
・ESG Information Site: Dialogue and Partnership with Society https://denka_sustainability.disclosure.site/en/themes/661
Denka Report 2023 Integrated Report81Stakeholders

Prologue

2. Examples of dialogue with stakeholders

Customers

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

Objective/Themes

Means■Providing safe, high-quality products that satisfy our customers and appropriate
information.
■Forging relationships built on trust through sincere communication with our customers■Face-to-face and online dialogue with customers■Providing technical services■Conducting customer satisfaction surveys■Visits by and dialogue with
the President■Use of internal portal sites■Employee awarenesssurveys■Labor-management council

Denka Group
Employees■Reflecting the opinions of employees to promote the creation of a healthy andcomfortable workplace for all members of the Denka Group.

Business Partners■Promoting open innovation and building good relationships with our business partners
to ensure co-existence and shared prosperity across the entire supply chain.

■Face-to-face and online meetings with suppliers■Actively participating in the formation of more habitable local communities andcontributing to their development as a good corporate citizen.

■Comprehensive disaster prevention
drills■Participation in local events■Facility tours and resident briefings

Local Communities■Maintaining sound political and administrative relations and fostering a relationship oftrust with society.
■Actively, effectively and fairly disclosing financial and non-financial information andensuring its reliability through constructive dialogue.
■Enhancing our group governance system to enhance the value of the entire company.
■Meetings with institutional investors and securities company analysts(Excluding shareholders' meetings and Financial Results Presentation)■Announcement of our Partnership Building Declaration■Educational support■Interaction with local
residents and dialogue■Social contribution activities■Holding of the General Meeting of Shareholders (once per year)
Improve the content of convocation notices and other materials for shareholders' meetings to increase thelevel of disclosure. Adoption of live-streaming for shareholders who are unable to attend the venue on theday, and the exercise of voting rights via the Internet using personal computers, etc.

■Holding of Financial Results Presentation (4 times a year: 80 - 100 people)
The President and senior management provide quarterly briefings on financial results and growth strategies toinstitutional investors and securities company analysts. (Briefings are also held for the media 2 times a year.)■ Meetings with institutional investors and securities company analysts (361 people)■ Individual/small meetings■ SR meetings

Shareholders andInvestors■ Top meetings■ ESE seminars■ Individual meetings■ Overseas road shows・Individual meetings/small meetings (175 in Japan and 106 overseas)

5%

Overseas 34%
29%

Total:
361 people
in Japan and 48%
overseas

6%4% 8%Japan 66%

■Main topics of dialogue and matters of interest to shareholders and matters forincreased disclosure
・Details of each segment and major products and future outlook
・Share of major products by sales application
・Cash allocation(Shareholder returns, strategic investment, human capital investment, R&D, financial leverage, etc.)
・Opportunities and risks
・Initiatives to achieve financial and non-financial KPIs in our "Mission 2030" management plan
(Business plans in areas of focus for target ROE, ROIC, and operating income, andmeasures to promote portfolio transformation, etc.)

The Corporate Communications Department conducts interactive dialogue with institutional investors andsecurities company analysts at individual meetings or small meetings to discuss financial results,
management plans and other details.

・SR meetings (2 times a year: 29 people in Japan)
The General Affairs Department conducts dialogue with major domestic shareholders (institutional
investors) to discuss our initiatives centered on governance and the voting policies of institutional
investors.

・Top meetings (once a year: 15 people in Japan)
The President discusses changes to our business portfolio, business plans, and other management
strategies with domestic institutional investors.

・ESG seminars organized by securities companies (once a year: 20 people in Japan)
Our Officer in charge of Investor Relations explains the unique nature and growth potential of ourmanagement strategies for ESG-based themes.

・Overseas road shows (3 times a year: 17 people overseas)
Our Officer in charge of Investor Relations holds dialogue with overseas institutional investors in theAmericas, Europe and Asia on management plans, business models, R&D, shareholder returns and ESG
initiatives (including annual conferences sponsored by securities companies)■ Feedback of shareholder opinions and views to management (4 times a year + every time)
In addition to providing quarterly feedback on the opinions of shareholders obtained through dialogue to the
President and other management and related departments, feedback is also provided whenever there is an
event that attracts a large number of shareholders' opinions. This is used as a reference for future
disclosure materials and management strategy formulation and promotion measures.

Denka Report 2023 Integrated Report82Financial information

Prologue

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation

FY2019FY2020

FY2021

Denka’s 11 Year Financial Summary
FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2022

Summary Statement of Income (million yen)
407,559

Net sales

341,645376,809

383,978

369,853

362,647

395,629

413,128

380,803354,391

384,849

Operating income

18,817

21,23024,04730,63425,84433,652

34,22831,58734,72940,123

Ordinary profit

17,82420,60424,28727,022

23,15831,49932,81130,03432,14336,474

Profit attributable to owners of parent

11,255

13,57319,021

19,472

18,14523,03525,04622,70322,78526,012Equity in earnings (losses) of affiliates

530

550

950

1,097

568

1,105

1,384

1,170

933

876

2,328

Current assets

158,595

164,747

170,497

161,876

168,902

184,129

190,730

198,452

200,726

218,164

251,793

Total assets

415,356

431,347445,569

443,864

454,944473,799483,827

501,448

526,035

557,646

Current liabilities

170,752

163,645

160,101

147,537

144,190

158,043

154,047

160,807

155,062

166,679

Net assets

180,709

189,516

210,798

216,071

227,487242,780

250,481

254,014270,036

292,094

Interest-bearing debt

114,241

120,669

122,536

124,596

113,748

108,269

112,134

134,340

138,191

137,032

32,32428,025
12,768Financial Position (million yen)592,158
164,457
300,351
169,729

Cash Flows (million yen)
8,946

Cash flows from operating activities

40,21527,24535,55744,01439,557

48,776

32,66041,954

40,61042,630Cash flows from investing activities(25,864)(26,693)(27,449)(34,979)(22,258)(29,298)(26,176)(36,303)(36,976)(36,839)

Cash flows from financing activities(12,784)(3,327)(7,437)(7,348)(19,319)(15,858)(8,408)9,544(6,706)(12,341)

Cash and cash equivalents at end of year

10,680

8,244

9,157

11,813

10,174

14,101

13,88929,17025,90920,20920,199100.00(28,268)
18,361Per Share Information (yen)Dividends per share*

50.0

50.0

62.5

65.0

70.0

105.0

120.0

125.0

125.0

145.0

118.13145.16207.40214.71205.05261.80286.18262.62264.24301.671,884.96

2,013.84

2,279.70

2,366.74

2,526.42

2,727.94

2,839.16

2,906.95

3,101.92

3,345.34

3,438.28

Operating income ratio (%)

5.5

5.6

6.3

8.3

7.1

8.5

8.3

8.3

9.8

10.4

7.9

Return on equity (ROE) (%)

6.4

7.4

9.6

9.3

8.3

10.0

10.3

9.1

8.8

9.4

Return on assets (ROA) (%)

4.4

4.9

5.5

6.1

5.2

6.8

6.9

6.1

6.3

6.7

Shareholders’ equity ratio (%)

43.1

43.5

46.9

47.7

49.1

50.5

51.0

50.0

50.8

51.7

Capital investment (million yen)

26,96425,73521,30021,19625,731

22,71032,74534,20542,32335,644

Depreciation and amortization (million yen)

21,58522,25423,032

23,242

24,35924,59922,94622,482

22,911

23,883R&D expenses (million yen)

10,605

10,828

11,127

11,787

13,026

13,86814,562

15,031

14,736

14,231

Number of employees at end of year (consolidated)

5,206

5,249

5,309

5,788

5,816

5,944

6,133

6,316

6,351

6,358

Profit per share
Net assets per share

148.08Financial Indices
4.4

4.9
50.1

Other

Management Plans

Denka’s main achievements

DENKA100 （2007-2012）

Resumption of DENKA100 （2013-2017）● Completed the Denka

Innovation Center main building

Environmental developments● Consumption tax hike(to 8%)

administration

14,926
6,406

Denka Value-Up （2018-2022）● Celebrated the centennial of the Company’s founding● Changed company name● Established Denka Performance Elastomer LLC● Signing of the Paris Agreement● Inauguration of the U.S. Trump

39,36926,554● Merger with DENKA SEIKEN Co., Ltd.

● Consumption tax

hike (to 10%)

● U.S.-China trade● COVID-19

pandemic

tensionNote: Figures for FY2017 and onwards are modified in accordance with the Partial Amendments to Accounting Standard for Tax Effect Accounting (Accounting Standards Board of Japan (ASBJ) Statement No. 28 issued in February 2018).
*Cash dividends per share 1. Denka 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 performance in each fiscal year, the value of dividends per share for the preceding fiscal years
has been retrospectively converted to reflect the value of dividends had the reverse share split already been in effect.
2. Dividends per share for FY2014 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 (¥2.0 per share prior to conversion)● Inauguration of the

U.S. Biden
administration● Russian invasion of

Ukraine・IR Information https://www.denka.co.jp/eng/ir/
Denka Report 2023 Integrated Report83Financial information

Prologue■ Corporate Profile (as of March 31, 2023)
Name

Report story

VisionStrategy

ESG
management

Stakeholders

Financialinformation■ Major Group Companies (as of April 1, 2023)

Denka Company Limited

EstablishedMay 1, 1915

Employees

Non-consolidated: 4,198 Consolidated: 6,406

Paid-in Capital¥ 36,998 million

Head Office

1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, Tokyo 103-8338, Japan

Europe3(Nihonbashi Mitsui Tower)
Tel.: +81-3-5290-5055

Southeast
Asia

8

Securities companies
2.9%

Shareholders
Other domestic
corporations
5.5%

88,555,840

Financial institutions
45.5%

sharesJapan

Overseas・Toyo Styrene Co., Ltd.

Europe・Denak Co., Ltd.
・Hinode Kagaku Kogyo Co., Ltd.
・Denka Azumin Co., Ltd.

Foreign investors
22.1%

・Nishi-nihon Koatsu Gas Co., Ltd.

Major Shareholders
Shareholder name3

9

Fax: +81-3-5290-5059■ Share Information (as of March 31, 2023)

Individual/other
24.0%

North
America

East Asia

Number of shares held
(hundred shares)

Percentage ofshares held(%)

・Denka Chemicals G.m.b.H*East Asia excludes Japan.

・Icon Genetics G.m.b.H

・DENKA SEIKEN UK Limited
North America

・Denka Renotec Co., Ltd.

・Denka Corporation

・Sanshin Bussan Kabusiki Kaisha

・DENKA SEIKEN USA Incorporated

・Denal Silane Co., Ltd.

East Asia

・Denka Performance Elastomer LLC

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

162,786

18.87

・Denka Polymer Kabushiki Kaisha

Custody Bank of Japan, Ltd. (Trust Account)

85,404

9.90

・Denka Astec Co., Ltd.

Mizuho Trust & Banking Co., Ltd. Retirement Benefit Trust, Mizuho Bank Account(Account retrusted by Custody Bank of Japan, Ltd.)32,158

3.73

National Mutual Insurance Federation of Agricultural Cooperatives

29,007

3.36

TAIJU LIFE INSURANCE COMPANY LIMITED

23,816

2.76

SSBTC CLIENT OMNIBUS ACCOUNT

17,141

1.99

STATE STREET BANK AND TRUSTCOMPANY 505001

13,992

1.62

・Denka Advanced Materials Vietnam Co., Ltd.

Denka Employee Shareholding Association

13,308

1.54

・PT.ESTOP Indonesia

・Denka Advantech Pte., Ltd.

JP MORGAN CHASE BANK 385781

11,532

1.34

・Denka Singapore Pte.Ltd.

・Denka Life Innovation Research Pte. Ltd.

Custody Bank of Japan, Ltd. (Trust Account 4)

11,295

1.31

・Denka Chemicals Holdings Asia Paciﬁc Pte.Ltd.

(Notes) 1. 2,280,095 shares of treasure stock have been excluded from the above list of major shareholders.
2. Treasury stock is excluded for calculation of the percentage of shares held.

・Akros Trading Co., Ltd.
・Denka Consultant & Engineering Co., Ltd.

・Denka Inorganic Materials (Tianjin) Co., Ltd. ・Denka Electronic Materials Dalian Co., Ltd.
・Denka Chemicals Development (Suzhou) Co., Ltd. ・Denka Advanced Materials (Suzhou) Co., Ltd.
・Denka Chemicals Shanghai Co., Ltd. ・Denka Taiwan Corporation

・Denka Korea Co., Ltd.
・Kurobegawa Electric Power Company ・Akros Trading Taiwan Co., Ltd.

・Akros Trading China Co., Ltd.

Southeast Asia

・Denka Construction Solutions Malaysia Sdn Bhd.

・Denka Infrastructure Technologies Pte.Ltd.

Denka Report 2023 Integrated Report84

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

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