COVALENT GROUP

Social and Environmental Report 2007

Published October, 2007
■ Headquarters
Nissei Building, 1-6-3 Ohsaki, Shinagawa-ku, Tokyo 141-0032, Japan
Tel: +81-3-5437-8411 Fax: +81-3-5437-7172
URL: http://www.covalent.co.jp/

The production and printing of this report reflect the following
environmental considerations:■ Environment, Safety and Health Department
30, Soya, Hadano, Kanagawa 257-8566, Japan
Tel: +81-463-84-6648 Fax: +81-463-83-4860
For any comments or inquiries concerning this report or ourenvironmental protection activities, please contact us.

Paper certified by the Forest
Stewardship Council (FSC)
was used, which is made fromwo o d from FS C - cer tifie dforests.

Waterless printing, a printing process that does notuse water, was used. Its
special characteristics are
its ink repelling plates.

Soy ink cer tified by theAmerican Soybean Associati o n was use d . I t h a s
excellent de - inking andbiodegradable characte ristics.

Our Earth and Its
People Are Irreplaceable
We place the highest consideration on human safet y and environment al
conservation, and as a good corporate citizen, we aim to achieve a mutually
beneficial relationship with the global community and the local communities inwhich we have a presence by contributing to their developments.

1

Social and Environmental ReportEditor’s noteThis is our fifth report since the publication of our
first report, Environmental Report 2003. It reflects
a wider scope than our original report, and istitled Social and Environmental Report 2007. Our
objective is to have our stakeholders, that is, ourcustomers, shareholders, employees and people inthe communities where we do business gain an indepth understanding of our social and environmental
commitments and activities.

Scope of the Report

CONTENTS
Company Overview
Principal Products

3
4

President’s Message

5

The Covalent Group’s
Philosophy and Principles

6

Corporate Governance

7This report pertains to the following facilities and affiliated companies:

Covalent Materials Corporation’s 3 facilities:
Oguni Facility
		Hadano Facility
Kariya Facility

378, Oaza Oguni-machi, Oguni-machi,
Nishiokitama-gun, Yamagata
30, Soya, Hadano, Kanagawa
1, Minami-Fuji, Ogakie-cho, Kariya, Aichi

Consolidated subsidiaries:
Covalent Materials Niigata Corporation
		 6-861-5, Higashiko, Seiro-machi, Kitakanbara-gun, Niigata
Covalent Materials Tokuyama Corporation
		 2-1-32, Eguchi, Shunan, Yamaguchi
Covalent Materials Nagasaki Corporation
		 296, Momozugo, Kawatana-cho, Higashisonogi-gun, Nagasaki
Covalent Materials Sekikawa Corporation
		 278, Oaza Tatsutashin, Sekikawa-mura, Iwafune-gun, Niigata
Tokai Ceramics Co., Ltd.
		 308-1, Yoshibora, Shidare-cho, Toyota, Aichi
SN Refractecture Tokai Co., Ltd. (at Kariya Facility)		 1, Minami-Fuji, Ogakie-cho, Kariya, Aichi• Toshiba Ceramics Co., Ltd. changed its name to Covalent		 Materials Corporation on June 1, 2007.
• Niigata Toshiba Ceramics Co., Ltd. changed its name to Covalent		 Materials Niigata Corporation on June 1, 2007.
• Tokuyama Toshiba Ceramics Co., Ltd. changed its name to		 Covalent Materials Tokuyama Corporation on June 1, 2007.
• Nagasaki Toshiba Ceramics Co., Ltd. changed its name to		 Covalent Materials Nagasaki Corporation on June 1, 2007.
• Sekikawa Toshiba Ceramics Co., Ltd. changed its name to		 Covalent Materials Sekikawa Corporation on June 1, 2007.
• In April 2007, SN Refractecture Tokai Co., Ltd. was excluded from		 consolidated subsidiaries because of the transfer of its shares to		 Kurosaki Harima Corporation.

Reporting Period

Fiscal 2006 (April 1, 2006 to March 31, 2007). This report presents theresults of activities in fiscal 2006 and also refers to subsequent topics.

Publication

Previous issue: December 2006

Next issue: October 2008 (scheduled)

Reference Guidelines
Environmental Reporting Guidelines (Fiscal Year 2003 Version),
Ministry of the Environment of Japan
Environmental Accounting Guidelines 2005,
Ministry of the Environment of Japan

Compliance andRisk Management

8

Environmental Consideration 9
Environmental Policy

9

Environmental Management System

10

Environmental Education

10

Targets and Results

11

Environmental Audits

11

Environmental Impact in Fiscal 2006

12

Reducing Environmentally
Harmful Emissions

13

Measures for Environmental Issues

16

Environmental Costs

16

Environmentally Conscious Products

16

History of Covalent Group’s
Environmental Protection Activities

19

Social Performance20

Labor and Human Rights(Employee Relations)20

Occupational Safety and Health Policy

21

Occupational Safety and HealthManagement System

22

Occupational Safety and HealthManagement Activities

22

Our Goal Is to Be an Enterprise
Trusted by Society

25

Corporate Citizenship Activities

26

Social and Environmental ReportCompany Overview

Company Overview

Message from the President

Company name: Covalent Materials Corporation
Established: June 2007
Founded: September 1928
Paid-in capital: 33.5 billion yen
Total assets: 132.4 billion yen(consolidated basis)
Net sales: 96.2 billion yen (consolidated basis)
Number of employees: 2,652 (consolidated basis)

Headquarters address: Nissei Building, 6-3, Ohsaki 1-chome, Shinagawa-ku,
			 Tokyo 141-0032, Japan
Facilities: Oguni, Hadano, Kariya
Sales offices: Kansai, Kyushu, Tohoku
Affiliated companies: Consolidated subsidiaries: 7
			 Non-consolidated subsidiaries: 5
			 Affiliates accounted for by the equity method: 2

Total assets, net sales, and number of employees are as of March 31, 2007.
Paid-in capital, facilities, sales offices, and affiliated companies are as of June 1, 2007.

Comprehensive,
Unified Set of Principles

Total Assets (consolidated basis)

Net Sales (consolidated basis)(Billion yen)

132.4

140
120

101.6

110.4

108.0

140

112.0

120

Corporate GovernanceCompliance and Risk Management

100

100

80

80

60

60

40

40

20

20

2002

2003

2004

2005

2006

(FY)

Environmental Consideration

Number of employees (consolidated basis)(Persons)
3,000

2,629

2,526

2,514

2,536

2,652

2,500
2,000
1,500

Social Performance

1,000
500

2002



(Billion yen)

2003

2004

Social and Environmental Report

2005

2006

(FY)

72.9

2002

69.5

2003

76.4

2004

84.8

2005

96.2

2006

(FY)

Principal Products

CERASIC ® atmosphericpressure sintered SiC ceramicheat exchange tubes

Our synthetic quar tz glass is not
only highly pure, but it also has othernumerous highly desirable properties
such as superior heat resistance, lighttransmittance, electrical insulation andchemical stability. Synthetic quartz glasswith these excellent properties is used
for photomask substrates for pattern
exposure, which is a critical process in the
manufacture of large liquid crystal displays(LCDs) and semiconductors.

As an upstream manufacturer of partsand materials, Covalent Materials wasamong the first in the industry to become
involved in environmental protectionand environmental impact reduction.
In keeping with this stance, today wedevelop new products that help solve
environmental and energy problems. Our
CERASIC® atmospheric pressure sintered
SiC ceramics are used in new modelincinerators as large heat exchange tubes
for collecting and reusing heat, and they
help curb dioxin emissions and conserve
energy. The material offers superior
strength, corrosion resistance and thermal
conductivity at high temperatures.
We supply solar battery manufacturers
in Japan and around the world with themelting crucibles used in the manufactureof the polycrystalline silicon, which areused to make polysilicon solar cells.
These are the principal type of powercells used in photovoltaic generation,
and are an increasingly popular source ofclean energy.

※ FPD=Flat Panel Display• Polished wafers• Annealed wafers• Epitaxial wafers• Diffused wafers• SOI wafers

Semiconductor-related
Products

TPSS Si-impregnated silicon carbide products

We develop and supply various fineceramic products and synthetic quartz
products with advanced functions
necessary for semiconductor manufacturing processes.
• High-purity quartz glass products• Synthetic quartz photomask
substrates for LSIs
• TPSS Si-impregnated silicon carbide
products• Special carbon and high-purity
graphite products• CEPURE® in-line gas filters• Vacuum-break filters• GLASGRAIN® high-purity fused silica
filler material• SAPPHAL® high-purity translucent
alumina ceramics• ADS high-purity alumina ceramics• High-purity single-crystal siliconmaterials• CERASIC® atmospheric pressure
sintered SiC

General Industrial Products

Carbon brushes

Fully utilizing our long-cultivated wealthof knowledge and know-how concerning
ceramic materials, we supply various
products and ser vices for industrial
applications.
We developed environmentally-friendly,
lead-free carbon brushes, which are used
as motor parts. These lead-free carbon
brushes comply with the RoHS Directive
and are highly regarded by customers.
• Kiln furniture for sintering electronicparts• TECORUNDUM silicon carbide
heating elements• Carbon brushes• QCH-HEATER®
• CERASIC® atmospheric pressure
sintered SiC• GLASSUN® fused silica refractories• Monolithic refractories• Refractories for the glass industry

Corporate GovernanceCompliance and Risk Management• CERASIC® atmospheric pressure
sintered SiC ceramic heat exchange
tubes• Silicon melting crucibles for solar
cells

Bio- and Medical-related
Products

NEOBONE ®

Capitalizing on our expertise in materials
and processing, we develop bio - andmedical-related products. NEOBONE ®
ceramic bone filler facilitates penetrationof biological tissue and speeds boneformation. Moreover, NEOBONE ® isstrong and easy to handle.
The ceramic scaffolds suitable for threed i m e n s i o n a l c u l t u re h ave a p o ro u s
structure owing to our unique forming
technology, allowing cells to penetrate
deep inside the ceramic and ensuring ahigh-density culture.
• NEOBONE® ceramic bone substitutes• Ceramic scaffolds

Social and Environmental Report

Message from the President• Large photomask substrates for LCDs

Company Overview

Large photomask substrates for LCDs

Comprehensive,
Unified Set of Principles

Focusing on the development ofhigh - qualit y wafers for increasingly
sophisticated semiconductors, we supply
highly reliable silicon wafers worldwide
using our integrated production
and qualit y control systems, which
encompass processes from pulling singlecrystal silicon ingots to processing.
As part of our effort to reduce environmental impact, we have switched fromoil- based formulas, which have beenused for wafer processing since theearly 19 9 0s, and lipophilic par ts andmaterials, to water-based agents, partsand materials. We have also abolished theuse of chromium-based agents used in
evaluation processes.

Environment-related Products

Environmental Consideration

Silicon Wafers

FPD*-related Products

Social Performance

Silicon Wafers

Company Overview

President’s Message

Message from the President
Comprehensive,
Unified Set of Principles

Creating New Values throughCollective Strength WhileContributing to Society

Corporate GovernanceCompliance and Risk Management
Environmental Consideration

We are pleased to present CovalentGroup’s Social and Environmental
Report 2007.

Environmental Report to reflect thebroadening of content concerning oursocial contribution activities.

Since Toshiba Ceramics Co., Ltd.
separated from Toshiba Group ina management buyout in October
2006, we have been developing ourorganization under a new c apital
structure. On June 1, 2007, we began
anew under the name Covalent
Materials Corporation.

In our social relations, we enact
rigorous compliance and risk managem e nt a n d a c t i ve l y c o mmu ni c atewith local communities. We have
expanded employee education andtraining, and we sponsor events in local
communities. We also offer practical
workplace training for junior and seniorhigh school students.
We are developing an occupational
health and safety management system
to ensure safe, secure workplaceenv iro nment s fo r ever yo ne w h oworks in the Covalent Group. We haveobtained Japan Industrial Safety and
Health Association certification at
six principal manufacturing sites andare working to create comfortable,
accident-free workplaces.

T h e wo r d “c ov a l e nt ” i s u s e d i ntechnical terms such as “covalentbond” and “covalent crystal,” and itmeans “sharing” and “bonding.” By
combining the materials and technologies of our ceramics and siliconbusinesses, our desire is that we create
new values while strengthening ties
with our customers, business partners,
the people in the communities where
we have a presence, our employees,
and all other stakeholders.

Social Performance

The Covalent Group has establisheda new corporate philosophy and new
management policies. In our corporate
philosophy we state our intention tobring together materials, technology,
and people in the pursuit and creationof unlimited value to contribute to
the prosperity of society. In keepingwith this philosophy, we aim to fulfill
our economic, environmental, andsocial responsibility and to maximize
corporate value.
This is the fifth edition of ourenvironmental report, which we haveissued each year since 20 0 3. We
have changed the title to Social andSocial and Environmental Report

We established a basic environment
policy in 1989. We observe environment-related laws, regulations, andsocial norms, and we have been
reducing the environmental impact
associated with our business activities,
while creating environmentally conscious products. Since fiscal 2005
we have been revising and improving
our voluntary environmental actionplans, and in fiscal 2006 we achieved
all targets for the reduction of CO 2
emissions per unit of output, reductionin the final waste disposal ratio, andreduc tion in chemic al substanceemissions.
As a result of environmental protection
activities related to production, we
achieved a 7.8% reduction of CO 2

emissions per unit of output from thefiscal 2005 level by such measures
as a review of cogeneration system
operating conditions at the Oguni
Facility, our principal manufacturingsite, and energy conservation measuresand improvements in pro duc tion
efficiency at all production sites. We
are also contributing to a transition
to a recycling - based societ y that
embodies the 3R concept of reduce,reuse and recycle waste. To achieve
zero emissions of waste (defined as a
final disposal rate of less than 1%), we
aim to minimize defects and material
loss through manufacturing yield
improvement and to cultivate recycling
partners for sludge and scrap waste.
As a result, in fiscal 2006 the Hadano
Facility achieved zero emissions status,
joining Covalent Materials Niigata
Corporation and Covalent Materials
Sekikawa Corporation.
The Covalent Group will continue to be
active in social contribution and realize
its corporate social responsibility bytapping into the collective strength
within and beyond the Group.
I hope that this report will deepen yourunderstanding of the Covalent Group’s business activities, and I ask for yourcontinued guidance and encouragementin the coming years.
October 2007

Dr. Susumu Kohyama
President and CEO
Covalent Materials Corporation

The Covalent Group is adhering to a comprehensive, unified set of principles articulated in three key documents—
Corporate Philosophy, The Covalent Group's Principles, and The Covalent Group Standards of Conduct—covering
corporate social responsibility, social commitment, and other pertinent matters.

Corporate
Philosophy(Basic management philosophy)

The CovalentGroup’s Principles(Action principles)

Comprehensive,
Unified Set of Principles

We, the Covalent Group, through our focus on
leading-edge materials and highly functional parts,
bring together materials, technology and people topursue and create unconditional value that willcontribute to the prosperity of society.

1. Prioritizing the Customer
We accord the highest priority to customers' satisfaction
by providing value-rich products and services based on
new perspectives and dynamic ideas.
2. Enhancing Corporate Value
Through constant change in management practices andtechnological innovation, we strive to garner the trust
and meet the expectations of all who are stakeholders in
the Covalent Group.
3. Contributing to Society
We place the highest consideration on human safety andenvironmental conservation, and as a good corporate
citizen, we aim to achieve a symbiotic relationshipwith the global community and local communities inwhich we have a presence by contributing to theirdevelopments.
4. Conducting Fair BusinessWe are fully aware of our social responsibilities as acorporate entity, and we obey the rules and establishednorms of Japan and other countries as we conductbusiness fairly and with integrity.
5. Respecting the Individual
We respect each employee's individuality and creativity,
and we foster a fair and generous environment in which
he or she can grow and evolve as an individual.

Corporate GovernanceCompliance and Risk Management

Corporate Philosophy

Message from the President

The CovalentGroup’s Principles

The Covalent Group
Standards of Conduct

Environmental Consideration(A set of values and standards of conduct shared by all employees)

The Covalent Group Standards of Conduct
Chapter 2 SOC for Corporate and Individual Relationships
9. Respect for the Individual
10. Safety and Health
11. Work Ethics
12. Information and Assets

Social Performance

Chapter 1 SOC for Business Activities
1. Customer Satisfaction
2. Production and Technology, Quality
Assurance and Product Safety
3. Marketing and Sales
4. Procurement
5. Export Control
6. Improper Payments and Contracts
7. Intellectual Property Rights
8. Accounting

Chapter 3 SOC for Relations with Society
13. Community Relations
14. Environmental Protection
15. Disclosure

Social and Environmental ReportCompany Overview

The Covalent Group’s Philosophy and Principles

Company Overview

Corporate Governance

Message from the President

The Company considers the purpose of
corporate governance to be the assuranceof highly transparent, sound corporate
m anag ement and the enhanc ementof management quality and efficiency.
The ongoing enhancement of corporate
value, the fulfillment of our responsibility
toward shareholders, customers, business
partners, employees, communities where
we have a presence, and other stakeholders, and the maintenance of amicable
relations, are important management
policies.

once each month and convenes special
meetings as necessary. The Board deliberates and decides matters stipulated in thelaws and regulations and the Articles ofIncorporation as well as other importantmatters concerning management andobjective opinions with outside directors.

Comprehensive,
Unified Set of Principles

The Company has two internal corporate
auditors and t wo ex ternal corporate
auditors. The corporate auditors attend
meetings of the Board of Directors andother important meetings, examine theconduct of business and the state of theCompany’s assets in cooperation with theaccounting auditor and the Corporate Audit
Office, an internal audit unit, and supervise
the directors’ execution of duties as anindependent body with a mandate fromshareholders.

The Company has eight directors, which
include four executive directors and four
ex ternal directors without executive
power. The term of office of directors
is set at one year in the A r ticles ofIncorporation to ensure flexible adaptation
to changes in the business environmentand clear-cut management responsibility.

and engage in day-to - day supervisionand verification of the development andoperation of internal control systems. The
Board of Auditors, which consists of all
the corporate auditors, is organized as aconsultative and decision-making bodyto articulate the opinions of the corporate
auditors. The Board meets once monthly,in principle, and otherwise as necessary.
T he ex ter nal direc tors and ex ternal
corporate auditors, who are from major
shareholders Unison Capital, Inc. and theCarlyle Group, monitor management andoffer recommendations from a shareholder
perspective. To ensure managementtransparency and strengthen supervision,
the Company has introduced an executive
officer system to separate supervisionfrom business execution.

The two internal corporate auditors actively
work to create an audit environ-ment togather information within the Company

The Board of Directors meets regularly

Corporate GovernanceCompliance and Risk Management

Corporate Governance Structure
Meetings of Shareholders
Appointment/Dismissal
Statutory
Audit

Environmental Consideration

Board of Auditors/
Corporate Auditors

Appointment/Dismissal

Appointment/Dismissal

Board of Directors/Directors

Accounting Auditor

Appointment/Dismissal

President

Statutory Audit

Supervisory

Accounting Audit

Instructions for Business Operations

Executive Officers

Internal Audit

Instructions for Business Operations

Social Performance

Corporate Audit

Operating Organizations

As of June 1, 2007

Social and Environmental Report

The Company considers compliancewith laws, ordinances, and social norms,
and the development of an integrated
management structure that responds torisks and crises essential for the survival ofan enterprise. The General Administration
Group implements contingency planningand other measures and conducts awareness activities through position-specificeducation. The Chief Risk Management
Officer (CRO) and the Cross-Functional

Team (CFT) have taken the lead in a groupwide initiative to identify and assessbusiness risks and other forms of risk andestablish a risk reduction activities policy.
The Company has established a Help Line,
which includes a group -wide whistle blower system, with the aim of assessing
compliance, uncovering risk informationand promptly responding. The Company
has also established the Clean Partner

Line on the corporate website, which is amechanism that lets suppliers and otheroutside parties directly contact the General
Administration Group (legal affairs and risk
management) in the event of violations
concerning laws, ordinances, or contracts
in transactions with outside parties.

Legal, consulting, etc.

Public Relations

Cooperation

President andExecutive Officers

Policy report

ReportReportReportGuidance/
Support

Corporate Audit

General Manager,
General Administration/
General Administration
Group

Guidance/Support

ReportCooperation

Corporate
Auditors

Clean Partner Line (report system)
Help Line (whistleblower system)

Risk information

Audit

Each business organizations

All employeesCF
T

Cooperation

Vendors/Partners

Audit

Audit

Business groups/
Affiliated companies
ReportInstruction

Risk information

CRO: Chief Risk Management Officer

CFT: Cross-Functional TeamSocial Performance

Administrative organizations(in charge of risk management)
Routine monitoring

Company Overview

Audit report

Instruction

CRO

Guidance/
SupportStaff organizations

Corporate organizations

Corporate GovernanceCompliance and Risk Management

Information

Environmental Consideration

Media organizations

Comprehensive,
Unified Set of Principles

Integrated Risk Management System

Message from the President

Compliance and Risk Management

Routine inspection

As of June 1, 2007

Social and Environmental ReportCompany Overview

Environmental Consideration
Environmental Policy

Message from the President

The Covalent Group voluntarily engages in environmental protection activities on a continual basis, which is guided
by the Environmental Policy we established in 1989. The policy is based on a respect for people, and it forms thebasis of our Corporate Philosophy and the Covalent Group’s Principles.
Since October 2003, our eight manufacturing sites, including consolidated subsidiaries in Japan, have been ISO
14001 certified.

Basic Environmental Policy of the Covalent Group

Comprehensive,
Unified Set of Principles

As a solutions provider, the Covalent Group endeavors to satisfy customers’ demands bycreating and delivering materials, parts and services with precision in the semiconductor, liquid
crystal, energy, environment and bio fields. In carrying out our activities, we promote
environmental conservation with the belief that the Earth’s resources are invaluable.
Accordingly, the Covalent Group promotes the following management concepts.
1. Position environmental protection as a critical issue at the heart of our business.

Corporate GovernanceCompliance and Risk Management

2. Adhere to environmental laws, environmental guidelines embraced by the Covalent Group,and other voluntary environmental protection standards.
3. Reduce the environmental impact of our business activities and prevent pollution.
4. The Group has voluntarily set action plans such as energy conservation to help prevent
global warming, including policies such as zero emissions through the effective use ofresources and the reduction of the use of chemical substances.

Environmental Consideration

5. Promote green procurement, and accord priority to the selection of raw materials that haveminimal environmental impact.
6. Contribute to society by developing and providing superior environmental technology andproducts, cooperate with communities, and undertake environmental protection activities ingeneral.

As of June 1, 2007
Social PerformanceSocial and Environmental Report

General Managers of Corporate
Staff Group Organizations

Environmental Officer(Chief Environmental Officer)

General Managers ofBusiness Groups(Group Chief Environmental Officers)

Corporate Environmental Manager(Environmental Management Officer)

Senior Managers of BusinessGroup Staff Organizations

Site Environmental
Management Committee

General Managers of Sites(Site Chief Environmental Officers)

Site Environmental Managers(Site Environmental
Management Officers)

Affiliated Companies

As of March 31, 2007

Comprehensive,
Unified Set of Principles

President

Corporate Environmental
Management Committee

Message from the President

The Covalent Group’s environmental management system is headed by an executive officer responsible forenvironmental protection (Chief Environmental Officer). The Corporate Environmental Management Committee
decides the Covalent Group’s environmental management policy and its general direction.

Company Overview

Environmental Management System

Main Qualifications
To ensure compliance and enhance the skills of individual employees, theCovalent Group encourages employees to acquire qualifications and toattend lectures.
■ Employees with Qualifications
Qualification

Number of employees

Training internal environmental auditors at Hadano
Facility

Briefing subcontractors on environmental andsafety requirements at Covalent Materials
Nagasaki Corporation

71

Industrial waste intermediary treatment facility engineering manager

7

Designated industrial waste supervisor

18

Energy management (heat, electricity)

27

Certified measurer (concentration, noise and vibration)

1

Working environment measurement expert (Type 1, Type 2)

6

Health supervisor (Type 1), health engineering supervisor

48

Boiler engineer (Class 1, Class 2)

88

Organic solvent work chief

266

Designated chemical substance work chief

642

Radiation protection supervisor

15

Hazardous material handler (Type “ko”, Type “otsu”)

406

High-pressure gas production and safety supervisor

49

Special high-pressure gas handling chief

85

Internal environmental auditor

160

Internal safety and health auditor

Social Performance

Pollution control manager (air, water, noise, vibration)120
As of March 31, 2007
Social and Environmental Report

Environmental Consideration

In order to deepen the understanding and heighten the awareness of environmental protection and to enhance skills,
all Covalent Group employees receive environmental education on a regular basis. The content of education varies
according to positions and responsibilities.
Contractors engaged in work at the Group’s sites are informed of environmental and safety requirements.

Corporate GovernanceCompliance and Risk Management

Environmental Education

10Company Overview

Targets and Results
The Covalent Group is working to reduce the environmental impact of its business activities in accordance with its
environmental action plan.
■ Results of the FY 2006 Environmental Action Plan
Priority items

Target for FY2006

Evaluation※1

Results

Message from the President

Prevention of Global Warming

Reduce CO2 emissions at least 1% in FY2006 compared with FY2005

7.8% reduction○

Zero emissions※2

Reduce the final disposal rate (amount of final disposal/total waste
discharged) at least 1 percentage point in FY2006 compared with
FY2005 (5.8% or less)

1.1 percentage
point reduction(5.7%)○

Reduction of chemical substances

Reduce the amount of chemical substance emissions as covered by
the Pollutant Release and Transfer Register (PRTR) by at least 1%
in FY2006 compared with FY2005 (by means of reducing use andlowering concentration of emissions, etc.)

4.4% reduction○※ 1: ○ = Target attained※ 2: Definition of zero emissions of waste Final disposal rate = Amount of final disposal / Total waste discharged x 100 ≦ 1

Comprehensive,
Unified Set of Principles

Environmental Audits
The Covalent Group conducts internal environmental audits to assess compliance with relevant laws and to makerecommendations. The Group works to raise the level of its environmental protection activities by undergoing ISOcertified examinations and internal environmental audits to gauge the continuous improvement of the ISO 14001
system operation and performance.

Corporate GovernanceCompliance and Risk Management

Internal Audits
The Company conducts internal
audits at all Covalent Group businesssites once a year to examine facility
management and other matters, andconducts follow-up audits concerning
issues identified in the audits.

Environmental Consideration

ISO 14001 Review

Oguni Facility

Kariya Facility

An ISO certification body reviews each business site annually to determine whether the environmental management
system is being carried out correctly.
■ ISO 14001 Certified Sites

Social Performance

Certified dateRenewal date forcertification in accordancewith 2004 version

Oguni Facility

February 6, 1998

March 18, 2006

Hadano Facility

March 20, 1998

April 28, 2006

Kariya Facility

April 28, 2000

April 28, 2006

December 5, 1997

March 3, 2006

Site name (Location)

Covalent Materials Niigata Corporation
Covalent Materials Tokuyama Corporation

March 20, 1998

April 21, 2006

Covalent Materials Nagasaki Corporation

December 8, 2000

January 27, 2006

Covalent Materials Sekikawa Corporation
Tokai Ceramics Co., Ltd.
※ Certification body: Japan Quality Assurance Organization (JQA)

11

Social and Environmental Report

April 23, 1999

March 24, 2006

October 10, 2003

December 22, 2005

Principal raw materials
850 t
589 t
507 t
5,594 t658 t

Air pollutant emissions
Nitrogen oxide
393 t
Sulfur oxide
20 t
Release of chemical
substances subject to
PRTR Law (air):

28 t

CO2 emissions 203,204 t －CO2

423 t

Principal source gases
Silicon tetrachloride
Trichlorosilane

Factories/
Development

Released into the atmosphere

Offices

2,217 t120 t

Total energy input
4,442,957GJ

Total amount of waste
discharged
14,306 t(of which final disposal)
813 t
Transfer of chemical
substances subject to
PRTR Law (waste)
10 t

Discharged into water(Energy input by hydroelectric
power generation) 630,867GJ
Consumption of chemical substances
subject to the PRTR Law 316 t

Discharge of waste

Corporate GovernanceCompliance and Risk Management}

5,759 tOUTPUT

Customers’ factories etc.

Consumption of water, including
industrial waterand groundwater 6.61million m3

BOD※ + COD※
SS※
Oil※
Release of chemical
substances subject to
PRTR Law (water)

72 t
47 t
under 5 t

Environmental Consideration

Quartz
SiliconCarbon
Silicon carbide
Alumina
Zirconia
Coal tar
Tar pitchRawmaterials

Comprehensive,
Unified Set of Principles

INPUT

Message from the President

The Covalent Group gathers and analyzes data on the environmental impact of its production activities on acontinuous basis and uses the data in order to reduce the environmental impact.
The table below shows the input of energy, chemical substances and water, and output such as emissions andtransfers, in fiscal 2006.

Company Overview

Environmental Impact in Fiscal 2006

20 t

Amount discharged 6.54million m3

Social Performance※ BOD: Biochemical oxygen demand※ COD: Chemical oxygen demand※ SS: Suspensoid※ Oil: N-hexane extracted substance※ Principal raw materials and raw gases listed here are those that are consumed in excess of (100 t) per year.

Social and Environmental Report12Company Overview

Reducing Environmentally Harmful Emissions
We have set targets for the prevention of global warming, zero emissions and the management of chemical
substances at all of our sites. At our sites, we are promoting activities that will reduce the emissions that impact theenvironment.

Preventing Global Warming
Message from the President

We have various measures in place to reduce CO2 emissions. We are reducing the ratio of CO2 emissions to net
sales through the use of alternative fuels with lower CO2 emission coefficients, cogeneration systems which use
waste heat. We are reviewing power generation facilities that use heavy oil and are reducing the use of heavy oil byusing the waste heat of heat-treating furnaces, and are involved in other energy-saving activities.
■ CO2 Emissions
CO2
emissions(1,000 tons)
250

Comprehensive,
Unified Set of Principles

200

CO2 emissions
Ratio to net sales
1.8

1.54 1.42
1.65
1.45 208 203
178
177
166

Ratio tonet sales(t-CO2/one million
yen)
2

1.5

150
1

Corporate GovernanceCompliance and Risk Management

Akashiba Power Plant, Covalent Materials’ private
hydroelectric power plant

Boiler fueled by LPG

At Oguni Facility, our private hydroelectric
power plant generates approximately 60
million kWh of electricity per year, contributing to the reduction of CO2 emissions.

Hadano Facility has converted its boiler
from heavy oil use to LPG fuel, which has
a low CO2 emission coefficient. The boilers
have lower CO2 emissions and sulfur oxide
generation.

100
0.5

50
0
2002 2003 2004 2005 2006

(FY)

Subject: 3 facilities and 6 consolidated subsidiaries※ The amount of net sales used for calculating the ratio to net
sales is the total amount of net sales of Covalent Materials
Corporation and its six consolidated subsidiaries.

Preventing Air Pollution and Offensive Odors
Air pollution and offensive odors are prevented by the installation of exhaust gas treatment equipment. The use ofheavy oil is reduced by using alternative fuels and waste heat from heat-treating furnaces.

Environmental Consideration
Social Performance

High-efficiency boiler

Covalent Materials Sekikawa Corporation
has halved its use of heavy oil and reduced
sulfur oxide generation by increasing
boiler efficiency and reusing heat-treating
furnace waste heat.
Deodorizing system

Kariya Facility has installed a deodorizing system on its boiler exhaust route in order toprevent strong odors.

13

Social and Environmental ReportOur production sites are improving their wastewater treatment facilities while strengthening monitoring by installingmeasuring devices for water quality management.

Zero Emissions
Under the 3R concept of reduce, reuse and recycle, we are working toward a recycling-based society by engaging
in zero emissions activities. This involves minimizing defects and material loss by improving manufacturing yield andworking with recycling partners for sludge and scrap waste.
■ Amount of Final Disposal andFinal Disposal Rate
Amountof final
disposal (t)Amount of final disposal
Final disposal rate

3,000

Final
disposalrate (%)
30

2,484
2,000
20.5
Park with landscape bricks

In fiscal 2006, Hadano Facility attained
zero emissions status and C ovalent
Materials Niigata Corporation andCovalent Materials Sekikawa Corporation
maintained their zero emissions status.

At Tokai Ceramics Co., Ltd., dust particles that had been generated in them a nu f a c t u r i n g p ro c e s s of c a s t a b l e
refractories were previously disposed of ina landfill as industrial waste, but now they
are used as raw material for landscapebricks to reduce waste. Landscape bricks
are used in the local community in addition
to being used at Tokai Ceramics.

1,210
1,000

13.1

882

10
813

8.3
6.8
0

5.7

0
2002 2003 2004 2005 2006 (FY)

Subject: 3 facilities and 6 consolidated subsidiaries

Social and Environmental Report

14

Social Performance

Hadano Facility

20

1,923

Environmental Consideration

Wastewater treatment system using improved wastewater treatment agent

Corporate GovernanceCompliance and Risk Management

Comprehensive,
Unified Set of Principles

Message from the President

Covalent Materials Nagasaki Corporation
has increased the condensation effectand reduced sludge generation throughimprovement of its wastewater treatment
agent.

Company Overview

Preventing Water PollutionCompany Overview

Reducing Chemical Substances
Results from the Reduction of Chemical Substances
The Covalent Group considers people’s health and total safety, and manages chemical substances as framed by the PRTR Law and
the Poisonous and Deleterious Substances Control Law. We have strengthened the “one drop control” of chemical management andimplemented the thorough management of chemical use, release and transfer. We promote green procurement to eliminate harmful
substances from our products, as part of our concerted effort to create environmentally conscious products and use safe alternatives. In
fiscal 2006, the amount of chemical substances handled and the ratio to net sales were reduced.

Message from the President■ Amount of Chemical Substances Handled
Amount of chemical substances handled (t)Ratio to net sales (kg/one million yen)Amount of chemical
substances handled (t)12,00010,000

90.7

95.0

87.7

8,000
6,000

10,187

10,80082.7
11,131

Ratio to net sales(kg/million yen)
100

73.6

80

Arsenic
Toxic
substances

10,4998,920

Acetic acid

HarmfulGlacial acetic acid substances

40

Other

20

Comprehensive,
Unified Set of Principles

2,000

Hydrofluoric acid
Mixed acid

60

4,000

0

■ Main Chemical Substances Managed by Covalent
Materials Group

Coal tar
Tar pitch

2002

2003

2004

2005

2006 (FY)0AcetoneAmmonium fluoride
MethanolPhenol resin
Hydrochloride
SulfateNitrateCaustic soda
Ammonia water (25%)
Hydrogen peroxide
Sodium fluorosilicate
Chromium trioxide
Lead oxide

Subject: 3 facilities and 6 consolidated subsidiaries※ The amount of net sales used for calculation of the ratio of the amount of chemical
substances handled to net sales is the total amount of net sales of Covalent
Materials Corporation and its six consolidated subsidiaries.

Pollutant Release and Transfer Register (PRTR) results for fiscal 2006

Corporate GovernanceCompliance and Risk Management

PRTR is a system for obtaining data on the amounts of harmful chemical substances released into the environment or transferred offsite, and the sources of such substances. Data are aggregated and disclosed.
The amount of hydrogen fluoride and its water-soluble salts decreased as a result of optimization of wastewater treatment conditions
and the transfer of the small-diameter wafer fabrication process.

■ PRTR Results for Fiscal 2006
Substance
numberspecified by
the PRTR Law

Substance nameTons: tAmount A moun t Releasehandled released
to airReleaseto water

Releaseto soilLandfill
withinsites

Amounttransferred

Transfer Transfertoas wastesewageEnvironmental Consideration

43

Ethylene glycol

10.5

10.4

10.4

0.0

0.0

0.0

0.1

0.0

0.1

45

Ethylene glycol monomethyl ether

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

63

Xylene

3.4

0.7

0.7

0.0

0.0

0.0

1.0

0.0

1.0

7.4

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

1.5

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0
0.2

68
198

Chromium andchromium (III) compounds
1,3,5,7-tetraazatricyclo[3.3.1.13.7]
decane227

Toluene

4.4

1.6

1.6

0.0

0.0

0.0

0.2

0.0

266

Phenol

14.3

14.2

14.2

0.0

0.0

0.0

0.1

0.0

0.1

283

Hydrogen fluoride andits water-soluble salts

262.7

20.4

1.2

19.2

0.0

0.0

8.7

0.0

8.7

304

Boron and its compounds

8.1

0.0

0.0

0.0

0.0

0.0

0.1

0.0

0.1

309

Poly (oxyethylene) nonylphenyl ether

3.1

0.6

0.0

0.6

0.0

0.0

0.0

0.0

0.0

346

Molybdenum and its compounds

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Subject: 3 facilities and 6 consolidated subsidiaries
Social Performance

Storage of Products Containing PCBs
The table at right shows products containing
polychlorinated biphenyl (PCB) held by the
Covalent Group. The products containing
PCBs, including those stored and currently
in use, are managed strictly to ensure thatno environmental pollution occurs during theperiod until 2016 when treatment of suchproducts must be completed by disposal
companies according to law.

15

Social and Environmental Report■ Storage of Products containing PCBs
Types of products
containing PCBs

Unit

Transformer

Unit

8

1

9

Capacitor

Unit

153

70

223

Stabilizer

Unit

1,076※

0

1,076

Other equipment

Unit

0

3

3

Other

kg

64

0

64

Quantity stored

Subject: 3 facilities and 6 consolidated subsidiaries※ Including 32 units that may contain PCB

Quantity currently in use

Total

Company Overview

As the result of a groundwater survey at Oguni Facility, fluorine was detected exceeding the environmental standard (maximum value
3.0 mg/l) at detection points surveyed on August 21, 2006 (environmental standard: 0.8 mg/l). Consequently, we are implementing
groundwater remediation within the site. The results of a groundwater survey conducted at the site boundary showed no fluorine inexcess of the environmental standard. We report to the prefecture the results of periodic water quality monitoring at the detection points
and at the site boundary.

Environmental Costs
The Covalent Group assesses environmental costs and applies them to business activities.
■ Environmental Costs

Million yen

Classification

Content

1) Business area costs

Expenditure

Cost

475

1,226

① Pollution prevention costs

Prevention of atmosphere, water, soil, pollution, etc.

254

558

② Global environmental protection costs

Prevention of global warming, protection of ozone layer, etc.

213

16

③ Resource circulation costs

Effective utilization of resources, recycling of waste, etc.

86522) Upstream/downstream costs

Green procurement, product recovery and recycling, etc.

003) Administration costs

Monitoring of environmental impact, planting of greenery, etc.

15424) R&D costs

Development of environmentally conscious products etc.

77

596

5) Social activity costs

Disclosure of information, etc.

026) Environmental remediation costs

Nature restoration etc.

0

239

567

2,105

Total environmental cost Total (million yen)
Period: April 2006 to March 2007
Subject: 3 facilities and 6 consolidated subsidiaries

Expenditure: Of expenditures subject to depreciation, the amount for environmental protection is reported.
Costs: The total amount of expenditures for environmental protection and depreciation of facilities is reported(including labor costs).

■ Environmental Benefits
Actualbenefits
Energyconsumption
Water
consumption
Total amountof wastedischarged

Environmental
impact reduction※1
225,594GJ

Monetary value of benefits※1

Decrease of 150 million yen※2

0m3

Increase of 15 million yen※3-1,371 t

Decrease of 31 million yen※1. The amount of reduction in environmental impact is the difference involumes of environmental impact between FY2005 and FY2006. Minus
figures indicate that an increase in environmental impact exceeded
reduction benefits due to increased production etc.
※2. Although energy consumption decreased, energy costs increased in
FY2006 compared with FY2005 as a result of increases in electricity costs,
Bunker A heavy oil, kerosene, NFO, and city gas.
※3. Although total water consumption was unchanged from FY2005, water
costs decreased because of decreases in consumption of industrial waterand city water and an increase in consumption of groundwater in FY2006.

Environmentally Conscious Products
Green Procurement

The Covalent Group Green Procurement Guidelines

As part of its effort to create ECPs, the Covalent Group
works to reduce the amount of chemical substancesused, especially those that are hazardous substances,while promoting the use of safer alternatives andchampioning green procurement.

In accordance with its Green Procurement Guidelines,
the Covalent Group accords priority to raw materials,
components and other supplies that have minimal
environmental impact. In October 2004, in order toachieve green procurement covering all suppliers in
an integrated manner, we introduced Eco Club, anenvironmental management support tool.
Social and Environmental Report

16

Message from the President

Fluorine Groundwater Pollution at Oguni Facility

Comprehensive,
Unified Set of Principles

As a result of a soil and groundwater investigation that was conducted at Kariya Facility from November 5 to December 22, 2005, it was
found that the measured value for PCBs exceeded the environmental standard. Removal and purification measures were implemented
at the site, and following completion, we submitted notifications of completion to Aichi Prefecture and Kariya City on October 13, 2006,
which were accepted. The subsequent soil and groundwater investigation in the vicinity where the PCBs had been detected and at thesite boundary confirmed that remediation brought the site into compliance with environmental standards. The contaminated soil, which
was removed from the site, is stored under strict management, and water quality at the site boundary is monitored periodically.

Corporate GovernanceCompliance and Risk Management

PCB soil and groundwater contamination at Kariya Facility

Environmental Consideration

Prevention of Soil and Groundwater Pollution

Social Performance

Measures for Environmental Issues

Company Overview

ECP※1 Guidelines
The Covalent Group is developing and providing environmentally conscious products (ECPs).
■ Items for Environmental Consideration
Life cycle

Items for environmental consideration

Message from the President

Procurement of parts and materials

Green procurement

Manufacturing process• Ozone depleting substances (ODSs) are not used.
• Voluntarily prohibited substances (acetone etc.) are not used.
• Resource savings and energy savings are considered.

Product distribution

Measures are taken to reduce packaging (use of recycled items, recovery, etc.)

Use by customers (product specifications)

Reduction in the product usage process. Specifically, reduction of power consumption, consumables, etc.

Other environmental items

Products and manufacturing methods are assessed.

※ 1 ECP ＝ Environmentally Conscious Product1. Development of RoHS ※ 2 compliance analysis technology

Corporate GovernanceCompliance and Risk Management

Europe’s RoHS Directive came into
effect in July 2006, and since then, fullcompliance with RoHS regulations has
been required of companies shipping
products to Europe. The RoHS Directive
regulates amounts of six harmful substances contained in products to withincertain values. The substances are lead,
mercury, cadmium, hexavalent chromium,polybrominated biphenyls (PBB), andpolybrominated diphenyl ethers (PBDE).

Environmental Consideration

To comply with the intent of the RoHS
Directive, the Covalent Group is developinga mechanism to prevent the shipment of
products containing harmful substances.
This involves performing internal trace
analysis of the regulated substances,examining the raw materials used in
production, and examining finishedproducts.

RoHS compliance analysis

Trace analysis of regulated substances※ 2 RoHS = Restriction of Hazardous Substances

2. Development of compound semiconductor substrates for power devices
Next-generation semiconductors are desirable to achieve efficient energy use, low loss and high output, and environment resistantdevices. We are developing compound semiconductor substrates for power devices composed with crystal growth of GaN on Si
substrates by using 3C-SiC buffer layers.

Social Performance

GaN
SiC
Si

Average Output Power (W/mm2)

Comprehensive,
Unified Set of Principles

Examples of ECP Research and Development

104
103

SiC

102
GaN

101
100

GaAs

Si

SiGe

10–1
100M

1G
UHF

10G
micro wave

Frequency (Hz)Evaluation of crystal growth17

Social and Environmental Report

Schematic illustration of GaN on Si substrate

Regions of semiconductor material
characteristics

InGaAs100G
millimeter wave

Company Overview

3. Development of silica glass fine processing technology using the hot-press method

Fine processing technology generally involves an etching method that uses a chemical solution or gas medium to produce a chemical
reaction, but with the hot press method that Covalent Materials has developed, no chemical solution or gas medium is used. Compared
to conventional methods, our hot press method has a less harmful impact on the environment. And by repeatedly using the dies,
environmental impact and the release of effluents also become lessened.

No chemicals
are used

Cross section image of a hot press
methodComprehensive,
Unified Set of Principles

Easy to create groovesof varying depths

Hot Pressing

Message from the President

By creating channels in quartz glass and ceramics with fine processing technology, microreactors and other various other applications
are being developed. Covalent Materials has developed a hot press method for silica glass using fine processing technology. Quartz
glass is a material known for excellent qualities such as high heat resistance and corrosion resistance, but its machining characteristics
have been poor. Therefore, an easy machining process has been desired.

Diagram of press method

150-μm-wide 55turn channel (6 layers)

Environmental Consideration

Corporate GovernanceCompliance and Risk Management

Processing Example 1 — Micro Flow Channels

Complex flow channel

φ150μm

φ99μm

φ49μm

φ24μm

φ10μm

Height

47μm

29μm

13μm

5.7μm

1.8μm

Roundness

0.818

0.868

0.843

0.903

0.829

Social and Environmental ReportSocial Performance

Processing Example 2 — Micro Lenses

18Company Overview

History of the Covalent Group’s Environmental Protection Activities
Since its foundation, the Covalent Group has accorded priority to harmony with society and the environment in the
conduct of its business. We intend to continually strengthen the foundation of environmental management with theaim of establishing sustainable management .
※※ Sustainable management means contributing to the establishment of a sustainable society through the fulfillment of corporate responsibility in terms of the economy,society and the environment and by respecting people.

Message from the President

History of the Covalent Group

1910
1920

1950

Major environmental protection
activities and evaluation

Major improvements of environmental
protection-related facilities

1918 Toyo Taika Renga Co., Ltd. (the current Kariya Facility)
is established.
1928 Denki Kinyu Co., Ltd. (the current Oguni Facility) is
established. (Foundation of the predecessor of thecurrent Covalent Materials Corporation)
1956 Kawatana Plant (the current Covalent Materials Nagasaki
Corporation) is established.

1951 Oguni Facility receives the Director-General Award for Excellent
Factories for Energy Control (Heat Category).

1958 Nihon Denko Co., Ltd. is renamed Toshiba Denko Co., Ltd.

1954 Oguni Facility’s Akashiba Power Plant (hydroelectric) in Oguni,
Yamagata prefecture, is completed.

1959 Tokai Rozai Co., Ltd., is renamed Toshiba Internal
Insulation Co., Ltd.
1961 Hadano Plant (the current Hadano Facility) is established.

Comprehensive,
Unified Set of Principles

1960

1968 Toshiba Ceramics Co., Ltd. is established as a result of themerger between Denko Co., Ltd. and Toshiba Rozai Co., Ltd.
1971 A research center (the current Core Technology Center)is established.

1970
1982 Tokuyama Ceramics Co., Ltd. (the current Covalent Materials
Tokuyama Corporation) is established.

1980

1985 Sekikawa Denshi Co., Ltd. (the current Covalent Materials
Sekikawa Corporation) is established.

Corporate GovernanceCompliance and Risk Management

1991 Niigata Toshiba Ceramics Co., Ltd. (the current Covalent
Materials Niigata Corporation) is established for volume
production of large-diameter silicon wafers.
1994 Tokai Ceramics Co., Ltd. is established.

1990

1974 Oguni Facility receives the Director-General Award for Excellent
Factories for Energy Control (Heat Category).
1978 Oguni Facility receives the Award of the Minister of International
Trade and Industry for Excellent Factories for Energy Control(Heat Category).
1984 Kariya Facility receives the President’s Prize of the Japan Energy
Conservation Center for Excellent Energy Saving Cases.

1991 Use of chlorine-based organic solvents is abolished throughout
the group.

1985 Oguni Facility starts introducing waste-heat-based snow
removing equipment, the use of which does not involve water
spraying.
1990 Oguni Facility’s second Akashiba Power Plant (hydroelectric)is completed.

1996 Kariya Facility receives the TPM Excellent Award Group 1.
1997 Oguni Facility starts manufacturing lead-free carbon brushes.
(Full-scale manufacturing starts in July 2001.)
1998 Oguni Facility receives the Award of the Director-General of the
Tohoku Bureau of Economy, Trade and Industry for Excellent
Factory Greening.
1999 Kariya Facility receives an award in the Aichi Prefecture Factory
Greening Contest.
1999 Nagasaki Toshiba Ceramics Co., Ltd. (the current Covalent
Materials Nagasaki Corporation) gains Eco-Mark certification
for its foamed ceramics.

1998 BOD treatment equipment is installed at Oguni Facility,
1998 Waste Recycling Center is completed at Oguni Facility.
1998 An emergency automatic shut-off gate is introduced at the final
discharge outlet of Oguni Facility.
1999 Noise-proof walls are installed at site boundaries of Hadano
Facility.

1999 Use of acetone is abolished throughout the group.

Environmental Consideration

2000 Green Procurement Guidelines are established and evaluationof suppliers for green procurement starts.

2000 Removal of incinerators from all production sites is completed.

2003 The Group participates in the Toshiba Group Environmental
Technology Exhibition for the first time, exhibiting radiantceramic tubes for incinerators.

2001 Heat storage combustion type exhaust gas treatment equipment
is installed at Kariya Facility as a countermeasure for offensive
odor and volatile organic compounds.

2001 Oguni Facility’s cogeneration system is completed.

2003 ISO 14001 certification is completed for all sites in Japan.
2004 Oguni Facility, Kariya Facility, and Nagasaki Toshiba Ceramics
Co., Ltd. (the current Covalent Materials Nagasaki Corporation)
receive occupational safety and health management system
certification (JISHA-qualified OSHMS).
2004 Niigata Toshiba Ceramics Co., Ltd. (the current Covalent
Materials Niigata Corporation) achieves zero emissions ofwaste.

2000

2005 Oguni Facility receives the Minister of Economy, Trade andIndustry Award for Excellent Factories for Energy Control (Heat
Category).

Social Performance2005 Sekikawa Toshiba Ceramics Co., Ltd. (the current Covalent
Materials Sekikawa Corporation) achieves zero emissions ofwaste.
2006 SIC Investment, a special purpose corporation for the tender
offer of Toshiba Ceramics' shares, is established;
Toshiba Ceramics Co., Ltd. becomes a wholly owned
subsidiary of SIC Investment following completion of thetender offer and share exchange and SIC Investment changes
its name to Covalent Materials Corporation.
2007 Toshiba Ceramics merges with Covalent Materials
Corporation, and the new Company, Covalent Materials
Corporation, is inaugurated.

19

Social and Environmental Report

2006 Kariya Facility holds an explanatory meeting for local residents
on soil and groundwater pollution.
2006 Hadano Facility, Niigata Toshiba Ceramics Co., Ltd. (thecurrent Covalent Materials Niigata Corporation), and Tokuyama
Toshiba Ceramics Co., Ltd. (the current Covalent Materials
Tokuyama Corporation) receive occupational safety and healthmanagement system certification (JISHA-qualified OSHMS).
2006 Implementation of soil and groundwater countermeasures
within the site is completed at Kariya Facility.
2006 Hadano Facility achieves zero emissions of waste.

2004 Measuring equipment for total phosphorus and total nitrogen is
installed at Kariya Facility.
2004 Introduction of central monitoring systems at final discharge
outlets is completed at Oguni Facility, Hadano Facility and
Kariya Facility.
2004 Nagasaki Toshiba Ceramics Co., Ltd. (the current Covalent
Materials Nagasaki Corporation) changes furnace fuel fromheavy oil to kerosene in order to reduce SOx.
2005 Kariya Facility introduces catalyst combustion type deodorizing
equipment for furnaces at advanced ceramics factories No. 1,
No. 2, and No. 3.
2005 Nagasaki Toshiba Ceramics Co., Ltd. (the current Covalent
Materials Nagasaki Corporation) changes furnace fuel fromkerosene to LPG in order to reduce CO2 emissions.
2006 Hadano Facility changes boiler fuel from heavy oil to LPG inorder to reduce CO2 emissions.

Company Overview

Social Performance

Based on the idea that the growth of diverse, independent individuals leads to the development of theorganization, we strive to enhance communication
with our employees. We have introduced a selfassessment system and an in-house recruitment
system to offer all our employees the chance todisplay their capabilities. We also have a complainthandling system.

Employer-employee RelationshipOur employees have a labor union. Management
and the union have a constructive relationship basedon a vigorous exchange of views on management
issues, measures, working conditions, and otherrelated matters.

Comprehensive,
Unified Set of Principles

Communication

In accordance with the basic policy of cultivating
relations between the individual and the organization
so that the individual is motivated to improve hisor her capabilities, we support employees’ selfdevelopment, and provide training and educationaccording to positions and responsibilities, andhave a system for job rotation to promote careerdevelopment.

Environmental Consideration

In order to employ diverse human resources andfoster a dynamic working environment, we respect
the basic rights of the individual and diverse
values, individual characteristics, and privacy.
The Covalent Group Standards of Conduct clearlyprohibits any act of persecution or harassment, or
discrimination on the basis of race, religion, sex,
nationality, physical disability, or age.

Human Resources Development

Social Performance

Respect for Human Rights

Corporate GovernanceCompliance and Risk Management

The Covalent Group, adhering to the Covalent Group’s Principles and Standards of Conduct, respects the rights ofindividuals and human rights. We are an organization of diverse employees, and we provide the mechanisms for
motivated employees to realize their full potential through their work.

Message from the President

Labor and Human Rights (Employee Relations)Social and Environmental Report20Company Overview

Occupational Safety and Health Policy
The Covalent Group maintains a clean work environment and works to prevent occupational accidents by adheringto the Basic Policy on Safety and Health Management. We realize that this is necessary for a creative, efficient,safe and comfortable workplace. Moreover, we encourage employees to take the initiative in their own healthmanagement.

Message from the President

The Covalent Group’s Basic Policy on Safety and Health Management, FY 2006
The Covalent Group recognizes that ensuring the safety and health of all people engaged in theGroup’s business is one of the most important tasks for management. Accordingly, this is embodied
in the slogan “Survival in the 21st century: establish a culture of safety and health, and enhancephysical and mental well-being.” We have reflected this theme in the items below:

Comprehensive,
Unified Set of Principles

I. Priority items
1. Establish an occupational safety and health management system
2. Eliminate occupational accidents
3. Enhance mental and physical health and eliminate occupational diseases and disorders
4. Promote comfortable working environments
5. Secure the safety and health of subcontractors
6. Promote disclosure of occupational safety and health measures and results
7. Each year and in the midterm, systematically improve performance concerning the action items listed below.

II. Action items
Corporate GovernanceCompliance and Risk Management

1. Establish JISHA-qualified OSHMS
Gain JISHA-qualified OSHMS certification or establish safety and health management standards equivalent to
JISHA-qualified OSHMS[Plan for gaining certification]
Fiscal 2006: Hadano Facility, Niigata Toshiba Ceramics Co., Ltd. (the current Covalent Materials Niigata
Corporation), Tokuyama Toshiba Ceramics Co., Ltd. (the current Covalent Materials Tokuyama Corporation)

Environmental Consideration

2. Implement measures to prevent occupational accidents
1) Risk assessment of equipment and facilities and work and formulation of improvement plans2) Countermeasures for potential risks concerning maintenance and non-routine work
3) Investigation of the causes of frequent accidents (pinching, catching, cuts and scratches) and preventionof recurrence4) Education and training for new workers, workers with less than 10 years of experience and newly assigned
chief foremen and deputy managers of production lines for skill enhancement
5) Improvement of workplace environments
6) Improvement of insufficient wind speeds of local ventilators
3. Mental and physical health management activities
Support and guidance for health and health checks by occupational physicians and nurses

Social Performance

4. Consultation for female employees (“Women’s Patrol”)
1) Survey of the working environment and improvement
2) Support for implementation of the plan formulated in accordance with the Law to Promote Measures
Supporting Development of the Next Generation
5. Safety and health of subcontractors
Establish a system for provision of risk information
6. Social activities
Promote exchanges with local communities

21

Social and Environmental ReportMessage from the President

We are in the process of establishing occupational safety and health management systems (OSHMS) with the aimof maintaining a safe and comfortable workplace free of occupational accidents.
In fiscal 2006, Hadano Facility, Covalent Materials Niigata Corporation, and Covalent Materials Tokuyama
Corporation gained OSHMS certification from the Japan Industrial Safety and Health Association (JISHA).

Company Overview

Occupational Safety and Health Management System■ Sites with OSHMS Certification
Site nameDate of certification

Oguni Facility

August 19, 2004

Hadano Facility

October 10, 2006

Kariya Facility

August 19, 2004

Covalent Materials Niigata Corporation

March 15, 2007

Covalent Materials Tokuyama Corporation

January 10, 2007

Covalent Materials Nagasaki Corporation

March 17, 2005

Occupational Safety and Health Management Activities
The Covalent Group endeavors to provide a work environment that is safe and comfortable as well as creative andefficient, based on respect for human rights.

Risk Assessment
Workplace improvement activities based on the results of risk assessment are enacted throughout the CovalentGroup. Risk assessment is a means for identifying potential hazards in the workplace, understanding the levelof each risk and determining necessary measures for eliminating or reducing the risk according to the risk level.
Through risk assessment, we aim to achieve essentially safe workplaces and enhance safety and health standards.

Social and Environmental Report

22

Environmental Consideration

Review at Covalent Materials Niigata Corporation

Social Performance

Review at Covalent Materials Tokuyama
Corporation

Corporate GovernanceCompliance and Risk Management

Comprehensive,
Unified Set of Principles

Review at Hadano Facility

Company Overview

Occupational Safety and Health Audits
The Covalent Group conducts internal audits of occupational safety and health management systems to assess
compliance with relevant laws and make recommendations. Oguni Facility, Hadano Facility, Kariya Facility, Covalent
Materials Niigata Corporation, Covalent Materials Tokuyama Corporation, and Covalent Materials Nagasaki
Corporation, all of which have certified occupational safety and health management systems, undergo review every
three years by the Japan Industrial Safety and Health Association (JISHA).

Message from the President
Comprehensive,
Unified Set of Principles

Covalent Materials Tokuyama Corporation

Covalent Materials Nagasaki Corporation

Hadano Facility

Mental Health-related Activities
The Covalent Group provides education on mental health to employees for the early prevention of mental healthproblems. The Company also has a system in which occupational physicians and nurses provide advice andguidance on mental health.

Corporate GovernanceCompliance and Risk Management

Mental health workshop at Oguni Facility.

Mental health workshop at Hadano Facility

Mental health workshop at Covalent Materials
Niigata Corporation

Environmental Consideration

Women’s Patrol
Under the banner of ”understanding the concerns of female employees and providing a female-friendly work
environment,” groups consisting of women’s health managers visit workplaces and conduct surveys among female
employees to identify problems and make improvements.

Social Performance

Sharing information at Oguni Facility

23

Social and Environmental Report“Women’s Patrol” at Covalent Materials Tokuyama
Corporation

Presentation on a female-friendly workplaceenvironment

President Kohyama speaks at the safety and healthconference

Message from the President

The Covalent Group holds an annual safety and health conference to enhance awareness of safety and health issues
and share information among the Group companies. The conference includes a speech by the president, an awards
presentation, a presentation by each site and a lecture by an outside speaker.

Company Overview

Safety and Health Conference

An onsite presentation

Safety and Health Education and Training

First-aid workshop at Covalent Materials Niigata
Corporation

Education on use of respirators at Covalent
Materials Nagasaki Corporation

Number of Occupational Accidents
According to statistics on occupational accidents within the Covalent Group, accidents involving employees withless than 5 years of experience account for the highest proportion. Among accident type, pinching or being caught
by equipment and cuts and scratches have been the most frequent.
■ Number of Occupational Accidents(Number)
20

Accidents requiring absence from work (1 day or longer)

Social Performance

Accidents requiring absence from work for 1 day or longer
Accidents not requiring absence from work

15
10
5
0
2000

2001

2002

2003

2004

2005

2006

Environmental Consideration

Training employees in crane operation at Oguni
Facility

Corporate GovernanceCompliance and Risk Management

The training of newly assigned managers includes subjects such as mental health and case studies of accidents.
Employees receive training according to their responsibilities.
Each site provides safety and health education and training programs based on the annual safety and healtheducation and training plans for that site’s needs. The objective is to ensure safety while raising employees’
awareness of safety and health.

Comprehensive,
Unified Set of Principles

An award-winning poster(FY)

Subject: 3 facilities and consolidated and non-consolidated subsidiaries in Japan

Social and Environmental Report24Company Overview

Our Goal Is to Be an Enterprise Trusted by Society (Social Relations)
The Covalent Group aims to be an enterprise trusted by society. To that end, we engage in fair and transparent
business activities while maintaining good relations with stakeholders and contributing to local communities invarious ways.

Partnership with Local Communities
Message from the President

We respect the cultures and customs of the regions where we do business and we strive to expand
opportunities for communication with local communities so as to facilitate understanding between thecommunities and the Covalent Group’s policies and business.
We are cultivating cooperation and partnerships with local communities by participating in and sponsoring
local events, holding traffic safety campaigns and clean-up campaigns, organizing onsite visits by local
residents and school children, and making the company facilities available for use for local events. To fulfill our
responsibility as a member of the community, we conduct corporate citizenship activities in accordance with theCovalent Group’s Basic Policy on Social Contribution.

Comprehensive,
Unified Set of Principles

Covalent Group’s Basic Policy on Social Contribution
1. Contribute to society in accordance with the Corporate Philosophy of the Covalent Group and the Covalent Group Standards of Conduct.
2. Promote corporate citizenship activities centered on contribution to local communities, social welfare and support of volunteer activities.

Corporate GovernanceCompliance and Risk Management

Compliance

Environmental Consideration

We comply with all applicable laws and regulations, and conduct fair and transparent business activities by
establishing internal control systems and reporting correct financial information.
We implement thorough management and protection of trade secrets, company information that is not in the
public domain, personal information and other information of the Company and third parties in an effort toprevent inappropriate disclosure, leakage or use.
We also engage in fair and appropriate competition, and on the basis of the Company’s accumulated efforts, we
provide products that deliver value at fair market prices.

Ban Against Improper Payments and Contact with Antisocial Groups

Social Performance

We do not make any payment or provide any benefit that is unlawful or unacceptable under generally acceptedbusiness practices, or contrary to the counterparty’s rules, to governmental officials or public agencies,
politicians, or any political party.
We continue to have no contact with antisocial forces or groups.

25

Social and Environmental ReportCompany Overview

Clean-up of the area around Covalent
Materials Sekikawa Corporation

Clean-up of the area around Oguni
Facility

Clean-up of the area around Covalent
Materials Niigata Corporation

Clean-up of the area around Hadano
Facility

Environmental Consideration

Covalent Materials Tokuyama Corporation
participates in a forestry event

Social Performance

Clean-up of the area around
Tokai Ceramics Co., Ltd.

Clean-up of the area around Covalent
Materials Nagasaki Corporation

Kariya Facility participates in the
530 Campaign

Social and Environmental Report

Message from the President

As a corporate citizen, each site of the Covalent Group cooperates with the local communities in which it is based
to enhance the quality of the area’s environment. Covalent Materials Tokuyama Corporation participated in an event
organized by the forestry office of Shunan City, Yamaguchi Prefecture, with the aim of maintaining the forest’s
effectiveness as a ”green dam” to ensure a stable supply of high-quality water to industrial water users in the area.
Kariya Facility employees took part in the 530 Campaign, with clean-up activities in Aichi prefecture.

Comprehensive,
Unified Set of Principles

Tree planting and Clean-up Drives in Local Communities

Corporate GovernanceCompliance and Risk Management

Corporate Citizenship Activities

26

Company Overview

Opportunities for Young People to Visit Factories and Learn through Hands-on Experience
The Covalent Group eagerly offers young people opportunities to visit its
factories. At Oguni Facility and Covalent Materials Sekikawa Corporation,
students from the area’s middle and high schools have a chance to find out
what the world of work is all about.

Message from the President

Middle school students learn about work at
Covalent Materials Sekikawa Corporation

Comprehensive,
Unified Set of Principles

High school students visit Covalent Materials Tokuyama Corporation

High school students visit Covalent Materials
Nagasaki Corporation

Corporate GovernanceCompliance and Risk Management

Awards Received
S afet y and health activities of
the C ovalent Group have won
recognition from local governments.

Environmental Consideration

Covalent Materials Tokuyama Corporation iscommended by the governor of Yamaguchi
prefecture for excellence in the management of
hazardous materials

Covalent Materials Sekikawa Corporation receives
an award for excellence in health management

Tokai Ceramics Co., Ltd. receives a certificate ofappreciation from the Shidare-cho community
association for donation of landscape bricks

Social PerformanceOguni Facility receives an award for excellence insafety management of boilers

27

Social and Environmental ReportCompany Overview

Disaster-prevention activities

Hadano Facility

Kariya Facility

Covalent Materials Tokuyama Corporation

Corporate GovernanceCompliance and Risk Management

Oguni Facility

Comprehensive,
Unified Set of Principles

Message from the President

We conduct emergency drills to ensure preparedness in the event of an earthquake, fire or other disaster.

Covalent Materials Nagasaki Corporation

Blood Donations

Social Performance

Environmental Consideration

As a part of corporate citizenship activities, blood donation drives are carried out at all sites.

Hadano Facility

Social and Environmental Report28Company Overview

Events Rooted in the Local Community
Oguni Facility holds a sumo tournament every year at the sumo ring at Inari Shrine, which is located on the site’spremises. This year’s special guest was once again stable master Azumazeki, whose ring name was Takamiyama. Many
local residents come to enjoy sumo bouts between employees and other various entertainment, as well as to shop atstalls organized by employees and local stores. In the ring, wrestlers from the Azumazeki stable, including popular sumo
wrestler Takamisakari, and the Chiganoura stable held training sessions watched by numerous spectators from the local
community.

Message from the President
Comprehensive,
Unified Set of Principles

Sumo tournament

Stalls organized by employees

Oguni Facility donated fireworks for the summer fireworks festival in Oguni.

Corporate GovernanceCompliance and Risk Management

Summer fireworks festival in Oguni

Environmental Consideration

In the local community, Kariya Facility is renowned for its magnificent cherrytrees. In the early spring, local residents are invited to visit Kariya Facility fora factory tour and to enjoy refreshments beneath the cherry blossoms.

Cherry blossom viewing at Kariya Facility

Social Performance

29

Social and Environmental ReportCOVALENT GROUP

Social and Environmental Report 2007

Published October, 2007
■ Headquarters
Nissei Building, 1-6-3 Ohsaki, Shinagawa-ku, Tokyo 141-0032, Japan
Tel: +81-3-5437-8411 Fax: +81-3-5437-7172
URL: http://www.covalent.co.jp/

The production and printing of this report reflect the following
environmental considerations:■ Environment, Safety and Health Department
30, Soya, Hadano, Kanagawa 257-8566, Japan
Tel: +81-463-84-6648 Fax: +81-463-83-4860
For any comments or inquiries concerning this report or ourenvironmental protection activities, please contact us.

Paper certified by the Forest
Stewardship Council (FSC)
was used, which is made fromwo o d from FS C - cer tifie dforests.

Waterless printing, a printing process that does notuse water, was used. Its
special characteristics are
its ink repelling plates.

Soy ink cer tified by theAmerican Soybean Associati o n was use d . I t h a s
excellent de - inking andbiodegradable characte ristics.