REPORT2022

APRIL 1.2021-MARCH 31.2022
Sanyo Special Steel Report 2022
(Integrated Report)

CONTENTS
Corporate Philosophy

1

Top Message

2

Our Business4

Value Creation Process

5

Global Business Development

6

Management Plan (2025 Medium-term Plan)

7

Topics8

Important ESG-related Issues

10

Environment
Environmental Management

11

Climate Change Prevention Initiatives

12

Information Disclosure According to TCFD
Recommendations

14

Contribution to a Resource-recycling Society

15

Reduction of Environmental Impact

16

SocialCreating a Safe Workplace

17

Disaster Prevention Initiatives

18

Promotion of Diversity Management

19

Promotion of Corporate Health Management

20

Human Resource Development

21

Quality Improvement Initiatives

22

Expanding Technological Superiority

23

Realization of Sustainable Procurement

24

Governance
Enhancement of Corporate Governance

25

Internal Control Systems

26

Officers

27

Key Financial Data

28

Corporate Philosophy■ Editorial Policy
This report summarizes the Sanyo Special SteelGroup's environmental, social, and governance(ESG) initiatives aimed at realizing a sustainable
society.
■ Period and Scope of Coverage
This report contains information on the initiativesof Sanyo Special Steel and its Group companies in
FY2021 (April 1, 2021 to March 31, 2022), but also
includes information outside the period covered.

Confidence-based Management
Confidence of Society
We aim to earn the confidence of society by contributing to therealization of an affluent and culturally rich society and fulfilling
our responsibilities as a member of society through our "highquality special steel manufacturing."■ Reference Guidelines and Other Documents"International Integrated Reporting Framework," IIRC
"Guidance for Integrated Corporate Disclosure andCompany-Investor Dialogue for Collaborative Value
Creation," Ministry of Economy, Trade and Industry

Confidence of Customers"Environmental Reporting Guidelines 2018," Ministryof the Environment

We aim to earn the confidence of our customers by rapidly andaccurately identifying their needs and appropriately providing
high-quality special steel products.

Task Force on Climate-Related Financial Disclosures(TCFD) Recommendations■ Notes on forecasts
The forward-looking statements in this report are
based on the judgment of the Group based on theinformation currently available. These statements
are subject to a number of uncertainties, and actual
results may differ materially depending on a numberof factors.

Confidence among People
We will build confidence among people by deepening
communication with all stakeholders and acting autonomouslyin accordance with social norms.

1

Top Message
We are committed to contributing to the realization of a sustainable society
through the practice of our corporate philosophy, "Confidence-based
Management," as well as meeting the ever-increasing need for highly reliable
special steels in the face of major changes in industry and society, including
carbon neutrality.
Since its establishment in 1933, the Sanyo Special Steel Group has played a role in a resource-recycling society
by manufacturing special steel products from iron and steel scrap, a recycled resource, and has contributed toindustrial and economic development by providing highly reliable special steel products to various fields of society.
In addition, we have responded to the globalization of markets ahead of others, and have established integrated
manufacturing bases for special steel in Japan, Europe, and India to capture global demand for special steel andformed and fabricated material business bases in the growing automotive markets of China and North America,
thereby building a supply chain that responds to local production and local consumption in customer industries.
Even under major social and industrial changes such as carbon neutrality, our highly reliable special steel
products will be in even greater demand around the world as important materials to support the development ofsociety. Under these circumstances, the Sanyo Special Steel Group will further build up the brand of the "SanyoSpecial Steel - the confident choice" by strengthening its business foundation and innovating technologies thatare ahead of the times to meet the needs of customers. We will continue to strive for the creation of economic
and social value and contribute to the realization of a sustainable society by creating through the practice ofour corporate philosophy, "Confidence-based Management," which aims to establish "confidence of society,""confidence of customers," and "confidence among people."

MIYAMOTO Katsuhiro,

Representative Director and President

2Top Message
Review of FY2021 and Current Business Environment

ESG Initiatives for the Realization of a Sustainable Society

Review of FY2021

Toward Carbon Neutrality by 2050

In FY2021, while the global economy was recoveringfrom the severe situation caused by the COVID-19
pandemic, prices of raw materials and fuels, including
iron and steel scrap, rose sharply. However, weachieved consolidated net sales of 363.3 billion yen
and consolidated ordinary income of 21.7 billion yen,a marked improvement from FY2020, when the Groupwas in the red, due to factors such as an increase insales volume resulting from a recovery in key customer
industries, including automobiles, industrial machinery,and construction machinery; higher sales prices resulting
from the application of the scrap surcharge system;
and improved earnings at Group companies, including
European subsidiary Ovako. (Figure 1)
In FY2021, the first year of our five-year management
plan "2025 Medium-term Plan," under the policy to strive
to increase earnings by strengthening our structure in
anticipation of changes in the demand structure andintensifying international competition, we have beenworking to improve the profitability of our overseas
businesses and to quickly demonstrate the synergies of
the collaboration with NSC and Ovako, which is a strength
not found in competitors. In the overseas businesses,
Ovako made progress in improving its profitability
and contributed significantly to consolidated businessperformance, and in the collaboration, under the plan togenerate about 10 billion yen in synergies among the threecompanies in FY2024, the sixth year of the collaboration,
the results were achieved with progress exceeding theplan in FY2021, the third year of the collaboration.

Current Business Environment and Response
Policies
In recent years, international competition in thespecial steel industry has become even more intense ascompetitors have increased capacity and improved quality
and technology. In addition, the current situation has seen
unprecedented cost increases due to a significant rise inenergy prices, mainly due to the situation in Ukraine, as
well as the depreciation of the yen. (Figure 2)
With regard to demand for special steel, there areconcerns about a slowdown in the economy due toautomobile production cuts caused by a shortage ofsemiconductors, etc., the prolonged situation in Ukraine,
global inflation, and other factors. It is therefore necessary
to continue to pay close attention to future trends.
Under these circumstances, the Sanyo Special SteelGroup, based on its basic policy of "Securing appropriate
margins" will promote sales price revisions and expansionof the application of surcharges, as well as focus on stable
operations and take necessary measures to addressincreased costs due to rising raw material and fuel prices.
Based on this policy, we aim to achieve ordinary income of
10.0 billion yen(Note) for the full year in FY2022 and strive
to further enhance our corporate value in the global special
steel market by establishing a solid corporate structurethat can continue to secure stable earnings.

Figure 1 Trends in consolidated business performance
Consolidated net sales(Billions of yen)

Consolidated ordinary income(Billions of yen)

21.7
400.0

300.0

363.3

10.7

20.0

20.0

385.0

9.4

10.0

262.5
200.0

100.0

210.7

185.8

157.5

0

▲1.5
▲4.8

0

FY2017FY2018FY2019▲10.0

FY2020

FY2021

FY2022

Forecast (Note)

Figure 2 Trends in raw material and fuel prices(Index based on the value of the first quarter of FY2020 as 100)

350
Iron and steel scrap
Chromium
Nickel300

297Electricity
LNG(Note) Based on purchase price

250

270
251

283
265

263

235

221
201

200

208
157
140

150

151
139

100

83
77

50

1Q

2Q

3Q

FY2020

4Q

1Q

170
169

86

89

2Q

3Q

FY2021

161

181

240
234
220

178

136 134
140

109

90

217

244

121
101

4Q

1Q

2Q

2nd half
forecast

FY2022Companies are expected to contribute to the realization of asustainable society. In particular, climate change is an important
issue that affects the very existence of humankind, and in July oflast year, we announced a roadmap for achieving our policy goalof realizing carbon neutrality by 2050. Based on this roadmap,
in addition to reducing our own CO2 emissions by 50% or morecompared to the FY2013 level in FY2030, we will promote ecoproducts that contribute to CO2 emission reductions by customers
and eco-solutions that deploy energy-saving and productivityenhancing technologies at overseas Group companies, aiming at
contributing to reducing emissions by approximately 20% of the
FY2013 level.
Ovako, the Sanyo Special Steel Group's European subsidiary,
has been promoting its world's most advanced initiatives toward
decarbonization, and in January 2022, it shifted to a carbonneutral production through a carbon offset program. Ovako has
introduced a climate surcharge in conjunction with this and has
begun selling green steel. In Europe, there is a strong interest in
low-carbon steel in customer industries, and we recognize that
Ovako's advantage in the European special steel market has
been further enhanced by being one of the first to achieve carbon
neutrality.
In terms of reducing CO 2 emissions and improving energy
efficiency, we believe that the need for highly reliable special
steel products, in which our Group excels, will further increase.
Recognizing this as a great opportunity to demonstrate ourGroup's strengths, we will actively promote innovations that
contribute to achieving carbon neutrality for society as a whole
and responses to new steel material needs that contribute toenvironmental issues faced by our customers.

to travel to and from foreign countries thus far, we will accelerate
the interaction of human resources across national borders in the
future.
In addition to these factors, technological growth is essential for
our Group's sustainable growth. For the purpose of enhancing ourcorporate value in the global special steel market, we will promotefurther expansion of our technological superiority by strengthening
our research, development, and quality competitiveness.

Enhancement of Corporate Governance
In June 2022, Sanyo Special Steel has transitioned to a
Company with an Audit & Supervisory Committee in order toaccelerate management decision-making, enhance discussionsof basic management policies at Board of Directors meetings,
and strengthen the supervisory function of the Board of Directors
in the execution of operations. We will continue to make ongoing
efforts to enhance corporate governance in order to live up to thetrust and confidence placed in us by our shareholders, suppliers,and other stakeholders, achieve sound and sustainable growth of
our Group, and enhance our corporate value over the medium- tolong-term.
We hope that this report, which introduces our ESG initiatives,
will help you to better understand the activities of our Group, and
we look forward to your continued support and assistance.

Aiming for Growth of People and Technology
As a group of manufacturing companies, we believe thatsafety, disaster prevention, and health are the basic premise of
our business activities and take precedence over everything else.
Based on this recognition, the Group promotes the reduction ofwork risks and the creation of a safe workplace by "integrating
top-down and bottom-up approaches" and "implementing both
hard and soft measures" with regard to safety, works to prevent
accidents from occurring and to prevent the spread of damage inthe event of a disaster by raising employee awareness of disasterprevention and conducts large-scale earthquake disaster drills
with regard to disaster prevention. With regard to health, in August
2021, we formulated the "Sanyo Special Steel Corporate HealthManagement Declaration" and established a corporate healthmanagement promotion structure with the Representative Director
and President as the Chief Corporate Health Officer to promote
the creation of an environment in which each and every employee
can safely and healthily engage in rewarding work on a daily
basis.
In terms of diversity, Sanyo Special Steel raised its mandatory
retirement age to 65 in April 2021 to promote the active
participation of the senior generation, and has long promoted
measures to promote the active participation of female employees.
In June 2022, a female executive officer was appointed.
Moreover, in order to respond to the globalization of businessactivities, we are developing global human resource development
initiatives. Although the spread of COVID-19 has made it difficult(Note) Publicly announced business performance forecast as of October 31, 2022

3

Our BusinessHighly reliable steel that supports
global manufacturing

High-cleanliness
steel
manufacturing
technology

Japanese,
European, and Indian
manufacturingbasesHigh-performance metal powders
that support the development ofadvanced technologies

In the Steel Products business, we manufacture andsell a variety of special steel products, including bearing
steel, engineering steel, stainless steel, heat-resistantsteel, and tool steel.
The Sanyo Special Steel Group's special steel
products are used as materials for some of the mostimportant parts of automobiles, industrial machinery, andplants, contributing to the functional improvement of end
products and the reduction of environmental impact in the
manufacturing processes of our customers.

Steel Products

Bearing steel

Engineering steel

Stainless steel

Heat-resistant steel

Tool steel

High alloy steel

Metal Powders

Powder metallurgy
high-speed steel

Metal powders

Example of modelingby 3D printerPowder metallurgy
products

Sputtering target
materials

Railroads and Shinkansenbullet trains
Bearing steel

Formed andfabricated materials

Powertransmission lines

In the Formed and Fabricated Materials business, wemanufacture and sell formed and fabricated materials
made from special steel bars and tubes.
In addition to Japan, the Sanyo Special Steel Grouphas established a supply system for formed and fabricatedmaterials in North America and China, which are growthmarkets for the automotive industry, thereby contributing
to the simplification of the processing process and local
production for local consumption for customers who are
expanding their business globally.
Formed andfabricated materials
Formed andFabricated Materials

Formed andfabricated materials

Bearing steel

Engineering steel

Formed andfabricated materials

Stainless steel

Automobiles
Formed andfabricated materials

Transmission gears, shafts, engine
parts, connecting rods, etc.

Metal powders

Brazing materials for heatexchangers, shot peening

Tool steel

Bearing steel

Stainless steelDies, rolls, tools,
etc.

Engineering steel

Powder metallurgy
high-speed steel

Bearings, linear
motion bearings,
ball screws, etc.

Boilers, waste heatrecovery, chemicalplant piping

Cutting tools, dies,injection molding
machine (ex. screw),
etc.

Formed andfabricated materials

Intake/exhaust valves, etc.

3D printerStainless steel

Factories, plants, power stations

RobotsHeat-resistant steel

Metal powders

Motor shafts for OA
equipment, sleeves, etc.

Bearing steel

Bearings, etc.

Die forged parts

PCs

Buildings

Bearing steel

Forged/cut and
CRF rings

Driving parts, etc.

High-voltage powertransmission lines

Engineering steel

Global supply
chain

Bearings

Gears, shafts, cylinders,sprockets, swivels, etc.

High alloy steel
wires

Integrated
production fromhigh-cleanlinesssteel

Aerospace

Bearing steel

Bearings

Bolts, gears, etc.

Supply system to meet global needs

In the Metal Powders business, we manufacture andsell metal powder products.
Sanyo Special Steel manufactures high-performance
metal powders with low impurities and excellent flowability
and powder metallurgy products formed by our unique
technology to support the development of advanced
technologies in various settings, from the front lines ofresearch and development to manufacturing sites.

Engineering steel

Formed andfabricated materials

Engineering steel

Metallurgical
technology
evaluation andanalysis system

Construction
machineriesWind power generation
Bearing steel

Spherical powder
with goodflowability

Bearing steel

Engineering steel

High-alloy steel
tubes

Desalination, heatexchangers, etc.

Powder metallurgy
products

Hard disk drives

Seismic isolation systems
Metal powders

Heat-resistant thermal
spray powder forboilers Metal powders
for 3D printing

Mobile phones/
Smartphones
Metal powders

Engineering steel

Electro-magnetic
wave absorber

Bolts

Medical fields
Ships

Stainless steelParts for dental treatment
devices (handpieces)
Metal powders

Dental devices

Engineering steel

Bolts, shafts, etc.
Stainless steel

Propeller shafts, etc.

Formed andfabricated materials

Heat-resistant steel

Driving parts, etc.

Engine valves

High alloy steel

4Value Creation Process
Since its establishment in 1933, the Sanyo Special Steel Group has played a role in a resource-recycling society by manufacturing special steel products from iron and steel scrap, a recycled resource, and has
contributed to industrial and economic development by providing highly reliable, high-quality special steel products.
We will continue to strive for the sustainable growth of the Group and contribute to the realization of a sustainable society through the practice of our corporate philosophy, "Confidence-based Management," whichaims to establish confidence of society, confidence of customers, and confidence among people.

InputsBusiness Activities

Inputs

Outputs

Business Activities

Shareholders' equity: 191.0 billion yen
Interest-bearing debt (net): 58.7 billion yen
D/E ratio: 0.30 times(Major achievements of business activities)

Outputs

Outcomes

Understandinguser needs

Manufacturing
technology
development
Product development

Creation of economic value

Steel Products

Metal Powders

Consolidated business performance
forecast for FY2022
Net sales: 385.0 billion yen (Note)
Ordinary income: 20.0 billion yen (Note)

Manufacture
Quality assurance
Sales

Formed andFabricated Materials(End of March 2022)

Global manufacturing bases
P.6 Global Business Development

Establishment of a solid corporate structure bystrengthening the business foundation
Corporate philosophy "Confidence-based Management"

Establishment of conﬁdence with all stakeholders

More than 90%
of water used in the
production process
is reused

ca
lc
om
mun
ities

nc

e

inv

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de

and

Co
Ap
div prop
info idend riate
dis rma s/
clo tionsureCo
to ntribu
act comm tionivit
ies unityceen

Rewarding
workplace andworking
conditions

Creation of eco-processes
and eco-products toward carbon neutralityers

Social capital

Confidence

artn"Confidence-baced
Management"

ce
en
fid

Practice ofcorporate philosophy

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Co

an
et)

sp

d ers

Confidence

esProvision ofhigh-quality
productssin

S h a re h o l

Bu

f
no l
ctio enta
duRe ironmv
en actimp(End of March 2022)sceGroup employees: 6,402

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de
nfi
pl
Co
he
t (t
men
Environ

Human capital

e

r
sto

ir
Fa de
tra

(Research and development expenses: 2.2 billion yen / FY2021)

Provision of high-performance, high-quality,and highly reliable products that are
utilized in various fields of society

C u sto m ers

Intellectual capital

Basic research technology
Manufacturing and product development
technology
Evaluation and analysis technology

P.7 Management Plan (2025 Medium-term Plan)

Management Plan "2025 Medium-term Plan"

fid

Iron and steel scrap/ferroalloy
Energy (electricity and city gas)
Industrial water

Improvement of profitabilityof overseas businessesConApproximately 95%
of raw materials arerecycled materials

Shareholder return
Payout ratio of approximately 30% of
net income excluding amortization of goodwill

Bearing steel
Largest domestic
market share

Manufactured capital

Natural capital(resources and energy)

Outcomes(Initiatives of the Sanyo Special Steel Group)(six capitals)

Financial capital(Note) Publicly announced business performance forecast as of October 31, 2022

P.12 Contribution to CO2 emission reduction with eco-products

Creation of a workplace where each and every
diverse individual can work in a safe, healthy andfulfilling manner every day
Development of human resources who can think andact autonomously and global human resources

Enhancement of corporate
valuein the global
special steel market
Global branding of"Sanyo Special Steel- the Confident Choice"Creation of social value
Contribution to the realizationof a sustainable society
Development of an affluent andculturally rich society
Carbon-neutral society
Establishment of a resourcerecycling society
Realization of a safe and secure society
Diversity and inclusion

Lo

Environmental conservation and CO2
emission reduction
Strengthening of partnerships withcustomers and suppliers
Synergies with NSC and Ovako

Employees

Coexistence with local communities
Partnerships with customers
and suppliers
Collaboration with NSC and Ovako(Values created)

Corporate governance
Autonomous internal control

Business environment surrounding the Sanyo Special Steel Group
Decrease in domestic demand due
to declining and aging population

Decrease in direct and indirect exports due to structural changes
such as local production for local consumption and review ofglobal supply chain

Increase in global demand,
especially in China and India

Intensifying competition among domestic andforeign special steel manufacturers in light of
future progress in the shift to EVs, etc.

Intensifying competition in procurement, especially for iron andsteel scrap, toward carbon neutrality by 2050

5

Global Business Development(Note) Publicly announced business performance forecast as of October 31, 2022
Head OfficeIntegrated Special
Steel Works
Secondary Processing
Works
Formed and FabricatedMaterials Works

Ovako Group AB(Forecast for FY2022(Note))

Sales Offices

Sales volume : 603 thousand tons
Net sales: 160.0 billion yen

Ningbo Sanyo Special Steel Products
Co., Ltd.

Sanyo Special Steel Co., Ltd.

Sanyo Special Steel
Manufacturing India
Private Limited(Forecast for FY2022(Note))
Sales volume : 881 thousand tons
Net sales: 189.0 billion yen

Sanyo Special Steel
Manufacturing de México,
S.A. de C.V.

(Forecast for FY2022(Note))
Sales volume : 115 thousand tons
Net sales: 24.2 billion yen

Global network to meet special steel needsaround the world
The Sanyo Special Steel Group has integrated special steel
manufacturing bases in Japan, Europe, and India to meet the needs ofspecial steel in all regions of the world through a tripolar global structure.
In addition, we have established a supply chain in the growing automotive
market through our Formed and Fabricated Materials business to meetthe local procurement needs of our customers who are expanding theirbusiness globally.
By making full use of these global networks, we will steadily capture
the growing global demand for special steel over the medium- to longterm and provide a stable supply of high-quality special steel products tocustomers around the world, thereby achieving profitable growth for theGroup and enhancing corporate value.

North
America
3%

Other
1%

Asia
5%

Asia
15%
Net salesby region(FY2021)

Japan
37%

Other
3%

Property,plant andEurope equipment
by region Japan33%
58%(FY2021)

Europe44%

6Management Plan (2025 Medium-term Plan)
With the aim of further enhancing its corporate value in the global special steel market, the Sanyo Special Steel Group has formulated amanagement plan (2025 Medium-term Plan) with an implementation period from FY2021 to FY2025.
Demand for special steel in Japan is expected to decline in the future due to changes in the social structure, such as a declining andaging population. Direct exports of special steel or indirect exports of products using special steel, etc., are also expected to decrease in
the medium- to long-term due to increasing demand from overseas customers for local production for local consumption and review of the
global supply chain.

In addition, although demand for special steel is expected to increase mainly in China and India, we anticipate intensifying competition
with domestic and overseas special steel manufacturers in light of future changes in social and industrial structures, such as the shift toEVs, as well as intensifying competition in procurement, especially for iron and steel scrap, toward carbon neutrality by 2050.
In view of these medium- and long-term changes in the structure of demand for special steel and intensifying international competition,
the Management Plan (2025 Medium-term Plan) aims to establish a solid corporate structure that can secure stable earnings bystrengthening our business foundation and further enhance our corporate value in the global special steel market.

Strengthening the Competitiveness of
the Entire Group

Deepening Technology
Expanding technological superiority

Fortifying corporate value in the global special steel market• Accurately responding to new customer demands and environmental
issues based on our strength in high-cleanliness steel• Deepening technology to meet the high reliability needs in the fields of"EV," "wind power generation," "railroads," and "hydrogen society," etc.

• Strengthening the cost competitiveness of the entire Group by reducing
both fixed and variable costs• Securing appropriate margins and improve sales mix to ensure captureof global demand

Reinforcing profitability of overseas businesses• Ovako : Establishing a solid earnings structure by strengthening its costcompetitiveness• SSMI : Further enhancing its position in the Indian market bystrengthening its cost competitiveness and sales strengths

Utilizing synergies with Nippon Steel and Ovako• Focusing on early implementation of measures to coordinate sales,
production, procurement, etc., to achieve full effect by FY2024

Boosting profitability of Formed & Fabricated Products
and Metal Powder Businesses• Formed and Fabricated Materials business: Strengthening of theintegrated profitability by leveraging the strength of the integrated
manufacturing process from forging to turning.
• Metal Powders business: Development and sales expansion of strategic
items for 5G and decarbonization, etc.

[2025 earnings plan][2025 financial indicators]

Environment • Social • GovernanceNet sales: Approx. 280 billion yen

Equity ratio: Approx. 60%

Ordinary income: Approx. 14 billion yen
ROS: Approx. 5%
ROE: Approx. 5%

D/E ratio: Approx. 0.2 times
D/EBITDA: Approx. 1 timeAchieving carbon neutrality by 2050

Establishment of a solid
corporate structure capable ofsecuring stable earnings
Five years tostrongly solidify
the managementfoundation[Management resource allocation]

Rearranging global corporate structure• Strengthening of the Group's overall structure through consolidation andreorganization, etc.

• Promotion of "eco-processes," "green energy utilization," "eco-products,"
and "eco-solutions"• Establishment of the "Carbon Neutrality Promotion Committee" headedby the President

Capital investment: 60 billion yen/5 years
R&D expenses: 12.5 billion yen/5 years

Promoting digital transformation (DX)
• Reform and efficiency improvement of production and businessprocesses through the use of the latest digital technologies

Strengthening governance system and promoting diversity
and health management• Strengthening of corporate governancesystem• Promotion of diversity management andcorporate health management
7Topics
Roadmap to Carbon Neutrality by 2050

European Subsidiary Ovako Shifts to Carbon Neutral

FY2030Eco-process promotion, etc.
Green energy utilization, etc.

Reduction of CO2 emissions by
50% or more compared to the
FY2013 level

Contribution to the reduction with ecoproducts and eco-solutions

Contribution to the reduction
equivalent to approx. 20% (notincluded in the above)[Our CO2 emissions](Million tons)

0.84

Contribution to the
reduction equivalent toapprox. 20% (not included) in
FY2030 with eco-products
and eco-solutions

Reduction of
50% or more
Net zero

FY2050Eco-process promotion
Spread of carbon-free electricity andfuels Utilization of CCUS, etc.

Aiming to achieve carbon
neutrality

FY2013

FY2030FY2050Sanyo Special Steel has long recognized the issue of climate change as an important challenge and has been promoting fuelconversion, energy conservation measures, and other initiatives to reduce CO2 emissions. In order to further accelerate these initiatives, wehave formulated a Roadmap to Carbon Neutrality by 2050 in July 2021.
Approximately 80% of our CO2 emissions come from the use of electricity and city gas. In order to achieve carbon neutrality by 2050,
we will strive to reduce our own CO2 emissions by 50% or more from the FY2013 level by FY2030 through our own self-help efforts as wellas the use of clean energy such as carbon-free electricity and hydrogen, etc. In addition, we aim to contribute to a reduction equivalent toapproximately 20% of the FY2013 emissions with eco-products and eco-solutions.

Our European subsidiary Ovako has been promoting its world's
most advanced initiatives toward the achievement of sustainablesteel production, reducing CO2 emissions from its special steel
manufacturing process by 54% as of 2020 compared to the 2015
level. In April 2020, the Hofors mill in Sweden became the firstin the world to successfully demonstrate the use of hydrogen toheat steel before rolling, and is working to further reduce CO2
emissions.
In order to further accelerate its initiatives to promptly resolve
climate change issues, Ovako has shifted to carbon neutral (netzero CO2 emissions in its manufacturing processes) in January2022 by purchasing carbon credits applicable to the Clean
Development Mechanism (CDM), which invests in greenhousegas emission reduction projects primarily in developing countries,
to offset its remaining CO2 emissions (Scope 1 and Scope 2) until
it achieves zero CO2 emissions in its manufacturing processes. In
conjunction with this, a climate surcharge system was introduced
for steel product prices to promote further initiatives to address
climate change issues and investment in new technologies.

P.12 Roadmap to Carbon Neutrality by 2050

Successful demonstration of the use of hydrogen to heat steel
before rolling for the first time in the worldEndorsement of TCFD Recommendations
Sanyo Special Steel has expressed its endorsement of the TCFD Recommendations in October 2021, in light of the situation ofinternational society that is working to achieve the long-term goals of the Paris Agreement.
TCFD is a task force established by the Financial Stability Board (FSB) in which central banks and financial regulators from majorcountries participate. In its final report, published in June 2017, TCFD recommends that companies disclose the financial impact of risks
and opportunities arising from climate change, as well as specific responses and strategies.
We will disclose information on the impact of climate change on the Sanyo Special Steel Group's business activities, etc., taking into
account the purpose of the TCFD Recommendations and the situation of international society that is working to achieve the long-term goalsof the Paris Agreement.

Construction of Carbon-free Hydrogen Plant at Hofors Mill in Sweden
Ovako is constructing a carbon-free hydrogen plant at its Hofors mill in Sweden that will utilize fossil-free electricity.
The plant is capable of producing 3,500 m3 per hour of carbon-free hydrogen from water electrolysis using fossil-free electricity, making it
the largest carbon-free hydrogen plant in Sweden.
In April 2020, Ovako succeeded for the first time in the world in heating steel billets using hydrogen as fuel in a pit furnace at the Hofors
mill. By utilizing carbon-free hydrogen as fuel for the furnace, we can reduce CO2 emissions at the Hofors mill by approximately 50%(approximately 20,000 tons per year).
The hydrogen plant will be the first step in the development of a hydrogen infrastructure that can be utilized in the field of transportationin the future, such as supplying generated hydrogen to fuel cell trucks, etc. The plant is also expected to contribute to the improvement of
the stability of the local power grid by demonstrating the interaction between the hydrogen plant and electric power network, and the use ofwaste heat for district heating, etc.

CDP Climate Change Score “B”
Sanyo Special Steel responded to the CDP climate change questionnaire for the first time in July 2022 and received a “B” score.
CDP is a British NGO that operates a global environmental disclosure system. In cooperation with institutional investors, CDP requests
companies to disclose information about their activities regarding climate change and greenhouse gas emissions and ranks companies'
efforts on climate change on an 8-level scale from A to D-. In 2022, more than 18,700 companies were surveyed around the world.

Hofors mill of Ovako, where the hydrogen plant isbeing constructed

Image of ripple effects from the establishment of a hydrogen plant8Topics
Development of "ECOMAX®5" That Achieves Elimination/Simplification ofParts Manufacturing Process

Transition to a Company With an Audit & Supervisory Committee
Sanyo Special Steel continues to make ongoing efforts to enhance corporate governance in order to live up to the trust and confidence
placed in it by its shareholders, suppliers, and other stakeholders, achieve sound and sustainable growth of the Sanyo Special Steel Group,and enhance its corporate value over the medium- to long-term.
In June 2022, we transitioned to a Company with an Audit & Supervisory Committee in order to accelerate management decisionmaking, enhance discussions of basic management policies at Board of Directors meetings, and strengthen the supervisory function of theBoard of Directors in the management.
In addition, we stipulated in the Articles of Incorporation that all or part of the decisions on the execution of important business operations(excluding matters stipulated in each item of Article 399-13, paragraph (5) of the Companies Act) may be delegated to the directors, for the
purpose of focusing deliberations at the Board of Directors to enhance discussions on management policy formulation and other matters. In
addition, we strive to speed up the decision-making process by delegating executive authority to the executive officers and below, who arein charge of business operations in accordance with the prescribed rules for decision-making authority.

Contribution to size and weight reduction of gears, shafts,
etc., for automobiles
For parts that require high strength, materials with rare and expensive
alloying elements such as nickel and molybdenum added or increased inquantity are generally used. The ECOMAX series, including ECOMAX5, isbased on high-cleanliness steel manufacturing technology that maximizes
the original performance of steel, and optimizes the alloy balanceof chromium, silicon, etc., and the operating conditions during steel
manufacturing to significantly increase the strength despite low-alloy steel.
In particular, it has achieved a service life more than five times longer thanthat of ordinary case-hardened steel (JIS SCM420) against peeling damage(pitching) on the gear tooth surface. The improved fatigue strength of theparts is expected to realize compact and lightweight designs and contributeto further size and weight reduction of various mechanical units, including
those for automobiles.

General Meeting of Shareholders
Gears and shafts to which ECOMAX5 is expected to be applied

Contribution to CO2 emission reduction through simplification/elimination of parts manufacturing processes(Product)(Product)Finishing

Finishing

Carburizing andquenching

Normalizing

Carburizing andquenching

Cold forging

Cold forging

Annealing

Annealing(Material)(Material)

In the process of manufacturing parts made of case-hardened steel, a heat treatment called "annealing" is applied to soften the material
when cold forging is performed. In the annealing process for alloy steels such as case-hardened steel, the material is heated until it reaches
an austenitic structure, usually around 800°C, and then cooled slowly over a long period of time to soften the material by precipitating
carbides in a spherical shape. ECOMAX5 can precipitate into a spherical shape and soften carbides in less than half the processing time of
conventional methods, without slow cooling, by maintaining a
low temperature range for a short time. In addition, the uniform
dispersion of spherical carbides resulting from annealing
ECOMAX5
facilitates high-precision molding in cold forging and improves
the compatibility of the material with near net molding.
Higher
Process
Shortening
Shortening Simplification
precision
elimination
In addition, the property of suppressing grain growthduring carburizing treatment is superior to that of generalcase-hardened steels and other steel grades in the series,
JIS steeland is expected to significantly shorten the treatment time by(Scr420,
eliminating the normal normalizing process after cold forging
SCM420, etc.)
and before carburizing and quenching, and by increasing the
carburizing temperature.
Manufacturing process of gear and shaft parts (example)“EcoLeaf” Certification, an Environmental Product Declaration
That Discloses Environmental Information Relating to Special Steel Products
Sanyo Special Steel has obtained “EcoLeaf” certification, an environmental product declaration(EPD) that quantitatively discloses environmental information that has been verified by a third-party
organization relating to the special steel products (bearing steel, engineering steel, and tool steel)manufactured and sold by Sanyo Special Steel.
EcoLeaf uses LCA (Life Cycle Assessment) to disclose quantitative environmental information
based on the entire life cycle of a product, from resource gathering, manufacturing, logistics and use, todisposal and recycling. Through the disclosure of data verified by a third party to ensure reliability andtransparency, customers will be able to assess the quantitative environmental impact of the products
they use and incorporate this information in their decision making when selecting environmentallyfriendly products.
With this EcoLeaf certification, we are now able to present our customers with objective and highly
transparent environmental information related to our products.
This is the first time that a Japanese special steel manufacturer has obtained EcoLeaf certification.
We will continue to contribute towards the realization of a sustainable society by supplying highquality and environmentally friendly special steel products.
◆ Japan EPD Program by SuMPO

https://ecoleaf-label.jp/english

JR-AW-23001E

Election/dismissal

Nomination & Compensation
Advisory Committee

Representative
Director

Independent External
Directors

Discussion of overall officer nomination andcompensation-related matters

Supervisory Committee for
Conflict of Interests (temporary)
Independent External Directors only

Board of Directors
Internal
Directors

Independent External
Directors

Provision of
discussion
details andopinions

Election/dismissal

Audit & Supervisory
Committee

Internal Independent External
Directors
Directors

7 internal directors, 4 independent external directors (including 1 female director)

Election/dismissal, supervision,delegation of authority
Deliberate on the appropriateness of importanttransactions and actions, etc., that may cause
conflicts of interest between the parent company
and our minority shareholders

Audit/
supervision

Business execution (Representative Director andPresident, Corporate Policy Committee, etc.)

Appointment of Female Executive Officer
Sanyo Special Steel believes that it is important for all
employees, regardless of gender, age, nationality, educational
background, or work experience, to fully demonstrate theirabilities, thereby improving our competitiveness. We are therefore
promoting the awareness building of female employees themselves
and the creation of a workplace culture that encourages female
employees to take an active role in the company through planned
recruitment of female employees, expansion of job categories forfemales employees, and external training, etc.
As of April 2022, the percentage of female managers increased
to 5.6%, and the first female executive officer was appointed onJune 24, 2022.
We will continue to work toward the activation of diversity
and inclusion, where diverse human resources come together
and interact with each other in a mutually beneficial manner,
through career development support and training, etc., for female
employees, in order to ensure diversity in the appointment of corehuman resources, etc.

SUDA Atsuko, Executive Officer and General Manager of
the Internal Control & Audit Department

9

Important ESG-related Issues
The Sanyo Special Steel Group aims to achieve sustainable growth of the Group and contribute to the realization of a sustainable society by building trust relationships with all stakeholders.
A company is a member of society, and its development would not be possible without the trust of its stakeholders. We will continue to practice our corporate philosophy of "Confidence-based Management" and contribute to the realization of a sustainable society.

Important issueE

Environment

Prevention of climatechangeAiming to achieve carbon neutrality by 2050
FY2030 target: 50% reduction from FY2013

Our CO2 emissions in FY2021: 15% (130,000 tons) reduction compared to FY2013

P.11~14

Achieved 89% recycling rate of our by-products

P.15

Reduction of environmental
impactCompliance with regulatory standards(Water Pollution Prevention Act, Air Pollution Control Act, etc.)

Complied with regulatory standards for all items(no cases of violation or deviation from laws, regulations, and agreements)

P.16

Achievement of a total absence of accidents(zero occupational accidents, zero accidents on the way to work)

Promotion of the reduction of work risks and the creation of a safe workplace by"integrating top-down and bottom-up approaches" and "implementing both hard and soft
measures."

Enhancement of disaster prevention measures and business
continuity management (BCM)

Conducted disaster drills, etc., in preparation for factory fires and wide-area disasters
Percentage of female managers: +1.7% compared to April 2020

Promotion of corporate
health management

Creation of a workplace environment in which

Recognized as a Certified Health & Productivity Management Outstanding
Organization 2022 (Large Corporation Category)

Human resource
development

Development of human resources who can think and act
autonomously

Quality improvement

Continuous improvement of quality management system, etc.

Strengthened technologies in the fields of "wind power generation," "railroads," and"electrification of automobiles," which are expected to grow, and conducted activities
to support quality improvement at overseas Group companies

P.22

Rapid and continuous creation of highly reliable products and newtechnologies with a view to global business expansion

Developed "ECOMAX®5," a high-strength case-hardened steel that achieves
elimination/simplification of the parts manufacturing process, and"QTP-HARMOTEX®," a die steel that contributes to consistent die life and productquality in harsh operating environments

P.23

each and every employee can work to the fullest every day

Development of global human resources

Further expansion oftechnological superiority
Realization of sustainableprocurement

Related SDGs

P.17 ～ 18

Promotion of participation of women (increase in average length ofservice and percentage of managers) and the elderly, support forparticipation of persons with disabilities, and promotion of work-lifebalance

SocialGovernance

Reference
page

Reduction of by-products, promotion of 3Rs

Promotion of diversity
managementG

FY2021 results (some are FY2022 results)

Contribution to a resourcerecycling society

Safety and disasterprevention

S

Targets and initiatives

Average years of service of female employees: Management track position +4%,
Technical service position +11.5%

P.19

Rate of male employees taking childcare leave: 37.8%

Implemented a self-transformation based on multifaceted observation
Formulated a long-term global human resource development plan

P.20

P.21

Establishment of fair and equitable transactions and partnerships
Establishment of a stable procurement structure

Promoted stable procurement

Promotion of procurement that takes the environment and humanrights into consideration

Presented supplier awards
Transitioned to a Company with an Audit & Supervisory Committee (in June 2022)

Corporate governance

Enhancement of corporate governanceInternal control systems

Promotion of risk management and compliance activities

Continued improvement of operation of the Board of Directors based on
effectiveness evaluation

P.24

P.25

Continued improvement of autonomous internal control systems
Conducted internal control education and dissemination activities

P.26

Appropriate operation of compliance help desk (whistle-blowing system)

10Environmental Management
Sanyo Special Steel has established an environmental policy that forms the basis of our environmental conservation activities. Based on
this policy, we have formulated an improvement plan for environmental preservation and are working to reduce environmental risks throughthe use of an environmental management system, including measures to prevent global warming, recycling of by-products, and measures
to prevent environmental pollution.
In addition, we contribute to the recycling of metal resources by manufacturing products using iron and steel scrap as the main raw
material, and we also promote the manufacturing of products that contribute to the reduction of environmental impact by extending theservice life and reducing the size and weight of parts and dies.

Environmental Policy<Philosophy>
We recognize that environmental problems such as global warming, air, water, and soil pollution, and waste problems are important issues
common to all humankind. As a company located in a rich environment with the World Cultural Heritage National Treasure "Himeji Castle" to the northand the Setonaikai National Park to the south, we are committed to contribute to the construction of a recycling society by giving consideration toenvironmental conservation at all stages of our business activities.
<Policy>
Based on the fact that we are a company with plants that manufacture and sell special steel and nonferrous metals, we will implement
environmental management based on the following policies.
1) We will contribute to the recycling of metal resources through the manufacture of steel products made from iron and steel scrap.
2) In addition to complying with environmental laws, regulations, and agreements, we will strive to continuously improve our environmental
management system to enhance our environmental performance, and responsibly manage business activities that may have an adverse impact
on the environment.
3) We will promote resource and energy conservation, recycling of by-products and reduction of waste, and reduction of pollutant and greenhousegas emissions to reduce the environmental impact at all stages of our business activities and contribute to environmental conservation andclimate change mitigation. In addition, we will strive to prevent environmental pollution by developing products that contribute to the reduction ofenvironmental impact.
4) We will focus on raising the environmental awareness of each and every employee in our environmental conservation activities.
5) In order to achieve this environmental policy, we will set environmental targets, review them at least once a year, and revise them as necessary.
6) We will appoint the General Manager of the Environmental Management Department as the Environmental System Manager to ensure that all
employees are thoroughly familiar with this environmental policy through education and training and that the environmental system is operated
and managed properly.

Environmental Management Structure
Carbon Neutrality Promotion Committee
The Carbon Neutrality Promotion Committee meets four times
a year to deliberate on basic strategies for achieving carbon
neutrality by 2050, as well as short- and long-term themes related
to its promotion.
In FY2021, the Committee deliberated on the roadmap
to achieve carbon neutrality by 2050 and the response to
climate change information disclosure based on the TCFD
Recommendations, and the main contents of the discussion werereported and deliberated at the Board of Directors meeting.

Environmental Conservation Committee
In order to promote the strengthening of environmental
management and the reduction of environmental risks, theEnvironmental Conservation Committee meets annually toformulate basic guidelines for environmental conservation anddeliberate on matters related to basic measures.
In FY2021, the Committee deliberated on the FY2020
results and FY2021 plans of the Environmental Conservation
Improvement Plan, including CO2 emission reduction targets, andreported the content of the deliberation to the Board of Directors.

Board of Directors
ReportSupervise

Environmental Conservation
Committee
Chair: Chief Officer for Environmental Systems(Executive Officer in charge of environmental divisions)

ReportSupervise

Carbon Neutrality
Promotion Committee
Chair: Representative Director and President

Members: Department heads of manufacturing
and administrative divisions

Members: Directors, Managing Executive Officers,
relevant Executive Officers,
and relevant department heads

Environmental Management Dept.
(Secretariat)

Environmental Management Dept. and Corporate
Planning Dept. (Secretariat)

Collaboration andimplementation of measures

Environmental audits andinterviews

Sanyo Special Steel and its Group companies in Japan and abroad
ISO 14001
certification

Environmental
Liaison Meeting

Environmental
patrols

Response to
the revision of laws

Acquisition of ISO 14001 Certification
We have acquired ISO 14001 certification, the international
standard for environmental management systems, at our head
office plant (manufacturing base), and are working to establish
this certification through annual internal audits and external audits.
Younger employees are also present at internal environmental
audits to promote understanding of the environmental
management system and to improve the system. We are also
focusing our efforts on ongoing training to facilitate a smooth
generation change of internal auditors.
In external audits, our environmental management system
is assessed as functioning effectively, and we will continue ourefforts to further reduce environmental risks through the use of
our environmental management system.

Environmental Liaison Meetings
Environmental Liaison Meetings are held monthly to share
information on the environment; those attending include the Chief
Officer for Environmental Systems, officers, and department
heads, etc.
At the meeting, information is shared on the following items,
etc., to reduce environmental risks.
(i) S t a t u s o f r e s p o n s e s t o i t e m s p o i n t e d o u t i nenvironmental patrols(ii) Legal and regulatory compliance assessment results
We share the results of measurements of air, wastewater,etc., as required by laws and agreements.
(iii)Status of industrial waste treatment and results ofinspection of industrial waste disposal facilities
We share the status of industrial waste treatment and theresults of inspections of industrial waste disposal facilities
of contractors.
(iv)Communication on the environment with government
and industry associations, etc.
(v) Latest revisions to environmental laws

Conducting environmental patrols
A team consisting of the Chief Officer for Environmental
Systems, officers, department heads, pollution control managers,etc., conducts patrols once a month, mainly at manufacturing
sites. We are working to reduce environmental risks by taking
action at each manufacturing site in response to points raised bypatrols.
(i) Checks on significant environmental aspects
Patrols are conducted on processes and equipment withsignificant environmental aspects (elements that may havea significant impact on the environment), and inspections
are carried out on the management status of facilities andmeasuring equipment and the work standards, etc., toimprove management levels and reduce risks.
(ii) Checks on emergency response drills
Emergency response drills are conducted to verify that there
are no problems with emergency operating procedures andthat there are no defects in equipment and instruments.
(iii)Patrols attended by the President
Once a year, environmental patrols are conducted with theattendance of the president.
In FY2021, we confirmed initiatives related to the recyclingof electric arc furnace slag generated as a by-product in the
manufacturing process, among others.

Responding to revisions to environmental laws
As stipulated in our environmental policy, compliance with laws
and regulations is the basic premise of our business activities. If
there is a revision of laws and regulations related to our business,
we revise our internal environmental standards and provide
education, etc., to persons concerned. We also hold "Study
Sessions on Environmental Laws and Regulations" to deepen
understanding of legal compliance obligations for a wide range of
employees, from foremen, team leaders, and Group companies'
general managers to managers of sales divisions, and promote
education for employees at all levels to reduce the risk of legal
violations due to insufficient knowledge.

<Example of response to the revision of the law>
• Act on Promotion of Global Warming Countermeasures
Revision
details:

The government's goal of achieving a decarbonizedsociety by 2050 was clearly stated in the basic
principles.
(Enforced in June 2021)

Status of
response:

The Environmental Liaison Meeting was held toinform the entire company of the details of the revisionof the law, and the Carbon Neutrality Promotion
Committee was established to strengthen initiatives
for decarbonization activities.

Environmental Accounting
The costs of environmental conservation measures in FY2021
were aggregated in accordance with the guidelines from the
Ministry of the Environment.
Expenses related to environmental conservation, such as
costs for maintenance and management of dust collectors,
water treatment facilities, and other environmental measuresequipment, and for recycling and disposal of by-products, totaled
approximately 3.1 billion yen.
In addition, approximately 300 million yen was invested
in the maintenance of dust collectors, the decommissioning
and replacement of transformers containing PCBs and otherequipment, and the conversion to LED lighting for the purpose ofenergy conservation. We will continue to implement measures toprotect the environment.
(Millions of yen)Classification

ExpenseInvestment

Cost of environmental measures

1,081

119

Cost of global warming measures

242

59

Resource recycling cost

1,568

100

Administrative activity cost139

0

R&D costs

33

0

Other environmental costs

11

0

3,075

278

Total

Environmental Awareness Development
Activities
We believe that it is important to raise the environmental
awareness of each and every employee when working on ourenvironmental conservation activities, and we regularly conduct
new employee education and grade-based environmental
training. In addition, we have established an incentive program
to encourage employees to acquire environmental conservationrelated qualifications, such as pollution control managers, and wehave also been working to have employees create a household
eco-account book.

11

Climate Change Prevention Initiatives
Roadmap to Carbon Neutrality by 2050

CO2 Emission Reduction Initiatives

Recognizing that climate change is an important issue that affects the survival of humankind, Sanyo Special Steel adopted a policy to"aim to achieve carbon neutrality by 2050" at the Board of Directors meeting in April 2021, and formulated and announced a roadmap forachieving this goal in July of the same year.
We aim to reduce CO2 emissions not only in our own manufacturing processes, but also at every stage of society by saving energy andutilizing green energy in our manufacturing processes and contributing with eco-products and eco-solutions.

Promotion of eco-processes (CO2 emission reductionin the manufacturing process)Contribution to CO2 emission reduction with
eco-solutions

As part of its initiatives to prevent climate change, SanyoSpecial Steel is working to reduce CO2 emissions, which is one of
the greenhouse gases (GHGs).
CO2 emissions derived from energy use in FY2021 were reducedby 15% (130,000 tons) from the FY2013 level (840,000 tons) to710,000 tons. We have been promoting eco-processes such as
the use of regenerative burners for heating furnaces, inverters
for large motors, and LEDs for factory lighting. We will continue
our initiatives to achieve carbon neutrality by 2050 by further
promoting eco-processes and utilizing green energy.

Sanyo Special Steel is promoting the reduction of CO2 emissions
not only in Japan, but also at our global manufacturing bases bydeploying its technologies that contribute to energy conservation
and reduction of unit energy consumption, such as rapid melting
technology in electric arc furnaces and yield/productivity improvementin the rolling process, to our Group companies that manufacture
special steel products overseas, including Ovako and SSMI.

[Our CO2 emissions]
FY2013

FY20302018 2019 2020 2021

Reduction of
50% or more

Eco-process promotion, etc.
(Approx. -15%)

0.84 0.77

0.71

0.57
0.49

Green energy utilization, etc.
(Approx. -35%)

0.42

Contribution to the reduction with
eco-products and eco-solutions

Development of bearing
steel for long-life wind
power generation

Carbon neutrality(Compared to FY2013)(Million tons)

Energy-saving heating
furnace with regenerative
burner

FY2050Eco-process promotion

Contribution to CO2 emission reduction with
eco-products

Spread of carbon-free electricity and fuels
CCUS utilization, etc.

Net zeroContribution to the
reduction equivalent toapprox. 20% (not includedin the above) in FY2030

Eco-processes

Green energy utilization

Promoting company-wide energy conservation
measures, mainly at manufacturing sites, anddevelopment of manufacturing technologies
to improve energy efficiency

Utilizing carbon-free electricity, fossil-freefuels, and renewable energy

Eco-products

Eco-solutions

Promoting development and supply of productsthat contribute to CO2 emission reduction at
the stage of product use and products that
contribute to eco-processes of consumers

Deployment of energy-saving and productivityenhancing technologies that contribute to the
reduction of unit energy consumption to overseas
Group companies, including Ovako and SSMI

*Started partial use of electricity derived fromrenewable energy sources in FY2022

Deployment oftechnologies to overseas
Group companies

Independent assured items(Million tons)

1.5

1,041
1.0

Other

Our sales volume(thousand tons)

1,061

1,002
854

0.84

Breakdown of CO2 emissions derived
from energy use

0.77 *1
0.57 *1

0.5

704

0.71

0.49 *1

2％

Heat-resistant stainless steel tubes

Coal coke

14％

Electricity

Natural gas

33％

FY2021CO2 emissions

51％

710,000 tCO2

0

2013

2018

2019

2020

2021

(FY)

<Calculation method>
Calculated based on the "Greenhouse Gas Emissions Accounting, Reporting, and Disclosing System" under the Act on Promotion of Global Warming Countermeasures.
The scope of aggregation and converted emission factor are as shown in the preconditions for calculating Scope 1 and 2 emissions on the next page.
*1 CO2 emissions in previous fiscal years have been retroactively adjusted due to the improved accuracy of the data.

In order to reduce CO 2 emissions, it is essential to work
not only on the manufacturing process but also on logistics. In
particular, the means of transportation for product shipment is an
important point in reducing the environmental impact of logistics.
Sanyo Special Steel has been striving to promote the useof rail transportation, which can reduce CO 2 emissions byapproximately 90% compared to truck transportation, andfreight ship transportation, which can reduce CO2 emissions byapproximately 80% compared to the same, on condition that
product quality is ensured. The percentage of our total productshipments transported by freight ship is much higher than the
manufacturing industry average.

<Specific initiatives>• Use of rail transportation to Tohoku area
• Use of freight ships for transportation to relay warehouses
located in the Kanto, Chubu, Chugoku, Shikoku, andKyushu areas• Switch from trucks to barges for transportation to Kobe Port
where export vessels departLong-life bearing steel
Reducing nonmetallic inclusions, which are
the sources of fatigue fracture, to extreme
minimum, contributes to CO 2 emission
Size and weight reduction of parts by
reduction by reducing the size and weight improving durability and reliabilityof automobile parts with improved durability
Failure rate reduction
and reliability and by reducing failures andand maintenanceenabling maintenance-free operation offree operation
by extending productwind power generation facilities, etc. withservicelonger service life.

Our CO2 Emissions Derived from Energy Use
Trends in CO2 emissions derived
from energy use

Sanyo Special Steel is focusing on the development of ecoproducts that contribute to the reduction of CO2 emissions not only
in our own manufacturing processes, but also in the stage of parts
manufacturing at customers and during end product use. For therealization of a carbon-neutral society, the need for products andtechnologies that reduce environmental impact is expected toincrease further, including the increased introduction of renewableenergy sources such as wind power generation and the size andweight reduction of parts in line with the shift of automobiles toEVs. We will contribute to the reduction of CO2 emissions at alllevels of society and the realization of a carbon neutral society
by implementing and further promoting eco-products with further
enhanced material properties, such as longer service life of partsand elimination/simplification of parts manufacturing processes,
based on the high-cleanliness steel manufacturing technology,
which is one of our strengths.

Reduction of environmental impact during producttransportation

Improving corrosion resistance and hightemperature strength using our proprietary
material technology enables waste heat
Improved heat recovery efficiency
recovery at higher temperatures and through higher strength
improves energy efficiency by raising
Higher efficiency oftemperature and pressure of boilers,
waste power generation
thereby contributing to CO 2 emission
through higher corrosion
resistance
reduction.

High-hardness and high-toughness steel
Achieving both high hardness andtoughness through our component designand steel heat treatment technology
contributes to the reduction of CO2
emissions by eliminating/simplifying
hardening heat treatment such as
carburizing during the manufacture ofautomotive parts.

Reduced part hardening heat
treatment load through new chemicalcomposition and new heat treatment
technology

Endorsement of the GX League Basic Concept
The GX League was established to provide a forum fordiscussion on the transformation of the economic and social
systems in their entirety and practice for the creation of newmarkets with players who are taking on the challenge of GX (Green
Transformation) to achieve carbon neutrality by 2050.
We endorse the GX League Basic Concept, which aims totransform the economic and social systems in their entirety toachieve carbon neutrality by 2050 in which corporate growth,
consumer happiness, and contribution to the global environment
are simultaneously achieved.

CFC (Chlorofluorocarbon) Emission
Control
CFC gas, a greenhouse gas, is used in commercial air
conditioners, etc. If released into the atmosphere, it is believed
to have an impact on global warming. In accordance with the Act
on Rational Use and Appropriate Management of Fluorocarbons,
we conduct inspections of Class I Specified Products suchas commercial air conditioners and ensure the recovery ofchlorofluorocarbons at the time of equipment disposal in order toproperly manage CFC gases.

12

Climate Change Prevention Initiatives
CO2 Emissions in the Value Chain
The CO2 emissions derived from energy use in our manufacturing operations (Scope 1 and Scope 2) and the CO2 emissions in our supply
chain (Scope 3) calculated using "Green Value Chain Platform" by the Ministry of the Environment and other information are as follows.
Independent assurance has been received for emissions in FY2021 for Scope 1, Scope 2, and Category (1) of Scope 3 (purchased
goods and services).

CO2 emissions (thousand t-CO2)
FY2019FY2020

FY2021

Calculation method

Scope1

Direct emissions from fuel usage at theCompany

261*1

237*1

336 ★

Scope2

Indirect emissions from the use of energy
produced by other companies

305*1

254*1

373 ★

Scope1+2

Emissions

566*1

491*1

710 ★

Scope3

Other indirect emissions equivalent to theCompany's supply chain

356*2

267*2

378 ★

(ii) Capital goods

67

31

18

(iii) Fuel- and energy-related activities not included in
Scope 1 and 2

113*2

100*2

134

Calculated by multiplying the quantity of electricity
purchased and fuel used by CO2 emissions intensity(iv) Upstream transportation and delivery

24

19

20

Calculated by multiplying the quantity of fuel used
reported under the Act on Rationalizing Energy Useby the CO2 emissions intensity(v) Waste generated from business operations

4

3

4

Calculated by multiplying the volume of waste by theCO2 emissions intensity(vi) Business trips

0

0

0

Calculated by multiplying the number of employeesby the CO2 emissions intensity(vii) Commuting by employees

1*2

1*2

1

Calculated by multiplying the number of employeesby the CO2 emissions intensity

231*2

210*2

237

Calculated by multiplying the emissions of major
subsidiaries (Ovako, SSMI, and Santoku Tech) by
their capital ratios(i)

Products/services purchased(xv) Investment

See previous pageCalculated by multiplying the quantity or value of raw
materials purchased by the CO2 emissions intensity
Calculated by multiplying the amount of capital
investment by the CO2 emissions intensity★ Independent assured items

Preconditions for calculating Scope 1 and 2 emissions

Preconditions for calculating Scope 3 emissions<Scope of aggregation>
Sanyo Special Steel (Head Office/Works, Tokyo Regional Office,Nagoya Branch, Osaka Branch, Hiroshima Branch, and Kyushu
Sales Office)<Scope of aggregation>
Sanyo Special Steel (Head Office/Works, Tokyo Regional Office,Nagoya Branch, Osaka Branch, Hiroshima Branch, and Kyushu
Sales Office)<Converted emission factor>
Source: List of calculation methods and emission factors
posted on the Ministry of the Environment's website"Greenhouse Gas Emissions Accounting, Reporting, andDisclosing System"<Converted emission factor>
Source: "Emission Intensity Database for Calculating Greenhouse
Gas Emissions of an Organization Through the Supply
Chain" posted on the website of the Ministry of theEnvironment/Ministry of Economy, Trade and Industry"Green Value Chain Platform"<Calculation period>
FY2021 (April 1 to March 31)*1 CO2 emissions in previous fiscal years have been retroactively
adjusted due to the improved accuracy of the data.

<Calculation period>
FY2021 (April 1 to March 31)*2 CO2 emissions in previous fiscal years have been retroactively
adjusted due to the improved accuracy of the data.

13

Information Disclosure According to
TCFD Recommendations
TCFD is the Task Force on Climate-related Financial Disclosures established by the Financial Stability Board (FSB). The Task Forcereleased its final report (TCFD Recommendations) in June 2017, setting forth a framework for corporate information disclosure of climaterelated risks and opportunities.
Sanyo Special Steel has expressed its endorsement of the TCFD Recommendations in October 2021, in light of the situation ofinternational society that is working to achieve the long-term goals of the Paris Agreement. Based on this, we will disclose information on
the impact of climate change on our business activities, etc.

Scenario

TCFD scenario analysis

Carbon neutral-related
responses in customer
industries, etc.
(growing need for low-carbon anddecarbonized steel and products/
technologies that reduce environmental
impact, shift to transportation with less
CO2 emissions (railroad), shift to ahydrogen society, etc.)(Reference) TCFD-recommended disclosure items and where to find in this report
Overview of TCFD-recommended disclosure items

Major climate-related
eventsPage
Structural changes indemand associated withthe shift to EVs, andgrowing need for smaller
and lighter automotive
parts, etc.

[Governance] The organization's governance around climate-related risks and opportunitiesa) The Board of Directors' oversight of climate-related risks and opportunities

P.11b) Management's role in assessing and managing climate-related risks and opportunities

P.11a) The climate-related risks and opportunities the organization has identified over the short, medium, and long term

P.14b) The impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning

P.14c) The resilience of the organization's strategy, taking into consideration different climate-related scenarios,
including a 2˚C or lower scenario

P.14[Risk Management] How the organization identifies, assesses, and manages climate-related risksa) The organization's processes for identifying and assessing climate-related risks

P.11b) The organization's processes for managing climate-related risks

P.11c) How processes for identifying, assessing, and managing climate-related risks are integrated into
the organization's overall risk management

P.11

1.5°C scenario[Strategy] The actual and potential impacts of climate-related risks and opportunities on the organization’s businesses,
strategy, and financial planning where such information is material[Metrics and Targets] The metrics and targets used to assess and manage relevant climate-related risks andopportunities where such information is materiala) The metrics used by the organization to assess climate-related risks and opportunities in line with its strategy andrisk management process

P.12､ 16b) Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks

P.12､ 16c) The targets used by the organization to manage climate-related risks and opportunities and performance against targets

P.12､ 16

* Net Zero Emissions by 2050: A roadmap scenario modeling what will be needed to put the world on track to net zero CO2 emissions by 2050.
* SSP5-8.5: A higher reference scenario without introducing climate policy under fossil fuel dependent development

Intensifying competition
for mineral resources due
to increase in demand forelectricity and storage
batteries, etc.

Introduction of carbon
pricing including carbon
tax• Increase in demand for electricarc furnace steel, which emits
relatively less CO 2, and materials,
technologies, and products that help
customers reduce CO 2 emissions(long-life bearing steel, hydrogenresistant stainless steel, etc.)

Shift of steel production
to electric arc furnaces
and increased use of ironand steel scrap

4°C scenario

Increasing frequency
and severity of weatherrelated disasters
Increase in averagetemperature
Decrease in water
resources and rise in
sea levels due to climatechangeOpportunityHigh• Growing need for our highly reliable
special steel products associated withthe shift to EVs

Opportunity• Increase in demand for our special
steel products with properties that
contribute to the size and weight
reduction of partsHigh• Decrease in special steel consumption
per automobile• Increase in demand for our highly
reliable bearing steel, which leads
to reduced maintenance and failure
prevention of wind power generation
facilities

Risk

Sanyo Special Steel's responses and strategies• Promote the development of eco-products that contribute to
CO2 emission reduction in the stage of parts manufacturing
at customers and during end product use(deepen technologies to meet the needs for higher reliability in the fieldsof "EV," "wind power generation," "railroads," and "hydrogen society,"
etc., which are expected to grow globally toward carbon neutrality, anddevelop and expand sales of strategic items (metal powders for 3D
printers, etc.)• With our strength in high-cleanliness steel, accurately respondto new customer requirements and environmental issues
arising from changes in social and industrial structures• Strengthen supply chain competitiveness by enhancing
collaboration with customers

MediumOpportunity
High

Opportunity• Elucidate the fatigue mechanism under the unique environmentof wind power generation, and promote development andmarket introduction of bearing steel for wind power generationthat achieves long life and high reliability

High• Promote development and supply of scarce resource-saving
high-performance products (ECOMAX series, Co-free maraging
steel powder, etc.)• Instability in procurement of secondary
raw materials due to restrictions onrare metal exports, etc.

Risk

• Secure and expand sources for ferroalloy procurement

Medium• Further enhance procurement supply chain management• Increase in costs for electricity, fuel,
etc.

Risk

* If additional burdens such as a carbon
tax were to be imposed, the resources forresearch and development, etc., would be
lost, which could lower the international
competitiveness of Japanese industry as
a wholeHigh• Increasing need for our highperformance materials that do not
rely on rare metals• Improve relative advantage of electricarc furnace steels with relatively low
CO2 emissions and especially of Ovako,
which is a leader in decarbonization

TCFD Scenario Analysis
The TCFD Recommendations call for disclosure of strategies and organizational resilience, taking into account climate-related risks andopportunities under multiple climate change scenarios, including the 2°C or lower scenario. In the special steel industry, investors and otherstakeholders are increasingly concerned about the impact of and responses to changes in key customer industries, such as a shift to EVs,
and introduction of carbon pricing for significant reductions in CO2 emissions in the future.
Sanyo Special Steel has conducted a scenario analysis by referring to the International Energy Agency's (IEA) Net Zero Emissions by
2050 (1.5°C scenario) and the Intergovernmental Panel on Climate Change's (IPCC) SSP5-8.5 (4°C scenario) to consider the long-term
impacts on the Group through 2050.2050 (1.5°C scenario) and the Intergovernmental Panel on Climate Change's (IPCC) SSP5-8.5 (4°C
scenario) to consider the long-term impacts on the Group through 2050.

Growth of wind power
market due to expansionof renewable energy

Assumed impacts(key risks and opportunities)• Intensifying global competition toacquire superior scrap• Damage to production facilities andinundation of business bases andwarehouses in coastal areas due tosevere weather disasters, and disruptions
to the procurement of raw materials,
equipment, and other materials, andproduct supply, etc.
• Increase in risk of heat stroke and other
health hazards and equipment failure• Operational disruptions due to decline inwater supply stability, etc.

Opportunity
High

Risk
High

Risk

High

• Promote CO 2 emission reduction of our Steel Group with
eco-solutions such as eco-processes and the use of green
energy• Promote procurement of low-cost carbon-free electricity, etc.,
gain customer understanding of the low- and de-carbonization
value of steel products and the costs required to achieve it,
and reflect them in sales prices to secure appropriate margins• Strengthen cost competitiveness of the entire Group throughcollaboration with NSC and Ovako, etc.
• Request suppliers to reduce CO2 emissions• Secure and expand sources of iron and steel scrap procurement
and optimize raw material mix• Secure iron sources in collaboration with the NSC Group• Continuously improve BCM (Business Continuity Management),
including enhancement of disaster prevention management
and natural disaster countermeasures• Ensure restoration financing measures by purchasing property
insurance and utilizing the Group's CMS (implemented)• Enhance procurement supply chain management, implement
flood control measures in anticipation of high water, etc., andmaintain private water sources for industrial use (continued)[Definition of degree of impact]
High: Risks/opportunities that could have a significant impact on business performance, such as increases or decreases in sales, losses, or profits in the order of billions of yen or more.
Medium: Risks/opportunities that may have a certain impact on business performance, such as increases or decreases in sales, losses, or profits in the order of hundreds of millions of yen.

14

Contribution to a Resource-recycling
Society
Special Steel Products Produced From
Recycled Raw Materials

Recycling of Electric Arc Furnace Slag

Sanyo Special Steel manufactures special steel by the electric arc
furnace steelmaking method using iron and steel scrap as the main
raw material, contributing to the recycling and effective use of iron andsteel resources. Iron and steel scrap accounts for approximately 80% of
the raw materials, and when internally recycled materials are included,
approximately 95% of the raw materials are recycled products.

Initiatives to Reduce By-Products
In FY2021, the volume of by-products generated by our
production activities was 252 thousand tons, and the volume
processed, including the volume sold, was 243 thousand tons. Byproducts include electric arc furnace slag, scale, dust, brick waste,
and sludge.
We promote resource recycling based on the 3R (Reduce,
Reuse, and Recycle) concept, and in FY2021, we reduced
approximately 90% of the processed volume either by recycling or
incineration, and finally disposed of the remaining 10% in landfills.
We will continue to work to expand the use of by-products in new
applications in order to reduce the volume of landfill disposal.

Sanyo Special Steel promotes the recycling of electric arc furnace
slag generated as a by-product of the manufacturing process andcontinues to achieve a 100% recycling rate by stabilizing the quality ofsuch products and meeting diversifying needs. Electric furnace slag has
attracted attention mainly as a substitute for natural resources such asstone and sand, and is used for roadbed material and asphalt aggregate
applications. In the future, it is expected to be used as inhibitors tocontrol foam expansion in steelmaking process, and as an aggregate forrecycled pavement.
Our electric arc furnace slag products are processed at the highest
level in Japan using pressurized steam aging equipment that is
effective in stabilizing expansion. In addition, we use multi-functionalclassification equipment made up of a classifier that can sort electricarc furnace slag products into six stages simultaneously, from coarsegrained aggregate to fine powder, and a granulator that chamfers
aggregate particles to adjust grain size and improve wear resistance.
Using these manufacturing processes, we provide customers with highquality electric arc furnace slag products.
We will continue to focus on the realization of a sustainable society
by putting in place a management system covering all aspects ofproduction, quality, and sales in compliance with the "Guidelines forManagement of Iron and Steel Slag Products" of the Nippon Slag
Association, and by undergoing reviews by third-party organizations tostrengthen the management system and further improve its reliability.

ReduceAwarded theme: "Recycling Iron and Steel Scrap, etc., into High-value-Added Special Steel Using Electric Arc Furnace"

In October 2021, Sanyo Special Steel received the "Award of the Director-General of the Industrial Science and Technology
Policy and Environment Bureau, Ministry of Economy, Trade and Industry" at the Awards for Resources Recirculation Technologies
and Systems.
The purpose of the Awards is to promote the recirculation business by recognizing, encouraging, and disseminating projects andinitiatives that feature outstanding technological developments, etc., that contribute to the reduction of waste generation, reuse, andrecycling. It is hosted by Japan Environmental Management Association for Industry under the auspices of the Ministry of Economy,
Trade and Industry.
Sanyo Special Steel has been offering high-value-added special steel products that contribute to longer life, smaller and lighterparts, and lower parts manufacturing costs by developing a highly productive process for ultra-high-cleanliness steel and scarceresource-saving case-hardened steel in the manufacturing process of special steel using the electric arc furnace steelmaking
method, which uses iron and steel scrap discharged from factories, etc., as raw material. These initiatives were highly evaluated fortheir contribution to 3R* activities that contribute to the creation of a resource-recycling society and their potential to help achievecarbon neutrality.
* 3R: Reduce, Reuse, and Recycle

RecycleReduce electricity, gas,and other resource
consumption
Reducae generation ofwaste

Recycle iron and steel resources andby-products

ReuseElectric arc furnace slag

Breakdown of by-productgeneration
0.4%

3%
6%

Breakdown of by-productprocessing
27thousand tons
11%

Raw materials(iron and steel scrap, etc.)

8%16%

FY2021

FY2021

thousand tons

thousand tons

252

243

Scale

Dust

Brick waste

SludgeOther

Reuse industrial water

Contributes to longer parts life,
smaller size and lighter weight, andlower manufacturing costs

Sanyo Special Steel's 3R activities (image)217thousand tons
89%

67%
Electric arc
furnace slag

Reuse

and other high-value-added
special steel products

Inspection

Reuse by-products

Cold rolling

Recycle by-products

Heat
treatment

Reuse water

Ultra-highcleanliness steel

Reduce by-products andwastegenerated in
the manufacturing process
Hot rolling

Utilize scrap raw materials

ReduceSteelmaking

3R
RecycleReceived "Award of the Director-General of the Industrial Science and Technology Policy andEnvironment Bureau, METI" at the Awards for Resources Recirculation Technologies and Systems

Recycling, etc.

Landfill disposal

Recycled pavement in Himeji City

15

Reduction of Environmental Impact
Efficient Use of Water Resources

Reduction of Air Pollutant Emissions

Water is essential in the manufacture of our products, forcooling steel and equipment, and as a source of power forequipment. Although our manufacturing base (Himeji City, Hyogo
Prefecture) is not located in an area exposed to high water stressas assessed by the WRI Aqueduct, we reuse more than 90%of the water used in our production processes, based on ourrecognition that water is a limited resource. In addition to watersupply from the industrial water works, we also have our own
source of water (groundwater) . Contaminated water that has
been used in the factory is sent to an on-site treatment facility to
be purified. The purified water is then reused within the factory,
while the remainder undergoes further treatment before being
discharged into public waters. At the drainage outlets to public
waters, a system is in place in which pH levels, turbidity, chemical
oxygen demand (COD), nitrogen, and phosphorus are constantly
monitored by automatic measurement, and if they exceed ourvoluntary internal management standards, which are stricter than
the standards set by prefectural ordinances, an alarm is issued
to enable the staff in charge to respond quickly. In addition,
periodic analysis of hazardous substances, etc., is conducted by
an external organization as part of our efforts to manage water
quality and prevent water pollution.

At facilities that generate soot and smoke, we have achieved
SOx (sulfur oxide) emissions well below the agreement value with
Himeji City by switching the fuel from heavy crude oil with highsulfur content to LNG (city gas) which contains almost no sulfur.
For NOx (nitrogen oxides) emissions, we are employing low
NOx burners and proper combustion controls, etc., to reduce theemissions. We have also installed automatic NOx measurement
equipment in the system to enable constant monitoring of heating
furnaces, which emit large amounts of NOx.
In addition, the April 2018 revision of the Air Pollution Control
Act stipulates that mercury concentrations in the exhaust gas
from electric arc furnaces for steelmaking should be voluntarily
reduced. Sanyo Special Steel regularly measures and records
mercury concentrations in accordance with the voluntarystandards recommended by the Japan Iron and Steel Federation
to confirm that the concentrations meet the voluntary control
standards.
As for dust collection facilities, we are working to increase
equipment capacity, including the installation of additional dust
collectors in buildings of continuous casting factories in FY2018.
We also use traditional methods to help prevent dust
dispersion, including patrols by water sprinkler vehicles and street
sweepers.

Chemical oxygen demand (COD) in wastewater
Concentration (mg/ℓ)
12Prefectural ordinance (addition criteria)

10
8
6
4

2.5

2.5

2.3

2.4

2.4

2
0

2017

2018

2019

2020

2021 (FY)

Suspended particulate matter (SS) in wastewater
Concentration (mg/ℓ)
35Prefectural ordinance (addition criteria)

30

Wastewater treatment facility

Proper Management of Chemical Substances
In accordance with the PRTR Act*, we monitor emissions
and transfers of chemical substances and report them to the
Ministry of Economy, Trade and Industry annually. We also workon initiatives to suppress the emissions. In addition, PCB waste
is properly stored and managed in accordance with the Act on
Special Measures concerning Promotion of Proper Treatment of
PCB Wastes, and the renewal/disposal of applicable equipment
is carried out systematically in order to complete disposal within
the time limit specified by the Act. As for highly concentrated PCB
waste, we conducted final identification of equipment subject todisposal in accordance with a written notification from the Ministryof Economy, Trade and Industry, and completed the consignmentof all the equipment to JESCO for disposal within the time limit.
For low-concentration PCB waste, we have listed the equipment
subject to disposal and are proceeding with the planned renewal/
disposal of equipment in order to complete disposal within thetime limit.
* PRTR (Pollutant Release and Transfer Register): Act on the Assessment of Releasesof Specified Chemical Substances in the Environment and the Promotion ofManagement Improvement

Emissions and transfersof chemical substances

25
20

10
5
0

0.6

0.6

0.6

0.8

0.7

2017

2018

2019

2020

2021 (FY)

Nitrogen concentration in wastewater
Concentration (mg/ℓ)
7060Legal standard (no additional criteria for prefectural ordinance)

40
30

10
0

1,303ｔ 240ｔ

Emissions into
public waters

10ｔ

Proper Disposal of Waste

50

20

Emissions to
the atmosphere

7.9

7.5

7.5

7.4

7.7

2017

2018

2019

2020

2021 (FY)Sanyo Special Steel outsources disposal to industrial waste
disposal companies and ensures that they can properly dispose of
our waste by checking their licenses and conducting preliminary
inspections of their disposal facilities. In addition, we confirm that
our wastes are properly disposed of through periodic inspectionsof disposal facilities and by checking the status of industrial
waste disposal using manifests. We have introduced electronic
manifests to ensure proper operation, and we are working tothoroughly separate waste at the sites where waste is generated.

(Thousand m3N)

60

Agreement value with Himeji City

57
40

20

0

2.1

1.5

1.1

0.3

2.5

2017

2018

2019

2020

2021 (FY)

Nitrogen oxide emissions(Thousand m3N)
300
Agreement value with Himeji City

250
200
150

148.9

150.0

2017

2018

132.0

116.5

149.1

100
50
0

2019

2020

2021 (FY)

Improvement Plans for Environmental Conservation
Our plans to improve environmental conservation and status of initiatives
Topic

Target/KPIs

Status of initiatives (FY2021 results, etc.)

Selfassessment*

Energy-saving andglobal warming
prevention

Reduction in CO2 emissions through promotion ofenergy-saving measures, etc.
(FY2030 target: 50% reduction from the FY2013 level)• CO2 emissions in FY2021: 15% reduction from the FY2013 level• Reduction of city gas by updating burners of electric arc furnaces• Energy-saving by improving combustion temperature control ofheating furnaces○○

Recycling of byproducts

Reduction in dust and sludge landfill volumes• Outsourcing of dust recycling to contractors○○

Improvement of the recycling rate of brick waste• Use of brick waste as a heat-resistant raw material○○

Compliancewith laws andregulations

Compliance with regulatory standards(Water Pollution Prevention Act, Air Pollution Control
Act, etc.)• Attainment of regulatory standards for all items(no cases of violation or deviation from laws, regulations, andagreements)

○○○

15

Transfers outside
the business site

Sulfur oxide emissions

Education andawareness-raising
activities for
employees

Promotion of
information
disclosure

Regular implementation of education and awarenessraising activities for employees• Implementation of community beautification activities(approx. 200 participants)• Recording of household eco-account books(approx. 10 participants)

Increase in the number of employees with environment- • Ongoing initiatives to increase the number of employees qualified
as pollution control managers
related public qualifications

○○○

○○

Periodic publication of environmental reports• Publication of "Sanyo Special Steel Report" and its release on
website○○○Cooperation with local governments and otherenvironmental administrations• Implementation of initiatives for Environment Month events○○○* Self assessment: The level of achievement of targets is indicated on a 3-point scale.
○○○ : Plans have been achieved ○○ : Steady progress toward achieving plans ○ : Further initiatives will be undertaken to achieve plans

16Creating a Safe Workplace
The Sanyo Special Steel Group believes that, as a manufacturing company, "safety" should be prioritized above all else. This isevidenced by the fact that employees greet each other with "Keep Safe!” to impart a sense of safety in one another. In our safety activities,
we have set a goal of "a total absence of accidents throughout the year" in order to practice our corporate philosophy, "Confidence-based
Management." We believe that we need to achieve a total absence of accidents throughout the year across the entire Group in order tobuild relationships of trust with various stakeholders and to achieve sustainable growth. We cannot achieve this goal if even one person
is left behind. There are no shortcuts to safety activities. We aim to achieve a total absence of accidents throughout the year through daily
safety activities and by creating a workplace where all workers can work safely with peace of mind.

■ Basic policy
Challenge safety activities that enable employees to know themselves (awareness), act on their own (initiative),
promote their own growth (independence), and discipline themselves (autonomous), to deepen mutual
understanding, and promote the creation of an open, safe, and healthy workplace.
■ SloganCompany-wide initiative to change behavior Challenge to create a new safety culture■ Three safety principle
Stop, Step Back, Check Hands & Feet – then double-check that it is really safe

Top-downHardmeasures
Investment forsafetyequipment

We have introduced a safety proposal system aimed at enhancing accident prevention measures by inviting proposals on ways toidentify unsafe spots in each workplace, ideas for safety measures, and methods for working safely, and making improvements based onthem. Soliciting safety proposals from workers who are actually working on-site is not only effective in formulating specific safety measures,
but also raises workers' safety awareness through the proposal process and leads to a transformation to true bottom-up safety activities,
which forms the core of our safety activities.
In addition, safety professionals are appointed from among the team leaders at work sites, and they are expected to take the initiativein improving work operations and environment at their own workplaces, thereby raising safety awareness and creating a synergy with thesafety proposal system.

Safety Promoter Activity■ Goals
Achievement of a total absence of accidents
Occupational accidents “0” Accidents on the way to work “0”In order to ensure the safety and health of employees in theworkplace, the Safety and Health Committee, chaired by the
Safety and Health Manager meets monthly to deliberate on basic
measures to prevent employee hazards and health problems aswell as on the causes of occupational accidents and measures
to prevent recurrence, etc. Half of the members of the Safety
and Health Committee are labor union representatives, inaccordance with laws and regulations, to ensure that the opinionsof workers are reflected in safety and health measures. We also
promote the reduction of work risks and the creation of a safe
workplace by "integrating top-down and bottom-up approaches"and "implementing both hard and soft measures" and report themonthly implementation status of safety activities and the annual
summary of safety and health activities to the Board of Directors,
thereby effectively implementing the PDCA management cycle(planning, implementing, monitoring/supervising, and taking
improvement measures) for constant improvements.
For our overseas subsidiaries, we monitor safety at local plants
and use web conferencing to identify weak points in terms ofsafety and provide support and guidance for safety activities byexchanging opinions and sharing information on each company's
initiatives, etc., thereby promoting the safety activities of the entire
Group.

Safety knowledge, risk behavior, and sensitivity to hazards, etc., vary for each age group and grade. Therefore, we need to conduct
specialized training for each respective grade. For the training targeting employees who have extended their retirement age, rehired
employees (those aged 60 to 64), and senior citizen partners (those aged 65 and older) in 2021, we will expand the scope of training toinclude employees of our partner companies.

Safety Proposal System

2022 Comprehensive Health and Safety Management Policy

Safety and Health Management

Grade-based Training

Safety Philosophy and Policy
Comprehensive Health and Safety
Management PolicySoftmeasureSafetyBottom-up
Safety professional and safety proposal system
Safety promoter activity
Various daily safety activities

Safety andhealtheducationsystemExcellent
workplacerecognition
systemSanyo Special Steel has been implementing the "safety
promoter activity" since 2016 to develop human resources who
can make judgments and act on their own by educating young
and mid-career employees selected from each workplace on
correct safety knowledge and the importance of compliance withrules, with the aim of achieving "true safety" by integrating topdown safety activities and bottom-up safety activities.
Young and mid-career employees appointed as safety
promoters patrol their own and other workplaces to enhancetheir perspectives to recognize good and bad points of their own
workplaces and improve their sensitivity to recognize dangerous
conditions as hazardous. In addition, they experience risk
assessment activities to identify hazardous operations and assess
risks, leading to the improvement of intrinsic safety throughimprovement measures, including equipment measures.

<Number and frequency rate of occupational accidents by year>(Number of cases)
15

Safety Experience Training Center
We have established a Safety
Experience Training Center thatenables us to have simulated
experience of hazards. In 2021,
2,483 employees received training
at the center, and to date the total is31,237.
In 2018, we installed VR (virtual
reality) equipment to provide a more
realistic experience. We will continue
to add new educational content andwork with our employees to think
about the importance of avoiding
hazards.

5.00

13

Number of occupational accidents
requiring time off from work (left axis)
Frequency rate (right axis)

4.00

9

10

9

6

6
1.77

5

1.04 3

2

2010

1.67
1.10

0.54

0.38
0

2.36

2011

2012

2014

1.26

4

2015

0.38
0.00

2016

2017

2018

2019

2020

2.00

4
0.88

2
0

2013

3.00

7

0.76 1.00

2021 (Year)

0.00<Reference> Frequency rate: Number of occupational accidents per million hours (Number of occupational accidents / Total number of working hours × 1,000,000)

17

Disaster Prevention Initiatives
Risk Management for Emergency Situations
Many employees work at Sanyo Special Steel, which has a variety of equipment and facilities. In addition to establishing a permanent
fire and disaster prevention management system, we are working to prevent accidents from occurring and to prevent the spread of (minimize)
damage in the event of a disaster by developing manuals in preparation of plant accidents such as fires and explosions and natural
disasters such as earthquakes, and conducting regular disaster drills, etc. In FY2021, we set the following four points as priority promotion
items under our basic policy for the year: "All employees in the workplace shall raise their awareness of fire and disaster prevention throughrisk assessment to prevent disasters, and acquire a high level of disaster response capability through education and training."• Enhancement of fire and disaster prevention management• Strengthening of management of facilities and other equipment at high risk of fire, explosion, and oil leakage• Improvement of disaster response capabilities through continued implementation of fire and disaster prevention education and training• Strengthening of disaster prevention measures through the activities of dedicated disaster prevention teams
In addition, for fire and disaster prevention risk assessment activities started in FY2020, new check items such as storm and flood
damage and crisis management were added in FY2021. We will strive to raise employees' awareness of disaster prevention and reduce
potential risks by identifying new risks and formulating and implementing countermeasures, both in factories and offices.

Initiatives to Raise Disaster Prevention
Awareness
With the aim of further raising employees' awareness of disasterprevention, Sanyo Special Steel holds workshops for hazardous
materials safety supervisors and managers and workshops for
managers in charge of fire and disaster prevention every year.
We are working to improve the management level of licensed
hazardous material facilities, small quantity hazardous materials,
and minute hazardous materials by providing direct instructions
to workplace managers and those responsible for handlinghazardous materials and high-pressure gases. In FY2021, at
the workshops for hazardous materials safety supervisors andmanagers held in July, the participants were again informed of thetypes and designated quantities of hazardous materials stipulated
in fire laws and regulations, the need to notify the fire department
and apply for permission when making changes, etc., and the
responsibilities and duties they must fulfill as safety supervisorsand managers. At the workshops for managers in charge of fireand disaster prevention held in September, the participants wereexplained of the disaster prevention management rules and firefighting plans that workplace managers should be aware of, andreminded of daily preventive management and the standardsof behavior in case of emergencies. They also deepened theirunderstanding of the necessity of first aid, cardiopulmonary
resuscitation, and AED to save lives from disasters, accidents,and sudden illnesses. Regarding the management of facilities, we
worked on 3S activities for licensed hazardous material facilities
and high-pressure gas facilities, with June and March designatedas months for strengthening management of licensed hazardous
material facilities and October as a month for strengthening
management of high-pressure gas facilities. We will continue
to promote further improvement of employees' awareness of
disaster prevention through these disaster prevention educationand management enhancement activities. In addition, since
FY2018, we have been holding first aid training sessions forforemen, where they receive practical training on cardiopulmonary
resuscitation (chest compressions, use of AED) and hemostatic
techniques, etc., with help from nurses.

Conducting Disaster Drills
In Sanyo Special Steel, the equipment and hazardous materials
used vary from workplace to workplace. In addition, employees'
awareness of and experience with disaster prevention varies
widely, not to mention new employees participating in disaster
drills for the first time. Furthermore, depending on the scale ofthe disaster, cooperation with affiliates may also be required. For
this reason, disaster drills are conducted in a more specific andpractical manner by identifying appropriate emergency situations.

Disaster drills conductedin FY2021

51

Large-scale earthquake disaster drill
In FY2021, we conducted a large-scale earthquake disaster
drill under the assumption that a huge earthquake with an
epicenter in the Nankai Trough had occurred, shutting down
lifelines such as electricity, water, gas, and transportation. Afterconfirming information on the earthquake and tsunami, we set
up the Disaster Task Force and collected information from eachdepartment on the safety of employees and damage to facilities.
In response, the Disaster Task Force issued instructions for
initial response to injured people and damaged facilities andfor secondary evacuation (tsunami evacuation to high places),and each department reported its activities to the Disaster Task
Force. We will continue to work to raise employee awareness andimprove their disaster response capabilities through drills.

Joint factory disaster drill with the Shikama Fire Department
In December 2021, we conducted a joint factory disaster drill with the Shikama Fire Department under the assumption that an oil fire had
occurred at our large rolling mill. During the drill, the Disaster Task Force played a central role and collaborated with the Fire Department
members to conduct initial fire fighting by the fire brigade, fire fighting by private and public fire brigades, and rescue and first-aid activities
for the injured, etc. This year's drill newly included evacuation and support requests to employees not only of the plant where the drill was
conducted, but also of neighboring plants, as well as preparations for the unlikely event of the spread of fire. After the drill, the participants
exchanged opinions and received feedback and guidance on the drill from members of the Shikama Fire Department. We will continue to
conduct drills that will help raise the level of the entire organization.

Preparedness for large-scale earthquakes and other wide-area disasters
In the event of a wide-area disaster such as a large-scale earthquake, it would be difficult to confirm the safety of employees andconsolidate such information through ordinary means of communication such as telephone calls. Sanyo Special Steel has therefore
introduced an Internet-based safety confirmation system to quickly gather information on the safety of employees in the event of an
emergency and, based on that information, take measures necessary for business continuity.
In addition, at our head office plant, we have stockpiled emergency food and drinking water necessary for our employees and employees
of our subsidiaries and cooperative companies working on our plant premises to safely return home and stand by. In addition, at sales
bases located in urban areas, we have stockpiled disaster prevention supplies in anticipation that employees would have difficulty returninghome to prepare for the unlikely event of wide-area disasters such as large-scale earthquakes.

18Promotion of Diversity Management
Promotion of Participation by Senior Generation

Based on the recognition that "a good workplace for women is also a good workplace for men," Sanyo Special
Steel promotes the creation of a workplace where all employees can work to the best of their abilities regardlessof gender. In addition, business activities are becoming increasingly globalized, with approximately 70% of theGroup's employees now being foreign nationals. Under such circumstances, we established the "Diversity (Human
Resources Diversification and Utilization) Promotion Group" in January 2021 as a specialized organization tofurther promote diversity management.
It is important that a company's diversity initiatives lead to the improvement of the company' competitivenessby enabling all employees to fully demonstrate their abilities, regardless of gender, age, nationality, educational
background, or work experience. In order to promote the growth of each and every employee and thedevelopment of the Sanyo Special Steel Group through the activation of diversity and inclusion, where diverse
human resources come together and interact with each other in a developmental manner, we are promoting
various initiatives such as further promotion of female participation, utilization of elderly employees after theextension of the retirement age, and stable employment of persons with disabilities.

Extension of retirement age
Ahead of other special steel manufacturers, Sanyo Special
Steel has extended the retirement age from 60 to 65 in April 2021.
We will promote experienced employees to further demonstrate
their abilities as highly skilled experts in the areas of work inwhich they have been engaged for many years by improving theirmorale and the vitality of the workplace as a whole. We will also
further enhance the environment for promoting the transfer oftechnology and skills and the development of future generations,and strengthen competitiveness by maintaining and improving ourmanufacturing capabilities.

Senior Citizen Partner Program

Promotion of Participation by Women

Sanyo Special Steel has established the "Senior Citizen
Partner Program" as a system for extending the employment of
employees who have reached the age of 65. Participation of themembers of the senior generation who are healthy, willing to work,and capable of performing their duties is also consistent withthe concept of diversity. We have extended the employment of
those who are deemed necessary from the viewpoint of businessexecution and the transfer of technology and skills when theyreach the age of 65 as "senior citizen partners." As of April 1,
2022, we had 80 "senior citizen partners" actively working at our
respective workplaces.

With the goal of increasing the percentage of female employees to 25%, Sanyo Special Steel has increased
the number of workplaces where female employees can actively work by systematically hiring female employees
and expanding their work areas, and introduced support systems, such as childcare leave and shorter working
hours, to reduce the burden during their life events and enable them to continue working.
In addition, under the General Employer Action Plan based on the Act on the Promotion of Women's
Active Engagement in Professional Life, we have set the goals of increasing the average length of service offemale employees by 15% over the three years from April 2020 to the end of March 2023, and increasing thepercentage of female managers by 1% from the March 2020 level. We are promoting the awareness building of
female employees through external training, etc., and the creation of an organizational culture that encourages
their participation.

Percentage offemale employees

Percentage offemale managers(As of April 2022)(As of April 2020)14 %(26% in planning position, 7% in technical service position)

3.9 %Average years of service offemale employees(As of April 2022)

5.6 %Pregnancy, childbirth, and childcare system timeline
PregnancyChildbirth

1 year old

2 years old(Compared to March 2020)+4.0 %
Technical service position +11.5 %Management track position

Females
3 years old

End of FY

4 years old

Males
Third grade

Breaks during pregnancy (extended rest periods in addition to regular breaks; up to 1 hour/day, up to twice a day)Maternity leave (early pregnancy to 8 weeks after childbirth)
Medical checkup leave for expectant and nursing mothers (special leave)
Protection of expectant and nursing mothers(employment considerations such as reassignment and reduced working hours)
Childbirth leave (special leave)
Childcare leave (until the end of the fiscal year of the child's third birthday)
Childcare time (30 min/time, up to twice a day) Until the child's first birthday
Reduced working hours for childcare (until the end of the fiscal year of the third grade of elementary school)
Exemption/limitation of overtime hours (up to 24 hours/month, up to 150 hours/year)
Until the end of the fiscal year of the third grade of elementary school
Exemption from late-night work Until the end of the fiscal year of the third grade of elementary school
Sick/injured childcare leave (limited to 5 days/year for one child and 10 days/year for two children;
restored paid leave or special leave) Until the end of the fiscal year of the sixth grade of elementary school

End of FY

Males andfemales
Sixth grade End of FY

Stable Employment of Persons with Disabilities
Sanyo Special Steel promotes the employment of persons with disabilities in order to realize a society in which everyone can work
vigorously. In addition to promoting recruitment activities in cooperation with Hello Work offices (public employment security offices) andspecial support schools, we are also continuously working to improve the work environment in both hard and soft aspects with working life
counselors for persons with disabilities playing a central role. For employees who are certified as persons with disabilities after joining thecompany, consideration is given to the nature and hours of their work so that they can continue to work. As of June 1, 2022, we had 24
persons with disabilities actively working at our respective workplaces.

Promotion of work-life balance
Work-life balance means being able to choose and realize
diverse ways of life, including family and community life, while
fulfilling one's professional responsibilities and feeling satisfaction
and fulfillment in one's work. To further encourage this, the "Act on
the Arrangement of Related Acts to Promote Work Style Reform"
are being sequentially enforced starting in April 2019. "Work stylereforms," such as the prevention of long working hours, proper
management of working hours, and requiring employees to takea certain number of days of annual paid leave, are becoming
increasingly important in achieving a work-life balance.
In addition to "no overtime day" every Wednesday andproductivity improvements aimed at reducing overtime hours,
Sanyo Special Steel is also working to increase the rate of paid
leave taken.
In addition, we encourage employees to take consecutive paid
leave and special incentive leave, and have established systems
that exceed legal standards, such as maternity, childcare, andnursing care leave. In addition, we support the realization ofa work-life balance for each and every employee by creatinga workplace environment and culture that makes it easier for
employees to take such leave.

Childbirth, Childcare, and Nursing Care Support Guidebook

Percentage of employees
taking paid leave(FY2021)74.7%
Percentage of male employees
taking childcare leave(FY2021)37.8%
19

Promotion of Corporate
Health Management
Based on the recognition that the safety and health of its employees is a prerequisite for its business activities, Sanyo Special Steel has
regarded the creation of a workplace environment in which each and every employee can work to the fullest every day as an importantmanagement issue, and formulated the Corporate Health Management Declaration in August 2021.
As people age, their risk of developing lifestyle-related diseases and serious illnesses increases. In addition, since the occurrence ofmental health problems has a significant negative impact on the vitality and productivity of the entire organization, prevention and early
detection of such problems are important. From these perspectives, we have established a corporate health management promotion
structure with the Representative Director and President as the chief health officer, and work together with the health insurance association
to promote comprehensive initiatives to improve the lifestyle of each and every individual and prevent mental health problems fromdeveloping.

Sanyo Special Steel Declaration of Corporate Health Management
Based on the recognition that the safety and health of its employees is a prerequisite for its business activities
and an important management issue, Sanyo Special Steel declares that it will work together with the Sanyo Special
Steel Health Insurance Association to comprehensively address health maintenance and promotion, and continue tocreate a workplace environment in which each and every employee can work to the fullest every day.
August 2021
Sanyo Special Steel Co., Ltd.
		MIYAMOTO Katsuhiro,		
Representative Director and President

Participants in the walking event "SANYO WALK 2022 Spring"

For the Promotion of Corporate Health Management
Corporate Health Management Strategy Map

Healthinvestment

Health investment effectIndicators related to the status
of initiatives for healthinvestment measures

Implementation of walking
eventsIncrease in the number ofparticipants in walking
events

Implementation of specifichealth guidance

Improvement of the specifichealth guidance
implementation rate

Implementation of smoking
cessation support

Increase in the number of
employees provided withsmoking cessation support

Operation of health apps

Increase in the number ofhealth app users

Implementation of mental
health training

Increase in the number ofparticipants in mental healthtraining

Implementation of heatstroke prevention measures

Decrease in the number ofheat stroke cases

Implementation of infection
prevention measures

Measures and responses inaccordance with the guidelines
for prevention of COVID-19
infection

Indicators related to change inawareness and behavior of
employees, etc.

Improvement of enthusiasm
and vitality at work

Increase in the percentageof employees with healthyeating habits
Increase in the percentageof employees with exercise
habitsDecrease in the percentage
of smokers

Final health-related target
indicators

Management
issues to besolved throughcorporate healthmanagement

Reduction in absenteeism(sick leave)

Reduction in presenteeism(working while ill or injured)

Increase in work
engagement(enthusiasm and vitality at work)

Improvement of job
satisfaction

Poor mental and physical health among employees not only causes a decline in productivity but in some cases may also result in theloss of human resources due to leave of absence, resignations, or other reasons. In addition to providing employees with statutory healthcheckups, medical checkups for metabolic syndrome, and health guidance, Sanyo Special Steel continues to conduct stress checkups,
which were made mandatory in FY2016. We also conduct group analysis based on the results of these checkups and recommend
employees with high stress levels to see an occupational physician. Moreover, we have established a mental health help desk and provide
support for quitting smoking, diet management counseling, and so on.
In August 2021, we established a corporate health management promotion structure with our President as the Chief Corporate Health
Officer to promote further initiatives and continuous improvement. We have also established the Corporate Health Management Promotion
Council, which includes occupational physicians, health insurance association, and labor union, as a meeting body for continuous
improvement, and appointed employees in charge of health promotion in each workplace. We are also promoting initiatives including theestablishment of "No Smoking Day", creation of a comfortable workplace environment by providing air-conditioned uniforms, giving healthrelated lectures, and holding walking/health check events to support the establishment of exercise habits.
These efforts led to the acknowledgement in March 2022 of SanyoSpecial Steel as a Certified Health & Productivity Management Outstanding
Organization (Large Corporation Category). We will continue to further
promote corporate health management and create a workplace environment
in which all employees can work to the full every day.

Creation of aworkplaceenvironment inwhich each andevery employee canwork to the fullest
every day

The 12th and22nd of eachmonth are
"No Smoking Days"
Corporate Health Management Promotion Council(Secretariat: Labor Administration Group)

Establishment of"No Smoking Day"

Holding health check events

Conducting a lecture on health topics

20

Human Resource Development
Sanyo Special Steel has systematically established various types of training according to job classification and career, including training
for all employees, to develop the abilities of each and every employee. We also actively encourage employees of affiliates to participate topromote human resource development throughout the Group.

Human Resource Management System

Awareness Reform for Diversity
Promotion

During personnel appraisals, we focus not only on the resultsof performance, but also on whether employees "set high goals
and boldly strive to achieve them" or whether they "executed theprocess to achieve the goals without fail" in the appraisal in orderto foster autonomy and a challenging spirit in our employees.
We are working to help employees to improve their skills throughwork topics and issues clarified in dialogue with their superiors,
and also support the self-realization of each and every employee
through career interviews and other means to foster theirdevelopment from a long-term perspective.

In order to promote diversity management and create aworkplace in which each and every employee can demonstrate
their abilities and work vigorously, it is essential to change theunderstanding and awareness of each and every employee.
From this perspective, Sanyo Special Steel conducts
training programs such as unconscious bias training, in whichorganizational leaders learn skills to understand and control
unconscious biases related to gender and age, and management
candidate training, in which female employees learn about
diverse role models and interact with female employees of othercompanies to improve their awareness and motivation to become
managers. In this way, we are working to improve the mindset andcareer education of female employees in order to promote their
participation.

(establishing work tasks and training themes through dialogue)

Self-transformation Program ThroughMultifaceted Observation
Develop Human Resources Who Can “Think and Act Autonomously”
Under our basic policy of “developing employees and make full use of their potential,” we have developed a meticulous education andtraining system. In addition to education through daily work, we provide timely training to develop human resources with an independent
mindset who can "think and act autonomously," such as those having the ability to set and solve challenges on their own.
In addition, we have various training programs and support systems for self-development, including a qualification acquisition incentive
system that provides rewards for acquiring qualifications and licenses, specialized training by division such as patents and sales, a wide
range of group training, dispatch to various external training programs, and correspondence courses.

We have introduced a self-transformation program throughmultifaceted observation. The program is designed for officers,
department heads, and other management levels to confirm
their evaluations by superiors, colleagues, and subordinates andunderstand how their actions are viewed by their subordinates andothers around them, thereby providing them with an opportunity
to objectively recognize their own management and behavioral
characteristics for self-transformation.

Respect for human rights
In the "Guidelines for Corporate Behavior," which describes the actions taken by a company, the Sanyo Special Steel Group has stipulated
that it shall respect human rights both in Japan and overseas, comply with relevant laws and regulations, international rules, and the spirit
thereof, and fulfill its social responsibilities with high ethical standards to create a sustainable society. Based on this, we promote businessactivities that respect human rights.

Human rights-related education and relief
mechanisms

Development of Global Human Resources
With the globalization of the business environment, Sanyo Special Steel is accelerating the development of human resources capable ofperforming on the international stage.
We are developing a global mindset through overseas language training for new employees in planning positions and short-term
language study abroad for selected employees, etc. We also promote international exchange and innovation through technical collaborationand mutual dispatch of human resources with overseas Group companies, assignments to overseas affiliates based on a role model, study
abroad and dispatch to research institutions overseas. By implementing these measures, we are working to systematically develop humanresources who are aware of their status as global human resources, who can act from diverse perspectives beyond borders, and who can
produce results while building good relationships through sufficient communication with users and other stakeholders around the world.

Through various educational opportunities, such as grade-based
training and labor management seminars, we are working to develop
a corporate culture in which each employee's human rights anddiversity are respected.
In addition, we have established a help desk for various
compliance issues, including human rights, and made known
to all employees and other concerned parties the details of thesystem, contact information for the service, and the fact that no one
would suffer any disadvantages for consulting or reporting. Thismechanism makes it easier for them to consult and for the company
to understand and identify human rights violation cases.
In dealing with individual cases received at the help desk, weinvestigate the facts with due care to ensure that those who haveinformed/consulted are protected and that they are not treateddisadvantageously, and, if necessary, obtain advice from lawyers andexternal experts to seek appropriate resolution of the case.

Prevention of child labor and forced labor
Based on international norms on human rights and the Guidelines
for Corporate Behavior, etc., we ensure compliance with labor-related
laws and regulations in each country and region, and prevent theoccurrence of child labor and forced labor in our business activities.

Building and maintenance of soundlabor-management relations
We respect the "right to organize" and "right to collective
bargaining" of the labor union in accordance with laws, regulations,and labor agreements, and strive to build and maintain sound labormanagement relations. The relationship with the labor union isbased on mutual understanding through bilateral dialogues, andwe regularly hold discussions with the labor union on management
conditions, safety and health, various management-related issues,
working conditions such as salaries and bonuses, and work-lifebalance.
In addition to complying with the minimum wages, etc., stipulatedby the laws and regulations of each country and region, we also set
salaries and other treatments based on the conditions agreed uponin sincere negotiations with the labor union. We have adopted aperformance-linked bonus system in which the amount to be paid isdetermined based on the business performance of the previous fiscal
year after reaching an agreement through negotiations with the labor
union.

21

Quality Improvement Initiatives
Quality assurance is to build a process that enables us to accurately identify customer needs and provide a stable supply of productsthat meet those needs, and is directly linked to our corporate philosophy of "Confidence-based Management." The Sanyo Special SteelGroup has established a quality management system based on ISO9001:2015 and promotes quality control activities in which the sales,
engineering, production, and quality assurance divisions work together to build quality in order to satisfy the product quality required by JIS,
overseas standards, and other product standards. We aim to become a company that continues to grow sustainably by focusing not only on
controlling product quality, but also on improving the quality management system, which is a key part of our corporate structure, to make it
more efficient and responsive to changes in the environment, such as globalization and changing customer needs.

Quality Assurance System
The Quality Assurance Department plays a central role inmaintaining and managing the quality management system,
which is the cornerstone of our quality assurance system. The
process of product quality control, in which the sales division
identifies customer needs, the engineering division reflects thoserequirements in process design, and the production division
manufactures products according to that design, is developed
through collaboration among divisions. In addition, the Quality
Assurance Department, an independent division, is responsible
for overall quality assurance operations to provide an effective
check and balance function, thereby ensuring that the quality
assurance function is optimized and enhanced to provide morereliable products. The Quality Assurance Committee, chaired by
the Officer in Charge of Quality Assurance, meets regularly to
discuss basic quality assurance policies and plans for the fiscal
year, and implements improvement activities such as "systematic
improvement of important issues," "prevention of quality
complaints," and "improvement of customer satisfaction."

Quality Assurance Initiatives
In response to the new ISO 9001:2015 requirement of "addressing risks and opportunities," each organization conducts risk assessmentsof its operations. Based on the issues identified through this process, the PDCA (Plan, Do, Check, Act) cycle is implemented from a
medium- to long-term perspective to improve the level of quality assurance. Specifically, we are working to improve our quality management
system by continuously revising our quality manuals, conducting quality patrols, and promoting information sharing between organizations
through internal quality audits. In November, which is National Quality Month, we hold quality lectures and e-learning programs on quality
compliance to raise employees' awareness of quality.

Promotion of Skills Transfer
Sanyo Special Steel has been organizationally and systematically carrying out skills
transfer activities since FY2015, and consistently continuing one-on-one training that pairs
employees imparting the skills with those learning them, promotion of the creation of teachingmaterials, and the operation of an award system aimed at increasing their motivation.
In FY2021, we started the "2025 Medium-term Plan" for our skills transfer activities,
and each section manager of the production division has set forth a vision (a vision of theworkplace that he/she hopes to realize through the activities), aiming to comprehensively"create a strong organization that can respond to all needs, including drastic production
increase requests from customers and extreme changes in order composition" throughout
the company.
In this fiscal year, the second year of the medium-term plan, the results of humanresource development through past activities began to appear in various areas, such as
avoiding production stoppages and responding flexibly to unexpected production requests
by making up for personnel shortages by the entire workplace to operate facilities.
We will continue to promote skills transfer activities to the future generation as part ofa wide range of human resource development activities aimed at further developing multiskilled workers, improving their skills, and fostering new hires as early as possible, with anemphasis on transferring knowledge of skilled employees to future generations.

Promotion of TPM activities
The entire production division is working on TPM (total productive maintenance)
activities to achieve zero loss and zero waste due to equipment breakdowns and problems,
aiming for stable operation of equipment and improvement of production capacity.
In order to improve on-site capabilities by improving each employee's ability, we haveestablished the "TPM School" as a place to provide training on basic knowledge about
equipment and machinery to develop human resources with a good understanding of theequipment. In addition, we have formed common-interest groups for each work category
with topics such as zero equipment problems, quality improvement, safety improvement,
and cost reduction to conduct improvement activities on a daily basis. The in-house TPM
contest, which is held four times a year to present the results of TPM activities, has been
held via the Internet since last year so that more concerned parties can attend the contest.
In this fiscal year, an overhead traveling crane simulator was introduced in the TPM
School for the purpose of early acquisition of overhead traveling crane licenses by new
employees, improvement of safety, and reduction of workload at work sites to further
activate TPM activities.

Approved for "TPG Certification" as a supplier of steel products for critical components of wind power generator

for the first time among Japanese steelmakers

Understanding and Reflecting Customer
Needs
Once a year, we ask our customers to evaluate our QCDD
(Quality, Cost, Delivery, and Development) and analyze theresults. We then identify and improve the low evaluation items,
leading to further improvement of customer satisfaction. In
addition, in order to understand customer needs in a timely
manner, we hold meetings to exchange technical ideas withcustomers and take part in domestic and international exhibitions.
We introduce products and new technologies developed byus, provide detailed information on our products, and collectinformation on latest customer needs, which is then used todevelop and improve our products.

TPG certification is a U.S. certification program that certifies that the TPG
requirements specified for each certification area, such as steel manufacturing,heat treatment, and nondestructive testing, have been met for the manufacture oftransportation and power generation-related products. Some wind turbine generator
manufacturers have already decided to require their suppliers to obtain TPG
certification.
In the mass production process of special steel manufacturing, we have realized
the manufacture of high-cleanliness steel with extremely low non-metallic inclusions
through the development of optimal processes and quality control, thereby contributing
to extending the service life of various parts manufactured by our customers. In The introduction of wind power generation is expected torecognition of our highly reliable manufacturing technology and quality control system expand toward the realization of a carbon neutral society.
that enable us to stably produce such high-cleanliness special steel and meet the TPG
requirements in the steel manufacturing field, we became the first Japanese steelmaker to receive TPG certification.
In addition to our continuous casting process, which can produce special steel with high productivity, we have also been certified for our ingot
making method, which can produce large-diameter steel products used in large bearings for wind turbine generators, etc., making us the firstcompany in the world to be certified for both processes.
This will allow us to use our special steel products as materials for bearings and other critical parts of wind turbine generators, even when TPG
certification is required. We will continue to contribute to the early realization of a carbon neutral society through the development, manufactureand supply of high-cleanliness special steel products.

22

Expanding technological superioritythat meets society'sneeds

New product and technology development: Responding to needsfrom a multilateral approach

Evaluation
technology

As the pace of technological progress accelerates, customer needs are
becoming increasingly diverse and sophisticated. The Sanyo Special SteelGroup uses the customer’s perspective to identify the truly key characteristics
and optimizes the composition, structure, and production of steel, thereby
exploring the very limits of steel’s potential to meet society's needs.

that is the source oftrust anddevelopment

Evaluation technology: Earning trust with advanced evaluation andanalysis technologies
For special steels, even slight differences in composition, microstructure, etc.,
can affect their properties. The development of evaluation technology that makes
the invisible visible and the unknown known is a source of new knowledge.
The Sanyo Special Steel Group utilizes cutting-edge evaluation and analysis
technologies as the basis for reliability in product and technology development.

Research and development activities of the Sanyo Special Steel Group are promoted mainly by the "Research and Development
Center," and the total amount of research and development expenses in FY2021 was 2,219 million yen. With the creation of "ecoprocesses" and "eco-products" toward carbon neutrality in 2050 in mind, we are pursuing the deepening of technologies to meet the needs
for even higher reliability, especially in the fields of EVs, wind power generation, railroads, and hydrogen society, which are expected to
grow globally. Furthermore, we are focusing on the early realization of synergies through collaboration among Group companies.
The status of research and development activities by segment is shown in the table below.

Steel
Products

Metal
Powders
Formed andFabricatedMaterials

Research purposes

Major issues and results• Development of high-performance products to be launchedin the fields of automobiles, railroads, environment andenergy, etc., which are expected to growth• Development of "ECOMAX ®5," a new lineup of the"ECOMAX ® series" of high-strength case-hardened
steels• Strengthening of quality and cost competitiveness throughimprovement of manufacturing processes of core products
such as bearing steel, structural steel, stainless steel, andtool steel• Development of "QTP-HARMOTEX®," a pre-hardened
die steel that contributes to consistent die life andproduct quality in the harsh operating environment of hothammer forging• Development of new products, mainly information
recording and processing products and powders for 3D
printing, which are expected to grow in the future• Expansion of the lineup of magnetic flat powders used
to eliminate unwanted noise generated by electronic
devices such as PCs and cell phones and to improve theinformation reading performance of IC cards, etc.

• Strengthening of technology and cost competitiveness ofthe formed and fabricated materials business• Establishment of rapid design technology for optimal molds
and ring rolling analysis technology, and development of
manufacturing technology for manpower saving

Contribution to improved productivity
and production quality anddie cost reduction■ Achievement of 64HRC hardness comparable to JIS SKH51(high-speed steel) and more than twice as much toughness
under the equivalent heat treatment conditions as generalpurpose cold tool steel (die steel).

• Establishment of die forged parts manufacturing
technology using CAE analysis technology, quality
improvement of ring rolling products, and development of
numerical control equipment for turning

R&D expenses(FY2021)

1,679 million yen

BetterPowder metallurgy
high-speed steel

SKH51

QCM64HARMOTEX®
8% Cr-based

SKD11■ Improved wear resistance, fatigue life, and crack resistance ofpunches, press dies, dies, and rolls for cold-working, etc., used
under severe conditions

Toughness(fatigue strength, crack resistance)■ Supports ultra-high-tensile processing and near-net-shapeformation<Comparison of microstructures>

BetterCoarse carbide

Suppression of the crystallization of coarse carbides,
which can reduce toughness and fatigue strength, withsuperior microstructure control technology

QCM64-HARMOTEX®

Die steel that contributes to consistent die life andproduct quality in harsh operating environments

Research and Development Activities

Segment

High hardness comparable to high-speed steel andtoughness far superior to high-speed steel

Hardnessthat optimizes
product performance

All technologies are based on principles. Now more than ever before, it isessential to pursue the principles by strengthening basic research, given today's
demands for ever more advanced product characteristics and mass-production
technology. The Sanyo Special Steel Group is gazing down at the microscopic
level to elucidate various mechanisms while keeping an eye on the performanceof the final product.

®

(strength, wear resistance)

Basic research

New productand technology
development「QCM64-HARMOTEX 」

JIS SKD11「QTP-HARMOTEX 」

Significant improvement of high temperature strengthand toughness compared to JIS SKT4

Application to hot hammer forging
dies to reduce deformation, wear,
and cracking■ AContribution to longer die life and reduced forming defects inforged parts■ Reduced CO2 emissions by curbing energy consumption formaterials and operations■ Supports the need to achieve carbon neutrality®

(wear resistance)

Basic research: Pursuing principles with an eye toward productcharacteristics

Cold tool steel with high hardness equivalent tohigh-speed steel (64HRC class) and high toughness

High temperature strength GOOD

The Sanyo Special Steel Group is promoting further expansion of its technological superiority by strengthening its research anddevelopment and quality competitiveness in order to further enhance its corporate value in the global special steel market. To this end, weare clarifying the functions of product development, process development, and basic research, and strengthening the medium- to long-term
research and development planning function to ensure the rapid and continuous creation of highly reliable products and new technologies
with a view to global expansion.

QTP-HARMOTEX®
High temperature strength andtoughness surpassing JIS SKT4SKT4Contribution to longer die life
and improved quality of
manufactured parts

Toughness

GOOD(crack resistance)• High strengthening of workpieces to reduce size and weight of parts• Formation into a shape close to that of the final product to meetthe demand for omission/simplification of post-processing.

501 million yen

38 million yen– What is hot hammer forging? –• A method that is widely used in the manufacture of parts with complex
shapes, such as undercarriage parts for automobiles and construction
machinery• The recent changes in needs have made the environment in which dies areused more severe, causing deformation and wear to progress more quickly

HammerDie
Material

Hot hammer forging machine23Realization of Sustainable
Procurement
The Sanyo Special Steel Group ensures compliance with laws, regulations, and social norms in accordance with its Procurement
Policy, conducts fair and equitable transactions with a wide open door policy both in Japan and overseas, and promotes environmentallyfriendly procurement activities with its suppliers. In recent years, corporate social responsibility requires companies to contribute tosocial sustainability in a variety of ways. In our procurement activities, we confirm the principles of "sustainable procurement," including
accountability, transparency, respect for human rights, and ethical behavior, for the raw materials and services we procure, and reflect
them in our procurement decision-making. We also strive to maintain and improve mutual understanding and trust relationships with our
suppliers, aiming for mutual development as a business partner and are working to realize "sustainable procurement" that contributes to thesustainability of our supplier's business operations through strengthened partnerships.

Procurement of ferroalloys with consideration for conflict minerals
Conflict minerals refer to four minerals – tin, tantalum, tungsten, and gold – mined in the Democratic Republic of Congo and neighboring
countries in Central Africa (DRC countries), and are referred to by the acronym 3TG. There are concerns that some of the profits from thetrade of these 3TGs are used to finance armed groups, thus contributing to human rights violations and conflict. We purchase tantalum andtungsten needed for special steel production and have confirmed through our suppliers that those purchases are "DRC conflict-free" (not asource of funding for armed groups). In addition, we respond to inquiries from customers whether our products are "conflict-free" by using
the "Conflict Minerals Reporting Template" to declare so.

Procurement Policy
In our procurement activities, we, Sanyo Special Steel, comply with relevant laws and regulations, conduct an open-door
policy across the board both domestically and internationally, conduct fair and equitable transactions, and thereby strive to build
partnerships with our suppliers. We also promote environmentally friendly procurement activities.

1. Compliance with laws, regulations, and social norms
We comply with all relevant laws, regulations, and social norms, in good faith, and thoroughly manage information obtained in
the course of business transactions.
In addition, we ensure not to have any relationship with anti-social forces that threaten the order and security of civil society.

2. Fair and equitable transactions

DRC countries(nine countries)

Tin
Tantalum
TungstenGold

We conduct an open-door policy across the board both domestically and internationally, to provide all our suppliers
opportunities to participate, and conduct transactions based on economic rationality.

3. Partnership building
We conduct transactions with all of our suppliers on an equal and fair basis, strive to maintain and improve mutual
understanding and trust relationships, and aim for mutual development as business partners.

4. Promotion of environmentally friendly procurement activities
In collaboration with our suppliers, we build a system to avoid purchasing raw materials, equipment, and various othermaterials containing hazardous chemicals.

Strengthening Partnerships
Supplier award system

Responsible Procurement
Initiatives to build a stable procurement structure
Sanyo Special Steel factories are normally in production 24
hours a day. Therefore, with the cooperation of our suppliers, we
receive shipments of iron and steel scrap, our main raw material,on a 24-hour basis. We also procure the required quantities
of ferroalloys and secondary materials, etc., when needed. In
anticipation of risks such as supply disruptions due to disasters,
etc., we strive to understand the production status, production
locations, and delivery routes, etc., of our major procurement items
by, for example, visiting the factories of our suppliers. We havealso established a system that enables us to sustain production
activities even in the event of an emergency by sharing information
on procurement items with our suppliers on a daily basis, promptly
securing substitute items in the event of an emergency, andmaintaining an appropriate amount of stock on our premises.

Sanyo Special Steel believes that building good business relationships with its suppliers is essential for sustainable procurement andvalues its partnerships with them. As part of this effort, we have established a supplier award system. Under the supplier award system,
we comprehensively evaluate quality, cost competitiveness, delivery date management, business status of the supplier, environmental
responsiveness, service provided, and other factors during transactions carried out with us over a fixed time period in the areas of raw
materials, various other materials, maintenance, and outsourcing, select suppliers who have attained outstanding achievements, andpresent them with an award. In FY2022, six companies were awarded for their outstanding achievements.

Declaration of Partnership Building
Sanyo Special Steel has announced its "Declaration of Partnership Building," which aims to increase added value throughout the supply
chain by promoting cooperation, co-existence, and co-prosperity with our suppliers in the supply chain.
We will continue to strengthen partnerships with our suppliers and aim
for mutual development as business partners by preventing small andmedium-sized enterprises (SMEs) and small businesses from bearing
burdens caused by unfair trade conditions due to the impact of COVID-19
infection and working to promote new collaborations such as initiatives toincrease added value throughout the supply chain and open innovation
business scales, groups and borders, and others.

24Enhancement of Corporate
GovernanceTransition to a company with an Audit & Supervisory Committee

Based on its corporate philosophy "Confidence-based Management," Sanyo Special Steel aims to earn the confidence of society bycontributing to the realization of an affluent and culturally rich society and fulfilling our responsibilities as a member of society through the"manufacture of high-quality special steel." In addition, we aim to earn the confidence of our customers by rapidly and accurately identifying
their needs and appropriately providing them with high-quality special steel products. We also strive to communicate with all stakeholders
and build confidence among people through autonomous actions in accordance with social norms. We recognize that these are therequirements and mission for the survival of the company.
In order to achieve this, we will strive to strengthen corporate governance by establishing a corporate governance structure suited to theGroup's business in order to improve the efficiency, soundness, transparency, etc., of our management.

Corporate Governance Structure

General meeting of shareholders
Nomination &Compensation
Advisory Committee

Initiatives to Improve the Functioning of the Board of Directors
In order to improve the functions of the Board of Directors, Sanyo Special Steel conducts analyses and evaluations of the effectivenessof the Board of Directors. Specifically, we conduct a questionnaire survey members of the Board of directors on general matters related to
the Board of Directors, such as its composition, management methods, the state of deliberations, and the state of cooperation with external
directors, etc., and the results of the analysis are evaluated by the Board of Directors.
In FY2021, based on the results of the effectiveness evaluation for FY2020, we set the following tasks and took measures.

Board of Directors
Audit & Supervisory Committee

11 directors,
including 4 independent
external directors

3 directors who are Audit &Supervisory Committee members,
including 2 independent external directors

Basic Policy on
Internal Control Systems<FY2021 tasks and measures>

Accounting auditor

Representative Director
and President
4 independent external directors(Autonomous internal control)<Business execution>(*3)

Representative Director
and President

Corporate Policy Committee

Company-wide committees
and meetings
Risk Management Committee

Rewards and Sanctions Committee
Executive officers
Business departments

Internal Control &Audit Department(1) Further enhancement of discussions from a company-wide, medium- to long-term perspective
In April 2021, we announced our medium-term management plan (2025 Medium-term Plan), which covers the period from FY2021 to FY2025.
We reported on its progress (semiannually) at the Board of Directors meeting held on December 23, 2021, and discussions were held from a
medium- to long-term perspective, including follow-up and revision of the plan.
(2) Enhancement of ESG-oriented measures
E : Publication of the 2050 Carbon Neutral Declaration and 2030 Roadmap, endorsement of the TCFD disclosure recommendations anddisclosure based on them, etc.
S : Shift to a mandatory retirement age of 65 ahead of other companies in the industry, declaration of corporate health management, etc.
G : Review of performance-linked compensation system, compliance with the revised corporate governance code, preparation for transition to a
Company with an Audit & Supervisory Committee, etc.
(3) Enhancement of opportunities for interaction between external directors, internal directors, and Audit & Supervisory Board
members (continued from FY2020)(i) April 30: Regular meeting between the Representative Director, Audit & Supervisory Board members, and external directors(ii) June 25: Plant tour and meeting for exchange of opinions for external directors and Audit & Supervisory Board members(iii) August 31: Meeting for exchange of opinions between external directors and Audit & Supervisory Board members(iv) December 23: Meeting for exchange of opinions between external directors and internal directors
Based on the results of the evaluation of the effectiveness for FY2021, which took into account the above measures, we concluded that the
Sanyo Special Steel's Board of Directors is functioning effectively.
In FY2022, based on the results of the questionnaire survey conducted once again, we will focus on the following tasks.

<Tasks for FY2022>(1) Enhancement of opportunities for officer training(2) Further enhancement of discussions from a company-wide, medium- to long-term perspective (continued from FY2021)(3) Enhancement of opportunities for interaction between external directors and internal directors (continued from FY2020)(4) Promotion of simplified and paperless board meeting materials(internal audit)(*2)

Sanyo Special Steel has transitioned to a company with an Audit & Supervisory Committee upon approval at the 110th ordinary general
meeting of shareholders held on June 24, 2022.
The transition to the new system will speed up the decision-making process and enhance discussions at the Board of Directors meetings
on management policies, etc. The supervisory function of the directors' management has also been strengthened by the fact that directors
who are Audit & Supervisory Committee members have voting rights at the Board of Directors meetings and the Audit & Supervisory
Committee has the authority to express opinions at the general meeting of shareholders regarding the appointment of directors (excluding
directors who are Audit & Supervisory Committee members), their compensation, and other matters.
In addition, we stipulated in the Articles of Incorporation that all or part of the decisions on the execution of important business operations(excluding matters stipulated in each item of Article 399-13, paragraph (5) of the Companies Act) may be delegated to the directors, for the
purpose of focusing deliberations at the Board of Directors to enhance discussions on management policy formulation and other matters.
Through these measures, we strive to speed up the decision-making process by delegating executive authority to the executive officers andbelow, who are in charge of business operations in accordance with the prescribed rules for decision-making authority.

(*4)

Subsidiaries/affiliates(*1)(*1) Audits of subsidiaries and affiliates are conducted through audits of consolidated financial statements.
(*2) Supervisory departments are designated for each subsidiary and affiliate.
(*3) Other than the above, committees and meetings include the Carbon Neutral (CN) Promotion Committee and the Safety and Health Committee, etc.
In order to prevent the occurrence or recurrence of any breach of compliance, we have also established a whistle-blowing system "compliance help desk."(*4) Directors who are Audit & Supervisory Committee members investigate the status of operations and assets of subsidiaries as necessary.
(*5) In the event of an important transaction that would cause a conflict of interest between the parent company and minority shareholders, a "Supervisory
Committee for Conflict of Interests" consisting of all independent external directors will be established on a case-by-case basis to deliberate and review
the situation, and the Board of Directors will make a decision based on the results.

Guidelines for Minority Shareholders Protection Policy in Transactions with Controlling Shareholders
The Board of Directors has resolved that transactions with the parent company's group shall be based on appropriate terms andconditions similar to those generally applicable to transactions with other companies, and confirmed that for transactions required underinternal regulations, the terms and conditions of such transactions shall not differ significantly from those normally applicable to transactions
with third parties, and that the implementation of such transactions shall contribute to our business and not be detrimental to our interests.
With respect to important transactions or actions that may cause conflicts of interest between the parent company and minority
shareholders, the Board of Directors establishes a "Supervisory Committee for Conflict of Interests" consisting of all independent external
directors to deliberate and examine the appropriateness of the subject transaction, etc., on a case-by-case basis, and the Board of Directors
makes a decision based on the results.

25

Internal Control Systems
The Board of Directors has resolved the "Basic Policy on Internal Control Systems," and the Internal Control & Audit Department, whichis in charge of internal control planning and internal auditing, and functional departments in charge of risk management in each area havebeen established to form an operational structure for the internal control systems of the Sanyo Special Steel Group.
In addition, risk management officers are assigned to each department and Group company to be in charge of planning and promoting
autonomous internal control activities in each department and Group company.
Under this operational structure, we operate internal control systems as described below.

Internal control plan

Sanyo Special Steel formulates an internal control plan for
the entire Group every year, taking into account revisions tolaws and regulations, changes in the business environment, andother factors. This plan includes basic policies, functional plans
for safety, environment, disaster prevention, and quality, etc.;
internal audit plans; and training plans. Based on the above, eachdepartment and Group company formulates its own plan.

2

Autonomous internal control activities

In accordance with the internal control plan, each department
and Group company of Sanyo Special Steel implements its own
internal control activities autonomously based on the natureof their business operations and inherent risks. Specifically,
they develop and educate employees on operational rules andmanuals, etc., conduct self-inspections, and improve operations
based on the results of these inspections.
In the event of an accident, disaster, or situation that may
violate the law, the department or Group company concerned
immediately reports the matter to the Internal Control & Audit
Department and takes corrective measures, including measures
to prevent recurrence, in cooperation with relevant departments.
In addition, the Internal Control & Audit Department collects andshares information on these cases within the Group, while eachdepartment and Group company conducts inspections to checkfor similar risks.

3Internal audits, etc.

In internal audits, the Internal Control & Audit Department andeach functional department check the status of internal controls
using internal control checklists and other written documents, andmonitor each department and Group company.
As a measure to complement internal controls, we haveestablished and operate a whistle-blowing help desk available
to officers, employees, temporary employees, and supplieremployees of Sanyo Special Steel and its Group companies,
as well as their families. In addition, Sanyo Special Steel andits domestic Group companies regularly conduct questionnaire
surveys on employee awareness regarding internal control toconfirm awareness of compliance and internal control activities,
and to educate and enlighten employees through the questions.

4

Assessments and improvements

The Internal Control & Audit Department and the director in
charge of the operations of each functional department report theoperational status of the internal control systems to the quarterly
Risk Management Committee meeting and the Board of Directors,
and share this information with each department and Group
company at the quarterly Risk Management Officers Meeting.
In addition, the director in charge of the Internal Control & Audit
Department compiles the assessment results of the effectivenessof the internal control systems based on the implementation status
of internal control activities and the results of internal audits, etc.,
and then reports them to the Risk Management Committee andthe Board of Directors.
Based on the assessment results, we formulate improvement
measures that contribute to enhancing the effectiveness of theinternal control systems and reflect them in the internal control
plan for the next fiscal year.

5

Education and awareness raising

Implementation of internal control education anddissemination activities

We provide education on internal control for officers andemployees of Sanyo Special Steel and its Group companies by
setting up courses on internal control in grade-based training
programs, etc. We are also actively working to raise awareness ofthe concept of internal control and the improvement of workplaceculture, etc., through dialogues between the Internal Control &Audit Department and each department/Group company.

6

Cooperation with external directors,
Audit & Supervisory Committee, and accounting auditor

External directors and Audit & Supervisory Committee
members are also members of the Risk Management Committee,
which deliberates on internal control plans, reports on theoperational status, and exchanges opinions. In addition, theRepresentative Director meets regularly with external directors
and Audit & Supervisory Committee members to ensure
appropriate and smooth exchange of information. The Internal
Control & Audit Department shares information and works closelywith Audit & Supervisory Committee members by holding monthly
liaison meetings with them to exchange opinions, etc.
We regularly report and exchange opinions with the accounting
auditor on the operational status of the Risk Management
Committee and the assessment results of internal controls overfinancial reporting.

Under the corporate philosophy of "Confidence-based
Management," Sanyo Special Steel ensures compliance among
officers and employees through regular training while top-level
executives themselves send out messages.
Specifically, we conduct grade-based internal control training,
hold regular compliance lectures and e-learning courses
on compliance and harassment, etc., within the Group, andtheme-based training on antitrust law, security export control,
mental health, and labor management, etc. In addition, eachdepartment and affiliate conducts internal control training thatsuits its respective needs and disseminates information on laws,
regulations, rules, and penal provisions necessary for businessexecution.

Message from top-level executives

Compliance help desk (whistle-blowing system)

Information provider
Officers, employees, temporary employees,
and supplier employees of the Sanyo Special Steel Group,and their family members, etc.

Survey/response

1

Sanyo Special Steel has established the "Guidelines for Corporate Behavior" that defines the code of conduct we should follow as acorporation and the "Code of Conduct" as guidance on conduct to be observed in the course of business activities based on the "Guidelines
for Corporate Behavior." We are working to ensure that all officers and employees are familiar with these standards.
In addition, the "Risk Management Committee," chaired by the President, meets quarterly to regularly report on the status of formulationand implementation of the internal control plan and matters related to risk management, including compliance with laws, regulations, andcompany rules, occupational safety, human rights violations such as sexual harassment and power harassment, and ESG risks such as theenvironment, disaster prevention, quality, financial reporting, and information security. The contents of the Risk Management Committee
meetings are reported at the "Risk Management Officers Meeting," which is attended by the risk management officers of each department
and Group company, to be disseminated to each department and Group company, thus ensuring a structure that enables information
sharing.
In order to review the status of compliance with laws, regulations, and company rules, etc., we use internal control checklists for eachdepartment and Group company, conduct internal audits, have established a whistle-blowing and consultation system, and periodicallyconduct questionnaire surveys of all employees.
By continuing these activities, we will strive to cultivate higher ethical standards. We will also maintain and improve the soundness ofmanagement not only of Sanyo Special Steel, but also of the entire Group, and practice our corporate mission to "make a social contribution
through business" by promoting business activities rooted in high ethical standards.

Provision

Provision(named or anonymous)

Compliancehelp desk(named or anonymous)

Contact

Compliancehelp desk(Internal contact)(External contact)

Sanyo Special Steel,Head Office

External specialized
agencies, etc.

* No one will be disadvantaged as a result of consultation or reporting.
Secrecy is maintained in strictest confidence.

Survey/response

Compliance and Risk Management Systems

In order to prevent the occurrence and recurrence ofincidents or actions that are or may have been in violation oflaws, regulations, social norms, or company rules, etc., we haveestablished a compliance help desk as an whistle-blowing andconsultation system that also takes into account the Whistleblower
Protection Act revised in June 2022. This help desk can be usedby anyone in the Sanyo Special Steel Group, including officers,
employees, temporary employees, supplier employees (including
those who were either of these within one year prior to the dateof the report or consultation), and their family members, etc. For
those with a problem that is difficult to solve in the workplace ora concern that you cannot talk to anyone about, the help desk
is available for consultation so that they do not need to takeit all on themselves. Anonymous consultation and reporting is
also possible, and no one will be disadvantaged as a resultof consultation or reporting. In addition to our help desk, theCompliance Consultation Office of our parent company, NSC, canalso be used. It is our policy to take prompt and appropriate actionin the event of consultation or reporting.
The compliance help desk also has a role in monitoring thestatus of internal control activities.

26

Officers
Ratio of independent external directors

Number of female directors(4 out of 11 directors are independent external directors)(1 out of 11 directors is female)

36.4 %

Representative Director
and President

Director, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

Director, Member of the Board,
Managing Executive Officer

MIYAMOTO Katsuhiro

TAKAHASHI Kozo

OI Shigehiro

OMAE Kozo

YANAGIMOTO Katsu

Independent External Director,
Member of the Board

Independent External Director,
Member of the Board

Director, Member of the Board

USUKI Masaharu

FUJIWARA KayoSONODA Hiroto

Director, Member of the Board,andSenior Audit & Supervisory
Committee Member

NAGANO Kazuhiko

Independent External Director,
Member of the Board, andAudit & Supervisory Committee
MemberYOGI Hiroshi

Independent External Director,
Member of the Board, andAudit & Supervisory Committee
Member

TOIDE Iwao

1

Policies and Procedures for the Appointment and Removal of Executives andNomination of Director Candidates
It is our policy that the Board of Directors determines the appointment of executives based on the experience, knowledge, and expertiseof each individual without distinction as to gender, age, nationality, etc., so as to create an optimal structure in which each person canappropriately fulfill his/her role and responsibilities and the management issues of our Group's businesses can be accurately addressed.
In addition to the above conditions, our policy is to make decisions on the nomination of director candidates by taking into consideration
the overall size of the Board of Directors and Audit & Supervisory Committee as a whole and the balance of the candidates that make up
the Board and the balance among the candidates.
It is our policy that the Board of Directors makes a comprehensive judgment before deciding on the removal of executives in the eventof any irregularity or serious violation of laws, regulations, or the Articles of Incorporation in the execution of their duties, or in the event thatthe person is deemed unable to fulfill his/her roles and responsibilities.
Procedures for the appointment and removal of executives and the nomination of director candidates are to be resolved by the Boardof Directors after deliberations at the "Nomination & Compensation Advisory Committee" consisting of the Representative Director andPresident and independent external directors. Prior consent of the Audit & Supervisory Committee is to be obtained for the nomination ofcandidates for directors who are the Audit & Supervisory Committee members.
In addition, the dismissal of a director is determined after deliberations at the "Nomination & Compensation Advisory Committee"
and a resolution of the Board of Directors, followed by submission of a proposal for dismissal of the director to the general meeting ofshareholders. The dismissal is finalized by the resolution of the said proposal.

Composition of the Board of Directors and Expertise and Experience of Its Members

Policies and Procedures for Determining Directors' Compensation

In order to ensure flexible decision-making in response to changes in the business environment and the development of an effective
corporate governance system, Sanyo Special Steel has set the size of the Board of Directors is appropriate to the Group's business andmanagement issues and ensures that the Board has a well-balanced and diverse mix of members in terms of experience, knowledge,
expertise, and gender, etc.

(i) Policy details

Expertise and experience

Business execution
Non-executive

Director who is an
Audit & Supervisory
Committee member(excluding directors who are Audit &Supervisory Committee members)
Director

Full name

Corporate
management

Manufacturing,
engineering,
research, anddevelopment

Sales

Finance andaccounting

Personnel
and labor
relationsInternational
experience

Legal

ESG

Knowledgeof otherindustries

●

●

●

●

●

●

MIYAMOTO Katsuhiro*

●

●

●

TAKAHASHI Kozo

●

●

●

OI Shigehiro●

OMAE Kozo●

YANAGIMOTO Katsu●

USUKI Masaharu*

Independent

FUJIWARA Kayo*

Independent

External

●

●

●
●

●

●

●

●
●

SONODA Hiroto●●

NAGANO Kazuhiko●●

YOGI Hiroshi*

Independent

TOIDE Iwao*

Independent

●
●
●
●

External

External

●

●

●

●

External

●

●

●

●

●

●

●

●

●

●

(ii) Method of determining policy

●

●

●
●

Directors (excluding those who are Audit & Supervisory Committee members)
The base amount is determined by position, taking into consideration the required abilities and responsibilities as well as the content
of the duties of each position, whether full-time or part-time.
For business execution directors, the total amount of compensation is performance-linked so as to provide incentives for thesustainable growth of the Group and the improvement of corporate value, with the base amount varying within a certain range
according to the consolidated performance of Sanyo Special Steel, and the amount of monthly compensation for each director isdetermined within the upper limit approved at the general meeting of shareholders.
For non-executive directors, the total amount of compensation is fixed in consideration of their duties, and the amount of monthly
compensation for each director is determined within the upper limit approved at the general meeting of shareholders.
Directors who are Audit & Supervisory Committee members
The amount of monthly compensation for each director who is an Audit & Supervisory Committee member is determined within theupper limit approved at the general meeting of shareholders, taking into consideration his/her position and the content of his/her duties
of each position, whether full-time or part-time.
(Performance-linked compensation)
As indices for performance-linked compensation, Sanyo Special Steel uses "consolidated ordinary income" from the perspectiveof short-term and medium- to long-term performance incentives (taking into consideration earnings targets in the mediumterm management plan, etc.) and "return on equity (ROE)" from the perspective of contribution to shareholders. The Company's
performance-linked compensation is calculated by multiplying the base amount determined for each position by a variable rate
determined based on the performance of these indices. This variable rate is varied within a range of ±20% to reflect almost equally thethree elements of short-term performance incentives, medium- to long-term performance incentives and shareholder contribution.

●* MIYAMOTO Katsuhiro, USUKI Masaharu, FUJIWARA Kayo, YOGI Hiroshi, and TOIDE Iwao are members of the "Nomination & Compensation Advisory Committee,"a non-statutory advisory body of Sanyo Special Steel.

For directors (excluding those who are Audit & Supervisory Committee members), the policy is determined by a resolution of theBoard of Directors after discussions at the "Nomination & Compensation Advisory Committee" consisting of the Representative Director
and President and independent external directors, and for directors who are Audit & Supervisory Committee members, the policy isdetermined through discussions at the Audit & Supervisory Committee.

(iii) Procedures for determining the amount of compensation
The specific amount of compensation for each director (excluding a director who is an Audit & Supervisory Committee member) is to be
determined by a resolution of the Board of Directors after discussions at the "Nomination & Compensation Advisory Committee" consistingof the Representative Director and President and independent external directors. The specific amount of compensation for each director
who is an Audit & Supervisory Committee member is to be determined through discussions at the Audit & Supervisory Committee.

27Key Financial Data
FY2012(101st period)

FY2013(102nd period)

FY2014(103rd period)

FY2015(104th period)

FY2016(105th period)

FY2017(106th period)

FY2018(107th period)

FY2019(108th period)

FY2020(109th period)

FY2021(110th period)

Business results
Net sales(Millions of yen)

138,306

161,587

171,495

149,148

138,680

157,485

185,818

262,452

210,721363,278

Operating income(Millions of yen)

1,516

6,883

9,169

12,188

11,685

10,96910,123-1,417-5,493

21,416

Ordinary income(Millions of yen)

1,670

6,749

9,735

11,54011,736

10,6599,437-1,521-4,762

21,664

Profit attributable to owners of
the parent(Millions of yen)

509

4,066

6,547

7,416

7,784

7,034

7,721

-3,717-6,87015,267

Total assets(Millions of yen)

198,771

203,522202,243

179,898

183,444

209,146374,246

327,963319,360

377,911

Net assets(Millions of yen)

97,151

102,905

113,644

113,140

123,143

128,959

200,200

182,202179,887

198,845

Interest-bearing debt (net)*2(Billions of yen)

51.6

47.8

33.2

14.3

12.7

28.4

69.0

48.7

46.9

58.7

Equity ratio

(%)

48.6

50.2

55.8

62.4

66.7

61.0

52.3

54.4

55.9

52.1

D/E ratio (net)(Times)

0.53

0.46

0.29

0.13

0.10

0.22

0.34

0.27

0.26

0.30

Financial conditions

ROS/ROE
ROS

(%)

1.2

4.2

5.7

7.7

8.5

6.8

5.1

-0.6

-2.3

6.0

ROE

(%)

0.5

4.1

6.1

6.6

6.6

5.6

4.8

-2.0

-3.9

8.1

Per share information
Net assets per share*1(Yen)

598.99633.47699.51

696.69759.36

3,960.99

3,480.62

3,273.07

3,273.84

3,615.39

Net income per share*1

(Yen)

3.16

25.21

40.60

46.00

48.29

218.34237.75-67.14-126.07280.19Dividend per share*1

(Yen)

2.00

5.00

10.00

12.00

12.50

31.70

69.00

15.50

－

90.00

Capital investment/research and development
Capital expenditures(Millions of yen)

14,716

4,629

7,176

9,908

9,795

8,119

10,61827,553

14,446

11,720Depreciation(Millions of yen)

11,581

10,965

9,826

9,343

9,098

9,047

9,338

15,033

14,187

15,903

Research and development expenses(Millions of yen)

1,424

1,388

1,383

1,596

1,608

1,716

1,773

2,475

2,110

2,219

Cash flows from operating activities(Millions of yen)

23,793

9,152

20,69828,77015,090-5,566

10,792

39,42522,313

7,086

Cash flows from investing activities(Millions of yen)

-20,534-4,951-5,873-8,510-11,141-8,354-69,046-12,463-19,412-13,298

Cash flows from financing activities(Millions of yen)

2,503

-5,352-17,426-18,807-10,775

14,70565,929-21,093-5,473

2,286

Sales volume(Thousand tons)

905

1,041

1,054

988

1,013

1,069

1,171

1,615

1,367

1,995

Number of Employees(Persons)

2,829

2,775

2,706

2,625

2,598

2,666

6,835

6,726

6,441

6,402

Cash flows

Other*1: In October 2017, a reverse stock split of 5 shares into 1 share was implemented.
*2: Interest-bearing debt (net) is the balance of interest-bearing debt minus cash and cash equivalents and deposits to affiliates.

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