Response to Climate Change(Disclosures in Line with the TCFD Recommendations)

History of Sakai Chemical’s initiatives to combat climate change throughits products and businesses
Period
1970s

1990s

Initiatives

Subject

Started operating a DeNOx catalyst factory

2010s

2020s

1

Started operating an electronic material factory

Contributed to energy conservation by enhancing the efficiency ofelectronic parts

Started operating a cosmetic material factory

Contributes to protecting human skin from increasing UV rays

Formulated a Basic Environmental Policy

Obtained ISO 14001 certification for the Otsurugi Factory

Switched from crude oil to LNG

Made the fuel switch at the Sakai Manufacturing Site

Switched from crude oil to LNG

Made the fuel switch at the Onahama Manufacturing Site

Developed substitute products for microplastic beads(MPB)

Developed the SciqasTM series (spherical silica), LPZINC-S(large-particle spherical zinc oxide), CalmaruTM (spherical calciumcarbonate), and BarimaruTM (spherical barium sulfate)

Formulated a Basic Procurement Policy
Started using carbon neutral LNG
Introduced solar power generation

Scope: Sakai Chemical (2020) → Scheduled to apply to all Sakai
Chemical Group companies from 2023
At the Matsubara Factory in 2021 and at the Otsurugi Factory in 2023
At the Otsurugi Factory in 2023

GovernanceIn response to environmental changes that can pose risks to our corporate management, including climate change, we assess the levels of risks
and opportunities, discuss appropriate countermeasures, and decide to implement such countermeasures under the oversight of the Board ofDirectors.
To mitigate impacts on environmental issues, including climate change, and contribute to solutions to social issues, the Sustainability
Committee, chaired by the Representative Director, meets at least twice a year to deliberate on targets and strategies related to climate change
while taking into consideration our business strategies to manage the progress of our initiatives.

2Strategy (short term: shorter than one year; medium term: one to five years; long term: five to 30 years)

scenario: Low-carbon, decarbonization, and carbon-recycling technologies will be used widely, and demand for❶ 2°C
sustainable products will grow.
TypeTransitionRisks

BusinessOpportunities

Environmental Changes

Expected Situations

TermLength

CO2 emissionregulations

Growing need for fuel decarbonization
Cost increase due to a switch tolow-carbon emissions materials andprocesses

Mediumterm

Switch to low-carbon
emissions products

Decline in demand for fossil fuel andpetrochemical products (such as plasticproducts)

Short
term

Changes in customer
behavior

Increase in demand for low-carbon
emissions products within the supply chain

Long
term

Increased demandfor products that
help mitigate climatechangeGrowing demand for carbon recycling,carbon-free fuel, carbon-absorbent
products, and products related to power
generation and storageLong
term

Development of
next-generation
technologies

Electrification of mobility
Use of hydrogen and ammonia as energy
sources

Mediumterm

18 2023 Environmental & Social ReportType

Expected Situations

Greater severity ofextreme weather
eventsHeavier wind and flood damage to our
production bases
Droughts and health damage in thesummer, which can lead to suspension ofproduction activities, delayed or disrupted
logistics, and consequently massive
damage to corporate activities in general

Rise in averagetemperatures

Increase in the cost of countermeasuresagainst heatstroke and air-conditioning
Decline in labor productivity in the event ofa lack of appropriate countermeasures

Growing demand for
products that help
adapt to climatechangeIncreased demand for healthcare products
Increased demand for heat-insulating andheat-barrier products
Wider spread of remote work
Increased demand for antibacterial andantiviral materials

Diversification of raw
material suppliersGreater opportunity of replacement
demand due to BCP measures

Major Countermeasures• Using LNG combined with carbon credits• Further enhancing the efficiency of energy use• Introducing renewable energy more widely• Introducing carbon-recycling technology more
widely• Reconsidering the business portfolio andmanufacturing processes with a view toreducing environmentally harmful emissions
from the manufacturing processes

PhysicalRisks

BusinessOpportunities

3TermLength

Environmental Changes

Contributed to rendering harmless nitrogen oxides, which could
cause photochemical smog and acid rain

Joined the Japan Responsible Care Council
2000s

scenario: Low-carbon, decarbonization, and carbon-recycling technologies will not advance, thereby heightening❷ 4°C
the physical risks of the greater severity of extreme weather events and a rise in average temperatures.

ShorttermLongterm

ShorttermLongterm

Major Countermeasures• Formulating a business continuity plan (BCP)
for each production base in line with thescenario• Considering optimal locations for production
and diversifying raw material suppliers• Enhancing measures to reduce health damage(such as heatstroke)• Introducing unmanned operations byaccelerating robotization and automation• Boosting sales of skincare products, including
sunscreen• Developing heat-insulating and heat-barriermaterials• Boosting sales of antibacterial and antiviralmaterials• Boosting sales of 5G- and 6G-compatibleproducts• Developing materials related to wastewater
and water purification

Risk Management

Sakai Chemical has identified issues of ESG materiality and manages risks through Group-wide materiality management. We recognize responses
to climate change as an extremely important issue from both our stakeholders’ and our own perspectives, and the Sustainability Committee
deliberates on them. We take the initiative in climate-related risk management, which we believe is a fundamental requirement for the existence
and activities of our Group.

4Metrics and Targets

Sakai Chemical has set a long-term
CO2 emissions reduction target with aview to achieving carbon neutrality by
2050. To achieve the target, we use
the CO2 emissions reduction rate as a
KPI and implement short-, mediumand long-term reduction measures,
including promoting energy-saving
activities and introducing renewableenergy sources.
* This CO2 emissions reduction roadmap
is based on the actual and estimatednon-consolidated Scope 1 and 2
emissions of Sakai Chemical Industry.

Vision for Sakai Chemical’s transition to carbon neutrality
We tackle the challenge of achieving carbon neutrality by 2050 by accelerating decarbonization in linewith progress in innovation.
（%）

CO2 emissions versus the FY2013 level as 100 (%)

100

Fuel switch from crude oil to LNG
90

Yield improvement and the promotion of the 3Rs

Establishment of optimal manufacturing processes

80
70
60
5040

• Developing decarbonization products(secondary battery materials, materials forwater electrolyzers, carbon-absorbentmaterials, carbon recycling catalysts, andsynthetic ammonia catalysts)• Enhancing the functions of electronic andenergy materials(small-size, minute-particles [for higher durability]
materials with uniform granularity distribution)■ Solar power generation■ Next-generation energy sources(New technologies using methanation,hydrogen, ammonia, etc.)■ Carbon neutral LNG and non-fossil energy
sources■ Indirect emissions from the use of fossil fueland electricity

30
201002013

2019

2025

2030

2035

2040

2045

2050 (Year)2023 Environmental & Social Report

19