TOKUYAMAREPORT
2023
Fiscal year ended
March 31, 2023
Integrated ReportOUR VALUE CREATION
Tokuyama will create new value in harmony with the environment by supplying products that addresssocial problems.
T o k uya m a a t a G la nc e

MissionTo create a bright future in harmony
with the environment,in collaboration with customers,

Our product lines anddemonstrating prowess
in diverse markets

based on chemistry

Overseas sales
companies, etc.

Other

Recycling

Vision13%

Waste processing

Be a value-creative company thatplaces first priority on R&D and marketing
Cement

Be a company that never stops challenging
new domains while refining
and exploiting its unique strengths

Cement16%

Consolidated
net sales(FY2022)

Be a company with healthy employees
who have healthy families and take pridein their work at their company
Be a company that fosters bonds with people incommunities and societies worldwide

CementChemicals

32%

Chlor-Alkali andVinyl Chloride

ValuesCommitment to customer satisfaction asa profit source

Caustic soda

A broader, loftier perspective
Employees who consistently surpass
their predecessors

PVC resin

Integrity, perseverance,a playful spirit and boldness
1. CMP: chemical mechanical polishing
2. IPA: isopropyl alcohol

Soda ashTokuyama Value
Creation Strategy

Tokuyama Value Creation

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

Key Data (FY2022 Results)
Semiconductor-grade
polycrystalline silicon

Inter-segment eliminations
and corporate-wide expenses

Other
¥

2.0 billion(¥5.3 billion)

CementElectronic &Advanced Materials*(¥3.7billion)

Silica for CMP1

7.0 billion¥
Chemicals¥

High-purity
aluminum nitride

その他の地域

153億円

6.8 billion

Operating Profit(FY2022)¥14.3 billion

Eco BusinessLife Science¥¥

7.3 billion

0 billion

Silicon

Other regions
SilicaHigh-purity IPA2 forelectronics manufacturing

Electronic &Advanced
Materials*

ThermalManagement
Materials

Asia
¥

IC
Chemicals25%

22.5 billion¥

79.2 billion
Net Sales by Region(FY2022)351.7¥
billion¥Fine
ChemicalsLife Science

10%

Eco Business

4%

Soda Ash
and Calcium
Chloride

DentalMaterials andEquipment
MedicalDiagnosis
Systems

351.7billion

Microporous filmJapan

250.0 billion¥

Environment

Ion-exchange
membranes
Plastic window sashes

Photochromic materials foreyeglass lenses

Electronic &Advanced Materials*

1,127

Company-wide(Common)

1,237

Life Science

Number of
Employees
by Segment

1,039(As of March 31, 2023)
Other

OMNICHROMA dental
filling composite resin

1,043

5,909

Eco Business

496

CementChemicals

627

340

Waste gypsum
board recycling*On April 1, 2023, the name was changed to Electronic &Advanced Materials

TOKUYAMA REPORT 2023

1

Contents

Section 1

Tokuyama Value Creation
OUR VALUE CREATION ���������������������������������� 1
Contents/Editorial Policy ��������������������������������� 2
The Path to Value Creation ��������������������������� 4

Section 2

Tokuyama Value Creation Strategy
Message from the President ������������������������ 6
Value Creation Process ���������������������������������12
Tokuyama’s Strengths Supporting
Value Creation �������������������������������������������������������14
Improving Value Creation ����������������������������16
Progress of Medium-Term
Management Plan 2025 ��������������������������������20
Message from the CFO ���������������������������������22

Section 3

Progress of Strategy by Business Segment
Electronic & Advanced Materials ����������24
Life Science �������������������������������������������������������������26
Eco Business ���������������������������������������������������������28
Chemicals �����������������������������������������������������������������30
Cement ������������������������������������������������������������������������32

Section 4

Management for Sustainable Growth

Message from the Executive Officer
in Charge of Sustainability ������������������������� 34
Vision and Materiality ������������������������������������� 36
Materiality KPIs and Results �������������������� 36
Disclosures Based on TCFD
Recommendations ������������������������������������������� 40

Section 5

Compliance ������������������������������������������������������������� 43
Stakeholder Engagement ��������������������������� 43
Dialogue with External Directors ���������� 44
Corporate Governance ��������������������������������� 46
Risk Management ��������������������������������������������� 50

Corporate Data
Financial and
Non-Financial Highlights ������������������������������52
Management Team �������������������������������������������56
Corporate Data �����������������������������������������������������58

2

TOKUYAMA REPORT 2023

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Editorial Policy
The Tokuyama Report is published to communicate the

Period Covered

Company’s management policy and medium- to long-term

FY2022 (April 1, 2022 to March 31, 2023)

strategy to stakeholders in a way that is easily understood.

Some activities and information included relates to FY2021 or earlier or isscheduled for FY2023 or later.

When preparing this report, we conducted interviews with

Report Scope

investors and a survey within the Company about the

Tokuyama Corporation and consolidated subsidiaries (56 companies)

our planning. We hope that this report will enable better• If the reported scope is different for some data in this report, the different scope
will be cited.
• In principle, entities listed as Tokuyama in this report generally refer to Tokuyama
Corporation and the Tokuyama Group.

communication with our stakeholders as well as a deeper

Reference Guidelines

understanding of the Tokuyama Group. This report briefly
outlines information that is highly relevant to the value• The Ministry of Economy, Trade and Industry, Guidance for Integrated
Corporate Disclosure and Company-Investor Dialogues for Collaborative
Value Creation 2.0

creation story. For more detailed IR and/or CSR• IFRS Foundation, Integrated Reporting Framework

FY2022 report. The feedback we received is reflected in

information, please visit the Company’s website.

• Global Reporting Initiative, GRI Sustainability Reporting Standards• Task Force on Climate-related Financial Disclosures (TFCD), Final
Report: Recommendations of the Task Force on Climate-related
Financial Disclosures

Information Framework

Overview of Strategy

Financial

Non-Financial

Tokuyama Report (Integrated Report)
This report includes corporate activities for a wide range of stakeholders,covering both financial and non-financial aspects of Tokuyama at present andfor the future that we aim to achieve.
https://www.tokuyama.co.jp/eng/ir/report/annual_rep.html

CSR Website
Provides more detailed information on
Tokuyama’s CSR activities

https://www.tokuyama.co.jp/eng/csr/

Details and Latest Data

Investors Website
Useful information for shareholders andTokuyama TCFD Report

investors, organized as an IR Library

Outlines initiatives against climate change
based on the TCFD’s four recommendations:
governance, strategy, risk management,
and metrics and targets· Financial summaries· Presentation materials· Annual securities reports· Corporate governance reports, etc.

https://www.tokuyama.co.jp/eng/csr/tcfd_information.html

Sustainability Data Book
Mainly includes data for understanding
today’s Tokuyama based on the perspectivesof responsible care (sustainability)
https://www.tokuyama.co.jp/eng/ir/

https://www.tokuyama.co.jp/eng/csr/report/index.html

Cautionary Note on Forward-Looking Statements

Disclaimer

This report contains forward-looking statements on the Company’s plans,This report is for information only and is not intended as a solicitation. The

strategies,operating performance and other matters. These forward-looking

Company assumes no liability for any losses due to investment decisions madestatements are the Company’s assessments based on information available atby relying on forward-looking statements, numerical targets, or other information

the time of this report’s preparation. Statements in this report are subject tocontained here.

various risks and uncertainties. The Company’s actual activities and/or operating
performance can differ materially from these forward-looking statements as aresult of many factors, including but not limited to changes in economic
conditions, the operating environment, demand trends, and exchange rates.

TOKUYAMA REPORT 2023

3

The Path to Value Creation

Historical
Background• World War I (1914 to 1918)

Social Problems• Japanese economic miracle• World War II (1939 to 1945)

1918–(1955 to 1973)

1960–

1945–

Chemicals: 1918 Nihon Soda Kogyo Co., Ltd. established for the domestic production of soda ash. Subsequently began production o

Cement: 1938 Began production of cement from byproducts of soda ash. Subsequently

Since our founding in 1918, Tokuyama has worked to accumulate technologies and create new products bydeveloping our inorganic chemicals business, while, from the 1970s, we began addressing social problems
by expanding the scope of businesses, mainly in organic and polymer chemistry. We are continuing to refine
the technologies that have become the cornerstone of our growth over more than a century, as we strive tocreate new value that meets the requirements of the coming age.

Net Sales / Operating Profit

Strengthened environmental measures

Net Sales
Changed production process of caustic soda

Operating Profit

Responded to booming demand for cement

Entered the petrochemicals businessand contributed to improving lifestyles
and developing infrastructure

Produced soda ash domestically
Used byproducts from soda ash
production as raw materials for cement

1918

1930

1940

1950

1960

Tokuyama Value Creation

Japanese industrial development
backed by domestically
produced soda ash
Tokuyama was originally established in 1918 as
Nihon Soda Kogyo Co., Ltd. by the founder Katsujiro Iwai,
succeeding two decades later with the domestic productionof soda ash (sodium bicarbonate) used as an ingredient inglassmaking. Tokuyama utilized the byproducts to makethe foray into the cement industry. In 1952, the production
method for caustic soda was converted into an electrolytic
process in response to market changes. The pioneering spiritof the founders, who were instrumental in Japan’s industrial
development, is the cornerstone of what makes Tokuyama what
it is today.

4

TOKUYAMA REPORT 2023

Diversifying businesses to
evolve into a comprehensive
chemical manufacturer
Armed with a solid management base, Tokuyama
made the move to take the advanced technologies we
had developed into new industry sectors. In 1964, Tokuyama
began production of polypropylene oxide, taking the first steps
into the field of petrochemicals. This was followed by entry into awide range of sectors, including film and construction materials
in the 1970s, and electronic materials like polycrystalline silicon
to meet the needs of the burgeoning semiconductor industry
as well as dental materials and eyeglass lens materials for thehealthcare sector in the 1980s.These moves gave Tokuyama astrong foundation upon which to grow into a comprehensive
chemicals manufacturer.

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

1970–(1986 to 1991)

1980–

Corporate Data

• Declining birthrate and aging population in Japan (from 1997)• COVID-19 pandemic• Digital revolution (from 1995) • Bankruptcy of Lehman Brothers (2008) (from 2020)• Adoption of the Sustainable• Kyoto Protocol (1997)• Oil shocks (1973, 1979)• Environmental• Japanese asset price bubble
pollution problems

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Development Goals or SDGs (2015)

1990–

2000–

2020–

2010–

of calcium chloride, caustic soda, PVC resin, and other materials

y changed production process and launched the recycling business in 1999 using cement kilns
Eco Business: 1967 Began production of ion-exchange membranes for use in salt production from concentrated seawater 2013 Established waste gypsum board recycling business, 2021 Converted this operation into a department
Life Science: 1978 Established dental materials and equipment business, 1982/1983 Established businesses for eyeglass lens material, pharmaceutical ingredients, and diagnosis equipment
Electronic & Advanced Materials: 1984/1985 Began production of semiconductor-grade polycrystalline silicon, high-purity IPA for electronics manufacturing, and aluminum nitride
Expanded businesses
globally and created
new businesses

Enhanced competitive powerby integrating businesses andspinning off companies

Pushed ahead withzero-emission policies
and resource recycling

Shifted toward energy conservation

FY2022 Net sales¥351.7 billion

Entered high value-added fields, such as
electronic materials and fine chemicals

FY2022 Operating profit¥14.3 billion

1970

1980

1990

More overseas operations
underpinning our growth as a
global company
The company name was changed to Tokuyama in
1994, marking our expansion overseas with a key focus
on Korea, Singapore, China and other countries throughout Asia.
In Japan, new Group companies were established, consolidated,
and reorganized to further boost the company’s operationalframework. With initiatives for moving toward a moresustainable society, Tokuyama expanded into the recycling
business in 1999 by utilizing cement plants.

2000

2010

2022

Toward a value-creative andsolution-providing company

While the economic system reeled from unprecedentedchanges in 2021—the digital revolution, advancements
in DX, inflation on a global scale, the COVID-19 pandemic—
Tokuyama took the first steps toward achieving a brand-new
vision: transforming from energy-intensive businesses into
becoming a value-creative and solution-providing company.
With both exceptional technical strengths and proven solutions
tailored to customers’ requirements, Tokuyama is aiming tobecome a company that delivers unique value while helping toresolve social issues.

TOKUYAMA REPORT 2023

5

Message from the President

Transforming Tokuyama into a corporategroup that contributes to the realization of asustainable society based on three domains:electronics, healthcare, and the environment
Tokuyama is stepping away from a business structure that is energy intensive to one
that is value creative, contributing to resolving social issues through proprietary
technologies. Looking ahead to 2030, we are now working on transformation in ourbusiness portfolio. President and Executive Officer Hiroshi Yokota will introduce theGroup’s Vision and medium- to long-term growth strategy, or where we are headed
as a Group.

Representative Director, President and Executive Officer

6

TOKUYAMA REPORT 2023

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate DataManagement Approach

Business Always Grows During the Hard Times andDeclines During the Easy Times
When managing Tokuyama, my primary concern is to breakaway from the old, energy-intensive business structure, which
requires large capital investment, and to transform Tokuyama
into a youthful company that can respond quickly to changes
in the business environment and take on the challenge ofcreating new businesses.
Since our founding in 1918, Tokuyama has continued to
grow progressively by supplying basic materials, such as
caustic soda, cement, and PVC resin, to a wide array of
industries. Throughout our history, employees have come tobelieve that the company would be secure for many years aslong as we adhered to traditional business practices.
However, Tokuyama is now facing a historic wave of change.
There is a strong requirement to build a new business portfoliothat is flexible, one that responds to carbon-neutral initiatives
and structural changes in the economy and society. At thesame time, with a declining birthrate and an aging populationin Japan, it is essential for Tokuyama to grow businessglobally, not only in the downward-trending Japanese market,
but in overseas markets with real growth potential.
For Tokuyama to continue to prosper in the future, it isnecessary to restructure. We will consolidate our management
structure to include overseas expansion and new businesses,
moving away from having standalone businesses, being
product and Japan focused, and maintaining the familiar
mindset that employees now have. To successfully restructure
into a value-creative company, it is critical to include diversity
into an organization with employees who are on the same
wavelength. I am adamant that it is important to havediversity—employees with different genders, nationalities,
values, and lifestyles—to improve our productivity andcompetitiveness.

Tokuyama’s Mission and Value Creation

Becoming a Market-Focused Company That Places the Customer
First with Products and Services Based on Market Needs
We have continued to grow by being a product-focusedcompany developing businesses based on our strengths andproprietary technologies. For example, during soda ash
production, our legacy business, quicklime (calcium oxide) is
created as a byproduct. To capitalize on this byproduct, theCompany began producing cement made from quicklime. Byutilizing this strategy, we extended our business domains
based on our own products. Using our own byproducts wasan economic, rational strategy. By integrating our businesses,
we strengthened the competitiveness of the Tokuyama
Factory, our main factory. I believe that our previous businessstrategy—energy-intensive businesses based on coal-fired
power generation—was sound.
Today, however, the structure of industry is changing due
to the digital revolution. Being product focused is becoming
outdated now that responding to ESG (environmental, social,and governance) issues is becoming more and more serious.
How can we create new products and services that will be
demanded by society in the future? How can we create new
business models that contribute to economic development
while minimizing impact on the environment? Right now is thetime when the success or failure of these initiatives will

determine the fate of the company, being market andcustomer focused is vital for developing and supplying
products and services that are based on customer needs.
To transform Tokuyama into a company focused on
customers and markets, I believe we need to review ourmanagement principles, the foundation of our business. In
2021, we redefined our Mission as “To create a bright futurein harmony with the environment, in collaboration with its
customers, based on chemistry.” For realizing this Mission,
we established our Vision, or becoming the company that wewant to be. We also developed and are disseminating the“four values” that all employees must follow. At the same, we
formulated and announced Medium-Term Management Plan
2025, covering the five years from FY2021 to 2025. This plan
clearly presents the vision Tokuyama is aiming for and theinitiatives for achieving our goals.
I believe that through these initiatives we will convey toboth society and employees our management’s determination
for a sweeping change of course. Our founder, Katsujiro Iwai,
had a saying: “Business always grows during the hard times
and declines during the easy times.”* Doing things the sameway does not solve problems. I will continue to lead theTOKUYAMA REPORT 2023

7

Message from the President

transformation of Tokuyama’s business portfolio and ourrestructuring that is a prerequisite for that transformation.

*“It is in trying times that business grows. On the other hand, if a company iscontent with maintaining the status quo, business will begin to decline even if
conditions are favorable.”Business Portfolio Makeover

For the Electronics, Healthcare, and Environment Domains: Enhance
the Share of Consolidated Net Sales from Growth Businesses to 50%
In Medium-Term Management Plan 2025, announced in
February 2021, Tokuyama set three pillars as priority issues:
Transform the business portfolio, Contribute to mitigating
global warming, and Practice socially responsible
management. “Transform the business portfolio” is the mostimportant management theme so that we can forge ahead toachieve sustainable growth.
Tokuyama’s basic strategy for the future is to focus on
creating new businesses that help resolve social issues rather
than those business that are based on conventional energyintensive materials. Our new strategic targets are threebusiness domains: electronics, healthcare, and theenvironment. While generating sustainable cash flow in the
traditional Chemicals and Cement business segments, we willconcentrate our management resources on the three growth
segments: Electronic & Advanced Materials, Life Science, andEco Business. We will increase the share of consolidated net
sales of these growth business segments to more than 50%
by FY2025 and more than 60% by FY2030. In the electronics
domain, Tokuyama will capture the top share in high-purity
and thermal management materials, while forging ahead with
globalization. In the healthcare domain, we intend to become
the industry leader in the vision, dental, and diagnostic fields,
where we can differentiate ourselves with proprietary
technologies. In the environment domain, Tokuyama will
boost production capacity for water treatment membranes,
grow the waste gypsum board recycling business, andpromote recycling photovoltaic panels from the R&D stage, inthis way making the environment business a new pillar for theGroup’s future. In April 2021, we reorganized to build ournext-generation business portfolio, adding the Eco Businessto Chemicals, Cement, Electronic & Advanced Materials(Electronics), and Life Science (Healthcare) to form fivebusiness divisions. In April 2023, we reorganized Electronic
Materials and established the Electronic & Advanced Materials
Business Headquarters.
Restructuring our business portfolio does not mean that
our traditional businesses will be downsized or eliminated. For
example, the Cement business is mature, having
comparatively small growth potential. However, there isenormous potential for resource recycling. I believe that
reexamining existing businesses from the perspectives ofelectronics, healthcare, and the environment thenincorporating those businesses into a new corporate structure
is another way of transforming our business portfolio.
We are currently in the third year of Medium-Term
Management Plan 2025. We will mobilize the collective
strength of the Group to transform our business portfolio,
aiming to achieve net sales of 320 billion yen, operating profitof 45 billion yen, and ROE (return on equity) of 11% or more in
the final year of the plan (FY2025).
*After a change in depreciation method, we updated the FY2025 targets for
operating profit and ROE from 40 billion to 45 billion yen and from 10% to 11%,
respectively (announced on April 28, 2023).
Notice Concerning the Revision of Targets for the Final
Year of the Company’s Medium-Term Management Plan
https://www.tokuyama.co.jp/eng/news/pdf/20230428_02_
Release_e.pdf

Priority Issues in Medium-Term Management Plan 2025

Transforming the business portfolio

Increase the share of consolidated net sales from growth businesses toContribute to mitigating global warming

Expedite the development/commercialization of nextgen energy technologies; Reduce greenhouse gas (GHG)

emissions by 30%*Reduction target: Base year FY2019 GHG emissions of approximately 7.26 million tonnes

8

TOKUYAMA REPORT 2023

over 50%

Practice socially responsible management

Step up high-priority CSR initiatives to lay thegroundwork for growth and to realize our VisionTokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Transforming the Company to Realize Our Vision

Focusing on Four Themes: “Reform Organizational Culture,” “Strengthen
R&D,” “Promote DX,” and “Accelerate International Expansion”
To successfully reach the goals of Medium-Term Management

have been developed and utilized only for our current

Plan 2025 and realize Tokuyama’s redefined Vision, it isbusinesses, so it is essential for us to always consider whatessential to promote the four reforms described below.

we can do with our technologies in the new domains—

The first is “Reform Organizational Culture.” Tokuyama’s

electronics, health, and the environment—then convert thosehistory spans more than a century, having developed a wideideas into real-world products and services. There is a limit torange of businesses centered on bulk materials. At the same

what we can do on our own. To quickly provide the new value

time, the frontier spirit, which should be part of the Group’sthat society will demand in the future, we will acquire theDNA, has weakened, since the number of employees whofunctional strengths and development skills that we needfocus on stability has risen during our growth. This trend has

through collaborations with other companies, open innovation,

persisted among executives and mid-career employees who

and M&As. By promoting marketing-driven R&D, we will

have experienced success in the conventional sense, so theretransform into a value-creating company.

is a tendency to view the adventurous spirit and challenges of

The third theme is “Promote DX.” In addition to improving

younger employees less favorably. However, to pioneer theour operations by introducing digital technology, Tokuyama

three new domains—electronics, healthcare, and thewill utilize AI and IoT (Internet of things) in various areas,

environment—we need an aggressive group of people who

including by upgrading supply chain management systems

are fulfilled and satisfied by taking on challenges in unknown

and boosting productivity at our plants. The goals are to

fields. I believe that restructuring our business portfolio will

fundamentally change the way we work and to strengthen ourchange our organizational culture and the current mindset ofcompetitiveness. We also intend to utilize materials informatics

our employees. I envision a future where a change in(MI) to accelerate R&D.

awareness will lead to a change in behavior, which in turn will

For the fourth theme, “Accelerate International Expansion,”transform our business structure and way of doing business.

we will continue growing overseas production and sales, while

For the second theme, “Strengthen R&D,” we willdeveloping our international markets, aiming to become aencourage customer-oriented R&D (research andglobal company with growth potential Tokuyama currently has

development) with marketing as the cornerstone. Over our

manufacturing and sales bases in eight countries and regions

long history, we have developed and built up a storehouse ofaround the world, mainly in Asia. The percentage of overseas

technologies that have changed the nature of industry andsales in FY2022 was 29%, and we plan to increase this toenriched people’s lives. However, many of these technologies

50% or more in FY2030. We have formed joint ventures withTOKUYAMA REPORT 2023

9

Message from the President

Formosa Tokuyama Advanced Chemicals Co., Ltd. (FTAC) inhigh-purity IPA for the electronics industry where theTaiwan and STAC Co., Ltd. (STAC) in Korea, both leading

demand is.

companies in their countries, so that we manufacture and sell

Contribute to Mitigating Global Warming

Becoming Carbon Neutral by Decarbonizing through Developing
and Supplying Environmentally Friendly Products

10

Tokuyama is one of the largest CO2 emitters among Japanese

One specific initiative for becoming carbon neutral is oncompanies. In addition to CO2 from our own power plants, fortrack: converting our captive power plants to biomass co-fired

example, CO2 is emitted from our core soda ash operations.

generation. Using palm kernel shells (PKS), among other

Much CO2 is also produced when limestone and coke arewaste biomass, we have started to convert one of thecalcined in lime furnaces. As well, ships that transport

Tokuyama Factory’s four power plants to biomass co-fired

limestone burn heavy oil. In other words, our current businessgeneration and are set to increase, from FY2025, thestructure is the basic reason for the amount of CO2 that wepercentage of power from biomass co-fired generation. Also,

generate.

the Shunan Industrial Complex Decarbonization Promotion

On the other hand, global industry is making major strides

Council, a public-private organization, has been studying a

toward achieving carbon neutrality by 2050. For Tokuyama tocarbon-free supply chain for ammonia, a fuel for in-houseremain a sustainable corporate group, it is essential to quickly

power generation. We have a plan to utilize over one million

determine a carbon-neutral/decarbonized business model

tonnes of ammonia annually at the Shunan Complex

while consistently producing and supplying basic materials(Yamaguchi Prefecture) by 2030.

that support industry, including caustic soda, PVC resin, andIn addition to developing and supplying environment-

polycrystalline silicon. Given this recognition, we have set

friendly products, we are developing CCU (carbon capture“Contribute to mitigating global warming” as a priority issue inand utilization) technologies to recycle CO2 into raw materials

our Medium-Term Management Plan 2025. By decarbonizing

for chemical and other products while extending ourwhile developing and supplying environmentally friendly

environmental management. We intend to keep contributing

products, we intend to reduce GHG (greenhouse gas)

to a sustainable global environment and industry byemissions by 30% in FY2030 compared with FY2019 levels,

establishing an environmentally conscious business model

putting us on a strong path for carbon neutrality.

that is not heavily dependent on fossil fuels.

TOKUYAMA REPORT 2023

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Practice Socially Responsible Management

Aiming to Realize our Vision through Materiality Initiatives
Tokuyama has identified 10 key CSR material issues inchange society for the better do not come from staying the

Medium-Term Management Plan 2025 as an action plan tocourse; new products and services are born from a vibrantrealize our Vision, redefined in 2021. These CSR materialorganizational culture with diverse employees and values thatissues include “Helping to fight global warming” andadapt over time. It will be necessary for us to hire and“Conserving the environment.” We believe that a businesspromote a diverse workforce. New employees will havestructure with less environmental impact—from transforming

different genders, nationalities, races, and values, and weour business portfolio—will result in improved CSR

should support their development through internal andmanagement. One initiative for security and disasterpersonnel management systems. Transforming our businessprevention as well as occupational safety/health isportfolio should go smoothly if we build an organization that

encapsulated in the material issue “Preventing accidents andwelcomes diversity and offers job satisfaction.

preparing for disasters,” a fundamental and important theme
for our business operations.

In the past, CSR was seen as making a social contribution
separate from a core business. Today, however, I view CSR

To deepen our relationship with society, we haveinitiatives as inseparable from the company’s Mission, social

positioned “Developing human resources,” “Promotion of

obligation, and growth strategy. I believe that sincerely

diversity and career fulfillment,” and “Promotion of physical &addressing material management and social issues will be themental health” as important issues. New businesses that

predominant driving force behind our sustainable growth.

A Message for Our Stakeholders

My Paramount Responsibility as President and Executive Officer isto Transform Tokuyama into a New Company
My most important responsibility as President and Executive

important management themes. Given the limited

Officer is to transform Tokuyama into a new company. This

management resources we have, it is not possible tostatement really says it all. We will change the mindset of our

implement all of these measures in a comprehensive way, so

employees, the organizational culture, systems, and businesswe must identify businesses and initiatives that we need tostructure. The Company will consistently take on new

focus on now by backcasting from where we want to be inchallenges, while adapting to the times and communicating

2030, and to optimally allocate funds, mainly to growth areas.

Tokuyama’s unique value to industry and society. I believe

Although the business environment is likely to remainthat this is the only way to live up to the trust and expectations

uncertain with rising geopolitical risks associated with Russia’sof our stakeholders.

invasion of Ukraine, soaring raw material prices, andWe have a mountain of work ahead of us, including

fluctuating exchange rates, Tokuyama is determined to

streamlining our traditional technologies through DX, R&D andpromote assertive, bold management under a solid

capital investment in growth businesses, on top of developing

governance structure to achieve sustainable growth andand growing our global operations. Improving our financial

maximize corporate value into the future. We sincerely ask for

position and further enhancing shareholder returns are also

the continued support of our stakeholders.

TOKUYAMA REPORT 2023

11

Value Creation Process
The Tokuyama Group is contributing to resolving social issues through business operations and to creating asustainable future, in line with our Mission. These steps are highlighted in the Value Creation Process.

Management challenges
SocietyJapan

Planet Earth

Accelerated change in industrial structure,
rapid digital revolution

Domestic demand shrinkage,
growing health consciousness

Growing environmental
consciousness, environmental
regulatory tightening

InputsBusiness

Stable financial baseTotal assets: ¥478.3 billion

Financial
Capital

Net assets: ¥241.6 billion

Tokuyama’s Strengths

Rating*: A*R&I Issuer Rating

Regionally oriented manufacturing base
Capital expenditures: ¥35.6 billion

Manufacturing
CapitalUnique technology/
manufacturing
processes

Steps towardachievingour Vision
Restructure theorganizational
cultureNumber of production plants:


20 in Japan, 5 overseas
Strengthen R&D

Unique technologies and manufacturing processes
developed over more than a century

Intellectual
CapitalR&D expenses: ¥13.6 billion
Number of patents held: 2,537

Manufacturing bases
for more efficient
production
Promote DX

Human resources with a common sense of values
Turnover*: Under 1%
Percentage of female managers: 4.7%

Human Capital*Non-consolidated

Zero
waste emissions

Accelerateinternational
expansion

Long valued customer and partner network
Number of countries and regions with sales1: 40 countries
Amount subsidized by Tokuyama Science Foundation2:

Social Capital
Approx. ¥1.23 billion
Number of times of stakeholder engagement: 144
1. Non-consolidated
2. Cumulative total for FY1998 to FY2022

Efficient use of stable supply of resources
Energy input: 57,300 TJ
Water resources input*: 41,932,000 m3

Natural Capital

CSR Priorities• Helping to fight global warming• Conserving the environment• Preventing accidents andpreparing for disasters*Excluding seawater used for cooling

Toward Tokuyama’s
12

TOKUYAMA REPORT 2023

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

To create a bright future in harmony with the environment,in collaboration with customers, based on chemistry

MissionVisionValues• Be a value-creative company that places first priority on R&D and marketing• Be a company that never stops challenging new domains while refining
and exploiting its unique strengths• Be a company with healthy employees who have healthy families
and take pride in their work at their company• Be a company that fosters bonds with people in communities
and societies worldwide• Commitment to customer satisfaction as a profit source• A broader, loftier perspective• Employees who consistently surpass their predecessors• Integrity, perseverance, a playful spirit and boldness

Model

Outputs and Outcomes

Growth businesses

Research anddevelopment capabilities
Marketing Strengths

Electronic& Advanced
Materials

Supply products and services
required throughout society
Maintain performance of advanced
electronic equipment and energy
savings through:• Semiconductor miniaturization• Higher semiconductor performance

Improve quality of life with better
health and preventive care

Traditional businesses• Better performing eyeglass lenses• Enhanced dental care
• Support clinical examinations for faster andAdvance unique
technologies, explore newtechnologies, streamline
business operations,
expand overseas

more accurate diagnosis and treatment

Chemicals

Transform
Business
Portfolio

Contribute to a closed-loop society
by recycling waste
Life Science• Develop a closed-loop society throughwaste recycling• Contribute to mass-processing of waste• Conservation of aquatic environments with

Cementinitiatives such as waste liquid desalination

Outputs (FY2022 results)

DX
Human capital strengths
Eco BusinessNet sales¥351.7 billion

Consolidated operating profit¥14.3 billion

Current net income attributed
to shareholders of theparent company¥9.3 billion

FY2030 target• Developing products and technologies
that address social issues•P romoting CSR procurement• Improved chemical management andproduct safety•P romotion of diversity and career fulfillment• Engaging with local communities•D eveloping human resources•P romotion of physical/mental health

Percentage of consolidated net
sales from growth businesses 60% or more
Percentage of consolidated
overseas net sales
GHG emissions

50% or more
30% reduction(compared with FY2019 levels)

Sustainable Growth
TOKUYAMA REPORT 2023

13

Tokuyama’s Strengths Supporting Value Creation
Tokuyama’s technologies are the foundation for creating value, over the course of more than a century

Uniquetechnology /manufacturing
technology
Along with the development of the Japanese chemical industry, Tokuyama has added
cement and chemical products to the product lineup. The Company is currently
developing businesses based on our proprietary strengths in technology, mainly inthe advanced electronic materials that support cutting-edge semiconductor
manufacturing, as well as the life sciences and the environment.

Separation Technology using Ion-Exchange Membranes

Molecular Design / Organic Synthesis Technology

In the 1960s, the Company was the first in Japan to commercialize ion-

Photochromic materials used for photochromic lenses require

exchange membranes. Today we offer separation technology for an array ofmolecular technology to design and control the chemical structure forapplications that use membranes that are resistant to chemicals as well asa specific purpose, such as color tone and fading as well as advanced

selective permeation, allowing only the target substance to pass through.

organic synthesis technology to create specific substances. The

This advanced technology is used in a

Company excels in all of thesewide range of industries, including thetechnologies, having a strong track

production of salt from seawater, therecord in the eyeglass lensrecovery of specific valuable materials,

materials sector. In the future,refining and producing food such asthese technologies will be extended

wine and soy sauce, as well as thefor use in a wider range
of applications.

production of acids and alkali fromneutral salt waste liquids.

Ion-exchange membrane

High Purity / High-Sensitivity Analysis Technology

Eyeglass lens materials

Direct Nitriding / Reductive Nitriding Technology

Our polycrystalline silicon for semiconductors, a raw material for

The Company’s high-purity aluminum nitride has the world’s top

silicon wafers, has the highest level of purity in the world. In addition,market share. Their excellent sinterability (hardens easily) is due thehigh purity IPA for the electronics industry, used for precision cleaning

reduction nitridation method a proprietary manufacturing process.

of semiconductor wafers and electronic devices, is characterized by aThis material is highly valued for its thermal conductivity and thermal

low level of impurities due to a

expansion coefficient, far

unique manufacturing method. The

exceeding competitors’ products,

Company’s high level of purity andand is used as a material forhigh-sensitivity analysis technology,

semiconductor heat dissipationthat does not overlook minute

substrates and semiconductor

amounts of impurities, facilitates

manufacturing equipment.

the development andmanufacturing of these products.

High-purity polycrystalline silicon

Waste Treatment Technology

Powder Control Technology

Since our beginning, the Company has worked hard on effectively

Using technology gained through years of experience, we provide

using and recycling waste in the cement manufacturing process, as

advanced powders, such as silica and aluminum nitride, for filling inwell as accepting large amounts of other waste, such as waste

resins and producing high-level functionality for composite materials

plastic, from sources outside of the Company. The cement kiln’s

by applying certain technologies including particle shape control andcombustion temperature is

the surface modification of powders.

extremely high (1,000 to 1,800˚C),

These techniques are developing

so combustible materials arequickly, and the Company is at theburned completely and thefrontier of the commercialization of

noncombustible materials can be

powders with unique properties,

used as substitute raw materials

including spherical aerogels andfor cement. This processing
technology leaves no residue.

14

Thermal management materials

TOKUYAMA REPORT 2023

hollow silica.
Resource recycling

Sunseal™

Tokuyama Value Creation

Manufacturingbases formore efficient
production

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Zero waste
emissions

Tokuyama has manufacturing bases for production worldwide: in eight countries andregions around the world, mainly in Japan and Asia. In addition to making production
more efficient at every site, the Company is reducing waste and recycling, aiming forzero waste emissions.

Tokuyama Factory

Kashima Factory

The Tokuyama Factory, located in Shunan City, Yamaguchi Prefecture,

The Kashima Factory, Kamisu City, Ibaraki Prefecture, Japan started

Japan, where Tokuyama was founded, is mainly responsible for

operations in 1985 as a manufacturing plant for life science products.

producing chemical products, cement, advanced electronic materials,

Using organic synthesis technology, accumulated over many years as

and products for eco-businesses. Starting with the production of soda

the company’s core technology, we have developed more efficientash, the company’s original business, we expanded the product range,

production in a wide range of fields, including APIs and intermediates,

while responding rapidly to changes in social and economic requirements.

eyeglass lens materials as well as dental materials and equipment.

What sets us apart from our competitors is the technology we have

We provide these products to more than 70 countries and regions

developed and the knowledge gained from every business; materials,

around the world. In particular, photochromic materials that change

including by-products; and the integrated, cooperative use of energy.

color in response to ultraviolet rays and dental materials and equipment

These factors are the source of Tokuyama’s market dominance. The

manufactured by Tokuyama Dental Co., Ltd. have a strong presence in

Factory has a zero waste emission rate of 99% or more fromthe global market. The Company is also working on reducing theprocessing waste at cement

environmental impact ofplants. In recent years, wemanufacturing processes,

have strengthened

and in 2023 we installed

cooperation with nearby

solar panels at this facility

companies and local

to utilize moregovernment, and are

renewable energy.

accelerating thedecarbonization of the
Shunan Industrial Complex.

Tokuyama Factory aerial photoTokuyama Chemicals (Zhejiang) Co., Ltd. (China)
Tokuyama Chemicals (Zhejiang) Co., Ltd., a subsidiary in China 100%

Kashima Factory building with solar
panels installed

Formosa Tokuyama Advanced Chemicals Co., Ltd.
(FTAC) (Taiwan)

owned by Tokuyama, was established in 2005 to fill the robust

The global semiconductor industry is expected to continue growing

demand from local customers. This company produces advanced

due to the spread of 5G and the penetration of AI. Demand for theelectronic materials, including fumed silica, high purity chlorosilane,chemicals essential for precision cleaning semiconductors andand high purity chemicals for the electronics industry. In particular,

electronic components is also intensifying. In light of these trends, in

fumed silica, with a broad range of applications, such as rubber andOctober 2020 the Company established and took a 50% stake inelastomers, maintains a solid share of the Chinese domestic market,

FTAC, a joint venture in Kaohsiung, Taiwan that manufactures and sells

and its superb quality is highly appreciated by our customers. Thishigh purity IPA for the electronics industry. Together with Taiwan

company will complete construction work in FY2023 to increase

Tokuyama Corporation, also a manufacturer of high purity IPA, theproduction of a hydrophobic grade of fumed silica, for which demandCompany has built a production and supply system for fulfilling local

is expected to grow. Going forward, Tokuyama Chemicals (Zhejiang)

demand in the Taiwanese

will satisfy customer

semiconductor market.

requirements with a

FTAC will grow andstrong production

intensify the business for

system that supports

advanced electronic

the competitiveness ofmaterials in Taiwan by

local production andleveraging our strengths in

the consistent supplyof products.

integrated production from
Tokuyama Chemical (Zhejiang)raw propylene.

FTAC

TOKUYAMA REPORT 2023

15

Improving Value Creation —Four Driving Forces for Transforming the Business Portfolio—Marketing Strengths
Fortifying customer-oriented marketing,refining Tokuyama Group’s unique
technologies to create new value
Director, Managing Executive Officer, General Manager of the Research andDevelopment Division

Fumiaki Iwasaki
Tokuyama’s R&D has two “wheels.” The first wheel is development

information gained through marketing, the Company is evaluating agroups under business divisions that are directly connected to

new business model: using the Group’s unique technologies toexisting businesses, and the other wheel is the R&D Division

create ideas for researching and developing new business. For

responsible for strategic medium- to long-term themes. In Medium-

example, our silica-based products have strengths in powder

Term Management Plan 2025, the Company has set one part ofcontrol technology, so the Company is developing new applications,

the Vision as “being a value-creative company that places first priority

including cutting-edge semiconductor materials and cosmetics. The

on R&D and marketing.” The mission of the R&D Division is toCompany has already begun making some sample shipments.

reinforce Tokuyama’s technological strengths by cultivating unique

To capitalize on high-purity technology for semiconductor

technologies and acquiring new ones. The overall goals are toindustries, it is necessary to improve our analysis technology.

create new value in growth businesses and for R&D to become theTokuyama Taiwan Corporation, an R&D center in Taiwan, along

driving force for transforming the business portfolio.

with the Tsukuba and Tokuyama research laboratories in Japan, is

In the past, the Company tended to be focused on the

now improving the ability to analyze trace impurities indevelopment of existing products and was softer on marketing.

semiconductor materials using new analytical equipment. For

There are many definitions of marketing, but generally speaking,Tokuyama to steadily capture opportunities for growth in themarketing means “creating a system that sells and selects products

semiconductor industry, we have a system in place that supports

and services (that makes customers want to buy them).” We believe

business growth through technology.

that R&D in a company boils down to “the act of creating productsTechnical human resources are essential for the successfulthat customers want to buy.” So, the Company established atransformation of organizational culture. To create new value in new

specialized marketing organization under the R&D Division in Aprilmarkets, the Company will cooperate with external organizations, in

2021 and strengthened this system for marketing that anticipates

industry, academia, and government, as well as recruit

market needs and technological change. Today, based on

career professionals.

Focusing on new applications—Developing silica-based products for cosmetics—
The mission of the Marketing Group is to contribute to achieving thebusiness strategies of Medium-Term Management Plan 2025 as well
as formulating and executing of the Group’s technology strategy. The
Group marketing teams anticipate market requirements andtechnological trends using specialists from each business field. To
develop new applications for silica-based products, the Groupparticipated in exhibitions for cosmetics in the United States, the EU,
and Japan. We exhibited cosmetics formulated from the Company’s
products by showing visitors to the exhibitions the outstanding
characteristics of these cosmetics, such as their smoothness. The
Group will capitalize on the strengths of our silica-based products by
anticipating the demand to replace plastic microbeads, now being
restricted to help protect the environment.

16

TOKUYAMA REPORT 2023

Exhibition in New York

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Research and Development Capabilities
Improving and strengthening corporate development centers

Opened the Tsukuba Second Research Laboratory
The Company will open the Tsukuba Second Research Laboratory in the fall of 2023 to transform thebusiness portfolio and to strengthen R&D for the new domains: electronics, healthcare, and the environment.
The Tsukuba Second Research Laboratory will receive some of the roles of the existing Tsukuba ResearchLaboratory as well as conduct R&D in the healthcare field, centered on developing medical materials anddiagnostic reagents, and in the environmental field, including ion-exchange membranes used in waterelectrolysis to produce hydrogen.
For its part, the Tsukuba Research Laboratory will focus on R&D in the electronics domain, centered on
next-generation semiconductor-related materials, while retaining R&D for eyeglass lens materials as well as
dental material and equipment made by Tokuyama Dental Corporation. Tokuyama also plans to install pilot

Tsukuba Second ResearchLaboratory exterior

equipment at all research laboratories to build a development approach that responds quickly to customers’
needs. As a result, the two research laboratories will have an R&D system with about 300 people aiming tobecome a unified R&D base that creates new value by integrating technology and expertise in a wide rangeof fields, including organic and polymer chemistry, biotechnology, and inorganic chemistry.

Strengthening the Tokuyama Research Laboratory
The Tokuyama Research Laboratory, our R&D center in western Japan, takes advantage of being locatedon the site of the Tokuyama Factory to research and develop new materials and technologies, while working
closely with business divisions. This research laboratory, with a key responsibility for using DX for R&D, isworking to speed up research and development by utilizing the latest digital technologies, such as materials
informatics. At the Analytical Science Department located in this laboratory, we are refining our own uniquehigh sensitivity analysis technology and improving the overall ability to analyze trace impurities in the
Silica Developed Products

advanced electronics device field, including ultrahigh purity polycrystalline silicon and chemicals for advanced
semiconductor manufacturing processes.

Research at Tokuyama Taiwan
The Taiwan Research Laboratory, established in 2018 as the Group’s first overseas R&D center, has been
growing through stages, first becoming a local subsidiary then full-scale operations in December 2022 as
Tokuyama Taiwan. As a company responsible for both sales and R&D, this center jointly develops productswith the Industrial Technology Research Institute (ITRI) of Taiwan, Tokuyama’s partner since the time of the
Taiwan Research Laboratory, and is working on new business development in Taiwan. The number of
personnel is increasing, and a new cleanroom will start operating in July 2023. Through R&D at the cuttingedge of the semiconductor industry, this center will hone our technological strengths and nurture humanresources as well as bolster their technical support for customers looking toward the growth of thesemiconductor industry.

Health food products soldin Taiwan

In the healthcare field, Tokuyama Taiwan launched a health food business in Taiwan in January 2023
after developing a brand name called Vitura—combining the words vivid and natural—selling health foodsupplements through the Vitura website in Taiwan.

Strengthening Open Innovation
To speed up our R&D, the Group conducts joint research with universities in and outside Japan, as well aswith national research institutes. In Taiwan, where the semiconductor industry is concentrated, the Grouphas worked the Industrial Technology Research Institute (ITRI) of Taiwan since 2018 through our contact
point Tokuyama Taiwan, which is responsible for research and development. We are continuing to work ontechnological developments for the miniaturization and sophistication of semiconductors. In recent years, wefirmed up partnerships in other fields than electronics by jointly developing useful technologies in thehealthcare field, and by working on next-generation technology themes in the environmental field.

TOKUYAMA REPORT 2023

17

Improving Value Creation —Four Driving Forces for Transforming the Business Portfolio—DX
DX (Digital Transformation) at Tokuyama
For Tokuyama, DX is not simply about streamlining operations byn

TDX Basic Policy

Tra
Co
rp
ns
f
rm orate A orm
ati
on
cti
ati
aim
vi
on
ed ty
at
ac
hie
vin
gv
isio

using digital technology. We think of DX (TDX*) as using the power ofdigital technology to help restructure our organization and operations
to achieve our medium- and long-term goals that will transform theCompany’s business portfolio. We are using AI and big data to ramp
up our R&D, as well as to improve supply chain management. At the

ns

tan

Phase 1: Steps to ensure corporate
survivalCo

DX initiatives from the perspective of overall optimization. By steadilyt tr

key people who will lead the transformation were assigned to eachdepartment. The Company has established a system to acceleratesfo

The DX Promotion Group was established, in April 2021, and thePhase 2: Preparing foundations
for transformationanpass on expertise.

Prsales departments to expedite decision-making and to visualize andomotesame time, we are using digital technologies in our corporate andPhase 3: Promoting
transformation

executing a multifaceted DX strategy, Tokuyama will create new
business models that anticipate the changing times.

Changes in the World
Declining workforce, progress in digitalization,changes in competitive environment*TDX: Tokuyama’s name for DX

FY2030Overcome Change

TDX Overview and Initiatives by Area
Tokuyama is now concentrating management resources on

Image recognition technology and AI are used to improve quality

Medium-Term Management Plan 2025, which ends in FY2025.

traceability throughout all processes, from raw materials to

Under this medium-term plan—based on the idea of building a new

products. Workstyle DX focuses on building an efficient,business portfolio where businesses in the domains of electronics,

comfortable work environment for going paperless, while R&D on

health, and the environment account for more than 50% of sales—

DX focusses on innovative new materials using materials informatics

the Company has set using DX as a management theme for(MI) and information sharing among researchers. For theserestructuring. Tokuyama will invest up to 10 billion yen over the

initiatives, the Company has set 15 quantitative targets to be

five-year period covered by the plan and will invest the resulting

achieved by FY2025, and we are working hard to achieve them.

cash and human resources into the three growth business domains

Tokuyama was designated as a DX certified business operator
by the Ministry of Economy, Trade and Industry (METI) in January

for higher growth and to improve corporate value.
Eight categories have been set for the development of DX, such

2022 in recognition of transforming the Company through DX.

as manufacturing, workstyles, R&D, and business transformation. A

Tokuyama will continue to improve productivity, enhance

project promotion team has been set up for each category tofunctionality, and speed up corporate initiatives by utilizing data anddesign and put into place specific initiatives. In manufacturing DX,

digital technology, with the goal of becoming a corporate group that

digital technology is used to improve plant management and to

grows sustainably.

stabilize operations, with the goal of making factories “smarter.”

TDX Promotion System

DX Certification (Acquired January 2022)
Project Owner: President

Steering Committee:
Executive Committee Members

PM: General Manager,
Corporate Planning Division

TDX ProjectWorkstyle
DX Project

Corporate
DX Project

Manufacturing DX Project
BusinessInnovation PJ

18

TOKUYAMA REPORT 2023

DigitalPlatform PJ

Quantitative Target: DX Promotion Index
R&D
DX Project
SCM DX Project
Other DX activities
in Tokuyama GroupImprove to 3.5 points by FY2025 (perfect socore of 5 points)

FY20200.80 pts.

FY20222.43 pts.

(Average score of 2.04 points for large Japanese corporations)*DX Promotion Index: Simplified self-diagnostic metrics for promoting digital management
reforms (formulated by the Ministry of Economy, Trade and Industry, Japan)

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Human Capital Strengths
Our Approach to Human Capital
Tokuyama sees employees as indispensable for sustainable growth

realize our Vision, as well as the direction for growth. This policy

because they are the most important “management capital.”

includes 10 articles as the basic principles of the human resources

Employees, or human capital, need the courage to changesystem and our policies, and underscores our maximum support

themselves, the courage to change the system, and the courage tofor the success of executives and employees.

take on challenges in new fields in order for us to transform ourIn FY2022, we developed a formal Human Recourses

business portfolio and provide solution-oriented products andManagement Strategy that links to our Medium-Term Management

services in the global market. The Company expects and supports

Plan 2025. This strategy includes initiatives such as collaboration

the growth of employees who embody the “four values” set out inwith business divisions, the revitalization of human resources

our Vision.

accustomed to Tokuyama, proactive recruitment, retention, and the

The Tokuyama Group Human Resources Policy states clearly

development of strategic human resources.

what the company expects of executives and employees who will

Investing in Human Capital
Tokuyama has set up training programs to foster and strengthen

The human resources system that supports the goals ofhuman resources, the source of our corporate competitiveness,

Tokuyama’s Vision was introduced ahead of Medium-Termand to help improve the next generation of employees.

Management Plan 2025, and assessing behavior in relation to the

In April 2022, we developed and released the Tokuyama Group
Human Resource Development Platform within the Company. This

“four values” has been added to the evaluation items forhuman resources.

platform includes and aligns the types of employee that theCompany expects and the skills required for each type of employee.
The platform is also used for guidelines that help develop current
job skills, as well as the skills required for career development.

Tokuyama Group
Human Resource
Development Platform(1) Personnel Policy

While nurturing the advanced engineers who support business(2) Career Plan

execution, the Company is focusing on global human resources
and conducting training for the skills necessary for the global
market. In addition, we reviewed the content and restarted next-(3) Human Resource
Development Systemgeneration leader training (NBL training) in FY2018 to cultivate themanagers, at an early stage, who will be responsible for the future(4) Individual Education
Training Menu

development of the Company.

Initiatives for Revitalizing the Organization
In FY2022, the Company examined our job rotation system andCompany has started new initiatives, such as opening You You

organized personnel information using a talent (HR) management

Terrace, a place of employment for people with disabilities, and wesystem. And in April 2023, we established HRBPs (Humanfounded an agricultural corporation, Tokuyama You You Farm Co.,

Resource Business Partners) in growth business divisions to bolster

Ltd. to support the independence of people with disabilities andcooperation between business divisions and the Human Resources

contribute to local communities. As well, Tokuyama received

Division. The Company encourages individual growth, including

Platinum Kurumin Certification from the Minister of Health, Labour

through job rotation, as well as placing the right people for

and Welfare in July 2022, as an excellent child-rearing support

restructuring the business portfolio based on training programs

company that is improving the work-life balance of employees.

from the career development system.
Tokuyama’s promotion of diversity creates an environment

The Company uses health management to encourage bettermental and physical health of employees and their families and for awhere all employees can thrive and be more assertive, emphasizing

more comfortable work environment. In recognition of thediversity of knowledge (knowledge and wisdom) as well as improving

management of health andproductivity through workplace reforms for more comfortable andproductivity, the Company

satisfying work. For the active participation of women, the Company

has been certified by Whitehas formulated an action plan in line with the Act on the Promotion

500 as an outstanding Healthof Women’s Active Engagement in Professional Life. We are

and Productivity

working hard to achieve several targets, such as the percentage ofManagement Organization

women in management. The Company, to employ more people(Large Enterprise Category)with disabilities, intends to reach the legally mandated employment

for two years in a row and as

level, and we are working to improve the work environment by, fora Health and Productivity

instance, making offices and plants barrier free. In addition, theStock for the first time.
TOKUYAMA REPORT 2023

19

Progress of Medium-Term Management Plan 2025

Transform Business Portfolio

Increase growth businesses’ share of
consolidated net sales to over 50%
FY2021-25 Plans

Priorities and Initiatives• Redefine/reorganize growth businesses around thethree themes of electronics, healthcare, and theenvironment, and proceed to move ahead withexpanding them• Chemicals and cement businesses to promoteincreased efficiency while generating sustainable
cash flows

Technology

Pursue added value and promote technologicaldifferentiation by collaborating more withexternal partners

Efficiency
Gains

Pursue company-wide operational efficiency,
mainly through DX

International
Expansion

Expand operations in growing overseas markets

Target Business Portfolio
Breakdown of Consolidated Net Sales by Business
FY2022Growth Businesses

FY2030

39 %

22%
3%

4%

10%

10%

Targetingat least

34%

60

33%

25%
1%

18%

11%

18%

32%

30%

16%

16%

17%
12%

19%

13%

10%

9%

FY2020(Results)

FY2022(Results)

FY2025(Forecast)

FY2030(Target)

29%

20%

%

Electronic &Advanced Materials
Life Science
Eco Business
Chemicals
Cement
Other

10%

28%

Breakdown of Consolidated Overseas Net Sales

FY2020(Results)

FY2022(Results)≥50%

FY2030(Target)FY2020 was created using reference values that include the financial impact of the current AccountingStandard for Revenue Recognition, etc.

➡ pp. 6–11

Message from the President➡ pp. 24–33

Progress of Strategy by Business Segment➡ pp. 44–45

Dialogue with External Directors

Contribute to Mitigation of Global Warming

Expedite development/commercialization of next-gen energy technologies
Reduce GHG emissions 30% by FY2030**Reduction target: GHG emissions of approximately 7.26 million tonnes base year FY2019➡ pp. 34–35

Message from the Executive in
Charge of Sustainability➡ pp. 40–42

Disclosures Based on TCFD
Recommendations➡ pp. 52–55

Financial and
Non-Financial Highlights

Practice Socially Responsible Management

Step up high-priority CSR initiatives to lay the groundwork forfurther growth and realize our Vision➡ pp. 36–39

20

TOKUYAMA REPORT 2023

Vision and Materiality➡ pp. 50–51

Risk Management

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Progress toward Achieving Targets
FY2020results

FY2021
results

FY2022
results

FY2025targets2

Keys to achieving
target259.21

293.8

351.7

320.0

Maintain growth whiletransforming portfolio

30.9

24.5

14.3

45.0

Growth toward FY2025

Growth business net sales
growth rate (CAGR)3 (%)

—

19.9

20.1

≥ 10

Strengthen R&D, accelerateinternational expansion

ROE (%)

13.4

13.2

4.1

≥ 11

Balance efficiency ofshareholders’ equity andfinancial base

KPI
Net sales(billion)

Operating Profit(billion)

1 FY2020 net sales are approximate amounts based on application of Accounting Standard for Revenue Recognition, etc., and are listed as reference values
2 Due to changing the depreciation method, the targets for operating profit for FY2025 (target) were updated from 40 billion yen to 45 billion yen and ROE was changed from
10% to 11% (announced April 28, 2023).
3 CAGR (compound annual growth rate): The annual geometric mean rate calculated from the growth rate over multiple years

Progress in FY2022
To transform our business portfolio, we are investing
management resources in promoting international expansion as
well as three growth business domains: electronics, healthcare,and the environment. In FY2022, net sales increased year on
year due to aggressive actions taken to adjust the sales pricesof chemicals, cement, and semiconductor-related products in
response to soaring raw material and fuel prices triggered by

Russia’s invasion of Ukraine. The growth rate of sales (CAGR)
for growth businesses was 20.1%, far exceeding the target of
10%. On the other hand, despite passing on raw material andfuel costs through sales price adjustments, operating profit fell
due to higher logistic costs and a decline in overseas market
conditions for chemical products. ROE also fell below theprevious year’s level.

Initiatives for Business Portfolio Transformation
High-Purity IPA for the Electronics Industry

Dental Materials and Equipment

Start of shipments from Taiwan JV factory andconstruction of South Korea JV factory

Expansion of production capacity

Formosa Tokuyama Advanced Chemicals Co., Ltd. (FTAC) is a
joint venture with Formosa Plastics Corporation for the productionof high-purity IPA for Taiwanese semiconductor manufacturers.
Commercial operation has begun and customer approval isprogressing smoothly. Our intention is to begin full-scale
operations by the end of FY2023. Similarly, STAC Co., Ltd.
(STAC) was established in South Korea as a joint venture with SK
Geo Centric Co., Ltd. (SKGC). Construction of the factory inSouth Korea is already underway, and work is going smoothly forthe start of operations in summer 2024. We intend to put theoperations of these twoplants on track as planned,
which will help transform ourbusiness portfolio andincrease the percentage ofnet sales coming fromoverseas.
Groundbreaking ceremony at JV
factory in South Korea

At the Kashima Factory, a new building for Tokuyama Dental
Corporation will be constructed to increase the production
capacity of composite resins. Sales of dental materials have been
growing steadily because of rising demand for OMNICHROMA
and resin blocks for CAD/
CAM crowns, mainly inEurope and the UnitedStates. To respond to thisgrowing demand, we are
now boosting production
capacity with this new
Rendering of new building forbuilding, which is scheduled
Tokuyama Dental Corporation
to start operations in
October 2024. When
expansion is complete,
production capacity is
expected to approximately
double, establishing arobust production system
to meet the strong demand.
Resin block for CAD/CAM crowns

TOKUYAMA REPORT 2023

21

Message from the CFO

Maximizing corporate value by improving
earnings from traditional businesses andaggressively investing in growth businesses
based on a sound financial position
Representative Director, Senior Managing Executive Officer
General Manager, Corporate Planning Division

Hideo Sugimura

What I Value as CFO
As CFO, I specifically focus on implementing a dynamic
business strategy based on future investment plans while
maintaining sound financial discipline. The Corporate Planning
Division is responsible for corporate planning as well as
accounting/finance. Since I have the responsibility for these tworoles—much like the gas pedal and brakes of an automobile—I
recognize that balancing them is also essential for risk
management. As well, I keep an eye on our ability to generate
cash, in this way maintaining a more stable financial foundation
while closely watching ROE, an indicator of management
efficiency.

In FY2015, Tokuyama recorded a significant impairment loss
related to Tokuyama Malaysia Sdn. Bhd, our former subsidiarythat we were worked with in polycrystalline silicon operations in
Malaysia. Since that loss was recorded, the Company’s financial
position has improved through consistent profits. However, as
the equity increases in the future, whether or not the Company
will be able to generate returns in proportion with this increase will
become an important part of our financial strategy. Although it is
not possible to predict future business conditions, including trends
in the costs of energy and resources, as CFO, I will take the leadin realizing sustainable growth and increasing corporate value.

Review of FY2022 and Outlook for FY2023
We continued to face tough business conditions in FY2022.
International concerns over energy and resource shortages
following Russia’s invasion of Ukraine triggered global inflation,
while in Japan the weak yen caused price hikes for imported
goods, putting pressure on corporate earnings. Given these
conditions, we came together as a group to work on tackling
the priorities of Medium-Term Management Plan 2025. As aresult, net sales increased year on year due to successfully
revising sales prices for chemicals, cement, andsemiconductor-related products. However, operating profit andother profit measures fell due to higher raw material and fuelcosts, logistics costs, and lower market prices. FY2022 was ayear when we learned many lessons, including the apparent
weaknesses of the energy-intensive business model.
For FY2023, we expect that the methods we have been
focused on—boosting profitability and setting proper pricing—will gradually produce tangible results. Nonetheless, there is alingering uncertainty over trends in raw material and fuel prices
as well as the slow semiconductor market. We expect net sales
to increase 8% year on year and the various profit indicators torise significantly, all exceeding 100% year on year. On thefinancial front, I want to see the Company continue to manage
funds effectively and carefully in preparation for redeeming asubordinated loan of ¥60 billion in September 2023.
22

TOKUYAMA REPORT 2023

Capex Plan Breakdown (FY2021–2025)

17%
At the time of planning

13% ¥160.0

36%billion~

15%
16%

32%
¥200.0

9%

20%

Results until FY2022,
estimates after thatbillion

10%

10%
4%

18%
Growth businesses
Rationalization / energy savings /CO2 emission reductions
Infrastructure for growth

R&D
Traditional businesses
OthersKeywords are priority investment in growth fields,
reduction of CO2 emissions,and energy savings
Major Capex Results• Construction of the factory of joint • Waste gypsum board recycling
venture company in Taiwan for
high-purity IPA• Construction of the factory of joint
venture company in Korea forhigh-purity IPA• Production capacity expansion ofdental materials

business Construction of a new plantin Muroran• Establishment of the Center forCommercialization of Advanced
Technology

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Financial and Capital Strategy
Since experiencing an impairment loss related to Tokuyama
Malaysia Sdn. Bhd., our former subsidiary, we have focusedon restoring our financial strength by limiting capital
expenditures to within the operating cash flow. As a result,
our ability to generate cash as well as avoid taking on interestbearing debt have both been reinforced, and a solid financialbase is supporting our medium- to long-term businessstrategy. The transformation of our business portfolio andinitiatives that are contributing to the mitigation of global
warming—set as Medium-Term Management Plan 2025
priorities—will require significant funding. While maintaining
the basic policy of making investments using our own funds,
we intend to bring about sustainable growth by investing

management resources in nurturing growth businesses and ininitiatives for creating a carbon-neutral society.
In addition to investing resources in the three growthbusinesses, electronics, healthcare, and the environment, we
will improve the efficiency of traditional businesses and securestable earnings through an energy transition plan that is
focused on carbon neutrality. At the same time, we will invest
in DX to support our business model transformation as well as
human capital and R&D, the sources of corporate
competitiveness. Total capital investment during the period
covered by Medium-Term Management Plan 2025 is
expected to exceed ¥160 billion.

Basic Policy on Shareholder Returns
Our basic shareholder return policy is to increase retained
earnings while providing consistent dividends to shareholders.
During the past several years, we have worked hard to gain
equity by positioning the cultivation of growth businesses andimproving our financial base as priority initiatives. From
FY2023, we will consider, once our business strategy
achieves results, revising our shareholder return policy, suchas improving dividends or raising the dividend payout ratio,
the result of an increase in the ratio of consolidated net salesof growth businesses and accelerated global expansion.
I am aware that having an appropriate share price is also
an important issue for improving shareholder value. As of
March 2023, the price-to-book ratio has been between the
0.6x and 0.7x level, which is below 1x. However, I do notbelieve this is an accurate reflection of our business results or
potential. We communicate information on the progress andresults of our business strategy to capital markets toencourage understanding and a shared among investors.

A Few Words for Our Stakeholders
One of Tokuyama’s strengths is a well-balanced businessportfolio that does not rely on a specific market. We willcontinue to develop growth businesses through investmentsthat fully consider financial soundness, while increasing theearnings of traditional businesses through efficient business
operations. This basic policy will never change. The
subordinated loan redemption will broaden our financial options
and allow the Company to further increase investment ingrowth businesses with the goal of boosting our top line. To
further develop our unique value creation process, I would liketo see the Company formulate and execute an effective
financial strategy for total optimization.
Tokuyama has achieved steady growth with support frommany stakeholders, including shareholders, investors,
customers, business partners, and local communities. We willcontinue to communicate information at shareholders’ meetingsand investor relations briefings to deepen our dialogue withstakeholders. I sincerely ask for your continued support.

Cash Flow Generation and Allocation (when Medium-Term Management Plan 2025 was formulated)
Operating Cash Flow

• Earnings growth• Cash flow from new

Cumulative ¥250.0 billion over 5 years• Screen prospective investments• Reduce inventory

products

Capex¥200.0 billion

Strategic Investment

Shareholder Returns(M&A, new business development)

Dividends
20-30% payout ratio

Max ¥30.0 billion

Consider acquisition ofown sharesTOKUYAMA REPORT 2023

23

Progress of Strategy by Business Segment:

Electronic & Advanced
Materials Growth businesses

Business Goal

*On April 1, 2023, the name waschanged to Electronic &Advanced Materials

Push forward with globalization and capture the top market share in
the high-purity and thermal management materials fields
supporting the miniaturization and stacking of semiconductors
電子・先端材料 Targets
Quantitative

Priority Measures

Net sales (billions of yen)

• Pursue aggressive expansion inoverseas markets• Develop new applications, expand
product portfolio• Produce high-quality products, pursue
microanalysis technology

Operating profit (billions of yen)

Net sales

150.0

Operating profit

25.0

20.5
100.0

91.5

103.0

102.0

50.0

7.2

9.0

10.0

7.0
5.0
0

FY2021
results

FY2022
results

FY2023
forecast

FY2025targets

SWOT Analysis• Superior quality in semiconductor-related products• Differentiation through such proprietary technologies
as reductive nitridation method (thermal management
materials) and direct hydration (IPA)• Lack of marketing strengths for global expansion

S• High market share in aluminum nitride powder

W

Strengths

Weaknesses

Opportunities

Threats• Growth in semiconductors due to increased
functionality of electronic devices, larger memory capacity,and electrification of vehicles

O

T• Entry of emerging manufacturers• Technological innovation in semiconductor market• Increased level of quality requirements from users associatedwith advancements in miniaturization and stacking

Progress by Product Area
Product Area
SiliconIC Chemicals

SilicaThermalManagement
Materials

FY2022 Results

TOKUYAMA REPORT 2023

Future Plans and Investments• Improve on quality control for semiconductor-grade
polycrystalline silicon•E nhance capacity for high-purity chlorosilanes andexpand in Asia
• Consider JV for polycrystalline silicon business in Malaysia•D evelop Taiwan JV supply structure for high-purity IPA for theelectronics industry
Establish JV in South Korea as a subsidiary for manufacturing
and sales of this product•L aunch JV plant in South Korea for high-purity IPA for theelectronics industry• Investment enhancement of hydrophobic silica•F DA certification of silica, grades for food additives.

• Expand CASE* and personal care applications• Enter organic silicone field• Invest in facilities to study mass production of aluminum
nitride filler at the Center for Commercialization ofAdvanced Technology•L aunch silicon nitride products•E xpand sales of boron nitride•D evelop new applications and enter downstream fields*Coatings, adhesives, sealants, elastomers

24

15.0

74.9

0

• Promotion of 5G and IoT, increased demand fordata centers

20.0

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Message from the Executive Officer in Charge

Responding with Technological Innovation to
the Semiconductor and Mobility Industries
Improving Our Market Presence

Executive Officer
General Manager, Electronic &Advanced Materials Business
Headquarters and Advanced
Materials Business Division

Katsumi Nagase

FY2022 Summary (results and issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business Implementation

TI

he Electronic & Advanced Materials Business Headquarters
was reorganized into two divisions: the Electronic Materials
Business Division and the Advanced Materials Business Division,as of April 2023. In the Advanced Materials Business Division, we
manufacture and sell fumed silica used for the semiconductor
polishing (CMP*) slurries and silicone rubbers, thermal
management materials such as boron nitride and aluminum nitride,for some of which the Company has the world’s top market share.
We received U.S. Food and Drug Administration (FDA) certification
for silica and began customer evaluations for entry into the foodand personal care markets. This will result in expansion
applications, which is the priority measures in the Medium-Term
Management Plan. Responding to expansion of the market in
China for adhesives for wind-power generator blades and paintinks in China, Tokuyama Chemicals (Zhejiang) Co., Ltd. will boost
capacity for surface-treated hydrophobic silica, with operations set
to begin in FY2023. Thermal management materials are supported
by robust demand for semiconductor components, but the issues
confronting us will be to meet quality requirements for state-of-theart semiconductors and to increase our presence in the mobility
industry as it grows.

n July 2021, we finished construction of a facility at the Centerfor Commercialization of Advanced Technology to manufacture
silicon nitride used in thermal management applications, then in
2022 we finished construction of the mass production examination
facility for aluminum nitride filler. By undertaking thecommercialization of new thermal management materials in
addition to the existing aluminum nitride powder, we plan toprovide the market with wide variety of products having excellent
heat dissipation and high strength required for EVs, and otherpower semiconductors products, some of which has function tosignificantly improve thermal conductivity by blending filler withresin. The manufacturing process that we are currently testing formass production is made up of a number of component
processes. While evaluating each of these processes, we areworking every day to develop technologies to ensure the quality,
safety, and stable production that will satisfy our customers. Global
demand, in China and elsewhere, is more dynamic than we initially
expected. We will do our best to commercialize new products
early, since we naturally consider quality and building a future
supply structure to be issues that we must address.

*CMP: chemical mechanical polishing

Honing Our Technology and Adding Valueto Remain the Company of Choice Among
Semiconductor Industry Leaders
FY2022 Summary (results and issues)T

he Electronic Materials Business Division includes two
subsegments: Silicon and IC Chemicals. For the Silicon
subsegment, soaring coal prices and other factors have pushed up
the cost of electric power, significantly increasing manufacturingcosts. This has exposed us to a more difficult business environment
than we have ever experienced. However, by carefully explaining
our business environment to our customers, we were able to gain
their understanding and pass on the cost increases to our productpricing. For IC Chemicals, on the other hand, there has been major
growth in demand from the electronics industry for high-purity IPA
used in cleaning processes due to more miniaturization andlamination of semiconductor chips. We have therefore built a plantin Taiwan for integrated production starting with raw materials;
demand in Taiwan is the strongest worldwide, so we have put asystem in place to supply locally manufactured products to ourcustomers there. We have similarly started construction of a newplant in South Korea, where we plan to supply samples tocustomers from FY2023. Given that these products are all used instate-of-the-art semiconductor plants, the technical challenge we

Executive Officer
General Manager, Electronic
Business Materials Division

Seiji Teranishi

face is how to maintain a high degree of purity throughout allprocesses before the products are used by our customers.
Another challenge is working out how we can help ourcustomers recognize this value, so that this technical advantage
results in earnings as a growth business.

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationThe semiconductor market will continue to enjoy solid growth.
However, the fact that this is such a growth market means thatcompetition over pricing and quality is intense. We must keep our
distance from price competition and pursue quality together withour customers, creating added value so that we can survive in thisgrowing market. Specifically, in order to meet customers’
requirements for high quality, we will continue to improve ourtechnologies for consistent production, quality control, andmicroanalysis, as we continually strive to be preferred by customers
who specify us for their purchases. Moreover, as we work to growsales in the Asian market, currently the most important“battleground,” we will also work on deploying into the US andEuropean markets, where growth is anticipated in the future.
TOKUYAMA REPORT 2023

25

Progress of Strategy by Business Segment:Life Science

Business Goal

Growth businesses

Use unique technology to capture top niche market share in areas
where differentiation is possible: vision, dental, and diagnostics

ライフサイエンス Targets
Quantitative

Priority Measures• Strengthen the marketing system and accelerate
expansion of production capability to further boost
market share of dental materials outside Japan• Develop new products and strengthen sales activities
to further expand the photochromic market
outside Japan• Strengthen the medical diagnostic systems businessNet sales (billions of yen)

Net sales

50.0

33.5

Operating profit (billions of yen)

Operating profit
37.5
7.3

25.0

46.0

10.0

40.0
7.5

8.0
5.0

6.0

0

0

FY2021
results

FY2022
results

FY2023
forecast

FY2025targets

SWOT Analysis• Unique product and technology development strengths
based on chemical technology• Able to swiftly respond to specific user requirements
through close coordination among sales,
manufacturing, and development

S

W

Strengths

Weaknesses

Opportunities

Threats• Growth of healthcare due to advent of super aging
society and heightened health awarenessO

T• Expansion of emerging markets in the Middle East,
Asia, and South America• Lack of marketing strengths and weak sales
system in overseas markets• Rise of emerging manufacturers centered on
South Korea and China• Destabilization of supply chain such as procuring
raw materials, outsourcing production overseas,and exporting product due to global instability

Progress by Product Area

26

Product Area

FY2022 Results

Future Plans and Investments

Fine Chemicals• Generic drug sales remained firm due to our strong reputation for
quality control• Global market share increased steadily due to strong performance ofphotochromic materials for eyewear lenses• Develop high-rarity APIs and strengthen
competitiveness• Develop new photochromic materials and enhancesales activities

Dental Materials
and Equipment• Tokuyama Dental Corporation began commercial operations of new
production line at the Kashima Factory• Composite resin business expanded worldwide due to increased
shipments to overseas markets and increased sales to Europe, the US,
and emerging countries• Sales of blocks for dental crowns increased• Further grow overseas market share by reinforcing
sales structure and accelerating improvements to the
supply system

Medical Diagnosis
Systems• Increased orders resulted in only slightly increased sales due to partsand materials shortages• Electrolytes for the Chinese market increased• Expand major product sales and earnings, whilestrengthening development of diagnostic reagentsTOKUYAMA REPORT 2023

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Message from the Executive Officer in Charge

Promoting DX, Strengthening Overseas Sales
Networks, Growing Earnings by Continually
Introducing New Products

Executive Officer
General Manager, Life
Science Business Division

Naoki Tamura

FY2022 Summary (results and issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationJW

apan’s declining birthrate and aging population are irreversible
trends. In order to compensate for the employee shortage thatwill result from the decrease in population, we have begun a DX
project at the Kashima Factory to ensure continued growth byincreasing production through plant automation.
In the dental materials and equipment subsegment, we begancommercial operations at the new expanded facility at the
Tokuyama Dental Corporation Kashima Factory, whereconstruction was completed in 2021, enabling us to make more
shipments to overseas customers. We have also been able tosteadily accelerate global sales of OMNICHROMA™ and othercomposite resins in Europe, the US, and emerging countries.
Although there was a delay in placing on the market resin blocks
for anterior teeth, these are now in full production.
Profit rose in the fine chemicals subsegment due to strong
sales of APIs and intermediates for generic drugs. Partly due toinventory buildup by generic drugmakers, orders remained strong
with favorable evaluations of our quality control. There was a
year-on-year decline in sales of photochromic materials foreyeglass lenses in this sector, partly due to inventory adjustments.
Nonetheless, the growth of our worldwide market share forphotochromic lenses has grown steadily along with thedevelopment of next-generation products.
For medical diagnosis systems, a shortage of parts andmaterials was among the factors that forced us to delay somedeliveries, but the subsidiary that A&T Corporation established in
China is now in full operation, helping to grow our sales to China.
Rising raw material and fuel prices, as well as a lockdown at the
Shanghai plant, made it a tough year for the microporous films
used in the backing sheets of disposable diapers and other items,
but we continued taking action, including developing
environmentally friendly products.

e will continue to develop DX systems for extended
production, reinforce our overseas network, and introduce
new products and services in order to continue transforming ourbusiness portfolio.
In the and equipment business subsegment, Tokuyama Dental
Corporation has decided to follow up on the production expansion
begun in 2021 by constructing a new facility on the Kashima
Factory aiming for completion in October 2024. When reorganizing
our European sales network, Tokuyama Dental Corporation plans
to make the joint venture Tokuyama Dental Deutschland GmbH
into a wholly owned subsidiary, in this way increasing the numberof expatriate employees in Europe. The sales plan is geared toward
more growth for our market share by resuming presentations at
exhibitions and more effective advertising as the impact of the
COVID-19 pandemic subsides.
For eyeglass lens photochromic materials, we will continue tofocus on developing new products in response to customer
requirements and changes in the market. For sales in this industry
sector, we intend to steadily improve shipment volumes, especiallyto overseas customers. In FY2022, we took on as a subsidiary
ASM Inc., a materials venture company with origins at the Universityof Tokyo, aiming to create new products in the materials field.
In the medical diagnosis systems business subsegment, we
are working to boost major product sales at A&T Corporation and,as we aim to increase earnings, we will capitalize on our Tsukuba
Second Research Laboratory to focus on developing medical
diagnostic reagents.

Market Environment
Map showing the relative sizes of global markets for dental materials and equipment
Europe and the United States make up 70% of the worldwide
market for dental materials and equipment, with North America
North America

being the largest market. In Brazil and other emerging countries,

Europe
China

Japan

Middle East
Central and South America

while the global market is expected to grow at a CAGR of
approximately 6%* until 2030.

Southeast Asia
Australia

Our Group is seizing this opportunity for market growth andaggressively intensifying our sales channels.
*Source: Estimate by Tokuyama based on Global Medical Device Market (May 2017),
Japan External Trade Organization (JETRO)

Stable market
Growth market

Circle size: market size

market growth continues in line with increasing per capita GDP,

Color: growth potential

TOKUYAMA REPORT 2023

27

Progress of Strategy by Business Segment:

Eco BusinessBusiness Goal

Growth businesses

Serve as a new business pillar for the future

環境
Quantitative Targets

Priority Measures• Respond to expanded demand for water treatment
membranes due to strengthened
environmental regulations• Expand resource recycling business in waste gypsum
board, photovoltaic panels and others• Commercialize developed next-generationenergy technologies

Net sales (billions of yen)

Operating profit (billions of yen)

Net sales

20.0

Operating profit

18.0

5.0
4.0

15.0

13.8
10.3

10.0

3.0

8.0

5.0

1.5

2.0
1.0

0

(0.4)
FY2021
results

00

FY2022
results

FY2023
forecast0(1.0)

FY2025targets

SWOT Analysis• Unique technologies such as continuous large
recrystallization technology for gypsum• Weak synergies among businesses• Ion-exchange membrane water treatment• Unique technologies, such as PV panel recycling
using thermal decomposition treatments

S• Decreased competitiveness due to risingenergy costs

W

Strengths

Weaknesses

Opportunities

Threats• Increased wastewater treatment demand due totougher environmental regulations in China andemerging countries

OT• Growing global environmental consciousness• Global awareness for creating a recycling-oriented society• Rise of emerging manufacturers centeredin China• Appearance and practical implementation ofalternative technologies

Progress by Product Area
Product Area

Environment

Ion-Exchange
Membranes

28

TOKUYAMA REPORT 2023

FY2022 Results• Waste gypsum board recycling: Construction began on thethird domestic site in Muroran City, Hokkaido

Future Plans and Investments• Waste gypsum board recycling: Ensure stable operation at
three factories in Japan and secure earnings and profits• PV (photovoltaic) panel recycling: Improved recycling quality
and completed process automation• PV panel recycling: Conduct demonstration testing forcontinuous operation to establish mass production technology
and business model• Completed large plant for Asian market•E xplore environment-related demand, such as the recovery ofvaluable resource and decarbonization

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

Message from the Managing Executive Officer in Charge
Director, Managing
Executive Officer
General Manager,
Eco Business Division

Increased Environmental Awarenessas an Opportunity to Commercialize
Distinctive Technologies

Tomohiro Inoue
operability and design. Given the extremely high evaluations
received from customers for this product, the investment ratio of
our partner, Panasonic Corporation, was changed in July 2023 toboost product development and sales of the NS50.
Since FY2019, solar panel recycling technology has beendeveloped in the town of Nanporo (Sorachi District) in Hokkaido incollaboration with NEDO,* and a treatment process wasestablished in FY2022. Our public announcement of these results
met with strong interest and high expectations both from Japanand overseas. In FY2023, we will carry out a continuous operation
demonstration test as we work on establishing this technology formass production, as well as a business model.

FY2022 Summary (results and issues)B

oth revenue and profit in this division increased in FY2022
compared with FY2021.
ASTOM Corporation achieved major improvements in bothrevenue and profit by meeting new large-volume demand from theuse of specialized membranes with distinctive characteristics torecover a valuable resource lithium (Li). There were also firm
demand for ion-exchange membranes used in the production ofsalt, foods, and potable water. Since strong demand is expectedin the future for these applications, both in Japan and overseas, aswell as strong demand for continual technology improvements, wewill not miss out on the opportunity to develop this technology
even further as well as starting work on improving and refining our
supply system.
Tokuyama Chiyoda Gypsum Co., Ltd., a company withtechnology for completely recycling waste gypsum board into theraw material for gypsum board, achieved major growth in revenue
since a plant was operating near maximum capacity. The decision
was made to capitalize on these circumstances, the untapped areaof gypsum board recovery, by moving ahead with a third plant in
Muroran City, Hokkaido, Japan, where operations are scheduled
to open in the fall of 2023. However, the achievement of thiscompany did not meet earnings targets, due to higher processing
costs resulting from an unprecedented surge in resource prices
triggered by Russia’s invasion of Ukraine. While this company isfacing a harsh business climate, we will secure earnings and stable
operations at our three locations as we go ahead with several
initiatives, including revising our prices.
Plastic window sash manufacturer Excel Shanon Corporation
has announced the rollout of Shannon Wind NS50, a new productthat vastly improves on existing performance, excelling at*NEDO: New Energy and Industrial Technology Development Organization

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationAs we look at the five-year period of our Medium-Term
Management Plan, although we see some progress in each of
our business subsegments, it is evident that we have not yet beenable to meet internal and external expectations in Tokuyama’s
three growth business domains: electronics, healthcare, and theenvironment. Although every one of our businesses has technicaland business challenges that must be overcome, we see the valueof each business subsegment increasing in the future amid
continued strong market growth and the high value andexpectations that our customers continue to place on our
technology. We will grasp this opportunity, refine our technologies,
help form a sustainable society through the commercialization ofenvironmentally friendly technologies, and pursue our goal ofestablishing new businesses for the future in FY2025, the final yearof our Medium-Term Management Plan.

Market Environment

Anticipated Volume for PV1 Panel Waste Disposal
In Japan, the start of the FIT system2 propelled the accelerated
adoption of solar power generation, while renewable energy
policies are driving this expansion in other countries around theworld. At the same time, massive quantities of used panels arealso expected to emerge, amounting to a forecast global disposal
volume of at least 1.7 million tonnes by 2030, rising to 60 million
tonnes by 2050.

In order to build up a circular system for solar power
generation, it will be necessary to prepare for the coming era ofmass disposal by establishing PV panel recycling technology thatis sustainable
1 PV: photovoltaic panels for converting sunlight into electricity
2 FIT system: A feed-in tariff for renewable energy

電子
・先端材料
Cumulative
global PV module waste disposal (estimated)
Cumulative PV module waste (million t)

Regular-loss scenario

Early-loss scenario

Cumulative PV capacity (GW)

Cumulative PV capacity

80

5,000
4,000

60

3,000

40

2,000

20

1,000
0

0

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

2042

2044

2046

2048

2050

*Source: Status of PV Module Recycling in Selected IEA PVPS Task12 Countries 2022

TOKUYAMA REPORT 2023

29

Progress of Strategy by Business Segment:

Chemicals

Business Goal

Traditional businesses

Ensure stable earnings in the existing business

化粧品
Quantitative
Targets

Priority Measures• Strengthening the Chloro-alkali and PVC chain to
maximize profits• Reduction of CO2 emissions and waste through thedevelopment and introduction of world-class energyefficient electrolyzers and manufacturing
process improvements• Improve manufacturing processes and supply chainsthrough promoting DX

Net sales (billions of yen)

Operating profit (billions of yen)

Net sales

150.0

14.2

Operating profit

12.5

10.0

85.0

6.8
50.0

5.0

0

0

FY2021
results

FY2022
results

FY2023
forecast

FY2025targets

SWOT Analysis• Weak sales network overseas• Only domestic manufacturer of soda ash• Electrolyzer unit, electrolysis and manufacturing
technology with extensive operating record• Spread of fuel cell vehicles and promotion ofhydrogen society• Sales volume of calcium chloride for antifreeze
fluctuates depending on weather conditions

S

W• Coal-based private power generation

Strengths

Weaknesses

Opportunities

ThreatsO• Increase in demand for caustic soda and PVC resin
due to economic growth in Southeast Asia and India

T• Decreasing domestic demand due to Japanese
economic recession, customers relocating
overseas, etc.
• Easing supply and demand balance due to tohigher production at competitors using expanded
electrolysis and vinyl chloride production plants• Impact of continued high raw material prices
associated with the Russian invasion of Ukraine

Progress by Product Area
Product Area30

FY2022 Results

Soda Ash andCalcium Chloride• Maintained competitiveness by establishing a stablesupply system

Chlor-Alkali andVinyl Chloride•S trengthen Group partnerships, with Shin Dai-Ichi Vinyl
Corporation as a wholly owned subsidiaryTOKUYAMA REPORT 2023

15.0

116.2

101.4

100.0

14.5

128.0

Future Plans and Investments•M aintain and update facilities needed for stablebusiness continuity• Advance energy savings and rationalization to addressenvironmental issues

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Message from the Managing Executive Officer in Charge

A Stronger PVC Business with Shin Dai-Ichi Vinyl
Corporation as a Wholly Owned Subsidiary
Focusing on Keeping Product Supply and Quality Stable
FY2022 Summary (results and issues)F

iscal 2022 was a tough year for our chemicals segment, withsoaring coal prices due to Russia’s invasion of Ukraine andeconomic stagnation resulting from China’s zero-COVID policy. We
asked our customers to allow price adjustments in response to
sharp increases in the prices of raw materials and fuel as well as
logistics costs, then having gained their understanding we havebeen working to ensure a stable supply. Although the businessenvironment is expected to remain uncertain in FY2023, I intend toengage in dialogues with our customers to work through theissues. Since we are the only manufacturer in Japan of soda ash
and calcium chloride, it is particularly important for us to maintainthe supply and quality. We will continue to work hard to provide acontinuous supply. Also, to reach our goal of a 30% reduction in
GHG emissions by FY2030, we are currently studying ways toinnovate for more environmentally sustainable manufacturing
processes in the Chemicals Business Division. In FY2023, welaunched the SCM Visualization Project as part of our promotion of
DX in the Chemicals Business Division. Through this project, we
will thoroughly review all existing operations and redesign tasks
that are overly dependent on personal skills, which I hope will leadto greater efficiency.

TopicsManaging Executive Officer
General Manager,
Chemicals Business Division

Hirotaka Nishihara

Also in FY2023, we will strive to provide a consistent supply to
our customers by placing the highest priority on safety and stable
operations. In addition, I prefer to think of the trend toward carbon
neutrality as a business opportunity and to make this a year whenthe entire Chemicals Business Division builds environmentallyfriendly manufacturing processes.

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationW

ith the cooperation of Sumitomo Chemical Co., Ltd., wemade Shin Dai-Ichi Vinyl Corporation into a wholly owned
subsidiary as of April 1, 2023. We reached this decision because
vinyl chloride is one of the most important items in our chlor-alkali
and vinyl chloride sector, and changing our approach in this way
enables us to accelerate our decision-making. Although making
vinyl chloride paste will be outsourced to Sumitomo Chemical’s
Ehime Plant beginning in FY2023, the supply to customers willcontinue as before with no change. The customers of our paste
business are primarily domestic manufacturers of wallpaper andflooring materials, as well as automotive-related processing
manufacturers. We will maintain the system that allows us toalways manufacture products sought by our customers and we willcontinue to sell the products that our customers prefer.

Contribute to Mitigation of Global Warming
Japan’s first domestic joint feasibility study of the social implementation of
circular carbon methanol utilizing CO2

In July 2023, Tokuyama began a feasibility study with Mitsubishi
CO2 as a chemical raw material. We are also considering using theGas Chemical Company, Inc. for the production and sale ofexisting methanol supply network of Mitsubishi Gas Chemical tomethanol using as raw materials the CO2 emitted from theserve customers who require environmentally circular chemicals.
Tokuyama Factory and hydrogen (H2) generated from caustic soda
Our aims in conducting this study are to help create a market
production, by applying Mitsubishi Gas Chemical’s proprietaryfor green products made in Japan and the social implementation
methanol production technology. Through this study, we are alsoof a CCU* industry by helping to instantiate low-carbon value andlooking at using the green electricity produced when biomass fuels
environmentally circular value, in order to promote the spread ofare fed into in-house power generation facilities to produce
environmentally friendly green products.
hydrogen, which can then be used as a methanol feedstock.
*CCU: carbon capture and utilization is the process of capturing carbon dioxide (CO2) to berecycled for further usage
Methanol is a base material for various chemical products, andas it can be produced from CO2, a greenhouse gas, it is expected
to be a powerful resource for building a carbon neutral society
H2through carbon capture and utilization (CCU*).
In-house consumption
HydrogenThe methanol produced through this initiative deserves theby Tokuyama
Methanoldescription environmentally circular. The commercialization of thesynthesis/
CH OH
results of this study will lead to the establishment of Japan’s first
CO2
distillationcommercial plant to recycle CO2 emitted from factories to produce
CO2 capture
Exhaust gas ofMethanolmethanol. At Tokuyama, our concept is to achieve the “greening”
facilities
power generation
External salesof chemicals through this circular carbon methanol method utilizing
facilities, etc.
3

TOKUYAMA REPORT 2023

31

Progress of Strategy by Business Segment:

CementBusiness Goal

Traditional businesses

Become the domestic industry leader in energy efficiency

Priority Measures

セメント
Quantitative Targets• Introduce energy-saving equipment to
reduce CO2 emissions• Reduce the amount of coal usage by
accepting more fuel-based wastematerials such as waste plastic

Net sales (billions of yen)

Operating profit (billions of yen)

Net sales

100.0

50.3

50.0

Operating profit

15.0

69.0

58.5

10.0

56.0

6.0

5.0

5.0
0

0

(1.9)
FY2021
results(3.7)
FY2022
results(5.0)

FY2023
forecast

FY2025targets

SWOT Analysis• Contribute to environmental preservation by accepting
waste from inside and outside the Company for cement
feedstock and as a thermal energy alternative• Enabling technological development from a chemical
standpoint based on chemical manufacturing• Domestic demand due to national resilience andLinear Chuo Shinkansen, Osaka/Kansai Expo andan IR,* etc.

• Higher of repair costs due to aging of facilities

S

W

Strengths

Weaknesses

Opportunities

ThreatsO

T• Demand for building infrastructure associated witheconomic development in emerging countries*IR: integrated resort• Decrease in domestic cement demand due todecline in population• Rising material and logistics costs• Criticism of cement industry due to problems with
CO2 emissions

Progress by Product Area
Product Area

FY2022 Results

Future Plans and Investments• Raising selling prices
Cement• Cutting manufacturing costs by using low-grade coal andincreased use of waste plastics/tires• Decision on sales subsidiaries merger

Recycling

32

TOKUYAMA REPORT 2023

• Consideration of suspending operations of a cement kiln
• Maintain and update facilities needed for stablebusiness continuity• More collection of waste plastics, etc.

• Advance energy saving and rationalization to addressenvironmental issues•S tart of a concrete dome silo operation for the consistent supplyof raw materials for cement• Expand waste treatment that contributes to aclosed-loop societyTokuyama Value Creation

Tokuyama Value
Creation Strategy

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

Message from the Managing Executive Officer in Charge
Managing Executive Officer
General Manager,
Cement Business Division

Initiatives to reduce costs and increase
selling prices

Takahide Taniguchi

FY2022 Summary (results and issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationOA

ur cement segment faced a tough environment due tosoaring coal prices, even higher than the levels they havebeen at since 2021, caused by Russia’s invasion of Ukraine. We
worked enthusiastically on both cost cutting and raising our selling
prices, our most urgent challenges. From early 2022, in order toimprove profitability, we used more waste plastics as an alternativefuel as well as low calorific value coals, which are difficult to handle,
while starting to increase selling prices. Although our efforts haveachieved limited results, operating profit fell for the second quarterin a row because of significant cost increases.
We invested in loading facilities for soil stabilizing cement at
the Osaka cement terminal, readying our system to meet growing
demand in the Kansai region for projects such as EXPO 2025
Kansai, Osaka, Japan and an integrated resort project. As well, we
merged four sales subsidiaries. These measures strengthened oursales network and management efficiency.

Topicss priority measures for our business target of being thedomestic industry leader in energy efficiency, we will focus on
introducing equipment that is energy efficient and that reduces
CO2 emissions as we cut coal consumption by using morealternative fuels, such as waste plastic.
For our specific initiatives to achieve our targets, in FY2023 wewill install high-efficiency clinker cooler bag-filters (converted fromelectrostatic precipitators) and tanks for new waste liquids. In
addition, we have been boosting the use of waste plastics and tirederived fuel.
Further, we invested in a concrete dome silo in FY2022 toconsistently secure alternative raw materials for cement.Because
the domestic demand for cement remains on a gradual downtrend,
to optimize production and match up our systems with the external
environment, we are considering into suspending the operation of
one cement kiln.

Contribute to Mitigation of Global Warming

Joint research toward effective utilization of biomass combustion ash and realization of CCS1
Disposal of fly ash emitted from biomass power plants, which havebeen increasing in recent years amid the trend toward eliminating
fossil fuels, has become an issue because this ash contains
elements such as potassium that restrict its reuse in cement. We
have been working since 2020 to develop technology for theeffective use of fly ash, including CO2 fixation. This technology will
be applied to a construction material sold by Itochu Enex Co., Ltd.
affiliate Kano FA Co., Ltd. (trademark: Recycle Beads™2) todevelop a new CO2-fixing admixture that enables biomass-derived
fly ash to be used effectively and for CCS to be more widely used.
By using fly ash that has been made to absorb CO2 with ourtechnology as a raw material for Recycle Beads™, and by effecting
further CO2 absorption during the production of Recycle Beads,™
we utilize them as CO2-fixing Recycle Beads™.
Initial studies performed by both companies have shown that
CO2 can be adsorbed into the calcium oxide contained in fly ash
and Recycle Beads™ to fix a greater amount of CO2 than isemitted during the production of Recycle Beads™. We willcontinue research for enabling the adsorption and fixation of more

CO2 at a lower cost as we move toward the goal of developing
construction materials that adsorb more than 10% of the total
amount of CO2 in our products.
1 CCS (carbon dioxide capture and storage)
2 Recycle Beads is a roadbed material and weed control product produced by KANOU FA
Co., Ltd., a company in which ITOCHU ENEX Co., Ltd. has a 49% stake.

Biomass power plant

Biomass fuel

KANOU FA CO., LTD.
Processing treatment

Combustion ash

Itochu Enex Co., Ltd.

Distribution

Recycle Beads

CO2 binding
treatment

Reutilization• Road subgrade material• Laid on a parking lot• Weed suppression material• Construction backfill material

TOKUYAMA REPORT 2023

33

Message from the Executive Officer in Charge of Sustainability
Executive Officer
General Manager of the Corporate
Social Responsibility Division

Michiko Seki

Tokuyama’s Views and System on Sustainability
Guided by our Mission—”to create a bright future in harmony
with the environment, in collaboration with its customers,
based on chemistry,”—we will improve our corporate value tocontinue to be a company needed by society and that takes
action to help create a sustainable society.
In Tokuyama’s promotion system for CSR management,
the CSR Promotion Council, chaired by the President andincluding all Executive Officers, encourages corporate
governance and makes decisions on important items related
to sustainability. In addition, Tokuyama’s Risk Management
and Compliance Committee, chaired by the director
supervising the Corporate Social Responsibility Division, hasbeen established under the CSR Promotion Council to handle
risk management and compliance, seen as the core and the“two wheels” of internal control. At the same time, expert
committees were spun off from the Risk Management andCompliance Committee to respond to issues in highly
specialized and important fields. In FY2022, the Sustainability
Committee was established as the eighth expert committee,
responding to sustainability issues not covered by other expert
committees in order to strengthen our governance. In FY2022,
this committee had four meetings to mainly discuss initiatives
to be taken for climate change, soft law responses related toexternal disclosure, and responding to human rights issues,
including those in the supply chains.
Promotion System for CSR Management
Board of Directors
Executive Committee
Strategy Committee

President

CSR Promotion Council
Risk Management and Compliance Committee

From the viewpoint of risk management andcompliance, we established expert
committees to handle cross-departmental
initiatives of special importance and thoserequiring expertise

Financial Reporting Committee
Fair Trade and Competition Committee
Security Trade Committee
Information Security Committee
Environment Committee
Safety Committee
Product Safety and Quality Assurance Committee
Sustainability Committee (established in FY2022)

NEW

Responded to issues related to sustainability such as “addressing
climate change” and “business and human rights” that fall outside
the scope of existing expert committees.

Connecting to Tokuyama’s Vision and Sustainability Initiatives
Promoting CSR management is one of the high-profile issues
in Medium-Term Management Plan 2025. First, we mustclearly state our fundamental approach and views on
sustainability, so we recently established the TokuyamaGroup Sustainability Principles showing what our company issupposed to be based on Tokuyama’s vision. By inculcatingthese principles into officers and employees’ behavior, we
revised the Tokuyama Group Code of Conduct. As it has
been more than 10 years since the Code of Conduct was last
revised, we updated the code to address value creation,
diversified working styles, climate change mitigation,reflecting a recent trend for ESG (environmental, social, andgovernance) as well as requests from society. Detailed
descriptions of action guidelines are included for the related
principles and policies, which have also been organized andsystematized.
For more information, please refer to the List of Policies
on Tokuyama’s website.
https://www.tokuyama.co.jp/eng/csr/policies.html

For example, for one new policy that addresses respectfor human rights,we established the Tokuyama Group Human
Rights Policy, which was influenced by the UN Guiding
Principles on Business and Human Rights.
To distribute information on these policies, Group
company CSR caravans encourage Group-wide
understanding and sharing, under the theme of “promoting
sustainability centered on Group management.” We alsobegan e-learning programs to raise awareness of theTokuyama Group Human Rights Policy.

In addition, KPIs for Materiality (key CSR issues), which
are the foundation for growth, are determined and monitoredby the CSR Promotion Council in order to strengthen our
initiatives. From FY2023, we will clarify the responsibilities ofall executive officers for addressing materiality, and reflect the
progress made in their remuneration for the following
fiscal year.
➡ pp. 36–39

Vision and Materiality

Developing and Systematizing Sustainability Policies
MissionVision and Values

Develop and systematize
sustainability policies
guided by Tokuyama’s
redefined Vision. Prepare
for non-financial information
disclosure

Sustainability Principles

Established the TokuyamaGroup Sustainability
Principles on April 1, 2023

Code of Conduct

Revised the TokuyamaGroup Code of Conduct
on April 1, 2023

Tokuyama’s Vision

Established the
Tokuyama Group
Human Rights Policy on
December 1, 2022.

Various Policies
Human Rights
PolicySafety Management
PolicyQuality Policy

Environmental
PolicyHealth Management
PolicyBasic Purchasing
PolicyHuman Resources
PolicyAnti-Corruption
Policy…

Materiality (CSR Priorities)
Helping to fightglobal warming

Conserving theenvironment

Preventing accidents Developing products
and preparing forand technologies thatdisasters
address social issues

Improved chemical
management andproduct safety

Engaging with local Promoting CSR Developing human Promoting diversity Promoting physicalcommunities
procurement
resources
and career fulfillment and mental health34

TOKUYAMA REPORT 2023

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

Progress of Sustainability Initiatives in FY2022
To make a “contribution to the mitigation of global warming,”
one of the priority issues in Medium-Term Management Plan
2025, we set the goal of reducing our GHG emissions by 30%
by FY2030 (compared with FY2019). Further, we havedeclared our intention to achieve carbon neutrality by FY2050.
We have put in a TCFD report on Tokuyama’s company-wide
and sweeping initiatives for becoming carbon neutral. This
report is designed to disclose detailed information on 11
items, based on the TCFD Recommendations, with the goalof gaining the understanding of stakeholders and conveying
our desire to meet the expectations of society.

generating no waste; however, considering the response to
climate change, it has become necessary to overhaul ourbusiness portfolio. We need to tackle issues such as how to
optimize the production system, shift to a portfolio with more
growing businesses, and reduce the total output of in-house
power generation.
To meet the goal of reducing our GHG emissions by 30%
by FY2030 (compared with FY2019), we took two major
GHG emission sources and promoted a reduction plan foreach of them: one source is GHG emissions from fuels forin-house power generation and the other is emissions from
cement production, which includes raw materials, fuels, andwaste that is burned. For fuels used for in-house power
generation, we have been conducting experiments on themixed combustion of non-fossil fuels, such as biomass andammonia. Based on this result,we are going to invest in thetechnology for mixed combustion. On the other hand, toreduce GHG emissions from making cement—since we plan
to increase using combustible waste, including waste
plastics—we will work on boosting production efficiency andreducing our overall GHG emissions.

For more information, please refer to Disclosures Based on
TCFD Recommendations on Tokuyama’s website.
https://www.tokuyama.co.jp/eng/csr/tcfd_information.html➡ pp. 40–42

Disclosures Based on TCFD Recommendations

Until now, Tokuyama’s strengths have been in a
recycling-oriented and highly efficient production system,
which is lean and highly integrated, enabling us to produce
power from coal-fired in-house power generation as well as
to use waste products as raw material for cement production.
This is a sustainable approach from the perspective of
GHG Emissions Reduction Targets(10,000 tonnes CO2e)

Considering closing one cement kiln line

400
(10,000 tonnes CO2e)800Group Companies
CHC emissions from waste
GHG emissions from raw materials
GHG emissions from fuels

726
Originating from waste, rawmaterials, and fuel (cement)

600

Increase waste input

300
200
100
0

2019

2020

2021

2022

2023

2024

(10,000 tonnes CO2e)400

Originating from fuel(from in-house
power generation)

30%

200

reduction

2026

2027

2028

2029

2030 (FY)FY2025 Co-firing with ammonia begins

400

Compared with
FY20192025

FY2025 Increased co-firing with biomass begins

300

50%
reduction

200
100
0

0

2019 2020 2021 2022

Base year

2030

2050 (FY)

2019

2020

2021

Becoming carbon neutral

2022

2023

2024

2025

2026

2027

2028

2029

2030 (FY)

Investigation and Reduction starting in FY2025
preparation period

FY2050ResultEstimate

What Needs to Be Addressed from Now
We are working to practice management that enables a
PDCA cycle for each of the CSR priorities, with the aim ofvisualizing a path to resolving issues. For promoting CSR
management, I think the following three approaches arecommon for tackling any issue: (1) to firmly establish short-,
medium- and long-term objectives (Vision), (2) to move
forward while getting stakeholders widely involved, and (3) todisclose information externally and leverage feedback fromstakeholders for the next step. In particular, the external
disclosure of non-financial information will be essential foraccountability in business activities and the transparency of
our governance. These disclosures must be made on aconsolidated basis, which requires that the entire Group
make concerted efforts for sustainability.
For Tokuyama “to create a bright future” and besustainable, we will disclose timely information externally thatis used for determining corporate value, including the ESG
that is now required of a company, respond to stakeholders’trust, and contribute to more improvement of ourcorporate value.

TOKUYAMA REPORT 2023

35

V is ion a n d Materi al i ty

Achieving Our Vision through Socially Responsible (CSR) Management
CSR management is essential for realizing Tokuyama’s
Mission, as redefined in 2021, “to create a bright future inharmony with the environment, in collaboration with its
customers, based on chemistry.” For example, for creatingproducts and services that contribute to a “bright future,”
we must first correctly understand the expectations andrequirements of society, and then for every person in theGroup to have a “vision” of what needs to be done and towork every day from a long-term perspective and have anawareness of potential social issues. This attitude and thisbehavior are also important for us as we move from thetraditional business model and transform ourselves into avalue creating company. In other words, Tokuyama’s CSR
management covers the creation of new value for asustainable society and it should be promoted by theconcerted effort of all managers and all employees.
   The Tokuyama Vision has been developed so that we
can clearly visualize our future image in order to realize our
Mission. Materialities (material issues) refer to CSR priority
issues identified by CSR management that are used when
making up an action plan for realizing our Vision.

   We work on our initiatives to realize our Vision, whileconnecting with the objectives of the divisions anddepartments for their goals for materiality as well as KPIs.
Every year, the Corporate Social Responsibility Divisionsummarizes the implementation of their initiatives, which isthen reported to the CSR Promotion Council, chaired by
the President, and with all executive officers. In addition,
for calculating executive remuneration for executive
officers, we incorporate items for addressing materiality as
criteria and evaluate executives according to the degree ofcontribution, taking into account our calculation of theexecutives’ specific roles and responsibilities. We areworking hard to continually raise the level of CSR
management by following the company-wide PDCA cycle that
we use to check on progress and analyze current conditions.
   The Sustainability Committee, established in FY2022,
has begun to promote CSR procurement and information
disclosure based on the TCFD recommendations. We havealso established, after obtaining approval from the Boardof Directors, the Tokuyama Group Human Rights Policy,
which is central to initiatives related to human rights.

Tokuyama’s Materiality
Material issues are used as guidelines to devise actionplans for realizing Tokuyama’s Vision. The table below
shows the aspirations and KPIs for each material issue aswell as results and the people and departments who areresponsible. Our actions for addressing materialities also
contribute to the realization of the UN’s SDGs. For
reference, our material issues and their main SDGs areshown in the table below.

Materiality KPIs and Results
Material Issue
Relationship to SDGs

Helping to fight global
warming

Conserving theenvironment

Preventing accidents
and preparing fordisasters

36

TOKUYAMA REPORT 2023

Our Vision

KPI / Target•	Achievement of carbon neutrality
by FY2050•	Reduction of GHG emissions of the Tokuyama Group: 30% reduction in FY2030(compared with FY2019)•	Active disclosure of climate-related information•	Promoting recycling andmaintaining zero landfill waste•	Maintaining low emissions ofenvironmental impact substances•	Complying with legal requirements
and other regulations, achievementof zero environmental accidents•	Contribution tobiodiversity conservation•	Reduced environmental impact:· Effective utilization rate for waste ≥94%
· Zero waste emission rate ≥99.9%· Maintaining low emissions of environmental impact substances•	Complying with legal requirements and other regulations, achievement of zeroenvironmental accidents•	Contributing to biodiversity conservation•	Accident prevention anddisaster preparation•	Improvements in process safety
management level•	Fostering and improving
the safety culture•	Zero accidents and zero lost time injuries; number of incidents: zero•	Deepened risk assessment•	Promoting smart security

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Process of Identifying Materiality
In 2019, the Company identified nine material issues
based on important social factors, dialogues withstakeholders, and third-party opinions from external
experts. In 2021, after reviewing these issues, in line with
the new Medium-Term Management Plan 2025, we
increased the number of materialities (material issues) toten, then formulated targets and KPIs for FY2025.

1

STEP

2

STEP

Extract and organize social issues fromthe social requirements and Tokuyama’s
business activities

Order of priority
Decide on the priority based on importanceto stakeholders and Tokuyama

Review by experts

3

Review priorities and quantifications (metrics)
based on feedback from outside experts

STEP

Commitment from management

4

CSR Promotion Council discusses suitabilityof material issues and approves them

Very
Important

Importance to Society and Stakeholders

STEP

Extract and organize issues   We are determined to always take action for building
a sustainable future with society, to contribute to resolvingsocial issues, increase trust from diverse stakeholders, as
we aim to improve corporate value. Tokuyama will solidify
relationships of trust with society by strengthening
initiatives for dealing with material issues, while pursuing
our own unique approach to CSR management.

Important

Helping to fightglobal warming

Conserving the environment
Preventing accidents andpreparing for disasters

Developing products andtechnologies that addresssocial issues

Engaging withlocal communities

Developing human resources

Promoting CSR procurement

Promotion of diversity andcareer fulfillment

Improved chemical
management andproduct safety

Promotion of physical &mental health

Very
Important

Importance to Tokuyama

For detailed information on our activities, please refer to the CSR page section of
Tokuyama’s website.
https://www.tokuyama.co.jp/eng/csr/

80% or more
FY2022 Results•	Promoting coordination with regions, local governments, and within the Industrial Complex, aiming
for carbon neutrality•	Considered introducing alternative fuels, such as biomass•	Acquired third-party certification for GHG emissions (Scopes 1, 2, and 3)•	Responded to CDP Climate Change Questionnaire (score: B)•	Changed the method of calculating GHG emissions to comply with the GHG Protocol•	Introduced internal carbon pricing to the screening of prospective investments•	Effective utilization rate for waste: 94.7%•	Zero waste emission rate: 99.9%•	Maintained low emissions of environmental impact substances; actions are being taken by
every department•	Complying with legal requirements and other regulations, and zero environmental accidents•	Forest volunteers, cleanup drives, etc.
•	Responded to designated alien species•	Number of serious accidents/disasters: zero
· Number of accidents: 2· Occupational accidents: Employees with no lost time injuries: 4Contractors with lost time injuries: 2; No lost time injuries: 2•	Identified risks through risk assessment and began mitigation•	Promotion of smart security: Considered the use of a detector for unusual items
in maintenance work

Achievementlevel

50% or more × less than 50%
Person responsible*
Department responsible

Director (President and Executive Officer)
Carbon Neutral Strategy Div.
Responsible CareManagement Department
Factory Planning and
Administration Department

Director (Chairperson ofEnvironment Committee)
Responsible CareManagement Department

Director (Chairperson of Safety Committee)
Responsible for CareManagement Department*Person responsible: Someone who serves as a director and chairperson of the committee/meeting body that he/she is in charge of

TOKUYAMA REPORT 2023

37

Material Issue
Relationship to SDGs

Developing products andtechnologies that
address social issues

Improved chemical
management andproduct safety

Engaging with local
communities

Promoting CSR
procurement

Developing humanresources

Promotion of diversity
and career fulfillment

Promotion of better
physical & mental health

Our Vision

KPI / Target•	Increased development of products
and technologies that help toresolve social issues,
focusing on SDGs

•	Promoting the development of products and technologies that help to resolve
social issues, focusing on SDGs
[Electronics] Expansion of product line and creation of new businessin peripheral materials[Healthcare] Creation of new technologies for product line expansion
and globalization[Environment] Creation of new technologies to reduce CO2 emissions•	Maintaining effective chemical
management and promoting
product safety within
the Tokuyama Group•	Complying with chemical laws and regulations in each country: Zero infractions ofchemical-related regulations and zero accidents due to product safety•	Risk management of chemical products, including the whole Group•	Harmoniously co-existing andcooperating with communities:
Contributing to a decentralizedsociety through business•	Contribution to communities:
Providing a place where people cangrow and flourish•	Harmoniously co-existing and cooperating with communities:· Dialogue with community· Active participation and cooperation in various community events(for residents, government, and other organizations)•	Helping resolve community issues and contributing to the sustainable
development of the community:· Hiring from local community· Social contributions· Contributions to the community through business•	Management of supply chainsbased on CSR procurement
guidelines•	Promoting survey and management of supply chains based on
CSR procurement guidelines:· More detailed investigations of suppliers by using refined assessment checklists· Establishing a system for on-site audits of suppliers· Reduced environmental impact from logistics•	Developing and strengthening
human resources, the source ofcorporate competitiveness•	Strengthening human resources forthe next generation•	Developing management personnel for the next generation•	Training highly skilled engineers to support business execution•	Begin suitable employee deployment and rotation of personnel based on careerplanning and job skills•	Established human resource development by linking with goal setting
and feedback•	Acceptance and utilization ofdiverse human resources•	Respect for human rights

Cultivation of physical &mental health of employees andtheir families, and creation ofa work-friendly environment•	Cultivating better physical andmental health•	Promotion of measures to address
lifestyle diseases•	Promotion of diversity and inclusion· Active promotion of women: 20% of new graduates, ≧5% of management
positions, ≧10% of executives, etc.
· Promotion of employment of persons with disabilities: 2.3%
•	Promotion of work-life balance: annual paid leave acquisition rate: ≧75%;
childcare leave acquisition rate: ≧75%
•	Number of male employees on childcare leave: ≧10 or ≧75% ofmale employees•	Acquisition rate of women taking childcare leave ≧70%

• Enhanced individuals’ awareness of health: smoking rate <15%
• Maintaining and lowering percentage of findings· Regular health consultation rate: 100%
· Re-examination rate: ≧90%
· Specific health guidance rate: ≧80%
• Lowering the leave rate: <5%• Stress check examination rate: ≧95%All non-consolidated

38

TOKUYAMA REPORT 2023

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

80% or more
Achievementlevel

FY2022 Results[Electronics] Accelerated initiatives aimed at commercialization through marketing originatingfrom customers[Healthcare] Decided to commercialize products based on multiple themes[Environment] Promoted Medium-Term Management Plan 2025 strategies and created businesses
based on multiple themes•	63 product reviews (second and third rounds); 706 labeling reviews•	Understood and responded to domestic and overseas regulatory trends· Japan (Chemical Substances Control Act, Industrial Safety and Health Act, and Law for
Promotion of Chemical Management)· Overseas (EU Chemicals Strategy for Sustainability, Nano Material Regulations, China’s Yangtze
River Protection Law, etc.)· Labeling and SDS-related (JIS and others overseas)•	Provided education to departments and Group companies involved in chemical productmanagement and conducted regular inspections and interviews on their state of management•	Promoted the management system for chemicals contained in products•	Dialogue with community· Conducted a dialogue with the community while taking COVID-19 countermeasures, such as
online conversations· Conducted factory tours for local community, local elementary school students, etc.
· Sponsored Tokuyama Summer Festival and Shunan Winter Tree Festival•	Social contribution· Participated in volunteer activities (cleanup drives, Tokuyama Chemical Club, etc.)· Educational support for neighboring schools (Mikage Bunko book program, work experience forjunior high school students, etc.)•	Contributions to the community through business· Provided specific power supply to Shunan City (for City Hall, Tokuyama Station Building, etc.)•	Revised CSR procurement guidelines (December 2022)•	Raised awareness of new CSR procurement guidelines
Requested written consent from companies with a transaction value of 30 million yen or more(collected from 215 out of 296 companies)•	Began to implement supplier assessments for companies with a transaction value of 100 million
yen or more by using the SAQ published by GCNJ (collected from 133 out of 181 companies)•	Implemented new business leader training (attended by 20 employees with a cumulative total of 37)•	Formulated an education plan on DX•	Implemented training related to global human resource development: Attended by 33 employees•	Launched a new self-development program•	Defined ideal images for the desired personnel and skills based on 13 job groups; publishedcompany-wide in April 2022
•	Created a system for strategic rotation; established HR business partners; Organized humanresource information through an HR management system•	Conducted four training sessions for evaluators (75 employees) to deepen their understanding ofappropriate goal setting•	Promotion of diversity and inclusion· Continued career hiring incorporating diverse skills and values (38 people in FY2022)· Number of female managers increased by five, reaching 2.7% (non-consolidated) with target
raised from 2.0% to 2.5% in FY2022, to 5% in FY2023; Consolidated percentage of womenamong all managers: 4.7%
· Percentage of people with disabilities: Although actions have been taken, the employment rate
for this group compared with FY2021 stayed at 2.02% (three people hired in FY2022)· Established an agricultural corporation in December 2021 with the aim of creating employment
for people with disabilities, preparing for the start of production in July 2023
· Number of male employees on childcare leave: 22 (average of 32 days)•	Respect for human rights· Established and released human rights policy (December 2022)•	Antismoking drive
Smoking rate: 18.9% (FY2021) 17.6% (FY2022) (FY2022 goal of less than 18% achieved)Banned indoor smoking, no smoking campaign•	Health guidance and measures after health diagnosis
Regular health checkup rate: 100% (FY2021) 100% (FY2022)
Re-examination rate: 81.0% (FY2021) 89.2% (FY2022)
Specific health guidance rate: 85.3% (FY2021) 84.5% (FY2022)•	Mental healthcare
Leave rate: 0.66% (FY2021) 0.75% (FY2022)
Stress check examination rate: 98.1% (FY2021) 97.5% (FY2022)
Implementation of mental health training and e-learning (for workers in management positions andregular workers)
Selected as an enterprise engaging in a health management program and certified as a health and•	productivity enterprise (White 500) in FY2023


Corporate Data

50% or more × less than 50%
Person responsible*
Department responsible

Director (in charge of Research &Development)
Research & Development Division

Director (Chairperson of Product Safety
and Quality Assurance Committee)
Responsible CareManagement Department

Director (in charge of CSR, and General
Affairs and Human Resource)
General Affairs Department
Environment & Safety Department
Factory Planning and
Administration Department

Director (Chairperson of Sustainability
Committee)
Procurement Department
Logistics Department

Director (in charge of General Affairs andHuman Resources)
Human Resources Department

Director (in charge of General Affairs andHuman Resources)
Human Resources Department

Director (in charge of General Affairs andHuman Resources)
Health Care CenterAll non-consolidated*Person responsible: Somebody who serves as a director and chairperson of the committee/meeting body that he/she is in charge of

TOKUYAMA REPORT 2023

39

D isclos u res Based on TCFD R eco m m end at i o ns

The Tokuyama Group supports the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD) and has conducted repeated investigations into climate change risks andopportunities based on the TCFD recommendations. In FY2022, we further analyzed these risks andopportunities, strengthened our strategy, and clarified our metrics and targets. See Disclosures Basedon TCFD Recommendations (Tokuyama TCFD Report, or TCFD Report) for more details.
Disclosures Based on TCFD Recommendations (TCFD Report)
https://www.tokuyama.co.jp/eng/csr/tcfd_information.html

1 Governance
The Tokuyama Group has identified climate change as oneof the most significant management risks. Accordingly,
helping to mitigate global warming is one of the key
objectives under Medium-Term Management Plan 2025.
   The new Sustainability Committee was establishedunder the CSR Promotion Council in FY2022 foraddressing major risks for sustainability, with a framework
created for identifying and assessing cross-organizationalrisks and opportunities. Items of special importance are
discussed by the CSR Promotion Council, and reported toand overseen by the Board of Directors. The Board of
Directors verifies the progress of these mitigation initiatives

and other key objectives of Medium-Term Management
Plan 2025, as well as future investment plans, among
other items.
   As mitigation initiatives transitioned from the concept
stage to the implementation stage from April 2023,
Tokuyama is accelerating efforts by establishing
the Carbon Neutral Strategy Division, which operates
independently. The TCFD Report provides more details,
including supervision by the Board of Directors and therole of the management team.
pp. 34-35

Message from Director in charge of sustainability

System to Promote Carbon Neutrality Achievement
Consistency with Group-wide policy

Sustainability Committee

Board of Directors

ReportCSR Promotion
CouncilPresident andall Executive Officers

Measure proposal
Supervise

President
ReportDecisions andoversight

Resolutions
and Report

40

Environment Committee• Ascertaining GHG emissions and implementing energy-saving measures• Corporate Social Responsibility Division, Tokuyama Factory, Kashima
Factory, and business divisions

TOKUYAMA REPORT 2023

Carbon Neutral Strategy Division• Reporting and investigating on decarbonization initiatives

Measure implementation

Executive
Committee
President andall Executive Officers

Division meetings• Deliberation on important matters and investment for
decarbonization initiatives

Guidance
Support
Requests

Divisions and group companies

Supervise• Examination of cross-organizational issues related to sustainability,
including climate change• Corporate Planning Div., Carbon Neutral Strategy Div., Corporate Social
Responsibility Div., General Affairs & Human Resources Div., and anyother divisions specified by the chairperson

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

2 Strategy
The Group’s Medium-Term Management Plan 2025
addresses both the risks related to climate change and thepotential new business opportunities in the environmental
field. For Tokuyama, risk mitigation includes making visible thecarbon costs coming from the introduction of carbon pricing,addressing the impact of potential changes in customer
procurement policies, and identifying the impact on financing
from potential policy changes at financial and investmentcompanies. Moreover, by focusing on international risk

scenarios, we analyzed risks and opportunities using the
1.5°C and 4°C global warming scenarios covering the period
from the present to 2050. Our aim is to monetize promisingbusiness opportunities while reducing climate change risks byshifting our business portfolio from energy-intensive to valuecreating companies. The TCFD Report covers the impact ofclimate-related risks and opportunities on the company’sbusinesses, strategy, and financial planning, and the resilienceof the company’s strategy.

Risks Posed by Climate Change (scenario analysis)

Short term: by FY2025, medium term: by FY2030, long term: by FY2050

Scenario

Risk
category

Target of risk
assessment

Potential impacts on the Group(financial)(identified risks)

Financial
impact• Increase in operating costs due toexpanded carbon pricing

Moderate

Medium tolong term

Large

Low

Moderate

Medium tolong term

Large

High

• Increased green energy production
and procurement costs

Large

Medium
term

Large

High

• Increased costs for green material
procurement and green process
conversion due to lack of technology
and market maturity

Large

Medium tolong term

Large

High

Large

Medium tolong term

Government Carbon pricing andpolicy andenergy• Increase in costs for mitigation
regulations
procurement costs
initiatives due to tightening the GHG
emission regulations

Technology

Green processadoption measures

1.5°C

Evaluation bystakeholders• Decline in market value and increase infinancing costs due to a poor
evaluation of carbon neutrality initiatives• Risk of litigation by local residents toshut down or decommission coal-fired
power plants owned by Tokuyama• Sustainability risks for biomass fuelMarketPenetration ofgreen procurement
by customers• Rejection of products by the market
based on large carbonfootprint evaluation• Decrease in profitability due to theinability to pass on the price fully
covers the costs for green
process adoption

Large

Medium tolong term

Physicalrisks(acute)More frequent
extreme weather
events and sea
level rise

• Wind and flood damage to
production plants; production plan
delays and increased costs due tosupply chain disruptions, etc.

Moderate

Physicalrisks(chronic)

Long-term
intensification of
extreme weather
events and rising
sea levels• Decrease in production capacity due
to insufficient factory cooling capacity
caused by rising average temperatures• Production halts due to storm surges
caused by rising sea levels

Minimal

Evaluation

4°C

Climate Change Opportunities (scenario analysis)
Scenario

Timing of risk Impact onmaterialization business

Opportunity
Opportunity
Type
Assessment Target

MarketResourceuse
efficiency

Response measures• Monitoring carbon pricing policy
trends and conversion to
non-fossil fuels• Evaluation and implementation of
measures based on internalcarbon pricing• Participation in the GX League• Construction of large-scale supply
chains and advancement of efficienttechnologies for green
energy utilization• Procurement system andprocess development

High• Enhanced disclosure of informationand setting GHG emission
reduction targets• Transform business portfolio• Ensuring the sustainability ofbiomass fuel

Large

High

• Steady reduction in GHG emissions• Creation of green products based on
mass balance approach certification• Enhancing supply chain cooperation
for green market formation• Construction of a carbon footprint
evaluation system

Long term

Moderate

Moderate

Long term

Minimal

Low

Large

• Enhanced BCP measures• Setting GHG emission
reduction targets

Short term: by FY2025, medium term: by FY2030, long term: by FY2050
ImpactLevel

TermPriority
Level

Response Measures

Large

Medium tolong termHigh• Commercialization of renewable resourcesand energy (biomass and hydrogen)

Shift to carbon• Enhancing site competitiveness by promoting
neutrality by regions
large-scale green supply chains for energy
andand materials
industrial complexes

Large

Medium tolong termHigh• Joining the Decarbonization Promotion
Council, promoting green supply chain
construction, and participating in andpromoting the development ofgreen technology

Requests for
CCU-related
products

Large

Mediumterm

Moderate

Expanding demandin theenvironmental
market1.5°C

Prioritylevel

Impact on Tokuyama Group• Expansion of businesses offering waste
disposal, effective utilization of resources,
and measures to combat global warming• Entering new business fields by establishing acarbon recycling system• Accelerating R&D, demonstration projects,
and actual green technology adoption inbusiness operations

TOKUYAMA REPORT 2023

41

Discl osu res B ased o n T CF D R e c om m e nd a t i o ns

3 Risk Management
Climate change risks are positioned as the mostsignificant type of risk as defined by “Responding to
global decarbonization” in the Mapping of Significant
Enterprise Risks.
   Given the accelerating global trend toward
decarbonization, under the Group’s Medium-Term
Management Plan 2025, we have decided that we must
shift away from our energy-intensive business structure,
which has been our strength up to this point. So, one ofthe priority issues of Medium-Term Management Plan
2025 is to “Contribute to Mitigation of Global Warming”
and we are pursuing group-wide initiatives to achieve this.
The TCFD Report covers details of the Company’s
processes for identifying and assessing climate-relatedrisks, processes for managing climate-related risks, andhow they are integrated into the company’s overallrisk management.
pp. 50-51

Risk Management

4 Metrics and Targets
Fuel-derived GHG emissions account for about 70% of our
total GHG emissions, and we are aiming to reduce these bypromoting energy-saving measures and switching to carbonneutral fuels. We will be reducing GHG emissions from raw
materials-derived by reducing the amount of limestone used.
We will go ahead with the development and introduction ofthese measures, while evaluating the economic viability.
At present, however, it appears that reducing these emissions
to zero will be difficult, so CO2 capture, utilization, andstorage (CCUS) could be necessary. The Group will goahead with the development and introduction of thesemeasures. The TCFD Report provides details of climaterelated metrics, Scope 1, Scope 2, and, Scope 3
greenhouse gas (GHG) emissions, as well as the targets
and performance against the targets.
   While the steady reduction of GHG emissions is our
responsibility as a company, we also recognize that
reducing GHG emissions caused by our products isimportant. Tokuyama is taking a multi-faceted approach toachieving global decarbonization (see the diagram below;“Initiatives to achieve carbon neutral FY2050”). In FY2022,
initiatives for adopting green hydrogen included thedevelopment of water electrolyzers, the development oftechnologies for the effective use of CO2 included CO2
capture from cement production, the development ofgreen products included the development of carbon
negative concrete, and the reduction in GHG emissions
originating from fuels-derived, raw materials-derived, andwaste-derived included collaborating with local
governments and industrial complexes. See the TCFD Reportfor more details on these initiatives. Looking ahead, we willcontinue contributing to achieving global carbon neutrality
by expanding our lineup of eco-friendly products andfurther developing innovative technologies.
pp. 34-35

Message from Director in charge of sustainability

pp. 52-55

Financial and Nonfinancial Highlights

Initiatives to achieve carbon neutral FY2050• Developing water electrolyzers• Establishing a base for water electrolyzer
operations in Yanai City, Yamaguchi Prefecture

Technology Development
Originating from fuels-derived, raw materials-derived, and waste-derived

Adopt green hydrogen
Effective use of CO2 (CCU technology development)
Develop green products
Develop green products

Develop green products

Develop green products• Conducting a verification
test for CO2 capture from
cement production*• Manufacturing methanolfrom emitted CO2*
*Still at feasibility study stage• Development of carbon negative concrete

Collaborate with other companies
in Shunan Industrial Complex
Use local energy(bamboo and other fast-growing trees)
Use biomass/ammonia/hydrogen as a monofuel orin combination with other fuels use renewable energy• Participating in the Shunan industrial Complex Decarbonization
Promotion Council• Concluding a partnership agreement for the utilization of woody
biomass materials• Blue carbon offsets• Captive power plants: Shift from coal tobiomass/ammonia/hydrogen• Efficiently utilize biomass combustion ash and CCS

Improve Tokuyama Factory’s
energy efficiency and processes
Transform thebusiness portfolio

FY202242

TOKUYAMA REPORT 2023

• Consider suspending operation of a cement kiln

FY2030FY2050Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

C o m p liance

Basic Stance and System
For Tokuyama the word compliance has a broad meaning,
including not only complying with laws and internal rules
but also behaving sensibly in a way that conforms withcorporate ethics to meet social expectations. To communicate
and spread awareness of compliance throughout theGroup, the Company has put together a leaflet that

includes the Tokuyama Group Code of Conduct. It is
distributed to all Group officers and employees. In
addition, we also conduct training based on job level for
raising awareness and hold meetings with managements
and those in charge of compliance at Group companies.

Whistleblowing System
An internal helpline has been established to enable safe,
anonymous reporting and consultations on complianceviolations involving the Tokuyama Group (including
potential violations) without fear of retaliation. Reportingand consultations can be carried out by mail, email, or
telephone. The helpline is operated in a way that protects
whistleblowers. Employees can use the helpline without
disclosing to the Company their name or department, anda female attorney is available for consultations. In FY2022,
the Company endeavored to boost the effectiveness of theinternal reporting system by setting up the system and to
be compatible with Japan’s revised Whistleblower

Protection Act, while ensuring that employees familiarize
themselves with the system, as well as inviting external
lecturers to provide training to employees working in theGroup’s internal reporting system as a way ofstandardizing and improving their employee support skills.
There were no occurrences of serious noncompliance in
FY2022.

Number of reports

FY2018FY2019FY2020

FY2021

FY2022

36

29

24

34

29

Note: Includes reports on workplace harassment and reports from Group companies in Japan.

St a keh o lder Engagement
Tokuyama emphasizes communication with diverse stakeholders, working in harmony with society tobuild a sustainable future.
Stakeholders

Main Avenues for Communication

Customers• ISO 9001

• TV commercials• Factory tours

Global Environment• Responsible Care • Environmental management • ISO 14001• Reduction of GHG emissions, energy conservation • Waste disposal• Development and provision of environmentally friendly products

Local Communities and Society• Accident prevention • Responsible Care Community Dialogue program • Community volunteers• Sponsorship of and participation in summer festivals • Grants to promote science and technology• Grants for raising the next generation, and safety and disaster prevention activities

Shareholders and Investors• Briefing session for individual investors • Briefing session on financial results• Brief statement of accounts • Annual Securities Report • General Meeting of Shareholders

Business Partners• Purchasing management

Employees• Workplace patrols • In-house newsletters • Education and training• Health and Safety Committee • Labor-Management Council• CSR purchasing• Biodiversity initiatives• Joint Occupational Health and Safety Conference

TOKUYAMA REPORT 2023

43

Dialogue with External Directors

Aiming to Establish Effective
Governance andto Sustainably Improve
Corporate Value
Yuz Kawamori
Yuzo
External Director, Audit &ExternC
Supervisory Committee
MemberNobuko Mizumoto
External Director, Audit &Supervisory Committee Member

Career Backgrounds and Valued Concepts
Kawamori After joining Kansai Paint Co., Ltd., I spent 17 years
in its International Business Unit and 17 years in the Japan
Business Unit. Then from 2010, I was in charge of groupmanagement as the Representative Director of the Board andPresident. You could say that my strength lies in my varied
experiences and achievements in both domestic and international
businesses. My creed in business is profitability and fairness.
Although a company’s fundamental mission is to generate
revenue, no company can last without conducting business in afair way with deep consideration for social values. Ever since I
was appointed as External Director of the Company, I havealways strived to monitor Tokuyama’s management structureand strategies from the perspectives of profitability and fairness.

Mizumoto After joining Ishikawajima-Harima Heavy Industries,
Ltd. (currently IHI Corporation), I was involved in various types oftechnical-related work and was later in charge of the digitaltransformation (DX). Since the time I was appointed as External
Director of Tokuyama in June 2021, I have been providing advice
on the suitability of the Company’s management strategy, mainly
from a technical point of view. In recent years, more and more
women have been appointed to the board of directors of various
companies in line with the concept of diversity. However, I believethat there are no real gender-based differences in corporate
management, so I am not really thinking about the fact that I ama woman as I carry out my duties as External Director. I feel thatdiversity of knowledge is more important than diversity of genders.

Assessment of Corporate Governance
Kawamori I think there are seven important themes
surrounding the management of any manufacturer: 1. financial
soundness, 2. continuity as a business entity, 3. transparent
management, 4. growth (profit generation), 5. compliance, 6.
quality improvement, and 7. safety. The agenda items addressedby Tokuyama’s Board of Directors always include topics related
to these management themes, and lively discussions are held onthese topics. In addition, the content of the discussions during
the Executive Committee are explained in detail to External
Directors through briefings, and executive training sessions areheld from time to time where Directors receive reports on
business progress from the general managers of each department.
I think that effective discussions and information sharing by the
Board of Directors are the two things that make governance at
Tokuyama superior to governance at other companies.

44

TOKUYAMA REPORT 2023

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Mizumoto I also agree with that idea. Each time the Board of
Directors meet, Directors have energetic discussions, allowing allof them to frankly express their opinions. This means that theCompany has created a corporate culture that values otherpeople. Also, there are four External Directors, including myself,
who all have different professional backgrounds. Combining thespecialized knowledge of Tokuyama’s Directors with the wideranging knowledge and insight of the External Directors helps toensure the effectiveness of our strategies and actions. This is myimpression of Tokuyama’s corporate governance.

Executing Medium- and Long-Term Strategies: The Roles of External Directors
Kawamori The Company is currently moving ahead with
Medium-Term Management Plan 2025, centered ontransforming the business portfolio. To realize sustainable growthwhen market conditions are uncertain, it is essential to accurately
grasp the potential needs of customers with a high level ofsensitivity and then to build a new business model in line with thechanging times. I recognize that, from the perspectives of
profitability and fairness, maintaining the support that comesfrom these initiatives is the mission of the External Directors aswell as the Audit and Supervisory Committee Members. Creatinga next-generation business portfolio is a common theme for theindustry as a whole. At first, successfully reforming Tokuyama’s
business structure and optimizing global expansion should allow
the Company to communicate the type of company we should
be in the Japanese and global economic communities.

Mizumoto From the perspectives of profitability and fairness,
which Mr. Kawamori previously mentioned, we could use
different words and say that there are elements that will change
as well as elements that will remain unchanged in the Company.
Something that will change is the Company’s business model; inother words, building a new value creation process byreorganizing business areas and regions of operation. In
contrast, I think the elements that will remain unchanged are theCompany’s Mission, Vision, and Values. I believe that the roleand mission of External Directors is to realize Tokuyama’s
Mission—defined as “To create a bright future in harmony withthe environment, in collaboration with its customers, based on
chemistry”—in management and business operations that
contribute to creating strong foundations.

Achieving Sustainable Growth: Outlook and Issues That the Company Faces
Kawamori For Tokuyama to continue growing now, during aperiod where the industrial structure is experiencing majorchanges, every employee must become a leader in fostering a
corporate culture of creativity and must take the initiative in their
daily work. The Genroku period of the Edo era was a time ofcreativity and independence, since Japan transitioned from afocus on the samurai culture to one more focused on the
average person. Talented individuals were produced in the newarts, such as joruri (music) and kabuki (theater), and new trends
that would later give shape to modern Japan were born in thefields of academics, thought, and religion. I believe that in order
to live during times of uncertainty, we must learn from history
and demonstrate our uniqueness, such as during the Genroku
period, enabling us to create value for the next generation.
Mizumoto It can probably be said that the reason why
Tokuyama has remained in business for more than 100 years is
because of the ability to respond flexibly to changes in businessconditions and market trends during each era. If the Company
takes advantage of the ability to look forward to figure out thechanges that lie ahead, as well as the skills and knowledge
accumulated within the Group, I believe that Tokuyama willdefinitely be able to achieve the goals of Medium-Term

Management Plan 2025. President Yokota has also taken aproactive stance for co-creation with external partner companies
and is committed to global environmental sustainability such as
responding to the recommendations of the Task Force on
Climate-related Financial Disclosures, as well as social
contributions through the Company’s businesses. I would like to
see us, as External Directors, work to maximize the economic
and social value that the Company provides, while sharing
policies and strategies with the President.
Kawamori Since Tokuyama is a long-established corporation,
for more than 100 years, there is a tendency for employee’s
attitudes to drift in a conservative direction. Taking this into
consideration, Tokuyama’s current management team is putting
everything on the line by developing new business domains andcultivating overseas markets. The most important thing in
corporate management is taking appropriate risks. There is alarge market and need associated with risk taking. We, as
External Directors and Audit and Supervisory Committee
Members, will support the astute decisions of top managementand drive ahead to create a corporate culture where employees
can comfortably work energetically as well as the sound,sustainable growth of the Group.
TOKUYAMA REPORT 2023

45

C o r p o r at e Gover nance

Basic StanceAmid the major transformations taking place throughout
society, Tokuyama, in line with the business environment weface today, has redefined the corporate Mission as“To create a bright future in harmony with the environment,in collaboration with customers, based on chemistry.” This
redefinition incorporates the Company’s desire to contributeto a sustainable society by pursuing business in harmony withthe environment and working to create the future together withcustomers. This is only possible with the trust and support ofshareholders, customers, suppliers, employees, local
communities, and all other stakeholders, which the Company
believes will fuel sustainable growth and greater corporate value
over the medium to long term. Corporate governance includes
a priority issue for management in order for the Company’s
Mission to be realized, and the Company therefore recognizes
the need to constantly strive to make improvements.
   In light of the Corporate Governance Code, theCompany’s Basic Policy is to respect the rights andequality of shareholders, cooperate effectively with all
stakeholders, achieve the disclosure of information andtransparency, maintain the independence of the Board of
Directors and improve the Board’s oversight, accelerate
decision-making, clarify responsibility, and strive forconstructive dialogue with shareholders.

Steps to Strengthen Our Governance Structure
FY2018

Evaluation of effectiveness of Board of Directors conductedby external organization (conducted annually after that date)
Introduction of performance-linked share-based
remuneration plan

FY2019

Revision of criteria for determining independence of
external directors

FY2020

Announcement of Tokuyama’s New Vision
Decision to abolish anti-takeover measures

FY2021One external director added (to strengthen diversity of Boardof Directors)

FY2022

Revision to “Basic Policy on Establishing the Internal Control
System” (revision to a policy focused on Group management)

FY2023

Enhance policies, such as establishing the Tokuyama Group
Sustainability Principles and the revision of the TokuyamaGroup Code of Conduct

Corporate Governance Reporthttps://www.tokuyama.co.jp/eng/company/
governance/index.html

Corporate Governance Structure
Number of Directors

Number of Audit & Supervisory
Committee members

5 (internal)
4 (external)

8 males
1 female

1 (internal)
4 (external)

4 males
1 femaleCorporate Governance Structure
Shareholders’ Meeting
Appoint/dismiss

Human Resources
Committee

Audit, etc.
ReportDecide/supervise

Accounting Auditors

Audit & Supervisory
Committee

Audit

Whistleblowing System

AssistAudit

Cooperate

Audit & Supervisory
Committee OfficeBusiness Operations
Executive
Committee
Strategy
Committee

Appoint/dismiss

Appoint/dismiss

ReportBoard of Directors

ReportPresident

CSR Promotion Council
Risk Management andCompliance Committee

Helpline Committee
Auditing Dept.
Internal audit

Business Divisions, etc.
Group Companies

46

TOKUYAMA REPORT 2023

Helpline

Guide
Support
RequestCorporate Social
Management
Responsibility Division
Divisions
Corporate Planning Division, etc.

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Progress of Strategy
by Business Segment

Management for
Sustainable Growth

Corporate Data

Meeting Bodies on Governance
Board of Directors

The Board of Directors supervises business operations in addition to deliberating on and making resolutions on important mattersrelated to the activities of the Company• Number of meetings held in FY2022: 17

Audit & Supervisory
Committee

Directors who are Audit & Supervisory Committee members attend meetings of the Board of Directors and other important internal
meetings in order to gather information on the state of business operations. They also conduct audits on how well the executive
officers are performing their duties.
• Number of meetings held in FY2022: 24

Human
Resources Committee

This committee holds discussions on such matters as the selection of director and executive officer candidates (excluding those on
the Audit & Supervisory Committee) and their remuneration, before Board of Directors meetings take place.

Executive Committee

Members of the Executive Committee are selected by the president and executive officer (referred to here as “the president”) fromamong the Company’s other executive officers. The Executive Committee serves as the Company’s decision-making body withrespect to the execution of business operations. In principle, the committee meets two times each month. Based on the approvalrelated rules and regulations determined by the Board of Directors, the Executive Committee deliberates on and makes decisions
on strategies and other important matters.

Strategy Committee

Members of the Strategy Committee are selected by the president from among the Company’s executive officers. The committee meets oncea month and serves as an advisory body to the president. In addition to deliberating on the direction of business execution, the Committee
works to confirm the allocation of management resources with the aim of evaluating conditions relating to business execution in respect toimportant matters requiring approval. It also sets the direction of policies related to business execution with regard to specific projects.

CSR Promotion Council

Chaired by the president, the CSR Promotion Council includes all executive officers. The Committee sets CSR policies and goals, while
also enabling initiatives to achieve those goals. The Committee focuses on maintaining effective corporate governance and internal
controls, which together form the foundation of the Company’s CSR. It also discusses important matters regarding internal controls.

Risk Management andCompliance Committee

Tokuyama’s Risk Management and Compliance Committee, chaired by the director supervising the Corporate Social Responsibility
Division, operates under the CSR Promotion Council. The Committee takes the initiative in promoting risk management andcompliance, which are central to effective internal control.

Expert Committees

Tokuyama operates various committees focused on risk management and compliance in critical and specialized areas, separatelyfrom the Risk Management and Compliance Committee. These committees operate under the CSR Promotion Council: theFinancial Reporting Committee, Fair Trade and Competition Committee, Security Trade Committee, Information Security
Committee, Environment Committee, Safety Committee, and Product Safety and Quality Assurance Committee.
From FY2022, a new Sustainability Committee was established to discuss areas that fall outside any existing framework, such as
climate change and human rights.

Helpline Committee

The Helpline Committee is responsible for the administration of Tokuyama’s helpline (whistleblowing) system that was established
for the internal reporting of legally questionable actions and behavior by Group executives and employees.

Internal Audit Department

This department, established to be responsible for internal auditing, performs internal audits of divisions and departments of theCompany as well as Group companies.

Analysis and Evaluation of Overall Effectiveness of the Board of Directors
Amid the major transformations taking place throughout
society, the trust and support of stakeholders is essential
for the Company to contribute to building a sustainable
society by conducting business in harmony with theenvironment and working to create the future together withcustomers against a backdrop of today’s challenging

business environment. To earn and retain this trust andsupport, the Company has positioned corporate
governance as a material issue for management, andconsequently has determined to evaluate the effectivenessof the Board of Directors every year.

Evaluation Process
Conduct questionnaire
survey for all directors, andAudit & Supervisory
Committee members

External directors conduct
interviews with executive
officers (every other year)

In the FY2022, the Company engaged an externalorganization to conduct a questionnaire survey of all the
directors, and analyzed their responses. The results were
submitted to the Board of Directors for review
and discussion.
   The evaluation revealed that the effectiveness of theBoard of Directors is generally being confirmed. The
evaluation also showed that initiatives to address theissues identified in the previous evaluation achieved acertain level of results overall. A high score was given forthe board’s monitoring and oversight of management teamDiscuss matters at Boardof Directors’ meetings, alsousing the services ofexternal organizations

Identify issues at Board of
Directors’ meetings anddecide on future responses

selection, evaluation, and compensation, while the score
for communication with stakeholders was relatively low,making it a high-priority issue.
   Additionally, the Board needs to keep focused on
effective monitoring of the progress made on initiatives toaddress the priority issues identified in the Medium-Term
Management Plan 2025. The Board of Directors willcontinue to monitor and oversee the executive
management team as it steadily implements the MediumTerm Management Plan 2025 to achieve the plan’s goals.

TOKUYAMA REPORT 2023

47

C or p or ate G over n a nc e

Adoption of Diverse Perspectives
Executive officers are appointed in each business segment
and area based on their knowledge and experience tomake certain that they direct the execution of businessand make appropriate decisions with regard to theCompany’s business operations, centered on chemicals.
   When nominating candidates for directorships, theCompany selects those who have demonstrated a highlevel of insight, diverse experience and expertise, and thentake into consideration the balance and diversity of theBoard of Directors, in order to ensure the Board properly
supervises and provides advice on important decisions
and business operations.
   When selecting and dismissing executive officers andnominating candidates for directorships (excluding
directors who are Audit & Supervisory Committee
members), discussions are held in advance of the subject
appearing on the agenda at a Board of Directors’ meetingat a meeting of the Human Resources Committee (an bodythat includes representative directors and external
directors). The Board of Directors then makes decisions in
response to the Human Resources Committee’s report.
   For the selection and dismissal of the President andExecutive Officer, the President Nomination Committee
deliberates on these matters, and the details of thesedeliberations are then presented to the Board of Directors
following a report by the Human Resources Committee, atwhich point the Board of Directors makes a decision.
   In the case of the nomination of directors who are
Audit & Supervisory Committee member candidates, theBoard of Directors makes decisions after receiving assent
from the Audit & Supervisory Committee.
* See the Company’s corporate website for the criteria used for
determining the independence of external directors
https://www.tokuyama.co.jp/eng/company/governance/
index.html

Skills Matrix of the Board of Directors
In light of the Company’s Vision and Medium-Term
Management Plan 2025, important skills are identified (seebelow) in areas where directors are expected to contributeManagement
Planning andStrategyInternal

External

Sales andMarketingfor the Board of Directors to conduct effective discussions
and exhibit the required decision-making andmanagement-supervision abilities:
Finance andAccounting

R&D,
Production
CSR (Legal,
Technology and ESG, Safety)
Engineering

Utilization of
DigitalTechnology

Overseas
Business
Operations

Hiroshi Yokota (Representative Director,
President and Executive Officer)
Hideo Sugimura (Representative Director,
Senior Managing Executive Officer)
Fumiaki Iwasaki (Director, Managing
Executive Officer)
Tomohiro Inoue (Director, Managing
Executive Officer)
Youji Miyamoto (Director, Audit &Supervisory Committee Chair)
Yuzo Kawamori (External Director, Audit& Supervisory Committee Member)
Nobuko Mizumoto (External Director,
Audit & Supervisory
Committee Member)
Hiraku Ishizuka (External Director, Audit &Supervisory Committee Member)
Naoki Kondo (External Director, Audit &Supervisory Committee Member)

Note: The above list does not show all the knowledge and experience possessed by the directors.

Response to Chief Executive Officer Succession Plan
In August 2021, the Company established the President
Nomination Committee, which formulates, implements,
and deliberates on the Chief Executive Officer (President
and Executive Officer) Succession Plan, and which reports
to the Human Resources Committee.
   The operations of the President Nomination

Committee are regularly reported to the Board of Directors
by the Human Resources Committee, and are audited by
the Board, in order to ensure that enough time andresources are invested in the systematic training of
succession candidates based on the Mission, Vision, andmanagement strategies of the Company.

Director Training
Since 2001, the Company has maintained a policy of
requiring newly appointed directors to participate in external
executive training. Since the executive office system wasintroduced in 2011, all newly appointed Executive Officers
participate in this training, as all of them are candidates for48

TOKUYAMA REPORT 2023

future directorships. The content of the training program
can be selected based on the experience and knowledgeof the individual, but with corporate governance in mind,
the required content includes legal affairs and corporate
governance as well as accounting and finance. The Company

Tokuyama Value Creation

Tokuyama Value
Creation Strategy

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

also allows participants to attend external seminars related
to their corporate responsibilities on their own.
   External directors are given the opportunity to visit
factories and to learn about the Company when they takeoffice, so that they can understand the current condition of

Corporate Data

the Company’s businesses and operations.
   Finally, the Company also holds study sessions, whenneeded, for all directors to gain a better understanding ofdomestic and international economic conditions, legal
revisions, and new systems.

Executive Remuneration
Policy on Determining Individual Director Remuneration
The Company has established a policy for determining thecontent of remuneration for directors on an individual basis(excluding those who serve on the Audit & Supervisory
Committee). The following is an overview of this information,
where individual remuneration is determined by the Boardof Directors following deliberations by the Human
Resources Committee.*1
Basic Policy
1) The remuneration plan for the Company’s directors is based on thefollowing perspectives:• Ensures that directors contribute to charting sustainable growth forcorporate performance and corporate value based on the
Tokuyama Vision• Provides a level of remuneration that secures and retains human resourcesthat can support the Company’s management• Considers the performance of the Company• Employs a highly transparent, objective remuneration decision process2) Remuneration for the Company’s directors consists of basic remuneration andbonuses*2 in the form of monetary remuneration and performance-linked
share-based remuneration in the form of nonmonetary remuneration.*3
Policy on Determining Director Remuneration on an Individual Basis
1) Basic remuneration• The basic remuneration (annual amount) is determined from acomprehensive perspective, taking into consideration the roles andresponsibilities to be undertaken.
• The determined basic remuneration is divided into 12 equal monthly payments.
2) Bonuses• Bonuses are determined on a scale from 0% to 150% of the standard bonus
amount pre-determined for each position. Each bonus is calculated
according to the degree of achievement with respect to performance targets
set in advance for each fiscal year.
• The performance targets are established based on the main financial
performance targets for the entire Group.
• The determined bonuses are paid at a fixed time of year.
3) Performance-linked share-based remuneration• Performance-linked share-based remuneration is based on the total numberof standard points determined for each position during the target period,
which is the fiscal years covered by the Medium-Term Management Plan.
Tokuyama share options are granted to the individual on a scale of 0% to150% of the standard points concerned, according to the level ofachievement of the pre-determined performance targets.
• The performance targets are established based on the main financial targets
under the Medium-Term Management Plan.
• In principle, the share options are only granted after the end of thetarget period.
4) Level of remuneration•T he levels of remuneration are decided on using compensation survey datafrom specialized external agencies.
Policy on Determining the Percentage of Each Type of Remuneration
for Directors
The percentage of remuneration for Company directors by type is determined
after considering the ideal balance between the basic standard for the required
roles/responsibilities on the one hand and incentives to stimulate the desire toachieve performance targets on the other.

Method for Determining Director Remuneration on an Individual Basis
1) Basic remuneration
The final annual amount of basic remuneration for each individual is calculated
and determined by the Representative Director, President and Executive
Officer, having received authorization to do so from the Board of Directors,
based on a standard amount predetermined for each position. The Human
Resources Committee deliberates on whether the calculated basic
remuneration is appropriate or not.
   As of FY2023, each individual’s specific roles and responsibilities
regarding important material issues for the realization of the Company’s CSR
management are taken into consideration. This is a factor in the calculation of
an individual’s remuneration, and part of the Company’s ESG initiatives.
2) Bonuses
Bonuses are determined by the Representative Director, President andExecutive Officer, having received authorization to do so from the Board of
Directors, based on performance for the target fiscal year after first
determining the payment percentage in accordance with the standard bonus
amounts for each position, the performance targets for the target fiscal year,
and the achievement level for those targets.
   The Human Resources Committee deliberates on whether the performancetargets, calculation methods, and calculation results are appropriate or not.
The specific performance target for FY2023 is the target consolidated ordinary
income set under the Medium-Term Management Plan. Each remuneration
amount is calculated by multiplying the individual’s standard amount by theperformance-linked coefficient (ranging from 0% to 150%) set according to
the degree of target achievement.
3) Performance-linked share-based remuneration
The granting of share options as part of performance-linked share-based
remuneration is based on the executive share-based remuneration regulations
deliberated by the Human Resources Committee and adopted by the Boardof Directors. The number of share options to be granted to each individual iscalculated by multiplying the total number of standard points determined forthe position concerned by the performance-linked coefficient (ranging from
0% to 150%) set according to the degree of target achievement.
In addition, the specific performance target is the Company’s target total
consolidated operating income for the target period.
1. The Human Resources Committee is composed of a majority of external directors
and they deliberate on issues related to human resources and remuneration regarding
officers; the committee also serves as a voluntary advisory body for the Company
that issues reports and makes recommendations to the Board of Directors.
2. Directors eligible for the bonus plan are those who are executive officers.
3. All directors, except those who serve on the Audit & Supervisory Committee,
Non-executive Directors, External Directors, and those not residing in Japan, areeligible for the performance-linked share-based remuneration plan.

Amount of Remuneration Paid to Directors and Audit &Supervisory Committee Members (FY2022)
Subject of Remuneration

Number ofPeopleRemuneration
AmountDirectors (excluding directors who are Audit &Supervisory Committee members)

4¥176 million

Directors who are Audit & Supervisory Committee
members (excluding external directors)

1¥29 million

External Directors

4¥56 million

Notes: The above amount includes the expenses recorded for FY2022, as well as an
adjustment of -25 million yen for the amount of expenses recorded for performancelinked share compensation, which takes into account the level of achievement of
performance evaluation indicators (accumulated consolidated operating income, etc.)
in FY2021 and FY2022 during the period covered by the plan.
The figures above do not include the employee salary portion for directors also
serving in employee positions

Policy on Holding Listed Shares for Purposes Other than Pure Investment
The Company holds shares of publicly listed companies
for strategic reasons in accordance with the requirements
for business activities as part of the overall management
strategy. This includes the need to maintain and bolstertransactions, raise funds, and consistently procure raw
materials. As far as the strategic holding of shares inpublicly listed companies is concerned, the Company will
limit holdings to the minimum level possible, taking into
consideration the need to ensure efficient corporate
management. The Company sold all shares of one listed

issue in FY2022, resulting in a total of 20 listed issues ofshareholdings as of March 31, 2022.
   In addition, the Board of Directors takes steps toverify the economic rationality of holding shares in publicly
listed companies by comparing capital costs that factor inassociated risks with accrued benefits, while confirming
the propriety of holdings based on a future outlook eachyear. The Company exercises voting rights in shares basedon the contribution to corporate value for both theCompany and the investee.

TOKUYAMA REPORT 2023

49

Risk Man agement

Strengthening Our Risk Management System
Tokuyama has established the Risk Management andCompliance Committee under the CSR Promotion Council aspart of our company-wide risk management system, as
outlined on p. 34: System to promote CSR management.
The Risk Management and Compliance Committee considers
events and issues that have recently emerged or that haveundergone a change in the degree of impact, by monitoringsocial conditions and coordinating with other committees. This
committee then assesses whether or not these are real risks
and meets with expert committees to develop a response.
   The Risk Management and Compliance Committee
performs group-wide enterprise risk management bymaking visible and mapping risk levels both quantitatively
and qualitatively from several perspectives: impact(monetary loss, decrease in market share, and scale ofimpact, etc.); occurrence frequency and probability;

and Company’s vulnerability.
   The expert committees examine and determine
mitigation policies for the risks they are responsible for(including risk reduction, avoidance, transfer, andretention). Based on the policies that are developed, theGroup plans and implement ways to manage risks as wellas conducts periodic reviews to check on the performanceof the risk management system.
   For instance, we are working to mitigate compliance risk
by setting up management systems for understanding the laws
and regulations that cover business execution. As well, we aretracking trends in amendments to those laws and regulations.
The Company has established the Cybersecurity Department
to prepare for changes in the business environment as well as
cyberattacks, which have become increasingly sophisticated.

Process of Identifying Significant Risks
Board of Directors
Executive
Committee

President

CSR Promotion Council
Risk Management and Compliance Committee
Identification of risks: Consideration of events and factors
Analysis of risks: Analysis of importanceClassification of risks: Determination of expert committees in charge

Expert Committees
Response to risks: Implementation of policies and measures
Evaluation of risk responses: Review of measures
Direction of risk responses: Management review of significant risks

Business Divisions, Group Companies/
Management Divisions

Business Continuity Management (BCM)
The Company has formulated, and continues to update,a BCP (business continuity plan) to ensure thatcircumstances do not prevent important operations fromcontinuing. We also secure funding and resources to makecertain that business keeps going, as we engage in business
continuity management in normal times, including taking
preventive measures, while we strengthen our ability tocontinue business operations.
   To address the COVID-19 pandemic, the Company set
up a crisis response headquarters in February 2020 with the
President as general manager. The headquarters held six
meetings in FY2022. Actions included notification of50

TOKUYAMA REPORT 2023

instructions issued by the government and industry bodies,
infection prevention measures, and establishing a structure
for contacts and public relations should an infection event
occur. Crisis response measures included acquiring an
understanding of infection responses and the state ofproduction at business sites in and outside Japan, as well asrecommending remote work and staggered commuting.
With the main threat of the COVID-19 pandemic considered
now over, the crisis response headquarters was disbanded
on February 28, 2023, subsequently transitioning to liaison
meetings with each department.

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

List of Enterprise Risks (FY2023)

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

*The chairperson of each committee/meeting body is a director and is responsible for managing the risks (risk owner)

Hazard risk (external environment risk) Risks posed by the external environment and potential events
Moderate category

Relevant committee/
meeting body*

Minimal category

Natural disasters

Earthquake, tsunami, weather-related disaster, abnormal weather event (typhoon,storm surge, heavy rains, etc.)

Risk Management andCompliance Committee

Accident or breakdown

Fire, explosion, chemical leak, equipment or device damage or failure, utility supply
interruption, accident with aircraft, ship or railway

Safety Committee

Pandemic disease

Widespread outbreak of COVID-19 or another endemic infectious disease

Risk Management andCompliance Committee

Country risks

War, conflict, terrorism incident, riot, unlawful political change, or economic crisis

Risk Management andCompliance Committee

Information security risks

Cyberattack, virus infection, information leaks, failure of system facilities/equipment,
system failure

Information Security
Committee

Business risk (strategic risk) R isks posed by the quality and accuracy of corporate strategies that affect performance andcorporate value
Moderate category

Relevant committee/
meeting body*

Minimal category

Global decarbonization
risks

Adoption of carbon pricing, adoption of international carbon taxation, progress ofgreen procurement, popularization of ESG investment and environmental finance,tighter regulations, increased political pressure, and accelerating climate change

Sustainability Committee

Market risks

Changes in market needs, marketing failures or deficiencies, emergence of newcompetitors, product development failures or obsolescence, delays in responding torapid technological innovations, and delays or barriers to overseas expansion

Executive Committee
Board of Directors

Human resource risks

Mass turnover, difficulty in securing human resources, workforce aging, distorted
human resource pyramid, failure to adopt new workstyles such as human resource
development and technology transfer (including workers from overseas), and humanresource mismatch due to business transitions

Executive Committee
Board of Directors

Financial risks

Funding plan or financing failure, paid capital increase, suspension of financial support,interest rate or foreign exchange rate fluctuation risk, and stock price decline

Executive Committee
Board of Directors

Operational risk (business process risk) 
Risks arising from deficiencies in internal processes related to business execution, or frominadequate functions
Moderate category

Relevant committee/
meeting body*

Minimal category

Manufacturing risks

Equipment or machine stoppages or accidents due to operating errors, industrial
accidents, and aging equipment or machinery

Safety Committee

Business risks

Soaring raw material or fuel prices, failed pricing policies, declining pricecompetitiveness, dependence on a small number of suppliers, and dependence on asmall number of customers

Executive Committee
Board of Directors

Serious product defects or
quality risks

Quality defects, voluntary recalls, product liability accidents, deficiencies in chemicalsafety management when exported, management of chemical substances containedin products, and mislabeling or counterfeit labeling

Product Safety and Quality
Assurance Committee

Business and human rights

Human rights violations in supply chains, boycotts, and consumer movements

Sustainability Committee

Legal and compliance risks

Non-performing loans/bad debts, intellectual property rights infringement, inventioncompensation disputes, antimonopoly law violation, Unfair Competition Prevention Act
violation (bribery), improper contract signing, insider trading, inadequate managementof licenses and permits, misconduct involving executives or employees, ties toantisocial forces, and intimidation

Fair Trade and Competition
Committee
Risk Management andCompliance Committee

Mapping of Significant Enterprise Risks

Product and quality

Country risks
Accident or breakdown
Financial risksMarket risks
Natural disasters

Business and human rights
Business risks
Manufacturing risks
Human resource risks

Responding to global
decarbonization

Damage that threatens the survival of the company, as wellas substantial damage such as loss of assets

Moderate

Significant decrease of profits, or minor loss of assets

Small

Little impact on corporate profits and assets

Definition of occurrence frequency and probability
Information
security risks
Legal andcompliance risksHigh

Occurs more than once a year; Will almost certainly occur inthe near future

ModerateOccurs several times a decade

Low

Occurs once every decade or more

Definition of vulnerability
Pandemic disease

Small

Scale of damage/impact

Large

Definition of scale of damage and impact
Large

Low

Occurrence frequency and probability

High

Mitigation measures have not been implemented or arecompletely inadequate

Moderate

Some measures have been implemented, but they are stillinsufficientLoweffective measures have been implemented and a management cycle is in placeHigh

TOKUYAMA REPORT 2023

51

F in a n cia l and Non- Fi nanci al Hi g hl i g ht s

Financial Analysis of FY2022
In FY2022, factors such as revised sales prices in chemicals,
cement, and semiconductor-related products led to anincrease in sales over the previous fiscal year. However, otherfactors, such as higher raw fuel costs and logistics expenses
as well as a slump in market conditions, caused a fall in
operating profits. Also, for the current net income attributed
to shareholders of the parent company, factors such as
weakening profitability have caused a decrease in profits aswell as lower ROE.
   In FY2023, despite the predicted effects of a slowing
market for semiconductors, sales and profits are expected

to increase over the previous fiscal year due to revised sales
prices for chemicals and cement as well a calming down of
raw fuel costs. Also, we anticipate a decrease in depreciation
and amortization due to a change (as of FY2023) to astraight-line method from the declining-balance method
used for the depreciation of tangible fixed assets.
   To achieve the targets of our Medium-Term Management
Plan 2025, we will continue investing in growth fields—intended
to transform our business portfolio—as well as investments
and initiatives to help mitigate global warming.

Financial Highlights
Net Sales / Operating Profit / Operating Margin

Net Sales / Operating Profit / Operating Margin(Billions of yen)

(%)
16

400

300

307.1

302.0

287.3

299.1

13.4

12.9

351.7

324.6

308.0

316.0
10.9

302.4

10.8

12

293.8
10.2
8.4

200
6.2

6.3

8

7.1

4.1

4

100
17.9

0

2013

18.7
2014

41.2

38.5

21.9
2015

2016

2017

35.2

34.2

2018

30.9

2019

2020

24.5
2021

14.3
2022

0
2023
(Forecast)

Net sales (left)
Operating profit (left)
Operating margin (right)* “Accounting Standard for Revenue Recognition” and other standards have been applied from FY2021(FY)

Profit Attributable to Owners of Parent / ROE

Profit Attributable to Owners of Parent / ROE(Billions of yen)

(%)
52.1

60

60

58.5

40
20

40

34.2
19.6

10.2

0

4.6

(65.3)

24.6

19.9

15.6

(100.5)

28.0

24.5
13.4

12.4

13.2

20

4.1

0

9.3

(20)

(20)
(33.3)

(40)

(40)
(60)

(60)
(80)

(80)
(94.0)

(100)
2013

2014

2015

Profit attributable to owners of parent (left)

(100)
2016

2017

2018

2019

2020

2021

2022

ROE (right)

2023(Forecast)

(FY)

2023
(Forecast)(FY)

Capital Expenditures / Depreciation and Amortization / R&D Expenses

Capital Expenditures / Depreciation and Amortization / R&D Expenses(Billions of yen)
61.0
60

40
35.6

33.3
25.3
20

16.7
8.7

20.0

18.8
10.1

13.9

26.4

23.7
17.3
14.2

8.5

7.5

15.9
13.9
7.9

18.5
15.0
8.0

16.1
9.1

17.0
10.8

19.7
12.6

20.7
13.6

0
2013
Capital expenditures

52

TOKUYAMA REPORT 2023

2014

2015

Depreciation and amortization

2016

2017
R&D expenses

2018

2019

2020

2021

2022

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

Cash Flows

Cash Flows(Billions of yen)
80

61.8
40

45.9

34.1

40.5

30.7

52.3

38.5

30.0

43.3

13.4

30.1

25.9

20.0

5 .1

0
(10.0) (11.9)(40)(25.5)(80)(12.6)(16.1)(21.1)(20.5) (18.3)(11.8)(19.2) (22.5)(37.6)(33.7)(33.7)

2021

2022(64.4)(101.2)

(120)
2013

2014

2015

Cash flows from operating activities

2016

2017

2018

Cash flows from investing activities

2019

2020

Cash flows from financing activities

2023(Forecast)(FY)Interest-Bearing Debt and Debt/Equity Ratio

Interest-Bearing Debt and Debt/Equity Ratio(Billions of yen)(Times)

300

5.0

283.1

4.74
244.1

240.7

4.0
213.9

200

3.0
139.9

100

1.74

142.4

128.9

116.3

1.11

1.05

2.0

109.2

98.4

1.68

1.0

0.84

0.69

0.49

0.50

0.62

0

0
2013

2014

Interest-bearing debt (left)

2015

2016

2017

2018

2019

2020

2021

(FY)

2022

Debt/equity ratio (right)

Total Assets / Shareholders’ Equity Ratio

Total Assets / Shareholders’ Equity Ratio(Billions of yen)
600

(%)
576.3

400

60

554.5

51.3
424.4

401.3

39.9

40.2
34.7

29.3

478.3

433.2

48.0
40

386.7

383.4

361.9

51.8

44.0

379.6

29.9

200

20
12.8

0

0
2013

Total assets (left)

2014

2015

2016

2017

2018

2019

2020

2021

Shareholders’ equity ratio (right)

Cash Dividends
per Share/ Payout
Ratio
Cash Dividends
Per Share/ Payout
Ratio

Total
Shareholder
ReturnTotal
Shareholder
Return(TSR)
(TSR)

(Yen)

(%)

80

60

70.0

70.0

70.0

70.0

53.8 70.0

(%)
150

30
122.1

60

24.4
19.9

100

18.0

95.0
85.9

10.1

88.1

78.6

10

71.9

65.3

0

0
2019

Cash dividends per share (left)

131.8

20

40

2018

124.6

22.9

50.0

20

(FY)

2022

2020

2021

Payout ratio (right)

2022

2023
(Forecast)

(FY)

58.4

50
2019

2020

Total Shareholder Return (TSR)

2018

TOPIX

2021

2022

(FY)

TOKUYAMA REPORT 2023

53

Non-Financial Highlights
GHG Emissions(thousand tonnes-CO 2e)(thousand tonnes/billion yen)

8,000

4
180
280

6,000

70
250

30

100

2,030
2.3

2.1

4,000

110

80
270

90

100
320

1,860

1,890

1,800

130

2

1.9

4,450

4,910

6,760
4,640

3

1,800

2.4

2,3
7,170

6,680

2,000

70
270

6,810

6,520

1

4,430

4,690

0

0

2018
GHG emissions (left)

2019
Emissions from fuels
Emissions from waste

2020
2021
Emissions from raw materials
Group Companies
Scope 1
Scope 2

(FY)
2022
Sales primary unit (right)* The values for FY2018 were calculated based on the SHK System, while the values for FY2019 to FY2022 were calculated
based on the GHG Protocol.

We recognize that the mitigation of global
warming is one of the most critical issues
today and are working hard to reducegreenhouse gas (GHG) emissions. GHG
emissions are the total emissions of gases
such as CO2, CH4 and N2O; of these, CO2
emissions account for approximately 99.8%of the volume of emissions. GHGs are
generated mainly by the combustion of fossil
fuels in captive power plants, as well as by
the decarboxylation of limestone (raw material)in the cement manufacturing process.
GHG emissions in FY2022 were 6,650
thousand tonnes.

Supply Chain Emissions* (Scope 3, non-consolidated)2%

Upstream

Category 1
Category 2
Category 3
Category 4
Other

29%

Category 1 

Scope 3Purchased goods and services
Category 2

26%
2%

6.51 million tonnes  Scope 1

Category 4 
Scope 3
Upstream transportation anddistribution

Fuel use at Tokuyama
Direct emissions from manufacturing
processes

Activities related to fuel and energy
not included in Scopes 1 and 2
Category 4

40 thousand tonnes Scope 2

Upstream transportation anddistribution
Category 5

Indirect emissions from use ofpurchased electricity and heat

Energy-related indirect emissions

Category 6 

Waste generated in operations
Category 8

Scope 3Business travel
Category 7

Upstream leased assets:
Not calculated (negligible level)* Due to rounding, sum of figures in breakdown does notequal total amount

Downstreamof direct emissions

Capital goods
Category 3

GHG emissions 40%
1.76 million tonnes

In-house

Employee commuting

Category 9
Downstream transportation anddistribution
Category 10-12
Processing of sold products:
Not calculated
Use of sold products: Not calculated
End-of-life treatment of soldproducts: Not calculated
Category 13-15
Downstream leased assets:
Not applicableFranchises: Not applicable
Investiments: Not applicable* GHG Protocol: organization co-sponsored by World Resources Institute (WRI) and World Business Council for Sustainable
Development (WBCSD); Scope 3 standard: standard issued by said protocol in November 2011 for calculating CO2 emissions
across an entire supply chain.

Energy Usage
We encourage energy conservation as away to mitigate global warming.
Through energy conservation, we arepromoting using less electric power andsteam in production, and we areencouraging more adoption of renewableenergy. In FY2022, the percentage of
renewable energy use throughout theentire Group was approximately 5%.

(TJ)
80,00060,000

4,000

6,400

3,800

7,100

3,900

6,500

3,200

7,000

6,800

4,000

53,50050,50050,60040,00055,60055,10055,20054,80020,000

0

2,100

2018
Non-consolidated
Renewable energy

52,70052,70052,5002,900

2019Group Companies
Nonrenewable energy

2,400

2020

2,700

2021

2,700

2022

(FY)

Energy from waste

Effective Utilization Rate for Waste / Zero Waste Emission Rate (Non-consolidated)
The effective utilization rate for waste andthe zero emission rate remained high in
FY2022 due to efforts to reduce the volume
of waste and comprehensive recycling
efforts. As a result of actively promoting therecycling of waste generated both internallyand externally, with a focus on the reuse ofwaste as feedstock and fuel for cement at
the Tokuyama Factory, the effective
utilization rate for waste was 94.7% andthe zero waste emission rate was 99.9%.

(%)
100
99.9

99.8

99.7

99.9

99.9

94.7

94.3

94.7

2020

2021

2022

95

93.1

93.9

90

85
2018
Effective utilization rate for waste

54

TOKUYAMA REPORT 2023

2019

Zero waste emission rate

(FY)Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Environmental Accounting (Percentage of Net Sales)
(%)
4.0
3.4

3.6

3.4

3.4

3.4

0.3

0.3

2021

2022

3.0

2.0

1.0
0.6

0.4

0.5

0
2018
Investments

2019

2020

(FY)

Expenses

Corporate Data

Environmental accounting has been
conducted since FY2000 for the purpose ofascertaining and analyzing the investments
and expenses required for conserving theenvironment, and for the purpose of
facilitating effective investment. The amountof investment for conserving the environment
was 0.3% of net sales and the total expenses
incurred for this purpose were 3.7%. The
amount of investment as a percentage of net
sales has ranged from 0.3 and 0.8% over the
past several years, while the total amount ofexpenses has been between 3.2 and 3.8%.
In FY2022, the Company updated electricprecipitators to tackle soot, smoke, anddust, and we modified and upgraded
equipment for reducing CO2 emissions.

Number of Employees / Percentage of Women among All Employees / Percentage of Women among All Managers(%)(People)
6,000

5,679

5,471

5,476

13.0

12.6

12.1

16

5,909

5,665

12

10.4

4,000
9.0

8
2,000

2,063

1,924

2,459

2,315

2,256

4.7
2.0

1.8

1.5

2.0

4

2.7

0

0

2018
2019
2020
2021
Number of employees (consolidated) (left)
Number of employees (non-consolidated) (left)
Percentage of women among all employees (non-consolidated) (right)
Percentage of women among all managers (non-consolidated) (right)
Percentage of women among all managers (Consolidated) (right)

(FY)

2022

Tokuyama is committed to the idea of diversity
in knowledge, and for this reason promotes
diversity by utilizing the varied values andperspectives of every employee in corporate
activities. The small number of female staff isthe cause for the low percentage of females ineach indicator. However, we are experiencing
a steady increase in the number of female
employees working actively at worksites.
For example, there is a gradual increase in
the percentage of female staff working inmanagement. We appointed our first female
outside director in June 2021 and our firstfemale executive officer in April 2023.

Accident Frequency Rates*
One of our safety management goals is toachieve zero accidents and lost time
injuries, and we are working to identify andeliminate risk factors, as well as tounderstand and recognize the behavioral
characteristics of each individual toeliminate unsafe behavior. There were no
lost time injuries to employees in FY2022.
We will continue our efforts to maintain
zero lost time injuries.

(%)
2.4
2.0

1.83

1.80

0.90

0.94

2.09

1.95

2.06

1.6
1.2
0.8

1.16

1.07
0.93

0.85

0.4

0.28

0.49

0
2018

2019

All industries in Japan

Tokuyama

2020

0.00

0.00

2021

2022

(FY)

Chemical industry in Japan*Accident frequency rates indicate frequency of occupational
injuries, and are expressed as number of employees absent
from work due to occupational injuries per 1 million total
working hours

Number of Patents Held
(Patents)
2,500

Overseas
53%

2,000

In Japan
47%

1,500

FY2022

1,000
500
0
2018

2019

2020

2021

2022

(FY)

Electronic & Advanced Materials,* Life Science, and Eco BusinessWe aim to be a value-creative company
that places first priority on R&D andmarketing, and we recognize thatinvestment in intellectual property isessential to achieve this. As we promote
global business expansion initiatives in
the fields of electronics, healthcare, andthe environment to refresh our businessportfolio, our patent rights include manytechnologies in these three areas, and weare focusing on acquiring patent rights
both domestically and overseas.

Chemicals, Cement and all companies*On April 1, 2023, the name was changed to Electronic & Advanced Materials

TOKUYAMA REPORT 2023

55

Ma n ag em ent Team (as of June 23, 2023)*From left to right: Fumiaki Iwasaki, Yuzo Kawamori, Tomohiro Inoue, Hiroshi Yokota, Nobuko Mizumoto, Hiraku Ishizuka, Naoki Kondo, Hideo Sugimura, Youji Miyamoto

Hiroshi Yokota

Representative Director, President and Executive Officer
In charge of Chemicals, Cement, Electronic & Advanced Materials, Center for Commercialization of Advanced
Technology, Auditing Office• Date of birth: October 12, 1961
• Number of Company shares owned: 32,600• Tenure as director: 8 years• Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: 17/17 (100%)

Hideo Sugimura

Representative Director, Senior Managing Executive Officer, General Manager of Corporate Planning Division
In charge of Corporate Planning, Corporate Social Responsibility, General Affairs and Human Resources,
Procurement and Logistics, Secretarial Department, Digital Administration, Carbon Neutral Strategy• Date of birth: October, 22, 1959
• Number of Company shares owned: 6,903• Tenure as director: 6 years• Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: 17/17 (100%)

Fumiaki Iwasaki

TOKUYAMA REPORT 2023

With extensive operational experience including the introduction of an information system,
management of an overseas subsidiary, and restructuring a domestic subsidiary, he is engaged inpromoting growth by developing plans and strategies as a general manager of corporate
departments.

Director, Managing Executive Officer, General Manager of Research and Development Division, and General
Manager of New Business Division
In charge of Life Science, New Business, Research and Development, Environment & Safety of Kashima Factory• Date of birth: June 21, 1960
• Number of Company shares owned: 2,642• Tenure as director: 3 years• Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: 17/17 (100%)

56

Utilizing extensive experience in personnel and labor issues, traditional businesses, and advanced
materials businesses, he is actively working on the promotion of the priorities of Medium-Term
Management Plan 2025, such as transforming the business portfolio, carbon neutrality,
implementing CSR management, etc.

Making use of the extensive experience gained through the fields of R&D and manufacturing
technology, he is pursuing new research and development.

Tokuyama Value Creation

New election

Tomohiro Inoue

Tokuyama Value
Creation Strategy

He is proactively working on the promotion of a broad range of businesses based on richknowledge accumulated through his experience in overseas operations, planning, businesspromotion projects, and experience as General Manager of the Manufacturing Dept.
Principal Concurrent Positions: Director, ASTOM Corporation

With a high degree of expertise in finance and accounting gained through his years of accounting
operations, he has been supervising management as an Audit & Supervisory Board member since2013, and as a director who is an Audit & Supervisory Committee member since 2017.
Significant concurrent positions: Auditor, ASTOM Corporation; Auditor, Tokuyama Dental Corporation;
Audit & Supervisory Board Member, A&T Corporation

External Director, Audit & Supervisory Committee Member• Date of birth: July 25, 1947
• Number of Company shares owned: 1,700• Tenure as director: 4 years• Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: 17/17 (100%)• Attendance at meetings of the Audit & Supervisory
Committee during the fiscal year ended March 31,
2023: 24/24 (100%)

Nobuko Mizumoto

Corporate Data

Director, Audit & Supervisory Committee Chairperson• Date of birth: January 22, 1958
• Number of Company shares owned: 2,200• Tenure as director: 6 years• Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: 17/17 (100%)• Attendance at meetings of the Audit & Supervisory
Committee during the fiscal year ended March 31,
2023: 24/24 (100%)

Yuzo Kawamori

Management for
Sustainable Growth

Director, Managing Executive Officer, General Manager of Eco Business Division, and Deputy General Manager
of Cement Business Division
In charge of Eco Business, Tokuyama Factory• Date of birth: December 8, 1964
• Number of Company shares owned: 1,700• Tenure as director: • Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: -Youji Miyamoto

Progress of Strategy
by Business Segment

Possessing extensive experience and broad insight into the manufacturing industry as a corporate
manager, he has been supervising management of the Company as an external director who has
been an Audit & Supervisory Committee member since 2019, and provides useful advice on the
promotion of overseas business among other items.

External Director, Audit & Supervisory Committee Member• Date of birth: March 31, 1957
• Number of Company shares owned: 500• Tenure as director: 2 years• Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: 17/17 (100%)• Attendance at meetings of the Audit & Supervisory
Committee during the fiscal year ended March 31,
2023: 24/24 (100%)

Possessing extensive experience and broad insight in the manufacturing industry as a corporate
manager, she has been supervising management of the Company as an external director who has
been an Audit & Supervisory Committee member since 2021, and provides useful advice on
carbon neutrality, digital transformation, CSR management, and other items.
Principal Concurrent Positions:
Outside Director, Okamura Corporation (Scheduled to assume office in June 2023)

New election

Hiraku Ishizuka

External Director, Audit & Supervisory Committee Member• Date of birth: December 29, 1960
• Number of Company shares owned: 0• Tenure as director: • Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: • Attendance at meetings of the Audit & Supervisory
Committee during the fiscal year ended March 31, 2023: -He possesses an abundance of experience and broad insight as a corporate manager in financial
institutions, therefore based on his knowledge on finance and accounting and insights into financeand the overall economy, he is expected to effectively supervise the management of the Company
and to give useful opinions and advice.
Principal Concurrent Positions: Representative Director & Chairman, Mitsubishi UFJ NICOS Co., Ltd.

New election

Naoki Kondo

External Director, Audit & Supervisory Committee Member• Date of birth: December 4, 1973
• Number of Company shares owned: 0• Tenure as director: • Attendance at meetings of the Board of Directors during
the fiscal year ended March 31, 2023: • Attendance at meetings of the Audit & Supervisory
Committee during the fiscal year ended March 31, 2023: -Based on his specialist perspective and rich experience as a lawyer, he is expected to expertly
supervise the management of the Company and to actively give useful opinions and advice.
Principal Concurrent Positions: Partner, Oh-Ebashi LPC & Partners
Outside Director (Audit & Supervisory Committee Member), ibis inc.

TOKUYAMA REPORT 2023

57

C o r p o r at e Data (as of March 31, 2023)

Company Overview

Tokuyama Corporation Business Sites
in JapanCorporate name

Tokuyama Corporation

EstablishedFebruary 16, 1918

Industry

Chemical manufacturing

Location

Tokyo Head Office
Front Place Akihabara
7-5 Sotokanda 1-chome, Chiyoda-ku,
Tokyo 101-8618, Japan
TEL. +81-3-5207-2500 FAX. +81-3-5207-2580

Tokuyama
Factory

Tokuyama Factory (Registered Address)
1-1 Mikage-cho, Shunan-shi, Yamaguchi
745-8648 Japan
TEL. +81-834-34-2000 FAX. +81-834-33-3790
Capital¥10,000 million

Number of
employees

5,909 (consolidated basis; 738 working overseas)
2,459 (non-consolidated)

Number of groupcompanies

56

Tokuyama
Research
Laboratory
ShunanSales Branch

NagoyaSales Branch

Tsukuba
Research
Laboratory

Hiroshima
BranchFukuoka
BranchKashima
Factory
Osaka
OfficeTokyo
Head OfficeTakamatsu
BranchStock Information
Total number of sharesauthorized to be issued

Common shares: 200,000,000 shares

Number of shares issued

72,072,056 common shares(excluding 16,271 treasury shares)

Common Stock Listings

Tokyo Stock Exchange Prime Market

Securities Code4043

Number of shareholders

Common shares:
25,667 shareholders

Fiscal year

From April 1 to March 31

Center forCommercialization ofAdvanced Technology

Consolidated Subsidiaries Overseas
Tokuyama Europe GmbH
Tokuyama Dental Deutschland GmbH

Tokuyama America Inc.
Tokuyama Dental America Inc.

Germany

United States

Tokuyama Dental Italy S.r.l.

Italy
Tokuyama Korea Co., Ltd.
STAC Co., Ltd

Dividend Policy

South Korea

Dividends will be paid to the shareholders stated in the final version of theregister of shareholders on March 31 and September 30. As far as the
distribution of profits is concerned, Tokuyama’s basic policy is to ensure thecontinuous and stable payment of dividends to shareholders. In carryingout this policy, the Company takes into consideration performance trends,
the dividend payout ratio, and the roadmap established under the
medium- to long-term business plan.

Shareholders by Type
3.7%
11.6%

China
Tokuyama (Shanghai) Co., Ltd.
Tokuyama Trading (Shanghai) Co., Ltd.
Tokuyama Chemicals (Zhejiang) Co., Ltd.
Shanghai Tokuyama Plastics Co., Ltd.
A&T Shanghai Co., Ltd.

36.1%

26.2%

Shareholders
by Type

New Caledonia

22.4%
Securities companies (26,044 thousand shares)
Individuals/Others (16,146 thousand shares)
Non-Japanese Corporations/Overseas residents (18,911 thousand shares)
Other domestic corporations (8,334 thousand shares)
Financial institutions (2,651 thousand shares)

58

TOKUYAMA REPORT 2023

TaiwanTokuyama Nouvelle Calédonie S.A.

Taiwan Tokuyama Corporation
Formosa Tokuyama Advanced Chemicals Co., Ltd.
Tokuyama Taiwan Corporation

Singapore

Tokuyama Singapore Pte. Ltd.

Tokuyama Value
Creation Strategy

Tokuyama Value Creation

Management for
Sustainable Growth

Progress of Strategy
by Business Segment

Corporate Data

Consolidated Subsidiaries
Electronic & Advanced Materials 1

Chemicals

Other

Tokuyama Chemicals (Zhejiang) Co., Ltd.2

Shin Dai-ichi Vinyl Corporation2

Tokuyama (Shanghai) Co., Ltd.

Production and sale of fumed silica, high-purity
chlorosilane, high-purity chemicals for electronics
manufacturing

Production and sale of PVC resin

Management company to provide services for othergroup companies in China

Formosa Tokuyama Advanced Chemicals
Co., Ltd.2
Production and sale of high-purity chemicals forelectronics manufacturing

Tokuyama Soda Trading Co., Ltd.
Stocking and sale of soda ash and calcium chloride

Tokuyama Trading (Shanghai) Co., Ltd.
Sale of Tokuyama Group products

Sun Arrow Kasei Co., Ltd.
Production and sale of PVC resin compounds

Tokuyama Taiwan Corporation
Marketing and R&D of growth businesses

Taiwan Tokuyama Corporation

Tokuyama Korea Co., Ltd.

CementProduction and sale of high-purity chemicals forelectronics manufacturing

Sale of Tokuyama Group products

Tokuyama Nouvelle Calédonie S.A.

Tokuyama Singapore Pte. Ltd.

Production and sale of cement

Tokuyama MTech Corporation

Production and sale of high purity chemicals forelectronics manufacturing
Sale of Tokuyama Group products

Production and sale of aluminum nitride substrates

Processing and sale of building materials andchemical products

Tokuyama America Inc.

Tokuyama METEL Corporation

Tokuyama Tsusho Trading Co., Ltd.

Production and sale of industrial cleaners

Stocking and sale of cement and ready-mixed
concrete

STAC Co., Ltd.
Production and sale of high purity chemicals forelectronics manufacturing

Tokuyama-Dowa Power Materials Co., Ltd.

Life Science
Shanghai Tokuyama Plastics Co., Ltd.2
Production and sale of microporous film

Tokuyama Dental Corporation
Production and sale of dental materials andequipment

Tokuyama Dental America Inc.
Sale of dental materials and equipment

Tokuyama Dental Deutschland GmbH
Sale of dental materials and equipment

Tokuyama Dental Italy S.r.l.
Sale of dental materials and equipment

A&T Corporation
Production and sale of diagnostic reagents,
analyzers and systems

Sale of Tokuyama Group products

Kansai Tokuyama Trading Co., Ltd.

Shunan System Sangyo Co., Ltd.

Stocking and sale of cement and ready-mixed
concrete

Civil engineering, construction work andplanning; on-site contracted factory work;stocking and sale of construction materials

Tokushou Co., Ltd.5
Stocking and sale of cement and ready-mixed
concrete

Tokushin Co., Ltd.

5

Stocking and sale of cement and ready-mixed
concrete

Shunan Swimming Club Co., Ltd.
Operation of health promotion facilities including
swimming and fitness clubs

Tokuyama Kairiku Unso K.K.
Shipping, transportation and warehousing

Tokuyama Art Block LABO Co., Ltd

Kyoueisekiyu Corporation

Production and sale of interlocking block

Petroleum-related businessTokyo Tokuyama Concrete Co., Ltd.

Yamaguchi Kisen Corporation

Production and sale of ready-mixed concrete andconcrete products

Marine transportation

Kawasaki Tokuyama Ready Mixed
Concrete Co., Ltd.

Freight forwarding

Production and sale of ready-mixed concrete

Chugoku Ready Mixed Concrete Co., Ltd.

Sale of diagnostic reagents, analyzers and systems

Production and sale of ready-mixed concrete

ASM Inc.

Hiroshima Tokuyama Ready Mixed
Concrete Co., Ltd.

One other company

Tokuyama Europe GmbH

5

A&T Shanghai Co., Ltd.

Development, manufacture and sale of Polyrotaxanes
related products

Sale of Tokuyama Group products

Production and sale of ready-mixed concrete

Shunan Kairiku Unso Limited
Shunan Bulk Terminal Co., Ltd.
Warehouse operations for bulk cargoes of coal, etc.

Tomitec Co., Ltd.
Production and sale of plastic molded productsSuper Nano Design Co., Ltd.
Design, manufacture and sale of nanomaterials

Seibu Tokuyama Ready Mixed ConcreteCo., Ltd.
Production and sale of ready-mixed concrete

Eco BusinessShirokawa Co., Ltd.
Production and sale of ready-mixed concrete

ASTOM Corporation
Production, sale and maintenance of ion-exchange
membranes and related equipment

Tokuyama Chiyoda Gypsum Co., Ltd.
Collection of waste gypsum board, production andsale of gypsum dihydrate, operation of waste
gypsum board recycling business

Excel Shanon Corporation3
Production and sale of plastic window sashes

Tohoku Shanon Co., Ltd.4
Production and sale of plastic window sashes

FL Tokuyama Corporation
Sale of plaster sheets and items made from plastersheetsKagawa Tokuyama Co., Ltd.
Sale of cement and construction materials,
production and sale of ready-mixed concrete

Kyushu Tokuyama Ready Mixed
Concrete Co., Ltd.
Production and sale of ready-mixed concrete

Toyomi Co., Ltd.
Production and sale of ready-mixed concrete

Notsuharu Co., Ltd.
Production and sale of ready-mixed concrete1	On April 1, 2023, the name was changed to Electronic &Advanced Materials
2	Specified subsidiary3	On July 3, 2023, became affiliated company accounted
for by the equity method.
4	On April 1, 2023, merged with Excel Shanon
Corporation.
5	On April 1, 2023, merged with Tokuyama Tsusho Trading
Co., Ltd.
Note: On January 1, 2023, Tokuyama Information Services
Corporation was acquired by Tokuyama Corporation.

TOKUYAMA REPORT 2023

59

Front Place Akihabara
7-5 Sotokanda 1-chome, Chiyoda-ku, Tokyo 101-8618, Japan
Corporate Social Responsibility Divisionhttps://www.tokuyama.co.jp/eng/