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