Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental Conservation
• Safety and Health
• Product Quality
• Corporate Governance
• CSR (Corporate Social Responsibility)
• Stakeholder Communication
• Human Rights
• Supply Chain Management

Environmental Achievements

• Reduced energy intensity by 0.4% in FY2018 (target was 1% reduction)
• Achieved zero emission of SOx since FY2012
• Significant reduction of NOx emissions
• Reduced industrial waste volume by approximately 0.5% annually since FY2016
• Group company obtained Eco Rail Mark certification

Social Achievements

• Achieved targets for female applicants in new hires (30% or greater), female employment (20% or greater), and female managers (10% or greater) in FY2018
• Introduced the first Reemployment Applicants Registration System
• Conducted various education programs for employee development
• Implemented various programs to support childcare and nursing care
• Achieved 100% consultation rate for health checkups in FY2018
• Achieved 100% implementation rate for stress checks in FY2018
• Conducted community contribution activities such as visiting chemistry classes at elementary schools

Governance Achievements

• Released Corporate Governance Report in December 2018
• Established a Nominating and Compensation Committee in June 2019
• Conducted compliance training sessions
• All management personnel took the Examination of Compliance Proficiency for Practical Business (96% acquired qualification)
• Shifted into a new management structure in January 2018 to strengthen supervisory and executive functions
• Introduced stock-based compensation plan in January 2018

Climate Goals & Targets

Environmental Challenges

• Decreased net sales in FY2018 due to declines in each segment except the specialty polymers segment
• Decreased operating profit in FY2018 due to a decrease in net sales, an increase in raw fuel costs, and other factors
• Harsh business environment in FY2019 due to high crude oil and naphtha prices, concerns over increases in raw material prices, and tightening environmental regulations in China
• Need to increase profitability of Core Businesses, develop new products in Growth and Cultivation Businesses, ensure stable procurement of raw materials and stable production, and achieve accident-free, disaster-free operation

Mitigation Strategies

• Expediting the development of new products mainly in the Functional Colorants and Basic Chemicals segments
• Improving competitiveness through cost reductions
• Investing capital into Koriyama Plant for expansion of business
• Restructuring Environment･Safety & Quality Assurance Department into Quality Assurance Department and Environment & Safety Department

Supply Chain Management

Responsible Procurement

• CSR Procurement Policy
• Procurement Guidelines

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Sustainability Reporting Standards, SASB standards, “Resource Transformation” Sector, Chemicals, ISO 26000: 2010 Guidance on Social Responsibility, Ministry of Economy, Trade and Industry Guidance for Collaborative Value Creation, Ministry of the Environment Environmental Reporting Guidelines 2018

Certifications: ISO 14001:2015, ISO 9001:2015, Eco Rail Mark

UN Sustainable Development Goals

• Goal 1
• Goal 3
• Goal 4
• Goal 5
• Goal 6
• Goal 7
• Goal 8
• Goal 9
• Goal 10
• Goal 11
• Goal 12
• Goal 13
• Goal 15
• Goal 17

Hodogaya Chemical Group supports the initiatives to achieve the SDGs for sustainable development through its business and CSR activities.

Sustainable Products & Innovation

• Bio-PTG (plant-derived raw material for polyurethanes)
• Environmentally-friendly charge control agents
• Acetyl hydroperoxide (environmentally-friendly disinfectant)
• Natural food dyes
• OLED materials

Awards & Recognition

• Second prize in the KORIYAMA EXPO AWARD contest

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance
• Sustainable Development Goals (SDGs)

Environmental Achievements

• Completed switching of raw fuel used in plants to city gas in FY2011, achieving zero emission of SOx since FY2012 and significant reduction of NOx emissions.
• Obtained Eco Rail Mark certification for Chloro-IPC products.
• Reduced energy intensity (although not meeting the target in FY2019).

Social Achievements

• Achieved targets for female applicants, employment, and managers (for three years starting FY2016).
• Achieved target employment rate of workers with disabilities (2.26%).
• Implemented various programs to support childcare and nursing care.
• Introduced a reemployment program for retired personnel.

Governance Achievements

• Transitioned to a Company with an Audit & Supervisory Committee in June 2015.
• Established a Nominating and Compensation Committee in June 2019.
• Introduced an electronic voting system for the General Meeting of Shareholders.

Climate Goals & Targets

Environmental Challenges

• Impact of COVID-19 on customer business activities (particularly smartphone and automotive industries), leading to a decline in demand.
• Impact of COVID-19 on raw material suppliers, resulting in delayed deliveries or procurement difficulties.
• Increase in industrial waste in FY2019 due to different product mix.

Mitigation Strategies

• Developed material for a diagnosis kit applicable to PCR diagnostic methods (adopted by several manufacturers).
• Promoting resource recycling to reduce final disposal volume of industrial waste.
• Implementing measures to reduce the risk of COVID-19 infection, including working from home and staggered commuting times.

Supply Chain Management

Responsible Procurement

• CSR Procurement Policy
• Procurement Guidelines

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Sustainability Reporting Standards, SASB standards, “Resource Transformation” Sector, Chemicals, ISO 26000: 2010

Certifications: ISO 14001:2015, ISO 9001:2015

UN Sustainable Development Goals

• 3 (Good Health and Well-being)
• 7 (Affordable and Clean Energy)
• 9 (Industry, Innovation and Infrastructure)
• 12 (Responsible Consumption and Production)
• 13 (Climate Action)
• 14 (Life Below Water)

Focus on five SDGs directly connected to products/services; engagement with other goals as activities fulfilling social responsibility.

Sustainable Products & Innovation

• Sugomaku (urethane waterproofing material)
• Soil improvement agents
• Octadecyl isocyanate (from vegetable oil)
• OXYATTACK (peracetic acid formulation)
• Bio-PTG (plant-derived raw materials)

Awards & Recognition

• Eco Rail Mark

Environmental Metrics

ESG Focus Areas

• Climate Change
• Environmental Conservation
• Responsible Care (RC)
• Quality Assurance
• Workplace Safety and Health
• Security and Disaster Prevention
• Sustainable Procurement
• Human Rights
• Community Contribution
• Diversity & Inclusion

Environmental Achievements

• Reduced CO2 emissions (Scope 1+2) to approximately 45,722 t-CO2 in FY2022.
• Achieved zero SOx emissions since FY2012.
• Significant reduction of NOx and dust emissions through various measures.
• Installed an ICP system-based heat pump at Koriyama Plant, reducing emissions by 171t-CO2/year and city gas consumption by 113,000Nm3/year.

Social Achievements

• Achieved zero lost-time injuries in FY2022 for both Hodogaya Chemical Group and subcontracting companies.
• Continued to improve engagement scores (almost monthly measurement).
• Increased percentage of personnel taking paid holidays.
• Increased rate of male personnel taking childcare leave.
• Certified as a Health & Productivity Management Outstanding Organization for a third consecutive year in FY2022.
• Established a system to comprehensively prevent all forms of harassment.
• Various community contribution activities, including volunteer weeding and corporate hometown tax donations.

Governance Achievements

• Established the Sustainability Development Committee with subcommittees focusing on global environment and TCFD.
• Appointment of a female Outside Director in June 2023.
• Strengthened quality management functions by restructuring the Environment and Safety & Quality Assurance Department.
• Achieved zero quality problems in FY2022.
• Implemented Internal Carbon Pricing (ICP) in FY2021.

Climate Goals & Targets

Environmental Challenges

• Increasing production volume leading to higher CO2 emissions.
• Climate-related risks (physical risks like extreme weather, transition risks like regulatory changes).
• Increase in industrial waste volumes in FY2022.
• Shortage of forestry workers hindering sustainable forestry.
• Potential human risks (violation of labor laws, harassment, etc.).
• Changes in values regarding human resources amid major global structural changes.

Mitigation Strategies

• Roadmap for reducing CO2 emissions with targets for 2025, 2030, and 2050.
• Climate scenario analysis and promotion of new initiatives to address transition and physical risks.
• Redoubled efforts to reduce industrial waste.
• Development of new technology for spraying herbicides by drone to improve the working environment in forestry.
• Appropriate and adequate management of human risk, prevention, avoidance, and mitigation of future losses.
• Continuous monitoring of human resource management trends and responding to changes based on the company's philosophy and vision.

Supply Chain Management

Supplier Audits: Regular use of Procurement Guidelines Implementation Status Survey Sheet and visiting audits.

Responsible Procurement

• Compliance with Procurement Guidelines (including human rights and environmental aspects).

Climate-Related Risks & Opportunities

Physical Risks

• Acute Increase in earthquakes, typhoons, and floods

Transition Risks

• Strengthening energy-related laws and regulations
• Market changes, especially in the agrochemicals business

Opportunities

• Eco-friendly market formation
• Development of energy-efficient products
• Expanding business opportunities due to the advent of the hydrogen society

Reporting Standards

Frameworks Used: TCFD

Certifications: ISO 14001:2015, ISO 9001:2015

Third-party Assurance: EcoVadis (Silver Medal in FY2022)

Sustainable Products & Innovation

• Bio-based urethane materials
• Materials for PCR diagnostic kits
• Eco-friendly aluminum coloring dyes

Awards & Recognition

• EcoVadis Silver Medal (FY2022)
• Health & Productivity Management Outstanding Organization (three consecutive years)

Environmental Metrics

ESG Focus Areas

• Climate Change
• Human Resources
• Corporate Governance
• Environmental Protection
• Community Engagement
• Supply Chain Sustainability
• Product Safety

Environmental Achievements

• Introduced CO2-free electricity at several plants and offices
• Introduced Internal Carbon Pricing (ICP) to promote low-carbon investments
• Reduced CO2 emissions (Scope 1 + Scope 2) to 45.7 thousand tons in FY2022
• Reduced energy intensity to 0.636 kl/million JPY of net sales in FY2022
• Achieved zero SOx emissions since FY2012
• Expansion of environmentally friendly products (Bio-PTGs, ODI, natural food dyes, peracetic acid formulation OXYATTACK)

Social Achievements

• Certified as a Health & Productivity Management Outstanding Organization for three consecutive years
• Improved FTSE Russell score each year due to proactive information disclosure
• Selected as a constituent of the FTSE Blossom Japan Sector Relative Index in FY2022
• Received Silver Medal from EcoVadis in FY2022
• Achieved zero lost-time injuries in FY2022
• Increased percentage of personnel taking paid holidays to 71% in FY2022
• Increased percentage of male personnel taking childcare leave to 83% in FY2022
• Implemented various work-life balance initiatives (refreshment leave, teleworking)

Governance Achievements

• Transitioned to a Company with an Audit & Supervisory Committee in 2015
• Introduced a stock-based compensation plan for officers in 2016
• Appointed a female Outside Director in June 2023
• Achieved zero statutory and regulatory violations and zero quality problems in FY2022
• Strengthened corporate governance through regular Board of Directors, Audit & Supervisory Committee, and Nominating and Compensation Committee meetings

Climate Goals & Targets

Environmental Challenges

• Surge in energy prices due to the Russia-Ukraine conflict
• Substantial decline in materials for PCR diagnostic kit demand
• Increase in raw material and fuel prices
• Increase in research and development expenses
• CO2 generation in hydrogen production from natural gas
• Need to strengthen existing businesses while building a new business portfolio
• Increase in industrial waste volumes in FY2022

Mitigation Strategies

• Introduced Internal Carbon Pricing (ICP)
• Reorganized business departments to improve efficiency and responsiveness
• Established a Korea Business Strategy Department
• Promoting energy-saving and resource-saving measures
• Exploring the use of green and blue hydrogen
• Joint development of new agricultural materials with ASAHI AGRIA CO., LTD.
• Strengthening efforts to reduce industrial waste

Supply Chain Management

Supplier Audits: Regular visiting audits of business partner companies

Responsible Procurement

• Procurement Policy and Procurement Guidelines
• Sustainable procurement
• Securing multiple suppliers and diversifying procurement countries
• Procurement Guidelines Implementation Status Survey

Climate-Related Risks & Opportunities

Physical Risks

• Severe natural disasters impacting production activities

Transition Risks

• Increased energy costs and raw material procurement costs due to carbon tax
• Increased R&D and manufacturing costs to meet eco-friendly demands
• Market changes due to eco-friendly market formation

Opportunities

• Expanding demand for climate change mitigation/adaptation products
• Expanding demand for products that contribute to lighter environmental impact
• Expanding business opportunities due to the advent of the hydrogen society

Reporting Standards

Frameworks Used: Ministry of Economy, Trade and Industry Guidance for Collaborative Value Creation, IFRS Foundation Integrated Reporting Framework, ISO 26000: 2010 Guidance on Social Responsibility, GRI Sustainability Reporting Standards, Ministry of the Environment Environmental Reporting Guidelines 2018, TCFD Recommendations

Certifications: ISO 14001, ISO 9001, EcoVadis Silver Medal, FTSE Blossom Japan Sector Relative Index constituent

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Goal 9 (Industry, Innovation and Infrastructure)

Creating specialty products to help achieve SDG goal 9

Sustainable Products & Innovation

• Bio-PTG
• ODI
• Natural food dyes
• OXYATTACK
• Oxygen supply materials
• Environmentally friendly aluminum coloring dyes

Awards & Recognition

• EcoVadis Silver Medal (FY2022)
• FTSE Blossom Japan Sector Relative Index constituent (FY2022)