Shin Etsu Chemical : Sustainability (1.1 MB)

Sustainability

We will create a sustainable society and achieve sustainable corporate growth

Basic Sustainability Policy

The Group views the implementation of its Business Principle and the making of contributions that benefit shareholders, investors, customers, business part- ners, local communities, employees, and all other

stakeholders as its social responsibility. To fulfill this responsibility, we have established a Basic Sustainability Policy and various internal regulations, and are carrying out activities accordingly.

Sources of	Business Activity
Our Competitiveness

Management Foundation

サSustainabilityステナビリティ

Health and safety of employees and contractors

Energy-saving,resource-saving, and reduction of the environmental impacts

Product quality improvements and product safety control

Promoting CSR procurement and the diversification of

supply sources

Respect for human rights, the development of human resources, and the promotion of diversity

Respect for and protection of intellectual property

Contribution to industry and social initiatives

Accurate and timely information disclosure and communication with stakeholders

Value Created		Vision

Basic Sustainability Policy

The Shin-Etsu Group will:

Do our best to increase the Group's corporate value through sustainable growth and make multifaceted contributions to society.

Carry out all of our company activities by always placing the utmost priority on safety.

Expand those businesses that contribute to the reduction of greenhouse gas emissions.

Maximize the efficiency of product development and manufacturing, and contribute to higher efficiency of society by supplying our products thus produced.

Engage in business activities while taking biodiversity into account and seeking harmony with the global environment.

Strive to respect human rights, assure equality in employment opportunities, and support the self-fulfillment of our employees.

Appropriately disclose information in a timely manner.

Carry out healthy, trustworthy, transparent corporate activities based on the integrity of the Group's ethical values.

Structure of Sustainability Initiatives

Shin-Etsu Group's Sustainability

What We Strive for

Contribution to the Earth's future

To promote sustainability activities in all aspects of our corporate activities, we have formed a Sustainability Committee consisting of approximately 60 members, including our directors, corporate officers, and department managers, as well as sustainability managers from Group companies, with the president of Shin-Etsu Chemical serving as the chairman.

Board of Directors

Managing Directors' Meeting

Reporting

Instruction

Sustainability Committee

CommitteeChairman (President)		Reporting	CommitteeMembers		Reporting
Nomination	Nomination
								Reporting

Audit & Supervisory Board

Secretariat

Development of

Sustainability

Initiatives

The Shin-Etsu Group

Our Mission

List of Executives in Charge of Sustainability Initiatives

To provide products that contribute to solving social issues

Business		The Group strictly complies with all laws and regulations, conducts fair
	business practices and creates unrivaled value for society and industry through
Principle
	the provision of key materials and technologies.
		Basic Sustainability Policy

Position	Name
Representative	Fumio Akiya
Director-Chairman of
the Board Meeting
Representative	Yasuhiko Saitoh
Director-President
Managing Corporate	Toshiya Akimoto
Officer
Managing Corporate	Fumio Arai
Officer

Current Positions (related to Sustainability)

In charge of Technologies

Chairman of Sustainability Committee

Vice Chairman of Sustainability Committee In charge of Public Relations, Legal Affairs General Manager of Office for Digitization and Digitalization

Chairman of Risk Management Committee

In charge of Purchasing

Key Sustainability Issues

Product quality improvements and product safety control

The foundation of all activities: Legal compliance, fair corporate activities Respect for and protection of intellectual property

Accurate and timely information disclosure and communication with stakeholders Risk management

Promoting CSR procurement and the diversification of supply sources

The Foundation

of Activities

The foundation of all activities:

Legal compliance, fair

corporate activities

Product quality improvements

and product safety control

Contribution to industry and

social initiatives

Health and safety of employees		Energy-saving, resource-
	saving, and reduction of the
and contractors
	environmental impacts
Promoting CSR procurement		Respect for human rights, the
and the diversification of supply		development of human resources,
sources		and the promotion of diversity
Respect for and protection of		Accurate and timely information
	disclosure and communication
intellectual property
	with stakeholders

Managing Corporate	Yukihiro Matsui
Officer
Managing Corporate	Masaki Miyajima
Officer
Corporate Officer	Toshiyuki Kasahara
Corporate Officer	Yoshimitsu Takahashi
Corporate Officer	Kai Yasuoka

In charge of Patents

In charge of Business Auditing

General Manager of Finance & Accounting Dept. In charge of Office of the President

In charge of General Affairs,

Environmental Control & Safety

In charge of Personnel & Labor Relations

Respect for and protection of intellectual property

Corporate governance

Corporate governance (Fair tax payment, Operation of Group Companies)

Corporate governance

Health and safety of employees and contractors

Energy-saving,resource-saving, and reduction of the environmental impact

Respect for human rights, the development of human resources, and the promotion of diversity

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Sustainability

Identifying Key Issues (Materiality)

In FY2015, the Sustainability Committee identified

the Sustainability Committee. As a result, we decided

Risks and Opportunities Related to the Key Issues

Key issue

Risks and opportunities (typical examples)

Corresponding initiatives

KPIs

"key sustainability issues" that the Shin-Etsu Group	to carry on with the key issues we identified in 2015.
needs to focus its efforts on in particular. Subsequently,	We continue to view legal compliance and fair corporate
in December 2018, all of our departments and major	activities as the foundation of all of our activities, and
domestic Group companies reviewed the key issues and	focus on these nine key issues.
their importance, which were then reviewed again by

The foundation of all activities:

Legal compliance, fair corporate activities

Legal violations, unjust conduct or fraud,

Risks	damages to corporate value caused by loss of
societal trust, etc.
Opportunities	Formation of the foundation of corporate value,
risk elimination, customer confidence creation,
business opportunity expansion, hiring and
retaining excellent human resources, etc.

Raising compliance awareness through
methods including training
Thorough bribery and corruption prevention	Number of serious legal or regulatory violations: 0
measures, etc.
P.56 Main Sustainability Initiatives

Materiality Identification Process

Clarify key issues

Step 1

In all of Shin-Etsu Chemical's divisions and major group companies in Japan, key issues were clarified by the following three steps: (1) review and organize stakeholders; (2) list key sustainability issues with reference to the central themes of ISO 26000; and (3) score the importance of each key issue to the Group and to its stakeholders.

Prioritize importance of key issues and organize the issues

Step 2

Based on the key issues and their importance as submitted by the divisions and companies, the Sustainability Committee reorganized them based on two axes: importance to the Group and importance to stakeholders.

Conduct a hearing with Outside Directors

Step 3

We conducted interviews with all Outside Directors regarding the reorganized key issues and their positioning. As a result, we received the following suggestions: (1) Compliance with laws and regulations is related to all issues; (2) All of the key issues listed are equally important to the Group and difficult to rank; and (3) We should also state what our goals are.

Review by the Sustainability Committee and final decision by the Managing Directors' Meeting

Step 4

Based on the suggestions of the Outside Directors, the Sustainability Committee reviewed the issues once again, and the nine key issues were identified following deliberations by the Managing Directors' Meeting, a decision-making body for business execution. In addition, it was decided that all these important issues would be tackled equally, in no particular order.

Promotion of human resource diversity

Strict enforcement of Process safety and Environmental

Energy-saving,resource-saving,

1. and reduction of the environmental impacts
   Health and safety of employees and contractors
   Product quality improvements and product safety control
   Promoting CSR procurement and the diversification of supply sources

Risks	Strengthening of greenhouse gas regulations,
raw material price rises, procurement difficulties,
etc.
Opportunities	Enhancement of competitiveness through
environmental burden reduction and productivity
improvement, expansion in demand for products
that contribute to environmental protection, etc.
	Impact on local communities and employees
Risks	caused by accidents and environmental issues,
damage to equipment and facilities resulting
from natural disasters, impact on operations
	associated with infectious diseases, etc.
Opportunities	Stable production and higher productivity
achieved through accident prevention measures
and new process development, etc.
Risks	Loss of customer trust due to issues concerning
product quality or safety, etc.
Opportunities	Fostering of customer trust through continuous
timely delivery of products at pledged levels of
quality, etc.
Risks	Production suspensions and shipment delays
caused by difficulties in procuring raw materials,
etc.
Opportunities	Stable procurement at fair prices through diver-
sified suppliers, gaining trust from customers

and society through thorough adherence to CSR procurement, etc.

Acceleration of environmental burden reduction, response to climate change

Water resource conservation Waste reduction, etc.

P.26 Natural Capital

Safety training implementation

Execution of environmental safety audits Improvement of workplace environments, etc.

P.18 Human Capital

Quality management

Quality audits and technical support Product safety management, etc.

P.56 Main Sustainability Initiatives

Revision of the Shin-Etsu Group CSR Procurement Guidelines

Compliance with the Act against Delay in Payment of Subcontract Proceeds, etc., to the subcontractors

Initiatives aimed at eliminating conflict minerals, etc.

P.25 Social and Relationship Capital

GHG Emissions (Scope1+Scope2): 6,613 thousand tons of CO2

Emissions intensity index of production volume relative to 1990:

54.2% (Shin-Etsu Group), 46.8% (Shin-Etsu Chemical)

Percentage of Group's product sales that contribute to CN: approx. 70%

Water recycle ratio: 92.6%

Waste recycling ratio: 71% (Japan), 75% (Overseas)

Number participants in safety training: 75,406

Number of work-related employee fatalities: 0

Serious accidents: 0

Lost-time accidents rate:0.00 (Japan), 1.15 (Overseas)

Lost-time accidents severity rate:0.00 (Japan), 0.03 (Overseas)

Number participants in product safety training: 71,142

Percentage of suppliers surveyed on sustainability: approx. 70%

Very Important

(women's participation and advancement, hire foreign nationals, employment of people with disabilities)

legal compliance

disaster prevention preservation

Developing energy-saving products

Realizing an appropriate balance

Ensure a stable supply of products by

Developing products with less environmental load

between work and life

diversifying suppliers of major raw materials

and diversifying production bases

Establishment and implementation of research

Improving and stabilizing quality characteristics

themes for the creation of new businesses

Recycling of products sold

Ensuring the quality and safety of products and services

Increase customer

Occupational safety

Thorough management of chemical substances

satisfaction

Importance

Elimination of human rights infringment risks

Promoting social responsibility

through the supply chain

Dialogues with investors

Improving information disclosure

for

Stakeholders

Increasing productivity

Contributing to

local communities

Developing and expanding

global human resources

Environmental

Appropriate rights of inventions, etc.

Social

Respect for intellectual property rights of third parties

Organizational Structure

Business

Important

Importance for the Shin-Etsu Chemical Group

Very Important

	Respect for		Human rights violations committed through	Promotion of respect for human rights	Percentage of Group employees who are familiar with
S	Risks	Creating an environment where a diverse
the Company's business activities or within its
human rights, the	the Group's human rights policy: approx. 90%
supply chain, etc.	workforce can play an active role
	development of		Number of child labor cases: 0
			Enhancing work-life balance systems
	human resources,			Number of forced labor cases: 0
	Opportunities	Hiring and retaining excellent human resources	Conducting human rights due diligence, etc.
	diversity	for human rights, etc.		Percentage of women in managerial positions at the
	and the promotion of		through business activities grounded in respect	P.18 Human Capital
				section manager level and above: 12.6%
				P.25 Social and Relationship Capital
		Risks	Delay in business progress caused by intellectual	Appropriate management of intellectual
	Respect for and	property infringement, etc.	Patents acquired: 1,714
		property and information assets
	protection of	Opportunities	Acceleration of in-house business development	Cybersecurity enhancement, etc.	Patents held: 22,310
	intellectual property	by safeguarding and utilizing intellectual	P.22 Intellectual Capital	*Scope: major consolidated manufacturing companies
			property, etc.
		Risks	Loss of trust when business activities do not
	Contribution to	align with society's needs, etc.	Fund-raising activities
	industry and social	Opportunities	Employment promotion and tax payment through	Local contribution activities, etc.
	initiatives	stable business operations, fostering of trust-	P.25 Social and Relationship Capital
			based relationships with local communities, etc.
	Accurate and		Damage to corporate value stemming from		Earnings briefings and conference calls for
	Risks		institutional investors and analysts: 4
	nondisclosure or incomplete disclosure of infor-	Timely and appropriate disclosure of corporate
	timely information	Plant tours for analysts and institutional investors /
		mation, loss of stakeholder confidence, etc.	information
	disclosure and	Opportunities	from stakeholders and society, etc.	Promotion of dialogue with stakeholders, etc.	Business briefing session: 1
			companies: 5
	communication with		Establishment of appropriate market valuation,	P.56 Main Sustainability Initiatives	One-on-one meetings with analysts: 312
	stakeholders		corporate value improvement, acquisition of trust	Small meetings for investors hosted by securities

For more details regarding our initiatives, please visit our sustainability site.

https://www.shinetsu.co.jp/en/sustainability/

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Sustainability

Main Sustainability Initiatives

(1) Efforts to reduce variability in the manufacturing pro-

cess: In addition to improving the precision of conven-

Number of participants in product safety training

(people)

The mission of the Shin-Etsu Group is to contribute to the sustainable development of the world through its business activities. In line with this mission, the Group engages in sustainability activities around the world in all of its business activities, including the provision of prod- ucts. For details of the Group's sustainability activities, please consult the "Sustainability" site on our website as well as the "Shin-Etsu Sustainability Report 2023".

"Sustainability" site (Shin-Etsu Chemical website)

https://www.shinetsu.co.jp/en/sustainability/

"Shin-Etsu Sustainability Report 2023"

https://www.shinetsu.co.jp/en/sustainability/esg_bn/

tional manufacturing techniques, we are introducing DX

and AI to check the progress of quality improvement.

(2) Automation of inspection process: We promote auto-

mation of measurement to prevent careless mistakes

and eliminate measurement variability caused by

misunderstandings by quality measurement person-

nel and check the improvement of quality measure-

ment accuracy.

(3) Promotion of quality improvement activities: We

check the progress of ongoing quality improvement

90,000

		71,142
60,000	49,851
42,933
30,000
0
2020	2021	2022	(FY)

government and organizations to which we belong.

Key Issues The foundation of all activities: Legal compliance, fair corporate activities

activities such as "yield Improvement" and "zero

careless mistakes."

We conduct environmental and health risk assessments at the development stage to assess the safety of new chemical substances. Furthermore, when developing new

Ensuring full compliance awareness

The Group is thoroughly committed to compliance with laws and regulations as stated in its Business Principle and annual Management Objectives. All officers and employees submit written oaths of compliance to the Company, and in the unlikely event of inappropriate behavior, disciplinary action is taken. In addition, it is stipulated that officers and employees who discover

a violation of laws or regulations must report it to the "Compliance Consultation Office".

Whenever laws and regulations related to corporate activities are enacted or revised, the Legal Department notifies internally and ensures that all employees are fully aware of the changes. In addition, to promote understanding of important laws and regulations, we serialize explanatory articles in the Company newsletter

Initiatives to prevent corruption

In 2015, the Group established an Anti-Bribery Regulations to send a clear statement that it does not engage in any form of bribery. By having officers and employees submit written oaths of compliance, we make every effort to prevent the improper provision of favors and requests to public officials, customers, and business partners in Japan and overseas. Furthermore, to raise awareness of employees' legal compliance, we make compliance with ethics in general one of our personnel evaluation items. We also conduct regular internal audits on corruption, embezzlement, and bribery.

The Shin-Etsu Group was among the first Japanese companies to agree to the Tokyo Principles for Strengthening Anti-Corruption Practices of the Global Compact Network Japan (GCNJ) and signed the letter of

We are also implementing six sigma activities* throughout the Company to improve quality standards.

*Six sigma activities: A quality improvement method developed at Motorola (USA) in the 1980s. Activities to prevent the occurrence of quality defects and improve quality by focusing on processes in which variability occurs and reducing that variability.

Product safety control

The Group has established strict chemical substance safety control regulations at each stage of procurement, development, manufacturing, and sales. We are also actively involved in the acquisition of research data and fact-finding surveys related to the manufacture, use, and disposal of chemical substances in cooperation with the

chemical substances, we focus on products and manufacturing technologies that do not use hazardous substances as specified in the Industrial Safety and Health Act, the Chemical Control Act*1, and the EU RoHS Directive*2. In addition, we provide SDS*3 information on product hazards and toxicities in order to communicate appropriate information to customers and transportation companies.

*1 Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture, etc. (Chemical Substances Control Law): A law aimed at preventing environmental pollution by chemical substances that may affect human health and ecosystems.

*2 RoHS (Restriction of the use of certain Hazardous Substances) Directive: An EU directive that restricts the use of certain hazardous substances in electric and electronic equipment.

*3 SDS (Safety Data Sheet): A safety data sheet that describes chemical and physical properties of chemical substances as well as information on toxicity and emergency measures.

and intranet and host lectures by outside experts. In 2022, 515 employees of Shin-Etsu Chemical's head office, plants, and Group companies in Japan attended the training course for promoting appropriate subcontracting transactions conducted by the Japan Fair Trade Commission and the Small and Medium Enterprise Agency. Our legal staff also attended a seminar by the Fair Trade Institute. In addition, in response to the revision of the Whistleblower Protection Act, we revised our Compliance Consultation and Reporting Rules, translated it into 14 languages, and disseminated it to all Group companies along with our Guideline for Compliance Consultation Office.

endorsement in February 2018.

For overseas Group companies, we conduct risk assessments on bribery and corruption prevention based on country-specific corruption perception indices published by Transparency International, an international organization working to combat

corruption. In FY2022, we surveyed 36 Group companies.

Key Issues Accurate and timely information disclosure and communication with stakeholders

We believe that timely and accurate disclosure of
corporate information promotes understanding among
stakeholders and leads to appropriate market valuation. In
FY2022, we held an online briefing on our silicones busi-
ness for securities analysts and investors. The briefing
session provided an overview of the silicones business,
its focus, growth areas, development of carbon neutral
products, and other initiatives to reduce environmental
impact at the Gunma Complex. The event was attended
by 116 analysts and investors and provided a good oppor-
tunity to deepen their understanding of our business.	Online briefing on the silicones business

Key Issues Product quality improvements and product safety control

Diagram of internal system for timely disclosure of financial information

Product quality improvements

Excellent quality is a non-price competitive advantage
not only for high value-added products but also for
general-purpose products. With this in mind, the Group
has conducted quality audits every year since 2000,
believing that it is essential to have both "defensive
quality management" to prevent the production and
shipment of substandard products and "offensive quality
management" to minimize quality variability and create
quality that cannot be matched by competitors. The 2022
quality audit prioritized items (1) to (3) below.	Quality audit

Collection and management of corporate information

Each Department

Shin-Etsu Chemical

Reporting
	Office of the
		President

Group companies

Timely disclosure of corporate information

Directors, Audit & Supervisory

Board Members or Board of

Directors

Reporting

Approval

Contact

Contact

Public Relations

Finance & Accounting

Department

Department

Consultation

Person in charge of

handling information

Decisions of the necessity and

Relevant departments

timing of timely disclosures

Timely disclosure

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