Nissan Chemical : Integrated Report 2023

Nissan Chemical Corporation Integrated Report 2023

Integrated Report

2 0 2 3

WHERE

IT ALL

BEGINS

Issued: October 2023

https://www.nissanchem.co.jp/eng/

Corporate Slogan

WHERE IT

ALL BEGINS

Nothing is going to change the world to be

better without beginning.

The slogan means Nissan Chemical creates such "beginning" to realize the hope of human by exploring the future.

Brand

Statement

Our goal is to fill the world with hope and happiness.

Our value is to produce a whole new excitement utilizing our imagination and creativity.

Our pride is our team of specialists believing in the infinite possibilities of chemistry and striving to achieve the impossible.

We are Nissan Chemical, an ever evolving company the world can't do without.

Nissan Chemical Corporation

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Integrated Report 2023

Nissan Chemical Corporation

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(Raison d'etre /

Corporate Purpose)

Nissan Chemical Corporation

Corporate Philosophy

Corporate Ethos Structure

Based on changes in the business environment, social issues, and management challenges,

we recognized the importance of the corporate philosophy once again.

To determine our direction for the future and clarify the raison d'etre of the Group, we redefined our

corporate philosophy in 2022.

Mission

Statement

(Our Values)

• Contribute to society with excellent technologies and

products."

"Promote prosperity and welfare through concerted efforts to constantly develop new areas."

"Respect people who exhibit a sense of responsibility, originality and motivation."

Contribute to the protection of the global environment and the existence/

development of humanity, offering the value sought

by society.

Course of

Action 1 Conduct sensible business activities as a

member of the international community in compliance with

laws and regulations.

2 Enhance corporate value by providing safe and useful products and services.

3 Strive to achieve no-accidents & no-disasters and protect the global environment.

4 Disclose information appropriately with a focus on communication with stakeholders.

5 Create a cheerful and pleasant workplace by respecting the individuality and personality of employees, and

promoting their health.

6 Conduct ourselves as good corporate citizens and decent members of society.

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c o n t e n t s

Value Creation

• Growth Strategies

" W H E R E I T A L L B E G I N S "

To Our Stakeholders 8

The History of Nissan Chemical 9

Financial and	P r o f i l e
Non-Financial Highlights 11

Message from the President 13

Value Creation Process 19

Human Capital 21

Intellectual Capital Research and Development 25 Intellectual Property 28

Financial Capital and Manufacturing Capital 29

Social Capital and Natural Capital 30

Materiality 31

Corporate Governance 33

Messages from Outside Officers 41

C o r p o r a t e

D a t a

Sustainability Promotion Structure 67

Information Disclosure in line with TCFD Recommendations 68 Responsible Care 73

Improvement of Products Quality 76 Compliance 77

Risk Management 80 Respect for Human Rights 83

Sustainability

Financial Review 85

Corporate Information 97

Business Plan Long-term and Mid-term Business Plans Overview and Progress 43

"Atelier2050" Long-term Business Plan 45 "Vista2027" Mid-term Business Plan 47 Long-term and Mid-term Business Plans Topics 48

Message from the CFO 49

Business Segments 53

Main Products and Services 55

Business Strategies 57

Nissan Chemical's initiatives are highly regarded by external analytics and research organizations.

T h i r d - p a r t y

E v a l u a t i o n

• FTSE Russell confirms that Nissan Chemical Corporation has been independently assessed according to the index criteria, and has satisfied the requirements to be- come a constituent of the FTSE Blossom Japan Sector Relative Index.
  The FTSE Blossom Japan Sector Relative Index is used by a wide variety of market participants to create and assess responsible investment funds and other products.

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Editorial Policy

In 1992, we introduced responsible care activities, and have disclosed the details of these activities via Environment and Safety Report from 1999. The Report transformed into CSR Report in 2013 and Annual report in which business overview and financial section were included since 2016.

Since 2018, we have comprehensively summarized the ma- teriality, value creation process, business strategies, and detailed financial information in addition to the business overview and E (Environment), S (Social), and G (Governance) information as an integrated report to make this report easier to understand mid-tolong-term value creation of Nissan Chemical Group to all stakeholders, including shareholders and investors.

We aim to make this report as a valuable communication tool by deepening our business activities and enhancing the content of the report.

Guidelines Used as Reference

• International Financial Reporting Standards (IFRS) Founda- tion "IFRS Sustainability Disclosure Standards"
• Ministry of Economy, Trade and Industry "Guidance for Col- laborative Value Creation"
• GRI "Sustainability Reporting Guidelines Standard"
• Ministry of the Environment "Environmental Reporting Guidelines"
• Task Force on Climate-related Financial Disclosures (TCFD)

To Our Stakeholders

Our company was founded as Japan's first chemical fertilizer manufacturer in 1887 to solve food issues which Japan faced under the founding spirit "to dedicate ourselves to prosperity of the nation by agricultural fertility". The pioneering spirit has been still very much alive at Nissan Chemical as we have continued putting effort into innovative technologies and projects that promote social progress, greatly transforming our business operations.

To realize corporate vision in a new era, we currently provide products and services on a global scale in four business domains, such as Chemicals, Perfor-

Reporting Period

FY2022 (April 2022 to March 2023)

The occupational accidents data (P12 and P75) is from January to De- cember 2022.

Information Disclosure System

Summarized

Information

mance Materials, Agricultural Chemicals, and Healthcare on the basis of ESG (En- vironment, Social and Governance) and SDGs (Sustainable Development Goals) established by the United Nations.

Issued

October 2023

(The previous edition was issued in October 2022, and the next edition is planned to be issued in October 2024.)

Detailed

Integrated Report

(this report)

Website

The social and economic environment surrounding us continues to change dramatically, including climate change, aggravated food and health issues, a decline in the labor force due to low birthrate and aging population and widening economic divides threatening the sustainability of society. From the time of our founding to the present, we have been working to solve social issues.

Frequency of Issuance

Annually

Contact for Inquiries About This Report

Nissan Chemical Corporation

Sustainability Promotion Group,

Sustainability Promotion & IR Department

TEL: [phone]

E-mail: [e-mail]

Scope of Reporting

The initiatives are described mainly in the financial and ESG information of the activities of Nissan Chemical Group.

Information

For general users For investors

Consolidated subsidiaries:

Nissei Corporation, Nissan Butsuryu Co., Ltd., Nissan Green & Landscape Co., Ltd.,

Nissan Engineering, Ltd., Nihon Hiryo Co., Ltd., NC Tokyo Bay Corporation,

Nissan Chemical America Corporation (NCA), Nissan Chemical Europe S.A.S. (NCE),

NCK Co., Ltd. (NCK),

Nissan Bharat Rasayan PVT. LTD. (NBR)

Entities accounted for using equity method:

Sun Agro Co., Ltd., Clariant Catalysts (Japan) K.K.

Group Companies:

In addition to the above consolidated subsidiaries and entities accounted for using equity method,

NC Agro Hakodate Corporation, Environmental Technical Laboratories, Ltd., Nissan Chemical Taiwan Co., Ltd. (NCT),

Nissan Chemical Product (Shanghai) Co., Ltd. (NCS), Nissan Chemical Agro Korea Ltd. (NAK),

Nissan Chemical Do Brasil (NCB), Nissan Agro Tech India PVT. LTD. (NAI),

Nissan Chemical Materials Research (Suzhou) Co., Ltd. (NSU)

By thoroughly pursuing our corporate philosophy "Contribute to the protection of the global environment and the existence/development of humanity, offering the value sought by society", and continuing to take on the challenge of creating unprecedented possibilities and value, we will strive for sustainable development of society and our group in the future.

KINOSHITA Kojiro

Representative Director, Chairman & CEO

Nissan Chemical Corporation

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The History of Nissan Chemical

Japan's first chemical fertilizer manufacturer founded 136 years ago by TAKAMINE Jokichi, who was called "Father of Biotechnology".

His pioneering spirit has been passed down and continues to this very day.

Core Technologies for Sustainable Growth

[Existing Technologies]

Fine Organic Synthesis	Functional Polymer	Ultrafine Particle	Biological Evaluation	Optical Control
Design		Control
		[New Technologies]
	Microbial Control	Information Science

250,000

(million yen)

200,000

1887

At the time of founding

Tokyo Jinzo Hiryo, the Nissan Chemical's predecessor organization, started in 1885 when TAKAMINE Jokichi, who was called the "Father of Biotechnology", brought phosphoric ore from the US back to Japan. Takamine, who strongly felt the need for improve the fertilizer used in Japa- nese agriculture to help make Japan a modern nation, approached SHIBUSAWA Eiichi, known as the "Father of Japanese Capitalism", the following year with the idea of the commercialization of fertilizer. SHIBUSAWA Eiichi, who was from a wealthy farming family, deeply agreed with Takamine's proposal. He established Japan's first chemical fertilizer manufacturer in 1887 becoming chairman (president) himself.

With the Company policy "to dedicate ourselves to prosperity of the nation by agricultural fertility", the company contributed to the increase of domestic food production.

1923

Establishment of company foundation for business diversification

In the first half of the twentieth century, amid a variety of M&A activities by domestic corpo- rates, the three companies were joined in 1923. The Company then promoted business diversification and entered under the umbrella of Nissan zaibatsu (Nissan Concern Company Group) in 1937, which was the 50th anniversary of its found- ing, renamed Nissan Chemical Industries.

After World War II, under the separation directive based on the Corporate Reconstruction and Improvement Law, the fat and oil section was separated into Nippon Oil and Fats (current NOF) in 1949 and Nissan Chemical Industries newly started.

SHIBUSAWA Eiichi (sec- ond from left) visiting Oji Plant just after the completion of the three-company joint.

Seen on the left is TANAKA Eihachiro who served as company president from 1923 to 1941.

1965

Acquired new technological ideas through entry into the petrochemical business

In 1965, we established Nissan Petrochemicals and entered the petrochemical busi- ness. However, the petrochemical industry experienced a structural slump due to the impact of the oil crises. The Company worked to rebuild its business, but it was unable to improve its profitability and began rationalization. The Company exited the petrochemical business in 1988.

Although resulting in a large deficit, this business brought the penetration of technological ideas to the Company, which led to the development of new technologies and businesses such as fine chemicals.

Nissan Petrochemicals Chiba Plant (1968)

1989

Restarted as a value-creating company

In 1989, we launched our mid-term business plan declaring the comeback as a value -creating company oriented with its two pillars: high-tech fields such as agro- chemicals and pharmaceuticals, and technology fields such as functional products and chemicals. The results of continued R&D investment in this difficult situation emerged. By the early 1990s, we released a large number of agrochemicals on the market and entered the semiconductor field. In the 2000s, sales of the active ingredient of LIVALO®*, an anti-cholesterol drug, increased significantly and we acquired exclusive marketing rights in Japan to ROUNDUP®, the world's largestherbicide. This was followed by the creation of new agrochemicals that are the main products at present.

* LIVALO® is a registered trademark of Kowa Company, Ltd.

2016

To be a future-creating company with sustainable growth based on our core technologies

In 2016, the Company launched the long- term business plan "Progress2030" looking ahead to 2030, recognizing the importance of expanding its business domains for sustainable growth.

We expand our business transcending the framework of industry and accelerate this effort toward the future. In order to clarify this stance, in 2018, we changed our name to Nissan Chemical Corporation.

In 2022, in light of the significant changes in the business environment, which was the premise for the formulation of Progress2030, we have launched the new long-term business plan "Atelier2050", looking ahead to 2050, in order to chart acourse for the Group to continue to develop and contribute to solving social issues.

40

(%)

150,000

100,000

50,000

The land in Ojima 1-chome,Koto-ku, Tokyo, now known as Kamayabori, had been selected for its convenience in transporting raw materials and products. In 1888, the production of superphosphate (fertilizer) started.

Founder TAKAMINE Jokichi (left)

Jinzo Hiryo advertisement from an agricultural magazine in 1891 (right)

Three-company Joint

Manufacture of sulfuric acid, soda, etc.

Kanto Soda

Nippon Kagaku Hiryo

(renamed from Nippon Seimi Seizo)

Dainippon Jinzo Hiryo

(surviving company)

50th anniversary of its founding

Entered under the umbrella of

Nissan zaibatsu and renamed

Nissan Chemical Industries

30

Collapse of Lehman

Brothers

20

Expansion of the			Entering the
imports of
petrochemical		Blooming of research	semiconductor field
products in Japan		10
Impact of the two oil	findings
	crises

• The changes in sales and operating margins for the Nissan Chemical on a non-consolidated basis from FY1950 to FY1976 and for the Nissan Chemical Group on a consolidated basis from FY1977 to FY2022.
• The figures for November and the following May or October and the following April are totaled so that the figures for the year are close to the March results.
• Including effects of changes in accounting policies from FY2021.

		Sales (left axis)		Operating margin (right axis)

0																0
	1896	1906	1916	1926	1936	1946	1956	1966	1976	1986	1996	2006	2016
1886	(FY)

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Financial and Non-Financial Highlights

Operating profit / Sales / Operating margin

(billion yen)			24.5		(%)
250				22.9	25
200	18.1	18.7	20.3			20
150						15
100	204.9	206.8	209.1	208.0	228.1	10
50	37.1	38.6	42.5	51.0	52.3	5
0	2018	2019	2020	2021		0
	2022 (FY)

Operating profit (left axis) Sales (left axis) Operating margin (right axis)

Operating profit reached record highs for nine consecutive years.

Operating margin achieved the Mid-term Business Plan (FY2022-2027) target of 20% or more. * Including effects of changes in accounting policies from FY2021

Net income attributable to owners of parent / ROE

(billion yen)				19.2	19.4	(%)
45				20
		17.5
	16.9
40	16.6
35						15
30
25						10
20					41.1
	30.8	33.5	38.8
15	29.4
10						5
5
0						0
2018	2019	2020	2021	2022(FY)

			Net income (left axis)		ROE (right axis)

Net income reached record highs for 10 consecutive years.

ROE exceeded the previous year's result and achieved the Mid-term Business Plan (FY2022-2027) target of 18% or more.

R&D expenses / Sales-to-R&D expenses ratio

(billion yen)						(%)
20	8.7						10
	8.3	7.9			7.3
		7.7
			7.4
15					(Forecast)
10	17.8	17.2			16.8	17.4	5
	16.5	16.0
				(Forecast)
5
0	2018	2019	2020	2021	2022	2023	0
	(FY)

R&D expenses (left axis) Sales-to-R&D expenses ratio (right axis)

Placing importance on R&D, we have maintained a high sales-to-R&D expenses ratio of 7-9%. R&D expenses temporarily decreased between FY2020 and FY2022 due to the COVID-19 pandemic.

Number of patent held

7,000					6,261
				5,709
6,000		5,031	5,479
5,000
4,406
4,000				4,169	4,560
3,000		3,707	4,010
3,238
2,000
1,000	1,168	1,324	1,469	1,540	1,701
0	2018	2019	2020	2021	2022(FY)
	Japan	Overseas

Total amount of dividend / Share repurchase / Total payout ratio

(billion yen)					(%)
35					100
30	72	75	75	76	78
25				9.0
			12.0
20		10.0	10.0		50
15	9.0
				23.1
10			15.0	17.3
	12.1	13.1
5
0	2018	2019	2020	2021	0
	2022 (FY)

Total amount of dividend (left axis) Share repurchase (left axis) Total payout ratio (right axis)

Total payout ratio achieved the Mid-term Business Plan (FY2022-2027) target of 75% maintained.

Dividends / EPS (net income per share) / Dividend payout ratio

(¥/share)					56.3	(%)
300					60
250	41.5	42.8	44.9	44.9		50
200						40
150				272	291	30
			232
100	198	210			20
		164
				122
50	82	90	104		10
0	2018	2019	2020	2021		0
	2022 (FY)

Dividend per share (left axis) EPS (left axis) Dividend payout ratio (right axis)

Dividends have increased for 11 consecutive years from FY2012 to FY2022.

Dividend payout ratio achieved the Mid-term Business Plan (FY2022-2027) target of 55% maintained.

Number of full-time employees / Ratio of females among full-time employees / Ratio of female researchers in regular positions

(number of people)				14.8	(%)
2,000				14.5	15
1,900			13.4			14
	12.6
	12.2		12.5	12.5	13
		11.9
1,800		11.5			12
11.1
			1,929	1,959
			1,924	11
1,700		1,890
1,861
					10
1,600	2018	2019	2020	2021		9
	2022 (FY)

Number of full-time employees (left axis)

Ratio of females among full-time employees (right axis)

Ratio of female researchers in regular positions (right axis)

Monthly average overtime / Annual paid leave acquisition ratio*

(hours)						(%)
20						85
					80.6	80.0
					(target)
19
					80
	75.8			76.0
18	19.7	73.2	71.0			75
		18.9	17.7	18.4	17.7
17	2018	2019	2020	2021	2022	70
	2027(FY)

Monthly average overtime (left axis)

Annual paid leave acquisition ratio (right axis)

* Figures from FY2019 also include annual paid leave acquisition by managers

EBITDA (operating profit + depreciation)

(billion yen)

70
60
50
40
30				61.2	63.3
		49.2	53.0
20	48.0
10
0	2018	2019	2020	2021	2022 (FY)

EBITDA

Liabilities with interest / D/E ratio*

(billion yen)					(%)
50					0
					-1.1
40
30
		-3.4	-5.2		-4
20	-5.7
		-6.1
		24.6		27.3
10	26.6	22.7
22.7
0					-8
2018	2019	2020	2021	2022 (FY)

			Liabilities with Interest (left axis)		D/E ratio (right axis)

* D/E ratio = (Loans payable -Cash and deposits) / Shareholders' equity

Lost-time injury frequency rate*

1.6	1.48
1.2	1.11				0.94	1.07	1.16
	0.76 0.81	0.88	0.81	0.90	0.93	1.10
0.8			0.73
0.4		0.37	0.37			0.37
				0.00		0.00		0.00
0.0						(target)
2014 2015 2016 2017 2018 2019 2020 2021 2022	2027 (Year)
	Nissan Chemical	Chemical industry

* Number of deaths and injuries due to occupational accidents per million actual working hours

GHG emissions

(1,000 tons)

400
350
300	114	90	91	100
		121
250	19
18		29
25
200				25
150	230	219		216		254
100	203	181	(target)
50
0	2018	2019	2020	2021	2022	2027(FY)

Dinitrogen monoxide (CO2 equivalent) CO2 emissions from non-energy use CO2 emissions from energy use

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Message from the President

Become "a group of

co-creators that face challenges for change with a strong passion" to continue creating irreplaceable "Must-Have" products

Sharing the Direction for the Future and the Corporate Philosophy with Employees

Building the Ideal State of Nissan Chemical Together with Employees

Our company was founded in 1887 as Japanʼs first chemical fertilizer manufacturer. We have now set up our corporate slogan "WHERE IT ALL BEGINS" and are moving forward with our business with our vision to create innovation.

Since our founding, we have transformed to respond to the occasional changes in the business environment. In an effort to determine our direction for the future and clarify the raison dʼetre of the Group, we have redefined our corporate philosophy to "Contribute to the protection of the global environment and the existence/development of humanity, offering the value sought by society" in April 2022. As a new growth strategy based on the business environment and social issues, we have formulated and launched two plans,

"Atelier2050" and "Vista2027". Atelier2050 is a long-term business plan with a broad perspective for 2050, and Vista2027 is a mid-term business plan that serves as a stepping-stone for Atelier2050.

I believe that our corporate philosophy and mid- to long- term direction of the Company have meaning only if they are thoroughly understood by each and every employee. For this reason, since April of last year, when we redefined our corpo- rate philosophy and started a new business plan, I have per- sonally visited our business sites in Japan and abroad, and given lectures to entire sites or conducted informal discus- sions with smaller level-specific groups. During my visits, I provide explanations while looking at the faces of the on-site employees and answer their questions on the spot. By com-

• Progress of the "Vista2027" mid-term business plan

municating directly to employees in that way, I foster a culture where we join forces and keep challenging ourselves to- gether. This fiscal year, as the COVID-19 pandemic gradually winds up, I plan to actively visit overseas business sites as well.

Operating Profit and Net Income at Record Highs for 9th and 10th Consecutive Year

Steady Push of Vista2027

Regarding our results for FY2022, operating profit and net income reached record highs for the 9th and 10th consecutive year, respectively. However, due to the sharp rise in price of raw materials and the deterioration of market conditions, the operating profit came short of its Vista2027 target for FY2022 by 1.2 billion yen.

I would like to explain the progress of the four basic strategies announced in Vista2027. With regard to our first strate- gy, "deeply exploit business areas and increase marketing ability," we established the Biological Group within our Biological Research Laboratories in April 2022, in order to accelerate the development of microbial control technology, a new core technology. In information science, another new core technology, we are also conducting verifications in materials informatics (MI). In addition, in April 2023, we newly established the Animal Care Planning Group within the Planning and Development Division, to consider developing veterinary pharmaceuticals and building a sales system.

Regarding our second basic strategy, "promote sustainable management", we newly established the Sustainability Promotion & IR Department in April 2022 and the department has since shown strong leadership in sustainability initiatives and measures. It holds business briefings and ESG briefings

Value Creation & Growth Strategies

YAGI Shinsuke

Representative Director,

President & COO

Vista2027

2022

2023

2024

2025

2026

2027

Vista2027 Stage I

Vista2027 Stage II

Major Financial Targets for FY2027

FY2022 Result

Sales: 285.0 billion yen

Sales: 228.1 billion yen (+20.1 billion yen)

Operating profit: 67.0 billion yen

Operating profit: 52.3 billion yen (+1.3 billion yen)

ROE: above 18.0%

ROE: 19.4%

Total payout ratio: Maintain 75%

Total payout ratio: 78%

(

) shows comparison to FY2021

Major Non-financial Targets for FY2027

FY2022 Result

Rate of total sales of Nissan Chemical Sustainable

Achievement of the

55%

Agenda* target products

55%

and services in

Maintain

Progress

target to maintain

consolidated net sales

at least

at least

*A plan to pursue "what we can do for the future of the globe and human"

GHG emissions (Scope1+2)

9.8% to FY2018

Reducing

30% to FY2018

Progress

Reduced

Compared

Compared

at least

by

Progress of the four basic strategies

1. Deeply exploit business areas and increase marketing ability
2. • Newly establishment of the Biological Group
   • Newly establishment of the Animal Care Planning Group
   • Verifications of materials informatics (MI)
3. Promote sustainable management
4. • Newly establishment of Sustainability Promotion & IR Department
   • Hold of business briefings and ESG briefing
   • Launch of the Nissan Chemical Sustainable Agenda
5. Strengthen the creation and co-creation process of values
6. • Newly establishment of the Digital Transformation Department
   • Provision of a company-wide digital transformation (DX) platform
   • Adoption of a role grading system in the personnel system
7. Expand market shares and profits of existing businesses
8. • Construction of new plant and manufacturing plants
   • Expanding the response ability of overseas business sites

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Message from the President

both inside and outside of the Company, and actively sends out related information.

In addition, we launched the "Nissan Chemical Sustainable Agenda" in April 2022. This plan aims to pursue "what we can do for the future of the globe and human" by providing products and services that contribute to solving social is- sues. We define the rate of total sales of products and services covered by the Nissan Chemical Sustainable Agenda as a key performance indicator (KPI). In Vista2027, we have set a target of "maintaining at least 55%"in each fiscal year. In FY2022, the first fiscal year of the plan, we achieved this tar- get.

As part of our third strategy, "strengthen the creation and co-creation process of values", we revised the personnel system in November 2022. We have replaced the conventional function-based personnel system with a role grading system that more efficient allocation of human resources based on potentiality and engagement of every workforce rather than seniority. Furthermore, we newly established the Digital Transformation Department in April 2022 and are making progress in developing a company-wide platform for digital transformation (DX). In preparation for the full-fledged

tural reform after shutting down melamine business, in the Chemicals business. Regarding Venus® Oilclean, a microor- ganism formulation that decomposes oils and fats, we joined a project to develop biofuels in order to reduce CO2 emissions and have started exploring new applications outside of the treatment of wastewaterʼs oils and fats.

When it comes to display materials in the Performance Materials business, we set out to deepen photo-alignment material for IPS liquid crystal as well as advanced the development of materials for next-generation displays such as mi- cro LED displays. In semiconductor materials, we strengthe n e d o u r d e v e l o p m e n t a b i l i t i e s o f E U V m a t e r i a l s i n anticipation of future growth, while expanding development and sales operations in a bid to increase our market share in multi-layer materials and packaging materials. In addition, NCK, our South Korean affiliate, built a new plant in Dangjin to strengthen its product supply abilities. The start of operations is scheduled for FY2024. NCK also newly established a semiconductor group in its R&D center located in Pyeongtaek, so as to respond even more rapidly to customers in South Korea and China. In inorganic materials, in addition to carrying forward sales promotion of oil and gas materials, we per-

Value Creation & Growth Strategies

launch of the data-driven system for Vista2027 Stage II which start from FY2025, we are currently steadily developing a platform for data utilization. We aim to utilize data to visualize greenhouse gas (GHG) emissions in real time and optimize the logistics systems.

As part of our fourth strategy, "expand market shares and profits of existing businesses", we promote measures to improve profitability of ammonia-related products as a struc-

formed evaluations of CCS materials aimed at efficiently storage CO2 in the ground, in collaboration with Australian national research institutes and university.

In Agricultural Chemicals business, we promoted global expansion of the insecticide GRACIA®. In addition, our Indian joint venture Nissan Bharat Rasayan (NBR), whose goal is to strengthen product supply abilities, started its commercial operation in March 2023. The construction of manufacturing

plants in Japan is also progressing smoothly, with operations scheduled to start in 2024.

In drug discovery in the Healthcare business, we are pri- oritizing human and capital investment in oligonucleotide therapeutics. In biomedical materials, a bio-venture company engaged in the realization of heart regenerative therapies through iPS cells, used our companyʼs prevelex® when producing cell clumps to perform clinical trials.

Enhancing our Discernment Abilities to Create Irreplaceable, "Must-Have" Products

ingless if we cannot assess whether there is demand for a particular product or technology in the market, what the potential scale of the business is, or when it is most effective to commercialize and launch the product in the market.

I think there is little value in coming up with outstanding technologies if the market will not use it. Furthermore, there are also methods to suggest and popularize a product or technology not on the market yet but which might become a "Must-Have" in the future. I regard business portfolio management as very important, in that it consists in investing limited capital such as people and money in promising business-

• Basic strategies and business domains of the long-term business plan "Atelier2050"

Atelier2050

As a big theme across the Company, I tell our employees the necessity to create unique products and technologies that cannot be substituted in the market, and without which the product cannot be manufactured or functioned, in order for our Group to keep growing in the future. I explain that, for so- ciety, such products and technologies are indispensable

es and maximizing corporate value.

Then, in order to develop "Must-Have" products and technologies that lead to sales and profit growth, it becomes important to have the marketing ability to judge the state of the market, ability that results from the recognition and resolution of customersʼ issues. I call this process "connoisseur", and we

Basic Strategy

Deeply exploit and expand

business areas

Expand into new areas related to

growing businesses

Pursue sustainable management further

Develop business activities that

contribute to solving

environmental and social issues

Renovate management and

business foundations

Accelerate the value-creation

process by utilizing digital

technology

Business Areas (expansion into new areas)

1	Information &			2 Life Science				3	Environment &
	Communication								Energy
	Semiconductor			Agrochemicals					Secondary battery
	materials			Animal health					materials and fuel
	Display materials			products					cell materials
			Biomedical materials
	Photofunctional
			Pharmaceuticals
	materials
			(small molecules,
				oligonucleotides,
				peptides)
	Sensing		Systems					Next-generation
						solar cell materials
								CCUS materials
	Metamaterials				Microbiome
				Biostimulant				CO2 reduction
									system
				Growing businesses

• MaterialsServices &

Industrial chemicals

Colloidal silica Affiliate companies

Core businesses

"Must-Have" products. Whether in the semiconductor business or other businesses, the level of technology asked of us is becoming quite advanced. In this context, if we create irreplaceable products and technologies inimitable by other com- panies, we will greatly contribute to the growth of our businesses and to the world.

For example, when conducting research and development (R&D) on new performance materials, which are growth driv- ers, if we pursue products and technologies that only we can provide and other companies cannot imitate, such as the alignment materials needed for LCD production and the anti-reflective coating materials essential to semiconductor production, these will become "Must-Have" products on the markets and we have an overwhelming competitive advantage.

"Must-Have" products and technologies are not easy to create. We allocate 8% of our sales to R&D, and we pride ourselves on the fact that this level exceeds that of other companies in our industry. However, large R&D expenses are mean-

put effort into developing discerning personnel. I repeatedly mention the terms "Must-Have" and "connoisseur" and, as a result, these terms seems to have absorbed to the employees as keywords. Developing discerning personnel is not an easy endeavor. The source of our corporate value is research and approximately 70% of our annual hires in regular positions are researchers, but an exclusive devotion to research does not develop discerning abilities. We offer opportunities for researchers to transfer to marketing positions so they can understand market trends. As a company, we support employees in the enhancement of their discernment abilities.

Creating Products that Contribute to Decarbonization for the Protection of the Global Environment and the Existence/Development of Humanity

As suggested by the expression "the era of VUCA," Volatility, Uncertainty, Complexity and Ambiguity have been increasing recently and, as society undergoes drastic changes, the fu-

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Nissan Chemical Corporation

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Message from the President

ture is anybodyʼs guess. Nissan Chemical is no exception in that regard.

Despite the circumstances, our basic approach for the management of the Group is to discover all sorts of risks, apply them to situations within our assumptions and take the lead by adopting the relevant measures. Delayed countermeasures against risk are due to a lack of imagination and may prove fatal when it comes to corporate management.

One of them is climate change countermeasures. Regarding climate change countermeasures as well, "unexpected situations " are no excuse for us to continue our business. In June 2022, we established the Climate Change Committee of which I am the Chairman. In 2020, we announced our 2°C and 4°C scenario analyses for the analysis period up to 2030 in the previous long-term business plan, but in the Climate Change Committee, we have also carried out new analyses on the 1.5°C and 4°C scenarios, and we announced them in July 2023. In these new analyses, we determined the impact on our business and the possible countermeasures, including the financial risks and opportunities, based on the 1.5°C and 4°C sce- narios. We also extended the analysis period until 2050.

We have a target of net zero GHG emissions by 2050, and have set the target of reducing by at least 30% from FY2018 level. We are also having discussions from a technological perspective, and are getting an understanding of which facilities we should improve. Moreover, we are conducting discussions on the best use of internal carbon pricing (ICP), as a way to build a structure for GHG reduction. For example, the Chemicals business generates a large amount of CO2 emissions but, by incorporating ICP in our managerial accounting as a corporation, we can actively implement initiatives that lead to increased profits for each business, while promoting decarbonization of business activities to achieve both social and economic value. We view our progress toward our ESG target indicators, such as those related to climate change countermeasures, and the following results not as formalities but as urgent issues to ensure our business continuance. Last year, in order to signify our stance, we put in place a mechanism which reflects the progress toward our ESG targets in officersʼ remuneration.

In order to realize our corporate philosophy "Contribute to the protection of the global environment and the exis- tence/development of humanity, offering the value sought by society," our company must continue to be chosen by stake- holders, and our products must continue to be chosen by the market. For us, overcoming various issues such as the reduction of GHG emissions and being the perpetually chosen company is our social value, and is closely connected to our social contribution.

By FY2027, the final year of Vista2027, we want to create products that contribute to decarbonization and the technologies that support them, such as environment & energy materials or CCS materials, as well as develop products that fit the slogan "where it all begins." I believe it is important to plant the seeds of technologies by the end of Stage I in FY2024. Then, after one or two sprout, I want us to work for the 20 next following years so that flowers blossom by 2050.

Securing Outstanding Personnel and Tackling the Future through Value Co-creation

In Atelier2050, we drew up our ideal state in 2050 "a future -creating company that grows through seeking to enrich people and nature" for the corporate state and "a group of co-creators that face challenges for change with a strong passion" for the organizational state. However, labor shortages and the securing of outstanding personnel are management issues in both the short term and the mid- to long-term. As initiatives in regard to these issues, we raised the salary of young employees and, in November 2022, revised our personnel system and adopted a role grading system. The aim of this system is to treat human resources appropriately according to their responsibilities and roles rather than seniority.

In FY2023, we have begun conducting career dialogue between superiors and subordinates, separately from the performance evaluation interviews conducted so far. We have created an environment where the right person can be at the right post, so that employees work in a pleasant atmosphere and the Companyʼs businesses continue to grow. We have also launched the "10% challenge" system to encourage employees ʼ appetite for challenge and free thinking. With this system, employees can dedicate 10% of their working hours to themes they want to work on independently, in areas outside of their day-to-day affairs or not explicitly stated in divi-

sion policies. They can work as an individual unit, but also collaborate with like-minded people inside or outside of the Company to discover even newer ideas.

We started extending the retirement age in April 2023. We are gradually raising the retirement age from 60 years of age to 65 in 2032. The experience and knowledge cultivated by our veteran employees are one of our important assets. We have created an environment in which they can make full use of themselves, renew their motivation and play an active role on the front line. I have great hopes regarding the participation of professional veterans.

Human resources, often called human assets, are represent priceless capita for a company. As suggested by our ideal organizational state for 2050, "a group of co-creators that face challenges for change with a strong passion," we remain committed to building an organization that supports co-creation and taking on challenges.

Further Strengthening of the Groupʼs Corporate

Governance through Reforms toward a Board of Directors Rich in Knowledge, Skill and Diversity

Revision to the Corporate Governance Code called for the further functional enhancement of the Board of Directors and animated discussions in their meetings, outside directors in- cluded. Therefore, the Group is continuously working to strengthen governance. I think the Board of Directors must be composed of members selected from various perspectives to make decisions in an appropriate and agile manner and supervise the execution of business activities in our companyʼs diverse fields. Those perspectives include the balance of knowledge, experience, skills, and other characteristics, and diversity, including gender, internationality, and practical experience in the totality of the board.

In June 2023, Ms. TAKEOKA Yuko became the second woman in the Companyʼs history to be appointed outside di- rector. Ms. TAKEOKA has many years of experience as a researcher centered on the synthesis and characterization of functional polymers, which is deeply related to our business. In addition to her expertise as a Doctor of Engineering, she has a rich experience and an extensive knowledge of the field. With the appointment of Ms. TAKEOKA, half of the four outside directors are now women. I also hope that Ms. TAKEOKA will contribute her female perspective on how to build a company where women can work easily and actively participate.

Our company has identified the expertness and skills requirements required for its directors: "corporate manage- ment," "research and development/technologies," "finance and accounting," "legal/risk management/internal control," "personnel affairs/personnel strategies," and "global experi- ence." In the future, we will work to form a Board of Directors comprised of talent with outstanding personalities and repu- tations, with a high level of knowledge and a strong sense of ethics, and suitable for our board. We will emphasize this bal- ance, as well as diversity in the formation of our board, and will continue to implement reforms to that end.

Moreover, the Nomination and Remuneration Advisory Committee, which is comprised of the Chairman, the President

and outside directors, is making progress in its discussions surrounding the President CEOʼs succession. We plan to define the ideal image of my successor and those coming after- wards, discuss what dispositions are required, what level of human resources we must choose when it comes to talent development, and resolve these themes and others at the Board of Directors.

Our company was founded in 1887 under the spirit "to dedicate ourselves to prosperity of the nation by agricultural fertility," by the pioneers of the Meiji period Mr. TAKAMINE Jokichi, Mr. SHIBUSAWA Eiichi and Mr. MASUDA Takashi, and 136 years have since passed. When comparing the time of our founding with our current era, the handled products themselves have changed but, from the time of our founding when there was no concept of sustainability, there is no change in our fierce passion for contributing to social development by solving social issues through the power of chemistry.

We challenge ourselves to effect change not simply for our Group but for the entire value chain, and engage in initiatives toward sustainability. In this way, we continue to be chosen as a corporation by all our stakeholders.

The lasting belief of Nissan Chemical,

unbroken since our founding

Improvement

of Company

Value

Our com	pan	y's products		Creating products
lead to the resolution of
	chosen by society
social issues

Improvement

of Social

Value

Our founder Mr. TAKAMINE Jokichi wished to contribute to the improvement of Japan's national power through agricul- ture, our company's strength, and he expressed that hope in our founding spirit, "to dedicate ourselves to prosperity of the nation by agricultural fertility."

Value Creation & Growth Strategies

Nissan Chemical Corporation

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Nissan Chemical Corporation

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