Shin Etsu Polymer : 2023 Sustainability Report

Shin-Etsu Polymer Co., Ltd.

Sustainability Report 2023

Shin-Etsu Polymer

INDEX 1

Prologue

2

Sustainability

Management

05 Financial and Non-Financial Highlights

07 Top Message

09 Our Basic Approach to Sustainability / Key Sustainability Issues / Shin-Etsu Polymer Value Chain / Stakeholder Engagement

14 Towards Establishing a Recycling-Oriented Society

1

Prologue

2Management Sustainability

3

3

Special

Feature

4

Environment

5

Society

6

Governance

7

Epilogue

16 First SIAA-Registered Antiviral Product

"Antiviral/Antibacterial KitcheNista"

20 Environmental Management / Countermeasures Against Global Warming / Waste Reduction and Recycling / Control of Chemical Substances /

Activities for Bio-diversity Protection / Information Disclosure Based on TCFD Recommendations

37 Improving Quality / Supply Chain Management / Human Resource Development / Respect for Human Rights / Work-Life Balance / Diversity & Inclusion / Occupational Health and Safety / Social Contribution Activities

53 Corporate Governance / Dialogues with Shareholders and Investors / Compliance / Risk Management

65 Business Overview of the Shin-Etsu Polymer Group / Third-Party Opinion / Response to Third-Party Opinion

Special Feature

4

Environment

5

Society

6

Governance

2

7

Epilogue

Shin-Etsu Polymer Sustainability Report 2023

Shin-Etsu Polymer Group Corporate Mission Statement

The Group strictly complies with all laws and regula- tions, conducts fair business practices, and contributes to the advance of industry and society by creating value through providing key technologies and products.

Shin-Etsu Polymer Group places safety and fairness first in its business and targets becoming a group of companies that develops together with society.

Basic Sustainability Policy

• We will do our best to increase the Group's corporate value through sustained growth and make multifaceted contributions to society.

• We will carry out all activities with safety as our top priority.

• We will develop and expand business that contributes to the reduction of GHG gas emissions.

• We will maximize the efficiency for product development and manufacture and contribute to improving the efficiency of society by providing such products.

• We will conduct our business activities in harmony with the global environment while taking biodiversity into consideration.

• We will strive to respect human dignity, assure equality in employment opportunities, and support the self-fulfillment of our employees.

• We will appropriately disclose information in a timely manner.

• We will carry out trustworthy corporate activities that are based on the integrity of the Group's ethical values.

1

Prologue

2Management Sustainability

3

Special Feature

4

Environment

Corporate Code of Conduct

• We have pride and awareness as employees of Shin-Etsu Polymer Co., Ltd. and its Group companies and do our best to become a company trusted by society by always maintaining a law-abiding spirit, complying with laws, regulations, internal codes, and rules and conducting fair and highly transparent corporate activities.

• We disclose a comprehensive range of corporate information where necessary and appropriate and promote communication with society as well as stakeholders, investors, customers, and communities as an "open company."

• We respect the histories, cultures, customs, etc. of individual countries and regions, work at developing business based on mutual trust, and make efforts to coexist with communities.

• We recognize global environmental preservation as one of our first priority challenges and, by fulfilling our social responsibilities, actively participate in the establishment of a recycling-oriented society aiming for sustainable development.

• Through our business activities, we try to develop and manufacture environmentally friendly products with high performance, contribute to an affluent society, and preserve the environment. Furthermore, we im- plement green procurement, properly control chemical substances, and comply with regulations on substances contained in products.

• We commit ourselves to meeting the requirements of customers and consumers and making efforts to provide attractive, safe, and quality products and services that are highly satisfactory. Furthermore, we care- fully handle personal information associated with customer's privacy and strictly control such information so that no leakage or illegal use should occur.

• We respect the principle of free competition and always promote fair trade. We also build transparent, fair, and healthy relations with custom- ers and consumers.

• We respect the human rights, individuality, and diversity of employees, realize fair treatment, and establish a working environment where they can exert their abilities and skills. We comply with occupational laws and regulations and do not engage in inhumane labor practices such as child or forced labor.

• We maintain healthy and normal relations with governments and their administrations.

1. We confront antisocial groups and organizations that threaten social order and security with a resolute attitude.
2. As a good corporate citizen, we carry out social contribution activities in a positive manner.

5

Society

6

Governance

7

Epilogue

3

Shin-Etsu Polymer Sustainability Report 2023

Editorial Policy

The Shin-Etsu Polymer Group issues a Sustainability Report every year as a communication tool to enable stakeholders to understand Group activities that will lead to the realization of a sustainable society. In addition to reports focusing on key sustainability issues (previously "key CSR issues"), we also strive to disclose information in line with requirements from our stakeholders.

The editorial policies for the fiscal 2023 version are as follows:

• In the Special Feature, we introduce antiviral and antibacterial food wraps that contribute to preventing infections.

• The Sustainability Report covers our organizations and activities related to sustainability management, the environment, society, and governance in a clear and easily understandable format for all our stakeholders.

• The information in this Report is disclosed on our website. We also provide additional information on our website.

• For this fiscal 2023 version, we received third-party comments from Mr. Yoshinao Kozuma, Professor Emeritus at Sophia University, as with previous editions. We will draw on the comments in our future efforts and initiatives.

WEB About our sustainability initiatives https://www.shinpoly.co.jp/en/sustainability.html

◦Period covered by this report

April 2022 - March 2023 (For Group companies in Japan); January - December 2022 (For overseas Group companies)

•Issued

September 2023 (Previous issue: September 2022; next issue: September 2024)

•Organizations covered by this report

Shin-Etsu Polymer Group (For further information, please see page 65)

•Fields covered by this report

This report covers the fields of environmental conservation and social activities. For an overview of the business, please refer to our corporate profile.

•References

Environmental Reporting Guidelines 2018 by the Ministry of the Environment

GRI Sustainability Reporting Standards 2016/2018/2019/2020/2021

The Task Force on Climate-related Financial Disclosures (TCFD) Recommendations

•Inquiries

Corporate Planning Department, Business Administration Unit, Shin-Etsu Polymer Co., Ltd.

Ote Center Building 1-1-3 Otemachi, Chiyoda-ku, Tokyo 100-0004 Japan

TEL [phone] FAX [phone]

URL https://www.shinpoly.co.jp/en/

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1

Prologue

2Management Sustainability

3

Special Feature

4

Environment

5

Society

6

Governance

7

Epilogue

Shin-Etsu Polymer Sustainability Report 2023

Financial and Non-Financial Highlights

	Sales / Operating Income (consolidated)		Net Profit Attributable to Owners of Parent / Net Profit per Share
		Consolidated sales	Consolidated operating income (right axis)			Net prot attributable to owners of parent	Net prot per share (right axis)

1

Prologue

(Million yen)					(Million yen)
140,000					108,278	14,000
120,000				92,640	12,749 12,000
100,000	85,460					10,000
		76,904
	8,153		9,732
	7,756
80,000					8,000
60,000			7,217			6,000
40,000						4,000
	85,460	80,254	76,904	92,640	108,278
20,000						2,000
0	2019/03	2020/03	2021/03	2022/03	2023/03	0

Distribution of Consolidated Sales	Composition Ratio of Consolidated
by Business Segment	Sales and Shipping Destinations

OthersElectronic

6.8% Devices

Business

22.8% 34.4%

Consolidated sales	Consolidated sales
24.2% 108,278	108,278	47.7%
million yen	million yen

17.9%

Return of Equity (ROE)

(Million yen)					(yen)
12,000					120	2
					105.68
10,000					100
				Sustainability Management
					8,529
		77.55		78.15	8,529
8,000	74.27		80
	6,049	6,288	56.09	6,308
6,000	6,049			60
			4,536
4,000					40
2,000					20	3
0					0	Special
	2019/03	2020/03	2021/03	2022/03	2023/03
Total Assets / Total Net Assets / Equity Ratio		Feature

		Total assets		Total net assets	Equity ratio (right axis)
(Million yen)			(%)

				135,364	4
75.1	80.0	79.8	122,577	77.4	Environment
105,378
107,032	108,212	76.7
	94,337	105,128
84,538	86,677
80,560
2019/03	2020/03	2021/03	2022/03	2023/03	5
Society
Total Net Assets per Share

(%)

10

8.6

8

7.7

7.6

7.0

6

5.3

4

2

0

2019/03

2020/03

2021/03

2022/03

2023/03

(yen)
1,500
				1294.09	6
1,200			1166.23
	1067.58
989.44	1042.40
				Governance
900
600
300
0					7
2019/03	2020/03	2021/03	2022/03	2023/03
5					Epilogue

Shin-Etsu Polymer Sustainability Report 2023

CO Emissions and Basic Unit of Production Weight (Overall)

Domestic Overseas Basic unit of production weight (right axis)

(t-CO₂)		1.535	1.555		(t-CO₂/t)
100,000	1.505		1.6
				1.300	1.301
80,000				71,728
	68,054	68,777		77,318
	65,545
60,000					44,401
				43,606
	40,704	42,039	39,567	0.8
40,000
20,000					32,916
	27,350	26,738	25,978	28,122
0	2018	2019	2020	2021	0
	2022 (Fiscal Year)

*The graphs are divided due to differing definitions of workplace accidents between Japan and overseas.

Workplace Accidents / Accident Frequency Ratio (Domestic)

	Accidents with lost working days		Accidents without lost working days
	Frequency ratio of accidents with		Accident frequency ratio (right axis)
	lost working days (right axis)
	(%)
(Number of accidents)

							1
Waste Emissions and Basic Unit of Production Weight (Overall)	Prologue
Domestic	Overseas	Basic unit of production weight (right axis)
(t)						(kg/t)
8,000		106.6				120
	101.1
		96.5
6,000				86.8	84.9
					2
	4,574	4,775		4,790	5,043
						Sustainability Management
4,000			4,067		2,280	60
	2,564		2,321
	2,427
	1,932
2,000
	2,147	2,211		2,469	2,763
	2,135
0	2018	2019	2020	2021		0	3
	2022 (Fiscal Year)
Workplace Accidents / Accident Frequency Ratio (Overseas)		Special
Accidents with lost working days	Accidents without lost working days		Feature
Frequency ratio of accidents with	Accident frequency ratio (right axis)
lost working days (right axis)
			(%)
(Number of accidents)

15						5	15					5
	4.49
12						4	12					4	4
9		2.78				3	9					3	Environment
6		1.67	1.67			2	6					2
							1.27
				1.08
3	0.56		0.56		0.47	1	3	0.42	0.62 0.62			1
					0.95	0.25 0.25	0.40 0.40
0				0	0	0	0	0.32				0
2018	2019	2020	2021		2019	2020	2021	2022	5
	2022 (Calendar Year)	2018	(Calendar Year)
*Domestic data is collected and aggregated on the basis of fiscal year (April 2022 - March 2023) while overseas data on the basis of calendar year (January 2022 - December 2022).
*Due to rounding, some totals may not correspond with the sum of the separate figures.								Society
*Domestic sites include Tokyo Plant, Nanyo Plant, Kodama Plant, Shiojiri Plant, Itoigawa Plant, and KitcheNista Co., Ltd.
*Overseas sites include Suzhou Shin-Etsu Polymer Co., Ltd., Dongguan Shin-Etsu Polymer Co., Ltd., Shin-Etsu Polymer (Malaysia) Sdn. Bhd., PT. Shin-Etsu Polymer Indonesia, Shin-Etsu Polymer India Pvt. Ltd., Shin-Etsu Polymer Hungary Kft.,
and Hymix Co., Ltd.
*Overall: Total of Japan and overseas plants

Ratio of Female Managers

(%)

5.0

4.0

2.95	3.21	3.11	3.21

3.0 2.59

2.0

1.0

0.0	2018	2019	2020	2021	2022 (Fiscal Year)

*Figures are as of the end of the fiscal year.

Number of Childcare Leave Takers
Male	Female
(People)
16
12						8
8
	11	11
4						7
			2		4
0		0	0		0
2018	2019	2020		2021	2022 (Fiscal Year)

6

6

Governance

7

Epilogue

Shin-Etsu Polymer Sustainability Report 2023

Top Message

Contributing to the Realization of a Sustainable Society

by Promoting Sustainability Management with the Aim of Becoming a Business That Continues to Grow with Society

President

Inheriting Management Policies to Further Enhance Corporate Value

I assumed the position of President of Shin-Etsu Polymer on June 23, 2023. I feel honored and privileged to take over this important role from Chairman Ono, our former president, with the start of the new medium-term management plan, Shin-Etsu Polymer Global & Growth 2027 (SEP G&G 2027). Over the last 10 years, as the General Manager of the Sales Unit, I have promoted the growth of our business by strengthening product development capabilities to meet the quality standards desired by our customers and developing a global production system to ensure a stable supply. Moving forward, we will continue enhancing our corporate value by providing high value-added products that take advantage of our basic technologies, while focusing on relationships of trust with our customers.

Since our establishment in 1960, Shin-Etsu Polymer has been dedicated to the development and application of basic technologies such as materials and composition, design, manufacturing processes, and evaluation and analysis of various resins including silicone rubber as the resin processing manufacturer of the Shin-Etsu Chemical Group. Currently, we are meeting a wide range of customer needs by combining compounding and processing technologies for silicone rubber and various plastics to provide high value-added products. In addition, based on its Corporate Mission Statement, the Shin-Etsu Polymer Group strives to be a business that continues to grow with society by putting safety and fairness at the forefront of its management. For this purpose, we will continue to pursue better product development by striving for energy conservation, resource efficiency, and reduced environmental impact in our business activities and proactively incorporating global challenges such as the SDGs into our goals.

In fiscal 2022, there were challenges such as soaring raw material prices and disruptions in international logistics due to the situation in Ukraine, resulting in declining sales volumes in some of our businesses. Nevertheless, we avoided a significant downturn, and overall performance improved due to increased demand in the automotive-related business and sustained high demand in the semiconductor business. Meanwhile, as the company with the top domestic market share for semiconductor-related containers, we need to secure production capacity that can constantly respond to market demands. Regardless of the current situation, we will continue to expand our facilities and improve market confidence from a medium- to long-term perspective, while striving to fulfill our role as a globally operating resin processing company in ensuring a stable supply of products.

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1

Prologue

2Management Sustainability

3

Special Feature

4

Environment

5

Society

6

Governance

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Epilogue

Shin-Etsu Polymer Sustainability Report 2023

Strengthening the business foundation to support sustainability management

In May 2023, our Group announced the Medium-Term Management Plan SEP G&G 2027, which covers the period from FY2023 to FY2027. To keep operating in the current rapidly changing social environment, it is crucial to build a robust corporate foundation that supports our cornerstone of sustainability management. In the Medium-Term Management Plan, we have set key issues and targets in each of the ESG areas to further clarify the issues that we need to tackle. We will continuously strive to resolve these issues, including climate change and our failure to meet the statutory employment rate of persons with disabilities, while focusing on timely information disclosure to stakeholders.

In particular, we recognize that reducing CO emissions is one of our major challenges. In our medium-term management plan, we have set a goal of becoming carbon neutral by 2050. We are examining measures to achieve carbon neutrality, with a focus on switching to renewable energy sources, including the introduction of solar power generation and energy storage facilities.

We will also continue to strengthen our sustainability management system to fulfill our social responsibility. The Group has established the Sustainability Committee to deliberate on CO emission reduction targets and climate change actions. In addition, the Compliance Committee is responsible for comprehensive risk management and the development and operation of a compliance system for the entire Group, including subsidiaries. We will actively promote the activities of both committees, while also engaging in constructive dialogue with shareholders and investors.

Furthermore, in March 2023, we formulated the Multi-Stakeholder Policy as a guideline for building relationships with various stake- holders, including employees and business partners. We will continue to work toward appropriate collaboration with all stakeholders as an open company.

Developing human resources to promote creativity and innovation

To achieve sustainable growth in the future, it is important to secure and develop human resources who can drive creativity and innovation in the company. Based on this idea, we have set the development and growth of our employees as one of our top priorities and will focus on developing human resources who can demonstrate a high level of expertise and ability. We promote workplaces that encourage employees to learn, play a more active role, and advance their careers and support them in reaching greater heights. Specifically, we are creating environments that facilitate continuous learning by establishing an on-site experience learning cycle that emphasizes OJT, while building a human resource system that makes it easy for each employee to take on new challenges. In addition, to create an environment where employees can play an active role regardless of gender or age, we have proactively implemented measures such as establishing a re-employment system that allows employees to continue working after reaching the mandatory retirement age, promoting women's participation and advancement, and expanding systems to help employees balance work and various life events like childcare and nursing care. Our entire Group will work together to achieve further growth by embracing people with diverse experiences and values to revitalize our organization and develop our business.

The products we offer are seldom seen by the public eye, but they support our current society and meet demands for the creation of a future society in a variety of ways. In the ever-changing market and social environment, we will strengthen our corporate foundation by promoting sustainability management, fulfill our responsibilities as a global company that aims to solve social issues through our business, and contribute to the realization of a sustainable society.

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1

Prologue

2Management Sustainability

3

Special Feature

4

Environment

5

Society

6

Governance

7

Epilogue

Shin-Etsu Polymer Sustainability Report 2023

2

Sustainability Management

1

Prologue

2

Sustainability Management	10	Sustainability Management
Towards Establishing a Recycling-Oriented Society	14
		3
		Special Feature
		4
		Environment

5

Society

6

Governance

7

9	Epilogue

Shin-Etsu Polymer Sustainability Report 2023

Sustainability Management

Our Basic Approach to Sustainability

Based on its corporate philosophy, the Shin-Etsu Polymer Group strives to be a business that continues to grow with society by putting safety and fairness at the forefront of its management. The Group will contribute to the realization of a sustainable society by aiming to solve social issues through its business while meeting the demands and expectations of society.

With our Corporate Mission Statement as our guide, the Shin-Etsu Polymer Group defines and implements 13 specific types of corporate activity in line with our Basic Sustainability Policy and Corporate Code of Conduct.

WEB Sustainability Promotion Structure https://www.shinpoly.co.jp/en/sustainability/activities/promotion.html

• Sustainability Promotion System

The Shin-Etsu Polymer Group has long been engaged in sustainability activities through its departments and Group companies. Under this framework, we are carrying out initiatives across the whole Group towards finding solutions to environmental and social issues including climate-related risks and opportunities.

Sustainability Promotion			Board of Directors
System Chart
		Report		Delegation/Supervision
			Board of Executive Officers
	Report	Supervision
Audit &	Report		Corporate Planning	Environmental
Sustainability Committee
Supervisory Board	Department	Security Committee

Promotion and supervision of sustainability activities

Business Operation Divisions

•Sustainability Training and Education

・We held an executive training session on the topic of the Task Force	・To deepen employees' understanding of sustainability activities, we
on Climate-related Financial Disclosures (TCFD) with the aim of gain-	provide an annual e-learning program. For the third iteration in fiscal
ing a better understanding of the need to respond to climate change	2022, we focused on climate change under the theme of "The Basics
risks. We expressed our endorsement of the TCFD Recommendations	of Sustainability."
in January 2022 and are working to address climate change.

The executive training session

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Prologue

2Management Sustainability

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Special Feature

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Environment

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Society

6

Governance

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Epilogue

Shin-Etsu Polymer Sustainability Report 2023