Mitsui Chemicals : ESG Report 2023

Mitsui Chemicals Group ESG Report 2023

Contents

Top Page… ………………………………………………………………… 5

Message from the CEO… ……………………………………………… 7

CSO Message…………………………………………………………… 10

Sustainability in the Mitsui Chemicals Group………………………12

Sustainability Management… …………………………………………13

Management System…………………………………………………13

Stakeholder Engagement… …………………………………………17

Support Initiatives… …………………………………………………19

Compliance Management… ……………………………………………74

Management System…………………………………………………74

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Initiatives… ………………………………………………………… 77

Whistleblowing system… ………………………………………… 80

Compliance Training… …………………………………………… 83

Bribery Prevention… ……………………………………………… 89

Tax… …………………………………………………………………… 91

Information Management… ………………………………………… 93

Management System……………………………………………… 93

Initiatives… ………………………………………………………… 94

Responsible Care… …………………………………………………… 95

Responsible Care Management… ………………………………… 96

Management System……………………………………………… 96

Roll Out Globally… ………………………………………………… 108

Safety and Prevention………………………………………………… 109

Management System……………………………………………… 109

Initiatives to Prevent Major Accidents…………………………… 112

Accidents and Occupational Injuries… ………………………… 118

Safety Education and Training… ………………………………… 123

Plant Operation Technology Training Center… ………………… 126

Environmental Protection… ………………………………………… 129

Management System……………………………………………… 129

GHG and Energy… ………………………………………………… 132

Industrial Waste… ………………………………………………… 136

Environmentally Hazardous Substances………………………… 138

Water………………………………………………………………… 142

Biodiversity… ……………………………………………………… 145

Environmental Accounting/Compliance… ……………………… 148

Product Stewardship… ……………………………………………… 150

Management System……………………………………………… 150

Regulatory Compliance

and Providing the Safety Use Information… …………………… 153

Providing Safe Products…………………………………………… 154

Training… …………………………………………………………… 157

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Quality of Products and Services…………………………………… 158

Management System……………………………………………… 158

Initiatives… ………………………………………………………… 161

Logistics……………………………………………………………… 163

Management System……………………………………………… 163

Safety and Quality in Logistics…………………………………… 166

Stable Transportation (Sustainable Logistics)… ……………… 171

Occupational Health… ……………………………………………… 177

Management System……………………………………………… 177

Health-focused Management… ………………………………… 179

Preventing Exposure to Harmful Substances … ……………… 185

Engagement with Society… ………………………………………… 187

Respect for Human Rights………………………………………… 188

Policy and Basic Approach … …………………………………… 188

Initiatives… ………………………………………………………… 195

Sustainable Procurement… ………………………………………… 199

Management System……………………………………………… 199

Supplier Evaluation and Guidance for Improvement … ……… 205

Participating in Initiatives… ……………………………………… 221

Human Resources Management… ………………………………… 225

Management System……………………………………………… 225

Talent Management … …………………………………………… 229

Diversity … ………………………………………………………… 233

Compensation & Benefit… ……………………………………… 243

Talent acquisition … ……………………………………………… 245

Talent and Organization Development … ……………………… 247

Comfortable Work Environment and

Maximization of Achievements … ……………………………… 251

HRIS and People Analytics… …………………………………… 259

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Social Activities… …………………………………………………… 262

Management System……………………………………………… 262

Laboratory Classes on the Wonders of Chemistry… ………… 263

Nurturing Future Generations… ………………………………… 267

Environment………………………………………………………… 270

Support for Employees' Participation

in Social Activities… ……………………………………………… 273

Disaster Relief… …………………………………………………… 275

Working in Harmony with Local Communities… ……………… 277

Others … ………………………………………………………………… 282

ESG Performance Data… …………………………………………… 283

Environment………………………………………………………… 283

Society… …………………………………………………………… 290

Governance… ……………………………………………………… 296

Guideline Cross-reference Tables…………………………………… 298

External Assessments… …………………………………………… 312

Editorial Policy… ……………………………………………………… 314

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Sustainability

What we call "Sustainability"

Grow and develop sustainably together with society

through achievement "our ideal future society"

- CSO Message

- Sustainability Management - Our Material Topics

Message from the CEO - Endeavor to create a circular economy - Blue Value™ / Rose Value™

Sustainability News

2023.11.17Annual update has been made to our Sustainability site.

2023.11.13Mitsui Chemicals Acquires Additional ISCC PLUS Certification

2023.10.24Mitsui Chemicals Acquires Additional ISCC PLUS Certification

Read more 

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Notice

Features

External Evaluation

View less

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Message from the CEO

Pushing the Mitsui Chemicals Group forward as my mission

I am to create a corporate culture where people constantly seek out new challenges as part of a truly global specialty chemicals company.

When I became president in April 2020, COVID-19 had just started to develop into a pandemic. It was a time when I had already resolved to transform the Mitsui Chemicals Group. The dramatic global changes that COVID-19 brought and the ensuing need to adapt to those changes gave me a cause to unite the Group around and propelled our evolution forward. Since we announced the Long-Term Business Plan VISION 2025 in 2016, things have not always gone as we hoped they would. Performance in the years directly following the plan's announcement, from fiscal 2017 to fiscal 2019, fell short of our initial expectations in terms of operating income in growth domains. After accelerating the transformations in fiscal 2020, however, performance has been trending up, and our operating income before special items in growth domains topped 100 billion yen in both fiscal 2021 and fiscal 2022. With volatility reduced in our Basic & Green Materials business segment, which we have been restructuring , I think it would be safe to say that we have finally taken our first step away from our traditional position as a basic-chemicals corporation and toward becoming a specialty-chemicals company.

I assumed the presidency while these business transformations across the Group were beginning to deliver on their promise. Looking ahead, the next mission for me will be effecting change in our corporate culture. Reshaping a corporate culture that has developed over our long history obviously takes longer than business transformations do. That said, I feel that the Group's recent successes have fostered a climate that motivates our individual employees to take on new challenges with a more proactive, aggressive mindset. We are also starting to see positive results from efforts geared toward "self-initiative, autonomy, and collaboration," such as a recognition system that commends employees for taking on challenges regardless of the outcomes and a project where employees formed a task force to design the layout for an optimal working environment at the new Head Office. Ideally, Group-wide efforts to tackle new challenges will help us overcome difficulties and grow closer and closer to what we envision for ourselves. That means we will need to weather business environments, where conditions are bound to be harsh, and clear a host of other hurdles.

Fiscal 2022: Business environment and performance

Seeing challenges in the business environment as opportunities, we are committed to bolstering the Group's strengths.

The market environment in fiscal 2022 was a harsh one, particularly during the second half of the year. Coming off a period of relatively strong performance levels since fiscal 2021, we found ourselves grappling with factors ranging from the slow recovery in the Chinese market to a semiconductor shortage and sharp increases in the prices of raw materials and fuels. However, these types of conditions make it easier to see what our individual businesses are capable of. I think that if we view the challenges as opportunities, look back on and recognize how previous strategies and investments have succeeded, and perform thorough analyses and evaluations of our business portfolio, we can keep growing into a company that charges confidently forward toward its goals in the face of whatever environmental changes we encounter.

While strong, healthy businesses will likely be able to withstand the difficulties ahead, the grueling business environment is also bound to expose weaknesses in some of our other businesses that lay hidden behind the solid results going back to fiscal 2021. Shifts in the environment might also push certain businesses into different positions within the portfolio. What I want organizations facing restructuring to do is not to just give up and resign themselves to that outcome but rather think hard about how they could go about changing that outcome-and then put that plan into action. Sports offer a great metaphor. Imagine a baseball team, for example. Not every player makes the top team; some have to go down to the minor leagues. Do players retire the moment they get sent down? No. Instead of giving up, they start working as hard as they can to earn a call-up and make the starting lineup. The same goes for a business. No business simply pulls out of the market right away. There is always the chance, too, that a business in a growth-investment position is beaten by competition and finds itself facing restructuring, opening up a spot for another business to take. That is why all of our businesses need to work to make one another better, identify issues to

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tackle with metrics like ROIC and carbon footprints always in mind, and find solutions to the problems they face, a process that helps make the business portfolio stronger on the whole. The road there is by no means a smooth one, of course. The phase is a high-pressure one for not just the company but also its individual employees. How do baseball players develop the strength and physical skills they need to thrive? They train, putting their bodies under strain and pushing themselves to a reasonable, effective limit. If our employees can get through the struggles they face now, I know that they will come out tougher and truly positive-minded. This is a crucial step in making VISION 2030 a reality-and a step we can only take in today's challenging business environment.

The VISION 2030 strategy: Looking toward the society of the future

Leveraging technologies and internal and external collaboration will enable us to accelerate business model transformation.

Leading the way forward as we work to resolve issues on the horizon is our Basic Strategy, consisting of points such as building solutions-based business models and bolstering circular-economy initiatives. To bring these points to fruition, we will need to work with other companies to create a viable ecosystem. A perfect example of that collaboration is a current effort in which multiple members of industrial complexes are teaming up to shift to green chemicals by driving transformations in crackers. Given that cutting CO2 emissions and shifting to green chemicals are now priority goals on a global scale, it only follows that members of the chemical industry should be working to create stronger frameworks for cooperation. In our efforts to build solutions-based business models, meanwhile, our core concept for creating and cultivating new business is to address social challenges in the areas of healthcare, food, and living environments. To that end, we are joining forces with research institutes, startups, and other partners to create digital technology-driven platforms for co-creation.

What gives us an edge in business model transformation-and an essential component of that process-is the technological prowess that we have honed over the course of our history. That technological advantage rests on the foundation of our precision synthesis technology, deriving from coal chemicals and dating back to the launch of Mitsui Mining in 1912, and our polymer science, rooted in the petrochemical operations that began in 1958 at Japan's first-ever ethylene plant. Joining those two core technology areas is a third field: bio-related technologies, which play significant roles in the fields of healthcare, food, and living environments I mentioned earlier. These three technologies represent the engines of our growth on the road to 2030. But will they be enough to sustain us in 2050, in the future society that awaits? To help us find answers to that question, we established the Frontier Technology Center in 2021. The new organization is responsible for generating discussion and research on the technology that will be essential in enabling the Mitsui Chemicals Group to solve challenges in the future society of 2050. We have also created a new CTO Office and firmed up our policy of strengthening technology-driven efforts with a Group-wide reach in 2023. By pooling the Group's assets and expertise from a technological perspective, positioning the chief technology officer (CTO) as the project owner responsible for overseeing the use of human resources and technology across conventional business boundaries, and using that setup to nurture internal co- creation, we believe we will be able to identify new business opportunities in growth domains.

Providing powerful support for these types of technology-driven R&D initiatives is corporate transformation through digital transformation (DX)-a pillar of our Basic Strategy. Management capabilities, including visualization and asset optimization, will be crucial to promoting Group-wide efforts and maximizing output. Our Digital Science Lab.™, scheduled to open in 2024, will bring together DX specialists to work on next-generation research and development using the Group's knowledge as a database in a high-performance computing environment. The new organization will work to establish materials informatics, streamlining the process of performing repeated calculations and experiments for the development of new materials and also facilitating tasks that used to rely on researchers' experience and instincts, such as identifying possibilities for new technology applications. At the same time, we are also driving progress on DX for our enterprise resource planning (ERP)-amission-critical system for managing Group assets in an integrated fashion. Laying a strong foundation for visualizing data on everything from technology to intellectual property and human resources will help form organic connections among assets on a Group-wide and global scope. To make the most of these DX-oriented technologies, we are training data scientists around the Group in line with the target figure set as a key performance indicators (KPIs). The goal for the years ahead is to create a linked web of data scientists in our business segments production/technology divisions, and other areas to transform ourselves into a more data-driven organization.

Enhancing corporate value by integrating the financial and non-financial perspectives

We will consolidate our financial and non-financial approaches to pursue our ideal vision as a united Group.

Since setting and disclosing our non-financial KPIs a year ago, our performance on those metrics has met our immediate goals. That said, we will not let ourselves be content with that success. We will continue to review the situation, including whether the KPI levels are appropriate to begin with. The important thing is to keep setting and reviewing KPIs that allow us to visualize what we need to do to enhance corporate value and determine if we are engaging in the right type of activities. I used to feel that our conventional financial KPIs tended to end up being objectives for business divisions alone; for Group-wide goals, they were somewhat weak. Our non-financial KPIs, on the other hand, have direct links to our material topics and prompt progress that goes straight toward our overall Group vision for 2030. If we can visualize how our efforts on the non-financial side ultimately connect to profit and return on invested capital (ROIC), we will have a great way of showing our employees that our corporate value is a product of both our business divisions and our functional divisions.

In 2023, we also began reflecting our non-financial KPIs in our formulas for calculating executive compensation. Not only will that encourage management to discuss the appropriateness of the non-financial KPIs at a deeper level, but it will also help make both financial and non-financial elements integral parts of management's decision-making process. In terms of corporate governance as well, I believe this is a crucial step in bringing outside directors, inside directors, and the rest of the management team together to execute management in a way that integrates financial and non-financial perspectives.

Our Blue Value™ and Rose Value™ products and services exemplify the fusion of financial and non-financial elements. Since 2023, we have disclosed the gross profits in addition to the sales revenue

ratios for these products and services. Blue Value™ and Rose Value™ products not only contribute to solutions to social challenges but also deliver high profit ratios. By increasing their sales revenue ratios, therefore, we generate social value together with financial value-and that adds to our corporate value in turn. In a similar vein, we are also working to increase employees' engagement scores not as an end in itself but rather as a means of improving our organizational capabilities-like boosting the process creating new products and businesses in new business areas. With higher engagement scores, then, comes an increase in corporate value. We will continue to unite the Group around the idea of linking our non-financial initiatives to performance.

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Seizing the momentum of the third wave toward a sustainable future

Recognizing our responsibilities as a chemicals company and embracing the Group's existing legacy, we are determined to be a first mover in green chemicals.

As the world focuses more and more on achieving carbon neutrality and bringing about a circular economy, one topic that the Group will inevitably need to address is its naphtha crackers. Although they emit considerable amounts of CO2, naphtha crackers are also key facilities in petrochemical operations and sit at the top of the stream in product manufacturing for industries of all kinds-giving them an essential role in society. The Mitsui Chemicals Group thus has to fulfill its supplier's responsibility using those naphtha crackers but also cut its CO2 emissions, another social demand. To do that, we are currently developing a value chain that includes a shift to bio-based raw materials and fuels at the very start of the process, chemical recycling and mechanical recycling at the end, and everything in between. The effort plays directly to our strengths as a Group, and I think it also represents a responsibility we must carry out.

The process of building that ecosystem also hinges on collaboration with other companies in regional initiatives. In 2023, we began constructing a framework for securing bio-based raw materials and utilizing clean ammonia through coordination with multiple companies at the industrial complexes where our Ichihara Works and Osaka Works-both plants with naphtha crackers-are located. While it will not be easy to address the many issues that remain, we are committed to making this important shift a reality. One reason is that we have a responsibility to live up to as a chemical company that emits CO2 in manufacturing plastic.

The second reason is that the initiative gives us the opportunity to leverage our strengths in chemicals in contributing toward solutions to social challenges. The Mitsui Chemicals Group has a history of embarking on bold endeavors, using its entrepreneurial spirit to venture into coal chemicals as the first generation of our business, and into petrochemicals as the second generation. Green chemicals represent the third generation, a context where our legacy of taking on challenges will shine.

Of course, we will need to have a solid grasp of changes in public consciousness in order to make sure that these green chemicals take root in society. In Europe, extensive environmental education has nurtured a social climate where consumers are generally willing to pay extra for eco-friendly products. Japan is not fully to that point yet, and it might take a while for the social tide to get there. Whether Japan can make that transition will depend on not just the corporate community but also government support and a host of other factors, but the Mitsui Chemicals Group is not willing to just sit by and wait for change to come-we will actively market our bio-based products and other items, cut costs, and work to provide added value that goes beyond the price premium. Products that put environmental contributions front and center will probably eventually see a boom in sales. When that happens, the key for us as a chemical company will be to keep offering products that have a solid basis in scientific evidence-not "greenwashing" our lineups by claiming environment-friendliness for products with little positive impact. That kind of consistency and integrity is our mission, I believe.

Becoming a corporate group that spearheads change and lives up to stakeholder expectations

We put employees at the center of our efforts to become what we want to be.

Going back to what I mentioned before, we need to remember that the process of significant change currently underway at the Mitsui Chemicals Group puts substantial pressure on the people in the field. Our employees are the ones who take the policies that management has laid out and put them into practice in the field. If management fails to hold up its end of the bargain with monitoring and support, people in the field get exhausted: baseball players suffering injuries, to borrow my earlier example. My job is to keep that from happening by maintaining a perspective on the big picture, implementing things in a balanced, well- paced way, and directing the effort along the growth trajectory. The core drivers of transformation are our employees. To make sure they propel that progress the right way, I and the rest of the management team need to provide support the right way. Instead of dividing people on the idea side and the execution side, a work specialization framework that characterized the mass-production era, we have to help every employee in our value-creation structure to think and act on their own, take on challenges, learn from mistakes, and keep that cycle going. Drawing a clear connection between individual employees' endeavors to try new things and the Group's actual growth and performance will make employees more confident. As that confidence turns into more individual action, the corporate culture will start to change. Those transformations will bring us closer to both the vision we have for the Mitsui Chemicals Group and our targets for 2030.

All these measures and policies have the power to enhance our corporate value, which I believe will enhance the value we provide to our shareholders and other stakeholders. I also know, however, that we still have work to do in bringing people on board and convincing everyone of the benefits that await. We will continue to engage in dialogue with all of our stakeholders and deliver solid performance, doing everything in our power to inspire more hopes, expectations, and support for our efforts to grow and realize the vision of the Mitsui Chemicals Group.

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CSO Message

Working toward effective management of non- financial KPIs

In VISION 2030, we reviewed our material topics and set KPIs linked to them.

In order to make steady progress toward our ideal vision, we have appointed Executive Officers to be in charge of the progress of each KPI, but this is not sufficient.

We need to continue conducting discussions about the validity of both material topics and KPIs.

Furthermore, the issue of how non-financial initiatives are contributing to the achievement of financial targets is also an important one in our efforts to enhance corporate value. Based on the above, we conducted a review in fiscal 2022 from two perspectives: top-down and bottom-up.

Going forward, we will conduct effective management of non- financial KPIs in conjunction with the risk management system reviewed in fiscal 2022, and steadily implement a management system that integrates both financial and non-financial metrics.

Sustainability in the Mitsui Chemicals Group

In response to global corporate sustainability issues indicated by SDGs and other initiatives, we aim to achieve the sustainable development of society and the Group through the following efforts.

Seek business opportunities and strive to solve challenges through business activities

Recognize future risks for the Group and uphold our corporate social responsibility

Aiming for "integration of financial and non-financial performance"

Review of non-financial KPIs by management

All non-financial KPIs were reviewed at the meeting of the Company-wide Strategy Committee, which was attended by all executive officers with specific titles, including the CEO. Opinions such as the following were raised and issues were recognized: "Non-financial targets cannot be achieved by functional divisions alone, and collaborations with business divisions are essential," "KPIs should be the key factors that need to be controlled in order to realize the Group's ideal vision," and "The deductive causal relationships between KPIs should be shown." Although we did not make any changes to our material topics or non-financial KPIs in fiscal 2022, management will continue to discuss them, taking into consideration that they will be reviewed as necessary.

Financial/non-financial relationship analysis by all functional divisions

We instructed all functional divisions to create a logic tree that visualizes the relationship between the non-financial metrics set by each division and their financial results.

This is because we wanted employees working on non-financial initiatives to have a sense of ownership, by reminding them that they are also responsible for enhancing corporate value on a financial level.

In addition, we wanted to encourage employees to have deeper discussions about the validity of the metrics and measures.

Consequently, we have achieved a certain level of results. For instance, some divisions considered reviewing their metrics after realizing that "there are some metrics that will not logically lead to financial results."

We will continue to refine the logic tree in each division, dig deeper into the organic relationships between financial and non-financial metrics throughout the Group, and work to visualize them.

Logic tree (Template)

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