JSR Group defines sustainability as “contributing to society by creating value with our business activities.” Promoting sustainability Groupwide while respecting diversity is considered as one of our important strategies for enhancing corporate value.

Our process for implementing sustainability initiatives involves identifying our materiality based on a comprehensive evaluation of the social and natural environments, product markets, technology trends, and stakeholder interests, while also considering our corporate mission and management policies. This process yielded KPIs related to the five priority issues for management foundation and the three priority issues related to business activity.

• 1. JSR Group’s Materiality

Among our materiality, there are two priority issues that we emphasize in particular. The first is to increase employee engagement because employees are the main actors in implementing sustainability activities, and to promote diversity, equity and inclusion (DE&I), which is the basis for these activities. The second is to address climate change and its enormous impact around the world by reducing our environmental impact. Going forward, in addition to initiatives for sustainability of our management foundation in relation to risk aspects, we will further promote sustainability initiatives for business activities that lead to business opportunities.

With FY2022 as the first year of the KPIs for materiality set in FY2021, we verified progress regularly. Details can be found on a separate page.

• 2. Establishment and Advancement of KPIs for Materiality

While we found that the progress of KPIs in FY2022 was steady, after confirming the progress over the past year, reviewing the situation, and analyzing the information obtained, we realized that it was necessary to focus on the characteristics of each business as well as the perspective of separating global initiatives from the initiatives based on regional characteristics when setting KPIs. This new found awareness could lead us to add or review KPIs as needed. We are working to reduce GHG emissions in accordance with the plan based on the KPI of reducing Scope 1 and 2 emissions by 30% in FY2030 compared to 2020 levels. Based on the information obtained in confirming progress and requests from stakeholders, we have determined a probable need to set more in-depth targets in the future, and have begun to review them.

For all KPIs, we believe that it is important not only to achieve the target, but also to firmly incorporate a sustainability perspective into the activities of each division through initiatives aimed at achieving the targets, empowering each and every employee can remain aware of sustainability in their daily work.

For example, as an initiative to achieve KPIs, with regard to "increasing employee engagement,” which relates to management foundation materiality, the results of the second global engagement survey conducted in FY2022 showed that many employees want management to enhance the dissemination of information on the company's direction, future vision, and long-term vision. In addition to sending out messages from top management and business heads multiple times, we have started to hold dialogue sessions between top management and a small number of employees as a venue for two-way communication. By setting increase engagement as a KPI at the organizational and departmental levels, it is incorporated into the activities of these organizations and departments.

Regarding business activity Materiality, we have set the sales volume and sales ratio of sustainability products as KPIs. We have made steady progress toward the targets for FY2024, and some businesses have already achieved them, but going forward, we will consider new KPIs that expand business opportunities while also being conscious of sustainability. This will lead to business development in line with the direction required by stakeholders.

Diversity is the source of our competitiveness. We are focusing on DE&I initiatives as a foundation to get the most out our diverse pool of human resources. In order to link the abilities of each employee to the enhancement of corporate value, it is necessary to increase the number of highly engaged employees who understand and empathize with the direction and vision of the company, mutually recognize and enhance their abilities, and have a sense of attachment to the company and desire to contribute. This is an important sustainability initiative that leads to the realization of each person's career aspiration, which in turn leads to the fulfillment of their lives. The Chief Sustainability Officer (CSO) is also in charge of promoting diversity in light of the prominent position of DE&I in sustainability, and from June 2023, I have been in charge of promoting global human resource strategies throughout the Group, as they are the main actors of sustainability promotion. With regard to human resource policies, the key is to balance and identify the parts that should be unified globally and those addressed by local rules. We will strengthen human resource management, which is the foundation of sustainability, in cooperation with the human resources departments of each Group company.

In promoting sustainability, it is also important to incorporate diverse perspectives and viewpoints. In addition to DE&I initiatives within the Group, we are aware of actively incorporating external perspectives and viewpoints.

One is that CSO serves as a director and directly participates in reports and discussions on the promotion of sustainability at meetings of the Board of Directors, and receives advice on the Company's initiatives from outside directors who offer an outside perspective.

In the past several years, interactions with external stakeholders have been limited due to the COVID-19 pandemic, but from the second half of FY2022, we have been able to network with other companies and invite experts to give lectures. We will continue to devise ways to incorporate broader perspectives and viewpoints and disseminate information within the Group.

By doing so, we believe that JSR Group's commitment to sustainability will steadily move forward from what we can do now to further contributing to the enhancement of corporate value with an awareness of all stakeholders.

In promoting sustainability, initiatives cannot be completed only within sustainability promotion department; it is necessary to communicate closely with other departments and Group companies. In FY2022, we held regular meetings aimed at promoting specific sustainability activities, refining existing activities and leading to new considerations. Going forward, we will continue to share various ideas and examples of initiatives to promote sustainability throughout the Group.

Compared to FY2019, when we set the current Materiality, the social and market environments surrounding JSR and JSR's business portfolio have changed significantly. Going forward, we will identify risks and opportunities in line with the current situation and consider reviewing our Materiality. In particular, we intend to strengthen the competitiveness of our products and services from the perspective of sustainability and set ourselves apart from other companies to create new opportunities in our business activities. In discussions toward the formulation of the next Medium-Term Management Policy, we will work with related departments to integrate our sustainability strategy into our management strategy. To that end, it is important for all employees to think independently about how to incorporate sustainability into their work and take action. I will continue to support the realization process.