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CSR Report 2009

SHOWA DENKO

Relations with Society / Environment and Safety Efforts

The Showa Denko Group’s ”socially useful” and ”environment-friendly” products

The Showa Denko Group produces various materials and components, which are then incorporated into final products found in your daily life. Some of these products are introduced below, grouped into ”socially useful” and ”environment-friendly” products.

Showa Denko Group’s products are everywhere!

SHOWA DENKO CSR REPORT 2009� SHOWA DENKO CSR REPORT 2009 �

❶ Agricultural materialsBiodegradable plastic (agricultural film)

❷ Personal computersHigh-purity gases/chemicals for semiconductor processing, rare-earth magnetic alloys, CMP slurries, hard-disk media

❸ Laser beam printersAluminum cylinders (photosensitive materials)

❹ Office-building exteriorsPhotocatalysts (antifouling paint)

❺ PoulticeSodium polyacrylate (raw material for pharmaceuticals)

❻ BathroomsAluminum hydroxide (artificial marble for bathtubs)

❼ CosmeticsVitamin C derivatives, ultraviolet screening agent (raw material for cosmetics); hair-curling agent

❽ Traffic signalsUltrabright LEDs (traffic signal lamps)

❾ �Medical gas processing systems

Waste anesthetic gas (nitrous oxide) decomposition system

Aluminum cansCan bodies and ends (beverage containers)

AutomobilesCast/forged aluminum rods, heat exchangers

Rooftop gardensPerlite (gardening material)

Flat-panel TVsLED chips (for display backlight), LCD glass polishing material, high-purity aluminum foil for electrolytic capacitors, aluminum heat sinks

Carbonated beveragesCarbon dioxide

Multi-paned glass windows

Molecular sieve (moisture absorbents)

Spectacle lensesAllyl ester resin (lens material)

House exteriorsExternal wall panels

Containers for yogurt/jelly

Aluminum cap seals

Mobile music playersHard disk media

Construction materialsFire-resistant double-layer pipes made from recycled PET plastic bottles (piping materials)

Rocket fuelLiquid oxygen/hydrogen

Digital camerasTitanium oxide, high-purity aluminum foil (for capacitors)

ApparelRaw materials for synthetic fibers (ammonia for nylon; acetic acid for polyester)

Mobile phonesCarbon nanofibers (used in lithium-ion batteries)Aluminum packaging for batteries

HelmetsVinyl ester resins

Showa Denko Group’s individualized products and technologies


05 06 07 0804

(Billion yen)

(Year)0

200

400

600

800

1,000

1,200

¢ Changes in consolidated sales

05 06 07 0804

（％）Operating income Ratio of operating income to sales

10

20

30

40

50

60

70

80

90

0 0

1

2

3

4

5

6

7

8

(Billion yen)

(Year)

¢ Changes in consolidated operating income and ratio of operating income to sales

0

2,000

4,000

6,000

8,000

10,000

12,000

05

4,365

6,753

06

4,933

6,251

07

5,304

6,025

08

5,510

6,246

04

3,909

7,257

(Persons) Japan Overseas

(Year)

¢ Changes in total number of employees

Petrochemicals39.9%

Chemicals9.3%

Inorganics8.8%

Aluminum and other23.2%

Electronics18.8%

¢ Consolidated sales by segment (term ended December 31, 2008)

Editorial policiesThis Report has been edited as an annual report on non-

financial information presenting efforts by the Showa Denko Group to contribute to the environment and to society. For detailed financial information, please refer to the Financial Statements and the Annual Report (http://www.sdk.co.jp/html/english/ir/library/index.html).

With the start of the commitment period of the Kyoto Protocol last year and impending discussions of the post-Kyoto framework at the 15th United Nations Climate Change Conference (COP15) at year’s end, this Report includes a special feature—a detailed account of Group efforts to combat global warming.

The importance and priority assigned to various disclosure items are based on stakeholder views and requests. This is how the Group selects the items addressed by the company’s activity policies and specified in disclosure policies for this Report. The scope of this Report includes non-publicly traded consolidated subsidiaries.

The Report covers environmental performance data for Showa Denko K.K. It also covers major Group companies in Japan with respect to CO2 emissions and final waste disposal

volumes, each a topic of interest to our stakeholders. Plans call for steadily expanding the Report’s coverage of data on Group member companies. The Report’s data on social responsibility performance also includes information on consolidated subsidiaries overseas. Beginning with last year’s Report, key items have been covered in ways that allow performance to be compared to the previous year. Details of various changes and response policies have also been added.

Links from the contents of this Report to the company’s website have been enhanced, and detailed data and site-specific environmental and social reports are posted at the website.

Based on opinions expressed by stakeholders in response to last year’s Report and to make the text of the Report clearer and easier to understand, we have added explanations of the terms used in the text. The document adopts a “universal design” color scheme to make each page and illustration clearer and more appealing to the eye, regardless of individual differences in color vision.

About the coverThe cover design depicts,

inside the “S” logo, several Showa Denko products that contribute to the good of society and to people’s lives. This design expresses our goal—to be a company that contributes to the sound growth of society through its business activities.

Report Scope

uTerminology used in this report”Showa Denko” in this report refers to Showa Denko K.K., while “ Showa Denko Group” refers collectively to Showa Denko K.K. and its non-publicly traded consolidated subsidiaries in Japan.

uFinancial performance dataThe figures provided in this report represent consolidated financial results for the Showa Denko Group.

uEnvironmental performance dataThe figures provided in this report indicate Showa Denko K.K.’s environmental performance.

The specific scope of the relevant data is noted when data is provided for the entire Group.

uSocial performance dataThe figures and other information provided in this report indicate Showa Denko K.K.’s performance in the sphere of social responsibility.

In the area of community relations, information has been added on non-publicly traded consolidated subsidiaries in Japan and around the world.

uPeriod covered by this ReportThis Report covers information for the period January 1 to December 31, 2008, with some information also provided for 2009.

The term ”the year” as used in this Report refers to the 2008 calendar year.

The term ”fiscal year” as used in this Report refers to the period from April 1, 2008, through March 31, 2009.

uPublication dateSeptember 2009 (The next edition is scheduled for publication in July 2010.)

uGuidelines referenced• Sustainability Reporting Guidelines 2006 (G3

Guidelines) from the Global Reporting Initiative (GRI)

• Environmental Reporting Guidelines 2007 from the Ministry of the Environment of Japan

uPrepared by:CSR Office, Showa Denko K.K.

13-9, Shiba Daimon 1-chome, Minato-ku, Tokyo 105-8518, Japan

An Overview of the Showa Denko Group

Corporate structure and financial information (data for the term ended December 31, 2008)

u�Company name: Showa Denko K.K.

u�Head office location: 13-9, Shiba Daimon 1-chome, Minato-ku, Tokyo 105-8518, Japan

u�Number of Group member companies: 155

u�Consolidated business results:Sales: 1,003.9 billion yen

Operating income: 26.8 billion yen

Net income: 2.5 billion yen

u�Total number of employees: 11,756

u�Major products by segment

PetrochemicalsOlefins, organic chemicals, and plastic products

ChemicalsChemicals, gases, specialty chemicals, functional resins

ElectronicsHard disk media, compound semiconductors, rare earth magnetic alloys, semiconductor-processing specialty gases, functional chemicals, electronic ceramics, fine carbons

InorganicsCeramics, graphite electrodes

Aluminum and otherAluminum sheets, aluminum foil, extrusions, forged parts, alminum heat exchangers, alminum cans, construction materials, engineering

C O N T E N T S

Showa Denko Group’s products are everywhere! 1

Editorial policies / An Overview of the Showa Denko Group �

Message from the Management 5

Special Feature: Achieving a Sustainable Society

Environmental efforts ❶Showa Denko Group’s promise:

6% reductions from 1990 levels in greenhouse-gas emissions 7

Environmental efforts ❷The Showa Denko Group contributes to the sound growth of society by providing environment-friendly products. 9

Highlights

Japan: In preparation for the next medium-term consolidated business plan 17

Overseas: Promoting global CSR management 19

CSR Management

CSR performance and issues 22

Corporate governance 2�

Risk management 26

Responsible Care management 29

Responsible Care Activities Plan �1

Social Commitment Report

Relationships with our stakeholders ��

Customer relations �5

Community relations �7

Shareholder and investor relations �1

Partner relations �2

Employee relations ��

Environmental and Safety Efforts

Report on phosgene leaks �7

Measures to combat climate change (global warming) �8

Resource use and environmental impact 50

Reducing chemical substance discharge 51

Environmental considerations: Atmosphere, water, and soil 5�

Reducing waste and encouraging recycling 55

Environmental accounting 56

Safety efforts 57

Third-party Opinions 61

Response to third-party assessments 62


*1 COPAn abbreviation for Conference of Parties. COP is the highest-ranking decision-making body, composed of representatives of signatories to an international convention. The COP of the United Nations Framework Convent ion on C l imate Change (UNFCCC) is an annual meeting of the leaders of environmental agencies of member countries, held to discuss achievements under the UNFCCC. COP15 is scheduled to be held in 2009 in Copenhagen, Denmark.

*2 Greenhouse gas (GHG)This refers to gases in the atmosphere that have greenhouse effects. GHGs emitted in a large volume by human activity cause global warming. GHGs include carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons. Ordinarily, infrared light released from the earths’ surface, as it is heated by sunlight, is emitted into outer space. GHGs absorb this infrared light, heating the earth.

*3 Kyoto ProtocolAn in te r na t iona l conven t ion on preventing global warming, established at COP3 in Kyoto, Japan in 1997 to set numerical targets on greenhouse gas emissions for individual countries. Japan’s target is to reduce greenhouse gas emissions by 6% vs. 1990 levels over the years 2008 through 2012.

*4 Emissions tradingThis is an economic tool for addressing environmental problems. Total emission levels are set for an environmental pollutant, and portions of the total emissions are allotted to individual polluters. These allotments can then be traded through market mechanisms. Use of emissions trading for greenhouse gases was determined in the Kyoto Protocol.

*5 Global warmingThe phenomenon in which the earth grows warmer due to the action of greenhouse gases such as carbon dioxide emitted by human activity. As the most serious environmental problem ever from a historical perspective, global warming is believed to result from the consumption of large volumes of fossil fuels from the dawn of the industrial revolution. Reports indicate this phenomenon is already visible in various ways, including rising sea levels. It is a pressing issue that threatens the survival of the human race.

Last year, a financial crisis originating in the United States spread around the world, with significant repercussions for the real economy. The Passion Project, the Showa Denko Group’s three-year medium-term consolidated business plan, was affected by these economic conditions. In 2008—the final year under the Passion Project, our business results considerably fell short of the financial targets.

Nevertheless, we f irmly bel ieve that our principles under the Passion Project—contribution to the sound growth of society—is appropriate. We are now proceeding with the Passion Extension, our business plan for 2009 and 2010 that incorporates new growth strategies and structural reform measures, in addition to targets and measures not completed under the Passion Project. In 2009 and 2010, we plan to return to a growth track and prepare for rapid advances in 2011 and beyond. In the recently formulated “strategic concepts” for the 2011-2015 period, we

Contributing to the sound growth of society is the cornerstone of the Showa Denko Group’s CSR efforts

To contribute to the sustainable development of society

Kyohei TakahashiPresident and Chief Executive Officer

Message from the Management

Passionfor Change

Sharing the passion to continue operating as a company valued by society

Group Values

1P5C

Challenge

Commit

Contribute

Complete

Collaborate

Group’s Vision

Guidelines

Code of Conduct

Passionfor Change


Group Values

1P5C

Challenge

Commit

Contribute

Complete

Collaborate

Group’s Vision

Guidelines

Code of Conduct

Passionfor Change


Group Values

1P5C

Challenge

Commit

Contribute

Complete

Collaborate

Group’s Vision

Guidelines

Code of Conduct

continue to aim to earn the full trust and confidence of the market and society. At the same time, we aim to contribute, as an evolving unique chemical company with individualized products, to the creation of society in which prosperity and sustainability coexist in harmony. To achieve this, we should put into practice our Code of Conduct in a straightforward and honest manner.

Last year, the phosgene (carbonyl chloride) gas leaks that occurred at Showa Denko’s Higashinagahara Plant caused significant inconvenience and concerns to members of the local community, including residents and companies operating on the plant site. While these incidents did not result in any cases of serious health damage, we fully recognize that such incidents should never occur at a company like ours, whose mission is handling chemicals. To ensure that such incidents do not recur, we have sought the guidance of the relevant authorities and the opinions of community residents and outside experts. Thus we have implemented appropriate countermeasures. We will continue seeking to make each plant safer and more secure through sustained dialogue with our stakeholders.

The 15th United Nations Climate Change Conference (COP15)* 1, to be he ld in Copenhagen at the end of the year, will discuss a framework for reducing greenhouse gas*2 emissions for the years beyond the Kyoto Protocol’s*3 commitment period (2008 through 2012). The Showa Denko Group must minimize the impact of its global operations on the earth’s environment. Through efficient use of energy and the development of environmental protection technologies, in addition to reducing greenhouse gas emissions, we seek to contribute to the sustainable development of society.

The Showa Denko Group is projected to meet its reduction target for greenhouse gas emissions (a reduction of 6% from 1990 levels) on its own, without the aid of external measures such as emissions trading*4. The Group has established a roadmap to reduce emissions by 50% worldwide by 2050 and will continue its efforts to fight global warming*5 from a strategic perspective.

This year marks the 70th anniversary of Showa Denko’s incorporation and the 100th anniversary of the launch of business by founder Nobuteru Mori. Demonstrating the inherited spirit of “perseverance,” the entire Showa Denko Group will work together to overcome the difficulties with “Passion for Change,” fully utilizing technological strengths and human capabilities accumulated over many years.

I hope that this report will serve as a starting point for a two-way dialogue with all of our stakeholders. We welcome your frank opinions and advice. (September 2009)

The Showa Denko Group is working to fulfill its commitment to help realize a sustainable society.

¢ Showa Denko Group’s Vision and philosophy

SHOWA DENKO CSR REPORT 2009 8

Kawasaki Plant installs GHG decomposition unit

In March 2009, the Kawasaki Plant installed and began test r u n s o f a g r e e n h o u s e g a s decomposition unit.

Until now, hydrofluorocarbons a n d o t h e r a l t e r n a t i v e s t o chlorofluorocarbons have partially been emitted during production and filling processes at this plant. In response, the plant has already implemented measures to reduce emissions of these greenhouse g a s e s . To a c h i e v e f u r t h e r reductions, the Plant has installed additional facilities that recover and decompose these gases by combustion. These facilities can eliminate almost all emissions of CFC-alternative gases at the plant.

Reducing CO2 emissions by shifting to a new fuel in the graphite electrode production process

In May 2009, the Omachi Plant completed a shift from heavy oil to liquefi ed natural gas (LNG).

The Omachi Plant produces the graphite electrodes used in recycling steel. Graphit ization furnaces, which comprise the key part of this process, are powered by CO2-free electr icity from a hydroelectric power plant owned by Showa Denko. This shift from heavy oil to LNG as the fuel used in the baking process offers the potential for continuous 10,000-ton annual reductions in CO2 emissions.

Installing new cracking furnaces to reduce CO2 emissions

In 2008, the Oita Petrochemical Complex began install ing new cracking furnaces, with construction slated for completion in 2010.

The seven existing cracking furnaces for naphtha (a material used in e thy lene p lants ) w i l l be d ismant led and rep laced with two high-efficiency, state-of- the-ar t cracking furnaces. (Each new furnace will produce 100,000 tons of ethylene a year.) Additionally, we will increase use of heat generated by furnaces and modify the distillation system to further enhance energy efficiency. Combined, these efforts will increase energy effi ciency by approximately 5.3% and reduce CO2 emissions by 59,000 tons a year.

Are the Kyoto Protocol targets achievable?

We are now in the second year of the commitment period (2008 through 2012) specified by the Kyoto Protocol. Barack Obama, the president of the United States, has announced the ambitious target of reducing U.S. greenhouse gas emissions by 83% from 1990 levels by 2050. In addition, a global agreement for the period beyond the commitment period under the Kyoto Protocol is expected to be reached at the 15th United Nations Climate Change Conference (COP15) in Copenhagen at the end of the year. Against this backdrop, Japan’s greenhouse gas emissions in 2007 totaled 1,374 million tons (CO2 equivalent), 9.0% higher than the total emissions of 1,261 million tons for the reference year (1990) under the Kyoto Protocol. Japan is required to reduce greenhouse gas emissions by 6% from the levels of the reference year during the Kyoto Protocol commitment period. This means that even after subtracting a forest absorption value of 3.8% and a Kyoto Mechanism value of 1.6% (a reduction achieved, for example, through emissions trading), the nation must cut emissions by another 9.6%.

A close look at the increase in emissions by sector in Japan shows that energy-derived CO2 emissions represent a major problem. Although CO2 volumes released by the manufacturing industry, such as those from factories, declined, the volumes discharged by all other sectors, including the transportation segment (automobiles, ships, etc.), the commercial and service sectors (retail, services, offi ces, etc.), and the household sector, increased significantly from the reference year (according to data released by the Ministry of the Environment in 2009). Compared to last year, while emissions from the transportation sector decreased slightly, those from other sectors have increased, with household-sector emissions in particular increasing by 8.4%. In response, the Energy Conservation Law has been revised to set a goal of even greater reductions in CO2 emissions, incorporating activities such as reporting by individual businesses, setting benchmarks, and expanding the range of sectors covered by the Law.

Efforts in response to climate change and reductions in greenhouse gas emissions will clearly become even

more important aspects of corporate business strategies in the future.

Responsibility for greenhouse gas emissions equivalent to those of 1.4 million people

The Showa Denko Group uses fossil fuels as raw materials and fuels to produce petrochemicals and organic/inorganic chemicals and to fabricate aluminum. The Group discharged approximately 3.1 million tons of greenhouse gases in 2008. Converted into carbon dioxide emissions, this is equivalent to the amount discharged by some 1.4 million people (based on data from the Team Minus 6% website).

We are moving forward with a mult i-faceted promotion of greenhouse gas emissions reduction efforts. In addition to reducing business-related greenhouse gas emissions (through efforts including the elimination of emissions of HFCs and other greenhouse gases at Kawasaki), reducing waste, improving distribution effi ciency (through efforts such as implementing a modal shift at Kawasaki), and conserving energy in offices, we are seeking to raise employee awareness of CO2-emissions reductions in the homes.

Keeping our promiseLast year, in addition to a unit energy consumption

target, the Showa Denko Group set a target of 6% for cuts in greenhouse gas emissions vs. levels for the reference year (1990) over the Kyoto Protocol commit-ment period. We also established a long-term roadmap to reduce greenhouse gas emissions by 50% from current levels and began preparing an action plan with a strategic focus on thorough energy conservation in current manufacturing methods and radical shifts in production technologies as well as raw materials and fuels.

In 2008, the Group achieved a 7% reduction from reference year levels, surpassing the 6% reduction goals. In the 2008-2012 period, we expect to achieve the goal of a 6% reduction in greenhouse gas (GHG) emissions without resorting to emissions trading. The goal will be achieved through such efforts as reductions in GHGs other than carbon dioxide and improvement in the effi ciency of the naphtha cracking furnaces at our petrochemical complex.

Showa Denko Group’s Promise: 6% reductions from 1990 greenhouse gas emissions levelsIn full awareness of the environmental impact of our business activities, the Showa Denko Group has set a greenhouse gas emissions reduction target of 6% for the commitment period (2008 through 2012) under the Kyoto Protocol and is moving forward with specifi c efforts to achieve this target.

Naphtha cracking furnaces at the Oita Complex LNG storage facilities at the Omachi Plant The GHG decomposition unit at the Kawasaki Plant

SHOWA DENKO CSR REPORT 20097

Achieving a Sustainable Society

Case1 Case2 Case3Oita Complex Omachi Plant Kawasaki Plant

Showa Denko Group’s Efforts

1500

2000

2500

3000

3500

41.04

1990

(reference year)

2006 2007 2008

-0%-3%

-7%

2008～2012Kyoto Protocol

commitment period

-6%

-25%

-40%

0

2,000

1,750

2,500

2,250

3,000

2,750

3,500

3,250

Emissions(kt-CO2)

Guidepost2020

Guidepost(Fiscal Year)2030

Environmental efforts ❶

Special Feature

Special Feature Achieving a Sustainable Society

¢ GHG emissions by the Showa Denko Group

(For Group company scope, see page 50)

SHOWA DENKO CSR REPORT 2009 10


Research themes for developing next-generation products

At the Showa Denko Group, we are conducting R&D activities based on what we see as our mission: to contribute to the sound growth of society by developing new products and new technologies. To

fulfill our social responsibilities in this area, we see the development of environment-friendly products and processes as one of the most crucial issues. Needless to say, all stakeholders involved in our corporate activities have a strong interest in technological developments related to energy and the environment, including

reduc ing env i ronmenta l impact and addressing

resource depletion, to

achieve both economic growth and environmental protection and to build a sustainable society worldwide.

In response, we at the Showa Denko Group seek to contribute to the sound growth of society by creating and providing innovative technologies in the fi elds of energy conservation and environmental protection in three target markets—electronics, automotive parts and personal care/environmental goods—by fully demonstrating the advantages of our unique position: a chemical company with strengths in inorganic chemical and metal technologies.

The Showa Denko Group’s strengths are based on the rich stock of inorganic/metal and organic chemical technologies, which have supported the development of many individualized products, and our capability to create innovative products through interconnections of these technologies. Our achievements in the area of environment-friendly products are typifi ed by our development of visible-light-responsive photocatalysts; ultrabright LEDs and vapor-grown carbon nanofiber “VGCF™” for energy-saving applications; and ECOANN™ ammonia made from used plastic.

We believe our individualized technologies that have supported such innovations will continue to remain our strengths in developing new technologies in the areas of energy conservation and environmental protection.

The Showa Denko Group contributes to the sound growth of society by developing environment-friendly products.As a company seeking to contribute to the good of society, the Showa Denko Group gives high priority to the development of environment-friendly products and processes. Here we introduce some of the innovative and environment-friendly products we have developed using our technological strengths.

The company’s plant in Kawasaki recovers hydrogen from used plastic and utilizes it as a raw material for producing ammonia. This process enables a 35% reduction in CO2 emissions compared with conventional methods for ammonia production from crude gasoline (naphtha). CO2 generated from recycled plastic is also captured and recycled. Showa Denko sells this ammonia under the trade name of ECOANN™.

Ammonia is used not only as a raw material for chemical fiber and fertilizer but also as a reducing agent for nitrogen oxides emitted from thermal power plants and factories, providing a cleaner environment.

ECOANN™ has been certifi ed for green purchasing by six electric power companies in Japan.

Showa Denko produces ammonia based on used plastic

Plastic Chemicals Recycling Plant.

Enviro

nmental E

fforts

SHOWA DENKO CSR REPORT 20099

E C Oproduct 1

Produce Ammonia by recycling waste plasticCrush and Knead!Gasify plastic

LowtemperatureGasi�cation

furnace

RPFstockyard

Metal recycle

Metal and Glass

Raw material of road

Raw material of caustic soda

Slag

Salt

Gas cleaner

Recycled waste plastic

Crusher

Metal separator

Extruder

Refuse Plastic Fuel

Reformfor

recycle

Crushplastics

Removemetals

Form plastics

HightemperatureGasi�cation

furnace

Ammonia is usedin many ways!

Produceammonia!

Ammoniacleans the air

Recycled wasteplastic

Ammonia

Produced byHydrogen and

nitrogen

Sodium hydroxide

Chlorine

Sulfur

Desulfurization system

CO Conversion system

Compositegas

Electrolysis system

Ammonia plantday

Clearresin

Acrylic fiber

Fertilizer

Nylon

Glue

Denitrationmaterial

day

Clean up the gas fromfactory and power plant

Photo: (From left) Yo Imaizumi, Mariko Inoue, Toshimaru Maeda, and Hiroshi Ishizuka Plastic Chemicals Recycling Promotional Offi ce, Kawasaki Plant, Chemicals Division

The Showa Denko Group contributes to the sound growth of society by developing

Kenji TsukamotoDirector and Corporate Offi cer;

Chief Technology Offi cerShowa Denko K.K.

ECOANN™

SHOWA DENKO CSR REPORT 200911 SHOWA DENKO CSR REPORT 2009 12


High-performance liquid chromatography (HPLC) is used to separate, identify, and quantify the amounts of ingredients dissolved in liquids. The technique is widely used, including in quality control of water in water supplies and rivers, analysis of food ingredients, industrial quality control, and clinical diagnoses based on analysis of tissue and body fl uids. Able to detect trace amounts of harmful heavy metals or carcinogenic halogen oxide, HPLC is also used to analyze substances found in, and to maintain the health of, our environment.

At the same time, HPLC often uses organic solvents. For this reason, Showa Denko is working to reduce the quantities of organic solvents used by HPLC analysis, which can lead to environmental pollution, by reducing the size of HPLC columns* and developing HPLC columns capable of quicker analysis.

Showa Denko LEDs offer low energy consumption, long life, and the capacity to fi ne-control light wavelengths for specifi c applications. These characteristics help conserve energy across a wide range of product applications, including LCD backlight for laptop computers and TVs and LED lighting seen in stores.

We recently developed red LEDs based on this technology to generate light at optimal wavelengths for plant growth. We expect these red LEDs will be used at plant factories, where vegetables and other plants are grown indoors under artificial lighting. This type of cultivation provides several key advantages, including stable production regardless of the weather, multiple cropping a year, and elimination of agricultural chemicals due to the fully controlled environment. These advantages should lead to rapid growth in agricultural production.

Future use of LEDs at plant factories will help achieve an environment-friendly society through the safe, low-cost supply of agricultural

products.

High-performance HPLC columnsLight-emitting diodes

Reducing environmental pollution through high performance and compact size

Shodex™ high-performance HPLC columnsCultivation experiment at a plant factory

* HPLC columnThis crucial HPLC component is fi lled with special fine particles. By passing a liquid through the column, you can separate various substances contained in the liquid.

E C Oproduct 4E C O

product 2

Showa Denko K.K. and Showa Denko Carbon, Inc., of the United States, manufacture graphite* electrodes, contributing to the protection of the environment by recycling scrap iron.

Graphite electrodes are used in electric steelmaking furnaces. Scrap iron is melted in these furnaces for recycling into steel. Temperatures inside the furnace reach 1,600°C, and the temperature at the tip of the electrode 3,000°C or higher. Graphite is the only material that can be used in such a severe environment. This process dramatically cuts both energy

use and CO2 emissions compared to processes that form steel from iron ore by the blast-furnace method.

Today, roughly 30% of the world’s crude steel is produced from scrap iron using electric steelmaking furnaces.

SuperEnd™ lightweight aluminum-can end produced by Showa Aluminum Can Corporation cuts weight based on improvements made in partnership with Asahi Breweries, Ltd. They offer increased compressive strength based on a unique shape while reducing end surface area and thickness. Compared to existing can ends in a conventional size known as 206 diameter,*1 each SuperEnd™ is approximately 9% lighter, which reduces greenhouse-gas emissions from production processes and transportation by roughly 6,000 tons of CO2 per year.

In recognition of these environmental characteristics, SuperEnd™ was awarded the appropriate packaging award in the Japan Packaging Contest 2008.*2

Graphite electrodesSuperEnd™Contributing to environmental protection through recycling of scrap iron

Reducing greenhouse-gas emissions by cutting weight

Graphite electrodesSuperEnd™

E C Oproduct 5E C O

product 3

* GraphiteMade by pulverizing and graphitizing needle coke.

*1 206 diameterIndustry name for size of can ends in current use. (approximately 6 cm in diameter)

*2 Japan Packaging Contest 2008 appropriate packaging awardThe most significant competition for Japan’s packaging industry, held to encourage the development and use of superior packages and packaging technologies. The appropriate packaging award is conferred on packaging that offers functionality addressing environmental concerns and consumer demand, realizing resource conservation, energy savings, and other achievements.

Lightweight aluminum-can end

Motonori UsukiMarketing Department

Electronic Materials Division

Kuniko IgarashiSeparation & Refi ning Business Group

Specialty Chemicals DepartmentChemicals Division

Junichi SatoResearch & Development Dept.

Technical CenterShowa Aluminum Can Corporation

Atsushi IwataManufacturing Department

Omachi PlantCarbons Division

Shodex™From energy conservation to stable production of agricultural products

LED



E C Oproduct 8

Production activities at factories and other facilities release as exhaust large volumes of CO2 and heat into the atmosphere. Showa Denko’s industrial T-coil™, a compact waste heat recovery equipment, reduces both energy consumption and CO2 emissions by recovering energy that would otherwise be wasted. By

enabling the recovery of at least 50% of exhaust heat energy, this device makes it possible to achieve massive reductions in fuel consumption. Recently, it has also been used to eliminate harmful gases, including volatile organic compounds generated by manufacturing processes.

Eco-friendly vehicles such as hybrid and electric vehicles are expected to play a major role in the automotive future. Batteries are core components in such vehicles, and improving battery performance will be essential to improving the performance of eco-friendly vehicles.

SCMG™ graphite anode material, developed using the graphitization technologies accumulated by Showa Denko over many years, has been judged to be the optimal anode material for use in eco-friendly vehicles, capable of operating even under conditions of heavy electrical current and remaining usable for a long period of time even under conditions of repeated charge and discharge. Our goal is to protect the earth’s environment by

supplying key materials used to build the coming generations of eco-friendly vehicles.

T–coil™

SCMG™Graphite anode material

Industrial waste heat recovery equipment

Massive reductions in fuel consumption through effi cient energy use

The heart of eco-friendly vehicles representing the mainstay of future automotive transportation

Graphite anode material

Mechanism of T-coil™

E C Oproduct 9

Photocatalysts represent a technology that harnesses light to decompose toxic volatile organic compounds and nitrogen oxide to render them harmless. Earlier photocatalysts, which could only be used with ultraviolet rays, were effective only outdoors, where ultraviolet radiation is plentiful. The visible-light photocatalysts currently being developed at Showa Titanium Co., Ltd. can use light energy even from artifi cial fl uorescent lighting, which contains few ultraviolet rays, and can be used indoors. We believe these technologies will signifi cantly reduce the harmful potential of organic solvents and other substances found in adhesives and coatings used in buildings and furniture, which cause the sick house syndrome. We are also hopeful that they may help check viruses

such as infl uenza and are currently undertaking verifi cation studies.

Photocatalysts are expected to evolve into a technology that helps protect our way of life. The Showa Denko Group is currently working with national research institutions to refine this technology.

E C Oproduct 7 Photocatalysts

Showa Denko produces rare earth magnetic alloys for rare earth* magnets. Rare earth magnets are known for their very strong magnetic force. With their

remarkable efficiency, motors and generators incorporating these magnets help conserve energy across a wide range of

applications, including hybrid vehicles, home appliances (air-conditioners and washing machines), and mobile phones. Use of these materials is also expected to grow

in environmentally-friendly fields such as wind power generation and trains.

Rare earth magnets occur in two types: neodymium magnets (consisting of neodymium, dysprosium, iron, and boron) and samarium-cobalt magnets (consisting of samarium and cobalt). Showa Denko is currently working to develop new applications for alloys manufactured by its proprietary methods.

Rare earth magnetic alloysUsed widely to conserve energy, from industrial use to consumer products

Rare earth magnetic alloys

* Rare earthA term referring to 17 elements, including neodymium and lanthanum, which demonstrate unique features not found in other metals due to a particular confi guration of electrons orbiting around their atomic nuclei.

E C Oproduct 6

The energy of light protects our way of life

Antifouling tests involving traditional photocatalysts: Soiling is applied to the center of the sample, which is then left outdoors. The soiling on the right-hand side, coated with a coating containing photocatalysts, degrades rapidly and is easily washed off.

No coating NTB™ coating

Masayuki Kishi (left) and Yuuichi IijimaE & I Heat Exchanger Design Group

Design DepartmentHeat Exchanger Division

Chiaki SotowaR & D Group II

Fine Carbon Department

Yasushi KurodaR & D Group

Showa Titanium Co., Ltd.

Kenichiro NakajimaTechnology Group

Production & Technology Control DepartmentRare Earth Division

Heat pipe

Air supplyExhaust

Transfer of heat energy

Release of heat energyContainer

Working fl uid

Intake of heat energyExhaust

Condensation

Air supplyPartition

Liquid

Heat fl ow

Steam

Vaporization



Showa Denko has chosen to commercialize NPAC, an environmentally-friendly solvent that can be used for ink utilized in special gravure printing processes. Sales of this product are slated to begin in early 2010.

While solvents used for ink utilized in special gravure printing processes use large amounts of organic solvents*1 such as toluene, NPAC is expected to serve as a highly safe substitute solvent. In addition, special gravure inks suitable for the recovery of volatile organic solvents are being examined in response to amendments of the Air Pollution Control Law. NPAC is attracting growing attention as a key solvent in such applications.

Additional NPAC demand is also expected to emerge for use as an extraction solvent for adhesives and optical fi lms.*2

n-Propyl acetate

A next-generation solvent attracting growing attention for its safety

E C Oproduct

Gravure printer

Our water supplies are essential to daily life. Water is rendered safe to drink through various processes at water purification plants. Sodium hypochlorite, an inorganic chemical* essential to purifi cation and sterilization in water processing, is produced through a reaction of chlorine and caustic soda, which is derived from the electrolysis of salt water.

In recent years, water safety standards have become stricter to ensure the safety of the water supply. Jiax™-S1 sodium hypochlorite, with decreased levels of chloric acid and bromic acid to meet

these new standards, went on sale in 2004, and sales volumes have risen year after year since then.

The JWWA logo seen on devices such as water faucets and shower heads in Japan certifies that the device meets standards established by the Ministry of Health, Labour and Welfare. Only products that have passed inspections by the

Japan Water Works Association can use this logo. Jiax™ was fi rst among its competitors to achieve this certifi cation.

Jiax™ for water–supply useProtecting the safety of our essential water supplies

Used for Tokyo tap water

Sodium hypochloriteE C Oproduct10

Bionolle™Biodegradable plastic

An environmentally-friendly plastic that harnesses the power of microorganisms

Biodegradable plastic are plastics characterized by low environmental impact, degrading over time into water and CO2 through microbial action.

In addition to environmental performance, Bionolle™ from Showa Highpolymer Co., Ltd. also provides the ease of processing into fi lms and is widely used as an agricultural fi lm. Plastic sheets are placed on fi elds to aid in crop cultivation— for example, for fi ghting frost. However, this leads to the problem of parts of sheets remaining in the fi elds after the

sheets are removed. Bionolle™ goes a long way toward solving this problem.

The various uses for Bionolle™ have grown steadily. Current applications include use as a packing material for OA equipment. We plan to develop other applications for this material as part of efforts to protect the environment.

E C Oproduct 13

Showa Eco–Pipe™Transforming PET plastic bottles into high-performance drain and ventilation pipes for homes

Showa Eco-Pipe™

Showa Eco-Pipe™ from Showa Denko Kenzai K.K. is a drain and ventilation pipe for homes made from PET resin obtained from used PET plastic bottles. Using recycled PET resin instead of crude oil consumes approximately one-third the energy compared to PVC pipes and reduces emissions of CO2 by approximately 800 kg per ton of products

manufactured, compared to PVC pipes.Not just environmentally-friendly but stronger

at lower temperatures than PVC pipes, Showa Eco-Pipe™ can be connected using adhesives, just like PVC pipes. Its main applications are sewer and rainwater drains as well as ventilation conduits. Showa Eco-Pipe™ has been certifi ed to use the Eco Mark as a recycled product with a low environmental impact.

E C Oproduct 12

AgriAce™ biodegradable mulch fi lm using Bionolle™

11

* Inorganic chemicalsA general term that refers to chemicals made from inorganic substances

(i.e., chemicals that do not contain carbon atoms in their structures).

*1 Organic solventsThe term “solvents” refer to liquids used to dissolve various substances. Organic solvents are organic compounds that occur in liquid form at room temperature, used to dissolve substances. Since many of these are harmful to the environment or the human body, research efforts are conducted to replace these with less toxic substances, to use water, or to eliminate solvents altogether.

*2 Optical fi lmsThe term refers to films that provide various effects by permitting the passage of, reflecting, or absorbing light rays, made by forming a film from high-polymer materials such as plastics. In recent years, demand for these films has grown dramatically, with growing use in display devices such as LCDs and plasma displays.

Takayuki NishijimaPlanning Offi ce,

Petrochemicals Sector

Yasushi IchikawaBionolle Department

New Polymer Materials DivisionShowa Highpolymer Co.,Ltd

Yuichi WatanabeDevelopment Group

Keipla Marketing DepartmentShowa Denko Kenzai K.K.

Toshio IijimaInorganic Chemicals Group

Gases & Chemicals DepartmentChemicals Division

NPAC

JWWA logo


In 2009, the Group's profi tability is improving, after hitting the bottom in the fi rst quarter. For the second half of the year, all segments will record operating income.

In the 2009-2010 period, we will take emergency measures to cope with the deterioration in the world economy while strengthening the competitive positions of respective businesses. Thus we will lay the groundwork for growth under the new consolidated business plan for 2011 and thereafter.

❶Future social needs

In view of the global warming issue and limitations of crude oil and other mineral resources, we expect increased social demand for environmental protection and energy conservation technologies.

We will strengthen our position as a ”unique chemical company with individualized products,” developing various components, materials and solutions. We will contribute to the sound growth of society by meeting the needs for energy conservation, health and safety, and higher effi ciency.

The Showa Denko Group is implementing the ”Passion Extension” for 2009 and 2010. This plan has been

worked out by reviewing the accomplishments under the three-year (2006-2008) consolidated business plan,

the Passion Project, and in response to the drastic changes in economic conditions in 2008.

At the same time, SDK is working on its new medium-term consolidated business plan for 2011 and thereafter.

In preparation for the next medium-term consolidated business plan

Structural Reform Efforts in 2009/2010 and Strategic Concepts for 2011 and Thereafter

—Promoting structural reform and laying the groundwork for sustainable growth—

Japan

SHOWA DENKO

highlight

¢ Quarterly trends of operating income

¢ Evolving unique chemical company: Concept

¢ Business portfolio New portfolio broken down by segment

Next-generation New Growth Base Need structural reform

Petro-chemicals

Allyl alcohol derivativesEco-friendly solvents

Olefi nsAcetyl derivativesSpecialty polymers

ChemicalsBiomassAdvanced chemical process

Functional monomers

Separation/purifi cation materialsReactive functional materials

AcrylonitrileAmino acids, AmmoniaChloroprene

Industrial gases

Electronics

Solar cellsLED artifi cial light sourceMagnetic alloysBattery componentsStoragePost photolithography materials

SiC power devicesOrganic ELFuel cell components(platinum-substitute catalyst; separators)Fluorine chemicalsNew optical materialsNano functional materials

Ultrabright LEDFine carbon(LIB carbon material)Rare earth magnetic alloys

HD mediaSemiconductor-processing materials

Inorganics PhotocatalystsFine carbon(resin composite)

Graphite electrodesAbrasives/refractories

Alumina

Aluminum

LIB packagingCooling system for power semiconductors in hybrid cars

High-purity aluminum foils for capacitorsAluminum cylinders for LBPAluminum cansShotic™

Automotive heat exchangers

(¥100mil.)

08/Q1 Q2 Q3 Q3Forecast

Q4Forecast

97

149

108

10

50

-86

-157

-72

-200-150-100-50050100150200

-200

-150

-100

-50

0

50

100

150

200

Q4 09/Q1 Q2

❸Business policy for major product lines

(1) HD media: As an independent HD media supplier, we will establish our overwhelmingly strong position in the market. We will achieve drastic improvement in effi ciency by reviewing our operation sites, and lead the market in the development of the next-generation recording technologies.

(2) Petrochemicals: We will replace cracking furnaces of our ethylene plant, improving its energy effi ciency to the highest

❹Financial targets

(1) Net sales, operating income and interest-bearing debt:

(2) Capital expenditure: During the three-year period (2011-2013), we will spend a total of ¥200 billion in capital

level in the world. We will also strengthen ties with respective derivative manufacturers.

(3) Graphite electrodes: We will expand our production capacities for large-diameter graphite electrodes on a global scale.

(4) Aluminum: We will complete structural reform of this business by 2010, and optimize our production setup. We will concentrate on high-value-added business areas where we can fully utilize our individualized technologies; including aluminum cylinders for laser beam printers and others.

❷Business portfolio

In 2011 and thereafter, the HD media business will be included in the category of ”base business”, which will provide profi ts and cash fl ows in a stable manner. The ultrabright LED, fine carbon and other businesses will be classified as ”growth driver” businesses. Our ”new growth driver” businesses will cover such areas as organic electroluminescent (organic EL) devices, fuel cell components, and flurorine-based chemicals. We will preferentially allocate resources to these areas.Task

1

Task

2

Performance forecast for 2009/2010 and structural reform

Concepts of the new business plan for the 2011-2015 period

Domain

Target markets

Values to be

provided

Source of strength

Environmental protection

Accumulation of information

Conservation & storage of energy;

new energy

Health and safetyIncreased convenience

and comfortSecurity of

energy supply

ElectronicsEnvironment/resourcesEnergy

Components, materials & solutions

Key technologies

Innovative technologies

Base technologies

Evolving unique chemical company

Contribution to society

2006-2008:

Passion ProjectLaying the groundwork for sustainable growth

•Accelerate ”new growth driver” businesses

• Continuous expansion in profit

• Improvement in financial strength

2009-2010:

Passion ExtensionPreparing for the next business plan for 2011 and after

• Structural reform in response to changes in environment

• Growth strategy based on identification of growth areas

2011-2015:

Medium-term business strategyAs an “evolving unique chemical company with individualized products,” we will contribute to sustainable growth of international society.

• Inorganic/metal & organic chemical technologies; ”human strengths”

• Structural reform; creation of next-generation businesses in such areas as energy & resource conservat ion, environmental protection, and electronics.

2009 Estimate 2010 Forecast 2013 Image 2015 Image

Net sales 6,700 8,000 9,500 11,000

Operating income -170 300 800 1,000

Profi t rate(operating income

basis)-2.5% 3.8% 8.4% 9.1%

Interest-bearing debt at year-end 4,200 4,300 3,800 3,500

(¥100mil.)

expenditure as well as loans and investments. Approximately half of the budget will be spent for electronics business. As for the HD media and graphite electrode operations, which are classifi ed as ”base businesses,” we will also make aggressive investments.

(3) R&D expenses: During the said three-year period, we will spend a total of

¥60 billion in R&D expenses. We will preferentially allocate resources to ”growth driver” and ”new growth driver” businesses. We will also make aggressive R&D investments in the HD media business.

(The next business plan will be announced in the second half of 2010)


27

28

29

30

31

26

25

2322

18

21

19

20

1716

24

1312

15

1011❾

❽

❼❻

14

❺

❹

❷

❸❶

22

21

20

19❾❼❽❻❺

❹❸

❷

❶

18

13

14

15

16

17

121011

Marketing, production, and R&D sites in Japan

20th anniversary of the founding of Showa Denko Carbon

On July 1, 2008, Showa Denko Carbon, Inc. (SDKC), of the United States, celebrated the 20th anniversary of its founding. In addition to pursuing further growth, SDKC will continue to contribute to the local community o f R idgev i l l e , South Carolina, b y p r o v i d i n g e d u c a t i o n a l s u p p o r t a n d e n c o u r a g i n g v o l u n t e e r activities.

CSR Office exchanges information with overseas subsidiaries

We are holding information exchanges between the CSR Offi ce and overseas subsidiaries since 2007.

In 2008, the CSR Offi ce exchanged information with 20 companies from nine countries at their respective sites on topics such as risk management, compliance, community relations, and communication with employees. Plans call for continuing and expanding these e f f o r t s t o i d e n t i f y i s sues , imp lemen t c r o s s - f u n c t i o n a l e f f o r t s g roupw ide , a n d a d d r e s s t h e issues faced by each company.

10th anniversary of the opening of Showa Denko’s Shanghai Representative Offi ce

I n August 2008, Showa Denko ’s Shangha i Representative Offi ce celebrated the 10th anniversary of its founding.

Fourteen Group member companies with sites in China took part in the fourth all-China conference held a t t he Shangha i R e p r e s e n t a t i v e Offi ce, together with a ceremony marking the 10th anniversary of its founding. This conference included d i s c u s s i o n s o f topics such as risk management and information security.

Conference for those managing overseas representative offi ces

On July 1, 2008, a conference was held at Showa Denko head office for managers of overseas representative offi ces, with 20 Group member companies with overseas sites participating. Attendees exchanged information and views on topics such as countermeasures against new strains of influenza, enhancing information infrastructures overseas, export controls, and SPS activities overseas.

I n a d d i t i o n t o continuing to hold this conference, we plan to work to resolve the issues faced by each c o m p a n y t h r o u g h active exchanges of information on a daily basis.

❶ F2 Chemicals Limited

❷ SHOTIC Europa-Industria de Aluminio Lda.

❸ Showa Denko (Europe) GmbH

❹ Showa Aluminium Czech s.r.o.

❺ Baotou Showa Rare Earth Hi-tech New Material Co., Ltd.

❻ Showa Denko (Dalian) Co., Ltd.

Grand Ocean-Showa Auto Air Conditioning (Dalian) Co., Ltd.

❼ Korea Showa Chemicals Co.

❽ Lianyungang Zaoling Abrasives Co., Ltd.

❾ Showa Denko (Shanghai) Co., Ltd.

Shanghai Showa Chemicals Co., Ltd.

Shanghai Showa Specialty Gases Purifi cation Co., Ltd.

10 Zhejiang Quzhou Juhua Showa Electronic Chemical

Materials Co., Ltd.

11 Ganzhou Zhaori Rare Earth New Material Co., Ltd.

12 Showa Specialty Gas (Taiwan) Co., Ltd.

Taiwan Showa Chemicals Manufacturing Co., Ltd.

Showa Denko HD Trace Corp.

Taiwan Showa Denko Electronics Co., Ltd

13 Showa Denko Rare-Earth Vietnam Co., Ltd.

14 Showa Aluminium (Thailand) Co., Ltd.

15 Showa Denko HD (Malaysia) Sdn. Bhd.

16 Showa Denko Singapore Pte. Ltd.

Showa Denko HD Singapore Pte. Ltd.

SHOTIC (Singapore) Pte. Ltd.

Showa Speciality Gas Singapore Pte. Ltd

17 PT. Showa Esterindo Indonesia

18 Showa Aluminium Manufacturing Philippines Corp.

19 Showa Denko HD America Corp.

20 Showa Aluminium Corporation of America

21 Showa Denko Carbon, Inc.

22 Showa Denko America, Inc.

❶ [Oita district]

Oita Complex

Showa Highpolymer’s Oita Plant

SunAllomer’s Oita Plant

Tsurusaki Kyodo Doryoku Tsurusaki Sanso Center

Japan Ethyl Acetate Pacifi c Hydrogen’s Plant

❷ Showa Aluminum Can’s Ohmuta Plant

❸ Fukuoka Branch

❹ Tokuyama Plant

❺ Showa Highpolymer’s Tatsuno Plant

❻ Osaka Branch Showa Denko Aluminum Trading

❼ Sakai Plant Showa Denko Sakai Aluminum

❽ [Hikone district]

Hikone Plant

Showa Aluminum Can’s Hikone Plant

Showa Denko Packaging’s Hikone Plant

❾ Showa Tansan’s Yokkaichi Plant

Union Showa Yokkaichi Plant

10 Nagoya Branch Nagoya Kenmazai Kogyo

11 Hamamatsu Air Supply

12 [Toyama district]

Showa Titanium Showa Denko Kenso

Toyama Air Supply

13 Omachi Plant Shinshu Showa

14 Shiojiri Plant Shinshu Showa

15 Fuyo Perlite’s Suwa Plant

16 Nippon Polytech

17 Showa Denko Packaging Isehara Plant

18 Yokohama Plant Tokyo Liquefi ed Oxygen

Showa Engineering

Showa Denko Kenzai

19 [Kawasaki district]

Kawasaki Plant

Corporate R&D Center (Kawasaki)

SunAllomer’s Kawasaki Plant

Showa Tansan’s Kawasaki Plant

Pacifi c Hydrogen Union Helium

20 [Tokyo district] (all head offi ces)

Showa Denko Showa Highpolymer

SunAllomer

Showa Tansan Showa Aluminum Can

Shoko Union Showa

Fuyo Perlite

21 [Chiba district]

Corporate R&D Center (Chiba)

Chiba Plant Tokyo Aluminum Wire

Showa Denko Electronics

22 Chichibu Plant

23 Showa Highpolymer’s Isesaki Plant

24 Kitakata Plant

25 Higashinagahara Plant

26 [Oyama district]

Oyama Plant

Showa Aluminum Can’s Oyama Plant

Showa parts

27 Oyama Plant (Nasu)

28 Showa Denko Kenzai’s Ishioka Plant

29 Touhoku Metal Chemical

30 Marusho Kogyo

31 Showa Denko HD Yamagata

Promoting global CSR management

Contributing to local communities of the countries in which we operate

Overseas marketing/production sites

Global highlight

Global highlight

Global highlight

Global highlight

1 42 3

SDKC’s 20th anniversary

The ceremony marking the 10th anniversary of the opening of Showa Denko’s Shanghai

Representative Offi ce

Conference for managers of overseas representative offi ces

CSR interviews in Responsible Care auditsGrand Ocean-Showa Auto Air Conditioning

(Dalian)

OverseasSHOWA DENKO

highlight


CSR Management

Over the three-year period covered by its medium-term CSR plan (2006-2008), the Showa Denko Group each year worked to build CSR foundations based on the keywords of promotion, firm establishment, and continuing development.In 2008, the Group moved forward with activities based on the following CSR policies:

See the following page for 2008 CSR performance.

At the end of 2008, in addition to reviewing the three years of the medium-term CSR plan, the Group established CSR goals to be achieved by the Showa Denko Group by 2015, and established CSR policies for 2009 and 2010 in accordance with the Passion Extension business plan.

*1 ComplianceThis refers to compliance with laws, regulations, in-house rules, operating manuals, and other rules, based on an understanding of the reasons underlying such rules. Alongside business ethics, compliance lies at the root of CSR activities.

*2 RiskPotential dangers and losses

Risk managementA management method for implementing s tab le bus iness management by addressing risks through cost-effective and appropriate means.

*3 Responsible care→See page 29.

*4 StakeholdersIndividuals or organizations affected by, or having an effect on, a company’s b u s i n e s s a c t i v i t i e s , i n c l u d i n g shareholders and other investors; employees; customers and consumers; partners and suppliers; government agenc ies ; and nongover nmenta l organizations (NGOs).

The Showa Denko Group seeks to earn the full trust and confidence of society by providing safe and useful products and services, thus fulfilling its corporate social responsibility (CSR).

CSR ManagementCSR performance and issues

2008 plans 2008 achievements Evaluation 2009 plans

Compliance

Building a fi rm foundation for the PDCA cycle in RC activities

Compliance structure checked through RC auditsSite checklists and compliance lists checkedInterviews with affi liates in Japan

○ Building a fi rm foundation for the PDCA cycle in RC activities and other domains

Continuing training and education activities related to specifi c laws and regulations

Ongoing training and education on individual legal matters, such as laws and export controls ◎

Achieving a systematic understanding of applicable laws and regulationsOngoing training related to individual laws and regulationsSystematizing ethics training and adopting relevant tools

Risk management

Introducing the PDCA principle to risk management

Risk-management rules established (February 2008)Interviews involving risk assessment (second year), RC audits, etc.Phosgene leaks at Higashinagahara Plant

△ Thoroughly applying the principle of risk management PDCA cycle

Promoting the BCP*5 and responses to new infl uenza strains

BCP preparation begun in each business sectionBasic action plan and site-specifi c action plans developed for new infl uenza strainsSite-specifi c action manuals prepared, supplies distributed

◎ Promoting the BCP and responses to new infl uenza strains

Internal control*6 system Establishing a system of internal controls for fi nancial reports Internal Control Promotion Offi ce established ◎ Promoting internal control for fi nancial reporting

Corporate governance Maintaining the internal control system Articles of Incorporation revised and outside director appointed ◎ Checking the corporate governance system

Dialogue with stakeholders

Customers and consumers

Maintaining lines of communication with customers through business transactionsReducing complaints

Activities to improve quality assurance continuedThe number of complaints continues decreasing, but the rate is slowing down.

○Maintaining lines of communication with customers through business transactionsReducing complaints

Shareholders

Continuing IR*7 activities (promoting overseas IR) Promoted in accordance with IR plans ◎ Continuing IR activities (promoting overseas IR)

Employees

Developing and promoting issues related to CSR cooperation with the labor union

Dialogue with the labor union continued.CO2 diet*8 activities conducted jointly

◎ Developing and promoting issues related to CSR cooperation with the labor union

Promoting awareness of the Code of Conduct Code of Conduct Guidelines revised (January 2008) ◎ Promoting awareness of the Code of Conduct

Guidelines

Employee awareness surveys Conducted in February 2009 ◎ Conducting employee awareness surveys and analyzing results

Partners

Starting CSR procurement and dialogue with business partners CSR procurement guidelines prepared ◎ Initiating surveys on CSR procurement

Society

Promoting dialogue Dialogue with communities continued using mobile exhibitions ◎ Promoting dialogue

Increasing corporate value

Advancing the medium-term consolidated business plan (achieving goals for fi nal year) Reported on pages 17-18 △ Promoting the Passion Extension business plan

Responsible Care (RC) Promoting the medium-term RC plan Reported on pages 31-32 ◎ Promoting the medium-term RC plan

Interactions with society Preparing CSR reports for corresponding sites Site-specifi c CSR reports posted on website ◎ Expanding and enhancing CSR reports for corresponding sites

EmployeesPromoting diversity in employment A diversity promotion team established within

the Human Resources Offi ce ◎ Promoting diversity programs

Improving human rights programs Human Rights Committee organization restructured➡Aiming at group deployment ◎ Promoting human-rights education in the

Showa Denko Group

◎…Fully achieved　○… Achieved 80% or more　△…Achieved less than 80%

General Policy for 2008:

Continued development of the third stage of CSR-based management

❶ Building a firm foundation for CSR at Group companies in Japan and overseas

❷ Sustained efforts to enhance the following core aspects of CSR: Compliance,*1 comprehensive risk management,*2 Responsible Care (RC)*3

❸ Sustained CSR dialogue with all stakeholders*4

The Showa Denko Group’s CSR policies for 2009-2010

Realizing a company that contributes to the sound growth of societySecondary theme: Contributing to the sustainable development of society

❶ Practicing CSR at Group companies in Japan and overseas

❷Sustained efforts to enhance the following core aspects of CSR:

• Maintaining and developing the compliance structure

• Promoting comprehensive risk management

• Deepening Responsible Care activities

❸Enhancing CSR dialogue with stakeholders

The Showa Denko Group’s CSR Goals for 2015

• While respecting employee diversity, share values and raise motivations for contributing to the sustainable development of society

• Address environmental protection and climate change issues not only as risks, but also as opportunities

• Encourage employees to discuss the Showa Denko Group’s social contributions through its products and businesses

*7 IRInvestor relations

*5 BCPBusiness Continuity Plan

Corporate risk management to prepare for emergencies such as natural disasters or major fi res, in the form of plans for the rapid restoration of business operations following such events.

*6 Internal controlA process incorpora ted in bus iness operations and executed by all members of an organization to achieve the goals of the organization. An internal control system is a system for implementing this process.

*8 CO2 dietIn 2008, the Showa Denko Group initiated carbon-dioxide diet efforts in

cooperation with the Team -6% Committee, a movement led by the Ministry

of the Environment of Japan to prevent global warming. The key point of

these activities is to have each employee declare his or her own efforts to

reduce carbon-dioxide emissions and to strengthen his or her efforts while

keeping a monthly self-assessment log on the corporate intranet. Progress

on these efforts will proceed through labor-management cooperative efforts.


CSR Management CSR Management

In July 2005, Showa Denko established a CSR Committee and a CSR Office to integrate and to aggressively implement Group CSR activities.

The CSR Committee is responsible for consideringand determining basic policies and comprehensive strategies and for managing all CSR-related activities undertaken throughout the Group.

As the secretariat for the CSR Committee and the Risk Management Committee, the CSR Office plans basic Group CSR policies and strategies, gathers CSRrelated information, coordinates efforts to ascertain and evaluate the progress of Group CSR activities, and formulates risk-management strategies for the entire Group.

In addit ion, we have assigned CSR managers at each sector, plant, office, and Group companies to implement CSR activities throughout the Group.

When its medium-term consolidated business plan was formulated in January 2002, Showa Denko defined its Vision. In August 2005, we partially revised its wording to emphasize corporate-wide CSR activities and to establish better relationships based on trust with our stakeholders all over the world.

In 1998, Showa Denko established its Code of Conduct, which sets company behavioral standards and fundamental goals for its executives and employees. This Code of Conduct represents the Group’s principles for promoting CSR, based on the Group’s Vision, and we strive to put this Code into practice. In 1999, the company established Guidelines that provide specific examples related to compliance with the Code. These guidelines were revised in 2005 and 2008. Group member companies are also establishing their own Guidelines for Code of Conduct to reflect their own specific circumstances.

uBoard of DirectorsAt Showa Denko, the Board of Directors

is responsible for important decision-making and supervisory functions, while corporate officers are responsible for business execution functions. The Board of Directors consists of 12 directors, including one outside director. Chaired by the Chairman of the Board of Directors, who does not serve as corporate off icer, the Board both determines the company’s fundamental policies and considers

and makes decisions on matters stipulated in the Companies Act and the Articles of Incorporation, in addition to decisions related to key issues regarding the execution of business operations. The Board of Directors also oversees each Director’s executive actions.

uBoard of AuditorsShowa Denko employs an auditor system.

The Board of Auditors consists of five auditors, including three outside auditors. Auditors attend meetings of the Board of Directors and other important meetings within the company, offer opinions when needed, and audit the execution of business operations, offering suggestions and advice to ensure that the Company operates in a sound manner. Auditors also seek to strengthen consolidated Group management by enhancing the overall auditing of Group member companies.

uCorporate OfficersTo ensure swift decision-making in the

execution of business operations and to invigorate such operations, Showa Denko has adopted a corporate officers system.

uCSR CommitteeShowa Denko has established a CSR

Committee at the highest management level

The Showa Denko Group has formulated its Vision, Code of Conduct, medium-term business plans, management policies, and annual action plans while respecting the independence of affiliate companies.

Group aff i l iates undertake business activities in cooperation with sections in charge of their businesses and report on the execution of their business activities in accordance with Group management rules.

Risk management is carried out on a Group basis in accordance with Group’s risk-management rules. The Group works to ensure thorough compliance throughout the entire Group by establishing guidelines for corporate conduct based on business type and conditions of affiliates.

Showa Denko auditors and internal-audit sections audit and examine the performance of affiliates as necessary. In addition, auditors work to ensure coordination with corporate auditors of key affiliates in various ways, including periodic meetings.

Showa Denko works to ensure the soundness, effectiveness, and transparency of its management and to continually improve its corporate value. To this end, the Group is improving its corporate governance*1 (e.g., internal control systems and fraud-prevention functions) based on the following strategies:

• �Strengthening compliance• �Strengthening management supervision

and oversight functions• �Clarifying management responsibilities• �Rapid, effective decision-making and

task implementation• �Strengthening the information disclosure

system

Corporate governance

*1 Corporate governanceNar row ly de f ined, th i s re fe rs to relationships between shareholders and company management and to a company’s decision-making and business execution structures and systems. More broadly defined, it refers to the relationships between a company and its stakeholders that help define the company’s ultimate goals.

Organization for promoting CSR

Corporate Vision

Code of Conduct and Guidelines

Showa Denko’s management organization

Group management

Corporate governanceto oversee all management strategies from a CSR perspective. Chaired by the President & CEO, the CSR Committee’s membership consists of members of the Management Committee.

uManagement Committee and R&D CommitteeMee t i ng week l y i n p r i nc i p l e , t he

Management Committee consults and makes decisions on issues to be submitted to the Board of Directors and on important general issues related to company management. The R&D Committee deliberates and makes decisions on important issues related to research and development.

uBusiness-sector structureTo clarify its system of responsibility for

implementing business operations, Showa Denko has adopted a structure based on business sectors. To ensure thorough performance evaluations that focus on results, we have also implemented a system for evaluating the performance of business sectors.

uCommitteesShowa Denko has established a number

of committees to handle specific issues central to the execution of business operations. These

Showa Denko Group’s Vision

We at the Showa Denko Group will provide products and services that are useful and safe and exceed our customers’ expectations, thereby enhancing the value

of the Group, giving satisfaction to our shareholders, and contributing to the sound growth of international society as a responsible corporate citizen.

Code of Conduct❶ We will develop and provide useful and safe technologies, products, and services to

contribute to the sound growth of society.

❷ We will observe the laws of Japan and of the foreign countries in which we operate, abide by Company rules, and strive to maintain the social order.

❸ We will conduct business in Japan and abroad based on the principle of fair and free competition.

❹ We will do our best to ensure safety and to protect the global environment.

❺ We will make sure that we maintain good communications with the public and disclose accurate information on our Company in a timely manner.

❻ We will respect human rights and create a cheerful and comfortable working environment.

❼ We will act as a member of the international society and contribute to the development of the regions in which we operate.



¢ Corporate governance structure

Business audit

Cooperation

Decision-making/supervision

Audit

Accounting office

Business execution

Board of Auditors

Auditors

Management Committee

R&D Committee

Safety Measures Committee

Corporate Ethics Committee

Security Export Control Committee

Responsible Care Committee

IR Committee

include the Risk Management Committee, the Corporate Ethics Committee, the Responsible Care Committee, the Security Export Control Committee, and the IR Committee. Each committee conducts investigation, research, and deliberations related to its areas of responsibility.

uInternal Audit OfficeAs an organization under the direct

authority of the President, the Audit Office performs internal audits. The Internal Audit Office investigates the status of business execution by SDK and its Group companies to ensure compliance with laws, regulations, and other applicable rules; the efficacy and efficiency of business operations; financial soundness; and the reliability of financial reporting.

uLegal AdvisorShowa Denko works to ensure compliance

with laws, obtaining advice on legal matters from its Legal Advisor as needed.

uInternal Control Promotion OfficeThe Internal Control Promotion Office

designs the system of internal control for financial reporting and evaluates the effectiveness of the system on behalf of the president. It also reports to the president on the results of these activities and provides support for developing and improving the internal control system to achieve an appropriate level in the design and use of the internal control system for financial reporting.

Showa Denko regards risk management as one of the most important aspects of company management. As such, the company seeks to improve, maintain, and promote its risk management system.

The Company has established a Risk Management Committee to promote risk management groupwide. This Committee prioritizes risks that threaten company policies, plans, and the Group as a whole based on assessments of their potential impact and likelihood. It also provides support for promoting measures to circumvent such risks and to respond to them should they occur. Major topics affecting the entire Group are presented for discussion at the CSR Committee, where decisions are based on deliberations from a wide range of perspectives.

In addit ion, speci f ic r isks involv ing matters such as environmental protection, security and disaster prevention, chemical substances, quality, intellectual property, fair trade, export controls, and contractual agreements are managed through a system of prior examination and decision-making, in accordance with internal regulations. Actions taken in the event of emergencies, including accidents and disasters, are implemented as stipulated in the emergency situation action guidelines and other internal regulations.

Risk management

Risk management

The risk-management PDCA cycle

*1 InventoryA term referring to periodic stock-taking at a store or other business, it can also be used to refer to reviews of tasks and problems.

*2 BottleneckThis refers to the rate-determining process stage at which efficiency or productivity is low.

The Group has taken “risk inventories,”*1 since 2007, assessing the importance of r isks, proposing and promoting r isk countermeasures, and implementing annual reviews to strengthen risk management.Voluntary efforts toward internal control

The Showa Denko Group has designed its internal control system in accordance with the Practice Standards for Management Assessment and Audit concerning Internal Control over Financial Reporting. We will verify that the system functions properly so that highly reliable financial reports will be prepared. Despite the impulse to regard such reporting system as merely self-protective, my belief is that they go well beyond such motivations. Activities like identifying and reducing risks and proactively identifying and resolving issues in the process of designing the internal control system can help improve Group business management. Our goal is to earn the full trust of our stakeholders through voluntary efforts on the part of the entire Showa Denko Group within the framework of this system.

Toshinori TakagiGeneral ManagerInternal Control Promotion Office

VOICE

The results of these efforts are summarized and presented at meetings of the Risk Management Committee. The information is organized into specific topics to be addressed companywide. When necessary, cross-functional efforts based on these topics are implemented companywide.

Examples of companywide efforts in 2007 and 2008 include the preparation of the Business Continuity Plan (BCP) —assuming such risks as large-scale earthquakes, fires, and explosions — and countermeasures against new influenza strains.

uBusiness Continuity Plan (BCP)Based on fundamental policies for each

business sector, we identified key operations with high priority by conducting a business impact analysis (BIA). This was followed by process analysis, including the identification of bottlenecks*2 for priority operations and consideration of strategies and responses. These activities are documented and firmly implemented through training and drills and continual improvements added annually thereafter.

u�Countermeasures against new influenza strains

Based on the basic plan for responding to new influenza strains, established as a fundamental policy for such measures, all Group member companies have prepared their own action plans and drafted specific countermeasures corresponding to alert levels. Specifically, as part of the Business Continuity Plan, we have worked out measures to prevent the exposure of employees to new flu strains and the spread of such viruses. We have established detailed action manuals. Activities are implemented through training and drills and continual improvements added.

¢ The risk-management PDCA cycle

Sector summaries Company summariesAnalyzing current conditions

Proposing countermeasures

Implementing risk countermeasure plans

Reviewing companywide tasks

Listing risks Implementing countermeasures

Assessing the potential impact

Management review

General meeting of shareholders

Corporate Officers

Business sectors

Internal Audit Office

President & CEO

Risk Management Committee

Board of Directors (Presided over by

company Chairman)

CSR Committee

uAccounting auditsShowa Denko works to ensure the

soundness of its accounting practices, undergoing periodic accounting audits by certified public accountants.

Accounting audit



Protecting our information systems from various risks

Despite many benefits they offer, information systems involve security risks. The field of information technology, as exemplified in the Internet, has seen remarkable growth in recent years. While these advances have resulted in great convenience, we must be very careful with the use of new technologies. For example, technologies that enable access to company networks while off company premises can also be used by outsiders to intrude and spy into company systems. It is essential to assess convenient functions from the perspective of security risks, implementing appropriate countermeasures and conducting verification.

As information systems provide main support of the company’s overall operations, we have a heavy responsibility. This makes us feel that our work is very rewarding.

VOICE

Kohei KasaharaManagerInformation Systems Office

We place adherence to societal norms and business ethics at the top of our management agenda, emphasizing compliance with laws and regulations in carrying out our operations. Although we had already firmly promoted legally compliant management at all companies within the Showa Denko Group, we established the Corporate Ethics Committee in January 2003 to ensure thorough implementation of legally compliant management from an organizational perspective. In 2005, we further enhanced the compliance system in each business sector, seeking to proactively prevent misconduct.

In the sphere of security-related trade controls, the company in 1987 established the Security Export Control Committee, which seeks to enhance compliance through these controls.

uCorporate Ethics Hot LineWe established the Corporate Ethics

Hot Line to serve employees of all Showa Denko Group companies. This system seeks to prevent or quickly correct any incidents such as violations of corporate ethics or laws, regulations, or company rules. The Corporate Ethics Hot Line focuses on a stringent respect for the privacy of employees seeking consultation. This system ensures no employees will be penalized for doing so; further, employees can report information or consult directly via the company intranet, e-mail, telephone, letters, or other means.

Since January 2005, the services have been made available at outside law offices, in addition to their availability within the company.

uCorporate Ethics MonthSince January 2004, we have designated

each January as Corporate Ethics Month.Dur ing Corporate Ethics Month, a l l

executives and employees of each Group member company in Japan carefully read the Code of Conduct and its Guidelines to refresh their understanding of the importance of corporate ethics, and each reexamines his

ComplianceuInformation securityWith the rapid growth of the Internet,

the quality and quantity of the information a company can handle and the speed at which it can do so have grown dramatically. At the same time, the risk of information-related crimes and accidents has never been higher, including the theft of personal information, leaks of internal company information, and unauthorized alteration of company websites. Showa Denko has es tab l ished Bas ic Guidelines for Information Security, Information Security Regulations, as well as Personal Information Protection Guidelines, seeking to develop a system to prevent information-security incidents and to minimize any resulting damage to its business while ensuring business continuity. We are also proceeding with activities intended to raise employee awareness through e-learning-based training. This will ensure a thorough understanding of these basic guidelines and regulations throughout the organization.

To maintain systems related to information security, we are making efforts to prevent unauthor ized access from outside the organ iza t ion; enhancing measures to

*1 Data centersSuch facilities are located in a building that features increased earthquake resistance, based on seismic base isolation techniques and a seismic control structure. Such buildings are also equipped with backup electrical systems and private generators as well as enhanced security measures, including a round-the-clock system for entry and exit control based on ID cards and security cameras.

prevent information leaks; and strengthening information-security governance at each overseas Group member company.

Under its Business Continuity Plan (BCP), Showa Denko is taking the following steps to protect such assets from the wide range of threats they face.

• Security measures for information resources such as PCs

• Hosting key system servers at data centers *1 and implementing t imely updates

• Enhancing the reliability of networks connecting key production sites

Key efforts in fiscal 2008:• Ensuring thorough implementation of

antivirus measures for PCs and other devices; enhancing measures to prevent theft and unauthorized access

• Enhanc ing secur i t y fo r overseas networks and making them easier to use

• Enhancing backup connections to key production facilities

*2 Showa Denko Group examination

The following three points are considered particularly important aspects of control:

① Judging with certainty whether items

require authorization

② Clearly determining how the items are

to be used

③ Investigating whether customers

have any ties to those seeking to

manufac tu re nuc lea r o r o the r

weapons

or her own individual actions. In addition, all officers and managers signs a declaration of compliance with the Code of Conduct and the corresponding Guidelines.

Case study-based learning is underway as part of Corporate Ethics Month. Measures implemented in 2009 included the introduction of e-learning for managers.

uSecurity Export ControlsIn the vicinity of Japan and around the

world, concerns continue to grow concerning the development and proliferation of weapons of mass destruct ion and the threat of terrorism. To ensure the development of a peaceful, secure world, developed nations are working to ensure that non-military products and advanced technologies that could be converted for use with weapons such as nuclear or conventional weapons do not reach countries of concern or terrorists, based on international frameworks and United Nations Security Council resolutions. The Showa Denko Group has independently developed its own in-house export control system and takes measures to ensure thorough compliance with Japan’s Foreign Exchange and Foreign Trade Act and with its own in-house control rules.

In accordance with the security export control rules, the Security Export Control Committee plays a leadership role for the entire Group in the area of export controls. Each business section and research section conducts careful examination*2 of all products and technologies for export, in consultation with the Security Export Control Committee. The person engaged in export in each section participate proactively in a training program consisting of in-house workshop, e-learning, outside training sessions, and practical skills certification exams to improve levels of control.

As a result of strenuous efforts for export control in 2008, there was no case of violation of the Foreign Exchange and Foreign Trade Act.



Security Export Control Com

mittee

The Showa Denko Group carries out the following audits at each stage, to confirm that activity plans concerning Responsible Care are implemented according to plan.

uSelf-auditingUsing checklists, the workplaces of Showa

Denko and 16 major Group companies evaluate their own Responsible Care systems and the status of its implementation, promoting

Showa Denko enacted the Responsible Care*1 Action Guidelines in 1995 as its corporate policy related to the environment, safety, and health and declared that it would implement Responsible Care. Since then, all business sectors of the Company have been engaged continuously in the relevant activities under these Guidelines. These activities also are being expanded throughout the entire Group.

In 2005 we signed the Responsible Care Global Charter, which contains international guidelines to Responsible Care activities, declaring our support for and intention to implement Responsible Care.

Responsible Care activities are promoted by the Responsib le Care Commit tee, throughout the Showa Denko organization and throughout the Group.

As of June 2009, Responsible Care activities were conducted at the head office, six business sectors (12 business divisions and 14 regional offices), three branches, the Corporate R&D Center, and 16 Group companies*2.

In addit ion, as part of i ts ef forts to strengthen the Group’s Responsible Care activities, Showa Denko is expanding the scope of such activities by ascertaining performance and providing on-site guidance concerning Responsible Care for domestic and overseas Group member companies involved in manufacturing, in addition to the 16 companies mentioned above.

In addition to establishing the new Risk Management Committee, the organizational reforms conducted in January 2007 placed the Responsible Care Committee beneath the CSR Committee, to promote Responsible Care as a key activity included in our CSR efforts.

The Showa Denko Group works to achieve continuous improvement in its Responsible Care activities through the plan-do-check-act (PDCA) cycle of formulating Responsible Care activity plans (plan), implementing these (do), auditing and evaluating the results (check), and reflecting these via management review in the next round of objectives and activity plans (act).

Responsible Care Management

*1 Responsible Care“Responsible Care” is the chemical industry’s global voluntary initiative, representing a commitment to work together to continuously improve the environmental, health, and safety p e r f o r ma nc e o f che mic a l s o v e r their entire life cycles, namely, the development, production, distribution, use, final consumption and disposal.

*2 16 Group companiesTsurusaki Kyodo Doryoku, Tokyo Liquefied Oxygen, Showa Titanium, S h i n s h u S h o w a , S h o w a D e n k o Packaging, Showa Aluminum Can, Showa Denko Sakai Aluminum, Showa Denko Electronics, Showa Engineering, Showa Highpolymer, Showa Denko Kenzai, Union Showa, Niigata Showa, Showa Aluminum Can Recycling Center, HI-PACK, Showa Tansan

Responsible Care Action Guidelines Responsible Care promotion system The PDCA cycle

Auditing structure

Workplace audit (Kitakata Plant)

¢ Responsible Care promotion system

¢ The PDCA cycle

Continual improvementResponsible Care Action

Guidelines❶ Throughout the entire life cycle of chemical

substances, we shall make our best efforts to review and improve business activities from the viewpoints of ensuring safety and health and protecting the environment.

❷ In manufacturing activities, we shall make our best efforts to reduce the burden on the global environment not only through conventional approaches to env i ronmenta l protect ion but a lso through promot ion of switching raw materials, energy conservation, waste reduction and recycling, and reductions in the release of chemical substances.

❸ In the development of new products and b u s i n e s s e s a n d i n t h e e s t a b l i s h m e n t , enlargement, and renovation of faci l i t ies, we sha l l unde r t ake ou r bes t e f f o r t s t o ensure safety and health and to protect the environment.

❹ We s h a l l p r o m o t e R & D a n d d e v e l o p techno log ies that w i l l cont r ibute to the improvement of safety and health and to the protection of the environment. We shall also promote the marketing of alternative or new products.

❺ We shall investigate the effects of the products and materials we handl on safety, health, and the environment, and we shall encourage our employees to develop a deep knowledge of safe use and handling and provide our customers with such information as well.

❻ In overseas business activities, technology transfer, and international trading of chemical products, we shall give full consideration to ensuring safety and health and to protecting the environment.

❼ We shall comply with international rules and domestic laws and regulations and make our best efforts to cooperate with the relevant international organizations and both foreign and domestic regulators.

❽ We shall participate proactively in various activities related to environmental protection and make our best efforts to communicate with society and local communities to achieve better understanding and trust.

President & CEO

Corporate Ethics Comm

ittee

Aluminum

Can Recycling Prom

otion Comm

itteeEnergy Saving/Global W

arming

Issue Subcomm

ittee

Secretariat (Environm

ent & Safety Office)

Responsible Care Planning Com

mittee

Safety Measures Com

mittee

CSR Committee

Implementation

DInternal audit, evaluation of

results

C

Management review

Activity plan

PA

Formulating management policies

and objectives

continuous improvements by reporting to the Safety Measures Committee on the results of these self audits and reflecting such results in objectives and activity plans for the following fiscal year.

uWorkplace auditingThe Safety Measures Committee conducts

on-site audits of the state of the efforts at respective workplaces described above, provides guidance as needed, and reports on the results of these audits to the Responsible Care Committee. The Responsible Care Committee examines these results and reflects them in companywide policies, objectives, and plans. At manufacturing companies within the Group, both in Japan and overseas, other than the above 16 companies, Responsible Care efforts are subject to onsite checking of their status and to on-site guidance.

uOverall auditingThe Audit Office audits the status of

Responsible Care measures throughout Showa Denko and reports on the results of these audits to the Responsible Care Committee.

uThird-party verificationS h o w a D e n k o s e e k s t h i r d - p a r t y

verification*3 of its Responsible Care activities and the accuracy of its data collection methods. SGS Japan Inc. has verified the contents of CSR Report 2009. (See page 61.) We will continue to improve our Responsible Care system and its performance through third-party verification.

Risk Management Committee Responsible Care Committee

Resource Saving/Recycling Subcom

mittee

Waste Reduction Subcom

mittee

Chemical Substances Release

Control Subcomm

ittee

Occupational Health and Safety Subcom

mittee

Accident Prevention Subcomm

ittee

Responsible Care Committee (June 2009)

*3 Third-party verificationThe term refers to the verification by an independent organization to increase the reliability of activities and data of a company or association.



Responsible Care Activities PlanResults in 2008 and policy/plans for 2009

Subject 2008 targets 2008 plans 2008 results and progress Rating 2009 policy/plans Page

Environmental conservation

Environmental management

● �Zero�environmental�problems ● �Continuing�detailed�investigations�of�legal�responses�

● �Planning�and�implementing�plans�to�reduce�potential�risks�in�existing�operations

● �Promoting�ISO�14001�certification�acquisition�plan

● �Two�environmental�problems�arose�(phosgene�leaks�at�Higashinagahara�Plant)● �Provision�of�appropriate�legal�and�regulatory�information�and�careful�examination�of�

legal�responses● �Decision�made�on�efforts�to�prevent�environmental�problems�in�business�lines● �Continuing�soil�improvement�efforts�at�Higashinagahara● �ISO14001�certification�attained�at�Chiba�Plant

△

[Policy]� Zero�environmental�problems[Plans]� ●��Steady�implementation�and�comprehensive�awareness�of�active�safety�

efforts�(utilizing�checklists�to�prevent�environmental�problems)� �●Planning�and�implementing�reductions�in�potential�risks

P29 · 30P47 to 56

Global warming initiatives

● �Energy�and�resource�conservation:�unit�energy�consumption�reduced�to�80%�or�less

● �Compliance�with�legislative�amendments

● �Reducing�energy�consumption�via�production�process�reviews,�optimization,�equipment�modifications,�etc.

● �Ensuring�execution�of�the�implementation�plans

● �Unit�energy�consumption:�91.6%�relative�to�1990�levels,�up�5.7%�from�2007● �Implementation�of�regular�reporting�by�respective�worksites △

[Policy]� Reducing�unit�energy�consumption�to�80%�or�less[Plans]� �● �Creating�energy�conservation�measures P48 · 49

● �Establishing�Showa�Denko�Group’s�GHG�emission�reduction�plans�in�compliance�with�the�Kyoto�Protocol;�reducing�six�designated�types�of�gases*1

● �Compliance�with�legislative�amendments

● �Steady�efforts�based�on�implementation�plans�for�Kyoto�protocol�targets�(reductions�in�six�gases)

● �Formation�and�partial�implementation�of�other�reduction�plans

● �Greenhouse�gas�emissions:�reduced�by�7%�vs.�1990�levels�in�the�Showa�Denko�Group● ��Plan�developed�for�achieving�Kyoto�protocol�targets�(for�Showa�Denko�alone)● �Head�office�building�subjected�to�energy�conservation�assessment:�scored�highly�at�

140�kWh/m2�(standard:�160)● �Energy�consumption�unit�2007�results�and�2008�reduction�plans�for�designated�

shippers�reported�to�authorities

◎

[Policy]� Achievement�of�Kyoto�protocol�targets�by�the�Showa�Denko�Group[Plans]� �● �Implementing�reduction�plans�at�each�site

P7 · 8P48 · 49

Reducing industrial waste

● �Reducing�landfill�waste�Showa�Denko:�1,800�t�(9%�relative�to�1990�levels)�Group�companies:�1,400�t

● �Implementing�waste�reduction�plans�at�each�site ● �Landfill�waste:�1,717�t�at�Showa�Denko�(down�728�t�from�2007;�9%�relative�to�1990�levels);�1,341�t�at�Group�companies�(down�199�t�from�2007);�targets�achieved

◎

[Policy]� Achieving�zero�emissions[Plans]� ●� �Eliminating�landfill�waste�through�efforts�such�as�more�effective�use�of�sludge� � Showa�Denko:�2,000�t�or�less� � Group�companies:�1,300�t�or�less

P55

● �Promoting�recycling ● �Stable�operation�of�the�used-plastic-based�ammonia�plant

● �Reducing�paper�waste�at�offices● �Aluminum�can�recycling:�Group�participation�rate�

100%,�with�each�employee�bringing�in�100�cans�over�three�months�on�the�average.

● �Production�of�ammonia�based�on�used�plastic:�up�38%�from�2007● �Reduction�in�paper�waste�(head�office):�2.6�t�reduction�from�2007● �Aluminum�can�recycling:�Group�participation�rate�94%,�with�each�employee�bringing�in�

229�cans�over�three�months�on�the�average○

[Policy]� Contributing�to�recycling-based�society[Plans]� �● �Promoting�recycling

P10, P40

Security and fire prevention

Equipment safety

● �Zero�equipment�incidents ● �Better�equipment�reliability● �Enhancing�the�change�management�system● �Promoting�voluntary�safety�initiatives�

● �6�equipment�incidents�(up�from�3�in�2007)� � �Damage�to�tank�storing�hazardous�materials,�damage�to�high-pressure�gas�tank/

leakage�of�ammonia�liquor,�damage�to�hydraulic-valve�hose/�oil�leak,�damage�to�flexible�hose�due�to�unintended�lorry�start-up,�etc.

● �Oita�Plant:�four�years�continuous�operation�as�certified�high-pressure�gas�operation�site

△

[Policy]� Zero�equipment�incidents[Plans]� �●�Holding�and�utilizing�active�safety�study�meetings� � ●�Enhancing�the�change�management�system� � ●�Promoting�voluntary�safety�initiatives P57 to 60

● �Comprehensive�risk�management ● �Utilizing�active�safety*2�study�meetings ● �Active�safety�study�meetings�held�four�times● �Emergency�earthquake�early�warning�system�installed

◎

Occupational safety and health

Occupational safety

● �Zero�lost-time�injuries ● �Strong�worksite�focused�on�safety�and�training● �Addressing�equipment�and�process�deficiencies● �Stricter�safety�standards

● �Three�incidents�resulting�in�lost-time�injuries�(down�from�seven�in�2007)�and�zero�minor�incidents�(down�from�six�in�2007)

● �Frequency�rate:�0.34● �Oyama�Plant,�Showa�Aluminum�Can�Corporation’s�Oyama�Plant,�Showa�Highpolymer�

Co.,�Ltd.’s�Tatsuno�Plant,�and�Showa�Denko�Electronics�K.K.�won�external�safety�awards● �Omachi�Plant�secured�Occupational�Safety�and�Health�Management�System�

accreditation,�while�six�other�sites�began�preparations�for�accreditation

○

[Policy]� ●�Zero�lost-time�injuries�� ●�Build�up�the�best�safety�management�system�in�the�chemical�industry[Plans]� �●�Strong�worksite�focused�on�safety�and�training� � ●�Addressing�equipment�and�process�deficiencies� � ●� �Stricter�safety�standards�(expanding�attainment�of�Occupational�Safety�and�

Health�Management�System�accreditation)

P58 · 59

Health management

● �Zero�work-related�illnesses ● �Enhancing�sanitation�management�structure● �Improving�work�environment�and�work�methods

● �Zero�work-related�illnesses◎

[Policy]� Zero�work-related�illnesses[Plans]� �●�Enhancing�sanitation�management�structure� � ●� Improving�work�environment�and�work�methods

P58 · 59

● �Promoting�Showa�Denko�Group�Health�21�Plan

● �Implementing�the�Health�21�Plan�at�sites ● �Implemented�preventive�activities�against�lifestyle-related�diseases�in�accordance�with�Showa�Denko�Group�Health�21�Plan

● �Responded�to�legal�framework�for�specific�medical�examinations�and�specific�health�guidance

● �Presented�successful�cases�at�worksites�and�implemented�training�sessions�by�public�health�nurses�and�nurses

◎

[Policy]� Promoting�Showa�Denko�Group�Health�21�Plan[Plans]� �●�Enhancing�health�support�system� � ●�Mental-healthcare�efforts�at�worksites P46

Chemical substance safety

Chemical substance management

● �Zero�accidents/incidents�involving�chemical�substances�or�violations�of�chemical�substances�legislation

● �Stronger�emphasis�on�chemical�management● �Handling�REACH*3�pre-registration

● �Zero�accidents/incidents�involving�chemical�substances�or�violations�of�chemical�substances�legislation

● �Promoted�MSDS*4�amendments�in�accordance�with�GHS*5

● �Chemicals�Management�Officer�provided�information�on�relevant�legislation�and�follow-up�training

● �REACH�pre-registration�completed�by�the�deadline

◎

[Policy]� �Zero�accidents/incidents�involving�chemical�substances�or�violations�of�chemical�substances�legislation

[Plans]� ●� �Comprehensive�implementation�of�compliance,�education,�and�management�structures

� � ● ��Collecting,�assessing,�and�providing�safety�information�(REACH�compatibility,�etc.)

P60

● �Reduced�chemical�emissions�(at�least�10%�per�year)

● �Firmly�implementing�voluntary�emissions�reduction�programs

● �Emission�of�PRTR*6�listed�substances:�345�t,�down�by�85�t�from�2007;�target�achieved● �Emissions�of�toxic�atmospheric�pollutants:�62�t,�down�by�44%�from�2007;�target�achieved ◎

[Policy]� Reducing�chemical�emissions[Plans]� ●Developing�and�implementing�reduction�plans�for�each�worksite P51 to 54

Quality assurance

Quality assurance

● �Products�that�offer�total�safety�in�use ● �Strong�emphasis�on�product�safety�(no�product-related�accidents)

● �Strong�emphasis�on�compliance

● �Continuation�of�zero�product-related�accidents�thanks�to�stronger�emphasis�on�product�safety�and�greater�authority�by�product�safety�screening�unit,�etc.

● �Continuation�of�zero�compliance�problems�thanks�to�stronger�emphasis�on�laws,�regulations,�and�in-house�quality�rules�(in�particular,�change�management)�through�quality�inspections

◎

[Policy]� ● �Products�that�offer�total�safety�in�use�� ● �No�product�accidents,�no�major�complaints[Plans]� �● ��Securing�product�safety�(comprehensive�risk�management�focused�on�

changed�products,�new�products,�and�ones�not�addressed�for�some�time)� ● ��Raising�the�bar�on�quality�assurance�and�quality�control�(increasing�the�

effectiveness�of�management�systems)� ● �Strong�emphasis�on�compliance

P35 · 36

plan, tai lored to local condit ions and circumstances. The following table lists the targets, achievements, and ratings for primary activities undertaken in 2008, together with plans for 2009. We will continue these efforts to achieve our goals.

Every two or three years, the Showa Denko Group establishes a medium-term Responsible Care activities plan, which is then used as the basis for annual action plans during the period covered. All workplaces promote Responsible Care and draft detailed action plans based on the comprehensive

◎…Fully achieved　○… Achieved 80% or more　△…Achieved less than 80%

(Figures shown are for Showa Denko alone)

*1 Six designated types of gasesThe following six types of greenhouse g a s e s a r e c o v e r e d : c a r b o n diox ide, methane, n i t rous ox ide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

*2 Active safety→See page 57.

*3 REACH→See page 60.

*4 MSDSThis is a document provided by the supplier to the user (customer) of a chemical substance, covering such matters as its name, toxicity, and physical/chemical properties; cautions concerning its handling and storage; and emergency measures.

*5 GHSThis is a system for classifying the hazards and toxic i ty of chemical substances according to certain criteria, reflecting the results on labeling and MSDS, and using these to prevent accidents and protect human health and the environment.

*6 PRTR→See page 51.


Social commitment report

Relationship to stakeholders

Social Commitment ReportThe Showa Denko Group believes the CSR foundations arise from business activities based on the trust and support of all stakeholders and on worksites where employees can work with pride.

We believe in the importance of continually seeking to improve our dialogue with customers, shareholders, community members, suppliers of raw materials and services, and employees. We view the opinions we gain through such dialogue as valuable assets.

Stakeholder perspectives

Customers

We strive to ensure satisfaction with Group products and services, thereby securing our customers’ patronage.

Local communities and authorities

We strive to ensure that local communities and authorities have confi dence in the safety and stability of our operations.

Employees and their families

We strive to provide rewarding worksites in which employees and their families can take pride.

Shareholders and investors

We strive to ensure satisfaction with Group performance and continued shareholding.

Business partners

We strive to maintain mutually benefi cial relationships based on trust in transactions with the Group.

Communication forums Views Company responses and challenges

Customers Regular meetings We’d like to see continuing quality improvements.

Based on the results of testing and analysis, we are ascertaining the causes of quality problems and developing countermeasures, as well as reporting these.Increasing the speed of problem-solving and reporting.

Shareholders, investors

IR meetings

We’d like to learn more about strategies for “growth driver” businesses, such as the HD media business.

Explanations of “growth driver” businesses, such as the HD media business, were offered at meetings with individual investors.

We’d like to learn more about the effects of fl uctuations in the price of raw materials, like crude oil, and your medium-term responses.

Explanations of growth strategies and the impact of raw-material prices were offered at meetings with institutional investors.

General meeting of shareholders

We’d like to hear about forecasts of future dividends and economic conditions.

Since it is unclear how long current economic conditions, which have worsened rapidly since the fourth quarter of 2008, will continue, it is extremely diffi cult at present to forecast future dividends and economic conditions.

SRI evaluation feedback

Your approach toward the ILO’s human-rights principles is not suffi cient

You need to implement environmental measures from a supply-chain management perspective.

We continue reviewing Group human-rights efforts.

Preparations have begun for CSR procurement (see page 42).

Partners Safety activities with partner fi rms Your support for safety activities needs to be enhanced.

Promoting systems at each worksite to support safety activities at partner companies (e.g., joint patrols, provision of methods, exchange of views, awards systems).

Communities, society

RC dialogueWe’d like to hear about measures to eliminate equipment accidents and preparations for large-scale earthquakes.

Through “site CSR reports” and other means, proactively communicating information on efforts at each site.Continuing periodic dialogue.

CSR report workshop

You need to send more messages to the public. You need to clarify how you determine and manage the environmental impact of the manufacture and use of your products, in view of their signifi cant environmental impact. You need to describe how you are revitalizing your human resources and respecting diversity.

Communicating in clear, easily understood ways information on efforts related to climate change and environmental sensitivity, which are considered important management challenges (see pages 7-16).Aggressive efforts in the areas of helping women employees thrive in the worksite, hiring non-Japanese employees, reemployment of retirees after mandatory retirement age, employment of people with disabilities, and making worksites barrier-free (see pages 43-46).

CSR report survey

We’d like you to continue to provide clear, easy-to-understand introductions to Showa Denko’s products and technologies.We’d like you to plan some activities in which entire families can participate, so that children can see where and how their parents work.I think it is very important that you make efforts to ensure a proper work-life balance.

We will continue to provide introductions to Showa Denko’s products and technologies that take the environment into account (see pages 9-16).Holding periodic plant tours rooted in the local community (see page 39).Enhancing support systems for compatibility, to support working styles suited to diverse lifestyles (see page 45).

RC dialogueYou should make more efforts to communicate how plastic is used effi ciently at your plant. (Tour of the used-plastic-based ammonia plant in Kawasaki)

Information on tours for the general public of our used-plastic-based ammonia plant is available on the company website.

Employees

Dialogue with labor union

The CSR activities of the Showa Denko Group should be communicated to employees in a clear, easily understood manner.

Promoting Group CSR educational activities (since July 2008).

CSR-activity themes that can be promoted side by side, under a common banner, need to be developed. Going on a CO2 diet to initiate these efforts.

Employee attitude survey The results of a companywide attitude survey of all employees carried out in February 2009 are currently being collected and analyzed.

Surveys of and interviews with women employees

I would like to see some opportunities for women to consider their careers.

Seminars led by career counselors from outside the company are held for women employees and their superiors.


Social commitment report Social commitment report

uQuality management systemRather than a defensive approach to

quality assurance that seeks to prevent defects from occurring, the Showa Denko Group implements a proactive approach in which customer satisfaction constitutes the key to the Group’s own satisfaction. The Group does this by developing and supplying products that will satisfy our customers.

The Group’s worksites and Group member companies, including overseas companies, have undergone inspection and registration of their quality management systems under relevant international standards, such as ISO9001*2 and ISO/TS16949. They strive to improve the quality of their products and services by effectively applying these quality management systems.

To make it possible for customers to use Showa Denko Group products in full confidence, product safety must remain a top-priority issue. With this in mind, we have established and periodically review the Quality Assurance and Quality Control Rules (see illustration to the right) as company rules regulating our actions, alongside laws and regulations.

These rules have been established to ensure the rational, systematic implementation of product-safety activities through all stages, including product design and development, commercial introduction and manufacture, and sales, as well as after-sale information management.

For products or product ingredients that can be absorbed directly or indirectly into the human body, including the raw materials used in pharmaceutical and cosmetic products, food additives, and packaging materials, we have established systems intended to ensure the safety of products for customers at all times. These include rigorous screening mechanisms for products brought to market and mechanisms that limit changes that can be made in manufacturing conditions.

The screening process does more than simply verify product safety: it alerts screening committees at various stages to potential risks associated with each item and ways to avoid such risks, from various perspectives, including properties, intended uses, and usage patterns for each product, as well as user characteristics and issues related to disposal.

Customer Relations

*2 ISOI n t e r n a t i o n a l O r g a n i z a t i o n f o r Standardizat ion: A pr ivate-sector international specialist organization es tab l i shed in 1947 to p romote international standardization of products and services. In 1987, it established the ISO 9000 series of standards on quality control and assurance; in 1996, it began establishing the ISO 14000 series of environmental standards. Plans call for implementation of the ISO 26000 guidance standard on social responsibility in 2010.

*1 Supply ChainThe entire ser ies of logist ics and product-distribution activities related to purchase of raw materials, production, and product sales.

Supply-chain management (SCM) refers to activities intended to efficiently manage the flow of goods and services, from the stage of raw materials to the customer or consumer, extending beyond the bounds of an individual company.

Ensuring product safety Efforts to meet environmental and social demands

Improving quality assurance and quality control levels

Showa Denko’s analysis & physical properties center

¢ Quality Assurance and Quality Control Rules

uReducing complaints To minimize problems for our customers, the

entire Showa Denko Group works as a single entity to reduce the numbers of complaints received. Over the years, our efforts have steadily reduced the incidence of customer complaints. However, in 2008, the number of complaints stopped falling for the first time.

This year, we plan to seek to earn even higher levels of trust from our customers and to further increase corporate value by achieving even greater reductions in the number of complaints and by keeping product-related accidents at zero. We plan to do this by proceeding with the steady implementation of a quality management system.

u�Activities targeting improved quality management levels

The Showa Denko Group performs periodic audits groupwide across business divisions and worksites to raise quality management levels.

These audi ts cover a broad range of quality management issues, including organizational vision, management leadership, activities to ensure customer satisfaction, quality assurance activities, product safety and risk management, day-to-day administration, and human-resource development.

In 2008, we implemented vigorous audits of 63 sites in Japan and around the world, identifying issues and providing advice on making improvements. This year, auditing will focus in particular on increasing the effectiveness of the quality management system.

In addition to holding periodic events such as training seminars for internal auditors, presentations of quality-assurance and quality-control rules, and product risk seminars, we undertake a wide range of other educational and training activities throughout the year, including field seminars to improve the skills of internal auditors.

Index(%)

03 04 05 06 07 08 (Year)0

20

40

60

80

100

Product safety screeningProduct risk assessmentSafety tests

New-product launch proceduresQuality assurance capability screeningProcedures for changes in manufacturing conditions

Screening before concluding contractsand specificationsScreening of sales and PR materials

Management of aftersale information

Using one-point texts (OPT) to reduce complaints

The Hikone Plant manufactures can bodies for beer and other beverages. With growing consumer interest in food safety in recent years, the quality requirements for breweries and beverage producers who represent our clients have grown increasingly rigorous. In response, we are using one-point texts (OPT) as part of efforts to reduce the number of complaints. Sections experiencing process defects prepare one-point texts to identify why a problem occurred to develop the practice of thinking about problems and in turn developing effective quality training.

Nevertheless, we continue to face a large number of potential risks. Our goal is to improve quality by visualizing and addressing these risks.

Takeshi ShinoharaQuality Control Section, Hikone PlantShowa Aluminum Can Corporation

VOICE

SalesAfter-sale

Design and development

Marketing and manufacture

There is swelling sentiment worldwide, particularly among purchasers in the information technology, electronics, and automotive industries, to select and procure products with the lowest possible environmental impact—products that are environmentfriendly through all stages of their life cycle, from production through use and disposal.

The Showa Denko Group does its best to meet requests from customers for assurance that current Group practices seek to reduce use of substances harmful to the environment and that Group products do not use or incorporate harmful chemical substances covered by the EU or other regulations.

The Group’s policy is to extend CSR management to the supply chain*1, in addition to responding to CSRrelated inquiries and surveys from customers

¢ Trends in annual numbers of complaints (Covering Showa Denko K.K. only)



As they seek to put down deep roots in their home communities, each worksite within the Showa Denko Group continues to make progress in dialogue with community residents. Through plant tours for employees’ families and local residents as well as Responsible Care dialogue, each worksite is making strenuous efforts to protect health, safety, and the environment.

u�Open laboratory (Corporate R&D Center)

Each year, the Corporate R&D Center in Chiba opens its doors for an “open laboratory,” including events such as tours, experiments for children, and mini-concerts. Each year, about 550 people attend. Last year marked the 15th open laboratory.

The event included introductions to the CO2 diet campaign and other programs, as well as experiments involving everyday materials in which children were encouraged to participate. Due to these activities, we received the Responsible Care Award*2 from the Japan Responsible Care Council.

The Showa Denko Group provides products and services that harness chemistry to contribute to society. The Group also works to promote a deeper understanding of chemistry in areas such as knowledge of chemical substances, appreciation of chemistry, and understanding the relationship between chemistry and the environment. By providing various opportunities, including hands-on chemica l exper iments and environmental education, the Group also takes proactive steps to encourage young people—the future generation—to contribute to local communities.

u�Chemical and environmental education in 2008

Our TechnoCaravan*1, which started in 2007, completed its rounds of all Showa Denko sites in June 2008. As a result, the number of visitors to our sites decreased in 2008. However, we had more participants in plant tours for students and teachers from nearby schools and more trainees than in 2007

The Showa Denko Group will continue t hese ac t i v i t i es t o deepen peop le ’s understanding of chemical and environmental

Community relations

*2 Responsible Care AwardA system of awards presented to individuals or groups, among companies t ha t a re member s o f t he Japan Responsible Care Council, who have contributed to promoting or enhancing Responsible Care activities.

Chemical and environmental educational activities

Communicating with local communities

0

500

1,000

1,500

2,000

2,500

06 0807

Trainees at affiliates Visitors to affiliates for plant tour Worksite trainees Visitors to worksites for plant tour

(People)

(Year)

0

5,000

10,000

15,000(People)

06 0807

Overseas affiliates Domestic affiliates Worksites

(Year)

issues and to reach out to the members of local communities.

u�Classes on demand In cooperation with nearby firms, the Oita

Complex in recent years has organized a program of on-demand chemical-experiment classes for local elementary and junior-high schools. In 2008, a total of 101 complex employees and retirees visited 11 classes at four schools, where they led students in experiments illustrating various ideas, including applying the power of chemistry to make batteries and to recycle polystyrene foam. Similar programs have been launched in other communities, including Chichibu, Higashinagahara, and Kitakata. We expect these programs to expand and grow.

u�Dream - Chemistry 21 Chemical Experiment Show for Children during Summer Vacation

On August 22-24, 2008, the Showa Denko Group participated in “Dream - Chemistry 21 Chemical Experiment Show for Children during Summer Vacation” for elementary and junior-high school students held at the National Museum of Emerging Science and Innovation (Miraikan) in Tokyo’s Odaiba area.

Based on the theme of “Let’s Build a Hand-Powered Generator Using a Powerful Magnet,” Showa Denko conducted an experiment in which a hand-powered generator was built using a neodymium magnet. This generator was then used to power a light-emitting diode (LED).

The experiment area at the open laboratory

Chemical Experiment Show for Children in Tokyo

u�Disaster-prevention agreement concluded in the event of a disaster (Yokohama Plant)

I n Januar y 2009, Showa Denko ’s Yokohama Plant concluded a disaster-prevention agreement involving cooperative efforts with local residents and businesses in the event of an earthquake or other disasters. This agreement calls for businesses in the area affected by a natural disaster to support the community’s recovery efforts and to control the damage. Among the support measures

to be provided by the Yokohama Plant are the provision of food, water, forklifts, and other heavy equipment and direct assistance through disaster response personnel. Participants in this agreement include the Kanagawa-ward office in the city of Yokohama as well as seven nearby businesses, local resident/neighborhood associations, and the fire department.

u�Volunteer activities at elementary school (Showa Denko Carbon)

Showa Denko Carbon, Inc. (SDKC), of the United States, is supporting the Trident United Way. The United Way Day of Caring, a volunteer activity organized by this organization, is an event intended to contribute to local communities. In September 2008, a total of 27 volunteers from SDKC and partner companies installed new personal mailboxes and built an outdoor pavilion classroom at Harleyville/Ridgeville Elementary School. The teachers, staff and school children welcomed these new facilities.

SDKC colleagues serving as volunteers

Signing ceremony for the disaster-prevention agreement

A class on demand in Oita

¢ Numbers of plant visitors for educational purposes (Affiliate figures included from 2007)

¢ Numbers of participants from local communities in plant tours and presentations (Affiliate figures included from 2007)

*1 TechnoCaravan→See page 39.



A tour at Showa Titanium

A tour at Showa Denko Packaging

Since the Showa Denko Group produces relatively few final products for consumer use*1, it faces certain difficulties in clearly explaining the Group’s business activities to consumers. Nevertheless, the Group believes firmly that it cannot advance its operations without gaining the understanding of consumers, even though these activities consist mainly of production at plants and supply of parts and components. We therefore make steady efforts to explain clearly to consumers our products and business activities from a wide range of perspectives.

u�TechnoCaravanThe TechnoCaravan*2 is a travel ing

exhibition of Group products that has been making the rounds of Group sites since March 2007. In June 2008, it completed the rounds of all Group sites. To date, the TechnoCaravan has visited 29 sites across Japan, welcoming a total of more than 12,000 visitors.

At Showa Denko Packaging’s Isehara Plant that the TechnoCaravan visited last year, products such as battery packaging materials were exhibited. The battery-powered motorcycle included in the exhibit was very well received, and approximately 90 people attended the exhibition. At the Osaka Branch,

*4 Group companies participating in aluminum-can recycling efforts

Showa Tansan, Tokyo Liquefied Oxygen, Tohoku Metal Chemical, Showa Titanium, Nagoya Kenmazai Kogyo, Showa Aluminum Can, Showa Denko Sakai Aluminum, Tokyo Aluminum Wire, Showa Denko Packaging, SANYO SHOWA Panel System, Showa Denko Electronics, Showa Engineering, Niigata Showa, Union Showa, Showa Denko Kenzai, Shoko, Showa Aluminum Powder, and SDS Biotech.

(In addition, some affiliates operating on Showa Denko sites are included in respective figures.)

*1 �Final products for consumer use

“Final products” refer to products supplied to and consumed by ordinary consumers. Showa Denko products are not usually seen by consumers since most of them are processed into final products by other firms.

*2 TechnoCaravanA traveling exhibition, intended to communicate an overview of the Showa Denko Group to i ts stakeholders, including Group employees, retirees, employees’ families, local residents, representatives of local governments, and customers.

*3 Showa Denko Kawasaki PlantOur Kawasaki Plant offers group tours of the plant that produces ammonia from used plastic.

CSR Report presentation

Citizens visiting our plant that produces ammonia from used plastic

Giving an explanation to a tour groupComment from a winnerTo collect aluminum cans in my neighbor-hood, I work with my parents, high-school friends, and relatives. I borrow a truck from a friend of mine and regularly deliver the collected cans to the plant.

Koichi TajimaOhmuta Plant, Showa

Aluminum Can Corporation

employees from Group member companies in the Osaka area were encouraged to attend, and customers were invited as well. Measures such as these resulted in an attendance of approximately 200 people.

u�Group tours of the used-plastic-based ammonia plant in Kawasaki

Our ammonia plant in Kawasaki*3 enables full recycling of used plastic recovered from homes. The plant gasifies used plastic to produce a raw material for ammonia. Almost all by-products from this process are reused.

Occasional group tours are held in response to requests to visit this plant. Over the past six years, more than 19,000 citizens have visited the plant, and the plant tours have been very well received.

u�CSR Report presentationThe Showa Denko CSR Report was

presented to interested stakeholders at the Corporate with ECO ACTION 2008, an event held in November 2008 sponsored by the Minato Eco-Conscious Consortium.

Participants posed numerous questions and offered views and comments on measures to combat global warming and the handling of chemical substances. Each comment received has been incorporated into subsequent CSR activities and is reflected in the preparation of this document, CSR Report 2009.

Moving forward, we plan to continue communicating with stakeholders through such activities.

u�Aluminum-can recycling activitiesThe Showa Denko Group is currently

making group-wide aluminum-can recycling e f fo r ts to cont r ibu te to re la ted loca l communities.

In 2008, a total of 7,900 people from the Group took part in these activities, an employee participation rate of 94.2 percent. Together, they collected some 7.15 million aluminum cans. As part of the funds raised by recycling the collected cans, ¥1.96 million was donated to local social welfare associations, year-end charity campaigns, and other charities.

Each year, an award is presented to employees who collect 3,000 or more cans. In 2008, a total of 338 employees won this award. Many winners collected cans for recycling not just on their own or with family members but with the broad cooperation of relatives and community members.

The collected aluminum cans are recycled into aluminum metal by Showa Aluminum Can Recycling Center, and then used to produce aluminum coils, which are used in turn to make aluminum cans at Showa Aluminum Can Corporation.

(Year)

Group companies*4

Worksites

20

003 04 05 06 07 08

40

60

80

100(％)

Total

Helping stakeholders to understand our products and services

¢ Trends in participation in aluminum-can recycling activities



The suppo r t p rov ided by pa r tne r companies is essential for operations at production sites, including manufacturing, maintenance, and distribution. For this reason, an association of partner companies has been formed at each site to communicate information between the Showa Denko Group and its partner companies and to share information among partner companies.

The Responsible Care Activities of each site are intended to achieve the same level of control “zero accidents or injuries” in activities involving not just employees, but all partners working at the site.

The Showa Denko Group has developed a new CSR procurement*3 system to promote business activities that place even more emphasis on society and the environment throughout the supply chain, f rom the purchase of raw materials through manufacture and sales.

Under this system, the Showa Denko Group CSR Procurement Gu ide l i nes established by the Group are shared with partners, with the goal of promoting CSR procurement by working in partnership in compliance with these Guidelines. Specific details are outlined in the illustration “Promoting Process of CSR procurement” shown below.

T he G r oup p l a ns t o c on t i n ue t o implement CSR procurement based on the three processes of self-assessment*4, field

Showa Denko believes disclosure and investor relations play a vital role in deepening shareholder and investor understanding of our approach to various issues, including corporate management, business activities, and strategy, helping these stakeholders accurately assess our corporate value. Our information disclosure measures are based on the following policies:❶ We seek to communicate proactively with

shareholders and investors and to improve management transparency.

❷ We s t r i ve to d isc lose in fo rmat ion concerning Showa Denko in a clear, fair, timely, and accurate manner to deepen understanding of and trust in our company.

u�Communicating with institutional investors and shareholders

We keep domestic institutional investors*1, analysts, and other market participants informed in various ways, including meetings to explain annual and semiannual financial results, conference call*2 for results announced for the first and third quarters, and meetings to outline progress with management plans.

Overseas institut ional investors and shareholders receive Engl ish-language versions of our annual results and transcripts of conference call, and other materials. In addition, several times each year, the President and/or members of the management team visit Europe, North America, and Southeast Asia to report in person on various issues, including Group business results and management plans.

The company takes every opportunity to participate in individual interviews, small group meetings, and other forums for interacting with institutional investors and shareholders.

u�Communicating with individual shareholders and investors

Individual shareholders and investors receive Interim Reports and Business Reports along with announcements of semiannual and annual results. They also have access via our website to materials used in meetings in which results are announced, as well as video and audio footage of such meetings. This information is made available soon after the actual meetings. In another effort to improve our dialogue with individual shareholders and investors, we have set aside an area of our website to respond to IR-related inquiries. Each year, we hold information presentations for individual investors, organized by securities companies.

u�Shareholder meetingsShowa Denko holds a regular general

meeting of shareholders each year at the end of March. In addition to invitations issued around four weeks before these meetings, we post related information on our website to ensure shareholders have enough time to consider various proposals. We have adopted a system whereby shareholders can exercise voting rights via the Internet, allowing even greater numbers of shareholders to participate.

At these meetings, reports are presented on a giant screen to make the proceedings as easy to follow as possible. Issues discussed include progress on the medium-term management plan and other business issues. Venue space is also set aside to introduce some Showa Denko Group products and technologies.

Partner relationsShareholder and investor relations

Responsible Care activities with partner companies

Promoting CSR procurement

Basic policy on information disclosure

Communicating with shareholders and investors

*3 CSR procurementGreen purchasing refers to purchasing that seeks to minimize environmental impact through purchasing decisions. In Japan, green purchasing has been promoted since the Green Purchasing Law took effect in April 2001.

CSR procurement more broadly applies the concept underlying green purchasing, basing purchases of raw materials, components, products and services on CSR efforts among potential partners. CSR procurement addresses efforts throughout the supply chain.

*4 Self-assessmentIn this step, partners reexamine their own CSR efforts by completing self-assessment form prepared by Showa Denko based on its CSR Procurement Guidelines.

*5 Field assessmentField assessments are undertaken in conjunction with self-assessments. In field assessments, Showa Denko evaluators visit key partners (important for the continuity of production activities) to confirm the status of CSR efforts, thereby ensuring sustained dialogue between Showa Denko and its partners.

*1 Institutional investorsBusiness entities that invest in securities on a large scale

*2 Conference callA system for making presentations over the Internet through slides, audio, and interactions with outside investors

Explanatory meeting on the company for individual investors

An explanatory meeting on the medium-term management plan for institutional investors and analysts

¢ Promoting Process of CSR Procurement

assessment*5, and follow-up, each undertaken side-by-side with partners, over a three-year cycle. By repeating this cycle, the Group will seek to achieve sustained improvements in CSR performance throughout the Group supply chain.

The Showa Denko Group’s CSR Procurement Guidelines (Summary)

Suppliers to the Showa Denko Group are asked to meet the following requirements:

Corporate governance• Establish a system for corporate governance.• Implement management in accordance with management

philosophies, policies, etc.

Business ethics, compliance• Comply with laws, regulations, societal norms and societal standards.• Establish an inside report system and measures to protect the rights

of whistleblowers.• Disclose corporate information in a timely, appropriate manner.

Quality, product safety (for products and services)• Develop and employ quality-assurance systems.• Meet the quality/delivery time requirements; provide a stable supply of

safe, reliable products and services.• Ensure appropriate control of chemical substances used in products.

Fair trade• Prohibit restrictions of free competition and the abuse of predominant

positions.• Provide accurate labels and descriptions of products and services.• Respect the intellectual property rights of others.

Environmental protection• Develop an environmental protection system.• Ensure appropriate control of chemical substances.• Strive to minimize environmental impact and to conserve energy and

other resources.

Occupational health and safety• Develop a health/safety management system.• Identify risks and sources of danger and implement appropriate

countermeasures.

Labor and human rights• Respect basic human rights.• Secure appropriate working conditions, and protect the rights of

workers.

Information security• Implement appropriate security measures for information assets.• Administer and protect confidential information and personal

information.

Contributions to society• Contribute to the sound development of society, both international and

local.

Showa Denko Group Partners

Joint improvement activities undertaken with partners, based on the results of ① and ② above.

❶ Self-assessment

❷ Field assessment

❸ Follow-up



Showa Denko’s personnel system is based on the idea that the company and individual employees are equal in status. We provide motivated and capable employees with a place where they can thrive, seeking to create a relationship in which both company and employees thrive and grow. We seek to create an environment in which employees can assess their career plans*1 and energetically strive to achieve these goals.

Under this personnel system, employee compensation and benefits reflect the scope of each employee’s role and responsibilities.

A company draws its competitive strength from its employees. Showa Denko promotes human resource development because we regard employees as valuable assets and a vital part of company management, not as mere resources.

Our personnel system provides an environment in which capable, motivated individuals can thrive. Our training programs are designed to improve specifi c targeted skills to help employees achieve the career plans they themselves have mapped out.

The Showa Denko Group considers that respect for employee diversity constitutes a key element of its management policy. The Group seeks to increase the vitality of the organization through respect for employee diversity, improving the capabilities and motivation of each employee, and applying these talents to maximum effect. We employ overseas students—chiefly from China—and promote the aggressive hiring of experienced personnel at other companies and in other industries. We also strive to establish a worksite where employees of diverse backgrounds can thrive—for example, by reemploying retired employees and expanding opportunities for women.

Employee relations

Concepts underlying the Showa Denko personnel system

Career support and human resource development

Respect for human rights and diversity

Increased corporate value

Company Contract

Opportunities

Requirements

Profits

Profit sharing

Self-realization and self-respect

Individual

Career plan

Commitment

Actions

Agreement

Employee’s ideal position

Company’s job requirements

Contributions and results

Payment and other compensation and benefits

Sharing the management visionAdvanced, specialized knowledge and skills and professionalism in each area and role

Innovative and creative human resources

Self-motivatedemployees

Employeesorientedtowardorganizationalsuccess

Creating new value with the boldness needed to think outside the box

Thinking, learning, and acting on one’s own initiative and assuming responsibility for the results

Pursuit of organizational success and demonstrating one’s own abilities in optimal ways for the entire organization

¢ The Showa Denko human resource model

Vigorously pursuing diversity across all job classifi cations

It is the policy of Showa Denko Carbon, Inc. (SDKC) to provide equal opportunity in all phases of employment, including but not limited to, recruiting, employment, job assignment or placement, promotion, demotion, transfer, lay-off, recall from lay-off, termination, compensation and training.

Job applicants are considered for employment or promotion opportunities based on qualifi cations and requisite work experience.

SDKC has challenged itself to vigorously pursue diversity across all job classifi cations, and in 2005, implemented a voluntary Affi rmative Action Plan (AAP) for minorities. Since the company’s implementation of an AAP, minorities have been promoted into management, supervisory, and maintenance positions, and hired in professional, skilled craft, and semi-skilled positions. Workforce diversity is a worthwhile business pursuit and SDKC is deeply committed to this principle.

Clint LucasVice President Human ResourcesShowa Denko Carbon, Inc.

VOICE

Employees eager to assume greater roles and responsibilities are given the freedom to do so. The company provides proactive support to encourage the development of the skills and capabilities needed to assume such roles and responsibilities

In addition, we have introduced a system of management by objectives (MBO) that seeks to clarify work objectives for all employees. Under this system, each employee meets with management to reach an understanding on setting objectives, assessing progress during the current term, and evaluating performance. We ensure employees are treated fairly, reflecting progress toward objectives in compensation.

u�Helping non-Japanese employees thriveThe Showa Denko Group has rapidly

globalized in recent years. At present, the Group has more than 30 production, sales, and other facilities located in 14 countries and territories other than Japan. More than 5,500 of its employees—roughly one-half of its total of 11,000 employees—are non-Japanese nationals.

Showa Denko has set the goal of hiring non-Japanese nationals for 10% of the positions taken by recent university graduates, focusing primarily on Chinese citizens. This fiscal year, it welcomed new employees from a wide range of nationalities, including Thai and South Korean employees. In addition to considering further expansion of employee nationalities, Showa Denko will work to enhance its follow-up support after employment.

98 99 00 01 02 03 04 05 06 07 08

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04/6 05/6 06/6 07/6 08/6 09/3 (Year/Month)

Showa DenkoLegal requirement

(%)

u�Expanding opportunities for those with disabilities

Seeking to establish an environment in which a wide range of individuals can work side-by-side, Showa Denko promotes employment opportunities for individuals with disabilities, in addi t ion to st r iv ing energet ica l ly to achieve barrier-free worksites. Since 2006, the proport ion of company employees represented by individuals with disabilities has consistently satisfied legal requirements*2. We plan to continue making every effort to expand employment opportunities for those with disabilities.

u�Promoting the employment and career advancement for women

As pa r t o f a managemen t po l i c y e m p h a s i z i n g r e s p e c t f o r e m p l o y e e diversity, Showa Denko is seeking to create opportunit ies for women employees to thrive, based on the five-year “F Plan” being implemented from 2008 through 2012.

¢ Overview of contracts between the company and individuals

¢ Changes in percentage of non-Japanese employees

¢ Changes in percentage of employees with disabilities

*1 Career plans“Career plans” refer to plans intended to visualize and help achieve employee’s own goals and ideals for the future.

*2 Legal requirementsThis rule sets the minimum percentage of regular employees with disabilities, as specified under the Disabled Persons’ Employment Promotion Law. Private firms and national/local governments must employ persons with disabilities at the specifi ed percentages or more. With regard to a private fi rm with 56 or more employees, the required percentage is 1.8%.



In 2008, it established a special team for promoting women’s activities in the workplace, identified tasks to be achieved under the F Plan based on in-house surveys and other activities, and described specific activities for 2009 and beyond in an Action Plan. At the same time, to raise awareness inside the company of the need to respect diversity, the company has continued educational activities such as providing all employees with pamphlets and communicating information through in-house magazine.

Women current ly account for more than 20% of new employees with university degrees. Since the launch of the Welcome Back System in April 2008, which helps employees who previously left the Group to reenter the workforce, seven employees, including five women, were hired by the end of March 2009.

Thanks to such efforts, at the end of 2008, women accounted for 6.1%*1 of the workforce (an increase of 0.5 point from 2007), 7.9% of the consolidated workforce in Japan (an increase of 1.0 point from 2007), and 18.6% of the consolidated workforce overseas. As of March 2009, the number of women managers increased to 13*1 (up two from 2007).

Showa Denko considers that respect for fundamental human rights is a key element in its management policy, and has worked to create a comfortable work environment respecting human rights. Respect for individual human rights means respect for diversity; the company believes that bringing together diverse employees differing in work experience, age, gender, and nationality, who work together to energize the Group and contribute broadly to society, will lead to corporate growth.

Proactive hiring and placement of women employees

Achieving a ratio of 10% women employees (2012)

Increasing the number of women at the management level

Supporting career design and skills development

Supporting independent career and skills development

Reviewing the career design and supporting skills development for “K” category employees

Developing an environment that encourages the realization of diverse ways of work

Reforming ways of work to improve work-life balance

Enhancing systems to configure flexible ways of work and to enable success in both work and home life

Establishing a management and corporate culture that accords due respect to diversity

Thorough implementation of a personnel system based on duties and results and thorough implementation of management by objectives.

Raising awareness of diversity

GoalsRevitalizing the organization by making the best use of

human resources by respecting diversity and enhancing the

skills and motivation of each employee

¢ Overview of the F Plan

u�Promoting a sound work-life balanceShowa Denko strives to check actual

hours worked by each employee, reduce working hours, and increase annual paid holidays taken to help employees achieve a sound work-life balance*2.

Creating a comfortable workplace

u�Support for both work and home lifeTo support ways of working suited to

diverse lifestyles, the support systems for both work and home life*3 were enhanced in April 2008. More employees have been making use of this revised system than previously—for example, 23 male employees had taken childcare leave by the end of 2008.

Based on these achievements, Showa Denko was authorized in October 2008 by the Tokyo Labor Bureau to use the Kurumin logo as a company certified to support the deve lopment o f the next generation. The company will continue to improve work conditions to enable all employees to ach ieve harmony between their lives both on and off the job.

0

3.0

6.0

9.0

12.0

15.0Showa Denko

12.1

03 04 05 06 07 08

13.1 13.1 12.8 13.3 13.9

Average days for manufacturing industry

(Year)

(Days)

u�Employee health managementWe must maintain and promote the health

of individual employees and their families throughout their lifetime to give employees the strength needed to work energetically and in full confidence. Based on the theme of building employee health, we launched the Showa Denko Group Health 21 Plan in 2005.

Specific efforts under this plan included establishing health goals and formulating plans to meet these goals at each worksite; providing health guidance based on the results of medical examinations; preventing lifestyle-related conditions such as metabolic syndrome and improving the health of individuals at risk for such conditions; holding nursing seminars; holding training sessions to increase awareness of various health issues; and meeting to promote the Health 21 Plan at each worksite to evaluate program progress and promote activities to achieve the program’s goals.

In addition, mental healthcare is provided to protect the mental health of employees. The following four types of care are provided with the cooperation of company healthcare staff and outside healthcare professionals:① Helping individuals to identify and manage

stress ② Care by site managers and supervisors③ Specialized care provided by site healthcare

staff④ Specialized care provided off-site, including

care by medical specialists

VOICE

Countermeasures against new influenza strains

A health management manual has been prepared based on the basic plan for responding to new influenza strains. Training, drills, and other preparations are underway with the goal of preventing the spread of such viruses, giving top priority to ensuring the safety of individuals working at Group facilities, including employees of partner companies, and their families.

TOPICS

Entry interview drills in preparation for a possible outbreak of a highly virulent new strain of H5N1 influenza

We support child-rearing2008 certified employer

Efforts to build a better R&D environment

I joined Showa Denko in 1991, and began working on the R&D of diamond thin films for use in semiconductors. This was followed by R&D of cathode material for lithium ion batteries, and then LED chips. Presently I belong to the Analysis & Physical Properties Center involved in the structural and physical analysis.

For me, the interplay between knowledge, skill and desire is a vital key to successful R&D and at the helm of this are proactive communication techniques and information retrieval techniques. Showa Denko has provided a conducive environment for R&D by sponsoring Self-Development Program*4 and conference participation for researchers, as well as provided opportunit ies for one-on-one communication with clients regarding details of their analysis requests and expectations.

Joseph GazeAnalysis & Physical Properties CenterTechnology Headquarters

*1Figures are for Showa Denko and seconded employees

*2 Work-life balanceThis refers to enabling each citizen to do rewarding work with a sense of fulfillment and to fulfill his or her job responsibilities, as well as providing choices and opportunities for diverse ways of living throughout various phases of life, including childcare and middle/advanced ages. Moving a step beyond the traditional concept of balance between work and home, a company must encourage the fullest development of employee abil i t ies, creating an environment in which employees can focus on their work and achieve success.

*3 Support systems for both work and home life

Revisions in the system ease the conditions under which fathers can take childcare leave. The first seven days of leave are paid. In addition, under the system, shorter working hours can be selected for the purpose of childcare or nursing care; childcare leave can be extended; and the conditions under which employees can take paid leaves have been eased.

¢ Annual paid holidays taken (per employee per year)

*4 Self-development ProgramThis training program invites employee to gain knowledge needed to build their own careers. Each employee can choose from 15 courses on topics ranging from logical thinking and coaching to marketing.



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60

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100

90 98 00 02 04 06 080

(FY)

The Group’s GHG emissions are down 7% from 1990 levels.

We have set numer ica l targets for reductions in emissions of GHG, including carbon dioxide, nitrous oxide, and CFC substi tutes, such as HFC and PFC, in manufacturing and fi l l ing processes. To achieve these targets, we established a program to systematically recover gases emitted during fi lling processes and installed a GHG decomposition unit. (See page 7, 8)

Leaks of phosgene*1 gas occurred twice, in August and November 2008, at the Higashinagahara Plant. Showa Denko wishes to express its heartfelt apologies for the inconvenience and worry these incidents caused among nearby residents and other parties. The following describes when and how these incidents occurred and what countermeasures we have taken. Showa Denko will work to prevent the recurrence of such incidents by implementing comprehensive safety control measures in accordance with instructions issued by regulators.

In addition, the Showa Denko Group is making steady efforts to prevent similar accidents, such as chlorine gas leaks.

〇 OutlineThe first leak occurred on August 9 during operations to shut off the supply of

phosgene to a reactor following completion of a synthesis reaction involving phosgene. A total of 17 persons, including 16 employees of Showa Denko or on-site contractor companies and one nearby resident, were examined after complaints involving discomfort. All recovered from their mild reactions.

The second leak occurred on November 15 during operations to shut down phosgene production. In this case, no phosgene was detected at the plant’s boundaries, and no health complaints were reported.

〇 CausesThe fi rst phosgene leak was attributable to wrong operation of a valve by operator.

The second was caused by insuffi cient cooling when liquefying phosgene gas.

〇 CountermeasuresThe primary improvements made to prevent the recurrence of such leaks are

outlined below.

1) Equipment improvements• Preventing unintended valve operation through automation and better labeling• Preventing leaks by sealing plant buildings• Improving safety equipment by adding interlocking features*2

• Preventing the emission of phosgene by strengthening the capabilities of phosgene exhaust removal equipment

2) Enhancing and strengthening the safety control system• Rev iewing and improv ing a la rm

systems and methods• Reviewing related rules and operating

procedures• Reviewing and enhancing training for

operators and other personnel• Designing a system for auditing the

state of safety controls

Regarding energy conservation as a major issue both for preventing global warming and protecting resources, the Group is currently advancing various measures to conserve energy, including reviewing and optimizing production processes and modifying facilities.

In 2008, the Group made efforts to reduce unit energy consumption*3 by improving production facilities and energy recovery. However, because of the impact of production cuts, the unit energy consumption in 2008 stood at 91.6% of the levels in 1990, the reference year. The Group will continue energy-conservation activities as it seeks to meet its goal for 2009 of maintaining unit energy consumption at or below 80% of 1990 levels.

The Company also operates hydroelectric power plants near its inland sites, which supply approximately 17% of its total electricity use. The Group will continue to draw on hydroelectric power generation as a clean energy source.

Report on phosgene leaks

Climate change (global-warming prevention) efforts

*3 Unit energy consumptionThe term refers to total consumption of energy necessary to produce one unit of product. When this value falls, the production efficiency increases while environmental impact decreases.

*4 SCMSCM refers to company activities to comprehensively control the entire flows of articles and information using information systems, covering all stages from purchase of raw materials through product manufacture, inventory control, distribution, and sales.

*5 Modal shiftSwi tch ing the pr imary means o f transporting goods from trucks and aircraft to rail and sea transportation to reduce environmental impact and increase effi ciency.

*1 PhosgeneA colorless gas at room temperature, with a distinctive odor. In gas form, it is heavier than air and sometimes settles and moves along the ground or the floor. An irritant of the eyes, skin, and respiratory tract, it can cause pulmonary edema if inhaled. Phosgene is used as raw material for plastics and agrochemicals.

*2 Interlocking featureA feature for preventing certain reactions or automatically arresting reactions underway if certain conditions are not met.

Promoting energy conservation

Reducing greenhouse gas emissions

Reducing environmental impact through supply chain management (SCM)

¢ Trends in unit energy consumption

Recognizing environmental conservation as a high-priority management issue, the Showa Denko Group is committed to cutting emissions of chemical substances and reducing industrial waste generation to prevent global warming and other environmental problems. Other key components of the Showa Denko management policy include safe & stable operation and Responsible Care —areas where efforts will help reduce accident rates.


2008 achievements

¢ Unit energy consumption: 91.6% relative to 1990 levels, up 5.7% from 2007

¢ Implementation of regular reporting by respective worksites

¢ Energy consumption unit 2007 results and 2008 reduction plans for designated shippers reported to authorities

¢ Greenhouse gas emissions: reduced by 7% vs. 1990 levels in the Showa Denko Group

¢ Plan developed for achieving Kyoto protocol targets (for Showa Denko alone)

2009 targets

¢ Policy

● Reducing unit energy consumption to 80% or less

● Achievement of Kyoto protocol targets by the Showa Denko Group

2008 plans

¢ Energy and resource conservation: unit energy consumption reduced to 80% or less

¢ Compliance with legislative amendments

¢ Establishing Showa Denko Group’s GHG emission reduction plans in compliance with the Kyoto Protocol; reducing six designated types of gases

An explanatory meeting for community residents (October 26, 2008).We will continue to hold similar meetings.

Due to a mistake in calculation in 2007, we have reviewed all data. We will make sure to prevent the recurrence through standardization of calculations.

uEfforts related to transportation

The Showa Denko Group has worked to reduce its environmental impact through SCM*4 activities, by minimizing waste generation and efficiently controlling the entire flow of goods from raw materials procurement through to production and transportation and delivery to customers and consumers.

In the transport sector, we are promoting a modal shift*5 from trucks and lorries to sea and rail transportation, methods that enable shipping of large volumes of cargo with lower environmental impact. In FY 2008, transport by sea and rail accounted for 72% of our shipments (in freight ton-km). We plan to proceed with efforts to reduce CO2 emissions and alleviate traffi c congestion while improving logistic effi ciency by further increasing our use of sea and rail transport.

In addition to this modal shift, to minimize the number of freight ton-km traveled, we have simplifi ed logistics in various ways: shifting to ports closer to our sites; reducing the number of shipments by increasing the size of delivery

(Showa Denko K.K. only)


Environmental and Safety EffortsEnvironmental and Safety Efforts

lots, after obtaining consent from customers; and loading trucks and containers more efficiently. In cooperation with transportation companies, we are aggressively switching to more fuel-efficient vehicles and encouraging ecological driving through efforts including adoption of digital tachograph*1 and GPS systems—all efforts that cut energy use. We are also focusing on comprehensive safe transportation practices.

The diagram below summarizes the resource useand environmental impact associated with the operations of Showa Denko and its Group companies.

To reduce our impact on the environment, the Group is currently pursuing the efforts described in the following pages.

u�Amendments to Energy Conservation Law

As required for designated shippers*2 under the amended Energy Conservation Law, Showa Denko reports on energy consumption and CO2 emissions associated with transport and submits plans to reduce transport-related unit energy consumption. We also implement measures to improve transport-related unit energy consumption and reduce CO2 emissions.

(Million ton-km)

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661

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648

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(FY)06

21.9

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2 emissio

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nit energy co

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54%

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45% 70% 38%

1%

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CO2 emissions Freight ton-km Freight ton

Road Rail Sea

Data on transport (Showa Denko K.K. only)¢ Freight ton-km

¢ Typical environmental impact index at Group companies*3 in 2008

¢ FY2008 ratios for use of various modes of transport

Resource use andenvironmental impact

2006 2007 2008

GHG emissions (kt-CO2) 473 430 401

Final landfill disposal (t)*5 1,715 1,540 1,341

Emissions of JCIA PRTR-listed substances (t) 76 68 90

*3 Total for nine consolidated manufacturing subsidiaries in Japan: Showa Titanium, Niigata Showa, Showa Denko Kenzai, Showa Aluminum Can, Showa Denko Packaging, Nippon Polytech, Tohoku Metal Chemical, Showa Denko Kenso, and Showa Highpolymer (GHG emissions include those for Tsurusaki Kyodo Doryoku and exclude those for Niigata Showa, Nippon Polytech and Showa Denko Kenso.)

*4Emiss ions o f tox ic a tmospher ic pollutants are included in emissions of PRTR-listed substances.

*5The figures given for waste emissions vo lumes cover was te f rom 2008 production activities only.

Products

Water

Energy

Raw materials

Emissions of air pollutants

Greenhouse gases2,729kt-CO2 (-109kt-CO2)

SOx 631t (-205t)

NOx 1,877t (-414t)

Soot and dust 155t (-56t)

JCIA PRTR-listed substances 301t (-72t)

JCIA Toxic atmospheric pollutants*4 62t (-49t)

COD 501t (-4t)

Total nitrogen 677t (-19t)

Total phosphorus 13t (-3t)

JCIA PRTR-listed substances 44t (-11t)

62,355t (-23,995t)

1.06Mkl(crude oil equivalent )

(−140,000kl)

71.21Mm3

(−3,510,000 m3)Emissions of water pollutants

Waste discharge*5

Plants operatedbyShowa Denko

INPUT OUTPUT

Reducing CO2 emissions through modal shifts at the Kawasaki Plant Chidori site

Using an unused rail spur track, the

Kawasaki Plant’s Chidori site in December

2008 began switching from truck to rail

transportation for certain products. This modal

shift has reduced CO2 emissions to roughly

one-quarter to one-third the emissions of

truck transportation.

This ef for t was highl ighted by the

New Energy and Industrial Technology

Development Organization (NEDO) for

FY 2008 support as a project resulting in

increased energy use efficiency.

TOPICS

First shipment in December 2008


The figures in parentheses represent increases or decreases relative to the previous year.

*1 Digital tachographA tachograph is a device installed in a motor vehicle to record driving behavior. Tachographs help drivers and managers achieve safe, economical driving by recording driving speeds and times and logging related data. A digital tachograph makes possible more detailed and precise recording and analysis than traditional tachographs, which record data on paper.

*2 Designated shipperA shipper shipping cargo of 30 million ton-kilometers or more per fiscal year.

Use outside Showa Denko31,459t (-16,155t)

Reductions in volume outside Showa Denko

29,179t (-7,112t)

Internal utilization21,924t

Landfill disposal1,717t (-728t)

Waste reductions inside Showa Denko

50,862t

¢ Transportation sector’s CO2 emissions and energy consumption rate


Environmental and Safety Efforts Environmental and Safety Efforts

The status of stored polychlorinated biphenyl*2 (PCB) waste is checked at regular intervals based on the Company’s checklist. This waste is stored appropriately in adequate facilities to prevent leakage. In addition, each business unit reports on the status of

stored PCB waste and related matters to the prefectural governor, as required under the Law Concerning Special Measures Against PCB Waste.

Taking fu l l advantage of the waste processing facilities of Japan Environmental Safety Corporat ion, our mission is the systematic disposal of PCB waste.

As a member of the Japan Chemical Industry Association (JCIA), Showa Denko since 1996 has undertaken voluntary surveys of the volumes of chemical substances discharged and transferred. In FY 2008, it performed a survey of 480 substances, including substances subject to the PRTR Law, submitting a report to the JCIA on 105 substances (of which 83 were subject to the PRTR Law). The total annual release of PRTR-listed substances was approximately 345 tons, down 85 tons from the previous fiscal year. Showa Denko will continue to make focused efforts to reduce discharge volumes

by preparing reduction plans for each site for PRTR-listed substances and for substances with high annual discharge volumes. The Company is currently seeking to ascertain and assess potential impact in areas surrounding its sites and improve communication with local communities and governments concerning risks as it works to reduce discharge volumes.

Reducing the discharge of chemical substances

PRTR*1

Volumereleased (t)

(FY)9998979695 00 01 02 03 04 05 06 07 080

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¢ FY2008 list of PRTR-listed substances released and transferred For emissions volumes and transfers, only the top 10 substances in terms of volume are shown. In addition, the Showa Denko website shows substances for which emissions volumes and transfers are one ton or greater.

¢ Release of JCIA PRTR-listed substances

¢ FY 2008 release of PRTR-listed substances at respective sites (sites with total release of at least 1 ton)

2008 achievements

¢Emission of JCIA PRTR*1 listed substances: 345 t, down by 85 t from 2007; target achieved

2009 targets

¢Policy •Reducing chemical emissions

2008 plans

¢Reduced chemical emissions (at least 10% per year)

JCIA No. PRTR No. CAS No SubstancesRelease (t/y) FY2007

Totalrelease

(t/y)

The amount ofincrease anddecrease forFY2007 (t/y)

FY2008Amount oftransfer

(t/y)To Air To Water To Soil Total

150 227 108-88-3 Toluene 42.8 0.0 0.0 42.8 46.0 -3.2 374.1

21 145 75-09-2 Dichloromethane 34.5 0.0 0.0 34.5 71.1 -36.6 78.5

199 299 71-43-2 Benzene 12.8 0.0 0.0 12.8 11.0 1.8 354.2

177 268 106-99-0 1, 3-Butadiene 11.6 0.0 0.0 11.6 25.7 -14.1 0.0

176 266 108-95-2 Phenol 8.0 0.0 0.0 8.0 7.2 0.8 0.0

251 304 ＊ Boron and its compounds 0.1 3.7 0.0 3.8 6.2 -2.4 6.5

102 63 ＊ Xylene 3.0 0.0 0.0 3.0 4.5 -1.5 0.0

132 1717-00-6 1, 1-Dichloro-1-fluoroethane 2.1 0.0 0.0 2.1 1.3 0.8 0.0

124 113 123-91-1 1, 4-Dioxane 1.5 0.1 0.0 1.7 2.0 -0.3 1.2

89 43 107-21-1 Ethylene glycol 0.0 1.6 0.0 1.6 1.6 0.0 0.1

73 11 75-07-0 Acetaldehyde 1.1 0.0 0.0 1.1 1.6 -0.5 205.9

137 172 68-12-2 N, N-Dimethylformamide 0.0 0.0 0.0 0.0 0.0 0.0 188.3

139 177 100-42-5 Styrene 0.5 0.0 0.0 0.5 0.0 0.5 46.0

244 232 ＊ Nickel compounds 0.0 0.4 0.0 0.4 0.6 -0.2 12.0

225 1 ＊ Zinc compounds (water-soluble) 0.0 0.4 0.0 0.4 0.6 -0.2 10.3

1068 207 ＊ Copper water-soluble salts 0.0 0.0 0.0 0.0 0.0 0.0 8.0

11 95 67-66-3 Chloroform 0.2 0.0 0.0 0.2 0.2 0.0 7.5

Total of the PRTR-listed substances 122.9 11.0 0.0 133.9 192.7 -58.8 1337.6

Total of the other substances (including JCIA PRTR-listed substances) 177.7 33.4 0.0 211.1 236.5 -25.4 943.2

Total 300.6 44.4 0.0 345.0 429.2 -84.2 2280.8

Hydrogen fluorideand its water-soluble

salts 6%Boron andits compounds94%

Shiojiri (Release of PRTR-listed substances: 1.4t)

Others 14%

Xylene 7%

2, 2- Dichloro-1, 1, 1-trifluoroethane

7%

Dichloromethane72%

Oyama (Release of PRTR-listed substances: 18.7t)

Others 18% Phenol35%

Benzene32%

Boron andits compounds

15%

Omachi (Release of PRTR-listed substances: 25.4t)

Others 1%

Dichloromethane99%

Higashinagahara (Release of PRTR-listed substances: 21.3t)

1, 3-Butadiene

16%

Toluene 61%

Others 19%

Ethyleneglycol

4%

Kawasaki (Release of PRTR-listed substances: 54.4t)

Toluene 35%

Benzene 27%1, 3-Butadiene

20%

Others 18%

Oita (Release of PRTR-listed substances: 13.1t)

Others 14%

1, 4- Dioxane78%

Chloroform 8%

Tokuyama (Release of PRTR-listed substances: 2t)

¢ JCIA PRTR-listed substances released and transferred (FY 2008)

Into soil0t

Volume transferred2,281t

Total volume released345t

Into air301t

Into water44t

Volume released/transferred

Hydrogen fluorideand its water-soluble salts 100%

Kitakata (Release of PRTR-listed substances: 1.1t)



PCB control

*1 PRTRThe Pollutant Release and Transfer Reg is te r (PRTR) i s a sys tem fo r registering the release and transfer of environmental pollutants. Under this system, businesses assess and report to regulators the extent to which chemical substances are released into the air, water, and soil or as waste during each of the following stages: production, use, and storage. Regulators then calculate and report the totals. The system was proposed by the Organization for Economic Cooperation and Development (OECD) in 1996 and has since become law in a number of countries. In Japan, the Chemical Substance Release Control Law (PRTR Law) was enacted in 1999, obligating business entities to assess and report the release/transfer volumes of 354 substances designated in the law. The reporting under the law began in 2000.

*2 Polychlorinated biphenyl (PCB)PCB is a material with high electrical insulation and chemical resistance. It was used in wide-ranging applications, including insulating oil for electrical appliances, paints, and carbonless copy paper. Due to its carcinogenicity and other problems, however, the manufacture, import, and use of PCB are now prohibited.




The Group is working to reduce emissions of pollutants such as sulfur oxides (SOx)*2, nitrogen oxides (NOx)*3, and soot*4 through the following measures:• Fuel conversion• Modifying combustion processes (e.g., using

low-NOx burners)• Appropriate operation and management of

desulphurization and denitration systems• Reductions in fuel consumption through

exhaust heat recovery systems• Strengthening monitoring systems

Amounts of SOx, NOx, and soot released fell this year from 2007 levels. The Group will continue to seek to reduce its environmental impact on the atmosphere.

The Group continues in efforts to reduce its impact on water quality in areas such as chemical oxygen demand (COD),*5 total nitrogen,*6 and total phosphorus,*7 through the following measures:• Improvements in manufacturing processes• Improvements in wastewater processing

equipment and operation and control factors• Promoting water reuse• Strengthening monitoring systems

COD and discharge of nitrogen and phosphorus all fell from 2007 levels. The Group will continue in efforts to reduce its impact on water quality.

On occasions such as changes in the uses of plant sites or soil removal, the Group undertakes surveys and other measures in line with the Soil Contamination Countermeasures Law and local government regulations. Soil improvements at the Higashinagahara Plant, which began in November 2006, were completed in May 2009.

On completing the JCIA Phase 2 voluntary program for reducing discharged volumes of 12 harmful atmospheric pollutants,*1 the Showa Denko Group is now working to achieve a new target: a 10% year-on-year reduction in pollutants released in relatively large volumes.

In 2008, the total amount discharged of nine substances handled by the Company was 62 tons, a decrease of 49 tons from the previous year. This decrease is attributable to lower volumes released of dichloromethane and 1,3-butadiene fo l lowing process improvements at the Higashinagahara Plant and the Oita Complex.

The Group remains com-mitted to achieving steady re-ductions in the discharge of harmful atmospheric pollutants through a combinat ion of various measures, including switching to substitute mate-rials and boosting recovery and recycling rates.

Environmental considerations: Atmosphere, water, and soil

Reducing water quality impact

Measures to prevent soi l and groundwater pollution

*2 SOxS O x i s g e n e r a t e d t h r o u g h t h e combustion of a sulfur-containing fuel. This pollutant affects the respiratory organs.

*3 NOxNOx generally occurs as a result of oxidation of nitrogen in the air where fuels and wastes are burned. This pol lutant is said to contr ibute to photochemical smog.

*4 SootSoot and solid particles generated from the burning of fuels and other materials.

*5 CODChemical oxygen demand, a common index of water quality, is the amount of oxygen required to fully oxidize chemicals in water.

*6 Total nitrogenTotal nitrogen is the sum of inorganic nitrogen (e.g., nitr i te, nitrate, and ammonium ions) and organic nitrogen (nitrogen in protein and various other organic compounds)

*7 Total phosphorus Total phosphorus is the collective term for inorganic and organic phosphorous compounds. Phosphorus is an essential element for all living things, but excessive phosphorus concentrations can, for example, lead to algae blooms.

*1 12 harmful atmospheric pollutants The 12 substances are the hazardous air pollutants selected by the JCIA for voluntary control, which include acry loni t r i le , aceta ldehyde, v iny l chlor ide monomer, chloroform, 1, 2-dichloroethane, dichloromethane, tetrachloroethylene, trichloroethylene, 1, 3-butadiene, benzene, formaldehyde, and ethylene oxide.

Reducing the discharge of harmful atmospheric pollutants

08060402009896949290 (Y)

COD and total nitrogen(t)

Total phosphorus(t)

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200

400

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80

100Total nitrogen

COD

Total phosphorus


2009 targets

¢Policy • Reduce Emissions of toxic atmospheric pollutants

2008 plans

2008 achievements

¢Reduce Emissions of toxic atmospheric pollutants (at least 10% per year)

¢Reduce environmental impact

¢Emissions of toxic atmospheric pollutants: 62 t, down by 44% from 2007; target achieved

¢ Changes in harmful atmospheric pollutants release (Showa Denko K.K.) ¢ Changes in amount discharged ¢ Changes in amount discharged

OitaKawasakiOmachiChichibu

Tokuyama (from 1999)HigashinagaharaOyama (from 2001)

0

1

2

3

4

99 00 01 02 03 04 05 06 07 08

Omachi Kawasaki

Oyama

(FY)

(t)

Omachi

0

5

10

15

99 00 01 02 03 04 05 06 07 08

Oita

Kawasaki

(FY)

(t)(FY)

(t)

0

50

100

150

200

250

300

350

400

99 00 01 02 03 04 05 06 07 08

Higashinagahara

Oyama

0

1

2

3

4

99 00 01 02 03 04 05 06 07 08

Chichibu

Kawasaki

(FY)

(t)

0

1

2

3

4

99 00 01 02 03 04 05 06 07 08

Oita

Tokuyama

(FY)

(t)

0

5

10

15

99 00 01 02 03 04 05 06 07 08

Kawasaki

(FY)

(t)(FY)

(t)

099 00 01 02 03 04 05 06 07 08

50

100

150

200

250

300

350

400

0

1

2

3

4

99 00 01 02 03 04 05 06 07 08

Tokuyama

(FY)

(t)

99 00 01 02 03 04 05 06 07 080

1

2

3

4

Kawasaki

(FY)

(t)

0

5

10

15

20

25

30

99 00 01 02 03 04 05 06 07 08

Kawasaki

Oita

(FY)

(t)Dichloromethane

Benzene

Tetrachloroethylene

1,3-Butadiene

Formaldehyde

Chloroform

Acrylonitrile

Acetaldehyde

Trichiloroethylene

Total amounts released of harmful atmospheric pollutants

080604020098969492900

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

NOx

SOx

Soot and dust

(Y)

(t)


Reducing atmospheric impact



Showa Denko is committed to ongoing environmental investment designed to reduce energy consumption and minimize environmental impact of our operations. Since 2000, environmental investment and associated expenses as well as their effects

To reduce the volume of industrial waste generated and disposed of, current Group efforts include curbing waste generation, encouraging reuse, and identifying effective new uses of recycling.• Reuse of waste acids and waste alkalis• Use of waste oil and waste plastics as fuels

(heat recovery)• Effective use of inorganic sludge (e.g., in

cement)The final landfill waste volume for 2008 was

1,717 tons, a decrease of 728 tons from the previous year. We achieved our target of no more than 1,800 tons in landfill waste through massive reductions attributable to successes like improvements in CFC cake processing at the Kawasaki Plant. At the same time, Group companies reached the target of no more than 1,400 tons of landfill waste, generating a total

Reducing waste and encouraging recycling

Environmental accounting

2008 results

*3 Environmental accountingA method whereby companies and other organizations measure and manage their effects on the environment in monetary terms as accurately as possible and report the results.

*1 Zero emissionsZero emissions: A concept, now a goal throughout society, to eliminate the generation of various waste substances by reus ing mater ia ls ra ther than processing them as waste. Proposed by the United Nations University in 1994, this concept seeks to realize a recycling-based society by reducing to zero the level of emissions into the environment through the most efficient resource and energy use possible.

*2 Bauxite residueUnwanted substance remaining after alumina is extracted from bauxite ore during the alumina production process.

Reducing industrial waste and encouraging recycling Efforts to reduce waste at

Corporate R&D Center (Chiba)

As a research laboratory, the Corporate R&D Center (Chiba) generates a wide range of waste substances, including some that require special management. The Center segregates this diverse waste by type, clearly labeling and color-coding each. It has also enhanced the system for communicating information from the environmental section to employees and for reflecting proposals from employees in its efforts, applying these measures in daily waste-reduction and recycling efforts.

Such efforts have been highly evaluated, including an award for FY 2008 from the city of Chiba recognizing the Center as an outstanding enterprise within Chiba City for waste reduction and r ecyc l i ng . The Center wi l l c o n t i n u e w i t h a n d r e f i n e i t s efforts to reduce e n v i r o n m e n t a l impact.

TOPICS

¢ Cost ¢ Reducing environmental impact

¢ Economic benefits

2008 achievements

¢Landfill waste: 1,717 t at Showa Denko (down 728 t from 2007; 9% relative to 1990 levels); 1,341 t at Group companies (down 199 t from 2007); targets achieved

¢Production of ammonia based on used plastic: up 38% from 2007

¢Reduction in paper waste (head office): 2.6 t reduction from 2007

¢Aluminum can recycling: Group participation rate 94%, with each employee bringing in 229 cans over three months on the average

2009 targets

¢Policy • Eliminating landfill waste through efforts such as more effective use of sludge Showa Denko: 2,000 t or less Group companies: 1,300 t or less

• Promoting recycling

2008 plans

¢Reducing landfill waste Showa Denko: 1,800 t (9% relative to 1990 levels) Group companies: 1,400 t

¢Stable operation of the used-plastic-based ammonia plant

¢Reducing paper waste at offices

¢Aluminum can recycling: Group participation rate 100%, with each employee bringing in 100 cans over three months on the average.

of 1,341 tons of such waste. We intend to continue making progress in reducing waste, setting targets of no more than 2,000 tons in landfill waste for Showa Denko alone and no more than 1,300 tons for Group companies in 2009. In addition, 14 sites, approximately one-half of all sites, are projected to achieve zero emissions*1. We plan to continue striving to expand the number of zero-emissions sites this year.

In addition, the Company is currently assess-ing contractors for intermediate processing and final disposal to ensure appropriate processing and disposal of generated waste.

With respect to the discharge of bauxite residue*2 into the sea, the Company in 2008 maintained the volume of such discharge at 14% below 2000 levels. The Company plans to completely eliminate the discharge of bauxite residue into the sea by 2015 and will continue to work to reduce discharge volumes.

Environment section staff at Corporate R&D Center in Chiba

have been subject to evaluation in the form of environmental accounting*3.

We invested in 2008 in projects to increase the capacity of exhaust gas treat-ment facilities (in Kawasaki and Yokohama) and installed facilities to decompose green-house gases (in Kawasaki). As a result, we have reduced environmental impact values in all items from 2007 levels.

Detail Capital investment Expenses

Cost within business site

Pollution prevention

Capital investments and expenses associated with prevention of atmospheric/water/soil pollution, noise, vibration, odor, etc.

4,046 1,487

Global environmental protection

Capital investments and expenses associated with energy conservation and combating global warming and ozone-layer depletion

1,800 1,347

Resource recycling

Capital investments and expenses associated with resource conservation and waste treatment

214 2,435

Upstream and downstream costs

Costs associated with reducing environmental impact in business operations upstream and downstream, including green purchasing and recycling of products and packaging

0 22

Administrative costs

Administrative costs relating to environmental conservation, including environmental issues training, introduction of environmental management systems, and environmental impact evaluations

15 563

R & D costsCosts associated with research and develop-ment of environmentfriendly products and technologies

4 483

Community outreach costs

Environmental conservation costs for local community outreach activities not directly linked to business operations, such as environmental conservation projects in communities, dialogue with residents, and plant tours

0 18

Other Compensation for health damages resulting from environmental pollution, etc. 0 183

Total 6,079 6,538

1990 2008

SOx 3,698 631

NOx 3,522 1,877

Soot and dust 283 155

COD 786 501

Total nitrogen 607 677

Total phosphorus 51 13

Landfill disposal 19,723 1,717

Unit energy consumption 100% 91.6%

Energy conservation 288

Resource recycling 1,069

Waste reduction 117

Other 19

Total 1,493




(million yen) (t)

(million yen)

08070605040302010099989796959493929190

(million yen)

(Y)(Showa Denko K.K. only)

0

5,000

10,000

15,000

20,000

25,000

30,000

¢ Investment in safety and disaster prevention (cumulative total from 1990)

98 99 00 01 02 03 04 05 06 07 0890 (Y)

Showa denko K.K. Group companies(t)

0

5,000

10,000

15,000

20,000

¢ Changes in final landfill volume

080706050403020100999897969594939291900

5,000

10,000

15,000

20,000

25,000

(million yen)

(Y)(Showa Denko K.K. only)

¢ Investment in the environment (cumulative total from 1990)＊ �Data�for�2007�and�earlier�years�represent�total�values�for�January�through�December,�while�2008�data�are�total�values�for�April�2008�through�March�2009.



The Showa Denko Group is working to ensure safety by analyzing past accidents and other problems and preventing their recurrence, as it seeks to eliminate equipment-related accidents. In the past, Showa Denko took measures each t ime an accident occurred. However, these proactive safety efforts seek to prevent accidents before they occur by implementing countermeasures based on check l is ts that systemat ize past lessons and ensure higher levels of reliability through coordinated improvements in equipment, staffing, and management systems.

In addition, the lessons learned from phosgene leaks that occurred twice in 2008 are being incorporated into these active safety efforts and deployed simultaneously companywide.

The Showa Denko Group is promoting systematic assessments of the earthquake resistance of its existing facilities and buildings as well as seismic safety measures. At the Oita Complex, we have implemented countermeasures against l iquid-surface fluctuations in the floating-roof tanks used to store hazardous materials. At the Kawasaki Plant, we have reinforced the seismic resistance of office buildings and embankment. Other efforts at these sites, which are home to a number of chemical plants, include new systems that automatically shut down plants to minimize damage in the event of major earthquakes, based on seismometers installed at the sites.

In the second half of 2008, earthquake warning systems*2 were established at all 19 sites, including plants, head office, branch offices, and the Corporate R&D Center.

The Showa Denko Group uses a groupwide maintenance prevention (MP) information system (a database that includes information concerning failures) to share information on cases involving equipment problems, accidents, and near misses, as well as countermeasures, at Group facilities. The system already contains data on some 1,400 cases and is used to assess the suitability of equipment design and inspections. This information is categorized and analyzed across the domains of design, equipment maintenance, and operations management for use in learning from past failures, as well as in collecting lists of points to check for use of such information in the present, and in equipment design, maintenance planning and solutions, and the preparation of operating manuals.

Safety efforts

Disaster prevention*3 Risk assessmentA series of processes intended to identify the risks and dangers inherent in a workplace; to estimate the extent of damage and likelihood of occurrence based on such identification; and to prioritize countermeasures and determine risk-reduction measures.

*4 OHSAS/OSHMSThe Occupational Health and Safety Assessment Ser ies (OHSAS) and the Occupational Safety and Health Management System (OSHMS) are intended to allow organizations to reduce the likelihood of problems by identifying, e s t ab l i sh ing , a nd imp lemen t i ng countermeasures against risks related to the occupational health and safety of employees.

*5 Frequency rateNumber of deaths and injuries occurring per one mi l l ion workinghours, as calculated by the following formula:

Frequency rate = (Number of deaths and injuries) / (total workinghours) X 1,000,000

Equipment safety

Seismic safety measures

Deploying the MP information system

*1 Active safetyThis means act iv i t ies to prevent equipment-related accidents, labor accidents, and environmental problems, by proactively implementing policies based on past experience and creating conditions under which such incidents do not occur. Using checklists prepared separately for the three categories of equipment accidents, labor accidents, and environmental problems, these activities have been performed since 2008 throughout the Showa Denko Group.

*2 Earthquake warning systemA system intended to predict the arrival time and intensity of an earthquake a t G roup f a c i l i t i e s and t o w a r n employees, based on data provided by the Meteorological Agency of Japan on earthquake epicenter location and magnitude.

Omachi Plant wins 2008 award for outstanding boiler management

I n November 2008, the Omach i P lant won an award for outs tanding boiler management from the Japan Boiler Association.

This award recognizes the plant for achieving a zero rate of serious boiler accidents, for facility improvements related to env i ronmenta l protect ion, and for efforts to ensure true safety, among other achievements.

Four boilers are currently operating at the Omachi Plant. The plant wil l continue aggressive efforts to ensure appropriate boiler management.

TOPICS

2008 achievements

[Disaster prevention]¢6 equipment incidents (up from 3 in 2007)¢Oita Plant: four years continuous operation as

certified high-pressure gas operation site¢Active safety*1 study meetings held four times¢Emergency earthquake early warning system installed[Occupational safety]¢Three incidents resulting in lost-time injuries (down

from seven in 2007) and zero minor incidents (down from six in 2007)

¢Omachi Plant secured Occupational Safety and Health Management System accreditation

[Chemical substances safety]¢Zero accidents/incidents involving chemical

substances or violations of chemical substances legislation

¢Promoted MSDS amendments in accordance with GHS¢Chemicals Management Officer provided information

on relevant legislation and follow-up training¢REACH pre-registration completed by the deadline

2009 targets

[Disaster prevention]¢Policy: • Zero equipment incidents¢Plans: • Holding and utilizing active safety study

meetings • Enhancing the change management

system • Promoting voluntary safety initiatives[Occupational safety]¢Policy: • Zero lost-time injuries • Build up the best safety management

system in the chemical industry

¢Plans: • Strong worksite focused on safety and training

• Addressing equipment and process deficiencies

• Stricter safety standards (expanding attainment of Occupational Safety and Health Management System accreditation)

[Chemical substances safety]¢Policy: • Zero accidents/incidents involving

chemical substances or violations of chemical substances legislation

¢Plans: • Comprehensive implementation of compliance, education, and management structures

• Collecting, assessing, and providing safety information (REACH compatibility, etc.)

2008 plans

[Disaster prevention]¢Zero equipment incidents¢Comprehensive risk management[Occupational safety]¢Zero lost-time injuries[Chemical substances safety]¢Zero accidents/incidents involving chemical

substances or violations of chemical substances legislation

Engineering Section staff at Omachi Plant

To eliminate workplace accidents, the Showa Denko Group is promoting safety activities intended to prevent accidents by using risk assessments*3 to identify and rectify the sources of risks. This initiative was launched in 2007.

Specifically, we have drawn up an active safety checklist based on past accidents. In addition to these checklists, our primary sites are adopting occupational health and safety management systems that focus on risk assessments. As of June 2009, three worksites had attained OSHMS*4 certification and three worksites OHSAS*4 certification.

The number of lost time injuries across the Group totaled five in 2008, a 50% reduction from 2007. As of June 2009, two cases of lost time injuries had already occurred. The Group plans to step up efforts to identify and rectify risk sources in the future.

Occupational health and safety

Occupational safety

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08(Y)

(For Group company scope, see page 29.)

All industries Chemical industryShowa Denko K.K. Showa Denko

Group companies

0

2.0

4.0

6.0

8.0

10.0

¢ Changes in frequency rate*5 of lost time injury



The Group provides its customers and consumers with information on any risks or hazards related to its products via MSDSs prepared for all products based on JIS standards. By the end of 2009, we will revise all MSDSs to include GHS information.

To protect against accidents involving chemical substances during road transport, the Group prepares yellow cards*1. Truck drivers are required to carry the cards at all times.

In September 2005, Showa Denko registered itself as a sponsor for six substances under the Japan Challenge Program initiative. In 2006, the Company began gathering and assessing safety information and has completed reports on three substances.

u�Global Product Strategy (GPS)As it works to achieve the goal agreed to in

the World Summit on Sustainable Development (WSSD)—to minimize the negative effects of chemical substances on people and the environment by 2020—the Showa Denko Group is seeking to implement integrated management of chemical substances under the International Council of Chemical Associations (ICCA).

Chemical substances safety efforts *1 Yellow card

This refers to an emergency contact card briefly describing appropriate response by transportation company personnel, police, and fire-fighters in the event of accidents involving hazardous or toxic substances.

*2 Japan Challenge ProgramUnder the Japan Challenge Program initiative, government authorities and private sector entities jointly collect safety information on existing chemical substances for public dissemination.

*3 HPV ProgramThe HPV (High Production Volume) Program is designed to encourage the gathering and assessment of safety information for high-volume toxic chemicals (defined as chemicals with annual production volumes exceeding 1,000 t).

*4 REACHRegistration, Evaluation, Authorization, and Restriction of Chemicals, or REACH.

REACH is the EU’s new chemical legislation to protect human health and the environment, which took effect on June 1, 2007. These regulations require all manufacturers and importers operating within the EU to evaluate the health and environmental impact of all chemical substances produced or imported in volumes of one ton or more a year and to register these substances with the European Chemicals Agency (ECHA). If any product is not registered under REACH regulat ions by the registration deadline (which varies with quantities handled, but by 2018 at the latest), production and sale of such product will be banned within the EU.

*5 Chemical complianceIn concert with the 2002 Strategic Approach to International Chemicals Management (SAICM), the goal is to respond to the Global Product Strategy (GPS) call to minimize the significant effects that the manufacture and use of chemical substances have on human health and the environment by 2020.

Safety information

Japan Challenge Program*2

Responding to international activities and trends

We are moving forward with cross-functional responses to REACH regulations

The EU’s new chemical regulations “REACH,” which took effect in 2007, requires industries to assess the risks posed by existing chemical substances and prohibits the manufacture and import even of products already on sale unless they have been assessed for harm and registered with the authorities, in accordance with volumes manufactured in or imported into the EU.

We are currently making progress in responding to the REACH regulations by holding explanatory meetings on REACH at all sites and undertaking activities to ensure broad REACH awareness, in addition to establishing a REACH Promotion Group as a cross-functional unit spanning section boundaries within the Company.

T h e E n v i r o n m e n t & S a f e t y Off ice wil l continue to pursue the strategic promotion of global chemical compliance.*5

Hiromi Niitsu (right)

and Tetsuro AbeREACH Promotion StaffEnvironment & Safety Office

VOICE

Safety awards received from the Japan Chemical Industry Association and the Japan Aluminum Association

Showa Denko Electronics K.K. and Showa Highpolymer Co., Ltd.’s Tatsuno Plant won the 2009 safety awards (awards for effort) from the Japan Chemical Industry Association (JCIA) and the Japan Responsible Care Council (JRCC), while the Oyama Plant and Showa Aluminum Can Corporation’s Oyama Plant won occupational safety awards (first prize) from the Japan Aluminum Association (JAA).

Over the 19 years since its founding, Showa Denko Electronics K.K. has had no lost time injuries. In January, the company’s total number of accident-free working hours surpassed 10 million hours. These achievements put the company at the top of the Showa Denko Group. Additionally, Showa Highpolymer Co., Ltd.’s Tatsuno Plant has had no lost time injuries since 1997, thanks to group-wide safety activities focusing on efforts to eliminate risk at the level of root causes based on previous near misses, risk assessments, safety patrols, and learning from accidents at other facilities.

Showa Denko K.K.’s Oyama Plant won recognition for achieving “no lost time injuries” in 2008, despite having some 1,200 employees and approximately 800 employees of partner companies. Showa Aluminum Can Corporation’s Oyama Plant has now achieved three years of no lost time injuries.

TOPICS

Showa Aluminum Can Corporation’s Oyama Plant (left), Showa Denko K.K.’s Oyama Plant

Showa Highpolymer Co., Ltd.’s Tatsuno Plant

Showa Denko Electronics K.K.

u�Health damage• For employees who have directly or indirectly

handled asbestos, we perform periodic health checkups as required by relevant laws. No incidents of health damage have been reported to date.

• We also provide asbestos health checkups for former employees of the Showa Denko Group, in addition to responding to various inquiries. In 2008, four cases were recognized as occupational accidents.

• We have received no reports of injury or damage to health from famil ies of employees, former employees, or residents of local communities.

Conditions related to asbestos as of the end of December, 2008, were as follows.

u�Use of asbestos• The Group neither manufactures nor sells

any products incorporating asbestos.• The Group uses sealing materials containing

asbestos for certain production facilities, including those for chemicals. We are currently replacing these materials with materials that do not contain asbestos.

Asbestos

I t i s a lso aggress i ve l y work ing to strengthen product stewardship in various ways, including participation in new voluntary chemical management activities at the JCIA and the JRCC to enhance risk assessment and risk management, taking the supply chain into account and collecting information and assessing safety at the manufacture, sale, and use/consumption stages.

u�HPV Program*3

Showa Denko participates in the High Production Volume (HPV) Program for 12 substances, including allyl alcohol, an organic chemical. Assessments are now complete for nine of these substances.

The results of these safety assessments are incorporated into revisions to MSDSs and other literature, together with results from the Japan Challenge Program. They are also widely disseminated to the public.

u�Foreign laws and regulationsIn response to the enforcement of EU

Regulations on the Registration, Evaluation, Authorization and Restriction of Chemicals*4 (REACH), we completed pre-registration of substances subject to the REACH regulations by December 1 of 2008. In addition to working to collect information from the supply chain, we are currently carrying out specific registration activities within the Substance Information Exchange Forum (SIEF). We are participating in consortia in Japan and overseas, aiming to achieve full registration of each substance.

In addition, we are responding to new legal and regulatory trends in South Korea, China, and elsewhere.


INDEPENDENCE ASSURANCE STATEMENT

SGS Japan’s Report on Sustainability activities in the Showa Denko CSR Report

2009

NATURE AND SCOPE OF THE ASSURANCE/VERIFICATION

SGS Japan was commissioned by Showa Denko K.K. to conduct an independent assurance of the CSR Report

2009. The scope of the assurance, based on the SGS Sustainability Report Assurance methodology, included

the text, and data in accompanying tables, contained in this report. Financial data was not included in this

assurance process.

The information in the CSR Report 2009 of Showa Denko K.K. and its presentation are the responsibility of the

governing body and the management of Showa Denko K.K. SGS Japan has not been involved in the

preparation of any of the material included in the CSR report 2009.

Our responsibility is to express an opinion on the text, data, graphs and statements within the scope of verification.

The SGS Group has developed a set of protocols for the Assurance of Sustainability Reports based on current

best practice guidance provided in the Global Reporting Initiative Sustainability Reporting Guidelines (2006) and

the AA1000 Assurance Standard (2008). These protocols follow differing levels of Assurance depending the

reporting history and capabilities of the Reporting Organisation.

This report has been assured using our Level 1 protocol for content veracity.

The visited sites for this assurance are Showa Denko K.K. head office and Chichibu Plant. The assurance

comprised a combination of pre-assurance research, interviews with top management, validation with external

bodies and stakeholders (at head office), interviews with managers and persons in charge of producing the

report and providing information contained in the report as well as review of related materials and verification

and confirmation of sampled data using documentation (at head office and Chichibu Plant).

STATEMENT OF INDEPENDENCE AND COMPETENCE

The SGS Group of companies is the world leader in inspection, testing and verification, operating in more than

140 countries and providing services including management systems and service certification; quality,

environmental, social and ethical auditing and training; environmental, social and sustainability report assurance.

SGS Japan affirms our independence from Showa Denko K.K. being free from bias and conflicts of interest with

the organisation, its subsidiaries and stakeholders.

The assurance team was assembled based on their knowledge, experience of the industry and qualifications for

this assignment, and comprised auditors who are registered with EMS, QMS, OHSAS, GHG Lead Auditors and

IRCA Registered Sustainability Assurance Practitioner.

VERIFICATION/ ASSURANCE OPINION

On the basis of the methodology described and the verification work performed, we are satisfied that the

information and data contained within Showa Denko CSR Report 2009 verified is accurate, reliable and

provides a fair and balanced representation of the organisation’s sustainability activities during the reporting

period.

Signed:

For and on behalf of SGS Japan Inc.

Masahiro Soga, Managing Director

11th

August, 2009

ASSURANCE STATEMENT

Third-Party Opinions

As part of its medium-term CSR plan, the Showa Denko Group has continued to make progress in creating an infrastructure for CSR in the following three stages: establishing a foothold; firm establishment; and further development. The CSR plan is linked to the Passion Project medium-term consolidated business plan that we began to implement in 2006. In 2008, the final year of the medium-term CSR plan, we stepped up our Responsible Care activities and had a continuing dialogue with all stakeholders. These efforts were based on continuous improvement in compliance and risk-management systems developed by 2007, as well as the concept for the third stage, namely, further development of CSR activities.

A l though we made s teady progress in developing control structures through the plan-do-check-act (PDCA) cycle in the areas of compliance and r isk management, phosgene gas leaks occurred at the Higashinagahara Plant. As we make sure that all sites within the Group learn a lesson from this experience, we will take every measure to ensure thorough application of the PDCA cycle to risk management so as to prevent the recurrence of such incidents.

In the area of dialogue with stakeholders, as part of our efforts to ensure our facilities establish deep roots in the local communities in which we operate, we focused on enhancing communication in various ways, including sponsorship of chemistry education within the community and the drafting of site-specific CSR reports. Most of our sites will issue their own site-specific CSR reports in 2009 to report on 2008 activities. We will perform various communication activities throughout the Group, including support for education within our communities and site-specific CSR reports, in order to solidify our identity as a group of companies trusted by the local communities in which we operate.

For Showa Denko, as an organization seeking to contribute to the sound growth of society through its activities, efforts to combat global warming represent a key topic. In 2008, the Group cut volumes of greenhouse gas emissions from its facilities by 7% from the 1990 levels, meeting and surpassing its goal of 6% reductions, without resorting to emissions trading. We will continue fulfilling our responsibilities as a member of international society by developing unique and individualized technologies in the areas of environmental protection and energy conservation, while continuing to reduce greenhouse gas emissions.

In our future initiatives, we will highly respect SGS Japan Inc.’s comments regarding the provision of accurate and detailed information to society, considering the comments as invaluable viewpoints expressed by the broader society. In addition to strengthening dialogue with stakeholders and establishing a system for incorporating viewpoints and requests of our stakeholders, we will seek to be a Group worthy of even deeper trust by society. We will do this by enhancing internal Group verification and communicating the most accurate information possible.

We wish to express our gratitude to the inspection personnel for their broad-ranging and detailed inspections. We will continue to incorporate the opinions expressed to advance the CSR initiatives of the Showa Denko Group, as we strive to be an enterprise trusted and valued by society through business efforts that advance the sound growth of society.

CSR Report 2009 Response to third-party assessments

Third-Party Opinions

Norikuni ImotoRepresentative Director and

Senior Managing Corporate Officer,Chief Risk Management Officer (CRO)

Showa Denko K.K.

CSR OfficeSHOWA DENKO K.K.

TEL:81-3-5470-3694 FAX:81-3-3431-6442URL:http://www.sdk.co.jp/html/english/csr/index.html

Showa Denko is striving to reduce greenhouse gas emissions in support of the Ministry of Environment’s campaign to combat global warming.

This report is printed on paper made from wood originating from appropriately managed forests.

We use NON-VOC ink (containing no volatile organic compounds), in which almost 100% of petroleum-based solvent has been replaced with vegetable-oil solvent.

We have adopted “color universal design” to make every page easier to look at regardless of individual differences in color vision.

The solvent of the ink for this report is based mainly on soybean oil.

We use the waterless printing process, which requires no dampening water containing such harmful substances as isopropyl alcohol. Thus, we have substantially reduced the generation of VOC.

As a member of GPN, Showa Denko is promoting green purchasing of printing.

showa denko csr report 2009 - 昭和電工株式会社 · showa denko csr report 2009 showa denko...

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