ASAHI KASEI CORP Annual Report 2022

Plain-text annual report

Asahi Kasei Report 2022 Be a Trailblazer 1 Asahi Kasei’s Commitment to Life and Living— Our Unwavering Philosophy for a Century Inspired by a desire for mankind to achieve happiness, Asahi Kasei was founded with the aim of supplying an abundance of high-quality daily necessities at affordable prices to enable people to lead better lives. For a century, while the needs of society have changed in accordance with the times, Asahi Kasei has used its insight to meet these needs. Anticipating changes in society to take on challenges and seeking to transform itself has been Asahi Kasei’s unchanging approach since its founding. Asahi Kasei Report 2022Asahi Kasei Group Overview Asahi Kasei’s Ideals Growth Strategy Strengthening of Corporate Governance Corporate Information 2 Contents Asahi Kasei Group Overview 32 Initiatives regarding Climate Change Disclosure Corporate Information 3 At a Glance 5 Addressing Social Issues and Advancing Business Portfolio Strategies 7 Financial Highlights 8 Non-Financial Highlights Asahi Kasei’s Ideals 10 Message from the President 18 Value Creation Model 19 How Asahi Kasei Works to Achieve Its Vision 21 Strengths That Deliver Sustainable Growth Growth Strategy Based on the TCFD Recommendations 35 Digital Transformation 38 Transformation of HR 42 New Business Creation 43 Fully Utilizing Intellectual Property and Other Intangible Assets to Create New Businesses—Establishment of the Intellectual Property Intelligence Department Business Strategies by Sector 45 Material 51 Homes 54 Health Care 58 Interview with the CEO of ZOLL Medical Corporation Strengthening of Corporate Governance 62 Corporate Governance 81 Consolidated Financial Statements 86 Corporate Profile / Stock Information 87 Information Disclosure Editorial policy For greater ease of understanding among our stakeholders regarding the Asahi Kasei Group’s operating climate and overall business activities, the Asahi Kasei Report focuses on such areas as our management strategy, business conditions, and management configuration, as well as our efforts toward sustainability in society. Detailed sustainability-related information is disclosed on our website. https://www.asahi-kasei.com/sustainability/ Period under review The period under review is fiscal 2021 (April 2021 to March 2022). The report also contains some information on activities from April 2022. Organizational scope The scope of the report is Asahi Kasei Corporation and its consolidated subsidiaries (in other cases, noted in the text). The titles and positions of corporate officers and other personnel as shown in this report are 67 Directors and Audit & Supervisory Board Members 70 Discussion Among Outside Directors current as of September 2022. Guidelines consulted Company-wide Strategies 23 New Medium-Term Management Plan 2024 — 73 Risk Management 76 Environmental Protection Integrated Reporting Framework, IFRS Foundation Guidance for Collaborative Value Creation, Ministry of Economy, Trade and Industry, Government of Japan, etc. Be a Trailblazer 27 Financial and Capital Policy 29 Green Transformation 77 Compliance / Information Security Disclaimer 78 Human Rights 79 Health and Productivity Management The forecasts and estimates shown in this report are dependent on a variety of assumptions and economic conditions. Plans and figures depicting the future do not imply a guarantee of actual outcome. 0305040201Asahi Kasei Report 2022 3 At a Glance 17.0% 22.1% Material Homes Health Care Note: Percentages exclude figures for the “Others” category and “corporate expenses and eliminations” from figures for the Group as a whole. 34.0% 31.1% Europe ¥153.1 billion 6.2% Fiscal 2021 Net Sales Notable Facts (as of March 31, 2022) ¥2,461.3 billion Employees 46,751 Of which, overseas employees account for nearly 40% Global bases More than 20 countries and regions 46.8% 49.0% Fiscal 2021 Operating Income ¥202.6 billion Consolidated subsidiaries Overseas sales ratio Credit rating 273 48.1% AA Japan Credit Rating Agency (JCR) Net Sales by Region Note: Percentages of net sales for the Group as whole Japan ¥1,276.9 billion 51.9 % China ¥238.7 billion 9.7% Asia (excluding China) ¥ 283.1 billion 11.5 % The Americas ¥389.4 billion 15.8 % Other Regions ¥120.2 billion 4.9 % 01Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyStrengthening of Corporate GovernanceCorporate InformationAsahi Kasei Report 2022Priority Fields for Provision of Value and Related Products Material Homes Health Care Environment & Energy Home & Living Health Care 4 Hipore™ and Celgard™ separators for lithium-ion batteries Ion-exchange membrane chlor-alkali electrolysis process Hebel Haus™ unit homes Hebel Maison™ apartment buildings Pharmaceutical products Mobility Engineering plastics Dinamica™ artificial suede Atlas™ condominiums Planova™ virus removal filters Life Material Pimel™ photosensitive polyimide Household products North American and Australian homes ZOLL AED 3™ automated external defibrillator 01Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyStrengthening of Corporate GovernanceCorporate InformationAsahi Kasei Report 2022Addressing Social Issues and Advancing Business Portfolio Strategies In every era, the Asahi Kasei Group has addressed social issues by dynamically transforming its business portfolio and supplying products and services that meet the changing needs of the times. We will continue to contribute to life and living for people around the world by Creating for Tomorrow. (¥ billion) 3,000 2,500 2,000 1,500 1,000 Founding and Japan’s first pro- duction of synthetic ammonia Expansion into petrochemicals and synthetic fibers Expansion into homes, health care, and electronics Progress in overseas business, focus on business restructuring Accelerated globalization through M&A, expansion of health care business Net sales (left scale): Material Homes Health Care Others Operating income (right scale) Notes: 1. Non-consolidated figures are shown through fiscal 1976; consolidated figures are shown from fiscal 1977. 2. Color-coded sales are based on classifications at the time of disclosure; results of health care–related businesses through fiscal 1988 are included in “Others.” “As industrialists, we must always remember that our ultimate mission is to improve people’s standard of living by supplying an abundance of the highest-quality daily necessities at the lowest prices.” 500 (Founder Shitagau Noguchi, 1933) 0 1922 1940 1950 1960 1970 1980 1990 2000 2010 2021 Social needs and times Asahi Kasei’s evolution Business portfolio transformation New business entry, M&A Withdrawal, downsizing, divestment 1922– Establishing the basis for modern life • Development of chemical industry and modern agriculture • The Great Depression and World War II Founding and Japan’s first production of synthetic ammonia Asahi Kasei contributed to establishment of the basis for modern life through its businesses such as the production of Bemberg™ cupro, a regenerated fiber. Chemical fertilizers, regenerated fiber, explosives, etc. • Ammonia • Regenerated fiber (cupro, viscose rayon) • Chemical fertilizer • Foods (monosodium glutamate) FY1940 Net sales ¥56 million 5 (¥ billion) 300 250 200 150 100 50 0 01Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyStrengthening of Corporate GovernanceCorporate InformationAsahi Kasei Report 2022 6 Social needs and times Asahi Kasei’s evolution Business portfolio transformation New business entry, M&A Withdrawal, downsizing, divestment 1940s– Sufficiency of daily necessities • Post-war recovery and modernization of industry • Start of period of high economic growth Expansion into petrochemicals and synthetic fibers After World War II, the modernization of industry advanced in Japan, driving the independence and growth of the Japanese economy. Asahi Kasei embarked on various new businesses that helped improve the quality of people’s lives. • Polystyrene Foods Fibers • Synthetic fiber (acrylic fiber) Chemicals FY1960 Net sales ¥ 44.9 billion 1960s– Improvement in quality of homes, development of public infrastructure • Period of high economic growth • Transition to stable economic growth Expansion into homes, health care, and electronics As the Japanese economy transitioned from a period of high economic growth to a period of more stable growth, Asahi Kasei entered new fields to address diversifying social needs. 1980s– Increased comfort and convenience • Emergence and collapse of economic bubble • Two decades of meager economic growth Progress in overseas business, focus on business restructuring After the collapse of Japan’s economic bubble, Asahi Kasei divested, withdrew, and downsized businesses to achieve a selectively diversi- fied portfolio. It was also during this time that we built our platforms for global management. • Saran Wrap™ • Acrylonitrile • Synthetic rubber • Ethylene Foods/Health care Homes/ Construction materials (construction of naphtha cracker) • Autoclaved aerated concrete • Hebel Haus™ unit homes • Artificial kidneys • Pharmaceuticals Others Fibers FY1980 Net sales ¥ 800.1 billion Chemicals • Hall elements • LSIs • Lithium-ion battery separators • Hebel Maison™ apartment buildings • Insulation panels • Acquisition of Toyo Jozo Co., Ltd. (pharmaceuticals and liquors) • Virus removal filters • Foods Others Fibers Health care Chemicals FY2000 Net sales ¥1,269.4 billion Electronics Homes/ Construction materials 2000s– Increasing awareness of the environment and quality of life • Regional diversification • Effect of global economic crisis • Advancement of digital technologies • Aging populations and pursuit of health and prosperity • COVID-19 pandemic • Rising interest in carbon neutrality and the circular economy Accelerated globalization through M&A, expansion of health care business Asahi Kasei accelerated the globalization of its operations and expanded its health care business through mergers and acquisi- tions. We reorganized our operations in the three business sectors of Material, Homes, and Health Care for thorough portfolio manage- ment with optimal allocation of management resources and greater generation of synergies between business domains. • Electronic compasses • UVC LEDs • Hydrogen production system (process verification) • New businesses for homes (seniors, medium-rise, overseas) • Critical care • Viscose rayon, acrylic fiber, polyester • Restructuring of petrochemical business • Liquors Others Material Health care FY2021 Net sales ¥2,461.3 billion Homes 01Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyStrengthening of Corporate GovernanceCorporate InformationAsahi Kasei Report 20227 Financial Highlights Net sales (domestic & overseas), operating income, operating margin EBITDA,1 depreciation and amortization, EBITDA margin (¥ billion) (¥ billion) (¥ billion) 2,461.3 2,042.2 2,170.4 2,151.6 2,106.1 198.5 209.6 177.3 171.8 202.6 9.7 9.7 8.2 8.2 8.2 2,500 2,000 1,500 1,000 500 0 300 240 180 120 60 0 400 300 200 100 0 311.9 313.6 295.6 305.1 15.3 14.5 13.7 14.5 350.8 14.3 113.5 104.0 118.3 133.3 148.1 Net income attributable to owners of the parent, EPS, EPS before goodwill amortization (¥ billion) 170.2 147.5 134.85 121.93 119.62 10.39 75.44 90.90 79.8 105.66 74.85 57.49 161.9 137.14 116.68 200 150 100 50 0 (¥) 200 150 100 50 0 2017 2018 2019 2020 2021 (FY) 2017 2018 2019 2020 2021 (FY) 2017 2018 2019 2020 2021 (FY) Domestic sales Operating income (right scale) Overseas sales (left scale) Operating margin (%) EBITDA EBITDA margin (%) Depreciation and amortization (tangible, intangible, and goodwill) Net income attributable to owners of the parent (left scale) EPS before goodwill amortization EPS (right scale) 1 Operating income, depreciation, and amortization Both net sales and operating income increased significantly in fiscal 2021, partly due to growth of overseas business and efforts to improve profitability in the Homes sector, in addition to an upswing in demand in the Material sector compared with the previous fiscal year when demand was impacted by the COVID-19 pandemic. Overseas sales accounted for nearly 50% of total net sales in fiscal 2021 reflecting overseas business expansion, including through M&A. Given the upward trend in depreciation and amortization due to proactive capital expenditures and M&A activities, the Asahi Kasei Group has positioned EBITDA as a major KPI signifying its ability to generate cash. The decrease in depreciation and amortization in fiscal 2018 resulted from a change in the method of depreciation of property, plant and equipment from the declining balance method to the straight- line method. Net income attributable to owners of the parent increased significantly in fiscal 2021, reflecting an improvement in extraordinary income and loss and a decrease in tax expenses compared with the previous fiscal year in conjunction with the reconfigura- tion of Veloxis Pharmaceuticals, Inc. Consequently, EPS also increased. As Asahi Kasei amortizes goodwill in accordance with Japanese accounting standards, EPS before amortization of goodwill is shown for reference. ROE,2 ROIC3 (%) 20 15 10 5 0 14.0 9.7 11.1 8.8 7.6 6.6 5.6 4.9 10.3 6.6 Capital expenditures, R&D expenses (¥ billion) Interest-bearing debt,4 D/E ratio (¥ billion) 186.6 154.1 153.7 136.2 101.3 85.7 90.1 91.0 89.7 98.7 200 150 100 50 0 766.3 703.8 659.0 0.52 0.45 0.45 424.9 0.31 301.7 0.23 800 600 400 200 0 (%) 0.8 0.6 0.4 0.2 0 2017 2018 2019 2020 2021 (FY) 2017 2018 2019 2020 2021 (FY) 2017 2018 2019 2020 2021 (FY) ROE ROIC 2 Net income per shareholders’ equity 3 (Operating income – income taxes) / average annual invested capital Asahi Kasei positions ROE and ROIC as major KPIs to indicate its efficiency in generat- ing profits. Until fiscal 2020, profits declined due to various changes in the operating environment while fund procurement needs increased in conjunction with growth investments, including M&A, while shareholders’ equity and invested capital rose in conjunction with profit growth. Although ROE and ROIC had trended downward as a result of these factors, both increased in fiscal 2021 due to an improvement in profits. Capital expenditures R&D expenses Interest-bearing debt (left scale) D/E ratio (right scale) 4 Amounts stated from fiscal 2019 exclude lease obligations. Asahi Kasei proactively carries out capital expenditures geared toward achieving growth over the medium to long term—including outlays in relation to decarbonization, digital transformation, and other areas to fortify its foundation—and R&D with a focus on the Health Care sector. While capital expenditures and R&D expenses in fiscal 2020 remained on a par with their fiscal 2019 levels due in part to strict selection of investments in light of the impact of the COVID-19 pandemic, both increased in fiscal 2021 on the back of the recovery in performance. Interest-bearing debt was up in fiscal 2021 owing to a rise in working capital, such as notes and accounts receivable–trade and inventories, due in part to increased market prices, and higher demand for funds in conjunction with M&A centered on the Health Care sector. However, Asahi Kasei continues to maintain a sound financial standing, with its D/E ratio at the end of fiscal 2021 unchanged from the level of the previous fiscal year as shareholders’ equity increased along with profit growth. 01Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyStrengthening of Corporate GovernanceCorporate InformationAsahi Kasei Report 20228 Non-Financial Highlights Greenhouse gas (GHG) emissions (Scopes 1 and 2) (Million tons CO2 equivalent) GHG emission reduction contributions through environmental contribution products (Index) 5 4 3 2 1 0 4.22 4.16 3.99 3.91 4.11 Target 3.58 or less −30%−30% or more or more (compared with (compared with FY2013) FY2013) 100 250 200 150 100 50 0 Target 200 or more 30 88 31 100 31 119 29 36 Number of digital professional human resources (%) 50 40 30 20 10 0 2,600 2,500 300 200 100 0 17 30 56 55 Target 2,500 100 230 2017 2018 2019 2020 2021 2030 (FY) 2018 2019 2020 2021 2030 (FY) 2017 2018 2019 2020 2021 2024 (FY) Applicable range: Production sites of consolidated companies Note: Fiscal 2021 figures are preliminary and may change after undergoing third-party verification. The Asahi Kasei Group has adopted a target to reduce the volume of its GHG emis- sions by 30% or more from the 2013 base-year level of 5.11 million t-CO2e by 2030 with a view to better clarifying its road map for achieving carbon neutrality. Ongoing endeavors to reduce emissions are advancing in order to achieve this target. Volume of GHG emission reduction contributions of environmental contribution products1 (left scale) Portion of sales of environmental contribution products2 (right scale) Note: Internal calculation of the volume of GHG emission contributions from a life cycle assessment per- spective based on the views of outside experts. 1 Using fiscal 2020 as the baseline year (100) 2 Portion of total net sales excluding the Health Care sector Products and services of the Asahi Kasei Group that contribute to improving the environment across their entire life cycle are designated as environmental contribution products. We will work to develop environmental contribution products with the goal of reducing society’s overall GHG emissions. Note: Total figures up to fiscal 2020 include only human resources specializing in data analysis. Applicable range: Total employees worldwide The Asahi Kasei Group will promote bottom-up human resource development to enable all employees globally to engage in their work duties with a mindset conducive to utilizing digital technology. In particular, we have defined human resources who resolve business issues and create new value and business models through advanced digital technology and data utilization as digital professional human resources. By pro- actively promoting the development and acquisition of such human resources, we aim to increase their number to 2,500 by fiscal 2024. Number of Group Masters Number of women working as managers and percentage of women in the total number of managers and the Group Masters program Number of valid patents and percentage of which accounted for by GG10-related patents 400 300 200 100 0 250 259 229 180 124 Target 300 100 300 240 180 120 60 0 277 257 277 Target 10.0 231 212 193 2.2 2.3 2.8 3.4 3.7 (%) 15 100 12,000 10,670 10,618 10,669 10,776 10,779 12 9 6 3 0 9,000 6,000 3,000 0 29.6 30.0 30.1 30.5 30.6 277 Target 50.0 (%) 80 100 60 40 20 0 2018/1 2018/10 2019/10 2020/10 2021/10 2024 2018/6 2019/6 2020/6 2021/6 2022/6 2030 2017/12 2018/12 2019/12 2020/12 2021/12 2030 The Asahi Kasei Group appoints, nurtures, and rewards as Group Masters human resources with the potential to proactively engage in and contribute to the creation of new businesses and the enhancement of established businesses. In addition to increasing corporate value, the Group Masters program contributes to the growth of our human resources and helps us to recruit outstanding external human resources. In accordance with business strategies and other matters, we also annually revise the technology and specialized fields for human resources to be appointed as Group Masters to enable us to better utilize the program. Number of women working as managers (left scale) Percentage of women in the total number of managers and the Group Masters program (right scale) Applicable range: Results for personnel employed by Asahi Kasei Corporation, Asahi Kasei Microdevices Corporation, Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Pharma Corporation, and Asahi Kasei Medical Co., Ltd. Amid rapid change in the operating environment, the Asahi Kasei Group must utilize the capabil- ities of its diverse human resources to boost co-creativity if it is to create value continuously. With the promotion of women as a KPI, we will realize conditions that enable diverse human resources, including women, to thrive in a variety of settings within the organization through the creation of an environment and requirements for achieving the KPI. Total number of valid patents (of which, are GG10-related patents) (left scale) Percentage of valid patents accounted for by GG10-related patents (right scale) Note: Valid patents are those for which the patent right or patent application has not expired. The number of patents in the graph represents the number of patent families (number of inventions). The Asahi Kasei Group focuses efforts on maximizing intellectual property value in order to establish a patent portfolio that contributes to its businesses. We will aim to further enhance our competitiveness by increasing the percentage of valid patents accounted for by 10 of our businesses (GG10) that will drive our growth going forward. 01Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyStrengthening of Corporate GovernanceCorporate InformationAsahi Kasei Report 2022 9 Asahi Kasei’s Ideals 10 Message from the President 18 Value Creation Model 19 How Asahi Kasei Works to Achieve Its Vision 21 Strengths That Deliver Sustainable Growth 02Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 202210 Message from the President Asahi Kasei is stepping forward to become a global trailblazer by reanimating its “A-Spirit” to boldly advance transformation without fear of change Koshiro Kudo President Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022Message from the President 11 The fire and accident at Asahi Kasei Group plants I would like to begin by once again offering my sincere apologies to everyone affected, quality assurance. My task now is to ascertain the circumstances on the front lines including neighboring residents, for the considerable concern and inconvenience fully and accurately, and to verify whether there is anything lacking that we have over- caused by the fire at our Bemberg Plant in Nobeoka, Miyazaki Prefecture, in April looked. I am currently visiting our front lines to communicate directly with employees 2022, and the serious accident that occurred at an affiliate in fiscal 2021. and deepen my understanding of their circumstances, including by seeing the expres- The Asahi Kasei Group will strive to identify the causes of these incidents, and sions on their faces as they work, and listening to their concerns. I am determined to thoroughly implement measures to prevent any recurrence. The foundations underpin- take decisive actions grounded in the front lines that will be effective in contributing to ning our businesses are the front line efforts for environmental protection, safety, and a fundamental solution. My ambition for Asahi Kasei I became President & Representative Director in 2022, a pivotal year as the centennial same time, however, I have been apprehensive that our appetite to take on challenges of Asahi Kasei’s founding. I sense a responsibility to preserve the heritage of Asahi and create new things may have dimmed in recent years. I am concerned that, after Kasei that has been nurtured by our predecessors for a century, and firmly pass it on several years of stable management, we may be on the verge of forgetting the meaning to subsequent generations. The essence of this heritage is “A-Spirit,” an aggressive of A-Spirit. To allow A-Spirit to fade would be to squander the legacy that our predeces- “animal spirit” and the spirit of Asahi Kasei. A-Spirit epitomizes the mettle of a pioneer sors worked so hard to build. Our heritage would be lost. Nevertheless, I am confident and the ambition to create things that did not exist before. In this way, A-Spirit is that A-Spirit—an intrinsic part of our heritage—can be reanimated if we inspire our unique to the corporate culture of the Asahi Kasei Group, and integral to the way we personnel. My message to employees is: “tradition is what we create, not what we pre- create new value without being bound by precedent. serve.” With this in mind, I intend to invigorate A-Spirit throughout the Asahi Kasei I see the Asahi Kasei Group as a company that embodies sincerity, one of our Group in fiscal 2022, building on the momentum of our centenary and the launch of Group Values. This is vividly reflected in the earnest manner in which our employees our new medium-term management plan (MTP). tackle their work, and in the value that our business activities provide to society. At the Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Message from the President 12 Asahi Kasei’s potential to generate two mutually reinforcing aspects of sustainability Rather than solely generating profits, I believe that companies must pursue their own countries. Cooperation and contributions based on a resolve to accept compromise will purpose in society. In fiscal 2022, coinciding with the centennial of Asahi Kasei’s enable us to overcome such divisions. founding, we redesigned the diagram of our corporate philosophy to reaffirm the Group Considering the role companies play in contributing value to society, the key is how Mission, Group Vision, and Group Values with employees globally. The Asahi Kasei they create value and whether they are capable of creating significant value. Such Group Mission states that “we, the Asahi Kasei Group, contribute to life and living for potential to create value depends on a company’s ability to combine and utilize its people around the world.” I believe that executing this mission sincerely will lead to intangible assets—including human resources, intellectual property, know-how, and sustainable growth of our corporate value. Indeed, it is only by contributing to the sus- data—and whether the created value meets the needs of society at a given time. I tainability of society that we can achieve sustainable growth of corporate value. This is firmly believe that the Asahi Kasei Group is exceptional in its abundance of intangible the basis of the two mutually reinforcing aspects of sustainability that we aim for. assets and ability to utilize them flexibly. We also have an exceptionally diverse array of The world faces several serious issues today—the decoupling of the United States and China, the Russia–Ukraine situation and the powerlessness of the United Nations, the deterioration of democracy and the rise of autocracy, and the differing expectations Two aspects of sustainability for Asahi Kasei of various countries toward the creation of a carbon-neutral society, in addition to a declining birthrate and aging population and a growing disparity between urban and rural areas in Japan. I firmly believe that in contributing to a sustainable society, there is no place for selfishness, either as an individual or as a company. A sustainable soci- ety will only be achieved if a diverse range of stakeholders around the world are willing to cooperate with one another to overcome global issues through mutual compromise. For example, consider the various proposals for international rules to achieve global carbon neutrality. There is an issue of fairness between developed and developing Contributing to a sustainable society Realizing the Group Vision countries. There are still many people in developing countries who are living in poverty Sustainable growth of corporate value and struggling to survive. These people would bear the brunt of such rules unless we fundamentally solve the issue of poverty. Achieving an energy transition for decarbon- ization will be extremely difficult unless we devise measures that not only take into account the wishes of developed countries but also the conditions of developing Action aligned with Group Values Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Message from the President 13 human resources as well as a broad range of businesses with active communication I am certain that our diversity, flexibility, and willingness to change allow us to create between them. Our custom, which dates from the time of our founding, of referring to value by continuously recombining our resources to fulfill our Group Mission of contrib- one another by name as opposed to by title, affords a high degree of approachability. uting to life and living for people around the world. The significance of three-sector management A century has passed since the founding of the Asahi Kasei Group. Our success in by continuing to refine our three-sector management to better clarify each sector’s navigating dramatic changes to the operating environment and maintaining firm role. Specifically, the Material sector will aim to improve profitability and investment growth is rooted in the efforts of our predecessors to overcome difficulties and proac- efficiency by helping resolve environmental issues through technological development tively transform our business portfolio. By always remaining conscious of our strengths and innovation in materials. The Homes sector will achieve growth in Japan, North and core competencies while constantly transforming our wide-ranging business, America, and Australia, and raise its cash-generating capabilities by continuing to we could maintain a certain degree of control as we adapted to changes in society for underpin people’s safe and comfortable daily lives. The Health Care sector will drive continual growth. overall profit growth by pursuing its mission of improving and saving patients’ lives. In I believe that a big reason for the Asahi Kasei Group’s continual portfolio transfor- this way, we will advance the execution of growth strategies and the reorganization of mation and operation in multiple sectors is an awareness that it must avoid a situation our portfolio reflecting the respective roles of each sector. Achieving growth in all three where the survival of the company would be imperiled by any single business being sectors will further strengthen our business platform—including intangible assets such unable to continue. As Asahi Kasei is not affiliated with any large industrial group, we as human resources, intellectual property, know-how, and data—and the strengthened have always had to rely on our own capabilities to survive as a growing company business platform will in turn create synergies that support the growth of each sector. I throughout our history. Our business portfolio spanning multiple sectors indicates how will increasingly emphasize to investors how our three-sector configuration enables us we have continually grown by taking on a variety of challenges in accordance with to organically utilize our intangible assets, which enhances the potential for increasing changes in the operating environment. corporate value. The Asahi Kasei Group currently operates businesses in three sectors: Material, Throughout our history, the Asahi Kasei Group has recovered from difficult situa- Homes, and Health Care. I believe that our current configuration of three sectors is tions by leveraging the strength of having multiple sectors to overcome challenges optimal for pursuing our Group Mission of contributing to life and living for people cooperatively. We currently face challenges in terms of how to capture opportunities around the world. We will achieve growth in all sectors over the medium to long term that arise from significant market changes, in order to achieve continuous growth. I am Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Message from the President 14 convinced that by clarifying the respective role of each sector and strengthening our our corporate value. I am also prepared to reform our way of three-sector management three-sector management, we will overcome these challenges and ultimately increase as needed to enable us to continue responding to changes in society. New Medium-Term Management Plan 2024 “Be a Trailblazer” Commitment embodied in the key concept of “Be a Trailblazer” Process for achieving financial targets To realize its ideals, the Asahi Kasei Group must create new value without fearing Our financial targets in the new MTP are operating income of ¥270.0 billion, return on change. As I stated at the outset, I believe that we must once again awaken the equity (ROE) of 11% or more, and return on invested capital (ROIC) of 8% or more by A-Spirit, including a healthy sense of urgency and a spirit of taking on challenges, to fiscal 2024. While achieving continuous profit growth by reaping the benefits of our achieve new growth for the next 100 years. Based on this, we emphasized our com- previous growth investments, we will seek to improve our capital efficiency. Personally, mitment to reawakening our A-Spirit in formulating the new MTP, including a redesign I believe that boldness and a focus on our front lines will be the keys to increasing of our philosophy diagram. ROIC. In terms of boldness, transformation of our portfolio with a focus on the Material While we were studying specific details of the new MTP, we had teams of mid-level sector is an urgent task. To achieve our targets, we must make bold management deci- employees expected to be next-generation leaders from the United States, Europe, sions to push ahead with transformation. Meanwhile, I believe by focusing on our front China, and Japan discuss their vision of the Asahi Kasei Group for 2030. I decided to lines we provide opportunities for business managers to exert their abilities. ROIC must make “Be a Trailblazer” the key concept of the new MTP based on a phrase that came be managed by each of our businesses based on their respective business character- up during the discussions that struck a particular chord with me. I think that the key istics and business stage. ROIC serves as a target for front-line employees in each concept of “Be a Trailblazer” fits in perfectly with my commitment to reawaken our business to align their direction, while taking the initiative in analyzing figures and the A-Spirit to take on challenges and create new things. circumstances behind them to identify ways to raise efficiency. Consider the analogy of The new MTP is positioned as the first step toward realizing the Asahi Kasei Group’s climbing a mountain. In the same way that working together to find the best route to vision for 2030. Going forward, we will aim to reach our vision for 2030 in stages. the summit and supporting one another along the way would raise the spirits of a group of climbers, ROIC acts as a target for strengthening the bonds of our front-line employees toward achieving their targets in operating businesses. Corporate Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Message from the President 15 management will implement bold transformation of our portfolio, while the front lines speed and asset-light as two sides of the same coin. By pursuing the optimal operating promote efficient business operations using ROIC as an indicator. These two essential framework with swift commercialization, we will greatly expand the potential for adding elements advance in tandem. higher value. Capital policy will also be important for improving ROE. We had previously aimed We designated 10 businesses as “10 Growth Gears” (GG10) that will drive our for a debt-to-equity (D/E) ratio of around 0.5 times. In the new MTP, we changed this future growth, and set a clear policy of making bold investments while proactively to a range between 0.4 times and 0.7 times, considering possible changes in the bal- examining M&A opportunities. We aim to increase the percentage of overall operating ance of our capital structure. I look forward to proactively communicating how our cap- income accounted for by GG10 from the current level of approximately 35% to 50% ital policy supports the business model of generating stable earnings in three sectors, by fiscal 2024 and to 70% by around fiscal 2030. To do so, approximately ¥600 billion to build further trust with shareholders, investors, and other stakeholders. of the ¥1 trillion we have allocated for investments over the three years of the MTP will be in GG10-related investments. Examples of GG10 include, in the Material sector, the Working to evolve our business portfolio business for lithium-ion battery separators, which has driven growth in recent years, Challenging investment for growth together with cash generation through the strength- and a hydrogen-related business using alkaline water electrolysis that we are currently ening of existing businesses and structural transformation are the essential combination commercializing. In the Homes sector, GG10 include businesses in North America for further evolution of our business portfolio. While striking a balance between them, and Australia that we acquired and are growing with new business models. In the the new MTP strongly emphasizes the three elements of speed, asset-light, and high Health Care sector, they include the critical care business, which is seeing expansion value-added. in the area of serious cardiopulmonary conditions, and the bioprocess business As a manufacturer, there is a conventional process of performing in-house including both Planova™ virus removal filters and Bionova Scientific, LLC, a CDMO research and development (R&D), building plants, developing markets, and earning (contract development and manufacturing organization) for next-generation antibody profits. While I am confident that the Asahi Kasei Group’s R&D has many highly prom- drugs, which we acquired in May 2022. These and the other GG10 businesses will ising technology seeds, I also recognize that increasing the speed of commercialization drive our growth going forward. We will promote policies tailored to the characteristics and appropriately seizing business opportunities is an issue. To quickly commercialize and stage of each business while emphasizing the aspects of speed, asset-light, and projects at an early stage, it may be better not to keep the entire process in-house. As high value-added. digital technology advances and society’s needs rapidly evolve, trying to do everything In terms of generating cash through the strengthening of existing businesses and by ourselves would only slow us down. We need to consider accelerating commercial- structural transformation, we will first aim to complete the reform of the strategic ization through out-licensing or forming alliances from a best-owner perspective in restructuring businesses that we have been advancing since the period of the previous order to quickly get our outstanding technology into practical use. This is why I see MTP. After identifying the strategic restructuring businesses by fiscal 2021, Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Message from the President 16 we classified them into the three categories of Recovery, Follow, and Exit based on technology in house, then we should aim to further strengthen it by business develop- reexamination of their strategies. Those classified as Recovery businesses are seeing ment such as M&A. their profit levels rise following progress in profit improvement measures. Going for- ward, we will continue to assess Follow businesses, which are currently executing Strengthening our business platform reformulated strategies. Exit businesses will be downsized, divested, etc., as quickly as The Asahi Kasei Group has businesses in a wide range of sectors, and human possible. We will continually assess our business portfolio from a medium-term per- resources with a variety of experience. In light of this, we actively promote measures spective and take prompt action on the strategic restructuring businesses. that strengthen our business platform by organically linking diverse human resources, Fundamental transformation of our business structure will entail withdrawal not intellectual property, know-how, and data, to utilize them as shared intangible assets. only from businesses with deteriorating performance but also from those that are Nevertheless, there is still potential to further leverage our diversity. In addition to the incompatible with our vision. By distributing the resources gained through such with- viewpoints of green transformation (G), digital transformation (D), and human resource drawals to GG10, we will further accelerate the evolution of our business portfolio. We transformation (P), we have identified the maximum use of intangible assets as a key will comprehensively evaluate compatibility with our vision from the five perspectives of focus of the new MTP. We are steadily advancing measures in each area. I believe our best owner, carbon neutrality, competitiveness, growth potential, and profitability and A-Spirit will be indispensable, as well as effective, for enabling us to link the latent capital efficiency, in addition to recent performance. The divestiture of the photomask potential of such intangible assets to value creation and growth. pellicles business, announced in May 2022, is one example. The business has a high While advancing such activities will necessitate greater intensity than before, the market share and consistently earns profits. Nevertheless, viewed from the best-owner first one or two steps in particular will require the most effort. If we can boldly clear perspective, we concluded that transferring it to another company would be optimal for those initial steps, I believe there is great potential for us to take the lead in society. the business itself. Although our initiatives in relation to strengthening our business platform are currently I spent most of my career in Asahi Kasei’s fibers and textiles business. Between receiving a strong reception externally, other companies will catch up or overtake us if 2001 and 2009, we closed down our viscose rayon, acrylic fiber, and polyester fiber we simply proceed at the same pace. I am therefore determined to reawaken our businesses. These closures were very tough for our suppliers and other stakeholders, A-Spirit in the strengthening of our business platform, and continuously take on bold including employees who were reassigned. Based on this experience, I keenly realize challenges in order to build a leading position among the global competition. that business closure is the last resort. It would surely be better to consider a busi- If we look at corporate governance solely in terms of companies meeting society’s ness’s future prospects while it’s still profitable, and take measures before it’s too late. expectations, there is a risk of confusing ends with means. If you only try to follow, On the other hand, if we determine that it would be best to keep a business or you will always be behind. The Corporate Governance Code may serve as a barometer, Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Message from the President 17 but ultimately it’s up to us to consider on our own accord how to strengthen the Asahi through dialogue with shareholders, investors, and other stakeholders, and revise it as Kasei Group’s business platform. We must not fall into the trap of passively satisfying appropriate. I look forward to opportunities for proactive dialogue where participants the items in the code. We should explain our rationale rather than mindlessly comply. can have a frank exchange of views. At the same time, I recognize that we must confirm our corporate governance policy Toward the next 100 years I have never been interested in doing something just because other people are doing first step toward the next 100 years, we will awaken our A-Spirit to boldly carve out it. I chose “Be a Trailblazer” as the key concept of the new MTP because of my com- new paths without fearing change. mitment to deploying our A-Spirit to the fullest extent. This is the ethos of the Asahi Kasei Group, which has continuously taken on challenges by constantly anticipating the future. Fiscal 2022 is a pivotal year for us in a variety of senses, including the cen- tennial of Asahi Kasei’s founding. The time is ripe for us to boldly take risks and embrace challenges looking ahead to the next generation. To emphatically take our Koshiro Kudo President Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 202218 Value Creation Model Outcome Fields for provision of value Asahi Kasei Group Business platform Two Mutually Reinforcing Aspects of Sustainability for the Asahi Kasei Group Contributing to a sustainable society Sustainable growth of corporate value (long-term outlook for around FY2030) Living in health and comfort Care for People Active life in the new normal Harmony with the natural environment Care for Earth Carbon-neutral sustainable world Operating income ¥ 400 billion (FY2021–FY2030 CAGR 7% or more) ROE 15 % or more ROIC 10 % or more Environment & Energy Mobility Life Material Home & Living Health Care Material Homes Health Care Expanding and enhancing intangible assets by repeatedly circulating and organically connecting them across sectors Data Know-How Brand Human Resources Technologies A-Spirit Customer Contact Points etc. Intellectual Property Input D/E ratio: 0.45 Credit rating: AA (JCR) Note: As of March 31, 2022 Core technologies, digital technology, data, manufacturing know-how, etc. Strong financial foundation Technologies in a wide range of fields Human resources involved in multiple businesses Advanced specialists, digital professional human resources, etc. Intangible assets Contact points with various markets Marketing channels, trust, brand, etc. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 19 How Asahi Kasei Works to Achieve Its Vision The Asahi Kasei Group seeks to achieve the two mutually reinforcing aspects of sustainability of “contributing to sustainable society” and “the sustainable growth of corporate value.” Here we describe Asahi Kasei’s value creation process, which is based on realizing the Asahi Kasei Group Vision. Sustainability for Asahi Kasei Process for Identifying Materiality The Asahi Kasei Group carries out business activities to provide new value to society by enabling “living in health and comfort” and “harmony with the natural environment,” as set forth in its Group Vision. We aim to achieve two mutually reinforcing Extremely important aspects of sustainability whereby it contributes to the creation of a sustainable society while such efforts lead to improved cor- porate value. We believe that providing value that contributes to ensuring the sustainability of society will bring about sustainable improvements in our corporate value along with a high level of profitability, which will in turn enable us to take on further chal- lenges. Guided by this belief, we established our Sustainability Policy in November 2021, under which we are accelerating actions for a sustainable society. s r e d l o h e k a t s r o f e c n a t r o p m I Highest priority as premise Governance Compliance/ sincerity Human rights Safety/quality P62–66 P 77 P 78 P 76 Wastewater Industrial waste Business Contribution to P45 – 60 Global environment Health and longevity Comfortable life Decarbonization P29–34 Circular economy P29–34 Supply chain management Communication with stakeholders Biodiversity Social contribution Diversity Human resources P38 – 41 Risk management P73– 75 Identification of Issues We identified issues in light of requirements of society and our Group Mission, Group Vision, and Group Values while making reference to international guide- lines such as ISO 26000 and the Global Reporting Initiative (GRI) Standards, as well as the evaluation cri- teria of major ESG rating institutions. Determination of Degree of Importance We evaluated the degree of importance both to society and to the Asahi Kasei Group and mapped it on two axes. Evaluation of Appropriateness We verified the appropriateness of the material issues by examining them from a diverse range of perspec- tives, such as through deliberations involving the lead- ers of various divisions, discussions with outside companies, and consultations with Outside Directors. Key Points of the Asahi Kasei Group Sustainability Policy Importance for the Asahi Kasei Group Harmony with the natural environment Harmony with the natural environment Health and comfort Health and comfort Basic activities Basic activities Examination and Approval Extremely important The Board of Directors approved the material issues after examination at the Management Council. • Realize the two mutually reinforcing aspects of sustainability of “contributing to sustainable society” and “the sustainable growth of corporate value” In fiscal 2017, the Asahi Kasei Group identified the important are integrated into management strategies. Accordingly, in light issues and subjects that it should prioritize as its materiality of these material issues, the new medium-term management through the process outlined above in order to achieve its plan identifies issues to be addressed in five fields for provision • Pursue optimal corporate governance for realizing vision. Having since reviewed these issues and subjects in of value that will contribute to Asahi Kasei’s creation of value over this goal accordance with changes in the operating environment, we the long term. The next page clarifies the process leading up to • Create value by contributing to sustainable society have defined them as shown in the above diagram. For detailed identifying opportunities and creating value in each of the fields • Carry out responsible business activities information on key performance indicators (KPIs) and initiatives for provision of value in order to ensure that our efforts to resolve • Facilitate the empowerment of personnel for each material issue, please view more information under issues lead to the creation of highly profitable opportunities. each category. Material issues are meaningful only when they Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 20 Process Leading Up to Value Creation in Each Field for Provision of Value • Expansion of clean energy • Progression of CASE and MaaS • Increasing sophistication of next- • Diversification of lifestyles • Advancement of a longevity society Operating environment • Transition to carbon neutrality and a circular economy generation communications technology • Intensification of natural disasters • Rising global population • Labor shortages Relevant fields for provision of value and issues they address Environment & Energy Carbon neutrality/ Circular economy Material Mobility Life Material Homes Home & Living Health Care Health Care Safe, comfortable, and eco-friendly mobility More comfortable and convenient lifestyles Homes/communities enriching people’s lives Society of active longevity Material issues that correspond with issues • Global environment –Decarbonization –Circular economy • Global environment –Decarbonization –Circular economy • Comfortable life • Global environment –Decarbonization –Circular economy • Comfortable life • Global environment –Decarbonization –Circular economy • Comfortable life • Health and longevity Specific examples of value creation opportunities projected based on the operating environment • Creation of a business model aimed at achieving a hydrogen society • Accelerated commercialization of vari- ous technologies contributing to carbon recycling • Provision of products and services contributing to GHG emissions reductions • Provision of products and services that meet diversifying needs for in-vehicle comfort as autonomous driving becomes widespread • Provision of products that meet needs for materials with low environmental impact • Creation of innovative products with strengths in competitive sensing tech- nologies in response to the develop- ment of markets for energy conservation and comfort • Realization of efficiency and greater productivity through industrialization and provision of high-quality homes suited to local conditions in North America and Australia • Provision of products and solutions with a strong competitive advantage for leading-edge semiconductor and packaging processes • Provision of homes compliant with Net Zero Energy House (ZEH) and ZEH Mansion (ZEH-M) standards • Provision of highly resilient homes able to withstand disasters • Provision of medical device solutions addressing unmet needs in the criti- cal care and cardiopulmonary condi- tions fields • Promotion of a global pharmaceutical business that reflects increasing needs for better medical care and the progression of aging societies in vari- ous developed countries overseas • Provision of bioprocess-related prod- ucts and services that support the safe and efficient manufacture of pharmaceuticals Output • Hydrogen-Related • CO2 Chemistry • Energy Storage • Car Interior Material • Digital Solutions • North American and Australian Homes • Critical Care • Environmental Homes and Construction • Global Specialty Pharma Materials • Bioprocess Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 202221 Strengths That Deliver Sustainable Growth At the root of the Asahi Kasei Group’s success throughout its history in adapting flexibly to changes in society to grow continuously are unique strengths that create value from its abundant intangible assets. Turning a Diverse Array of Intangible Assets into the Group’s Shared Assets We have transformed our business portfolio flexibly and proactively in Maximizing the Value of Intangible Assets through the Promotion of DX and Intellectual Property Strategies The Asahi Kasei Group focuses in particular on the promotion of DX accordance with changes in the times. This transformation is sup- and intellectual property strategies with the goal of appropriately com- Examples of Utilizing Intangible Assets Across Business Sectors Utilizing M&A know-how and human resources from the Health Care sector for overseas expansion in the Homes sector ported by a business platform that underpins the Asahi Kasei Group bining its shared assets to maximize their value. As barriers between In the Health Care sector, business development leveraging M&A and as a whole. In a highly volatile and unpredictable operating environ- industries become lower and activities transcending industry frame- corporate venture capital (CVC) activities is driving growth. Utilizing the ment, it becomes increasingly important to reinforce the foundation works accelerate, new value can be created by taking data, intellectual know-how and human resources accumulated through such efforts, and platform supporting such transformation. property, and other intangible assets accumulated in one field and uti- the Homes business expanded into Australia in 2017 and North We have a diverse range of businesses. Rather than confining the lizing them in another, or by combining such intangible assets in differ- America in 2018. Overseas net sales in the Homes business were diverse human resources, data, technologies, know-how, and other ent fields. Amid an unpredictable operating environment, it is also vital ¥146.3 billion in fiscal 2021, and the fiscal 2025 target is ¥200 billion. intangible assets created through these businesses to any single field, to enhance the precision of strategy planning and decision-making by we accumulate them as shared assets for the Asahi Kasei Group as a utilizing data and intellectual property in an integrated manner. whole. We have expanded and enhanced our diverse and extensive To this end, we established Digital Value Co-Creation to spread DX intangible assets by leveraging them across our business sectors to throughout the Asahi Kasei Group as a whole, and the Intellectual Utilizing a variety of expertise gained through the operation of diverse businesses in enhancing the management of the Asahi Kasei Group as a whole repeatedly circulate and organically connect them. Efforts that contribute Property Intelligence Department to utilize intellectual property in our As our three business sectors differ in the value they provide and the to the circulation of such intangible assets include the transfer of human management. In addition, to deliberately track, manage, and analyze industries that they serve, each has its own industry-specific manage- resources across business sectors, the deliberate provision of opportuni- our accumulated intangible assets, we have accelerated the develop- ment methods, perspectives, risk management know-how, and other ties for human resources within the Asahi Kasei Group to connect, and ment of mechanisms such as DEEP, a data management infrastruc- unique expertise. Senior executives share the diverse perspectives and the cultivation of an open and dynamic corporate culture receptive to ture for the Asahi Kasei Group as a whole, and SPACE, a personnel information gained from such expertise to quickly understand market diverse ideas that encourages employees to take on new challenges. recommendation system. trends and enhance management. Systems for Accumulating, Expanding, and Enhancing Intangible Assets in Asahi Kasei’s Business Platform Material Homes Health Care Asahi Kasei Group Business platform Expanding and enhancing intangible assets by repeatedly circulating and organically connecting them across sectors Data Know-How Brand Human Resources Technologies A-Spirit Customer Contact Points etc. Intellectual Property Utilizing human resource rotations across business sectors to cultivate the next generation of leaders We cultivate human resources with broad viewpoints and elevated per- spectives by implementing planned transfers across business sectors to give people experience of a diverse range of businesses. The sys- tems we have developed to deliberately circulate our intangible assets are centered on people. For example, after growing as digital human resources, personnel from business units transferred to Digital Value Co-Creation return to their business units as DX promotion leaders. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information02Strengthening of Corporate GovernanceAsahi Kasei Report 2022 22 Growth Strategy Company-wide Strategies Business Strategies by Sector 23 New Medium-Term Management Plan 2024— Be a Trailblazer 27 Financial and Capital Policy 29 Green Transformation 32 Initiatives regarding Climate Change Disclosure Based on 45 Material 51 Homes 54 Health Care 58 Interview with the CEO of ZOLL Medical Corporation the TCFD Recommendations 35 Digital Transformation 38 Transformation of HR 42 New Business Creation 43 Fully Utilizing Intellectual Property and Other Intangible Assets to Create New Businesses—Establishment of the Intellectual Property Intelligence Department 03Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 23 New Medium-Term Management Plan 2024 — Be a Trailblazer The Asahi Kasei Group formulated its new medium-term management plan (MTP) for three years from fiscal 2022 to fiscal 2024 focused on the theme “Be a Trailblazer” as the first step toward realizing its vision for 2030. Review of the Previous Medium-Term Management Plan While we achieved our initial target for net sales in fiscal 2021, the same time, we steadily implemented growth strategies in our fields for provision of value and strengthened our founda- the final year of the previous MTP, results for operating income, tion for growth under an uncertain operating environment. Financial Targets for FY2024 Operating income ¥270 billion ROE 11% or more ROIC 8% or more net income, ROIC, and ROE fell short of the plan amid changes in international affairs—such as the decoupling of the United States and China and the situation in Russia and Ukraine—and major changes in the operating environment, including the COVID-19 pandemic and surging feedstock and fuel prices. At Major Initiatives • Promoted growth strategies through proactive M&A in the Health Care and Homes sectors • Accelerated the technological development and commercializa- tion of hydrogen-related, CO2 chemistry, and other businesses • Implemented reforms in strategic restructuring businesses identified through business evaluations Priority Investments • Implemented M&A in the Health Care sector • Expanded growth businesses such as lithium-ion battery (LIB) separator • Strengthened foundation for digital transformation (DX) and decarbonization Strengthened Business Platform Green: Formulated Sustainability Policy, introduced internal carbon pricing, and declared goal of achieving carbon neutrality Digital: Formulated Asahi Kasei DX Vision 2030, established Digital Value Co-Creation, and launched DX training People: Strengthened management capabilities, began career design program for young employees, and promoted empowerment of women Vision for 2030 Issues exposed by major changes in society, such as those prompted by COVID-19, correspond with the Asahi Kasei Group’s commitment to “Care for People, Care for Earth.” Such issues will become more interrelated across a variety of indus- tries as industrial boundaries become less distinct. The Asahi Kasei Group, with its diverse range of businesses, views these issues as significant business opportunities and aims to achieve further growth by boldly taking on challenges in our five fields for provision of value. We are also targeting a reduction in our GHG emissions of 30% or more by fiscal 2030 compared with fiscal 2013. Long-Term Outlook for Around FY2030 Operating income ¥400 billion ROE 15% or more ROIC 10% or more Basic Guidelines for Business Portfolio Evolution Challenging investment for growth together with cash genera- tion through the strengthening of existing businesses and struc- tural transformation are the essential combination for further evolution of our business portfolio. To strike a balance between them, we will place a strong emphasis on the three elements of speed, asset-light, and high value-added. With regard to “asset-light,” we will create optimal business models and scenarios tailored to each of our businesses based on the following two approaches without being constrained by conventional ideas of the process industries. In terms of existing businesses, we will pursue ways to generate profits by utilizing existing assets to the full. In the Material sector in particular, we will examine a variety of possibilities, including the downsizing and divestiture of businesses, from the standpoint of reducing GHG emissions to achieve carbon neutrality. In order to estab- Aims of the New Medium-Term Management Plan We will evolve our business portfolio to realize our vision by pur- lish new businesses, we will thoroughly pursue optimal uses of capital, including utilizing the capital of other companies, with- suing two mutually reinforcing aspects of sustainability as “con- out being exclusively dependent on our own R&D investments tributing to sustainable society” and “the sustainable growth of or owning our own facilities for commercialization. Being asset- corporate value.” Specifically, we will focus resources on business light in the development of new businesses accelerates the that will drive future growth while reaping the benefits of growth pace of development and allows us to focus on fields where we investments and advancing the reform of strategic restructuring can build superior positions, resulting in higher added value. businesses. In addition, we will embark on a fundamental busi- ness structure transformation from a medium-term perspective. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202224 Challenging Investment for Future Growth The Asahi Kasei Group has designated businesses that will We plan to invest ¥1 trillion or more on a cumulative basis Investments” section on page 28 . Although GG10 currently drive future growth as 10 Growth Gears (GG10) and will focus over the period of the new MTP, of which approximately ¥600 account for approximately 35% of our total operating income, resources on them going forward. With GG10 as gears to not only billion will be in GG10-related businesses. We will also proac- we will aim to increase this to more than 70% by around 2030. accelerate our own growth but also the transformation of soci- tively identify M&A opportunities to make bold investments. The following table provides an overview of GG10. ety, we aim to accelerate the creation of a sustainable society. For more details, please see the “Capital Expenditure and Overview of GG10 Businesses GG10 Environment & Energy Major Products and Services Market Environment Future Direction Hydrogen-Related (P46 ) Hydrogen-related business centered on alkaline water electrolysis systems Amid growing global demand for green hydro- gen, the water electrolysis market is predicted to grow, led by Europe. Through participation in demonstration projects around the world, etc., we aim to become a leading supplier driving the commercialization of the business by 2025 and construction of a supply chain. CO2 Chemistry (P47 ) • CO2 chemistry (manufacture of chemical products using CO2 as feedstock) • CO2 separation and recovery systems (CO2 adsorption technologies, etc.) The CO2 separation and recovery market, gar- nering increasing attention with efforts to achieve carbon neutrality, is expected to expand globally. Energy Storage (P48 ) of batteries over their total life • LIB separators and next-generation battery materials • Various new technologies helping enhance the value With growth centered on automotive applica- tions, the LIB separator market is forecasted to more than triple in size between 2021 and 2025. We will advance demonstrations in Europe with the aim of commercializing a busi- ness for CO2 separation and recovery systems by 2027. As for CO2 chemistry, we began R&D in the 1980s and have been operating a licensing business since 2002; we will seek to commercialize next-generation technologies in addition to expanding existing technologies. To meet robust demand, we will increase our production capacity for LIB separators over the medium to long term, including by examining strategic partnerships. We will identify various new technologies that will contribute to the swift commercializa- tion of innovative new materials and the enhancement of the value of batteries over their total life. Mobility Car Interior Material( P49 ) solutions (air conditioning, sound, etc.) • Interior materials, such as seat upholstery • Interior space management-related technologies and As new needs arise in relation to interior space in conjunction with the rapidly advancing shift to electric vehicles (EVs) on a global scale, the growth of the car interior market is expected to outpace the growth of automobile production. Catering to new market trends and needs, we will utilize group-wide resources such as marketing, technological, and design capabilities in an integrated manner, and strengthen our concept proposals in addition to material proposals with the aim of becoming the leading global manufacturer of car interior materials. Life Material Digital Solutions (P50 ) Electronic components Current sensors, gas sensors, magnetic sensors, milli- meter wave radar ICs, etc. Electronic materials Photosensitive polyimide, photosensitive dry film, high- performance glass fabric, epoxy resin curing agent, etc. The market for digital solutions is likely to expand due to increasing needs for digital tech- nologies and the cutting-edge technologies that underpin them due to the progression toward a carbon-neutral society, an aging society, and a digital society. We will offer components, materials, and solutions in response to the needs of the digital society by strengthening our integration of electronic components and materi- als. In addition, we will explore new developments aimed at future growth, including M&A, while promoting the identification of new business opportunities. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202225 GG10 Home & Living North American and Australian Homes (P53 ) Environmental Homes and Construction Materials (P52 ) Health Care Critical Care (P57 ) Major Products and Services Market Environment Future Direction North America Promoting a supplier model to streamline a wide range of processes in manufacturing and on construction sites Australia Promoting a new business model pursuing competitive advantages leveraging strengths in R&D Hebel Haus™ unit homes, Hebel Maison™ apartment buildings, pre-owned Hebel Haus™ homes, Neoma Foam™ insulation panels Amid expectations of solid ongoing demand for homes in North America and Australia on the back of a housing shortage associated with pop- ulation growth, issues including labor shortages, lengthy construction periods, and delays in the adoption of IT have become evident. Using our know-how in industrialized housing development cultivated in Japan, we will offer high-quality homes suited to local conditions. In North America, we will aim to establish and promote a supplier model streamlining a wide range of processes around housing frames at manufacturing and construction sites. In Australia, we will pursue customer satisfaction by establishing a highly competitive business model that builders or suppliers could not achieve alone. Potential demand is high as only 20% of new order-built unit homes in Japan currently meet ZEH standards, despite the government target for ZEH-level energy efficiency performance in new housing from fiscal 2030. Based on our superior homes with high durability and thermal insulation perfor- mance, we will offer new solutions in the field of energy, such as electricity purchas- ing systems. By contributing to the environment and realizing customer satisfaction, we expect this business to continue to be a main source of stable earnings from fiscal 2025 onward. • Critical care medical devices, such as defibrillators (defibrillators for professional use, AEDs, LifeVest™ wearable defibrillator, etc.,) • Diagnosis and treatment of cardiopulmonary conditions Global market growth is anticipated in both criti- cal care medical devices and the diagnosis and treatment of cardiopulmonary conditions due to factors including the progression and increasing sophistication of medical care and the aging of society. We will aim to become the leading global player in cardiopulmonary resuscitation and related areas through endeavors that include offering critical care medical devices and multifaceted solutions for the diagnosis, treatment, and management of heart disease and launching innovative medical devices that address unmet needs in relation to sleep apnea, acute myocardial infarction, and other diseases. Global Specialty Pharma (P55 ) Various pharmaceuticals for immunology and transplan- tation, etc. (such as Envarsus XR™ immunosuppressant) With approximately 25,000 kidney transplants carried out annually in the United States, the market is expected to see ongoing growth. Bioprocess (P56 ) • Bioprocess-related products centered on Planova™ virus removal filters • Pharmaceutical contract research organization (CRO) and contract development and manufacturing organi- zation (CDMO) services The bioprocess market is predicted to expand continuously due to the ongoing growth of bio- therapeutics, such as biopharmaceuticals, and the increasing diversity and sophistication of pharmaceutical technologies. We will promote business development, clinical development, and sales through col- laboration between Asahi Kasei Pharma and Veloxis Pharmaceuticals. In addition, we will aim to capture further growth opportunities, including the potential for acquiring a business platform in Europe. In addition to expanding our position in the virus removal filter market, we will aim to capture further growth opportunities through our entry into the CRO and CDMO businesses. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202226 Generating Cash through the Strengthening of Existing Businesses and Structural Transformation reexamining the strategies of strategic restructuring businesses. Furthermore, we will advance a fundamental business These businesses are categorized as Recovery businesses structure transformation, not only with respect to businesses During the period of the new MTP, we will promote fundamental (those achieving a recovery in profits through strategy revision), with deteriorating performance but also from the standpoint of business structure transformation from a medium-term per- Follow businesses (those planning and implementing reorgani- compatibility with our vision. Assessing businesses from the five spective while aiming to complete the reform of the strategic zation strategies), and Exit businesses (those under consider- perspectives of best owner, carbon neutrality, competitiveness, restructuring businesses, which we has been advancing since ation for downsizing or divestiture). Going forward, we will growth potential, and profitability and capital efficiency, we will the period of the previous MTP. carefully monitor Follow businesses and downsize or sell Exit create and implement a specific road map during the period of Business Evaluation Framework implement regular evaluations of our business portfolio, based through fundamental business structure transformation to GG10 businesses as quickly as possible. At the same time, we will the new MTP. We will then allocate the resources gained on which we will promptly reformulate the strategies of under- in order to accelerate the evolution of our business portfolio. performing businesses. C I O R S O R / Fundamental business structure transformation Strategic restructuring businesses Net sales growth rate Building on evaluations of the growth potential (net sales growth rate), profitability (operating margin), and capital efficiency (ROIC) of each strategic restructuring business, we have evalu- Reform of Strategic Restructuring Businesses Fundamental Business Structure Transformation Revise the strategies of businesses whose recent performance Structural transformation by assessing not only business deteriorated due to the COVID-19 pandemic and other factors performance but also strategic fit with our vision Exit Businesses under consideration for downsizing or divestiture Recovery Businesses achieving a recovery in profits through strategy Follow revision Businesses planning and implementing reorganization strategies Best owner Carbon neutrality Competitiveness Growth potential Profitability and capital efficiency Targets in the New Medium-Term Management Plan Targets in the New Medium-Term Management Plan ated these businesses including the perspectives of sustainabil- • Assess Follow businesses that are currently executing • Formulate and implement a road map for fundamental ity (quantitative indicators such as GHG emissions), profit amount, profit volatility, and business stage. Based on the results of the business evaluations, senior executives, including the President, and the heads of businesses held discussions reformulated strategies and complete the downsizing or divesti- ture of Exit businesses business structure transformation • Invest the resources gained through transformation • Implement regular business evaluations and revise the strate- in GG10 to accelerate growth gies of underperforming businesses Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Financial and Capital Policy 27 Enhancing Capital Efficiency economic slowdown as an effect of United States–China decou- The Asahi Kasei Group focuses on the cost of shareholders’ pling and the COVID-19 pandemic. In response, we are equity and seeks to continuously realize return on equity (ROE) advancing strategy reformulation following evaluations of busi- exceeding that cost. While pursuing the optimal capital struc- nesses that were unable to maintain certain levels of operating ture, we will work to heighten return on invested capital (ROIC) income, ROIC, and revenue growth. in each business by portfolio transformation, building competi- Despite the impact of changes in the operating environ- tive advantage, raising productivity, and carefully examining ment, we maintained a sound financial foundation thanks to the investment projects to ensure effective returns. success of our three-sector management. While emphasizing Achievements of the Previous Medium-Term Management Plan financial discipline, we made proactive investments in the Health Care sector, where we expect growth over the medium to long term, in lithium-ion battery separators and other growth In fiscal 2021, the final year of our previous medium-term man- businesses, and to strengthen our business platform, such as agement plan (MTP), net sales exceeded the initial target while by digital transformation and measures for decarbonization. profitability and capital efficiency fell short. This was largely due Regarding shareholder returns, the cumulative dividend payout to lower than expected operating income and ROIC in the ratio over the three years of the previous MTP (fiscal 2019 to Material sector which was impacted by changes in the operat- 2021) was 41%, essentially in line with the initial plan. ing environment from around fiscal 2019, such as the global Primary Financial Metrics FY2018 FY2019 FY2020 FY2021 FY2021 initial plan (as of May 2019) Net sales (¥ billion) Operating income (¥ billion) Operating margin EBITDA (¥ billion) EBITDA margin Net income (¥ billion) EPS ROIC ROE D/E ratio Net D/E ratio Capital ratio Profitability Capital efficiency Financial health 2,170.4 2,151.6 209.6 9.7% 313.6 14.5% 147.5 ¥106 8.8% 11.1% 0.31 0.17 53.6% 177.3 8.2% 295.6 13.7% 103.9 ¥75 6.6% 7.6% 0.52 0.36 48.2% 2,106.1 171.8 8.2% 305.1 14.5% 79.8 ¥57 4.9% 5.6% 0.45 0.30 50.3% 2,461.3 2,400.0 202.6 8.2% 350.8 14.3% 161.9 ¥117 6.6% 10.3% 0.45 0.31 50.4% 240.0 10.0% 370.0 15.4% 180.0 ¥130 9.0% 11.1% Around 0.50 — — Toshiyasu Horie, CFO Director, Senior Executive Officer Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 28 Policies in the New Medium-Term Management Plan Shareholder returns the level of shareholder returns, with a payout ratio of around Framework for capital allocation We will determine the level of shareholder returns based on the 30% to 40% (total for the three years of the new MTP.) Share By raising our overall cash generation capability and capital effi- medium-term outlook for free cash flow. Shareholder returns buybacks will be performed as deemed appropriate based on ciency, over the three years of the new MTP we expect to will basically be by dividends, with an aim to maintain or comprehensive consideration of the suitable level of equity, achieve operating cash flow between ¥750 billion and ¥900 bil- increase dividends per share. We will strive to steadily increase investment items, and the share price. lion, and investing cash flow between ¥800 billion and ¥900 billion including capital expenditure and financial investments. Shareholder returns of between ¥150 billion and ¥180 billion are expected along with profit growth. We plan to increase interest-bearing debt to augment cash as needed, expecting to borrow between ¥50 billion and ¥300 billion depending on the circumstances. Anticipating a debt-to-equity (D/E) ratio of between 0.4 times and 0.7 times, we will pursue optimal capi- tal efficiency while maintaining financial soundness. Capital expenditure and investments Over the three years of the new MTP, we plan to make invest- ments exceeding ¥1 trillion, of which we expect to invest approximately ¥600 billion in the GG10 businesses. In selecting investment projects, we will emphasize financial discipline in both large and small investments for growth by carefully exam- ining projects from the three perspectives of environmental value (whether it is worth investment even considering carbon pricing), investment efficiency (whether it will ultimately contrib- ute to improved ROIC), and the investment scenario (whether it is better to invest with capital outside Asahi Kasei.) Framework for Capital Allocation (three-year period FY2022–2024) Operating cash flow 3-year total ¥750 billion to ¥900 billion Borrowing capacity Increase in interest-bearing debt +¥50 billion to ¥300 billion (D/E ratio of 0.4 to 0.7) Cash flows (¥billion) 300 200 100 0 （100）（200）（300）（400） 249.9 212.1 139.6 124.5 13.1 253.7 183.3 95.9 （37.7）（110.3）（198.9）（193.7）（157.8）（221.0）（318.2） Investing cash flow Capital expenditure and financial investments 3-year total (including M&A) ¥800 billion to ¥900 billion* * Cash-outflow basis (different from decision-adopted basis) Shareholder returns 3-year total ¥150 billion to ¥180 billion Dividends per share and dividend payout ratio (¥) 40 30 20 10 0 34 34 34 34 34 59.1 45.4 27.9 32.2 29.1 (%) 80 60 40 20 0 2017 2018 2019 2020 2021 (FY) 2017 2018 2019 2020 2021 (FY) Operating cash flow Investing cash flow Free cash flow Dividends per share (left scale) Payout ratio (right scale) Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 29 Green Transformation (GX) To create new value by strengthening its business platform and enhancing the sophistication of its businesses, the Asahi Kasei Group is focused on the key areas of green (G), digital (D), and people (P). As green transformation (GX) is a shared and pressing task globally, initiatives are advanced including cooperation with other companies. Aiming to Create a Carbon-Neutral and Sustainable World With GX as a key for enabling “harmony with the natural envi- Framework for Promoting GX GX in Management Strategy ronment” under our Group Vision, we aim to create a carbon- In fiscal 2019, we established a Sustainability Committee with the GX is one of the pillars of the Asahi Kasei Group’s management neutral and sustainable world. We are working to achieve this goal of promoting sustainability across the Asahi Kasei Group. strategy. In our MTP, we formulated our growth strategy based aim through a two-pronged approach: reducing GHG emissions Chaired by the President and with Executive Officers for Business on megatrends related to climate change. As initiatives related from our business activities and contributing to reducing soci- Sectors, Technology Functions, and Business Management to climate change, pursuing business opportunities from the ety’s GHG emissions. Functions as members, the committee shares information on perspective of reducing risks related to our businesses and miti- We are targeting a reduction of 30% or more GHG emissions sustainability-related issues including global environmental mea- gating and adapting to climate change are key tasks along with from our business activities by fiscal 2030 (compared with fiscal sures and provides direction for activities. In fiscal 2021, in order transforming our business portfolio. 2013), and our goal is carbon neutrality by 2050. We aim to to accelerate our contribution to reducing society’s GHG emis- To implement these initiatives related to climate change, we achieve carbon neutrality with efforts centered on the utilization sions, we launched a Green Solution Project to advance the cre- have also allocated a budget for investments related to decar- of existing technologies up to 2030 in combination with efforts ation of new businesses aimed at achieving carbon neutrality. bonization to give greater priority to such investments, and are over the medium to long term looking ahead to 2050, including Regarding efforts to reduce GHG emissions from our business prepared to implement investments totaling approximately ¥60 the development of new technologies. The evolution of our busi- activities, we appointed an Executive Officer for Carbon Neutrality billion over the three years to fiscal 2024. ness portfolio, as set out in the medium-term management plan and established a dedicated project in fiscal 2022. The project To raise awareness and encourage actions for achieving (MTP), is also a vital element in achieving these goals. has begun detailed discussions on clarifying and giving concrete carbon neutrality, we operate internal carbon pricing (ICP) that To contribute to reducing society’s GHG emissions, we will form to our roadmap for carbon neutrality. tracks GHG emissions from our business activities as a mone- capitalize on the diverse technologies and businesses that are a distinctive feature of the Asahi Kasei Group to pursue the devel- opment of products and the creation of businesses that will help reduce GHG emissions from a variety of perspectives. Given that reducing society’s GHG emissions requires a funda- mental transformation of social structures, people’s lifestyles, and other matters, we will proactively cooperate with other com- panies across industries and promote initiatives with govern- ment agencies and other parties. Through these efforts, we will also advance our own evolution and growth. Board of Directors (Management Council) President Administrative departments Strategic business units, Core operating companies Sustainability Committee Global Environment Committee Other subcommittees Risk Management & Compliance Committee ESH & QA Committee Carbon Neutrality Project Green Solution Project tary value. We seek to carefully select investment projects in order to increase production and accelerate investments that reduce CO2 emissions by incorporating a monetary value of ¥10,000 per ton of CO2 emissions into calculations to determine the profitability of capital expenditures. We also incorporate ICP into performance evaluations for internal awards. Furthermore, we calculate and provide data to customers on the carbon foot- print of our products—GHG emissions from the extraction of raw materials to manufacture and shipment—with a view to accelerating the reduction of society’s overall GHG emissions. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 30 Reducing GHG Emissions from Business Activities Asahi Kasei has adopted the following targets for Scope 1 power generation, between 100,000 tons and 200,000 tons liquefied natural gas in order to reduce GHG emissions, with (direct GHG emissions) and Scope 2 (indirect GHG emissions through purchases of non-fossil fuel electricity, and between start-up in March 2022. The fuel conversion is expected to from the use of electricity, heat, and steam supplied by other 100,000 tons and 200,000 tons through manufacturing pro- reduce GHG emissions by approximately 160,000 tons annu- companies), which are the GHG emissions that our business cess improvement and innovation. In addition, we will transform ally. We are also expanding our utilization of biomass fuel and activities most directly affect as a manufacturer, and that we are our business portfolio with an emphasis on the perspective of solar power. For example, the Italian manufacturing site of Sage most expected to reduce. GHG emission reductions. Automotive Interiors, Inc., and the Shiga Plant of Asahi Kasei Targets 2030 Target to reduce GHG emissions by 30% or more (compared with fiscal 2013) 2050 Goal to achieve carbon neutrality (net-zero emissions) In the second step, we will seek to achieve carbon neutrality Jyuko Co., Ltd., are proactively utilizing solar power generation. by 2050 through the greening of electricity and steam through The Asahi Kasei Group has also begun using electricity gener- the practical application of decarbonization technologies devel- ated from solar power systems installed on Hebel Maison™ oped by the Asahi Kasei Group, such as alkaline water electroly- apartment buildings of Asahi Kasei Homes Corp. In the period covered by the first step toward reducing sis technology, the innovation of manufacturing processes, and GHG emissions from our business activities, leading up to the further transformation of our business portfolio. Accelerating the Utilization of Carbon Footprints 2030 we will advance reductions with a focus on existing technologies. In the second step, which we will promote from Progress to Fiscal 2021 Calculating the carbon footprint of products and services and providing that data to customers represents an important role 2030 to 2050, we will advance reductions centered on the The Asahi Kasei Group is successively upgrading and raising that a materials manufacturer can play in helping society as a utilization of new technologies. the capacity of the hydroelectric power facilities it owns, primar- whole achieve carbon neutrality. With a focus on our mainstay Specifically, in the first step we will aim to reduce 300,000 ily in Miyazaki Prefecture. In addition, we converted one of our products, we are advancing the calculation of the carbon foot- tons of emissions through the low-carbonization of in-house independently owned coal-fired thermal power plants to run on print of products while utilizing digital technology. Roadmap to 2050 (Million tons CO2-e) 1st Step Reduction centered on established technologies 3.91 2nd Step Reduction centered on new technologies <3.6 • Low-carbonization of in-house power generation 300,000 tons • Purchase of non-fossil power 100,000 to 200,000 tons • Manufacturing process improvement and innovation 100,000 to 200,000 tons • Business portfolio transformation from the perspective of reducing GHG emissions • Greening of electricity and steam through the practical application of technologies for alkaline water electrolysis, CO2 separation and recovery, etc. • Promotion of manufacturing process innovation • Promotion of business portfolio transformation 2020 2030 Carbon neutral 2050 5 4 3 2 1 0 In May 2022, we established a system to calculate the carbon footprint of synthetic rubber and elastomer products, and began providing the data to customers in June. Using this system, we can adjust the unit size and scope of the carbon footprint data we calculate, enabling us to ascertain data according to needs. We have also established a platform for calculating the carbon footprint of performance resins used as material for automobile parts, electronic parts, etc., by ascer- taining GHG emissions of each product grade. Leveraging these leading examples, we will utilize digital technology to establish a framework enabling us to grasp the carbon footprint of products in each of our businesses. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 31 Contribution to Reducing Society’s GHG Emissions To contribute to reducing society’s GHG emissions, we are fiscal 2020. Looking ahead to fiscal 2030, we also aim to further trains. Asahi Kasei was the first company in the world to com- working to reduce such emissions from a life cycle assessment increase the sales ratio of environmental contribution products, mercialize technology for making polycarbonate using CO2 and (LCA) perspective, which assesses the impact of our products which currently account for approximately 30% of total consoli- ethylene oxide, and has licensed the technology to polycarbon- and services with an emphasis on reducing environmental dated net sales excluding the Health Care sector.* ate manufacturers globally. This technology recovers CO2 that impact across their entire life cycle. We have adopted the fol- lowing targets in order to advance the further expansion and * As the Health Care sector emphasizes providing value to society from the perspective of enabling “living in health and comfort,” its net sales are excluded from the calculation. would otherwise be emitted into the atmosphere from other plants, and uses it as a material to manufacture polycarbonate, new development of products and services that contribute to Expansion of Environmental Contribution Products which reduces CO2 emissions compared with conventional such reductions. Defining environmental contribution products manufacturing methods. In addition, as the manufacturing pro- Targets 2030 • At least double the contribution to reduced GHG emissions (compared with fiscal 2020) • Increase the sales ratio of environmental contribution products Based on the opinions of outside experts, the Asahi Kasei Group independently calculates the amount of contribution to GHG emission reduction from an LCA perspective. We have des- ignated a total of 20 products and services as environmental contribution products in fiscal 2022. We are proactively promot- ing the development and widespread adoption of environmental contribution products, aiming to at least double their contribu- tion to reduced GHG emissions by fiscal 2030 compared with GHG Reduction by Environmental Contribution Products Sales Ratio of Environmental Contribution Products (Million tons CO2-e) (%) 30 20 10 0 At least double FY2020 30% 2020 2030 FY2030 Taking into account reviews by outside experts, the Asahi cess involves materials alone, without using solvents, the Kasei Group assesses the environmental contribution level of absence of any environmental impact in conjunction with dis- products proposed by its strategic business units and core posing of used solvents is also a distinguishing feature. operating companies from an LCA perspective. The products and services that are recognized internally as contributing to Reduction of energy consumption by using CO2 sensors the environment are designated “environmental contribution The Asahi Kasei Group has developed CO2 sensors—small, products.” We assess such products and services from the high-precision, low-power gas sensors that measure CO2 con- perspectives of climate change (including CO2 emission centration levels in the air—by combining the module technol- reduction, energy saving, and renewable energy), resources ogy of Senseair AB, a company we acquired, with our own (waste reduction, recycling, water resources, and raw materi- compound semiconductor technology. While optimal ventilation als), biodiversity, and prevention of environmental pollution. in accordance with air quality can improve the energy efficiency As efforts to develop and expand such products contribute to of air conditioning in buildings and large structures, this requires reduced environmental impact in society while fostering the the high-precision measurement of CO2 concentration levels. growth of our businesses, they also help promote the two Our CO2 sensors are suited to this application, helping to mutually reinforcing aspects of sustainability of “contributing reduce the electricity consumption of heating and cooling sys- to sustainable society” and “the sustainable growth of corpo- tems. As the measurement of CO2 concentration levels is simi- rate value,” which we aim for. larly essential for the energy efficiency of the air conditioning of Polycarbonate manufacturing technology using CO2 strengthen our environmental con- Polycarbonate is a high-performance plastic used in a wide tribution by increasing the sales of range of products, such as DVDs, Blu-ray discs, housings for our CO2 sensors in line with the smartphones and other consumer electronics, automobile widespread adoption and expan- headlight covers, and windows for airplanes and high-speed sion of EVs. electric vehicles (EVs), we will Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 32 Initiatives Regarding Climate Change Disclosure Based on the TCFD1 Recommendations The Asahi Kasei Group examines the changes that are expected management share information on and discuss issues related to occur due to climate change and their impact on its busi- to sustainability, including climate change. The results of these nesses from a variety of perspectives. Along with posing risks, discussions are reported to the Board of Directors, which then Estimated Cost of CO2 under the +1.5ºC Scenario The Asahi Kasei Group currently emits approximately four million tons of CO2 (Scopes 1 and 2) per year. Assuming a CO2 price of climate change also presents opportunities for Asahi Kasei. Our discusses issues including the state of initiatives for the whole ¥10,000 per ton, the annual cost of these emissions would come new medium-term management plan (MTP), which is currently Asahi Kasei Group. We are also working on a specific roadmap in progress, was formulated with these risks and opportunities for achieving our GHG emission reduction targets through the in mind. We will contribute to the creation of a sustainable soci- Carbon Neutrality Project (please see page 29 for a diagram ety through our diverse technologies and businesses while pro- on this system). actively promoting climate change adaptation and mitigation measures as growth opportunities. Strategy Basis of analysis Corporate Governance We examined the impact on our current businesses and the The Asahi Kasei Group regards promoting measures to new opportunities for us leading up to 2050 based on a +4ºC address climate change as an important management task. scenario in which global warming countermeasures have not Accordingly, these measures are one of the core themes of our progressed adequately (IPCC, SSP3-7.02) and a +1.5ºC sce- to ¥40.0 billion. As we are reducing our emissions with the goal of achieving carbon neutrality by 2050, this cost is declining. Under a trial calculation based on the required CO2 price4 and our CO2 reduction targets, the total cost of emissions until 2050 would be ¥530.0 billion on a cumulative basis (using a present value discount rate of 5%). Meanwhile, the Asahi Kasei Group has approximately ¥1.7 trillion in net assets (as of March 31, 2022) and is positioned to record positive net income every year up to 2050. We will accu- rately perceive climate change risks, including CO2 costs, to pursue business opportunities and evolve our business portfolio. We will endeavor to expand net assets and enhance shareholder returns through strategic investments in businesses that contrib- management strategy. nario in which CO2 emissions have been significantly curbed in ute to the environment. Policies and important matters regarding climate change order to rein in temperature rises (WEO, Net Zero Emissions by are deliberated and decided by the Board of Directors, and 2050 Scenario (NZE)3). specific related matters are determined by the Management Council, the decision-making body for business execution (spe- Note: Our analysis is based on a variety of assumptions. Changes to these assumptions may result in actual risks and opportunities differing significantly from the analysis. cifically, these include decisions on MTPs, GHG emission Risks regulations through carbon pricing and other government poli- cies primarily aimed at achieving decarbonization, we anticipate a shift in demand to materials suitable for decarbonization as a risk. We also anticipate market structure changes resulting from reduction targets, and capital expenditure plans, as well as con- Under the +4ºC scenario, we primarily anticipate physical risks, an acceleration in the transition to a circular economy and the firming the state of their progress). such as intense heat, heavy rain, and floods. In particular, we emergence of innovative technologies designed to create a Our Sustainability Committee, which is chaired by the perceive damage to production sites caused by the effects of decarbonized society as risks. President, promotes the decisions of the Board of Directors and increasingly severe storms and floods and the resultant cost of While the degree of these risks varies, we are advancing the Management Council at the business level. At meetings of such damage to be a risk for our major sites in Japan and over- risk mitigation initiatives based on the view that all may manifest the Sustainability Committee, members of executive seas. Under the +1.5ºC scenario, in addition to tightened as the climate changes going forward. 1 TCFD: Task force on Climate-related Financial Disclosures. The TCFD was established and its recommendations were officially announced by the Financial Services Board in 2017. 2 One of the scenarios in the sixth report of the Intergovernmental Panel on Climate Change (IPCC). SSP stands for Shared Socio-Economic Pathway and SSP3-7.0 refers to a regional rivalry in which no climate change countermeasures are enacted and temperatures rise 4ºC by 2100. 3 One of the scenarios in World Energy Outlook (WEO) 2021, prepared by the International Energy Agency (IEA). NZE is a scenario for achieving global net-zero emissions by 2050 in order to limit temperature rises to 1.5ºC by 2100. 4 CO2 prices (US$/tCO2) under NZE in WEO 2021: US$130 in 2030, US$205 in 2040, and US$250 in 2050. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 33 Opportunities The Asahi Kasei Group has positioned Environment & Energy, Mobility, Life Material, Home & Living, and Health Care as fields for provision of value in its MTP. We have also designated GG10 as businesses in which we will focus resources to achieve growth. Established on the basis of megatrends related to climate change, these fields can clearly provide value in terms of mitigation and adaptation under various climate change scenarios, even consider- ing the latest IPCC and IEA reports. Accordingly, we believe that our business promotion and direction can provide various products and services as business opportunities to address climate change. Megatrends Fields for provision of value GG10 Relationship with climate change scenarios 4ºC 1.5ºC Decarbonized society Environment & Energy Digital society Healthy longevity society Mobility Life Material Home & Living Health Care Hydrogen-Related CO2 Chemistry Energy Storage Car Interior Material Digital Solutions North American and Australian Homes Environmental Homes and Construction Materials Critical Care Global Specialty Pharma Bioprocess Note: Deemed to have a strong relationship, including a direct reference in the sixth IPCC report and in WEO 2021 Although not as strong as the above, expected to be broadly related Risks Important Changes Main Risks Major Initiatives +4ºC scenario +1.5ºC scenario Serious storm and flood damage “Physical” production risks • Impact on production from damage to plants or suppliers • Continuous revision of BCP and reinforcement of preemptive response (review of inventory levels, study of multiple suppliers/sites, etc.) Rise in temperature “Human” production risks • Deterioration of working environment and productivity at • Promotion of industrialization and utilization of IT in housing construction • Promotion of heatstroke countermeasures at construction sites Decarbonization Changes in market structure construction sites • Rise in costs due to stricter regulations (manufacturing and raw material costs) • Changes in materials needs (decarbonization requirements, necessary specifications) • Contraction of existing markets due to the transition to a circular economy • Contraction of existing markets due to the advance of replacement technologies • Expansion in utilization of renewable energy, etc. • More efficient energy use; development and commercialization of industrial processes for decarbonization • Decarbonization of raw materials • Acceleration of product decarbonization by ascertaining carbon footprints5 • Development of material and chemical recycling technologies and promotion of their practical application • Adoption of biomass feedstock • Review of management resource allocation Opportunities Important Changes Main Opportunities Major Initiatives +4ºC scenario +1.5ºC scenario Serious storm and flood damage Increase in heatstroke and infectious diseases • Increase in need for disaster-resilient housing • Greater emphasis on resilience in home construction and urban development, such as the expansion of Hebel Haus™ • Expansion in demand for existing and new pharmaceuticals and acute critical care products • Provision of related pharmaceuticals and medical devices • Provision of related process materials, equipment, and services and Hebel Maison™ Decarbonization government policies • Expansion in demand for carbon-free products • Promotion of the spread of ZEH6 and ZEH-M6 through • Decarbonization of homes and urban environments through the expansion of ZEH-compliant Hebel Haus™ and Hebel Maison™ • Promotion of the low carbonization of various products (energy, materials, processes) • Development of chemicals made with CO2 as material Spread of electric vehicles (EVs) • Increase in EV-related demand (battery components, materials for reducing vehicle weight) • Development of materials for next-generation mobility • Strengthening of collaboration with automobile and battery manufacturers Advent of a hydrogen society • Increase in demand for water electrolysis using renewable energy • Development of a system to manufacture green hydrogen and promotion of its commercialization Transition to a circular economy Expansion of the digital market • Expansion in demand for materials and infrastructure compatible with a circular economy • Development of material and chemical recycling technologies and promotion of their practical application • Adoption of biomass feedstock • Growth in demand for decarbonization-related digital solutions • Promotion of electronic components, such as current sensors and CO2 sensors, and semiconductor- and substrate-related electronic (industry and society) materials businesses 5 GHG emissions of a product from material extraction to production 6 Net Zero Energy House (ZEH) and Net Zero Energy House Mansion (ZEH-M): Houses and apartment buildings with a net energy consumption of zero or less through advanced insulation and energy saving combined with power generation such as solar Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202234 Risk Management Metrics and Targets Asahi Kasei implements independently assured tracking of its The Asahi Kasei Group has positioned the following metrics as being relevant to climate change risks and opportunities. GHG emission volumes on an annual basis. The Sustainability Committee and its subcommittee the Global Environment Committee share information on the results and the level of GHG emissions7 2030: Reduce by 30% or more (compared with fiscal 2013) 2050: Achieve carbon neutrality Target Significance of Metric progress toward achieving targets and discuss future initiatives. GHG emissions7/operating income (Fiscal 2021 result: 0.20 t-CO2e/100 million yen) Decline signifies reduction of carbon tax risk The committees also monitor the level of GHG emission reduc- ROIC Around 2030: Achieve ROIC of 10% or more Increase indicates progress toward becoming a high- earnings enterprise capable of adapting to change tions, examine business strategies, and report to the Board of Directors during the formulation and annual review of the MTP. Operating income of GG10 Around 2030: 70% or more of total operating income (Fiscal 2021: 35%) Signifies growth of related businesses capable of contrib- uting to addressing climate change In addition, the committees monitor related matters on a quar- Others terly and monthly basis. For capital expenditures examined and Internal carbon pricing (ICP) Make investment decisions based on ¥10,000/t-CO2e and utilize in awards program proposed as needed, the committees also assess profitability and make decisions in light of internal carbon pricing. Reflection of climate change issues in executive remuneration Reflect the level of achievement of sustainability promotion, including initiatives related to climate change, in perfor- mance-linked remuneration 7 Direct GHG emissions from business activities as indicated by Scope 1 (direct GHG emissions) and Scope 2 (indirect GHG emissions from use of electricity, heat, and steam supplied by other companies) Overview of the Group’s Response to Climate Change Various scenarios in the event of climate change progressing From curtailing temperature rises through government policies and social changes to intense heat, flood damage, and ecosystem destruction, etc., through failure to curtail temperature rises Risks Transition risks • Carbon pricing (CO2 costs) • Loss of value of business assets through CO2 costs • Business deterioration resulting from technological progress and market changes, etc. Physical risks • Damage to supply chain due to flooding and other adverse weather events, etc. Asahi Kasei Group Management Opportunities Promotion of new MTP focused on the theme “Be a Trailblazer” (GG10, asset-light, business structure transformation) Control KPIs GHG emissions, GHG emissions/operating income, ROIC, GG10 operating income Progress management Quarterly meetings, rolling review of MTP, monthly monitoring, Global Environment Committee Proactive advancement Climate change mitigation and adaptation • Hydrogen-related • Digital-related products business and services • CO2 separation, • Health care business, etc. recovery, and utilization • EV-related business • ZEH and resilient homes Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 35 Digital Transformation Formulation of a DX Promotion Road Map and the Asahi Kasei DX Vision 2030 Strengthening of the DX Framework We have worked to strengthen the framework to accelerate the Cultivation and Recruitment of Digital Human Resources The Asahi Kasei Group proactively promotes the utilization of dig- promotion of DX across the Asahi Kasei Group as a whole. In We are proactively cultivating and recruiting digital human ital technology as a means of leveraging its diverse intangible April 2021, we established Digital Value Co-Creation, an organi- resources. Along with solidifying our DX human resources assets to transform business models and drive value creation. In zation consolidating the promotion of DX in each of the func- foundation by advancing measures to create 40,000 digital promoting the utilization of digital technology, we formulated an tions of sales, marketing, research and development (R&D), personnel, with all employees acquiring digital literacy and overall road map to reinforce our foundations for advancing digi- manufacturing, and production together with digital technology- working with a mindset for utilizing digital technology, we are tal transformation (DX), setting the period up to fiscal 2021 as related matters such as IT infrastructure and cybersecurity. In also cultivating human resources who can promote DX autono- the Digital Introduction Period to focus on its front lines and doing so, we put in place a system for co-creation and collabo- mously in each of our businesses, including through the devel- resolve actual issues using digital technology and the Digital ration with internal and external parties in the digital field. To opment of business leaders into DX leaders. Through the Deployment Period to deploy digital technology across busi- promote such co-creation and collaboration, we opened CoCo- implementation of development programs and recruitment, we nesses, regions, work roles, and other aspects of operations. CAFE, a digital co-creation laboratory with the aim of fortifying have also advanced the cultivation and recruitment of digital From fiscal 2022, we will advance the utilization of digital tech- our DX foundation and creating businesses by encouraging professional human resources who can resolve the issues of nology in adding value from intangible assets and creating new interactions among internal and external digital-related human businesses and create new value and business models by uti- business models and businesses as the Digital Creation Period resources. We have also established a system for collaboration lizing advanced digital technology and data. As a result of with the aim of transitioning to the Digital Normal Period, which between the heads of business units and Digital Value these efforts, we achieved our target of recruiting and cultivat- sees all employees utilize digital technology as a matter of course. In recognition of these initiatives, Asahi Kasei was selected as a DX Stock for two consecutive years in 2021 and 2022, a selection made jointly by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange, Inc. Our initiatives were also featured in DX White Paper 2021, which was published by the Information-technology Promotion Agency, Japan. In fiscal 2021, we formulated the Asahi Kasei DX Vision 2030 Co-Creation (relationship manager system) to facilitate the ing 230 digital professional human resources by the end of sharing of issues, key topics, and other matters in each busi- fiscal 2021, as planned. ness and the promotion of concrete initiatives. Overview of the DX Promotion Road Map From 2018 Digital Introduction Period From 2020 Digital Deployment Period From 2022 Digital Creation Period From 2024 Digital Normal Period in order to further accelerate DX. The vision internally and exter- • MI, production technology • Formulation of the Asahi Kasei • Business model transformation, nally portrays the world that we aim to realize through DX in 2030 innovation, IP landscape, etc. DX Vision 2030 adding value from intangible assets by co-creating “healthy living” and “a future world full of smiles” About 400 projects through borderless connections enhanced by digital innovation. • Digital Value Co-Creation, • Utilization in management co-creation laboratories, etc. decision-making • Utilization in human resource management, etc. All employees gain a mindset of digital utilization Foundations of functional DX Acceleration of group-wide Management innovation DX promotion through DX 40,000 digital human resources Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 Three Main Pillars of the Digital Creation Period from Fiscal 2022 For a strengthened digital platform, we will accelerate the culti- vation and recruitment of digital human resources, instill agile In the Digital Creation Period from fiscal 2022, the Asahi Kasei development that makes use of design thinking throughout the Group will promote DX through the three main pillars of business Asahi Kasei Group, and facilitate data utilization. transformation, enhancement of management, and a strength- We have also established DX-Challenge 10-10-10 as a key ened digital platform based on its data management platform performance indicator (KPI) (fiscal 2024 target) to measure the with a diverse array of data. In terms of specific initiatives, we progress of our DX efforts. Under this KPI we will aim for a ten- will focus on business transformation in the five areas of adding fold increase in the number of our digital professional human value from intangible assets and accelerating co-creation, inno- resources compared with fiscal 2021 (approximately 2,500 of all vating marketing, connecting supply chains, creating new busi- employees globally), a tenfold increase in the volume of data nesses, and operating smart factories. For the enhancement of usage throughout the Asahi Kasei Group compared with fiscal management, we will focus on the six areas of DX utilization for 2021, and a ¥10 billion profit contribution from main projects, in promoting the visualization of management and for decision- addition to the contribution to profits through the utilization of making, sophisticated intellectual property usage, invigoration of DX in normal business activities. In these ways, we will fully uti- human resources, advanced research and development, quality lize our diverse assets by leveraging digital technology to change maintenance, and the visualization of product carbon footprints. our business models at a rapid pace. Three main pillars of the Digital Creation Period Innovating marketing Connecting supply chains Business transformation Life Material Life Material Life Material Creating new businesses Mobility Mobility Mobility Home & Living Home & Living Home & Living Operating smart factories Asahi Kasei data management infrastructure DEEP Health Care Health Care Health Care Supply chain Visualization of carbon footprints Adding value from intangible assets/accelerating co-creation Environment Environment Environment & Energy & Energy & Energy Visualization of management/ decision-making Plants R&D Corporate Enhancement of management Quality maintenance Sophisticated IP usage Human resources DX Advanced R&D Strengthened digital platform Digital HR cultivation and recruitment, further introduction of agile development, promotion of digital data usage DX-Challenge 10-10-10 Digital professional human resources Volume of digital data usage 10 times (vs. FY2021) 10 times (vs. FY2021) Profit contribution from main projects ¥10 billion (Three-year total) DX-related investment* Three-year total: ≈¥30.0 billion * IT investments and cloud usage fees for digital transformation 36 Kazushi Kuse Director Primary Executive Officer Oversight: Digital Transformation (DX) Senior General Manager, Digital Value Co-Creation Eliminating All Barriers through Digital Technology to Evolve Value Creation I believe that people, data, and organizational culture are the three factors that are vital to the success of DX. The Asahi Kasei Group accumulates an enormous volume of data from its diverse businesses, technologies, and human resources. The extent to which we can create new value, such as busi- ness transformation and increased efficiency, by making full use of such data depends on our people and organizational culture. DX will progress dramatically when we have estab- lished an organizational culture in which not only digital pro- fessional human resources but all employees properly understand digital technology to make full use of the abun- dance of data we accumulate, and in which employees pro- actively utilize Garage methodology and the like to promote agile development. Ultimately, spurring transformation depends on people and organizations—digital technology is a means of achieving such transformation. I sense a tremendous potential in a future that will be unlocked by combining manufacturing technology with digi- tal technology. We will continue transcending the barriers among companies and industries through the power of digi- tal technology to accelerate our contribution to resolving a wide range of social issues and the creation of new value. Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 37 People, Data, and Organizational Culture as Success Factors for Digital Transformation: Initiatives of the Asahi Kasei Group People Data Organizational culture In fiscal 2021, we launched the Asahi Kasei DX Open Badge Program Accelerating value creation as an integrated whole requires a frame- Fostering an organizational culture to drive the Asahi Kasei Group’s with the goal of enhancing the digital literacy of all employees. The work that enables the data assets accumulated in the Asahi Kasei digital transformation and value creation is essential. With this in program comprises five levels, from Level 1 to Level 5, with those up Group to be utilized in a cross-sectional manner. To this end, we have mind, we are promoting Garage methodology—an approach for spur- to Level 3 designated as expected achievement levels for all employ- established the data exploration and exchange pipeline (DEEP), a ring innovation and achieving DX—to foster such an organizational ees to become digital human resources and Levels 4 and 5 used as data management platform. DEEP can readily locate data dispersed culture. The Garage approach is used to create new value and ser- part of efforts to cultivate digital professional human resources. We throughout the Asahi Kasei Group and link data between different vices based on products and know-how in Asahi Kasei’s diverse busi- have currently held courses up to Level 3, with employees worldwide systems. These functions have reduced the lead time required to uti- ness sectors through co-creation and digital technology. A diverse working to acquire the knowledge and skills through e-learning and lize data, increased efficiency, and raised productivity. Going forward, range of participants in different generations, positions, and organiza- hands-on experience to resolve issues autonomously on the front we will use the platform to enhance data governance and foster a tions use design thinking to create narratives of human-centered lines utilizing digital technology. Employees are issued with a digital data utilization culture. Using DEEP, we are currently advancing ideas and experiences. Deploying a development style that verifies badge managed by a blockchain after completing each level, which efforts that include consolidating the sales data of automotive-related value in an agile manner will enable us to foster a culture that reflects helps promote the visualization of their skills. For Levels 4 and 5, we businesses, visualizing the carbon footprint of our products, and visu- user feedback without delay. The fostering of an organizational cul- will advance the cultivation of digital professional human resources in alizing the state of management of each business. We will further ture for digital transformation and value creation is proceeding coordination with ongoing human resource cultivation efforts in the accelerate the digital transformation of our businesses by utilizing steadily with CoCo-CAFE—a venue for taking on challenges and fields of R&D and production technology along with the Group DEEP to drive forward the sharing and utilization of the information co-creating—being utilized in a variety of value creation activities Masters program. assets of the Asahi Kasei Group as a whole. and undertakings on a daily basis. Dashboard Portal site Level 1 Knowledge Novice level 15 minutes Level 2 Skill Intermediate level Level 3 Experienced Target for all employees 1 hour A few hours Level 4 Expert True digital professional Solving actual problems Level 5 Thought Leader Transformation driver Recognized as Group Masters Sharing a dashboard utilizing various data on the portal site 40,000 digital personnel targeted in fiscal 2023 Pictograms to enliven use Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202238 Transformation of HR The Asahi Kasei Group seeks to create new value by leveraging its diverse intangible assets including human resources, intellectual property, know-how, and data. To support this effort, we are developing platforms that support the autonomous growth of our human resources and are conducive to contributions from diverse individu- als in accordance with our basic principles that “people are our most valuable assets” and that “everything starts with people.” The Asahi Kasei Group’s Human Resource Strategies Discovering the Future with Lifelong Growth and Co-creativity of Diverse Individuals To ensure lifelong growth, we will further intensify efforts to promote In specific terms, we are promoting a number of measures learning and challenges aimed at achieving such growth, with each with the objective of raising the active participation and work Lifelong growth—whereby all employees continuously challenge and every employee envisioning their own career, and enhance engagement of diverse human resources. These entail enhancing themselves and achieve growth—and co-creativity—leveraging the management capabilities that bring about results by fully drawing the development of professional human resources by expanding Asahi Kasei Group’s diversity to promote collaboration—will play an out the strengths of individuals and teams. the Group Masters program,* implementing measures aimed at important part in enabling us to adapt and take the initiative in an To enhance co-creativity by leveraging diversity, we will imple- revitalizing our organizations and spurring the growth of our human operating environment characterized by discontinuous and unpre- ment a range of initiatives focused on expanding diversity and con- resources based on the results of KSA engagement surveys (an dictable changes. necting diversity. Overview of Human Resource Strategies People are our most valuable assets, everything starts with people Discovering the future with lifelong growth and co-creativity of diverse individuals Promoting challenge and growth Lifelong growth Autonomous career development and realization of growth Improvement of management capabilities to draw out the strengths of individuals and teams Enhancing employee well-being and work engagement Leveraging diversity Co-creativity Expanding diversity Diverse expertise, Connecting diversity Combination and integration of individuality, and workstyles knowledge Strengthening competitiveness of the Asahi Kasei Group Number of Group Masters FY2024: 300 (FY2021: 259 in 64 fields) Main KPIs Growth behavior index Continuous actions to monitor and maintain/improve Engagement survey results on a 5-point scale FY2020: 3.65, FY2021: 3.69 Diversified HR index Proportion of women working as managers and Group Masters FY2030: 10% (FY2018: 2.2%, FY2021: 3.4%) Proportion of women and non-Japanese Executive Officers FY2018: 8%, FY2022: 22% assessment of employee empowerment and growth), and estab- lishing a workplace environment that facilitates the active participa- tion of diverse human resources, including women. In order to expand the human resources responsible for management, we are encouraging the next generation of leader candidates to take the initiative in achieving their own growth through coaching and other approaches while implementing training through programs to strengthen leadership and teamwork. We are also providing systems, IT infrastructure, and other attributes of the working environment to facilitate employee perfor- mance in the post-COVID-19 era. Going forward, we will utilize digi- tal tools to promote the visibility of human resources and connect them with each other to enable diverse individuals to enhance their expertise and achieve growth, regardless of their age. In addition, we will establish key performance indicators (KPIs) and implement measures that will allow us to continuously provide value to society by combining and uniting their knowledge. * A program to increase highly specialized human resources who are recognized inside and outside the company by appointing, developing, and rewarding human resources as Group Masters who proactively engage in, and are expected to contribute to, the cre- ation of new businesses and the strengthening of established businesses Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 39 Enhancement of Human Resource Management Capacities Workplace environments have been transformed as a result of autonomous growth of both employees and organizations. impact facilitates the ability to visualize the success or failure of the COVID-19 pandemic, making online communication the The KSA engagement surveys are based on the empower- past measures and provides accurate information on the current norm and fostering greater acceptance of diverse lifestyles and ment and growth cycle model proposed by Professor Hiroya status of the organization that can be used to guide future action. workstyles. As such, the empowerment and motivation of Hirakimoto of Osaka University and use three indicators related In fiscal 2021, we began conducting and utilizing KSA in an employees requires management to implement appropriate to individual employees and organizations: (1) Supervisor– integrated manner with stress checks, which had previously measures based on an accurate understanding of the circum- subordinate relationships, workplace environments; (2) been conducted separately. This enables a more multifaceted stances surrounding employees and organizations. Based on Employee empowerment; and (3) Action driving growth. and comprehensive understanding of individuals and organiza- this recognition, the Asahi Kasei Group launched its KSA The gauging of these three indicators and their degree of tions, which contributes to the formulation of measures. engagement surveys in fiscal 2020, which gauge metrics per- taining to employee empowerment and growth. Work engage- ment is generated from synergies between the capacities of individual employees, exemplified in their feelings of self- efficacy and confidence and positivity toward work, and the capacities of organizations, demonstrated through support from supervisors and coworkers, workplace discretion, and evalua- tions and feedback. To measure work engagement, we track conditions pertaining to the empowerment of individual employ- ees, supervisor–subordinate relationships, and workplace envi- ronments. This information is shared within the organizations to facilitate discussion among employees and therefore spur the Items Gauged through KSA Engagement Surveys 1) Supervisor–subordinate relationships, workplace environments • Support from supervisors • Interpersonal relationships supporting work • Encouragement of ingenuity • Respect for diversity • Workplace openness 2) Employee empowerment 3) Action driving growth • Ability to maintain a positive stance (individual capabilities) - Confidence, feeling of self-efficacy - Strength to overcome adversity - Capacity for plotting course toward achieving goals - Optimism • Motivation toward work (work engagement) • Experience-based learning • Contributions to organization • Problem-solving/ improvement efforts • Job crafting Framework of KSA Engagement Surveys Comments from Managers Following the Implementation of KSA Engagement Surveys (questionnaire responses of managers directly overseeing subordinates) 2) Employee 3) Action driving empowerment growth Individual and organizational growth 1) Supervisor–subordinate relationships, workplace environments “ It was very beneficial to use the results of the KSA survey in discussions with division members to involve everyone in “ The results of the KSA survey cast light on aspects of organiza- tions that I was unaware of as a department head. The weak- thinking about ways to drive employee empowerment and growth in the workplace.” “ The KSA survey results helped me share the strengths and weaknesses of our organization with everyone.” nesses indicated by the survey report gave me a newfound understanding of our organization.” “ We gained a deeper understanding of our organization through the KSA survey, fostering a greater sense of solidarity in our efforts to maintain our strong corporate culture.” Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 2022 40 Group Masters Program In implementing human resource strategies, the heightening of resources while enabling us to recruit external talent. Moreover, platforms, and diverse market channels and business models the specialized skills of individual employees is as important as succession plans are put in place for Group Masters to link the that serve as the source of our competitiveness. In fiscal 2021, the enhancement of human resource management capacities. development of human resources with the cultivation of busi- biotechnology was added to the fields identified as core tech- For this purpose, the Asahi Kasei Group has established the nesses in order to raise competitiveness. nologies, bringing the total to ten as shown below. We also Group Masters program to appoint, nurture, and reward individ- annually review the fields and categories of work for which spe- uals who are contributing or are expected to contribute to the Group Masters Human Resource Portfolio cialists should be cultivated in both specific business fields and creation of new businesses or the reinforcement of established Under the Group Masters program, technology fields to be core company-wide functions as core platforms. In fiscal 2022, businesses as Group Masters. This program thus helps develop strengthened from a cross-business perspective are defined as we added machine safety and other items to core platforms a robust pool of human resources with high-level specialist core technologies, and engineers that drive the enhancement of while making changes that included transferring digital innova- expertise and skills who are competitive inside and outside the technologies in these fields are appointed as Group Masters. tion from core technologies to core platforms. In this way, we organization. The program defines five ranks of Group Masters. For the pursuit of ongoing business growth and new business are accelerating the development of human resources who will The roles of each rank are clearly defined, and compensation creation over the next five to ten years, we annually review the drive forward each sector. increases in line with rank, to promote the growth of human core technologies, production technologies, expertise, business Group Master Ranks and Roles Group Masters Fields in Fiscal 2022 Ranks Roles Executive Fellow Senior Fellow (Status Equivalent to Executive Officer) (Status Equivalent to Managing 1. Actively participating in Person who newly developed or considerably expanded a field of technology Principal Expert (Status Equivalent to Managing Executive or Senior Managing Executive) Person who takes the lead in a field of technology Executive, Senior Managing Executive, or Executive Officer) Person whose term as Executive Fellow or Principal Expert expires after retirement age but who is expected to continue the roles shown at right Person ranked below Principal Expert (candidate to be Principal Expert) Lead Expert Person ranked below Lead Expert (candidate to be Lead Expert) Expert and contributing to new business creation and strengthening operations by cultivating and enhanc- ing their skills and abili- ties as a leading specialist 2. Fostering younger person- nel in the relevant areas Actively participating in and contributing to new business creation and strengthening operations by cultivating and enhancing their skills and abilities Business unit-specific fields 88 Group Masters Material Homes Health Care Core technologies 131 Group Masters • Membranes and separation • Electrochemistry (electrolysis and batteries) • Fibers and polymers • Catalysts, chemical processes, and • Analysis and computer simulation • Biotechnology • Process development and construction technologies inorganic synthesis • Compound semiconductors • Product design and advanced control • Plant engineering R&D Support functions Digital innovation Core platforms 76 Group Masters Quality assurance Environmental preservation Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202241 Active Participation of Global Human Resources Promotion of Human Resources from Companies Acquired Overseas to the Management of Core Operating Companies Development and Active Participation of Human Resources Hired Locally Overseas suggestion by the United States team during those discus- sions formed the basis of “Be a Trailblazer,” the theme of the We are further promoting efforts to develop outstanding human new MTP. When an overseas business is acquired, its outstanding human resources hired locally overseas to be human resources who resources are also incorporated into the Asahi Kasei Group. contribute not only to their respective businesses but to the Their participation is advancing in the management of core Asahi Kasei Group as a whole. In addition to working to develop operating companies at the Executive Officer level. Also, while human resources hired locally overseas, including through Asahi Kasei Corp. had three non-Japanese Executive Officers in cross-border rotations for their development and the strength- fiscal 2016, this increased to six in fiscal 2022. Of these six, ening of their networks with personnel in Japan, we are promot- one has oversight of a business sector while another has been ing their participation in discussions by the next generation of assigned as Chief Executive of an acquired business. As these leaders on company-wide subjects. In fiscal 2021, when con- appointments demonstrate, we utilize human resources in ways sidering the new medium-term management plan (MTP) that extend beyond their original business backgrounds. which began in fiscal 2022, we created teams comprising next-generation leaders from the United States, Europe, and China to discuss the Asahi Kasei Group’s vision for 2030. A Comments from Participants in Workshops on the Asahi Kasei Group’s Vision for 2030 “ I was able to deliberate on future businesses as well as work across divisions with a real sense of unity. The workshop produced many wonderful ideas. I think it would be excellent for the Group to hold similar exercises every two or three years on improving its current businesses as well as on its future vision.” —Phani Nagaraj, Asahi Kasei Asaclean Americas, Inc. “ The workshop gave me a sense that the Group is committed to trans- forming itself to move forward. With the further vitality of those working locally, I have high hopes for the Group’s development and success in the Chinese market.” —Juan Guo, Asahi Kasei Microdevices (Shanghai) Co., Ltd. “ The workshop was a great opportunity for me to network with other members of the Asahi Kasei Group. I am grateful for this experience and hope that such company-wide networking opportunities will continue in the future.” —Meghann Woo, Synergos Companies LLC “ This initiative led me to feel that the Asahi Kasei Group has the potential to offer valuable solutions that are really needed by the industry through the synergies the Group creates.” —Bijan Farazandeh, Asahi Kasei Microdevices Europe GmbH Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202242 New Business Creation Various Approaches to New Business Creation The Asahi Kasei Group primarily adopts three approaches— research subjects, corporate venture capital (CVC) activities, business creation, we are focusing on green (G), digital (D), in-house R&D, investment in startups and other promising and strengthening the implementation of M&A in order to pro- and people (P)—GDP—transformation and the full utilization of companies, and collaboration/M&A—to the creation of new mote and accelerate each of these approaches. To strengthen intangible assets. businesses. We take steps including eliciting and advancing the business platform underpinning these approaches to new Material Homes Health Care Businesses Life Innovation Homes Acute Critical Care Technologies underpinning businesses Measures Business platform Environmental Solutions Mobility & Industrial Construction Materials Pharmaceuticals & Medical Care Businesses in three sectors Fruitful trees In-house R&D Planting seeds Investment in startups and other promising companies Nurturing saplings Collaboration/M&A Transplanting trees Eliciting and advancing research subjects • Unrestrictive work systems (20% rule) • Holding internal business contests • Eliciting new business concepts using backcasting (activities designing the society of the future) • More than 30 investments and two acquisitions CVC activities • Cultivating business selection acumen for more than a decade • Strengthening ties with startups (including recruitment of local employees) Strengthening of the implementa- tion of M&A • 2012 Acquisition of ZOLL Medical Corporation • 2015 Acquisition of Polypore International, Inc. • 2018 Acquisition of Sage Automotive Interiors, Inc. • 2020 Acquisition of Veloxis Pharmaceuticals, Inc. Areas to strengthen the business platform: GDP transformation and full utilization of intangible assets Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202243 Fully Utilizing Intellectual Property and Other Intangible Assets to Create New Businesses—Establishment of the Intellectual Property Intelligence Department The Asahi Kasei Group’s policy for utilizing intellectual property and other intangible assets entails aligning them with corporate strategy Policy for utilization of intellectual property and other intangible assets and business strategies in a timely manner, maximizing its own diverse intangible assets, and fully utilizing intellectual property land- scaping (IPL). Based on this policy, we established the Intellectual Property Intelligence Department as an organization reporting to the Timely alignment Maximization of Visualization of with corporate/ the value of diverse intangible assets Executive Officer for Corporate Strategy, tasked with the mission of utilizing intellectual property and other intangible assets to create and business strategies intellectual property using IPL execute strategies aiming to achieve the growth of GG10. Case Studies of Business Strategies Utilizing Intellectual Property and Other Intangible Assets Focused on Creating New Businesses Formulation of strategies for the hydrogen-related business Process for Formulating Strategies for the Hydrogen-Related Business Centered on alkaline water electrolysis technology, we have cre- ated business strategies utilizing intellectual property and other intangible assets via the following steps in order to enter the hydrogen business. STEP 1 STEP 2 STEP 3 Implement an overarching analysis of the entire hydrogen business based on available information Using IPL, clarify the technologies that will be our strengths and the technologies that will be the strengths of competitors Verify our areas of superiority and consider partners with whom we should join forces STEP 1 Industry Trend Analysis STEP 2 Benchmarking Additional Analysis and Examination of Business Strategies STEP 3 Overview of industry trend Capabilities of competitors Strategy to focus on strength Strategy for co-creation Understand alkaline water electrolysis technology trends Identify noteworthy players (companies) Technology 1 Technology 2 Technology 3 Technology 4 Technology 5 Verification of superiority based on an overview of patents in relation to Technology 3 Co-creation with a partner that has Technology 4, which Asahi Kasei lacks Asahi Kasei Company A Company B Company C — — — — — — — — — — — — — — — Asahi Kasei Company X Company Y Technology 2 Technology 5 Technology 4 Formulation of strategies for circular economy-related Strategies for Fully Maximizing the Value of Intellectual Property and Other Intangible Assets in the Circular Economy Market businesses To lead the design of the circular economy (CE) market, we must combine accelerating market formation with achieving commercial viability. The Asahi Kasei Group seeks to accelerate development by carrying out joint development with other com- panies in order to take the initiative in the CE market. We reduce our investment by outsourcing technologies that have already been established and widely licensing low-profit busi- nesses to other companies. We will ensure the commercial via- bility of our core sectors by continuing to maintain exclusive ownership of them. Outsourcing Outsourcing mature technologies to reduce capital investment Joint R&D Adopting cutting-edge technologies from academia and startups Asahi Kasei Group exclusive technology R&D Production (Asahi Kasei Group) Production and sales Realizing profitability through building/ maintaining exclusivity of the Asahi Kasei Group’s business ￥ Customers Recycling Blockchain (technology obtained) Use Reuse Obtaining standard essential patents (SEPs) Recovery Standardization (out-licensing) Licensing-out business with a narrow profit margin through standardization ￥ Patent pool (SEPs) ￥ Partners Academia Startups Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceAsahi Kasei Report 202244 Business Strategies by Sector 45 Material 46 Hydrogen-Related 47 CO2 Chemistry 48 Energy Storage 49 Car Interior Material 50 Digital Solutions 51 Homes 52 Environmental Homes and Construction Materials 53 North American and Australian Homes 54 Health Care 55 Global Specialty Pharma 56 Bioprocess 57 Critical Care 58 Interview with the CEO of ZOLL Medical Corporation Growth StrategyAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance Business Strategies by Sector Material Koshiro Kudo Executive Officer for Material Business Sector President & Representative Director In fiscal 2022, Asahi Kasei reconfigured the Material sector into three strategic business units: Environmental Solutions, Mobility & Industrial, and Life Innovation. Amid dramatic upheaval in the operating environment prompted by social changes Sales Composition and Major Products by Business Field Life Innovation Digital Solutions • Mixed-signal LSIs, electronic compass • Magnetic sensors • UVC LEDs • Pimel™ photosensitive polyimide/PBO precursor • Sunfort™ dry film photoresist • Glass fabric Comfort Life • Bemberg™ cupro fiber, Roica™ premium stretch fiber • Saran Wrap™ cling film • Ceolus™ microcrystalline cellulose pharmaceutical and food additive • Photopolymers and platemaking systems J a p Material Sector FY2021 Net Sales ¥1,210.0 billion a n 4 0 % O v e r s e a s (after reconfiguration*) 6 0 % Basic Policy of the Medium-Term Management Plan 45 Environmental Solutions • Hipore™ and Celgard™ lithium-ion battery separators, Daramic™ lead-acid battery separators • Chlor-alkali electrolysis systems, Microza™ hollow-fiber filtration membranes • Synthetic rubber, elastomers • Acrylonitrile (AN), methyl methacrylate, styrene, polyethylene, polystyrene Mobility & Industrial • Dinamica™ artificial suede • Leona™, Tenac™, and Xyron™ engineering plastics, SunForce™ foamed beads, Asaclean™ purging compound for molding machines • Leona™ nylon 66 filament • Duranate™ curing agent for polyurethane coatings including decarbonization, the Material sector has Basic Strategy adopted a more keenly market-focused business Improving profitability and capital efficiency by portfolio transformation with strategies and tactics that are not following existing paths in order to management, with an organizational system sup- realize carbon neutrality porting the Environment & Energy, Mobility, and Life Material fields for provision of value. In this way, we will promote business expansion by strengthening existing businesses and shifting management resources to future growth fields for a high-value- added profit structure that is not easily impacted by Portfolio Strategy Challenging investment Focus on next growth businesses • Accelerating commercialization of new businesses that contribute to decarbonization (related to hydrogen, CO2, energy storage, etc.) • Building on value chain in automotive interior materials • Exploring new business opportunities related to electronic compo- market conditions, thereby accelerating growth. nents and materials Cash generation Full use of existing assets • Profit growth by expanding production capacity in the separator business • Business development utilizing intangible assets (technology licensing business related to CO2 chemistry, new business models for ion-exchange membranes, etc.) Business Performance and KPIs Operating income growth, operating margin (¥ billion) Operating income (left scale) Operating margin (right scale) (%) Others in Material Life Innovation Mobility & Industrial Environmental Solutions 140 120 100 80 60 40 20 0 (20) 130.0 106.0 8.8 8.8 C A G R 7 % 10.6 10.6 2019 2020 2021 2022 2024 After reconfiguration* Forecast Target 21 18 15 12 9 6 3 0 (3) (FY) 8.0 6.7 8.8 ROIC (%) 10 8 6 4 2 0 2021 2024 (FY) Before reconfiguration Target * Figures have been recalculated to reflect the revision of business categories in FY2022 18 RIOC 10.6 12 6 0 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 46 Asahi Kasei seeks to help reduce greenhouse gas emissions around the world through the supply of low-cost green hydrogen by swiftly commercializing large-scale alkaline water electrolysis systems and becoming a key player in the hydrogen supply chain. Environment & Energy Operating Environment Global progress in hydrogen-related technology development aimed at realizing Business Strategies a decarbonized society As hydrogen is gaining attention as an essential material for a decarbonized society, many companies are advancing efforts for R&D and commercialization of hydrogen-related technologies. There are several methods for producing hydrogen. Among these methods, Asahi Kasei is developing alkaline water electrolysis technology, which is suited for large-scale systems and is expected to enable low-cost, mass production of hydrogen. Meanwhile, we have set up a hydrogen production project for applying this technology in countries around the world, most notably in Europe, where demand is rising for green hydrogen produced using renewable energy. Moreover, the market for electrolytic cells for produc- ing hydrogen is expected to grow to a significant scale going forward. Strengths of the Asahi Kasei Group Participation in multiple large-scale verification projects for alkaline water electrolysis systems based on chlor-alkali electrolysis technology Becoming a leading supplier of alkaline water electrolysis systems through swift commercialization and supply chain development While performing trials to achieve high-reliability alkaline water electrolysis systems, we are working to reduce the costs for practical application with commercialization targeted in 2025. We plan to expand beyond system supply to become involved in operation and monitoring. With this objective in mind, we will start by introducing these systems into Europe, which is ahead of other markets in this regard. Our hydrogen-related business requires the development of new supply chains through collaboration with various companies, ranging from upstream energy suppli- ers to downstream hydrogen users. We are already receiving a large number of inquiries regarding our alkaline water electrolysis systems. Accordingly, we will be Asahi Kasei’s alkaline water electrolysis systems are based on the ion-exchange membrane chlor-alkali electrolysis technology we have been seeking out ideal partners as we drive the development of the supply chain. developing since 1975. We are unrivaled in the chlor-alkali electrolysis field with our ability to provide membranes, electrolytic cells, elec- Our goal going forward is to become a leading supplier of alkaline water electrol- trodes, operating technology, and monitoring systems, and we have a leading share in the global market for ion-exchange membranes. The ysis systems with a share of 20% in the electrolytic cell market. At the same time, we expertise accumulated in this area is being utilized to develop large-scale alkaline water electrolysis systems that can be used with renew- will invest proactively to meet the rapidly growing demand for green hydrogen as we able energy and other intermittent power supplies, and we are participating in multiple verification projects in this regard. In Japan, trial operation of a 10 MW-class water electrolysis system, one of the largest single-unit systems in the world, is underway at the Fukushima Hydrogen Energy Research Field of the New Energy and Industrial Technology Development Organization (NEDO). In addi- accelerate the global expansion of our hydrogen-related business through means such as collaboration with other companies with a focus on asset-light operations. tion, we are engaged in a joint project for developing large-scale alkaline water electrolysis hydrogen production systems and verifying green chemical plants together with JGC Holdings Corporation. This project was adopted as a NEDO green innovation fund project, specifically for hydrogen production through electrolysis using renewable energy, in 2021. In this project, we are working to develop large-scale alkaline water electrolysis hydrogen production systems, with the target of creating 100 MW-class systems, as well as systems for integrating and controlling the production of green chemicals using renewable energy. In Europe, Asahi Kasei is accumulating operating expertise and data through participa- tion in the ALIGN-CCUS project and its successor, the TAKE-OFF project. Key Points for Development of the Hydrogen-Related Business • Completion of technologies for large-scale systems and modularization • Development of integrated control systems (overall process optimization) • Reduction of costs Alkaline water electrolysis equipment costs: ¥52,000 per kilowatt (2030) • Development of partnerships in the supply chain • Securing hydrogen demand based on region and business model Commercialization in 2025 and growth into new business pillar in 2030 Source: NEDO GG10 Hydrogen-RelatedAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 47 Environment & Energy Asahi Kasei is pursuing carbon neutrality by utilizing cutting-edge, proprietary technologies to separate, recover, and utilize CO2. Operating Environment Development of various CO2-related technologies for contributing to decarbonization For carbon neutrality, technologies for separating, recovering, and utilizing CO2 are being developed around the world. Centered on eco-conscious Europe, movements toward carbon neutrality are advancing in various industries. Specific efforts include recovering CO2 from flue gas at power plants and factories, and separating CO2 and recovering methane from biogas. Accordingly, related markets are expected to grow rapidly in the future. There has also been a sharp increase in attention directed toward carbon footprints in the procurement of raw materials. There is thus rising interest in reducing CO2 emissions from raw material manufacturing processes as well as in using materials produced from CO2. Asahi Kasei is developing CO2 separation and recovery technology as well as technology for producing chemical products from CO2 Business Strategies Verification trials for CO2 separation and recovery technology, and advancement of business for CO2 utilization technology Asahi Kasei is studying the launch of verification trials for CO2 separation and recovery technology using actual gas in fiscal 2022 or fiscal 2023. We are target- ing commercialization of this technology for relatively small-scale processes (CO2 chemistry). We thereby aim to contribute to reduced CO2 emissions through various efforts spanning from CO2 recovery to usage. using biogas or other gases by fiscal 2027. Strengths of the Asahi Kasei Group CO2 adsorption through proprietary zeolite and use of CO2 as a material via various technologies Asahi Kasei is developing CO2 separation and recovery technology that adsorbs CO2 from mixed gases using a proprietary zeolite. We have a long history of using zeolite as a catalyst, and the associated knowledge and technology are being utilized for the purpose of CO2 adsorption. The CO2 adsorption process using our zeolite only requires half of the energy needed for the amine method that is currently mainstream. This process is therefore expected to contribute to lower CO2 recovery costs. Moreover, the Asahi Kasei Group has been engaged in the development of CO2 chemistry, for using CO2 as a raw material, since the In Europe, the trend toward encouraging the use of biogas is creating demand for technology to separate CO2 and recover methane from biogas. We are therefore studying the possibility of conducting trials in Europe. Meanwhile, development is being advanced for large-scale systems that can be used at facilities like power plants and factories. As for CO2 chemistry, we are focused on licensing the technology we have commercialized for LIB electrolyte material. At the same time, we are accelerating the development of isocyanate production technology. We are targeting the com- 1980s. In 2002 we began licensing our polycarbonate manufacturing technology which was the first in the world to utilize CO2 while also not mercialization of a special isocyanate expected to be used as a next-generation using toxic phosgene, and our technology is used for 16% of global polycarbonate production capacity. Based on this technology and our automotive paint material in 2026. commercialization expertise, we started licensing a technology that uses CO2 as a raw material for lithium-ion battery (LIB) electrolyte in 2021. We are also developing various isocyanates for use as materials for producing polyurethane. The Asahi Kasei Group enjoys world-leading R&D capability and a track record of commercializa- tion in these fields. CO2 separation/ recovery CO2 Chemical feedstocks CO2 chemistry (Use of CO2 as a raw material) Polycarbonate Materials for LIB electrolyte Isocyanates Other chemical products Other new technologies under development include CO2 conversion using green hydrogen, ethylene production by CO2 electroreduction, and bio-conversion of CO2. With our world-leading environmental solutions technologies, we will contrib- ute to the increased utilization of CO2 and to the reduced use of fossil resources. GG10 CO2 ChemistryAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 48 The Asahi Kasei Group will respond to rising energy storage demand associated with decarbonization and thereby expand its contributions centered on LIB separators and pursue new business opportunities related to next-generation energy storage devices. Environment & Energy Operating Environment Rising importance of LIBs as energy storage devices widely adopted Business Strategies throughout society As efforts to reduce greenhouse gas emissions advance, we expect that dependence on fossil fuels will decrease and the use of renewable energy will expand, stimulating growth in demand for energy storage devices. Various technologies are currently being developed to create next-generation storage devices. Nevertheless, LIBs will continue to be an important device in the energy storage field for the foreseeable future. Pursuit of growth of separator business while exploring new business opportunities Maintaining its focus on the growth of the separator business, the Asahi Kasei Group will explore the potential for broadening its operations to include other energy storage-related The trend toward electric vehicles has recently sparked rapid growth in the market for LIBs centered on automotive applica- products and services. tions. Demand for LIBs is anticipated to continue to grow as this trend is complemented by the full-fledged spread of electricity For separators, we are studying the addition of production capacity in Europe and the storage systems going forward. United States to facilitate local production and consumption. We are also examining the pos- Battery and component manufacturers are currently increasing their supply capacity while devoting effort to the development sibility of strategic partnerships with other companies to achieve an asset-light configuration. of new technologies to address the diverse needs arising from the expansion of applications for energy storage devices. At the same time, higher levels of profitability will be pursued through means such as raising In addition, global growth in LIB demand is also projected to stimulate increased demand for LIB reuse and recycling solu- tions, which, in turn, is expected to give rise to new markets. productivity via digital transformation in order to maximize returns from past investments. Meanwhile, we are working toward the development of next-generation energy storage Strengths of the Asahi Kasei Group Provision of high-quality separators that address diverse needs based on accumulated expertise and industry-leading technological capability The Asahi Kasei Group started researching and developing LIBs in the 1970s, and we developed the early devices that would evolve to become the LIBs of today. The technology and knowledge we have accumulated over this long history are being applied to our business for separators, one of the core components of LIBs. Our strengths in this business include the safety and high performance of our separators backed by our technological exper- tise, reliable supply capability, and ability to supply both wet-process and dry-process separators. We have earned high recogni- tion for our ability to make proposals and develop products that leverage these strengths, and we have built strong relationships with customers in areas demanding high levels of performance. Other strengths of the Asahi Kasei Group include our eco- friendly production processes and our comprehensive patent portfolio. Over the medium term, we plan to raise our separator production capacity to 3 billion m2 a year in order to meet the projected robust demand. Furthermore, our subsidiary Polypore International, LP, partnered with Shanghai Energy New Materials Technology Co., Ltd., in 2021 to establish a dry process separator joint venture in China’s growing LIB market. With this joint venture, we aim to culti- vate the Chinese market for LIBs for electricity storage systems. devices. Efforts to this end include commercializing innovative elec- trolytes that utilize the high ion- conductivity solvents currently under development, and develop- ing innovative lithium-ion capaci- tors featuring improved energy density and reduced costs. As we pursue new business opportunities in the growing LIB LIB Separator Market Scale (Billion m2) 15 12 9 6 3 0 Automotive Other Average growth rate from 2021–2025: 35% 2019 2020 2021 Forecast 2025 Forecast market, we will also seek to develop Source: Future Outlook of Energy, Large Scale Secondary Batteries, and Materials innovative, next-generation batteries. 2020—Electric Vehicles and Automotive Batteries, Future Outlook of Energy, Large Scale Secondary Batteries, and Materials 2020—Electricity Storage Systems and Fixed Installation Batteries, Future Outlook of Energy, Large Scale Secondary Batteries, and Materials 2021—Electric Vehicles and Automotive Batteries, Fuji Keizai Co., Ltd. GG10 Energy StorageAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 49 Asahi Kasei will supply its proprietary, differentiated, high-value-added solutions to the automotive interior mate- rial market, which is growing in conjunction with the diversification of automotive interior needs. Operating Environment Growth projected in automotive interior material market together with diversification of automotive inte- rior needs driven by advancement of CASE and MaaS Business Strategies Mobility Connected Autonomous Shared Electric and comfort, we aim to become a distinctive automotive interior solu- The advancement of CASE (connected, autonomous, shared, and electric) and mobility as a service (MaaS) trends in the automotive industry is driving the diversification of needs related to automotive interiors. Changes to Automotive Interiors Driven by CASE These trends are creating needs for functions and characteristics in materials and components that differ from conven- tional expectations. As a result, the auto- motive interior material market is projected to grow at a faster rate than vehicle production volumes. The broaden- ing range of automotive interior needs presents a substantial business opportu- nity for us, with our diverse lineup of products and technologies. Changes in automotive interiors • Monitoring of in-vehicle • Use as in-vehicle living environment room or office • Recognition and moni- toring of passengers • Diversification of seat design and layout • Public use • Availability for various purposes • Noise reduction • Thermal management • Weight reduction • Monitoring technologies • Smart textiles • Greater comfort • Innovative designs New needs for interior parts/ components • Easy cleaning, antifoul- • Soundproofing, vibration ing properties • Odor resistance, anti- bacterial properties • Enhancement and diversification of performance proofing, thermal insulation • Transition to new materials Strengths of the Asahi Kasei Group Provision of comprehensive solutions leveraging Sage Automotive Interiors’ superior proposal capabilities and Asahi Kasei’s diverse products Sage Automotive Interiors, Inc., which joined the Asahi Kasei Group in 2018, enjoys strengths in its design and customer proposal capabilities. These strengths are being used to shape regional and material strate- gies and are thereby contributing to the rapid growth of our automotive interior material business. We have thus been able to secure a position as a leading global supplier in the seat fabric* market. Asahi Kasei’s Dinamica™ artificial suede has been well received as a high-quality sustainable material that does not use organic solvents during the production process. Incorporating Sage’s design capabilities into this brand has enabled us to create distinctive high-value-added products, which have been increas- ingly adopted around the world. Our diverse lineup of products and technologies includes various offerings for increasing the quality of automotive interiors, and combining these offerings to make unique proposals creates significant opportunities for Asahi Kasei. At the same time, we will take advantage of our digital transforma- tion, intellectual property (IP), and other foundations to provide proposals that leverage IP landscaping for automobile manufacturers. * Knitted, woven, and nonwoven car seat fabric (excluding natural and synthetic leather) Becoming an automotive interior solutions provider by offering value that meets new needs By honing superiority for solutions in terms of design, sustainability, tions provider by developing materials and components, and by offer- ing services, with a focus on user experience. Sage will further solidify its position as a leading supplier by trans- forming its business portfolio for higher added value. This will entail enriching its lineup of fabrics matched to customer needs and devel- oping frameworks for regional supply in accordance with regional demand. Sage is targeting net sales exceeding ¥100 billion in 2024. While raising production capacity for Dinamica™ products, sustain- ability initiatives will be reinforced. Our growth strategies for meeting diversifying automotive interior needs will include the further differentiation of our solutions. We will acquire foundations for direct involvement in and contribution to the development activities of automobile manufacturers in specific auto- motive interior fields, and develop plant-derived materials, highly recyclable monomaterials, and materials featuring greater comfort. We will also seek to create sensing systems that monitor automotive interiors to track passenger comfort. In addition, effective key account management practices will be adopted to gain a better understanding of automobile production processes so that we can provide unique, comprehensive solutions through development pro- posals matched to current trends and needs. GG10 Car Interior MaterialAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 50 Asahi Kasei will respond to the needs of the digital society with distinctive components, materials, and solutions by leveraging its unique position of having both electronic components and electronic materials, and by integrat- ing these offerings. Life Material Operating Environment Accelerated evolution of digital technologies and solutions in response to diversification of Business Strategies needs stimulated by social change Digital technologies and solutions are constantly evolving in conjunction with the accelerated digitalization of society, leading to continued market growth. As needs become more diverse in a variety of fields, the operating environment is changing at a rapid pace. Digital technolo- gies and solutions will be imperative to providing new value in response to these trends. The market is expected to undergo substantial growth over the medium to long term as a result of the advancement of digital technolo- gies and solutions. Factors behind this advancement are projected to include the new trend toward electric vehicles amid rising environ- Provision of unique solutions matched to new market needs by integrating electronic components and electronic materials Based on an accurate understanding of market trends, we integrate electronic components and electronic materials to create solutions using various technolo- gies, providing new value with unique products and services that meet the latest mental awareness; digitalization as seen in the spread of 5G, 6G, and other high-speed communications systems; and the rising desire for market needs. more comfortable lifestyles as people live healthier and longer. Strengths of the Asahi Kasei Group Deployment of high-value-added products that lead the markets for electronic compo- nents and electronic materials Having both electronic component and electronic material businesses is a significant strength of the Asahi Kasei Group. In our electronic component business, we supply competitive technologies and solutions in markets related to energy conservation and healthy and comfortable lifestyles. Specific areas include sound quality control, and technologies for sensing magnetic fields, gases, etc. We also lead the industry in terms of mixed-signal large-scale integrated circuit design technology for bridging the gap between analog and digital information. In these areas, Asahi Kasei offers a number of products with world-leading market shares and Electronic components Electronic materials has built strong, trust-based relationships with customers as a distinctive electronic components manufacturer. Our electronic materials business, meanwhile, supplies highly competitive products that are employed in cutting- edge semiconductors. World-leading market shares have been maintained along with high evaluation globally for products including Pimel™ photosensitive polyimide pre- cursor, a semiconductor buffer coating; dry film photore- sist used in etching circuits on printed wiring boards; and ultrathin glass fabric for printed wiring boards. Creating innovative products with competitive sensing technology in the energy conservation and comfort markets Providing highly competitive products and solutions for leading-edge semiconductor and packaging process innovations Product examples Product examples • Current sensors • Gas sensors (CO2, alcohol) • Magnetic sensors • Millimeter wave radar ICs • Photosensitive polyimide precursor • Photosensitive dry film • High-performance glass fabric • Epoxy resin curing agent To meet needs emerging amid rising environmental awareness, we will pursue opportunities related to sensing solutions for electric vehicles, and related to Hall elements that contribute to energy conservation in air conditioning and other equipment. To contribute to the advancement of a digital society, we will drive the evolu- tion of new electronic components that accommodate 5G, 6G, and other commu- nication systems as well as electronic materials for cutting-edge semiconductors, for data server and other applications, and for chip packaging process innovation. Meanwhile, we will supply solutions that utilize sound quality control and sensing technologies to improve sound and air quality in living spaces and vehi- cles in order to accommodate the desire for more comfortable lifestyles as people live healthier and longer. Furthermore, a dedicated organization for creating innovation has been estab- lished to drive future growth. This will help us capitalize on the latest needs in order to create value through means including in-licensing of technologies and M&A activities. GG10 Digital SolutionsAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 51 Homes Order-Built Homes • Hebel Haus™ unit homes • Hebel Maison™ apartment buildings Real Estate • Apartment rental network, real estate brokerage • Atlas™ condominiums Sales Composition and Major Products by Business Field Construction Materials • Hebel™ AAC panels • Neoma Foam™ and Neoma Zeus™ phenolic foam insulation panels • Foundation piles, structural components Overseas Business and Others • Australian business • North American business Remodeling • Maintenance, renovation, etc. Overse a s 1 8 % Homes Sector FY2021 Net Sales ¥822.4 billion n 8 2 % (after reconfiguration*) J a p a Basic Policy of the Medium-Term Management Plan Basic Strategy Maximizing lifetime customer value in the domestic business and continuing to invest and generate returns from past investments in the overseas business, increasing cash generation capability while maintaining high operating margin (10%) and ROIC (over 30%) Homes Fumitoshi Kawabata Executive Officer for Homes Business Sector Director, Primary Executive Officer, Asahi Kasei Corp. President & Representative Director, Asahi Kasei Homes Corp. Director, Asahi Kasei Construction Materials Corp. In fiscal 2021, Asahi Kasei Homes made McDonald Jones Homes Pty. Ltd. (which became NXT Building Group Pty. Ltd. in April 2022) a consolidated sub- sidiary as part of the development of overseas busi- ness in North America and Australia as a new pillar of growth. I believe that by steadily transforming the busi- ness portfolio of the Homes sector in step with the Portfolio Strategy Business Performance and KPIs needs of the era, we will offer new value to society while further strengthening our efforts to generate Challenging investment Focus allocation of resources to Operating income growth, operating margin (¥ billion) Operating income (left scale) Operating margin (right scale) (%) cash in a stable manner. Utilizing the strengths we growth businesses • Focusing expansion based on platforms in North America and 100 Construction Materials 95.0 have developed in existing businesses, we will pro- Australia (including continued M&A) actively expand into new businesses and markets and transform our business model while sharpening our focus on customer satisfaction. • Expanding environmentally friendly homes and construction materials (net-zero emission houses and apartment buildings, insulation material) Cash generation Promotion of high added value in domestic business and maximization of synergies in overseas business • Customer satisfaction as the essence of the domestic business; developing and providing homes and services that seamlessly meet the ever-changing needs of people’s lives at different times and in different environments • Improvement of profitability of overseas business by leveraging the indus- trialization, systemization, and digitalization know-how cultivated in Japan Overseas Business and Others Remodeling Real Estate Order-Built Homes 80 60 40 20 0 （20） 72.9 8.98.9 C A G R 9 % 10.210.2 2019 2020 2021 2022 2024 After reconfiguration* Forecast Target 20 16 12 8 4 0 (4) (FY) Free cash flow over net sales (%) 10 8 6 4 2 0 5.6 4.5 8.8 10.6 12 C A G R 4 % 18 6 0 2021 2024 (FY) Before reconfiguration Target * Figures have been recalculated to reflect the revision of business categories in FY2022 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 52 Home & Living Business Strategies Proposal of greater value through enhanced inter-business synergies The fundamental goal of our homes business is to satisfy customers, and this is why we seek to maximize the value we provide to customers over the entire lifespan of the prod- ucts we offer. We pursue synergies among our various areas of operations beginning from order-built homes, with renovation, real estate brokerage, insurance, infrastructure, and other operations developed to offer seamless support for the living needs that change based on lifestyles. In this manner, we supply homes and services that continue to earn the favor of customers, thereby securing reliably high earnings and cash genera- In addition, we have set targets to increase the ratio of ZEH-compliant unit homes, and of achieving a 70% rate of ZEH-M–compliant apartment building orders among total orders received in fiscal 2024. As one facet of these efforts, we began offering our unique Eco ResiGrid system for rental housing units in March 2021. Through this system, we lease the roofs of newly constructed Hebel Maison™ ZEH-M–Compliant Apartment Building Orders among Total Hebel Maison™ Orders (%) 100 80 60 40 20 0 44 2021 70 (FY) 2024 Target We will pursue customer satisfaction as the essence of business as well as seek to protect and enrich people’s lives and create platforms to support life. Operating Environment Strong latent housing demand amid numerous social issues to be resolved through housing In Japan, the number of housing units is sufficient when compared to the number of households, but roughly 40% of the occupied housing units do not meet standards for seismic resistance. Furthermore, homes that feature both easy access and energy effi- ciency are only a few percent of the total. In urban areas, the large number of homes constructed during the peak period for hous- ing starts in the 1970s have since aged, creating a pressing need to replace them with high-quality homes that can be passed on to the next generation. The Japanese government has adopted a goal of having all new homes constructed from fiscal 2030 feature energy efficiency that complies with Net Zero Energy House (ZEH) standards. This is just one of the momentous changes occurring in the environment sur- rounding homes and energy. In 2020, only 24% of newly ordered unit homes met ZEH standards, and apartment buildings that are compli- ant with the applicable ZEH-M standards are still rare throughout the industry. For this reason, home manufacturers will have an important role to play in advancing the trend toward such homes going forward. 60 50 40 30 20 10 0 ZEH-Compliant Homes among New Housing Orders (%) 2020 target for home manufacturers Home manufacturers 11.9 15.4 19.2 20.5 24.0 Total General contractors tion capabilities. 2016 2017 2018 2019 2020 (FY) Source: Survey presentation materials from Sustainable open Innovation Initiative Strengths of the Asahi Kasei Group Commitment to the “Long Life Home” concept since the founding of Asahi Kasei Homes Since its founding, Asahi Kasei Homes has continued working to create homes that can be passed down through successive gener- ations. The “Long Life Home” concept that we advocate has garnered new attention as people’s values grow more diverse, and as society ages rapidly, approaching an era when many people will live to be 100. We are contributing to the realization of a sustainable society while exercising consideration for society and for the planet. These buildings from their owners over a 30-year contributions are being made with the high durability and seismic resistance of Hebel Haus™ houses, our planning capabilities for flexibly accommodating lifestyle changes, our long-term maintenance and inspection systems, and our service frameworks for pass- ing houses on to future generations. When developing houses compliant with ZEH standards, we strive to offer distinctive value propositions. To deliver this value, we utilize our Neoma Foam™ next-generation insulation, which maintains its superior insulation performance over the long term; help improve disaster resilience by encouraging the installation of storage batteries; and purchase surplus solar power through our Hebel Electric Power electricity retail business. period, during which we maintain and operate solar power generation systems on these roofs. By partnering with owners and tenants of rental housing units, we aim to help protect the envi- ronment, strengthen resilience to disasters, and provide greater levels of value. GG10 Environmental Homes and Construction MaterialsAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 53 We are providing high-quality homes suited to each region by improving efficiency and productivity through industrialization. Operating Environment Substantial opportunities created by labor shortages, long construction periods, and sluggish adoption of IT Business Strategies Home & Living Efforts to expand our housing business overseas are being limited to North America and Australia out of consideration for the sizes of their economies, their population growth rates, and their ratios of high-income individuals. Housing demand has been growing in recent years. At the same time, however, needs to rationalize construction processes and to reduce costs have also been rising rapidly amid construction delays due to chronic labor and material shortages, as well as rising costs associated with increasing material prices. North American Market In North America, the millennial generation that represents a large portion of the population has reached house-buying age. As such, this market is expected to see firm residential housing demand going forward. At the same time, the changes to the social climate brought about by the COVID-19 pandemic have sparked a rise in the desire for homeownership, which in turn has triggered a sharp increase in demand. Asahi Kasei’s main target market is the state of Arizona, with a high population growth rate, which has drawn a large number of companies to participate in this market. However, Arizona also faces a hous- ing shortage stemming from factors including insufficiency of construction workers. Australian Market Through a combination of natural growth and immigration, the population of Australia is expected to rise to 30 million by 2030, a 15% increase from the level today. It is therefore anticipated that this country will enjoy steady growth in the housing industry over the medium to long term. Order trends are strong in this market due to the historic highs for construction demand spurred by the government subsidy programs implemented in response to the impacts of the COVID-19 pandemic. Meanwhile, labor costs are rising sharply as a result of shortages of workers, and materials costs are also on the rise. As a result, construction periods are lengthening. Strengths of the Asahi Kasei Group Industrialized housing development, design, and construction expertise fostered through Hebel Haus™ In Japan, industrialized housing, which involves managing quality through the use of standardized components and materials, and prefabricated modules, has become well established. This is considered to be exceptional when compared with other countries. Reasons for this are said to include the evolution of unique technologies spurred by efforts to improve quality in response to Japan’s frequent earthquakes and humid climate. Asahi Kasei launched its homes business amid the growing demand of the 1970s. We then proceeded to propose housing that met urban lifestyle needs, including three-story homes and two-generation homes, while developing frameworks for the efficient supply of high-quality houses. The development, design, and construction expertise fostered through these efforts is anticipated to give rise to innovation in the construction industries and at the construction sites of overseas countries, where construction periods can be nearly twice as long as those in Japan. We thereby aim to contribute to the rationaliza- tion of construction processes and to the improvement of the quality of homes. Improvement of quality and reinforcement of earnings power by shortening construction periods through heightened efficiency Rather than simply adapting Japanese homes to overseas markets, Asahi Kasei partners with local companies with a strong understanding of the market and of our approach in order to increase quality, and to streamline and shorten construction, through improved processes and IT. We thereby aim to grow net sales from overseas housing operations to ¥200 billion in fiscal 2025 while achieving an operating margin on par with the level of 10% or more in our domestic business. Net Sales in Overseas Housing Operations (¥ billion) 200 200.0 164.0 146.3 150 100 50 0 25.0 2020 2021 2022 2025 (FY) Forecast Target North America In North America, we have acquired several companies in the home- building industry, most notably Erickson Framing Operations LLC, a building compo- nent supplier that produces and installs walls and roofs for wooden houses. We also acquired companies that perform electrical, concrete, and HVAC work, as well as plumb- ing work. Our goal in the North American market is to develop a supplier model that rationalizes the various processes at con- struction sites. Australia In Australia, we have acquired steel frame home builders, most notably NXT Building Group Pty. Ltd., and brought frame fabrication processes in-house. We will pursue high levels of customer satisfac- tion in Australia by establishing a model that achieves a level of competitiveness that could not be reached by a single construc- tion company or supplier. GG10 North American and Australian HomesAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate GovernanceHealth Care Shuichi Sakamoto Executive Officer for Health Care Business Sector (joint) Director, Primary Executive Officer, Asahi Kasei Corp. Chairman & Director, Asahi Kasei Pharma Corp. Chairman & Director, Asahi Kasei Medical Co., Ltd. Board Director, ZOLL Medical Corporation Richard A. Packer Executive Officer for Health Care Business Sector (joint) Primary Executive Officer, Asahi Kasei Corp. Chairman & Board Director, ZOLL Medical Corporation Sales Composition and Major Products by Business Field Acute Critical Care • Defibrillators for professional use • LifeVest™ wearable defibrillator • Automated external defibrillators (AEDs) • Ventilators • Thermogard System™ temperature management system • Implantable neurostimulator devices for central sleep apnea • Home-based testing and diagnostic solutions for sleep apnea Jap a n 2 4 % Health Care Sector FY2021 Net Sales ¥ 415.9 billion O v e r s e as 76% 54 Pharmaceuticals • Teribone™ and Reclast™ osteoporosis drugs • Recomodulin™ anticoagulant • Kevzara™ rheumatoid arthritis drug • Plaquenil™ immunomodulator • Envarsus XR™ immunosuppressive drug Medical Care • Planova™ virus removal filters • Hemodialysis products • Therapeutic apheresis devices • Contract research organization (CRO) and contract development and manufacturing organization (CDMO) businesses In fiscal 2021, the Health Care sector continued to implement proactive business expansion measures. These included M&A related to sleep apnea in the Basic Policy of the Medium-Term Management Plan Basic Strategy Under the mission of “improve and save patients’ lives,” capture a wide range of business opportunities in global markets in both pharmaceuticals and medical devices to drive the Asahi Kasei Group’s income growth acute critical care business, in-licensing in the phar- Portfolio Strategy maceutical business, and adopting capital expendi- ture decisions for the bioprocess business in the medical care business. The Health Care sector aims to become a major pillar and the driver of the Asahi Kasei Group’s Challenging investment Accelerate growth through business development • Bringing innovative medical devices in critical care to market • Expanding global pharmaceutical business through collaboration of Asahi Kasei Pharma and Veloxis • Expanding the scope of the bioprocess business to capture market growth by evolving as a global health care enterprise growth promoting both pharmaceuticals and medical devices worldwide. We will pursue further growth by offering optimal solutions to medical needs in order Cash generation Gain earnings through growth of overseas business and strengthening of domestic businesses • Strengthening and expanding of overseas market position in critical to fulfill our mission of saving the lives of patients care, pharmaceutical, and bioprocess businesses and improving their quality of life (QOL). • Greater efficiency and sophistication of domestic business operations through the use of DX, etc. Business Performance and KPIs EBITDA growth, EBITDA margin (¥ billion) EBITDA (left scale) EBITDA margin (right scale) (%) 150 120 90 60 30 0 Acute Critical Care Pharmaceuticals & Medical Care 140.0 10 50 40 8 101.7 24.524.5 C A G R 1 1 % 26.426.4 30 20 10 0 (FY) 2019 2020 2021 2022 2024 Forecast Target 6 4 2 0 ROIC (%) 10 8.8 10.6 8 6 4 2 0 6.2 8.8 2021 2024 (FY) Target 18 ROIC 10.6 12 6 0 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 55 We will transform into a Global Specialty Pharma business focused on immunology, transplantation, and related disease areas. Operating Environment Paramount importance of the U.S. pharmaceutical market, the largest in the world, to growing the pharmaceutical business Business Strategies Health Care The global pharmaceutical market is expected to grow to the scale of $1.6 trillion by 2025, with a compound annual growth rate of between 3% and 6% over the period from 2021 to 2025. During this period, the U.S. pharmaceutical market will continue to be the world’s largest market, with a projected scale of between $605 billion and $635 billion in 2025.1 This market features an ecosystem through which innovation is created as pharmaceutical companies, other companies, government agencies, academic institutions, drug discovery startups, and investors perform their respective roles while coordinating with other parties. Accordingly, our acquisition of a business platform in the U.S. market is expected to facilitate the further growth of our pharma- ceutical business. Asahi Kasei enjoys strengths in markets related to kidney failure and kidney transplantation. In the U.S., one in seven adults, or approximately 37 million people, suffer from chronic kidney disease, and some 780,000 of them have end-stage renal failure. Compared with dialysis, kidney transplantation is a treatment that provides better quality of life for patients and is more economical from a healthcare standpoint. Around 25,000 kidney transplantations are performed each year, and this number is projected to increase. 1 Source: Global Medicine Spending and Usage Trends Outlook to 2025, IQVIA Holdings, Inc. Strengths of the Asahi Kasei Group Unique Envarsus XR™ immunosuppressive drug and U.S. sales channels of Veloxis In the U.S., our subsidiary Veloxis Pharmaceuticals, Inc., supplies Envarsus XR™, an immunosuppressive drug for kidney trans- plant patients, and is establishing sales channels targeting major hospitals and medical specialists in the immunology and trans- plantation fields. Envarsus XR™ employs a proprietary sustained release tacrolimus formulation that limits the rise in maximum concentration of the drug in the bloodstream and maintains an effective concentration for a longer period of time. This allows the drug to be effective with a single daily dose and with reduced side effects. Moreover, Envarsus XR™ has already been designated as a vital drug for kidney transplant patients by numerous leading- edge healthcare institutions in the U.S., and we are achieving smooth growth of this product with a share of more than 10% of tacrolimus applications and at least 30% of new kidney transplant patients. Approx. 500,000 dialysis patients Dialysis Treatments for end-stage renal failure Approx. 200,000 kidney transplant patients (over 25,000 new transplants every year) Kidney transplant Hemodialysis Peritoneal dialysis Living donor kidney transplant Deceased donor kidney transplant Source: National Kidney Foundation Immunosuppressant administered for life following transplant to prevent rejection Utilization of expertise in core fields for Veloxis and Asahi Kasei Pharma We will continue to pursue higher sales of Envarsus XR™, positioning this drug as a growth driver for the pharmaceutical business. In developing our global pharmaceutical operations, we will utilize the expertise of Veloxis and Asahi Kasei Pharma to accelerate clinical and business development, through means such as M&A, in-licensing, and open innovation. At the same time, we will look to develop, launch, and expand sales of new drugs. This objective will be accomplished by strengthening our clinical and business development functions in the U.S., the world’s largest pharmaceutical market and the forefront of pharmaceutical innovation. We also aim to establish a business platform in Europe, in addition to those in Japan and the U.S., in order to capture new business opportunities. In the Japanese market, we plan to grow sales of existing pharmaceuticals, including Teribone™ and Kevzara™, while actively expanding our pipeline through in-licensing. We will also form drug discovery alliances with academic institutions and biotech startups to create innovative new drugs through open innovation. Region Core treatment areas Products Asahi Kasei Pharma Orthopedics • Teribone™ • Reclast™ Critical care/ hospital based Japan • Recomodulin™ Immunology • Kevzara™ • Bredinin™ • Plaquenil™ Veloxis Pharmaceuticals Global Specialty Pharma targets 1 Disease areas adjacent to immunology/transplantation, specialty focused 2 Hospital based (large number of beds) Infection* Immunology/ transplantation Renal diseases U.S. Transplantation • Envarsus XR™ • VEL-101 (former FR104) * Invasive/severe infection (e.g., deep mycosis) GG10 Global Specialty PharmaAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 56 We will evolve into a premium partner that contributes to biologics safety and manufacturing efficiency for pharmaceutical companies. Operating Environment Expansion of bioprocess-related markets in conjunction with rapid growth of the biopharmaceutical market Business Strategies Health Care The emergence of more diverse and sophisticated drug discovery technologies is driving the growth of bioprocess- related markets. This growth is being fueled by the shift in focus of drug discovery away from small molecule medicines produced through chemical syntheses and toward new drugs such as biopharmaceuticals, which utilize gene recombination, cell culture, and other biotechnologies, as well as next-generation therapies, such as cell therapy, gene therapy, and nucleic acid drugs. In these areas, the market for virus removal filters, which are used to prevent the contamination of biophar- maceuticals, plasma derivatives, and other biologically originated formulations by viruses, has continued to show strong growth in conjunction with biopharmaceuticals and plasma derivatives. This strong level of growth is expected to continue going forward. For biopharmaceuticals, it is important to develop production processes that ideally match the characteristics of each formulation, and there is also a need to select the appropriate filter based on the requirements of the given process. Accordingly, the ability to reliably supply a broad lineup of high-quality products is of the utmost importance to induce pharmaceutical companies to choose Asahi Kasei as their trusted partner. Strengths of the Asahi Kasei Group Leading position in virus removal filter field In 1989, Asahi Kasei released Planova™, a cellulose hollow-fiber membrane that was the world’s first virus removal filter to be developed for use during the manufacture of biotherapeutics. We have since gained the No. 1 global market share for this product. The production of biopharmaceuticals and plasma derivatives requires sophisticated quality management. We have earned a strong reputation and trust with regard to our ability to contribute to quality management with technologies for removing viruses from substances with a high level of precision based on the size of membrane pores. Moreover, we are able to offer technical sup- port backed by scientific insight, and product proposal and supply capabilities that accommodate customer needs. This has enabled us to build a strong network among pharmaceutical companies and key opinion leaders in the industry. To achieve the reliable supply required in this area, we have decided to build a new Planova™ assembly plant in Nobeoka, Miyazaki Prefecture, Japan, which is scheduled for completion during fiscal 2023. The new plant will take full advantage of automation and digital transformation technologies as a smart factory featuring superior levels of quality and production efficiency. Capturing new growth opportunities through CRO and CDMO businesses Leveraging our customer base and brand, which span across a variety of bioprocess fields, we are expand- ing the scope of operations. For example, we have entered the contract research organization (CRO) busi- ness in the area of assessing the safety of biotherapeutics. In 2019, we acquired ViruSure Forschung und Entwicklung GmbH, an Austrian company that performs contract biosafety testing services for confirming safety with respect to viruses and other pathogens on behalf of pharmaceutical companies. This was fol- lowed in 2021 by our acquisition of Bionique Testing Laboratories LLC, a U.S. company supplying myco- plasma contract testing services. We have also entered the contract development and manufacturing organization (CDMO) business. Bionova Scientific, LLC, acquired in May 2022, is a biopharmaceuticals CDMO that provides pharmaceutical companies with production process development and manufacturing services on a contract basis. Bionova has a strong track record with next-generation antibody drugs, which are complicated and challenging to produce, and has earned a strong reputation for its process development technology. Based in California, Bionova is targeting the numerous drug-discovery startups on the U.S. West Coast. Bionova looks to grow orders by differentiating itself through the supply of contract process development and manufacturing ser- vices for small-scale research projects that are difficult for large CDMOs to accommodate. In these ways, we are taking a multifaceted approach to capturing the growth of the pharmaceutical market, including the rapidly growing sector of next-generation pharmaceuticals, by supplying pharmaceuti- cal companies with comprehensive products and services. Virus removal filters Purification filters Fluid management Synergies Synergies Synergies of customer of customer of customer base, brand, base, brand, base, brand, etc.etc. etc. Biosafety testing services (CRO) CDMO Advanced therapy medical products (gene therapy, cell therapy, regenerative medicine, next-generation vaccines, etc.) Biopharmaceuticals Plasma derivatives GG10 BioprocessAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 57 We will pursue growth by expanding operations in cardiopulmonary resuscitation and other existing areas as well as in adjacent areas in order to contribute to improved health care and save more lives. Operating Environment Global growth in medical needs related to heart disease Business Strategies Health Care Heart disease is the leading cause of death in the U.S. and many other developed countries. This situation is stimulat- ing global growth in medical needs related to defibrillators for treating cardiac arrest and other lifesaving devices, as well as equipment for diagnosing and treating heart disease and related conditions. Defibrillators include those implanted in the body and those that are used externally. External defibrillators include those used by healthcare institutions, the automated external defibrillators (AEDs) placed in public facilities, and the wearable defibrillators that are worn at all times by individuals at risk of cardiac arrest. When a person is in cardiac arrest, the chance of survival decreases by the minute. As such, it is important to further spread the availability of medical devices and systems for swiftly saving people’s lives. Moreover, there are substantial unmet medical needs in areas adjacent to heart disease as there are still numerous diseases for which effective treatments have yet to be established. Strengths of the Asahi Kasei Group Market-leading lineup of defibrillators along with new businesses established through M&A Our subsidiary ZOLL Medical Corporation offers a broad product portfolio with outstanding technology related to car- diopulmonary resuscitation. ZOLL has continued to grow its existing operations while acquiring new technologies and businesses through M&A. Currently, ZOLL’s two main business domains are resuscitation, in which it supplies defibrillators for healthcare institutions and AEDs, and cardiac management solutions, which is centered on the LifeVest™ wearable defibrillator. With business centered in the U.S., ZOLL has a world-leading market share for defibrillators for healthcare institu- tions, AEDs, and LifeVest™ along with a superior R&D capabilities and support systems that have earned high levels of customer satisfaction. Moreover, a solid position has been built for LifeVest™ as a bellwether for developing new markets. LifeVest™ has been worn by more than 800,000 people around the world and has saved thousands of lives. In addition, ZOLL purchased Respicardia, Inc., and Itamar Medical Ltd. in fiscal 2021, thereby entering a new business field through the acquisition of innovative devices for diagnosing and treating sleep apnea, which is common among heart disease patients. Pursuit of growth by augmenting our portfolio in cardiopulmonary disease areas We have continued to pursue organic growth in existing critical care businesses centered on cardio- pulmonary resuscitation. We are also expanding our existing businesses and branching into adjacent fields through M&A. In resuscitation, we are solidifying our market position by expanding operations in the U.S., Europe, and other regions while diversifying our product portfolio. In cardiac management solutions, we have heightened the penetration of LifeVest™ in the U.S. and other markets. Looking ahead, we will further promote LifeVest™ with the goal of having it adopted as a standard of care. Meanwhile, the heart disease insight gained and the relationships built with healthcare institutions will be used to accelerate the market adoption of the sleep apnea diagnosis and treatment solutions of Respicardia and Itamar Medical. We aim to achieve further growth by enriching our portfolio of products that address unmet medical needs in cardiopulmonary disease as well as areas adjacent to critical care. Acute myocardial infarction Cardiac arrest Respiratory distress TherOx, Inc. (Acquired in June 2019) Therapy for acute myocardial infarction Respicardia, Inc. (Acquired in April 2021) Implantable neurostimulators for the treatment of moderate to severe central sleep apnea (CSA) Itamar Medical Ltd. (Acquired in December 2021) Diagnosis solutions for home-based testing for sleep apnea Expansion to Expansion to Expansion to adjacent areas adjacent areas adjacent areas Cardiopulmonary resuscitation Growth of existing Growth of existing Growth of existing businesses businesses businesses LifeVest™ Professional defibrillators, AEDs GG10 Critical CareAsahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 58 Interview with the CEO of ZOLL Medical Corporation Critical Care Driving the growth of the Asahi Kasei Group, pressing and ZOLL are both focused on long-term growth. Since join- ing Asahi Kasei, ZOLL has achieved a compound annual growth rate of 14%, and we are very proud to be a leading part of what is an incredibly resilient and determined long- ahead for the next 10 years term growth culture. Jonathan Rennert Chief Executive Officer ZOLL Medical Corporation Q2 ZOLL has expanded its businesses through M&A. What kind of strategic investments has ZOLL pur- sued, and what do you focus on when evaluating opportunities? ZOLL is always looking for M&A opportunities that comple- ment our business, spur growth, and positively enhance patient care. We have three approaches to strategic investments: • Small equity investments in startups that we think hold Q1 This year marks the 10th anniversary of ZOLL joining the Asahi Kasei Group in 2012. Since then, ZOLL most important is the respect each organization holds for great potential; the other. We have a mutually beneficial, symbiotic relation- • Structured investments in companies with an option to pur- has achieved remarkable growth. What are the key ship that is based on trust and respect. Together, we have chase in the future; factors and driving forces of this success? found the right balance of Asahi Kasei’s support and gover- • Outright acquisition of companies and technologies that we nance and ZOLL’s autonomy. For example, Asahi Kasei’s think offer a good fit with our portfolio of solutions. We’re very proud of ZOLL’s growth. We have quadrupled our sound financial foundation and our shared emphasis on Since joining Asahi Kasei in 2012, ZOLL has made 12 business in the last 10 years, and Asahi Kasei has been tre- innovation have enabled ZOLL to pursue our growth strate- acquisitions—totaling approximately $1.2 billion of acquisi- mendously supportive of our efforts. gies in the ways we think are best for our business and for tion cost—and numerous equity investments. Some of those There are several factors that have driven the successful the larger group of Asahi Kasei companies. transactions have augmented existing businesses, while relationship between Asahi Kasei and ZOLL. One of the Another reason for our mutual success is that Asahi Kasei others are helping us expand into adjacent markets. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance59 Critical Care Q3 Regarding the core businesses of Resuscitation and Cardiac Management Solutions, what continuous started to enter this space, which validates our strategy and We see tremendous potential for increasing the synergy will only drive deeper adoption by physicians around the between the worlds of cardiology and sleep medicine, and growth trajectory is ZOLL aiming for? And what is the world. Additionally, we are expanding our portfolio of cardiac that’s been supported by recent clinical guidance on the company focusing on specifically? diagnostic products, including launching the ZOLL Arrhythmia importance of systematic screening of cardiology patients Management System (AMS) in 2021. Lastly, CMS is collabo- for sleep apnea. Of course, ZOLL already has deep roots ZOLL’s largest businesses are the Resuscitation and Cardiac rating closely with ZOLL’s newest divisions to help more and expertise in cardiac disease, and expanding into sleep- Management Solutions (CMS) divisions. Although both lead patients receive diagnosis and treatment for sleep-disordered disordered breathing will enable us to help even more their respective markets, they continue to pursue aggressive breathing conditions, which are shown to correlate with car- underserved patients with products that complement each growth strategies as there are still many unserved patients diovascular disease, and help strengthen the collaboration other in the areas of diagnosis and treatment. who would benefit from ZOLL’s technologies. between the worlds of cardiology and sleep medicine. Itamar’s WatchPAT™ is revolutionizing diagnosis of sleep In Resuscitation, we are investing in innovation and prod- uct development to extend our market leadership in external defibrillators. We also continue to diversify our revenue base, Q4 In 2021, ZOLL acquired Respicardia and Itamar. What were the objectives for these acquisitions as apnea with an at-home test that is commercially available in multiple markets, including the U.S., Japan, and Europe. By helping connect the world of cardiology with the world of sleep- including meeting increased demand for integrated data new fields of business for ZOLL? And what value will disordered breathing, we expect to extend Itamar’s leadership solutions, and growing ExpertCare™ Services, which covers they create? position in the home sleep-apnea testing (HSAT) market. product training, device testing, software updates, and tech- nical support. Sleep-disordered breathing is a major co-morbidity of cardiac Our CMS division focuses on the diagnosis, treatment, and disease, and ZOLL’s acquisition of Respicardia and Itamar in management of acute cardiovascular disease, evolving from 2021 will help us extend our core mission of helping to save an initial emphasis on preventing sudden cardiac death more lives. (SCD) to addressing broader clinical needs across the cardiac Research shows complex interrelationships between car- disease “continuum of care.” Of course, we remain commit- diovascular disease and both obstructive sleep apnea (OSA) ted to CMS’ flagship product, the LifeVest® wearable cardio- and central sleep apnea (CSA). For example, CSA is common verter defibrillator (WCD): Twenty years after ZOLL pioneered in patients with heart failure—with an estimated 10 million the commercialization of this technology, other providers have patients worldwide who suffer from both. Itamar’s WatchPAT™ ONE home sleep apnea test device Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 60 Critical Care Our Respicardia division offers the remede¯ ® System, which is the only implantable device approved by the FDA to Q6 ZOLL has become the driver of the Health Care busi- ness sector of the Asahi Kasei Group. What is ZOLL treat moderate to severe CSA in adult patients. Since joining aiming for in the next ten years? ZOLL in April 2021, Respicardia has seen significant and steady growth in implants and order revenue, and we expect As ZOLL looks to the future, our business strategy remains that momentum will accelerate throughout 2022. focused on improving outcomes for underserved patients Q5 What areas will ZOLL expand in moving forward? In fiscal 2022, what areas is ZOLL investing in? suffering from critical cardiopulmonary conditions. We have aggressive goals for growth. While maintaining our leadership positions in resuscitation, we will continue to broaden our scope to other areas of acute critical care, includ- There are powerful trends influencing international opportu- ing acute myocardial infarction (AMI), heart failure (HF), and Asahi Kasei brand is less well known. Another contribution is nities—including aging populations, investments in digitali- sleep-disordered breathing and acute respiratory care. that we serve as a bridge between Asahi Kasei’s Japanese zation, and demand for improved health services—and the To get there, we will continue to: diversify our portfolio of heritage and some of the different management styles com- global market for medtech is expected to reach approxi- products and solutions; pursue the clinical work to prove monly used in U.S.-based companies, and having a decade mately $600 billion by 2025. We recognize the tremendous other indications of use for those solutions; and realize the of experience balancing this dynamic has been helpful as opportunities in markets outside of the U.S., and we priori- synergies of recent acquisitions to fuel future growth. more companies join the Asahi Kasei family. It all comes tize accordingly. For the past decade, Asahi Kasei has been on a journey to back to the mutual respect and symbiotic relationship We will also continue to evaluate M&A opportunities and become a global healthcare company, and ZOLL has been a between ZOLL and Asahi Kasei. could be in a position to execute additional transactions big part of that journey. Our contributions include a record of should the conditions be attractive. Finally, we plan to be growth and significant contributions to Asahi Kasei’s financial active in small strategic equity investments this year. performance—contributions that will continue. However, our main focus in fiscal 2022 will be to support ZOLL represents Asahi Kasei’s largest workforce in the and grow the companies that have recently joined the ZOLL U.S., and there are two areas of additional contribution that family. Each new technology added to our portfolio represents stem from that. One is that, because of the size of ZOLL’s market opportunities in the billions of dollars. We will concen- workforce in the U.S., we carry significant value as “brand trate on realizing synergies and accelerating market penetration. ambassadors” for Asahi Kasei in a marketplace where the Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information03Strengthening of Corporate Governance 61 Strengthening of Corporate Governance 62 Corporate Governance 67 Directors and Audit & Supervisory Board Members 70 Discussion Among Outside Directors 73 Risk Management 76 Environmental Protection 77 Compliance / Information Security 78 Human Rights 79 Health and Productivity Management 04Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate GovernanceCorporate Governance Basic Approach Guided by the Group Mission of contributing to life and living for people around the world, the Group Vision for Asahi Kasei is to provide new value to people throughout the world and help resolve social issues by enabling “living in health and comfort” and “harmony with the natural envi- ronment.” Based on this approach, we aim to contribute to society while achieving sustainable growth and improving corporate value over the medium to long term, by spurring innovation and creating synergies through the integration of our diverse range of businesses. To that end, we will continuously pursue the optimal corporate governance framework for ensur- ing transparent, fair, timely, and resolute decision-making in accordance with changes in the busi- ness environment. Corporate Governance Configuration Audit Election Oversight Election Shareholders Meeting Audit & Supervisory Board (5 Audit & Supervisory Board Members, including 3 Independent Outside Members) Audit Board of Directors (9 Directors, including 3 Independent Outside Directors) Nomination Advisory Committee Remuneration Advisory Committee Cooperation Report Oversight Cooperation Independent Auditors Execution of operations Audit Management Council President 62 Meetings of the Board of Directors, Advisory Committees, and Audit & Supervisory Board (fiscal 2021) Composition No. of Meetings Held Average Attendance Board of Directors Chair Hideki Kobori All 9 Directors All 5 Audit & Supervisory Board Members 15 99% Main Subjects of Agenda • Business investment • Medium-term management plan • Risk management and compliance • Optimum composition and size of Board of Directors • Policy for nomination of candidates to be Directors and Audit & Supervisory Board Members • Standards for judging independence of Outside Directors and Audit & Supervisory Board Members 3 100% 6 100% • Policy and system for remuneration of Directors • Deciding on performance-linked remuneration of individual Directors • Auditing state of performance of Directors’ duties 18 99% • Auditing state of operations and financial affairs • Evaluation of Independent Auditors Nomination Advisory Committee Chair Tsuyoshi Okamoto Remuneration Advisory Committee Chair Tsuyoshi Okamoto Audit & Supervisory Board Chairperson Masafumi Nakao Outside Directors Tsuneyoshi Tatsuoka Tsuyoshi Okamoto Yuko Maeda Representative Directors Hideki Kobori Shigeki Takayama Outside Directors Tsuneyoshi Tatsuoka Tsuyoshi Okamoto Yuko Maeda Representative Directors Hideki Kobori Shigeki Takayama All 5 Audit & Supervisory Board Members Major Activities of Outside Officers Internal Audit Department Attendance rate of Outside Directors and Audit & Supervisory Board Members at meetings of the Board of Directors 96.2% Attendance rate of Outside Directors at meetings of the Nomination Advisory Committee 100% Ratio of Independent Officers Independent Ratio of Women Women Ratio of Independent Directors and Audit & Supervisory Board Members Ratio of Independent Directors on the Nomination Advisory Committee Ratio of Independent Directors on the Remuneration Advisory Committee 6 8 2 3 2 3 2 12 Note: 6 out of 14 Officers are independent (3 out of 9 Directors are independent) Note: 2 out of 14 Officers are women (1 out of 9 Directors is a woman) Tsuneyoshi Tatsuoka 93% Tsuyoshi Okamoto 100% 100% Yuko Maeda 91% Tetsuo Ito 93% Akemi Mochizuki 100% Akio Makabe Tsuneyoshi Tatsuoka 100% Tsuyoshi Okamoto 100% 100% Yuko Maeda Attendance rate of Outside Directors at meetings of the Remuneration Advisory Committee 100 % Attendance rate of Outside Audit & Supervisory Board Members at meetings of the Audit & Supervisory Board 97.3% Tsuneyoshi Tatsuoka 100% Tsuyoshi Okamoto 100% 100% Yuko Maeda Akio Makabe Tetsuo Ito Akemi Mochizuki 100% 100% 92% Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance 63 Fields in Which Expectations of Directors and Audit & Supervisory Board Members Are Particularly High In order to contribute to life and living for people around the world, Asahi Kasei pursues two aspects of sustain- internationalization of markets and businesses, digital expertise to advance digital transformation, knowledge of ability: “contributing to a sustainable society” and “sustainable growth of corporate value.” To this end, we have the environment & society to respond to changes in the social environment and the status of stakeholders with identified the knowledge, experience, and capabilities required to advance Group management and its supervi- agility, and human resource management expertise to utilize people as the foundation of business management. sion and auditing at a higher level in a discontinuous and uncertain business environment, and have considered We expect each Director and Audit & Supervisory Board Member to demonstrate their knowledge, experi- the composition of the Board of Directors with consideration to the balance of its diversity and independence. ence, capabilities, etc., especially in the areas described as follows, and will accordingly carry out important Specifically, in addition to expertise in the fields of corporate management & strategy, finance & accounting, decision-making of group management and appropriate supervision and auditing comprehensively from legal affairs, intellectual property, & risk management, and R&D, manufacturing, & technology, which are indis- diverse perspectives. pensable for pursuing opportunities and reducing risks, we also emphasize global knowledge to align with the Corporate Management & Strategy Finance & Accounting Legal Affairs, Intellectual Property & Risk Management R&D, Manufacturing & Technology Global Digital Environment & Society Human Resource Management Directors Hideki Kobori Koshiro Kudo Shuichi Sakamoto Fumitoshi Kawabata Kazushi Kuse Toshiyasu Horie Tsuneyoshi Tatsuoka Independent Tsuyoshi Okamoto Independent Yuko Maeda Independent Masafumi Nakao Yutaka Shibata Tetsuo Ito Independent Akemi Mochizuki Independent Haruyuki Urata Independent Audit & Supervisory Board Members Note: Up to four fields with particularly high expectations are noted for each individual. The table above does not represent all of the knowledge, experience, and capabilities of each individual. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance64 Results of Evaluation of Effectiveness of the Board of Directors (fiscal 2021) The Board of Directors conducts regular evaluations of its own effectiveness through deliberations at meetings of Officer Remuneration Remuneration for Officers in fiscal 2021 the Board of Directors at the end of each fiscal year. The main measures implemented in fiscal 2021 and issues The amount of remuneration, etc., of Directors and Audit & Supervisory Board Members in fiscal 2021 recognized for the future are as follows: Main measures implemented in fiscal 2021 The Board of Directors implemented the following measures in fiscal 2021 based on the evaluation of the previous fiscal year. 1) Consideration of the role of the Board of Directors throughout the year, including enhanced agenda items relat- ing to medium- to long-term management issues and holding meetings of independent officers The Board of Directors actively took up and deliberated agenda items relating to sustainability, business portfolio manage- ment, risk management promotion, and the new medium-term management plan that starts in fiscal 2022. Furthermore, in addition to the regular meeting opportunities between Outside Directors and Audit & Supervisory Board Members that were held in the past, in October 2021, an opportunity was created for only Outside Directors and Outside Audit & Supervisory Board Members to hold a discussion on the role of the Board of Directors, the nature of explanations and deliberations at meetings of the Board of Directors, and how to evaluate the effectiveness of the Board of Directors, from an independent and objective standpoint, as an interim review of effectiveness evaluations of the Board of Directors. Based on this, and fol- lowing multiple deliberations at meetings of the Board of Directors, the following items were determined as described below: 2) Introduction of “matters to be discussed” and narrowing down of agenda items, and 3) Improvements to enhance deliber- ations at meetings of the Board of Directors. 2) Introduction of “matters to be discussed” and narrowing down of agenda items In addition to “matters for resolution” and “matters for reporting,” “matters to be discussed” was established as an agenda item to further deepen deliberations on important management matters, such as, for example, financial and capital policies, estab- lishment of optimum governance, the medium-term management plan and other management plans, business portfolio strate- gies, and large-scale M&A and investments. At the same time, the scope of sustainability and diversity-related matters to be discussed by the Board of Directors was expanded, while the entrustment of decision-making authority for certain business operations, such as capital investment and personnel affairs, was promoted to ensure prompt management decision-making and effective deliberations by the Board of Directors. 3) Improvements to enhance deliberations at meetings of the Board of Directors The Board of Directors further enhanced deliberations at its meetings by increasing the time for questions and answers on the day of meetings based on prior explanations to Outside Directors and by clarifying issues and improving executive summaries for large-scale M&A and investment projects, etc. Issues recognized for the future Classification Directors of which, Outside Directors Audit & Supervisory Board Members of which, Outside Audit & Supervisory Board Members Breakdown by remuneration type (Millions of yen) Amount paid (Millions of yen) Basic remuneration 470 49 140 45 297 49 140 45 Performance- linked remuneration 127 – – – Stock-based remuneration 46 – – – Number of Directors and Audit & Supervisory Board Members paid 11 4 6 3 Composition of remuneration for Executive Directors in fiscal 2021 Basic remuneration 58.9% Performance-linked remuneration 30.2% Stock-based remuneration 10.8% (Paid monthly) (Paid monthly) (Paid at the time of retirement) • Performance-linked remuneration = commitment to results • Stock-based remuneration = perspective of shareholders Note: Outside Directors receive basic remuneration only. Remuneration for Directors At the 131st Ordinary General Meeting of Shareholders, held on June 24, 2022, Asahi Kasei submitted and obtained approval for a proposal to raise the maximum monetary remuneration for Directors and Audit & Supervisory Board Members and partially revise its stock-based remuneration system. The Company also revised its policy for determining the content of individual remuneration, etc., for each Director (hereinafter, the “decision- making policy”). The following is an outline of remuneration for Directors following the revision. Based on measures implemented in fiscal 2021, the Board of Directors has confirmed a common awareness of the following issues for the future. (1) Decision-making policy 1) Review and improve results of efforts during the current fiscal year Based on the improvement efforts made during the current fiscal year, conduct an interim review and make improve- ments in a timely and appropriate manner. 2) Deepen deliberations on the makeup of the Board of Directors Continuously examine the size and makeup of the Board of Directors, including its independence and diversity. As one of the corporate governance mechanisms to ensure that the Asahi Kasei Group achieves sustainable growth and enhances corporate value over the medium to long term, the Board of Directors sought the advice of the Remuneration Advisory Committee on the decision-making policy. Respecting the contents of the committee’s report, the Board of Directors passed a resolution on the decision-making policy, which includes the following basic policy. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance 65 Basic policy The Directors’ remuneration of the Company is one of the important components of corporate governance. The Company designs this system to provide appropriate incentives to both executives and supervisors for achieving sustainable growth and improving medium- to long-term corporate value. Remuneration for Non-executive Directors1 including Outside Directors, who supervise the manage- • Standards for financial incentives selected from the perspectives of appropriateness as clear and objective evaluation criteria based on earnings results as well as awareness for increased capital efficiency • The formula required to calculate individual performance-linked remuneration is outlined as follows: Index calculated by evaluation2 Basic amount by rank Individual performance-linked remuneration amount ment of the Company, solely comprises fixed basic remuneration at a level determined in consideration of 2 Coefficient comprehensively considering achievement of financial targets and non-financial targets third-party survey data, in order to secure a high degree of independence unaffected by short-term earn- ings fluctuations. The remuneration for Executive Directors combines performance-linked remuneration with stock- based remuneration as nonmonetary remuneration, in addition to fixed basic remuneration, which serves a basic livelihood, in order to provide incentives tied to earnings and management strategy as senior man- agement, with levels of remuneration amounts and proportions of types of remuneration adjusted as appropriate for each role according to management strategy and tasks, in consideration of third-party survey data. In conjunction with the revision of the decision-making policy, Asahi Kasei revised the performance- linked remuneration component of remuneration for Directors. Specifically, the Company changed its standard financial indicators from ROA to ROIC from the perspective of emphasizing awareness of the importance of increasing invested capital efficiency and of linking remuneration with the degree of achievement of the targets established in the medium-term management plan. To ensure the optimal way of remunerating Directors and the design of the remuneration system, the Board of Directors and the Remuneration Advisory Committee regularly deliberate and continually confirm 2) Stock-based remuneration their appropriateness and make improvements. 1 Non-executive Directors include the Chairman. (2) Basic design 1) Performance-linked remuneration • Designed to reinforce a common perspective with shareholders, including both the benefits of share price increases and the risk of share price decreases • A trust established by Asahi Kasei acquires shares of the Company and grants them to eligible Directors. Based on the Share Grant Regulations adopted by the Board of Directors, eligible Directors are conferred points in accordance with their rank (maximum of 150,000 points per fiscal year) and the shares are granted to eligible Directors corresponding to the accumulated number of points at the time of their retire- ment as Director and as Executive Officer of the Group (one share of stock per point). • Designed by combining both the achievement of financial targets, such as capital efficiency, to provide incentives tied to earnings and management strategy as management leaders, together with the achieve- Point calculation formula ment of non-financial targets including individual targets, one of which is progress on sustainability • Calculated by making a comprehensive judgment based on achievement of financial targets such as consolidated net sales, operating income, return on invested capital (ROIC), etc., together with achievement of individually set targets, including progress on sustainability Standard points determined for each individual rank × 50% Standard points determined for each individual rank × 50% × performance-linked index Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance The “performance-linked index” shall be a number1 determined in the range of 0.0 to 1.5 according to the • The Remuneration Advisory Committee comprises a majority of Outside Directors and regularly reports to the degree of target achievement2 of non-financial and other indicators relating to sustainability set forth in the Board of Directors on the process of confirmation and determination described on the left. medium-term management strategies and plans. 66 Indicator Weight Indicator Calculation Method FY2022 Target FY2024 Target (4) Changes to breakdown and levels of remuneration Job satisfaction DX Diversity 1/3 1/3 1/3 Percentage of employees absent due to mental illness 0.80% 0.64% Total number of digital professionals 1,000 2,500 Percentage of female employees in line posts and highly specialized positions 3.9% 5.0% 1 Values set forth in the table on the right shall be used Degree of Target Achievement Performance-Linked Index as the performance-linked index according to the degree of achievement of the targets. 120% or more 2 Targets are set for each fiscal year for the above- 105% or more but less than 120% mentioned indicators and the percentage of achieve- ment for each indicator is calculated. The degree of target achievement is deemed to be the total of the achievement percentage for each indicator multiplied by each of the weights. 95% or more but less than 105% 80% or more but less than 95% Less than 80% 1.5 1.2 1.0 0.5 0.0 Asahi Kasei revised its stock-based remuneration system at the 131st Ordinary General Meeting of Shareholders held on June 24, 2022. Specifically, in order to further improve the link between the stock- based remuneration system and the Group’s medium-term management strategies and plans, the Company changed to a performance-based stock remuneration system linking the number of shares granted to the degree of achievement of performance targets. In addition, the Company raised the maxi- mum number of shares to be granted to Directors under the revised system by increasing the maximum amount of money to be contributed by the Company to the trust for acquiring the shares of the Company, and the maximum number of points to be granted to Directors (revising the upper limit on the total number of points per fiscal year to be granted to eligible Directors from 100,000 to 150,000). (3) Decision-making process • As authorized by the Board of Directors, the Remuneration Advisory Committee confirms the reasonableness and appropriateness of the evaluation of the achievement of targets by Executive Directors, as proposed by the President & Director, and determines remuneration amounts for individual Directors by applying this evaluation to the framework formula determined by the Board of Directors. • The Board of Directors determines the amount of fixed basic remuneration by rank. • Stock-based remuneration is granted when certain conditions are met, corresponding to points conferred based on the Share Grant Regulations adopted by the Board of Directors (the Remuneration Advisory Committee reports the degree of achievement of targets and the performance-linked indicators at the end of each fiscal year in relation to stock-based remuneration). Stock-based remuneration 10.6% As a result of the revision of remuneration for Directors, Performance-linked remuneration (cash) 25.4% the breakdown and levels of remuneration for the President & Representative Director will be changed as described on the right on the assumption that the basic amount is multiplied by an evaluation index of 100%. Before the change Basic remuneration 64.0% After the change Basic remuneration 50.0% Remuneration for Audit & Supervisory Board Members Performance-linked remuneration (cash) 30.0% Stock-based remuneration 20.0% The performance-linked remuneration system is not applied with regard to the remuneration for Audit & Supervisory Board Members, and their remuneration consists of fixed remuneration. Individual remuneration amounts are determined through discussions with Audit & Supervisory Board Members. Strategic Shareholdings The Company is continuing to reduce its holdings of shares held for purposes other than pure investment (strate- gic shareholdings), taking into consideration factors such as the risk of share price fluctuations, costs associated with such holdings, and capital efficiency. The purpose, effectiveness, and economic rationale of individual strategic shareholdings are regularly evalu- ated from qualitative and quantitative aspects each year, and are reviewed by the Board of Directors. As a result of the verification, the Company reduces, through sales or other means, holdings of shares judged to be no longer compatible with the purpose of holding them or deemed to have costs and risks that outweigh the benefits of holding them, taking into consideration the conditions of the company concerned. Strategic holdings of listed shares Sales of strategic shareholdings (¥ billion) (stocks) (¥ billion) 250 200 150 100 50 0 203.8 178.6 61 61 60 156.4 123.2 123.2 56 117.7 43 80 70 60 50 40 0 50 -100 -150 -200 0 -250 30 25 20 15 10 5 0 16.7 20.5 18.1 7.4 28.8 Cumulative total for five fiscal years ¥91.5 billion 2017 2018 2019 2020 2021 (FY) 2017 2018 2019 2020 2021 (FY) Fiscal year-end amounts of strategic shareholdings on the balance sheets (left scale) Number of stocks (right scale) Note: During fiscal 2021, the Company sold all of its holdings in 13 stocks including Bridgestone Corporation and Lion Corporation. As a result, at the end of fiscal 2021, strategic shareholdings (including unlisted companies) amounted to 7% of consolidated net assets. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance Directors and Audit & Supervisory Board Members (as of June 24, 2022) Directors 67 Hideki Kobori Koshiro Kudo Shuichi Sakamoto Fumitoshi Kawabata Chairman & Representative Director President & Representative Director Director Director Kazushi Kuse Director Presidential Executive Officer Primary Executive Officer Primary Executive Officer Primary Executive Officer Joined Asahi Kasei April 1981 Joined Asahi Kasei Asahi Kasei Fibers Executive Officer April 2011 April 1978 April 2008 April 2009 April 2010 April 2012 June 2012 April 2014 April 2016 April 2022 Joined Asahi Kasei Asahi Kasei Microdevices Director, Senior Executive Officer Asahi Kasei Microdevices Director, Primary Executive Officer Asahi Kasei Microdevices President & Representative Director, Presidential Executive Officer Asahi Kasei Senior Executive Officer Asahi Kasei Director (position held at present) Asahi Kasei Representative Director (position held at present), Primary Executive Officer Asahi Kasei President and Director, Presidential Executive Officer Asahi Kasei Chairman and Director (position held at present) April 1982 April 2013 April 2016 April 2017 April 2019 June 2021 April 2022 Asahi Kasei Lead Executive Officer Asahi Kasei President of Fibers & Textiles SBU, Senior General Manager, Osaka Office Asahi Kasei Senior Executive Officer, President of Performance Products SBU Asahi Kasei Director (position held at present) Asahi Kasei Representative Director (position held at present), President and Director (position held at present), Presidential Executive Officer (position held at present) April 2014 Asahi Kasei Chemicals Executive Officer Asahi Kasei Chemicals Director, Senior Executive Officer November 2014 Asahi Kasei Lead Executive Officer, Corporate Strategy General Manager April 1982 April 2012 April 2013 April 2014 April 2016 June 2016 April 2018 April 2019 Asahi Kasei Senior Executive Officer February 2016 Asahi Kasei Director (position held at present) Asahi Kasei Pharma Chairman & Director (position held at present) Asahi Kasei Medical Chairman & Director (position held at present) Asahi Kasei Primary Executive Officer (position held at present) April 2017 April 2019 June 2019 Joined Asahi Kasei Asahi Kasei Homes Executive Officer Asahi Kasei Homes Director (position held at present), Senior Executive Officer Asahi Kasei Homes Marketing Division General Manager Asahi Kasei Homes Chubu Sales Division General Manager Asahi Kasei Senior Executive Officer Asahi Kasei Homes President & Representative Director (position held at present), Presidential Executive Officer (position held at present) Asahi Kasei Primary Executive Officer (position held at present) Asahi Kasei Director (position held at present) April 1987 April 2005 Joined IBM Japan IBM Japan Executive Officer January 2008 IBM Vice President January 2017 IBM Japan Chief Technology Officer July 2020 Joined Asahi Kasei Asahi Kasei Executive Officer Asahi Kasei Executive Fellow April 2021 Asahi Kasei Senior Executive Officer Asahi Kasei Digital Value Co-Creation Senior General Manager (position held at present) Asahi Kasei Primary Executive Officer (position held at present) Asahi Kasei Director (position held at present) April 2022 June 2022 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance Directors 68 Toshiyasu Horie Director Senior Executive Officer Tsuneyoshi Tatsuoka Tsuyoshi Okamoto Outside Director Outside Director Yuko Maeda Outside Director Joined Asahi Kasei April 1980 April 1985 April 2015 April 2016 April 2019 April 2020 April 2022 June 2022 Asahi Kasei Chemicals Corporate Planning & Coordination General Manager Asahi Kasei Petrochemicals Business SBU Planning & Coordination General Manager Asahi Kasei Executive Officer Asahi Kasei Lead Executive Officer Asahi Kasei Senior Executive Officer (position held at present) Asahi Kasei Director (position held at present) Joined Ministry of International Trade and Industry January 2010 Councilor, Cabinet Secretariat August 2011 June 2013 July 2015 June 2016 Deputy Vice-Minister of Economy, Trade and Industry Vice-Minister of Economy, Trade and Industry Retired from Ministry of Economy, Trade and Industry Asahi Kasei Director (position held at present) April 1970 June 2002 April 2004 June 2004 April 2007 April 2010 April 2014 April 2018 June 2018 July 2018 Joined Tokyo Gas Co., Ltd. April 1984 Joined Bridgestone Corporation Tokyo Gas Co., Ltd. Executive Officer Tokyo Gas Co., Ltd. Senior Executive Officer Tokyo Gas Co., Ltd. Director Tokyo Gas Co., Ltd. Representative Director, Executive Vice President Tokyo Gas Co., Ltd. Representative Director, President Tokyo Gas Co., Ltd. Director, Chairman Tokyo Gas Co., Ltd. Director, Senior Corporate Advisor Asahi Kasei Director (position held at present) Tokyo Gas Co., Ltd. Senior Corporate Advisor (position held at present) September 2003 Tokyo Medical and Dental University Director of Technology Transfer Center and Intellectual Property Manager of Intellectual Property Right Department Tokyo Medical and Dental University Visiting Professor Kyoto Prefectural University of Medicine Specially Appointed Professor Bridgestone Corporation Executive Officer Japan Agency for Marine-Earth Science and Technology Auditor (position held at present) CellBank Corp. Director (position held at present) Kyushu University Executive Vice President (position held at present) Asahi Kasei Director (position held at present) October 2009 October 2011 May 2013 April 2014 January 2017 October 2020 June 2021 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate GovernanceAudit & Supervisory Board Members 69 Masafumi Nakao Yutaka Shibata Tetsuo Ito Akemi Mochizuki Haruyuki Urata Audit & Supervisory Board Member Audit & Supervisory Board Member Outside Audit & Supervisory Board Member Outside Audit & Supervisory Board Member Outside Audit & Supervisory Board Member Joined Asahi Kasei Asahi Kasei Executive Officer April 1975 June 2001 Joined Public Prosecutors Office October 1984 Joined Aoyama Audit Corporation April 1977 Director, Special Investigation Dept., Tokyo District Public Prosecutors Office March 1988 August 1996 Certified as a Certified Public Accountant Joined Orient Leasing Co., Ltd. (currently ORIX Corporation) February 2005 ORIX Corporation Executive Officer April 1978 April 2009 April 2012 June 2012 April 2014 Joined Asahi Kasei Asahi Kasei Microdevices Director, Executive Officer Asahi Kasei Lead Executive Officer, New Business Development General Manager Asahi Kasei Director Asahi Kasei Corporate Research & Development General Manager June 2014 Retired as Asahi Kasei Director April 1979 April 2008 April 2009 April 2011 April 2015 April 2016 June 2016 April 2017 June 2019 Asahi Kasei Senior Executive Officer Asahi Kasei Primary Executive Officer Asahi Kasei Director Asahi Kasei Representative Director, Vice-Presidential Executive Officer Asahi Kasei Audit & Supervisory Board Member (position held at present) April 2016 April 2017 June 2018 April 2019 June 2021 Asahi Kasei Lead Executive Officer Asahi Kasei Kuraray Medical President & Representative Director, Presidential Executive Officer Asahi Kasei Medical President & Representative Director, Presidential Executive Officer Asahi Kasei Primary Executive Officer Asahi Kasei Pharma President & Representative Director, Presidential Executive Officer Asahi Kasei Director Asahi Kasei Vice-Presidential Executive Officer Asahi Kasei Audit & Supervisory Board Member (position held at present) July 2007 July 2008 January 2009 Chief Prosecutor, Tokyo District Public Prosecutors Office Superintending Prosecutor, Takamatsu High Public Prosecutors Office Deputy Prosecutor-General, Supreme Public Prosecutors Office December 2010 Retired from Public Prosecutors April 2011 June 2015 Office Certified as an attorney of Counsel, Nishimura & Asahi law firm (position held at present) Asahi Kasei Audit & Supervisory Board Member (position held at present) Joined Tohmatsu Audit Corporation (currently Deloitte Touche Tohmatsu LLC) August 2006 June 2007 June 2001 Tohmatsu Audit Corporation Partner July 2018 June 2021 Akahoshi Audit Corporation Partner (position held at present) Asahi Kasei Audit & Supervisory Board Member (position held at present) January 2008 January 2009 January 2011 June 2015 June 2020 June 2021 June 2022 ORIX Corporation Managing Executive Officer ORIX Corporation Managing Director ORIX Corporation Director and Deputy President ORIX Corporation Director and Deputy President, and Group CFO ORIX Corporation Representative Director and Deputy President, and Group CFO ORIX Bank Corporation Representative Director and President ORIX Bank Corporation Director and Chairman ORIX Bank Corporation Special Adviser (position held at present) Asahi Kasei Audit & Supervisory Board Member (position held at present) Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance70 Discussion Among Outside Directors Honing flexibility and sensitivity to changes in the operating environment, achieving further growth as a sustainable company How do you rate “Be a Trailblazer,” the new medium-term management plan for 2024, and what expectations do you have for the new management team? From the perspective of achieving sustainable growth, it is extremely important that Asahi Kasei has established the MTP to serve as a milestone until 2024, while advancing toward a vision for 2030, with portfolio management identified as a key Tatsuoka In formulating the new medium-term management for achieving the objectives. plan (MTP), members of the Board of Directors shared their perceptions of the external environment and fully discussed Okamoto Likewise, I find it highly notable that discussions were matters to be incorporated into the plan over several meetings. advanced on a company-wide basis, including the process in Of particular note is the adoption of return on invested capital which numerous discussions took place at meetings of the (ROIC) as a key performance indicator (KPI) for performance- Board of Directors. The new MTP is an excellent plan that will linked remuneration, to emphasize capital cost and capital effi- allow Asahi Kasei to steadily advance its immediate priorities ciency as well as sales and profits. while maintaining a long-term outlook toward 2030. Particularly distinctive is Asahi Kasei’s commitment to focusing on how it will strengthen its three-sector management through the plan. In specific terms, the MTP clearly identifies 10 businesses— referred to as 10 Growth Gears (GG10)—that will drive Asahi Kasei’s future growth. The plan also targets strategic structural transformation, setting out the way in which Asahi Kasei will renew its existing business portfolio. Furthermore, as the plan clarifies the approach to various issues, including policies on cash flow management and shareholder returns, I consider it to be well balanced and clear. Tatsuoka I feel that the new MTP expresses Kudo-san’s strong resolve as the new President. Asahi Kasei uses the term “A-Spirit” to express an “animal spirit” and the Asahi Kasei spirit comprising ambitious motivation, a healthy sense of urgency, quick decisions, and a spirit of advancement. I hope that Asahi Kasei will promote the plan by successfully instilling this spirit throughout the company, allowing employees to swiftly exert their abilities to the fullest extent despite an uncertain outlook. Tsuyoshi Okamoto Outside Director Yuko Maeda Outside Director Tsuneyoshi Tatsuoka Outside Director Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance Okamoto It’s important for employees to feel that corporate pol- icies, not only the MTP, relate directly to them. A company depends on the strength of its front-line workers. The manage- ment style should enable those working on the front lines to How do you evaluate the corporate governance configura- tion? Also, what corporate governance issues do you think Asahi Kasei will face going forward? sense the President’s high Okamoto The Board of Directors evaluates its own effective- expectations of them. While it ness on an annual basis with regard to Asahi Kasei’s corporate entails a heavy responsibility governance configuration, and I appreciate that the evaluations for a new President to assume have accumulated substantial results. In the evaluations, mem- office amid a challenging and bers give their frank opinions, based on which various reforms dramatically fluctuating oper- and improvements have been promoted. For example, meet- 71 monitoring. As a result, dis- cussions on the new MTP fol- lowed a different format than with previous MTPs. I also feel that important subjects are being presented to the Board of Directors with greater fre- quency. Going forward, I hope the Board of Directors will more proactively discuss ating environment, it must ings between Outside Directors and Audit & Supervisory Board important issues that affect the company’s future direction over also be rewarding in the sense Members have been introduced, as have discussions among the medium to long term—portfolio transformation and human that Asahi Kasei celebrated its Outside Officers. Accordingly, I sense that the corporate gover- resource development, for example. We should have deeper centenary in 2022 and is now nance configuration has improved steadily overall. discussions on such subjects in addition to adopting resolutions embarking on its next 100 years. on specific agenda items. Maeda Although many companies hire outside experts to eval- As Okamoto-san mentioned, meetings between Outside Maeda I also hope that Asahi Kasei will develop employee- uate the effectiveness of their Board of Directors, Asahi Kasei Directors and Audit & Supervisory Board Members, and among friendly workplaces where those on the front lines are moti- conducts its evaluation internally. For this reason, evaluations Outside Officers, now take place on a regular basis. Having a vated. In many cases at large Japanese companies, those contain many in-depth comments that reflect the actual situa- supervisory side whose members routinely communicate and whose efforts have underpinned the company over a long tion, and indicate a good understanding of internal circum- exchange opinions with each other freely will help ensure period become executives. At Asahi Kasei, however, the stances, which leads me to feel that information sharing is smooth cooperation if an urgent situation arises. As regularly Executive Officer in charge of digital transformation took up the functioning well. Nevertheless, speaking as an outsider, there sharing information on matters identified enhances the ability of position only a few years after joining the company. Such are times when it takes me some time to grasp the chronology the supervisory side to execute their roles, I feel that such flexible Executive Officer promotions are excellent in terms of of a matter proposed to the Board of Directors. I would appreci- meetings have facilitated progress. providing motivation. Ideally, I would like to see the further ate it if such materials could be improved slightly to facilitate promotion of women to such positions. From a diversity perspective, I have concerns about the KPIs more in-depth discussions. Given the recent efforts to ensure that matters for deliberation are discussed fully, though, I do Okamoto The Board of Directors has long discussed the orga- nizational structure in relation to corporate governance. for non-financial metrics in the new MTP. The KPIs include only feel that discussions are improving steadily. Although Asahi Kasei is a company with an Audit & Supervisory a numerical target for the number of women in senior positions. Board, it also has a Nomination Advisory Committee and a However, I am keen for Asahi Kasei to develop workplaces that Tatsuoka The last few years have seen Asahi Kasei transition Remuneration Advisory Committee. This structure enables the are friendly not only to women but to all employees, including from a management system in which resolutions are passed on Board of Directors to operate flexibly in accordance with real ways to reduce the personnel turnover rate. I think that having each agenda item to a monitoring system whereby important conditions at any given time to determine matters to be dis- non-financial indicators as performance metrics for manage- subjects are monitored on a company-wide basis. Asahi Kasei cussed and decided upon. If this positive facet of its corporate ment is a very positive step toward making them effective. currently operates a hybrid system of management and governance is used effectively, I believe the Board of Directors Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance72 can perform its governance functions satisfactorily through its Tatsuoka The string of accidents is extremely regrettable and perspective that utilize the current organizational structure. must be recognized as a serious matter. Issues of quality and respective specialties of the What is your opinion on the series of fires and accidents at Asahi Kasei’s plants? Also, what in your view is particularly important to prevent recurrences? safety have been raised as agenda items at meetings of the three sectors, and collabora- Board of Directors on numerous occasions. The Board of tion through the adoption of Directors has repeatedly discussed issues including the status unique research by universi- of Asahi Kasei’s systems for managing safety and quality, and ties, national research insti- how to increase employee awareness levels. In light of the acci- tutes, and other organizations. Maeda I have been greatly disappointed by the succession of dents, however, maybe we should return to first principles and Doing so will further advance accidents over the last few years. My biggest concern is carry out thorough examinations based on the assumption that Asahi Kasei’s vision of three- whether the message that safety is the highest priority is prop- some fundamental issue may exist. I believe it’s necessary not sector management in terms erly reaching those working on the front lines. The company I only to gather feedback from the front lines but also to examine of change and flexibility, which will in turn improve future cor- worked at previously designated the day on which a fire had matters of safety in specific terms by incorporating the views of porate value. occurred as a company-wide disaster prevention day. Every objective third parties. year on that day, all officers would visit plants, where opera- tions were stopped for the day to give employees the opportu- nity to reflect on disaster prevention and safety. Such steps were taken to impress upon employees that nothing is more important than preventing accidents. It’s often difficult for large On what areas do you think Asahi Kasei must focus going forward in order to achieve ongoing improvements in cor- porate value? Okamoto Going forward, as barriers between industries become lower and social issues become more interrelated, I suspect that developments transcending industries will only accelerate. I believe that a sustainable society and ongoing improvement of corporate value will naturally follow if Asahi companies to thoroughly convey management’s commitment in Tatsuoka In its aim to achieve ongoing improvements in corpo- Kasei shares its management assets and steadily promotes the this regard to contractors and subcontractors. Demonstrating rate value, I believe it is crucial for Asahi Kasei to promote busi- new MTP by leveraging its diverse range of business in accor- its corporate stance by designating a certain day for all employ- nesses that society and people continuously consider to be dance with its Group Mission. Adapting to change will be ees to consider safety would be one way for Asahi Kasei to pro- essential by offering solutions to social issues regardless of the essential for implementing the plan. It will be important for mote the issue. operating environment. Sharpening its alertness to changes in Asahi Kasei to accurately understand changes and revise its Okamoto Accidents and corner-cutting tend to occur in places a sense of speed will be vital in determining how Asahi Kasei by remaining highly sensitive to the operating environment. In that are difficult for management to monitor. In its new MTP, I will apply its outstanding technology seeds and business my capacity as an Outside Director, I am committed to further commend Asahi Kasei for focusing investments in the GG10 as models for a carbon-neutral society. fulfilling my role in being alert to changes. the operating environment and working with determination and basic stance as necessary, and to flexibly respond to changes growth drivers and bringing such businesses to center stage. At the same time, I wonder how it’s possible to monitor and assess Maeda Asahi Kasei operates highly specialized businesses in all the employees who support GG10 behind the scenes. I three sectors. However, when a company becomes as big as believe that enabling employees to work with pride, confidence, Asahi Kasei, it must not only grow but enhance its significance and a sense of responsibility will boost front-line morale and by truly making a difference to people’s lives in order to con- serve as an important element in contributing to a fundamental tinue to thrive. Offering social value requires Asahi Kasei to solution to accidents. strengthen its inputs, such as new ideas from a mutual Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance73 Risk Management Overview of the Risk Management Framework and Roles of Constituents Risk Management Framework and Roles of Constituents Risk Management Policies The Asahi Kasei Group is accelerating its global development of diverse operations in three sectors. This development is taking place in a highly volatile operating environment, characterized by changes in values spurred by the COVID-19 pandemic as well as rising international tensions asso- ciated with the decoupling of the economies of the United States and China and Russia’s invasion of Ukraine. The emergence of new and more complex risks threatens to have an even greater impact on the operations of the Group. We therefore recognize the need to track risks on a group- wide basis and strengthen our risk countermeasures. Accordingly, measures were launched in fiscal 2022 as our first step in reinforcing corporate governance. Risk Management Reinforcement Measures Instituted in September 2022 Clarification of the risk management framework and roles of involved parties Under the guidance of the Board of Directors, the President oversees overall risk management with support from the Executive Officer for risk management and compliance. This Executive Officer tracks conditions pertaining to our overall risk management activities based on the instructions of the President, and offers guidance and support to the heads of the relevant departments (adminis- trative, business, etc.) with regard to specific risk countermeasures. Furthermore, a Risk Management Team has been assembled under this Executive Officer. This team is responsible for monitoring the risk management activities of each department and aiding in the implementation of risk countermeasures. Meanwhile, the Risk Management & Compliance Committee, which is chaired by the President, works to reinforce awareness among department heads regarding management-level decisions and instructions pertaining to risk management. Enhancement of risk management PDCA cycle The Asahi Kasei Group’s basic policy is to have organizations managing risks autonomously. To facilitate these efforts, we are enhancing our risk management PDCA (plan–do–check–act) cycle based on established risk categorizations. Risks requiring regular monitoring by the Board of Directors are defined as Material Group Risks. Meanwhile, risks with the potential to impact the ability of business divisions to accomplish the assigned goals of annual management plans are cat- egorized as Material Business Risks, which are addressed through a focused approach within the respective fiscal year. For more information, please refer to the following page. Audit & Supervisory Board Coordination Audit Reporting Internal Audit Department Reporting Board of Directors Reporting Oversight President Reporting Instructions Organizational functions Chairperson: President Executive Officer for risk management and compliance Risk Management Team Risk Management & Compliance, General Affairs; Corporate Strategy, etc. Risk Management & Compliance Committee Reporting Instructions Reporting Instructions Raising awareness Executive Officers for each administrative function Support Heads of business units Heads of regional divisions Audits based on policies, rules, etc. Material Group Risks Material Business Risks PDCA Cycle for Managing Material Group Risks and Material Business Risks Autonomous Organization-Level Risk Management Business Sites Worldwide Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance74 Risk Management PDCA Cycle (Material Group Risks and Material Business Risks) Selection Criteria Response Process Risks Identified for Fiscal 2022 Material Group Risks Material Business Risks Material risks with the potential to impede the fulfillment of the Group Mission or the accomplishment of the goals of the medium-term management plan Risks that relate to social responsibility with a large degree of impact on, or significant attention from, stakeholders and society Shared, group-wide material risks requiring a group-wide response • Examination of possible risks by the Executive Officer for risk management and compliance, and by the Risk Management Team, through discussion with corporate administrative departments and business departments Discussion with the President and approval of risk items and response policies by the Board of Directors at the beginning of the fiscal year* • Planning of countermeasures after incorporation of necessary subjects into concrete risk items by the Risk Management Team and departments responsible for specific risk subjects Selection Countermeasure planning Material risks with potential to impact the ability of business divisions to accomplish goals of annual management plans and that thus need to be addressed through a focused approach within the respective fiscal year • Examination of possible risks by business departments, incorporation into annual manage- ment plans, and approval by the Board of Directors at the beginning of the fiscal year • Planning of risk countermeasures by business departments based on management plans • Support for risk countermeasures from corporate administrative divisions and the Risk Management Team • Implementation of risk countermeasures by relevant departments, regular reporting to the President and Board of Directors by the respective Executive Officers, and reflection of feedback into risk countermeasures Implementation/ reporting • Implementation of risk countermeasures by business departments, regular reporting to the President by heads of business units, and reflection of feedback into risk countermeasures (twice annually) Monitoring of the overall PDCA cycle by the Executive Officer for risk management and compliance and by the Risk Management Team Reporting on annual activities and plans to the Board of Directors * Revisions instituted as necessary in response to major changes in the operating environment Risks related to accidents at production sites Risks related to workplace safety (environmental pollution or suspension of operations due to accidents, etc.) Risks related to quality-associated misconduct Risks related to quality issues or associated misconduct Risks related to violation of laws and regulations Risks related to noncompliance with laws and regulations for the environment, safety, and quality Risks related to products and services meeting regulatory requirements or customer expectations Risks related to global supply chains (feedstock procurement, material procurement, economic sanctions, export restrictions, human rights) Risks related to procurement or supply (supply chain) disruptions Risks related to logistics (regulations,work environments, costs) Risks related to personnel and labor Risks related to cybersecurity and communications infrastructure Risks related to leaks of confidential or personal information and cybersecurity Risks related to large-scale natural disasters, pandemics, or emergencies overseas (terrorism, conflict, etc.) Risks related to pandemics (suspension of operations, etc.) Risks related to M&A Risks related to climate change Risks related to business alliances and M&A Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance75 Directives for Addressing Material Group Risks Material Group Risks Approach of Main Measures Risks related to accidents at production sites Risks related to quality-associated misconduct • Enhancement of culture of safety through more extensive communication between management and frontline workers • Reinforcement and enhancement of Life Saving Actions (adherence to activity prohibitions for eliminating serious accidents) • Improvement of workplace safety and fire prevention technologies • Reinforcement of workplace safety auditing functions and cultivation of environmental safety experts For more information, see “Environmental Protection” on page 76 • Enhancement of quality awareness and culture through regular communication between management and frontline workers • Extensive circulation of information regarding quality risks through increased information communication from corporate quality assurance departments • Reinforcement of governance through quality inspections and reinforcement of training for quality assurance personnel Risks related to noncompliance with laws and regulations for the environment, safety, and quality • Circulation of information regarding regulations and regulatory revisions, exhaustive education activities, appointment of experts, and strengthening of internal consultation frameworks • Development of systems for improving compliance Quick detection of and response to signs of emerging risks through close coordination among relevant departments from wide- ranging perspectives related to geopolitical trends, economic security, etc. Feedstock procurement risks • Monitoring of suppliers • Diversification of procurement routes and maintenance of appropriate inventory levels for feedstocks used in major products and businesses Risks related to global supply chains Material procurement risks Risks related to economic sanc- tions, export restrictions, etc. • Monitoring of suppliers • Formation and maintenance of relationships with alternative suppliers for equipment components prone to unreliable supplies • Revision of management procedures pertaining to delivery and upgrade timings for equipment components • Timely monitoring of regulatory trends and consultation with relevant organizations and experts as necessary before issues emerge • Rigorous screening of customers through external screening systems Human rights risks • Installation of internal frameworks for protecting human rights in line with the Asahi Kasei Group Human Rights Policy • Definition of priority businesses across supply chain and performance of human rights due diligence For more information, see “Human Rights” on page 78 Risks related to cybersecurity and communications infrastructure • Implementation of swift and flexible countermeasures to combat ever-evolving cyberattacks through technical measures made pos- sible by installing security systems and raising and reinforcing awareness regarding security via employee education, etc. For more information, see “Information Security” on page 77 Risks related to large-scale natural disasters, pandemics, or emer- gencies overseas (terrorism, conflict, etc.) • Redevelopment of response policies and manuals based on past incidents (large-scale earthquakes, pandemics, etc.) and arrange- ment of drills in preparation for risk materialization • Establishment of standards and systems for setting up emergency response headquarters and response manuals to prepare for acts of terrorism, conflicts, and other extreme circumstances that may occur overseas Risks related to M&A • Prudent due diligence of potential acquisitions • Careful verification of post-merger integration plans Risks related to climate change • Monitoring and formulation of measures based on annual analyses and investigations of climate change-related risks and opportunities For more information, see “Initiatives Regarding Climate Change Disclosure Based on the TCFD Recommendations” on page 32 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance 76 Environmental Protection Policy and Management Framework The Asahi Kasei Group Mission states that “we, the Asahi Kasei Group, contribute to life and living for people Current Status and Fiscal 2022 Improvement Policy In fiscal 2021, in addition to a serious industrial accident at an around the world.” Based on this mission, we implement environment, safety, and health (ESH) and quality affiliate in March 2021, there were 21 minor industrial accidents assurance (QA) activities that recognize health maintenance, process safety, workplace safety and hygiene, involving small fires, smoke, and minor leaks of hazardous materials quality assurance, and environmental protection as the most important management tasks in all business activi- and other substances within plant grounds. In addition, a fire ties. In July 2022, we revised the Asahi Kasei Group Environment, Health, Safety, and Quality Assurance Policy. lasting for an extended period occurred in April 2022, bringing the Under this revision, we strive for stable and safe operation while preventing workplace accidents and securing the total number of industrial accidents over the past 10 years to 22. safety of personnel and members of the community, and are strengthening our environmental safety initiatives. In light of these circumstances, a meeting of the ESH & QA We aim to gain public understanding and trust by ensuring legal compliance and adopting self-imposed Committee held in July 2022 reaffirmed that measures to address targets to achieve continuous improvement while proactively disclosing information and communicating. industrial accidents and prevent the spread of fires are an urgent 4 3 2 1 0 Occurrences of industrial accidents and serious industrial accidents (As of August 2022) 4 3 2 2 Serious industrial accidents Industrial accidents 3 2 1 1 1 1 1 1 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 Management Framework PDCA Cycle for Safety Management ESH & QA Policy ESH Targets Targets of Core Operating Companies, Regions, Etc. task. At the same time, the committee decided to accelerate the effects of investigations by first applying the results to the front lines in order to realize a swift and sure response, and determined on a policy to thoroughly implement efforts to prevent any recurrence of industrial accidents and fires by once again carrying out an in-depth assessment to ascertain their causes. In fiscal 2022, we are prioritizing the following three measures based on this policy. Plan Implement 1) Company-wide promotion and establishment of activities to enhance process safety technology in order to prevent industrial accidents 2) Implementation of performance assessments through expert audits to evaluate the effectiveness of these activities 3) Enhancement of the effectiveness of fire prevention and extinguishing equipment and of emergency drills to prevent Review Audit Review Audit the spread of fires Sustainability Report In addition, we will focus on creating a culture that strengthens two-way communication with the goal of fostering a culture of safety among all employees. As part of these efforts, we will promote and ingrain the Life Saving Actions program, one of our uniform, company-wide safety initiatives. Management Council ESH & QA Committee Chair: President Sustainability Committee Executive Officer for ESH & QA Corporate ESH Officer Corporate Quality Ensurance Officer General Manager of Corporate Health Care Promotion Center • ESH & QA Implementation Managers (Presidents of SBUs and Core Operating Companies, Senior General Manager of Corporate Research & Development, Senior General Manager of Corporate Production Technology) • ESH Implementation Managers (Senior General Managers of each Region/Senior General Managers of each Works) Note: A site or group of sites consisting of several plants and facilities is called a Region or Works The Asahi Kasei Group, which aims to realize the two mutually reinforcing aspects ESH of sustainability of “contributing to sustainable society” and “the sustainable growth of corporate value,” acknowledges that the serious industrial accidents of recent years constitute a serious risk that could undermine our value from the perspectives of public trust, consideration for the environment, the safety of employees and local communities, and our own growth. To prevent such critical accidents, we are striv- ing to enhance process safety technology on a company-wide basis and foster a culture of safety, including at subsidiaries and affiliates, while incorporating improvement measures based on audits by experts. Masatsugu Kawase Lead Executive Officer Oversight: ESH & QA and Manufacturing Functions FY2022 Target Priority Initiatives and Measures Nurture a culture of safety • Promotion and ingraining of the Life Saving Actions program (thor- ough adherence to rules on prohibited behaviors to eradicate serious occupational accidents) • Strengthening of two-way communication between management and the front lines Develop human resources with expertise in ESH • Establishment of Group Masters in ESH and formulation of succes- sion plans for them Achieve zero serious industrial accidents • Company-wide promotion of activities to enhance process safety technology and introduction of expert audits Process Safety Prevent the spread of fires • Enhancement of the effectiveness of fire prevention and extinguish- ing equipment (participation of experts) • Implementation of effective emergency drills in cooperation with public fire departments Please see “Process Safety” for details on these initiatives. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance 77 Compliance / Information Security Compliance Policy and Management Framework The Asahi Kasei Group positions compliance as a priority issue of materiality from the perspective of value cre- ation. We seek to act with sincerity in accordance with our Group Values through strict compliance with internal rules as well as laws and regulations that relate to our businesses and operations. We apply the Asahi Kasei Group Code of Conduct to all executives and employees and thoroughly familiarize them with the code while continuously revising it in light of changing societal demands and circumstances. To strengthen management of compliance, we established the Risk Management & Compliance Committee, which is chaired by the President and has Presidents of SBUs and core operating companies as members. Matters to be reported include plans and results of compliance promotion activities, serious compliance viola- tions, and the operational status of the Compliance Hotline. Awareness of the Code of Conduct Prevention of Bribery The Asahi Kasei Group has endorsed the United Nations Global Compact and declared that it will work to pre- vent all forms of corruption, including coercion and bribery. In particular, we consider bribery to be a serious risk factor that could considerably jeopardize our corporate reputation. Accordingly, we have established the Asahi Kasei Group Basic Policies for Prevention of Bribery and operate bribery prevention measures in accordance with regulations. Information Security Policy and Management Framework The Asahi Kasei Group considers information security to be a serious issue for management in promoting digital transformation (DX). Accordingly, we formulated the Asahi Kasei Group Information Security Policy with the aim of ensuring and further enhancing information security. Regarding the information security framework, we have established a specialized internal organization (the Security Center) for the implementation of information Group companies in Japan maintain an understanding of the status of compliance through questionnaires on the security measures at all Group companies in Japan and overseas from the perspectives of both corporate gover- issue and regular exchanges of opinions in small groups—such as sections and subsections—using examples of nance and technology. compliance violations, which help promote awareness and understanding of compliance. In fiscal 2021, the com- pliance questionnaire response rate came to 93.5%, with 97% of respondents answering that they had read the Asahi Kasei Group Code of Conduct and approximately 80% that they understood it. Going forward, we will also Cybersecurity Cybersecurity measures have become increasingly important due to the sharp rise and growing sophistication expand and strengthen compliance activities globally. of cyberattacks. The Asahi Kasei Group began operating a security operation center (SOC)1 utilizing advanced security systems, such as endpoint detection and response (EDR),2 to prevent such cyberattacks. In addition, Compliance Hotline The Asahi Kasei Group operates a Compliance Hotline in order to promptly collect information on compliance vio- we devote efforts to employee awareness activities, including carrying out targeted email attack drills several times a year, as most cyberattacks originate from suspicious emails, and implementing regular information lations and take measures in response. A wide variety of reports and consultations are received, including from security training. suppliers and their employees, with the designated office or an investigation and response team carrying out 1 A SOC is an organization that monitors security. It receives alerts and other intelligence from security tools and investigates the impact investigations depending on the nature of the reports or consultations. The Executive Officer for Risk scope and severity of attacks. Management & Compliance reports on the operational status of the hotline to the Risk Management & Compliance Committee and to the Audit & Supervisory Board. The system was revised in June 2022 in accordance with an amendment to Japan’s Whistleblower Protection Act. Number of reports and operational status (fiscal 2021): 66 reports (4 of which were in relation to human rights issues, such as discrimination and harassment) 2 EDR is a system for detecting advanced cyberattacks. The system can also respond to incidents in a variety of ways, such as by collecting logs required for analysis and isolating breached computers. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance Human Rights Policy Respect for the human rights of all people is one of the most important aspects of the Asahi Kasei Group’s business Due Consideration for Human Rights in Procurement In order to address human rights and labor issues, the Asahi Kasei Group has established a management frame- activities. The Asahi Kasei Group Human Rights Policy, which was established with the approval of the Board of work that coordinates among Corporate Procurement & Logistics, the Sustainability Strategy Planning Directors in March 2022, complies with the International Bill of Human Rights and the International Labour Department, and Group companies. Under this framework, in addition to providing ongoing training for Organization’s Declaration on Fundamental Principles and Rights at Work. The Asahi Kasei Group has also employees, we ascertain the status of corporate social responsibility (CSR) initiatives at suppliers with a CSR pledged its support for the Ten Principles of the United Nations (UN) Global Compact as well as the UN Guiding questionnaire, and work together with suppliers to foster an awareness of CSR, including human rights. Principles on Business and Human Rights and the Children’s Rights and Business Principles. Guided by these frameworks, we will strive to identify and appropriately address human rights issues in our business activities. FY2021 CSR Procurement Questionnaire Results (raw material suppliers) 78 Outline of the Asahi Kasei Group Human Rights Policy Basic Approach • Respecting the human rights of all stakeholders • Compliance with international human rights standards • Endeavoring with business partners to remediate and eliminate human rights violations that occur Addressing Human Rights Issues (daily activities) Promoting Respect for Human Rights • Compliance with laws and regulations (corporate initiatives) Overall Evaluation Rank D: 2 2% Rank C: 3 3% Rank B: 17 17% * Major suppliers Responding companies* 101 Average Scores by Category 9. Harmony with the local community 8. Supply chain 1. Corporate governance 100 80 60 40 20 2. Human rights 3. Labor Rank A: 79 78% 7. Information security 4. Environment 6. Product safety and quality assurance 5. Fair corporate activities (including on working hours, wages, safety and hygiene, and protection of personal • • Education Implementation of human rights due will establish a human rights due diligence system and information) diligence • Prohibition of unacceptable conduct • Commitment to engage with affected (including discrimination and harassment) stakeholders • Respect for the human rights of all people in society (including customers and • • Grievances mechanisms Disclosure communities) create a mechanism to implement it on an ongoing basis. The system will proactively identify, avoid, and mitigate any negative impacts that the Asahi Kasei Group may have on society. Human Rights Due Diligence Process Act: Information disclosure and review of activities Check: Tracking and verification of initiatives A P Corporate Human Corporate Human Rights Policies Rights Policies C D Plan: Fact-finding, evaluation, and identification of risks Do: Mitigating risks and taking preven- tive and corrective measures Human Rights Due Diligence To fulfill our responsibility to respect human rights, we Regarding the supply chain, the Asahi Kasei Group’s procurement policy states that it is a policy to con- expresses a firm policy against all forms of discrimination and harassment. This policy applies to all executives sider suppliers as important partners. In addition, we formulated Supplier Guidelines in 2021 to promote and employees. Specific examples of education and training include study sessions focusing on abuses of understanding and cooperation among suppliers. power in the workplace and promoting greater awareness of human rights and diversity issues through the in- house magazine and intranet. Going forward, we will continue to advance various initiatives based on the Asahi Kasei Group Human Rights Policy. Human Rights Education and Training The Respect for Human Rights and Diversity section of the Asahi Kasei Group Code of Conduct clearly Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance 79 Health and Productivity Management Overview of Health and Productivity Management Initiatives Efforts to maintain and promote the physical and mental health of our employees and their families are at the core of the Asahi Kasei Group’s health and productivity management activities. Based on the Statement on Initiatives and Medium- to Long-Term Approach to Health and Productivity Management In April 2021, the Asahi Kasei Group transferred responsibility for the health and productivity management Management for Health issued in October 2020, and the Group Health and Productivity Management Vision set functions at its major domestic sites to the Corporate Health Care Promotion Center, and commenced health and forth in the statement, the Corporate Health Care Promotion Center—an organization reporting to the Chief Health productivity management initiatives within a framework to promote health and productivity management on an and Productivity Officer (CHO)—takes the lead in promoting initiatives for health and productivity management. integrated, group-wide basis. In April 2022, we also began a variety of health and productivity management In recent years, the total number of leave days taken by employees has been increasing, causing both the activities at smaller offices and subsidiaries in Japan. amount of lost working time and healthcare costs to increase. In response, we have been promoting measures to address mental health issues, metabolic syndrome, cancer, and smoking, which are factors behind the increase in leave days. In April 2022, we added the enhancement of sleep quality and quantity—which are said to be largely related to presenteeism1—to our health and productivity management targets, and relevant initiatives are advancing. Among such measures, we especially consider company-wide self-care2 training to address mental Our focus from fiscal 2022 to fiscal 2024 will be to generate concrete benefits through the activities of major domestic sites and to ensure that the benefits of such activities are tangible for as many employees as possible. We also plan to expand the activities to smaller offices and subsidiaries in Japan as well as to overseas sites during this period. In addition, we will introduce health management tools through the digital transformation of health information with the goal of quantitatively ascertaining conditions at each workplace and verifying the health issues to be essential for maintaining and promoting physical and mental health through health and effectiveness of various measures. productivity management initiatives in order to achieve sustainable increases in corporate value. At the same time, we are also focusing on individual and organizational revitalization that supports the From fiscal 2025, we will further enhance various health and productivity management activities by evaluating and inspecting prior activities. We will take on new challenges, disseminating and entrenching health and success and growth of each individual, fosters greater working satisfaction and fulfillment, and creates a vibrant and productivity management on a group-wide and global basis as we seek to undertake well-being management.4 strong organizational climate. For this purpose, we will improve our productivity and development by enhancing work engagement and advancing the comprehensive utilization of KSA engagement surveys3 and stress checks, enabling us to pursue the two mutually reinforcing aspects of sustainability of “contributing to sustainable society” and “the sustainable growth of corporate value,” which the Asahi Kasei Group aims for. 1 The practice of going to work while suffering from an illness or symptoms of some kind, lowering work performance and productivity. 2 In mental health promotion, self-care is the practice of employees being aware of their own stress levels and applying the knowledge and methods they have acquired to cope with such stress. 3 Engagement surveys that ascertain the state of individuals and organizations using three indicators: (1) Supervisor–subordinate relationships, workplace environments; (2) Employee empowerment; and (3) Action driving growth. 4 Well-being management is a management approach that goes beyond promoting physical and mental health to emphasize the development of organizations in which employees feel happiness, sense tangible growth, and go about their work with a high degree of autonomy and motivation. Contributing to sustainable society and sustainable growth of corporate value FY2020–2021 FY2022–2024 FY2025– Success and growth of each individual Greater working satisfaction and fulfillment Vibrant and strong organizational climate Group productivity improvement Maintaining and promoting the physical and mental health of employees and their families • Develop health and productivity management frameworks • Commence initiatives at smaller independent plants in Japan • Disseminate and entrench practices on a group-wide basis • Entrench philosophy, stance, and policies and improve recognition • Generate concrete benefits and • Evolve practices to undertake tangible performance improvements well-being management • Tackle new challenges • Commence initiatives at major • Launch global initiatives domestic sites Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information04Strengthening of Corporate Governance 80 Corporate Information 81 Consolidated Financial Statements 86 Corporate Profile / Stock Information 87 Information Disclosure 05Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information05Strengthening of Corporate Governance81 Consolidated Financial Statements Consolidated Balance Sheets Asahi Kasei Corporation and Consolidated Subsidiaries March 31, 2022 and 2021 ASSETS Current assets: Cash and deposits Notes and accounts receivable–trade Notes, accounts receivable–trade, and contract assets Merchandise and finished goods Work in process Raw materials and supplies Other Allowance for doubtful accounts Total current assets Noncurrent assets: Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Land Lease assets Accumulated depreciation Lease assets, net Construction in progress Other Accumulated depreciation Other, net Subtotal Intangible assets Goodwill Other Subtotal Investments and other assets Investment securities Long-term loans receivable Long-term advance payments–trade Net defined benefit asset Deferred tax assets Other Allowance for doubtful accounts Subtotal Total noncurrent assets Total assets Millions of yen 2022 2021 ¥ 244,641 – 434,595 252,521 146,120 141,608 117,195 (2,471) 1,334,209 646,311 (333,966) 312,344 1,569,782 (1,288,462) 281,320 69,567 8,679 (6,814) 1,865 102,284 159,312 (121,477) 37,834 805,215 431,335 405,508 836,843 246,701 6,227 30,432 1,193 54,276 34,404 (426) 372,808 2,014,866 ¥ 221,779 338,640 – 203,159 166,494 111,798 97,131 (2,225) 1,136,776 598,675 (319,144) 279,531 1,535,326 (1,286,057) 249,269 70,577 8,615 (7,687) 928 84,463 182,414 (149,920) 32,495 717,262 351,921 342,454 694,374 286,517 1,241 29,390 – 21,116 32,709 (445) 370,529 1,782,165 Thousands of U.S. dollars* 2022 $ 1,998,538 – 3,550,323 2,062,912 1,193,693 1,156,834 957,397 (20,186) 10,899,510 5,279,887 (2,728,257) 2,551,622 12,823,969 (10,525,790) 2,298,178 568,311 70,901 (55,665) 15,236 835,585 1,301,462 (992,378) 309,076 6,578,017 3,523,691 3,312,703 6,836,394 2,015,366 50,870 248,607 9,746 443,395 281,055 (3,480) 3,045,568 16,459,979 ¥ 3,349,075 ¥ 2,918,941 $27,359,489 Detailed Consolidated Financial Statements are available at the following link: https://www.asahi-kasei.com/ir/library/financial_briefing/pdf/2203statements.pdf Millions of yen Thousands of U.S. dollars* LIABILITIES AND NET ASSETS 2022 2021 2022 Liabilities: Current liabilities: Notes and accounts payable–trade Short-term loans payable Commercial paper Lease obligations Accrued expenses Income taxes payable Advances received Provision for grant of shares Provision for periodic repairs Provision for product warranties Provision for removal cost of property, plant and equipment Other Total current liabilities Noncurrent liabilities: Bonds payable Long-term loans payable Lease obligations Deferred tax liabilities Provision for grant of shares Provision for periodic repairs Provision for removal cost of property, plant and equipment Net defined benefit liability Long-term guarantee deposits Other Total noncurrent liabilities Total liabilities Net assets: Shareholders’ equity Capital stock Authorized—4,000,000,000 shares Issued and outstanding—1,393,932,032 shares Capital surplus Retained earnings Treasury stock (2022—6,640,935 shares, 2021—6,396,867 shares) Total shareholders’ equity Accumulated other comprehensive income Net unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Commitments and contingent liabilities Total liabilities and net assets ¥ 178,092 239,491 113,000 2,224 146,275 58,115 62,476 208 4,738 4,007 4,445 110,778 923,850 160,000 253,785 8,715 52,017 490 5,396 12,298 152,081 22,490 39,139 706,410 1,630,260 103,389 79,887 1,282,325 (6,219) 1,459,381 66,287 (341) 167,225 (5,142) 228,029 31,405 1,718,815 ¥ 142,087 144,571 84,000 880 126,705 21,268 78,601 124 7,222 3,522 5,651 88,533 703,163 110,000 320,404 3,921 58,669 513 3,415 12,652 158,832 21,939 30,899 721,243 1,424,406 103,389 79,641 1,158,792 (5,932) 1,335,890 91,887 (347) 50,462 (10,416) 131,586 27,058 1,494,535 $ 1,454,881 1,956,466 923,127 18,168 1,194,960 474,757 510,383 1,699 38,706 32,734 36,312 904,975 7,547,178 1,307,083 2,073,237 71,195 424,941 4,003 44,081 100,466 1,242,390 183,727 319,737 5,770,852 13,318,030 844,612 652,618 10,475,656 (50,805) 11,922,073 541,516 (2,786) 1,366,106 (42,006) 1,862,830 256,556 14,041,459 ¥3,349,075 ¥2,918,941 $27,359,489 * As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥122.41 = US$1 prevailing on March 31, 2022, has been used. * As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥122.41 = US$1 prevailing on March 31, 2022, has been used. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information05Strengthening of Corporate Governance 82 Consolidated Statements of Comprehensive Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2022 and 2021 Net income Other comprehensive income Net increase (decrease) in unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Share of other comprehensive income of affiliates accounted for using equity method Total other comprehensive income Comprehensive income Comprehensive income attributable to: Owners of the parent Non-controlling interests Millions of yen Thousands of U.S. dollars* 2022 2021 2022 ¥163,834 ¥ 82,098 $1,338,404 (25,746) 5 114,406 5,403 3,599 97,668 ¥261,502 ¥258,322 3,180 24,806 (106) 35,491 12,631 3,020 75,842 ¥157,941 ¥154,817 3,124 (210,326) 41 934,613 44,139 29,401 797,876 $2,136,280 $2,110,301 25,978 * As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥122.41 = US$1 prevailing on March 31, 2022, has been used. Consolidated Statements of Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2022 and 2021 Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Non-operating income: Interest income Dividends income Equity in earnings of affiliates Other Total non-operating income Non-operating expenses: Interest expense Other Total non-operating expenses Ordinary income Extraordinary income: Gain on sales of investment securities Gain on sales of noncurrent assets Insurance income Gain on step acquisitions Total extraordinary income Extraordinary loss: Loss on valuation of investment securities Loss on disposal of noncurrent assets Impairment loss Loss on fire at plant facilities Loss on product compensation Business structure improvement expenses Total extraordinary loss Income before income taxes Income taxes — current — deferred Total income taxes Net income Net income attributable to non-controlling interests Net income attributable to owners of the parent Millions of yen 2022 2021 ¥2,461,317 1,691,549 769,769 567,122 202,647 ¥2,106,051 1,425,342 680,709 508,901 171,808 1,364 4,332 8,878 7,088 21,663 3,643 8,614 12,257 212,052 26,545 912 3,777 1,700 32,934 511 7,526 6,811 – – 15,017 29,866 215,121 93,046 (41,759) 51,287 163,834 1,954 ¥ 161,880 1,895 4,308 3,451 7,677 17,331 3,209 7,893 11,102 178,036 17,312 353 – – 17,665 66 10,637 1,937 22,287 2,118 7,750 44,795 150,906 73,273 (4,465) 68,808 82,098 2,330 ¥ 79,768 Thousands of U.S. dollars* 2022 $20,107,156 13,818,716 6,288,449 4,632,971 1,655,477 11,143 35,389 72,527 57,904 176,971 29,761 70,370 100,131 1,732,309 216,853 7,450 30,855 13,888 269,047 4,174 61,482 55,641 – – 122,678 243,983 1,757,381 760,118 (341,140) 418,977 1,338,404 15,963 $ 1,322,441 * As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥122.41 = US$1 prevailing on March 31, 2022, has been used. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information05Strengthening of Corporate Governance Consolidated Statements of Changes in Net Assets Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2022 and 2021 83 Millions of yen Capital stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity Net unrealized gain on other securities Deferred gains (losses) on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Shareholders’ equity Accumulated other comprehensive income Balance at March 31, 2021 ¥103,389 ¥79,641 ¥1,158,792 ¥(5,932) ¥1,335,890 ¥ 91,887 ¥(347) ¥ 50,462 ¥(10,416) ¥131,586 ¥27,058 ¥1,494,535 Cumulative effects of changes in accounting policies 9,212 9,212 9,212 Restated balance 103,389 79,641 1,168,004 (5,932) 1,345,102 91,887 (347) 50,462 (10,416) 131,586 27,058 1,503,747 Changes during the fiscal year Dividends from surplus Net income attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Transfer from retained earnings to capital surplus Change of scope of consolidation Capital increase of consolidated subsidiaries Net changes of items other than shareholders’ equity (47,187) 161,880 (371) 0 245 (412) 125 (47,187) 161,880 (412) 125 – (371) 245 (25,600) Total changes of items during the period – 245 114,321 (287) 114,279 (25,600) (47,187) 161,880 (412) 125 – (371) 245 5 5 116,763 116,763 5,274 5,274 96,443 96,443 4,347 4,347 100,789 215,069 Balance at March 31, 2022 ¥103,389 ¥79,887 ¥1,282,325 ¥(6,219) ¥1,459,381 ¥ 66,287 ¥(341) ¥167,225 ¥ (5,142) ¥228,029 ¥31,405 ¥1,718,815 Capital stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity Net unrealized gain on other securities Deferred gains (losses) on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Shareholders’ equity Accumulated other comprehensive income Millions of yen Balance at March 31, 2020 ¥103,389 ¥79,641 ¥1,125,738 ¥(5,990) ¥1,302,777 ¥67,027 ¥(241) ¥13,027 ¥(23,275) ¥ 56,538 ¥24,145 ¥1,383,460 Changes during the fiscal year Dividends from surplus Net income attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Transfer from retained earnings to capital surplus Change of scope of consolidation Capital increase of consolidated subsidiaries Net changes of items other than shareholders’ equity Total changes of items during the period – (0) 0 0 0 (45,800) 79,768 (0) (914) (10) 69 (45,800) 79,768 (10) 69 – (914) 0 (45,800) 79,768 (10) 69 – (914) 0 33,054 59 33,113 24,860 24,860 (106) (106) 37,434 37,434 12,859 12,859 75,049 75,049 2,913 2,913 77,962 111,075 Balance at March 31, 2021 ¥103,389 ¥79,641 ¥1,158,792 ¥(5,932) ¥1,335,890 ¥91,887 ¥(347) ¥50,462 ¥(10,416) ¥131,586 ¥27,058 ¥1,494,535 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information05Strengthening of Corporate Governance Consolidated Statements of Changes in Net Assets Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2022 and 2021 84 Thousands of U.S. dollars* Capital stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity Net unrealized gain on other securities Deferred gains (losses) on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Shareholders’ equity Accumulated other comprehensive income Balance at March 31, 2021 $844,612 $650,609 $ 9,466,481 $(48,460) $10,913,242 $ 750,649 $(2,835) $ 412,238 $(85,091) $1,074,961 $221,044 $12,209,256 Cumulative effects of changes in accounting policies 75,255 75,255 75,255 Restated balance 844,612 650,609 9,541,737 (48,460) 10,988,498 750,649 (2,835) 412,238 (85,091) 1,074,961 221,044 12,284,511 Changes during the fiscal year Dividends from surplus Net income attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Transfer from retained earnings to capital surplus Change of scope of consolidation Capital increase of consolidated subsidiaries 2,001 Net changes of items other than shareholders’ equity (385,483) 1,322,441 0 (385,483) 1,322,441 (3,366) (3,366) 1,021 1,021 (3,031) – (3,031) 2,001 (209,133) (385,483) 1,322,441 (3,366) 1,021 – (3,031) 2,001 41 41 953,868 953,868 43,085 43,085 787,869 787,869 35,512 823,372 35,512 1,756,956 Total changes of items during the period – 2,001 933,919 (2,345) 933,576 (209,133) Balance at March 31, 2022 $844,612 $652,618 $10,475,656 $(50,805) $11,922,073 $ 541,516 $(2,786) $1,366,106 $(42,006) $1,862,830 $256,556 $14,041,459 * As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥122.41 = US$1 prevailing on March 31, 2022, has been used. Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information05Strengthening of Corporate Governance 85 Cash flows from financing activities: Net increase (decrease) in short-term loans payable Increase (decrease) in commercial paper Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from issuance of bonds payable Repayments of lease obligations Purchase of treasury stock Proceeds from disposal of treasury stock Cash dividends paid Cash dividends paid to non-controlling interests Purchase of shares in subsidiaries not resulting in change in scope of consolidation Other, net Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Increase in cash and cash equivalents resulting from changes in scope of consolidation Cash and cash equivalents at end of year Millions of yen Thousands of U.S. dollars* 2022 2021 2022 ¥ 65,632 29,000 896 (51,094) 50,000 (2,298) (412) 125 (47,187) (2,190) – (152) 42,321 21,027 25,600 216,235 ¥(168,641) (55,000) 143,467 (16,936) 50,000 (1,226) (10) 69 (45,800) (1,198) (307) (287) (95,869) 9,639 9,695 204,771 $ 536,165 236,909 7,320 (417,401) 408,463 (18,773) (3,366) 1,021 (385,483) (17,891) – (1,242) 345,732 171,775 209,133 1,766,481 1,112 ¥ 242,948 1,769 ¥ 216,235 9,084 $ 1,984,707 * As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥122.41 = US$1 prevailing on March 31, 2022, has been used. Consolidated Statements of Cash Flows Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2022 and 2021 Cash flows from operating activities: Income before income taxes Depreciation and amortization Impairment loss Amortization of goodwill Increase in provision for grant of shares (Decrease) increase in provision for periodic repairs Increase (decrease) in provision for product warranties (Decrease) increase in provision for removal cost of property, plant and equipment Decrease in net defined benefit liability Interest and dividend income Interest expense Equity in earnings of affiliates Gain on sales of investment securities Loss on valuation of investment securities Gain on sale of property, plant and equipment Loss on disposal of noncurrent assets Decrease in notes and accounts receivable–trade Increase in notes, accounts receivable–trade, and contract assets (Increase) decrease in inventories Increase in notes and accounts payable–trade Increase in accrued expenses Increase in advances received Other, net Subtotal Interest and dividend income, received Interest expense paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities: Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of shares in subsidiaries resulting in change in scope of consolidation Payments for transfer of business Payments of loans receivable Collection of loans receivable Other, net Net cash used in investing activities Millions of yen Thousands of U.S. dollars* 2022 2021 2022 ¥ 215,121 119,738 6,811 28,391 60 (502) 233 ¥ 150,906 108,369 1,937 24,903 148 2,033 (221) $ 1,757,381 978,172 55,641 231,934 490 (4,101) 1,903 (1,562) (2,939) (5,696) 3,643 (8,878) (26,545) 511 (912) 7,526 – (45,911) (73,257) 21,392 10,184 10,546 (19,112) 238,843 7,212 (3,647) (59,137) 183,271 (3,267) 7,224 (142,256) 1,280 (27,452) (5,805) 33,437 (80,912) – (6,102) 2,782 52 ¥(221,019) 9,891 (4,303) (6,202) 3,209 (3,451) (17,312) 66 (353) 10,637 5,214 – 6,110 1,706 1,371 8,190 15,896 318,744 8,690 (3,086) (70,672) 253,676 (6,262) 4,333 (133,347) 656 (16,945) (8,061) 20,264 (4,811) (17,566) (6,144) 10,428 (297) ¥(157,751) (12,760) (24,009) (46,532) 29,761 (72,527) (216,853) 4,174 (7,450) 61,482 – (375,059) (598,456) 174,757 83,196 86,153 (156,131) 1,951,172 58,917 (29,793) (483,106) 1,497,190 (26,689) 59,015 (1,162,127) 10,457 (224,263) (47,423) 273,156 (660,992) – (49,849) 22,727 425 $(1,805,563) Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information05Strengthening of Corporate Governance Corporate Profile / Stock Information (as of March 31, 2022) Corporate Profile Company Name Asahi Kasei Corporation Paid-in Capital ¥103,389 million 86 Employees 46,751 (consolidated) 8,646 (non-consolidated) Founding May 25, 1922 Establishment May 21, 1931 Asahi Kasei Group Offices Asahi Kasei Corporation Tokyo Head Office Hibiya Mitsui Tower 1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006 Japan Tel: +81-(0)3-6699-3000 Fax: +81-(0)3-6699-3161 Core Operating Companies Asahi Kasei Microdevices Hibiya Mitsui Tower 1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006 Japan Tel: +81-(0)3-6699-3933 Asahi Kasei (China) Asahi Kasei Homes 8/F, One ICC Shanghai International Commerce Centre No. 999 Huai Hai Zhong Road, Shanghai 200031 China Tel: +86-(0)21-6391-6111 Fax: +86-(0)21-6391-6686 Asahi Kasei America 800 Third Avenue, 30th Floor New York, NY 10022 U.S.A. Tel: +1-212-371-9900 Fax: +1-212-371-9050 Asahi Kasei Europe Fringsstrasse 17, 40221 Düsseldorf, Germany Tel: +49-(0)211-33-99-2000 Fax: +49-(0)211-33-99-2200 Asahi Kasei India The Capital 1502B, Plot C-70, G-Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051 India Tel: +91-22-6710-3962 Fax: +91-22-6710-3979 Asahi Kasei Asia Pacific 1705-1706, 17th Floor Singha Complex Building, 1788 New Petchaburi Road, Bang Kapi, Huai Khwang, Bangkok 10310 Thailand Tel: +66-(0)21-634-944 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Tel: +81-(0)3-6899-3000 Asahi Kasei Construction Materials 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Tel: +81-(0)3-3296-3500 Asahi Kasei Pharma Hibiya Mitsui Tower 1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006 Japan Tel: +81-(0)3-6699-3600 Asahi Kasei Medical Hibiya Mitsui Tower 1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006 Japan Tel: +81-(0)3-6699-3750 ZOLL Medical 269 Mill Rd., Chelmsford, MA 01824-4105 U.S.A. Tel: +1-978-421-9655 Veloxis Pharmaceuticals 2000 Regency Parkway, Suite 500 Cary, NC 27518 U.S.A. Tel: +1-919-591-3090 Stock Information Stock Listing Stock Code Tokyo 3407 Authorized Shares 4,000,000,000 Outstanding Shares 1,393,932,032 Transfer Agent Sumitomo Mitsui Trust Bank, Ltd. Independent Auditors PricewaterhouseCoopers Aarata LLC Number of Shareholders 166,437 Largest Shareholders % of equity The Master Trust Bank of Japan, Ltd. (trust account) 17.62 Custody Bank of Japan, Ltd. (trust account) JP Morgan Chase Bank 385632 Nippon Life Insurance Company Asahi Kasei Group Employee Stockholding Assn. Sumitomo Mitsui Banking Corp. State Street Bank West Client — Treaty 505234 Mizuho Trust & Banking Co., Ltd. retirement benefit trust (Mizuho Bank account) Trustee of sub-trust: Custody Bank of Japan, Ltd. Sumitomo Life Insurance Company Custody Bank of Japan, Ltd. (trust account 4) Note: Percentage of equity ownership after exclusion of treasury stock 5.32 3.32 2.95 2.59 1.83 1.60 1.43 1.43 1.35 Asahi Kasei Report 2022Asahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth StrategyCorporate Information05Strengthening of Corporate GovernanceAsahi Kasei Report 2022 05 Corporate Information 87 Information Disclosure Investor Relations On our IR website, we present information on the Asahi Kasei Group’s business performance and future policies, in addition to posting financial results materials and a wide variety of management briefing materials. https://www.asahi-kasei.com/ir/ Sustainability We disclose detailed information on Asahi Kasei’s sustainability policies, systems, results, and data regarding ESG issues on our sustainability website (Sustainability Report). https://www.asahi-kasei.com/sustainability/ GRI Standards Content Index https://www.asahi-kasei.com/sustainability/basic_information/guidelines/ SASB Content Index https://www.asahi-kasei.com/sustainability/basic_information/sasb/ Inclusion in Socially Responsible Investment Indexes (as of 2022) • FTSE4Good Index • MSCI Japan Empowering Women Index (WIN) CDP Climate Change and Water Security A– Evaluation Asahi Kasei received an A– evaluation in the categories of Climate Change and Water Security in the 2021 survey • FTSE Blossom Japan Index • MSCI Japan ESG Select Leaders Index conducted by CDP. We received an A– in the Climate Change category for seven consecutive years from 2015 to • FTSE Blossom Japan Sector Relative Index • S&P/JPX Carbon Efficient Index 2021, while 2021 was our third year to receive an A– in the Water Security category. • MSCI ESG Leaders Indexes Acquisition of the Highest Rank from Development Bank of Japan, Inc. (DBJ) under its DBJ Environmentally Rated Loan Program In August 2022, Asahi Kasei received a Development Bank of Japan loan under the DBJ Environmentally Rated Loan Program, having obtained the system’s highest rating as a 2022 “company with particularly advanced environmental programs.” Selected as a DX Stock In 2022, Asahi Kasei was selected as a Digital Transformation (DX) Stock, an initiative conducted jointly by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange, for the second consecutive year. Hibiya Mitsui Tower 1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006 Japan www.asahi-kasei.com/ Strengthening of Corporate GovernanceAsahi Kasei Group OverviewAsahi Kasei’s IdealsGrowth Strategy

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