ASAHI KASEI CORP
Annual Report 2023

Plain-text annual report

Asahi Kasei Report 2023 Be a Trailblazer 1 The Asahi Kasei Group Contributes to Life and Living for People around the World Guided by the universal purpose set forth in its Group Mission, the Asahi Kasei Group creates new businesses in response to social issues that change with the times. Meanwhile, we also achieve growth by repeatedly transforming our business portfolio in accordance with the conditions of each era, including through business downsizing and withdrawal. The essence of the heritage nurtured by our predecessors in that process is “A-Spirit.” Representing the Asahi Kasei spirit, this term epitomizes the mettle of a pioneer and our ambition to create things that did not previously exist. A-Spirit is unique to the corporate culture of the Asahi Kasei Group, and integral to the way we create new value unbound by precedent. We will continue striving toward our Group Vision of enabling “living in health and comfort” and “harmony with the natural environment” by addressing changing social issues through two mutually reinforcing aspects of sustainability: “contributing to sustainable society” and “the sustainable growth of corporate value.” Asahi Kasei Report 202322 On the Publication of the Asahi Kasei Report 2023 The Asahi Kasei Report aims to enhance understanding among our stake- business portfolio. Chief Financial Officer Toshiyasu Horie also touches on holders regarding the narrative of how the Asahi Kasei Group creates value efforts to further improve capital efficiency and the Asahi Kasei Group’s through two mutually reinforcing aspects of sustainability—contributing to mindset regarding capital allocation in his Message from the CFO, while a sustainable society and achieving sustainable growth of corporate value. Outside Director Tsuyoshi Okamoto describes the status and challenges of It is also intended as a tool for constructive dialogue with our stakeholders. the Asahi Kasei Group’s efforts to improve corporate value, as well as mea- This report consists of descriptions of the Asahi Kasei Group’s business sures to strengthen governance. The Message from the President and model, management strategy, governance, and other content, with emphasis these opening pages present the key points that we particularly want to on the details and progress of our medium-term management plan (MTP) convey to our stakeholders. This report also includes features newly added for fiscal 2024, focused on the theme “Be a Trailblazer.” It is compiled by a since fiscal 2022, such as a new presentation of our value creation model project team comprising related departments under the supervision of the and progress on implementing business strategies for our “10 Growth Executive Officer for Corporate Planning, Accounting & Finance, and IR. Gears” (GG10) businesses to drive future growth, as well as the status of The Asahi Kasei Report 2023 describes progress of activities and efforts to create value from the future management policies at the conclusion of the first year of the MTP, perspective of GDP (Green, Digital, People) and the maximum use of along with messages from management and input from our employees. intangible assets. The Message from the President in Asahi Kasei Report 2022, published Over the more than 100 years since its founding, the Asahi Kasei Group in fiscal 2022, featured a straightforward explanation from President has grown by continually transforming its business portfolio. We have done so Koshiro Kudo on his thoughts and determination upon assuming the role of by capturing the ever-changing needs of the times to create new businesses, President, as well as how the Asahi Kasei Group will create value by exe- and downsizing or withdrawing from businesses whose value-creation cuting its MTP. In his message in fiscal 2023, looking back on the year became problematic. We hope that, through this report, our stakeholders since he assumed the role, Mr. Kudo also acknowledges new challenges will recognize the potential of the Asahi Kasei Group as it continues to that lie ahead for improving the Asahi Kasei Group’s corporate value, as transform into the future, and we welcome your unreserved feedback. well as his thoughts and determination regarding transformation of the Regarding photos used on the cover and at the beginning of each section A number of photos used in this report are winning entries from our “2nd Sustainability Photo Contest” held in fiscal 2022 among all Asahi Kasei Group employees and executives. More than 1,000 photos were submitted by 622 applicants from 22 countries around the world, a great many of which convey our commitment to “Care for People, Care for Earth.” Photographer Cover Name Company Country/region Siriporn Pentanyakorn Asahi Kasei Advance Thailand Thailand On the Publication of the Asahi Kasei Report 2023 Name Company Country/region Kaytlin Kilian Sage Automotive Interiors U.S.A. Asahi Kasei Report 2023 3 Period under review The period under review is fiscal 2022 (April 2022 to March 2023). The report also contains some information on activi- ties from April 2023. 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 current as of September 2023. Disclaimer The forecasts and estimates shown in this report are depen- dent on a variety of assumptions and economic conditions. Plans and figures depicting the future do not imply a guaran- tee of actual outcome. Contents 01 Asahi Kasei’s Ideals 4 Message from the President 12 Message from the CFO 15 Message from an Outside Director 02 Value Creation 18 Addressing Social Issues and Transforming Our Business Portfolio 20 Asahi Kasei’s Technological Heritage and Path to Three Sectors 22 At a Glance 23 Financial Highlights 24 Non-Financial Highlights 25 Value Creation Model 26 Value Creation Mechanism 28 Materiality 03 Growth Strategy 31 Progress on Medium-Term Management Plan 2024— Be a Trailblazer 36 Strategies by Sector 36 Material 43 Homes 47 Health Care 04 Strengthening Our Foundation for Growth 53 New Business Creation 57 Green Transformation 61 Disclosure Based on the TCFD Recommendations 64 Digital Transformation 68 Transformation of HR 74 Health and Productivity Management 76 Maximum Use of Intangible Assets 05 Strengthening of Corporate Governance 79 Directors 80 Directors and Audit & Supervisory Board Members 82 Corporate Governance 84 Discussing Asahi Kasei’s Corporate Governance: Interview with New Outside Director Chieko Matsuda 89 Risk Management 92 Environmental Protection 93 Human Rights 94 Compliance / Information Security 95 Communication with Stakeholders 06 Corporate Information 97 Consolidated Financial Statements 102 Corporate Profile / Stock Information 103 Information Disclosure Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 4 Message from the President Creating unique Asahi Kasei value through maximum use of diverse intangible assets to transform our business portfolio without delay Koshiro Kudo President Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information5 No Growth Without Transformation We adopted the key concept of “Be a Trailblazer” in our medium-term man- Why do I place such an emphasis on tackling challenges? Because just agement plan (MTP) launched in April 2022. The heritage passed on since as we have thrived through the transformation of our business portfolio, we our founding is the “A-Spirit,” which the plan aims to spur among all would cease to grow if we stop transforming. We must never forget this. employees. “A-Spirit” comprises ambitious motivation, a healthy sense of Our growth will stagnate and eventually decline if we maintain the status urgency, quick decisions, and a spirit of advancement, and represents the quo instead of taking on new challenges. To continue to grow without falling source of the transformative power that has brought about the Asahi Kasei into such circumstances, we must continuously push ourselves, never let- Group’s growth. Our history of growth is a sequence of tackling challenges ting up on our transformation. With this in mind, upon unveiling the MTP in to create new value. I became concerned, however, that stable manage- fiscal 2022, we set forth the key concept of “Be a Trailblazer” to awaken the ment over many years and increased recognition of the Asahi Kasei Group “A-Spirit” among all employees. in society has fostered a corporate culture that accepts the status quo. Celebrating our centenary, I harbored a sense of foreboding as I looked over our history from founding to present day. Continuing to Grow with People by Contributing to Life and Living through Innovation If I were asked to describe Asahi Kasei, I would first share our Group on the basis of this belief led to a three-sector management configuration— Mission of contributing to life and living for people around the world. Our Material, Homes, and Health Care—which enables us to seek steady customers and society at large expect us to create new value while spurring growth into the future. Based on our experience of transformation, I am innovation with our original technologies, to improve the quality of life and convinced such a configuration represents the most suitable form of man- living for people around the world with such value, and to continuously con- agement for Asahi Kasei today. tribute to society through value creation. Our business activities are based With that said, managing a large number of businesses can lead to on the belief that our growth is maintained by facilitating the development of abstract aims among each of those businesses, so we must avoid losing society through the consistent pursuit of value that contributes to realizing sight of our goals. Meanwhile, accelerating the pace of innovation requires the Group Vision of living in health and comfort and harmony with the natu- continuous investment and R&D, and ensuring and expanding a stable ral environment. The two mutually reinforcing aspects of sustainability— earnings base to fund such activities is indispensable. In the MTP, we have contributing to a sustainable society and achieving sustainable growth of clarified the roles of the three sectors and established targets and measures corporate value—embodying our ideal for the future, refer exactly to this to address these two challenges. The roles for each of the sectors are state. Transforming our business portfolio through repeated trial and error defined and built on their distinctive characteristics while focusing on Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information6 technological development and innovation based in the aforementioned Group by steadfastly promoting growth strategies through the respective belief. We will continue to improve the corporate value of the Asahi Kasei roles of the three sectors. Material Homes Health Care The Material sector pursues the creation of The Homes sector raises cash-generating The Health Care sector drives the Asahi Kasei new business models to improve profitability capabilities by accelerating growth in Japan, Group’s profit growth through the provision of and capital efficiency through R&D and innova- North America, and Australia through continu- innovative pharmaceuticals and medical tion of materials technology that contributes to ous efforts to underpin people’s safe and com- devices that satisfy unmet needs, in pursuit of a sustainable society. fortable daily lives. its mission to improve and save patients’ lives. Progress on the Medium-Term Management Plan Fiscal 2022: a year in which we further firmly solidified our commitment to transformation direction of future structural transformation of petrochemical chain-related businesses. At the same time, we proactively implemented M&A and invest- Fiscal 2022 was the first year of the new MTP, and we vigorously imple- ment focused on the “10 Growth Gears” (GG10) businesses that are to mented and worked on specific measures. From the perspective of busi- drive our future growth. To give an example, we obtained a new growth ness portfolio transformation, publicly announced measures in fiscal 2022 driver in the bioprocess business through the acquisition of Bionova included the transfer of our photomask pellicles business and the establish- Scientific, LLC, a contract development and manufacturing organization ment of a joint venture for our spunbond nonwoven business. We also (CDMO) for next-generation antibody drugs, which are expected to enjoy recorded an impairment loss on Polypore International, LP, following a significant growth into the future. We also began increasing production change of strategy in our lithium-ion battery (LIB) separator business. capacity for Pimel™ photosensitive polyimide to address growing demand Although our photomask pellicles business held a strong industry position of cutting-edge semiconductor applications in the Digital Solutions busi- and enjoyed sufficiently high profitability, we decided to transfer it to a com- ness, which comprises the electronic components and electronic materials pany capable of further leveraging the potential of the business from a best- owner perspective. While the impairment loss on Polypore entailed a painful businesses. Furthermore, in our North American housing business, we were able to expand our business model—which is currently beginning to bear outcome, we set forth a strategy for the future of the separator business by fruit centered on Arizona—by acquiring Focus Companies, a construction establishing a clear strategic position of focusing resources on Hipore™ work supplier in Nevada. wet-process LIB separators, which have the potential for significant growth Meanwhile, we focused efforts on strengthening our business platform, in the automotive market going forward. As I will expand on shortly, we also including intangible assets, such as human resources, core technologies, established an internal team to advance full-fledged discussions on the and know-how. Having put forth the maximum use of intangible assets as a Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information7 key area for transformation in the MTP, I am glad to see that awareness for the operational efficiency of each employee, the key is to efficiently allocate leveraging intangible assets has spread considerably within Asahi Kasei. For finite management resources to achieve maximum results. In this light, rais- example, by using IP landscaping when deciding whether to establish a joint ing productivity is a quintessential management issue. Low productivity sig- venture for our spunbond nonwoven business, we found that a combination nifies that management resources, including already scarce human of the businesses would yield competitive advantages. Many cases of use resources, are not being properly allocated to high value-creating fields or for our intangible assets have emerged, such as the construction of a new, future growth fields. I believe that organizational leaders must continuously data-driven business model for smart electrolyzers in the ion-exchange ask themselves if they are allocating management resources optimally from membrane chlor-alkali electrolysis process, which employs digital technol- a medium- to long-term perspective. ogy. In particular, we are seeing concrete results in relation to digital trans- This issue also applies directly to the Asahi Kasei Group. Return on formation (DX). These include the selection of Asahi Kasei as DX Stock for invested capital (ROIC) indicates the level of productivity relative to capital the third consecutive year by the Ministry of Economy, Trade and Industry invested by shareholders and creditors. With profit growth stagnating (METI), and a profit contribution of ¥2.8 billion from projects manifested in against an increase in invested capital in recent years, our ROIC in fiscal fiscal 2022 alone. 2022 was 4.0%, lower than our cost of capital. Fundamentally strengthen- Despite such progress in steadily implementing medium-term measures, ing our profit structure is an urgent necessity. As a first step toward achiev- operating income in fiscal 2022 came to ¥128.4 billion, significantly lower ing this goal, we established the Build-up to Trailblaze (BT) Project in fiscal than the forecast of ¥210.5 billion announced along with fiscal 2021 results 2023. In addition to streamlining measures that have an immediate effect, in May 2022. The impact of the deteriorating operating environment, includ- the project aims to reduce SG&A expenses by ¥20 billion per year by adopt- ing in petrochemical-related Basic Materials and the separator business was ing measures designed to raise productivity, including rethinking our work- extremely significant, while our inability to adequately anticipate accelerating styles and organization. We must also advance business portfolio changes in the operating environment is a shortcoming that we must transformation from the perspective of productivity—whether we are allocat- address. With that said, I believe we were right to have a sense of urgency ing management resources properly to businesses with future growth from the outset over the need to transform our business portfolio without potential—if we are to manage management resources efficiently over the delay, centered on the Material sector, a stance we have maintained since medium to long term. the unveiling of the MTP. Fiscal 2022 renewed my strong conviction that we must take the lead in transforming of our own accord, rather than following Transforming our business portfolio without delay others, to address irreversible changes occurring throughout the world. Asahi Kasei promotes the transformation of its business portfolio from a Raising productivity: our foremost challenge two-pronged approach: increasing the profits of GG10 and advancing struc- tural transformation focused on petrochemical chain-related businesses. If I may digress slightly, raising productivity has been identified as the great- Looking first at our growth strategy, we established GG10 along with the est challenge facing Japan today, where human capital is in short supply MTP in fiscal 2022, However, I believe that lumping together 10 businesses due to serious population decline. Japan cannot expect to address this with different time frames, scales, and growth directions has made GG10 social issue unless companies work proactively to raise their own productiv- difficult for both internal and external stakeholders to understand. Reflecting ity. Although discussions on raising productivity tend to focus on improving on this, we have classified GG10 businesses into three major categories Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 8 beginning in fiscal 2023, clearly defining our vision for allocating resources GG10 businesses designated as growth potential areas, such as the according to business direction. hydrogen-related, CO2 chemistry, and separator businesses, must be man- We have positioned four businesses—critical care, global specialty aged under strategies that are fundamentally different from those adopted pharma, and bioprocess in the Health Care sector, and Digital Solutions in in the past. By focusing on niche domains, we have raised earnings by the Material sector—as first priority areas. With a focus on globally competi- leveraging our strong technological capabilities. In short, our niche strategy tive businesses, we will prioritize the investment of management resources has been successful, resulting in our growth to date. However, I believe in various businesses in the Health Care sector with the aim of achieving that these businesses must shift to a strategy of scaling up operations growth over the medium term. At the same time, we intend to reap steady through continuous investment over the long term in cooperation with a results from the sleep apnea diagnosis and treatment device businesses, wide range of partners. Businesses classified as growth potential areas are bio-CDMO businesses, and other businesses that we have already acquired already attracting attention around the world, with technologies and prod- through M&A and designated as growth drivers. We will also invest proac- ucts essential to addressing environmental issues. While these businesses tively, including in pursuit of inorganic growth, in Digital Solutions. In three can be expected to continuously spur innovation and achieve growth, our businesses in the Material sector—hydrogen-related, CO2 chemistry, and independent operation is insufficient; we need to work in concert with a energy storage including separators, which are growth potential areas—we variety of other companies. Given that heavy capital expenditure will be will make upfront investments aimed at future growth. We have also desig- required, I believe we must consider all funding options, including subsi- nated another three businesses—car interior material in the Material sector, dies, the use of capital of other companies, and joint ventures. Such and environmental homes and construction materials and North American endeavors represent a new challenge for us, since we have traditionally and Australian homes in the Homes sector—as earnings base expansion operated in niche domains, but we aim to steadily increase the profitability areas for boosting our cash-generating capabilities. We will make invest- of businesses classified as growth potential areas and developing them to ments based on careful assessment of the ability to maintain steady earn- contribute to the world. ings generation and to expand the scale of earnings. In particular, we are In addition to growth strategies, we are steadily implementing and inte- leveraging the know-how and expertise developed in the homes business in grating the reform of strategic restructuring businesses and fundamental Japan to establish new business models in the North American and business structure transformation as a business portfolio transformation Australian homes business in accordance with the attributes of each region, measure. Beginning with businesses in the Exit category—including the and will bolster the earnings base of this business by expanding areas of aforementioned business transfer—we are advancing structural transfor- operation. For GG10, we are making investments of ¥600 billion in total over mation with the aim of implementation by fiscal 2024 for businesses that the three years from fiscal 2022 to fiscal 2024, as initially planned. Through had net sales totaling over ¥100 billion or more in fiscal 2021. The biggest these investments, we aim to enable GG10 to generate operating income issue we face in advancing fundamental business structure transformation totaling ¥150 billion in fiscal 2024, accounting for more than 50% of the is how to reorganize petrochemical chain-related businesses, which have profits from our businesses. Although not all of the capital expenditure and net sales of approximately ¥600 billion. Looking back, we closed our M&A focused on GG10 in recent years will necessarily produce results by naphtha cracker in the Mizushima area of Okayama Prefecture in fiscal fiscal 2024, I am confident that these efforts will be a major driver of growth 2016 and switched to joint operation of a cracker with another company over the medium to long term from fiscal 2025 onward. considering the future supply and demand balance in Japan. In addition to Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 9 optimizing the balance between supply and demand, petrochemical chain- business portfolio we also need to turn ideas into new businesses by lever- related businesses are facing the challenge of achieving carbon neutrality. aging our sophisticated and diverse technologies for potential business For this reason, we are examining the direction of such businesses to opportunities. When we announced our MTP, I said that we would acceler- determine whether making investments required to achieve carbon neu- ate such transformation with an emphasis on the three elements of speed, trality and bearing costs such as carbon taxes will allow them to make suf- asset-light, and high value-added. This is based on my belief that quickly ficient profits. commercializing technologies and business ideas is indispensable to accel- There are three major directions for structural transformation. The first is erating transformation. to explore and promote the potential for developing and adding value to The way we use our intangible assets is key to commercializing technol- technologies in relation to carbon neutrality. In addition to building an ogies and ideas and offering them to society. It also shapes Asahi Kasei’s appropriate balance between the supply and demand of petrochemical unique identity. Despite having such an abundance of sophisticated intangi- products, we must confront environmental issues head-on. With a focus on ble assets, though, we struggle to bring them to commercialization. To me, our technologies to mitigate environmental impact, such as technology to this indicates that we have not made full use of our intangible assets at the produce basic feedstocks from bioethanol, we need to explore all possible business development and business building stages. Based on this analy- solutions. To this end, we will proactively conduct verification trials aimed at sis, we have begun developing businesses in fiscal 2023 centered on tech- commercializing such technologies to establish them as the key to reorga- nology to leverage the Asahi Kasei Group’s intangible assets with an nization of the petrochemical industry in Japan. In addition to possibility, we emphasis on the elements of speed and asset-light. This approach will are considering operating businesses jointly with other companies or exit- make maximum use of core technologies that have yet to be commercial- ing from businesses as our second and third options. I would like to ized but can contribute to society. They can also contribute to earnings emphasize here that simply detaching petrochemical chain-related busi- through a business model whereby Asahi Kasei provides core technologies nesses from the Asahi Kasei Group would not solve this issue. I believe that and receives license fees and royalties from clients that develop them into companies involved in the petrochemical industry must advance verification products. Making extensive use of digital technology, we will also build and trials of outstanding technologies that contribute to achieving carbon neu- promote the use of several frameworks to visualize and integrate our trality while establishing cooperative relationships that allow them to bring intangible assets. such technologies to capitalize on each other’s strengths, to optimize the Since I worked in the textile industry for many years, I will use a weaving balance between supply and demand, and to achieve carbon neutrality. We analogy. If the business operations of a company are the warp, intangible will finalize the direction of each business and steadily implement actions in assets would be the weft. Interweaving the two creates new fabric, in other sequence by the end of fiscal 2024 as we continue to work toward struc- words new value. For the Asahi Kasei Group, which manages a diverse tural transformation. Strengthening our business platform to accelerate business portfolio transformation array of businesses, nurturing an organizational culture that allows us to move freely while strengthening vertical and horizontal coordination is inte- gral to spurring innovation and bringing about transformation. Using terms such as integrate and connect, we have long promoted horizontal practices In addition to pursuing growth by capturing business opportunities that have to achieve close communication and cooperation between sectors as well already come to light, to sustainably advance the transformation of our as internally and externally. Today, the results of such efforts are emerging, Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 10 strengthening the Asahi Kasei Group laterally. However, I feel that issues participation in meetings has enabled more multi-faceted discussions. remain to be addressed vertically, in terms of sharing information within Moreover, following the General Meeting of Shareholders in fiscal 2023, organizations. Only by nurturing an organizational culture that allows all the composition of the Board of Directors changed. Inside Directors are employees to think, speak, and act uninhibitedly, without being hampered now centered on Executive Officers responsible for corporate functions, by superior-subordinate relationships, are we able to unlock their spirit of and a higher proportion of Outside Directors is expected to further taking on challenges. While I believe that the Asahi Kasei Group’s organiza- enhance the effectiveness of the Board of Directors. tion is open, as typified by the culture of referring to one another by name as In fiscal 2022, we revised risk management as a whole from two per- opposed to by title, I wonder if we have really nurtured an environment in spectives: clarification of the risk management framework and roles of which all employees can speak openly with each other. In fiscal 2023, we involved parties, and enhancement of the risk management PDCA cycle. In will again reform the environment and vision for our organization and work my view, thoroughly pursuing and confirming the effectiveness of estab- on improvement measures. lished rules through an ongoing process of trial and error strengthens and refines risk management. Although confusion may result regardless of how Strengthening governance to enhance effectiveness well the infrastructure has been developed for addressing risk, we pursue I believe that we made great progress in strengthening governance and enhanced risk management by making modifications each time an issue risk management in fiscal 2022 by focusing efforts on enhancing their occurs. There is risk of a delay when everyone thinks that someone else will effectiveness. Holding in-depth discussions and drawing conclusions respond, so we are striving to raise awareness to ensure that all involved based on discussions is of the utmost importance to ensure proper, work- parties take ownership of risk response to improve its effectiveness. In view ing governance. Although fiscal 2022 saw many changes in Management of fires, accidents, and other incidents in recent years, we endeavor in par- Council membership, its meetings facilitated free and open discussions ticular to deepen mutual understanding through dialogue between members taking into account overall optimization, which contributed to in-depth dis- of management, including myself, and employees on matters that are fun- cussions at meetings of the Board of Directors. In addition, Rick Packer, damental to what we do, such as workplace safety, quality assurance, and Executive Officer for the Health Care Business Sector, became the first employee well-being. non-Japanese member of the Management Council in 2023. His Making Steady Progress Toward Increasing Corporate Value At present, and since May 2022, Asahi Kasei’s price-to-book (P/B) ratio— investors to increase corporate value. Since we are advancing business the ratio of our market capitalization to our net assets—remains less than portfolio transformation without delay and accelerating initiatives designed one. I deeply regret not being able to receive a more appropriate evaluation to raise productivity, I am convinced of our ability to improve profitability and in the stock market. In addition to improving our business results, we will do capital efficiency. We are considering all possible shareholder return options, everything in our power to raise the expectations of shareholders and including dividend increases and share buybacks. Going beyond mere Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 11 temporary improvement in return on equity (ROE), we aim to realize operat- challenge of transformation to accelerate growth. In terms of future outlook, ing income of ¥200 billion, ROIC of 6%, and ROE of 9% or higher in fiscal in addition to the globally competitive critical care, global specialty pharma, 2024 by continuously increasing our earnings power. and bioprocess businesses in the Health Care sector, we are investing pro- I believe that we are underrated because many of our growth initiatives actively in the growth of Digital Solutions and car interior material as niche are still in progress, and have yet to be fully reflected in business results. and high value-added businesses, and businesses making a major social Another factor is that the stock market fails to appreciate the Asahi Kasei contribution, such as the energy storage (separator business) business and Group’s potential. As I have stated, we are determined to tackle the hydrogen-related business in the Material sector. I strongly believe that we have exceptionally high potential to increase our corporate value going for- ward. Meanwhile, our inability to fully and precisely emphasize our growth prospects and future outlook to capital markets is something I consider to be a major challenge confronting me as President. We will implement our growth strategies with a greater sense of urgency to quickly achieve results that specifically demonstrate the Asahi Kasei Group’s growth prospects and potential. I believe that initiatives currently underway can demonstrate our future growth. By clearly defining points to emphasize, such as the way in which we will develop technologies and businesses that contribute to future growth, though they have yet to be reflected in business results, I will continue to provide straightforward expla- nations to shareholders and investors as we strive to earn proper evaluation of the Group. Koshiro Kudo President Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Message from the CFO Aiming for ongoing growth in corporate value through efficient capital allocation and dialogue with capital markets 12 Toshiyasu Horie, CFO Representative Director, Senior Executive Officer Review of Earnings Performance in Fiscal 2022 In fiscal 2022, the Asahi Kasei Group saw solid performance in the Homes sector, but it was a challenging year for the Material and Health Care sectors, which were impacted by a worsening business environment. In Material, business was significantly impacted by decline in demand due to economic slowdown in Asia, especially China, while in Health Care, the critical care business, which had seen steady growth until now, was impacted by supply chain dis- ruption, which hindered parts and materials procurement. Consequently, we were unable to generate profits in a well-balanced manner in these three sectors, and as a result, operating income fell by 36.7% year on year, and ROIC decreased from 6.6% to 4.0%. A major lesson learned from these results is that we did not act quickly enough to improve productivity and inventory control in the face of a rapidly deteriorating business environment, and we hope to make significant improvement in that regard in fiscal 2023. Additionally, in fiscal 2022, we recorded an impairment loss of ¥186.4 billion on the goodwill and other intangible assets related to Primary Financial Metrics Net sales (¥ billion) 2,170.4 2,151.6 2,106.1 2,461.3 2,726.5 FY2018 FY2019 FY2020 FY2021 FY2022 Profitability Capital efficiency Operating income (¥ billion) Operating margin EBITDA (¥ billion) EBITDA margin Net income (loss) (¥ billion) EPS ROIC ROE D/E ratio Financial health Net D/E ratio 209.6 9.7% 313.6 14.5% 147.5 ¥106 8.8% 11.1% 0.31 0.17 177.3 8.2% 295.6 13.7% 103.9 ¥75 6.6% 7.6% 0.52 0.36 171.8 8.2% 305.1 14.5% 79.8 ¥57 4.9% 5.6% 0.45 0.30 202.6 8.2% 350.8 14.3% 161.9 ¥117 6.6% 10.3% 0.45 0.31 128.4 4.7% 305.0 11.2% (91.3) ¥(66) 4.0% (5.5)% 0.57 0.41 Capital ratio 53.6% 48.2% 50.3% 50.4% 48.1% Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 13 Polypore International, LP, in the U.S. While apologizing to our Meanwhile, in terms of growth strategies, we will focus invest- and in the medium term we will efficiently increase productivity by stakeholders for recording this large impairment, I would like to ments on the GG10 businesses to drive our future growth, and reviewing workstyles and organizations. In fiscal 2023, we will focus explain the causes behind it. thereby achieve sustained growth. Our traditional pattern of suc- on cost reduction and have commenced some initiatives to improve In the lithium-ion battery (LIB) separator business, to prepare for cess consists of a business model that generates high profits by productivity over the medium term, aiming for an annual cost reduc- future expansion of the automotive market and to respond to trends leveraging technologies honed in niche fields and making appropri- tion effect of ¥20 billion in fiscal 2024. and technical issues in the environment-friendly vehicle market, we ate investments. GG10 include some fields in which that pattern We believe that the current P/B ratio of less than one is a mes- acquired Polypore in 2015, thus obtaining the Celgard™ dry-process remains viable, and some in which it does not. In particular, the sage from our shareholders and investors that their confidence in LIB separator business and the Daramic™ lead-acid battery sepa- businesses with growth potential such as LIB separators and our capital efficiency and profitability is waning, and that they have rator business. We integrated these with our Hipore™ wet-process hydrogen-related are expected to see substantial market expansion misgivings about our future. In order to regain trust, we will not only LIB separator business, but changes in the automotive market in the future, and we believe that maintaining and enhancing com- improve our business performance in the short term, but also accel- unexpectedly accelerated, causing earnings to fall far short of the petitiveness will require a much higher level of investment than has erate the transformation of our business portfolio over the medium original plan. However, the Hipore™ separator business holds good been conventional for us. We are therefore considering various to long term and increase our ability to generate cash by efficiently prospects for growing business opportunities in the automotive options, including financing from other companies. investing capital in growth areas. market, and we have therefore decided to dissolve the Hipore- Polypore asset grouping and concentrate resources on the Hipore™ separator business. By doing so, we will pour our efforts into further improving the future growth and profitability of the sepa- rator business and quickly recovering corporate value. Progress of the Medium-Term Management Plan Initiatives for business portfolio transformation As part of the MTP launched in fiscal 2022 focused on the theme Working to improve capital efficiency and productivity Starting in fiscal 2021, we have been evaluating our business port- Capital Allocation Policy When it comes to business portfolio transformation going forward, folio, including the ROIC of each individual business, and reviewing the importance of capital allocation cannot be overemphasized. the business strategies based on these evaluations. The most Due to diminished earnings, operating cash flow is expected to be important and difficult point in promoting ROIC management is to ¥600 billion to ¥700 billion over the three years of our MTP. On the fully instill an ROIC mindset among on-site personnel involved in the other hand, cash flow from investing activities is expected to be business. Through the company intranet, internal magazine, etc., ¥800 billion to ¥900 billion, equal to the level anticipated when we we share perspectives on management considerations using ROIC formulated the MTP, as it includes cash outflows from projects “Be a Trailblazer,” we consider business portfolio transformation our as an indicator with business unit members, and management and already decided. When making investment decisions, we of course top priority, and will proceed with the restructuring of petrochemical business unit members regularly discuss the ROIC status of each carefully examine profitability and maintain a rigorous policy of chain-related businesses. Not only our business divisions, but also business and measures for improvement. As a result of these dis- focusing on diligently selected projects. Specifically, we set and corporate divisions, including Corporate Strategy, which I am cussions, business unit members’ awareness of ROIC is also then strictly apply a hurdle rate based on the cost of capital and responsible for, are actively involved. Having worked for many years changing. In fiscal 2023, in addition to proceeding with the transfor- add a risk premium based on circumstances such as the region in in the petrochemical business that now faces major challenges, I mation of our business portfolio, we will work closely with business which we operate and business characteristics. Furthermore, after feel a sense of responsibility to see this restructuring through to unit members and on-site personnel to speed up management making an investment, we continue to conduct monitoring to deliver completion. Petrochemical chain-related businesses have a diverse decisions and improve capital efficiency. substantial improvements in investment efficiency, including ave- range of stakeholders, including raw material suppliers, customers, In addition, in response to our fiscal 2022 results, starting in nues to recovery when the business environment takes a downturn. business partners, and employees. While building consensus fiscal 2023 we are implementing the BT Project, which aims to Financing for investments consists primarily of interest-bearing through careful discussions with these various stakeholders, we will improve productivity group-wide in order to quickly improve profit- debt, and is expected to increase by ¥250 billion to ¥500 billion. also take into account the outlook for profitability and capital effi- ability. This is a company-wide project with the President as the At the same time, in concentrating investment on GG10, for busi- ciency based on the costs and investments required to achieve project owner and me as the management team leader. We are nesses with growth potential we will consider non-traditional fund- carbon neutrality, and solidify our plans by fiscal 2024 year-end. moving forward on two trajectories: in the short term we will review ing options, such as utilizing capital from other companies. indirect costs within our group and reduce duplication to cut costs, We anticipate a D/E ratio of around 0.7 and a net D/E ratio of Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information around 0.6, and we believe that we will continue to maintain Framework for Capital Allocation (three-year period FY2022–2024) 14 sufficient financial soundness. Regarding shareholder returns as well, we maintain the same assumptions that were made at the formulation of the MTP, and target total returns of ¥150 billion to ¥180 billion over the three-year period. We emphasize a policy of achieving stable shareholder returns through dividends, and for fiscal 2022 we paid a dividend of ¥36 per share, an increase of ¥2 per share from fiscal 2021. We will maintain this policy in fiscal 2023 and also study the repurchase of shares based on comprehensive consideration of investment proj- ects and share price levels in addition to capital structure optimization. Working Toward Mutual Understanding with Shareholders and Investors I have gained a renewed sense of how important it is for us to con- sider our strategies and their execution from the perspective of shareholders and investors, and to act promptly when areas for improvement are identified. We will actively engage in dialogue in order to reflect evaluations from such perspective in our business management. Through recent dialogue with shareholders and investors, it has been brought to our attention that our capital allo- cation may be skewed, particularly toward capital expenditure and M&A. Our ultimate objective is of course to steadily increase return on investment, but whereas the primary interest of shareholders and investors may be how to efficiently convert funds into cash, we on the company side are concerned with building businesses for future growth and fortifying our management foundation, and the two perspectives can differ in terms of the timeframes involved. To bridge that gap, the Asahi Kasei Group will continue to make every effort to gain the understanding of our shareholders and investors as we improve information disclosure to carefully explain our thinking, and our vision for the future. Operating cash flow 3-year total ¥600 billion to ¥700 billion Borrowing capacity Increase in interest-bearing debt +¥250 billion to +¥500 billion (D/E ratio of around 0.7, net D/E ratio of around 0.6) + Other cash sources (Sale of businesses, use of other companies’ capital in investment projects, etc.) 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 Cash flows (¥ billion) 300 200 100 0 （100） （200） （300） （400） 212.1 124.5 13.1 253.7 183.3 95.9 90.8 （37.7） （157.8） （122.8） （221.0 ） （213.6） （198.9） （193.7） （318.2） Dividends per share and dividend payout ratio 34 34 34 34 36 59.1 45.4 32.2 29.1 (¥) 40 30 20 10 0 (%) 80 60 40 20 0 1 株当たり変換配当金と配当性向 2019 2020 2018 2021 2022 (FY) 2018 2019 2020 2021 2022 (FY) 2022 年度 Operating cash flow Investing cash flow Free cash flow 1 株当たり年間配当金：36 Dividends per share (left scale) Dividend payout ratio (right scale) 配当性向：（当期純利益が赤字の為、表示なし、折れ線は 2021 まで） Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Message from an Outside Director 15 “ Bolder and faster transformation needed for Asahi Kasei to reach its full potential Asahi Kasei’s Growth Potential In the five years since becoming an Outside Director of Asahi Kasei strength is shaped by the collective motivation of its employees. In the MTP, Asahi Kasei set forth its policy of focusing investment in GG10- in 2018, I have engaged in the supervision and advising of manage- related businesses. However, senior management must also pay care- ment. I have also served as Chair of the Remuneration Advisory ful attention to employees working in roles that underpin businesses Committee since fiscal 2018 and of the Nomination Advisory other than GG10, maintaining and enhancing their motivation through Committee since fiscal 2020. In my position as an Outside Director, proper appraisal. I am acutely aware of the need to monitor whether risk manage- Meanwhile, the company must of course incorporate diversity ment is sufficiently implemented as the company works to achieve to secure talented human resources. We have now entered an era global sustainable growth. The MTP unveiled by Asahi Kasei in April in which Asahi Kasei would not be viable as a global company with- 2022 aims to realize the growth of businesses that contribute to out ingraining diversity in its organization, to the extent that the global development. I believe that the role of Outside Directors is to company constitutes a harmonious whole in terms of everything offer useful advice on promoting the plan from a risk management from gender and nationality to age, career background, and work- perspective. style. I understand that Asahi Kasei is more advanced than other The technologies accumulated by Asahi Kasei since its founding companies, in that it proactively recruits mid-career hires and are world class. No matter how much the business environment adopts a variety of systems designed to increase diversity, such as changes going forward, I am certain that the company can survive by the Group Masters program. Nevertheless, without greater momen- refining its technological capabilities. It must also have the ability to tum for further diversity promotion, securing human resources to adapt to change while transforming its operations with a focus on maintain and grow businesses will likely become more difficult. technology when navigating an era of volatility. Asahi Kasei, which has grown by transforming its business portfolio, undoubtedly has that ability. If it can leverage this strength, the company can turn the Adopting a Bolder and Faster Approach to Business Portfolio Transformation global issue of addressing carbon neutrality to its advantage. I am Measures implemented to evolve Asahi Kasei’s business portfolio convinced that Asahi Kasei is richly endowed with the capabilities are gradually beginning to bear fruit. In particular, transformation of that companies need to navigate the coming era and achieve growth. the Material sector’s business portfolio is advancing steadily, includ- Energizing Human Resources and the Organization as the Key to Growth ing the transfer of the photomask pellicles business and the estab- lishment of a joint venture for the spunbond nonwoven products business. A recent move by senior management for transforming I believe that people are a vital key to Asahi Kasei’s growth. No matter the business portfolio that I rate highly is their decision regarding how outstanding its technological capabilities, a company cannot fully expansion of the separator business. The plan to expand the sepa- utilize its strengths without the abilities and motivation of the people rator business in North America has been the subject of lively dis- who use that technology. It is no exaggeration to say that a company’s cussions since 2022, which resulted in the company scrutinizing Tsuyoshi Okamoto Outside Director Became an Outside Director of Asahi Kasei in June 2018 after serv- ing in a variety of positions including President and Chairperson of Tokyo Gas Co., Ltd., Vice Chair of Keidanren, and Chairperson of The Japan Gas Association. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 16 risk factors and pausing the plan to reexamine it. Deciding to apply management. If anything, the earning capabilities of each sector Officers and non-Executive Officers came to five each and the the brakes to a project once it has gotten underway is easier said allow the Asahi Kasei Group to achieve stable earnings by diversifying number of Inside Directors and Outside Directors came to six and than done. Senior management’s decision will set an excellent prec- risks. In addition, managing the three sectors has the benefit of four, respectively, including two female Outside Directors. The edent for Asahi Kasei in examining investments going forward. The enabling group-wide management of their intangible assets, including Board of Directors is currently transitioning from a management same can be said of the decision—made at the same time—to human resources. Owing to three-sector management, Asahi Kasei system, whereby it passes a resolution on each agenda item relat- record an impairment loss on the goodwill and other intangible has the fundamental strength to drive forward structural transforma- ing to business execution, to a monitoring system that monitors key assets of Polypore. The fact that senior management agreed to a tion of its businesses. For example, one might say that it enabled the subjects for Asahi Kasei on a company-wide basis. The latest revi- decision that entailed posting a consolidated loss demonstrates company to maintain a sound financial standing even after the sion to the membership of the Board of Directors strongly reflects how serious they are about the separator business. I also applaud recording of the aforementioned impairment loss on Polypore. the determination to transition to this system. My own view is that President Kudo’s prudent judgment in personally addressing and Meanwhile, I am convinced that Asahi Kasei’s extensive tech- the Board of Directors should aim for a monitoring system, so I rate explaining these decisions to the public. nologies and intellectual property will be increasingly utilized across the revised composition highly. In light of unparalleled changes in the external environment in sectors group-wide, holding the key to the creation of synergies Asahi Kasei has established the corporate governance configura- recent years, Asahi Kasei must adopt a bolder and faster approach among businesses. Currently, Asahi Kasei is promoting initiatives for tion of a company with an Audit & Supervisory Board. In such a con- to business portfolio transformation. By fiscal 2024, the company bolstering the areas of green (G), digital (D), and people (P) to figuration, the Nomination Advisory Committee and the Remuneration will discuss further acceleration of reforms to implement structural strengthen its business platform and for maximizing the use of its Advisory Committee play important roles. Although fundamentally transformation of businesses with net sales of more than ¥100 bil- strengthened intangible assets. Active discussions are taking place advisory—they have no authority under the Companies Act—the fact lion based on fiscal 2021, and finalize a policy for structural trans- at meetings of the Board of Directors on what Asahi Kasei needs to that these committees are voluntary enables flexible operation with formation of the approximately ¥600 billion petrochemical-related do to make efficient use of its abundant intangible assets. open and meaningful discussions. For example, it has given the business with a view to carbon neutrality. With the company enhancing management rationality and qual- Remuneration Advisory Committee the authority to decide on Capitalizing on the Unique Advantages of Three-Sector Management ity in these ways, I believe it is vital for Asahi Kasei to communicate performance-linked remuneration. I believe it is appropriate to main- its future growth potential to the capital markets, as well as steadily tain the current configuration for the time being while continuing to improve its business performance, in order to continuously enhance study the company’s future governance structure. Asahi Kasei has grown by adapting to change and transforming its its corporate value going forward. The most effective form of com- operations with a focus on technology. However, I feel that aspects of munication with capital markets is messaging from senior manage- its diversification are perceived negatively by the capital markets. The ment. I believe that Asahi Kasei’s share price would be valued company currently has three sectors: Material, Homes, and Health properly if the President took the lead in engaging with the capital Care. The essence of the matter is whether their respective corporate markets to emphasize Asahi Kasei’s strengths. values are maximized under collective management or when oper- ated as individual businesses. I have supervised management as an Outside Director of Asahi Kasei for five years. In that time, I have Improved Monitoring Functions for Corporate Governance As initiatives aimed at strengthening Asahi Kasei’s corporate gover- never felt that the three sectors should be managed individually or nance make steady progress, I feel that its governance configuration that it would be better to separate one and leave its management to has improved. In fiscal 2023, the company revised the composition another company. Asahi Kasei is more than capable of managing the of the Board of Directors, rearranging it to comprise the Chairman, three sectors, and in-depth discussions to that end also take place at President, and four Executive Officers responsible for corporate meetings of the Board of Directors. The company pays careful atten- functions as Inside Directors and adding another Outside Director. tion to the operation of each sector, maintaining a firm grip on With this revision, of the 10 Directors, the number of Executive Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 17 Value Creation 18 Addressing Social Issues and Transforming Our Business Portfolio 20 Asahi Kasei’s Technological Heritage and Path to Three Sectors 22 At a Glance 23 Financial Highlights 24 Non-Financial Highlights 25 Value Creation Model 26 Value Creation Mechanism 28 Materiality Name Gibran Sinoé Hernández Rocha Company Sage Automotive Interiors Juárez Plant Country/region Mexico 02Asahi Kasei Report 2023Addressing Social Issues and Transforming Our Business Portfolio Value Creation Corporate Information Asahi Kasei Report 2023 18 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. History of Business Portfolio Transformation and Growth 1922 – 1940s– 1960s– 1980s– 2000s– Founding and Japan’s first production of synthetic ammonia Expansion into synthetic resins and synthetic fibers Expansion into petrochemicals, homes, health care, and electronics Progress in overseas business, focus on business restructuring Accelerated globalization through M&A, expansion of health care business Asahi Kasei’s evolution (composition of net sales) Chemical fertilizers, regenerated fiber, explosives, etc. FY1940 ¥56 million Others Foods/Health care Fibers Health care Others Fibers Health care Chemicals Foods Fibers Chemicals Homes/ Construction materials FY1960 ¥44.9 billion FY1980 ¥800.1 billion FY2000 ¥1,269.4 billion Chemicals Homes/ Construction materials Electronics Homes Others Material FY2022 ¥2,726.5 billion Business portfolio transformation New business entry, M&A Withdrawal, downsizing, divestment • Ammonia • Regenerated fiber (cupro, viscose rayon) • Chemical fertilizer • Foods (monosodium glutamate) • Polystyrene • Synthetic fiber (acrylic fiber) •• Saran Wrap™ •• Acrylonitrile •• Synthetic rubber •• Ethylene (construction of naphtha cracker) •• Autoclaved aerated concrete •• Hebel Haus™ unit homes •• Artificial kidneys •• Pharmaceuticals •• 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 •• 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 Growth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for Growth Value Creation Asahi Kasei Report 2023 19 History of Offering New Value that Addresses Social Issues 1922 – 1940 s– 1960 s– Social needs and times Growing as a modern nation, Japan required technologies to develop its agricultural and industrial chemical sectors. Asahi Kasei’s evolution Helping bring stability to people’s lives from our roots in businesses supporting food and clothing • Successfully produced synthetic ammonia for fertilizer to raise agricultural productivity • Began production of Bemberg™ artificial fiber as a substitute for silk Sufficient supply of daily necessities Promoting new businesses for better quality of life was crucial to Japan’s transi tion • Expanded into various new businesses, including synthetic resins and from post-war recovery to high Cashmilon™ synthetic fiber economic growth. In an era of high economic growth, developing public infrastructure— improving homes and expanding medical technology—became necessary. Offering convenient and comfortable lifestyles as a diversified manufacturer of products for food, clothing, and shelter • Launched of homes business to meet homeownership demand • Entered petrochemical business with operation of large-scale petrochemical complex • Expanded into resins business following launch of sales of Saran Wrap™ cling film • Launched medical devices business with artificial kidneys, etc. 1980 s– Cell phones, personal computers, audiovisual equipment, and other technologies gained Supplying key components for information devices integral to modern living • Leveraged chemical industry expertise to enter the field of electronics, including large-scale popularity with the advent of the integrated circuits (LSIs) information age. • Began sales of lithium-ion battery separators 2000 s– Global environmental issues such Contributing to life and living for people around the world as global warming and the challenge • Promoted sustainability through technological developments to achieve carbon neutrality of aging populations in developed and initiatives to reduce CO2 emissions countries come to the fore. • Strengthened Health Care sector, including expansion into critical care business through M&A • Leveraged expertise with unit homes in Japan to enter homes business in North America and Australia • Global expansion of pharmaceutical business with acquisition of U.S. pharmaceutical company Growth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information20 Asahi Kasei’s Technological Heritage and Path to Three Sectors Based on the chemical technology from the time of our founding with viscose rayon, BembergTM, and ammonia synthesis, we have developed diversified businesses while transforming our portfolio with the technologies developed becoming the source of additional new technologies, resulting in the current three-sector configuration. Food processing technology Foods Divested to Japan Tobacco Inc. in 1999 Basic chemicals Chlorine, ammonia, hydrogen, etc. Fermentation chemistry technology Fermented products Pharmaceuticals Inorganic chemistry Electrochemistry Electrolysis membrane technology Ion-exchange membranes Viscose rayon Cellulose chemistry technology Microcrystalline cellulose Health Care Fuel cells membranes Membrane separation technology Alkaline water electrolysis systems Water treatment membranes Hollow fiber technology Artificial kidneys, leukocyte reduction filters Virus removal filters Spinning technology Synthetic fiber, nonwovens, artificial suede Critical care devices Acquisition of ZOLL Medical Corporation in 2012 Petrochemicals Catalyst and manufacturing process technology Polymer design and compounding technology Fiber and plastic processing technology Glass fabric Photosensitivity technology Photosensitive resins, photosensitive electronic materials, dry film photoresist CO2 conversion technology Processed plastic products Microporous membranes Lithium-ion battery separator Material Hall elements Electronic compasses Thin film and microfabrication technology UVC LEDs Semiconductor and LSI circuit design technology LSIs Insulation panels Homes Autoclaved aerated concrete Manufactured building technology High-strength concrete piles Unit homes Apartment buildings Materials chemistry Structural design Concrete engineering Note: Photos of discontinued products included Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information The Asahi Kasei Group’s Businesses and Leading Products Note: Percentages exclusive of “Others” category and “corporate expenses and eliminations” 18.3% 48.5% 26.4% 25.8% Fiscal 2022 Net Sales ¥2,726.5 billion Fiscal 2022 Operating Income ¥128.4 billion 47.8% 33.1% Health Care We contribute to progress in medical therapy by advancing specialized leading-edge technology in new combinations and addressing unmet medical needs, enabling patients to enjoy a better quality of life. Health Care TeriboneTM autoinjector osteoporosis drug ZOLL AED 3TM automated external defibrillator PlanovaTM virus removal filters LifeVestTM wearable defibrillator Homes We enable secure and enriched living through the provi- sion of high-quality, highly durable homes and con- struction materials, and various related services. Home & Living Hebel HausTM unit homes Hebel MaisonTM apartment buildings AtlasTM condominiums North American and Australian homes 21 Material Leveraging leading-edge technology, we provide high value-added materials and products worldwide to open new possibilities for the future. Environment & Energy HiporeTM and CelgardTM lithium-ion battery separators Ion-exchange membrane chlor-alkali electrolysis process Mobility Engineering plastics DinamicaTM artificial suede Life Material PimelTM photosensitive polyimide Household products Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationAt a Glance Notable Facts (as of March 31, 2023) Net Sales by Region Note: Percentages of total consolidated net sales Material Homes Health Care Note: Graphs by sector exclusive of “Others” category and “corporate expenses and eliminations” 22 Employees 48,897 More than 40% overseas Global bases More than countries and regions 20 Consolidated subsidiaries 285 Europe ¥189.1 billion 6.9% Overseas sales ratio 50.6 % Credit rating AA Japan Credit Rating Agency (JCR) China ¥242.0 billion 8.9% Asia (excluding China) ¥285.2 billion 10.5 % Japan ¥1,348.0 billion 49.4% The Americas ¥503.4 billion 18.5 % Other Regions ¥158.9 billion 5.8% Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationFinancial Highlights Net sales (domestic & overseas), operating income, operating margin EBITDA1, depreciation and amortization, EBITDA margin Net income attributable to owners of the parent, EPS, EPS before goodwill amortization (¥ billion) 3,000 2,400 1,800 1,200 600 0 2,170.4 209.6 2,151.6 2,106.1 177.3 171.8 2,726.5 2,461.3 202.6 9.7 8.2 8.2 8.2 128.4 4.7 (¥ billion) (%) (¥ billion) 300 25 240 20 180 15 120 10 60 0 5 0 400 300 200 100 0 313.6 295.6 305.1 14.5 13.7 14.5 350.8 305.0 14.3 11.2 176.7 104.0 118.3 133.3 148.1 (%) 20 15 10 5 0 (¥ billion) 200 100 0 (100) 147.5 161.9 75.44 119.62 103.9 105.66 90.90 79.8 74.85 57.49 137.14 116.68 (91.3) (38.66) (65.84) 2018 2019 2020 2021 2022 (FY) 2018 2019 2020 2021 2022 (FY) 2018 2019 2020 2021 2022 (FY) 23 (¥) 200 100 0 (100) Domestic sales Operating income (right scale) Overseas sales (left scale) Operating margin (%) EBITDA EBITDA margin (%) (right scale) Depreciation and amortization (tangible, intangible, and goodwill) (left scale) Net income attributable to owners of the parent (left scale) EPS before goodwill amortization EPS (right scale) Net sales increased significantly in fiscal 2022 due to expansion of existing busi- nesses, the weakening yen, increased prices for petrochemical products, and the effect of acquisitions. Operating income decreased with deteriorating perfor- mance of the Material and Health Care sectors, mainly due to a worsened oper- ating environment and temporary factors. Overseas sales increased to over half of total net sales in fiscal 2022 due to expansion of overseas businesses, includ- ing by M&A, and the weakening yen. 1 Operating income, depreciation, and amortization Given the upward trend in depreciation and amortization due to proactive capital expenditure and M&A, the Asahi Kasei Group positions EBITDA as a major KPI signifying its ability to generate cash. Depreciation and amortization increased significantly in fiscal 2022 with acquisitions in the Health Care sector and capital expenditures in the Material sector. Asahi Kasei incurred a net loss in fiscal 2022 due to the recording of an impair- ment loss of ¥186.4 billion related to Polypore. As goodwill is amortized in accor- dance with Japanese accounting standards, EPS before amortization of goodwill is shown for reference. ROE2, ROIC3 Capital expenditures, R&D expenses Interest-bearing debt4, D/E ratio (%) 20 10 0 (10) 11.1 8.8 7.6 6.6 5.6 4.9 10.3 6.6 4.0 (5.5) (¥ billion) 200 150 100 50 0 154.1 153.7 136.2 186.6 174.9 90.1 91.0 89.7 98.7 105.0 (¥ billion) 1,000 750 500 250 0 939.5 0.57 703.8 0.52 659.0 766.3 0.45 0.45 424.9 0.31 0.8 0.6 0.4 0.2 0 2018 2019 2020 2021 2022 (FY) 2018 2019 2020 2021 2022 (FY) 2018 2019 2020 2021 2022 (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 generating profits. In fiscal 2022, ROE was negative as a result of recording a net loss, and ROIC declined due to the decrease in operating income. Capital expenditures R&D expenses Asahi Kasei proactively carries out capital expenditures geared toward achieving growth over the medium to long term—including for expansion of growth busi- nesses, and in relation to decarbonization, digital transformation, and other areas to fortify its foundation—and R&D focused on the Health Care and Material sec- tors. Capital expenditures declined in fiscal 2022 due to strict selection of invest- ments considering deterioration in the operating environment. Interest-bearing debt (left scale) D/E ratio (right scale) 4 Amounts stated from fiscal 2019 exclude lease obligations. Interest-bearing debt increased in fiscal 2022 as working capital such as accounts receivable and inventories increased with higher market prices, and demand for funds increased in conjunction with M&A centered on the Homes and Health Care sectors. As a result, the D/E ratio also increased. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Non-Financial Highlights 24 Greenhouse gas (GHG) emissions (Scopes 1 and 2) GHG emission reduction contributions through environmental contribution products Number of digital professional human resources (Million tons CO2 equivalent) 4.16 3.99 3.91 4.03 3.68 3.58 or less Target 100 −30% or more −30% or more (compared with FY2013) 5 4 3 2 1 0 (Index) 250 200 150 100 50 0 30 91 31 100 33 32 117 120 29 38 Target 200 or more (%) 50 40 30 20 10 0 3,000 1,500 1,000 500 0 30 56 55 230 Target 2,500 100 1,206 2018 2019 2020 2021 2022 2030 (FY) 2018 2019 2020 2021 2022 2030 (FY) 2018 2019 2020 2021 2022 2024 (FY) Applicable range: Production sites of consolidated companies Note: Fiscal 2022 figures are preliminary and may change after undergoing third-party verification. Volume of GHG emission reduction contributions of environmental contribution products1 (left scale) Portion of sales of environmental contribution products2 (right scale) Note: Total figures up to fiscal 2020 include only human resources specializing in data analysis. Applicable range: Total employees worldwide The Asahi Kasei Group is targeting a GHG emission reduction of 30% or more by fiscal 2030 compared with fiscal 2013 to clarify its path toward carbon neutrality. Ongoing endeavors to reduce emissions are advancing in order to achieve this target. Note: Internal calculation of the volume of GHG emission reduction contributions from a life cycle assessment perspective 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 contri- bution products. We will work to develop environmental contribution products with the goal of reducing society’s overall GHG emissions. The Asahi Kasei Group promotes bottom-up human resource development to enable all employees to engage in their work duties with a mindset conducive to utilizing digital technology. In particular, we proactively promote the development and recruitment of digital professionals who use advanced digital technology and data to resolve business issues and create business models. These efforts have led to the emergence of such professionals in a wide range of fields, including through the Asahi Kasei DX Open Badge Program. Number of Group Masters Target 360 100 250 259 229 294 180 400 300 200 100 0 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 277 Target 10.0 309 277 257 212 231 2.3 2.8 3.4 3.7 3.9 400 300 200 100 0 15 100 12,000 10,618 10,669 10,776 10,779 10,271 12 9 6 3 0 9,000 6,000 3,000 0 30.0 30.1 30.5 30.6 31.6 277 Target 50.0 (%) 80 60 40 20 0 2018/10 2019/10 2020/10 2021/10 2022/10 2024 2019/6 2020/6 2021/6 2022/6 2023/6 2030 2018/12 2019/12 2020/12 2021/12 2022/12 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. Our corporate value is enhanced by the development and recruitment of specialists in various fields. For effective utilization, fields of technology and specialization for the appointment of human resources as Group Masters are reviewed annually in accordance with business strategy. Number of women working as managers (left scale) Percentage of women in the total number of managers and the Group Masters program (right scale) 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) Applicable range: Results for personnel employed by Asahi Kasei Corp., Asahi Kasei Microdevices Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. Amid rapid change in the operating environment, the Asahi Kasei Group must utilize the capabilities 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 real- ize conditions that enable diverse human resources, including women, to thrive in a variety of settings within the organization through the creation of an environ- ment and requirements for achieving the KPI. 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. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Value Creation Corporate Information Asahi Kasei Report 2023 25 Value Creation Model A vital key to value creation at the Asahi Kasei Group is to continuously transform our business portfolio while maximizing the use of our abundant intangible assets. In these efforts, we make full use of our ability to precisely connect wide-ranging management resources, unite businesses, and appropriately control resource allo- cation for value creation that is unique to the Asahi Kasei Group. Input Financial Foundation New business creation Business evaluation Output Fields for provision of value Material Environment & Energy Business enhancement Mobility Homes Life Material Outcome Contributing to sustainable society FY2030 Target Scope 1 and Scope 2 GHG emissions Reduction of ≥30% (compared with FY2013) 2050: Goal to achieve carbon neutrality (net-zero emissions) Volume of GHG emission reduc- tion contributions of environ- mental contribution products At least double (compared with FY2020) Percentage of women among managers and Group Masters 10% Vision Two Mutually Reinforcing Aspects of Sustainability Human Resources Customer Contact Points Resource allocation Restructuring Business Portfolio Management Data Trust, Brand A-Spirit Intellectual Property Core Technologies, Digital Technology Monitoring Manufacturing Know-How Structural transformation Home & Living Health Care Health Care Sustainable growth of corporate value Long-term Outlook for Around FY2030 Operating income ¥400 billion ROE ROIC ≥15% ≥10% Growth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthValue Creation Asahi Kasei Report 2023 26 Value Creation Mechanism Diverse intangible assets are the source of the Asahi Kasei Group’s growth Development based on microporous membrane technology Expanding to solution-oriented business Care for People • Extended to biosafety testing for Cellulose fiber Dialyzers (cellulose and polysulfone hollow-fiber membranes) Hydroelectric power Electrochemistry Virus removal filters (cellulose hollow-fiber membrane) Virus removal filters (PVDF hollow-fiber membrane) Separation filtration membrane (hollow-fiber membrane) for water treatment etc. Lithium-ion battery separators (polyolefin film) Next-generation alkaline water electrolysis systems Ion-exchange mem- brane for chlor-alkali electrolysis Alkaline water electrolysis systems Care for Earth biologics • Entered biologics CDMO business • Data-driven services for ion- exchange membrane chlor-alkali electrolysis process • Full range of services for hydrogen production, from components and equipment to operation • Service business utilizing knowl- edge acquired in the separator business The source of the Asahi Kasei Group’s growth is our abundant intangible assets, such as human resources, core technologies, intellectual property, expertise, data, and other such assets that we have accumulated in the process of growing through the creation of diverse businesses. At the core of these intangible assets lies our A-Spirit, which epitomizes our heri-tage. This is the origin of our ability to transform by leveraging intangible assets in the creation of diverse businesses, and it comprises ambitious motivation, a healthy sense of urgency, quick decisions, and a spirit of advancement. We achieve growth by utilizing these abundant intangible assets along with our ability to transform in business operations. The ability to adapt to changes in the operating environment is crucial amid a business landscape characterized by dramatic change and an unpredictable future. By accumulating and maximizing diverse intangible assets, the Asahi Kasei Group is able to seize business opportunities that arise from changes in the operating environment and create new value. We treat all of the intangible assets we accumulate as assets to be shared throughout the entire Asahi Kasei Group, and we leverage them to their maximum potential by deploying and linking them across different sectors. Our accumulation and maximum utilization of intangible assets are firmly bolstered by the transfer of human resources across different sectors, the provision of opportunities for human resources within the Asahi Kasei Group to connect, and the fostering of a free and open organizational culture that accepts diverse ideas and takes on new challenges. Maximizing the Value of Intangible Assets through DX and Intellectual Property StrategiesBarriers between industries have become lower and activities tran-scending industry frameworks are accelerating. In order to create new value, naturally we must expand our accumulated intangible assets to other fields and explore and utilize unprecedented combinations, but amid an unpredictable operating environment, it is also vital to enhance the precision of strategy planning and decision-making by utilizing intan-gible assets in an integrated manner. Accordingly, the Asahi Kasei Group is promoting DX and intellectual property strategies. We have estab-lished Digital Value Co-Creation to spread DX throughout the Asahi Kasei Group as a whole, and the Intellectual Property Intelligence Department to utilize intellectual property in our management. In addition, to methodically track, manage, and analyze our accumulated intangible assets, we have accelerated the development of mechanisms such as a group-wide data management infrastructure, a “seeds and needs” matching system that links our core technologies with so-called emerg-ing technologies, and employee (expert) recommendation system. Leveraging Core Technologies to Extend BusinessBased on chemical technology, we have created several core technolo-gies through unique developments and combinations of technologies. The production of synthetic ammonia using hydroelectric power in Nobeoka, Miyazaki Prefecture, Japan, was one of our earliest busi-nesses. Following this, microporous membrane technology was continu-ally developed resulting in cellulose fibers and ion-exchange membranes for chlor-alkali electrolysis. Technologies for these have then been applied in several other businesses. Cellulose fiber technology is used as part of the Health Care sector, in dialyzers for blood purification and in virus removal filters. From virus removal filters we continued to create new products for the manufacture of next-generation pharmaceuticals. From ion-exchange membrane technology we developed businesses that are currently central to our growth strategy, such as lithium-ion bat-tery separators, water treatment filtration membranes, and membranes for alkaline water electrolysis systems. The accumulation of the Asahi Kasei Group’s unbroken succession of expertise and technology creates products that will provide solutions to future social issues. Going forward, we are also looking to leverage our core technolo-gies in solution-oriented businesses. For example, in relation to virus removal filters, we have expanded into the business of contract bio-safety testing services for pharmaceutical companies, and entered the biopharmaceutical contract development and manufacturing organiza-tion (CDMO) business. In addition, we are studying the creation of service-oriented businesses that utilize the knowledge and business foundations that we have cultivated in the separator business.Growth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationValue Creation Strengthening of Corporate Governance Corporate Information Asahi Kasei Report 2023 27 Business Portfolio Management The Asahi Kasei Group has transformed its business portfolio and grown evaluating mechanically, we perform comprehensive evaluation of by capturing the changing needs of society in every era and providing whether a business contributes to corporate value enhancement by products and services that bring new value to society. Business Portfolio discussing the formulation and revision of the MTP based on such Management is an important management cycle for efficiently allocating quantitative data and qualitative information. the Asahi Kasei Group’s cash and diverse intangible assets among its businesses, and leveraging business growth to achieve two mutually reinforcing aspects of sustainability: “contributing to a sustainable soci- Resource Allocation We perform efficient investment of resources based on the results of ety” and “sustainable growth of corporate value.” business evaluations. Ongoing investment for growth is realized by allo- cating stable cash flow generated by businesses with high cash-generating whether returns on investment are forthcoming. For M&A and large- ability, such as the Homes sector, to businesses with future growth scale capital investments that require resolutions by the Management Business Evaluation Efficient allocation of resources depends on the results of proper busi- potential, such as the Health Care and Material sectors. ness evaluations. The Asahi Kasei Group conducts annual evaluations of We also allocate necessary resources as circumstances require. dozens of businesses from both financial and non-financial perspectives. New business creation is pursued by commercializing seeds of technol- From the financial perspective, we evaluate net sales, operating margin, ogy gained through R&D and corporate venture capital (CVC) investment, ROIC, sales growth rate, and free cash flow within a given time span. On and by obtaining businesses through M&A. Business enhancement is the non-financial side, we conduct evaluations from the perspectives of performed by expanding production capacity and developing new prod- competitiveness, achievement of carbon neutrality targets such as GHG ucts in established businesses. When a business experiences a tempo- Council and the Board of Directors, management and corporate depart- ments conduct annual monitoring of each business for a certain period of time following those resolutions. We have assembled a framework that allows us to study necessary countermeasures in a timely manner by conducting post-resolution regular monitoring of such businesses for changes in the business environment, the status of profitability, the status of risk manifestation, and other factors, and sharing status emission reduction, relationships with other businesses in the value rary decline in performance, strategic restructuring is conducted. When reports with management and members of those businesses. chain, and whether or not we are the best owner. Rather than simply it becomes challenging for the Asahi Kasei Group to create value in a Knowledge gained from the results of such monitoring is also used Business Evaluation Framework I C O R / S O R Net sales growth rate Financial perspectives • Net sales growth rate • Operating margin • ROIC • Free cash flow, etc. Non-financial perspectives • Best owner • Carbon neutrality • Competitiveness, etc. business on our own, we study structural transformation including the when considering points to check when considering future M&A and use of other companies’ capital, downsizing, or withdrawal to control large-scale capital investments. resources, in order to achieve efficient resource management across the In addition, for major businesses, including those that do not fall into entire business portfolio. Based on these criteria, under our MTP we the above categories, on a quarterly basis, the President and the have designated 10 businesses as “10 Growth Gears” (GG10) with the responsible Executive Officers have direct discussions with members of potential for further investment-driven earnings growth, and prioritize those businesses on the status of earnings performance and KPIs, as them for resource allocation. For more information on GG10, please see well as on emerging challenges and countermeasures. page 34 . Monitoring For businesses categorized for strategic restructuring as a result of busi- ness evaluation, we conduct frequent monitoring and follow up on the evaluation and progress of possible strategic options in a timely manner. For GG10, we monitor whether the market is growing as expected and Growth StrategyAsahi Kasei’s IdealsStrengthening Our Foundation for Growth Materiality 28 Asahi Kasei’s Vision 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 aspects of sustainability by contribut- ing to the creation of a sustainable society while leading to improved corporate value. We believe that providing value that contributes to ensur- ing 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 challenges. Guided by this belief, we endeavor to provide products and services that correspond to changes in the social climate. We will continue to offer such products and services, contributing to a sustainable society through the pursuit of innovation while taking into account the lifestyles of people around the world. Key Points of the Asahi Kasei Group Sustainability Policy • Realize the two mutually reinforcing aspects of sustainability of “contributing to sustainable society” and “the sustainable growth of corporate value” • Pursue the optimal form of governance for realizing Asahi Kasei’s In 2021, we established our Sustainability Policy to clarify the Asahi Kasei Group’s stance on sustainability and to heighten a mutual internal sustainability vision understanding for accelerated action toward creating a sustainable society. The policy sets forth specific and essential elements to approach matters of sustainability in addition to basic concepts. • Create value by contributing to sustainable society • Carry out responsible business activities • Facilitate the empowerment of personnel Process for Identifying Materiality In fiscal 2017, the Asahi Kasei Group identified important issues and subjects that it should prioritize as materiality through the process outlined Integration into Management Strategies Material issues are meaningful only when they are integrated into below. We review these subjects and issues in accordance with changes in the operating environment. Highest priority as premise Governance Compliance/ sincerity Human rights Safety/quality Identification of Issues Extremely important 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 P.82–88 P.94 P.93 P.92 Wastewater Industrial waste Business Contribution to P.36– 51 Global environment Health and longevity Comfortable life Decarbonization P.57–63 Circular economy P.60 Supply chain management Communication with stakeholders P.95 Biodiversity Social contribution Diversity P.73 Human resources P.68 – 73 Risk management P.89– 91 We identified issues in accordance with requirements of society and our Group Mission, Group Vision, and Group Values, in consideration of international guidelines and the evaluation criteria of 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 perspectives, such as through deliberations involving the leaders of various divisions, discussions with outside companies, and consul- tations with Outside Directors. 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 Extremely important Examination and Approval The Board of Directors approved the material issues after several deliberations by the Management Council. management strategies to realize our vision. In the MTP we have therefore established non-financial key performance indicators (KPIs) pertaining to materiality and identified issues to be addressed in the five fields for provision of value that will contribute to Asahi Kasei’s value creation over the long term. Materiality Non-Financial KPIs(Benchmarks) Vision (Targets) Contributions to GHG emission reduction At least double by fiscal 2030 (compared with fiscal 2020) Contribution through businesses GG10-related patents Decarbonization GHG emissions Account for over 50% of total patents by fiscal 2030 Reduction of 30% or more by fiscal 2030 (compared with fiscal 2013) Number of digital professional human resources Tenfold increase by fiscal 2030 (compared with fiscal 2021) Human resources Diversity Number of Group Masters 360 by fiscal 2024 Percentage of women in the total number of managers and the Group Masters program 10% by fiscal 2030 For more information regarding KPIs and initiatives on material issues, please access the links in the materiality diagram. The fol- lowing page clarifies the process leading up to identifying opportu- nities and creating value in each of the fields for provision of value. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 29 Process Leading Up to Value Creation in Each Field for Provision of Value Operating environment • Expansion of clean energy • Transition to carbon neutrality and a circular economy • Progression of CASE and MaaS • Increasing sophistication of next-generation communications technology • Rising global population • Diversification of lifestyles • Intensification of natural disasters • Labor shortages • Advancement of a longevity society Material issues to be addressed through businesses Sectors and businesses Global environment (decarbonization, circular economy) Comfortable life Health and longevity Environmental Solutions Mobility & Industrial Life Innovation Material Homes Health Care Fields for provision of value and issues in the current MTP Environment & Energy Mobility Life Material Home & Living Health Care Carbon neutrality/Circular economy Safe, comfortable, and eco-friendly mobility More comfortable and convenient lifestyles Homes/communities enriching people’s lives Society of active 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 various technologies contributing to carbon recycling • Provision of products and services contributing to GHG emission 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 envi- ronmental impact • Creation of innovative products with strengths in competitive sensing technologies in response to the development 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 • Provision of medical device solu- tions addressing unmet needs in the critical care and cardiopulmonary conditions fields • Promotion of a global pharmaceuti- cal business that reflects increasing needs for better medical care and the progression of aging societies in various developed countries overseas able to withstand disasters • Provision of bioprocess-related GG10 Businesses • Hydrogen-Related • CO2 Chemistry • Energy Storage • Car Interior Material • Digital Solutions • North American and Australian Homes • Environmental Homes and Construction Materials products and services that support the safe and efficient manufacture of pharmaceuticals • Critical Care • Global Specialty Pharma • Bioprocess Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationGrowth Strategy 31 Progress on Medium-Term Management Plan 2024—Be a Trailblazer 36 Strategies by Sector 36 Material 43 Homes 47 Health Care 30 Name Katerina Kasalova Company Sage Automotive Interiors, Strakonice Fabrics Country/region Czech Republic 03Asahi Kasei Report 2023 Progress on Medium-Term Management Plan 2024—Be a Trailblazer The Asahi Kasei Group is working to achieve the targets of its medium-term management plan (MTP) for fiscal 2024 focused on the theme “Be a Trailblazer” by promoting business portfolio management and strengthening Contributing to sustainable society Vision Two Mutually Reinforcing Aspects of Sustainability its business platform in accordance with the basic policy. We continuously take on challenges and pursue Non-Financial KPIs 31 transformation to realize our vision. Basic Policy Fiscal 2022 Results Business Portfolio Management Challenging investment for growth Focusing resources on 10 Growth Gears (GG10) that will drive future growth and aiming to have them provide more than 70% of operating income around fiscal 2030 Implement both with an emphasis on speed, asset-light, and high value-added Cash generation from structural transforma- tion and strengthening existing businesses Integrated approach to structural transformation comprising reform of strategic restructuring businesses and fundamental business structure transformation Strengthening Business Platform • Transformation in the key areas of green (G), digital (D), and people (P) • Maximum use of intangible assets Financial KPIs Operating income ¥128.4 billion ROIC 4.0% ROE −5.5% Non-Financial KPIs Scope 1 and Scope 2 GHG emissions 3.68 million t-CO2e1 Volume of GHG emission reduction contributions of environmental contribution products 120 (index)2 Percentage of women among managers and Group Masters 3.8% Number of digital profes- sional human resources 1,206 Digital data usage 2.6 times (compared with FY2021) Number of Group Masters 294 FY2024 FY2022 April 2022 1 Preliminary figure; may be revised due to third-party evaluation 2 Indexed to FY2020 baseline as 100 Scope 1 and Scope 2 GHG emissions Reduction of ≥30% (compared with FY2013) Volume of GHG emission reduc- tion contributions of environmen- tal contribution products At least double (compared with FY2020) Percentage of women among managers and Group Masters 10% Long-Term Outlook for Around FY2030 Sustainable growth of corporate value Financial KPIs Operating income ¥400 billion ROE ROIC ≥15% ≥10% Fiscal 2024 Targets Financial KPIs Operating income ¥200 billion ROE ≥9% ROIC ≥6% Non-Financial KPIs Number of digital professional human resources 2,500 Volume of digital data usage 10 times (compared with FY2021) Number of Group Masters 360 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information32 Review of Fiscal 2022 In fiscal 2022, Asahi Kasei achieved record-high net sales of ¥2,726.5 billion, increasing sales across all which produces battery separators. In light of these setbacks, we expect to achieve the initial fiscal 2024 business segments with expansion of existing businesses, continued weakening of the yen, and rising target of ¥270 billion for operating income two or three years behind schedule. We will continue to seek prices for petrochemical products. Meanwhile, operating income decreased to ¥128.4 billion, due in part growth from a medium- to long-term perspective, targeting ¥200 billion in operating income as well as to prolonged shortages of semiconductors, stagnant demand stemming from the impact of lockdowns in return on equity (ROE) of 9% or more and return on invested capital (ROIC) of 6% or more for capital effi- China, and surging feedstock and fuel prices. In addition, we incurred a net loss as a result of recording ciency in fiscal 2024. We are determined to return to a trajectory of growth through steady implementation an impairment loss of ¥186.4 billion in March 2023 on Polypore International, LP, our U.S. subsidiary of our strategy set forth in the initial plan. Fields for Provision of Value / Sectors and Businesses Fiscal 2022 Achievements and Issues Direction for Fiscal 2030 Environment & Energy Material sector Environmental Solutions In Environmental Solutions, we focused resources on three approaches—expediting green solutions, cultivating energy storage businesses, and promoting actions to achieve carbon neutrality—with the aim of realizing green transformation. Operating income deteriorated significantly to an operating loss of ¥2.3 billion in contrast with the original forecast of ¥42.3 million. This outcome was attributable to the sluggish perfor- mance of the basic materials and separator businesses. We recognize that revising the strategy of the separator business and further accelerating the structural transformation of petrochemical chain-related businesses are pressing issues. Mobility Material sector Mobility & Industrial Life Material Material sector Life Innovation In Mobility & Industrial, we enhanced our lineup of products in car interior material and next- generation mobility. In particular, we advanced concept proposals combining a diverse range of technologies and expertise in products for electric vehicles. Operating income of ¥10.8 billion was well below the original forecast of ¥23.8 billion, reflecting the impact of sluggish growth in the automobile industry as a result of semiconductor shortages and other factors. We recognize the need to carefully monitor automobile industry trends and to make prog- ress toward restoration of earnings. In Digital Solutions, we integrated the electronic components and electronic materials businesses and proactively explored new business opportunities to address the needs of a digital society. While operating of ¥27.8 billion was lower than the original forecast of ¥37.4 billion due to factors including delays in the recovery of market conditions for certain products and the impact of a plant fire in Comfort Life, Digital Solutions achieved adequate earnings. We recognize that we must increase the production capacity of the electronic materials business to expand Digital Solutions. We will continue to make forward-looking investments in the separa- tor business and in hydrogen-related businesses. For the separator business, we will improve the earnings base of existing businesses and revise our strategy to accelerate expansion considering the use of outside capital and alliances. Although it will take time for hydrogen- related businesses to contribute to profits, we will advance develop- ment in preparation for future expansion of demand. To accelerate structural transformation, we will consider drastic measures with regard to commodity products centering on petro- chemical chain-related businesses. We are committed to accelerating the provision of innovative mate- rials and solutions through the establishment of close partnerships with key automobile manufacturers to clearly ascertain signs of recovery in the automobile industry and restore earnings. We will strengthen the business structure by focusing on improving cost competitiveness and revising the product portfolio. We expect Digital Solutions to deliver strong growth and maintain high ROIC. In addition to expansion of existing products, we will implement aggressive expansion measures for cutting-edge semi- conductors and packaging processes by exploring co-creation opportunities to provide new value. For Comfort Life, we will focus on rebuilding the earnings base. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 33 Fields for Provision of Value / Sectors and Businesses Fiscal 2022 Achievements and Issues Direction for Fiscal 2030 Home & Living Homes sector Health Care Health Care sector We pursued customer satisfaction by strengthening cooperation among business units amid challenging business conditions in the domestic business, while proactively expanding opera- tions in the overseas business. Despite a difficult operating environment in the order-built homes business, including rising construction material costs, we increased net sales and oper- ating income with higher average sales prices due to larger and higher value-added homes, as well as reduction efforts. In the overseas business, we advanced forward-looking business portfolio transformation by expanding the regions of operations through new acquisitions in North America and Australia. As a result, we recorded operating income of ¥76.0 billion, slightly exceeding the forecast at the beginning of the fiscal year. We recognize that the Homes sector faces challenges in terms of raising the productivity and profitability of various busi- nesses to ensure their continued and consistent cash generation. In Health Care, we are advancing toward becoming a global health care company by capturing a broad range of opportunities in global markets in both the pharmaceutical and medical device businesses to drive overall income growth. Despite strong sales growth for mainstay products in the pharmaceutical and medical businesses, operating income was ¥41.9 billion compared to the original forecast of ¥58.0 bil- lion. This was largely attributable to the difficulty of procuring components due to semiconduc- tor shortages, and a slowdown in orders stemming from U.S. economic downturn, resulting in a pause in growth in the critical care business. We entered the biopharmaceutical CDMO business through an acquisition in the medical business to achieve growth over the medium term. Although results were below the original forecast in fiscal 2022, we expect the sector to grow over the medium to long term. This will require steady implementation of the growth strategy set forth in the MTP. In the order-built homes business, we will instill marketing strate- gies, including those for high-end customers. In addition, we will promote high value-added strategies by raising our proportion of homes compliant with Net Zero Energy House (ZEH) and ZEH Mansion (ZEH-M) standards and work to realize a sustainable soci- ety in various ways, such as achieving the goal of the RE100 initia- tive. In the overseas business, we will build a business platform resilient to material costs and fluctuations in demand with the aim of improving efficiency through industrialization and providing high- quality homes by raising productivity. Identifying the critical care, global specialty pharma, and bioprocess businesses as growth areas, we will seek to expand existing busi- nesses and reap the benefits of proactive investments thus far. In addition, we will continuously capture growth opportunities in the global market by leveraging business development measures including M&A and in-licensing to pursue further expansion of sales and profit. Challenging Investment for Growth In fiscal 2022, we focused resources on the GG10 businesses to drive future growth. We aim for GG10 to account for over 70% of our overall operating income by around fiscal 2030. We are actively exploring M&A opportunities and making bold investments to achieve this. While our approach of focusing resources on GG10 will continue in fiscal 2023, we will further clarify the priority of resource allocation among GG10 as we make investment decisions. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 34 Positioning of Investments GG10 Investment Scale and Direction (FY2022–2024, decision-adopted basis) Profit1 Growth Target (increase in FY2024 compared with FY2021) Health Care Critical Care First Priority Global Specialty Pharma Maintain proactive investments for growth over the medium term, increase focus on gaining income from past investments Growth Potential Make upfront investments while cooperating with other compa- nies to strengthen competitive- ness as drivers of future growth Earnings Base Expansion Explore and examine investment opportunities to steadily expand earnings scale, continue to con- sistently generate earnings Bioprocess Life Material Digital Solutions Environment & Energy Energy Storage Hydrogen-Related CO2 Chemistry Home & Living North American and Australian Homes Environmental Homes and Construction Materials Mobility Car Interior Material Up to ¥200 billion in investments is planned, including the acquisition of Bionova Scientific, LLC (Bionova), a U.S. biopharmaceutical CDMO, in May 2022. We will continue to proactively explore investment opportu- nities to achieve growth in Health Care. Regarding previous M&A investments, sales at Veloxis Pharmaceuticals, Inc. (Veloxis), declined amid the impact of the COVID-19 pandemic, and progress is delayed by one or two years from the initial plan. Respicardia, Inc., and Itamar Medical Ltd., (Itamar), aim to expand sales by steadily creating synergies with ZOLL Medical Corporation (ZOLL). Bionova has decided to increase its capacity for process development and GMP2 manufacturing of next-generation antibody drugs while aiming to increase profits by expanding orders. Approx. ¥15 billion increase We plan to invest up to ¥200 billion, including the fiscal 2022 decision to increase production capacity of Pimel™ photosensitive polyimide. We will continue to seek growth through proactive investments, including inorganic growth. Approx. ¥10 billion increase We plan to invest over ¥200 billion, primarily in the separator business and hydrogen-related businesses, which have high growth potential over the medium term, as upfront investments in future growth drivers. For the separator business in particular, we are examining the possibility of making large-scale investments, such as to establish manufacturing of Hipore™ LIB separators in the North American market. — We plan to make investments up to ¥100 billion, including the acquisitions of the Focus Companies of the U.S. in November 2022 and Arden Homes Pty Ltd. of Australia in February 2023. Regarding previous investments, we expect Synergos Operations LLC, our North American homes business, to see persistently firm demand, reflecting acute shortages of homes in the regions where it oper- ates. NXT Building Group Pty. Ltd., our Australian homes business, will accelerate growth by streamlining construction processes and improving efficiency. Approx. ¥10 billion increase We plan to invest up to ¥100 billion, including the fiscal 2022 investment to expand car interior material in the U.S. We will concentrate on reaping the benefits of previous investments while focusing on investments with a high degree of certainty going forward. Although the performance of Sage Automotive Interiors, Inc., (Sage) stagnated due to sluggish growth in the automobile market, it will return to a growth trajectory in line with market recovery. Approx. ¥10 billion increase 1 Profit: Operating income + amortization from PPA 2 Good Manufacturing Practice, a collection of regulations related to manufacturing with which manufacturers of pharmaceuticals are required to comply. The manufacture of pharmaceuticals according to strict GMP regulations is referred to as GMP-compliant manufacturing. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 35 Cash Generation from Structural Transformation and Strengthening Existing Businesses We will further accelerate the structural transformation of businesses in response to underperformance Discussions on petrochemical chain-related businesses are proceeding with particular emphasis on compared with the initial targets set forth in the MTP. At the outset of the MTP, we advanced such trans- whether such businesses can be sufficiently profitable considering the investments required to achieve formation under the two approaches of reform of strategic restructuring businesses—which saw a deteri- carbon neutrality and related costs including carbon taxes. oration in recent performance due to the impact of the COVID-19 pandemic and other factors—and We have established three major options for the direction of business structure transformation: fundamental business structure transformation, in terms of both performance and compatibility with our 1) collaborative operation with other companies through joint ventures and other arrangements, 2) exit medium-term vision. As these efforts involve businesses with interdependent supply and demand relation- from the business, and 3) developing carbon-neutral technologies and increasing added value. We are ships, such as for raw materials, we are currently examining ways to achieve structural transformation exploring the possibility of the third option while also examining the first and second options. We have through the integration of the two approaches. Net sales of businesses to be targeted for structural trans- already confirmed the direction and taken concrete action for several businesses, such as seeking suitable formation totaled more than ¥700 billion in fiscal 2021. Of these, we aim to complete the structural trans- partners from the best-owner perspective and advancing negotiations, and will finalize the direction and formation of multiple businesses with net sales totaling ¥100 billion or more by fiscal 2024, including those steadily implement the structural transformation of the remainder by fiscal 2024. Although the removal of identified as Exit businesses in the reform of strategic restructuring businesses. Meanwhile, we will under- some businesses from the scope of consolidation due to business withdrawal or the launch of joint ven- take the structural transformation of petrochemical chain-related businesses, which we have designated tures with other companies will result in a decline in the operating income of petrochemical chain-related as businesses handling commodity chemicals, the earnings volatility of which has once again become businesses, we will seek to transition to an earnings structure that enables stable earnings growth. In prominent. Although there is some overlap with the aforementioned businesses with net sales totaling addition, we aim to achieve carbon neutrality throughout our supply chain and to generate profits through ¥100 billion or more, net sales of petrochemical chain-related businesses total approximately ¥600 billion. a licensing business by developing technology related to bio-based feedstocks. Directions of Business Structure Transformation Under Consideration Policy of Structural Transformation of Petrochemical Chain-Related Businesses • Planning to implement structural transformation of businesses with sales of more than ¥100 billion during FY22–24 (incl. those designated as Exit in the Strategic Restructuring Business) • Examining the medium-term direction of the petrochemical chain-related business with sales of approximately ¥600 billion with a view to carbon neutrality Sales of subject businesses (FY21 results) ¥700 billion or more Approaches Example of Initiatives 1) Collaborative operation with other companies through joint ventures, etc. • Raising competitiveness • Sharing required investment and cost burden • Mutual utilization of innovations for carbon neutrality Established JV for spunbond nonwovens 2) Exit from the business • Plant downsizing/closure • Sale of the business to the best owner Divestiture of photomask pellicles 3) Developing carbon- neutral technology and increasing added value • Using proprietary or licensed tech- nology for carbon neutrality • Transformation of product portfolio with value for customers Developing proprietary technology for basic feedstocks from bioethanol Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationStrategies by Sector Material sector 36 Message from the Head of the Material Sector Koshiro Kudo Executive Officer for Material Business Sector President & Representative Director Presidential Executive Officer Asahi Kasei Corp. “ Addressing society’s ever-changing needs with diverse technologies and innovation We operate three businesses in the Material sector: Environmental Solutions, Mobility & Industrial, and Life Innovation. These correspond to the Environment & Energy, Mobility, and Life Material fields for provision of value, addressing society’s ever-changing needs with a lineup of high value-added materials and products unique to Asahi Kasei. In fiscal 2022, the performance of the basic materials business in Environmental Solutions in particular declined sharply, reflecting a generally harsh operating environment. I believe this decline highlighted again the need for structural transformation centered on the petrochemical chain-related busi- nesses. In the separator business, we made clear our policy of focusing resources on growing the Hipore™ business and recorded an impairment loss on Polypore International, LP. Fiscal 2022 was also a year that saw us advance transformation focused on the medium-term direction of the sector, such as transferring the photomask pellicles business and establishing a joint venture for the spunbond nonwoven products business, taking into consider- ation the best-owner perspective. In fiscal 2023, despite continuing uncertainty in the operating environment, including a slowdown in demand due to an economic recession centered on China, we will strive to expand growth businesses, such as separators, car interior material, and Digital Solutions. At the same time, we will continue to advance the business reforms we have been studying, including withdrawal from the general-purpose tire cord business, to increase profitability. Promoting Business Portfolio Transformation to Focus Resources on Future Growth Businesses The Material sector is targeting net sales of ¥1.53 trillion and operating income of ¥110 billion for fiscal 2024, the final year of the MTP. Although achieving the target for operating income will require a significant improvement from the level of fiscal 2022, we will execute a range of measures, such as those for raising productivity and reducing costs, and clarify our resource allocations, including for business portfolio transformation, to expand growth businesses focused on GG10. Asahi Kasei has established three categories for GG10 according to busi- ness direction. We regard Digital Solutions, which we have positioned as a first priority area, as a business with the potential to aim for high growth while main- taining a high return on invested capital (ROIC). Accordingly, in addition to achiev- ing growth in individual products such as Pimel™, whose production capacity we decided to expand for leading-edge semiconductors, Digital Solutions will seek to offer unique value drawing on its combined strengths in electronic com- ponents and electronic materials and pursue inorganic growth opportunities. Life Innovation Environmental Solutions Digital Solutions Comfort Life • Mixed-signal LSIs, electronic • Bemberg™ cupro fiber, Roica™ compasses • Magnetic sensors • Gas sensors • Pimel™ photosensitive polyimide/ PBO precursor premium stretch fiber • Saran Wrap™ cling film • Ceolus™ microcrystalline cellulose pharmaceutical and food additive • Photopolymers and platemaking • Sunfort™ dry film photoresist systems • Glass fabric • Hipore™ and Celgard™ lithium-ion battery separators, Daramic™ lead-acid battery separators • Chlor-alkali electrolysis systems, Microza™ hollow-fiber filtration membranes J a • Synthetic rubber, elastomers Material Sector FY2022 Net Sales ¥1,316.6 billion p a n 4 0 . 3 % O v e r s e a • Acrylonitrile (AN) and other petrochemical-related products Mobility & Industrial • Car interior fabric • Dinamica™ artificial suede • Leona™ nylon 66 filament • Duranate™ curing agent for polyurethane coatings • Leona™, Tenac™, and Xyron™ engineering plastics, SunForce™ foamed beads, Asaclean™ purging compound for molding machines s 5 9.7% Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 37 Message from the Head of the Material Sector KPIs FY2021 (after reconfiguration1) FY2022 FY2024 target (announced in Apr. 2023) Net sales (¥ billion) 1,210.0 1,316.6 1,530.0 Operating income (¥ billion) Operating margin EBITDA (¥ billion) EBITDA margin ROIC2 106.0 8.8% 183.0 15.1% 6.7% 41.0 3.1% 128.5 9.8% 2.4% 110.0 7.2% 187.0 12.2% 6.0% Note: Shaded rows are management KPIs in the Material sector Operating income, operating margin (¥ billion) 120 100 80 60 40 20 0 (20) Others in Material Life Innovation Mobility & Industrial Environmental Solutions 2019 2020 After reconfiguration1 2021 Operating income (left scale) Operating margin (right scale) (%) 12 10 8 6 4 2 0 (2) 66.1 41.0 4.7 3.1 2022 (FY) 2023 Forecast (announced in May 2023) We have positioned the energy storage business—which includes separa- tors—the hydrogen-related business, and the CO2 chemistry business as growth potential areas. Given their high potential for growth over the long term, we will make strategic upfront investments in these three businesses, including utilizing the capital of other companies. In the hydrogen-related busi- ness, we are conducting verification trials to commercialize an alkaline water electrolysis system and examining potential business models. As we are receiving many inquiries in response to global trends, we are working to accel- erate commercialization of the system. We have positioned the car interior material business as one of our earnings base expansion areas. Although the business has been affected by the downturn in production in the automobile industry in recent years, sales volumes are recov- ering and a structure for achieving expansion while generating stable earnings, including the results of measures for raising productivity, is once again taking shape. We will aim for further growth by firmly benefiting from market recovery. Meanwhile, we must examine structural transformation of the petrochemi- cal chain-related businesses with an eye to achieving carbon neutrality. The frame of reference of the examinations will come down to whether meeting the costs required to address environmental issues will allow the businesses to make sufficient profits. We will consider a variety of options, such as promot- ing the development of technology and the creation of products with high added value in relation to addressing environmental issues, as well as the establishment of joint ventures with other companies and withdrawal from businesses, if required, after carefully examining the profitability and competi- tiveness of each business. Pursuing High Added Value and Earnings Growth by Creating New Business Models The Material sector operates a diverse range of businesses. Although it faces challenges related to business structure transformation and decarbonization, the sector also has a purpose and the potential to continuously spur innova- tion, creating new materials and new business models to realize the Group Mission. Under the concept of Product-based Platform as a Service (P-PaaS), which provides a platform that helps increase customer value, the Material sector will expand solution-oriented businesses that do not simply sell prod- ucts. For example, it will offer data-driven services, such as predictive mainte- nance and optimal operation proposals, using smart electrolyzers for the ion-exchange membrane electrolysis process. Through these efforts, we will promote business expansion by shifting man- 1 Figures have been recalculated to reflect the revision of business categories in FY2022 agement resources to future growth fields with the aim of establishing a high value-added profit structure that is resilient to changes in market conditions. 2 ROIC = operating income (1 − tax rate) / (fixed assets + working capital, etc.) Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 38 GG10 Hydrogen-Related Environment & Energy Helping to 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 Operating Environment Global progress in hydrogen-related technology development aimed at realizing a decarbonized society As hydrogen is gaining attention as an essential material for a decarbonized society, projects related to green hydro- gen produced using renewable energy are being launched around the world. There are several methods for producing hydrogen. Among them, Asahi Kasei is developing alkaline water elec- trolysis technology, which is suited for large-scale systems and is expected to enable low-cost, mass production of hydrogen. As seen not only in highly environmentally conscious Europe, but also with the Inflation Reduction Act that went into effect in 2022 in the U.S. and the 2023 revision of the Basic Hydrogen Strategy in Japan, the movement to adopt green hydrogen production and usage is gaining momentum worldwide, and the market for electrolysis sys- tems for hydrogen production is expected to grow significantly going forward. Strengths of the Asahi Kasei Group Steady verification of alkaline water electrolysis systems based on chlor-alkali electrolysis technology Asahi Kasei’s alkaline water electrolysis systems are based on the ion-exchange membrane chlor-alkali electrolysis technology that we commercialized in 1975. In the chlor-alkali electrolysis field, we have the ability to provide mem- branes, electrolytic cells, electrodes, operating technology, and monitoring systems, and we have a high global market share in ion-exchange membranes. We are leveraging the expertise we have accumulated in this area to develop large-scale alkaline water electrolysis systems that can be used with renewable 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 is underway at the Fukushima Hydrogen Energy Research Field of the New Energy and Industrial Technology Development Organization (NEDO). In addition, our joint verification project with JGC Holdings Corporation was adopted as a NEDO Green Innovation Fund project, specifically for hydrogen production through electrolysis using renewable energy. 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 has accumulated operating expertise and data through participation in the ALIGN-CCUS proj- ect and its successor, the TAKE-OFF project. Additionally, in 2023, our “verification research on alkaline water electrol- ysis systems to expand the supply of green hydrogen (Europe)” was selected as a NEDO research project*. We will continue to work with partner companies to acquire knowledge for commercialization. * NEDO’s international verification project on Japanese technology for promoting energy consumption efficiency, which aims to study the technology’s satis- faction of verification requirements (pre-verification study and verification research) Business Strategies Becoming a leading supplier of alkaline water electrolysis systems through swift commercialization and supply chain development While performing trials to enhance safety, durability, and performance, and achieve high-reliability alkaline water electrolysis systems, we are working to reduce the costs for practical application with commercialization targeted in 2025. We will start by intro- ducing these systems in regions that are ahead of other markets in this regard, but in the future, we aim to capture a major global market share of electrolysis systems, and are considering involvement in operations and monitoring as well. In 2022, with funding from NEDO, we broke ground on a pilot facility at our Kawasaki Works to conduct verification tests to control multiple electrolyzer modules. We also joined the Hydrogen Council, a global initiative involving approximately 150 companies and orga- nizations, as a steering member. In 2023, we joined the Japan Hydrogen Forum, which supports decarbonization in the U.S., and we have been deepening our collaboration with various government agencies, companies, and organizations. Our hydrogen-related business requires the development of new supply chains through collaboration with various companies, ranging from upstream energy suppliers to downstream hydrogen users. We are already receiving many inquiries regarding our alkaline water electrolysis systems. Accordingly, we will be seeking out ideal partners as we drive the development of the supply chain, and we will accelerate the global expansion of our hydrogen-related business to meet rapidly growing demand. 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) • Cost reduction of alkaline water electrolysis systems • 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 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 39 GG10 CO2 Chemistry Environment & Energy 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 Business Strategies 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 (CO2 chemistry). We thereby aim to contribute to reduced CO2 emissions through various efforts spanning from CO2 recovery to usage. 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 mate- rial, since the 1980s. In 2002 we began licensing our polycarbonate manufacturing technology which was the first in the world to utilize CO2 while also not using toxic phosgene, and our technology is used for 16% of global polycarbonate production capacity. Based on this technology and our commer- cialization expertise, we started licensing a technol- ogy that uses CO2 as a raw material for lithium-ion battery (LIB) electrolyte in 2021. We are also develop- ing various isocyanates for use as materials for pro- ducing polyurethane. The Asahi Kasei Group enjoys world-leading R&D capability and a track record of commercialization in these fields. CO2 chemistry (Use of CO2 as a raw material) CO2 separation/recovery Materials for LIB electrolyte Other chemical products Chemical feedstocks Polycarbonate Isocyanates CO2 Verification trials for CO2 separation and recovery technology, and advancement of business for CO2 utilization technology Asahi Kasei is considering verification trials for CO2 separation and recovery technology using actual gas with the aim of commercializing the technology by fiscal 2027 for processes using biogas or other gases. In Europe, the trend toward encouraging the use of biogas is picking up pace. Reflecting this trend, we are seeing the announcement of a variety of policies, programs, and investment plans, such as the European Commission’s REPowerEU plan, which incorporates the use of biogas to replace natural gas from Russia. We are considering verification in Europe where growing demand is forecasted for separating CO2 from biogas to recover methane. We are also developing sys- tems for power plants, factories, and other facilities. As for CO2 chemistry, we are focused on licensing the technology we have commercialized for LIB electrolyte material. At the same time, we are acceler- ating the development of isocyanate production technology. We are targeting the commercialization of a special isocyanate expected to be used as a next- generation automotive paint material in 2026. The performance of the material has received a strong reception in sample evaluations conducted at paint manufacturers, automobile manufacturers, and other potential customers. 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 contribute to the increased utilization of CO2 and to the reduced use of fossil resources. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 40 GG10 Energy Storage Environment & Energy Responding to rising energy storage demand associated with decarbonization, expanding contributions centered on LIB separators; pursuing new business opportunities related to next-generation energy storage devices Operating Environment Rising importance of LIBs as energy storage devices widely adopted throughout society The need for energy storage is accelerating along with the trend toward decarbonization. While various new technologies are being developed, we believe lithium-ion batteries (LIBs) will remain an important device in this field for the foreseeable future, and the market is expected to grow substantially due to the rapidly advancing move toward vehicle electrification. The U.S. Inflation Reduction Act, which went into effect in 2022, is also expected to stimulate the further proliferation of electric vehicles. Current mainstream LIBs use either ternary or lithium iron phosphate (LFP) cathode materials. LIBs that use ternary cathode materials are characterized by high capacity, and mainly use wet-process separators, while those that use LFP cathode materials mainly use dry-process separators. In addition, rapidly rising global demand for LIBs is also projected to stimulate increased demand for LIB reuse and recycling solutions, which should give rise to new markets. Strengths of the Asahi Kasei Group Addressing diverse needs based on accumulated expertise and industry-leading technological capabilities The LIB separator business operated by the Asahi Kasei Group is based on technology and knowledge that we have cultivated since the 1970s, and includes LIB research and the development of prototypes that would evolve into the LIBs of today. Our strengths in this business include the quality, safety and high performance of our separators backed by our technological expertise, and reliable supply capability, plus our experience with both wet-process and dry-process separators. We have earned particular recognition 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. Sales volumes for our wet-process Hipore™ separators grew at a compound annual growth rate (CAGR) of 17% from 2000 to 2021. Additionally, our strengths include world- class environment-friendly technology, high productivity powered by accumulated production technologies, and a comprehensive patent portfolio. In China, where the LIB market is expanding, the dry-process separator joint venture established by our subsidiary Polypore International, LP, and Shanghai Energy New Materials Technology Co., Ltd. (SEMCORP) to tap into the market for energy storage system LIBs, commenced operations in the second half of fiscal 2022. Business Strategies Pursing growth in the separator business while exploring new business opportunities With the growth of the separator business as its focus, the Asahi Kasei Group is pursuing fur- ther possibilities in energy storage-related businesses. We have decided to concentrate resources on the growth potential of Hipore™ in the sep- arator business, and in this pursuit with North America as our main target market going for- ward, we are considering means such as alliances to strengthen our supply framework. Currently, none of the major separator manufacturers have wet-process production facilities in North America, with each company competing under the same conditions. Therefore, we aim to establish a solid position by leveraging the strengths of Hipore™, namely its high perfor- mance, quality, safety, productivity, and environment-friendly technology. Meanwhile, we are working toward the development of next-generation energy storage devices. In fiscal 2023 we commenced full-fledged licensing activities for innovative lithium- ion capacitors featuring improved energy density and reduced costs. We are also working to commercialize the technology that is currently under development for innovative electrolyte material utilizing high ion-con- ductivity solvents. Outlook for automotive LIB separator demand In addition, for longer-term business development, we are leveraging the knowledge we have cultivated in the separator business to create solution-ori- ented business and develop next-generation innovative bat- teries to meet the needs of a vast energy storage market. 2021-2025 (billion m2) 年平均成長率 35% 35 28 21 14 7 0 Source: Asahi Kasei estimates Others China Europe North America Japan (Year) Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 41 GG10 Car Interior Material Mobility Supplying proprietary, differentiated, high value-added solutions to the automotive interior material 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 interior needs Changes to Automotive Interiors Driven by CASE Due to the advancement of CASE and MaaS trends in the automotive industry and the growing awareness of sustainability, needs regarding automotive interiors are becoming more diverse. These trends are creating needs for functions and character- istics in materials and components that differ from conventional expectations. As a result, the automotive interior material market is projected to grow at a faster rate than vehicle production volumes. The broadening range of automotive interior needs presents a substantial business opportunity for us, with our diverse lineup of products and technologies. antibacterial properties • Enhancement and diver- sification of performance • Noise reduction • Thermal management • Weight reduction • Soundproofing, vibra- tion proofing, thermal insulation • Recognition and monitoring of passengers • Diversification of seat design and layout New needs for interior parts/ components • Public use • Availability for various • Greater comfort • Innovative designs Changes in automotive interiors technologies • Smart textiles • Easy cleaning, antifouling vehicle environment • Odor resistance, living room or office • Transition to new • Use as in-vehicle • Monitoring of in- Autonomous Connected • Monitoring Electric properties Shared purposes materials Strengths of the Asahi Kasei Group Meeting customer needs with high-quality sustainable materials and strong design proposal capabilities Sage Automotive Interiors, Inc., which joined the Asahi Kasei Group in 2018, enjoys strengths in its design and customer pro- posal capabilities. By using these strengths to deploy regional and material strategies on a global scale, we have secured a position as a leading global supplier in the seat fabric* market. In 2023, we rebranded our artificial suede material by integrat- ing Lamous™ with Sage’s Dinamica™, and we are focusing on integrated promotion from raw fabric to finished products. Our artificial suede has been well received as a high-quality sustainable material that uses no organic solvents during the production process. Combining this with Sage’s design capabilities has enabled us to create distinctive high value-added products that have been increasingly adopted around the world. To respond to the resulting robust demand, in fiscal 2022 we added production capacity in Nobeoka City, Miyazaki Prefecture, Japan. 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 transformation, 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) Business Strategies Becoming an automotive interior solutions provider by offering value that meets new needs In our car interior material business, we are targeting net sales exceeding ¥100 billion in 2024. In addition to artificial suede, demand is growing for PVC synthetic leather as an alternative to natural leather, and to expand the prod- uct lineup to meet customer needs, we have begun producing this material in China, with expansion to other regions planned in the future. We continue to raise production capacity for Dinamica™ products while reinforcing sustain- ability initiatives. Additionally, in parallel with business expansion, we will strengthen our production through means including factory closure and con- solidation, and develop frameworks for regional supply in accordance with regional demand. By so doing, we will further solidify our position as a leading supplier. Our growth strategies for meeting diversifying automotive interior needs include the further differentiation of our solutions. We will acquire foundations for direct involvement in and contribution to the development activities of auto- mobile manufacturers in specific automotive interior fields, and develop vegan leather and other plant-derived materials, highly recyclable monomaterials, and materials featuring greater comfort. In addition, effective key account management practices will be adopted to gain a better understanding of auto- mobile production processes so that we can provide unique, comprehensive solutions through development proposals matched to current trends and needs. By honing superiority for solutions in terms of design, sustainability, and comfort, we aim to become a distinctive automotive interior solutions provider by developing materials and components, and by offering services, with a focus on user experience. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 42 GG10 Digital Solutions Life Material Leveraging a unique position of having both electronic components and electronic materials; addressing the needs of the digital society with distinctive components, materials, and solutions Operating Environment Accelerated evolution of digital technologies and solutions in response to diversification of needs stimulated by social change Digital technologies and solutions are constantly evolving along with the accelerated digitalization of society, including the prog- ress of AI technology, leading to continued market growth. As needs become more diverse in a variety of fields, digital technolo- gies and solutions have become imperative to providing new value in response to changes in the operating environment. The market is expected to continue to undergo substantial growth as a result of the advancement of digital technologies and solutions. It is expected that continuous significant market expansion will be especially driven by rapid market change toward electric vehicles amid rising environmental awareness; digitalization as seen in the spread of 5G, 6G, and other high- speed communications systems; and the rising desire for 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 components and electronic materials Business promotion reflecting market trends for both electronic components and materials is a major strength of the Asahi Kasei Group. In our electronic components business, we draw on our years of experience in analog signal processing technology to propose optimal solutions for markets related to energy conservation and healthy and comfortable lifestyles—including electric vehicle applications—centered on sound quality control, and magnetic, electric current, infrared, and other sensing devices. Leading the industry in terms of mixed-signal large-scale integrated circuit design technology for bridging the gap between analog and digital information, Asahi Kasei offers a number of products with world-leading market shares, building strong, trust-based relationships with customers as an innovative and distinctive electronic components manufacturer. In addition to its sophisticated development capabilities, manufacturing technology, and quality control, our electronic materials business builds on its strength in accommodating customer requests to underpin the growth of the cutting-edge semiconductor market by maintaining a lineup of high-performance and highly competitive products. World-leading market shares have been maintained along with high evaluation globally for products including Pimel™ photo- sensitive polyimide precursor, a semiconductor buffer coating; dry film photoresist used in etch- ing circuits on printed wiring boards; and ultra- thin glass fabric for printed wiring boards. • High-density wiring (photosensitive dry film and photosensitive buffer coat) • Low transmission loss (low-dielectric glass fabric and plastic optical fiber) • High-precision adhesion (latent epoxy Creating innovative products with com- petitive sensing technology in the xEV, energy conservation, and comfort markets Providing highly competitive materials and solutions for cutting-edge semiconductor and packaging process innovations • Analog signal processing • Software algorithms • Sensing (magnetic, current, infrared, and Electronic components Electronic materials millimeter wave) hardener) Business Strategies Provision of unique solutions matched to new market needs through the integration and unified management of the electronic components and materials businesses The unified management of the electronic components and materials businesses will allow Asahi Kasei to accurately identify market trends and create solutions using its various acquired technologies, thereby accelerating growth through distinctive products and services. We will aim to achieve operating income of ¥70 billion for Digital Solutions by around 2030. In electronic components, we established a project to expand our business for electric current sensing devices with high-speed response and high sensitivity, ideal for next-generation power device applications that are seeing an expansion in demand related to electric vehicles. With a focus on China, we also set up garage- style laboratories at several global bases, where customers can experience noise cancellation technology, high-precision CO2 sensors, and other solutions that enhance the sound and air quality of spaces, such as living rooms and car interiors, to accelerate sales expansion. In addition, we will pursue further business opportu- nities for Hall elements that contribute to the environment and to energy conserva- tion and explore opportunities to offer solutions based on environmental sensing. In electronic materials, we are seeking to expand our provision of highly com- petitive electronic materials and solutions, to spur technological innovation in 5G, 6G, and other communication systems that support the development of digital society and in cutting-edge semi-conductors and packaging processes used in data servers and other equipment. To this end, we have decided to increase pro- duction capacity for Pimel™. Meanwhile, we are promoting the acceleration of product development utilizing digital transformation and activities to spur innovation to achieve future growth. In addition to autonomous growth, we will advance value creation, including through the adoption of outside technologies and through M&A, to strengthen and expand our business domain. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 43 Strategies by Sector Homes sector Message from the Head of the Homes Sector Fumitoshi Kawabata Executive Officer for Homes Business Sector Vice-Presidential Executive Officer, Asahi Kasei Corp. President & Representative Director, Asahi Kasei Homes Director, Asahi Kasei Construction Materials “ Celebrating half a century of the homes business, striving forward as an essential company of true value for all stakeholders “Long Life” Concept Focused on the Future In fiscal 2022, we celebrated the 50th anniversary of Asahi Kasei’s homes business. I would like to express my sincere appreciation to all of our stake- holders, including customers, employees, shareholders, and investors, for helping us achieve record-high net sales and operating income in such a major milestone year. With the support of such customers, Hebel Haus™ has established a solid position in Japan’s urban housing. In addition, the business has grown steadily in step with changes in society, including remodeling, leasing, broker- age, and condominium businesses, and promoted overseas homes busi- nesses in recent years. The construction materials business has also played a role in realizing high value-added homes by making full use of the technologi- cal capabilities of Asahi Kasei’s materials. The homes business seeks to offer long-lasting homes where people can continue to live with peace of mind. Passed on since our founding, this aspira- tion precisely aligns with the concept of sustainable homes for the future. I am confident that we will see increasing demand in the coming era for the “Long Life” products and services that we provide to support life, well-being, and living for customers. Profit Growth by Strengthening Domestic Businesses and Expanding Overseas Businesses The growth of the Homes sector has contributed to society and raised the cash-generating capability of the Asahi Kasei Group. The current MTP targets net sales of ¥1 trillion and operating income of ¥95 billion for the Homes sector in fiscal 2024. While domestic businesses are securing earn- ings despite a challenging operating environment, including a declining pop- ulation, our challenge is to firmly grow the overseas businesses, which are projected to see an increase in demand, in order to achieve these targets. In recent years, we have made higher value-added proposals in the order- built homes business, such as homes for seniors and homes that protect the environment. We also promoted new marketing strategies for high-end prod- ucts and conducted organizational reforms to fully leverage the strengths of Asahi Kasei Homes. As a result, despite greater-than-anticipated change in our operating environment—including higher construction material costs as an effect of global affairs—we were able to increase operating income from the previous fiscal year. 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 . 6 % 2 ersea s 2 v O Homes Sector FY2022 Net Sales ¥899.0 billion n 7 7.4% Homes Order-Built Homes • Hebel Haus™ unit homes • Hebel Maison™ apartment buildings Remodeling • Maintenance, renovation, etc. J a p a Real Estate • Apartment rental network, real estate brokerage • Atlas™ condominiums Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information In the overseas business in recent years we have made acquisitions in North America and Australia, where we aim to enhance the quality of homes and raise productivity using the know-how in industrialized housing develop- ment which we cultivated in Japan. In fiscal 2022, satisfaction with our prog- ress in establishing new business models in both countries—where demand for homes is steady—led us to expand our North American business with the acquisition of the Focus Companies, a construction work supplier in Nevada, and our Australian business with the acquisition of Arden Homes Pty Ltd., a housebuilder in Victoria. A Leader in Environmental Protection, Promoting Sustainability Together With Customers In fiscal 2019, Asahi Kasei Homes joined RE100, an initiative for companies committed to sourcing 100% of the electricity used in their operations from renewable energy, in order to achieve decarbonization. Using a system whereby we purchase electricity generated primarily through solar power from customers, we expect to achieve our goal significantly earlier than initially anticipated. This achievement is based on the trust and expectations that cus- tomers place in the Asahi Kasei Group, and I feel that promoting sustainability together with them is highly meaningful. In addition, in fiscal 2023 our GHG emission reduction targets were approved by the Science Based Targets initia- tive (SBTi), a global body promoting GHG emission reductions, as consistent with the 1.5ºC target, and we expressed our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). As one of the few companies to address all three of the TCFD, SBTi, and RE100, we are committed to faithfully fulfilling our role in society. The vision of the homes business is to be an essential company of true value for customers, society, and employees as we embark on a new chapter following our 50th anniversary. People remain the source of value creation for the homes business in any era. We will therefore unstintingly invest in the growth of our employees to build an organization where all can feel proud and happy to work. We also aim to remain a company that is loved and depended on by all our stakeholders. KPI KPIs Net sales (¥ billion) Operating income (¥ billion) Operating margin EBITDA (¥ billion) EBITDA margin Free cash flow ratio ROIC2 Operating income, operating margin Construction Materials Others Overseas Business Remodeling Real Estate Order-Built Homes (¥ billion) 80 60 1,500 1,200 900 40 600 300 20 0 0 44 Message from the Head of the Homes Sector FY2021 (after reconfiguration1) FY2022 FY2024 target (announced in Apr. 2023) 822.4 72.9 8.9% 87.3 10.6% 4.5% 33.2% 899.0 76.0 8.5% 93.4 10.4% 1.3% 27.2% 1,000.0 95.0 9.5% 115.0 11.5% 4.0% 24.0% Note: Shaded rows are management KPIs in the Homes sector (%) 20 15 10 5 0 76.0 77.7 8.5 8.5 2022 2023 (FY) Forecast (announced in May 2023) 2019 2020 After reconfiguration1 2021 Operating income (left scale) Operating margin (right scale) 1 Figures have been recalculated to reflect the revision of business categories in FY2022 2 ROIC = operating income (1 − tax rate) / (fixed assets + working capital, etc.) Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 45 GG10 Environmental Homes and Construction Materials Home & Living Together with our customers, contributing to sustainability through homes Operating Environment Rapidly rising requirements for improved energy efficiency and decarbonization Business Strategies Although Japan has a sufficient quantity of housing units relative to the number of households, only a small percentage of homes fully meet energy efficiency performance standards. Updating to comfortable homes that can be passed on to the next genera- tion has therefore become an urgent priority. Meanwhile, the Japanese government has declared its aim to achieve carbon neu- trality by 2050 and to reduce GHG emissions by 46% by fiscal 2030 (compared with fiscal 2013). Against this backdrop, changes to relevant laws and revisions of programs are proceeding rapidly to further improve energy efficiency performance in homes and expand the introduction of renewable energy. Spread of ZEH-compliant newly ordered unit homes (Homes) Government vision for homes in 2030 • New housing to have ZEH-level energy efficiency performance • 60% of newly ordered unit homes to be equipped with solar power generation systems At the same time, ZEH-compliant homes account for less than 30% of order-built unit homes and only a small percentage of ready-built unit homes. As a result, the role of home manufacturers with an already high proportion of ZEH compliance is becoming ever-more significant. In addition, installations of solar power gener- ations systems and insulation materials are projected to expand in both the remodeling and new housing markets, and demand in the insulation materials market is expected to increase. 300,000 250,000 200,000 150,000 100,000 50,000 80.8% 79.7% 76.0% 73.3% 98.7% 98.7% 97.5% 97.4% 0 19.2% Order- built 1.3% Ready- built 2018 20.3% Order- built 1.3% Ready- built 2019 24.0% Order- built 2.5% Ready- built 2020 Non-ZEH ZEH 26.7% Order- built 2.6% Ready- built 2021 (FY) Source: Survey presentation materials from Sustainable open Innovation Initiative Strengths of the Asahi Kasei Group Housing units and customer relationships built through our “Long Life Home” concept In addition to high levels of seismic and fire resistance, Hebel Haus™ homes have outstanding energy efficiency and power generation performance. In recent years, we have rapidly increased the number of ZEH-compliant Hebel Haus™ homes through our own unique value-added proposals, such as utilizing our Neoma Foam™ next-generation insulation, which maintains its superior insulation performance over the long term, and improving disaster resilience by encouraging the installa- tion of solar power generation systems and storage batteries. Another of our strengths is that many of the buildings we have constructed in the half-century since our founding remain standing thanks to the durability of our buildings and maintenance support with a periodic inspection service for 60 years free of charge. Leveraging synergies among businesses beginning from the order-built homes business, such as remodeling pro- posals tailored to the life stages of customers, support for moving and selling, and insurance and infrastructure proposals for approximately 290,000 housing units, we aim to pursue lifetime customer satisfaction. Aiming to promote the spread of ZEH- and ZEH-M-compliant homes and achieve RE100 as a leading company in environmental protection ZEH-compliant % (revised contract basis) The order-built homes business promotes unique initiatives, such as Eco ResiGrid, to increase the proportion of ZEH-M-compliant apartment buildings. For this product, Asahi Kasei Homes leases the roofs of Hebel Maison™ buildings to install, own, maintain, and operate solar power generation sys- tems and storage batteries. In addition, the remodeling business seeks to pro- mote the spread of solar power generation systems and storage batteries, and the apart- ment rental network aims for apartment build- ings to provide greater value by promoting the use of clean electricity by tenants, as well as by owners and ourselves. While promoting the spread of homes that protect the environment through these cross- business efforts, through our Hebel Electric Power business we purchase surplus electricity from customers who have installed solar power generation systems, allotting the purchased electricity for use in the business operations of the Asahi Kasei Group. Asahi Kasei Homes expects to achieve its RE100 goal of sourcing 100% of the electricity used in its operations from renewable energy during fiscal 2023. ZEH-M compliant % (order contract basis) 2025 Target 85% 70% 62% 44% 67% 81% 2022 2022 2021 2021 2025 Target Hebel Haus™ Hebel Maison™ Electricity retail business: Asahi Kasei Purchase and supply of renewable electricity Intermediary: Asahi Kasei Homes Use as renewable energy in the Asahi Kasei Group’s operations Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 46 GG10 North American and Australian Homes Home & Living Providing high-quality homes suited to each region; improving efficiency and productivity through industrialization Operating Environment Steady demand for homes owing to population increases and substantial opportunities created by labor shortages, long construction periods, and sluggish adoption of industrialized housing development Given the sizes of their economies and population growth rates, we have promoted the overseas expansion of our homes business with a focus on North America and Australia. While housing demand has grown in recent years, the need to rationalize construction processes and reduce costs is becoming more acute amid chronic labor shortages and rising costs associated with increasing material prices. U.S. Market Australian Market • The millennial generation represents a large portion of the population and has reached house-buying age. As such, residential housing demand is expected to remain firm over the medium to long term. Arizona and Nevada, our main operating regions, are states where an increasing number of businesses are located and where the popula- tion inflow from other states is particularly high. • Although we began to see a slowdown in the market as a whole due to sharply rising inflation and mortgage rates in the second of fiscal 2022, newly built homes are on a recovery track in fiscal 2023, helped in part by a shortage of previously owned homes. • Through a combination of natural growth and immigration, the pop- ulation is projected to continue to increase by at least one million over the next three years. Accordingly, Australia is expected to enjoy steady growth in the housing industry over the medium to long term. • Unprecedented construction demand stemming from subsidy mea- sures triggered by the COVID-19 pandemic has led to a sharp rise in material and labor costs. Although the housing industry as a whole experienced financial difficulty in fiscal 2022, with construction delays due to adverse weather and other factors, resumed immigration is expected to alleviate labor shortages from fiscal 2023. Strengths of the Asahi Kasei Group Industrialized housing development, design, and construction expertise fostered through Hebel Haus™ With quality controlled through the use of standardized components and materials and of prefabricated modules, Japan’s industrialized housing is established as an exceptional form of industry compared with other countries. Above all, Asahi Kasei has developed frameworks for the efficient supply of high-quality homes, including developing Japan’s first system- atic three-story homes. As the development, design, and construction expertise fostered through these efforts spurs innovation in construction industries overseas, where con- struction periods can be nearly twice as long as those in Japan, it helps streamline construction processes and improve the quality of house building. Business Strategies Asahi Kasei improves and increases the effi- ciency of construction processes and enhances quality by working together with local compa- nies with a strong understanding of the market, rather than simply introducing Hebel Haus™ in its Japanese format. In fiscal 2022, the over- seas business achieved its fiscal 2025 target of net sales of ¥200 billion ahead of schedule. Going forward, we aim to achieve an operating margin on par with the level of 10% or more in our domestic business. Net sales and operating income of overseas business (¥ billion) (¥ billion) 250 200 150 100 50 0 203.4 210.0 146.3 8.6 7.5 2021 2022 11.4 2023 Target 20 16 12 8 4 0 Net sales (left scale) Operating income (right scale) North America Establishing a supplier model to streamline a wide range of processes in manufacturing and on construction sites In North America, we have acquired several companies in the homebuilding industry, most notably Erickson Framing Operations LLC, a building component supplier that manufactures and installs walls and roofs for wooden houses. We also acquired companies that perform electrical, concrete, and HVAC work, as well as plumbing work. With these acquisitions, we are working to make construction processes more efficient and enhance quality. In fiscal 2022, we expanded our operating regions to include Las Vegas, Nevada, by acquiring the Focus Companies, a construction work supplier. In addition to a promising outlook for continuously steady demand for homes due to a chronic housing shortage in Nevada, we expect to create synergies with our existing business in Arizona. Australia Establishing a highly competitive business model in Australia that builders or suppliers could not achieve alone We are steadily growing our market share with a focus on NXT Building Group Pty. Ltd., a major unit homes company, by expanding our business regions to include New South Wales, where it was founded, and to other states through such methods as new acquisitions of builders. In fiscal 2022, we advanced into Victoria for the first time with the acquisition of Arden Homes, a housebuilder in that state. Accounting for approximately 30% of the unit homes market—the largest share—Victoria is expected to enjoy a continuous demand for homes thanks to population increases, an abundant supply of building sites, and other factors. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 47 Strategies by Sector Health Care sector Message from the Head of the Health Care Sector Richard A. Packer Executive Officer for Health Care Business Sector Primary Executive Officer, Asahi Kasei Corp. Chairman & Board Director, ZOLL Medical Corporation Board Director, Veloxis Pharmaceuticals, Inc. “ Toward a global healthcare company with diverse growth drivers The Health Care sector is diversified, operating in fields ranging from critical care to pharmaceuticals and bioprocess. Four core operating companies, ZOLL Medical, Asahi Kasei Pharma, Veloxis Pharmaceuticals, and Asahi Kasei Medical, each aims to grow while pursuing the mission of “Improve and save patients’ lives.” The leaders of the core operating companies and I work closely together through the Healthcare Business Unit Meetings, where we discuss management issues, strategies, and prioritizing resource allocation from the perspective of the entire sector, in order to achieve medium- to long- term expansion as the growth driver of the Asahi Kasei Group. Fiscal 2022 presented us with various challenges. There were macro fac- tors such as raw material supply constraints and a slowdown in the U.S. bio- tech industry, along with challenges in managing our sales force and responding to fluctuating customer demands. As a result, net sales and oper- ating income fell short of our targets. In fiscal 2023, we have the opportunity to take a big step forward, over- coming the challenges of the previous year, particularly in critical care, and achieving a significant recovery in the Health Care sector as a whole. We are all focused on doing the work necessary, and making the hard decisions needed, in order to realize further growth. Pursue High Growth and Improved Profitability by Leveraging Strengths of Each Business Our MTP goal is ¥590 billion in revenue and ¥60 billion in operating income for fiscal 2024, and in the long term, we aim to ensure an operating margin over 20%. This is an ambitious target which sets our agenda of expansion and growth while improving profitability, and we will develop strategies in each of our businesses to move us toward this goal. By leveraging ZOLL’s recent acquisitions of Respicardia and Itamar Medical, we will create new growth engines in critical care. We will maximize our opportunities by generating synergies between these companies and LifeVest™ in providing diagnostic and therapeutic solutions for sleep-disor- dered breathing related to cardiology. In addition, with TherOx™, which pro- vides supersaturated oxygen therapy for acute myocardial infarction, we are working to create new markets with new solutions. We are accumulating data through clinical trials, promoting the therapeutic effects, and raising awareness among clinicians. In pharmaceuticals, we aim to build a global specialty pharmaceutical business utilizing the foundations of Asahi Kasei Pharma and Veloxis. Combining the best knowledge of each organization in business development and clinical development, we will maximize our growth potential in core dis- ease areas such as immunology and transplantation, and further expand our Acute Critical Care • LifeVest™ wearable defibrillator • Defibrillators for professional use • Automated external defibrillators (AEDs) • Ventilators • Thermogard System™ temperature management system • Supersaturated oxygen therapy • Implantable neurostimulator devices for central sleep apnea • Home-based testing and diagnostic solutions for sleep apnea Japa n 2 1 . 8 % Health Care Sector FY2022 Net Sales ¥496.9 billion O v e r s e a s 7 8.2% Pharmaceuticals • Teribone™ and Reclast™ • Kevzara™ rheumatoid arthritis drug osteoporosis drugs • Plaquenil™ immunomodulator • Recomodulin™ anticoagulant • 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 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 48 Message from the Head of the Health Care Sector FY2021 FY2022 FY2024 target (announced in Apr. 2023) business scale. We will build globally while maintaining our strength in local geographies. KPIs Another critical aspect of our medium-term strategy is to establish a bio- process business that offers a unique value proposition to the biopharmaceu- tical industry. By combining our products and services including CRO and CDMO, we can make significant contributions especially in terms of improving the safety and efficiency of pharmaceutical manufacturing. As we anticipate the recovery of the U.S. biotech industry, we will position ourselves intelligently to ensure product and service supply capability that enables us to move swiftly ahead when the market rebounds. We will continue to pursue growth in areas where we have strengths. In implementing these strategies, we must prioritize investments and con- centrate our resources on the businesses that will lead to growth which is sus- tainable over the long-term. With regard to DX, Asahi Kasei Pharma’s digital marketing has received high acclaim, winning the Grand Prize in the Nikkei BtoB Marketing Awards, for example. The embrace of DX across all of our businesses will allow us to increase productivity while improving our ability to anticipate changing markets. New Structure to Realize Further Innovation Looking beyond the immediate horizon, our vision extends to becoming a truly global healthcare company. As a step in this direction, in 2023 we established our headquarters for the sector in the U.S. By locating the headquarters in the world’s largest healthcare market and the forefront of innovation, we can accelerate our growth through swift business development in anticipation of industry trends. Furthermore, from fiscal 2023, the Health Care sector is being led by a non-Japanese executive based in the U.S. This is a unique structure within Asahi Kasei and speaks to our commitment to change and grow as a Group. We continue to actively seek opportunities to address global issues in the healthcare industry and contribute to making a difference in the lives of patients worldwide, helping them in their pursuit of a healthier and more fulfilling life. Net sales (¥ billion) Operating income (¥ billion) Operating margin EBITDA (¥ billion) EBITDA margin ROIC* 415.9 52.2 12.5% 101.7 24.5% 6.2% 496.9 41.9 8.4% 106.4 21.4% 4.2% 590.0 60.0 10.2% 126.0 21.4% 6.0% Note: Shaded rows are management KPIs in the Health Care sector EBITDA, EBITDA margin (¥ billion) 120 90 60 30 0 Acute Critical Care Pharmaceuticals & Medical Care 106.4 111.5 21.421.4 20.920.9 (%) 40 30 20 10 0 2019 2020 2021 2022 2023 Forecast (announced in May 2023) (FY) EBITDA (left scale) EBITDA margin (right scale) * ROIC = operating income (1 − tax rate) / (fixed assets + working capital, etc.) Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 49 GG10 Critical Care Health Care Contributing to health by pursuing further growth in the field of serious cardiopulmonary diseases and saving as many lives as possible Operating Environment Substantial market potential in the field of cardiopulmonary disease Business Strategies Heart disease is the leading cause of death in the U.S. and many other developed countries. There are increasing needs for critical care devices such as defibrillators to treat sudden cardiac arrest, as well as equipment for diagnosing and treating cardiopulmonary disease. Defibrillators include those implanted in the body and those that are used externally. External defibrillators include those used by healthcare institutions, automated external defibrillators (AEDs) placed in public facilities, and wearable defibrillators that are worn at all times by individuals at elevated risk of sudden 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 lives. Additionally, in the field of cardiopulmonary diseases, as society ages and medical technology becomes more sophisticated, there is a growing potential market for products and services that respond to unmet medical needs in clinical settings. Strengths of the Asahi Kasei Group A unique product lineup and strong network with medical institutions Our subsidiary ZOLL Medical Corporation is a global medical device manufacturer specializing in medical devices and solutions for critical care, including cardiopulmonary resuscitation, and cardiopulmonary diseases. Since joining the Asahi Kasei Group, ZOLL has continued to grow its existing operations while acquiring new technologies and businesses through M&A, and its sales have risen approximately four-fold with a CAGR of 13% from 2012 to 2022. One of ZOLL’s strengths is its unique product lineup, which includes the LifeVest™ wearable defibril- lator. The potential market for wearable defibrillators is estimated at $3 billion in the U.S. alone, and a solid position has been built for LifeVest™ as a bellwether for developing new markets. LifeVest™ has been worn by more than 1 million people around the world and has saved thousands of lives. Another strength is a strong network with hospitals with a rich lineup of products for medical professionals, including defibrilla- tors for medical institutions. ZOLL’s growth trajectory (sales) ($ million) 2,500 2,000 1,500 1,000 500 0 19.2% 10-year CAGR Increased demand for ventilators due to COVID-19 13% 2012 2014 2016 2018 2020 2022 (FY) Business development and product portfolio expansion in cardiopulmonary diseases and related acute care fields Patient services While we aim to continue increasing market penetration of LifeVest™ and establishing it as a standard treatment, ZOLL has also expanded into new fields. In fiscal 2021, through the acquisitions of Respicardia and Itamar Medical, it acquired groundbreaking devices for the diagnosis and treatment of sleep apnea, which often occurs in patients with heart disease. Each has a potential market worth billions of dollars, and we will aim to achieve solid results by realizing synergies with existing businesses and accelerating entry into the sleep apnea market while develop- ing and expanding these two companies. Healthcare infrastructure As a market leader in critical care products such as defibrillators for healthcare professionals and AEDs for public facilities, we will continue to invest in technological innovation and product and service development. In addition to diversifying our product portfolio, we aim to expand by steadily capturing global market growth outside the U.S. Patient services business • Global potential market of over $10 billion • Current market penetration of less than 10% • Business growth rate in mid-teens • 70–80% gross profit margin Healthcare infrastructure business • Global market potential of over $5 billion • Leading positions in multiple product categories • Business growth in high single digit range • 50–60% gross profit margin LifeVest™ wearable defibrillator Arrhythmia management system Heart failure management system At-home testing solution for sleep apnea Implantable neurostimulator device for central sleep apnea Ventilators Defibrillators for professional use Automated external defibrillators (AEDs) Automated CPR device Acute myocardial infarction treatment system Thermogard System™ temperature management system Software solutions Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 50 GG10 Global Specialty Pharma Health Care Accelerating our transformation 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 pharmaceuticals business The global pharmaceutical market is expected to grow to the scale of $1.6 trillion by 2025, with a compound annual growth rate (CAGR) 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 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 coordinate with other parties. Accordingly, our acqui- sition of a business platform in the U.S. market is expected to facilitate the further growth of our pharmaceuticals business. Asahi Kasei focuses on 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 transplants are performed each year, and this number is projected to increase. U.S. Kidney Failure and Kidney Transplant Market Approx. 500,000 dialysis patients Treatments for end-stage renal failure Approx. 200,000 kidney transplant patients (over 25,000 new transplants every year) Dialysis Kidney transplant Hemodialysis Peritoneal dialysis Living donor kidney transplant Deceased donor kidney transplant 1 Source: Global Medicine Spending and Usage Trends Outlook to Source: National Kidney Foundation 2025, IQVIA Holdings, Inc. Immunosuppressant administered for life following transplant to prevent rejection Strengths of the Asahi Kasei Group Veloxis immunosuppressant Envarsus XRTM steadily expanding market share We supply Envarsus XR™, an immunosuppressive drug for kidney transplant patients, through our subsidiary Veloxis Pharmaceuticals, Inc. 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, which allows the drug to be effective with a single daily dose. Another advantage is that our small group of highly skilled medical representatives (MRs) has acquired sales channels with spe- cialists at major U.S. hospitals in the fields of immunology and transplantation. 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 for this product with a fiscal 2022 share of more than 15% of tacrolimus applications and at least 30% of new kidney transplant patients. Sales volume growth slowed temporarily due to restrictions on MR activities during the COVID-19 pandemic, but has been steadily rising since fiscal 2022. Business Strategies Aiming for sales of ¥200 billion in the pharmaceuticals business, specializing in diseases related to immunology and transplantation We will continue to pursue higher sales of Envarsus XR™, positioning this drug as a growth driver for the pharmaceuticals business on a global scale. We also aim to grow as a Global Specialty Pharma business by focusing on pharmaceuticals for large hospitals, with priority areas of immunology and transplantation, and related disease areas such as infectious diseases, renal diseases, and specialty areas. In addition, by deepening the collaboration between Asahi Kasei Pharma and Veloxis, we will further strengthen clinical development and business development functions 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 strengthen- ing our clinical and business development functions in the U.S., the world’s largest pharmaceutical market and the forefront of pharmaceutical innovation. Pharmaceuticals sales growth targets 200.0 150.0 150.0 93.3 (¥ billion) 200 150 100 At the same time, in the Japanese market, we plan to grow sales of existing pharmaceuticals while actively expanding our pipeline through in-licensing. For the phar- maceuticals business as a whole, we are targeting sales of ¥150 billion in 2025 and ¥200 billion in 2030. 50 0 2021 2025 2030 (FY) Targets Region Core Treatment Areas Products Global Specialty Pharma Targets Asahi Kasei Pharma Orthopedics • Teribone™ • Reclast™ Japan Critical care/hos- pital based • Recomodulin™ Immunology • Kevzara™ • Bredinin™ • Plaquenil™ Veloxis Pharmaceuticals U.S. Transplantation • Envarsus XR™ • VEL-101 (former FR104) 1 2 Disease areas adjacent to immunology/transplantation, specialty focused Hospital based (large number of beds) Infection Immunology/ transplantation Renal diseases Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 51 GG10 Bioprocess Health Care Evolving into a premium partner that contributes to biologics safety and manufacturing efficiency for pharmaceutical companies Operating Environment Expansion of bioprocess-related markets with rapid growth of biopharmaceutical market The emergence of more diverse and sophisticated drug discovery technologies is driving biopharma- ceutical market growth in areas such as genetic recombination and cell culture drug development, and the market is expected to see a CAGR of 8% from 2022 to 2030. Furthermore, there is a shift to next-generation treatments such as cell therapy, gene therapy, and medium molecular weight drugs, and the bioprocess-related market continues to expand. In these areas, the market for virus removal filters, which are used to reduce the risk of virus con- tamination during the pharmaceutical manufacturing process, a high rate of growth is expected to continue. 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. For pharmaceutical companies, the presence of filter man- ufacturers that offer a broad product lineup and high product quality will become even more impor- tant going forward. Strengths of the Asahi Kasei Group Firm position staked out by our Planova™ virus removal filter 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 a major global market share for this product. Our technology, which separates viruses with a high level of precision based on the size of membrane pores, has earned a strong reputation in the manufacturing process of biopharmaceuticals and plasma derivatives, and has expanded its market share. Moreover, we are able to offer technical support backed by scientific insight, the ability to make product propos- als that accommodate customer needs, and the ability to pro- vide stable product supply. This has enabled us to gain the trust of, and build a strong network among, pharmaceutical compa- nies and key opinion leaders in the industry. * According to research by Asahi Kasei Business Strategies Continuing to expand business by leveraging the customer base and brand Investing in development and capacity expansion for Planova™ In fiscal 2022, we launched Planova™ S20N, a new product that aims to improve the operational efficiency of pharmaceutical processes in addition to its excellent filtration flow rate and superior virus removal properties. Additionally, to meet growing demand, we are currently constructing a new Planova™ assembly plant in Nobeoka City, Miyazaki Prefecture, scheduled for completion in fiscal 2023. The new plant will be a “smart fac- tory” that fully utilizes automation and digital technology to significantly improve quality and production efficiency. Expanding into the CRO and CDMO businesses Bionova Scientific LLC, a U.S. company acquired in May 2022, is a biopharmaceutical CDMO (contract devel- opment and manufacturing organization) that provides contract manufacturing process development and con- tract manufacturing services to pharmaceutical companies. Its strength lies in its extensive track record with complex next-generation antibody drugs, which are particularly difficult to manufacture. Bionova continually receives more inquiries from drug discovery startups located in its home state of California and other parts of the West Coast. Such inquiries tend to begin with small-scale R&D projects which major CDMO companies are unsuited to handle. To meet forecasted demand growth, we have decided to quadruple Bionova’s phar- maceutical manufacturing capacity. Virus removal filters Purification filters Fluid management Synergies of Synergies of customer base, customer base, brand, etc. brand, etc. Biosafety testing services (CRO) Synergies of Synergies of customer base, customer base, brand, etc. brand, etc. CDMO Advanced therapy medical products (gene therapy, cell therapy, regenerative medicine, next-generation vaccines, etc.) Biopharmaceuticals Plasma derivatives Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Strengthening Our Foundation for Growth 53 New Business Creation 57 Green Transformation 61 Disclosure Based on the TCFD Recommendations 64 Digital Transformation 68 Transformation of HR 74 Health and Productivity Management 76 Maximum Use of Intangible Assets Asahi Kasei Report 2023 52 Name Dong Xiaolin Company Asahi Kasei (China) Country/region China 0453 New Business Creation New Business Creation Overview The Asahi Kasei Group primarily adopts three approaches—in-house R&D, investment in startups and To strengthen the business platform underpinning these approaches to new business creation, we are other promising companies, and collaboration/M&A—to the creation of new businesses. We take steps focusing on green (G), digital (D), and people (P)—GDP—transformation and the full utilization of including eliciting and advancing research subjects, corporate venture capital (CVC) activities, and intangible assets. strengthening the implementation of M&A in order to promote and accelerate each of these approaches. Businesses Technologies underpinning businesses Measures Business platform Life Innovation Environmental Solutions Material Homes Health Care Homes Acute Critical Care Mobility & Industrial Construction Materials Pharmaceuticals & Medical Care Businesses in three sectors Fruitful trees In-house R&D P.54 Investment in startups and other promising companies P.55 Collaboration/M&A P.56 Planting seeds Nurturing saplings 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) CVC activities • More than 50 investments and two acquisitions • Building a system for speedy decision-making • Strengthening ties with startups (including recruitment of local employees) Strengthening of the imple- mentation 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 Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 54 In-House R&D Corporate R&D Mission Based on the degree of novelty of the field of business and the market growth potential, R&D at the Asahi Initiatives to Accelerate Commercialization We use a stage-gate system for R&D project management and appropriate resource allocation. We refine Kasei Group, is divided into group-wide corporate R&D on medium- to long-term subjects and R&D business models, business strategies, and patent strategies by clarifying requirements at each stage of focused on specific subjects for the enhancement of each existing businesses. The mission of Corporate exploration, research, development, business development, and preparation for commercialization, while Research and Development is to continually generate new value that leads to new business creation at specifying the stage-based positioning of each project. In addition, as part of our R&D and commercializa- the technological frontier of the Asahi Kasei Group, fulfilling the following three roles. tion efforts aimed at the three elements of speed, asset-light, and high value-added, we pursue business development with technology value in order to quickly and effectively maximize the value the intangible assets (intellectual intangible assets such as technology, know-how, and processes) of the Asahi Kasei Group and leverage them for business contribution. This initiative is a new co-creation strategy approach that aims to build a profit model different from the traditional product sales business and monetize proj- ects at the development stage. Aiming for World-Changing Innovations Guided by its slogan “Let’s create innovations that change the world,” Corporate Research & Development is working to build mechanisms and foster a corporate culture that encourages the spontaneous growth of highly specialized human resources. Specifically, we are implementing a variety of bottom-up measures, such as a system by which up to 20% of work assignments are decided at the individual’s discretion (20% rule), a poster presentation event aimed at providing opportunities for free and lively communication to create new businesses and core technologies (idea fest), and a registration system for those wishing to experience work at a startup or work on secondment outside the company for a limited time (cross- border learning). By effectively combining these with top-down measures, we aim to foster a culture that encourages growth and constantly taking on challenges, both as an organization and as individuals. Mission of Corporate Research and Development Evolution and acquisition of core technologies Evolving core technologies, acquiring and cultivating external technolo- gies to develop highly differentiated and superior products and services New value creation Creating new value with a future-oriented perspective that captures potential customer and social needs Deepening and evolution of platform technology functions Deepening and evolving platform technology functions that support the Asahi Kasei Group Areas of Strategic Priority In three strategic areas—carbon neutrality (decarbonization and use of hydrogen, energy storage and conservation), the circular economy (resource recycling), and health care—and we are prioritizing resource allocation on R&D subjects that contribute to the realization of a sustainable society. The main sustainability- related subjects are green hydrogen production, CO2 separation and recovery, CO2 chemistry, polyamide 66 using biomass-derived intermediate, and the development of polyamide recycling technology. Strengthening Platform Technology Functions (Active Use of DX and Open Innovation) In advancing R&D, we actively utilize digital technology and open innovation, aiming both to accelerate R&D and raise added value. Specifically, with regard to DX, we utilize materials informatics, IP landscap- ing, and digital platforms to raise the efficiency of R&D, while actively formulating technology strategies and anticipating market trends. In open innovation, we aim to deepen our core technologies and acquire new technologies through future-oriented backcasting. To that end, we are engaged in multifaceted activities such as joint research with leading universities and research institutes both in Japan and overseas, collaboration with startups, and co-creation with new partners using external platforms. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 55 Investment in Startups and Other Promising Companies Corporate Venture Capital (CVC) Activities The Asahi Kasei Group established a CVC Office in 2008 to pursue new business creation. Since 2011, from bases in the U.S., we have taken measures to evolve our business portfolio by acquiring cutting-edge technologies and businesses through investment and collaboration with startup companies. also pursuing CVC activities as an option to be involved from the development stage. Collaborating with startup companies at the development stage allows us to deepen our understanding of new markets and technologies, and to gain corporate knowledge on the appropriate timing of decisions to proceed to the next step. Additionally, investing in startup companies enables us to secure future potential acquisition Currently, in addition to Silicon Valley and Boston in the U.S., we have expanded the scope of our global candidates and build up a pipeline for new business creation. CVC Japan, and other countries in various fields among the Asahi Kasei Group’s three business sectors. We activities by adding bases in Germany in 2019, China in 2020, and Japan in 2023. At each base, dispatched personnel and local employees select investment targets according to the regional characteristics of each startup, with further dedicated personnel in Japan to enhance internal collaboration. Business unit Organizational management functions Local Investment Committee (2016) Acquired entity Managers who understand business development and investment functions Technology managers CVC General Manager Professional human resources (business managers) Hiring Investment professionals Dispatch of business development personnel Business development functions Exploration and investment functions Human resources (dispatched personnel) who are familiar with the in-house business and have internal networks Human resources who are investment specialists with local networks Hiring Local human resource pool Investment professionals Return to promote innovation with insight on CVC activities CVC functions In the U.S., where the “outside-in” approach of incorporating other companies’ technology and business is widespread among major corporations, different players handle the three stages of research, development, and business. At the research stage, research institutions such as universities develop tech- nologies, and at the development stage, startup companies develop products from those technologies and verify business models. At the business stage, major corporations acquire promising targets from To advance these activities, Corporate Venture Capital seeks out startup companies that are compati- ble with the Asahi Kasei Group, disseminates information to related departments, conducts investment- related operations, and supports investee companies to promote commercialization. We operate a system that enables speedy decision-making and investment-related procedures suited to local business cus- toms. We have allocated $90 million for investment over the three years through fiscal 2024, and the investment committee is given discretion to make decisions regarding investments up to $5 million per company. To date, we have invested in more than 50 startup companies in the U.S., Europe, China, have played a role in creating new innovations, including the acquisition of two companies, Crystal IS, Inc., and Senseair AB. In April 2023, we established a “Care for Earth” investment framework as a new initiative to achieve carbon neutrality. Over the five-year period through fiscal 2027, we have allocated $100 million globally to invest in startup companies working to solve environmental issues in areas such as hydrogen, batteries, carbon management, and biochemicals. In addition to direct investment, we will also engage in indirect Original CVC investment framework Newly CVC investment framework Care for People Care for Earth Scope DX, Health Care sector, Homes sector Objectives Aiming to create new businesses, partnerships, and acquisitions based on corporate and divi- sion strategies Parallel Effort Time frame Aiming for commercialization within 5 years Scope Areas related to decarbonization centered on hydrogen, carbon management, biochemicals, and batteries Objectives (1) Reduction of GHG emissions for Asahi Kasei and society (2) Creation of new businesses related to decarbonization (3) Participation in sustainable ecosystem Time frame Aiming for commercialization within 5–10 years among a large number of startups and deploy their businesses. In addition to undertaking all three stages CVC investment categories ourselves through in-house development and conducting the final business stage through M&A, we are Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 56 investment through venture capital (VC) firms, which specialize in the management of funds collected from investment framework dedicated to this area, we aim not only to create new businesses but also to investors. By utilizing a portion of our investment budget to include external professionals and expand reduce our own GHG emissions and the GHG emissions of society. Additionally, through participation in access to deal sources (sources of information on investment projects), we can also obtain information the ecosystem of carbon neutrality, this investment framework also serves as a starting point for portfolio regarding regulations. Aiming toward carbon neutrality in 2050, the “Care for Earth” framework has differ- transformation in the Material sector. ent time frames and different decision criteria compared to conventional investments. By allocating an Collaboration/M&A M&A Target Fields Since acquiring ZOLL Medical Corporation in 2012, the Asahi Kasei Group has actively pursued business Post-Merger Integration From the initial M&A consideration stage, we conduct due diligence in anticipation of the following three expansion through full-fledged M&A. In our current MTP, we are promoting M&A to accelerate growth and points with a view to post-merger integration (PMI). achieve results, mainly in the growth fields of GG10. In the Health Care sector, we have positioned M&A as a means of strategic growth in the critical care and bioprocess fields, and are expanding existing busi- nesses and entering new fields. In the Homes sector, we have positioned the overseas housing business • Post-acquisition governance (management structure, approval authority at acquired company) • Post-acquisition operational framework (method for providing services to customers) as a new pillar of earnings and are conducting M&A in the U.S. and Australia. Regarding our future M&A • Acquisition scenario to accomplish envisioned operations trajectory, we will continue to use it as a means of strategic growth in the Health Care sector, while in the Material sector, we will position it as an important means of expanding our business in future mainstay By incorporating the results into a concrete PMI plan, we are able to implement PMI that maximizes fields such as Digital Solutions. post-M&A synergistic effects. M&A Selection Criteria Criteria we emphasize when selecting candidates for M&A include compatibility with our growth strate- gies. With limited management resources in terms of both finances and human resources, we are concen- trating on M&A in GG10 and other growth areas. Based on our experience with several successful cases of M&A, we have positioned the following four points as keys to success, and conduct thorough checks when selecting companies to invest in, and this has given us a solid track record. • Strong business foundation and clear business strategy • Management that runs operations with full command over the business • Management that understands and accepts Asahi Kasei Group philosophy, management policies, and business operations • Trust cultivated through business activities prior to acquisition In addition, to maximize synergistic effects, we appoint a suitable person responsible for PMI imple- mentation, and thoroughly monitor the status of synergy creation both quantitatively and qualitatively. Approach to Future M&A We regularly review previous M&A cases and accumulate knowledge in the form of an M&A Management Book, including cases of failure, which is used to educate personnel involved in M&A projects. In addition, by reporting reviews of M&A to the Board of Directors, the Management Council, and business unit lead- ers, we receive diverse opinions and take steps to increase the probability of successful M&A, thereby contributing to inorganic growth going forward. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Green Transformation (GX) 57 Overview of GX for Realizing Two Mutually Reinforcing Aspects of Sustainability Guided by its Group Mission and Group Vision, the Asahi Kasei Group seeks to improve corporate value business level through discus- through optimal business portfolio management. Specifically, this entails achieving sustainable growth of sions focused on the environ- Board of Directors corporate value by contributing to a sustainable society from the perspective of life and living for people ment by the heads of around the world, having these two aspects of sustainability be mutually reinforcing rather than advancing businesses. The Sustainability independently. To this end, we are promoting GX as a priority theme under our MTP focused on the theme Committee reports the results of (Management Council) President Oversight and advice Reports “Be a Trailblazer.” its discussions to the Board of Asahi Kasei understands that issues in relation to climate change have a particularly significant impact Directors, receiving advice from it on entire social systems. We are therefore promoting initiatives aimed at creating a carbon-neutral society as appropriate. by 2050 while transforming our business portfolio and improving productivity. At the same time, we are We are also working on a steadily reducing our GHG emissions (Scope 1 and Scope 2) and proactively working to reduce GHG specific scenario for achieving our emissions throughout our supply chain, including Scope 3. GHG emission reduction targets The Board of Directors deliberates and decides on matters of the highest priority, such as sustainabil- through the Carbon Neutrality Administrative departments Strategic Business Units, Core Operating Companies Coordination Policy, shared measures Sustainability Committee Global Environment Committee Risk Management & Compliance Committee Carbon Neutrality Project ity policy and targets for reducing GHG emissions, and the Management Council does so on individual Project and creating new businesses focused on realizing carbon neutrality in strategic business units and measures and other efforts. core operating companies to accelerate our contribution to reducing society’s GHG emissions. The Sustainability Committee, chaired by the President, communicates these decisions to the heads of sectors and other bodies to ensure promotion on a group-wide basis. In addition, the Global Environment Committee, a subcommittee of the Sustainability Committee, facilitates promotion at the Blue enclosures indicate Asahi Kasei’s major areas of contribution • Biomass utilization technology • Resource-saving • Energy-saving processes • Recycling technology • Improved recovery rate (changes in consumer behavior) Renewable energy (solar, wind, hydroelectric power) • Storage batteries • Alkaline water electrolysis system Household electricity consumption Industrial electricity consumption Electric vehicles Green fuel Green methanol Biomass- derived raw materials Basic feedstocks Recycling Separation Reduce Recycle H2 CO2 Chemical products (manufacturing) • Material recycling • Chemical recycling • CO2 separation / recovery • CO2 chemistry • Greater durability • Biodegradable technology (research subsidy) • Elucidating mechanism of microplastic formation Outflow Recovery Consumers (use) Reuse Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 58 Reducing GHG Emissions from Business Activities Asahi Kasei is reducing GHG emissions in its business activities to address climate risks. Under the MTP, we are working on reductions primarily through our established technologies, positioning the period up to Activities for Achieving Carbon Neutrality Achieving carbon neutrality by 2050 is a major challenge for the Asahi Kasei Group. We recognize that 2030 as a first step in the road map to achieve carbon neutrality by 2050. In fiscal 2023, we are working fundamental technological innovation, business model change, and other large-scale endeavors, as well on reducing GHG emissions using two approaches: group-wide activities to achieve carbon neutrality, and as steady energy-saving activities and continued efforts to reduce GHG emissions, are integral to achiev- activities by individual product, such as calculating the carbon footprint of products (CFP). ing carbon neutrality. Progress Toward Achieving Our Targets For Scope 1 (direct GHG emissions) and Scope 2 (indirect GHG emissions from the use of electricity, heat, In fiscal 2023, we are continuing to identify every possible reduction measure, examining specific measures and reduction scenarios from a variety of perspectives, such as the low-carbonization and decarbonization of energy, and improved efficiency and innovation of production processes. We are also and steam supplied by other companies), we have adopted targets to reduce GHG emissions by 30% or considering structural transformation of petrochemical chain-related businesses that takes into account more by 2030 compared with fiscal 2013 and achieve carbon neutrality (net-zero emissions) by 2050. investments and costs for achieving carbon neutrality going forward. In fiscal 2021, our GHG emissions were 21% lower than in fiscal 2013, and in fiscal 2022 they were 28% lower owing to measures including the low-carbonization of energy. We established a Carbon Neutrality Project in fiscal 2022 to strengthen initiatives for reducing group-wide GHG emissions. Under Investment framework for CVC focused on the environment The Asahi Kasei Group performs corporate venture capital (CVC) activity to acquire innovative technolo- the guidance of the responsible Executive Officer, the project examines specific emission reduction mea- gies and create new businesses. In April 2023 we established a “Care for Earth” investment framework sures and scenarios for achieving the 2030 and 2050 targets. The project will continue to examine mea- with up to $100 million allocated over the five-year period to fiscal 2027 targeting early-stage startups sures and scenarios and proactively promote initiatives to achieve the targets. working to solve issues in the field of the environment. Systematizing calculations of the carbon footprint of products Asahi Kasei works to calculate CFP as an approach to address customer needs and achieve carbon neu- trality. With more than half of the business units in the Material sector already conducting calculations, our efforts to calculate CFP are proceeding steadily. In fiscal 2023, we will promote further calculations using a newly developed group-standard CFP calculation system, which we also plan to use in considering GHG emission reduction measures. Targets and results GHG emissions (Scopes 1 and 2) (Million tons CO2 equivalent) 2021–2030 1st Step 2031–2050 2nd Step Reduction centered on established technologies Reduction centered on new technologies –21% –28% –30% or more 5.11 4.03 3.68 <3.58 2013 Base Year 2021 Result 2022 Result 2030 Target Note: Preliminary figures shown for fiscal 2022; subject to revision as a result of third-party verification. Carbon neutral 0 2050 Goal (FY) 6 5 4 3 2 1 0 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 59 Contributing to Reductions in Society’s GHG Emissions The Asahi Kasei Group believes that its diverse technologies and businesses have the potential to contrib- ute to reduced GHG emissions in society. Viewing this potential as a business opportunity, we focus on developing products that contribute to GHG emission reductions throughout the value chain. Designating Examples of Environmental Contribution Products Process for manufacturing dimethyl carbonate using CO2 as feedstock Demand for dimethyl carbonate (DMC) is increasing sharply as a feedstock for polycarbonate and as a products certified internally for their contribution to improving the environment or reducing the impact on component of lithium-ion battery (LIB) electrolyte. Asahi Kasei licenses technology for a process to manu- the environment across the entire life cycle of the product or service as Environmental Contribution facture DMC using CO2 for half of the feedstock. This not only utilizes CO2 that would be released into the Products , we have established targets and work to balance business growth with environmental con- atmosphere from other plants, it further reduce CO2 emissions by also being an energy-saving process. tribution. Meanwhile, most GG10 businesses will create business opportunities through both climate change adaptation and mitigation. We have therefore decided to focus our allocation of resources on GG10, including investment of approximately ¥600 billion over the three-year period from fiscal 2022 to fiscal 2024. CO2 Ethylene EO Progress Toward Achieving Our Targets Regarding Environmental Contribution Products which we internally certify, we have fiscal 2030 targets of at least doubling the volume of their contributions to GHG emission reduction from the fiscal 2020 level, and increasing the proportion of their sales relative to our total net sales excluding the Health Care sector. A total of 23 products have been certified as Environmental Contribution Products as of fiscal 2023, Ethylene manufacturers Ethylene oxide (EO) manufacturers Ethylene carbonate (EC) and DMC manufacturers EC DMC Electrolyte recipe and their contribution to reduced GHG emissions rose to 1.2 times the fiscal 2020 level, and their sales LIB License Asahi Kasei process technology CO2 Lithium salt Additive were 32% of the total. In certifying Environmental Contribution Products, we confirm the rationality by receiving advice from outside experts on the method of calculating environmental contribution and on the suitability of our approach. Targets and results GHG reduction by Environmental Contribution Products Sales proportion of Environmental Contribution Products 200 or more 100 117 120 (Index) 200 100 0 (%) FY2021 33% FY2022 32% FY2030 Target 2020 Base Year 2021 Result 2022 Result 2030 Target Note: Percentage of total net sales excluding the Health Care sector EV manufacturers LIB manufacturers Electrolyte Electrolyte solution manufacturers UVC LEDs UVC LEDs are small devices that sterilize water, air, and surfaces by emitting ultraviolet (UV) light that deactivates viruses and bacteria. UVC LEDs have been incorporated into a wide range of products, including water purification systems, medical devices, and air purifiers. Unlike mercury lamps (UV lamps) which have been used in UV disinfection, UVC LEDs contribute to energy-saving as they emit the necessary light as soon as they are switched on. Another advantage of UVC LEDs is that they do not use mercury, which is an environmentally harmful substance. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 60 Building a Circular Economy The Asahi Kasei Group regards transitioning to a circular economy as a priority for creating a sustainable chain. In September 2022, in partnership with FamilyMart Co., Ltd., ITOCHU Corporation, and ITOCHU society from perspectives including sustainable use of finite resources, reduction of GHG emissions, and Plastics Inc., we conducted a demonstration trial of a service utilizing a bin for collecting post-use plastic mitigation of the impact on the global environment and ecosystem caused by product disposal. bottles at a FamilyMart store in Tokyo. The service allowed consumers using a smartphone app to track Accordingly, we develop technology and promote businesses in relation to recycling used plastics, the process of plastic bottles from collection to final recycled material. Going forward, we will make use of using biomass materials, extending the service life of products, enhancing recyclability, and other environ- the platform to promote further resource recycling of plastics. mental benefits. Working to Achieve the Practical Application of Biomass Feedstock The Asahi Kasei Group is developing technology to create basic feedstocks, such as ethylene and propyl- ene, from bioethanol. Creating multiple basic feedstocks at a similar rate to when a traditional petrochemi- cal feedstock (naphtha) is used, this technology enables the use of existing petrochemical complexes and manufacturing processes while reducing GHG emissions in the manufacturing process. Although there are General consumers • Recording of collection activities • Viewing of personal collection records • Plastic bottle recycling info after collection App Blockchain many issues to be addressed before it can be commercialized, we are focusing efforts on developing this technology in light of its potential to make sustainable, through the use of biomass-based feedstocks, a variety of chemical products in people’s daily lives. In fiscal 2022, we obtained ISCC PLUS certification—a global system operated by International Sustainability and Carbon Certification (ISCC) to certify sustainable products—for several products as part of our efforts to promote the expansion of products using biomass feedstocks. ISCC PLUS is a certifica- tion system that tracks and ensures that biomass-based and renewable feedstocks and products are sustainable and deforestation-free in supply chains. Under this system, a third-party institution verifies and certifies that biomass and recycled feedstocks are managed properly using the mass balance approach1 across the supply chain, including product manufacturing. 1 A control method attributing biomass-based feedstock characteristics to a portion of the production volume of a product according to the ratio of such feedstock introduced when blending biomass-based feedstocks and petrochemical-based feedstocks to manufacture a product. Recycle into Recycle into new products new products Collection Recyclers FamilyMart stores Collection service providers Incoming and Incoming and outgoing info, outgoing info, other blockchain other blockchain records records Features • Secure traceability • Encourage changes in consumer behavior Biodiversity Recycling plastic as a resource With the aim of achieving practical implementation at an early stage, PS Japan Corporation, an Asahi Kasei Group company, has entered the final planning phase to verify the chemical recycling of post-use polystyrene back to styrene monomer by thermal decomposition. At the same time, Asahi Kasei has promoted the development of recycling technology for post-use The Asahi Kasei Group maintains a policy of mitigating its impact on biodiversity in its business activities and endeavoring to make sustainable use of natural resources. In April 2022, we joined the 30by30 Alliance for Biodiversity, a coalition established by government agencies including the Ministry of the Environment, companies, non-profit organizations, and other bodies, to preserve biodiversity. As part of these efforts, we are advancing preparations to apply for the polyethylene in cooperation with parties involved in the supply chain—including consumer goods manu- Asahi Woods of Life, where we have conducted activities and research aimed at preserving biodiversity facturers, molded parts manufacturers, and recycling operators—and universities. However, society-wide since 2007, to be recognized as an OECM2 area. efforts, including by consumers, are crucial to ensuring that post-use plastics are utilized as a resource instead of discarded. To this end, the Asahi Kasei Group is developing a platform visualizing the resource loop of recycled plastics to promote consumer understanding and change behavior by displaying the ratio of recycled content in recycled plastic products and to visualize the companies involved in the recycling 2 Abbreviation for “other effective area-based conservative measures” applicable to areas, other than protected areas such as national parks, that contribute to the preservation of biodiversity. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Disclosure Based on the TCFD1 Recommendations 61 Awareness of Climate Change The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report, published in March 2023, stated that the world will not achieve the Paris Agreement target of limiting temperature rises to Strategy Basis of analysis We examined the impact on our current businesses and the new opportunities leading up to 2050 based 1.5ºC compared with pre-industrial revolution levels during the 21st century, even if every country meets on a +1.5ºC scenario in which CO2 emissions have been significantly curbed in order to rein in tempera- its GHG emission reduction targets. In addition, the G7 Ministers’ Meeting on Climate, Energy and ture rises (WEO, Net Zero Emissions by 2050 Scenario (NZE)2) and a +4ºC scenario in which global warm- Environment, held in April 2023, emphasized the steadfast commitment of G7 countries to taking immedi- ing countermeasures have not adequately progressed (IPCC, SSP3-7.03). ate, short-term, and medium-term actions over the coming critical decade. As the sense of urgency Note: Our analysis is based on a variety of assumptions. Changes to these assumptions may result in actual risks and opportunities differing regarding continuous global warming increases throughout the world, the Asahi Kasei Group recognizes that significantly from the analysis. government policies and initiatives for adapting to and mitigating global warming are accelerating. Our Stance Over the century since its founding, the Asahi Kasei Group has tackled social issues that change with the times, promoting its business activities while continuously transforming itself. In a major transitional period, when climate change is an issue for the entire social system, we conduct initiatives for achieving a carbon neutral society by 2050 while transforming our business portfolio and raising productivity through our MTP . We are also steadily reducing our own GHG emissions (Scope 1 and Scope 2) and working to reduce GHG emissions throughout our supply chain, including Scope 3. Corporate Governance The Asahi Kasei Group works to achieve Green Transformation (GX), which is regarded as an important management task and positioned as one of the core themes of management strategy (please see page 57 for a diagram and details on GX). Opportunities The Asahi Kasei Group transforms its business portfolio with a view to the transition to a carbon neutral society and other megatrends. Specifically, our MTP established “10 Growth Gears” (GG10) that are growth-driving businesses in which we will focus investments. Over the three years of the plan, we will target investments in GG10 of approximately ¥600 billion. The plan also set targets of at least doubling the volume of GHG emission reduction contributions from Environmental Contribution Products (products and services that contribute to a reduction in GHG emissions in society) by 2030 compared with fiscal 2020 while increasing their sales ratio. We believe that the direction of our business promotion can provide various products and services as business opportunities for mitigating and adapting to climate change. 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 World Energy Outlook (WEO) 2022, prepared by the International Energy Agency (IEA). NZE is a scenario for achiev- ing global net-zero emissions by 2050 in order to limit temperature rises to 1.5ºC by 2100. 3 A scenario outlined in the IPCC Sixth Assessment Report. The Shared Socio-economic Pathway (SSP) 3-7.0 assumes a scenario whereby measures to address climate change are not adopted and temperatures rise 4ºC in 2100 under development marked by regional rivalries. Megatrends Fields for provision of value GG10 Businesses Relationship with climate change scenarios 4ºC 1.5ºC Operating Income of GG10 (¥ billion) 400 Decarbonized society Environment & Energy Digital society Society of healthy longevity 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 2022 Although not as strong as the above, expected to be broadly related GG10 202.6 Approx. 35% Over 70% Investment of Investment of approx. ¥600600 billion billion approx. ¥ (based on fiscal 2022–2024 investment decisions) Other businesses 2021 result Around 2030 (FY) Note: Proportion of business income from GG10, excluding corporate expenses and eliminations Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 62 Opportunities Important Changes Main Opportunities Major Initiatives • Promotion of the spread of ZEH1 and ZEH-M1 through • Decarbonization of homes and urban environments through the expansion of ZEH-compliant Hebel Haus™ Transition to a carbon neutral society government policies • Expansion of demand for renewable energy • Increase in need for energy saving • Expansion in demand for carbon-free products and Hebel Maison™ • Transition to carbon neutral energy • Energy saving and process innovation • Expanded use of biomass-based raw materials • Chemicals made with CO2 as material • Expansion of Environmental Contribution Products • Promotion of carbon neutrality and improvement of product competitiveness through measurement of carbon footprints2 +1.5ºC scenario 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 system to manufacture green hydrogen and promotion of its commercialization Transition to a circular economy • 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 • Provision of long-life homes Expansion of the digital market • Growth in demand for decarbonization-related digital solutions • Promotion of electronic components, such as current sensors and CO2 sensors, and semiconductor- and substrate-related (industry and society) electronic materials businesses Serious storm and flood damage • Increase in need for disaster-resilient housing • Greater emphasis on resilience in home construction and urban development, such as expansion of Hebel Haus™ and Hebel Maison™ +4ºC scenario Rise in temperature • Increase in need for insulation performance • Provision of insulation material and homes with superior insulation performance Increase in heatstroke and infec- tious diseases • Expansion in demand for existing and new pharmaceuticals and acute critical care products • Provision of related pharmaceuticals and medical devices Risks Under the +1.5ºC scenario, in addition to tightened regulations through carbon pricing and other govern- Under the +4ºC scenario, we primarily anticipate physical risks, such as intense heat, heavy rain, and flooding. In particular, we perceive damage to production sites caused by the effects of increasingly ment policies primarily aimed at achieving decarbonization, we anticipate a shift in demand to materials severe storms and floods and the resultant cost of such damage to be a risk for our major sites in suitable for decarbonization as a risk. We also anticipate market structure changes resulting from an Japan and overseas. acceleration in the transition to a circular economy and the emergence of innovative technologies While the degree of these risks varies, we are advancing risk mitigation initiatives based on the view designed to create a decarbonized society as risks. that all may manifest as the climate changes going forward. Risks Important Changes Main Risks Major Initiatives +1.5ºC scenario Transition to a carbon neutral society Changes in market structure • Rise in costs due to stricter regulations (manufacturing and raw material costs) Estimate: Current GHG emissions (Scope 1 and Scope 2) × Carbon costs = Increase of approx. ¥55 billion per year3 • 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 • Expanded use of biomass raw materials • Acceleration of product decarbonization by ascertaining carbon footprint • Revision of management resource allocation (including business portfolio transformation) • Development of material and chemical recycling technologies and promotion of their practical application • Adoption of biomass feedstock • Revision of management resource allocation (including business portfolio transformation) 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.) +4ºC scenario Rise in temperature “Human” production risks • Deterioration of working environment and productivity at construction sites • Promotion of heatstroke countermeasures at construction sites • Promotion of industrialization and utilization of IT in housing construction 1 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 2 GHG emissions of a product from material extraction to production 3 In fiscal 2022, the Group’s GHG emissions (Scope 1 and Scope 2) came to 3.68 million t-CO2e (preliminary figure). Referencing the 2030 CO2 price level and other criteria in WEO2022’s NZE scenario, we expect a rise in costs of approximately ¥55 billion per year in the case of carbon costs of ¥15,000 per ton of CO2 emissions. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 63 Risk Management The Asahi Kasei Group prioritizes the management of climate change risks, which it positions as one of its Material Group Risks. The Asahi Kasei Group implements independently assured tracking of its GHG emissions on an annual basis. The Sustainability Committee and its subcommittee, the Global Environment Committee, share information on the tracking results and the level of progress toward achieving targets, and discuss and verify future initiatives. The committees also verify initiatives and other efforts for reducing GHG emissions during the formu- lation and annual review of the MTP, linking the results to business strategies and measures. In addition, the committees monitor related matters on a quarterly and monthly basis. For capital expenditures, we assess profitability and make decisions in light of internal carbon pricing. In July 2023, we raised our internal carbon price per ton of CO2 emissions from ¥10,000 to ¥15,000 in order to promote further action for achieving carbon neutrality. Metrics and Targets The Asahi Kasei Group has positioned the following metrics as being relevant to climate change risks and opportunities. Target Significance of Metric GHG emissions* GHG emissions*/ operating income 2030: Reduce by 30% or more (compared with fiscal 2013) 2050: Achieve carbon neutrality (Fiscal 2022 result: 2,900 t-CO2e/100 million yen) ROIC Around 2030: Achieve ROIC of 10% or more (Fiscal 2022: 4.0%) Operating income of GG10 Around 2030: 70% or more of total operating income (Fiscal 2021: 35%) Decline signifies reduction of carbon tax risk Increase indicates progress toward becoming high earnings enterprise capable of adapting to change Signifies growth of related busi- nesses capable of contributing to addressing climate change Others Internal carbon pricing (ICP) Make investment decisions based on ¥15,000/t-CO2e and utilize in awards program Reflection of climate change issues in executive remuneration Reflect the level of achievement of sustainability promotion, including initiatives related to climate change, in performance-linked remuneration Global greenhouse gas emissions by segment (ESG data) * 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 Asahi Kasei Group’s Response to Climate Change Various climate change scenarios From curtailing temperature rises through government policies and social changes to intense heat, flood damage, and ecosystem destruction 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. Asahi Kasei Group initiatives Reduction of Asahi Kasei’s emissions (Scope 1 and Scope 2) Reduction of society’s emissions (Scope 3) Business portfolio transformation Physical risks Business continuity plan initiatives • Damage to supply chain due to flooding and other adverse weather events, etc. etc. Opportunities Climate change mitigation and adaptation • Hydrogen business • CO2 separation, recovery, and utilization • EV-related business • ZEH and resilient homes • Digital-related products and services • Healthcare business, etc. Control Proactive advancement Promotion of new MTP focused on the theme “Be a Trailblazer” KPIs GHG emissions, GHG emissions/operating income, ROIC, GG10 operating income Progress management Quarterly meetings, rolling review of MTP, monthly monitoring, Global Environment Committee For more details, please see “Disclosure based on TCFD Recommendations.” Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Digital Transformation Asahi Kasei DX Vision 2030 Co-creating “healthy living” and “a future world full of smiles” through borderless connections enhanced by digital innovation 64 In accordance with the Asahi Kasei DX Vision 2030, we promote digital transformation (DX) of all aspects of business activities, including development, manufacturing, and marketing. Digital technology is merely a means to an end; I believe that people, data, and organiza- tional culture are the three factors that hold the key to achieving transformation. In fiscal 2023, the second year of our Digital Creation Period, we will sharpen our focus on these three factors for success to accelerate transformation. In addition, we will aim to create an even stronger company-wide business platform by fully utilizing intangible assets spanning our three sectors to create new businesses and strengthen existing ones. With transformation extending beyond the Asahi Kasei Group to include the supply chain, competitors, and other entities, we continuously promote initiatives with a focus on collaboration with external parties. Moreover, we offer digital education support for students, who will lead the future of industry, and community members. We look forward to further transcending organizational, corporate, and national boundaries to co-create value with our partners using digital technology. Kazushi Kuse Director, Primary Executive Officer, Oversight for Digital Transformation (DX) Senior General Manager, Digital Value Co-Creation Toward Achieving the Asahi Kasei DX Vision 2030 The Asahi Kasei Group proactively promotes the utilization of digital technology as a means of leveraging its Strengthening the DX Framework We have worked continuously to strengthen our framework to accelerate the promotion of DX across the diverse intangible assets to transform business models and drive value creation. In promoting the utilization Asahi Kasei Group as a whole. In April 2021, we consolidated DX promotion and IT-related organizations of digital technology, we formulated a digital transformation road map. Designating the period beginning in in R&D, production, and manufacturing to establish Digital Value Co-Creation. In April 2022, we over- fiscal 2022 as the Digital Creation Period—which followed the Digital Introduction Period and the Digital hauled DX promotion organizations in sales and marketing and for cultivating digital human resources on a Deployment Period—we are currently advancing initiatives to realize management innovation through DX in company-wide basis, enhancing management, and achieving business transformation. We are imple- accordance with this road map. We will then to transition to the Digital Normal Period, in which all employ- menting company-wide activities matched to the operational challenges faced in our business sectors. In ees utilize digital technology as a matter of course. The company’s initiatives to date have received a strong addition, we established an independent organization for cultivating digital human resources in January reception. Asahi Kasei has been selected as a DX Stock for three consecutive years—2021, 2022, and 2023. This organization is accelerating initiatives designed to reinforce digital foundations, such as manag- 2023—a selection that the Ministry of Economy, Trade and Industry (METI) makes jointly with Tokyo Stock ing the curriculum for cultivating human resources, including the plan to train all employees as digital Exchange, Inc. and the Information-technology Promotion Agency, Japan (IPA). Our DX initiatives were also human resources and the DX Open Badge program. featured in the 2023 Monozukuri White Paper, which is produced jointly by the METI, the Ministry of Health, Labour and Welfare, and the Ministry of Education, Culture, Sports, Science and Technology. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 65 Digital Creation Period In our Digital Creation Period which began in fiscal 2022, we aim to realize management innovation through DX based on three pillars: reinforcing digital foundations, enhancing management, and achieving business transformation. On the basis of our reinforced digital foundations, we will enhance manage- ment and achieve business transformation as we enter the phase for reaping the benefits of our efforts from fiscal 2023. We established “DX-Challenge 10-10-10” as KPIs targeting fiscal 2024, and we are making good progress on each indicator. In terms of specific ini- tiatives, we aim to achieve a tenfold rise in the number of digital professional human resources compared with fiscal 2021 (approximately 2,500 employees worldwide), a tenfold increase in the volume of digital data usage compared with fiscal 2021, and an increase in the profit contribution through high prior- ity projects of ¥10 billion (cumulative total over three years up to fiscal 2024), in addition to profit contribution through the utilization of DX in normal activi- ties. As of March 31, 2023, the number of digital professional human resources stood at 1,206 employees, the volume of digital data usage had increased 2.6 times, and profit contribution amounted to ¥2.8 billion. Digital Transformation Road Map Fiscal 2024 KPI: DX-Challenge 10-10-10 Digital professional human resources 10 times Approximately 2,500 employees worldwide to be digital professional human resources (tenfold increase compared with fiscal 2021) 2,500 Volume of digital data usage 10 times Tenfold increase in digital data usage throughout the Asahi Kasei Group (compared with fiscal 2021) Profit contribution through high priority projects ¥10 billion In addition to normal activities, contribution to profit increase of ¥10 billion through high priority projects* * Three-year total, including strength- ening of existing businesses, new businesses, and enhancement of management platform 2021 2022 2023 2024 (FY) 2021 2022 2023 2024 (FY) 2022 2023 2024 (FY) Note: • Total DX-related investment of approximately ¥30 billion planned (IT investments and cloud usage fees for digital transformation) • Graphs are for illustrative purposes only. FY2016 FY2018 FY2020 FY2022 FY2024 Digital Introduction Period Digital Deployment Period Digital Creation Period Digital Normal Period Foundations of functional DX • Materials informatics, production technology innovation, IP landscaping, etc. About 400 projects Acceleration of group-wide DX promotion • Formulation of the Asahi Kasei DX Vision 2030 • Digital Value Co-Creation, co-creation laboratories, etc. Management innovation through DX 40,000 digital human resources 01 Reinforcing Digital Foundations 02 Enhancing Management 03 Achieving Business Transformation All employees gain a mindset of digital utilization Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 66 01 Reinforcing Digital Foundations We will reinforce digital foundations, such as accelerating the cultivation and recruitment of digital human resources, instilling agile development, and promoting data utilization in preparation for the Digital Normal Period, when all Group employees will use digital technology as a matter of course. Accelerating the Cultivation and Recruitment of Digital Human Resources Cultivation of all employees as digital-utilizing personnel In fiscal 2021, we launched the Asahi Kasei DX Open Badge program, which comprises five levels (Level Cultivating digital professional human resources on the front lines We are accelerating the cultivation and recruitment of digital professional human resources capable of uti- lizing advanced digital technology and data to address issues and create models with business applica- tions. In addition to materials informatics personnel in the R&D domain and personnel utilizing data (power users) in production and manufacturing domains, we have recognized employees who have completed Level 4 and 5 of the newly established Asahi Kasei DX Open Badge program as digital professional human resources. We will further promote their individual growth to bring their number to 2,500 by the end of fiscal 1 to Level 5), as a measure to train and develop 40,000 personnel as digital human resources. On com- 2024. In the business sectors, we are seeing the emergence of communities centered on experienced digi- pleting each level, employees are issued a blockchain-managed digital badge, which they can use in their tal professionals, which is leading to further development of personnel and already generating solutions to email signatures and on social media. As of March 31, 2023, a total of 16,000 employees of the Asahi many frontline issues and delivering results for initiatives aimed at improving business process value. Kasei Group in Japan have acquired the Level 3 badge verifying that they understand the importance of and can utilize digital technology and data. We are also building frameworks conducive to a culture of digi- tal transformation throughout the Group, awarding the Asahi Kasei DX Open Badge Level 3 “9 Mastered” Instilling Agile Development We implement Asahi Kasei Garage, a method of approaching and a program for supporting the spurring of badge to employees who complete all nine courses in Level 3, and holding events for dialogue between innovation and the achievement of digital transformation. As a combination of design thinking, which incor- corporate officers and “9 Mastered” badge holders. porates new user experiences from a customer perspective, and agile development, which forms concepts Overseas, more than 4,000 employees have acquired Level 1 and 2 badges, the courses for which by using digital technology to quickly implement various ideas, the program promotes activities creating are available in several languages. We are also accelerating the development of external activities, such as new value and services through co-creation on the subjects of enhancing management and spurring busi- providing instruction of the Asahi Kasei DX Open Badge program at a senior high school in Miyazaki ness model innovation, based on products and expertise across Asahi Kasei’s diverse business domains. Prefecture, as we continue to promote next-generation digital education activities transcending organiza- tional, corporate, and national boundaries. Level 1 Knowledge Novice level Level 2 Skill Intermediate level Level 3 Experienced Target for all employees Level 4 Expert True digital professional Level 5 Thought Leader Transformation driver Targeting 40,000 digital human resources Promoting Data Utilization We established the data exploration and exchange pipeline (DEEP), a data management platform for employees to easily search, link, and utilize the Asahi Kasei Group’s shared data assets. The platform was fully launched in April 2022. DEEP reduces the lead time required to utilize data, increases efficiency, and raises productivity by visualizing internal data. It will also enhance data governance and foster a data utili- zation culture within the Asahi Kasei Group. We are already advancing efforts that include consolidating the sales data of automotive-related businesses, visualizing the carbon footprint of our products, and pro- viding data to customers through initiatives using DEEP. In addition, we are establishing a digital platform (DPF) that can continuously consolidate and utilize information gained through R&D activities as data. Going forward, we will coordinate DEEP and the DPF to promote further data utilization. With the increas- ing implementation of information sharing on examples of data utilization on the front lines and of internal community activities, we are gradually fostering a culture to underpin the Digital Normal Period. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 67 02 Enhancing Management 03 Achieving Business Transformation Asahi Kasei will increase the speed of management decision-making and improve development efficiency Business innovation through DX, such as business model innovation and new business creation, will con- in various ways, such as pursuing data-based management, visualizing the carbon footprint of products tribute to the growth of businesses, including GG10, which are positioned as the drivers of future growth (CFP) to realize sustainability management, transforming R&D, and converting to smart factories. in the MTP. DX Case Studies DX Case Studies Promoting the Development of a CFP Calculation System Asahi Kasei is promoting the development of a CFP calculation system for visualizing CO2 emis- Cross-Industry Resource Recycling Project: Launching Demonstration Trials of Plastic Recycling sions to achieve carbon neutrality by 2050. As a first step, we are calculating the CFP of each We are advancing a project using blockchain technology to develop a platform to manage and mainstay product in the Material sector. We also began providing information to a portion of our visualize the resource loop of recycled plastics. The project is developing an open digital platform customers to realize decarbonization in the supply chain. In fiscal 2023, we will develop a for use not only by a wide variety of companies involved in the recycling chain, but also by con- company-wide standard CFP calculation system, using the information gained through the sumers to realize a circular economy. Demonstration trials were launched in fiscal 2022 to verify visualization of emissions as the basis for formulating strategies. Optimization (minimization) Regional revitalization, community contribution Prediction Visualization changes in consumer attitude and behavior with a view to practical application of the platform. In fiscal 2023, the number of corporate partners has increased and verification is continuing through comprehensive demonstration trials ranging from the collection of plastic bottles to the manufac- turer of the final product. Asahi Kasei will continue to promote further recycling of plastics by confirming the value of traceability using digital platforms through a series of initiatives. Use Disposal Creating a culture of recycling Final product Collection Recycling certification CO2 emissions reduction & strategy formulation Visualization strategy revision Molding Pelletization Sorting Achieved with digital platform Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Transformation of HR Developing platforms that support the autonomous growth of employees and facilitate contributions from a diverse range of individuals Satoshi Nishikawa Lead Executive Officer Executive Officer for Human Resources, Deputy Oversight for Health & Productivity Management 68 all employees and executives as a guideline for our human resources, to ensure that they relish taking on challenges. I am convinced that these elements can further refine and fully leverage our intangible assets, such as our Group Values of sincerity, chal- lenge, and creativity, and our diversity and open and dynamic corporate culture, all of which we have culti- vated over a century. We must reawaken the A-Spirit and promote the cultivation of human resources who boldly embrace change and continuously take on challenges and enhance our organizational strength if we are to further advance transformation. To this end, the MTP promotes human resource strategies focused on lifelong growth and co-creativity to culti- vate individuals and enhance organizational strength. Lifelong growth is that which all employees autonomously envision their own careers and con- tinuously learn, take on challenges, and achieve growth. The ability of leaders to draw out individual In the period between its founding in 1922 and the celebration of its centennial in 2022, the Asahi Kasei and team capabilities to their fullest extent is vital to achieving such lifelong growth, and to that end we are Group has grown continuously while transforming its business portfolio. Realizing the two mutually rein- focusing on measures to enhance management capabilities. Co-creativity entails leveraging the diversity forcing aspects of sustainability of “contributing to sustainable society” and “the sustainable growth of of the Asahi Kasei Group to promote collaboration. We believe that we can create unique value by organi- corporate value” will require us to promote further transformation. cally connecting our diverse technologies, businesses, and human resources. Based on this belief, we will To support such transformation, Asahi Kasei set up a human resource strategy project headed by the examine and promote measures from the two perspectives of expanding and connecting diversity. President in fiscal 2021, and began formulating human resource strategies linked to the MTP in fiscal Asahi Kasei has adopted three KPIs pertaining to human resources. The first is the number of Group 2022. Our Executive Officer with Oversight of General Affairs and Human Resources serves as a Board Masters. Group Masters are human resources who play a proactive role in creating new businesses and Director to ensure that such strategies are constantly in alignment with management and business strate- strengthening existing ones through highly specialized industry-leading skills. As cultivating advanced spe- gies. In addition, monthly meetings with the President and regular meetings with the heads of business cialists in a diverse range of businesses helps advance both lifelong growth and co-creativity, we are focus- units are held, which I attend in my capacity as Executive Officer for Human Resources. We are pursuing ing efforts on the cultivation of Group Masters. The second is the Asahi Kasei Group’s original growth both shared company-wide measures and measures by business unit to enable us to address a wide vari- behavior index. We use this index, which indicates the extent to which employees are pursuing efforts to ety of issues unique to each business while incorporating matters of management, including our business portfolio transformation, into those relating to human resources. enable growth and take on challenges, for its suitability in gaining an overview of the state of lifelong growth. The third index is the proportion of women working as managers and Group Masters, particularly in leader- In the MTP, we adopted the term “A-Spirit”—derived from the first letter of Asahi Kasei—to express ship positions. We have adopted a target of 10% for the whole Asahi Kasei Group by fiscal 2030, as a KPI the attitude we expect from employees. With a strong emphasis on its four elements of ambitious motiva- to measure the active participation of our diverse human resources. We aim to create value by enabling not tion, a healthy sense of urgency, quick decisions, and a spirit of advancement, we are instilling A-Spirit in only women but a diverse array of human resources to actively participate and realize co-creativity. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 69 Overview of Measures Based on Human Resource Strategies The Asahi Kasei Group promotes measures enhancing both lifelong growth and co-creativity based on its system that centrally manages information on employees, which line managers have begun utilizing as a human resource strategies to cultivate human resources who contribute to value creation. Regarding life- tool to improve their organizations. long growth, we pursue a number of initiatives—such as operating an open position posting system and With respect to co-creativity, Asahi Kasei operates the Group Masters program to cultivate human providing various career guidance programs—to encourage employees to take on challenges in new resources with a variety of specialized skills, and implements measures to promote the active participation environments and develop their careers autonomously. In fiscal 2022, we introduced Co-Learning of women to expand diversity. At the same time, we are developing an environment enabling diverse Adventure Place (CLAP), an online learning platform, to support employees taking on challenges of their workstyles tailored to work duties and individual circumstances by allowing for remote work from home or own accord and reskilling in response to business portfolio transformation. CLAP supports upskilling for satellite offices. We are also bolstering our recruitment of richly experienced mid-career human resources all employees—of all ages—through a system allowing them to study from a library of more than 10,000 to ensure that we maintain the talent necessary to strengthen our businesses and transform our business internal and external items. Particularly in regard to senior personnel, to whom the concept of lifelong portfolio. In fiscal 2022, 328 mid-career recruits and 267 new graduates joined Asahi Kasei, with the growth also applies, we support taking on challenges and achieving growth even beyond the age of 60, former accounting for more than half of all new recruits. Moreover, we promote to executive positions and accordingly in fiscal 2023 extended the option of retirement through age 65. As we also emphasize those who have joined the Asahi Kasei Group through overseas M&A activities. In terms of connecting the enhancement of management capabilities, we have put in place a foundation for line managers to diversity, we transfer human resources across business sectors to combine and integrate knowledge. In work on improving their own organizations by visualizing the vitality and growth behavior of workplaces addition, we are working to build our own system to accurately identify the human resources that the through KSA surveys, a measure we developed to improve engagement. Meanwhile, we are taking steps Asahi Kasei Group needs. In this way, we are promoting efforts enabling human resources with knowledge to facilitate the lifelong growth of management executives, such as advancing initiatives for managers to of various technologies and businesses to interact with each other. enhance their own management capabilities by assigning coaches, and arranging for selected next- The Asahi Kasei Group’s business sectors are wide-ranging. Mindful of this, we promote human generation leader candidates to participate in special development programs. In fiscal 2022, we pro- resource measures headed by business leaders to ensure that such measures are aligned with issues moted efforts to visualize our human resources by introducing Career Management Place (CaMP), a faced by each business. In particular, Homes takes many measures unique to the sector incorporating Outline of Human Resource Strategies Main company-wide measures Measures by business unit Lifelong growth Autonomous career development and realization of growth Improvement of management capabilities to draw out the strengths of individuals and teams • Autonomous learning platform “CLAP” • Promoting active participation of senior personnel, extension of retirement age • Open position posting system • Employee work engagement survey (KSA) • Nurturing and obtaining management executives • Strengthening next-generation leader development • Executive remuneration linked to Human Resource KPIs Expanding diversity Diverse expertise, individuality, and workstyles Connecting diversity Combination and integration of knowledge Co-creativity • Nurturing professional human resources as “Group Masters” • Promoting active participation of women • Strengthening mid-career recruitment • Flexible workstyles not bound by time and place • Obtaining human resources through M&A • Personnel transfers across business sectors • Active recruitment of outstanding overseas human resources • Employee (expert) recommendation system • Visualization of human resources “CaMP” • Maximum utilization of IP With business leaders taking ownership of human resource measures, each business enacts its own measures in alignment with company- wide policies Examples • Career development programs matched to changes in the operating environment of the Material sector • Human resource system con- struction and operation unique to the Homes sector industry-standard approaches. Further transformation will be indispens- able to improving the Asahi Kasei Group’s corporate value. A wide range of measures are being applied to accelerate this transfor- mation. High-priority measures among them are introduced on the following pages. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 70 Measures to Strengthen Lifelong Growth KSA: Measure to Enhance Engagement KSA, an engagement survey assessing employee empowerment and growth, is an initiative that effectively CLAP: Measure to Support Reskilling Co-Learning Adventure Place (CLAP), the Asahi Kasei Group’s own learning platform, is a system that runs a plan-do-check-act (PDCA) cycle by visualizing the state of individuals and organizations to encour- freely allows employees to learn using materials needed to improve their own specialist skills or career age employee work engagement and behavior conducive to taking on challenges and achieving growth. development from a library of more than 10,000 internal and external e-learning items. Using this system, Asahi Kasei conducts KSA surveys on an annual basis and shares each organization’s results with line each organization support employees in learning essential skills and reskilling in response to operating envi- managers. Based on these results, each organization takes the lead in working to address issues. While ronment changes and business portfolio transformation. In the period between its introduction in December gauging three indicators—supervisor–subordinate relationships and workplace environments; employee 2022 and March 31, 2023, 15,500 out of 19,000 eligible employees used CLAP, equivalent to 81%. With empowerment; and a growth behavior index—KSA surveys focus on the growth behavior index as a KPI. 12,300 users completing one or The score for this KPI is steadily rising, having stood at 3.65 in fiscal 2020 when we launched this initia- more of the e-learning items, a sig- tive, and 3.71 in fiscal 2022, and we will continue to increase it further (on a five-point scale from 1 to 5). nificant number of employees are Items Gauged through KSA Engagement Surveys Supervisor–subordinate relation- ships, workplace environments • Support from supervisors • Interpersonal relationships supporting work • Encouragement of ingenuity • Respect for diversity • Workplace openness (psychological safety) Employee empowerment Growth behavior index developing activities that allow • Ability to maintain a positive stance (individual capabilities) - Confidence, feeling of self-efficacy - Strength to overcome adversity • Experience-based learning • Contributions to organization • Problem-solving/ improvement efforts - Capacity for plotting course toward achieving goals • Job crafting - Optimism • Motivation toward work (work engagement) employees to learn from in-house specialists or connect with each other through learning, in addition to enabling continuous learning by employees to develop their own careers and learn autonomously. engaging in autonomous learning. Through CLAP, we incorporate the concept of learning together, Not a Lesson. An Adventure. Welcome to CLAP. Co-Learning Adventure Place The name is inspired by the idea of taking enjoyment in learning together as if going on an adventure. CLAP offers an extensive library of learning items and ways to connect with a variety of colleagues. The real joy of adventure is learning about an unknown world. But what you discover after that is up to you. Find your own ways to learn and connect with others. Step outside your comfort zone when your curiosity is excited, even just a little bit. Don’t worry if it doesn’t work out—having the courage to try is what matters. Praise others if you think they’re having a great adventure. Reach out and make a connection to those you aspire to emulate. Asahi Kasei has many amazing people you haven’t met. CLAP belongs to you. Success depends on enjoying it. The CLAP Concept Comments from Employees Who Utilized the KSA Survey “ I reviewed the order of work priorities to reduce total labor hours. As a result, each employee’s work- “ I addressed issues raised at discussion meetings with supervisors. First, we raised the headcount on load decreased and overtime hours were clearly reduced. ” three shifts and increased personnel with mid-career hires to alleviate the burden on each worker. Second, we are devolving some authority to supervisors, a position that line workers can aspire to, as part of the effort to foster a culture in which employees proactively aim to advance their careers. ” “ Reflecting input from organization members, we reclassified business unit meeting participants from general manager or above to assistant manager or above. We created opportunities for young employ- ees to make presentations at the meeting every two months, which we plan to use to increase their “ The survey helped unite our department, deepening our understanding of our own organization and sense of participation and improve their skills. ” inspiring us to maintain our current positive workplace culture. ” Comment from an Employee Using CLAP “ The Osaka Sales Department of Asahi Kasei Construction Materials began activities using CLAP in June 2023. Members recommend to one another the videos they like from the CLAP video menu. Using Microsoft Teams, we take turns every Monday to recommend videos, and those who watched them then give their feedback. We hope this activity will lead to autonomous learning as well as learning together. ” Makoto Kai Osaka Sales Department Asahi Kasei Construction Materials 123Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 71 Energizing Senior Personnel in Response to Extending the Retirement Age In fiscal 2023, Asahi Kasei raised the retirement age in Japan from 60 to 65 to support the lifelong growth Cultivating Managers to Enhance Management Capabilities Asahi Kasei is working to improve training programs targeting general managers, who hold the key to of employees. Analyzing afresh the framework of expectations for what they will, can, and must achieve, organizational management. The program comprises a variety of elements, including group training and we match employees reaching the age of 60 to work assignments in accordance with analysis results to e-learning on management as well as 360-degree feedback evaluating their behavior from multiple per- further draw out the capabilities of senior personnel who still seek to refine their specialist skills and con- spectives, a one-on-one course to improve their skills for communicating on an individual basis with sub- tinuously take on new challenges matched to a changing environment. Asahi Kasei expects that assigning ordinates, and a course for using KSA surveys. In addition, we began incorporating an individual coaching senior personnel to environments where they can tackle their work enthusiastically and demonstrate their program in fiscal 2020, which approximately 200 out of 680 applicable personnel had completed as of full capabilities will enhance their job satisfaction while stimulating younger employees. February 2023. Using the Open Position Posting System to Realize Autonomous Career Development We are also focusing efforts on cultivating and recruiting management executives. To this end, we have introduced coaching with the aim of facilitating the growth next-generation leader candidates and operate programs to improve leadership and teamwork. Selected from among General Managers and In fiscal 2003, the Asahi Kasei Group adopted an open position posting system, through which dozens of Senior General Managers, certain candidates each year are promoted to the position of Group Executives1 human resources each year transfer of their own accord to different departments to take on challenges in through the program. As of April 2023, there were 36 Group Executives and 76 candidates to become new environments. The number of personnel transferring to other departments through the open position Group Executives. We will continue aiming to secure candidates and further raise the quality of human posting system has been trending upward in recent years, at 53 in fiscal 2021 and 67 in fiscal 2022. We resources. will continue striving to improve the system—which supports employees in developing their careers auton- omously to realize lifelong growth—in various ways, such as expanding the scope of concurrent assign- ments to allow employees to experience work in departments other than their own for set periods of time. 1 Group Executives are appointed by resolution of the Board of Directors from among Executive Officers as individuals with responsibility and authority for improving the corporate value of the Asahi Kasei Group as a whole. Specifically, Group Executives include Lead Executive Officers and above at Asahi Kasei Corporation and Executive Officers at equivalent positions in core operating companies. External Recognition and Awards Related to the Asahi Kasei Group’s Human Resources Examples of Human Resource Initiatives Included in the Ito Report OpenWork: Workplace Review Site The Asahi Kasei Group’s human resource strategies were included as useful examples when In rankings compiled independently by OpenWork, a website providing considering policies on human capital management in the Ito Report on Human Capital employee reviews of companies, Asahi Kasei was ranked eighth for job Management 2.0, which was published by the Ministry of Economy, Trade and Industry in May satisfaction in fiscal 2021 and first overall in the chemical, petroleum, glass, 2022. The report highlighted our original measures for enhancing engagement (the KSA survey) and ceramic industries in fiscal 2022. and the Group Masters program. Excellence Award at HRX of The Year 2022 Ranked in the Top 25 in LinkedIn Top Companies Organized by the HR Executive Consortium to promote human resource transformation (HRX) LinkedIn, a U.S.-based social media platform focusing on careers, extracts and among Japanese companies, HRX of The Year recognizes companies conducting innovative ini- independently analyzes data based on collected user profile information for its Top tiatives in the field of human resources. In December 2022, at the inaugural awards, the Asahi Companies list, ranking the most attractive 25 companies that promote the professional Kasei Group’s system for cultivating digital human resources received the Excellence Award. growth of employees. The Asahi Kasei Group was ranked 22nd in fiscal 2023 and 7th among Japanese companies. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information72 Measures to Strengthen Co-Creativity Cultivating Professional Human Resources through Expansion of the Group Masters Program Asahi Kasei needs to draw on the diverse capabilities of its human resources, including in technology, marketing, sales, manufacturing, environmental safety, and intellectual property, to accelerate the creation of new businesses and the reinforcement of existing ones, while cultivating and recruiting many special- ists in various fields, which is essential for improving corporate value. The Group Masters program is a system that allows Asahi Kasei to secure industry-leading, highly specialized human resources, cultivat- ing and rewarding those expected to proactively take part in and contribute to such business creation and reinforcement. Tasked with the development of the next generation, among other roles, Group Masters help improve Asahi Kasei’s organizational strength, as well as enhancing and demonstrating their own specialized skills. We track the number of Group Masters as a KPI. There were 90 when we revised the program in fiscal 2016, and this has steadily increased to 294 as of fiscal 2022. Our MTP, which began in fiscal 2022, set a target of 300 Group Masters by fiscal 2024. However, given the pace of increase, we have raised that target to 360. In all our businesses, including the 10 Growth Gears (GG10) we have designated as drivers of future growth, Group Masters will not only propel technological devel- opment but also contribute to business expansion and the creation of new businesses by taking the lead in enhancing the Asahi Kasei Group’s abundant intellectual property and co-creating human resources. Group Master Ranks and Roles Ranks Roles Executive Fellow (Status Equivalent to Executive Officer) Person who newly developed or consider- ably 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 Senior Fellow (Status Equivalent to Managing 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 1. Actively participating in and contributing to new business creation and strengthening operations by cultivating and enhancing their skills and abilities as a leading specialist 2. Fostering younger personnel in the relevant areas Actively participating in and contributing to new business creation and strengthening opera- tions by cultivating and enhancing their skills and abilities Comments from Group Masters “ I am determined to contribute to the growth of Global Specialty Pharma through alliances with partners in Japan and overseas based on my specialization in phar- maceutical licensing alliances. ” Kazuko Yokota Principal Expert Business Development and Licensing Pharmaceutical R&D, Business and Strategy Division Asahi Kasei Pharma “ I will drive the development of innovative technologies in relation to hydrogen with a focus on water electrolysis to contribute to the creation of a carbon- neutral society and the sustainable improvement of corporate value. ” Yosuke Uchino, Ph.D. Lead Expert Clean Energy Project and Green Solution Project, Environmental Solutions SBU Group Masters Fields in Fiscal 2023 Business unit-specific fields 87 Group Masters Material Homes Health Care Core technologies 132 Group Masters • Fibers and polymers (design, polymeriza- • Compound tion, processing, and application) semiconductors • Membranes and separation • Electrochemistry (electrolysis and batteries) • Catalysts, chemical processes, and • Analysis and computer simulation • Biotechnology inorganic synthesis R&D Support functions Digital innovation Core platforms 75 Group Masters • Chemical processing technologies • Polymer processing technologies • Computer-aided engineering technologies • Measurement, control, and machine systems • Design and construction technologies • Plant engineering Environmental preservation Quality assurance Note: Fields in bold were revised in fiscal 2023 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information73 Diversity, Equity, and Inclusion Co-creativity that capitalizes on the diversity of human resources to co-create businesses is indispensable Promoting Co-Creation by Transferring Human Resources Across Business Sectors and Visualizing Human Resources to addressing dramatic changes in the operating environment and continuously creating new value. The Asahi Kasei Group cultivates human resources with broad viewpoints and elevated perspectives by Positioning diversity, equity, and inclusion (DE&I) as one of its management strategies, the Asahi Kasei proactively implementing transfers across business sectors to give people experience in a diverse range of Group establishes and expands systems and provides support to realize rewarding work environments businesses. The overseas expansion of the Homes business is a prime example of the cultivation of friendly to a diverse range of human resources. human resources with experience of a variety of businesses leading to business expansion. The Homes business swiftly expanded overseas by making use of human resources with extensive experience in over- Promoting the active participation of women Along with seminars on preparing for childcare leave and returning from leave to support the active partici- seas expansion and M&A know-how from the Health Care sector. The growth of its overseas business has improved the performance of the Homes business, raising its ability to generate cash. Transferring pation of female employees through events in their personal lives, including childbirth and childcare, Asahi human resources across business sectors truly enables us to maximize our abundant intangible assets, Kasei has conducted a variety of initiatives, such as a mentoring program to support the career develop- such as diverse businesses and technologies, which are strengths of the Asahi Kasei Group. We will fur- ment of female managers. As a result of these efforts, the number of female managers increased from ther promote this measure going forward. three in 1994 to 309 as of June 1, 2023. In addition, women account for two Directors, one Audit & Supervisory Board Member, and two Executive Officers among senior management. In fiscal 2022, we introduced Career Management Place (CaMP) to promote the visualization of human resources. This system digitalizes and centrally manages a range of information, such as the In fiscal 2022, we adopted as a KPI a target to increase the percentage of female managers, particu- career approaches, specializations, and experience of employees. We will accelerate co-creativity by con- larly in leadership positions (managers and Group Masters), to 10% by fiscal 2030 (the figure in fiscal 2022 solidating necessary human resource information to support growth effectively, such as the appropriate was 3.8%). Targeting 5% in fiscal 2024, we have also linked achievement of the percentage to executive allocation of human resources, and their cultivation. remuneration. Senior management, the Diversity Promotion Office—the organization promoting diversity—and busi- ness units are acting as one, implementing concrete initiatives tailored to issues in each business unit to Promoting Overseas Human Resources As the proportion of overseas sales has risen, the percentage of overseas employees increased to over 40% achieve this target. We are also enhancing our system to tackle the company-wide issues of long working as of March 31, 2023. We are expanding the promotion of non-Japanese and locally hired human resources hours for managers and the gap in experience between men and women in core positions, while the com- to major positions at overseas sites and cultivating the most talented individuals into human resources who mitment and leadership of senior management is providing strong support for activities on the front lines. contribute not only to their respective businesses but also the Asahi Kasei Group as a whole. As one exam- Creating an environment supporting the active participation of all motivated human resources The Asahi Kasei Group promotes extensive support measures to create an environment accommodating the individual circumstances of employees, thereby allowing all human resources to properly demonstrate their talents and play an active role. For example, we are working to create an inclusive environment by introducing a variety of systems. These include a work rehabilitation system supporting a seamless return to work after receiving medical treatment, a system ensuring time for outpatient medical care to balance treatment and work, and a system allowing a leave of absence to employees whose spouses have been transferred overseas. In its corporate governance report, Asahi Kasei has stated its commitment to promoting women, non- Japanese, and mid-career recruits to key positions. For information on initiatives and various data pertain- ing to the recruitment of people with disabilities, please refer to our sustainability report . ple, we arranged for discussions on the Asahi Kasei Group’s vision for 2030 between the next generation of leaders from the U.S., Europe, China, and Japan when considering the MTP to begin in fiscal 2022. An opinion offered during the discussions became the basis for “Be a Trailblazer,” the concept for the MTP. We are also proactively promoting talented human resources who became Asahi Kasei Group employees through overseas M&A to the position of Executive Officer, advancing their participation in group-wide man- agement. As of March 31, 2023, Asahi Kasei Corporation had seven non- Japanese Executive Officers. Comments from an Overseas Employee “ My transfer from Crystal IS (which joined the Asahi Kasei Group in fiscal 2011) to Corporate Venture Capital symbolizes the bold spirit of Asahi Kasei. I am committed to using the expertise I have developed and the Group’s network to contribute to the transformation of Asahi Kasei’s business portfolio and the achievement of “Be A Trailblazer.” ” Jeff Chen Corporate Venture Capital, Asahi Kasei America, Inc. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 74 Health and Productivity Management The Asahi Kasei Group works to develop dynamic human resources and workplaces based on the well being of employees and their families Masatsugu Kawase Director, Senior Executive Officer Chief Health and Productivity Officer In fiscal 2020, the Asahi Kasei Group issued a Statement on Management for Health, indicating its con- viction that maintaining and promoting the physical and mental health of employees and their families is an important management task. In fiscal 2021, we began developing a framework to facilitate the inte- grated group-wide promotion of health and productivity management to create an environment that empowers employees to play an active role in good mental and physical health. Today, amid rapidly changing work conditions, including the rise of telecommuting, the number of people on leave of absence for mental health purposes is increasing in society as a whole. Asahi Kasei views measures to improve mental health as a priority task in health and productivity management. Based on this view, we have established the percentage of employees on leave of absence for mental health purposes as one factor in determining Director remuneration. Maintaining and improving the physical and mental health of employees raises productivity and invigorates our organizations, which leads to improved corporate value. Human resources are everything when it comes to the sustainable improvement of corporate value. With this in mind, we will strengthen our support for not only our employees but also their families, to allevi- ate any anxieties and burdens in relation to their well-being or in their personal lives, with the aim of creat- ing an environment that allows all employees to work enthusiastically in good physical and mental health. Overview of Health and Productivity Management Initiatives Contributing to sustainable society and sustainable growth of corporate value 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 Selected as a “White 500” Enterprise The Asahi Kasei Group proactively promotes various measures and activities focused on mental health, serious lifestyle-related illnesses, cancer, smoking, and sleep to support the success and growth of each individual, foster greater working satisfaction and fulfillment, and create a vibrant and strong organizational climate. In recognition of such initiatives, in fiscal 2022 Asahi Kasei was selected as a “White 500”1 enterprise for the first time under the 2023 Certified Health & Productivity Management Outstanding Organization Recognition Program. 1 The Certified Health & Productivity Management Outstanding Organization Recognition Program honors companies and other organizations practicing exceptional health and productivity management based on their initiatives addressing community health-related issues and efforts implementing the health promotion efforts of the Nippon Kenko Kaigi. The top 500 companies in the large enterprise category are selected as “White 500” enterprises. Health and Productivity Management Targets Asahi Kasei revitalizes individuals and organizations while striving to reduce the number of employee absence days. Efforts to increase the quality and quantity of sleep—cited as an important indicator from the perspective of raising productivity—are a distinctive feature of our targets. Company-wide KPIs and Targets KPIs Results Targets 2019 2020 2021 2022 2023 2024 Percentage of employees on leave of absence for mental health purposes Percentage of employees with serious lifestyle-related illnesses Percentage of employees affected by metabolic syndrome Number of days absent by employees due to cancer- related illnesses Percentage of employees affected by smoking habits Percentage of employees affected by insufficient rest from sleep 0.91 0.98 1.00 1.07 0.80 0.64 11.0 11.0 10.7 10.7 11.1 11.4 11.1 10.7 8.9 8.9 7.7 7.8 79.2 68.1 87.5 88.6 67.3 67.3 25.8 24.7 23.5 22.5 18.5 15.5 32.4 28.5 27.2 28.0 24.2 22.7 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information  Priority Measures Measures to improve mental health In addition to care by line managers as has long been implemented, Asahi Kasei conducts and strength- ens training in relation to mental health to promote understanding of strategies for coping with stress and mental health issues. In May 2023, we conducted mental health self-care education for all employees to enable them to quickly identify and address personal concerns regarding stress and mental health. In fiscal 2020, the Asahi Kasei Group began conducting KSA surveys (engagement surveys assessing employee empowerment and growth), which allow for the analysis and visualization of work engagement among employees in terms of enthusiasm, immersion, and vitality. We conduct surveys each July in con- junction with stress checks. Currently, we are working to improve work engagement in various ways to further revitalize individuals and organizations. These include ensuring that each workplace comprehen- sively uses the analysis results of both surveys to promote communication among employees. Measures to address lifestyle-related illnesses Specific health guidance and the Slim Up Challenge Asahi Kasei promotes measures to prevent and address lifestyle-related illnesses among its employees. Since fiscal 2022, we have stipulated that employees diagnosed with metabolic syndrome must, as a general rule, undergo spe- cific health guidance. We also offer the Slim Up Challenge as a program for those at risk of metabolic syndrome. Creating opportunities for exercise In addition to walking events and other activities, each manufacturing site hosts meetings to help assess the 75 Encouraging employees to undergo cancer screening We offer financial assistance to encourage employees to undergo cancer screening in regular medical checkups and health screening. Aside from this assistance, we have a program providing support for treatment when employ- ees develop cancer and an internal program to help them on their return to work. Awareness of these programs among employees is promoted. In recognition of such initiatives, in fiscal 2022 Asahi Kasei received the Silver Award in the Cancer Ally Awards 2022. Smoking Group no-smoking policy The Asahi Kasei Group has set forth a basic approach of supporting efforts to quit smoking habits and protect- ing employees from unwanted exposure to secondhand smoke. Under this basic approach, we will gradually transition from a total ban on smoking during work hours (working toward a target to remove indoor smoking areas) in April 2024 to a total ban on smoking within company premises and during banquets in April 2025. In addition to traditional no-smoking challenge projects arranged by our health insurance association, we hold seminars and other events on quitting smoking habits and support the efforts of employees to stop smoking. Sleep We conducted a questionnaire on sleep with the goal of improving sleep quality and raising the productivity level of work and daily life. Following the questionnaire, we identified employees with severe insomnia and held a trial sleep improvement program for those who wished to take part. In light of the high level of satisfaction among participants and its effectiveness in improving sleep quality to a certain degree, we will operate the pro- Yoga class for employees gram on a group-wide basis going forward. In addition, we hold online seminars to increase literacy on sleep. physical stamina of employees and arranges events to monitor changes over the years. Asahi Kasei also We are also studying the establishment of sub-KPIs that gauge the effectiveness of such measures for creates fitness opportunities by posting videos to its employee website with exercises that can be prac- achieving the KPIs to verify whether they are functioning effectively. ticed in any location by anyone. Cancer Conducting company-wide e-learning on cancer prevention and support for work–treatment balance Asahi Kasei holds company-wide, simultaneous e-learning to encourage employees to acquire a correct understanding of cancer, improve their lifestyles to prevent cancer, and increase the cancer screening rate to facilitate early detection and early treatment. Medium- to Long-Term Approach for Fiscal 2025 and Beyond FY2020–2021 FY2022–2024 FY2025– • 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 tangible performance improvements • Commence initiatives at major • Launch global initiatives domestic sites • Group no-smoking policy • Evolve practices to undertake well-being management • Tackle new challenges Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Maximum Use of Intangible Assets 76 Guiding Principle for Use of Intangible Assets In its MTP, Asahi Kasei adopted the maximum use of intangible assets as one of its key areas for transfor- 1 Rights-focused perspective Extending the Exclusive Marketing Period for Teribone™ (Freeze-Dried Preparation) mation to strengthen its business platform. We aim to improve our corporate value by organically connect- ing our intangible assets, which we view as a vital management resource. Four Key Areas for Transformation to Strengthen Our Business Platform Overview of Intangible Assets G Green Green Transformation Green Transformation Maximum Use of Intangible Assets P People D Digital Digital Transformation Digital Transformation Transformation of HR Transformation of HR Connecting organically Human Resources Customer Contact Points Data Trust, Brand A-Spirit Intellectual Property Core Technologies, Digital Technology Manufacturing Know-How Improving corporate value through value creation Using Rights to Maximize the Value of Intellectual Property and Intangible Assets The Asahi Kasei Group leverages intellectual property rights from both a rights-focused perspective and an informational perspective to maximize the value of its intangible assets. In terms of the former, we pro- tect our businesses from imitation by other companies and grant intellectual property licenses to other companies to earn royalty income by obtaining patents and leveraging them to secure exclusive rights. For the latter, we gain insights on industrial trends and the intellectual properties and business strategies of other companies by analyzing publicly available intellectual property information, and utilize these insights to develop our business and management strategies. 1 Rights-focused perspective Patent rights bestow the enforceable right of exclusivity (Creates barriers to entry, allows monetization through licensing, etc.) Use of Rights 2 Informational perspective Patents represent the largest available source of technological information, enabling access to information on the strategies of other companies Use of Information (IP landscaping) With the conclusion of the patent reexamination period for Teribone™ (freeze-dried preparation) in 2017, the entrance of generic drugs was expected to lead to a sharp decline in sales. In response to this risk, Asahi Kasei Pharma launched the Teribone™ subcutaneous autoinjector, which enables self-administered injection at home, and has endeavored to protect Teribone™ businesses through a set of patents. Specifically, we have succeeded in maintaining sales by effectively extending the exclusive marketing period of Teribone™ (freeze-dried prepara- tion)—as a result of efforts to ensure multifaceted protection through dosage and administration patents pre- scribing the drug’s distinctive feature, namely, its use for patients at high risk of bone fracture, and patents emphasizing its features for enhancing quality. Furthermore, in September 2023, a provisional injunction was issued preventing the manufacture, sale, or application for sale of a generic version of Teribone™ (freeze-dried preparation) in a provisional injunction against infringement of patent rights based on Asahi Kasei Pharma’s man- ufacturing process patent. 2 Informational perspective Investigating the Possibility of Combining Nonwoven Business with that of Industry Peer The Asahi Kasei Group uses its intangible assets to strengthen established businesses and achieve structural transformation as well as to create new businesses. When deciding to establish a joint venture for our spunbond nonwoven business, we used IP landscaping. The map on the right provides an overview of the patents of both the Asahi Kasei Group and an industry peer. In addition to objectively demonstrating the existence of technological synergies between the two companies through this over- view, we conducted a simulation of advantages over other companies in the event of combining forces, thereby identi- fying a path to success. We made a strategic decision using this approach, which achieved structural transformation that enables the growth of the nonwoven business. Identifying the nonwoven domain as one with promising technological synergies Industry peer Asahi Kasei 2 Informational perspective Strengthening Communication with Automobile Manufacturers In the automotive domain, the Asahi Kasei Group fosters business communication with automobile manufacturers by using IP landscaping to visualize relationships between our technologies and those of automobile manufacturers. Using IP landscaping to objectively identify common domains with manufacturers and potential for co-creation to realize sus- tainability, we gain opportunities to introduce our products in business negotiations. Structure (Space Design) Sensor Battery Plastic (material) Automobile manufacturers Asahi Kasei Patents related to carbon neutrality and the circular economy Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Constructing a Corporate Value Improvement Narrative through IP Activities In fiscal 2022, the Asahi Kasei Group analyzed the correlation between indices of management and indices of The Cabinet Office’s Intellectual Property/Assets/Capital and Other Intangible Assets Governance Guidelines ver. 2.0 calls on companies to clarify how they link investment in and utilization of intellectual intellectual property and intangible assets as an initiative to visualize the corporate and business contribution of property and intangible assets to management indices at the corporate level, and how this contributes to IP activities. Results of a review of the correlation between several indices of management (such as net sales, improving corporate value. The Asahi Kasei Group’s corporate value improvement narrative meets the profit, operating margin, and ROIC) and various indices of intellectual property and intangible assets (such as requirements set out in the guidelines. 77 numbers of patents, overseas patent applications, and forward patent citations, and a variety of patent scores), confirmed a correlative relationship between EBITDA and patent value in the chemical industry. Corporate management index Intellectual capital index Corporate management index Intellectual capital index EBITDA Patent Value Patent Asset Index EBITDA (Asahi Kasei) Patent Value Patent Asset Index Correlation between EBITDA and patent value in the chemical industry Note: Analysis of data of 20 companies in the chemical industry over the last ten years (Millions of yen) 600,000 A D T B E I 400,000 200,000 0 0 Correlation observed between EBITDA and Patent Asset Index R2 = 0.53 5,000 10,000 15,000 20,000 Patent Value (Patent Asset Index) Change of EBITDA and Patent Asset Index of Asahi Kasei 200 (%) 150 100 50 0 EBITDA trending upward Patent value (patent asset index) trending upward EBITDA growth rate (left scale) Growth rate of Patent Asset Index (right scale) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 116 (%) 110 104 98 92 In fiscal 2023, we examined the possibility of creating a specific road map (corporate value improvement narrative) for reflecting intellectual property measures in corporate value based on the assumption of a corre- lation between intellectual property measures (investment and utilization) and management indices. In the examination, we organized our intellectual property measures into strategic activities and intel- lectual property procedures and utilization. The examination led us to a narrative in which strategic activi- ties and intellectual property procedures and utilization supported by our intellectual property platform improve corporate value in ways that include optimizing our business portfolio and increasing Group profit. Asahi Kasei’s Intellectual Property Report 2023 reports on the corporate value improvement narrative pertaining to the Asahi Kasei Group’s three business sectors. Strategic activities Corporate value Intellectual property strategy briefings Contribution to corporate strategies Market analysis through IP landscaping Contribution to business strategies Higher ratings for intellectual property strategies Intellectual property procedures and utilization Proper clearance Formulation of intellectual property strategies Construction of strategic patent portfolio Strategic utilization of patent rights Increase in Group profit Intellectual property platform Four-region global structure More efficient intellectual property operations Development of intellectual property experts Company-wide intellectual property training Verifying the Appropriateness of Corporate Value Improvement Narrative With the cooperation of external experts, we are working on objective and qualitative verification of the correlation between the elements constituting the corporate value improvement narrative described on the left. In one business, we identified a significant correlation between intellectual property procedures and utilization (patent score) and net sales of the business, thereby verifying the probability of the narrative. Examples of KPIs Based on the Corporate Value Improvement Narrative Asahi Kasei improves corporate value by promoting intellectual property activities aligned with its corpo- rate value improvement narrative. We have established KPIs as a way to verify the extent to which promo- tion of intellectual property activities fuels contributions to management and business. The KPIs focus in particular on IP activities with a close connection to financial indicators. We will continue to pursue further corporate value improvement by promoting IP activities while regularly optimizing the KPI and confirming our progress toward achieving it. Level of contribution to management and business strategies of IP landscaping We established a KPI on the contribution to management and business strategies of IP landscaping, an IP activity closely connected to the improvement of corporate value. The KPI measures the contribution level of IP landscaping with a focus on the three essential elements of quantity, quality, and productivity. Specifically, quantity demonstrates the number of IP landscaping cases, quality is assessed in terms of the percentage of repeats1 and actions2, and productivity is calculated using the number of IP landscaping cases conducted Number of IP landscaping cases Targets per person. Incorporating the perspective of quality makes for an indicator that more accurately expresses the level of contribution to business activities and, in turn, corporate activities. By fiscal 2025, we aim to more than double the level of contribution compared by meeting this KPI target. 1 IP landscaping requests from the same organization 2 Cases where the outcome of IP landscaping has led to decision or action on the management, business, or development side of the requesting organization 40 30 20 10 0 Number of repeats Number of actions 2018–21 average (half year) 2022 H1 2022 H2 2023 H1 2025 H2 Optimization of business portfolio Improvement of corporate value with fiscal 2022. We aim to improve corporate value Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Strengthening of Corporate Governance 79 Directors 80 Directors and Audit & Supervisory Board Members 82 Corporate Governance 84 Discussing Asahi Kasei’s Corporate Governance: Interview with New Outside Director Chieko Matsuda 89 Risk Management 92 Environmental Protection 93 Human Rights 94 Compliance / Information Security 95 Communication with Stakeholders Asahi Kasei Report 2023 78 Name Choi Jaeho Company Asahi Kasei Microdevices Korea Country/region Korea 05 Directors (as of June 27, 2023) 79 Back row, from left Masatsugu Kawase Hiroki Ideguchi Toshiyasu Horie Chieko Matsuda Tsuneyoshi Tatsuoka Kazushi Kuse Front row, from left Tsuyoshi Okamoto Koshiro Kudo Hideki Kobori Yuko Maeda Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information80 Directors and Audit & Supervisory Board Members (as of June 27, 2023) Directors Hideki Kobori Chairman & Director Koshiro Kudo President & Representative Director Presidential Executive Officer Kazushi Kuse Director Primary Executive Officer Toshiyasu Horie Representative Director Senior Executive Officer Hiroki Ideguchi Director Senior Executive Officer 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, 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 Joined Asahi Kasei Asahi Kasei Fibers Executive Officer April 1987 April 2005 Joined IBM Japan IBM Japan Executive Officer Asahi Kasei Lead Executive Officer January 2008 IBM Vice President 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) January 2017 IBM Japan Chief Technology Officer July 2020 April 2021 April 2022 June 2022 Joined Asahi Kasei, Asahi Kasei Executive Officer, Asahi Kasei Executive Fellow 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 1985 April 2015 April 2016 April 2019 April 2020 April 2022 June 2022 April 2023 Joined Asahi Kasei Asahi Kasei Chemicals Corporate Planning & Coordination General Manager Asahi Kasei Petrochemicals SBU Planning & Coordination Senior 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) Asahi Kasei Representative Director (position held at present) April 1985 April 2016 April 2017 April 2019 April 2020 April 2022 June 2023 Joined Asahi Kasei Asahi Kasei Pharma Corporate Planning & Coordination Senior General Manager Asahi Kasei Pharma Executive Officer Asahi Kasei Executive Officer Asahi Kasei Corporate Strategy Senior General Manager Asahi Kasei Lead Executive Officer Asahi Kasei Senior Executive Officer (position held at present) Asahi Kasei Director (position held at present) Masatsugu Kawase Director Senior Executive Officer Tsuneyoshi Tatsuoka Outside Director Tsuyoshi Okamoto Outside Director Yuko Maeda Outside Director Chieko Matsuda Outside Director April 1990 April 2016 April 2018 Joined Asahi Kasei April 1980 Asahi Kasei Chemicals Basic Chemicals Division Senior General Manager Asahi Kasei Production Center Planning & Coordination Senior General Manager Joined Ministry of International Trade and Industry January 2010 Councilor, Cabinet Secretariat August 2011 Deputy Vice-Minister of Economy, Trade and Industry April 2020 Asahi Kasei Senior Managing Executive June 2013 April 2023 June 2023 Asahi Kasei Production Center Senior General Manager Asahi Kasei Senior Executive Officer (position held at present) Asahi Kasei Director (position held at present) July 2015 June 2016 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 April 1987 Tokyo Gas Co., Ltd. Executive Officer September 2003 Tokyo Medical and Dental University Joined The Long-Term Credit Bank of Japan, Limited 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) Director of Technology Transfer Center and Intellectual Property Manager of Intellectual Property Right Department Tokyo Medical and Dental University Visiting Professor October 2009 October 2011 Kyoto Prefectural University of Medicine Specially Appointed Professor May 2013 April 2014 Bridgestone Corporation Executive Officer Japan Agency for Marine-Earth Science and Technology Auditor (position held at present) January 2017 CellBank Corp. Director (position held at present) October 2020 Kyushu University Executive Vice President (position held at present) June 2021 Asahi Kasei Director (position held at present) October 1998 Joined Moody’s Japan K.K. September 2001 Corporate Directions, Inc. Partner October 2006 Booz & Company, Inc. Vice President (Partner) April 2011 Tokyo Metropolitan University Faculty of Economics and Business Administration Professor (position held at present) Tokyo Metropolitan University Graduate School of Management Professor (position held at present) June 2023 Asahi Kasei Director (position held at present) Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 81 Takuya Magara Audit & Supervisory Board Member Akemi Mochizuki Outside Audit & Supervisory Board Member Haruyuki Urata Outside Audit & Supervisory Board Member Yoshikazu Ochiai Outside Audit & Supervisory Board Member Joined Asahi Kasei October 1984 Joined Aoyama Audit Corporation April 1977 Asahi Kasei Homes Executive Officer March 1988 Certified as a Certified Public Accountant Joined Orient Leasing Co., Ltd. (currently ORIX Corporation) Asahi Kasei Homes Director August 1996 Asahi Kasei Homes Senior Executive Officer Asahi Kasei Homes Primary Executive Officer Asahi Kasei Homes Vice-Presidential Executive Officer Asahi Kasei Homes Advisor Asahi Kasei Audit & Supervisory Board Member (position held at present) Joined Tohmatsu Audit Corporation (currently Deloitte Touche Tohmatsu LLC) 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) February 2005 ORIX Corporation Executive Officer August 2006 ORIX Corporation Managing Executive Officer April 1986 Appointed as Public Prosecutor October 2015 Tokyo District Public Prosecutors Office Deputy Superintending Prosecutor April 2017 Saitama District Public Prosecutors Office Chief Prosecutor June 2007 ORIX Corporation Managing Director February 2018 Supreme Public Prosecutors Office January 2008 January 2009 January 2011 June 2015 June 2020 June 2021 June 2022 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) July 2020 June 2022 Director of Criminal Affairs Dept. Supreme Public Prosecutors Office Deputy Prosecutor-General Tokyo High Public Prosecutors Office Superintending Prosecutor January 2023 Retired as Public Prosecutor April 2023 Certified as an attorney-at-law June 2023 Nishimura & Asahi law firm Of Counsel (position held at present) Asahi Kasei Audit & Supervisory Board Member (position held at present) Audit & Supervisory Board Members Yutaka Shibata Audit & Supervisory Board Member Joined Asahi Kasei Asahi Kasei Executive Officer 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) April 1979 April 2008 April 2009 April 2011 April 2016 April 2017 June 2018 April 2019 June 2021 April 1982 April 2012 April 2014 April 2016 April 2018 April 2022 June 2023 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Corporate Governance 82 Changes to Strengthen Corporate Governance (fiscal 2003–2020) Fiscal 2003 Number of Directors reduced from 30 to 7 (maximum number also changed from 45 to 15) 2015 Establishment of Nomination Advisory Committee and Remuneration Advisory Committee Working to Strengthen Corporate Governance Basic Policy 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 Reduction of Directors’ term of office to 1 year Adoption of an Executive Officer system Establishment of Strategic Management Council Election of 2 Outside Corporate Auditors out of 4 Corporate Auditors Transition to a holding company structure Asahi Kasei separated management and execution by operating companies and oversight by the holding com- pany through transition to a holding company structure and adopted an Executive Officer system to clearly sep- arate execution and oversight at the holding company. In addition, we reduced the number of Directors and lowered the maximum number to facilitate quick deci- sion-making and established a framework to hold Directors to account on an annual basis, including for results, by setting their term of office at one year. the world and help resolve social issues by enabling “living in health and comfort” and 2007 Election of 2 Outside Directors “harmony with the natural environment.” 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 inte- gration of our diverse range of businesses. To that end, we will continuously pursue the optimal corporate governance framework for ensuring transparent, fair, timely, and resolute decision-making in accordance with changes in the business environment. 2008 Election of 3 Outside Directors Adoption of takeover defense measures In 2003, we established the Group Advisory Committee to enhance the soundness and transpar- ency of management by having advice from outside experts reflected in all aspects of management. In 2007, we began nominating Outside Directors for election, with their number increasing to three in 2008. 2011 Renewal of takeover defense measures 2014 Ratio of Outside Directors increased to one-third of all Directors Majority of Corporate Auditors comprise Outside Corporate Auditors Discontinuation of takeover defense measures We increased the ratio of Outside Directors to one-third by composing the Board of Directors of six Inside Directors and three Outside Directors while appointing those responsible for business operations as Representative Directors. Holding of regular meetings between Outside Directors and Independent Auditors Holding of regular meetings between Outside Directors and Corporate Auditors Formulation of policies for the nomination of Director and Corporate Auditor candidates, of criteria for the independence of Outside Directors and Outside Corporate Auditors, and of policy regarding strategic shareholdings Asahi Kasei established the Nomination Advisory Committee and Remuneration Advisory Committee as part of its response to Japan’s Corporate Governance Code and formulated policies for the nomination of Director and Corporate Auditor candidates, criteria for the independence of Outside Directors and Outside Corporate Auditors, and policy regarding strategic shareholdings. In addition, we started to hold regular meetings between Outside Directors and Independent Auditors and between Outside Directors and Corporate Auditors. In 2016, we began disclosing the results of evaluations of the effectiveness of the Board of Directors. 2016 Transition from holding company to operating holding company configuration 2017 Introduction of stock-based remuneration system Asahi Kasei introduced a stock-based remuneration system using a share grant trust to clarify the linkage between its share price and the remuneration of Directors and enable them to enjoy the benefits of rising share prices as well as bear the risks of falling share prices, so that they share such benefits and risks with shareholders. 2020 Delegation of authority to Remuneration Advisory Committee to determine remuneration We delegated authority to determine amounts of per- formance-linked remuneration for individual Executive Directors from the Board of Directors to the Remuneration Advisory Committee considering it appropriate for such judgment to be made taking a comprehensive view of Asahi Kasei Group results as a whole while maintaining a highly independent, objec- tive, and transparent standpoint. Board of Directors Audit & Supervisory Board Other Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information83 Changes to Strengthen Corporate Governance (fiscal 2021–2022) 2021 2022 Introduction of Interim Reviews at Meetings of Independent Officers In fiscal 2021, Asahi Kasei began holding interim reviews evaluating the effectiveness of the Board of Directors by arranging discussion meetings of Independent Officers attended solely by Outside Directors and Outside Audit & Supervisory Board Members to incorporate more objective viewpoints and enhance the effectiveness of the Board of Directors. At the meetings, participants discuss the role of the Board of Directors, the nature of explanations and delib- erations at meetings of the Board of Directors, and ways to evaluate the effectiveness of the Board of Directors, from an objective standpoint to identify issues at the Board of Directors and steadily improve its effectiveness. Improvement of Meeting Proceedings through Better Organization of Discussion Points We standardized the organization of discussion points in materials for meetings of the Board of Directors, thereby pro- moting better deliberations and more efficient discussions during meetings, with a focus on priority discussion points. Revision of Remuneration System for Directors Given that remuneration of Directors is a key constituent element of corporate governance, we revised the remunera- tion system for Directors to provide appropriate incentives for both those charged with business execution and those conducting oversight for the continuous growth of the Asahi Kasei Group and increased corporate value over the medium to long term. Specifically, we aligned indicators for the performance-linked remuneration of Directors with indicators in the MTP and linked stock-based remuneration with the level of achievement of non-financial indicators. Introduction of Matters to Be Discussed in Relation to Important Management Matters In addition to matters to be resolved and reported, Asahi Kasei introduced matters to be discussed in fiscal 2022 to enable more in-depth discussions at meetings of the Board of Directors. This move allows important management matters to be deliberated in greater detail. Enhancement of the Setting of Agenda Items at Meetings of the Board of Directors Asahi Kasei enhanced the setting of agenda items at meetings of the Board of Directors, taking into consideration the circumstances of businesses and social trends. The Board of Directors improves its oversight function by proactively taking up various issues for discussion, such as business portfolio management, reviews of major M&A and significant investments, and management risks in relation to economic security and the global supply chain. Improvement of Management of Meeting Proceedings through Pre-Meeting Briefings In fiscal 2022, we reduced the time spent on explaining materials at meetings of the Board of Directors by providing pre-meeting briefings to enhance the quality and ensure the efficient progress of discussions at the meetings. Introduction of Surveys to Receive Feedback from Employees In fiscal 2022, we began anonymous surveys for Executive Officers and employees (excluding Directors and Audit & Supervisory Board Members) who attend meetings of the Board of Directors to assist with proposals and reporting. We use the results of the surveys to gauge expectations of and issues facing the Board of Directors and make improvements. Revision of the Composition of the Board of Directors Asahi Kasei decided to revise the composition of the Board of Directors with Inside Directors focused on Executive Officers responsible for corporate functions and an increased number of Independent Outside Directors and female Directors. Note: Please refer to the section pertaining to our corporate governance configuration on page 85 for the ratio of independent members and female members among the Board of Directors and Audit & Supervisory Board in fiscal 2023. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationDiscussing Asahi Kasei’s Corporate Governance: Interview with New Outside Director Chieko Matsuda 84 Q Viewed from the outside, what impressions do you have of Asahi Kasei’s corporate governance configuration? My connection with Asahi Kasei began in the early 2000s through discussions in my capacity as an analyst for a credit rating agency, and I subsequently had the opportunity to work with Asahi Kasei as a management consultant. Over this long relationship, I sense that Asahi Kasei has been focused on strengthening corporate governance these last few years in particular. Japanese companies tend to adopt U.S. and European models of corporate governance when strengthening their governance. In my view, however, blindly imitating the U.S. and Europe will not lead to a fundamental strengthening of governance. In that respect, I have the impression that Asahi Kasei carefully con- siders its own way of governance, and improves it step by step. Q What expectations do you have for Asahi Kasei at present? While I personally have a fondness for diversified companies, I understand that unwarranted diversification is viewed negatively from an investor’s perspective. I believe that companies with extensive business portfolios such as Asahi Kasei can offer a compelling explanation to investors by outlining the process and background to the reorganization and consolidation of their businesses as a story, from origins to the present. Honorary Fellow Dr. Akira Yoshino once gave me a firsthand explanation of the course of Asahi Kasei’s businesses. I was very interested to hear about the origins and subsequent offshoots of businesses through his explanation, which was very persuasive. Given its wealth of such sto- ries, I think that Asahi Kasei should put more emphasis on its own narrative. Q In light of your experience and expertise, in what ways do you aim to contribute as an Outside Director? There are three main ways I aim to contribute. The first is to offer opinions from an investor’s perspective. In doing so, I will draw on my experience at a bank assess- ing the creditworthiness of companies, and my work as a securities analyst. My perspective differs from that of those in charge of business execution due to our different standpoints, so our opinions may diverge from time to time. Nevertheless, I hope to play a part in enhancing the quality of management through discussions from multiple perspectives. The second is to offer opinions on company-wide strategy. I am keen to engage proactively in discussions on business portfolio management in my capacity as a professor currently researching corporate management, primarily company-wide strategies. The third is diversity. For a company such as Asahi Kasei, which is expected to spur innovation, ensuring task-oriented diversity in terms of career back- grounds and other roles, as well as of gender and nationality, is also crucial. I intend to make use of my position as someone who has had many career roles to share my views. Q On what points do you intend to focus in supervising management as an Outside Director? A key role of outside directors is to supervise management from the perspective of someone who can see things in a certain way precisely because they are on the outside. With that said, having a discussion would be impossible without knowing anything about a company’s businesses. As an outside officer at other companies over the years, I have endeavored to develop my intuition by visiting many sites and plants, including overseas, for a firsthand sense of working envi- ronments and the mood of the people. Talking in person with frontline employees often brings business model issues to light, highlighting their essence from a management perspective. I hope to proactively visit Asahi Kasei’s front lines and communicate in a similar manner. Chieko Matsuda Outside Director Following roles at The Long-Term Credit Bank of Japan, Limited, Moody’s Japan K.K., Corporate Directions, Inc., and Booz & Company, Inc., Chieko Matsuda teaches as a professor at Tokyo Metropolitan University’s Faculty of Economics and Business Administration and its Graduate School of Management. She became an Outside Director of Asahi Kasei in June 2023. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 85 Corporate Governance Configuration (as of June 27, 2023) Status of Activities in Fiscal 2022 Shareholders Meeting Meeting No. of Meetings Held Average Attendance Main Subjects of Agenda Audit Election Oversight Election Audit & Supervisory Board (5 Members, including 3 Independent Outside Members) Cooperation Independent Auditors Audit Board of Directors (10 Directors, including 4 Independent Outside Directors) Nomination Advisory Committee Remuneration Advisory Committee Execution of operations Audit Report Oversight Cooperation President Internal Audit Department Management Council Audit SBUs, core operating companies, administrative functions Ratio of Independent Officers Ratio of Women Independent Women Directors and Audit & Supervisory Board Members Nomination Advisory Committee Remuneration Advisory Committee Directors and Audit & Supervisory Board Members 7 8 2 4 2 4 3 12 Note: 7 out of 15 Directors and Audit & Supervisory Board Members are independent Note: 3 out of 15 Directors and Audit & (4 out of 10 Directors are independent) Supervisory Board Members are women (2 out of 10 Directors are women) Board of Directors Chair: Hideki Kobori Nomination Advisory Committee Chair: Tsuyoshi Okamoto Remuneration Advisory Committee Chair: Tsuyoshi Okamoto Audit & Supervisory Board Chair: Masafumi Nakao 15 5 6 19 99% (Directors and Audit & Supervisory Board Members) • Medium-term management plan, annual management plan • Quarterly and annual results • Examinations, decisions, and follow-up of large investments, M&A, and reorganization • Analysis and disclosure for TFCD • Enhancement of risk management, follow-up on plant accidents, and influence of the situation in Ukraine • Effectiveness evaluation of the Board of Directors, review on the offi- cer remuneration system, nomination of officers 100% (committee members) • Election of chair • Committee schedule • Nomination of officers for fiscal 2023 100% (committee members) • Review on the officer remuneration decision-making policy • Review on the performance-linked remuneration system • Review on the stock-based remuneration system • Decision of individual performance-linked remuneration amounts 98% (Audit & Supervisory Board Members) • Audit plans • Opinion exchange on agenda of the Board of Directors meetings • Checks of financial statements • Opinion exchange sessions with Outside Directors • Evaluation of Independent Auditors Fields in Which Expectations of Directors and Audit & Supervisory Board Members Are Particularly High We have identified the knowledge, experience, and capabilities required to advance Group management and its supervision and auditing at a higher level in a discontinuous and uncertain business environment, and have considered the composition of the Board of Directors with consideration to the balance of its diversity and independence. In addition to “corporate management & strategy,” “finance & accounting,” “legal affairs, intellectual property & risk management,” and “R&D, manufacturing & technology,” which are indispensable for pur- suing opportunities and reducing risks, we also emphasize “global” to align with the internationalization of markets and businesses, “digital” to advance digital transformation, “environment & society” to respond to changes in the social environment and the status of stakeholders with agility, and “human resource man- agement” to utilize people as the foundation of business management. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information To further enhance the monitoring capability of the Board of Directors, we decided to adjust the com- position so that Inside Directors mainly comprise Executive Officers responsible for corporate functions. We expect that each Director and Audit & Supervisory Board Member will demonstrate their knowl- edge, experience, and capabilities, and will accordingly carry out important decision-making of group management and appropriate supervision and auditing comprehensively from diverse perspectives. Skill Matrix (configuration from June 27, 2023) 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 Kazushi Kuse Toshiyasu Horie Hiroki Ideguchi Masatsugu Kawase Tsuneyoshi Tatsuoka Independent Tsuyoshi Okamoto Independent Yuko Maeda Independent Chieko Matsuda Independent Yutaka Shibata Takuya Magara Akemi Mochizuki Independent Haruyuki Urata Independent Yoshikazu Ochiai Independent Audit & Supervisory Board Members 86 Results of Evaluation of Effectiveness of the Board of Directors (fiscal 2022) The Board of Directors of the Company conducts regular evaluations of its own effectiveness every fiscal year. The evaluation method and measures in fiscal 2022 and issues recognized for the future are as follows: Effectiveness evaluation method In the middle of the fiscal year, based on the previous fiscal year’s evaluation as well as institutional inves- tors’ demands and capital market trends, the chair of the Board of Directors took the lead in examining the future direction of the Company’s Board of Directors. Independent officer meetings, which were attended only by Outside Directors and Outside Audit & Supervisory Board Members, also conducted interim reviews on the effectiveness of the Board of Directors and exchanged opinions. Then, the Board of Directors discussed the matters to organize and categorize them into issues that require improvement within the current fiscal year and ones that require continuous consideration. After these steps, at the start of the new fiscal year, the Board of Directors again deliberated on the effectiveness of the Board of Directors, as well as checking the progress of improvement actions in the fiscal year. Main measures implemented in fiscal 2022 The Board of Directors of the Company implemented the following measures in fiscal 2022 based on eval- uation of the previous fiscal year. (1) The composition of the Board of Directors To keep a higher level of the Group management and supervision and auditing on the management in this discontinuous and uncertain business environment, we have discussed the composition of the Board of Directors considering the balance of its diversity and independence. We decided that the following rectifi- cations will be made on the member composition to further enhance the monitoring capability of the Board of Directors and facilitate discussions in the Board of Directors: i. A rectification to ensure that Inside Directors are mainly composed of officers responsible for corpo- rate departments ii. Increases in Independent Outside Directors and female Directors (2) Receiving feedback from employees Anonymous surveys were conducted for officers and employees (who are not Directors or Audit & Supervisory Board Members) who attended the Board of Directors meetings as assistants for proposing or reporting. The surveys are intended to know what expectations or issues the officers and employees have with the Board of Directors. The surveys found that employees and other staff generally recognize the value in deliberations by the Board of Directors from perspectives different from those of internal dis- Note: Up to four fields with particularly high expectations are noted for each individual. The table above does not represent all of the knowledge, cussions. The survey also helped us identify issues with how to propose and report matters in the Board experience, and capabilities of each individual. of Directors meetings with an awareness of differences from internal meetings, including the Management Council. These issues have led to the following improvements for facilitating meetings. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 87 (3) Improvements for facilitating meetings Starting from fiscal 2022, the agenda includes matters to be discussed in addition to matters to be resolved and reported, and a procedure is established for the Management Council meetings and other Remuneration for Directors (1) Decision-making policy As one of the corporate governance mechanisms to ensure that the Asahi Kasei Group achieves sustain- internal meetings to share their discussions with the Board of Directors. With such measures, the Board of able growth and enhances corporate value over the medium to long term, the Board of Directors sought Directors can discuss important management matters more deeply. In addition, the meetings of the Board the advice of the Remuneration Advisory Committee on the decision-making policy. Respecting the con- of Directors provide a more concise explanation of materials while enabling outside officers to receive a tents of the committee’s report, the Board of Directors passed a resolution on the decision-making policy, preliminary explanation. The executive summary is utilized to organize discussion points. These improve- which includes the following basic policy. ments helped the Board of Directors have more effective discussions. Furthermore, a guidance document was created to clarify basic points so that meetings can be facilitated more effectively, considering the composition and role of the Board of Directors. Basic policy Issues recognized for the future Based on measures implemented in fiscal 2022, the Board of Directors has confirmed a common aware- ness of the following issues for the future. (1) Methods to evaluate the effectiveness of the Board of Directors We continue to scrutinize evaluation methods with objective perspectives, such as working with third parties. (2) The way that the Board of Directors should be As our business environment is changing, we continuously pursue the ideal Board of Directors (in terms of independence, diversity, and organizational structure). Officer Remuneration Remuneration for Officers in fiscal 2022 The amount of remuneration, etc., of Directors and Audit & Supervisory Board Members in fiscal 2022 Classification Directors of which, Outside Directors Audit & Supervisory Board Members of which, Outside Audit & Supervisory Board Members Amount Paid (Millions of Yen) Breakdown by Remuneration Type (Millions of Yen) Basic Remuneration Performance-linked Remuneration Stock-based Remuneration Number of Directors and Audit & Supervisory Board Members Paid 528 53 154 53 379 53 154 53 95 — — — 54 — — — 11 3 6 4 Composition of remuneration for Executive Directors in fiscal 2022 Basic remuneration 56.5% (Paid monthly) Performance-linked remuneration 27.7% Stock-based remuneration 15.8% (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. The Directors’ remuneration of the Company is one of the important components of corporate gover- nance. The Company designs this system to provide appropriate incentives to both executives and super- visors for achieving sustainable growth and improving medium- to long-term corporate value. Remuneration for Non-executive Directors* including Outside Directors, who supervise the manage- ment of the Company, solely comprises fixed basic remuneration at a level determined in consideration of 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 management, 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. 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 their appropriateness and make improvements. * Non-executive Directors include the Chairman. (2) Basic design 1) Performance-linked remuneration • 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 achievement 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 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 88 • Standards for financial incentives selected from the perspectives of appropriateness as clear (3) Decision-making process and objective evaluation criteria based on earnings results as well as awareness for increased • As authorized by the Board of Directors, the Remuneration Advisory Committee confirms the reason- capital efficiency • The formula required to calculate individual performance-linked remuneration is outlined as follows: Index calculated by evaluation1 Basic amount by rank Individual performance-linked remuneration amount 1 Coefficient comprehensively considering achievement of financial targets and non-financial targets • Target figures / standard figures and actual figures of management indicators to be used for the calcu- lation of performance-linked remuneration in fiscal 2022 ableness 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 con- ferred 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 indi- cators at the end of each fiscal year in relation to stock-based remuneration). • The Remuneration Advisory Committee comprises a majority of Outside Directors and regularly Fiscal 2022 Target Figure / Standard Figure Fiscal 2022 Actual Figure reports to the Board of Directors on the process of confirmation and determination described above. Consolidated net sales Consolidated operating income Consolidated ROIC2 ¥2,731.0 billion ¥2,726.5 billion ¥210.5 billion ¥128.4 billion 6.0% 4.0% 2 (Operating income–income taxes) / average annual invested capital 2) Stock-based remuneration • Designed to reinforce a common perspective with shareholders, including both the benefits of share price increases and the risk of share price decreases Strategic Shareholdings The Company is continuing to reduce its holdings of shares held for purposes other than pure investment (strategic 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 evaluated 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 • A trust established by Asahi Kasei acquires shares of the Company and grants them to eligible shares judged to be no longer compatible with the purpose of holding them or deemed to have costs Directors. Based on the Share Grant Regulations adopted by the Board of Directors, eligible and risks that outweigh the benefits of holding them, taking into consideration the conditions of the Directors are conferred points in accordance with their rank (maximum of 150,000 points per fiscal company concerned. year) and the shares are granted to eligible Directors corresponding to the accumulated number of points at the time of their retirement as Director and as Executive Officer of the Group (one share of Strategic holdings of listed shares Sales of strategic shareholdings stock per point). • The following table describes the status of the performance targets above, which are defined by the Board of Directors, for fiscal 2022. Indicator Indicator Calculation Method Fiscal 2022 Target Figure / Standard Figure Fiscal 2022 Actual Figure Job satisfaction Percentage of employees absent due to mental illness DX Diversity Total number of digital professionals Percentage of female employees working as managers and Group Masters 0.80% 1,000 3.9% 1.07% 1,206 3.8% (¥ billion) (stocks) (¥ billion) 200 150 100 50 0 178.6 156.4 61 123.2 123.2 60 117.7 56 88.1 43 33 80 70 60 50 40 30 40 30 20 10 0 20.5 18.1 7.4 38.1 Cumulative total for five fiscal years ¥112.9 billion 28.8 2018 2019 2020 2021 2022 (FY) 2018 2019 2020 2021 2022 (FY) Fiscal year-end amounts of strategic sharehold- ings on the balance sheets (left scale) Number of stocks (right scale) Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Risk Management 89 Basic concept We are accelerating the global expansion of the Asahi Kasei Group’s diverse operations in three sectors. Meanwhile, the operat- ing environment has become highly volatile. The emergence of new and more complex risks threatens to have a substantial impact, which makes it necessary for us to grasp and manage risks from the broader perspective of group management. In fiscal 2022 we adopted a major revision to our risk management framework. Risk Management Framework and Roles of Constituents Audit & Supervisory Board Audit Coordination Reporting Internal Audit Department Reporting Board of Directors Reporting Oversight President Hiroki Ideguchi Director, Senior Executive Officer Executive Officer for Risk Management & Compliance My role in the risk management framework Our Risk Management Team, which reports directly to me as the responsible Executive Officer, keeps track of the activities of each business unit. In addition to providing direction and support regard- ing individual risk countermeasures, this team functions as the organizer for the Risk Management & Compliance Committee, chaired by the President, and ensures that decisions and instructions from upper management are fully conveyed to each business unit. Reporting Instructions Organizational functions Chair: President Executive Officer for Risk Management & Compliance Risk Management Team Risk Management & Compliance, General Affairs; Corporate Strategy, etc. Risk Management & Compliance Committee By having a Risk Management Team comprising members from General Affairs and members Reporting Instructions Reporting Instructions from Corporate Strategy, we are able to respond not only to pure risks but also to business opportuni- ties and risks. Strengthening risk management in line with business characteristics Our basic policy is for each organization to manage its own risks autonomously. Among the various risks, those requiring regular monitoring by the Board of Directors are defined as Material Group Risks, and those which could impede the annual plans of business units are categorized as Material Business Risks to be addressed through concerted effort within a given fiscal year. Flexible management commensurate with individual circumstances is required. In the Material sector, there is substantial overlap between Material Group Risks and Material Business Risks, and in the Homes and Health Care sectors, there are many cases in which the business unit directly handles industry-specific risks such as permits and regulations. To prevent inadequate risk response due to administrative functions and business units each expecting the other to take the lead, we have clarified each of their roles and responsibilities, and strengthened communication among administrative functions and between administrative functions and business units, ensuring quick and proper response both in normal times and in emergencies. 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 Raising awareness Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 90 Risk Management PDCA Cycle (Material Group Risks and Material Business Risks) Selection Criteria Response Process Material Group Risks Material Business Risks Material risks with the potential to impede the fulfillment of the Group Mission or the accomplish- ment 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 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 the Executive Officer for Risk Management & Compliance, and by the Risk Management Team, through discussion with corporate administrative functions and business units 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 respon- sible for specific risk subjects • 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 Selection Countermeasure planning • Examination of possible risks by business units, incorporation into annual management plans, and approval by the Board of Directors at the beginning of the fiscal year • Planning of risk countermeasures by business units based on management plans • Support for risk countermeasures from corporate administrative divisions and the Risk Management Team Implementation / reporting • Implementation of risk countermeasures by business units, 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 & 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 Enhancement Policy for Fiscal 2023 Strengthening risk response capabilities in each organization Clarification of scope of responsibility Enhancement of execution Importance of strengthening mutual communication Risk Management Team as a hub to strengthen inter-organizational coordination Business units Responsibility for responding to risk occurrences • Greater sensitivity to risks • More effective risk countermeasures Corporate administrative functions Responsibility for guidance and supervision in areas of responsibility • Heightened awareness as second line of defense • Enhanced coordination to address risks that span different areas and to eliminate overlapping countermeasures Business units Risk Management Team Corporate administrative functions Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information91 FY2023 Material Group Risks and thrust of main initiatives Material Group Risks Thrust of Main Initiatives Risks related to accidents at production sites (environmental abnormalities, industrial accidents, injuries) • Reinforcement and enhancement of Life Saving Actions (adherence to activity prohibitions for eliminating serious accidents) • Improvement of fire prevention technology at individual production sites • Reinforcement of workplace safety auditing functions and cultivation of environmental safety experts • Identification of hazard sources at individual production sites, conveyance and education of process safety techniques, thorough implementation of For more information, see “Environmental Protection” on page 92 PDCA in response to abnormalities Risks related to quality-associated misconduct (data falsification, etc.) • 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 domestic and international laws, regulations, certification requirements, etc., regard- ing the environment, safety, and quality assurance Risks related to economic security and global supply chains Risks related to cybersecu- rity and technological infor- mation management Environment and safety Quality assurance Risks related to tightening of economic sanctions and export restrictions (including both upstream and downstream) • 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 • 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 Risks related to corporate activi- ties due to geopolitics • Setting of risk scenarios for geopolitical emergencies and studying of impacts on business activities such as employee safety, procurement, and sales • Specification of initial responses and BCP to be carried out under task force in the event of emergency Human rights risks (including both upstream and downstream) • Promotion of business activities in accordance with the Asahi Kasei Group Human Rights Policy • Fostering an awareness and culture of respect for human rights through human rights due diligence, education and awareness activities, etc. For more information, see “Human Rights” on page 93 Feedstock/material procurement risks Risks related to cybersecurity and communications infrastructure • Transparency for raw material procurement risks and countermeasure priorities for each business, strengthening of support systems on corporate side • Diversification of procurement routes and maintenance of appropriate inventory levels for feedstocks used in major products and businesses • 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 • Implementation of swift and flexible countermeasures to combat ever-evolving cyberattacks through technical measures made possible by installing security systems and raising and reinforcing awareness regarding security via employee education, etc. • Planning and implementation of BCP measures aimed at achieving minimum level of IT usage (communication, information access) in the event of large-scale disaster Risk of technological information leakage • Formulation of technological information management rules and implementation of leak prevention measures based on those rules • Strengthening of group-wide unified monitoring systems for leak prevention measures For more information, see “Information Security” on page 94 Risks related to natural disasters, pandemics, and terrorism or conflicts Headquarters and office districts ( domestic and overseas) Production sites (domestic and overseas) • Recompilation of response policies and manuals based on past cases such as large-scale natural disasters and pandemics, implementation of training simulating risk actualization • 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 “Disclosure Based on the TCFD Recommendations” on page 61 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information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 around the world.” Based on this mission, we implement environment, safety, and health (ESH) September, leading to fires that took time to extinguish. In and quality assurance (QA) activities that recognize health maintenance, process safety, workplace safety addition, there were 14 minor incidents involving small and hygiene, quality assurance, and environmental protection as the most important management tasks fires, smoke, and minor leaks of hazardous materials and in all business activities. In July 2022, we revised the Asahi Kasei Group ESH & QA and Health & other substances within plant grounds. In total, 19 indus- Productivity Management Policy . Under this revision, we strive for stable and safe operation while trial accidents, including serious ones, have occurred over preventing workplace accidents and securing the safety of personnel and members of the community, the past 10 years. and are strengthening our environmental safety initiatives. In light of these circumstances, the ESH & QA We aim to gain public understanding and trust by ensuring legal compliance and adopting self-imposed Committee convened in July 2023, reaffirming the impor- targets to achieve continuous improvement while proactively disclosing information and communicating. tance of measures to address industrial accidents and Occurrences of industrial accidents and serious industrial accidents (As of July 2023) Serious industrial accidents Industrial accidents 4 3 2 1 0 4 3 2 2 2 2 1 1 1 1 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 0 Current Status and Fiscal 2023 Improvement Policy In fiscal 2022, industrial accidents occurred in April and 92 Management Framework PDCA Cycle for Safety Management ESH & QA Policy ESH Targets Targets of Core Operating Companies, Regions, Etc. 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 Review Audit Review Audit Sustainability Report The Asahi Kasei Group, which aims to realize the two mutually reinforcing aspects 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 per- spectives of public trust, consideration for the environment, the safety of employ- Masatsugu Kawase Director, Senior Executive Officer Oversight for ESH, QA, Regional Offices, Manufacturing, Production Technology Functions ees and local communities, and our own growth. To prevent such critical accidents, we are striving 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. prevent the spread of fires. At the same time, the committee determined on a policy to work toward understanding conditions at work sites and taking effective measures, given that there is no immediate remedy. In fiscal 2023, we are prioritizing the following three measures based on this policy. 1) Prevention of industrial accidents through company-wide promotion and establishment of activities to impart Plan process safety technology 2) Prevention of the spread of fires, drawing on standards for the installation of fire prevention and extinguish- Implement ing equipment in areas at high risk of indoor fires 3) Implementation of a PDCA cycle of activities at work sites with the support and collaboration of experts In addition, we will focus on developing a culture that strengthens two-way communication with the goal of fostering a culture of safety among all employees. To this end, we will promote and ingrain the Life Saving Actions program, a uniform, company-wide safety initiative. FY2023 Target Priority Initiatives and Measures ESH Process Safety Nurture a culture of safety • Promotion and ingraining of the Life Saving Actions program (thorough adherence to rules on prohibited behaviors to eradicate serious occupational accidents) • Strengthening of two-way communication between management and work sites Develop human resources with expertise in ESH • Establishment of Group Masters in ESH and formulation and implementation of succession plans for them Achieve zero serious industrial accidents • Company-wide promotion of prioritized activities for imparting process safety technology • Implementation of highly effective expert audits of work sites Prevent the spread of fires • Promotion of standards established with the participation of experts for installation of fire prevention and extinguishing equipment • Implementation of effective emergency drills in cooperation with public fire departments Please see “Process Safety” for details on these initiatives. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Compact as well as the UN Guiding Principles on Business and Human Rights and the Children’s Rights platform to discuss and determine our approach to and Business Principles. Guided by these frameworks, we will strive to identify and appropriately address human rights, and to promote the Asahi Kasei Group 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 activities. The Asahi Kasei Group Human Rights Policy, which was established with the approval of the Board of Directors in fiscal 2021, complies with the International Bill of Human Rights and the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work. The Asahi Kasei Group has also pledged its support for the Ten Principles of the United Nations (UN) Global human rights issues in our business activities. 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 (corporate initiatives) • Compliance with laws and regulations (including on working hours, wages, safety and hygiene, and protection of personal information) • Prohibition of unacceptable conduct (including discrimination and harassment) • Respect for the human rights of all people in society (including customers and communities) • Education • Implementation of human rights due diligence • Commitment to engage with affected stakeholders • Grievance mechanisms • Disclosure 93 and human rights among all employees. We will continuously carry out activities to raise awareness of human rights and strengthen our initiatives going forward. Management Framework Establishment of Human Rights Committee We established a Human Rights Committee as a Human Rights Policy. The first meeting of the com- mittee was held in 2022. With public interest in human rights issues growing each year and various countries adopting related laws and regulations, the committee will continually share information pertain- ing to human rights initiatives. Board of Directors (Management Council) President Sustainability Committee Human Rights Committee Administrative departments Strategic business units Global Environment Committee Risk Management & Compliance Committee ESH & QA Committee Due Consideration for Human Rights in Procurement At the Asahi Kasei Group, Corporate Procurement & Logistics, the Sustainability Strategy Planning Department, and Group companies work in collaboration to foster awareness of corporate social respon- sibility (CSR), including respect for human rights. Our Supplier Guidelines stipulate that all suppliers must respect human rights. In addition to thorough propagation of this knowledge, we conduct a CSR procure- ment questionnaire on an annual basis to ascertain the status of initiatives in relation to human rights and labor practices at suppliers. In fiscal 2022, we also conducted a survey of suppliers regarding procured materials containing tanta- lum, tin, tungsten, gold, cobalt, and mica in response to the issue of conflict minerals, which have been identified as a possible source of funding for armed groups linked to inhumane acts. The results of the survey confirmed that none of the materials procured came under the category of conflict minerals. Regarding the supply chain, the Asahi Kasei Group’s procurement policy states that it is a policy to consider suppliers as important partners. In addition, we formulated Supplier Guidelines in 2021 to promote understanding and cooperation among suppliers. FY2022 CSR Procurement Questionnaire Results (raw material suppliers) Overall Evaluation Rank D: 7 3% Average Scores by Category 1. Corporate governance Human Rights Education and Training The Respect for Human Rights and Diversity section of the Asahi Kasei Group Code of Conduct clearly Rank C: 28 13% Rank B: 60 28% expresses a firm policy against all forms of discrimination and harassment. In fiscal 2022, we held human * Major suppliers rights seminars by outside experts for training and raising awareness among senior executives. In addi- tion, we promoted understanding of respect for human rights through e-learning on the topic of business Responding companies* 214 Rank A: 119 56% 9. Harmony with the local community 8. Supply chain 7. Information security 100 80 60 40 20 2. Human rights 3. Labor 4. Environment 6. Product safety and quality assurance 5. Fair corporate activities Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 94 Compliance / Information Security Compliance Policy and Management Frame The Asahi Kasei Group positions compliance as a priority issue of materiality from the perspective of value creation. 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 violations, and the operational status of the Compliance Hotline. Awareness of the Code of Conduct Group companies in Japan maintain an understanding of the status of compliance through questionnaires on the issue and regular exchanges of opinions in small groups—such as sections and subsections—using examples of compliance violations, which help promote awareness and understanding of compliance. In fiscal 2021, the compliance 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 expand and strengthen compliance activities globally. Establishment of the Group Principles As Asahi Kasei’s business becomes more diversified and global, legal requirements and public expectations around the world are increasingly complex and demanding. The Group Principles were established as basic principles to be applied to each business and region based on these common standards. The Group Principles form the basis of ongoing efforts to develop the optimal system of Group management. Compliance Hotline The Asahi Kasei Group operates a Compliance Hotline in order to promptly collect information on compli- ance violations and take measures in response. A wide variety of reports and consultations are received, including from suppliers and their employees, with the designated office or an investigation and response team carrying out investigations depending on the nature of the reports or consultations. The Executive Officer for Risk 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 2022): 85 reports (2 of which were in relation to human rights issues, such as discrimination and harassment) Prevention of Bribery The Asahi Kasei Group has endorsed the United Nations Global Compact and declared that it will work to prevent 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 pre- consistently across the entire Asahi Kasei Group. Accordingly, Group companies around the world formulate rules suited vention 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 Cybersecurity Cybersecurity measures have become increasingly important due to the sharp rise and growing sophisti- digital transformation (DX). Accordingly, we formulated the Asahi Kasei Group Information Security cation of cyberattacks. The Asahi Kasei Group began operating a security operation center (SOC)1 utilizing Policy with the aim of ensuring and further enhancing information security. Regarding the information advanced security systems, such as endpoint detection and response (EDR),2 to prevent such cyberat- security framework, we have established a specialized internal organization (the Security Center) for the tacks. In addition, we devote efforts to employee awareness activities, including carrying out targeted implementation of information security measures at all Group companies in Japan and overseas from the email attack drills several times a year, as most cyberattacks originate from suspicious emails, and imple- perspectives of both corporate governance and technology. menting regular information security training. 1 A SOC is an organization that monitors security. It receives alerts and other intelligence from security tools and investigates the impact scope and severity of attacks. 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 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Communication with Stakeholders 95 The Asahi Kasei Group’s businesses are built on relationships of trust with stakeholders. We believe that understanding the requirements and meeting the expectations of a diverse range of stakeholders—including customers, shareholders and investors, suppliers, community members, the general public, and employees—will improve our corporate value. Accordingly, we have created a variety of communication opportunities to ensure that dialogue with stakeholders further enhances our business activities. Main Stakeholders and Communication Opportunities • Support by marketing and sales personnel • Provision of information on products and services via website • Addressing of telephone, website, and other inquiries Customers • General Meetings of Shareholders, various briefings for investors • Individual meetings, information disclosure via website Shareholders and investors • Addressing of telephone, website, and other inquiries • Safety discussion forums and other gatherings, CSR questionnaires • Whistle-blowing system (Compliance Hotline) Suppliers Communities and society • Various training programs and meetings, communication between employees and management • In-house magazine and intranet Employees • Whistle-blowing system (Compliance Hotline) Promoting Dialogue Focused on Improving Corporate Value Led by its senior management, Asahi Kasei proactively endeavors to disclose information and engage in two-way communication to allow shareholders and investors in Japan and overseas to gain an understanding of its road map, including the Asahi Kasei Group’s vision, management strategies, and corporate governance, for achieving sustainable growth of corporate value. In fiscal 2022, we held briefings on sustainability (such as our response to climate change and human resource strategies), intellectual property strategies, DX strategies, and other topics, in addition to management briefings, earnings results briefings (quarterly), and business briefings, disclosing details of them on our website. We conduct approximately 277 individual meetings annually, engage in dialogue with passive investors on the topic of shareholder relations, and hold many meetings and other forums on non-financial information, such as ESG, intellectual property, and intangible assets. We strive to improve information disclosure based on the views of shareholders and investors by receiving feedback in response to various briefings, meetings, disclosure materials, and other documents. For overseas investors, we provide full disclosure in English on our website and proactively conduct meetings, primarily online conferences. Senior management proactively promotes communication to improve corporate value over the medium to long term by making presenta- tions at briefings and through meetings, small meetings, and other forums. In these ways, we accelerate the transformation of our business portfolio and improve KPIs while taking into account the disposition of the stock market—such as for further improvement of capital effi- ciency—which are identified through dialogue. Establishing the Miyazaki Prefecture Digital Human Resource Development Consortium ment of digital human resources across industry, government, and academia. Although issues including the ageing population and labor shortages are becoming increasingly serious in Miyazaki Prefecture, it has abundant tourism resources and thriving industries, such as agriculture, forestry, fisheries, and livestock. The consortium believes leveraging digital technology can further enhance the prefecture’s appeal. The consortium will begin by operating programs for students and working adults, respectively, and expand the scope of its activities by promoting this initiative through a concerted industry– government–academia effort, with each organization utilizing engagement and its own strengths to develop human resources who will drive digitalization within Miyazaki Prefecture. • Regular community networking events • Community contribution activities In May 2023, five organizations, including Asahi Kasei, established a consortium to develop digital human resources in Miyazaki Prefecture, where our company was founded and a main location of our manufacturing sites. The consortium aims to address issues in the prefecture and contribute to regional revitalization by promoting efforts to popularize, spread, and improve the quality of digital technology through develop- Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Corporate Information 97  Consolidated Financial Statements 102 Corporate Profile / Stock Information 103 Information Disclosure Asahi Kasei Report 2023 9696 Name Suriyawong Pramsamai Company Daramic (Thailand) Country/region Thailand 0697 Consolidated Financial Statements Consolidated Balance Sheets Asahi Kasei Corporation and Consolidated Subsidiaries March 31, 2023 and 2022 ASSETS Current assets: Millions of yen 2023 2022 Cash and deposits Notes and 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 ¥ 251,181 442,692 310,380 162,255 169,918 154,335 (2,567) 1,488,195 ¥ 244,641 434,595 252,521 146,120 141,608 117,195 (2,471) 1,334,209 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 663,642 (347,877) 315,765 1,611,495 (1,313,694) 297,801 69,232 12,017 (6,457) 5,560 120,299 188,994 (125,950) 63,045 871,701 368,089 368,695 736,784 212,611 8,466 28,267 25,836 45,916 37,248 (498) 357,846 1,966,332 646,311 (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 Thousands of U.S. dollars* 2023 $ 1,880,942 3,315,052 2,324,247 1,215,029 1,272,413 1,155,721 (19,223) 11,144,189 4,969,612 (2,605,040) 2,364,572 12,067,508 (9,837,457) 2,230,051 518,436 89,988 (48,353) 41,635 900,846 1,415,261 (943,163) 472,106 6,527,640 2,756,395 2,760,933 5,517,328 1,592,115 63,397 211,674 193,470 343,837 278,928 (3,729) 2,679,691 14,724,667 Total assets ¥ 3,454,526 ¥ 3,349,075 $25,868,848 Detailed Consolidated Financial Statements are available at the following link: https://www.asahi-kasei.com/ir/library/financial_briefing/pdf/2303statements.pdf LIABILITIES AND NET ASSETS Liabilities: Current liabilities: Notes and accounts payable–trade Short-term loans payable Commercial paper Current portion of bonds payable 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 (2023—7,864,299 shares, 2022—6,640,935 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 Millions of yen 2023 2022 ¥ 180,560 196,032 124,000 40,000 6,766 147,163 17,491 72,948 80 8,410 4,240 3,788 110,683 912,163 170,000 409,424 28,526 27,767 339 4,309 15,910 128,708 22,703 38,671 846,355 1,758,517 103,389 79,841 1,142,325 (7,426) 1,318,129 52,310 72 265,013 25,397 342,793 35,087 1,696,009 ¥ 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 Thousands of U.S. dollars* 2023 $ 1,352,104 1,467,965 928,561 299,536 50,666 1,102,014 130,979 546,263 599 62,977 31,751 28,366 828,838 6,830,635 1,273,027 3,065,928 213,614 207,930 2,539 32,267 119,140 963,816 170,009 289,584 6,337,839 13,168,466 774,217 597,881 8,554,179 (55,609) 9,870,668 391,718 539 1,984,521 190,183 2,566,969 262,745 12,700,382 ¥3,454,526 ¥3,349,075 $25,868,848 * 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 ¥133.54 = US$1 prevailing on March 31, 2023, has been used. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Consolidated Statements of Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2023 and 2022 Consolidated Statements of Comprehensive Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2023 and 2022 98 Net income (loss) 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 2023 2022 Thousands of U.S. dollars* 2023 ¥ (89,370) ¥163,834 $(669,238) (13,706) 414 95,343 30,593 2,544 115,188 ¥ 25,818 ¥ 23,452 2,367 (25,746) 5 114,406 5,403 3,599 97,668 ¥261,502 ¥258,322 3,180 (102,636) 3,100 713,966 229,092 19,050 862,573 $ 193,335 $ 175,618 17,725 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 Foreign exchange loss Costs associated with idle portion of facilities 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 Business structure improvement expenses Total extraordinary loss Income (loss) before income taxes Income taxes—current —deferred Total income taxes Net income (loss) Net income (loss) attributable to non-controlling interests Millions of yen 2023 ¥2,726,485 1,952,709 773,776 645,424 128,352 2022 ¥2,461,317 1,691,549 769,769 567,122 202,647 3,896 4,021 923 5,210 14,050 5,907 2,287 3,300 9,371 20,867 121,535 32,201 729 8,814 – 41,744 2,805 12,517 189,446 7,092 13,326 225,186 (61,906) 56,118 (28,654) 27,464 (89,370) 1,942 1,364 4,332 8,878 7,088 21,663 3,643 – 850 7,764 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 Thousands of U.S. dollars* 2023 $20,416,991 14,622,652 5,794,339 4,833,189 961,150 29,175 30,111 6,912 39,015 105,212 44,234 17,126 24,712 70,174 156,260 910,102 241,134 5,459 66,003 – 312,595 21,005 93,732 1,418,646 53,108 99,790 1,686,281 (463,576) 420,234 (214,572) 205,661 (669,238) 14,542 Net income (loss) attributable to owners of the parent ¥ (91,312) ¥ 161,880 $ (683,780) * 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 ¥133.54 = US$1 prevailing on March 31, 2023, has been used. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Consolidated Statements of Changes in Net Assets Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2023 and 2022 99 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 ¥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 Millions of yen Balance at March 31, 2022 Changes during the fiscal year Dividends from surplus Net income (loss) attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Capital increase of consolidated subsidiaries Net changes of items other than shareholders’ equity Restated balance Changes during the fiscal year Dividends from surplus Net income (loss) attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Capital increase of consolidated subsidiaries Net changes of items other than shareholders’ equity (48,575) (91,312) (139) 25 0 (46) (1,414) 208 (48,575) (91,312) (1,414) 208 (139) 25 (46) (48,575) (91,312) (1,414) 208 (139) 25 (46) (13,977) (13,977) ¥52,310 414 414 97,789 97,789 30,538 30,538 114,764 114,764 3,682 3,682 118,446 (22,806) ¥ 72 ¥265,013 ¥ 25,397 ¥342,793 ¥35,087 ¥1,696,009 Millions of yen Total changes of items during the period – (46) (140,000) (1,207) (141,253) Balance at March 31, 2023 ¥103,389 ¥79,841 ¥1,142,325 ¥(7,426) ¥1,318,129 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 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 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 (47,187) 161,880 (371) 0 245 (412) 125 (47,187) 161,880 (412) 125 (371) 245 (47,187) 161,880 (412) 125 (371) 245 (25,600) (25,600) 5 5 116,763 116,763 5,274 5,274 96,443 96,443 4,347 4,347 100,789 215,069 Total changes of items during the period – 245 114,321 (287) 114,279 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 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationConsolidated Statements of Changes in Net Assets Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2023 and 2022 100 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 $774,217 $598,225 $ 9,602,554 $(46,570) $ 10,928,418 $ 496,383 $(2,554) $1,252,247 $ (38,505) $1,707,571 $235,173 $12,871,162 Thousands of U.S. dollars* Balance at March 31, 2022 Changes during the fiscal year Dividends from surplus Net income (loss) attributable to owners of the parent Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Capital increase of consolidated subsidiaries Net changes of items other than shareholders’ equity (363,749) (683,780) (1,041) 187 (363,749) (683,780) (10,589) (10,589) 1,558 1,558 (1,041) 187 (344) 0 (344) (104,665) (363,749) (683,780) (10,589) 1,558 (1,041) 187 (344) 886,970 (170,780) 3,100 3,100 732,282 228,681 859,398 732,282 228,681 859,398 27,572 27,572 Total changes of items during the period – (344) (1,048,375) (9,038) (1,057,758) (104,665) Balance at March 31, 2023 $774,217 $597,881 $ 8,554,179 $(55,609) $ 9,870,668 $ 391,718 $ 539 $1,984,521 $190,183 $2,566,969 $262,745 $12,700,382 * 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 ¥133.54 = US$1 prevailing on March 31, 2023, has been used. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationConsolidated Statements of Cash Flows Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2023 and 2022 Millions of yen Thousands of U.S. dollars* 2023 2022 2023 Millions of yen Thousands of U.S. dollars* 2023 2022 2023 101 Cash flows from financing activities: Net increase (decrease) in short-term loans payable ¥ (29,778) ¥ 65,632 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 Proceeds from share issuance to non-controlling interests Cash dividends paid to non-controlling interests Payments from changes in ownership interests in subsidiaries that do not result 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 (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Increase (decrease) in cash and cash equivalents resulting from changes in scope of consolidation Cash and cash equivalents at end of year 11,000 209,648 (75,461) 50,000 (3,665) (1,415) 208 (48,575) 1,499 (1,371) (163) (149) 111,780 15,744 4,744 242,948 29,000 896 (51,094) 50,000 (2,298) (412) 125 (47,187) – (2,190) – (152) 42,321 21,027 25,600 216,235 $ (222,989) 82,372 1,569,927 (565,082) 374,420 (27,445) (10,596) 1,558 (363,749) 11,225 (10,267) (1,221) (1,116) 837,053 117,897 35,525 1,819,290 212 ¥ 247,903 1,112 ¥ 242,948 1,588 $1,856,395 Cash flows from operating activities: Income (loss) before income taxes Depreciation and amortization Impairment loss Amortization of goodwill Increase (decrease) in provision for grant of shares Increase (decrease) in provision for periodic repairs Increase (decrease) in provision for product warranties Increase (decrease) in provision for removal cost of property, plant and equipment Increase (decrease) in net defined benefit liability Interest and dividend income Interest expense Equity in earnings of affiliates (Gain) loss on sales of investment securities (Gain) loss on valuation of investment securities (Gain) loss on sale of property, plant and equipment (Gain) loss on disposal of noncurrent assets (Increase) decrease in notes and accounts receivable–trade, and contract assets (Increase) decrease in inventories Increase (decrease) in notes and accounts payable–trade Increase (decrease) in accrued expenses Increase (decrease) in advances received Other, net Subtotal Interest and dividend income, received Interest expense paid Income taxes (paid) refund Net cash provided by (used in) 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 of loans receivable Collection of loans receivable Other, net ¥ (61,906) 138,956 189,446 37,695 (279) 2,585 198 2,951 (5,838) (7,917) 5,907 (923) (32,201) 2,805 (729) 12,517 8,405 (84,053) (7,949) (5,167) 8,040 (8,982) 193,563 13,666 (5,859) (110,565) 90,804 (5,209) 3,702 (151,973) 7,796 (20,185) (7,352) 43,200 (78,420) (6,661) 2,132 (613) ¥ 215,121 119,738 6,811 28,391 60 (502) 233 (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 $ (463,576) 1,040,557 1,418,646 282,275 (2,089) 19,357 1,483 22,098 (43,717) (59,286) 44,234 (6,912) (241,134) 21,005 (5,459) 93,732 62,940 (629,422) (59,525) (38,693) 60,207 (67,261) 1,449,476 102,336 (43,874) (827,954) 679,976 (39,007) 27,722 (1,138,034) 58,380 (151,153) (55,055) 323,499 (587,240) (49,880) 15,965 (4,590) Net cash provided by (used in) investing activities (213,584) (221,019) (1,599,401) * 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 ¥133.54 = US$1 prevailing on March 31, 2023, has been used. Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information Corporate Profile / Stock Information (as of March 31, 2023) Corporate Profile Company Name Asahi Kasei Corporation Paid-in Capital ¥103,389 million 102 Employees 48,897 (consolidated) 8,787 (non-consolidated) Founding May 25, 1922 Establishment May 21, 1931 Asahi Kasei Group Offices Asahi Kasei Corporation Core Operating Companies 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 Asahi Kasei (China) 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 No. 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 Room#1705-1706, 17th Floor Singha Complex Building, 1788 New Petchaburi Road, Bang Kapi, Huai Khwang, Bangkok 10310 Thailand Tel: +66-(0)21-634-944 Asahi Kasei Microdevices Hibiya Mitsui Tower 1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006 Japan Tel: +81-(0)3-6699-3933 Asahi Kasei Homes 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 205,670 Largest shareholders Percentage of equity (%) The Master Trust Bank of Japan, Ltd. (trust account) 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 Meiji Yasuda Life Insurance Company Note: Percentage of equity ownership after exclusion of treasury stock 15.49 6.14 3.41 2.95 2.71 1.83 1.73 1.43 1.43 1.33 Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate InformationInformation Disclosure 103 Investor Relations In addition to financial results and management briefing materials, the For Investors section of our website features a wide variety of infor- mation for investors in an easy-to-understand format. https://www.asahi-kasei.com/ir/ Sustainability The Sustainability section of our website presents information on our sustainability from the aspects of the environment, society, and gov- ernance (ESG). It covers initiatives, systems, and data regarding ESG issues. 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/ CDP Climate Change Reporting https://www.asahi-kasei.com/jp/sustainability/environment/climate_change/pdf/climate_change_01.pdf CDP Water Security Reporting https://www.asahi-kasei.com/jp/sustainability/environment/water_use/pdf/water_use_01.pdf Inclusion in Socially Responsible Investment Indexes (as of 2023) • FTSE4Good Index • MSCI ESG Leaders Indexes • FTSE Blossom Japan Index • MSCI Japan ESG Select Leaders Index • FTSE Blossom Japan Sector Relative Index • MSCI Japan Empowering Women Index (WIN) • S&P/JPX Carbon Efficient Index • Morningstar Japan ex-REIT Gender Diversity Tilt Index 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 “company with particularly advanced environmental programs.” 2022 Selected as a DX Stock In 2023, Asahi Kasei was selected as a Digital Transformation (DX) Stock, in an initiative con- ducted jointly by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange, for the third consecutive year. Recognized as “White 500” for 2023 (Large Enterprise Category) Asahi Kasei was selected as a “White 500” enterprise under the 2023 Certified Health & Productivity Management Outstanding Organizations Recognition Program, conducted by the Ministry of Economy, Trade and Industry and Nippon Kenko Kaigi. Hibiya Mitsui Tower 1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006 Japan https://www.asahi-kasei.com/ Asahi Kasei Report 2023Value CreationGrowth StrategyAsahi Kasei’s IdealsStrengthening of Corporate GovernanceStrengthening Our Foundation for GrowthCorporate Information 

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