Toray Industries Inc. Annual Report 2023

Plain-text annual report

TORA Y RE P ORT 02 Descriptions of predicted business results, projections and business plans contained in this material are based on forecasts and assumptions regarding the future business environ- ment made at the present time. This material is not a guarantee of the Company’s future business performance. Toray Industries, Inc.Toray Report 2023In addition to our traditional Management Philosophy (which includes the Corporate Philosophy, Corporate Missions, Corporate Guiding Principles), the Toray Philosophy includes the Corporate Slogan (which simply expresses Toray’s stance on embodying the Corporate Philosophy), the Vision (which represents the direction the Group is headed), the Corporate Culture (which includes values and management perspec-tives that have been maintained since the company’s founding), and the President’s Principles.VisionCorporatePhilosophyCorporateMissionsCorporateGuiding PrinciplesPresidentʼsPrinciplesCorporateSloganCorporateCultureToray PhilosophyCorporate Philosophy Contributing to society through the creation of new value with innovative ideas, technologies and products Corporate Missions For our customers: To provide new value to our customers through high-quality products and superior services For our employees: To provide meaningful work and fair opportunities For our shareholders: To practice sincere and trustworthy management For society: To establish ties and develop mutual trust as a responsible corporate citizen Corporate Guiding Principles Safety and Environment Placing top priority on safety, accident prevention and environmental preservation in order to protect the safety and health of employees, customers and local communities and contribute to building a sustainable society Ethics and Fairness Acting with fairness, high ethical standards and a strong sense of responsibility while complying with laws, regulations and social norms to earn trust and meet social expectations Customer-Focus Providing solutions of high value to customers, and pursuing customer satisfaction and the world’s highest level of quality Innovation Achieving continuous innovation in all corporate activities, and aiming for dynamic evolution and growth Strong Genba-Ryoku (Workplace Competency) Learning from one another and making self-driven efforts to leverage technologies and expertise in order to strengthen workplace competency, which is the foundation of our corporate activities Cooperation and Co-creation Forming integrated internal linkages and strategic alliances with external partners, and evolving together with society by 03 creating new value Emphasis on Human Resources Providing motivating work environments where employees can demonstrate their abilities, and building a vibrant corpo- rate culture Information Disclosure Appropriately disclosing corporate information and enhancing communication with stakeholders in order to maintain man- agement transparency Respect for Human Rights Fulfilling our responsibility to respect human rights as a good corporate citizen Vision Toray Group Sustainability Vision Corporate Culture • Contributing to society through business activities • People-centric management • Management from a long-term perspective • Pioneering spirit Corporate Slogan Innovation by Chemistry Toray Industries, Inc.Toray Report 2023Contents Value Creation Story Value Creation Strategy 04 Governance Segment Information Data 06 14 16 18 20 22 23 24 26 36 56 58 60 62 67 70 72 74 76 80 82 86 87 90 92 94 95 96 97 98 100 104 105 106 107 To Our Stakeholders Toray Group Value Creation History The Toray Group Value Creation Process Financial Highlights Non-Financial Highlights Toray Group’s Vision Long-Term Corporate Vision, TORAY VISION 2030 Review of the Medium-Term Management Program, Project AP-G 2022 Medium-Term Management Program, Project AP-G 2025 TORAY IR Day: Medium-term Management Program, Project AP-G 2025 Business Outline and Strategy Human Resources Management Interview with a Newly Appointed CEO REAL TALK—Everyone’s Voice Initiatives for Global Environmental Issues IR Seminar: Toray Group’s Initiatives Toward Realization of a Hydrogen Society R&D Intellectual Property Advanced Business Management by Utilizing Digital Technologies Members of the Board and Corporate Auditors Interview with a Newly Appointed Outside Director Corporate Governance Comments from an Outside Director Compliance Risk Management Results by Segment for FY 2022 Fibers & Textiles Performance Chemicals Carbon Fiber Composite Materials Environment & Engineering Life Science CSR Roadmap 2025 from the Perspective of Materiality Stakeholder Engagement External Evaluation Toray Group Worldwide Network Investor Information Toray Industries, Inc.Toray Report 2023Toray Group Corporate Social Responsibility Materiality In June 2023, Toray Group has selected a total of 11 material issues for its CSR activities, including five issues relat- ing to the Group’s Corporate Philosophy of contributing to society through the creation of new value. The other six issues represent key management foundation points that are consistently necessary to address as important issues. Accelerating Climate Change Mitigation Promoting a Circular Economy Taking a Nature- Positive Approach Contribution to Society through the Creation of New Value Committed to Healthier Lives Establishing Sustainable Supply Chain Enhancing Product Quality and Safety Developing in Collaboration with Stakeholders Ensuring Safety and Fire Accident Prevention Ensuring Ethics and Compliance Management Foundation Respecting Human Rights and Promoting Human Resource Diversity Strengthening Corporate Governance 05 Contribution to Society through the Creation of New Value Management Foundation Accelerating Climate Change Mitigation Accelerate the shift to carbon neutrality by contributing to reduction of global greenhouse gas emissions through inno- vative technologies and advanced materials and by pursuing emissions reduction across the Toray Group. Promoting a Circular Economy Promote sustainable, circular resource use and production by increasing recycling, using biomass-based raw materials, and converting CO2 into resources. Taking a Nature-Positive Approach Contribute to restoration of the natural environment by offer- ing products that help provide clean water and air, reduce envi- ronmental impact, and otherwise benefit the environment and by working to preserve green spaces and properly manage chemical substances. Committed to Healthier Lives Contribute to healthy, hygienic lifestyles by providing advanced materials that promote health and longevity, reduce the burden on nursing care and healthcare providers, improve the quality of medical care, and contribute to human safety. Developing in Collaboration with Stakeholders Focus on sustainable development for both the Group and society by pursuing co-creation with stakeholders and contrib- uting solutions to social issues. Appropriately disclose infor- mation and promote dialogue with stakeholders. Ensuring Safety and Fire Accident Prevention Protect public safety and the personal safety of employees by pursuing zero accidents, thoroughly practicing disater and fire prevention, and ensuring safe work environments. Ensuring Ethics and Compliance Act with fairness, high ethical standards and a strong sense of responsibility while complying with laws, regulations and social norms to earn trust and meet social expectations. Enhancing Product Quality and Safety Provide safe, high-quality products by further strengthening qual- ity control, quality assurance, and product safety management. Strengthening Corporate Governance Maintain sound management across the Toray Group by review- ing management systems and programs, strengthening inter- nal controls, and implementing risk management (managing risks related to business activities such as economic security, security trade, and information security). Establishing Sustainable Supply Chain Focus on building a stable, sustainable supply chain by pro- moting environmental conservation and respect for human rights throughout the supply chain. Respecting Human Rights and Promoting Human Resource Diversity Respect internationally recognized human rights and cre- ate work environments that allow a diverse pool of human resources to demonstrate their creativity. Moreover, taking materiality into account, in June 2023, the Group formulated CSR Roadmap 2025, which outlines activity targets, main initiatives, and key performance indicators (KPIs) for each of the Group’s ten CSR guidelines. https://www.toray.com/global/sustainability/stance/roadmap.html *Please refer to P.100 for the CSR Roadmap 2025 from the Perspective of Materiality Toray Industries, Inc.Toray Report 2023Toward a Truly Sustainable Company T o r a y I n d u s t r i e s , I n c . 06 T o r a y R e p o r t 2 0 2 3 ススススススススススススTo Our Stakeholders T o r a y I n d u s t r i e s , I n c . 07 T o r a y R e p o r t 2 0 2 3 Mitsuo Ohya President Toray Industries, Inc. Material of the suit worn:senbism™ (marketing by Toray Industries, Inc. Women’s & Men’s Wear Fabrics Dept.) Passing on the Company Values — Nurturing people while contributing to society and the environment, yesterday, today, and tomorrow— I was appointed president in June 2023 during the first year of the new Medium- Term Management Program, Project AP-G 2025 (AP-G 2025). Since its founding in 1926, Toray has voiced its strong belief that the Company is a public institution that serves society. Accordingly, we have engaged in corpo- rate activities with the ultimate goal of contributing to society. Toray’s corporate philosophy, “contributing to society through the creation of new value with inno- vative ideas, technologies, and products,” is based on the former company prin- ciple, “Toyo Rayon contributes to communities,” which was first expressed and codified in 1955. It was revised to the present corporate philosophy in 1986. While far from a novel concept today, Toray understands that its efforts to carry out the philosophy of “contributing to society” has attracted the recognition of society, which in turn has led to performance growth. At the same time, we have inher- ited the unwavering commitment to sustainability management of our predeces- sors, which entails developing human resources and taking all possible measures to protect the environment with an awareness toward chemistry-based manufac- 08 turing. Guided by this management vision, in 2018 we formulated the Toray Group Sustainability Vision. It clarifies the four perspectives of the world as envisioned by the Toray Group , and states internally and externally the commitment to initiatives that must be taken in order to realize them. Furthermore, in 2020, we announced details of the “Toray Philosophy” as a systemized approach to the management vision that underpins the Company and has been passed down since our found- ing, including the corporate philosophy. I am deeply respectful of the fact that Toray Group executives and employees have contributed to the development of society in Japan and worldwide by intro- ducing a variety of innovative materials based on this philosophy. I also keenly feel the weight of responsibility from being entrusted to lead the Company at a time of great change in the business environment. Together with our more than 48,000 employees, we will continue to share Toray’s mission since its founding to nurture people while contributing to society and the environment through our business activities, and this in turn will drive cor- porate development. Raison d’être of the Chemical Industry We believe that sustainability is an extremely important issue for the chemical industry. The chemical industry has a critical mission to provide useful raw mate- rials to help society become carbon neutral. On the other hand, the environmen- tal impact of business activities is significant, so the cost burden of energy and Toray Industries, Inc.Toray Report 2023To Our Stakeholders raw material conversion to achieve carbon neutrality is a major issue. In addition, there are areas where individual company efforts alone cannot address emissions reduction of the entire supply chain, such as promoting the use of renewable elec- tricity and hydrogen, as well as the disposal of raw materials and after-use mate- rials. We believe that the path to sustainable growth for chemical industry and materials manufacturers is to support the transformation of all industries and soci- eties by creating innovations toward carbon neutrality, while utilizing frameworks for reducing GHG emissions throughout society, such as the Japanese govern- ment’s Green Transformation (GX) measures and the GX League in Japan—a pri- vate sector-led initiative—to gain society’s understanding for sharing some of the costs of transformation of social and industrial structures. Toray Group intends to take the initiative in the industry with respect to such efforts. Toray Group Sustainability Initiatives The basic concept of our carbon neutral initiatives is to promote both “contribution to GHG reduction in society and reduction of emissions from our own business activities.” Under this concept, we aim to become carbon neutral in 2050 through the following four initiatives: (1) contribute to the carbon neutrality of society by expanding the Sustainability Innovation (SI) Business, (2) reduce Scope 1 and 2 09 emissions by thorough energy conservation, fuel conversion, and renewable elec- tricity usage, (3) reduce Scope 3 emissions through recycling, biomass-derived raw materials usage, CO2 recovery and recycling, and (4) make gradual, continu- ous investments tailored to each country’s energy situation. With regard to the circular economy, we are promoting product recycling, utiliz- ing biomass-derived raw materials, and conducting research on CO2 recovery and recycling. As there is growing momentum for recycling of end-of-life products, we will strive to build an advanced recycling system that only Toray Group can provide, such as reverse supply chain of polymer-related products, utilizing our strength of having multiple outlets for the same polymer including fiber, resin, film, composite materials, and water treatment. To this end, we will fully grasp the level of accep- tance of environmental premiums by consumers, customer trends in each indus- try and product, and the status of regulations and rule formation. As for the use of biomass-derived raw materials, we are developing technologies that utilize non-ed- ible and non-food biomass that does not compete with food. We have begun mass production of partial bio-polyethylene (PET) fiber utilizing bio-ethylene glycol (EG) derived from non-food sugarcane waste molasses, as well as commenced trial sales of nylon 510 fiber utilizing mainly non-edible castor beans. We are also redoubling our efforts in projects that help reduce environmental burdens, such as seawater desalination using water treatment membranes and the reuse of wastewater, as well as projects that contribute to better medical care and foster public health . Toray Industries, Inc.Toray Report 2023Medium-Term Management Program, Project AP-G 2025 —Five Basic Strategies— In the process of formulating AP-G 2025, we spent time reviewing the previous Medium-term Management Program, AP-G 2022, and were also conscious of the demands of society in areas such as sustainability. Over the past three years, the business environment has changed dramatically, with the spread of COVID-19 and the Ukraine situation leading to the greater prevalence of a bloc economy, as well as diversification in the way people work and their values. These are phenom- ena that we must respond to. In addition, capital efficiency to effectively allocate and utilize limited management resources along with global risk management are becoming increasingly important. As a materials manufacturer that has operated under the premise of continuous capital investment, we have needed to demon- strate how we would seek solutions to increase earnings scale and efficiency. The results are summarized in five basic strategies and financial strategies in AP-G 2025. Basic Strategy 1, “Sustainable growth,” is based on the Toray Group Sustainability Vision. We will work to expand our business by allocating management resources to the Sustainability Innovation (SI) business and the Digital Innovation (DI) business as 10 growth areas in which we can leverage our strengths and expect to increase earn- ings. DI supports the realization of a sustainable world. In Basic Strategy 2, “Ultimate value creation,” and Basic Strategy 3, “Product and operational excellence,” we will leverage digital technology with a focus on the frontlines. For ultimate value creation, we will promote the integration of tan- gible and intangible assets, the extension of the value chain and cross-organiza- tional value creation to add value to our businesses, while creating profitable new businesses that help solve social issues. For product and operational excellence, we will strengthen our quality capabilities and promote cross-organizational cost reduction activities that leverage the comprehensive strengths of our organization. In Basic Strategy 4, “Enhancement of people-centric management,” we will realize job satisfaction and supportive workplaces by securing and promoting diverse human resources, working to develop personnel, providing environment and opportunities that lead to employee pride in working for Toray Group, and building an organizational culture that values feedback from the frontlines. In Basic Strategy 5, “Risk management and governance,” we will appropriately control risks associated with business operations, such as economic security risks and country risks. We will also improve the effectiveness of internal controls, eliminate opportunities for fraud, and ensure sound organizational operations. Our mission is to further deepen the understanding both internally and exter- nally of the background and significance of the policies and strategies adopted and revised in AP-G 2025, as well as to implement the program. Toray Industries, Inc.Toray Report 2023To Our Stakeholders Incorporating ROIC in Toray Group — Business growth while maintaining a sound financial structure— In addition to the basic strategies, we will continue to maintain and reinforce the financial structure by improving asset efficiency based on cash flow and return on invested capital (ROIC) to support further growth. The SI and DI businesses to be expanded in Basic Strategy 1 include not only existing businesses but also businesses that require new investment and platforms, such as those related to resource recycling. In addition, investment is needed to accelerate GHG emission volume reductions. To this end, we will be even more balanced about allocating limited management resources mainly to capital investment, R&D, and human resources as we pursue business growth while maintaining a sound financial posi- tion. To help with this, we adopted ROIC as a new KPI. We will improve manage- ment resource efficiency and implement optimal reallocation, as well as increase capital efficiency by improving the balance between cash inflows and outflows and achieve sound, sustainable growth. Expansion of the Sustainability Innovation (SI) and Digital Innovation (DI) Businesses 11 While the international situation remains uncertain, there is further increase in demand to ensure a sustainable society. Under AP-G 2025, we plan to invest a total of ¥450 billion in the SI and DI busi- nesses, which we have designated as growth business fields, including capital investment and R&D expenses. We will also build a cross-organizational structure to propose comprehensive solutions to customers and accelerate external collab- oration with the aim of expanding these businesses to account for almost 60% of consolidated revenue. As a materials manufacturer with advanced research and technology devel- opment capabilities, Toray Group will continue to demonstrate the importance of its existence amid more opportunities to help achieve a sustainable society by expanding the SI and DI businesses. In addition, Toray Group is developing materials for building a green hydrogen supply chain, as it foresees the arrival of an era when green hydrogen, made from power provided by renewable energy and water becomes the mainstream of energy medium for the world. Toray is already the global leader in key components such as hydrocarbon (HC)-based electrolyte membranes, which increase the per- formance of water electrolysis devices. Thus in June 2022, Toray established the HS Division directly under the authority of the President in order to expand this business for the membranes. In order to shift to full-scale global deployment for bolstering the introduction of green hydrogen, Toray has also begun cooperating with companies and organizations from Japan and overseas, including Siemens Toray Industries, Inc.Toray Report 2023 Energy AG, one of the world’s leading manufacturers of water electrolysis devices and a company with which Toray has agreed to build a strategic partnership. Ultimate value creation —Create value by multiplying tangible and intangible assets— Since its founding, Toray’s mission has been to improve the quality of people’s lives, and this has ingrained a corporate culture of creating new and valuable prod- ucts, maintaining high quality, and providing products at reduced costs through tireless self-driven efforts. That is something to be proud of, but revenue growth is essential as a means to continue this mission, as an ideal without means will not be realized. When I was at the frontlines of sales, I believed my role was to deliver to the market the products created by Toray’s vaunted research, technology, and production, as well as to correctly communicate their value to the market and receive consideration for it. We will once again make known our basic approach to selling prices and our fundamental action of communicating with the market. We will also work on Toray’s unique pricing strategy, which is data-driven and backed by digital technology. In addition, we will create new value and increase our earning power by mul- 12 tiplying our tangible and intangible assets, including our accumulated elemental technologies and intellectual property, past capital expenditures, worldwide net- work of production bases, diverse business groups, and above all, the human resources who manage our business by making use of these assets. People-centric management –Toray brand– People-centric management is one of the values and management view Toray Group has been passed down since its establishment as part of its corporate cul- ture. We will continue to uphold this in order to put our corporate philosophy into practice. Toray’s philosophy that “success or failure of a company is decided by its people, and employees shape its destiny,” has been widely adopted not only in Japan but also overseas, and Toray is implementing Toray-style management on a global scale while respecting the differences in customs and societal ways of thinking in each country and region. To realize our corporate philosophy of “contributing to society through the cre- ation of new value with innovative ideas, technologies, and products,” we believe that the Toray brand is fostered when Toray Group employees deliver products and services of high technology and quality to customers and are recognized by soci- ety based on the Toray Philosophy. We consider the UL certification issue uncov- ered two years ago to be a matter that could have shaken the Toray brand. We will continue to work earnestly to prevent such a recurrence and restore confidence in our products. Toray Industries, Inc.Toray Report 2023To Our Stakeholders In Basic Strategy 4, we promote “enhancement of people-centric management” under AP-G 2025. Employees embody the Toray brand itself, and Toray’s sustain- able development would not be possible without employees who understand the Toray Philosophy. I tell our employees that the key phrases of people-centric man- agement are “Power of dialogue,” “One team, our team (all for one, one for all),” “Ability to think things through and get things done,” and “Swing for the fences.” With dialogue as the starting point, Toray will focus on creating an environment where full-fledged corporate growth and human growth and happiness through team building and interpersonal skills leads to Toray’s Group’s sustainability. Toward a truly sustainable company –Fundamentals lead to results– I am by no means trying to say anything new. Toray already has something to be proud of in terms of its management principles, technology, product creation ability, and people. Targeting the Corporate Philosophy and taking fundamen- tal actions outlined in the Toray Philosophy, the united efforts of Toray execu- tives and employees have made a difference and will lead to results. We will engage in dialogue with our customers and the market, earn the trust of society from the results of our corporate activities, and create a virtuous cycle in which 13 employees work energetically with the aim of becoming a truly sustainable com- pany. To this end, I am committed to taking a long-term, all-encompassing view- point to ensure that the direction in which each individual’s actions will swell and move us forward is the correct one. We appreciate the continued understanding of our stakeholders. Mitsuo Ohya President Toray Industries, Inc. Toray Industries, Inc.Toray Report 2023 Toray Group began as a manufacturer of viscose rayon in 1926. On top of all three major synthetic fibers such as nylon, polyester, and acrylic, the Company has continued to develop innovative technologies while creating a host of advanced materials and high-added-value products in a broad range of films, chemicals, resins, electronic and information materials, carbon fiber composite materials, pharmaceuti- cals and medical products, water treatment, and environmental fields. With an eye toward how society will evolve in 2050 and how innovative technologies and advanced materials may be utilized as a driving force, we will adopt a long-term perspective toward enhancing our corporate value. (Trillion yen) FY 2022 Consolidated Revenue ¥2,489.3 billion 2 1 14 FY 2000 Consolidated Net Sales ¥1,075.4 billion FY 1990 Consolidated Net Sales ¥917.1billion 1926 Establishment 1960 1970 1980 1990 2000 2010 2020 Toray Industries, Inc.Toray Report 20231941Succeeded in the synthesis and melt spinning of Nylon 6 fiber using proprietary technologyDeveloped using proprietary technol-ogy, “Nylon 6” has created new mar-kets as a new fiber that can be applied in fishing nets as well as apparels such as stockings.1959Manufacture of LUMIRROR™ polyester film beganToray was the first company in Japan to industrialize polyester film. Positive steps have been taken to address market growth and to adapt to changing conditions and circum-stances while gaining a share across a wide range of fields such as video tapes, industrial materials, specialty products, and others.1971Manufacture and marketing of carbon fiber TORAYCA™ beganHigh-performance carbon fiber TORAYCA™ features light weight, high tensile strength, and high stiff-ness. Sales activities commenced under the registered trademark “TORAYCA” from 1971.1971Marketing of ESCAINE™, ultra-microfiber non-woven fabric with suede texture, beganESCAINE™ is a non-woven fabric with suede texture using ultrafine micro-fibers. It was highly acclaimed as a fashion material for its lightweight and excellent chromogenic properties. Currently, it is being used in such areas as automobile interiors and furniture.Toray Group Value Creation HistoryFY 2022 Consolidated Revenue ¥2,489.3 billion FY 2000 Consolidated Net Sales ¥1,075.4 billion 15 FY 1990 Consolidated Net Sales ¥917.1billion 1960 1970 1980 1990 2000 2010 2020 (Trillion yen) 2 1 1926 Establishment Toray Industries, Inc.Toray Report 20232014Full-scale entry into the large-tow carbon fiber businessThrough the acquisition of the U.S.-based large-tow carbon fiber manufacturer Zoltek Companies, Inc., Toray Group aims to further expand its business for large-tow carbon fiber as an advanced mate-rial that brings about solutions for global environmental problems in a broad range of fields.1980Marketing of ROMEMBRA™ reverse osmosis membrane elements beganResearch began in 1968 with ongo-ing development as a water treatment membrane. ROMEMBRA™ enabled the production of ultra-pure water for the semiconductor industry and the desalination of sea and brine water.1990TORAYCA™ carbon fiber prepreg certified as a primary structural material for The Boeing Company’s passenger aircraftInitially the main applica-tions of carbon fiber were fishing rods, golf shafts, and other sporting goods. Through improved technology and quality, the Company built up trust in this product as a secondary structural material in aircraft applications. In 1990, Toray prepreg was certified for the first time as a primary structural material (for structural parts where damage is directly linked to a crash) for the Boeing 777.2006Strategic partnership started with UNIQLO CO., LTD.As a company that provides innovative technologies and materials that have the power to fundamentally change society, Toray entered into a partnership agree-ment with UNIQLO CO., LTD., a com-pany that enriches people’s lives through clothes. Under this partnership both com-panies provide products that deliver new value and unprecedented levels of per-formance and comfort to people all over the world. In a bid to realize its corporate philosophy of “Contributing to society through the creation of new value with innovative ideas, technologies and products,” Toray Group will provide new value to society through a process of co-creation with customers, suppliers, and other parties that make up the supply chain, starting at the materials stage, while promoting mutual cooperation in R&D, sales and marketing, and Financial Capital • Net assets ¥3,194.0 billion • Rating (R&I) A+ Equipment Capital • Number of manufacturing subsidiaries 105 • Capital Expenditures ¥115.2 billion Intellectual Capital • Valid and Enforceable Patents 21,323 Domestic 6,295 Overseas 15,028 • R&D Expenses ¥68.9 billion 16 Human Capital • Number of Employees 48,682 • Gender Ratio (Male:Female) 7:3 • Number of R&D staff about 4,300 Social and Relationship Capital • Business Bases 29 countries/regions Natural Capital • Petrochemical products • Metals, mineral raw materials • Natural fiber • Plant-based material • Water resources • Energy resources (Crude oil, natural gas, etc.) Fibers & Textiles uit of ultim ate hnologies gy integratio n w te olo D & R c rs u p e h t h g u o n h c e t d n a s e n g n i t a e r C r t h t i m i l E n s u Performance Chemicals D e m o n s t r a ting the collective s t r e ngths of our R & D o rganizations Life Science S ale s P r o b a s p e o & d s i Corporate Philosophy Contributing to society through the creation of new value with innovative ideas, technologies and products M a r k e t i n g o n n g m s o a t l u e r i a l s t i o n s Environment & Engineering Innovation through Co-creation Customers Providing New Value to Society Toray Group Sustainability Vision Produc t i o n r i n h i g h - q u g a stable supply of ality products a l v alue chain u ilding a B o b g l Carbon Fiber Composite Materials Value that we cherish as management core value Contributing to society through business activities People-centric management Management from a long-term perspective Accelerating measures to counter climate change Realizing sustainable, recycling-based use of resources and production Providing clean water and air Contributing to better medical care and hygiene for people worldwide Toray Industries, Inc.Toray Report 2023The Toray Group Value Creation Process production, the key strengths of Toray Group, based on the core values of “contributing to society through business activities,” “people-centric management,” and “management from a long-term perspective.” At the same time, we will work to realize the four perspectives of the world as outlined in the Toray Group Sustainability Vision. Innovation through Co-creation Customers Providing New Value to Society Accelerating measures to counter climate change Realizing sustainable, recycling-based use of resources and production Providing clean water and air Contributing to better medical care and hygiene for people worldwide Toray Group 17 Sustainability Vision Fibers & Textiles e m o n s t r a ting the collective s t r e ngths of our D R & D o rganizations Life Science hnologies uit of ultim ate gy integratio n D & R c w te rs u olo n h c e n g n i t a e r C p e h t h g u o e t d n a s r t h t i m i l Performance Chemicals E n s u r i n h i g h - q S ale s P r o p b a s e o & d M a r k e t i n g s i o n n g m s o a t e r i a l s l u t i o n s Corporate Philosophy Contributing to society through the creation of new value with innovative ideas, technologies and products Environment & Engineering Produc t i o n u g a stable supply of ality products u ilding a a l v alue chain B o b g l Carbon Fiber Composite Materials Value that we cherish as management core value Contributing to society through business activities People-centric management Management from a long-term perspective Toray Industries, Inc.Toray Report 2023 Financial Highlights Revenue Core Operating Income and Core Operating Income to Revenue Proﬁt Attributable to Owners of Parent, ROA and ROE Dividend per Share and Capital Expenditures Depreciation and Amortization FY 2022 Revenue (consolidated) ¥2,489.3 billion (Billion yen) 3,000 2,500 2,000 1,500 1,000 500 0 FY 2022 Core Operating Income (consolidated) FY 2022 Proﬁt Attributable to Owners of Parent ¥9.6 billion Core Operating Income to Revenue 3.9% (Billion yen) 150 100 50 0 ¥72.8 billion ROA 3.1% ROE 5.0% (%) 6 (Billion yen) 100 80 60 40 20 0 4 2 0 (%) 10 8 6 4 2 0 (FY) 19 20 21 22 23 Forecast (FY) 19 20 21 22 23 Forecast (FY) 19 20 21 22 (FY) 19 20 21 22 23 (FY) 19 20 21 22 23 (FY) 19 20 21 22 23 Forecast Forecast Forecast 18 Core operating income (left axis) Core operating income to revenue (right axis) Proﬁt attributable to owners of parent (left axis) ROA (right axis) ROE (right axis) Dividend per share (left axis) Payout ratio (right axis) Total Assets and Equity Ratio Interest-bearing Liabilities and Debt-to-Equity Ratio (D/E ratio)　 Cash Flows R&D Expenses/Expenditures Environmental Facility Investment Environmental Preservation Costs End of FY 2022 Total Assets ¥1,635.8 billion Equity Ratio 48.1% (Billion yen) 2,000 1,600 1,200 800 400 0 End of FY 2022 Interest-bearing Liabilities ¥950.1 billion D/E ratio 0.62 (Billion yen) 1,000 800 600 400 200 0 (%) 50 40 30 20 10 0 FY 2022 Cash Flows from Operating Activities Cash Flows from Investing Activities ¥145.2 billion -¥102.7 billion FY 2022 R&D Expenditures ¥68.9 billion FY 2022 ¥1.5 billion FY 2022 ¥9.3 billion Environmental Facility Investment Environmental Preservation Costs Free Cash Flow ¥42.5 billion (Billion yen) 1.0 0.8 0.6 0.4 0.2 0 300 200 100 0 -100 -200 -300 (Billion yen) 120 80 40 0 -40 -80 -120 (Billion yen) (Billion yen) (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 23 (FY) 19 20 21 22 (FY) 19 20 21 22 Forecast Total assets (left axis) Equity ratio (right axis) Interest-bearing liabilities (left axis) D/E ratio (right axis) Cash ﬂows from operating activities (left axis) Cash ﬂows from investing activities (left axis) Free cash ﬂow (right axis) Payout Ratio FY 2022 Dividend per Share ¥18.0 yen Payout Ratio 39.6% FY 2022 Capital Expenditures ¥115.2 billion FY 2022 Depreciation and Amortization ¥129.2 billion (Billion yen) 200 (Billion yen) (Yen) 20 16 12 8 4 0 80 60 40 20 0 (%) 50 40 30 20 10 0 150 100 50 0 2.0 1.5 1.0 0.5 0 140 120 100 80 60 40 20 0 (Billion yen) 10.0 7.5 5.0 2.5 0 Toray Industries, Inc.Toray Report 2023FY 2022 Revenue (consolidated) ¥2,489.3 billion (Billion yen) 3,000 2,500 2,000 1,500 1,000 500 0 End of FY 2022 Total Assets ¥1,635.8 billion Equity Ratio 48.1% (Billion yen) 2,000 1,600 1,200 800 400 0 100 50 0 D/E ratio 0.62 (Billion yen) 1,000 800 600 400 200 0 (%) 50 40 30 20 10 0 Core Operating Income (consolidated) Proﬁt Attributable to Owners of Parent Core Operating Income to Revenue FY 2022 ¥9.6 billion 3.9% (Billion yen) 150 FY 2022 ¥72.8 billion ROA 3.1% ROE 5.0% (%) 6 (Billion yen) 100 80 60 40 20 0 300 200 100 0 -100 -200 -300 4 2 0 1.0 0.8 0.6 0.4 0.2 0 (%) 10 8 6 4 2 0 80 40 0 -40 -80 -120 Revenue Core Operating Income and Proﬁt Attributable to Owners of Core Operating Income to Revenue Parent, ROA and ROE Dividend per Share and Payout Ratio Capital Expenditures Depreciation and Amortization FY 2022 Dividend per Share ¥18.0 yen Payout Ratio 39.6% (Yen) 20 16 12 8 4 0 (%) 50 40 30 20 10 0 FY 2022 Capital Expenditures ¥115.2 billion FY 2022 Depreciation and Amortization ¥129.2 billion (Billion yen) 200 (Billion yen) 140 150 100 50 0 120 100 80 60 40 20 0 (FY) 19 20 21 22 23 (FY) 19 20 21 22 23 (FY) 19 20 21 22 Forecast Forecast (FY) 19 20 21 22 23 Forecast (FY) 19 20 21 22 23 Forecast (FY) 19 20 21 22 23 Forecast Core operating income (left axis) Core operating income to revenue (right axis) Proﬁt attributable to owners of parent (left axis) ROA (right axis) ROE (right axis) Dividend per share (left axis) Payout ratio (right axis) 19 Total Assets and Equity Ratio Interest-bearing Liabilities and Cash Flows R&D Expenses/Expenditures Environmental Facility Investment Environmental Preservation Costs Debt-to-Equity Ratio (D/E ratio)　 End of FY 2022 Interest-bearing Liabilities ¥950.1 billion FY 2022 Cash Flows from Cash Flows from Operating Activities Investing Activities ¥145.2 billion -¥102.7 billion Free Cash Flow ¥42.5 billion (Billion yen) FY 2022 R&D Expenditures ¥68.9 billion FY 2022 Environmental Facility Investment FY 2022 Environmental Preservation Costs ¥1.5 billion ¥9.3 billion (Billion yen) 120 (Billion yen) 80 (Billion yen) 2.0 (Billion yen) 10.0 60 40 20 0 1.5 1.0 0.5 0 7.5 5.0 2.5 0 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 23 Forecast (FY) 19 20 21 22 (FY) 19 20 21 22 Total assets (left axis) Equity ratio (right axis) Interest-bearing liabilities (left axis) D/E ratio (right axis) Cash ﬂows from operating activities (left axis) Cash ﬂows from investing activities (left axis) Free cash ﬂow (right axis) Toray Industries, Inc.Toray Report 2023Non-Financial Highlights Net Sales/Revenue of Green Innovation Businesses Net Sales/Revenue of Life Innovation Businesses Avoided CO2 Emissions Energy Consumption and per Reduction of Atmospheric VOC Waste Recycling Rate Unit Energy Consumption Index Emissions (VS. FY 2000) FY 2022 Revenue of Green Innovation Businesses FY 2022 Revenue of Life Innovation Businesses ¥993.4 billion ¥369.6 billion FY 2022 Avoided CO2 Emissions 366 million tons Reduction of Atmospheric VOC Emissions Waste Recycling Rate FY 2022 70.9% FY 2022 86.8% (Billion yen) 1,000 (Billion yen) 400 (Million tons) 400 800 600 400 200 0 300 200 100 0 300 200 100 0 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 1990 2019 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 J-GAAP IFRS J-GAAP IFRS 20 Contributed Annual Water Filtration Throughput Reduction of Greenhouse Gas Emissions per Unit of Sales/Revenue (%) (VS. FY 2013) Reduction of Comparative Water Usage per Unit of Sales/Revenue (%) (VS. FY 2013) Percentage of Women in Unit Manager or Higher Positions Number of Employees by Gender FY 2022 Contributed Annual Water Filtration Throughput 67 million tons/day FY 2022 Reduction of Greenhouse Gas Emissions per Unit of Revenue (%) FY 2022 Reduction of Comparative Water Usage per Unit of Revenue (%) 34.6% 31.9% (FY 2013 is set to an index value of 100) (FY 2013 is set to an index value of 100) (Million tons/day) 70 60 50 40 30 20 10 0 (Index) 100 90 80 70 60 0 (Index) 100 80 60 0 (FY) 19 20 21 22 (FY) 13 19 20 21 22 (FY) 13 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 18 19 20 21 (VS. FY 1990 / Toray alone) FY 2022 Energy Consumption 24.6 Million gigajoules Per Unit Energy Consumption Index 85.4 (Million gigajoules) (FY 1990 is set to an index value of 100) (Index) 100 (%) 80 80 60 40 0 75 70 65 0 Energy consumption (left axis) Per unit energy consumption index (right axis) *The energy consumption shown in this graph does not include renewable energy. (Toray alone) FY 2022 10.0% Percentage of Women in Unit Manager or Higher Positions FY 2022 Male 34,018 Female 14,664 40 30 20 10 0 (%) 10.0 9.5 9.0 0 (Employees) 50,000 40,000 30,000 20,000 10,000 0 Male Female (%) 90 85 80 0 100 50 0 Average Time on the Job and Number of Employees Taking Childcare Leave (Toray alone) Number of Employees Taking Number of Employees Taking Childcare Leave: Male Childcare Leave: Female FY 2022 82 AverageTime on the Job: Male 17.2years (Employees) 150 46 AverageTime on the Job: Female 17.5years (Years) 21 14 7 0 Number of employees taking childcare leave (left axis) Average time on the job (right axis) Male Female Male Female Toray Industries, Inc.Toray Report 2023 Net Sales/Revenue of Net Sales/Revenue of Avoided CO2 Emissions Green Innovation Businesses Life Innovation Businesses FY 2022 FY 2022 FY 2022 Revenue of Green Innovation Businesses Revenue of Life Innovation Businesses Avoided CO2 Emissions ¥993.4 billion ¥369.6 billion 366 million tons Energy Consumption and per Unit Energy Consumption Index (VS. FY 1990 / Toray alone) FY 2022 Energy Consumption 24.6 Million gigajoules Per Unit Energy Consumption Index 85.4 (FY 1990 is set to an index value of 100) Reduction of Atmospheric VOC Emissions (VS. FY 2000) Waste Recycling Rate FY 2022 Reduction of Atmospheric VOC Emissions FY 2022 Waste Recycling Rate 70.9% 86.8% (Billion yen) 1,000 (Billion yen) 400 (Million tons) 400 (Million gigajoules) 40 (Index) 100 (%) 80 30 20 10 0 80 60 40 0 75 70 65 0 (%) 90 85 80 0 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 1990 2019 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 Energy consumption (left axis) Per unit energy consumption index (right axis) *The energy consumption shown in this graph does not include renewable energy. Percentage of Women in Unit Manager or Higher Positions (Toray alone) Number of Employees by Gender FY 2022 Percentage of Women in Unit Manager or Higher Positions 10.0% FY 2022 Male 34,018 Female 14,664 (%) 10.0 9.5 9.0 0 (Employees) 50,000 40,000 30,000 20,000 10,000 0 21 Average Time on the Job and Number of Employees Taking Childcare Leave (Toray alone) FY 2022 Number of Employees Taking Number of Employees Taking Childcare Leave: Male Childcare Leave: Female 82 AverageTime on the Job: Male 17.2years (Employees) 150 46 AverageTime on the Job: Female 17.5years 100 50 0 (Years) 21 14 7 0 (FY) 19 20 21 22 (FY) 13 19 20 21 22 (FY) 13 19 20 21 22 (FY) 19 20 21 22 (FY) 19 20 21 22 (FY) 18 19 20 21 Male Female Number of employees taking childcare leave (left axis) Male Female Average time on the job (right axis) Male Female J-GAAP IFRS J-GAAP IFRS Contributed Annual Water Filtration Throughput Reduction of Greenhouse Gas Emissions Reduction of Comparative Water per Unit of Sales/Revenue (%) Usage per Unit of Sales/Revenue (%) FY 2022 Contributed Annual Water Filtration Throughput 67 million tons/day (Million tons/day) (VS. FY 2013) FY 2022 34.6% (VS. FY 2013) FY 2022 31.9% Reduction of Greenhouse Gas Emissions per Unit of Revenue (%) Reduction of Comparative Water Usage per Unit of Revenue (%) (FY 2013 is set to an index value of 100) (FY 2013 is set to an index value of 100) 800 600 400 200 0 70 60 50 40 30 20 10 0 300 200 100 0 (Index) 100 90 80 70 60 0 300 200 100 0 (Index) 100 80 60 0 Toray Industries, Inc.Toray Report 2023 Toray Group’s Vision Toray Group established its Long-Term Corporate vision, TORAY VISION 2030, as a milestone for realizing the four perspectives of the world envisioned for 2050 as clarified in the Toray Group Sustainability Vision. Moreover, in March 2023, it announced the Medium-Term Management Program, Project AP-G 2025, which defines the issues to be addressed over the three-year period from FY 2023 to FY 2025. Since then, the Group has been moving forward with these efforts. Toray Group Sustainability Vision climate change, water shortages, and resource depletion, through its innovative technologies and advanced materi- als. This means that the Group must not only ensure that Toray Group Sustainability Vision formulated in July 2018 its growth does not have a negative impact on global sus- clarifies the four perspectives of the world in 2050 that tainability, but must also work closely with its business Toray Group aims to achieve, as well as the initiatives that partners worldwide to help realize the co-creation of new must be taken in order to realize them. More specifically, value. As the basis for TORAY VISION 2030, Toray Group Toray Group’s mission is to provide the necessary solu- Sustainability Vision outlines the future direction of Toray tions to the challenges facing the world in terms of both Group and its contribution to addressing global issues, development and sustainability, including the issues of including the goals of the Paris Agreement and the United an ever-increasing global population, aging populations, Nations Sustainable Development Goals (SDGs). T o r a y I n d u s t r i e s , I n c . 22 T o r a y R e p o r t 2 0 2 3 The World as Envisioned in 2050 and Toray Group Initiatives Toray Group Initiatives Four Perspectives of the World as Envisioned in 2050 d n a i l s e g o o n h c e t e v i t a v o n n i s ’ p u o r G y a r o T s l a i r e t a m d e c n a v d a Accelerating measures to counter climate change Realizing sustainable, recycling-based use of resources and production Providing clean water and air Contributing to better medical care and hygiene for people worldwide A net zero emissions world, where greenhouse gas emissions are completely offset by absorption A world where resources are sustainably managed A world with a restored natural environment, with clean water and air for everyone A world where everyone enjoys good health and hygiene 1 2 3 4 Long-Term Corporate Vision, TORAY VISION 2030 Toray Group aims to achieve sound, sustainable growth while promoting a business model transformation by accu- rately identifying changing industrial trends caused by Long-term Strategies to Achieve “Sound, Sustainable Growth” demographic factors, environmental issues, and techno- 1. Global Expansion in Growth Business Fields logical innovation. With this in mind, Toray Group is pro- • Promote SI Business, which contributes to the solutions moting active investment to promote “global expansion in for issues of global environment, resource, and energy, growth business fields.” To make this possible, the Group as well as to better medical care, longevity, and the fos- is working to maximize the value it can create over the tering of public health medium- to long- term by “strengthening competitive- 2. Strengthening Competitiveness ness” through continuous business model innovations and • Create new value through business advancement and total cost reductions, and by “strengthening the manage- high-added-value creation, thereby providing solutions with ment foundation” to enable investment for growth based material-oriented approaches to customers and society on enhanced capital investment efficiency and an improved • Pursue dramatic cost reductions by setting challenging financial structure. targets as well as strive to reduce environmental impact Furthermore, the Group had worked across all segments 3. Strengthening the Management Foundation under the policy of “global expansion in growth business • Improve cash flow and capital efficiency, and balance fields” by expanding business activities through the supply financial soundness and growth investment of Green Innovation (GR) products and Life Innovation (LI) • Conduct business structure reforms of low-growth and products, and since FY 2023, the Group has set a new tar- low-profitability businesses get for the supply of Sustainability Innovation (SI) products that merge these two groups of products in an effort to expand revenue and profit. In addition, the Group is actively engaged in the group-wide Future TORAY-2020s Project Revising 2030 Targets Upwards and Accelerating Action on Sustainability (FT Project). As part of this project, the Group is investing Toray Group has advanced its growth strategies along the resources intensively in large-scale themes with the aim basis of the Toray Group Sustainability Vision. In light of the of achieving total revenue of around ¥1 trillion in the 2020s outcomes of its efforts through FY 2022, however, the Group 23 across all new businesses. has revised its targets for FY 2030 and has set out to accel- erate action on sustainability. Specifically, the Group has sig- nificantly elevated the respective targets for CO2 emissions avoided in the value chain, water filtration throughput con- tribution by Toray’s water treatment membranes, and GHG emissions and water usage in production activities. Toray Group Sustainability Vision: FY 2030 Targets Previous Targets FY 2030 Target [Baseline: FY 2013] New Targets Supply of Green Innovation products Supply of Life Innovation products CO2 emissions avoided in value chain*2 Water filtration throughput contribution by Toray’s water treatment membranes*3 4-fold 6-fold 8-fold 3-fold GHG emissions in production activities Per unit of revenue across the Toray Group*4 30% reduction Integrated Supply of Sustainability Innovation products*1 CO2 emissions avoided in value chain*2 Water filtration throughput contribution by Toray’s water treatment membranes*3 GHG emissions in production activities*4 Per unit of revenue across the Toray Group Greenhouse gas emissions of Toray Group in Japan*5 Water usage in production activities Per unit of revenue across the Toray Group 30% reduction Water usage in production activities Per unit of revenue across the Toray Group FY 2030 Target [Baseline: FY 2013] 4.5-fold 25-fold 3.5-fold 50% or more reduction 40% or more reduction 50% or more reduction *1 (1) Products that accelerate measures to counter climate change; (2) products that facilitate sustainable, recycling-based use of resources and production; (3) products that help provide clean water and air and reduce environmental impact; and (4) products that help deliver better medical care and hygiene for people worldwide. *2 Toray calculates the CO2 emissions reduced throughout the value chain of products in accordance with the chemical sector guidelines of the Japan Chemical Industry Association, the International Council of Chemical Associations (ICCA), and the World Business Council for Sustainable Development (WBCSD). *3 Water treated annually with Toray water treatment membranes. It is calculated by multiplying the amount of fresh water that the Toray membranes can produce per day, including reverse osmosis (RO), ultrafiltration (UF) and membrane separation bioreactors (MBR), by the number of membrane elements sold. *4 With the use of renewable energies and other zero emission power sources rising worldwide, the Toray Group aims to employ zero-emission power sources at a rate equivalent to or better than the targets in each country by FY 2030. *5 In Japan, Toray works to surpass the reduction target set for the industrial sector by the Japanese government (absolute emissions reduced by 38%) in its comprehensive plan (Cabinet decision on October 22, 2021) based on Japan’s Act on Promotion of Global Warming Countermeasures. Toray Industries, Inc.Toray Report 2023Review of the Medium-Term Management Program, Project AP-G 2022 Revenue and Core Operating Income Analysis Under the Medium-Term Management Program, Project AP-G 2022, announced in May 2020, Toray Group raised the three basic strategies of “Global expansion in growth business fields,” “Strengthening competitiveness,” and “Strengthening the management foundation.” At the same time, it also established the four Group-wide ini- tiatives of “New business creation,” “Advanced business management by utilizing digital technology,” “Reduction of greenhouse gas emissions in production activities,” and “Ensuring the Toray Philosophy is fully embraced.” And to achieve “Sound, sustainable growth” in line with the Long-Term Corporate Vision, TORAY VISION 2030, the Group took an approach that balanced the pursuit of busi- ness expansion through active investment with efforts to implement structure reforms and to reinforce the financial structure to facilitate the growth strategy. However, economic activity stagnated from the begin- ning of 2020 stemming from the spread of COVID-19, and growth subsequently slowed due to changes in the external environment, including the spread of infections to COVID variants, Russia’s invasion to Ukraine, supply con- straints from labor shortages and disruptions in logistics, and soaring resource prices from inflationary pressure. Although revenue managed to return to a recovery track from FY 2021 against the backdrop of progress in vaccina- tions, profits faced downward pressure due to shortcom- ings in passing on higher material prices to sales prices in line with increases in variable costs. A decline in factory 24 utilization rates due to inventory adjustments in the semi- conductor and display markets also had an impact. As a result, revenue and core operating income of FY 2022 both came in far below the initial targets, only reaching ¥2,489.3 billion and ¥96 billion, respectively. Revenue and Core Operating Income (Billion yen) Revenue Core operating income 2,091.2 1,883.6 2,228.5 2,489.3 2,600.0 180.0 125.5 132.1 90.3 96.0 (FY) 2019 2020 2021 2022 2022 Target Variance Analysis of Core Operating Income (Billion Yen) -138.0 180.0 -217.0 +196.0 +67.0 +8.0 96.0 (FY) 2022 Target Quantity Material and Fuel Price Sales Price Fixed Cost Currency Variance, etc. 2022 Actual Billion Yen AP-G 2022 Target FY 2022 Actual Difference Factors for Increase and Decrease of Core Operating Income Fibers & Textiles 76.0 51.2 -24.8 Performance Chemicals 90.0 30.4 -59.6 Income decreased due to pandemic-induced changes in the demand structure, such as a shift from formal wear to sports and out- door apparel. Another factor include a drop in sales volume of materials for industrial applications, and the impact of soaring raw material and fuel prices. Resins & Chemicals Business: • Income decreased due to a slow recovery in automobile production volumes and a decline in sales volume caused by slow eco- nomic recovery in China. Films Business, Electronic & Information Materials Business: • Income decreased significantly due to lower sales volume. The market is currently in an adjustment phase following a period of unusually high telecommuting-driven demand for TV and smartphone display-related products and special demand for semicon- ductors. The sharp rise in raw material and fuel prices also had a significant impact. Carbon Fiber Composite Materials 24.0 15.9 -8.1 Sales volume fell due to the impact of lower the lower production rate of commercial aircraft in aerospace applications. However, higher sales of carbon fiber for wind turbine blades and pressure vessels in industrial applications helped to minimize the decline in income. 19.0 19.7 +0.7 Income grew due to promotion of high-added-value products for seawater desalination applications undertaken to expand the reverse osmosis (RO) membrane business. Another contributing factor was a net change in price due to the depreciation of the yen. 0 2.0 0.2 2.5 +0.2 +0.5 +7.1 Income increased due to a reduction in fixed costs for Toray Industries, Inc. Reconciliations ▲31.0 ▲23.9 e m o c n I g n i t a r e p O e r o C Environment & Engineering Life Science Others Total 180.0 96.0 -84.0 Outcomes/Achievements of the Three Basic Strategies 1. Global Expansion in Growth Business Fields Even during the COVID-19 pandemic, our Green Innovation (GR) and Life Innovation (LI) businesses expanded and almost achieved their targets. Although revenue in the GR businesses was below target in carbon fiber for aircrafts and battery separator films, revenue expanded in resins for automobiles and motorcycles, large tow carbon fibers for wind turbine blade applications, water treatment mem- branes, and Toray Engineering’s inspection and production equipment. As a result, the total amounted to ¥993.4 bil- lion. In addition, revenue from the LI businesses came to Toray Industries, Inc.Toray Report 2023 ¥369.6 billion due to the addition of the “supporting per- sonal safety” field and an increase in shipments of non- woven fabrics for hygiene applications and sports-related materials. However, the operating margins of both busi- nesses declined due to the increased costs associated with rising raw material and fuel prices. Revenue from GR Businesses Revenue from LI Businesses (Billion Yen) 993.4 1,000.0 (Billion Yen) 369.6 Free Cash Flow (3-year total), D/E Ratio (Billion Yen) 237.3 120.0 0.79 0.80 0.67 0.62 3-year total (FY 2020-2022) AP-G 2022 Target (FY) 2020 2021 2022 AP-G 2022 Target 308.4 300.0 Operating CF Investment CF FCF D/E Ratio 832.2 711.8 23% 20% 22% 20% 20% 17% 276.6 24% 20% 21% 21% 20% 17% (FY) 2020 2021 2022 2022 Target (FY) 2020 2021 2022 2022 Target Revenue from Green Innovation Businesses Revenue from Life Innovation Businesses Gross proﬁt margin of Green Innovation Businesses Gross proﬁt margin of Life Innovation Businesses Group average gross proﬁt margin Group average gross proﬁt margin 2. Strengthening Competitiveness As a part of the Total Cost Reduction Project (NTC Project), we promoted cost competitiveness through constant vari- able cost and fixed cost reduction activities coupled with drastic cost reductions by means of production process innovation. We thereby achieved a reduction of ¥203.1 bil- lion, significantly exceeding the three-year cumulative tar- get of ¥150 billion. Total Cost Reduction Project (Billion yen) Sustainability In addition to expanding the GR and LI Businesses, Toray Group also significantly exceeded its FY 2022 targets for GHG gas emissions and water usage per unit of revenue (20% and 25% reduction respectively compared with FY 2013). As a result of advancing activities targeting carbon neutrality through business activities, the Group signifi- cantly increased CO2 emissions avoided in the value chain by 9.5 times compared with FY 2013. Sustainability Target for FY 2022 FY 2013 Actual (Baseline year) (J-GAAP) FY 2022 Actual (Compared to FY 2013) (IFRS) FY 2022 Target (Compared to FY 2013) (IFRS) Avoided CO2 Emissions 40 million tons 9.5-fold 5.3-fold 25 Contributed Annual Water Filtration Throughput 27.23 million tons/day 2.5-fold 2.4-fold Greenhouse gas emissions per unit of sales in production activities 337 tons/ 100 million yen 233 tons/ 100 million yen (35% reduction*) 20% reduction FY 2020-2022 3-year total of reduction AP-G 2022 Target Water consumption per unit of sales in production activities 15,200 tons/ 100 million yen 10,030 tons/ 100 million yen (32% reduction*) 25% reduction Variable cost reduction 119.3 100.0 * The calculation of the figure for the baseline of FY 2013 includes data for companies that joined the Toray Group in FY 2014 or later. Fixed cost reduction Innovation of production process 67.6 16.2 35.0 15.0 Total 203.1 150.0 3. Strengthening the Management Foundation Owing to careful selection of capital investment proj- ects during the COVID-19 pandemic, free cash flow increased to ¥237.3 billion (three-year cumulative total), far surpassing the target of ¥120 billion. Furthermore, owing in part to an increase in retained earnings and greater equity due to foreign exchange impacts at group companies outside Japan, the D/E ratio was 0.62, which was far below the guideline of around 0.8. Meanwhile, the Group also focused its energies on structure reforms for low-growth and low-profitability businesses, includ- ing consolidating manufacturing bases in the Japanese fibers and textiles business. Compliance Despite deploying activities to instill the compliance awareness of “having the integrity to do the right thing in the right way,” inappropriate actions related to UL certifi- cation were discovered. Therefore, Toray Group set out to thoroughly investigate the root causes and implemented measures to prevent recurrence. In order to reform the corporate culture not to let any misconducts happen again, the management team has expressed its commit- ment to compliance while the Group has engaged in activ- ities to deepen communication with the frontlines. Issues for the Next Medium-term Program In looking to AP-G 2025, the Group recognized that the challenges that must be addressed were: (1) Expanding business and improving profitability (profit margin), (2) Accelerating sustainability measures, (3) Improving asset efficiency (concentrating management resources on growth business fields), and (4) Enhancing internal con- trols and promoting even greater compliance awareness. Toray Industries, Inc.Toray Report 2023Medium-Term Management Program, Project AP-G 2025 (FY 2023–2025) Innovation and Resilience Management—Value Creation for New Momentum Covering the three-year period from FY 2023 to FY 2025, the as “sustainable growth,” “ultimate value creation,” “product Medium-Term Management Program, Project AP-G 2025 and operational excellence,” “enhancement of people-cen- (hereafter AP-G 2025), is founded on the Toray Philosophy tric management,” and “risk management and governance” and aims to achieve “sound, sustainable growth” through to engage in efforts to expand the Sustainability Innovation “contributions to real solutions to the challenges the (SI) Business and Digital Innovation (DI) Business as growth world faces in balancing development and sustainability” business fields, as well as in efforts involving business as presented in the Toray Group Sustainability Vision. In advancement and high-added-value creation. Other areas of this respect, the Group will focus on value creation that focus include efforts to enhance quality strength and cost enables the related growth strategy as well as strength- competitiveness. At the same time, the Group will ensure ening the Group’s human resources base that supports financial soundness by conducting business operations that this approach, thereby advancing efforts to strengthen consider a balance between profits, cash flow, and asset the management foundation in a way that enables growth efficiency. Moreover, the Group will promote the expansion investments from the perspectives of capital investment of high-growth and high-profitability businesses along with efficiency, the financial structure, and human resources. structure reforms for low-growth and low-profitability busi- Under AP-G 2025, the Group has set the basic strategies nesses in order to trace a new growth trajectory. Basic Strategies of AP-G 2025 Seizing Profit Opportunities 26 Strengthening the Management Foundation 1 2 3 4 5 Sustainable Growth Focusing management resources on Sustainability Innovation Business and Digital Innovation Business Ultimate Value Creation Maximizing profitability by making the most of tangible and intangible assets, and by collaborating with external partners Product and Operational Excellence Promoting cross-organizational cost reduction activities lever- aging enhancement of quality strength and organizational strength, which are the sources of competitiveness Enhancement of People-centric Management Preserving and further building upon the legacy of our corpo- rate culture, which prioritizes developing people, while promoting individual career development, and improving job satisfaction Risk management and Governance Ensuring sound organizational management by enhancing internal controls and improving management capabilities Financial Target for FY 2025 Revenue 2,489.3 billion yen 2,800.0 billion yen Core Operating Income 96.0 billion yen 180.0 billion yen FY 2022 Actual FY 2025 Target Core Operating Margin ROIC*1 ROE*2 3.9% 2.7% 5.0% 6% About 5% About 8% Free Cash Flow 237.3 billion yen (3-year cumulative total) Positive (3-year cumulative total) D/E Ratio 0.62 0.7 or lower (guideline) Exchange rate assumption for AP-G 2025: 125 yen per US dollar *1 ROIC = Core operating income after tax / Invested capital (average of the balances at beginning and end of the period) *2 ROE = Net profit attributable to owners of parent / Average equity attributable to owners of parent Toray Industries, Inc.Toray Report 2023Variance Analysis of Core Operating Income (Business Growth Factors) (Billion yen) +20.0 +64.0 Variance factor Difference (billion yen) Business strategies for increasing income 180.0 Difference in quantity (Net of fixed cost variance) +64.0 96.0 FY 2022 Actual Difference in quantity Net change in price FY 2025 Target Net change in price +20.0 Total +84.0 Fibers & Textiles: Increase quantity sold of ultra-microfiber nonwoven material with a suede texture and airbags, where capital investment has been completed, reflecting the recovery in automobile production volume Performance Chemicals: [Resins] Boost compound production sites by expanding PPS polymer production facili- ties; increase quantity sold by capturing growth of the xEV market in China [Films] Increase quantity sold by meeting higher requirement for release film for multi- layer ceramic capacitor (MLCC) and by capturing growth in mobile device and auto- motive markets [Electronic &Information Materials] Achieve full operation of facilities that have already been expanded in line with OLED market growth Carbon Fiber Composite Materials: Capture increasing demand in aircraft applications Fibers & Textiles: Promote recyclable products with high-added-value (including “dif- ference in quantity.”) Performance Chemicals: Pass on increased costs to sales prices and execute pric- ing strategy Carbon Fiber Composite Materials: Advance high-added-value strategy through expansion of intermediate materials Segment Revenue and Core Operating Income Targets for FY 2025 (Billion yen) FY 2022 Actual FY 2025 Target Main strategies / major capital investments Fibers & Textiles Revenue 999.2 1,030.0 Core operating income 51.2 64.0 Developing environmentally friendly materials and rebuilding the recycling supply chain; expanding business and reaping the benefits of capital investment in growth fields such as ultra-microfiber nonwoven material with a suede texture and airbags; creating high-added-value with functional fibers; expanding Ultrasuede™ production facilities Resins & Chemicals: Increasing market share in China and the automobile market; expanding PPS polymer pro- duction facilities Films: Expanding business of films for electronic component manufacturing processes; expanding production facili- ties for PET films used in MLCC manufacturing processes and OPP films for automotive capacitors Electronic & Information Materials: Expanding business in OLED and semiconductor markets; expanding produc- tion facilities for electronic coating materials for OLED 27 Capturing market growth in both aviation and industrial/sports applications; expanding production facilities for indus- trial-use carbon fiber Securing top market share for reverse osmosis (RO) membrane market and expanding peripheral businesses Strengthening the business foundation by pursuing business development outside Japan, expanding indications, improving existing products, and ensuring thorough cost reductions Revenue 909.4 1,040.0 Performance Chemicals Core operating income 30.4 91.0 Carbon Fiber Composite Materials Revenue Core operating income Environment & Engineering Revenue Core operating income Life Science Others Revenue Core operating income Revenue Core operating income 281.7 15.9 228.8 19.7 53.8 0.2 16.4 2.5 370.0 36.0 280.0 27.0 60.0 2.0 20.0 0 Reconciliations Core operating income ▲23.9 ▲40.0 Total Revenue Core operating income 2,489.3 96.0 2,800.0 180.0 Sustainability Targets for FY2025 FY 2013 Actual (Baseline) (J-GAAP) FY 2022 Actual (Compared to FY 2013) (IFRS) FY 2025 Target (Compared to FY 2013) (IFRS) Revenue from Sustainability Innovation (SI) Business 562.4 billion yen 1,282.8 billion yen (2.3-fold) 1,600.0 billion yen (2.8-fold) CO2 emissions avoided in value chain 40 million tons Water filtration throughput contribution by Toray’s water treatment membranes 27.23 million tons/day 9.5-fold 2.5-fold 15.0-fold 2.9-fold Greenhouse gas emissions per unit of revenue in production activities 337 tons/100 million yen 35% reduction* 40% reduction Greenhouse gas emissions of Toray Group in Japan 2.45 million tons 21% reduction* 20% reduction Water usage per unit of revenue in production activities 15,200 tons/100 million yen 32% reduction* 40% reduction *The calculation of the figure for the baseline of FY 2013 includes data for companies that joined the Toray Group in FY 2014 or later. Toray Industries, Inc.Toray Report 2023Seizing Profit Opportunities BASIC STRATEGY 1 Sustainable Growth Having established “contributing to society through busi- ness activities” as one of its basic concepts for manage- ment, Toray Group engages in business operations that aim to achieve “sound, sustainable growth.” As part of this strategy, the Group will work to expand businesses by con- centrating management resources on growth business fields. Similarly, the Group will contribute to the realization of a circular economy through efforts to reduce GHG emis- sions, recycle, and use biomass-based resources intended to “achieve carbon neutrality for Toray Group.” Expanding Business in Growth Business Fields Founded on the Toray Group Sustainability Vision Growing demand for addressing sustainability and the evo- lution of digital technology indicate increase of business opportunities in areas where Toray’s core technologies can be utilized. One of such business fields in which greater profits are expected by exercising Toray’s strengths is the Sustainability Innovation (SI) Business. It is a redefinition of a combination of Green Innovation (GR) Business and Life Innovation (LI) Business the Group had focused on thus far in line with the Toray Group Sustainability Vision. Another is the Digital Innovation (DI) Business, which will serve to help real- ize the four perspectives of the world envisioned for 2050. We have newly positioned both as growth business fields that supports the “sound, sustainable growth” of the Group. The Group will allocate ¥450 billion worth of resources con- sisting of capital investments and R&D expenditures to the SI and DI Businesses. With this resources, the Group intends to build a cross-organizational structure and accelerate both comprehensive solution proposals to customers, as well as internal collaborations, with an aim of expanding these busi- nesses to account for approximately 60% of consolidated rev- enue. Furthermore, these allocations will solidify the Group’s position as a “leading company in the materials business that contribute to sustainability,” and will embody its core value of “contributing to society through business activities.” 28 • Expansion of the Sustainability Innovation (SI) Business The SI Business aims to achieve ¥1,600 billion revenue by FY 2025 through the focused allocation of capital invest- ments, R&D, and other resources. Specifically, the Group will allocate these resources to lightweight materials, hydrogen and fuel-cell related materials, and carbon fibers for wind turbine blades that will contribute to the acceler- ation of action on climate change; recycled materials that will contribute to resource circulation; water treatment membranes and air filters that will contribute to providing clean water and air; and hygiene materials, pharmaceuti- cals, and medical devices that will contribute to medical care as well as public health. Contributing to better medical care and hygiene for people Accelerating measures to counter climate change Providing clean water and air 26% FY 2022 1.3 trillion yen 51% 15% 7% Promoting resource recycling Revenue from of SI Business (Billion Yen) 1,600.0 1,282.8 Expand at an annual growth rate of 7.6% (FY) 2022 Actual 2025 Target Toray Group Growth Business Fields Growth Business Fields under AP-G 2022 Growth Business Fields under AP-G 2025 GR Business Green Innovation Busines SI Business Sustainability Innovation Business*1 LI Business Life Innovation Business *1 Group of businesses or products that can help realize the Toray Group Sustainability Vision 1 2 3 4 Products that accelerate measures to counter climate change Products that facilitate sustainable, recycling- based use of resources and production Products that help provide clean water and air and reduce environmental impact Products that help deliver better medical care and hygiene for people worldwide 4 3 2 1 0 Revenue from Growth Business Fields Gross proﬁt margin of all growth business ﬁelds 20% 23% (Trillion Yen) 15% 13% Gross proﬁt margin of other business ﬁelds Growth business ﬁelds 54% Growth business ﬁelds 59% New DI Business Digital Innovation Business Materials, equipment, technologies, and services that help improve convenience and productivity by supporting the widespread adoption of digital technology (FY) 2022 Actual 2025 Target Investment in growth business ﬁelds Breakdown (cid:12255) Capital Investment (cid:12255) R&D 450 Billion Yen 270 Billion Yen 180 Billion Yen Toray Industries, Inc.Toray Report 2023 • Expansion of the Digital Innovation (DI) Business The DI Business will focus on the resins, films, electronic and information materials, and other advanced materi- als used to manufacture semiconductors and displays, as well as on RO membranes used to produce the ultrapure water required for semiconductor fabrication processes along with cleaning and stripping solvents. Moreover, the DI Business aims to achieve revenue of ¥250 billion in FY 2025 by strengthening efforts to provide total solutions to customers, including proposals that combine materials and processes together with manufacturing and inspec- tion equipment. CO2 Emissions Avoided in Value Chain (Baseline: FY 2013) (FY) 2013 2022 2025 2030 Baseline year: 38 million tons 9.5-fold (Actutal) 15-fold (New target after review) 8-fold (Previous target) 25-fold (New target after review) Emissions reduction in the SI Business • Energy conservation (Carbon ﬁber for aircraft, and comfortable clothing, etc.) • Water treatment • Recycling • Air puriﬁcation • Biomass-based Electronic coating and mounting materials Semiconductor manufacturing and inspection equipment Cleaning and stripping solvents Sustainability Targets for FY 2025 • Renewable energy (Carbon ﬁber for wind turbine blades, and materials to build hydrogen infrastructure, etc.) materials • Low environmental impact RO membranes for ultrapure water production Release ﬁlm for semiconductor molds Flexible printed circuit boards Display materials PPS resin for power modules Courtesy of Mitsubishi Electric Corporation Revenue from DI Business (Billion Yen) 250.0 166.4 Expand at an annual growth rate of 15% (FY) 2022 Actual 2025 Target Contributing to the Realization of a Carbon Neutral Society By further expanding the SI Business, Toray Group will sig- nificantly elevate the target for CO2 emissions avoided in the value chain in FY 2030 from the original 8 times to 25 times compared with FY 2013 in an effort to contrib- ute to “building a carbon-neutral society.” Furthermore, in an effort to “achieve carbon neutrality for Toray Group” by 2050, the Group hiked the target for reducing GHG emis- sions per unit of revenue to more than 50% and the tar- get for GHG emissions of Toray Group in Japan to more than 40% (absolute value) compared with FY 2013, and will accelerate efforts to achieve these. FY 2025 Target [Baseline: FY 2013] FY 2030 Target [Baseline: FY 2013] Greenhouse gas emissions per unit of revenue in production activities Greenhouse gas emissions of Toray Group in Japan Previous Targets — New Targets 40% reduction Previous Targets — New Targets 20% reduction Water usage per unit of revenue in production activities Previous Targets — New Targets 40% reduction 30% reduction 50% or more reduction 7% reduction 40% or more reduction 30% reduction 50% or more reduction 29 Contributing to Building a Circular Economy Under AP-G 2025, Toray Group set new targets for recy- cling-oriented use of resources. Specifically, the FY 2030 revenue target for “products that facilitate sustainable, recycling-based use of resources and production” in the SI Business was set to ¥400 billion, while the target for the percentage of raw materials sourced from recycling used in Toray core polymers* was set to 20% in an effort to accel- erate the Group’s contributions to building a resource-recy- cling-based economy. * Percentage of raw materials sourced from recycling used in Toray core polymers: The ratio of PET and nylon polymer raw materials sourced from recycling, derived from bio- mass, or produced with CO2 recycling. Revenue Target Revenue target for products that facilitate sustainable, recycling-based use of resources and production in the SI Business in FY 2030 Target for percentage of raw materials sourced from recycling, derived from biomass, or produced with CO2 recycling used in Toray core polymers* in FY 2030 400 billion yen *PET and nylon polymers 20% Examples of Recycling-Oriented Use of Resources Recycling Biomass Recycled PET film ECOUSE™ Lumirror™ Fiber made from recycled plastic (PET) bottles &+™ Switching to Biomass-Based Materials Toray Industries, Inc.Toray Report 2023Seizing Profit Opportunities BASIC STRATEGY 2 Ultimate Value Creation value chain based on collaborations between the Group and its external partners, and through the use of digital technologies. Toray Group will strengthen value creation by maximiz- ing the use of tangible and intangible assets held by the New Business Creation Group. Specifically, the Group will engage in strategic pric- Toray Group aims to generate a total of ¥1 trillion in sales ing and value chain innovation as approaches to advanc- across the target themes in the 2020s by concentrat- ing business and creating high-added-value. Moreover, the ing resources on large-scale themes that are anticipated Group will work to create new businesses. to help solve social issues and become growth drivers Business Advancement and High-Added- Value Creation for Toray Group. Specifically, the Group will continue to engage in and accelerate commercialization for themes intended to solve global-scale environmental issues and Along with working to differentiate its products, Toray realize a society that offers personal safety, health, and Group will actively engage in strategic pricing intended longevity. These themes include “materials related to to ensure customers acknowledge the value generated hydrogen and fuel cells,” “products and process technol- by the Group, and that the price appropriately reflects ogies utilizing biomass,” “environmentally friendly printing this value. Furthermore, Toray Group will maximize the solutions,” “next-generation medical care,” and “next-gen- value it delivers to customers through innovations in the eration display solutions.” Future TORAY-2020s Project (FT Project) Growth Business Field Theme 30 Products that accelerate measures to counter climate change ▶ Materials related to hydrogen and fuel cells • Electrolyte membranes • Hydrogen tank materials • Electrode base materials • CCM / MEA Products that facilitate sustainable, recycling-based use of resources and production ▶ Products and process technologies utilizing biomass Products that help provide clean water and air and reduce environmental impact ▶ Environmentally friendly printing solutions Products that help deliver better medical care and hygiene for people worldwide ▶ Next-generation medical care • Process technologies utiliz- ing biomass raw materials • 100% bio-based products • Environmentally friendly print- ing materials that contribute to CO2 emissions reduction and are VOC-free • Cancer drugs • Cancer diagnostic agents • Cardiac diagnosis and treatment devices Digital related products ▶ Next-generation display solutions • Next-generation display materials and manufactur- ing equipment Phase Long-term development Business development Business expansion Toray Industries, Inc.Toray Report 2023BASIC STRATEGY 3 Product and Operational Excellence therefore strive to further deepen the trust of its custom- ers. Likewise, this strategy seeks to embody the strong will of “providing solutions of high value to customers, and Strengthening the competitiveness of Toray’s products and to pursuing customer satisfaction and the world’s high- services will rely on further refining quality and cost com- est level of quality” as included in the Corporate Guiding petitiveness. In addition, this strategy will accelerate DX Principles. Similarly, it seeks to maintain the Group’s posi- promotion that is closely tied to the Genba (workplace). tion as one that boasts the height of its quality strength. Enhancing Quality Strength As a measure for this, the Group will leverage digital tech- nologies and deploy the Quality Strength Enhancement Toray Group has recognized anew that “quality is the foun- Project (QE Project) intended to fundamentally enhance dation of the Toray brand and the source of profit,” and will the process capability for each product. Quality Strength Enhancement Project (QE Project) Comprehensively managing process capability for each product, utilizing digital technology. Enhancing quality strength in every phase, from design and development to sales. Measures Design and development Production Sales Design and development that makes it easier to produce high-quality products Process capability and quality control system for each product and piece of equipment Reflecting reliably and properly customer performance requirements to quality Monitoring process capability control status Effects Reliable high quality achieved in mass production Stable production of high-quality products Appropriate product standards 31 Total Cost Reduction Advanced Business Management by Under AP-G 2025, Toray Group will continue its group- Utilizing Digital Technology wide Total Cost Reduction Project (NTC Project) utilizing Under AP-G 2025, the Group plans to make ¥20 billion in the Group’s collective strengths. This Project seeks to digital technology related investments in order to accel- reduce costs regarding every aspect of the Group’s busi- erate efforts to build global data infrastructure designed ness activities, from production process innovations that to effectively utilize data accumulated by Toray Group directly result in significant cost reductions to rational- throughout the Group, initiatives to combine analysis ization and streamlining of everyday tasks. In particular, and simulation technologies, and cooperation with value it aims to reduce costs by a three-year cumulative total chain partners. Moreover, the Group plans to train more of ¥200 billion through stronger cost controls and higher than 2,000 human resources fluent in digital technologies yields at Group companies outside Japan. Group-wide in order to promote the use of data and digi- Cumulative cost reduction of 200 billion yen over 3 years Variable cost reduction activities Fixed cost reduction activities Production process innovations Effect target 125 billion yen/ 3 years Effect target 60 billion yen/ 3 years Effect target 15 billion yen/ 3 years tal technologies in an approach that is closely tied to the Genba (workplace). This strategy will enhance the Group’s value creation capability and competitiveness in every aspect of its business activities, including R&D, produc- tion, sales, and management. Toray Industries, Inc.Toray Report 2023Strengthening the Management Foundation That Underpins Growth BASIC STRATEGY 4 Enhancement of People-Centric Management range of human resources. In terms of human resources development, the Group will provide support for employ- ees to develop their own careers and will promote the “People-centric management” has been Toray Group’s training of leaders who can assist in developing workplace approach to management ever since its founding. As such, competency. Toray Group will promote job satisfaction the Group seeks to advance the promotion and participa- and supportive workplaces by providing workplace envi- tion of young core human resources, locally hired staff ronments and opportunities that lead to employee pride outside of Japan, highly specialized human resources, in working for the Group, and by building an organizational women, and seniors by securing and promoting a diverse culture that values feedback from the frontlines. Enhancement of people-centric management Securing and promoting diverse human resources Human resources development Promoting job satisfaction and supportive workplaces • Actively appointing young core human resources • Planned promotion of locally hired staff to management posi- tions at group companies out- side Japan 32 • Developing and providing career opportunities for highly special- ized human resources • Empowering women in the workforce and supporting their networking • Providing opportunities for senior human resources • Supporting self-reliant career development based on career path worksheets used by employees and their superiors • Creating workplaces environ- ments and opportunities that lead to employee pride in working for the Toray Group • Developing professional • Enabling work styles that human resources by supporting employee self-development and empowering them to acquire abilities and skills • Expanding opportunities such as internal recruitment, encour- aging employees to take on new challenges • Training leaders who can develop workplace competency accommodate employee life stages, along with career development • Building an organizational cul- ture that values feedback from the frontlines BASIC STRATEGY 5 Risk Management and Governance systems, and to enhance the effectiveness of group-wide internal controls. In addition, the Group will strengthen internal controls by promoting digitalization and expanding Amid the growing uncertainty in the business environ- the scope of operation flows without human intervention. ment due to intensifying geopolitical and other risks, the On the other hand, the Group seeks to complement the importance of risk management involved in Toray Group’s management audit function of Group companies outside business management approach is increasing. Therefore, Japan and strengthen workplace competency through the Group seeks to identify the risks in each country and cooperation between the functional axis and regional axis. region, draft contingency plans for emergencies, check Moreover, the Group will build global data infrastructure for vulnerabilities in the supply chain, and strengthen the in an effort to promote the advancement and greater effi- resilience of product supply continuity. Furthermore, Toray ciency of global management. Group seeks to improve its operation and quality audit Toray Industries, Inc.Toray Report 2023Financial Strategy Basic Policy Financial Strategy Toray Group’s basic policy is to promote business expan- to large-scale investments intended to expand business, sion while maintaining financial soundness, and therefore the Group will also execute capital investments to address aims for capital investments to total ¥500 billion over the sustainability, improve quality strength, enhance cost three-year period from FY 2023 to FY 2025 (¥355.2 billion competitiveness (including digital technology use), and under AP-G 2022) and R&D expenditures to reach ¥220 bil- upgrade aging facilities. The Group will conduct strate- lion (¥193.8 billion under AP-G 2022) over the same period. gic investments in M&As and alliances separately from In particular, the Group plans to invest ¥450 billion in its capital investments. Meanwhile, the Group seeks to growth business fields, with ¥270 billion in capital invest- improve ROIC through profitability and capital efficiency ments and ¥180 billion in R&D expenditures. In addition enhancements. Breakdown of Capital Investment Breakdown of R&D Expenses Regular investment, etc. Environment compliance investment Digital-related Others Growth business ﬁelds 3-year total: 500 billion yen For M&A, conduct strategic investments separately from capital investments 3-year total: 220 billion yen Growth business ﬁelds Maintaining Financial Soundness and Capital Allocation 33 Although free cash flow (three-year cumulative total) and Along with assuming an operating cash inflow of ¥760 the D/E ratio improved significantly compared with the ini- billion over the three-year period from FY 2023 to FY tial plan under AP-G 2022, improvements in asset efficiency 2025, capital investments and R&D expenditures are envi- have lagged. Therefore, along with concentrating manage- sioned to generate an investment cash outflow of ¥720 ment resources in growth business fields and engaging billion. This capital allocation aims to achieve a positive in strategic pricing, the Group will raise the reliability of free cash flow, thereby stabilizing and increasing share- returns, which will connect to improved ROIC. Specifically, holder returns. Furthermore, the Group will revise the D/E for this purpose the Group will further strengthen efforts ratio guideline downward from around 0.8 to 0.7 or lower to identify risks involved in, as well as to enhance manage- to support sound, sustainable growth based on a strong ment of, capital investments and R&D expenditures. financial foundation. AP-G 2025 targets | • Free cash flow : Positive (3-year total) • D/E ratio : 0.7 or lower 3-year total of Capital Allocation (FY 2023-2025) CF from Operating Activities CF from Operating Activities*1 760 billion yen ■ Cash in ■ Cash out *1 Before deduction of R&D expenses CF from Investing Activities CF from Investing Activities (Net investment) 720 billion yen CF from Financing Activities Interest- bearing liabilities, etc. Share- holder returns Business investment Capital investment 500 billion yen R&D Expenses 220 billion yen Including investments for growth business field: 270 billion yen Including investments for growth business fields: 180 billion yen Shareholder returns policy • While maintaining stable continuous divi- dends, aiming to increase dividends based on earnings growth • Dividend payout ratio of 30% or more Toray Industries, Inc.Toray Report 2023Financial Strategy Cash Flows (Billion yen) 300 200 100 0 -100 -200 (FY) Interest-bearing Liabilities, Owner’s Equity and Debt-to-Equity Ratio (D/E Ratio) (Billion yen) 1,800 0.89 95.4 113.7 81.1 42.5 2019 2020 2021 2022 1,200 600 0 (FY) 0.79 0.67 0.62 2019 2020 2021 2022 0.9 0.6 0.3 0.0 Cash ﬂows from operating activities Interest-bearing liabilities (left axis) Owner’s Equity (left axis) Cash ﬂows from investing activities Free cash ﬂow D/E ratio (right axis) Initiatives to Reinforce the Financial Structure and Enhance Asset Efficiency The Group aims to raise asset efficiency in terms of cash flow and ROIC* and improve ROIC while seeking a balance between business expansion and greater profitability. 34 Seizing Profit Opportunities • Expanding businesses in growth fields (SI/DI businesses) • Improving profitability through value creation Improving reliable return on investment • Investing necessary management resources to achieve targets • Promoting M&A in areas where synergies can be expected Strengthening the Management Foundation • Using a D/E ratio guideline of 0.7 or lower • Enhancing management of free cash flow • Reducing working capital by maintaining Cash Conversion Cycle Improvement (3C-i) activities • Enhancing structural reforms based on Four categories for growth potential and profitability Growing core operating income Efficient management of invested capital ROIC improvement * ROIC = Core operating income after tax / Invested capital (average of the balances at beginning and end of the period) Toray Industries, Inc.Toray Report 2023Initiatives to Enhance Asset Efficiency 1. Efficient Use of Working Capital and low-profitability businesses,” and “low-growth and In order to address today’s drastically changing business low-profitability businesses.” In turn, this approach will environment, the Group must minimize inventories for allow the Group to efficiently improve ROIC by investing products, as well as inventories in the intermediate process management resources in growth business fields and by and upstream raw material procurement stages. For this maximizing the profitability of existing tangible and intan- purpose, the Group will leverage DX to visualize and opti- gible assets. mize inventory along the supply chain, as well as continue • The Group aims to further expand “high-growth and 3C-i activities for working capital. At the same time, it will high-profitability businesses” through capital invest- seek to reduce working capital by managing the number of ments, etc. days for inventory and receivables and payables. • The Group aims to grow market share for and shift “low- Working Capital and CCC (Cash Conversion Cycle) (Billion yen) 800 600 400 200 0 114 115 117 112 (Days) 125 122 120 115 110 0 growth and high-profitability businesses” into the high- growth and high-profitability business category through capital investments, etc., given that revenue growth is low compared with market growth. • The Group aims to shift “high-growth and low-profitability businesses” into the high-growth and high-profitability category through ultimate value creation and enhanced product and operational excellence. Many of the growth drivers for AP-G 2025 are categorized in this area. • The Group aims to shift “low-growth and low-profitabil- ity businesses” into the other three categories through 35 (FY) 2018 2019 2020 2021 2022 structure reforms. In the case where businesses have Inventories (left axis) Net receivables and payables(left axis) CCC (right axis) 2. Business Portfolio Reforms Under AP-G 2022, the Group analyzed the business port- folio along the two axes of growth potential and ROIC, and mainly promoted structure reforms for businesses belong- ing to the low-growth and low-profitability category. Under AP-G 2025, the Group will employ revenue growth rates as an indicator for growth potential and ROIC as an indi- cator for profitability. These axes will serve as standards for categorizing Toray Group businesses and companies into “high-growth and high-profitability businesses,” “low- growth and high-profitability businesses,” “high-growth low potential for escaping from the low-growth and low-profitability category and where such businesses continue to generate losses, the Group will consider withdrawal and reduction. Four categories for growth potential and profitability l a i t n e t o p h t w o r G High-growth and low- proﬁtability businesses • Capital Investment • Enhancing competitiveness High-growth and high- proﬁtability businesses • Capital Investment • M&A Low-growth and low- proﬁtability businesses • Business structure reform Low-growth and high- proﬁtability businesses • Capital Investment • Increasing market share Withdrawal/reduction Proﬁtability (ROIC) Shareholder Return Policy Toray Group considers the appropriate distribution of prof- while comprehensively taking into account business earn- its to shareholders to be an important management issue, ings trends, the financial structure, and the securing of and therefore aims to increase dividends through earnings retained earnings necessary for future growth. The divi- growth. This approach is taken under the Group’s basic dend payout ratio is set to 30% or more. policy of maintaining stable and continuous dividends Toray Industries, Inc.Toray Report 2023 TORAY IR Day June 5 and 9, 2023 Medium-term Management Program, Project AP-G 2025 Business Outline and Strategy T o r a y I n d u s t r i e s , I n c . 36 T o r a y R e p o r t 2 0 2 3 We provided an opportunity for the General Managers of each business division to di- rectly explain their business strategies for the Medium-Term Management Program, Project AP-G 2025, focusing on the three-year business strategy through FY 2025. We engage in a diverse array of businesses under differing operating conditions. In light of this, we execute growth strategies in line with each stage of these busi- nesses and their respective strengths. Taking this opportunity, we would like to fully convey those strategies to you. *Organization names and titles are current at the time of IR Day event. Message from the President Value Creation for New Momentum I would like to explain the concept behind the formu- a sustainable society, including capital investment and lation of the Medium-Term Management Program, promotion of DX. Project AP-G 2025 (hereafter AP-G 2025). Under AP-G 2025, we will maximize the cash gener- Since its establishment in 1926, Toray’s manage- ated from tangible and intangible assets accumulated to ment philosophy has been based on the concept date, under the theme of “value creation” that enables of “Companies are public institutions and contrib- this. To this end, our priority is to improve overall prof- ute to society through their businesses,” and it has itability and asset efficiency by increasing the share of been carried forward to the current corporate philos- Sustainability Innovation and Digital Innovation busi- ophy, “Contributing to society through the creation nesses, which are highly profitable growth business of new value with innovative ideas, technologies, and fields. The subheading of AP-G 2025, “Value Creation products.” for New Momentum,” also implies that Toray Group will We have been actively addressing environmental reach even greater heights through a renewed focus issues from an early date, including the establishment on the creation of social and customer value. There is of the Global Environment Committee in 1992. In addi- accelerating movement worldwide toward sustainabil- tion, we have been expanding our Green Innovation ity, led by decarbonization. For Toray as a materials man- (GR) businesses since 2011 and our Life Innovation (LI) ufacturer which has accumulated advanced research businesses since 2014. In 2018, we released the Toray and technology development capabilities, this means Group Sustainability Vision, which outlines the world we ever increasing opportunities to help solve social issues. aspire to live in, the challenges we face, and our efforts We are certain that we can play an even more important to resolve them. role in realizing this. Toray’s mission is to provide the necessary solutions to the challenges facing the world in terms of balancing development and sustainability through supplying inno- vative technologies and advanced materials. In addition, we have defined promotion of growth strategies based on the Toray Group Sustainability Vision as our basic long-term strategy, with the aim of achieving “sound, sustainable growth.” Our growth strategy involves targeting business Akihiro Nikkaku expansion through aggressive capital investment made President during the past four medium-term management pro- grams, investing management resources in such growth business fields as carbon fiber composite materials. As a materials manufacturer that provides materials to all industries, Toray needs to identify growth business fields and invest capital in advance to fulfill its social respon- sibility to ensure high quality and stable supply globally. On the other hand, sustainable growth requires continu- ous capital investment and development to realize such 37 Toray Industries, Inc.Toray Report 202338 Toray Group’s Measures for Ultimate Value Creation Toray Group is creating ultimate value with an increased sense of urgency to create high-added-value for businesses and new businesses. Cultivated throughout its history to date, Toray Group’s five core strengths are the following: proposing solutions based on materials, creating new technologies through the pursuit of ultimate limits and technology integration, demonstrating the collective strengths of its R&D organi- zations, ensuring a stable supply of high-quality products, and building a global value chain. In promoting “ultimate value creation,” a key theme of our Medium-Term Management Program, Project AP-G 2025, we will draw on these strengths as a foundation of our efforts while leveraging digital technology with a focus on the frontlines to pair tangible and intangible assets and fully utilize them in a bid to realize high-added-value creation for businesses as well as for creating new busi- nesses. In view of these aspirations, I would like to shine a light on our measures for “ultimate value creation.” Group-Wide Action to Support Growth Business Fields Under AP-G 2025, we will not only focus on the growth of each business, but also look to expand in growth business fields through Group-wide action. Toray applies a single polymer to diverse fields such as fibers and textiles, films, and resins and has the ability to use this polymer in a wide variety of processes from polymerization to processed products globally. This strength in turn allows us to recover recycled resources and expand into a wide range of busi- nesses. In June 2022, we established the Environmental Solutions Department, a dedicated department to formu- late resource recycling strategies across our businesses by identifying markets in which we can promote the value of resource-recycling materials. Positioning the resource recycling market as a growth field, we will work to pro- mote both sustainability and economic growth. In the Mobility field, we established the Next Mobility Department to provide direct marketing to OEMs and to deliver speedy solutions to customers, leveraging cross-organizational, products, and regional collabora- tion. In this manner, we will increase the value offered to customers as a set rather than a single item. We have, for example, combined Ultrasuede™ and TORAYPEF™ as surface and base materials, respectively, in order to provide new value. We anticipate this initiative will help trigger the application of these composite materials in the specifications of other proposals. Enriching and Extending the Global Value Chain promote local production for local consumption, but are also resistant to geopolitical risks and capable of stead- fastly fulfilling our supply responsibilities. These factors make up Toray’s intangible assets that the Company has continued to build up since its overseas expansion in the 1950s. Looking ahead, we will strategically place human resources in areas close to end customers and fine tune our global sales operation capabilities. In addition, we will maximize the value provided to customers while enriching and extending the value chain by leveraging collaboration with overseas business sites and external resources, creating high-added-value through advanced processing and technology integra- tion, addressing sustainability issues, and promoting other measures. As part of the Group’s endeavors, we launched the AI-based material concierge service as a DX service to help customers optimally select materials and reduce development time in the resin business in 2023. In the water treatment business, we will also focus on subscription-based services that help customers min- imize their management burden while ensuring stable facility operations through TORAYWISE™, our proprietary real-time monitoring system. Value Provided to Customers DX services Resource recycling Advanced processing Advanced processing Materials Materials Materials Employing Strategic Pricing We believe it is extremely important to have a pricing strategy that appropriately reflects the value created to improve profitability. Taking into consideration the envi- ronment and market conditions of each business, we will therefore take advantage of every opportunity to proac- tively improve pricing. For example, we are utilizing digi- tal tools to plot customer transactions on the two axes of sales volume and price. In visualizing customers whose sales volume and prices do not match specifications, we have already initiated steps to negotiate price increases. Enhancing Brand Value Toray Group’s trading company revenue (excluding inter- company sales) totals ¥1,050 billion, which exceeds that of its competitors. Moreover, we have developed structures in our respective businesses that not only Under AP-G 2025, the Group as a whole will leverage its profile as a driving force throughout the organization to win not just on product specifications and price, but Toray Industries, Inc.Toray Report 2023 Example of Initiative for Management of Price Differences between Customers and between Products Variance Analysis of Core Operating Income (Business Growth Factors) Identifying customers and products where product prices do not reﬂect the relevant costs, transaction volume and speciﬁcation differences, and raising product prices P r i c e Area above standard price (Billion yen) +20.0 +64.0 96.0 180.0 Visualize target customers Negotiate to raise product prices Area below standard price Direct sales Via trading companies Sales volume (FY) 2022 actual Difference in quantitly Net change in price 2025 target Variance factor Difference (billion yen) Business strategies for increasing income Difference in quantity (Net of fixed cost variance) +64.0 Fibers & Textiles: Increase sales volume of ultra-microfiber nonwoven material with a suede texture and airbags, where capital investment has been completed, reflecting the recovery in auto- mobile production volume Resins & Chemicals: [Resins] Boost compound production sites by expanding PPS polymer production facilities; expand market share in Chinese xEV market [Films] Increase sales volume by meeting higher requirement for release film for multi-layer ceramic capacitor (MLCC) and by capturing growth in mobile device and automotive markets [Electronic & Information Materials] In line with the OLED market growth, achieve full operation of facilities that are being expanded and scheduled to be completed within the term of AP-G 2025 Carbon Fiber Composite Materials: Capture increasing demand in aircraft applications Fibers & Textiles: Promote recyclable products with high-added-value (including “difference in quantity.”) Net change in price +20.0 Performance Chemicals: Pass on increased costs to sales prices and implement pricing strategy Carbon Fiber Composite Materials: Advance high-added-value strategy through expansion of intermediate materials Total +84.0 39 Mitsuo Ohya Executive Vice President and Representative Member of the Board on brand. For example, Ultrasuede™, an ultra-microfiber nonwoven material with a suede texture, clearly defines our business vision and commitment to customers. As a result of our continued efforts to promote the cool image of Made in Japan as our brand identity, in con- junction with the Toray corporate brand, we have wit- nessed an increase in the brand value of Ultrasuede™ by a factor of 5.2 times from ¥6.6 billion in FY 2017 to ¥34.2 billion in FY 2022. At the same time, we are work- ing toward the 100% use of plant-based raw materials to further enhance our brand value. In line with these endeavors, we will also proactively enhance our brand value in our performance chemicals, carbon fiber, water treatment, and other businesses under AP-G 2025. Improving Asset Efficiency First, Improve ROIC to Approximately 5% Under AP-G 2025, we have set certain financial targets for FY 2025 as KPIs. This includes core operating income of ¥180 billion (¥96 billion in FY 2022) and ROIC of approxi- mately 5% (2.7% in FY 2022). As far as our core operating income is concerned, we will work to improve our capac- ity utilization rate by expanding quantities sold in growth business fields. In addition, we will improve our profitabil- ity by ultimate value creation, including improvement in pricing. As a part of these endeavors, we will take steps to increase ROIC by reducing working capital and con- tinuing to engage in reengineering with a focus on low- growth and low profitability businesses while improving the turnover of existing assets. Over the period of AP-G 2025, the Performance Chemicals Business which experienced a decline in FY 2022, is projected to enjoy the largest increase in income owing to recovery in market conditions. We are targeting increase core operating income by ¥64 billion on the back of differences in quantity and ¥20 billion owing to the net change in price from capturing recovery of the aircraft application demand in the carbon fiber composite mate- rials business and business growth in the automobile, semiconductor, and other markets, as well as the reap- ing the benefits from the past capital investments, cou- pled with advances in high-added-value products in the fibers and textiles, resins, films, and carbon fiber compos- ite materials businesses. Toray Industries, Inc.Toray Report 202340 R&D Strategies Utilizing Core Technologies and Combined Strengths to Differentiate Materials and Enhance the Ability to Create Value Undivided R&D Organization The definitive characteristic of Toray Group’s R&D approach is all of its R&D functions have been central- ized into the Technology Center. This undivided R&D organization is able to generate new technologies through fusion and integration of existing technolo- gies more easily and enables more rapid deployment of advanced materials to a wide range of business fields. Each division at the Toray Technology Center is engaged in R&D involving various materials based on the four core technologies of organic synthetic chemistry, poly- mer chemistry, biotechnology, and nanotechnology. In many cases, the new materials conceived in this center flourish in other business fields. Another major charac- teristic is that the Group can fully utilizes its combined strengths by exploiting the technologies and knowledge from many different fields to solve problems in an indi- vidual business field. Toray Group has been particularly focused in recent years on enhancing the use of these combined strengths. In this respect, it has been fusing its core technologies with its “chemical engineering process,” “engineering,”and “analysis technologies” in an effort to accelerate development for key initiatives. In the area of “chemical engineering process,” the Group creates safe, cost-competitive processes from the perspective of chemical engineering, and supports group-wide themes. In the area of engineering, the Group applies molding, surface treatment, AI, and other elemental technologies to realize and demonstrate innovative processes and equipment that are able to consistently produce prod- ucts with the nanometer scale, thereby contributing to the development of equipment capable of consistently producing nano-level products, as one example. In the area of analysis, the Group leverages high-end electron microscopes and other devices that can directly observe molecules to analyze structures and compositions. Undivided R&D Organization Technology Center centralizes these technologies to solve various challenges involved in research, technolog- ical development, and manufacturing. Acceleration of Cross-Business Deployment of Separation Membrane Technology Since the 1980s, Toray Group has created unique separa- tion membrane technologies such as dialyzer and reverse osmosis (RO) membrane. Going forward, further evolu- tion and development of these technologies will move in an increasingly interesting direction. For example, in the area of water treatment, these membranes are used to collect valuable materials and to separate oil from water, and in the health care field, their uses are expanding in areas such as personal protective clothing and new blood purifiers. Moreover, in the chemicals area, research is progressing in biochemical processes that integrate sep- aration technologies and biotechnologies. Similarly, in the area of new energy, membrane technologies are being rolled out for use in electrolyte membranes designed to produce hydrogen for the realization of a hydrogen soci- ety. Serving as a means of creating added-value in such a broad range of industrial fields, separation membrane technology is rooted in the fiber, textile, and film technol- ogies possessed by Toray Group. Without question, this cross-business technology deployment stems from the Group’s undivided R&D organization. Using Super Nanotechnology in the Creation of High-Added-Value Products Each of Toray Group’s business fields possesses many unique and high-value differentiated products, or so-called unrivaled technologies and products, which stand on its advanced technological capabilities. Along with making these technologies the de facto standard and expand- ing market share, the Group continues to engage in Technology Center Divisions/ Technical Dept. Development Center New Projects Development Div. Manufacturing Div. / Technical Dept. Basic Chemical Materials (advanced materials & technologies) Innovative polymer NANOALLOYTM Nano-structure design control Core Technologies Organic synthetic chemistry Biotechnology Functional powders Engineering Div. Polymer chemistry Nano technology R&D Division Carbon ﬁber composite materials Membrane etc. Chemical Engineering Process Chemical Engineering Dept. Engineering Analysis Engineering Development Center Research Laboratories, Toray Research Center, Inc. Business Fields Fiber & Textiles Resins & Chemicals Films Carbon Fiber Composite Materials Electronics & Information Materials Pharmaceuticals/ Medical Products Water Treatment, Environment Affiliated Companies S u s t a i n a b i l i t y I n n o v a t i o n Toray Industries, Inc.Toray Report 2023 the Group envisions R&D expenditures reaching the level of ¥220 billion, a ¥25 billion increase from AP-G 2022 period. The Group will accelerate development through allocating more of these R&D expenditures to the high-added-value themes prioritized by each busi- ness field in the aim of increasing revenue in FY 2025 by more than ¥200 billion over FY 2022. Priority Subjects for the Technology Center High-added-value themes prioritized by each business field Fields Priority issues for the Technology Center Fibers & Textiles NANODESIGN™, recycled fibers Resins & Chemicals PPS resin, NANOALLOY™ resin , fine particles Films Nano-multilayer film, lithium-ion battery separator film Carbon Fiber Composite Materials Intermediate materials for industrial use, fuel cell electrode substrates Electronic & Information Materials Electronic coating materials, environmentally friendly printing materials Pharmaceuticals & Medical Products APOA2-i, acute lung injury treatment column Water Treatment, Environment & Amenity RO membranes for seawater desalination, air filters Others, new businesses, basic and foundational themes 41 Satoru Hagiwara Executive Vice President and Representative Member of the Board, CTO developments that secure and expand profits by continu- ously reducing costs. NANODESIGN™, NANOALLOY™, and nano-multilayer are just three of these technologies that have enabled a leap in the improvement of mate- rial properties and that have created products with char- acteristics unique to Toray Group. Likewise, the Group is focusing its energy into these technologies, which it refers to in general as Super Nanotechnology. NANODESIGN™ is a proprietary flow control tech- nology that forms fiber cross-sections at the level of points and that controls the process at the nano-scale, thereby creating unprecedented fibers. This technology has enabled the fibers to have luster, moisture reten- tion, water repellency, elasticity, and other properties as we like. Meanwhile, NANOALLOY™ is a technology that disperses and kneads different polymers at the nano- level as a means of expressing heat resistance, resil- ience, and various other properties to a higher degree. This technology has been adopted for impact-absorb- ing components for sports equipment and automobiles. Finally, nano-multilayer technology allow us to individu- ally design film thicknesses ranging from several hun- dred to a thousand layers, thereby enabling flexible wavelength selection design. This technology is used in a wide array of applications, including films with metal- lic luster and films for automobile head-up displays. By deploying these Super Nanotechnologies within each business field, the Group aims to expand related revenue to the level of ¥40 billion by FY 2025 (from approx. ¥12 billion in FY 2022). Super Nanotech NANODESIGN™ Fiber precision Cross-section control NANOALLOY™ Polymer microstructure control Nano-multilayer Nano-multilayer/ polymer design technology Investing ¥220 Billion in R&D Expenditures under AP-G 2025 Toray has consistently increased its R&D expendi- tures under the concept that research and technologi- cal development provide the key to building the Toray of tomorrow. During the three-year period of AP-G 2025, Toray Industries, Inc.Toray Report 2023Fibers & Textiles Business Basic Policy under AP-G 2025 Aim for sustainable growth with high profitability through the realization of strengthened foundation and advanced of products as measures for promoting sustainability, and through global business expansion in growth business fields The World’s Only Three Dimensional Business Model Toray’s fibers and textiles business provides custom- ers with a full range of solutions by combining its three axes of strength: technological development and a vari- ety of products, vertical integration in the supply chain, and global business network. Leveraging the world’s only three dimensional business model, we are expand- ing our business not only in the apparel field, but also for use in industrial applications such as textiles for air- bags, nonwoven fabrics for hygiene products, and artifi- cial leathers for automobile interiors. As far as the Group’s technological development and variety of products are concerned, we are working on the development of core materials to high-performance fibers as well as biomass-based and recycled fibers, based on polymer chemistry technology. From a supply chain vertical integration perspective, we are pursuing added value at each stage of production from raw mate- rials (filament and staple fibers) to textiles and garments. Our global operations include 28 production bases in 17 countries worldwide. This network allows us to establish and maintain a production platform in optimal locations, including cooperation with external partner factories. World’s only Three Dimensional Business Model 42 3 Global Business Network North Africa South Asia Americas EU ASEAN South Korea China Japan 1 Technological Development & Variety of Products Nylon Polyester Acrylic 2 Industrial FY Advanced Materials PPS PTFE PLA PTT Nano Nonwoven Microﬁber* SB Provide solutions to customers with freely combining our strengths in three axis * Nonwoven material created using ultra-fine fibers in an “Islands in the Sea” configuration Main Initiatives of AP-G 2025 Under Project AP-G 2025, Toray Group will work to address the following main initiatives (growth strategies) in its fibers and textiles business: (1) Improving profitabil- ity by ultimate value creation, (2) Business expansion in growth fields based on high-performance, highly textured products that make use of environmentally responsible materials, and (3) Product and operational excellence. Improving Profitability by Ultimate Value Creation In the fibers and textiles business, we will focus on expanding artificial leather and airbag businesses and add- ing higher value utilizing Toray’s unique technologies. In specific terms, we will direct our energies largely toward the fashion and automobile interior fields as we strive to expand our business centered on the Ultrasuede™ brand developed in Japan and the ALCANTARA™ brand from Italy. Particularly for artificial leather, demand is expected to increase significantly due to the shift away from nat- ural leather and the rapid expansion of the EV market pushing demand upward for automobile interior applica- tion. Accordingly, we will expand production facilities for Ultrasuede™ in Japan. Demand for airbag fabrics is expected to grow at 7% annually between 2022 and 2025. Against this backdrop, Toray is looking to address the needs of the world’s major automobile manufacturing regions through its six fabric production bases. In addition, our supply chain network is comprised of three fiber production sites and two cush- ion sewing sites. We have also established R&D and marketing sites as a part of efforts to build an integrated supply chain. Looking ahead, we will leverage these strengths to meet diversifying needs, including trends in interior spaces as well as the growing demand for envi- ronmentally friendly products associated with the shift to autonomous driving. Toray Group will create a continuous stream of prod- ucts that offer innovative functions commensurate with efforts to provide higher added-value through its Proceeding high-added-value creation with Toray’s unique technology: NANODESIGN™ • Smooth and sleek texture uts-fit™ • Bulkiness, retention of shape • Rich in stretchability Qticle™ • Natural and deep color • Elastic and stretchable Kinari™ • Luster that surpasses silk • Noble glaze, rustling sound of silk • Easy to process and sewing, looking beautiful when tailored • Warm texture Camifu™ • Lightness, elasticity • Functional addtives retainability Awards: Technology Award of The Society of Fiber Science and Technology; Grand Prix of Senken Gosen Award Material Division; Chemical Society of Japan’s Award for Technical Development, etc. Fibers Textiles Garments Major Products (already in the market) Toray Industries, Inc.Toray Report 2023Vertical Integration inSupply Chainon expanding our production base in India, a promising market for the future. In contrast, we will take steps to improve the profit foundation by optimizing the scale of production, reviewing the business portfolio, and with- drawing from low-profitability businesses at affiliates in Japan as well as nylon fiber and polyester/cotton fabric businesses that are in need of business structure reform. By addressing the aforementioned major initiatives, we aim to achieve revenue of ¥1,030 billion in FY 2025, up ¥30.8 billion compared with FY 2022, and core operating income of ¥64 billion, up ¥12.8 billion compared with FY 2022 exceeding the fiscal 2019 level prior to the pandemic. Target for FY 2025 7% 6% 999.2 1,030.0 64.0 51.2 +12.8 Difference in quantity Net change in price Difference in ﬁxed cost Difference in currency translation, etc. (FY) 2022 actual 2025 target Revenue (billion yen) Core operating income (billion yen) ROIC (%) Variance Main Factors Difference in quantity • Expansion of business growth fields such as airbag and artifi- cial leathers •Capturing recovering demand for integrated apparel business • Sales expansion of textile with advanced functions and high-added-value Net change in price • Expansion of high-added-value such as NANODESIGN™ products • Proceeding with passing on the rise in raw material and fuel prices to the sales price • Business structure reform for low-growth and low profitability Difference in fixed cost • Expansion of new production lines for products including airbag and artificial leathers • Increase of expenses and labor cost due to expansion of sales activities Kenichiro Miki Senior Vice President, General Manager, Fibers & Textiles Division 43 unique technologies, such as conjugate spinning technol- ogy NANODESIGN™. These products include uts-fit™, Kinari™, Qticle™, and Camifu™. Business Expansion in Growth Fields based on High-Performance, Highly Textured Products That Make Use of Environmentally Responsible Materials Turning to high-performance, highly textured products that make use of environmentally responsible mate- rials, we aim to expand our business with a focus on two brands, namely the biomass-based Ecodear™ and &+™, which utilizes recycled materials. Ecodear™ is a plant-based synthetic fiber which does not affect atmo- spheric CO2 concentration even when incinerated. Toray Group markets Ecodear™ N510, a 100% plant-based nylon fiber produced from nylon raw materials such as castor oil plants and corn. Premarketing examples of 100% plant-based polyester include Patagonia’s Sugar Down and headrest covers of All Nippon Airways’ ANA Green Jet, a special aircraft to embody its environment slogan “ANA Future Promise.” &+™ is a recycled fiber made from collected PET bot- tles, fishing nets, and other waste materials that can be made into high-added-value functional fibers with trace- ability functions. Fishing nets and gear are said to account for 10% of marine plastic waste by weight. The viability of the recycling business depends on involvement of stake- holders. When people’s thoughts and actions for the future are connected (&), new value (plus factors) is added. For example, we are making fibers from the PET bottles col- lected from the 2023 Tokyo Marathon and recycling it into the uniforms to be worn by volunteers from the following year. In addition, boxes have been set up next to vending machines located in the Group’s business and production bases in Japan to collect PET bottles for use in the manufacture of &+™. Promotional activities have begun in Malaysia with the cooperation of the Penang state government to extend this initiative overseas. Product and Operational Excellence In the pursuit of product and operational excellence, we are strengthening our textile sales capabilities to lead- ing apparel customers in Japan and overseas with a focus on our high-performance materials AIRTASTIC™, Primeflex™, and Dermizax™. Moreover, we will con- tinue our efforts to deepen and extend our global supply chain for apparel applications, with a particular emphasis Enhancing Global Megabrand Expansion Advanced nylon and polyester fabric made of Toray’s unique thin yarns, light and compact, with soft textures Advanced fabric with flexible and stretching texture. Has durability, light- ness, comfortability, fast-drying prop- erties, applicable to various purposes Functional fabric offering a high level of water resistance, breathability and resistance to condensation, as well as excellent elasticity Toray Industries, Inc.Toray Report 202344 Resins & Chemicals Business Basic Policy under AP-G 2025 Contributing to the realization of a sustainable society by creating high-added-value products Main Initiatives of AP-G 2025 Resins Business Enhancing Governance In light of the inappropriate action in improperly identify- ing certain resin products as receiving certification from Underwriters Laboratories (UL), a third-party safety sci- ence organization headquartered in the United States, details of which were announced in January 2022, Toray is continuing to promote measures aimed at pre- venting recurrence. In addition to taking all necessary steps regarding actions on the recurrence prevention measures in response to the recommendations of the Expert Committee, Toray has completed UL recertifica- tion for the necessary grades and secured the reinstate- ment of ISO 9001 certifications for the scope of products for which certification was partially suspended or with- drawn. Moving forward, we will promote measures to prevent a recurrence, appropriately operate a quality con- trol system, and further enhance compliance awareness. Actions on the recurrence prevention measures in response to the recommendations of the Expert Committee 1 Enhance compliance awareness ✔ Promotion of corporate culture reform through senior managers continually communicating mes- sages to employees the importance of compli- ance and through communication to the frontlines ✔ Enhancement communication by 5,900 employees on the floor, in order to 1. Enhance process con- trol, 2. Create a culture of openness and 3. Foster a sense of pride (Ongoing) 2 3 4 5 6 Establish work procedures and an training system for UL-related operations ✔ 1. Training for all members 2. Restructuring of the certification system/oper- ation procedures 3. UL verification audit, C-CAP (Completed) Transfer personnel between business divisions and other interaction ✔ 1. Change of director in charge of the division 2. Personnel transfer of related individuals (Completed) Establish a system to con- firm UL compliance by the internal quality assurance organizations and/or exter- nal organizations ✔ 1. Internal audit by the Quality Assurance Division 2. External audit by UL and ISO recertification (Chiba, Nagoya) (Completed) Strengthen the structure of quality assurance organization ✔ Strengthened organizational structure by increas- ing members in the division and by strengthening auditing system, etc. (Completed) Establish system to ensure reporting of misconduct to Toray administrative organizations ✔ Improved contents of the internal survey (imple- mented in November 2022), conducted a fol- low-up of results (Completed) Creating High-added and Ultimate Value In the resins business, Toray Group commercializes a broad lineup of products, including amorphous ABS resin, crystalline nylon resin, PBT resin, PPS resin, and LCP resin. We also brought to the market TORAYCA™ resin, a carbon fiber reinforced plastic. In addition to an extensive array of products, we provide total solutions encompass- ing a wide range of areas, including material development and proposals, design proposals, and support for process and molding, to comprehensively assist customers in their product development activities. These efforts are backed by the strength of our global capabilities and net- work of 19 business and production bases in 10 countries outside Japan. Toray Group is also successively increas- ing its compound production capacity in growth regions. Under AP-G 2025, we will work to enhance the per- formance of our resin compound business as a first step in creating high-added-value. The percentage of high-performance product revenue to total revenue in the engineering plastic resins business will climb from 30% in 2022 to 36% in 2025. In specific terms, we are targeting 250% growth in revenue from xEV-related sales, where demand is projected to especially expand in FY 2025 compared with FY 2022. If we meet the tar- get, the ratio of xEV applications within the automobile applications is expected to reach 46%. Automobile applications (Trend in revenue) Expansion of engineering plastics business for automobile applications: 135% (Revenue from FY 2022 FY 2025) Revenue from ICEV application (internal combustion engine vehicle) Ratio within Revenue 25% 2 5 0 % (FY) 2022 2025 Revenue from xEV application Increase ratio within revenue to 46% PPS resins form a second integral component of efforts for high-added-value creation. PPS resin is a super engineering plastic with long-term heat resis- tance, chemical resistance, and flame-retardant prop- erties. Its use is expanding in versatile applications, including power semiconductors. Toray has established the world’s only integrated monomer/polymer/com- pound production system and held a 32% share of global PPS compound sales in 2022. During the AP-G 2025 period, we will expand our polymerization facili- ties in South Korea as well as sales globally, focusing on Europe and China with the goal of securing a global mar- ket share of 36% by 2025. Third in our efforts for high-added-value creation, we will look to our ABS resins. While competition for gen- eral purpose ABS resins is becoming increasingly harsh, we expect demand for high-performance ABS resins to return to a 5% annual growth trajectory, and will focus on transparent ABS resins and automobile applications. We aim to maintain our number one share of the global market for transparent ABS resin, and are targeting a global share of 45% by FY 2025, with sales volumes Toray Industries, Inc.Toray Report 2023Contributing to the Realization of a Sustainable Society While focusing on expanding sales of high-performance products, we are working to make materials more sus- tainable through three methods: (1) material recycling, in which plastic products are collected from the market and returned to the polymer or compounding process; (2) chemical recycling, in which collected raw materials are depolymerized and returned to the monomer process; and (3) bio-based production of raw materials. While our efforts are currently focused on material recycling, we aim to push forward with chemical recycling and the use of bio-based raw materials during the period. Through these means, we aim to employ sustainable materials for 30% of the raw materials we sell by 2030. Taking all of the aforementioned into consideration, Toray aims to capture demand in the xEV and other growth markets by enhancing its solution propos- ing capabilities, expanding global bases, and develop- ing high-performance products in the resins business. Furthermore, by expanding the fine chemicals business, we aim to increase core operating income in the resins and chemicals businesses as a whole by ¥16 billion in FY 2025 compared with FY 2022. Target for FY 2025 8% 3% 909.4 1,040.0 91.0 Revenue (billion yen) Core operating income (billion yen) ROIC (%) Resins & Chemicals +16.0 Films +60.6 Electronic & Information Materials 30.4 (PPS, Nylon, PBT Resins) Capturing demand from recovery of global automobile production volume and growth of the xEV market (ABS resins) Capturing demand from recovering market conditions, improving product mix through sales expansion of transparent ABS and high-added-value products Fine chemicals business (FY) 2022 actual 2025 target Kazuhiko Shuto Vice President, General Manager, Resins & Chemicals Division 45 for automobile applications projected to reach 1.6 times that of FY 2022. Furthermore, we aim to establish our status as a high performance and sustainable ABS resin supplier by developing the market for recycled grades and launching ABS resins using bio-based monomers. In addition, to strengthen our ability to create value through digital innovation, we will integrate materials informatics (MI) and design support tools (CAE systems). We aim to increase the value we provide to custom- ers by significantly shortening product development lead times, significantly reducing product development costs, and achieving the selection of the best material candidate. Chemicals Business Expanding the Fine Chemicals Business In the chemicals business, we aim to expand sales mainly of products with the world’s top market share by utilizing our proprietary technologies and raw materials. In spe- cific terms, we will focus on New Zeolite (NZ) products that contribute to the advancement of agricultural and food security as raw materials for agricultural chemicals, dimethyl sulfoxide (DMSO), which is used as a clean- ing agent and solvent for semiconductors and electronic components, and Thiokol™, which contributes to high insulation and energy conservation as a sealant for insu- lating glass. DMSO, in particular, is safe and is expected to be in demand as a substitute for other catalysts. Toray has also developed the world’s first inter- feron drug for cats and dogs and a chronic kidney dis- ease drug for cats with the aim of extending the healthy life expectancy of companion animals. In the aromatic fine chemicals business, we will focus on proposing fragrances to the cosmetics industry based on market research and analysis, and building a flavor supply net- work to China, ASEAN, and other countries for the food industry. Moreover, as a new business, we will promote the development of high-performance resin powders for 3D printing by utilizing our high-performance poly- mer design technology. Strengthening the Lactam and Lactam-Related Business Toray’s caprolactam uses the Company’s unique photo- reaction technology to realize high safety and easy pro- cess. To further reduce environmental impact, we are also developing a new type of lamp that uses LED as its photoreactive light source. Moreover, we are expanding our business in various fields by leveraging the by-prod- ucts generated during caprolactam production. Lactam Nylon Lactam-related business Ammonium sulfate Fertilizer By-product DMSO Solvent/resolvent By-product Rubber chemicals HX Gas odorants Toray Industries, Inc.Toray Report 202346 Films Business Basic Policy under AP-G 2025 Complete the concept shift from plastic films to environmentally friendly functional films while promoting the transfer of increased product value to selling prices in line with improvements in quality Developing Various Applications through the Pursuit of Ultimate Performance The film business has production and processing sites in nine countries around the world. Drawing on this network, Toray Group is developing such products as polyethylene terephthalate (PET) films that pursue ulti- mate performance and biaxially oriented polypropylene (OPP) films for a variety of applications, including smart- phones, displays, and electronic components used in multilayer ceramic capacitors (MLCCs), capacitors, motors, and batteries for automobiles as well as food packaging materials through polymer, nano, film making and other fundamental technologies. Main Initiatives of AP-G 2025 Expanding the Digital Innovation and Mobility Businesses The thinner the functional film, the better is its product characteristics. As a result, the growth in functional film demand is seen mainly in capacitor dielectric material, semiconductor manufacturing processing, and mobili- ty-related applications. As far as capacitor dielectric applications are con- cerned, MLCCs are becoming smaller while increas- ing in capacity at an accelerating pace. This reflects the improved performance of electronic devices and higher data transmission volume. Under these circum- stances, Toray’s PET films have been adopted by many MLCC manufacturers owing to their superior smooth- ness and cleanliness, which enables thinner and more ceramic layers. Based on the increase in demand, we will increase production capacity in Japan by 1.6 times compared with the current level by 2025. For our ultra- thin OPP capacitor films for xEVs, for which we hold a 60% global market share, steps have already been taken to increase production capacity in Japan by 1.6 times in 2022. As the leader in the automotive capacitor film market thanks to our ultra-thin, high voltage resis- tance, high-quality products, we plan to increase our production capacity another 1.4 times by 2025 in light of the forecast growing demand for xEVs. In the area of semiconductor packaging manufactur- ing process applications, we will strengthen our produc- tion system for dry film photoresist (DFR) application PET films, which are essential for the formation of semi- conductor circuit boards amid the trend toward finer wiring. Toray boasts a high market share in the high-end DFR market and is taking preparatory steps to address increased demand in areas where sound growth is expected, including data center servers. From a mobility application perspective, polyphenyl- ene sulfide (PPS) films with high heat resistance and durability (resistance to hot water, strong acids, and chemicals) are enjoying widespread acceptance and use as xEV motor insulation materials and in fuel cell vehicle (FCV) as well as hydrogen production equipment applications. Sales are expanding rapidly in China, espe- cially for motor applications. Complementing this prod- uct, we are strengthening global partnerships to create new applications for our PICASUS™ brand of polyes- ter films which employs our nano-layering technology. PICASUS™ helps to control light direction by enabling the transmission of vertical incident light while reflect- ing obliquely incident light and addresses the needs of xEVs for heat insulation and automated driving. Demand Forecast : PET Film for MLCC Process (Thousand t/Y) 100 80 60 40 20 0 (CY) Expand at an annual growth rate of 8% 2022 2023 2025 Expanding the Sustainability Innovation Business Toray has taken the lead ahead of its competitors to col- lect and recycle the PET film discarded after use in the MLCC manufacturing and other processes. Moving for- ward, we will deepen collaboration with supply chain companies to provide this recycling system more broadly. Moreover, we will promote the early introduction of chemical recycling and development of bio-based PET. Responding to pressing social issues including reducing food loss (extend the shelf life of food) and use of plastic, we are developing films for use in pack- aging materials that combine high-barrier PET films with Toray Industries, Inc.Toray Report 2023 thinner, stronger sealant films that help reduce the use of plastic by 30%. These films have a structure that does not use aluminum foil as a barrier material to preserve quality and enables microwave heating, which emits 80% less CO2 when compared with boiling. We project our products will become mainstream in the retort mar- ket going forward. Furthermore, we are promoting the shift to mono-material packaging to address the recy- cling difficulties encountered with packaging materials made of different ones. Reducing Food Waste and Plastic Consumption —Films for Retort Pouches Existing structure Sustainable structure (mic) (mic) 12 PET (Print) 12 (1) High-barrier PET (1) Our original technology for Vapor Deposition 15 NY (Strength) 7 AL foil (Barrier) Retortable-CPP 70 60 (2) Thinner & Stronger Retortable-CPP (2) Our original technology for ﬁlm production 2-Layer Total 72mic -30% Reduction! in multi layer, coating, and polymer design technologies, while upgrading and expanding our production and pro- cessing sites in line with the growing demand for films. We will also strengthen our cost competitiveness by introducing innovative processes and promoting smart factories using DX technology. Taking into account the aforementioned, we will focus on expanding the digital innovation, mobility, and sus- tainable innovation businesses while promoting ini- tiatives to strengthen our ultimate value creation and competitiveness. Through these means, we will work to increase core operating income by ¥28.0 billion in FY 2025 compared with FY 2022. Target for FY 2025 (Performance Chemicals) 8% 3% 1,040.0 909.4 91.0 Resins & Chemicals Films +28.0 30.4 +60.6 Electronic & Information Materials Increase in production volume of polypropylene ﬁlm TORAYFANTM and polyester release ﬁlm LumirrorTM used in MLCC production lines, from increase in semiconductor production due to the boost in installment of semiconductors for smartphones and automobiles,in addition to increase in production volume in each market Expansion of high-added-value products Increase in functional ﬁlms for packaging Structure reform of BSF, etc. 47 4-Layer Total 104mic (FY) 2022 actual 2025 target Revenue (billion yen) Core operating income (billion yen) ROIC (%) Kazuhisa Itsuji Corporate Vice President General Manager, Films Division Strengthening Ultimate Value Creation and Competitiveness Toray Group will focus on strategic pricing and promot- ing value in its bid to create ultimate value. The market for the general-purpose films used in electronic compo- nents is distinguished by its large number of custom- ers and decentralized pricing strategies. In reality, prices have repeatedly risen and fallen from the initial prices set individually due to a variety of circumstances, includ- ing the balance between supply and demand as well as fluctuations in raw material and fuel prices. In this instance, we classify customers into major and long tail users, quantify the risk of losing business, extract cus- tomers and products where prices are not appropriate in terms of price, sales volume, and specifications, and take steps to negotiate price hikes. Meanwhile, in the case of PET film for dry film resist (DFR) use, for exam- ple, we will focus on reflecting our efforts to reduce cir- cuit defects attributable to foreign substances inside films and surface micro-scratches, to help reduce cus- tomers’ production costs, and other initiatives in our product prices. To strengthen our competitiveness, we will create new products and markets by leveraging our strengths Toray Industries, Inc.Toray Report 2023Electronic & Information Materials Business Basic Policy under AP-G 2025 Maximizing and stabilizing sales and profit by expanding sales in growth markets and regions, strengthening the management foundation, and creating new large-scale businesses Turning “The One” Strategy Cycle Main Initiatives of AP-G 2025 As the “First One,” the Electronic & Information Materials Business quickly ascertains future needs through its close relationships with leading companies in each industry and rapidly develops products by uti- lizing its own fundamental and process technologies. Next, we build high barriers to entry with an intellectual property (IP) network, production performance (high quality, stable supply, cost competitiveness), and cus- tomer support to become the “Only One.” We will also promote de facto standardization and establish our posi- tion as “Number One.” We call this “The One” Strategy and under AP-G 2025 will bring about the spiraling up of this cycle. In addition to the recession due to stay-at-home demand, in the previous Medium-Term Management Program, Project AP-G 2022, the results for the final fiscal year were affected by inventory adjustments in the display and semiconductor supply chains. Despite the decline, however, we had been steadily laying the groundwork for AP-G 2025 during the same period. First, in the semiconductor and JISSO (packag- ing) market, we took advantage of the spread of xEVs and renewable energy infrastructure and, in addition to concentrating our efforts on the development of materials for power semiconductors with a high mar- ket share, greatly expanded our share in the Chinese market. Having developed a photodefinable polyimide material that is free of N-methyl-2-pyrrolidone (NMP) solvent and thereby contributes to reducing environ- mental impact, we are also advancing toward making this the de facto standard coating material for semi- conductors. In the display field, we made progress in developing materials for micro LEDs while maintain- ing good relationships with OLED display manufactur- ers. In the printing-related field, we have developed a volatile organic compound (VOC)-free printing tech- nology and are focusing on developing label and pack- age printing applications. In new fields, we worked on the development of multi-core optical fibers, for which NANODESIGN™ technology was adopted, and devel- opment of high-resolution scintillator panels. We have also strengthened our support system by assigning key personnel in sales, research, and tech- nology to major locations around the world. Under AP-G 2025, we will promote “The One” Strategy underpinned by these foundations. Semiconductor & JISSO Market: Sales Expansion of Materials for Power Semiconductors The semiconductor market has experienced repeated cycles of growth and stagnation and it is expected to expand at an average annual growth rate of 7% or more until 2025. Under such circumstances, by means of our close relationships with leading companies and indus- try-academia-government collaboration, we aim to expand our business to exceed the market growth rate through, for example, the development of high-performance prod- ucts in advance of the market, the establishment of bases in growth regions, sales expansion of environmentally friendly products (the NMP-free polyimide coating mate- rial). Geared toward xEVs and renewable energy in par- ticular, with regard to power semiconductor applications, which are expected to further expand, we will focus on meeting the needs for highly reliable buffer coatings and thermal conductive materials with high heat resistance and high voltage resistance. Display Market: Expansion of Business Centered on OLED In the display market, OLED, which features high bright- ness, efficient dimensional designs, and low power dis- sipation, is beginning to be used not only in mid-sized TVs and smartphones but also in tablets and for auto- motive displays. Used as a material for insulation layers and planarization layers, Toray’s photodefinable poly- imide is becoming the de facto standard in the OLED Market Size of OLED Displays Expand at an annual growth rate of 10% ($B) 60 40 20 0 Forecast of OLED Display Percentage Change CY 2022 CY 2025 40% 60% 3% 3% 1% 15% 5% 2% TV (CY) 2023 2024 2025 (Estimated by Toray) 48 Toray Industries, Inc.Toray Report 2023 market and is expected to grow significantly along with light-emitting materials. In the micro LED market for next-generation displays, we also provide many related materials for wearable devices and VR goggles while preparing for full-scale market growth. scintillator technology that can obtain clear X-ray digital images by forming fine partition walls for each pixel. We aim to find applications in, for example, nuclear power plant piping inspections, aircraft part inspections, and the medical field, including mammography. As mentioned above, in the electronic information and materials business, we aim to increase our core operat- ing income by ¥14 billion in fiscal 2025 (compared with fiscal 2022) by expanding the market share of our mate- rials for OLED displays and power semiconductors as well as by promoting diversification through the launch of new businesses. Target for FY 2025 (Performance Chemicals) 8% 3% 1,040.0 909.4 91.0 Resins & Chemicals Films 30.4 +60.6 Electronic & Information Materials +14.0 Increase in TV and smartphone production Increase in the ratio of OLED display Semiconductor market recovery Increased demand for power semiconductors Printing materials & others (FY) 2022 actual 2025 target Revenue (billion yen) Core operating income (billion yen) ROIC (%) 49 Hiroshi Enomoto Senior Vice President General Manager, Electronic & Information Materials Division Printing Market: Accelerating Development of Applications for Completely VOC-Free Printing Systems In the printing industry, the use of large amounts of organic solvents for inks and cleaning agents has become an issue in terms of environmental friendli- ness and work environment. In response, Toray has succeeded in developing a completely VOC-free print- ing system that does not use organic solvents using IMPRIMA™, an offset printing plate that does not require dampening water, and water-soluble electron beam (EB) curable ink. With this innovative system that can significantly reduce CO2 emissions, we will work with partner companies to accelerate the development of applications such as food packaging. Achieved “Completely ZERO VOC Printing System” VOC Content* CO2 Emission* 100 Cleaning Agent 100 Completely ZERO VOC Ink Printing Process 80% Reduction Ink <20 0 Gravure EB Ink/ Gravure EB Ink/ *Estimated by Toray with solvent gravure printing emissions as 100 New Growth Markets: Focus on Multi-Core Optical Fibers and X-Ray Scintillator Panels In new areas, we have developed a multi-core optical fiber that pushes the boundaries of conventional opti- cal fibers by combining our proprietary NANODESIGN™ technology and resin flow control technology. By arrang- ing multiple cores that transmit light in a single fiber, this product simultaneously achieves high-speed, high-ca- pacity communication as well as power savings and is thus expected to be found applications in data centers and supercomputers. We have also developed a scintillator panel for digi- tal X-ray inspection with the world’s highest resolution. X-ray digital imaging promises high-speed process- ing and low cost, but the problem is that the image becomes blurry due to the diffusion of light within the panel. In response to this, we are developing cellular Toray Industries, Inc.Toray Report 202350 Carbon Fiber Composite Materials Business Basic Policy under AP-G 2025 In order to seize the business opportunity of the carbon neutral society, which is expanding and accelerating on a global scale, Toray Group provides the best products and realizes business expansion through social contribution by leveraging the core strengths of its carbon fiber composite materials, “high functionality” and “reliability (usability)” Carbon Fiber Demand to Grow at an Annual Rate of 17% structure based on the industrial application expansion, and (3) strengthening quality and cost competitiveness. Through its carbon fiber composite materials business, Toray Group provides optimal products that meet the needs of customers from high-performance regular tow carbon fibers to low-cost large tow carbon fibers that are suitable for mass production. Manufactured in Japan, the United States, France, and South Korea, Toray Group maintains an annual regular tow carbon fiber production capacity*1 of 28,770 tons. Meanwhile, with an annual production capacity of 35,000 tons, the Group manu- factures large tow carbon fibers in Mexico and Hungary. Toray Group has the world’s largest share*2 in both reg- ular tow and large tow. Demand for carbon fiber will continue to expand at an annual rate of 17% owing to such megatrends as the drive toward carbon neutrality and is projected to exceed 200,000 tons by 2025. In particular, pressure vessels, including compressed natural gas (CNG) tanks, renewable natural gas (RNG) tanks, and hydrogen (CHG) tanks, wind turbine blades, existing commercial aircraft models, and gas diffusion layer base materials for fuel cells can be expected to drive growth. *1 As of March 2023 *2 Global Market share in 2022: Regular tow 35%; Large tow 50% Demand Forecast by Application Demand Forecast by Region (K tons) 250 200 150 100 50 0 (CY) Others Wind Turbine Blades Pressure Vessels % CAGR (2022-2025) Sports Aerospace 203.7 17 Others (JPN, KOR, etc.) China Americas Europe % CAGR (2022-2025) 203.7 17 175.1 154.0 128.3 175.1 154.0 128.3 19 19 19 10 13 15 42 4 17 22 23 24 25 22 23 25 24 (Toray’s estimate) Main Initiatives of AP-G 2025 Toray Group has identified six goals to be achieved in its carbon fiber composite materials business over the three-year period of AP-G 2025. In particular, energies will be directed toward the three main tasks of (1) captur- ing recovery in aircraft demand, (2) reforming its business Items to be accomplished in the three years of AP-G 2025 1 Respond to Recovering Demand for Commercial Airplanes and for New Demand Reorganize production bases for airplane (securing personnel) and gain new demands such as UAM and next generation aircraft programs 2 Capture Expanding Industrial Market 3 Business Structure Reform without Overdependence on Aerospace Applications 4 Strengthen Regional Cooperation Increase production capacity to capture growing demand for industrial applications such as pressure vessel (CHG), wind turbine blades, and centrifuge Expand production and sales for industrial and sports applications after aircraft demand recovers, and shift to business without over- dependence on aerospace applications Improve services by strengthening collab- oration among regional subsidiaries in the Americas (CMA - TAC-G) and Europe (CFE - CIT - DELTA - EACC) 5 Develop a Road Map for Carbon Neutrality Achieve carbon-neutrality in Europe (CFE) by 2040 and entire carbon fiber composites businesses by 2050 6 Improve Compliance Improve operation of security trade control and quality control, etc. Capturing the Recovery in Aircraft Demand In light of the subsiding impact of the pandemic and the likelihood of a rapid recovery in passenger demand, both Boeing and Airbus announced plans to gradually increase production of existing models through to 2025. In addi- tion, the development of next-generation aircraft that can further reduce fuel consumption and CO2 emissions is expected by the beginning of 2030. To capitalize on the recovery in existing model demand, we will focus on pref- erential production from existing qualified material pro- duction lines. Responding without delay, we will steadily increase capacity of existing regular tow machines in a bid to minimize the impact on other applications. Moreover, we will work to address R&D and marketing issues related to the development and selection of mate- rials with a view to obtaining material qualification for the next-generation aircraft program from 2025. Reforming the Group’s Business Structure Aerospace applications accounted for 55% of the mar- ginal profit of the carbon fiber composite materials business in FY 2019. With 64% of the Group’s regular tow dependent on aircraft and aerospace applications, results under AP-G 2022 were significantly affected by COVID-19. Under AP-G 2025, we therefore intend to build a balanced earnings base that does not overly depend on aircraft applications. With the aim of improv- ing our business portfolio, we will focus on capturing Toray Industries, Inc.Toray Report 2023the recovery in demand for commercial aircrafts and expanding high-added-value products. In addition to expanding the scale of business through large-scale capital investments, we will also promote further cost reductions. Based on these endeavors, Toray Group is targeting revenue of ¥370 billion in FY 2025, an increase of ¥88.3 billion compared with FY 2022. From a profit perspective, the Group is targeting core operating income of ¥36 billion in FY 2025, up ¥20.1 billion com- pared with FY 2022. Demand for carbon fiber is projected to fully expand from 2026. Applications that are expected to drive this demand include hydrogen tanks and urban air mobility (UAM) flying vehicle development, which are estimated to increase four-fold (90,000 tons) and 10 times (2,000 tons), respectively, by 2030 compared with 2025, as well as next-generation aircraft, which are anticipated to expand to 3,000 tons around 2030. In light of con- ditions as they currently stand, the three-year term of AP-G 2025 is positioned as a preparatory period that Toray Group will take all steps to capture this potential demand, and we will continue to put in place a sound business base and promote environmental measures to address wide-ranging issues such as carbon neutrality. Others • Utility Price Increase, etc. • Labor cost increase due to wage increase • Increase due to large-scale investments, etc. 51 Target for FY 2025 4% 2% 370 282 36.0 Large-scale Investments Cost Reduction Increase in Expenses High-Added- Value Products +20.1 15.9 • Expansion of intermediate materials (TAC-G, GDL Base Material, etc.) • Expansion of Ultra-strength carbon ﬁber, etc. 2022 actual 2025 target (FY) Recovery in Aircraft Demand Revenue (billion yen) Core operating income (billion yen) ROIC (%) Minoru Yoshinaga Senior Vice President, General Manager, Torayca & Advanced Composites Division the growing demand for industrial applications while strengthening profitability. In order to strengthen our profit structure, we will install new cost-competitive equipment, adopt a price formula linked to raw material and fuel costs, and enhance product value through technical services and quality improvement. Marginal Profit Structure by Application 15% 55% (64%) 20% 25% (31%) 21% 34% (44%) FY 2019 FY 2022 FY 2025 30% (36%) 55% (69%) 45% (56%) Aerospace (RT) Industrial & Sports (RT) Industrial (LT) *Numbers in parentheses indicate the ratio of RT Strengthening Quality and Cost Competitiveness Toray Group’s competitive advantage in its carbon fiber composite materials business includes its global power from each of production capacity, location, and human resources perspectives. Our strengths in this business also include the quality and reliability of data accumu- lated over 50 years and our development proposal capa- bilities encompassing regular and large tow as well as such diverse intermediate materials and composites as thermoplastic and thermoset resins. While taking full advantage of these inherent strengths against the grow- ing emergence of competing manufacturers, we will work to increase our production capacity and produc- tion lines at optimal locations and promote the develop- ment of innovative processes in order to enhance our cost competitiveness. As a part of efforts to enhance our quality capabilities, we will not only focus on cre- ating leading-edge material and products, but also on such activities as improving our carbon footprint. Road to Carbon Neutrality As a leading carbon fiber company, Toray will promote a progressive approach toward carbon neutrality. In line with the Toray Group Sustainability Vision, our policy is to reduce mainly Scope 1 and Scope 2 CO2 emissions by over 30% from the current level by 2030. Moreover, we intend to initiate the production of recycled carbon fiber in Europe and the U.S. with the ultimate goal of achieving carbon neutrality by 2050. Meanwhile, we will quantify the Life Cycle Assessment (LCA) improvement effects on customers’ products and clarify Toray’s contribution. Demand for Carbon Fiber in Full Swing from 2026 As previously mentioned, Toray Group has identified various policies for its carbon fiber composite materials business under AP-G 2025. Guided by these policies, we will strengthen our business structure by capturing Toray Industries, Inc.Toray Report 2023 52 Water Treatment Business Basic Policy under AP-G 2025 Strengthening the business foundation as a “Leading Company” in the water treatment membrane business—To achieve expanding global market share and secure profitability— The Strengths of Broad Product Lineups and a Global Integrated Operation System As the core business in the Environment & Engineering segment, the first strength of the water treatment business is its ability to propose total solutions (IMS*) through the combination of its broad product lineups. Toray Group develops, produces, and sells various mem- brane products of different diameters entirely in-house in accordance with the substances to be separated during water treatment, from reverse osmosis (RO) mem- branes to nanofiltration (NF) membranes, ultrafiltration (UF) membranes, and microfiltration (MF) membranes. In this way, it designs the optimal system in accordance with the water source and application to achieve the highest performance in an economical manner. The sec- ond strength is its global integrated operation system for production, sales, and technology. Through an organiza- tion consisting of five locations globally, the Group reli- ably supplies high-quality products and offers detailed customer support in a timely manner. It has also estab- lished R&D bases beyond Japan in China and India, and is committed to developing new products that align with the water quality and needs of each region. * IMS: Integrated Membrane System IMS (Integrated Membrane System) D e s a l i n a t i o n S e a w a t e r T r e a t m e n t S u r f a c e W a t e r W a s t e w a t e r R e c l a m a t i o n Seawater River/ Lake Water Biological Treatment Effluent Wastewater Reclamation TORAY UF TORAY RO TORAY UF TORAY UF TORAY UF TORAY RO Product water uses: Potable Industrial Agricultural TORAY MBR TORAY RO RO Membrane Demand to Grow at an Annual Rate of 5% U.S. market is experiencing growing demand for sewage and wastewater reuse as a countermeasure for droughts, especially on the West Coast, whereas the Middle East market continues to construct large-scale seawater desali- nation plants, leading to an outlook for strong demand. RO Membrane demand outlook (Toray’s estimate) RO Membrane demand (FY 2019=100) 5% CAGR (’22-’25) Others Middle East USA China 2019 2022 2025 150 100 50 0 (FY) Main Initiatives of AP-G 2025 Under AP-G 2025, the Group aims to increase market share and secure profitability by (1) expanding business and solving social issues, (2) enhancing activities in growth business fields and growth applications, (3) strengthening price and non-price competitiveness, and (4) enhancing its sales network and the sophistication of its sales meth- ods. In addition, the Group supports these efforts by (5) strengthening its organizational power and governance. Five Major Issues Business expansion and solving social issues • Achieve top market share in RO business • Enhance activities in growing water reuse field • Development of brine mining technology and study of product recycling Enhance activities in growth areas and growth applications • Promote global business development in growth fields such as Water reuse, ultrapure water for semiconductors • Keep No.1 position of SWRO and further enhance our presence in China and the US market Strengthen price and non-price competitiveness • Development of high-added-value products • Promote thorough cost reduction • Development of drastic cost reduction technology for the future Enhance our sales network and sophistication of sales methods • Strengthen web and digital marketing • Expand maintenance warranty sales using ICT technology • Enhance collaboration with partners Strengthen organizational power & governance • Provide opportunities and HR development for young employees • Strengthen quality management systems 1 2 3 4 5 Demand for mainstay RO membranes is anticipated to grow at an annual rate of 5% through 2025. As the larg- est market, China is expected to see greater demand even as applications change, including the launch of applica- tions for new energy in contrast to a contraction in appli- cations for thermal power generation as the country aims to achieve peak carbon emissions by 2030. Moreover, the Growth Driver Strategies Aiming for the Top Global Share of RO Membranes In the mainstay RO membrane business, the Group oper- ates through an organization consisting of five locations globally in order to accelerate the development of high- added-value products that reflect customer needs in a Toray Industries, Inc.Toray Report 2023 replacement demand from large-scale desalination plants is expected to increase in line with the accumulation of new plants. Although Toray’s technology has succeeded in becoming the de facto standard for seawater desalination applications and has captured an overwhelming major- ity share, Toray Group will continue to construct supply chains that correspond to this growth in demand, become the accepted provider of specifications for replacement demand through technical service enhancements, and engage in efforts aimed at a further shift to localization and uncompromising cost reductions. In this way, the Group will solidify the de facto standard position. Under AP-G 2022, the Group enhanced its systems for local production for local consumption and steadily pro- moted enhancements to its business structure, thereby achieving business expansion that exceeded the target. Under AP-G 2025, the Group will continue to promote the expansion of business activities for all growth applications, centered on the RO membrane business, with the aim of increasing revenues approximately 1.2 times over the three years. At the same time, the Group will contribute to the achievement of sustainability targets and to the realiza- tion of carbon neutrality through business expansion. Target for FY 2025 Revenue of Water Treatment Business (FY 2013=100) System MBR UF RO 300 200 100 0 (FY) 2013 2016 2019 2022 2025 target CO2 emissions avoided by using RO membranes for seawater desalination*1 RO membrane method 53 Evaporation method 336 (t-CO2/2.6m3-water) *1 Figures in the circles above represent CO2 emissions for the entire product life cycle Source: Innovations for Greenhouse Gas Reductions, Japan Chemical Industry Association (JCIA) Sustainability Target FY 2013 (Baseline year) FY 2022 FY 2025 Target Water filtration throughput contribution by Toray’s water treatment membranes 27.23 million tons/day 2.4-fold 2.9-fold Satoshi Shimoyama Corporate Vice President General manager, Water Treatment & Environment Division timely manner. Similarly, it will use this organization to enhance sales activities for priority applications and to construct global supply chains in a way that aligns with sales expansion. In addition to promoting cost reductions, the Group also works to further strengthen non-price com- petitiveness by enhancing its technical services. In short, the Group will globally deploy technical services that inte- grate everything from technology proposals for customers to support for the use of these technologies via after-sales services. Through these efforts, the Group aims to capture the top global share of the RO membrane market in 2025. Enhancing Sales Activities for Sewage and Wastewater Reuse Applications Since the start of the 2000s, efforts to reuse sewage and wastewater, especially in countries and regions suffering from drought, have accelerated. Compared to seawater desalination, sewage and wastewater reuse costs about one-third and it is easier to obtain the raw water, even in inland areas. Moreover, water reuse helps reduce environ- mental impact by curtailing wastewater discharge, which has led the market to expand at a pace exceeding at an annual rate of 10%. For example, with its poor access to water resources, Singapore began operating an advanced treatment plant called “NEWater,” which even enables sewage water to be used as drinking water. In addition to developing new products and making IMS proposals, the Group is working to strengthen its ability to communicate through a dedicated website and to allocate resources in a focused manner as a means of incorporating demand for these applications scattered among different regions. Global Approach to Ultrapure Water Applications for Semiconductors Ultrapure water applications for semiconductors are another growth application. Efforts centered on Europe and the U.S. to attract and build semiconductor plants in their own countries have been gathering strength. At the same time, as the performance of semiconductors improves and the fabrication process evolves, more advanced require- ments are being placed on the cleaning water used at each stage of the production process, thereby increasing the need for ultrapure water. In response to these demands, Toray Group developed a new product that significantly enhances the ability to remove silica and other substances from water that cause lower yields during semiconductor fabrication cleaning processes. Along with implementing intensive promotional activities for this product and devel- oping more effective energy-saving products, the Group aims to expand business activities for ultrapure water pro- duction applications for semiconductors. Maintaining the De Facto Standard Position for Seawater Desalination In addition to increasing demand for water stemming from a growing population and industrial development poli- cies, rising environmental awareness means the Middle East continues to construct large-scale seawater desali- nation plants using the RO membrane method, which generates few CO2 emissions. This trend in seawater desalination applications is also spreading not only in the Middle East but also in North Africa against the backdrop of skyrocketing energy prices. Moreover, RO membrane 53 Toray Industries, Inc.Toray Report 202354 Pharmaceuticals and Medical Products Business Basic Policy under AP-G 2025 Utilizing the outcomes/achievements during AP-G 2022 and improving the probability of success in development, boost profitability, and restore the soundness of the business within FY 2025. Realizing a profitable and sustainable business foundation around 2030. Business Overview and Main Initiatives of AP-G 2025 In Vitro Diagnostics Kit developments that assist in its early detection will be extremely high. In addition to pharmaceuticals such as Dorner™ and Remitch®*, dialyzers, dialysis machines, extracorporeal circulation therapeutic columns, catheters, and contact lenses, Toray Group’s pharmaceuticals and medical prod- ucts business contributes to health and hygiene as well as longevity with a variety of products using advanced materials. Toray Group’s technologies in fibers, mem- branes, and surface processing are primarily brought together in the fields of dialysis and blood purifica- tion. In addition to Japan, we possess production facil- ities for dialyzers and dialysis machines in China, and besides that in Japan sales bases in the United States, Europe, China, South Korea, and Singapore. The main tasks for AP-G 2025 include: improving the functions of and obtaining additional indications for existing products while developing their overseas business; the steady launch of the diagnostic business; and the provision of high-added-value services by utilizing DX/AI. *REMITCH® is a registered trademark of Torii Pharmaceutical Co., Ltd. Priority Measures • Improve functions, obtain additional indica- tions and develop overseas business of existing products • Create maximum value utilizing exiting assets (tangible and intangible) • Launch of the diagnostic business • Identify growth areas, provide high-added-value services utilizing DX/AI, strengthen solution pro- posals and expand business and product devel- opment in the oncology field. • Develop environmentally friendly products • Place top priority on quality, foster competitive- ness led by innovative cost reduction technology Promoting New Product Development Pancreatic Cancer Diagnostics Kit Having obtained marketing approval for Toray APOA2- iTQ, an in vitro diagnostic test kit that assists in the diag- nosis of pancreatic cancer, domestic sales will begin once insurance coverage becomes available. Pancreatic cancer is the leading cause of cancer death in Japan with approximately 38,000 per year (2020). An extremely seri- ous disease without noticeable symptoms and a five- year survival rate in advanced stages III and IV of less than 10%, we believe that the social significance of new Nucleic Acid Drug Currently under development, a nucleic acid drug (TRK- 250) that aims to inhibit the progression of lung fibro- sis has completed Phase I clinical trials in the United States. Improved biostability, which had been an issue with previous nucleic acid drugs, and efficient delivery to target tissue—by being administered directly to the lungs as an inhalant—is expected of this new-concept pharmaceutical that has received orphan drug desig- nation from the FDA in the United States. Inhaled by means of a nebulizer, there is almost no systemic expo- sure and the risk from potential side effects is expected to be low, so we aim to acquire a business partner and conduct the next phase of clinical trials. Adhesion Barrier We are promoting as open innovation an adhesion barrier (TRM-270C) for use in surgical operations that combines Toray’s fiber and film processing technologies with the polymer nanosheet technology of Nanotheta Co., Ltd., a start-up from Waseda University. Featuring both flexi- bility and good adhesion to organs—due to its laminated structure of an anti-adhesion layer made of biodegradable resin and a support layer made of water-soluble resin— we are developing this product as a medical device that provides the necessary handling in laparoscopic surgery and in robot-assisted surgery, which has been increas- ing in recent years. Clinical trials having commenced in the gastroenterology field in 2022, we are also organizing clinical trials in the fields of obstetrics and gynecology. Strengthening the Dialysis Business In our core dialysis business, we are focusing on devel- oping a new system that will contribute to improved patient satisfaction, ease the burden on healthcare providers, and reduce costs (time). The AI-based anal- ysis system utilizes big data to select, depending on the patient’s condition, the appropriate dialysis mem- brane, adjust the amount of fluid removed and blood flow in real time, and even to predict falls in blood pres- sure during treatment. We are also demonstrating our strengths as the only manufacturer in Japan that cov- ers the full range of dialysis-related needs, from reverse osmosis (RO) tap water treatment equipment to dialy- sis machines. In addition to evolving an artificial dialy- sis management system that links a series of devices with electronic medical records, we have developed a Toray Industries, Inc.Toray Report 2023Personal Health Record (PHR) system to collect infor- mation on patients’ daily lifestyles, further strengthen- ing our total dialysis solution. Artificial dialysis management system MICS (Patient monitoring System) DMACS(Dialysis Machine Advanced Communication System) First in industry Machine area Dialysis area Tap water Dialysate RO machine Dissolving machine Dialysis ﬂuid delivery machine Dialysis monitoring system (TR-10EX) Enhancement of HotBalloon™ As Japan moves toward a super-aging society, the num- ber of patients with atrial fibrillation, a type of arrhythmia, is increasing. Since this condition can cause cerebral infarction, heart failure, and dementia, there is a growing need for a curative ablation treatment. Toray launched the world’s first hot balloon ablation catheter (HotBalloon™) for the treatment of atrial fibrillation. Using cauteriza- tion through thermal conduction, HotBalloon™ has been praised for its potential in reducing the risk of recurrence due to uneven cauterization. Having obtained insurance coverage not only for paroxysmal atrial fibrillation but also for persistent atrial fibrillation, physician-led clinical research is being commenced. Also developing a bet- ter operable second-generation product that will main- tain the same level of safety and effectiveness, we are planning for its market launch in FY 2023. Global ablation market (Estimate by Toray) and core operating income of ¥2 billion by accelerat- ing the overseas expansion and getting additional indi- cations for existing products, strengthening the dialysis business, and sales of diagnostics. As our long-term vision around 2030, we will pursue business expansion by means of global launch and sales expansion in the diagnostics business, accelerated overseas expansion and through getting additional indi- cations for existing products, and the development of environmentally-friendly products. In addition, we pur- sue business expansion through new product launches and solution services. We aim to achieve revenue of ¥100 billion and will work to transform our business into a highly profitable one. Specifically, we will pursue syn- ergetic effect among pharmaceuticals, diagnostics, and medical devices with nucleic acid science at the core. In the blood purification field, we will increase our compet- itiveness through high functionality, minimization, and recycling design, and accelerate the expansion of the dialysis business through the use of DX/AI. Revenue Plan of the Life Science Segment Billion yen 100 80 60 40 20 0 53.8 60.0 (FY) 2022 result 2025 target 2030 vision Billion yen 400 300 200 100 0 (FY) 2016 2019 2022 2025 Hirofumi Kobayashi Senior Vice President General Manager, Pharmaceuticals and Medical Products Division Aiming for Revenue of ¥100 billion or More around 2030 Amid the effects of soaring and persistently high raw material and fuel prices, and the NHI drug revision and reimbursement prices revision, under AP-G 2022, we secured earnings by promoting high-added-value sales, expanding indications and areas, and appropriately responding to medical facilities and government stock- piling projects during COVID-19. However, core operat- ing income was sluggish. To escape from this situation, in AP-G 2025, we aim to achieve revenue of ¥60 billion 55 Toray Industries, Inc.Toray Report 2023Human Resources Management 56 Based on the thinking that the success or failure of a com- pany is decided by its people, and employees shape its des- tiny, Toray positions human resources as its most important management resource. At the same time making the secur- ing and development of human resources its most import- ant management issue, the Company is promoting human resource strategies in an integrated manner with its man- agement strategies. On the path from the development to the commercial- ization of advanced materials, the involvement over the medium- to long-term of human resources who possess a range of abilities remains essential. The Company is lever- aging the advantages of Japan’s membership-type employ- ment system, where the company protects jobs, employees can work with peace of mind, and teamwork is valued. At the same time, we aim to create organizations and work- places that incorporate flexible employment structures, where each and every employee can feel fulfilled with their own abilities and develop their own careers, and where they can work as teams to achieve major goals. Strengthening of Human Resources Development 1 Development of Next-generation Management Leaders Toray is systematically training successor candidates who can take charge of the next generation of management. Toray Management School, which opened in 1991, selects 20 section managers every year. In addition to helping the candidates acquire the knowledge and skills essential for corporate management, the School also improves their problem-setting and problem-solving abilities through joint research in which themes are selected by groups. 600 gradu- ates including 35 women have gained practical management experience at Japanese and overseas group companies, and 179 have gone on to take up management positions at Toray and its Japanese and overseas group companies. Current President Mitsuo Ohya is also one of the School’s graduates. In 2006, we also launched the Toray Group Management School for division and department managers of Japanese group companies and candidates for management suc- cession at the Toray Synthetic Textile Cluster. In 2021, we launched Management Training for General Managers, geared toward those who are about to be promoted to the senior management level of Toray Group. Expanding and Raising Level of Core Human Resources Charged with Front-line Workplace Competency Having systemized OJT, OFF-JT, self-development, and per- sonnel systems and measures, Toray is developing its human resources by linking each of these systems. We have pre- pared training programs for employees at all levels in all fields with the aim of improving and strengthening specialized capabilities, such as in management, sales, accounting, tech- nology development and production management as well as in global capabilities. At the same time, we are making it possible for key human resources candidates, who will be responsible for front-line workplace competency, to attend training sessions and other activities in a planned manner. In particular, we are focusing on the development of profession- als with advanced expertise, technical skills and originality in problem solving, of leaders who act with foresight, leader- ship and a sense of balance, and of human resources who can play an active role in global business . Career Path Worksheets that Support Self-Reliant Career Development Toray introduced the career path worksheet as a tool to sup- port the growth of each and every employee. Employees draw up their own career plans and, through interviews with their superiors, verify their past work experience and their current level of achievement in relation to the required skills as well as discuss their career prospects. Based on that con- tent, superiors also formulate training plans for their subordi- nates, thereby creating a system to support subordinates in their work execution and career development. Furthermore, we have adopted a self-declaration system as part of our job rotation system, allowing employees to apply for a transfer every year to advance their careers. In this way, we are incor- porating human resources development measures that sup- port the self-reliant career development of our employees and promoting the creation of a highly motivated, highly pro- ductive organization. Fostering Mindset to Face Challenges through In-house Recruitment System In addition to supporting self-reliant career development, Toray is also conducting internal recruitment with the aim of fostering the mindset to face challenges. Job openings are posted on the Company’s intranet, and employees who have been employed in their current position for three years or more are free to apply. Every year, many employees are taking advantage of this open recruitment system to achieve transfers across fields and types of occupation. Company-wide Training Course Enrollment in FY 2022 Training category Persons enrolled Men Women Total Time dedicated to training per employee (hour) Management 699 59 758 44.8 Sales, marketing, and administration 262 74 336 20.2 Technical 620 84 704 29.0 Global Total 74 12 86 50.2 1,655 229 1,884 34.7 Out of the Total, Digital Training 238 24 262 27.0 Toray Industries, Inc.Toray Report 2023Securing and Promoting Diverse Human Resources 2 Active Promotion of Locally Hired Staff We are also raising awareness among locally hired staff work- ing at group companies around the world that they are Toray group employees. Developing human resources into execu- tives who understand and can put Toray’s management phi- losophy and policies into practice, we are actively promoting people to management positions, including executive posi- tions at Toray’s headquarters. We are also conducting human resources development overseas through both OJT and OFF-JT. In addition to training sessions at each company, by means of OFF-JT we are regularly holding group training ses- sions by region and rank as well as holding training sessions in Japan for directors and executives. Furthermore, we are also providing career development through international personnel rotations. At the present time, two local staff members have been appointed as Toray executive officers, and five have fol- lowed the executive officers as directors. At group companies around the world, local staff account for 60% of executive posi- tions, including departmental managers, factory managers and above, in Europe and the United States, and 45% in Asia. Accelerating Promotion of Women’s Empowerment in the Workforce By utilizing the career path worksheets to support individual skill development and planning for realizable careers, we are working to improve the retention rate of female employees and the ratio of female employees in managerial positions. We have also designed systems to minimize the difficulties and challenges that female employees may face, especially the impact of life events on their career development. The num- ber of women working at Toray Group companies outside Japan is also increasing, and in FY 2022, 14 female employ- ees were dispatched in countries and regions such as China, Southeast Asia, Europe, and the United States, in positions such as sales, legal affairs, accounting, and technologies, etc. Toray Group’s female manager training program, which was launched in 2014, was independently planned by female general managers and to date has been held eight times. Female managers who had participated commented that it was a good opportunity to learn from a variety of role models who have the experience of responding to a variety of situa- tions, as well as to strengthen their awareness of their own career development. In addition, male managers also partici- pated in the most recent training session, and together they discussed career development for female employees. Targets for Promoting Women’s Empowerment in the Workforce (April 2021 to March 2026) 1. To increase the ratio of women in management positions year by year. The immediate specific target is to increase the ratio of women in management positions from 5.1% in FY 2020 to 6.5%. 2. The ratio of the continued employment rate of female employ- ees to the continued employment rate of male employees is set at 1.0 for each employment management category, for employ- ees who have been with the Company up to 10 years. Number of Women in Management Positions and Women as a Percentage of Total Management (Toray Industries, Inc.) (Number) 800 8.3% 8.7% 8.9% 9.0% 9.3% 9.7% 9.8% 10.0% 10.0% 4.4% 4.4% 4.5% 4.6% 4.9% 5.1% 5.6% 6.0% 6.1% 600 400 200 0 (FY) 2015 2016 2017 2018 2019 2020 2021 2022 2023 Department manager Section manager Unit manager *As of April each year Percentage of women in section manager or higher positions Percentage of women in unit manager or higher positions Promoting Job Satisfaction and Supportive Workplaces 3 Job satisfaction for each and every individual is connected to the source of vitality that creates new value. Through the introduction of the career path worksheet, Toray aims to become a company that supports “finding a place for self-re- alization within Toray Group.” Under AP-G 2022, we extended the Toray Philosophy (TP) Project to share and disseminate our philosophy so that each and every employee could gain the sense that they were contributing to society through their work. Under AP-G 2025, we are holding live “REAL TALK—Everyone’s Voice” events between management and employees, including the pres- ident, and launching initiatives to respect feedback from workplaces and lead to the fostering an open organizational culture. To create supportive workplaces, we are also working to enhance and upgrade support for balancing work and life. These efforts includes setting up a section to showcase a variety of support system available on the WELBOX, our online employee welfare service site, so that employees, irrespective of their gender, can choose from a variety of lifestyles. In particular, systems relating to childcare, nurs- ing care, and maternity protection have been well-developed exceeding legal requirements and easy to use. Use of Childcare Leave (Toray Industries, Inc.) FY 2017 2018 2019 2020 2021 2022 Number of employees taking childcare leave Women 68 58 60 66 56 46 Men 3 4 10 22 40 82 57 Toray Industries, Inc.Toray Report 2023Interview with a Newly Appointed CEO Toward Toray Group’s Transformation and Sustainable Growth advance in their careers, their own areas of expertise and areas in which they have an interest broaden. At TMUS, career paths opened up for me not only in engineering but also in sales, and I became interested in that kind of work. I believe that building a career not only as an engi- neer but also in sales activities has led me to the posi- tion I am in today. — Please tell us how you felt when you were appointed CEO and what your future aspira- Tri Q. Huynh President & CEO Toray Membrane USA, Inc. (TMUS) 58 — Please tell us your reasons for joining Toray sub- tions are. sidiary TMUS in the United States and your After becoming involved in sales activities and manage- impressions of Toray Group after having joined ment, I worked hard to become a CEO someday, so when the Company. I heard that I had actually been selected as CEO, I was After graduating from university, I worked for eight or very happy and honored to have achieved my long-held nine years at a water treatment company, mainly as an goal. On the other hand, I was a little surprised that I was engineer, but that company was later acquired by a major selected as the CEO of a Japanese company, as I imagine company. I joined Toray Membrane USA (TMUS) in 2008, at the management level, I fall into the younger category. shortly after the company was established, and the CEO However, this is my 15th year at TMUS. As I have been at the time, who knew of me, had approached me. Even working my way up since the early stages of the startup, before joining the company, I had the opportunity to gain I have been able to see how this company has grown up first-hand experience of Toray products and knew what to now and therefore believe that I have a good under- kind of functions they had, and thus I rated Toray’s tech- standing of Toray’s corporate culture as well as the cur- nological capabilities very highly. At the same time, I felt rent situation. Although we have grown in a short period that Toray had the potential to become an industry leader of time from a startup to a company that can generate in the near future, so decided to join the company as a profits, my feeling is that we still have a lot of potential. senior engineer. After joining the company and the team Therefore, my goal from now on is to lead TMUS to the members, I was convinced that this startup was pre- next chapter in its growth to make the company even cisely the best place for me to demonstrate my skills. bigger. This starts with a change in mindset of employ- Furthermore, after joining the company, I realized that ees. I would like to create a company that can grow sus- Toray Group has a vision of wanting to be successful tainably by building a foundation of thinking that looks at over the long-term, not just the short-term. long-term growth, rather than simply focusing on earning immediate profit. I find this a challenging task, and am — Did you have a career path to management in honored to have been given this opportunity. mind when you joined the company? To be involved in corporate management was not what — What do you think are the challenges that Toray I was aiming for from the beginning. As I had majored Group is facing in the United States? in chemical engineering at university, I wanted to first As a group, Toray possesses diverse, chemistry-based improve my abilities as an engineer. However, as people technologies. From there, in addition to water treatment, Toray Industries, Inc.Toray Report 2023Please watch the short film STRAIGHT PATH, which is based on President Huynh’s true story. we are expanding our various businesses globally, undergoing consolidation, and there are cases in which including textiles, carbon fiber composite materials, and small companies have pooled a variety of technolo- functional chemicals, and are working to contribute to gies and grown into major companies. In an increasing people’s lives and society. I feel proud to be a member number of cases, such companies are proposing a vari- of the Group. ety of packaged solutions. For TMUS to adapt to these With regard to our business in the United States, I think changes in the competitive environment and exhibit fur- it is good that a diverse group of local human resources ther growth, I believe it is important to strengthen part- is responsible for the management of the group compa- nerships not only of course within the Group but also nies. This is because we local human resources have a outside the Group and with our customers, while aiming good understanding of the culture and people of each to create more value than we could do alone. region and exert an important presence in the success of our business. — Lastly, could you please give a message to those On the other hand, although a major company with who will join Toray Group in the years to come. world-class technology at its disposal, Toray is not well Looking back on my journey, the first thing I would like to known in the United States. Additionally, there is lit- say to everyone who joins Toray Group is to view working 59 tle communication or collaboration between the local at Toray as a long-term commitment rather than a short- group companies, giving the impression that each com- term. I do not recommend Toray to people who think that pany is developing its business independently. This often once they find the job they want, they can just move on places them at a distinct disadvantage when competing to the next one. However, it is a great place for people against huge corporate groups. If the group companies who want to build their career over the long term. in each region were closely connected and pooled their Conversely, for those people who want to grow and resources, we could expect various synergies between improve themselves at Toray, a long-term commitment our businesses and be able to increase our competitive- is essential. In other words, it will be necessary to find ness as a group. I also think that Toray’s name recogni- opportunities to contribute to the challenges Toray is fac- tion would improve by becoming more active as a group. ing and increase their own value while gaining knowl- Therefore, I think what is needed is more collaboration edge, skills, and experience. I believe that this is the and cooperation among the local companies. meaning of long-term commitment and that will also lead to an attachment and loyalty to the Company. This — What strengths does TMUS possess in the has also provided a driving force in my own career. United States? Having begun its life as a startup, TMUS is now I mentioned that there is room for improvement in increas- entering a period of generational shift. In addition to ing Toray’s name recognition in the United States. When it the active participation of mid-level employees, nurtur- comes to the water treatment industry, Toray’s products ing the younger generation has become an issue. In such as hollow fiber ultrafiltration (UF) membranes and the meantime, the business environment is constantly reverse osmosis (RO) membranes have extremely high changing, and if we stand still, we will soon be left performance, and the technological capabilities backed behind. Under these circumstances, I would like to give by these achievements are undoubtedly recognized as back to Toray and will do my utmost to make the neces- a brand. This is where TMUS’s greatest strength lies. In sary changes and bring about evolution to grow TMUS the water treatment industry, however, companies are in a sustainable manner. Toray Industries, Inc.Toray Report 2023Special Feature REAL TALK—Everyone’s Voice Open Communication from All Angles We have livestreamed “REAL TALK—Everyone’s Voice” since January 2023 as an opportunity to pro- mote open two-way communication between man- agement and employees with the aim of fostering a corporate culture that enables everyone to be freer, more open, and further demonstrate a pioneering spirit. Started by former President Akihiro Nikkaku, President Mitsuo Ohya has continued this initiative, answering questions from employees. Employee questions are wide-ranging, from seri- ous workplace inquires such as “What do you think about the fact that we sometimes have to spend an inordinate amount of time preparing documents to respond to random comments from upper manage- ment, making it difficult to concentrate on our main duties?,” “How do you plan to address aging produc- tion facilities?,” “What are your measures to deal with personnel shortages?” to everyday queries like “How does the president spend his days off?” and “What is the president’s daily schedule?” The pres- ident also answers questions received via the live chat on the day of the livestream. REAL TALK livestreams were held twice in FY 2022 and are scheduled to be held a total of six times in FY 2023, including at our factories. REAL TALK provides a valuable opportunity for employees to interact with President. REAL TALK has been well received by many employees, with positive com- ments including: “I felt closer to the president,” “I got a glimpse of the president’s thoughts and per- sonality,” “The atmosphere felt free and open,” “These sessions will likely improve communication skills Group-wide,” and “The president expressed his frank opinions about workplace issues.” In post-lives- tream surveys, 90% of employees responded that the program was “very good” or “good.” President Ohya took the baton from the former president to lead REAL TALK The 5th REAL TALK, with his first participation in the livestream, was held at Tokyo Head Office 60 Meeting between staff and President Ohya before starting the session Post-livestream survey results (average of previous 6 surveys) Fair/Not very good/Not good Suit jacket made with Toray material senbism™ Very good/Good As for his impressions of the livestream, President Ohya said: “I listen to the opinions of all employees, including younger ones, very closely. I want to use such opportunities to have many discussions with employees globally.” E m p l o y e e f r o m P e r s o n n e l s e r v i n g a s m o d e r a t o r D e p a r t m e n t Toray Industries, Inc.Toray Report 2023[The 6th REAL TALK from the Nagoya Plant] E m p l o y e e f r o m P l as t ic s Tech n ica l D e p ar t m e n t s e r v i n g as m o d e r a t o r P r e s i d e n t O h y a President Ohya and participating employees exchanged opinions about the everyday challenges and good points of the Nagoya Plant based on opinions of those working there, providing a 40-minute session full of realism that only a live talk session can create. Comment from REAL TALK Management Staff Representative Employee answering a question 61 Takayuki Minami Corporate Communication Planning & Administration Group, General Administration & Communications Division REAL TALK has been planned not with the goal of reaching conclusions, but rather to provide a forum where employee voices can be conveyed to management, employees can hear manage- ment thoughts directly, and each individual can have the opportunity to think and take action. At first, I was worried about how employ- ees would react to the event, but post-session surveys revealed increasingly supportive com- ments with each livestream, with more people saying “It’s a good project, so keep up the good work!” Some departments watch REAL TALK at monthly meetings and discuss their impressions and opinions, so we feel that internal communi- cation is gradually changing. The 7th REAL TALK to be held at the Ishikawa Plant U s i n g t h e l a r g e c o n f e r e n c e r o o m a t t h e To k y o h e a d o ffi c e a s i v e s t r e a m i n h o u s e l a s t u d i o f o r t h e Toray Industries, Inc.Toray Report 2023Initiatives for Global Environmental Issues T o r a y I n d u s t r i e s , I n c . 62 T o r a y R e p o r t 2 0 2 3 Toward Achieving Carbon Neutrality by 2050 In addition to expanding businesses in the areas such as renewable energy, hydrogen, electrification-related mate- rials, recycling of resins, and other areas in which it has conventionally been involved, Toray Group will create busi- nesses related to CO2 separation and recycling, and other new businesses as a means of bolstering the Sustainability Innovation (SI) Business. This effort is also intended to con- tribute to the achievement of carbon neutrality in 2050 by reducing greenhouse gas emissions throughout soci- ety. Moreover, the Group will develop and introduce sus- tainable energy (renewable power and hydrogen) and raw materials, innovative processes, and technologies that uti- lize CO2 through the expansion of the SI Business, thereby reducing its greenhouse gas emissions (Scope 1 and Scope 2) in the aim of achieving carbon neutrality for the Group in 2050. The Group will also work to reduce Scope 3 green- house gas emissions for the purpose of decreasing emis- sions throughout the supply chain. Toray Group believes that achieving carbon neutral- ity will require transformations based on new concepts together with leaps in technological innovation, and that doing so will rely on initiatives undertaken by individual companies, as well as through joint efforts involving entire industries, nations, and society as a whole. The Group there- fore engages in measure and policy proposals intended to achieve carbon neutrality in collaboration with economic organizations, industry associations, and initiatives. Major organizations and their committees and subcom- mittees (examples) in which the Group holds membership • Nippon Keidanren (Japan Business Federation): Subcommittee on Global Environment, Committee on Environment • Japan Association of Corporate Executives: Environment and Energy Committee • Japan Chemical Industry Association: Technical Affairs Committee • Japan Chemical Fibers Association • Japan Environmental Management Association for Industry • GX League Contributing to a carbon neutral world Increasing the Volume of Greenhouse Gas Emissions Avoided through the Sustainability Innovation (SI) Business Achieving carbon neutrality for the Toray Group by 2050 Adopting greenhouse gas emissions reduction technology in business activities Returns from the SI Business s n o i s s i m e s a g e s u o h n e e r g e d i w - y t e i c o S Reducing emissions Promoting carbon capture Present 2050 • &+™ fiber made from recycled plastic (PET) bottles • Carbon fiber for hydrogen tanks • Carbon fiber for wind turbine blades • Water treatment membranes • CO2 separation membrane s n o i s s i m e s a g e s u o h n e e r g s ’ p u o r G y a r o T • Maximizing the use of zero-emission electricity and fuels • Increasing the efficiency of existing production processes • Developing innovative low-greenhouse gas emission production technologies • Developing and maximizing the use of recycling technology and biotechnology • Taking on the challenge of CO2 recycling and carbon capture Present 2050 Returns from the SI Business (Corresponding KPls) FY 2030 Target [Compared to FY 2013] (Corresponding KPls) FY 2030 Target [Compared to FY 2013] Supply of Sustainability Innovation products CO2 emissions avoided in value chain 4.5-fold 25-fold GHG emissions in production activities GHG emissions per unit of revenue for the entire Toray Group Over 50% reduction GHG emissions of Toray Group in Japan Over 40% reduction TCFD Initiatives Governance System Related to Climate Change Toray Group has positioned the Sustainability Committee chaired by the President as the body in charge of oversee- ing efforts to combat climate change. The Committee defines policies, medium- and long-term roadmaps, and targets for achieving the Toray Sustainability Vision, including carbon neu- trality in 2050, and manages the progress of these efforts. At least once a year, the Board of Directors receives a report Board of Directors Management, Decision-making Report summarizing the matters discussed by each group-wide com- mittee, including the Sustainability Committee, and appro- priately monitors the measures to counter climate change. When making management decisions, the Board considers climate change-related issues as an important element for engaging in oversight and comprehensive decision-making. Sustainability Committee Chair: President Deliberation on sustainability-related plans and follow-up on initiatives for realization of the Toray Group Sustainability Vision Sustainability Innovation (SI) Business Expansion Project Climate Change Project Promote SI business expansion Promote reduction of environmental burden • Expansion of SI business in each business division • Expand mobility, resource recycling, and hydro- gen businesses • Challenge 50+ Project • Strategic planning for GHG emission reduction • Measures toward realization of nature positive Cooperating CSR Committee Risk Management Committee Safety, Health, and Environment Committee Technology Committee Risk Management As part of its periodic risk identification and assessment efforts, the Risk Management Committee considers climate change-related risks to be one of relatively high importance. The Committee therefore conducts detailed risk analyses and assessments based on the TCFD framework under the super- vision and management of the Sustainability Committee as Strategy Toray Group has identified climate change-related risks and opportunities, and performed quantitative scenario analyses to grasp their financial impacts based on the qualitative sce- nario analyses regarding the potential influence of each on the Group from the Toray Group TCFD Report 2021. After the anal- ysis was conducted, Toray Group reconfirmed the resilience of the long-term strategy (outlined in the Long-Term Corporate Vision, TORAY VISION 2030) that will drive its achievement of the Toray Group Sustainability Vision. The Paris Agreement target is to limit global warming to well below 2°C, preferably to 1.5°C, compared to pre-indus- trial levels. Looking to help achieve this target and achieve carbon neutrality in 2050, Toray Group primarily analyzed the 1.5°C increase scenario, but also considered the 2°C increase the body with sole responsibility for climate change-related issues. Based on the results of its assessments, the Risk Management Committee reconsiders risks and promotes measures to address climate change-related risks in a group- wide yet agile manner. scenario. The Group also looked at the 4°C increase scenario assuming insufficient progress on efforts to ameliorate global climate change. Based on these scenario analyses, Toray Group is bolster- ing the Sustainability Innovation (SI) Business, which con- tributes to the achievement of the Toray Group Sustainability Vision. Similarly, the Group promotes the production of green hydrogen, its use in industrial and transportation applica- tions, and the development of products that help utilize CO2, thereby contributing to the reduction of greenhouse gas emissions in working to achieve carbon neutrality for society as a whole. Moreover, the Group seeks to reduce its green- house gas emissions and aims to achieve carbon neutral- ity through the development and introduction of sustainable T o r a y I n d u s t r i e s , I n c . 63 T o r a y R e p o r t 2 0 2 3 Initiatives for Global Environmental Issues energy and raw materials returned through the expansion of the SI Business, as well as through innovative processes and technologies that use CO2. In addition, Toray Group aims to achieve a circular econ- omy by recycling plastic products and switching to bio-based materials, as well as through the use of Toray technologies that support a circular economy, in areas such as water treat- ment, hydrogen, and renewable energy-sourced electric power. Specifically, the Group will promote material recycling for reusing plastic products and chemical recycling for con- verting these back into their basic chemicals. And it will pro- mote technological developments that use bio-ethylene glycol (EG) derived from non-edible sugar cane molasses. Moreover, the Group is engaged in the development of CO2 separation membranes as a key technology for separating and recover- ing CO2 for use. Main Opportunities/Risks and Responses Related to Climate Change (excerpt) Social Change Main Opportunities / Risks Main Response by Toray Group Magnitude of Opportunity 2°C 4°C 1.5°C Increase in ratio of renewable energy Opportunities • Growth of renewable energy-related business • Growth of storage battery-related business Risks • Soaring energy costs • Delay in energy conversion to secure suppliers • Carbon fiber for wind turbine blades • Energy conservation efforts L ¥60.0 billion (Cost) Establishment and raising of carbon taxes and GHG emissions reduction targets Opportunities • Growth of energy conservation-related business • Increased procurement costs of fossil resource-derived raw materials and fuels Risks • Criticism for fossil resource use • Loss of competitiveness due to carbon tax disparity • Decrease in existing users due to changes in the supply chain • Lightweight materials (carbon fiber, resin) • Insulating and heat shielding products (insulation, heat shielding fibers, films, etc.) • Functional garments (cooling materials) L • GHG emission reduction ¥85.0 billion (Cost) 64 Change in social systems for realization of hydrogen society Opportunities • Growth of business related to hydrogen manufacturing, transport, storage, and use • Gas separation membrane (porous carbon fiber) • High-strength carbon fiber for hydrogen tanks • Components and materials used in fuel cells Risks • Decline in material prices due to increased competition • Securing suppliers due to delay in conversion to hydrogen • Strengthening competitiveness L L L Opportunities • Growth of materials business for electric mobility • Lightweight materials (carbon fiber, resin) • Battery materials • Materials for motors and hydrogen tanks Electrification of mobility Adoption of CCUS Changes to the economic system toward the realization of a circular society • Decrease in demand for products related to internal Risks combustion engines • Decline in material prices due to increased • Responding to demand for electrification • Strengthening competitiveness competition ¥230.0 billion (Revenue) Opportunities • Growth of businesses related to CO2 separation and recovery • Gas separation membrane (porous carbon fiber) Risks • Thermal power generation electricity cost increase • Energy conservation efforts Opportunities • Growth of biomaterials business • Growth of recycled materials business • Growth of businesses contributing to waste reduction (emissions reduction, durability) Risks • Increased waste disposal costs • Shrinking materials market due to the shift away from mass production and mass consumption • Opportunity loss due to delay in responding to a recycling-oriented society • Biopolymers • Membrane bioprocess, biodegradable materials • Recycled materials (Ecouse™, &+™, etc.) • High-performance packaging materials • VOC free waterless printing system for flexible packaging • Strengthen waste management and promote recycling • Responding to demand for bio-based materials and recycling, etc. M L L L S S M *1 Excerpt from Toray Group TCFD Report VER.2 (Japanese version) https://www.toray.co.jp/sustainability/tcfd/ *2 Items that are difficult to estimate quantitatively with a certain degree of accuracy are classified into the following three levels (large, medium and small) according to the magnitude of their impact Sales revenue of 50 billion yen or more or business profit of 5 billion yen or more on sales revenue or business profit. Large (L): Medium (M): Sales revenue of 10 billion yen or more but less than 50 billion yen, or business profit of 1 billion yen or more but less than 5 billion yen Small (S): The impact on revenue was analyzed for the sales aspect, and the impact on business profit was analyzed for the cost aspect. In cases where the same size classification for each climate scenario was considered to have varying degrees of impact within that classification, a gradient was used, with darker colors used for those deemed to have a greater impact. The gradient represents changes within the same category of “social change” and does not represent differences in the magnitude of impact between different categories. Sales revenue less than 10 billion yen or business profit less than 1 billion yen KPIs and Targets Toray Group has set forth its quantitative targets for FY 2030 in the Toray Group Sustainability Vision. In addition, as the milestone for the Vision, it has disclosed the results for FY 2022, as well as targets for FY 2025 as the interim target in the Medium-Term Management Program, Project AP-G 2025 (See P.23 and P.27). Toray Industries, Inc.Toray Report 2023 Status of Environmental Management Initiatives Promoting Life Cycle Management In addressing global environmental issues, it is vital to con- sider the entire life cycle of products and services to reduce environmental impact while also delivering improved eco- nomic and social value. In this respect, Toray Group practices life cycle management (LCM). LCM is the basis for Sustainability Innovation (SI) products, and the Group has adopted life cycle assessment*1 and the Toray Eco-Efficiency Analysis (T-E2A)*2 tool and is working to establish LCM as a tool to measure CO2 reduction in the entire life cycle of products and services. Products are certified as SI products through a two-stage screening process by the divisional commit- tees and the Sustainability Innovation Certification Committee (provisional name) as the successor to the Green Innovation Certification Committee. Only those products determined to be effective solutions for global environmental issues through this process as based on objective evidence are certified. *1 Life cycle assessment (LCA) is a method for quantitatively assessing the resources that have gone into a product and the impact the product will have on the environ- ment and ecosystems over its life cycle. Environmental Accounting Toray has been practicing environmental accounting since 1999, to track investments and gauge their cost effectiveness. The value of environmental facility investments in FY 2022 Greenhouse Gas Emission Reduction Initiatives As its greenhouse gas emissions reduction target for CSR Roadmap 2022, Toray Group presented the goal of reducing greenhouse gas emissions per unit of revenue by 20%*1 com- pared with FY 2013 levels for the entire Toray Group on a con- tinuous basis through FY 2022, and implemented systematic reduction measures. Greenhouse gas emissions for the entire Toray Group during FY 2022 decreased 10.9% over the previous fiscal year to 4.89 million tons-CO2. Toray Group minimized greenhouse gas emissions per unit of revenue by increasing group-wide revenue and by implementing initiatives intended to reduce greenhouse gas emissions (promotion of energy savings through process improvements, use of renewable energy, reduction of coal use at overseas plants, etc.), and thereby decreased emis- sions 34.6%*2 compared with FY 2013 levels. In FY 2022, Toray and its group companies in Japan reduced greenhouse gas emissions 16.1% over the previous fiscal year by bolstering the efficiency of energy consumption and by reducing waste and loss. Greenhouse gas emissions per unit of revenue improved 9.2% over the previous fiscal year thanks to higher revenue and initiatives to reduce greenhouse gas emissions. These efforts resulted in a 33.2% decline com- pared with FY 2013. Toray’s Life Cycle Management Approach *2 T-E2A is an environmental analysis tool developed by Toray Industries, Inc. It produces a map of multiple products plotted along the axes of environmental impact and eco- nomic performance, enabling users to select the most environmentally friendly and economical products. amounted to ¥1.49 billion, a decline of ¥330 million over the previous fiscal year, while environmental preservation costs amounted to ¥9.26 billion, an increase of ¥2.51 billion. 65 Greenhouse Gas Emissions and Greenhouse Gas Emissions Per-Unit-of Net Sales (Per-Unit-of Revenue) (Toray Group)*3 (10,000 tons-CO2 eq) 1,000 Base value 100.0 88.5 85.1 88.2 86.3 800 600 400 200 0 (FY) 517 254 44 219 548 563 576 304 331 356 40 203 37 195 33 186 497 300 31 166 (Index) 100 80 60 40 20 0 79.4 549 330 33 186 65.4 489 305 20 165 2013 2017 2018 2019 2020 2021 2022 Toray Industries, Inc. Group companies in Japan Group companies outside Japan Greenhouse gas emissions per-unit-of net sales (per-unit-of revenue) *1 For Scope 1 and 2 *2 Until FY 2022, this was calculated by multiplying the GHG emissions and revenue of individual subsidiaries worldwide by the applicable Toray Industries’ equity share. Starting in FY 2023 however, the calculation method will change, and the degree of financial control Toray Industries has over the individual subsidiary (not the equity share) will be used, in accordance with the GHG Protocol, the international standard. *3 Until FY 2019, emissions per unit of sales were used due to the adoption of Japanese accounting standards. Since FY 2020, however, emissions per unit of revenue have been used due to the adoption of International Financial Reporting Standards (IFRS). Moreover, values for FY 2013 as the baseline year are calculated by including emissions and revenues from companies that joined Toray Group during or after FY 2014. Installing Renewable Energy Systems Toray Group is systematically installing renewable energy sys- tems. The Group installed a solar power generation system at Toray Plastics Precision (Zhongshan) Ltd., in FY 2020, as well as at Seta Plant 3 and Toray Precision Co., Ltd., in FY 2021, and respectively started operation. In addition, Tokai Plant began co-combusting sludge fuel as boiler fuel from FY 2017. Toray Industries, Inc.Toray Report 2023Analysis &assessmentEnvironmentalassessment toolsLife cycle cost(LCC)Product assessment interms of economic aspectsEco-efficiencyanalysisT-E2AProduct assessment interms of environmentaland economic aspectsCO2 emission reductionAssessment of thetotal reduction of CO2attributable overtheir entire life cycleEnvironmentalcontribution indicatorsProduct assessment interms of environmentalaspectsLife cycle assessment(LCA) Initiatives for Global Environmental Issues In addition, the Group also switched all power consumed by Toray’s headquarters to 100% renewable energy starting in April 2022. This move has reduced greenhouse gas emissions by an estimated 1,500 tons-CO2 annually on a global basis. Energy Conservation Measures Toray is vigorously working on energy conservation activities with the goal of reducing its per-unit energy consumption*1 by 2% annually. Although energy consumption declined 5.9% in FY 2022 as a result of promoting greater energy consump- tion efficiency and reducing waste and loss, per-unit energy consumption worsened 6.9% due to a decline of 12.0% in production volumes. Meanwhile, compared with FY 1990, the baseline year for reductions in per-unit energy consumption, this is an improvement of 14.6%. Toray Group organizes energy conservation teams to help carry out annual energy conservation diagnostics at plants in Toray and its group companies around the world. In FY 2022, the Group conducted these activities at five of Toray’s plants, three group company plants in Japan, and four group company plants around the world. The energy savings thereof effectively reduced greenhouse gas emissions by more than approxi- mately 10,000 tons-CO2 per year. Biodiversity Initiatives Next to the issue of climate change, the issue of biodiversity preservation has been a major focus of the international com- munity in recent years. Biodiversity forms the basis of natural capital such as water, air, plants, animals, and minerals that are indispensable to human society. Climate change caused by human activities, depletion of natural resources, ecosystem destruction, and species extinction are causing biodiversity loss to occur at an alarming rate, making it a serious problem facing humankind. This has sparked an international discussion about the importance of taking a nature positive approach to stopping and reversing biodiversity loss. Toray Group views conservation of biodiversity as a critical global environmental issue which is as just important as reduc- ing greenhouse gas emissions. Toray is contributing to the bio- diversity conservation and nature positive approach through its business activities. This includes water treatment technology Energy Consumption and Per-unit Energy Consumption Index (Toray Industries, Inc.)*2 (Million gigajoules) 50 40 30 20 10 0 (FY) 100.0 30.3 81.6 83.3 Base value 90.9 85.9 85.4 79.9 29.0 27.6 26.5 24.0 26.1 24.6 1990 2017 2018 2019 2020 2021 2022 Energy consumption Per-unit energy consumption (Index) 100 80 60 40 20 0 *1 Energy consumption per converted production volume *2 The energy consumption shown in this graph does not include renewable energy. to produce reliably safe drinking water, water conservation through the reuse of treated wastewater, and air purification using filter-related materials. The Group also uses environmental assessment check- lists to conduct safety reviews for all products and to carry out environmental risk investigations before making capital investment. The checklists enable the Group to ensure that it is not exceeding legal limits on regulated substances con- tained in exhaust gas, wastewater, and waste from manufac- turing. When assessing new land use, the checklists cover items related to biodiversity, including regulations at produc- tion bases, the necessity for surveys on rare species, and any requests from citizen groups, among other considerations. Through these efforts, Toray strives to assess its impact on biodiversity and help build a sustainable world. Newly establishing the Environmental Solutions Department within the Corporate Marketing Planning Division 66 Under the Toray Group Sustainability Vision, Toray Group is engaged in group-wide initiatives geared toward combating climate change and promoting a circular economy. In June 2022, the Group established the Environmental Solutions Department within the Corporate Marketing Planning Division to serve as the headquarters for using the strengths of the Group’s businesses to their fullest through an approach to marketing and supply chain management that cuts across its businesses. In working toward the realization of a circular economy, the Group must tackle issues in its Fibers & Textiles, Resins, Films, and other business divisions, while at the same time charting the optimization of group-wide policies for polyester, nylon, and other polymers on an individual basis. The primary mission of the Environmental Solutions Department is to build a value chain that straddles each department regarding issues involved in securing resources for recy- cling, developing technologies, and commercialization, and to realize systems that connect the value chain to revenue and profits. At the same time, the Group launched the Circular Economy Subcommittee led by the Executive Vice President in charge of Marketing & Sales to debate pol- icies involving Toray initiatives for a circular economy. The subcommittee has been working to achieve the targets raised by the Group for 2030, namely a revenue target of ¥400 billion for prod- ucts that facilitate sustainable, recycling-based use of resources and production, and a target of 20% for the percentage of raw materials sourced from recycling used in Toray core polymers*1. *1 The ratio of PET and nylon polymer raw materials sourced from recycling, derived from biomass, or produced with CO2 recycling. Yuriko Teshigawara General Manager, Environmental Solutions Department Toray Industries, Inc.Toray Report 2023 IR Seminar Toray Group’s Initiatives Toward Realization of a Hydrogen Society The Group held an IR Seminar titled “Toray Group’s Initiatives Toward Realization of a Hydrogen Society” on September 5th, 2023. In this event, these three speakers gave presentations: Satoru Hagiwara, Executive Vice President and Representative Member of the Board, Keisuke Ishii, General Manager, Torayca Division, and Kozo Takahashi, General Manager, HS Division. Hydrogen Is the Key to Fulfilling Carbon Neutrality In 2050, in the world that has achieved carbon neutrality, the primary energy source will have completely shifted from fos- sil fuels to wind, solar, and other forms of renewable energy. Moreover, hydrogen will have come to play an important role as a source of clean power, a carrier of clean power, and as a form of secondary energy. Satoru Hagiwara Executive Vice President and Representative Member of the Board, CTO Hydrogen Long-term Demand Forecast (upper) and Transition to Clean Hydrogen (lower) Unit: Million tons Assumption: Bloomberg NEF’s Net-zero scenario Demand expected to grow to 500 million tons in 2050 (5 times the current size) New Demand Existing Demand Shift Expansion Gray Hydrogen Green Hydrogen Derived from renewable energy With CO2 capture Derived from fossil fuel Blue Hydrogen *Green hydrogen and blue hydrogen are collectively called “clean hydrogen.” Transition to hydrogen from other energy “Hydrogen Integration” Industry (steel, etc.), Power generation Buildings (residential, commercial) Transport (commercial vehicles, etc.) Replacement to clean hydrogen Ammonia, methanol, reﬁnery Green Hydrogen to be more than 80% • Hydrogen to Enter in Expansion Period after 2030 Thanks to the Positive Cycle of Scale-up and Cost Reduction • New Demand to Grow along with the Expansion of Hydrogen Integration Already, the trend toward real-world implementation of clean hydrogen is spreading among countries across the globe, with the number of related projects exceeding 1,000 and amounting to a total investment of ¥45 trillion. Over the coming decade, real-world usage will progress centered on green hydrogen, which is produced by water electrolysis using renewable energy, where replacement of existing demand for ammonia and other raw materials will begin. Following on this, new demand will emerge as each sector begins to convert to hydrogen use, after which up-scaling and cost reductions are expected to progress. The hydrogen society will then enter a period of rapid expan- sion, driving the hydrogen market to a scale of 500 million tons per year in 2050, five times of its size today. Green hydrogen is expected to account for 80% of the total. 67 Developing and Manufacturing a Wide Range of Core Materials Used throughout the Hydrogen Supply Chain The feature of Toray’s hydrogen-related businesses is the range of products it offers across the entire supply chain, from production to transportation, storage, and use. For example, Toray’s carbon fibers are required for the wind power used to generate green electricity employed to produce hydrogen, while its water treatment membranes are used to produce water that serves as the raw material. The water electrolyzers, which are expected to expand in the future, include alkaline (ALK) and polymer electrolyte membrane (PEM) types. Toray is working to apply its core materials such as diaphragms, polymer electrolyte membranes, catalyst coated membranes (CCM), electrodes, subgasket films for these electrolyzers. In regard to hydrogen transportation and storage, Toray provides carbon fibers and plastic liners of which high-pressure tanks are made, while in terms of use it delivers the core materials that are similar to those used in fuel cells. The primary driver for expansion of green hydrogen is reali- zation of parity pricing (pricing that can compete with existing fuels). As part of its efforts to realize a hydrogen society, Toray therefore provides advanced materials as solutions that facil- itate the answers to the challenge of increasing the availabil- ity of lower cost clean hydrogen to a wide range of customers throughout the supply chain. Production Transportation & Storage Use Water Electrolyzers Hydrogen Transport & Storage Facilities Hydrogen Consumers Renewable Energy Resources Clean Electricity Solar Wind Alkaline (ALK) Polymer electrolyte membrane (PEM) • Carbon Fiber Pure Water • Diaphragm • Eletrolyte Membrane • CP, GDL • CCM • Subgasket Water Resources • Water Treatment Membranes Storage Tanks Hydrogen Electrochemical Compressor Hydrogen Tube Trailer Hydrogen Refueling station • Carbon Fiber For Tanks • Plastic Liners • CCM • Electrolyte Membrane Industry Transport Power Building • Electrolyte Membrane • CP, GDL • Subgasket • Plastic Liners • Carbon Fiber for Tanks • CCM, MEA Toray’s technologies and products CCM : Catalyst Coated Membrane, CP : Carbon Paper, GDL : Gas Diffusion Layer, MEA : Membrane Electrode Assembly Toray Industries, Inc.Toray Report 202301002003004005000%25%50%75%100%2020203020402050 IR Seminar Toray Group’s Initiatives Toward Realization of a Hydrogen Society Converting Toray’s Proprietary Technologies and Strengths into Customer Value Toray develops the core materials that will support a hydro- gen society by leveraging its key polymer and process- ing technologies, thereby providing these materials with an advantage in terms of its high quality compared with its com- petitors. Moreover, Toray holds a leading industry share for car- bon fibers used in gas tanks; carbon paper (CP), gas diffusion layer (GDL), and other electrode materials used in fuel cell and water electrolysis systems; and catalyst coated membranes (CCM) / membrane electrode assembly (MEA). In addition, in 2025 the Group plans to begin mass-production of hydro- carbon (HC) electrolyte membranes, which are positioned to become a major new product. With over 60 years of history, Toray carbon fibers were first used for natural gas as applications spread to the high-pressure tank field, and will continue deploying into new areas with the expansion of the hydrogen market. In the field of fuel cells, the Group developed CP electrode materials for passenger vehi- cles, and is now working with a focus on expanding the busi- ness for heavy duty vehicles that will depend on fuel cells for decarbonization. HC electrolyte membranes have a history of 20 years, while the CCM/MEA offered by Greenerity, Toray’s subsidiary in Germany, have a history of 30 years. Leveraging these proprietary technologies and strengths accumulated over the years, Toray Group will enable lighter weights, higher pressure, greater reliability, better efficiency, improved performance, superior durability, and other forms of value for the hydrogen supply chain, which are ultimately deliv- ered to its customers. Key Elemental Technologies Toray Group’s Products Converting Toray’s Unique Technologies and Strengths into Customer Value End Products i i l l s e g o o n h c e T s s y a n A d n a n o i t a u a v E l Polymer Technology Carbon Fiber • High performance and reliable quality based on proven track record Top share in the industry • Global production and technical support system Spinning Technology Carbonizing & Sintering Technology Film Manufacturing & Coating Technology Catalyst Formulation Technology Carbon Paper / Gas Diffusion Layer Top share in the industry • Design of excellent strength, conductivity, gas permeability • Free of impurities, excellent surface quality Polymer Electrolyte Membranes Start of production planned in 2025 • Design and control of polymer and membrane structure • Excellent gas barrier and proton conductivity Catalyst Coated Membrane/ Membrane Electrode Assembly Top share in water electrolysis • Design and control of catalyst layer • Ultimate pursuit of catalyst loading reduction High-pressure H2 GasTanks • Lightweight • Reliability • Higher pressure applicability Fuel Cell Systems (stationary, mobility) • Improved fuel efficiency • High power • Safety • High durability Water Electrolyzer Systems • Energy conservation • High H2 production rate • Precious metal conservation • High durability 68 Promoting R&D of Innovative Technologies that Contribute to Carbon Recycling A carbon neutral world will also need to realize carbon recy- cling, whereby carbon is recovered and converted into valuables (ammonia, methane, methanol, synthetic fuel, poly- mers, etc.) for use in combination with clean hydrogen. This will require separating various mixed gases into their individ- ual components, for which Toray proposes innovative sep- aration membranes. One of these is hydrogen separation membranes. The Group has demonstrated the highest level of hydrogen purity in the world by leveraging its water treat- ment RO membrane technology for use in this area. Another is CO2 separation membranes, for which the Group has demon- strated basic performance in terms of heat resistance and effi- ciency, for example, and for which it is advancing to the field demonstration stage. Moreover, the Group is investigating a hydrogen-oxidizing bacterium-based bioprocess as a technol- ogy to convert the series of raw gases into valuables. Aiming to Achieve Sales of ¥300 Billion in FY 2030 Sales for Toray Group’s hydrogen-related businesses in FY 2022 amounted to around ¥20 billion. During FY 2025, the final year of Medium-Term Management Program, Project AP-G 2025, the Group is targeting sales of up to ¥60 billion, with carbon fibers for hydrogen tanks, electrode materials, and CCM/MEA as the primary growth drivers. Together with HC electrolyte membranes, further growth in these businesses will serve as a driver in the Group’s efforts to steadily capture the growth of the hydrogen society with the aim of achieving ¥300 billion sales in FY 2030. Challenge for Expansion of Hydrogen-related Businesses Supply of Gas CO2 ¥300 Billion e u n e v e R ¥20 Billion ¥60 Billion • Provide Toray Group’s Proprietary Advanced Materials throughout the Hydrogen Supply Chain • Collaborate with Customers to Demonstrate Values, while Aiming for Sustainable Growth High-Efficient Hydrogen Separation Membrane All-Carbon CO2 Separation Membrane 2022 2025 (Target) 2030 (Expectation) Toray Industries, Inc.Toray Report 2023 Initiatives of Torayca & Advanced Composites Division Anticipating Dramatic Growth in Demand for High-pressure Gas Tanks and Gas Diffusion Layer (GDL) for Fuel Cells 40 80 60 100 (K tons/year) Carbon Fiber Demand Outlook 4-fold High-pressure hydrogen tank Natural gas (CNG) tanks, etc. High-pressure hydrogen tanks Expanding at annual growth rate of 42% (2022-2025) Toray’s carbon paper (CP) is used as porous transport layers (PTLs) for the water electrolyzers that produce hydrogen, while high-pressure gas tanks reinforced with carbon fiber are used for hydro- gen refueling stations, hydrogen transport trailers, and fuel cell vehicles. Moreover, CP and the gas diffusion layer (GDL) made from CP play an important role as electrode substrate for fuel cells. In particular, fuel cell vehicles are considered to be advantageous for large trucks and other long distances commercial vehicles that travel because they offer better payloads and range than battery EVs. Likewise, the Group anticipates signif- icant growth in demand for carbon fibers used in high-pressure hydrogen gas tanks starting in 2026. Specifically, the demand for carbon fibers for high-pressure gas tank applications, including those used for natural gas, is expected to expand at an annual growth rate of 42% until 2025, whereas the demand for these in 2030, when hydrogen gas tank applications will fully take-off, is expected to quadruple that of 2025. Moreover, the demand for CP and GDL used in polymer electrolyte mem- brane (PEM) type water electrolyzers and fuel cells is also growing. This area is expected to expand rapidly, with demand in 2030 increasing 3.5-fold compared with 2025. Boasting a leading share of the industry, Toray’s GDL has superior features compared with those of competing manufacturers, in terms of gas per- meability, water transportation characteristics, high conductivity, high strength, and high surface quality. Thereby it contributes to the higher output, longer life, and improved safety of fuel cell vehicles. Increase at annual rate of 35% (2022-2025) General Manager, Torayca Division Demand Outlook for CP/GDL Keisuke Ishii 3.5-fold GDL for fuel cell (t/year) 1,400 2022 2022 2025 2023 2030 2025 2030 2023 1,000 1,200 800 200 400 600 (CY) (CY) 20 0 0 69 Working to Capture the Growth of the Hydrogen Society through Hydrocarbon (HC) Electrolyte Membranes Initiatives of HS Division 75 50 100 (GW) ALK type Estimated by Toray Market Outlook for Water Electrolyzer The HS Division offers the core components that are shared by water electrolyzers, hydrogen compressors, and fuel cells, namely electrolyte membranes, catalyst coated membranes (CCMs), and membrane electrode assemblies (MEAs) made by laminating a gas diffusion layer onto a CCM. Moreover, it is responsible for Greenerity (Germany) and Yamanashi Hydrogen Company (YHC). Along with establishing the basic concept of hydrocarbon (HC) electrolyte membranes at its laboratories, Toray acquired Greenerity and has since incorporated its CCM/MEA production technol- ogies. Later on, it demonstrated this technology as part of a national project, entered a partnership with Siemens Energy, and established the HS Division as a new profit center in June 2022. Leveraging proprietary polymer design, precision polymerization, and nano- level structure control technologies, Toray conceived of HC electrolyte mem- branes, which contribute to significant performance improvements for PEM-type water electrolyzers with superior adaptability to renewable energy power sources. As the use of renewable energy progresses in the future, the ratio of PEM-type electrolyzers using HC electrolyte membranes will rise compared to existing alkaline-type water electrolyzers, and are therefore expected to account for 50% of the market by around 2030. The electrolyte membrane market will also grow significantly along with the increase, and is expected to reach a mar- ket scale of around ¥160 billion annually in 2030, of which the Group intends to capture a major portion using Toray’s proprietary HC electrolyte membranes. Market Outlook for Electrolyte Membrane Estimated by Toray General Manager, HS Division Kozo Takahashi (Billion yen) 200 PEM type 2022 2022 2030 2025 2030 2025 150 100 (CY) (CY) 50 20 0 0 Toray Industries, Inc.Toray Report 2023 R&D Toray’s corporate slogan, “Innovation by Chemistry,” represents our pursuit of technological innovation in the core area of chemistry and our aim of being a global leading corporation in advanced materials. We plan to continue bolstering the Group’s combined strengths and creating innovative advanced mate- rials well into the future. Toray’s Technical Fields Toray Group’s core technologies are “organic synthetic chemistry,” “polymer chemistry,” “biotechnology” and “nanotechnol- ogy.” Based on these, we are working toward greater depth and fusion of fundamental technologies such as polymerization, fiber spinning, textile processing, film processing, and organic synthesis, while expanding our operations from fibers and tex- tiles to films, chemicals, and resins. We are also creating advanced materials and developing businesses in the fields of elec- tronics & information materials, carbon fiber composite materials, pharmaceuticals, medical devices, and water treatment. Textile Technology Fiber Technology Fine Technology TORAY’s Core Technologies Organic Synthetic Chemistry Synthetic Fibers Textiles, Apparels Industrial Materials, Amenity Materials Ultra-microﬁber Non-woven fabric with Suede Texture Carbon Fibers Advanced Composite Materials Engineering Plastics High-performance Films Electronic Materials Printing Materials High-performance Membranes, Water Treatment Systems Artiﬁcial Organs, Medical Devices Biotools Pharmaceuticals Veterinary Medicines, Fine Chemicals Synthetic, Plastic Raw Materials Molding Technology Coating Technology Fine Patterning Surface Control Technology Carbonization Technology Film Processing Technology Dispersion Control Technology Microstructure Technology Gene Utilization Technology Medicinal Technology Fermentation Technology Polymer Chemistry Film Technology 70 Biotechnology Nanotechnology Material Design Won The Chemical Society of Japan Award for Technical Development for 2022 for development of advanced, highly functional textiles by precise control of fiber cross-section morphology at the nano-level Toray received the The Chemical Society of Japan Award for Technical Development for 2022 for the development of highly functional textiles by precise control of fiber cross-sections. This was the second straight year for Toray to receive recogni- tion for its advances in nanotechnology. The award recognizes the creation of NANODESIGN™, an innovative conjugate spinning technology that employs a new technology to freely and precisely control the cross-sectional shape of composite fibers, and the successful commercial- ization of advanced fibers leveraging NANODESIGN™. Specifically, Toray has leveraged NANODESIGN™ to make it possible to develop fibers and textiles for comfortable clothing that combine natural texture with the functionality of synthetic fibers. Conventional fibers cannot match these capabilities. These advances include Kinari™, a fabric that realized the multiple characteristics of natural silk. Another is Camifu™, a new textile material that combines excellent water absorption and quick-drying performance with a natural feel. There is also Qticle™, a stretch fabric with outstanding colorability. Toray Industries, Inc.Toray Report 2023Research and Technological Development Provide the Key to Building the Toray of Tomorrow Percentage Breakdown of Total R&D Expenditures R&D Expenditures (Billion yen) FY 2022 R&D Expenditures 68.9 62.8 62.1 66.4 66.9 FY 2022 ●Fibers &Textiles 10% ●Performance Chemicals ●Carbon Fiber Composite Materials 15% 7% ●Environment & Engineering 27% 18 19 20 21 22 (FY) Toray Consolidated subsidiaries ●Life Science ●Corporate R&D 4% 37% R&D Basic Policy and Organization Toray’s Technology Center serves as the headquarters for driving research and technological development into advanced materials based on the firm conviction that research and technological development provide the key to building the Toray of tomorrow. Developing and commercializing materials requires a certain amount of time. Thus, the strength of Toray Group’s R&D lies in our ability to recognize the value of materials and our commitment to distant long-term continuity, as well as pipeline management from a long-term perspective not only for themes that generate profits today, but also for the ones in the near and distant future. Moreover, Toray R&D teams inherit the idea of “The Deeper, the Newer”—a concept that digging deep into something will result in new discoveries and inventions—the DNA of “pursuit of the ultimate limits.” Based on a grand vision of the times and the needs of soci- ety, Toray aims to drive innovation that possesses social and economic value. Toray Group has centralized all of its R&D functions into the Technology Center. Bringing specialists from many fields together in this undivided R&D organization makes it easier to create new innovations by integrating technologies. This also enables the Group to fully utilize its combined strength by actively exploiting techniques and knowledge from many fields to solve problems in a single field of business. Establishing New Research Facility That Will Foster Sustainable Economic Progress Based on “Fusion of Green and Nano-based Technologies” Concept Toray is setting up a new research facility at Nagoya Plant with the aim of accelerating R&D in response to green trans- formation (GX) and next-generation mobility. The Company will build a framework to promote integrated material devel- opment, process design, and customer proposals. The facil- ity is scheduled for completion in FY 2026. This facility will bring together polymer, chemicals, and carbon fiber composite materials researchers, as well as dig- ital transformation professionals and developers with chem- ical engineering expertise. They will be driving advances in nanotechnology, such as incorporating materials infor- matics (MI) and computational chemistry in areas that will include polymer design, nanostructure control, and com- posite material design. The facility itself is being designed to integrate nanotechnology with green technologies, such as recycling and biorefining. At the same time, by working to reduce environmental impact from process perspectives, the facility will be bolstering materials development that will help achieve a sustainable society. By locating the facility adjacent to the Environment and Mobility Development Center and the Advanced Composites Center, both of which engage in mobility-related develop- ment and evaluations, the Company is also expecting to generate synergies while promoting integrated R&D and digital solutions proposals. Toray will reinforce open inno- vation internally and externally by creating an open labo- ratory for cocreation with customers and academia while deploying a framework to deepen communication among researchers and encourage ideas to emerge. 71 Exterior of new research facility Toray Industries, Inc.Toray Report 2023Intellectual Property Intellectual Property Strategies Management Strategies R&D Strategies Business Strategies Patents Filed Overseas Domestic Patents Held Overseas Domestic 1,613 6,256 6,303 6,295 1,615 1,514 4,245 3,018 3,232 14,399 14,935 15,028 2020 2021 2022 (FY) 2020 2021 2022 (FY) Basic Policies on Intellectual Property Toray Group has formulated and executes the following four intellectual property strategies as its basic policies on intel- lectual property. 1. Intellectual property strategies, as a part of the strategy trinity, that conform to management principles Toray Group regards intellectual property as one of its vital management resources. We have linked our intellectual prop- erty strategies mutually and organically with our business and R&D strategies, and as a component of this “trinity,” we have positioned intellectual property strategies as one of the most important elements of our management strategies. 2. Promoting the procurement of rights In order to protect Toray Group’s products and technolo- gies and to ensure profits, we promote high-quality patent applications and patenting, and strive to build a strong pat- ent network with deterrence capabilities. Regarding trade- marks, we execute the acquisition of appropriate rights with an eye to improving brand value. The decline in the number of patent applications filed during FY 2021 was due to the careful selection of filing countries in consideration of cost-effectiveness. 3. Respecting the rights of others Toray operates a patent confirmation system to comprehen- sively investigate the relationship between its own products and technologies and patents owned by other companies to assure that there is no infringement upon the rights of other parties. We also check the relationship of our trademarks with those registered by other companies prior to use. 4. Rightful enforcement of our own rights When Toray Group’s patent rights are infringed upon by another party, we take proper steps depending on the cir- cumstances by exercising our patent rights, such as demand- ing that infringement cease, receiving monetary profits from licensing, and using our patent rights for cross-licensing with the patent rights of other parties. 72 Systems and initiatives for intellectual property strategy implementation Toray Group implements intellectual property strategies in line with its basic policies through the following systems, initiatives, etc. 1. Patent responsibility structure and global patent strategy responsibility structure Toray and its major group companies appoints patent man- agers for each product line and technology group and have established patent committees with the participation of members from the Intellectual Property Division, as well as research, R&D, and marketing and sales departments. Activities with regard to filing, patenting, defense, and exploitation of rights are promoted upon deliberation by the patent committees. In addition, the supervising executives in charge of technology and production in each business are appointed as global patent strategy chairperson to guide and supervise global intellectual property activities conducted by Toray and its Japanese and overseas group companies in each business. 2. Development and implementation of an Intellectual Property (IP) action plan Under the guidance of global patent strategy chairperson, each business division formulates and carries out an “IP action plan” concerning important matters on intellection property. Themes that should be given particular emphasis are selected as “Rank-A Projects” and focused upon for pro- motion. The status of implementation of the IP action plan is reported once a year to the Board of Directors. 3. Building barriers to other companies’ entry by intellectual property Toray and its major domestic and overseas subsidiaries and affiliated companies are strategically using patent application and patenting as well as concealment of know-how to build strong barriers to entry by other companies. 4. Patent confirmation system When manufacturing or selling new products, we ensure that utilization, production, sale, etc. of our technologies and prod- ucts do not infringe upon the patent or other rights of others. 5. IP landscape initiatives In formulating IP strategies, we are taking action to explore ways to utilize our patents, and other initiatives, such as pro- moting the training of personnel (IP analysts, and others) who can exploit IP landscapes, developing research tools, and also analyzing the business environment and investigat- ing new and relevant topics. Toray Industries, Inc.Toray Report 2023Assessing Toray’s intellectual property 1. Toray Takes Top Spot on Patent Result’s Ranking for Fiber, Paper and Pulp Industry The “2022 Ranking of Capability to Prevent Other Companies from Obtaining Patent Rights,” published annually by Patent Result Co., Ltd., is an advanced patent application index that compiles the number of patents by a company that were cited as reasons for rejection of another company’s patent application in the course of the patent deliberation process, in any particular year. Toray was ranked No. 1 in the fiber, paper and pulp category for the eleventh consecutive year. As the same index benchmarks are used, if “fiber, paper and pulp,” and “chemicals” categories are treated as a single industry, Toray’s ranking becomes No. 4. The following figure illustrates the changes in the PAI for six competing companies, including Toray Group, regard- ing patent families pertaining to the SDGs (Sustainable Development Goals). The SDGs are a set of international objectives consisting of 17 goals and 169 targets that aim to achieve a sustainable, better planet by 2030. Toray Group has steadily increased the value of related patents that can contribute to the achievement of SDGs over the past 20 years, including years prior 2015 when the SDGs were first raised by the UN Summit. Since 2016, the Group has been in a superior position compared to its competitors. PAI trend of SDGs-related patents (comparison of 6 companies) 2. Ranked 16th on the “2022 Patent Asset Growth 10,000 Ranking” Toray ranked 16th on the “Patent Asset Growth Ranking,” a list created by Nikkei Business Magazine consisting of the top 40 Japanese companies ranked in accordance with the degree of growth in patents held by these companies over the past two years as of the end of December 12, 2022. This ranking adopts a calculation method that combines the num- ber of held patents with the frequency of citations made in patents filed by other companies, for example, and therefore tends to reflect trends in innovation. 3. Patent Asset Index™ Assessments LexisNexis’s PatentSight™ provides a Patent Asset Index™ (PAI) based on the technical and market value of patent families. 8,000 6,000 4,000 2,000 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Toray A company B company C company D company E company *Prepared by the Company using the PatentSight Patent Asset Index™ of LexisNexis, Inc. 73 Toray intellectual property contributes solutions to global environmental issues Separation Membrane Technology Since the 1980s, Toray has continued to create innovative sep- aration membrane technologies for artificial kidney, reverse osmosis (RO) membrane, and other similar applications, where the evolution and development in these technologies has shown further expansion. The figure to the right maps the standing of patents related to separation membrane technol- ogies held by Toray Group, and uses different colors corre- sponding to each technological field to indicate Toray’s many patents. In the field of membrane bioprocesses, specifically, Toray advances research into bioprocesses that fuse membrane technologies and biotechnologies in order to produce inedi- ble sugars and chemicals from inedible biomass at high-effi- ciency while consuming less energy. At the same time, Toray has been conducting demonstrations and commercialization investigations in Thailand regarding these technologies. Toray has acquired multiple related patents (red dots) in conjunction with this development, through which it will help to realize a society that does not rely on fossil resources. Landscape map of patents related to separation membrane technology (each dot: Toray Group patents) Composite porous ﬁlm Hollow ﬁber membrane Semipermeable production Purifying blood Semipermeable membrane module Semipermeable membrane Separation membrane module Carbon membrane Membrane bioprocess Membrane electrolytic assembly Toray Industries, Inc.Toray Report 2023 Advanced Business Management by Utilizing Digital Technologies Promotion of Closely Genba (Workplace)-Linked DX Having declared advancements in management through digital transformation (DX) to be a key initiative, Toray estab- lished the Toray Digital Transformation (TDX) Promotion Committee, which is chaired by the President, as a body to debate and discuss group-wide policies for promoting DX. After having put in place the subordinate Technology Center DX Promotion Committee and the Business DX Promotion Committee, the Company is advancing a group- wide TDX Promotion Project in addition to departmental initiatives. In particular, we will promote utilization of data and digital technologies in a manner closely tied to the Genba (work- place) to successfully face a number of challenges, such as creating products and services that meet the needs of our customers and society, strengthening cost competitive- ness, and increasing the sophistication of business manage- ment. Specifically, in addition to promoting DX themes in research and development, production, business, and man- agement fields, we will develop a global data infrastructure and develop human resources fluent in digital technologies. Toray Digital Transformation (TDX) Promotion Committee Technology Center DX Promotion Committee Drive advancement and streamlining by leveraging digital technology in research and technological development (R&D), and production Business Division DX Promotion Committee Contributing to visualizing global management informa- tion in sales & marketing, finance & accounting, purchas- ing & logistics, and advancing business management Investing ¥20 Billion in DX Promotion 74 Under AP-G 2025, based on DX closely tied to the Genba (workplace), we will promote building of a global data infra- structure to utilize the data accumulated within Toray Group throughout the Group, integration of analysis and simula- tion technologies, collaboration with the value chain, and the development of more than 2,000 human resources flu- ent in digital technologies. In building a global data infrastructure, we will centralize Toray Group’s performance management data, including that from domestic and overseas affiliates, and improve Group governance through timely monitoring systems such as Business Intelligence (BI). By combining analysis and simulation technologies, we will work to reduce costs and improve quality through the visualization of production activities and data analysis, and create new materials through simulation informatics. In collaboration with the value chain, we will work to improve the accuracy of pro- duction and sales plans and the optimization of inventory through real-time collaboration and management, while focusing on visualizing our carbon footprint. We will also accelerate the promotion of DX in all aspects, such as in strengthening digital marketing and in managing signs of problems by utilizing AI. As far as human resources are concerned, we will expand and upgrade the DX human resource certification system and develop human resources who understand the workplace, know how to use digital technology as a tool, and who will take the lead in improving that workplace. Investment related to digital technology: ¥20 billion Building a global data infrastructure Promoting accumulation, sharing, and visualization of data Combining analysis and simulation tech. Using AI and MI* to capture benefits of digitally leveraged manufacturing *Materials Informatics Cooperating with value chain partners Real-time cooperation and management Development of HR fluent in digital technology Establishing a base of human resources fluent in digital technologies totaling 2,000 people group-wide • Focusing on the development of senior leaders and leaders who are familiar with both the frontlines and digital technology Level of Digital Fluency Expert Over 20 people Creation of new digital methods (Professional) Senior Leader Over 200 people Execute from problem-setting to solution by themselves using digital methods (Leader) Leader Associate Over 600 people Solving problems with basic digital methods (Field promoters) Over 1,200 people Mastering the digital basics General Digital Personnel Toray Industries, Inc.Toray Report 2023 Case 1 Apparel Business Cockpit System To strengthen our ability to build global value chains and sales operations, which are strengths that the Toray Group has cultivated over the years, we are promoting business model reform. We are achieving this reform by working to deepen and extend our value chain by utilizing collabora- tion with bases outside Japan, external resources, and DX tailored to actual situations in the workplace. In supply- ing differentiated, highly advanced processed products, we are building an integrated supply chain data platform that centrally manages data dispersed across various sites, such as customer orders from major global apparel companies, fabric and garment production schedules. This makes it possible to visualize data, act quickly on any abnormalities, improve prediction accuracy, and provide value in the form of, for example, reduced lead times and production flexibility. Customer Information linkage Toray Cockpit System • Integrated Supply Chain Data Platform • Real-time monitoring/alerting/analysis Reduced lead times and increased ﬂexibility Order Information linkage Information linkage Yarn arrangement Information linkage Fabric arrangement Information linkage Garment Product Order Garment Product Shipment Sample Development Yarn factory Fabric factory Garment factory Yarn Shipment Fabric Shipment Case 2 Development of Flame-Retardant CFRP by Means of Integrated Materials Informatics (MI) Having utilized integrated MI, which combines MI using self-organizing maps (introduced from Tohoku University) with its proprietary multiscale simulations (MS), Toray suc- ceeded in halving the development period for a flame-re- tardant carbon-fiber reinforced plastic (CFRP). Simplifying and displaying in visual form vast amounts of data, a self-organizing map arranges materials with sim- ilar characteristics close to each other. Using this feature makes it possible to analyze complex information in a form that is easy for humans to understand. A method that combines microscale (molecular dynamics, etc.) and mac- roscale (CAE, etc.) simulations, using MS makes it pos- sible to analyze phenomena from multiple angles, solve essential problems, and promote material design. Going forward, we will expand integrated MI’s range of applica- tions while accelerating the streamlining and sophistica- tion of research and technological development. 75 Integrated MI Request properties Self-Organization Map MI Multiscale Simulation Mechanical properties Process optimization Functionality (ﬂame retardancy, etc.) Suggestion for CFRP formulation that meets the required properties Prediction of CFRP structural properties without experimental evaluation Reduced CFRP development time by half Achieve target physical properties in a short period of time P y r o l y s i s R e s i d u a l 50% 25% 0% Flame retardant target Existing product Improved product Huge level of prescribing suggestions by MI Efficient prescription reﬁnement with self-organizing maps Introduced by Tohoku University Our proprietary technology that links macro to micro simulations and analyzes them in a uniﬁed manner CAE (Macro) Molecular simulation (micro) Case 3 Building of a Toray Common Data Analysis Environment Data analysis such as MI and process informatics (PI) is performed in the following steps: data acquisition → accu- mulation → processing → analysis. Systems for data acquisition and accumulation are built according to each department’s operations. However, since data process- ing and analysis deal with organized numerical data, build- ing of a common company-wide environment was needed from the perspective of increasing sophistication and effi- ciency of initiatives. In response, from November 2022, we built and rolled out the Toray Common Data Analysis Environment to the entire Company. This is equipped with a programming environment (Python common envi- ronment) and a proprietary data analysis tool that can be operated intuitively. Since its rollout, utilization of the Toray Common Data Analysis Environment has extended throughout Toray including technical and business depart- ments, contributing significantly to DX promotion within the Company. Data Analysis Flow Data Collection Sensor Data Experiment Data External data etc. Data Accumulation Numerical data Image data Chemical structure, etc. (unorganized) Data Processing Numerical Conversion ＋ Data processing Integrated data Data analysis Production Efficiency New Material Creation Python Common Environment • Use Python without complicated environment settings • Program templates created by experts can be used Toray Common Data Analysis Environment Data Analysis Tools • Advanced data analysis without programming • Intuitive GUI for easy operation Toray Industries, Inc.Toray Report 2023 Members of the Board and Corporate Auditors (As of June 27, 2023) Members of the Board Chairman and Representative Member of the Board Akihiro Nikkaku President and Representative Member of the Board Mitsuo Ohya 1973 Joined the Company 2001 General Manager, Engineering Division; General Manager, Second Engineering Dept. 2002 Vice President (Member of the Board) 2004 Senior Vice President (Member of the Board) 2006 Senior Vice President (Member of the Board & Member of the Executive Committee) Executive Vice President and Representative Member of the Board 2007 2010 President and Representative Member of the Board 2020 President and Representative Member of the Board, Chief Executive Officer, Chief Operating Officer Chairman and Representative Member of the Board (incumbent) 2023 1980 Joined the Company 2009 General Manager, Industrial & Textile Fibers Division 2012 Vice President (Member of the Board) 2014 Retired from Vice President (Member of the Board) President and Representative Member of the Board, Toray International, Inc. Senior Vice President (Member of the Board & Member of the Executive Committee) 2016 2020 Executive Vice President (Representative Member of the Board) 2023 President and Representative Member of the Board (incumbent) Representative Member of the Board Satoru Hagiwara 1981 Joined the Company 2012 General Manager, Industrial Films Division; Chairman, Toray Films Europe S.A.S.; Chairman, Toray Plastics Europe S.A. Vice President (Member of the Board) 2014 Senior Vice President (Member of the Board) 2017 President and Representative Member of the Board, Toray Advanced Film Co., Ltd. 2020 Senior Vice President (Member of the Board) 2022 Executive Vice President (Representative Member of the Board) (incumbent) 76 Member of the Board Kazuyuki Adachi 1980 Joined the Company 2017 Director, Toray Industries (Thailand) Co., Ltd.; President, Luckytex (Thailand) Public Company Limited; Chairman, Thai Toray Textile Mills Public Company Limited 2018 Senior Vice President (Member of the Board) 2020 Senior Vice President (Member of the Board) 2023 Executive Vice President (Member of the Board) (incumbent) Member of the Board Kazuhiko Shuto Member of the Board Tetsuya Tsunekawa 1980 Joined the Company 1998 Vice President (Member of the Board), Penfabric Sdn. Berhad 2005 Chairman, Toray Jifa (Qingdao) Textile Co., Ltd. 2010 General Manager, Textiles Division 2014 Vice President (Member of the Board) 2016 Senior Vice President (Member of the Board) 2018 Retired from Senior Vice President (Member of the Board) Chief Representative for China; Chairman & President, Toray Industries (China) Co., Ltd.; Chairman, Toray Sakai Weaving & Dyeing (Nantong) Co., Ltd. 2020 Senior Vice President 2022 Senior Vice President (Member of the Board) 2023 Executive Vice President (Member of the Board) (incumbent) 1984 Joined the Company 2004 General Manager, Films & Film Products Research Laboratories General Manager, Advanced Film Technical Dept., Films & Film 2009 Products Research Laboratories 2012 General Manager, Tsuchiura Plant 2014 Vice President (Member of the Board) 2016 Senior Vice President (Member of the Board) 2020 Retired from Senior Vice President (Member of the Board) Senior Vice President 2022 Senior Vice President 2023 Senior Vice President (Member of the Board) (incumbent) Member of the Board Masahiko Okamoto Member of the Board Takashi Yoshiyama 1986 Joined the Company 2009 Vice President (Member of the Board), Toray Industries (Malaysia) Sdn. Berhad; Vice President (Member of the Board), Penfabric Sdn. Berhad; General Manager on Special Assignment, Finance & Controller’s Division (Finance & Controller’s Chief for Malaysia) General Manager on Special Assignment, International Division 2011 2013 General Manager, Finance Dept. 2017 General Manager, Controller’s Dept. 2020 Corporate Vice President (Member of the Board) 2023 Senior Vice President (Member of the Board) (incumbent) 1984 Joined the Company 2009 General Manager, Advanced Composites Technical Dept. 2010 General Manager, Second Advanced Composites Technical Dept. 2014 General Manager, Composites Production Dept., Shiga Plant General Manager, Manufacturing Division (Advanced 2016 Composites Manufacturing) General Manager, Manufacturing Division (Advanced Composites Technology and Manufacturing) President, Euro Advanced Carbon Fiber Composites 2023 Corporate Vice President (Member of the Board) (incumbent) 2017 Member of the Board (Outside) Kunio Ito 2002 2004 Dean, Graduate School of Commerce and Management and Faculty of Commerce and Management, Hitotsubashi University Executive Vice President and Board Member, Hitotsubashi University 2013 Director, Kobayashi Pharmaceutical Co., Ltd. (incumbent) 2014 Director, Seven & i Holdings Co., Ltd. 2015 2018 Member of the Board of the Company (incumbent) Director, Hitotsubashi CFO Education and Research Center (Incumbent) Research Professor, Department of Business Administration, Hitotsubashi University Business School Toray Industries, Inc.Toray Report 2023 Members of the Board Member of the Board (Outside) Ryoji Noyori Member of the Board (Outside) Susumu Kaminaga Member of the Board (Outside) Kazuo Futagawa 2001 1997 Dean, Graduate School of Science and School of Science, Nagoya University Director, TAKASAGO INTERNATIONAL CORPORATION (incumbent) 2003 President, RIKEN 2004 Special Professor, Nagoya University (incumbent) 2015 Director-General, Center for Research and Development Strategy, Japan Science and Technology Agency (incumbent) Vice President (Member of the Board) of the Company Member of the Board of the Company (incumbent) 1969 Joined Sumitomo Precision Products CO., LTD. 1995 Representative Director, Surface Technology Systems Ltd. 2000 Director, Sumitomo Precision Products CO., LTD. 2002 Managing Director, Sumitomo Precision Products CO., LTD. 2004 President, Sumitomo Precision Products CO., LTD. 2012 Senior Advisor, Sumitomo Precision Products CO., LTD.; Representative Director, SK Global Advisers Co., Ltd. (incumbent) Director, DEFTA Capital (incumbent) 2016 Outside Director, Olympus Corporation 2020 Member of the Board of the Company (incumbent) Corporate Auditors 1980 Joined the Ministry of Health and Welfare 2012 Director-General of Minister’s Secretariat, the Ministry of Health, Labour and Welfare Director-General, Health Policy Bureau, the Ministry of Health, Labour and Welfare 2014 2015 Vice-Minister of Health, Labour and Welfare 2017 Retired from Vice-Minister of Health, Labour and Welfare Special Advisor on Policy, Social Security Reform Office, 2018 Cabinet Secretariat Member of the Board of the Company (incumbent) Member of the Board, Kanamic Network Co., LTD. (incumbent) 2020 Member of the Board (Outside) Yuko Harayama Corporate Auditor Hideki Hirabayashi Corporate Auditor Yoshiyuki Tanaka 77 1998 Assistant Professor, Faculty of Economics, University of Geneva 2002 Professor, Graduate School of Engineering, Tohoku University 2007 Outside Director, Compagnie de Saint Gobain SA 2010 Deputy Director, Directorate for Science, Technology and Industry, Organization for Economic Cooperation and Development Executive Member, Council for Science, Technology and Innovation, Cabinet Office 2020 Executive Director, RIKEN 2022 Co-Representative Director, Japanese Association for the Advancement of Science (incumbent) 2013 2023 Member of the Board of the Company (incumbent) 1981 Joined the Company 2003 Director, Penfibre Sdn. Berhad 2005 Executive Vice President, Toray Plastics (America), Inc. 2007 General Manager, Industrial Films 1st Dept., the Company 2010 In charge of Europe Region; Chief Representative for Europe; General Manager, Europe Office General Manager, General Administration & Legal Division; General Manager, General Administration Dept. 2016 1984 Joined the Company 2006 Executive Vice President, Toray Fluorofibers (America), Inc. 2014 General Manager, Okazaki Plant 2015 Vice President (Member of the Board) 2018 General Manager, Manufacturing Division (Fibers & Textiles Technology and Manufacturing) President and Representative Member of the Board, Toray Opelontex Co., Ltd. 2020 2017 Vice President (Member of the Board) 2020 Retired from Vice President (Member of the Board) Corporate Vice President 2021 Senior Vice President 2023 Corporate Auditor (incumbent) 2021 Corporate Auditor (incumbent) Outside Corporate Auditor Hiroyuki Kumasaka Outside Corporate Auditor Makiko Takabe Outside Corporate Auditor Kozo Ogino 2007 1973 Joined FUSO Audit Corporation (later MISUZU Audit Corporation) Chairs of the Board of Council; Head, Tokyo Office, the Audit Corporation Representative Liquidator, the Audit Corporation 2008 Outside Corporate Auditor, MATSUDA SANGYO CO., LTD. 2011 External Corporate Auditor of the Board, Japan Airlines Co., Ltd. Outside Audit and Supervisory Committee Member, MATSUDA SANGYO CO., LTD. 2015 1981 Appointed as an Assistant Judge 2014 Chief Judge, Fukui District Court and Family Court 2015 Presiding Judge, Intellectual Property High Court 2018 Chief Judge, Intellectual Property High Court 2020 President, Takamatsu High Court 2021 Registered as a lawyer (Dai-ichi Tokyo Bar Association) Of Counsel, Nishimura & Asahi (incumbent) 2023 Outside Corporate Auditor of the Company (incumbent) 1981 Joined The Mitsui Bank, Ltd. 2010 Executive Officer, Sumitomo Mitsui Banking Corporation 2011 Managing Executive Officer, Sumitomo Mitsui Banking Corporation 2013 Director, Sumitomo Mitsui Financial Group, Inc. 2014 Director and Senior Managing Executive Officer, Sumitomo Mitsui Banking Corporation Director and Deputy President, Sumitomo Mitsui Banking Corporation Director, Deputy President, Executive Officer, Group CRO, Sumitomo Mitsui Financial Group, Inc. 2017 2019 Outside Corporate Auditor of the Company (incumbent) 2019 Senior Advisor, Sumitomo Mitsui Financial Group, Inc. President & CEO (Representative Director), SMBC Trust Bank Ltd. 2022 Chairperson, SMBC Trust Bank Ltd. (incumbent) 2023 Outside Corporate Auditor of the Company (incumbent) Toray Industries, Inc.Toray Report 2023 Management Team (As of June 27, 2023) President Mitsuo Ohya Executive Vice President Satoru Hagiwara Executive Vice President, Legal & Compliance Division (Security Trade Administration Dept.), Quality Assurance Division, and Intellectual Property Division; Technology Center Executive Vice President Kazuyuki Adachi Executive Vice President, Manufacturing Division Executive Vice President Kazuhiko Shuto Executive Vice President, Marketing & Sales; Corporate Marketing Planning Division; Affiliated Companies Division Resins & Chemicals Division Senior Vice President Hirofumi Kobayashi Senior Vice President, Pharmaceuticals & Medical Products Division; Pharmaceuticals & Medical Products Division (Technology & Manufacturing) Senior Vice President Tetsuya Tsunekawa Senior Vice President, Corporate Strategic Planning Division; HS Division 78 Senior Vice President Shigeki Taniguchi Senior Vice President, CSR & Investor Relations; General Administration & Communications Division; Tokyo Head Office Senior Vice President Kenichiro Miki Senior Vice President, Fibers & Textiles Division; Osaka Head Office Senior Vice President Satoru Nishino Senior Vice President, Chief Representative for Americas; President, Toray Industries (America), Inc.; Chairman, Toray Plastics (America), Inc. Senior Vice President Hiroshi Enomoto Senior Vice President, Chief Representative for Europe; President, Toray Industries Europe GmbH Senior Vice President Hajime Ishii Senior Vice President, Fibers & Textiles Division; Global SCM Division Senior Vice President Hiroyuki Matsuda Senior Vice President, Information Systems Division; Engineering Division Senior Vice President Masahiko Okamoto Senior Vice President, Finance & Controller’s Division Corporate Vice President Yuichiro Iguchi Corporate Vice President, Research & Development Division; Basic Research Center Corporate Vice President Yoshio Yamamoto Corporate Vice President, Legal & Compliance Division; Toray Industries, Inc.Toray Report 2023Corporate Vice President Kazuhisa Itsuji Corporate Vice President, Films Division; Chairman, Toray Films Europe S.A.S. Corporate Vice President Satoshi Shimoyama Corporate Vice President Kei Shimaji Corporate Vice President, Water Treatment & Environment Division; Water Treatment Division; Chairman, Toray Asia Pte. Ltd.; Chairman, Toray Membrane (Foshan) Co., Ltd. Corporate Vice President, Electronic & Information Materials Division Corporate Vice President Osamu Tsuneki Corporate Vice President, Purchasing & Logistics Division Corporate Vice President Takashi Yoshiyama Corporate Vice President, Torayca & Advanced Composites Division; Chairman, Toray Carbon Fibers Europe S.A. Corporate Vice President Katsuyuki Yanai Corporate Vice President, Human Resources Division; Toray Human Resources Development Center Corporate Vice President Shinichiro Hata Corporate Vice President, Quality Assurance Division Vice President Young Kwan Lee Vice President Teh Hock Soon Vice President, Chief Representative for the Republic of Korea; President, Toray Industries Korea Inc.; Chairman, Toray Advanced Materials Korea Inc. 79 Vice President, Chief Representative for Malaysia; President,Toray Industries (Malaysia) Sdn. Berhad; Chairman, Penfabric Sdn. Berhad; Chairman, Toray Malaysia Systems Solution Sdn. Bhd.; Chairman, P.T. Century Textile Industry Tbk Vice President Kazuyuki Yakushiji Vice President Masahide Matsumura Vice President Toru Kutsuzawa Vice President, Manufacturing Division (ACM Technology & Production) Vice President, Chief Representative for Thailand; President, Toray Industries (Thailand) Co., Ltd. Vice President, Chief Representative for China; Chairman and President, Toray Industries (China) Co., Ltd.; Chairman, Toray Sakai Weaving & Dyeing (Nantong) Co., Ltd.; Chairman, Toray International (China) Co., Ltd. Vice President Hiroshi Tsuzuki Vice President, Corporate Strategic Planning Division; Corporate Marketing Planning Division Executive Fellow Executive Fellow Akihiko Kitano Executive Fellow, Advanced Materials & Application Center; ACM Technology Division Toray Industries, Inc.Toray Report 2023Interview with a Newly Appointed Outside Director Diversity is all about the change created by people with wide-ranging attributes and differences collaborating with each other in an environment of mutual respect. — What are your aspirations as a newly formats and semantics. Effective governance is not a mat- appointed outside director? ter of simply completing an organization chart. It entails I am often asked “what is your area of expertise?” Rather the smooth two-way flow of information from the frontline than focusing on a single path, I have increasingly explored to management and vice versa. Given any decision-making a wide range of avenues when encountering different fields system of organization made up of human component, and educational opportunities and worked to expand my outputs can often become blurred. With this in mind, I scope of knowledge. If forced to comment, I would say that intend to look closely at this from an external perspective my expertise lies in education and economics. I was, for as an outside director. example, approached to become a professor at the Graduate Daring to offer an opinion from a slightly skewed per- School of Engineering at Tohoku University, not only for my spective, familiarity with work in a company can often expertise in engineering, but also because of my commit- manifest itself in fixed assumptions that impede change. ment to foster researchers who can look at their efforts from Moreover, while recognizing that engagement is critical to multiple perspectives, including the practical social applica- the creation of value involving various stakeholders, self-in- tion and business value creation of research results. terest has the exact opposite effect. I will also closely mon- My first contact with Toray was when I was involved in itor this issue from a neutral standpoint. developing the Science, Technology, and Innovation Basic Plan of Japan’s Cabinet Office. To a large part, I feel that my career has unintentionally fostered a sense of diver- 80 — Why do you think diversity is important? Imagine an organization where everyone thinks and acts sity as opposed to specialization, and as a result, I have the same way. In a world where the correct answer never become adept at examining various issues from multi- changes, this scenario can be extremely efficient. In con- ple perspectives. I have also served as an outside direc- trast, companies in general, including Toray, operate in a tor of Compagnie de Saint Gobain SA, a company based rapidly changing external environment and exist in a world in France with a long history. Immediately after assum- of uncertainty where value disappear in an instant. The ing office, conditions deteriorated, most notably with the world is not a place with fixed answers. Under these cir- global economic crisis caused by the collapse of Lehman cumstances, I am convinced that diversity is critical to Brothers, and I was faced with a mountain of unforeseen ensuring multifaceted views and a flexible organization. problems and the need to address investors’ concerns. Discussions surrounding diversity in Japan tend to From this experience, I realized firsthand the importance focus on the empowerment of women. It is a mistake of the role that outside directors play in reconciling inter- to think that this is a solution to efforts aimed at promot- nal and external perspectives. In serving as a Toray outside ing diversity. Putting in place a comfortable workplace for director, I am therefore committed to using my unique per- women, increasing the number of female managers, and spective and experience to help the Company enhance its providing women with preferential treatment are not in corporate value in a sustainable manner. themselves the solution. The goal is to secure a level play- ing field and to allow women to demonstrate their abilities — What do you consider are the most important in similar fashion to men, which will lead to increased cor- aspects of effective governance? porate value. Diversity is not only about gender or other The larger the organization, the more complex and inter- such differences. Diversity is also about individuality and a national the business, the more important it is to integrate comprehensive range of factors, including the experience the organization and make decisions quickly. I believe that that each individual has gained. On the other hand, when a well-functioning decision-making system that oversees simply bringing together a diverse group of people, should an organization in a manner where critical decisions and those individuals behave as they please then an ineffi- issues are addressed in a timely manner is indicative of cient organization that is unable to make any decisions is effective governance. I am not referring here purely to likely to result. Diversity in business is all about the change Toray Industries, Inc.Toray Report 202381 Yuko Harayama Outside Director created by people with wide-ranging attributes and differ- application of AI and promotion of DX is merely the natu- ences collaborating with each other in an environment of ral evolution of tools that help to further enhance conve- mutual respect. With this in mind, I believe that it makes nience. It is important that we utilize these tools to create sense to become an organization that is resilient to envi- innovations and not become passive users. ronmental change and highly capable of creating value. — What are your thoughts on the use of AI in — Do you have any closing words about leadership in a diverse organization? innovation and the promotion of DX? Leadership is not about a person at the top of the hierar- Ideas belong to each individual. Historically, people have chy wielding authority to make subordinates follow him or come together to put forward new ideas. With the emer- her. Leadership is a skill that motivates people to behave gence of generative AI, which instantly organizes a huge with conviction. In a diverse organization, not only man- amount of data and facts that people cannot fully exam- agement, but also a variety of people are expected to exer- ine, human beings gained an amazing bag of wisdom. cise leadership in various situations. I would add one more Wherever possible, I have promoted the importance of thing, the key role of a leader is to lead the team or orga- becoming people who can employ AI wisely. At the same nization into the future. Leadership does not necessarily time, it is equally important that we maintain the neces- require the leader to provide all the answers. Leadership sary axis and materials to judge AI, and ensure that we are can be achieved by letting others decide and taking respon- not controlled by it. My fear is that AI will proffer plausible sibility. Put simply, I believe that seeing an issue to the very answers that we will grow to rely without question. The end is of the utmost importance. Toray Industries, Inc.Toray Report 2023Corporate Governance Basic Policy From the outset, one of Toray Group’s managerial principles has been that the purpose of a company is to contribute to society. The Group has developed the Toray Philosophy that incorporates this principle. The Group systematizes the Toray Philosophy as a Corporate Philosophy, Corporate Missions, Corporate Guiding Principles, etc. The Corporate Missions clearly enunciate that the Group will practice “sincere and trustworthy management.” The Corporate Guiding Principles stipulate the Group’s commitment to “acting with fairness, high ethical standards and a strong sense of responsibility while complying with laws, regulations and social norms to earn trust and meet social expectations.” When establishing the corporate governance structure, the Group seeks to real- ize these philosophies as its basic policy. Outline of Governance System and Reasons for Adopting the System Toray operates as a company with a Board of Corporate Auditors and Board of Directors. The Board of Directors, which includes outside directors, decides on the business execution and supervises the execution of duties by the members of the Board. The Board of Corporate Auditors includes outside corporate auditors and independently audits the execution of duties by the members of the Board, separately from the Board of Directors and the executing organization. This framework is designed to secure the transparency and fairness of decision made by the Board of Directors. In addition, there is a Governance Committee, which serves as a voluntary advisory body to the Board of Directors. The Governance Committee deliberates on all matters relating to corporate governance, enhancing the effectiveness of governance by the Board of Directors. Toray Group operates in a broad spectrum of busi- ness fields at a global level. Business management and decision-making, as well as oversight, require assessment of a wide variety of risks from multiple perspectives based on expertise related to the day-to-day operations of the Group’s worksites. To that end, the structure of the Board of Directors is designed to ensure that members bring a diverse range of perspectives to management oversight and decision-making. Meanwhile, outside directors are elected to the Board to enhance transparency and fairness, to ensure management oversight from an even broader perspective, and to obtain appropriate managerial advice from a medium- to long-term perspective. The Board of Corporate Auditors is entirely independent of the Board of Directors. Based on professional expertise in finance, accounting, and law, as well as an understand- ing of the Group’s businesses, the Board of Corporate Auditors oversee directors’ execution of their duties. Corporate Governance Structures General Meeting of Stockholders General Meeting of Stockholders Election Election Election Decision-making & Oversight Functions Independent Auditor Cooperation Board of Corporate Auditors 5 Corporate Auditors (3 outside corporate auditors) Audit Board of Directors 13 members of the Board (5 outside directors) Report Governance Committee 7 members (including 5 outside directors) Cooperation Audit Cooperation Audit Cooperation Auditing Dept. President Business Execution Functions Conference Organs Executive Committee Company-wide Committees Ethics and Compliance Committee Sustainability Committee Risk Management Committee CSR Committee, etc. Internal audit Divisions, Departments, Subsidiaries Departmental Committees and Conferences 82 Strengthening the Governance Framework Toray introduced an operating officer system in June 2020 to enable execution based on swift decision making that accurately responds to the business environment and its changes. Additionally, we took this opportunity to reduce the number of directors, and as of June 27, 2023, had appointed eight internal members of the Board and five Toray Industries, Inc.Toray Report 2023outside directors, for a total of 13 directors. The Board of Directors determines the scope of business execution to be delegated to vice presidents and supervises the exe- cution of those duties. There are seven directors who also serve as vice presidents. The Chairman convenes and chairs the Board of Directors’ meetings. The Governance Committee consists of two inside and five outside direc- tors, and it is chaired by an outside director to ensure a multifaceted perspective. Reduction in number of Members of the Board and change in its composition Year 2009 2012 2014 2015 2018 2020 2023 Total number of Board members 30 28 26 25 19 Outside directors included Percentage of outside directors 1 3.8% 8.0% 2 10.5% 12 4 13 5 33.3% 38.5% Policy on the Composition of the Board of Directors, Policy and Procedures for Selecting Members of the Board The Board of Directors has to evaluate a wide variety of risks multilaterally to fulfill its roles of oversight and decision-making. To that end, the Board of Directors strives for appropriate bal- ance in the number of members and structure, with members who widely cover the fields of the corporate activities of the Group in terms of knowledge, experience and ability, and appro- priately ensures diversity as a whole with the announcement of the skill matrix of members of the Board. As to the structure of the Board of Directors, the Governance Committee contin- uously reviews it. Skill Matrix Name Management experience Global business experience Technology/ Manufacturing/ R&D Sales & Marketing Legal/Intellectual property/Risk management Accounting/ Finance Strategic 83 Business operations Corporate ● ● ● Akihiro Nikkaku Mitsuo Ohya Satoru Hagiwara Kazuyuki Adachi Kazuhiko Shuto Tetsuya Tsunekawa Masahiko Okamoto Takashi Yoshiyama Kunio Ito Ryoji Noyori Susumu Kaminaga ● Kazuo Futagawa Yuko Harayama Hideki Hirabayashi Yoshiyuki Tanaka Hiroyuki Kumasaka Makiko Takabe Kozo Ogino d r a o B e h t f o r e b m e M r o t i d u A e t a r o p r o C ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● (DX) ● (ESG) ● (Science and technology) ● (Business strategies) ● (Policy science) ● (Innovation) ● ● ● ● ● ● ● * The skill matrix above is not an exhaustive list of all the knowledge and experience held by the individuals, but presents up to two major skills among those that the Company expects of them to promote management strategies. Status of Outside Directors/Corporate Auditors Elections Toray ensures objectivity and transparency of corporate governance by establishing and disclosing standards for independence of outside directors and outside corporate auditors. Based on these standards, the Company elects five outside directors and three outside corporate auditors and submits notification regarding their status as indepen- dent officers to the Tokyo Stock Exchange. Toray Industries, Inc.Toray Report 2023 Corporate Governance 84 Remuneration for Members of the Board Given their roles, remuneration for internal members of the Board consists of basic remuneration which is a fixed amount as well as a performance-based remuneration, including a bonus which takes into account the consoli- dated business results for each fiscal year and other fac- tors, and stock acquisition rights as stock options, which are linked to medium- to long-term business results. In the light of their roles, remuneration for outside directors con- sists of basic remuneration only. Remuneration is set at a level that enables the Company to secure superior human resources and further motivate them to improve performance, referring mainly to the results of a survey of other companies’ remuneration by an external third-party organization. The Company undertakes reviews of the payment ratios of performance-based remu- neration and remuneration other than performance-based remuneration as appropriate, based on the results of a sur- vey of other companies’ remuneration and deliberations at the Governance Committee. With the maxi- respect mum limit of total remuneration is determined at gen- eral meetings of stockholders. Particulars of the agenda at the general meeting of stockholders are determined by the Board of Directors following a report from the Governance Committee. Bonuses are determined by the Board of Directors following a report from the Governance Committee, with consideration given mainly to the consol- idated core operating income for each fiscal year that best represents the results of the Company’s global business remuneration, to basic operations, plus the historical record. The maximum limit of total number of Stock Acquisition Rights as well as the limit of remuneration relating to the granting of the Stock Acquisition Rights as stock options to members of the Board is resolved at the general meetings of stockholders. Within that limit, the total number of Stock Acquisition Rights to be allocated to each internal member of the Board is determined at the Board of Directors meet- ing based on the standards determined by the Board of Directors after the Governance Committee makes a report to the Board of Directors. The issue price of the 12th series of stock acquisition rights allocated during the fiscal year under review (allocated on August 20, 2022) was ¥685,000 per stock acquisition right (¥685 per share). Given their roles, remuneration for corporate auditors consists of basic remuneration only. With respect to basic remuneration, the maximum limit of total remuneration is determined at general meetings of stockholders. Within the scope of the maximum limit, basic remuneration to each corporate auditor is determined through consulta- tion by corporate auditors based on the Company’s internal regulations. Regarding details of remuneration to individual mem- bers of the Board, the remuneration system is continuously reviewed by the Governance Committee. Based on the results, the Governance Committee makes a report to the Board of Directors, which makes a resolution. Accordingly, the Board of Directors believes that the said details are in line with the Decision-making policy. Details of Remuneration (April 2022- March 2023) Position Total remuneration (millions of yen) Members of the Board (excluding outside directors) Corporate auditors (excluding outside corporate auditors) Outside directors Outside corporate auditors 566 79 56 36 Total remuneration by type (millions of yen) Performance-based remunerations Basic 380 79 56 36 Bonuses Non-monetary remunerations Stock options as remunerations Recipients 79 — — — 107 — — — 9 2 4 3 Notes: 1. Recipients included one member of the Board (excluding outside directors) who retired during FY 2022. 2. Total amounts of remuneration do not include the ¥17 million paid in salaries to one employee-director. Composition of Remuneration (April 2022- March 2023) President and Representative Member of the Board Internal Member of the Board Basic: 63% Performance-based remunerations Bonuses: 17% Basic: 68% Performance-based remunerations Bonuses: 13% Stock options as remunerations: 20% Stock options as remunerations: 19% Toray Industries, Inc.Toray Report 2023 Overview of the Results of the Analysis and Evaluation Toray’s Board of Directors implemented “Questionnaire Survey to Evaluate the Effectiveness of the Board of Directors in the fiscal year ended March 31, 2023” of all the 17 Board members and corporate auditors. In addition, the Company had individ- ual interviews with seven outside directors and outside corpo- rate auditors to hear opinions in relation to the responses to the questionnaire. The collection and summary of the question- naire and interviews were outsourced to a third-party organiza- tion to ensure transparency and objectivity. The survey results were analyzed and evaluated at the Governance Committee held on June 9, 2023, and the results of the analysis and evalu- ation were deliberated at the Board of Directors’ meeting held on June 14, 2023. The overview of the analysis and evaluation results shown below describes the contents resolved at the Board of Directors meeting. (1) In FY 2022, the Board of Directors performed oversight and decision-making based on a deep understanding and sympathy with the Management Philosophy and Corporate Missions. As a result, we believe that the Board of Directors generally fulfilled its roles and responsibilities in indicat- ing the direction of corporate strategies and other major courses of action in an appropriate manner. (2) In FY 2022, the Board of Directors held 15 meetings in total to perform oversight and decision-making in a timely and appropriate manner. We believe that the Board of Directors generally fulfilled its roles and responsibilities in establish- ing an environment conducive to appropriate risk-taking by maintaining dialogue between outside directors and vice presidents and undertaking other initiatives in the operation of the Board of Directors. (3) With respect to the 15 Board of Directors meetings held in FY 2022, the attendance rate of the members of the Board was 100%. Outside directors made remarks mainly from their respective professional viewpoints. Their opinions at the Board of Directors’ meetings, including the abovemen- tioned remarks, were appropriately reflected in measures taken by the management. The Board of Directors con- firmed that progress has been made in determining the root cause and implementing recurrence prevention mea- sures in relation to the inappropriate actions involving UL LLC certification in the Company’s resins business. With respect to transactions causing possible conflicts of inter- est, internal procedures to handle them were appropriately carried out. For all of the reasons above, we believe that the Board of Directors generally fulfilled its roles and responsi- bilities in carrying out the effective oversight of members of the Board and the management from an independent and objective standpoint in an appropriate manner. (4) In light of foregoing, we believe that the Board of Directors generally fulfilled its roles and responsibilities in an effec- tive manner in FY 2022. Regarding “diversity at the Board of Directors meetings,” however, we will continue discus- sions, on the premise of ensuring quality, on the recruit- ment of human resources that can contribute to realizing the Toray Philosophy. With regard to “further activating dis- cussions at the Board of Directors meetings,” continuing from the fiscal year ended March 31, 2023, specific mea- sures for improvement must be taken in the fiscal year end- ing March 31, 2024 and thereafter so as to further improve the effectiveness of the Board of Directors. (5) With respect to the opinions received from the members of the Board and corporate auditors while evaluating the effectiveness of the Board of Directors, the Governance Committee shall deepen discussions based on those opin- ions with a view to further improving the effectiveness of the Board of Directors, as necessary. 85 Measures to ensure the effectiveness of the governance framework for listed subsidiaries Chori Co., Ltd • On March 25, 2020, Chori Co., Ltd. established the Governance Committee, which is a voluntary committee, to strengthen the independence, objectivity, and accountability of the functions performed by its Board of Directors regard- ing the nomination and remuneration of members of the Board. The subsidiary’s Governance Committee also delib- erates on matters that become necessary to be addressed from the perspective of protecting the interests of its gen- eral shareholders. No former employees, directors, officers, or other personnel of the Company serve as members of the Governance Committee, which is composed mainly of inde- pendent outside directors, hence the independence of the subsidiary in exercising authority over the election and dis- missal of its directors is guaranteed. Suido Kiko Kaisha, Ltd. On December 20, 2021, Suido Kiko Kaisha, Ltd. established the Governance Commit-tee, which is a voluntary commit- tee. Its purpose is to appropriately manage the election and dismissal of members of the senior management (full-time executive directors), nomination of director candi-dates, remu- neration of members of the senior management and directors, and conflicts of interest with the controlling shareholder, while strengthening the in-dependence, objectivity and accountabil- ity of the functions of the Board of Directors regarding deci- sions and other matters on important transactions and actions with the controlling shareholder for the purpose of protecting the interests of minority shareholders. By requiring a majority of the committee members to be independent outside direc- tors, the independence of the subsidiary in exercising authority over the election and dismissal of its directors is guaranteed. • When exercising authority over the elec-tion and dismissal of the subsidiary’s out-side and independent directors, the Com- pany seeks to make an appropriate decision for each agenda item, while serving the interests of the subsidiary’s sharehold- ers in general. That decision depends on whether the candi- date can oversee management from a broader perspective to further im-prove the transparency and fairness of manage- ment and can provide appropriate management advice from a medium- to long-term perspective, based on his/her sympa- thy to the management philosophies of Toray and the subsidi- ary in addition to understanding of the businesses. • When exercising authority over the election and dismissal of the subsidiary’s independent outside directors, the Company seeks to make an appropriate decision for each agenda item, while serving the interests of the subsidiary’s shareholders in general. That decision depends on whether the candidate can oversee management from a broader perspective to further improve the transparency and fairness of management and can provide appropriate management advice from a medium- to long-term perspective, based on his/her sympathy to the management philosophies of Toray and the subsidiary, in addition to understanding of the businesses. • The transactions between the Company and the subsidiary are concluded based on the negotiations with reference to several factors such as the market price. • The transactions between the Company and the subsidiary are concluded based on the negotiations with reference to several factors such as the market price. Toray Industries, Inc.Toray Report 2023Comments from an Outside Director Kunio Ito Outside Director 86 Q The new leadership team kicked off in June. Please let us know your thoughts regarding the inquiry process up to finalizing the new team and your assessment of that process. A As Toray engages in such a broad range of main businesses, managing them and exercising leadership is no easy task. Led by the Governance Committee, we have long discussed and sought a person with a new management style and outstanding leadership who can realize the “New Toray,” while carry- ing over the extensive experience built up over the years under President Akihiro Nikkaku. As the new president appointed through this process, I expect to see Mr. Mitsuo Ohya fuse Toray’s technological capabilities with his own expertise in marketing, thereby realizing creativity and innovation amid the discontinuous changes in the business environment and driving growth in corporate value. Q The Tokyo Stock Exchange requires improvements from any company that falls below a PBR of 1x. The Medium-Term Management Program, Project AP-G 2025 (AP-G 2025), includes “improving profitability” and “improving asset efficiency” as challenges, as well as “ultimate value creation” as one of its basic strategies. Please provide some comments and recommen- dations for Toray on AP-G 2025. A As an outside director, I feel disappointed that Toray’s PBR has fallen below 1x. In addition to releas- ing the names of companies that have dropped below this benchmark, the Tokyo Stock Exchange also announced the “JPX Prime 150,” made up of those companies that have created significant corpo- rate value. Based on my analysis, the average PBR of the 150 selected companies is 3.6x. These com- panies clearly have earnings capability, in other words, excellent net profit-to-sales ratios. And their ROE greatly exceeds their cost of capital. In this respect, I believe both “improving profitability” and “improving asset efficiency” are appropriate program challenges under AP-G 2025. All that is left to do now is take action. Q Another basic strategy under AP-G 2025 is “enhancement of people-centric management.” Please provide us with a few comments if you have any thoughts on the strengths and weak- nesses of Toray regarding human resources. A I feel that historically, Toray has highly valued its people, and that it has been committed to train- ing. Nearly 30 years ago, well ahead of the rest of the industry, Toray opened the Toray Management School as a selective manager training program. Today, the number of companies that have introduced selective personnel training programs has drastically increased, and Toray was truly a pioneer in this respect. One aspect that symbolizes the Company’s stance, though, is that despite struggling with its performance at times, Toray has continued to administer this program without ever suspending it or cutting its budget. So, I feel that it makes sense to include “enhancement of people-centric man- agement” within AP-G 2025. As society has come to recognize the importance of human capital man- agement, however, I feel it is important for Toray to create an environment and corporate culture that enable people to grow rather than one that nurtures them, and to enhance the autonomy and inde- pendence of individuals. Q Please tell us about your impression after having participated in the Institutional Investors Collective Engagement Forum (IICEF)’s Collective Engagement Program. A The Collective Engagement Program was a valuable opportunity in that I was able to engage in sin- cere dialogue with the investors that attended. And I feel I truthfully answered their various ques- tions to the best of my ability. I myself have engaged with many investors over the years, and feel that I understand where their interests lie. Yet I am convinced that directly conversing with investors regarding individual companies and touching upon their specific areas of interest was beneficial for strengthening the governance of Toray in the future. The participants of the program fully conveyed the message that investors are most strongly interested in the governance of the companies in which they invest, and that they wish to ascertain whether they should continue to trust and invest in these companies. I therefore intend to strive together as part of the Board of Directors in order to meet the investors’ expectations. IICEF Collective Engagement Program Date: Attendance: Participating Investors: 7 companies (organized by the Institutional Investors Collective Engagement Forum) February 20, 2023 Kunio Ito, Member of the Board; Susumu Kaminaga, Member of the Board; Kazuo Futagawa, Member of the Board; and Kazuya Jono, Corporate Auditor • Dai-Ichi Life Insurance Co., Ltd. • Mitsubishi UFJ Trust and Banking Corporation • Resona Asset Management Co., Ltd. • Sumitomo Mitsui Trust Asset Management Co., Ltd. • Meiji Yasuda Asset Management Co., Ltd. • Pension Fund Association • Sumitomo Mitsui DS Asset Management Co., Ltd. We held a collective engagement with the seven companies listed above regarding the inappropriate actions relating to UL certification by Toray’s resins business. The collective engagement provided Toray an opportunity to explain the awareness held by the outside directors and outside corporate auditors, together with the Company’s initiatives, regarding corporate culture and governance. At the same time, the collective engagement served as a valuable opportunity to deepen the under- standing between Toray and the investors on these issues. Toray will continue to ensure accountability going forward. Toray Industries, Inc.Toray Report 2023 Compliance Basic Approach In order to contribute to society by leveraging innovative technologies and advanced materials in line with its cor- porate philosophy, as well as by working to resolve major global issues, Toray Group must build and maintain relation- ships of trust with our various stakeholders. And in order to gain this trust, it is essential to comply with the laws Ethics and Compliance Structure Toray has established an Ethics and Compliance Committee chaired by the President and consisting of the vice presi- dents. At this committee, management and workers come together to consider and discuss policies related to ethics and compliance. Moreover, this Committee reports on the operational status of the whistle-blowing system estab- lished by Toray Group, including the number of reports (consultations) and other details, to members of the Board. During FY 2022, this Committee met twice to deliber- ate and discuss Toray Group’s ethics and compliance activ- ity results for FY 2021 and the activity plans and progress updates for FY 2022. We also discussed individual mea- sures, such as the implementation of Compliance Month and collaboration on plans with safety activities. In each Ethics & Compliance Code of Conduct Toray Group has established the Ethics & Compliance Code of Conduct (revised in June 2023), which outlines the code of conduct as important rules to be followed by executives and employees of Toray Group, as well as the compliance helpline, and the promotion framework for ethics and com- pliance. The contents of the code are regularly reviewed and regulations related to our business activities in each country in which we operate and maintain the highest level of integrity in all our actions. Therefore, top management focuses on a leadership role in placing the highest priority on compliance, while both the Group and its suppliers are required to promote ethics and compliance. workplace, instead of top-down initiatives led by each divi- sional/departmental general manager, we promote such activities by shifting to middle-up-down approach. As a starting point, the middle management at each work- place themselves considered and implemented the activi- ties required in each workplace, then conveys the opinions obtained through the activities to the top management. In initiatives for group companies around the world, Toray Group has established the Affiliate Companies’ Compliance Meeting and the Overseas Affiliate Companies’ Compliance Meetings under the Ethics and Compliance Committee. Through these committees, Toray Group is examining and promoting compliance activities in each company, country and region. by the Ethics and Compliance Committee, chaired by the President and consisting of the vice presidents. Also, reports are made and submitted to the Board of Directors by this committee. The code of conduct is thoroughly commu- nicated to all Toray group executives and employees includ- ing contracted, part-time, and temporary workers. Corporate Ethics and Legal Compliance Education Toray posts information on CSR and legal compliance on its corporate intranet. Toray Group circulates important infor- mation about legal and compliance matters that are highly relevant to its business in Japan and overseas. Besides, for the entire group companies, we promote active discus- sions in workplaces through workshops to examine these matters and study cases of corporate misconduct. Since FY 2012, Toray has provided e-learning courses on corporate ethics and legal compliance for all executives and employees, including contracted, part-time, and tem- porary workers. Themes in the training courses set for each fiscal year included explanations to instill Toray’s code of conduct and whistle-blowing system, as well as case stud- ies on anti-bribery, human rights and harassment. Compliance Code of Conduct and Toray Group’s whis- tle-blowing system, and 96.4% of the targeted partici- pants took the course. In a survey of participants, 60.8% answered that they had “understood” the content of the Code of Conduct, and 38.9% that they had “understood the Code of Conduct to some extent,” and we are continu- ing to disseminate information and promote education to further instill its content. We are also using similar teaching materials to conduct training sessions at our group com- panies in Japan. Following the case of misconduct in UL certification registration, in FY 2022 we also conducted thorough compliance training throughout the Company, covering topics such as an introduction to the incident, an analysis of its causes, and countermeasures. In FY 2022, the courses focused on the Ethics & 87 Toray Industries, Inc.Toray Report 2023 Compliance Expanding the Whistle-Blowing System the Corporate Ethics and Legal Toray established Compliance Helpline as a whistle-blowing system in FY 2003 and expanded the system to include all group com- panies in Japan in FY 2010. In FY 2022, Toray and its group companies received a total of 97 whistle-blowing (con- sultation) cases, of which seven resulted in disciplinary action. The facts were investigated with utmost care to protect against any risk of negative impact on the individ- ual reporting to or consulting with the hotline. If a problem was identified, efforts were made to solve the problem and measures were taken in accordance with the internal rules of each company, such as company regulations. The oper- ational status of the whistle-blowing system is reported to the Board of Directors and the Board of Corporate Auditors by the Ethics and Compliance Committee. In 2022, we developed internal regulations based on the Whistleblower Protection Act, which had been revised and enforced in June of the same year, and added executives, employees who have retired within one year, and business partners to the users of the whistle-blowing system. We also made our own revisions, such as adding rules regarding the designation of personnel who handle whistleblower-related tasks. Content and Number of Whistle-Blowing (Consultation) for Toray Group (Number of cases) 100 90 10 44 36 2019 80 60 40 20 0 (FY) 89 17 49 23 2021 74 15 44 15 2020 97 24 32 41 2022 Consultation on compliance issues, such as improper expense handling Reporting (consultation) on harassment and other human rights issues Other reporting (consultation) 88 Reinforcing Compliance in Product Quality Assurance Toray Group is pursuing five major issues to reinforce prod- uct quality assurance compliance throughout the Group. 1. Reinforcement of structures related to quality assur- ance systems of the entire Toray Group The Group provides guidance to Toray Industries and its group companies globally regarding the development of quality assurance system, and audits the effectiveness of these sys- tems and operations. Based on the formulated product qual- ity assurance vision, the organizations design initiatives to close the gap between the vision and actual performance. 2. Development of human resources and creation of workplace culture not allowing any misconduct Toray has designated November as Quality Month. Coinciding with this initiative, the Company has conducted quality assur- ance compliance education since FY 2020. By providing edu- cational materials to Toray Industries as well as its group companies in and outside Japan, each department and com- pany is taking the initiative in promoting training. (Number of training participants in FY 2022: 23,918) 3. Understanding of actual state of agreements with customers and establishment of guidelines related to product quality (assurance) Based on the guidelines for product quality assurance agreements, we continue to assess agreements and review their provisions as necessary. 4. Appropriate maintenance or control and moderniza- tion or fulfillment of measuring equipment The Group has risk assessment tables for judging the necessity of upgrading or conducting maintenance on measuring equipment, and use them to identify devices in need of an upgrade. 5. Improvement of quality data management system to not allow any misconduct The Group is developing data management systems that minimize human involvement, such as by automating mea- surement and transfer of measurement data, and issuance of inspection reports. Competition Law Compliance, Anti-Corruption, and Anti-Bribery 1. Competition Law Compliance The Ethics & Compliance Code of Conduct defines the code of conduct related to competition laws that must be observed by all Toray group executives and employ- ees. Educational materials related to competition laws have been prepared in Japanese and English for all Toray group employees. Within Japan, the Group prepares and utilizes compliance training materials and gathers exam- ples of compliance violations related to competition laws. In FY 2022, no legal action was taken against Toray Group on the grounds of anti-competitive behavior, antitrust or monopoly practices. Toray Industries, Inc.Toray Report 2023 2. Anti-Corruption and Anti-Bribery In January 2020, Toray Group formulated the Anti-Bribery Regulations that explicitly prohibit offering and accepting bribes to or from public officials and business partners, and established the rules for approval and reporting when offer- ing or receiving money or other benefits to or from pub- lic officials and business partners. Similar rules have also been introduced at both domestic and overseas group companies. The Ethics & Compliance Code of Conduct defines the code of conduct related to anti-corruption and anti-bribery measures that must be observed by all Toray group exec- utives and employees. Accompanying guidelines and edu- cational materials covering to the anti-corruption and anti-bribery measures have been prepared in Japanese and English for all Toray group employees and they are shared on a group-wide basis. No legal action was taken against Toray Group on anti-corruption or anti-bribery grounds in FY 2022. Protection of Personal Information In order to comply with Japan’s Act on the Protection of Personal Information, Toray has established Regulations for the Management of Personal Information, together with a management framework and practices to ensure each department manages personal information appropriately. Audits are regularly conducted into the management con- ditions in each department. Promotion of Mission B.E.A.R. Activities In FY 2018, Toray Group launched a new initiative with the slogan “Have the integrity to do the right thing in the right way.” The initiative includes the follow- ing four principles for taking more effec- tive action to ensure compliance. Compliance Action Principles B: Be fair, be honest and have integrity E: Encourage respect and communication A: Adopt a Genba (workplace) approach—Look to the facts! R: Responsibility as a member of our excellent company Under the name “Mission B.E.A.R.,” an acronym of the first word of each principle, Toray group companies formu- late declarations and action plans related to compliance, and implement initiatives that correspond to their individual Implementing Internal Legal Audits In FY 2022, Toray implemented internal legal compli- ance audits relating to high-priority items including the Antimonopoly Act, bribery regulations, insider trading regu- lations, and concluding agreements, for designated depart- ments of Toray and its group companies in Japan. Nothing Improving Security Trade Controls Concerns about the spread of conventional mass weap- ons of destruction and changes in the international secu- rity balance necessitate risk management addressing security trade controls. Toray convenes a Security Trade Administration Committee comprising officers of divisions that are involved in exports and technology transfer. In FY 2022, the committee decided on measures to implement In FY 2022, the Company received no complaints con- cerning personal information and there were no data breaches. Major Toray group companies in and outside Japan appropriately conduct management in accordance with the management systems and methods specified by the internal rules of each company. 89 situations. Toray Group implements periodic follow-ups for the initiatives of each company, shares the effective initia- tives of each company within the Group, and encourages each company to take the initiative in evolving their compli- ance activities. In FY 2022, Toray continued to assist each company’s compliance promotion activities. Including the Compliance Promotion Month, steps were actively taken to share com- pliance-related initiatives, utilize the results of compliance awareness questionnaires, and carry out collaborative proj- ects with safety activities at plants. Through these activi- ties every effort is being made to strengthen risk response that emphasizes factors unique to each region and type of business while reinforcing Toray Group’s integrity-driven corporate culture. inappropriate was found in any of the items covered, but we will continue to raise awareness of legal compliance by sharing information through educational activities and in-house magazines. for the fiscal year after considering pressing risks based on recent international circumstances and regulatory trends. The committee members also convene a Divisional Security Trade Administration Committee that communi- cates corporate measures and implements supplementary programs, such as precautions to be taken by departments and group companies under its supervision. Toray Industries, Inc.Toray Report 2023 Risk Management Risk Management Structure In order to respond to risks that rapidly emerge due to changes in the surrounding environment and to respond immediately in the event of a crisis, Toray Group has the Risk Management Committee, chaired by the General Manager of Toray Industries, Inc.’s Corporate Strategic Planning Division. It also facilitates close communication between the Board of Directors and top management as it pursues risk manage- ment as an integral part of management strategy. In addi- tion, as subordinate organizations of the Risk Management Committee, the Overseas Crisis Management Committee and Local Crisis Management Committee have been estab- lished to manage employees’ overseas travel under normal conditions and compile information on overseas risks. Risk Management Activities For risk management in normal times, the Group imple- ments a PDCA cycle to manage Toray Group Priority Risks (hereinafter referred to as Priority Risks) and Specified Risks. In principle, the Company conducts an exhaus- tive identification of Priority Risks once every three years. Priority Risks are set based on those with a high degree of potential risk (probability of occurrence × degree of impact), and the division or department responsible for mit- igating each risk focuses on risk mitigation. Specified risks 90 Risk Management Committee System Risk Management Committee Chairperson: General manager of Corporate Strategic Planning Division Secretariat: Risk Management Group, Corporate Strategic Planning Division Directions on implementation measures Activity reports Directions Reporting Risk mitigation activities for priority risks Divisions and Departments responsible for priority risks mitigation Overseas Crisis Management Committee Directions Reporting Local Crisis Management Committees in each countries and regions Toray Industries, Inc. and its Group companies include risks arising in a short period of time, and have a complementary relationship with priority risks. Specified Risks are determined by a dedicated department in the Corporate Strategic Planning Division that routinely mon- itors domestic and overseas trends, based on consulta- tion with top management. In the event of a crisis, a quick response system is established according to the level of the crisis, in accordance with internal regulations. Improvement of the risk mitigation activities through periodic follow-up Periodic and exhaustive risk assessment Questionnaire surveys on risks Assessment of potential risks Deliberation at the Risk Management Committee Priority Risks Routine risk monitoring Collection of information within the organization Assessment of identiﬁed risks Deliberation with top management Speciﬁed Risks Establishment of a response system Risk mitigation activities Follow-up the status of the activities Reporting in the event of a crisis Assessment of the crisis level Establishing a quick response system which corresponds to he level of crisis and responding to the crisis Normal conditions In the event of a crisis Business Risks Major risks that Toray Group has evaluated to have signifi- cant impact on business, etc. are listed below. For details on each risk, please refer to “Business and Other Risks” in the Annual Securities Report (142nd Period). • Crisis response risks based on the possibility of war [*Priority Risks] • Product supply disruption risk [*Priority Risks] • Risks related to product demand, market trends, and business plans • Risks related to global business development • Risks related to foreign currency, interest rate and secu- rities market fluctuations • Risks related to environmental issues such as climate change, water shortages, and resource depletion • Risks related to natural disasters and accidents • Risks related to human resource strategies • Risk related to compliance • Risks related to information security and cyber threats * “Crisis response risks based on the possibility of war” and “Product supply disruption risk” were set as Priority Risks for the sixth three-year period (FY 2023 to 2025) through identifying and evaluating risks, which is described on the following page. Toray Industries, Inc.Toray Report 2023Major initiatives in FY 2022 1. Identifying and evaluating risks In 2022, we conducted the following process to iden- tify and evaluate risks for the entire Group that could hin- der the achievement of the targets of the Medium-Term Management Program from FY 2023 to 2025. (1) A survey was conducted to identify the imminence of risks as well as specific concerns in Toray Group’s func- tional departments and domestic and overseas affiliates, targeting 118 risks (see chart below) comprehensively organized in the categories of “business environ- ment,” “disasters,” “operations,” “E (environment),” “S (society),” and “G (governance)” surrounding the Group. (2) After aggregating and analyzing information obtained from the survey, discussions on risk awareness, issues, and countermeasures were held with risk-related departments and top management. (3) Summarizing the analysis of the questionnaire survey and information obtained from the discussions, draft of Priority Risk is deliberated and decided by the Risk Management Committee. Each division also sets its own risks to be addressed. Identifying Risks for Achievement of the Targets of the Medium-Term Management Programs Changing business environment Business environment Country, Politics, Economy, Society, Technology, Industry Disasters Natural disasters, Human-made disasters Conduct of business and operations Operations Contract, Trade, Procurement. Production, transport and deIivery, Products and service, Management, Equipment and facility related accidents, Social infrastructures E (Environment) Climate changes, Water usage, Biodiversity, Leakage and waste, Environmental regulation, Societal needs S (Society) Occupational health and safety, Labor and management, Abuse of human rights, Securing talented personnel, Technology, know-how, and abilities, Morale and moral G (Governance) Compliance, Information security, Intellectual property, Finance, IR, PR, Communication, Risk management Responsibilities that must be fulﬁlled Achievement of the targets of the Medium-term Management Program 2. Priority risk mitigation activities (1) Addressing Information Security Risks Information security has been included as one risk area in the fifth three-year set of Priority Risks for Toray Group, and more comprehensive initiatives have been taken group-wide. In FY 2022, the Group established the Toray Group Information Security Steering Committee, which is chaired by the head of Toray Industries’ General Administration & Communications Division, and changed the system from individual optimization of each company to the entire Group. Under the supervision and manage- ment of the committee, Toray Group as a whole maintains and improves information security by formulating group- wide security management standards, following up on the implementation status, and conducting periodic security assessment and monitoring. In the event of incidents such as information leaks or suspension of information system use due to cyber-attacks, we ensure that such incidents are reported to the head of the General Administration & Communications Division within 24 hours. Then, depend- ing on the damage or the possibility of damage, a system and response procedures are in place and operated to con- tact relevant parties inside and outside the Company and to prevent the spread of damage. (2) Addressing Global CSR procurement risks Toray Group has designated “Global CSR procurement risks” as one type of risk under the fifth set of Priority Risks, and has considered the adoption of a process that involves identifying important CSR procurement risk types corre- sponding to specific countries, regions, and industries, and then picking out suppliers that require risk investigation, auditing, and/or mitigation measure implementation. In FY 2022, we carried out testing in cooperation with Japanese and overseas Group companies to verify whether the sur- vey sheets and audit procedures for suppliers, which were created with the three priority issues of human rights and labor, safety and health, and environmental preservation as survey targets, are actually operational. We have also established a process to narrow down the list of suppli- ers to be surveyed based on supplier information collected from each of our domestic and overseas Group companies. In the future, we will strive to reduce CSR procurement risks for the entire Group by establishing processes for risk identification and investigation, conducting risk investiga- tions of identified suppliers to be surveyed, and conducting audits and follow-ups when risks are identified. 3. Business Continuity Plan Initiatives In FY 2018, Toray Industries, Inc. created and began admin- istering BCPs for key products selected from each busi- ness in accordance with the Procedures for Developing BCPs for Designated Key Products in the event of an earth- quake. Group companies in and outside Japan began this initiative in FY 2019. In addition, since FY 2012, Toray Group has continued to conduct company-wide drills on setting up an emergency response headquarters. In FY 2022, as in FY 2021, in light of Toray’s enhanced network environ- ment and the improved reliability of public network infra- structure, the Company conducted initial response drills online, on the assumption that a large number of employ- ees could be working from home due to the suspension of transportation services and the outbreak of COVID-19. Toray Group will continue to strengthen its capability to respond to earthquakes with training and other measures. 91 Toray Industries, Inc.Toray Report 2023Results by Segment for FY 2022 Segments Summary of Financial Results Fibers & Textiles Performance Chemicals 92 Carbon Fiber Composite Materials Environment & Engineering While hygiene material applications were sluggish from the impact of the worsen- ing supply-demand balance, apparel applications saw a recovery from the pandemic. Industrial applications witnessed a demand recovery trend for automobile applications in some regions. Almost all applications and regions were affected by the soaring costs of raw materials and fuels as well as persistently high transportation costs. The Performance Chemicals segment overall was affected by the soaring raw mate- rial and fuel prices. In the resins and chemicals businesses, while the fine chemicals business per- formed strongly, the resins business was weak given the impact of demand declines in the Japanese and Chinese markets and other factors. Demand declined due to inventory adjustment in supply chains for optical applications and electronic parts in the films business as well as OLED-related materials and circuit materials in the elec- tronic & information materials business. In aerospace applications, production rate of aircrafts at the major customer showed a recovery trend. Sports applications grew strongly, due mainly to bicycles for outdoor leisure, fishing rods, and golf applications. In industrial applications, demand for environment- and energy-related applica- tions, including compressed natural gas tank applications, remained strong due to rising oil prices. We promoted passing on the rise in raw material and fuel prices to the sales price. In the water treatment business, demand for reverse osmosis membranes and other products grew strongly, while facilities that newly started operations contributed to the performance. Among Japanese subsidiaries in the segment, an engineering subsidiary saw increases in the shipment of lithium-ion secondary battery-related equipment. Life Science In the pharmaceutical business, while sales volume of orally active prostacyclin deriv- ative DORNER™ expanded for the overseas markets, sales of pruritus treatment REMITCH®* were affected by the introduction of its generic versions as well as by a NHI drug price revision. In the medical devices business, shipment of dialyzers for hemodiafiltration grew strongly in Japan, but the business was affected by the soaring prices of raw materi- als and fuels. *REMITCH® is a registered trademark of Torii Pharmaceutical Co., Ltd. Toray Industries, Inc.Toray Report 2023 Performance (Billion yen) * The figures in parentheses of each segment are composition ratios by segment. Main Products Revenue 999.2 (40％) Revenue 909.4 (37％) Revenue 281.7 (11％) Revenue 228.8 (9％) Revenue 53.8 (2％) Core Operating Income 51.2 (43％) Core Operating Income 30.4 (25％) Core Operating Income 15.9 (13％) Core Operating Income 19.7 (16％) Core Operating Income 0.2 (0.2％) • Filament yarns, staple fibers, spun yarns, woven and knitted fabrics of nylon, polyester, acrylic, and others • Nonwoven fabrics • Ultra-microfiber nonwoven fabric with suede texture • Apparel products, etc. • Nylon, ABS, PBT, PPS, and other resins and molded products • Polyolefin foam • Polyester, polyethylene, polypropylene, and other films and processed film products • Raw materials for synthetic fibers, and other plastics • Fine chemicals • Electronic and information materials, and graphic materials, etc. • Carbon fibers, carbon fiber composite materials, and their molded products, etc. 93 • Comprehensive engineering • Condominiums • Industrial equipment and machinery • IT-related equipment • Water treatment membranes and related equipment • Materials for housing, building, and civil engineering applications, etc. • Pharmaceuticals • Medical devices, etc. * Excludes other businesses, equivalent to ¥16.4 billion (1%) in revenue and ¥2.5 billion in core operating income, and adjustment of core operating income of -¥23.9 billion. The com- position ratio by segment of core operating income is calculated excluding the adjustment amount. Toray Industries, Inc.Toray Report 2023Fibers & Textiles Revenue ¥999.2 billion Core Operating Income ¥51.2 billion (FY) Revenue (Billion yen) 2021 2022 Changes 2023 (Forecast) 836.2 999.2 +19.5% 989.0 Core Operating Income (Billion yen) 42.2 51.2 +21.5% 59.5 Core Operating Margin 5.0% 5.1% 6.0% Changes in Core Operating Income (Billion yen) 42.2 +1.9 +2.4 +1.3 +3.4 51.2 94 Core Operating Margin 5.1% ROA (Core Operating Income/Assets) 5.6% +9.1 FY 2021 Difference in quantity Net change in price Cost variance, etc. Difference from foreign currency translation of overseas subsidiaries’ results FY 2022 Toray Expands Production Facilities for Ultrasuede™ Suede Texture Artificial Leather Toray has decided to expand the production facilities for Ultrasuede™ at the Shiga Plant and Gifu Plant. The Company will increase annual production capacity from 10 million m2 to 15 million m2. The new production lines are scheduled to start operation in the second half of 2024 with total capital investment of approximately ¥10 billion. Ultrasuede™ is a highly sensitive, high-performance suede texture artificial leather sold globally as a leading edge Japan-quality brand. Increasing production capacity roughly 1.6-fold in 2019, production has continued at full-capacity. In addi- tion to fashion and home interior items, applications of this product have expanded in recent years including automobile interiors. In particular, electric vehicle interior applications have expanded as a substitute for natural leather from the perspec- tive of environmental friendliness. Moreover, given its good affinity with increasingly simple and excellent design of interiors, applications are expanding from conven- tional seat material to materials for ceilings, door trim, instrument panels, and other areas. Accordingly, demand for this product is dramatically growing. Examples Lexus RZ Nio EC6 LOVOT Toray Industries, Inc.Toray Report 2023Performance Chemicals Revenue ¥909.4 billion (FY) Revenue (Billion yen) 2021 2022 Changes 2023 (Forecast) 910.0 909.4 -0.1% 929.0 Core Operating Income (Billion yen) 91.0 30.4 -66.6% 41.0 Core Operating Income ¥30.4 billion Core Operating Margin 3.3% ROA (Core Operating Income/Assets) 2.6% Revenue Breakdown of Performance Chemicals Segment (FY) 2021 2022 Resins, Chemicals 425.9 419.5 Films 335.0 321.5 Electronic & Information Materials 74.1 55.2 Trading, Other 530.3 547.1 Adjustments ▲455.4 ▲433.8 Total 910.0 909.4 Core Operating Margin 10.0% 3.3% 4.4% Changes in Core Operating Income (Billion yen) 91.0 -46.9 -14.8 -60.6 +1.3 -0.1 30.4 95 FY 2021 Difference in quantity Net change in price Cost variance, etc. Difference from foreign currency translation of overseas subsidiaries’ results FY 2022 Toray Increases Lumirror™ Release Film Production Capacity for Multi-Layer Ceramic Capacitor Manufacturing In order to respond immediately to growing demand for multilayer ceramic capac- itors (MLCCs) in telecommunications and automotive applications, Toray Group decided to boost production capacity of Lumirror™ biaxially oriented polyester release films for manufacturing MLCCs in Japan, the biggest consumer of release films. Specifically, the Group will retrofit the production facilities at Gifu Plant to increase production capacity 1.6-fold compared with today. At a total capital invest- ment of ¥8 billion, the new facilities are scheduled to begin production in 2025. Lumirror™ is an extremely smooth film that is highly effective in enabling thin, irregularity-free ceramic layers. Many MLCC manufacturers have adopted it for this reason, helping them to miniaturize and raise the capacity of MLCCs. Toray leads the global MLCC mold release film market, currently producing these films in Japan (Mishima and Gifu Plants), Malaysia, and Korea. The new production line is expected to address recycling by collecting used film for reuse. Lumirror™ is a biaxially oriented polyester film, first produced on an industrial scale in Japan by Toray. It is used worldwide in a variety of applications ranging from electron- ics to packaging, magnetic and in- dustrial specialties. Toray Industries, Inc.Toray Report 2023 Carbon Fiber Composite Materials Revenue ¥281.7billion Core Operating Income ¥15.9 billion (FY) Revenue (Billion yen) 2021 2022 Changes 2023 (Forecast) 215.2 281.7 +30.9% 302.0 Core Operating Income (Billion yen) 1.6 15.9 +907.5% 20.5 Core Operating Margin 0.7% 5.7% 6.8% Changes in Core Operating Income (Billion yen) +11.7 -9.3 +11.5 +0.5 15.9 96 Core Operating Margin 5.7% ROA (Core Operating Income/Assets) 2.5% 1.6 FY 2021 Difference in quantity Net change in price +14.3 Cost variance, etc. Difference from foreign currency translation of overseas subsidiaries’ results FY 2022 Toray Develops High-Speed Thermal Welding Technology for Carbon Fiber Reinforced Plastics As a technology that contributes to high-rate production (high-speed and high-ca- pacity) and weight savings for aircraft, Toray Group developed a thermal welding technology that rapidly and securely joins carbon fiber reinforced plastic (CFRP) components in a similar manner as standard welding. This technology enables high- speed assembly of thermosetting CFRP parts as well as of thermosetting and ther- moplastic CFRP parts without the need for adhesive bonding and bolt fastening. Thermosetting CFRP has been used for airframes made of CFRP because of its high reliability based on a long track record of use. The downside, however, is that the complicated CFRP adhesive bonding and bolt fastening processes have become assembly bottlenecks. In terms of production time, CFRP airframes have therefore lagged behind those of aluminum alloy airframes. The Group will push ahead with demonstrations of this technology with a view to commercializing its use in air- frames after 2030, along with further expanding CFRP applications. Thermally Welded Assembly of Aircraft Structural Demonstrator Applying this Technology Toray Industries, Inc.Toray Report 2023Assembly bythermal weldingApprox. 20 minFrameSkinStringerClipHalfClip Environment & Engineering Revenue ¥228.8 billion (FY) Revenue (Billion yen) 2021 2022 Changes 2023 (Forecast) 199.3 228.8 +14.8% 248.0 Core Operating Income (Billion yen) 16.5 19.7 +19.2% 25.0 Core Operating Income ¥19.7billion Core Operating Margin 8.6% ROA (Core Operating Income/Assets) 6.3% Core Operating Margin 8.3% 8.6% 10.1% Changes in Core Operating Income (Billion yen) +3.4 -7.3 +6.3 16.5 +0.8 19.7 +3.2 97 FY 2021 Difference in quantity Net change in price Cost variance, etc. Difference from foreign currency translation of overseas subsidiaries’ results FY 2022 Toray Receives Reverse Osmosis Membrane Order for The World’s Largest Seawater Desalination Plant Toray Group received a reverse osmosis (RO) membrane order for the Taweelah desalination plant in the United Arab Emirates. Following commissioning during the second half of fiscal 2022, this plant became the world’s largest RO desalination facility, with a daily capacity of 909,000 cubic meters of water. The United Arab Emirates began considering construction launch using the RO method nearly 20 years ago. Key factors in Toray obtaining this order were that its RO membrane technology and robust track record in the Middle East over the past 15 years have delivered lower capital investment and operating costs than the con- ventional evaporation method. The country has plans to build other RO plants in the future, and Toray will continue to contribute to its infrastructure development by pro- viding RO membranes and technical support. Toray Membrane Middle East LLC (TMME) will pro- vide technical services. By strengthening RO membrane Hail Dammam Taweelah supply and technical support, Medina TMME Toray Group will help allevi- ate water shortages in the Middle East as a region that supports stable energy sup- ply of the world. Riyadh Jeddah Makkah Toray Industries, Inc.Toray Report 2023 Life Science Revenue ¥53.8 billion Core Operating Income ¥0.2 billion 98 Core Operating Margin 0.4% ROA (Core Operating Income/Assets) 0.3% (FY) Revenue (Billion yen) 2021 2022 Changes 2023 (Forecast) 52.0 53.8 +3.5% 55.0 Core Operating Income (Billion yen) 1.4 0.2 -86.2% 0.0 Core Operating Margin 2.6% 0.4% 0.0% Changes in Core Operating Income (Billion yen) +0.6 -1.6 1.4 -0.3 FY 2021 Difference in quantity Net change in price -1.2 +0.1 0.2 Cost variance, etc. Difference from foreign currency translation of overseas subsidiaries’ results FY 2022 Toray Receives Marketing Approval for an In Vitro Diagnostics Kit for Aiding in the Diagnosis of Pancreatic Cancer Toray Group received marketing approval from Japan’s Ministry of Health, Labour and Welfare in June 2023 for “Toray APOA2-iTQ,” an in vitro diagnostic test kit intended to aid in the diagnosis of pancreatic cancer. This is the first kit approved in Japan to measure two apolipoprotein A2 (APOA2) isoform concentrations in plasma. Toray will begin offering Toray APOA2-iTQ domestically once insurance coverage becomes available for it. Professor Kazufumi Honda of the Graduate School of Medicine of Nippon Medical School discovered that the quantitative ratios of APOA2-AT and APOA2-TQ change in the blood of pancreatic cancer patients. Based on the results of joint research with Nippon Medical School and the National Cancer Center, as well as research conducted by the Japan Agency for Medical Research and Development, Toray has obtained unique antibodies that specifically recognize the terminal structures of the two APOA2 isoforms and developed Toray APOA2-iTQ by using the antibodies which can precisely measure the concentrations of these isoforms. Although survival rates are expected to improve if pancreatic cancer can be detected at an early stage, this type of cancer progresses more rapidly than oth- ers and has symptoms that do not readily become apparent to those suffering from it. As the new kit is blood-based, Toray APOA2-iTQ enables testing of more people than other approaches. Moreover, the reagent measures substances that differ from existing tumor markers and is therefore expected to detect pancreatic cancer which is not detectable by those markers. Toray Industries, Inc.Toray Report 2023DATA SE C TION 99 Toray Industries, Inc.Toray Report 2023CSR Roadmap 2025 from the Perspective of Materiality Materiality Main Initiatives of CSR Roadmap 2025 KPIs of CSR Roadmap 2025 Related CSR Guidelines Related SDGs Reduce greenhouse gas emissions per unit of revenue enue (%) 3-5 Reduction of greenhouse gas emissions per unit of rev- Accelerating Climate Change Mitigation Reduce water consumption per unit of revenue Aim for a high waste recycling rate Expand revenues from Sustainability Innovation Business*1 Expand contribution to CO2 reduction in the value chain*2 Expand water filtration throughput contribution by Toray’s water treatment membranes*3 Reduce greenhouse gas emissions per unit of revenue Promoting a Circular Economy Reduce water consumption per unit of revenue Aim for a high waste recycling rate Expand revenues from Sustainability Innovation Business Expand contribution to CO2 reduction in the value chain Expand water filtration throughput contribution by Toray’s water treatment membranes 3-6 Increase in solar power generation capacity (%) 3-7 Reduction of water usage per unit of revenue (%) 3-8 Waste recycling rate (%) 7-1 Revenues from Sustainability Innovation Business 7-2 Contribution to CO2 reduction in value chain 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) 3-5 Reduction of greenhouse gas emissions per unit of rev- enue (%) At least 40% lower than FY 2013 (FY 2025) 3-6 Increase in solar power generation capacity (%) At least 10% higher than FY 2022 (FY 2025) 3 Safety, Accident Prevention, and Environmental Preservation 3-7 Reduction of water usage per unit of revenue (%) 3-8 Waste recycling rate (%) 7-1 Revenues from Sustainability Innovation Business 7-2 Contribution to CO2 reduction in value chain At least 40% lower than FY 2013 (FY 2025) At least 86% At least 87% At least 87% 1,600 billion yen (FY 2025) 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) 15 times compared to FY 2013 (FY 2025) 7 Contributing Solutions to Social Issues through Business Activities FY 2023 FY 2025 FY 2024 Targets At least 40% lower than FY 2013 (FY 2025) At least 40% higher than FY 2022 (FY 2025) At least 40% lower than FY 2013 (FY 2025) At least 86% At least 87% At least 87% 1,600 billion yen (FY 2025) 3 Safety, Accident Prevention, and Environmental Preservation 15 times compared to FY 2013 (FY 2025) 7 Contributing Solutions to Social Issues through Business Activities Taking a Nature-Positive Approach 100 Reduce greenhouse gas emissions per unit of revenue enue (%) 3-5 Reduction of greenhouse gas emissions per unit of rev- Reduce water consumption per unit of revenue Aim for a high waste recycling rate 3-6 Increase in solar power generation capacity (%) 3-7 Reduction of water usage per unit of revenue (%) 3-8 Waste recycling rate (%) Reduce atmospheric VOC*4 emissions 3-9 Reduction of atmospheric VOC emissions (%) Expand revenues from Sustainability Innovation Business Expand contribution to CO2 reduction in the value chain Expand water filtration throughput contribution by Toray’s water treatment membranes 7-1 Revenues from Sustainability Innovation Business 7-2 Contribution to CO2 reduction in value chain 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) 15 times compared to FY 2013 (FY 2025) 7 Contributing Solutions to Social Issues through Business Activities Expand revenues from Sustainability Innovation Business 7-1 Revenues from Sustainability Innovation Business 1,600 billion yen (FY 2025) Committed to Healthier Lives Reduce overtime work exceeding standard hours Encourage the use of annual paid leave by labor union members Developing in Collaboration with Stakeholders Enhance information dissemination through owned media such as the Group’s websites and social media accounts Facilitate exchange of opinions between management and employees, ascer- tain issues and problems, and reflect them in the Group’s CSR initiatives Expand opportunities for management to disseminate information and pro- mote communication with stockholders and investors Enhance communication with the mass media Expand revenues from Sustainability Innovation Business Expand contribution to CO2 reduction in the value chain Expand water filtration throughput contribution by Toray’s water treatment membranes Request suppliers to comply with the Toray Group CSR Procurement Guidelines, and strive to ascertain the status of each company’s CSR initiatives Identify high-risk areas that may have a negative impact on the environment and human rights, and promote supply chain due diligence to implement measures to prevent or mitigate the identified risks Promote procurement of responsibly sourced materials such as non-conflict minerals and sustainable palm oil Reduce CO2 emissions intensity from distribution activities Continually investigate and ascertain logistics risks related to natural disas- ters such as typhoons and heavy rains, and strive to reduce risks Implement social contribution activities at the appropriate scale Promote active planning and implementation of voluntary social contribution activities at each Group site, on an ongoing basis Implement a range of educational support activities that capture interest and curiosity of youngsters through school visits and company tours focusing on areas such as science, environment, and career opportunities, thereby help- ing to inspire upcoming generations 8-6 Reduction in employees who exceed 45 hours/month of non-statutory working hours 8-7 Available annual paid leave used by labor union mem- bers (%) 6-1 Number of corporate website page views (per month) 6-2 Interviews conducted to exchange opinions within the (Second round) (Second round) company (rate of progress) 6 Communication 6-3 Interviews with key investors in which management Cumulative total of Cumulative total of Cumulative total of participates (number) 6-4 News releases (number) 7-1 Revenues from Sustainability Innovation Business 7-2 Contribution to CO2 reduction in value chain 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) 15 times compared to FY 2013 (FY 2025) 7 Contributing Solutions to Social Issues through Business Activities 9-1 Suppliers agreeing to the Toray Group CSR Procurement Guidelines (%) 9-2 Implementation of supply chain due diligence (% of cases) 9-3 Oil procurement needs met by palm oil sourced in a manner that is environmentally responsible and respect- ful of human rights (% of oil purchased, by value) 9-4 Reduction in CO2 emissions per unit of sales from dis- tribution activities (year-on-year) 9-5 Key external inventory sites that have been assessed for natural disaster risk and have implemented mea- sures to mitigate serious risks (%) 10-1 Social contribution expenditure (% change from aver- age expenditure over last six years) 10-2 Social contribution activities (number) 2,500 or more 2,500 or more 2,500 or more 10-3 Beneficiaries of educational support activities such as science classes for schools and career education (number) 15,000 or more 15,000 or more 15,000 or more 10 Social Contribution Activities as a Good Corporate Citizen At least 40% lower than FY 2013 (FY 2025) At least 10% higher than FY 2022 (FY 2025) At least 40% lower than FY 2013 (FY 2025) At least 86% At least 87% At least 87% At least 70% lower At least 72% lower At least 72% lower than FY 2000 than FY 2000 than FY 2000 1,600 billion yen (FY 2025) 3 Safety, Accident Prevention, and Environmental Preservation 7 Contributing Solutions to Social Issues through Business Activities 8 Human Rights Promotion and Human Resources Development Year-on-year reduction Year-on-year reduction Year-on-year reduction 90% 90% 90% 1 million page views/ 1 million page views/ 1 million page views/ month month month (First round) 100% completed 120 200 30% 120 200 1,600 billion yen (FY 2025) 60% 120 200 At least 75% At least 85% At least 90% At least 90% At least 60% (FY 2024) At least 70% (FY 2024) 1% 1% 1% At least 60% At least 75% At least 90% 100% or higher 100% or higher 100% or higher At least 90% 9 Establishing Sustainable Supply Chain Toray Industries, Inc.Toray Report 2023FY 2023 FY 2024 Targets FY 2025 At least 40% lower than FY 2013 (FY 2025) For more information on Materiality, please click here. https://www.toray.com/global/sustainability/stance/materiality.html Related CSR Guidelines Related SDGs 3 Safety, Accident Prevention, and Environmental Preservation 7 Contributing Solutions to Social Issues through Business Activities 3 Safety, Accident Prevention, and Environmental Preservation 7 Contributing Solutions to Social Issues through Business Activities 3 Safety, Accident Prevention, and Environmental Preservation 7 Contributing Solutions to Social Issues through Business Activities 101 At least 86% At least 87% At least 86% At least 87% At least 40% lower than FY 2013 (FY 2025) At least 87% 1,600 billion yen (FY 2025) 15 times compared to FY 2013 (FY 2025) At least 40% higher than FY 2022 (FY 2025) At least 40% lower than FY 2013 (FY 2025) At least 87% 1,600 billion yen (FY 2025) 15 times compared to FY 2013 (FY 2025) Expand water filtration throughput contribution by Toray’s water treatment membranes 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) Expand water filtration throughput contribution by Toray’s water treatment membranes 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) Reduce greenhouse gas emissions per unit of revenue enue (%) 3-5 Reduction of greenhouse gas emissions per unit of rev- At least 40% lower than FY 2013 (FY 2025) Expand water filtration throughput contribution by Toray’s water treatment membranes*3 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) Reduce greenhouse gas emissions per unit of revenue 3-5 Reduction of greenhouse gas emissions per unit of rev- enue (%) At least 40% lower than FY 2013 (FY 2025) 3-6 Increase in solar power generation capacity (%) At least 10% higher than FY 2022 (FY 2025) Materiality Main Initiatives of CSR Roadmap 2025 KPIs of CSR Roadmap 2025 Reduce greenhouse gas emissions per unit of revenue enue (%) Accelerating Reduce water consumption per unit of revenue Climate Change Aim for a high waste recycling rate Mitigation Expand revenues from Sustainability Innovation Business*1 7-1 Revenues from Sustainability Innovation Business Expand contribution to CO2 reduction in the value chain*2 7-2 Contribution to CO2 reduction in value chain 3-5 Reduction of greenhouse gas emissions per unit of rev- 3-6 Increase in solar power generation capacity (%) 3-7 Reduction of water usage per unit of revenue (%) 3-8 Waste recycling rate (%) Promoting a Circular Economy Reduce water consumption per unit of revenue 3-7 Reduction of water usage per unit of revenue (%) Aim for a high waste recycling rate 3-8 Waste recycling rate (%) Expand revenues from Sustainability Innovation Business 7-1 Revenues from Sustainability Innovation Business Expand contribution to CO2 reduction in the value chain 7-2 Contribution to CO2 reduction in value chain Reduce water consumption per unit of revenue Aim for a high waste recycling rate Taking a Nature-Positive Approach Reduce atmospheric VOC*4 emissions 3-9 Reduction of atmospheric VOC emissions (%) Expand revenues from Sustainability Innovation Business 7-1 Revenues from Sustainability Innovation Business Expand contribution to CO2 reduction in the value chain 7-2 Contribution to CO2 reduction in value chain 3-6 Increase in solar power generation capacity (%) 3-7 Reduction of water usage per unit of revenue (%) 3-8 Waste recycling rate (%) Enhance information dissemination through owned media such as the Group’s websites and social media accounts 6-1 Number of corporate website page views (per month) Facilitate exchange of opinions between management and employees, ascer- 6-2 Interviews conducted to exchange opinions within the tain issues and problems, and reflect them in the Group’s CSR initiatives company (rate of progress) Expand opportunities for management to disseminate information and pro- 6-3 Interviews with key investors in which management mote communication with stockholders and investors Enhance communication with the mass media participates (number) 6-4 News releases (number) Expand revenues from Sustainability Innovation Business 7-1 Revenues from Sustainability Innovation Business Expand contribution to CO2 reduction in the value chain 7-2 Contribution to CO2 reduction in value chain Continually investigate and ascertain logistics risks related to natural disas- ters such as typhoons and heavy rains, and strive to reduce risks Implement social contribution activities at the appropriate scale Promote active planning and implementation of voluntary social contribution activities at each Group site, on an ongoing basis Implement a range of educational support activities that capture interest and curiosity of youngsters through school visits and company tours focusing on areas such as science, environment, and career opportunities, thereby help- ing to inspire upcoming generations 9-3 Oil procurement needs met by palm oil sourced in a manner that is environmentally responsible and respect- ful of human rights (% of oil purchased, by value) 9-4 Reduction in CO2 emissions per unit of sales from dis- tribution activities (year-on-year) 9-5 Key external inventory sites that have been assessed for natural disaster risk and have implemented mea- sures to mitigate serious risks (%) 10-1 Social contribution expenditure (% change from aver- age expenditure over last six years) 10-3 Beneficiaries of educational support activities such as science classes for schools and career education (number) Expand revenues from Sustainability Innovation Business 7-1 Revenues from Sustainability Innovation Business 1,600 billion yen (FY 2025) Committed to Healthier Lives Reduce overtime work exceeding standard hours Encourage the use of annual paid leave by labor union members 8-6 Reduction in employees who exceed 45 hours/month of non-statutory working hours 8-7 Available annual paid leave used by labor union mem- bers (%) Year-on-year reduction Year-on-year reduction Year-on-year reduction 90% 90% 90% 7 Contributing Solutions to Social Issues through Business Activities 8 Human Rights Promotion and Human Resources Development Expand water filtration throughput contribution by Toray’s water treatment membranes 7-3 Contribution of Toray water treatment products 2.9 times compared to FY 2013 (FY 2025) 1 million page views/ month (First round) 100% completed Cumulative total of 120 200 1 million page views/ month (Second round) 30% Cumulative total of 120 200 1,600 billion yen (FY 2025) 15 times compared to FY 2013 (FY 2025) 1 million page views/ month (Second round) 60% Cumulative total of 120 200 6 Communication 7 Contributing Solutions to Social Issues through Business Activities Developing in Collaboration with Stakeholders Request suppliers to comply with the Toray Group CSR Procurement 9-1 Suppliers agreeing to the Toray Group CSR Guidelines, and strive to ascertain the status of each company’s CSR initiatives Procurement Guidelines (%) Identify high-risk areas that may have a negative impact on the environment and human rights, and promote supply chain due diligence to implement measures to prevent or mitigate the identified risks cases) 9-2 Implementation of supply chain due diligence (% of Promote procurement of responsibly sourced materials such as non-conflict minerals and sustainable palm oil At least 75% At least 85% At least 90% At least 60% (FY 2024) At least 70% (FY 2024) At least 90% At least 90% 9 Establishing Sustainable Supply Chain Reduce CO2 emissions intensity from distribution activities 1% 1% 1% At least 60% At least 75% At least 90% 100% or higher 100% or higher 100% or higher 10-2 Social contribution activities (number) 2,500 or more 2,500 or more 2,500 or more 10 Social Contribution Activities as a Good Corporate Citizen 15,000 or more 15,000 or more 15,000 or more At least 10% higher than FY 2022 (FY 2025) At least 40% lower than FY 2013 (FY 2025) At least 87% At least 72% lower than FY 2000 1,600 billion yen (FY 2025) 15 times compared to FY 2013 (FY 2025) At least 87% At least 72% lower than FY 2000 At least 86% At least 70% lower than FY 2000 Toray Industries, Inc.Toray Report 2023CSR Roadmap 2025 from the Perspective of Materiality Materiality Main Initiatives of CSR Roadmap 2025 KPIs of CSR Roadmap 2025 Related CSR Guidelines Related SDGs FY 2023 FY 2025 FY 2024 Targets Ensuring Safety and Fire Accident Prevention Ensuring Ethics and Compliance Enhancing Product Quality and Safety Strengthening Corporate Governance Aim for zero major accidents 3-1 Number of major accidents Achieve world’s best standard for safety management Aim for zero fire and explosion accidents Aim for zero environmental accidents 3-2 Achievement for world’s best standard for safety man- agement (not exceeding 0.05 frequency rate for occu- pational accidents resulting in lost work time) 3-3 Number of fire and explosion accidents 3-4 Number of environmental accidents Aim for no major cases of violation of laws or ordinances 2-1 Number of major violations of laws or ordinances Conduct internal legal audits and improve problems found in the audits 2-2 Group companies implementing internal legal audits (%) • Group companies in and outside Japan: Implemented focus- Provide information and implement education on major laws and regulations and other compliance-related matters 2-3 Group companies providing information and imple- menting education on major laws and regulations and other compliance-related matters (%) Ensure that quality assurance compliance education is being fully implemented 4-1 Quality assurance compliance education (% of peo- ple trained) Enhance the auditing function to ensure improvement and continuity of Toray Group’s overall quality assurance framework, and conduct auditing to check its effectiveness 4-2 Quality and product safety audit implementation rate (%) Aim for zero product accidents 4-3 Number of product accidents Regularly hold Toray Group Business Strategy Discussion*5 sessions at Board of Directors meetings 1-1 Toray Group Business Strategy Discussion sessions held at Board of Directors meetings (times) Operate an effective internal control system 1-2 Board of Directors’ positive assessment of the implemen- tation of the Basic Policy for Internal Control Systems (%) Follow up on the status of internal control implementation at each group company 5-1 Group companies implementing self-assessment and results follow-up using the internal control checklist (%) 102 Implement risk reduction across the Group for information security risks such as cyberattacks and information leaks 5-2 Group companies implementing information security eval- uation and risk reduction (%) Establishing Sustainable Supply Chain Respecting Human Rights and Promoting Human Resource Diversity Request suppliers to comply with the Toray Group CSR Procurement Guidelines, and strive to ascertain the status of each company’s CSR initiatives Identify high-risk areas that may have a negative impact on the environment and human rights, and promote supply chain due diligence to implement measures to prevent or mitigate the identified risks Promote procurement of responsibly sourced materials such as non-conflict minerals and sustainable palm oil Reduce CO2 emission intensity from logistics Continually investigate and ascertain logistics risks related to natural disas- ters such as typhoons and heavy rains, and strive to reduce risks Implement human rights education and training Achieve the legally mandated employment rate of persons with disabilities As part of career development initiatives for core staff, enhance the use of the career path worksheets included in the personnel information system Promote the use and improve the operation of measures to support employee work-life balance Reduce overtime work exceeding standard hours Encourage the use of annual paid leave by labor union members 9-1 Suppliers agreeing to the Toray Group CSR Procurement Guidelines (%) 9-2 Implementation of supply chain due diligence (% of cases) 9-3 Oil procurement needs met by palm oil sourced in a manner that is environmentally responsible and respect- ful of human rights (% of oil purchased, by value) 9-4 Reduction in CO2 emissions per unit of sales from dis- tribution activities (year-on-year) 9-5 Key external inventory sites that have been assessed for natural disaster risk and have implemented mea- sures to mitigate serious risks (%) 8-1 Group companies implementing human rights educa- tion and training (%) 8-2 Group companies that have achieved legally mandated employment rate of persons with disabilities (%) 8-3 Career development initiatives for core staff using the personnel information system (use of career path work- sheets) (% of employees) 8-4 Employees returning to work from childcare leave (%) 8-5 Male employees taking childcare leave or other leave for the same reason (%) 8-6 Reduction in employees who exceed 45 hours/month of non-statutory working hours 8-7 Available annual paid leave used by labor union mem- bers (%) *1 Business areas and product lines that can help realize the Toray Group Sustainability Vision *2 Toray calculates the CO2 emissions reduced throughout the value chain of products in accordance with the chemical sector guidelines of the Japan Chemical Industry Association, the International Council of Chemical Associations (ICCA), and the World Business Council for Sustainable Development (WBCSD). *3 Water treated annually with Toray water treatment membranes. It is calculated by multiplying the amount of fresh water that the Toray membranes can produce per day, includ- ing reverse osmosis (RO), ultrafiltration (UF) and membrane separation bioreactors (MBR), by the number of membrane elements sold. *4 Volatile organic compounds *5 Toray Group Business Strategy Discussions are opportunities to check the progress made on medium-term management issues, including initiatives for sustainability, and the direction of business operations. No more than 0.05 No more than 0.05 No more than 0.05 3 Safety, Accident Prevention, and Environmental Preservation • Toray Industries, Inc.: 100% ing on high-risk companies 2 Ethics and Compliance 100% 100% 100% 0 0 0 0 0 8 100% 100% 90% 35% 35% 0 0 0 0 0 8 100% 100% 90% 70% 70% 0 0 0 0 0 8 100% 100% 90% 100% 100% At least 75% At least 85% At least 90% At least 90% At least 60% (FY 2024) At least 70% (FY 2024) 1% 1% 1% At least 60% At least 75% At least 90% 100% 100% Year-on-year increase 100% Year-on-year increase Year-on-year reduction 100% 100% Year-on-year increase 100% Year-on-year increase Year-on-year reduction 100% 100% Year-on-year increase Year-on-year increase Year-on-year reduction 90% 90% 90% 4 Product Quality and Safety 1 Corporate Governance 5 Risk Management At least 90% 9 Establishing Sustainable Supply Chain 8 Human Rights Promotion and Human Resources 100% Development Toray Industries, Inc.Toray Report 2023Materiality Main Initiatives of CSR Roadmap 2025 KPIs of CSR Roadmap 2025 Ensuring Safety and Fire Accident Prevention Ensuring Ethics and Compliance Aim for zero major accidents 3-1 Number of major accidents Achieve world’s best standard for safety management Aim for zero fire and explosion accidents Aim for zero environmental accidents 3-2 Achievement for world’s best standard for safety man- agement (not exceeding 0.05 frequency rate for occu- pational accidents resulting in lost work time) 3-3 Number of fire and explosion accidents 3-4 Number of environmental accidents Aim for no major cases of violation of laws or ordinances 2-1 Number of major violations of laws or ordinances Conduct internal legal audits and improve problems found in the audits 2-2 Group companies implementing internal legal audits (%) Provide information and implement education on major laws and regulations and other compliance-related matters 2-3 Group companies providing information and imple- menting education on major laws and regulations and other compliance-related matters (%) Ensure that quality assurance compliance education is being fully 4-1 Quality assurance compliance education (% of peo- Enhance the auditing function to ensure improvement and continuity of Toray Group’s overall quality assurance framework, and conduct auditing to check 4-2 Quality and product safety audit implementation rate ple trained) (%) 4-3 Number of product accidents implemented Enhancing Product Quality and Safety its effectiveness Aim for zero product accidents of Directors meetings Regularly hold Toray Group Business Strategy Discussion*5 sessions at Board 1-1 Toray Group Business Strategy Discussion sessions Strengthening Operate an effective internal control system Corporate Governance company Follow up on the status of internal control implementation at each group 5-1 Group companies implementing self-assessment and results follow-up using the internal control checklist (%) Implement risk reduction across the Group for information security risks 5-2 Group companies implementing information security eval- such as cyberattacks and information leaks uation and risk reduction (%) held at Board of Directors meetings (times) 1-2 Board of Directors’ positive assessment of the implemen- tation of the Basic Policy for Internal Control Systems (%) Request suppliers to comply with the Toray Group CSR Procurement Guidelines, 9-1 Suppliers agreeing to the Toray Group CSR Procurement and strive to ascertain the status of each company’s CSR initiatives Guidelines (%) Identify high-risk areas that may have a negative impact on the environment and human rights, and promote supply chain due diligence to implement measures to prevent or mitigate the identified risks cases) 9-2 Implementation of supply chain due diligence (% of Establishing Sustainable Supply Chain Promote procurement of responsibly sourced materials such as non-conflict minerals and sustainable palm oil Continually investigate and ascertain logistics risks related to natural disas- ters such as typhoons and heavy rains, and strive to reduce risks Implement human rights education and training Achieve the legally mandated employment rate of persons with disabilities As part of career development initiatives for core staff, enhance the use of the career path worksheets included in the personnel information system Promote the use and improve the operation of measures to support employee work-life balance Reduce overtime work exceeding standard hours Respecting Human Rights and Promoting Human Resource Diversity 9-3 Oil procurement needs met by palm oil sourced in a manner that is environmentally responsible and respect- ful of human rights (% of oil purchased, by value) 9-4 Reduction in CO2 emissions per unit of sales from dis- tribution activities (year-on-year) 9-5 Key external inventory sites that have been assessed for natural disaster risk and have implemented mea- sures to mitigate serious risks (%) 8-1 Group companies implementing human rights educa- tion and training (%) 8-2 Group companies that have achieved legally mandated employment rate of persons with disabilities (%) 8-3 Career development initiatives for core staff using the personnel information system (use of career path work- sheets) (% of employees) 8-4 Employees returning to work from childcare leave (%) 8-5 Male employees taking childcare leave or other leave for the same reason (%) 8-6 Reduction in employees who exceed 45 hours/month of non-statutory working hours 8-7 Available annual paid leave used by labor union mem- bers (%) FY 2023 0 FY 2024 Targets 0 FY 2025 0 Related CSR Guidelines Related SDGs No more than 0.05 No more than 0.05 No more than 0.05 3 Safety, Accident Prevention, and Environmental Preservation 0 0 0 0 0 0 0 0 0 • Toray Industries, Inc.: 100% • Group companies in and outside Japan: Implemented focus- ing on high-risk companies 2 Ethics and Compliance 100% 100% 100% 100% 100% 0 8 90% 35% 35% 100% 100% 0 8 90% 70% 70% 100% 100% 0 8 90% 100% 100% 4 Product Quality and Safety 1 Corporate Governance 5 Risk Management At least 75% At least 85% At least 90% At least 60% (FY 2024) At least 70% (FY 2024) At least 90% At least 90% 9 Establishing Sustainable Supply Chain 103 Reduce CO2 emission intensity from logistics 1% 1% 1% At least 60% At least 75% At least 90% 100% 100% Year-on-year increase 100% Year-on-year increase Year-on-year reduction 100% 100% Year-on-year increase 100% Year-on-year increase Year-on-year reduction 100% 100% Year-on-year increase 8 Human Rights Promotion and Human Resources 100% Development Year-on-year increase Year-on-year reduction Encourage the use of annual paid leave by labor union members 90% 90% 90% Toray Industries, Inc.Toray Report 2023Stakeholder Engagement Toray Group has established the Basic Policies to Promote Dialogue with Stakeholders. The Group is commu- nicating proactively with various stakeholders in all aspects of its corporate activities, and periodically report on and discuss the content of these activities with its management. With the goal of strengthening the system for engaging with stakeholders, a new organization was established in April 2018 to supervise communications in general, and efforts are being made on centralizing the function of information transmission, both internally and externally. Engaging with Stockholders and Investors Engaging with Employees The Group actively communicates with institutional investors and securities company analysts by provid- ing information materials when requested and holding same-day results briefings when quarterly earnings are announced. In addition to IR materials, including inte- grated annual reports, the Group also provides a wide range of information on management policies and strate- gies, as well as financial and earnings information in the Investor Relations section of the Toray website. Briefings on business for stockholders are held in order to deepen their understanding of Toray Group. In FY 2022, Toray held four results briefings and held 565 meetings with investors and analysts. Continuous dissemination activities are necessary to increase empathy for the Toray Philosophy and for each and every employee to act and make decisions based on the Toray Philosophy. We have thus been devising meth- ods, such as expanding our information tools and holding regular events, in working to increase employee participa- tion. As one of our new activities, we have been conduct- ing live video streaming called “REAL TALK—Everyone’s Voice” since January 2023 as a forum for open, two-way communication between management and employees. Held twice at Toray’s headquarters in FY 2022, the plan is to hold this type of event six times in total, including at plants, in FY 2023. 104 Engaging with Customers Engaging with the Mass Media Toray Group believes that the customer comes first. Communication is carried out closely with the custom- ers, mainly through the marketing and sales depart- ments, and periodic customer satisfaction surveys. The results of these surveys are shared internally at Board meetings and through in-house newsletters as the Group strives to provide even higher quality customer service. To serve as spaces for communication with cus- tomers, we have established showrooms at our main locations, including Mishima (inside the Toray Human Resources Development Center) and Shiga (within the Shiga Plant). In FY 2022, we renovated the exhibition space on the corporate culture floor of the Toray Human Resources Development Center (Mishima). Toray recognizes that public relations and corporate com- munication activities have a role in fulfilling responsibili- ties for information disclosure as well as influencing public opinion. Accordingly, Toray’s Corporate Communications Department actively engages with a wide range of media organizations, acting as the public’s point of contact with the Company. Based on Toray’s Information Disclosure Principles, the department provides fair and impartial information, even if it may cast the Company in a bad light, in a timely and appropriate manner. In FY 2022, the Company issued 171 press releases and responded to 182 media requests for information. Engaging with Business Partners Engaging with Local Communities While providing materials and products as a manufac- turer of advanced materials, Toray Group must engage in upstream management of its supply chains to bet- ter fulfill the needs of its customers, including the areas of production facilities and procured raw materials and resources. Accordingly, the Group has established its Basic Purchasing Policies and Basic Distribution Policies to emphasize this approach and ensure fair business activ- ities. Throughout the Group, proper and fair transactions, adherence to laws, environmental preservation, respect for human rights, improvements in quality and other poli- cies in initiatives with regard to corporate responsibility in procurement, purchasing, and distribution are promoted. In addition to holding informal gatherings for discussion regularly, Toray Group strives to engage in more active dialogue with nearby residents in a variety of other set- tings, including by participating in events sponsored by local governments and inviting local residents onto plant grounds for summer festivals. In FY 2022, the impact from COVID-19 infections sub- sided, and we actively engaged in activities that contrib- uted to local communities. Toray Industries, Inc.Toray Report 2023 External Evaluation Toray was included in the following SRI indices. Included in the Dow Jones Sustainability™ Index Asia Pacific Included in The S&P Global Sustainability Yearbook 2023 Toray Industries is included in the Asia Pacific Index of the Dow Jones Sustainability™ Indices (DJSI). The DJSI are stock indices from S&P Global that evaluate corpo- rate performance in terms of sustainability. Toray Industries is among the 710 global leaders in sus- tainability listed in The Sustainability Yearbook 2023 pub- lished by S&P Global. Included in FTSE4Good Index/ FTSE Blossom Japan Index/ FTSE Blossom Japan Sector Relative Index MSCI Japan ESG Select Leaders Index AAA Rating/Included in the MSCI Japan ESG Select Leaders Index Toray Industries is included in the “FTSE4Good Index Series”, “FTSE Blossom Japan Index Series” and the “FTSE Blossom Japan Sector Relative Index” developed by FTSE Russell, a wholly owned subsidiary of the London Stock Exchange Group. The Company is also included in the FTSE Blossom Japan Sector Relative Index. Having acquired the highest rating of AAA on the ESG rat- ing by MSCI, Toray Industries is included in the MSCI Japan ESG Select Leaders Index. MSCI provides institutional investors (from pension funds to hedge funds) across the globe with various tools to support investment decisions. 105 *1 The use by Toray Industries, Inc. of any MSCI ESG Research LLC or its Affiliates (“MSCI”) data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of Toray Industries, Inc. by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or ser- vice marks of MSCI. *2 The inclusion of Toray Industries, Inc. in any MSCI Index, and the use of MSCI logos, trade- marks, service marks or index names herein, do not constitute a sponsorship, endorsement or promotion of Toray Industries, Inc. by MSCI or any of its affiliates. The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates. Selected as CDP Water Security A List Company Selected as Constituent of S&P/JPX Carbon Efficient Index Toray Industries was recognized as a Water Security A List company, the highest rating, by CDP, a global non- profit organization, for the fourth consecutive year. In 2022, the Company was given a A- rating on climate change performance. Toray has been selected as a constituent of the environ- mental stock index presented by S&P Dow Jones and the Tokyo Stock Exchange. Toray Industries, Inc.Toray Report 2023Toray Group Worldwide Network Toray Group operates businesses in 29 countries and regions including Japan. 310 subsidiaries and affiliated companies (114 in Japan, 196 overseas) (as of March 31, 2023) Japan France Indonesia 106 ■ Toray Fine Chemicals Co., Ltd. ■ Toray Advanced Film Co., Ltd. ● Suido Kiko Kaisha, Ltd. ● Toray Construction Co., Ltd. ● Toray Engineering Co., Ltd. ■ Toray Medical Co., Ltd. ● Toray Systems Center, Inc. ■ Toray International, Inc. ■ Chori Co., Ltd. ● ■ Du Pont-Toray Co., Ltd. ● Japan Vilene Company, Ltd. ■ DuPont Toray Specialty Materials K.K. ■ Dow Toray Co., Ltd. ■ Sanyo Chemical Industries, Ltd. United Kingdom ● Toray Textiles Europe Ltd. Italy ● Alcantara S.p.A. ■ Toray Carbon Fibers Europe ● ■ P.T. Indonesia Toray Synthetics S.A. ■ Toray Films Europe S.A.S Thailand China ● ● Toray Fibers (Nantong) Co., Ltd. ● Toray Sakai Weaving & Dyeing (Nantong) Co., Ltd. ● Toray Industries (H.K.) Ltd. ■ Toray Plastics (China) Co., Ltd. ● Toray Industries (China) Co., Ltd. ● Pacific Textiles Holdings Ltd. Republic of Korea ●■■● Toray Advanced Materials Korea Inc. ■ Toray Battery Separator Film Korea Limited ■ STEMCO, Ltd. ■ STECO, Ltd. Malaysia ● ■ Penfibre Sdn. Berhad ■ Toray Plastics (Malaysia) Sdn. Berhad ● Toray Textiles (Thailand) Public Company Limited ● ■ Thai Toray Synthetics Co., Ltd. U.S.A. ■ Toray Plastics (America), Inc. ■ Toray Composite Materials America, Inc. ■ Zoltek Companies, Inc. ■ Toray Advanced Composites USA Inc. Other group companies ● Fibers & Textiles ■ Performance Chemicals ■ Carbon Fiber Composite Materials ● Environment & Engineering ■ Life Science ● Other ■ Trading Major Offices and Plants in Japan Overseas Offices Osaka Head Office Branches Nagoya, Hokuriku, Kyushu, Tohoku, Chugoku & Shikoku Plants Shiga, Seta, Ehime, Nagoya, Tokai, Aichi, Okazaki, Mishima, Chiba, Tsuchiura, Gifu, Ishikawa, Nasu U.S.A. Toray Industries (America), Inc. Germany Toray Industries Europe GmbH Republic of Korea Toray Industries Korea Inc. India Toray Industries (India) Private Limited China Toray Industries (China) Co., Ltd. Brazil Toray do Brasil Ltda. Beijing Branch Toray Industries, Inc.Toray Report 2023 Investor Information (As of March 31, 2023) Common Stock: Issued: 1,631,481,403 shares (including treasury stock) Number of Stockholders: 206,980 Annual General Meeting: The annual general meeting of stockholders is normally held in June in Tokyo. Listings: Common stock is listed on the Tokyo Stock Exchange. Independent Auditor: Ernst & Young ShinNihon LLC Transfer Agent: Sumitomo Mitsui Trust Bank, Limited 1-4-1, Marunouchi Chiyoda-ku, Tokyo 100-0005, Japan Cash Dividends Per Share Total for the year Interim FY 2022 FY 2021 ¥18.00 9.00 ¥16.00 8.00 Principal Stockholders Shares held The Master Trust Bank of Japan, Ltd. (Trust Account) 255,550,400 Custody Bank of Japan, Ltd. (Trust Account) 132,812,600 Nippon Life Insurance Co. TAIJU LIFE INSURANCE COMPANY LIMITED STATE STREET BANK WEST CLIENT-TREATY 505234 71,212,250 35,961,000 26,808,514 Percentage of shares held* 15.95 8.29 4.45 2.24 1.67 National Mutual Insurance Federation of Agricultural Cooperatives Custody Bank of Japan, Ltd. (Trust 4 Account) Sumitomo Mitsui Banking Corporation JP MORGAN CHASE BANK 385781 Mitsui Fudosan Co., Ltd. 26,593,000 1.66 24,608,800 24,022,000 20,241,561 19,460,720 1.54 1.50 1.26 1.21 *Percentage of shares held is calculated excluding 29,636,294 shares of treasury stock. Stock Price Range Composition of Stockholders (Thousands of shares) (Yen) 1,500 1,200 900 600 300 0 2018 April Treasury Stock 29,636 1.82% Other Japanese Companies 126,950 7.78% Non-Japanese Investors 407,635 28.85% 107 Japanese Securities Companies 25,849 1.58% Japanese Financial Institutions 670,968 41.13% Individuals and Others 307,442 18.84% 2019 April 2020 April 2021 April 2022 April 2023 April Corporate Data (As of March 31, 2023) Toray Industries, Inc. Head Office Nihonbashi Mitsui Tower, 1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, Tokyo 103-8666, Japan Telephone: 81 (3) 3245-5111 Facsimile: 81 (3) 3245-5054 www.toray.com URL: Established: January 1926 Paid-in Capital: ¥147,873,030,771 Number of Employees: 48,682 Toray: 6,992 Japanese subsidiaries: 10,420 Overseas subsidiaries: 31,270 Toray Industries, Inc.Toray Report 20231-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, Tokyo 103-8666, Japan Telephone: 81 (3) 3245-5111 URL: www.toray.com For questions about this report; IR Dept. Telephone: 81 (3) 3245-5113 Printed in Japan Issued: December 2023 Toray Integrated Annual Report 2023

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