Products to Enhance Sustainability

SEKISUI CHEMICAL Group has positioned Products to Enhance Sustainability as the most appropriate conduit through which to realize both a sustainable society and the sustainable growth of the Group itself.
Through the development and expansion of Products to Enhance Sustainability, we aim to help solve social issues, beginning with efforts to achieve the SDGs, while growing as a company.
Under the current Medium-term Management Plan, we have identified a policy that demonstrates the feasibility of realizing our Long-term Vision through sustainable growth as well as the upgrade and expansion of efforts to create and acquire new businesses. Under this policy, we will utilize the Products to Enhance Sustainability system to transform our product portfolio. Within Products to Enhance Sustainability, in particular, we have established Premium Framing as a framework for products that have a high degree of contribution to solving social issues and a high level of profit-generating ability. Moving forward, we will strengthen measures to strategically expand Premium Framing. In addition, we will continue to strengthen and integrate technology platforms, which are the source for developing Products to Enhance Sustainability, and to foster human resources. Furthermore, we have formulated the Strategic Area Map to serve as a compass for realizing our Long-term Vision. We will work to develop Products to Enhance Sustainability and to expand markets, which we will then allocate to the expansion of established enhancement areas as well as efforts to enter innovation areas. Under the current Medium-term Management Plan, we have set a target for fiscal 2025 of over ¥1 trillion in net sales for Products to Enhance Sustainability. We will aggressively invest management resources in key businesses and products in enhancement areas, which we will focus on by extending from existing businesses, and in innovation areas, which create new innovations through fusion and other means. In this manner, we will expand our contributions to solving social issues through our business activities and further accelerate the creation of new products that will drive future growth.

Since fiscal 2006, we have continued to operate a product evaluation system to quickly resolve natural environment and social issues. Products that contribute significantly to solving such issues are certified and registered as Environment-Contributing Products based on criteria determined through discussions among internal committee members.
Since fiscal 2010, we have received opinions and advice from outside advisors on standards and concepts as well as the validity of results to ensure high standards and transparency.

FY2006: Launched the Environment-Contributing Products system.
In order to promote the development and expansion of products that contribute to the resolution of natural environment issues, we have launched a product system that certifies and registers products that contribute to the resolution of issues based on internal standards.

FY2017: Expanded the scope of products to include products that contribute to the resolution of social- environment issues in addition to the natural environment.
Also promoted the development and increased use of products that further solve problems. Reaffirmed that the goals are the same as those of the SDGs.

FY2020: Worked to evolve as Products to Enhance Sustainability.
Introduced Premium Framing and sustainability assessments. Sustainability assessments were completed in FY2022.

FY2023: Introduced negative checks for environmental issues.
At the time of registration, confirm whether multiple environmental issues have had a negative impact, or what measures are being considered to prevent a negative impact.

SEKISUI CHEMICAL Group is working to improve its ability to contribute to the resolution of social issues in order to accelerate (Drive) efforts aimed at achieving a sustainable society as well as sustainable growth as a company as outlined under Vision 2030. In specific terms, we have been implementing the following initiatives since fiscal 2020.

Establish Premium Framing
To improve profitability, we will match our business portfolio to expand business through products that contribute significantly to solving social issues, and establish Premium Framing in a way that strategically expands contributing products.

Conduct sustainability assessments
We will conduct sustainability assessments to confirm and evaluate items necessary to improve the sustainability of products and businesses with related departments in a bid to improve sustainable management capabilities.

We are committed to expanding Premium Framing as a medium-term target.
Our goal is to accelerate our contribution to solving social issues by formulating strategies that balance the resolution of social issues with profitability.

In addition, in order to continue producing products that contribute to the resolution of social issues and to further expand their contribution, it is essential for the Group and its products to remain sustainable. To this end, we added a new perspective to the existing certification process to evaluate the sustainability of companies and products from fiscal 2020.
Assessing various initiatives across the supply chain, including profitability, process evaluation, and governance (internal control), steps were taken to confirm the sustainability of and potential risks to the Group and its products. In addition, we introduced negative checks for environmental issues from fiscal 2023, and are confirming whether or not products impose a negative impact on various environmental issues as well as what measures are being considered to prevent any negative impact at the time of registration as Products to Enhance Sustainability.

SEKISUI CHEMICAL Group is working to appropriately ascertain product information on raw material procurement, safety in use, and disposal methods. The information collected is also provided to society and customers.

The Group undertakes the following measures to collect information on the procurement of raw materials.

(1) Quality and safety of raw materials
We sign contracts with raw material suppliers with respect to purchasing specifications, and obtain the quality control items and evaluation results to ensure compliance with specifications.

(2) Sustainability of raw materials
As far as human rights, the environment, and social considerations related to the manufacture of raw materials are concerned, we confirm that there are no problems through surveys of raw material suppliers.

We conduct due diligence on raw material suppliers that are deemed to be particularly high risk. Based on the results, we propose measures and work together to make improvements.

We evaluate the impact of our products on the environment and society from the following perspectives.

(1) Negative impact
We promote a design review (DR) system through to the start of sales to check the environmental and social impacts of each product throughout its life cycle from the planning and development to the product design stage. Since environmental and social impacts are positioned as important factors that need to be confirmed, we use a product environmental impact assessment sheet to quickly recognize negative impacts and consider reduction measures before commercializing products.

(2) Positive Impact
As described in (1) above, we assess the positive environmental and social impacts of our products prior to the launch of sales through the use of product environmental impact assessments within the DR system.
In particular, the positive impact of our products is refined before commercialization so that it exceeds the standards of the Products to Enhance Sustainability System.

After a product goes on sale, we evaluate whether the environmental and social impact of each product meets the standards for Products to Enhance Sustainability. After clearing these standards, an application is lodged to register the product.
In addition, we employ the LIME2 method for more than 60% of registered Products to Enhance Sustainability. We conduct LCA assessments to quantitatively evaluate environmental and social impacts.

Utilizing DR, we conduct product environmental impact assessments to confirm the environmental and social impacts of all products sold throughout their life cycles.
The results of impact assessments for each product are not disclosed. Certain information is however provided by determining the ratio of negative impact to positive impact for all products on a Group-wide basis and reflecting that information in the calculation of SEKISUI Environment Sustainability Index.

To ensure the safe use of our products, we prepare a safety data sheet (SDS) and present it to our customers at the time of product sale.

In order to reduce the environmental and social impacts of our products at the time of disposal, we have formulated a resource recycling policy.
Based on this policy, we are promoting the recycling of waste to achieve our long-term goal of a circular economy.
As far as the disposal of waste is concerned, we exchange manifests with waste contractors. In addition, we take steps to confirm the final disposal method and recycled items, and consider the potential of converting to higher quality recycling.

Products to Enhance Sustainability are products that make a significant contribution to the resolution of environmental and social issues. SEKISUl CHEMICAL Group's internal committee members evaluate the degree of contribution based on certain internal standards and authorize registration based on the results.
Under Vision 2030, we position the outcomes produced through materiality that has an important impact on management and society as Products to Enhance Sustainability. We also aim to resolve social issues and grow our business by developing Products to Enhance Sustainability and expanding the market.
The Group has set the development of Products to Enhance Sustainability and market expansion^* as a KPI target, and is working toward its achievement.

SEKISUI CHEMICAL Group has held meetings of the External Advisory Board since fiscal 2010. The External Advisory Board is a meeting of internal and external members organized by the supervising director of the organization in charge of sustainability. These meetings are an opportunity to receive opinions and advice from outside experts on the standards, registration, and future perspectives of Products to Enhance Sustainability.
In-house executives are members of the certification screening committee^* for Products to Enhance Sustainability. Specifically, these include the executive officers who oversee organizations in charge of the technical aspects of each divisional company, and the organization heads who are in charge of management planning operations with a grasp for business conditions as a whole.
We have also invited five experts from outside the Company with various backgrounds in industry, government, and academia, who are engaged in environmental and other sustainability-related work to join the External Advisory Board .
In fiscal 2023, the External Advisory Board held two meetings in October and one in February. At these meetings, we received opinions and advice on the significance of the contribution of newly registered products to the natural and socials environment, how to convey that significance, and future expectations.

We are strengthening and reviewing the operation and criteria of the Products to Enhance Sustainability System to ensure that the product portfolio continues to evolve in line with business strategies that take into account the demands of social and business conditions.
Since fiscal 2023, we conducted negative checks on all environmental issues when registering products.
This is in response to social demands such as the EU Taxonomy and COP15. The goal is to avoid any negative impact on environmental issues, and to secure a positive impact, or in other words, improve the quality of solutions to environmental issues. Moreover, we aim to promote an awareness of issues among business stakeholders through negative checks.

To clarify the amount of return to natural capital up to fiscal 2019, SEKISUI CHEMICAL Group worked to visualize the degree to which each Environment-Contributing Product contributed to the resolution of social issues. We calculated and quantified into a single indicator (damage costs) the various contribution vectors in the life cycle of Environment-Contributing Products. We multiplied the market impact, based on sales, by the environment contribution of each product to arrive at a quantifiable contribution by product, which was then reflected in the SEKISUI Environment Sustainability Index.

In calculating the impact on the environment for each Environment-Contributing Product until fiscal 2016, we broadly classified environmental issues into three areas that should be resolved in our aim to help realize an earth with maintained biodiversity. However, since broadening the scope of Environment-Contributing Products from fiscal 2017, we have since taken steps to integrate contributions across four areas adding the area of human health/social assets.
We began conducting environmental impact assessments based on the contribution to solving issues in the natural and social environments of Products to Enhance Sustainability throughout their respective life cycles from fiscal 2020. These contributions to natural and social capital are reflected in the SEKISUI Environment Sustainability Index. In particular, we started to explore the possibility of evaluating the social value of our products based on impact-weighted accounting.

Since fiscal 2023, we have been using the updated IDEA LCA database to calculate the SEKISUI Environment Sustainability Index.
The MiLCAver3.1 LCA calculation systems incorporates IDEA database ver. 3.1 and reflects further findings on the impact on biodiversity. By utilizing this system and setting new benchmarks, we aim to accurately grasp the impact on biodiversity. By doing so, we will promote activities that reduce negative impact and increase positive impact.

SEKISUI CHEMICAL Group maintains 26 technological platforms. We are encouraging forums to fuse these platforms, with the belief that fusion will help accelerate the resolution of social issues, including environmental issues.
Currently, we are holding workshops on startups, new technologies, and prior cases for each issue, with an eye on the technologies, development, and market transformation required to achieve such long-term goals as carbon neutrality and a circular economy. In addition, we are providing forums for discussing matters that require cross-organizational initiatives, centered on development and strategic management organizations. We have also established task forces to promote activities on promising topics.
Furthermore, we have launched an in-house entrepreneur development program to help acquire the skills necessary to commercialize the Products to Enhance Sustainability that have been developed.

Under the current Medium-term Management Plan, SEKISUI CHEMICAL Group initiated steps to undertake a second set of measures to support the expansion of Products to Enhance Sustainability within its established limit for ESG Investment. These measures are designed to encourage the development of Products to Enhance Sustainability and to spur planning and proposals intended to expand their markets. Climate change, resource recycling, water-related risks, and biodiversity are four environmental issues that the Group would like to strengthen under its current Medium-term Management Plan. In order to strengthen identification endeavors, we reviewed the operational requirements of the second set of support measures related to each of the aforementioned and themes that correspond to innovation areas that we hope to enter in a bid to realize our vision. Furthermore, in a bid to accelerate innovation, we have included requirements for internal fusion and open innovation with external parties.
Under the mechanism for the second set of support measures, the leader planning the theme submits an application and a screening committee decides whether or not to invest. This committee also evaluates the importance attached to solving social issues and the contribution to enhancing sustainable corporate value. Moreover, deliberations are made on how internal fusion or open innovation with external parties has helped accelerate a theme, and how we can expand our corporate value as a result of this fusion.

SEKISUI CHEMICAL Group supports the basis of LIFE and the resolution of social issues by delivering value to society including peace of mind for the future through its products and businesses. In fiscal 2023, we introduced examples of innovation that will become next-generation products at the following venues.

[Promote efforts to mitigate climate change through products]
Introduction and exhibition of film-type perovskite solar cells at the COP28 Japan Pavilion Ministry of Economy, Trade and Industry event "Taking action together with ASEAN"

Taking into consideration the needs of society and customers, we strive to stay one step ahead of the curve by promoting the value of low-carbon, decarbonized products that help mitigate climate change.
To convey the value of low-carbon, decarbonated products to customers, we calculate the carbon footprint of products by means of the Carbon Life Cycle Assessment (C-LCA).
Calculations are made based on the boundary set according to the purpose and product. At this stage, raw materials are calculated using a publicly available database (IDEA) that applies a coefficient for mean GHG emissions. We believe that efforts by raw material manufacturers and cooperation with supply chains will enable us to utilize the low-carbon value of each company’s efforts.
The volume of raw materials used and the energy consumed during production are calculated using actual measurement data at production plants.
The importance of low-carbon value as an indicator and LCA assessments is expected to increase in the future. In order to understand and better appreciate the significance of calculation methods, we actively participate in such forums as the LCA Utilization Promotion Forum, the LCA Forum, and the Institute of Life Cycle Assessment to brush up our knowledge on how to handle each method and solution. In addition, we encourage our employees to participate in external training courses, and also conduct LCA training within the Company.

The following illustrates the activities taken by the Group and the industry to encourage transformation intended to achieve a decarbonized society.

1. Sales activities that use Carbon Footprint of Products (CFP) to promote the low-carbon value of products
The UIEP Company, which handles a large number of plastic infrastructure products, prepares materials that explain calculated value to customers, with a focus on plastic pipes, and also conducts training for sales personnel. The Company has trained more than 500 employees who have continuously engaged in sales activities that promote the value of low-carbon products since fiscal 2021.

2. Activities to increase the reliability of product CFP calculations
As part of our efforts to increase the reliability of our product CFP, we are actively working to acquire CFP certification and establish Product Category Rules (PCRs). At present, such products as ESLON Heat-resistant Plastic AD joint HG and interlayer film for automotive laminated glazing (manufactured at a plant in Europe) are registered as Approved CFP products.

3. Activities promoting greater recognition of LCA and low-carbon value within the industry
As a member of the executive committee of the 2024 International Conference on EcoBalance organized by the Institute of Life Cycle Assessment, Japan”, we are working to create plans for the establishment of global LCA calculation rules and the sharing of case studies.

4. Participation in a study group investigating environmental evaluation calculation methods for resource recycling
We participated in an LCA Japan Forum-sponsored study group (chaired by Associate Professor Jun Nakatani of The University of Tokyo). The group held a study session on global calculation rules for resource recycling as a basis for activities to visualize the value of resource recycling.

5. Participation in the UTOKYO LCA Center for Future Strategy
We have participated in the ”UTOKYO LCA Center for Future Strategy led by Professor Ichiro Daigo of The University of Tokyo. As part of the is effort, we embarked on considerations into a preemptive LCA that will lay the groundwork for the future.
A preemptive LCA is a means of quantitatively evaluating the environmental, economic, and social benefits of advanced scientific and technological products at the developmental stage, and presenting their social implementation. Presenting evidence-based social implementation strategies also contributes to achievement of the SDGs.

Current Medium-term Management Plan targets (FY2023-2025)
Over ¥1 trillion

FY2030 target
Expand sales of problem-solving products and services

FY2050 target
Drive sustainable corporate growth through products and services that improve environmental and social sustainability