Putting our Business Principle into practice

Each and every individual working at the Shin-Etsu Group is conscientiously carrying out his or her daily work under our Business Principle: "The Group strictly complies with all laws and regulations, conducts fair business practices and contributes to people’s daily lives as well as to the advance of industry and society by creating value through the provision of key materials and technologies." In order to realize our Business Principle, the Shin-Etsu Group work with a two-pronged approach, "to supply key materials that meet society's needs" and "to contribute to the solution of the various issues that our planet Earth is faced with", and in FY2018, we carried out the following activities.

Strengthening ESG Activities

In August 2017, we restructured the former CSR Promotion Committee into the ESG Promotion Committee to further promote company-wide ESG activities in all aspects of our corporate activities. In FY 2018, the committee reviewed the key CSR issues² identified by the Group in February 2016. Following the review, the committee decided to keep all nine as key CSR issues for the Group. The Group is carrying out those initiatives to further strengthen our ESG activities.

I would like to outline our recent efforts in strengthening our ESG activities.
Firstly, we have strengthened our activities in disclosing information related to climate change. In May 2019, the Group announced our support for the recommendations from the TCFD (Task Force on Climate-related Financial Disclosures)³. The Group has also joined the TCFD Consortium of Japan⁴. We will strive to disclose information related to climate change in accordance with the TCFD recommendations.

Secondly, we have established "The Shin-Etsu Group Human Rights Policy". The Group has conducted its business at its sites around the world always on the basis of respecting the human rights of all individuals. In FY 2018, we decided to codify our initiatives for human rights at the Group as the Human Rights Policy. We will adhere to relevant international codes of conduct⁵ and redouble our efforts to promote activities that respect human rights, in order to instill an abiding sense of respect for human rights among Group companies worldwide.

Contributing to the SDGs

The Group made a change to one of its management goals for FY 2019, seeking to "contribute to SDGs" rather than to "contribute to improving the global environment." The 17 goals of the SDGs illustrate the challenges faced equally by us all in the 21st century. In order to resolve these issues, it is important to tackle individual problems as they stand in our way, and resolve them one by one. To this end, when we consider making investments in our existing businesses or developing new products and new businesses, we set store by assessing their affinity and suitability with SDGs. As it turned out, over 97% of investment proposals at Shin-Etsu Chemical in FY 2018 were conducive to SDGs. In order for human society to achieve sustainable development and raise its quality of life while also reducing environmental impacts, it is crucial to maximize efficiency. I believe that the Group has a significant role to play in this regard. The Group will strive to achieve this goal in all aspects, be it in improving existing products or in developing new ones.

Working to Further Strengthen Our Stance for Fair Corporate Activities

Since 2010, the Group has been a member of the UN Global Compact and has carried out initiatives to put into practice its 10 principles that cover four main areas: human rights, labor standards, environment and anti-corruption. In February 2018, we signed on, as the first company to do so, to the Tokyo Principles for Strengthening Anti-Corruption Practices  established by the Global Compact Network Japan⁶. Our signing on to the Tokyo Principles is compatible with our stated intention to “comply with all laws and regulations, and conduct fair business practices” indicated in our Business Principle. It  also contributes to the achievement of the Goal 16 of the SDGs: "Peace, justice and strong institutions." We will incorporate the Tokyo Principles into our daily operations by sharing them throughout the Group and maintaining the anti-corruption norm as a key element in our Business Principle.

Totally Committed to Responsible Care

The Group signed and put into practice the Responsible Care^®7 Global Charter of the International Council of Chemical Associations (ICCA) in 2006. Furthermore, in 2014, we also signed the revised Responsible Care® Global Charter issued by the ICCA. In accordance with this Charter, we are continuously striving to ensure environmental conservation and to improve occupational safety and health as well as process safety and prevention. In FY 2017, a total of 23 Group offices, globally, conducted their business activities in compliance with the Charter through such means as carrying out audits of environmental and safety management.

As above, I have introduced only some aspects of the Group's CSR activities that we are presently engaged in. These activities are explained in greater detail in each chapter of this Sustainability Report.

The role of our Group is to provide such materials of value as would be considered indispensable in improving people’s quality of life and in solving issues faced by the market. Through these efforts, the Group will work to achieve sustainable growth. We would be most grateful for your continued understanding and support in the future.

• 1 ESG
  Environment, Social and Governance (ESG) refers to the three central CSR factors expounded on by investors and others that are used to evaluate a company's CSR endeavors.
• 2 Key CSR issues
  The Group has established nine key issues to consider in CSR. The first, " legal compliance, fair corporate activities," serves as the foundation of all our activities, followed by eight others: 1) Employees and contractor health and safety; 2) Energy-saving, resource-saving and the reduction of the environmental impact; 3) Product quality improvements and product safety control; 4) Promotion of CSR procurement and diversification of supply sources; 5) Respect for human rights,  development of human resources and promotion of diversity; 6) Respect for and protection of intellectual property; 7) Contribution to industry and social initiatives and 8) Accurate and timely information disclosure and communication with stakeholders.
• 3 TCFD (Task Force on Climate-related Financial Disclosures)^®
  This task force deals with the disclosure of information on climate change, and was established in September 2015 by the FSB (Financial Stability Board). The FSB is an international organization that monitors the state of international finance and plans measures and regulations to govern it. In December 2017, the TCFD announced its recommendation that companies should analyze their own risks and opportunities based on multiple medium and long-term climate change scenarios (varied future climate scenarios with a rise in temperature of 2°C or less), and to disclose information regarding the degree to which finances will be affected.
• 4 TCFD Consortium of Japan
  This group was established in May 2019, led by the Japanese Ministry of Economy, Trade and Industry, the Financial Services Agency, and the Ministry of the Environment. Companies, financial institutions and other organizations that are in agreement with the TCFD recommendations join forces in this consortium. All participating parties share the aim of promoting initiatives for disclosing corporate information effectively, as well as encouraging accurate decisions to be made based on this information in investments made by financial institutions and similar organizations.
• 5 International codes of conduct
  These include the Universal Declaration of Human Rights, the ILO international labor standards, the UN Guiding Principles on Business and Human Rights, as well as the Ten Principles of the United Nations Global Compact.
• 6 Global Compact Network Japan (GCNJ)
  Global Compact Network Japan (GCNJ) is the local Global Compact network branch that has been set up to actively work as a CSR platform in Japan. It aims to disseminate the United Nations Global Compact's mission and various key principles to management levels within companies and organizations through such means as CSR education designed for people in management, organizing study groups with different themes as well as holding various symposia. As of March 2019, more than 300 Japanese companies/groups are participating in GCNJ.
• 7 Responsible Care®
  Activities whereby each company that handles chemical materials on a voluntary basis commits itself to improve health, safety and environmental performance in all the life-cycle processes from the development of chemical materials through manufacture, distribution, usage, final consumption and disposal up to recycling, and then making public the results of its activities and continuously engaging in dialogue with the local community and the public, while striving to maintain good communication with society.