Annual Report 2018

  From Tosoh's President

Tosoh’s Vision for CSR

During fiscal 2018, an increase in petrochemical product prices resulting from a rise in raw material and fuel prices along with active product markets overseas led to favorable business conditions for Tosoh. The company consequently achieved record consolidated net sales, operating income, and net income. I believe that we made solid progress toward the goals of the three-year medium-term business plan that we launched in fiscal 2017. Our implementation of measures to achieve the objectives of our three basic management policies—the strengthening of commodities and specialties management, the maintenance and strengthening of the financial base, and the promotion of safety reforms—helped in that respect.

We have seen our profitability grow steadily in recent years. Increasing corporate value, however, which is another of our goals, is not simply a matter of becoming a company with strong earnings—it is about becoming a company worthy of the trust of our shareholders and investors, customers, business partners, local communities, and other stakeholders. As conveyed by our corporate philosophy, “Contribute to society through the chemistry of innovation,” we have positioned the company’s CSR activities as the foundation of management. We believe that our primary responsibility is to refine technologies in accordance with changing needs to deliver products of value to society.

Establishing Our Materiality and Strengthening Our Promotional Structure

We have implemented a number of policies to proceed with comprehensive and systematic groupwide CSR. The most important is the introduction of the Tosoh Group CSR Basic Policy, which replaces the Management Basic Policy. The new plan positions CSR as a management priority and clearly conveys our internal and external corporate direction. In formulating the policy, we clarified our corporate philosophy and defined our actions in response to societal issues to make them easy to understand. We have also restructured our corporate ideals and created a materiality assessment of 18 items based on the biaxial matrix of “demands from society” and the “sustainable growth” of the Tosoh Group. The “demands from society” are based on the Sustainable Development Goals (SDGs) adopted by the United Nations in 2015.

We have fortified our CSR promotion structure on a companywide basis. We have established the CSR Committee, a cross-disciplinary body for which I will serve as chairperson, and implemented a plan-do-check-act (PDCA) cycle for our business activities. We also intend to share information through daily communication and regular meetings led by the CSR representative of each division and complex. By instilling awareness in all employees that CSR is an issue that they must take an active role in, we will enhance the effectiveness of our CSR-related activities.

Medium-term Business Plan (2017-2019)

Basic Policies

Strengthen Commodities and Specialties Management

• Consolidate the dual operations of commodities and specialties and achieve a suitable balance
• Bolster the competitiveness and earning power of commodities based on present capabilities
• Invest in expansion of growth areas and expand business domain of specialties through R&D and M&A

Maintain and Strengthen Financial Base

• Construct a solid financial foundation for flexible, agile investment in growth areas

Promote Safety Reforms

• Establish safe, stable operating technologies
• Eliminate problems and abnormal events

Raise corporate value by strengthening commodities and specialties while maintaining a suitable balance, and construct a business portfolio that is strong enough to withstand fluctuations in the external environment

Business Positioning

Commodities

• Secure cash flow and profits, the foundation of management
• Provide highly competitive utilities and raw materials for use in Tosoh products
• Keep in mind that despite changes in profit and loss caused by the external environment, demand for commodities remains steady, as they are required basic materials

Specialties

• Expand earnings as a driver of growth
• Maintain high profitability through sustained development
• Recognize that lead time in excess of 10 years is required from development until profitability is achieved

	Fiscal 2019 Targets
Net Sales	¥750 billion
Operating Income	¥85 billion
Operating Margin	10% or better
ROE	10% or better

The SDGs adopted by the United Nations in 2015 are international development targets for 2030 that apply to all nations. They consist of 17 goals and 169 targets for sustainable diversity and inclusion and are designed for global coverage. In Japan, governments, private companies, and various associations are pursuing the UN’s SDGs.

Aiming to Become the World’s Safest Chemical Manufacturer

Safety reform ranks among the three basic policies of our medium-term business plan. Over a three-year period beginning in 2014, we invested about  ¥10 billion on restoration construction. Going forward, we will continue to focus on safety measures that eliminate trouble by investing in safety and preventative maintenance.

The restoration performed to this point has succeeded in reducing the occurrence of abnormal events caused by procedures. Additionally, our five-year effort to restore to the Yokkaichi Complex the high-pressure gas certification it lost after the 2011 accident at the Nanyo Complex bore fruit in fiscal 2017 with the complex’s recertification.

Reacquiring certification, though, was not the sole objective. We aim to become the world’s safest chemical manufacturer. To that end, we are consolidating the technological capabilities and knowledge of all employees in related divisions. And we are constructing operational support systems capable of heading off major incidents before they occur with the introduction of digital technologies such as IoT and AI.

Reducing and Using CO₂ Emissions

Chemical manufacturers are naturally closely connected with the environment. Over the past several decades, therefore, Tosoh has undertaken numerous environment-related initiatives, including anti pollution, energy conservation, and waste reduction measures.

Our most pressing issue is how to reduce CO₂ emissions. To secure the high volume of electric power required in manufacturing chemical products at low cost, we operate a coal-fired power generation plant. Determining how best to reduce its CO₂ emissions is crucial for our medium- and long-term growth.

In June 2018, we established the CO₂ Reduction and Effective Use Promotion Committee alongside the Energy Management Committee we had formed previously to resolve this issue. We will continue working to lower our CO₂ emissions volume, while also conducting company-wide R&D to determine how to use those emissions. The obstacles are daunting technologically and financially, but I believe that it is our mission as a chemical manufacturer to navigate them.

Engendering a Healthy and Open Corporate Culture

Governance at Tosoh considers compliance essential to survival. In 2017, numerous scandals at major manufacturing companies were brought to light, and this has resulted in a harsher view of corporations within society. If we are to prove worthy of the trust of our stakeholders and society at large and to continue our growth, we must observe our internal company rules and adhere sincerely to the norms of ethical behavior expected of members of society. Schemes and regulations are necessary elements of a CSR program. But they are meaningless if we only formulate and don’t commit. One of my most important roles is to direct sustained efforts to ensure our employees are aware of the significance of CSR.

It’s time for employees to get back to basics and reconsider their behavior. It’s imperative that we work to engender an open corporate culture where we can look at activities that have been conducted and systems that have been in place and observed or upheld as a matter of custom and feel free to identify those that might be odd or unreasonable. I intend to continue to lead by example in this regard.

I hope that all of you who have a stake in this company will review the 2018 CSR Report thoroughly, and that you won’t hesitate to provide us with comments and opinions on the various aspects of our activities and performance. Thank you very much for your sustained, valuable support.

Toshinori Yamamoto
President
Tosoh Corporation

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 A Fresh New Approach to CSR

In June 2018, we completed our new CSR Basic Policy, established a CSR promotional structure, and formulated a materiality assessment with the goal of strengthening the promotion of our CSR activities. We believe that the implementation of a materiality assessment based on the Tosoh Group CSR basic policy will enable us to contribute to resolving key societal issues through the sustained promotion of our CSR activities. Our basic policy is a concrete plan devised to lead us to the realization of our corporate philosophy.

The role chemical companies play in solving societal issues has grown considerably in magnitude. We pledge to continue to make our presence known as a chemical company that is actively doing its part to support the sustainable growth of society.

Keiichiro Nishizawa
Director, Executive Vice President
Chairman, RC Committee
Tosoh Corporation

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