Materiality and ESG Key Issues

The Process of Identifying Materiality

The members of the Board of Directors conducted a series of discussions on the theme of “sustainability management unique to Dexerials in an era of VUCA^＊.” Based on such discussions, we identified materiality—technology and human capital—as our important issues as we contribute to the realization of a prosperous and efficient society while simultaneously ensuring economic value and social value.
Furthermore, we also incorporated materiality into one of the basic policies of Mid-Term Management Plan “Achieving Evolution” (hereinafter, new Mid-term Plan), namely the “evolution of the management base.” We then began taking action, setting a target for our sustainability strategy (a key performance indicator for technology and human capital).
We intend to strengthen investments in technology and human capital for the future, evolve into a company that can achieve differentiation through its technologies and the human resources that support such technologies, and thereby work toward further growth and the enhancement of corporate value.

*VUCA: Volatility, Uncertainty, Complexity, and Ambiguity

ESG Key Issues

Basic Approach—ESG Initiatives Distinctive to Dexerials and Essential to Further Growth and Corporate Value Enhancement

The Dexerials Group is committed to taking on its medium- to long-term key issues from the perspective of ESG and in line with its Sustainability Policy based on the following approach. Accordingly, we will engage in thorough communication with our business partners, focusing on coexistence and coprosperity, and contribute to the realization of a sustainable society for the entire value chain, premised on the resolution of external diseconomies (social issues).

Many of our products are highly value-added products that meet the needs of society. They thus tend to be single-source products whose quality and stable supply must be maintained without fail. As such, we will thoroughly comply with laws and regulations and take measures to address various risks related to business continuity (information security, BCP, occupational safety, quality, etc.) and thereby build a solid business foundation while reducing potential financial risks. In our responsibility as a global company, we will reduce the environmental impact of our business activities and promote a circular economy. At the same time, we will work to improve energy efficiency and productivity through the adoption of smart factories, and contribute to the decarbonization of society.

As we seek to boost the vitality of every employee and expand opportunities for their endeavors while operating our businesses globally, we will continue to engage in our initiatives for health and productivity management, respecting the human rights of all stakeholders, promoting active involvement of diverse human resources, and supporting our employees in maintaining sound mental and physical health.

Our management will seek to clearly determine the direction of business management in the BANI^＊ era, maintain and improve our management system, which underpins speedy and bold decision-making (risk-taking), and continuously work to evolve corporate governance toward greater effectiveness and transparency.

*BANI: Brittle, Anxious, Non-linear, and Incomprehensible

The Process of Identifying ESG Key Issues

The ESG Key Issues were identified in 2024 from a medium- to long-term perspective, based on our Sustainability Policy and for the resolution of external diseconomies (social issues). As a global company, we comprehensively considered international rules, standards, and guidelines, along with the requests from progressive customers and external evaluation agencies of various countries, as well as the consistency with our purpose and growth strategy.
At the start of the review process, 42 issues were extracted, with these ultimately narrowed down to 13 issues following a series of reviews taking in the diverse perspectives outlined above. Much like the Mid-Term Management Plan, KPIs and targets were set for fiscal 2028 based on the decisions of our management. Accordingly, initiatives have been launched with the aim of accomplishing such targets.

Initiatives on ESG Key Issues

	ESG Key Issues			Issues and Initiatives	Fiscal 2024 Results	KPIs / Goals to Fiscal 2028
Governance	Corporate governance	Non-Consolidated	Maintenance and enhancement of the management system	Discussions on skills matrix for our vision of the ideal Board of Directors; implementation management succession	Discussions on revising the skills matrix at the Nomination and Remuneration Committee Deliberation and implementation of Board successions Regular monitoring of succession plans for management at the Nomination and Remuneration Committee	Regular reviews of the skills matrix and implementation of the succession process Discussions on the skills matrix and monitoring of the succession plan
			Evolution of corporate governance toward greater effectiveness and transparency	Steadily implement and improve the evaluation of Board of Directors' effectiveness (every fiscal year)	Steadily improved effectiveness through the implementation of the fiscal 2024 action plan finalized by the Board of Directors	Steadily implement and improve the evaluation of Board of Directors' effectiveness (every fiscal year)
				Consistently maintain a highly transparent determination process for the executive remuneration system and implement system review by the Remuneration Committee	Maintained a transparent decision-making process for the executive remuneration system at the Board of Directors and Nomination and Remuneration Committee toward the upkeep of remuneration governance	Consistently maintain a highly transparent determination process for the executive remuneration system and implement system review by the Remuneration Committee
	Compliance	Consolidated	Compliance with laws and regulations and penetration of the Dexerials Group Code of Conduct	Strictly maintain zero tolerance of serious violations of laws and regulations, including violations associated with the prevention of bribery and other corruption (every fiscal year)	Serious violations of laws and regulations: None	Strictly maintain zero tolerance of serious violations of laws and regulations, including violations associated with the prevention of bribery and other corruption (every fiscal year)
	Compliance	Consolidated		Improve employee awareness of compliance	Launched the Compliance Committee 100% participation rate in internal training (Japan and overseas combined)	Improve scores in the Group-wide survey on compliance awareness
	Risk treatment	Consolidated	Strengthening information security	Prepare for the risk of dealing with significant environmental changes	Major security incidents: None	Major security incidents: None (every fiscal year)
	Risk treatment	Consolidated	Strengthening BCP		Finalized activities policy for an all-hazards approach business continuity plan and clarified challenges Conducted BCP drill for Group company (DXPS)^＊1	Development and operation of a business continuity plan that adopts an all-hazards approach to counter diverse risks
	Supply chain		Supply chain management	Work with suppliers and have the entire supply chain fulfill its social responsibilities regarding the global environment, human rights, labor, and other matters	CSR^＊2 procurement assessment: 96%^＊3 of suppliers achieved an average score of 3 or higher	CSR procurement assessment: Average score of 3 or higher
Environmental	Climate change	Supply chain	Reduction in CO₂ emissions	Reduction in supply chain emissions	CO₂ emissions (Scope 1,2): -37% versus FY2019 CO₂ emissions (Scope 3): DXPS^＊1 calculation framework	CO₂ emissions (Scope 1,2): -38% versus FY2019 CO₂ emissions (Scope 3): Set reduction target and reduce
	Climate change	Consolidated	Reduction in CO₂ emissions	Improve energy efficiency and productivity through measures including energy-saving and the adoption of smart factories	Clarified and analyzed current statuses Formulated implementation plan	Energy productivity (Net sales ÷ energy used): 1.5x versus FY2023
	Resource recycling	Consolidated	Resource recycling	Reduce waste and use resources efficiently	Percentage of waste disposed at landfills: 0.12%^＊4 Chemical recycling initiatives with R Plus Japan, Ltd.	Percentage of waste disposed at landfills: 0.5% or less (every fiscal year) Establish chemical recycling system for waste plastic
	Pollution control	Consolidated	Reduction of environmental incidents^＊5	Practice strict compliance with laws and regulations for environmental conservation (including the prevention of water and air pollution)	Violation of environmental regulations: None	Violation of environmental regulations: None (every fiscal year)
Social	Diversity and respect for human rights	Non-Consolidated	Promoting active involvement of diverse human resources	Improve ratio of female managers	Ratio of female managers: 7.9%	Ratio of female managers: 10% or higher
	Diversity and respect for human rights	Supply chain	Compliance with international human rights principles	Promote human rights awareness and due diligence based on our human rights policy	Drafted human rights policy document	Promote human rights awareness and due diligence based on our human rights policy
	Employee health and safety	Consolidated	Health and productivity management	Create an environment where employees can continue to work safely, maintaining sound mental and physical health	Introduction of data-driven health management and a complete smoking ban covering domestic sites	FY2030: Steady improvement based on the roadmap
	Employee health and safety	Consolidated	Strengthening occupational safety		Serious industrial accidents, equipment-induced accidents: None	Serious industrial accidents, equipment-induced accidents: None (every fiscal year)
	Product quality	Consolidated	Maintenance and improvement of Product quality	Provide Dexerials Group products that are high quality, safe, and reliable	Occurrence of serious quality problems: None^＊6	Occurrence of serious quality problems: None (every fiscal year)

*1DXPS: Dexerials Photonics Solutions Corporation
*2CSR: Corporate Social Responsibility
*3Scores are as of July 2025 and based on evaluations of 105 suppliers from which Dexerials Group procures key raw materials
*4Headquarters and Tochigi Technology Center, Kanuma Plant, Tome Operation
*5Pollution that adversely affects the environment, such as chemical substance leaks and illegal emissions
*6Quality problems that may result in accidents, product recalls, or compensation payments due to quality defects

Initiatives on ESG Key Issues(PDF)