Overview of Materiality Analysis

The DIC Group recently once again abstracted and analyzed material issues, that is, issues with the potential to negatively affect its performance, and has identified those of particular significance. Guided by its new medium-term management plan, DIC111, and by its longterm growth scenario, the Group will continue working to ensure that these efforts are beneficial to the management of its businesses.

Materiality Analysis Process

Abstraction of Issues

DIC has abstracted material issues of particular significance to the DIC Group based on, among others, the GRI’s G4 Sustainability Reporting Guidelines, issues delineated in DIC111, and principal risks and opportunities.

Materiality Analysis

Sustainability Committee members, heads of departments that spearhead the implementation of initiatives related to sustainability themes, site general managers, and senior management from Group companies in the United States, Asia and elsewhere assessed abstracted issues from the perspectives of importance to DIC Group businesses and importance to stakeholders. Based on the results of this process, and of extensive subsequent deliberations by the Sustainability Subcommittee and the Sustainability Committee, issues of particular significance to the Group were determined.
As a result of this process, issues of fundamental importance to DIC Group businesses, including occupational health and safety, respect for human rights and compliance, are presented separate from the DIC Group’s Materiality Matrix.

(a) Importance to DIC Group businesses

Issues were assessed for potential to negatively affect the DIC Group now or in the future, with consideration given to both risks and business opportunities.

(b) Importance to stakeholders

The DIC Group recognizes four major external stakeholder groups (customers, suppliers, local communities and society, and investors). Issues were examined in terms of both level of interest on the part of stakeholders and potential impact. Key criteria from external assessment organizations (the Dow Jones Sustainability Indices (DJSI), FTSE, MSCI, the Sustainability Accounting Standards Board (SASB) of the United States and Sustainalytics) were also referenced, adding an objective perspective.

Identifying Priority Materiality Themes

Guided by its DIC111 medium-term management plan, launched in fiscal year 2019, the DIC Group once again abstracted and analyzed material issues, that is, issues with the potential to negatively affect its performance, from which it identified four themes of primary importance to the Group that it designated priority materiality themes.

The DIC Group’s Materiality Matrix

The DIC Group’s Materiality Matrix

Process for Abstracting Material Issues

Members of the Sustainability Committee and its various working groups, site general managers and senior management from Group companies around the world assessed abstracted issues based on, among others, the GRI’s G4 Sustainability Reporting Guidelines, social imperatives, risk management and issues delineated in DIC111. Based on the results of this process, and of extensive subsequent deliberations, issues of primary importance were determined.

Priority Materiality Themes

01Transformation to a sustainable business structure

Reason for identificationhifting from businesses that are vulnerable to changes in the macroenvironment to more differentiated high-value-added businesses is essential. There is also a need to shift to businesses that create social value, i.e., businesses that take into account factors such as value to customers and markets, as well as sustainability.
Targets/KPIsSet forth policies for implementing the Value Transformation strategy in each business and determine concrete measures. Manage the progress and verify the benefits of each measure on a regular basis using the PDCA cycle.
StatusDespite the impact of COVID-19, measures formulated for each business for fiscal year 2020 were implemented. In addition to steadily reaping the benefits of these measures, in fiscal year 2021 DIC will promote the formulation of new initiatives that anticipate changes in the operating environment with the aim of accelerating portfolio transformation.

02Product stewardship

Reason for identificationCollaboration with other industries will be increasingly important to the appropriate management of chemicals over their entire life cycles. Recognizing that the creation of a global operating system that facilitates the disclosure of product safety information and ensures smooth communication with customers is the foundation of product stewardship*, DIC has established a chemical substance information management system that facilitates the management of chemical substance information and has begun using a proprietary sustainability index, one purpose of which is to evaluate its efforts to minimize the environmental impact of products from the design stage.
Targets/KPIs
  • Implement the Global Chemical Information management Project (GCIP)
    (a) Fiscal year 2021: Begin using the new chemical substance information management system at DIC Group companies in Japan.
    (b) Fiscal year 2024: Expand deployment to overseas Group companies other than Sun Chemical.
  • Complete and introduce the proprietary sustainability index.
    (a) Fiscal year 2020: Begin use at DIC on a trial basis.
    (b) Fiscal year 2021: Promote full-scale deployment at Group companies.
Status
  • Implementation of the GCIP
    • Prelaunch tests were commenced for a new global chemical substance information management system CIGNAS that reflects the outcome of a review of business processes. Deployment of the system is scheduled for July 2021, beginning in Japan.
    • In fiscal year 2020, a promotional team was set up within a DIC Group company in the PRC and began working toward expanding deployment to that country.
  • Prelaunch tests of the proprietary sustainability index to identify issues and confirm final format
    Two new key phrases—“DIC Group strengths” and “key social imperatives”—were introduced; evaluation procedures were modified, final product assessments were carried out and the focus of portfolio transformation was clarified.
  • Product stewardship is a philosophy that emphasizes assessing product-specific ESH risks and sharing findings, together with information on appropriate handling, with stakeholders, with the aim of reducing the ESH impact of products over their entire life cycles, i.e., from the procurement of raw materials through production, sale and disposal.

03Response to climate change

Reason for identificationThe DIC Group recognizes that responding to climate change is increasingly important to a company’s ability to conduct business and will work to reduce CO2 emissions attributable to production, promote low-carbon businesses and satisfy TCFD requirements.
Targets/KPIs
  • Reduction in CO2 emissions attributable to production(Scope 1 + Scope 2 reduction) : 30% from the fiscal year 2013 level by fiscal year 2030(6.3% over the three years of DIC111)
  • Promotion of low-carbon businesses : 25% increase in sales from the fiscal year 2018 level by fiscal year 2021
  • Response to the TCFD : Conduct scenario analysis and disclose in line with the recommendations of the TCFD (Help minimize and respond to climate change)
Note: Creation of an energy-saving and decarbonization framework → Introduction of internal carbon pricing and strengthening of efforts to address Scope 3 emissions
Status
  • In fiscal year 2020, the DIC Group resolved to introduce an internal carbon pricing system (a system for placing a monetary value on CO2 emissions) with the aim of quantifying climate change risk and offering incentives to reduce CO2 emissions. In fiscal year 2021, we introduced an internal carbon pricing system, beginning with new investment projects, and built a system that can factor CO2 reduction costs into the impact of capital investments.
  • DIC began formally exploring the practical implementation of a closed-loop recycling system for polystyrene used in plastic containers for food products, among others.
  • DIC set new a target for reducing CO2 emissions. The Company now aims to achieve carbon neutrality—net zero CO2 emissions— by fiscal year 2050 and will seek to reduce CO2 emissions 50% from the fiscal year 2013 level by fiscal year 2030.
  • The DIC Group’s CO2 emissions in fiscal year 2020 (Scope 1 and 2) were as follows:
Response to climate change

04Efforts to strengthen product development capabilities and create new businesses

Reason for identificationThe DIC Group views areas at the intersection of ESH-related issues and social changes and its core competencies and new businesses that contribute to the resolution of as priorities.
Targets/KPIs Operating income of ¥10.0 billion in fiscal year 2025
StatusIn fiscal year 2020, DIC applied its organic chemical structure technologies to launch compounds for use as materials for stereolithography 3D printing for dental applications. The Company also developed a distinctive flake alumina filler that imparts heat dissipating properties to components for electronics equipment, among others, positioning it to expand into new businesses using inorganic materials.