Our Approach to Biodiversity

Coexistence with the natural environment is becoming increasingly important in the establishment of a sustainable society alongside climate change response, and the creation of international information disclosure frameworks is gaining momentum.
The Denka Group has established the ESG Basic Policy, which includes "Reducing Environmental Impact and Protecting Biodiversity." Under this policy, we are working to understand our environmental impact and promote the maintenance and enhancement of biodiversity in accordance with the guidelines published by the TNFD ^※.

• ※TNFD: Taskforce on Nature-related Financial Disclosure

Efforts for biodiversity conservation

Since September 2022, we have been working on biodiversity initiatives with the aim of identifying the connections between our business activities and biodiversity, and understanding our priority issues. This initiative begins with Denka's 10 directly managed business sites (factories and research facilities) located throughout Japan. ^*1 Because these facilities are scattered and the surrounding natural environments vary, we conducted a survey of each business's connection to the natural environment from October 2022 to March 2025. (See "Preliminary Survey of the Natural Environment" below.)
Specifically, the LEAP approach recommended by TNFD ^*2 Using this method, we will understand the dependence on and impact on biodiversity and the natural environment within the scope of direct operations, which are considered to have a significant relationship between corporate activities and the surrounding natural environment within Denka Group 's value chain, and conduct an ENCORE analysis. ^*3 We will organize and disclose information about our efforts to promote, mitigate, and avoid this problem. In particular, we are undertaking company-wide initiatives, including the introduction of lighting that is less likely to attract insects at night and improving water quality by regularly cleaning the waterways on our premises.
Furthermore, when developing new land uses or changing existing land use methods, we assess the impact on biodiversity and strive to minimize any negative impacts if they are deemed likely.

• ※1Denka's domestic direct-controlled offices (Omi Plant, Omuta Plant, Chiba Plant, Bibai Branch Plant, Shibukawa Plant, Ofuna Plant, Isesaki Plant, Isesaki (Ota) Plant, Gosen Office (Niigata Plant, Kagamida Plant), Denka Innovation Center)
• ※2LEAP Approach: An integrated approach for evaluating nature-related issues based on scientific evidence, including points of contact between business activities and nature, dependencies and impacts, risks, and opportunities. Consists of four phases: Locate, Evaluate, Assess, and Prepare.
• ※3ENCORE analysis is a method of analysis that narrows down the sectors and sub-industries and examines the degree of dependence and impact on nature.

Preliminary survey of natural environment

Denka has been conducting a quantitative assessment of biodiversity risks at its business sites since October 2022. For 10 domestic business sites, we are organizing environmental data (the presence of areas important for biodiversity around the factory, the presence of areas where ecosystem integrity is rapidly declining, etc.) and continuing activities to confirm points of contact with the natural environment from the perspective of location and operational activities.
In addition, we are promoting exchanges of opinions with local governments to consider regionally rooted initiatives, and are currently in discussions with the City of Machida, where the Denka Innovation Center is located, regarding activities for the conservation of rare plants.

Proximity to areas of biodiversity importance (KBA ^※4) at production sites

In assessing the potential impact of our business activities on biodiversity, we used the Environment Ministry's "Environmental Assessment Database (EADAS)" and the "KBA Map" from Conservation International Japan to examine the proximity of our sites to important biodiversity areas.
The survey targeted production sites in Japan within a radius of approximately 5 km (20 km for the Bibai Plant).
As a result, we confirmed that five of the following 10 sites are located in proximity to important biodiversity areas.

• ※4KBA: Key Biodiversity Area

Furthermore, in order to protect the endangered species *Cypripedium macranthos* and *Cypripedium macranthos* that grow naturally within the Denka Innovation Center, we have installed protective fences to prevent people from entering the surrounding area and have continued to manage the area by measuring the number of plants for over 10 years.
Our company will continue its efforts to conserve and protect rare and endemic species whenever we identify them.

Investigation and analysis of dependence on and impact on nature at each business site (Scoping~Locate~Evaluate)

In 2022, we surveyed the 10 Denka domestic direct-controlled business sites to gain an overview of their principal business activities and analyze their dependence on and impact on nature using the ENCORE tool based on scientific evidence. The results are shown in the table below.

Factors of dependence and impact on ecosystem services that are likely to occur in the sector (industry) to which the Omi Plant belongs

In the sectors applicable to Denka's domestic direct-controlled business sites, an ENCORE analysis revealed a strong impact on natural capital and a high level of dependence on ecosystem services in the categories of "water," "greenhouse gases," "water and soil pollutants," "solid waste," and "disruption." In particular, the Omi Plant's hydroelectric power generation has a strong level of dependence and impact on water, and therefore, the areas in which the Omi Plant's hydroelectric power generation has a presence were designated as "priority areas." As a measure for the surrounding environment at the Omi Plant designated as a "priority area," we are implementing initiatives to mitigate negative impacts on biodiversity by introducing lighting that is less likely to attract insects at night. In addition, as a measure for the hydroelectric power plant located in a "priority area," we are regularly cleaning the waterways on the premises to improve water quality and increase positive impacts on biodiversity.

• Integrity of ecosystems: Assessment of species diversity, risk of extinction, and natural capital of ecosystems in the natural environment (region)
• Importance of biodiversity: Evaluation of local importance such as being a legally protected area or an internationally protected area, a habitat of endemic species or a habitat of endangered species.
• Water stress: Evaluation of the amount of water used in relation to the amount of water (freshwater) supply in the natural environment (region)

Identification and materiality assessment of risks and opportunities related to natural capital at Omi Plant

The Denka Group recognizes that nature-related risks and opportunities at the Omi Plant arise from the relationship of dependence and impact on natural capital, and from this perspective, we will identify important risks and opportunities, and for the assessment, we will formulate future world hypotheses based on the scenario analysis guidance provided by the TNFD, and examine and analyze them based on the two axes of likelihood ^※5 (feasibility ^※6) and severity ^※7 (impact ^※8), and identify them. (See table below.)

• ※5Likelihood of occurrence: Possibility of risk occurring in future world based on scenario analysis
• ※6Feasibility: The possibility of opportunities materializing in future worlds based on scenario analysis
• ※7Severity: Degree of financial impact on the company in the future world
• ※8Importance: Degree of financial impact that opportunities may have on companies in the future

Assessment of financial impacts

Based on the importance assessment of risks and opportunities related to natural capital at the Omi Plant, we estimated the financial impact and conducted an evaluation.
The evaluation of financial impact was conducted using the severity of risks and the degree of impact of opportunities, using Denka's performance data, set values, and publicly available parameters related to the listed items. Furthermore, the likelihood of risk occurrence and the feasibility of opportunities were qualitatively assessed considering Denka's case studies and trend forecasts for each scenario.

Establishment of response measures, evaluation indices (KPI), and targets for Omi Plant

The importance and financial impact assessments of nature-related risks and opportunities at the Omi Plant, which has been designated as a priority area, led to the identification of priority issues (materiality). The formulation of response measures adopts the "AR3T Framework ^※9" proposed by SBTN, and our efforts are organized according to the steps from avoiding and reducing impacts to restoring and regenerating nature, and further to contributing to system transformation.

• ※9AR3T Framework: A framework for action proposed by the Science Based Targets Network (SBTN).
  Avoid, Reduce, Restore & Regenerate, Transform

Initiatives from 2026

Starting in fiscal 2026, we will formulate specific measures for priority issues identified at the Omi Plant, and set targets and indicators for evaluating these measures (KPI). In implementing these measures, we will place importance on collaboration with government agencies related to Denka and communication with experts involved in the local natural environment of the Omi Plant, and aim to connect these efforts to specific environmental conservation activities as the Denka Group.
Furthermore, in order to achieve the Denka Group's environmental materiality of "environmental conservation and minimization of environmental footprint," we will accelerate the transition to a nature-positive approach and the establishment of sustainable business models, with a view to expanding our efforts to the value chain (upstream and downstream).

Participation in TNFD Forum

Participation in Keidanren Nature Conservation Council

In October 2024, the Company will join the Keidanren Nature Conservation Council ^※ and make social contributions to biodiversity through the Biodiversity Declaration Initiative.

• ※The Keidanren Nature Conservation Council was established in 1992 to support nature conservation activities in developing countries and Japan, and to promote corporate nature conservation activities. As of November 2024, 141 companies are members of the Committee.

ISCC PLUS Certification

Our company sells “Biomass BOPS”, which maintains the transparency, rigidity, and food safety of the sheet “BOPS” made from biaxially stretched polystyrene resin while allocating biomass-derived raw materials using a mass balance approach.
This product is part of a product group that has received ISCC PLUS certification, an international certification system that manages and guarantees products using sustainable raw materials such as recycled materials and biomass throughout the supply chain.
By curbing the use of fossil resources and promoting the use of renewable resources, our company aims to reduce the burden on ecosystems and conserve biodiversity through product development and the use of sustainable raw materials, thereby contributing to the realization of a recycling-oriented society and coexistence with the natural environment.

Collaboration with Environmental Organizations

Denka collaborates with governments, local authorities, companies, and regional communities through various activities, including participation in initiatives such as the 30by30 Alliance and climate change initiatives, for the conservation of regional biodiversity at 10 domestic directly controlled sites including the Omi Plant, which has been designated as a priority area.
Under the resource recycling brand "D-NODE™", the Denka Group is building a recycling-oriented model that maximizes resource value and reduces waste by utilizing chemical recycling technology for polystyrene. In Ichihara City, Chiba Prefecture, through a public-private partnership with local residents and TOYO STYRENES (a group company), we collect used polystyrene at 14 public facilities and re-resource it from target products with a sorting accuracy of over 85%. This reduces CO ₂ emissions by about 40% compared to incineration treatment. Furthermore, this initiative contributes to biodiversity conservation through the reduction of environmental impact on nature through the proper disposal of waste. With one of the largest polystyrene production capacities in Japan, we will leverage our social influence to promote the establishment of a sustainable resource recycling and ecosystem conservation balance by deepening collaboration with local governments, companies, and regional communities in addition to expanding our processing capacity.

Community Activities to Protect Biodiversity