We have received third-party opinions on our reports for over 10 years, since our 2011 CSR Report. It is extremely rare in Japan for a report to be written by an NPO for over 10 years, and we acknowledge its significance while reaffirming our responsibility. Meanwhile, as integrated reports transition to main reports, the number of cases in which third-party opinions are attached has decreased. We are not aware of the reason for this, but because integrated reports, like traditional reports, are non-statutory disclosure documents and disclosure is based on the issuer's ingenuity, we believe that third-party opinions continue to function in the same way as before.

According to the explanatory materials provided with the report, the theme of this report is "Denka's ESG Management." Considering the establishment of the "ESG Basic Policy" in November 2021, the shift from environmental management to ESG management (which we consider to be synonymous with sustainability management), and the publication of this report just before the start of the next management period, which begins in fiscal 2023 and will further strengthen ESG management, the choice of theme seems appropriate. Furthermore, the president's message and dialogue, as well as the inclusion of ESG in the directors' skills matrix, convey a strong commitment and enthusiasm for ESG management, so the theme is adequately reflected within this scope. However, the "ESG Basic Policy" merely presents a framework, leaving the impression that the report's core theme is brief. We feel that more in-depth content and strategies regarding the 13 items should have been provided. This report only mentions "passion and strong will," so I would like the 2023 edition to explain how the 13 items will be developed in the next management plan, setting KPIs and providing an explanation. It also states that "preparations are underway to visualize non-financial initiatives linked to future financial results," so I hope to see evidence demonstrating how the 13 items will be transformed over time from non-financial to financial. While this is a challenging undertaking, I believe it is possible, as last year the company attempted to "present key indicators of business activities in a related diagram, taking into account the time period leading up to financial results."

There are two points in this report that particularly caught my attention. The first is the "Vision Formulation Project." While there are many such projects, it is noteworthy that it is comprised of 44 young employees. ESG management is a type of management that produces results over a long period of time, so we believe this is the ideal project structure for vision formulation. Furthermore, in recent years, it has become common for ESG management to focus on "future generations" as stakeholders, so in that sense, we believe it is possible to formulate a vision that meets the expectations of "future generations."

The second section is "About the Next Management Plan." It's only one page long, but it's sure to catch the reader's eye. The first of these is the "formulation of an eight-year management plan from fiscal 2023 to fiscal 2030." Many Japanese companies publish three-year medium-term management plans. Some have criticized this three-year period as "incomplete and a contributing factor to the loss of growth potential for Japanese companies." In today's world, where corporate management is shifting from short-term to long-term thinking and toward ESG management, I have certainly considered three years to be incomplete. Given this situation, I heartily applaud the report, which is moving forward with the formulation of an eight-year long-term management plan.

The company also announced that it will review its materiality in its next management plan. Recently, new approaches to materiality have emerged. One is dynamic materiality, which states that materiality is dynamic and changes over time. From this perspective, I believe the materiality identified in 2017 should naturally be reviewed. The other is the idea of "single materiality" and "dual materiality." The former is materiality that considers only the financial impact of a company on society and the environment, or the impact a company has on society and the environment. The latter is materiality that considers both simultaneously, but I believe that double materiality is appropriate for the materiality of an integrated report appropriate for ESG management.

Other points that caught my attention were the following four: Publication of a roadmap towards carbon neutrality: The TCFD also places importance on transition plans, "Work that can be done better than anyone else": Simple words with deep meaning, Health and Productivity Management Declaration: With the emphasis on human capital, this has become an important management issue, and Responding to biodiversity: Ranked in the top three risks in the Global Risk Forecast published by the World Economic Forum, and a draft of the TNFD (Task Force on Nature-related Financial Disclosures) has been published.
Overall, this report can be described as "a future-oriented report that raises high expectations for future initiatives and reports." Therefore, it is essential that the next report faithfully reflects the commitments of this period.

Finally, I would like to make two suggestions not mentioned in the report. The first is to "restructure the corporate philosophy system." The current corporate philosophy, "The Denka Value," consists of a mission and a code of conduct. Meanwhile, the "Vision Formulation Project" discusses core values, purpose, and mission. I believe that a corporate philosophy is easy to understand if it is composed of three Ws and one H. That is, Why (why we exist) = Purpose; Where (where we are heading) = Vision; What (what we do) = Mission; and How (how we achieve it) = Value. Since all of these are being discussed in the project, I believe it is possible to formulate a new corporate philosophy. Purpose, in particular, is a pillar of the corporate philosophy. It is a key element in connecting people and organizations, organizations with organizations, and organizations with society through empathy, and is therefore essential for promoting ESG management. Furthermore, since you place importance on improving employee engagement, I am confident that sharing a corporate philosophy based on purpose will produce positive results.

The second is the establishment of an ESG promotion department. A promotional organization is necessary to concretely deploy the "passion and strong will" for ESG management. In June 2021, the Financial Services Agency revised its "Investor and Company Guidelines," adding a clause stating, "Have you established a framework for company-wide consideration and promotion of sustainability initiatives, such as by establishing a committee?" The new guidelines encourage the establishment of such a committee. In response to this trend, an increasing number of companies are establishing internal committees to promote ESG. While there is no legal definition for this type of committee, why not consider establishing one as a third committee, following Nomination and Remuneration Advisory Committee and audit committee? By establishing a committee directly linked to the board of directors, we hope to further stimulate discussions on ESG management within the board of directors.

• Recycling-oriented Society Study Group:A citizen group that considers the way of society in harmony with natural ecosystems to be passed on to the next generation from a global perspective, and conducts research, support, and practice for the formation of a recycling-oriented society by citizens, businesses, and governments in local communities. In the sustainability workshops, the group studies and makes proposals on what the reports should look like.
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