The resolution of the corporate value creation story is improved

You have been writing third-party opinions for our reports since 2011. During this time, the reports have been continuously improved, and at times, have made significant leaps forward. I believe that the 2025 version is worthy of such a leap forward. In last year’s third-party opinion, I raised the point that “an important point for improving this report may be to increase the resolution of the value creation story.” In this report, I first defined corporate value, and then presented a formula for calculating it. Based on this formula, I clarified Denka’s corporate value, cash generation through our businesses, growth rate for the future, and capital cost minimization, and made these the pillars of the report’s structure, clarifying our initiatives and outlook for each. As a result, the entire report has created a flow of the value creation story, and it has become clear how each initiative contributes to corporate value creation, thus increasing the resolution of the corporate value creation story. I believe that this will give readers the impression of a significant leap forward.
There are several methods for defining corporate value, but each has its limitations, and some are not suitable for integrated reports. The discounted cash flow (DCF) method adopted this time is a very easy-to-understand method for defining corporate value in integrated reports, as it can reflect future growth potential, incorporate company-specific circumstances, and include environmental and social values. Some companies are beginning to adopt this method, and I believe it was a wise choice.
The adoption of the DCF method has also brought about changes to the descriptions in the report. For example, in the section on “Strengthening Intangible Assets.” Until now, intangible assets have only been mentioned in relation to intellectual property initiatives, but this time, we positioned them as a driving force for growth, and viewed not only intellectual property, but also human capital management, sustainability management, DDX, etc. as intangible assets, and declared that we would strengthen them. We have clarified that intangible assets contribute to minimizing capital costs and increasing growth rates.

Description of materiality and roadmap is more detailed

There has been a noticeable increase in the amount of information regarding topics of interest to readers, with materiality and roadmaps being prime examples. The identification of materiality has been attracting increasing attention as it clarifies the main issues and opportunities an organization faces and significantly influences its value creation efforts. Accordingly, the amount of information provided in reports during this period has also increased, and in this report, we have taken a further step by linking materiality to the KPIs and 2030 targets of Mission 2030. At the same time, the frequency of the term "materiality" has increased significantly. This suggests that materiality is becoming better understood and more widely accepted within the Company, and is serving as a compass for the implementation of various policies and plans.
There is a specific process that has drawn attention to materiality. While this report provides an overview of the "Review Process," I believe that this alone is insufficient to convince readers of the validity of materiality. I believe that information that serves as a prerequisite for identifying materiality is essential. Since this is closely linked to Mission 2030, I believe that the management environment and social trends up to 2030 should be described in an integrated manner along with the formulation of Mission 2030. This may help readers and employees alike to recognize that the identification of materiality is valid.
Roadmaps are important as they organize the process of corporate value creation along a timeline and serve as blueprints for ensuring that goals are achieved. In particular, integrated reports place greater emphasis on conveying future visions than conventional reports, and thus roadmaps that demonstrate the necessity of realizing those visions are of great importance. While we have made efforts to address this point in our reports to date, this report includes more detailed descriptions, such as the DDX Roadmap. Please always take into account social and environmental changes and strive to create detailed roadmaps.

Companies must raise their awareness of social issues and produce reports that respond to social requests.

While this report has reached a high level of completeness, the final goal post for the report should not remain where it is due to the expansion and deepening of societal requests. It is important to always keep our antennas up, accept those requests, and reflect them in ongoing improvements. Immediate issues include a human resource strategy linked to the management strategy, a more detailed process for financializing non-financial information, and quantitative impacts.
Regarding the former, I mentioned last year that "the integration of the management strategy and human resource strategy cannot be read," but this has not been realized. As stated in the Human Resource Version of the Ito Report, the disclosure of the human resource strategy in the integrated report is important, and it is essential to show that linkage concretely. It is necessary to describe the human resource strategy in conjunction with the management strategy, including what kind of human resources are needed to promote the management strategy, how those human resources will be developed, and how they will be acquired.
As for the latter, I have previously stated that we should visualize and disclose the connection between non-financial indicators and financial results (2024 version) and the connection between non-financial indicators and corporate value (2025 version). I would like you to take this visualization a step further and clarify the processes through which individual non-financial initiatives are financialized. I also hope to see how these individual initiatives affect management indicators such as PBR and ROE.

Career

After working for a newspaper company for 25 years, I changed jobs to an environmental startup, then became a freelancer after working for a publishing company. I have been pursuing the way companies disclose information through university lectures and NGO activities. During this time, I have given lectures, presented papers, written third-party opinions, and provided consulting on corporate information disclosure.
My publications include "The Path to Environmental Management," "Trends in CSR Reporting and Examples of Disclosures" (2010-2017), "Reports in Japan: Trends and Examples" (2018-2019), "CSR Practices That Show Results" (co-authored), and "Environmental Solution Companies: A Comprehensive Guide Vol. 1-6" (co-authored).