Focus on sustainability initiatives under the Mid-Term Management Plan

In fiscal 2023, the first year of the Mid-Term Management Plan “Creating New Value for the Future (Stage 1)” (“CV-1”) aiming at the Group’s sustainable growth and an increase in corporate value, we focused on various priority measures to pursue sustainability of society and increase the Group’s sustainable corporate value under the three guidelines in CV-1: “Creation of value,” “Creation of smart manufacturing,” and “Evolution of organizational capabilities for the future.”

Specifically, I visited 17 domestic and eight overseas sites to have candid dialogue with employees supporting the Group's value creation activities because CV-1 aims to enhance “a sense of speed” and “focus on issues” with sustainability placed at the core of our management issues, and we also needed to ensure that on-site employees are well aware of our “Mission/Vision/Value (“MVV”)” which was renewed at the start of the Mid-Term Management Plan. In these initiatives, I increased opportunities for direct dialogue with employees to explain the Group’s future direction and the three guidelines in CV-1 in my own words and exchange opinions with them. I felt a good response as we were able to understand firsthand each other’s perspective, which helped deepen my understanding of the sites. We will continue to work on sustainability initiatives as the core of our management issues by further addressing the sustainability issues through these engagements, holding discussions with outside directors, and responding to the global trend of sustainability disclosures.

Place sustainability at the core of our management issues – Review of the first year of the Mid-Term Management Plan

For Guideline 1 "Creation of value," we expanded our products contributing to sustainability in both our core and new business areas. With the movement toward vehicle electrification, we saw increases in sales of belts for electric power steering and inquiries on "FlowMetal™,” a low‐temperature sintered metallic nanoparticle product that enables efficient thermal management as well as sales of belts for agricultural machinery supporting food production. In addition, we launched new products in the medical device and healthcare equipment markets that contribute to people’s well-being and posted sales of absorbable bone regeneration materials in excess of the plan. We also launched a removal detection system “Removal Alert™,” which aims at reducing burdens of both patients and nurses. In fiscal 2024, we will enhance collaborations with outside parties and strategic investments to further evolve these new businesses.

For Guideline 2 "Creation of smart manufacturing," we accelerated the use of digital technology to prepare for the realization of the "Bando Dream Factory" in future. Toward automation using big data and AI, we made full use of information acquired from sensors installed in various processes to ramp up efforts to “eliminate manual record keeping operation” and “introduce unmanned and autonomous operation by converting skills and know-how into data.” We also worked on the development of digital human resources who will play an integral role in the “development of smart manufacturing methods.” In fiscal 2024, we will focus on developing processes that use AI, IoT, robot technology, etc. as well as developing and improving technology and manufacturing methods to increase productivity and resource and energy efficiency, in order to ensure “safe, secure, and eco-friendly manufacturing” set forth in the "Bando Dream Factory."

For Guideline 3 "Evolution of organizational capabilities for the future," we started an “engagement survey” to quantitatively assess employees’ willingness to contribute to the company and a sense of unity, trust relationship, etc. between the company and employees. The results are shared at group meetings of each workplace to identify issues through direct dialogue and develop and implement action plans for improvement. In fiscal 2024, we will continue to improve engagement while respecting values of individual employees. We are also promoting initiatives that address climate risks and contribute to the development of society, and as part of such efforts, we worked on the calculation of Scope 3 CO2 emissions and started the disclosure from fiscal 2023.

Recognition of external environment

Currently, energy prices such as natural gas and crude oil prices as well as raw material prices remain high, wars and conflicts in various regions show no sign of ending, and climate risks have been intensifying, all of which are contributing to an increasing tendency toward a VUCA* world. So, it is becoming increasingly difficult to manage the business, but I will continue to visit sites and deepen the dialogue with our stakeholders to see through the essence, with an aim to pursue sustainability of society and increase the Group’s sustainable corporate value.
* Volatility, Uncertainty, Complexity, and Ambiguity

[Sustainability activity themes]

Fiscal 2023 and current initiatives
In fiscal 2023, the sixth year under the “Sustainability activity themes (formerly, “CSR promotion themes”),” some progress was made in each theme.

[Products and services]
In fiscal 2023, the ratio of "Environmentally-Friendly Products" among the total newly marketed products was 66%, achieving the target of "50% or more" on a non-consolidated basis. We registered four products as “eco-moving” products, including accessory drive power transmission belts for automobiles that reduce wastes and CO2 emissions generated in the production process and heat dissipation sheets for 5G base stations. In April 2024, we also launched a double cog belt for large buggy cars and motor scooters which uses cellulose nanofibers in a power transmission belt for the first time in the world, contributing to the realization of a sustainable global environment through reduction of CO2 emissions by extending belt lifespan and downsizing the drive system.

[The environment]
As part of our initiatives for the realization of carbon neutrality by 2050 and the achievement of FY2030 targets (38% reduction of Scope 1 and 2 emissions compared to 54,703 tons in fiscal 2013 on a non-consolidated basis), our subsidiaries in China and Spain introduced solar power generation systems in fiscal 2023. In fiscal 2024, our group companies are developing FY2030 targets and the specific roadmap to achieve these targets. In June, we changed the “1.5°C to 2°C scenario” in the climate change-related information disclosure based on TCFD recommendations to the “1.5°C scenario” in an effort to enhance the disclosure by reflecting a global perspective.

[Labor/Safety]
As mentioned above, in fiscal 2023, we began full-scale efforts to improve engagement, and in terms of safety efforts, we promoted “General safety inspection” and “Returning to the basics of safety.” As a result, in October 2023, Ashikaga Plant received the Encouragement Award in the “Tochigi Labor Bureau Director’s Award,” and in January 2024, Nankai Plant achieved a record of 12.5 million hours of accident-free operation (no accident resulting in accidental death or absence from work for not less than one day) and received the “No Industrial Accident Record Certificate (Class 4)” from the Minister of Health, Labour and Welfare.

[Compliance/Human rights]
We developed the human rights policy in April 2023 and disseminated the contents to all Group employees. In fiscal 2023, we conducted again supplier assessments covering the entire supply chain and follow-up meetings with suppliers based on the results. We also started preparations for the human rights due diligence. To strengthen compliance, we worked to enhance employee education by, for example, introducing e-learning courses for information security, compliance with the Subcontract Act, and security export control.

[Stakeholder communication]
We renewed the naming rights contract of Bando Kobe Science Museum (Kobe Science Museum), which we have acquired for the purpose of educating and nurturing rich creativity of the youths who will lead the next generation, for another five years from April 2024. In addition, for the Noto Peninsula Earthquake which occurred in January 2024, both the Company and employees made donations. We are continuing to carry out CSR activities such as cleanup activities and educational support in a manner that meets the needs of local communities in Japan and overseas where our sites are located, and for example, we planted trees and also focused on food waste reduction initiatives in Thailand.

The Group will continue to focus its efforts on its mid-term management plan, MVV, material issues and sustainability activity themes. In addition, by practicing our management philosophy of “a spirit of harmony and in good faith,” we intend to make use of “collective intelligence” created through repeated dialogues with the Group's employees and stakeholders having diverse values to realize new value creation, innovation and sustainability.

We appreciate continued understanding and support from our stakeholders.

August 2024

President and Representative Director,
Bando Chemical Industries, Ltd.

Tomio Ueno