CSRReport

Every day, with Showa Denko

Daily life friendly

to people and

the earth

Relations with Society / Environment and Safety Efforts

0201

Ultrabright LEDs (traffic signal lamps)

Traffic signals5

Display backlight (white LEDs)

Flat-panel TVs8

Fire-resistant double-layer pipes fromrecycled PET bottles

Construction materials16Biodegradable plastic(agricultural film)

Agricultural materials17

Waste anesthetic gas (nitrous oxide)decomposition system

Medical gas processing systems6Allyl ester resin (lens material)

Spectacle lenses1Aluminum cans, lids, aluminumbottles (beverage containers)

Aluminum cans2

External wall panels

House exterior9Aluminum cylinders(photosensitive material)

Laser beam printers4

Raw materials for synthetic fabrics(ammonia for nylon; acetic acid forpolyester)

Apparel15

Aluminum hydroxide (artificial marble for bathtubs)

Bathrooms18Cast/forged aluminum rods(SHOTICTM), Heat exchangers (Aluminum lightweight parts)

Automobiles14

The Showa Denko Group produces various materials and components, which are then incorporated into final products found in your daily life. Some of these products are introduced below:

Showa Denko Group’s individualized products and technologies

Showa Denko Group’s products can be found everywhere

Vitamin C derivatives, ultravioletscreening agent (raw material forcosmetics)

Cosmetics10

Hard disk media for small-sized harddisk drives

Mobile music players12

Molecular sieve (desiccant)

Laminated glass windows7

Capacitors(titanium oxide for stacked ceramic

capacitors, high-purity aluminum foilfor electrolytic capacitors)

Digital cameras11

12

5

3

67

9

10

16

15

17

By the numbers

The total number of employ-ees of the Showa DenkoGroup in Japan and over-seas is approximately11,000, of which 5,300employees, accounting for47% of the total workforce,work at overseas businesssites (as of the end ofDecember 2007).

11,000In 2007, 14,751 people visit-ed and toured Showa DenkoGroup plants located inJapan and overseas.The Showa Denko Group isstrengthening its ties withresidents of local communi-ties.

14,000Showa Denko has manyoriginal and exclusive prod-ucts, as well as productswith leading market shares.These products account forabout 1/3 of net sales (com-pany estimate).

One-thirdVirtually all personal comput-ers used around the worldincorporate hard disk drives.One of every five of thesedisk drives is equipped withhard disk media made byShowa Denko (companyestimate).

One of every fivehard drives

The Showa Denko Group’s socially useful and environment-friendly products

4

11

12

14

18

8

13

Carbon nanofibers(used in lithium-ion batteries)

Mobile phones13

High-purity gases/chemicals forsemiconductor processing(motherboards)

Personal computers3

0403

Ferroalloys Rare earth metals

Graphite

Ceramics

Carbide Organic synthesis

Amino acids

High polymers

Polyolefins Solid aluminum capacitors

Catalysts

Acetic acid Allyl esters

Phenol resins

Biodegradable plastics

Electrochemistry

Electrolysis

Electric furnaces

Molten salt electrolysis

Alumina Gallium Chemical vapor depositionEpitaxial growth

Billet production Extrusion

Casting and forging

Metal rolling

Graphite electrodes

Abrasives Refractories

Chemical-grade alumina

Ultrahigh pressure Fine powder technology

VGCFTM

(carbon nanofiber) LIB cathode material

Petrochemicals

Aluminum hydroxide

Vitamin derivatives

Magnetic alloys

Superhard materials Semiconductor polishing agents Sputtering

Hard disk media

LEDs

Aluminum foil for capacitors

SHOTICTM

Titanium oxide

Heat exchangers

Aluminum cylinders

Chlorine Caustic soda Chemicals

Brine electrolysis……Products

……Technologies

……Purchased or intermediate products

……Products introduced on pages 1 and 2

Aluminum

Start of Japan’s first aluminum smelting

Aluminum cans

Japan’s first production of aluminum cans

Established the company to fully use hydroelectric power generation

Al2O3

Al

Cl2 NaOH

TiO2

Ga

Al(OH)3

Medical gas Semiconductor-processing specialty gasesFirst production of ammoniumsulfate using domestic technologies

Water electrolysis

Fertilizers

High-pressure technology

HydrogenH2 Ammonia

NH3

TitaniumTi

The Showa Denko Group first recognized the potential of the electrochemicalindustry that uses water, an important resource plentiful in Japan.

With technologies rooted in electrochemistry, Showa Denko over the years hasaccumulated processing technologies based on organic and inorganic chemistry andmetallurgy. Today, these advanced technologies and expertise are used to producematerials and components essential to the electronics and automotive industries, as wellas materials and components that form the basic raw materials of various productsessential to our daily lives.

Showa Denko’s Technologies

0605

An Overview of theShowa Denko Group

Corporate structure andfinancial information(data for the term ended December 31, 2007)

�Company name: Showa Denko K.K.�Head office location: 13-9, Shiba Daimon 1-chome, Minato-ku, Tokyo 105-8518, Japan�Number of group companies: 137�Consolidated business results:

Sales 1,023.2 billion yenOperating income 76.7 billion yenNet income 33.1 billion yen

�Total number of employees: 11,329�Major products by segmentPetrochemicals

Olefins, organic chemicals, and plastic productsChemicals

Chemicals, gases, specialty chemicals, functionalresins

ElectronicsHard disk media, compound semiconductors, rareearth magnetic alloys, semiconductor-processingspecialty gases, functional chemicals, electronicceramics, fine carbons

InorganicsCeramics, graphite electrodes

Aluminum and otherAluminum metal, aluminum sheet, aluminum foil,extrusions, fabr icated aluminum, construct ionmaterials, engineering, etc.

Change in consolidated sales

0703 04 05 06Year

1,100

1,000

900

800

700

600

(billion yen)

Report Scope�Terminology used in this report¡ In this report, “Showa Denko” refers to

Showa Denko K.K., while the “ShowaDenko Group” collectively refers to ShowaDenko K.K. and its non-publicly tradedconsolidated subsidiaries in Japan.

�Financial performance data¡The figures provided in this report represent

consolidated financial results for the ShowaDenko Group.

�Environmental performance data¡The figures provided in this report represent

Showa Denko K.K.’s environmentalperformance.

¡The specific scope of the relevant data isnoted when Group company data isincluded.

�Social performance data¡The figures and other information provided

in this report represent Showa DenkoK.K.’s social performance.

¡ In the area of community relat ions,information has been added on non-publicly traded consolidated subsidiaries inJapan and around the world.

�Period covered by this Report¡This Report covers the latest information for

2008 and for the period January 1 -December 31, 2007.

¡The term “Year” as used in this Reportrefers to the calendar year of 2007.

¡The term “Fiscal year” as used in thisReport refers to the period from April 1,2007 to March 31, 2008.

�Publication date¡August 2008

(The next edit ion is scheduled to bepublished in July 2009.)

Guidelines referenced �Sustainability Reporting Guidelines 2006

(G3 Guidelines) from the Global ReportingInitiative (GRI)

�Environmental Reporting Guidelines 2007from the Ministry of the Environment

�A table of comparison between this Reportand the guidel ines is posted on ourwebsite.

Prepared by: �CSR Office,

Showa Denko K.K.13-9, Shiba Daimon 1-chome, Minato-ku,Tokyo 105-8518, Japan

Showa Denko Group’s products can be found everywhere! 1

Showa Denko’s Technologies 3

Editorial policies / An Overview of the Showa Denko Group 5

Message from the Management 7

Special Feature : Achieving a Sustainable SocietyShowa Denko Group’s Promise:6% reductions from 1990 Levels in greenhouse gas emissions 9Showa Denko cosults experts to help attain targets 11Showa Denko producing environment-friendly products 13

Progress with the Passion Project Medium-termConsolidated Business PlanContributing to the sound growth of international society by providing individualized products and services 15

Showa Denko Group’s Operation SitesPromoting Global CSR Management 17

CSR ManagementCSR plans and performance 20Corporate governance 21Risk Management 24Responsible Care Management 27Responsible Care Activities Plan 29

Social Commitment ReportRelationship with our stakeholders 31Customer relations 33Community relations 35Shareholder and investor relations 39Partner relations 40Employee relations 41

Environmental and Safety EffortsMeasures to prevent global warming 45Resource use and environmental impact 48Reducing chemical substance discharge 49Environmental considerations:Atmosphere,water, and soil 51Reducing waste and encouraging recycling 53Environmental accounting 54Safety efforts 55

Third-Party Opinions 59

Questionnaire on CSR Report 2007 63

Glossary 64

C O N T E N T S

SHOWA DENKO CSR REPORT2008

Changes in consolidated operating income and ratio of operating income to sales

0703 04 05 06Year

8070605040302010

0

8

6

4

2

0

(billion yen) (%)Operating incomeRatio of operating income to sales

Changes in total number of employees

(persons)

Year03 04 05 06 07

12,00010,000

8,0006,0004,0002,000

0

Japan Overseas

7,535

3,088

7,257

3,909

6,753

4,365

6,251

4,933

6,023

5,304

Consolidated sales by segment

Petrochemicals38.6%

Chemicals 8.3%

Electronics19.6%

Inorganics8.3%

Aluminum andother25.2%

About the coverThe design on the cover features two

circles inside an “S” to represent “Showa.”This design expresses the interwoven nature,both in urban and living environments, of thelives of our readers and the products andservices of the Showa Denko Group.

This concept is also l inked to thei l lustrat ion of “Showa Denko Group’sproducts can be found everywhere!” at thebeginning of the Report depicting placeswhere Showa Denko products are used.

Editorial policiesThis Report has been edited as an annual report on non-

financial information presenting efforts by the Showa DenkoGroup to contribute to the environment and society. Fordetailed financial information, please refer to FinancialStatements and the Annual Report (http://www.sdk.co.jp/html/english/ir/library/index.html).

In l ight of the Fourth Assessment Report of theIntergovernmental Panel on Climate Change (IPCC) andclimate change, the key agenda item in the 2007 and 2008summits, this Report includes a special feature thatdiscusses in detail Group efforts to combat global warming.

The importance and prior i ty assigned to variousdisclosure items are based on stakeholder opinions andrequests. This is how the Group selects the items addressedby the company’s activity policies and specified in disclosurepolicies for this Report.

The scope of this Report includes non-publicly tradedconsolidated subsidiaries.

The Report covers environmental performance data forShowa Denko K.K. However, it also covers major Group

companies in Japan with respect to CO2 emissions, and finalwaste disposal volumes, each a topic of interest to ourstakeholders. Plans call for steadily expanding the Report’scoverage of data on Group member companies.

The Report’s social performance data also includesinformation on consolidated subsidiaries overseas.

Beginning with this year’s Report, key items have beencovered in ways that allow performance comparisons withthe previous year. This year’s Report also adds details ofvarious changes and response policies.

Links from the contents of this Report to the company’swebsite have been enhanced. Detailed data and site-specificenvironmental and social reports are now posted on thewebsite.

The text of the Report itself is intended to be clearer andmore easily understood, based on opinions expressed bystakeholders in response to last year’s Report. A glossary ofCSR-related terms is provided at the end of the Report.

A “universal design” coloring is used to make every pageand drawing easier to look at regardless of individualdifferences in color vision.

0807

The Showa Denko Group fulfills its CSR(Corporate Social Responsibility) by makinggood-faith efforts to put the Code of Conduct---acode based on the Showa Denko Group’s Vision---into practice. In the following, I’d like to reporton last year’s achievements and discuss theremaining issues to be addressed, as well aspolicies for the current year.

The Kyoto Protocol’s commitment period(2008 to 2012) is now underway. In 2007, in itsFourth Assessment Report (AR4), theIntergovernmental Panel on Climate Change(IPCC) reported that increases in greenhousegases*1 released by human activity constitute apotential cause of global warming. In response,greenhouse gas reduction targets for years rangingto 2050 were discussed at the HeiligendammSummit held in Germany and at the UnitedNations Framework Convention on Climate

Change (COP13) held on the Indonesian islandof Bali. The general direction of these efforts wasconfirmed in the Hokkaido Toyako Summit heldthis July. The opportunities and risks created byclimate change have become major factors incorporate strategy.

The Showa Denko Group regards climatechange policy as an important management topicand has set 6% greenhouse gas reduction targetfor the Kyoto Protocol commitment period fromthe levels in 1990, the reference year.

We have already begun to see decliningGroup emissions of greenhouse gases. We expectto achieve the target on our own, through thesteadfast pursuit of current measures, withoutresorting to emissions trading. We’ve also begundrafting a Group roadmap in accordance with thetargeted 50% reductions in global greenhouse gasemissions by the year 2050.

In the Passion Project, the three-yearconsolidated business plan covering the periodfrom 2006 through 2008, the Showa DenkoGroup positioned CSR as the managementfoundation for all operations. Based on this plan,the Group has strengthened its financial standingby accelerating development of growth businesses,continually expanding profitability, and reducinginterest-bearing debt.

Last year, in the second year of the plan, westepped up efforts to develop growth businessesand promoted structural reforms while pursuingcost reductions. Sales and operating incomeclimbed to 1,023.2 billion yen (up 11.9% fromthe previous year) and 76.7 billion yen (up11.6%), respectively. Since this year marks thefinal year of the plan, we’re working hard toachieve the targets specified in the Passion Project.

Seeking to fulfill its social responsibility, the

Showa Denko Group contributes to thesustainable growth of society through its activities,products, and services. The Group faces manychallenges in its efforts to help protect theenvironment globally and to create a brighterfuture for society. We plan to take full advantageof the capabilities, both technological and human,that constitute a proud legacy from the company’sfounding. With Passion for Change, we will seekto overcome each and every obstacle weencounter, aiming to earn the full trust andconfidence of the market and society.

In this CSR Report, we describe the efforts ofthe Showa Denko Group from the stakeholders’perspective. In addition, through this publication,we hope to promote bilateral communicationwith stakeholders. Our sincere hope is that theCSR Report will help you understand the ShowaDenko Group’s efforts. We welcome your frankopinions and advice as important guidance in ourefforts.

Showa Denko’s effortsto cope with climate change

Passion for Change

Contribute Collaborate Complete

Commit

Challenge

Group Values1P5C

Group’s Vision

Code of Conduct

Guidelines

M e s s a g e f r o m t h e M a n a g e m e n t

President and Chief Executive Officer

Kyohei Takahashi

Sharing the passion to continue operating as acompany valued by society

(July 2008)

Environmental protection andsustainable growth of society

[Showa Denko Group’s Vision and philosophy]

*1 Greenhouse gases The Kyoto Protocol stipulates emissions reduction targets for the following six greenhouse gases: carbon dioxide,methane, nitrous oxide, HFCs, PFCs, and SF6.

1009

No delay can be tolerated in implementing measures to combatclimate change. In full awareness of the environmental impact ofour activities, the Showa Denko Group has set its greenhouse gasemissions reduction target at 6% for the commitment period (2008to 2012) under the Kyoto Protocol. We expect to achieve this targetwithout resorting to emissions trading.

We’ve also begun formulating a strategy to attain a target of50% GHG emissions reduction worldwide by 2050.

Start of theKyoto Protocol commitment period

The commitment period (2008 to 2012) under theKyoto Protocol began last year. In i ts FourthAssessment Report, the IPCC reported that increases ingreenhouse gases released by human activity constitutea potential cause of global warming. Efforts to mitigateclimate change and reduce greenhouse gases are nowmajor factors in the business strategies of al lcompanies.

Japan’s greenhouse gas emissions totaled 1,340million tons (CO2 equivalent) in 2006, 6.2% above thetotal emissions of 1,261 million tons for the referenceyear (1990) under the Kyoto Protocol. Japan is requiredto reduce greenhouse gas emissions by 6% from thelevels of the reference year during the Kyoto Protocolcommitment period. This means, then, that even aftersubtracting a forest absorption value of 3.8% and aKyoto Mechanism value of 1.6% (for example, throughemissions trading), the nation must cut emissions byanother 6.8%.

A close look at the increase or decl ine inemissions by segment in Japan shows that energy-derived CO2 emissions represent a major problem.Although CO2 volumes released by the manufacturingindustry, such as factories, declined, the volumesdischarged by al l other segments, including thetransportation segment (automobiles, ships, etc.), thecommercial and service sectors (retail, services, offices,etc.), and household segment increased significantlyfrom the reference year (according to data released bythe Japanese Ministry of the Environment).

Grasping the significance of greenhousegas emissions equivalent to the volumereleased by 1.5 million people

The Showa Denko Group uses fossil materials asraw materials and fuels to produce petrochemicals andorganic/inorganic chemicals and to fabricate aluminum.The Group discharged approximately 3.2 million tons in2007. Converted into carbon dioxide emissions, thisamount is equivalent to the amount discharged by some1.5 million people (based on data from the Team Minus6% website).

Reducing the Group’s greenhouse gas emissionsis essential to achieving sustainable social growth, andthe mult i- faceted promotion of greenhouse gasemissions reduction is among our highest prioritymanagement issues.

We take every possible measure to cutgreenhouse gases, especially those resulting from ouroperations. We do this, for example, by reducingconsumption of raw materials and fuels and electricity,reducing wastes, improving distribution efficiency, andimplementing energy-saving measures in offices. Weare also running an awareness-raising campaign thatencourages employees to reduce CO2 emissions athome (see page 45).

A pledge to achieve the target for theKyoto Protocol commitment period

In 2007, in addition to a unit energy consumptiontarget, the Showa Denko Group set a target of 6% forcuts in greenhouse gas emissions from levels in thereference year (1990) over the course of the KyotoProtocol commitment period.

In 2007, the Group achieved 5% reductions fromreference year levels, paring emissions to levels belowthose in the reference year. We continue to reduceother greenhouse gases in addition to carbon dioxideand to improve the efficiency of naphtha crackingfurnaces at our petrochemical complex, thereby seekingto achieve the targeted 6% reduction on our own duringthe Kyoto Protocol commitment period, withoutresorting to emissions trading.

Start of efforts to draft a roadmap andstrategies for greenhouse gas reductionsby 2050

In the 2007 Hei l igendamm Summit held inGermany and the COP13 held on the Indonesian islandof Bali, agreements were concluded to achieve 50%greenhouse gas emission reduction by 2050.

The Showa Denko Group has established thefollowing roadmap for the period from 2030 to 2050and has begun preparing an action plan that primarilyaims at drast ic energy conservat ion for currentmanufacturing methods and a radical shift in productiontechnologies and raw materials and fuels.

Japan’s total greenhouse gas emissions (FY)

Referenceyear

2006

1,4001,2001,000

800600400200

0

(million tons-CO2) Other greenhouse gases(CO2 not derived from energy)(Methane)(Nitrous oxide)(HFCs)(PFCs)(SF6)Energy-derived CO2

Energy-derived CO2 emissions in Japan by segment (FY)

Industry Transpor-tation

Commercialand service

Household Energyconversion

600

500

400

300

200

100

0

(million tons-CO2) Reference year 2006

482460

217 254

164

229

127 166

67.9

77.3

GHG emissions by the Showa Denko Group (FY)See page 48 for the scope of Group companies

Reference year1990

2007 Result

2006 Result

Target forthe period

2012 Forecast

2016 Forecast

3,500

3,000

2,500

2,000

1,500

1,000

500

0

(kt-CO2)

-25% fromreference year

2020 Guidepost

-40% from reference year

2030 Guidepost

Special Feature Achieving a Sustainable Society

Showa Denko Group’s Promise:

6%reductionsfrom 1990 Levels in greenhouse gas emissions

1211

Special Feature Achieving a Sustainable Society

To reduce greenhouse gas emissions by 40% from 1990 levels bythe year 2030, Showa Denko seeks the views of experts and researchers.For example, on May 13, 2008, we invited three specialists as panelists,leading to an energetic exchange of views within our company.Presented below are some of the topics discussed at the meeting.

Greater focus on communication

From the viewpoint of a corporate CSR assessor forinvestment markets

Mr. Masahiko KawamuraSenior Researcher at NLI Research Institute

After completing a master’s program in the Kyushu UniversityGraduate School of Engineering, Mr. Masahiko Kawamuraentered the Mitsui Ocean Development & Engineering Co., Ltd.(MODEC), then joined the NLI Research Institute in 1988. Hehas been active in various surveys and research, mainly onurban issues, environmental management, assessments ofcorporate environmental performance, corporate socialresponsibility, and environmental communications. He alsoserved in the Environmental Communicat ion Awardsexamination workgroup and in the Secretariat of the JapanEnvironmental Management Awards.

Survey and research results-ledcorporate strategy desired

¡I’d like corporations to achieve sustainablegrowth by accurately identifying the riskscreated by climate change and incorporatingthis understanding into corporate strategies.

¡In countr ies character ized by rapid,widespread economic development, I havehigh expectations for contributions from themultinational corporations with advancedtechnologies that operate in such countries.Meeting these expectations is an essentialissue to be addressed in the future.

¡Showa Denko is making a sincere effort toaddress greenhouse gas reductions, andthese activities have begun to pay dividends.My view is that the company should makethese activities widely known to those insideand outside the company.

Viewpoint of a scientist activein global warming research

Dr. Seita EmoriChief of the Climate Risk AssessmentResearch Section, Center for GlobalEnvironmental Research, National Institutefor Environmental Studies

After completing the doctoral program at the Tokyo UniversityGraduate School of Arts and Sciences, Dr. Seita Emoriassumed his current position in 2006. He also serves as GroupLeader at the Frontier Research Center for Global Change atthe Japan Agency for Marine-Earth Science and Technologyand is guest associate professor at the Center for ClimateSystem Research at the University of Tokyo. He specializes inmeteorology and is active in research on global warmingpredictions based on computer simulations.

More attention should be directedto natural energy sources

¡Needless to say, compliance with laws andindustry-specific regulations is mandatory inJapan and at overseas sites wheremanufacturing facilities are located. But Ibelieve foresight and preemptive action willbecome increasingly critical.

¡As a climate change measure and to end ourdependence on oil, we will need to examineour use of natural energy sources.

¡As the two other specialists have pointedout, Showa Denko needs to publicize thecharacter of the Showa Denko corporategroup and how group activities contribute tosociety. I would hope to see a more activeapproach to public relations on the part ofShowa Denko.

Viewpoint of an NPOthat studies global climatechange, energy policies, and social trends

Ms. Mika OhbayashiDirector of Institute for Sustainable EnergyPolicies (incorporated nonprofitorganization) and Vice-Chairperson ofGreen Energy “law” Network Japan

Ms. Mika Ohbayashi is involved in energy and nuclear powerissues in Asia, helping to establish the Institute for SustainableEnergy Policies in 2000. She actively consults on andadvocates for local energy policies and related issues ininternational forums, such as the COP and has served onnumerous committees for environmental and energy policy invarious government divisions, including the Ministry of theEnvironment, Ministry of Economy, Trade and Industry, and theTokyo Metropolitan Government.

In Response toGuidance and Suggestions

Our Group PolicyWe pursue and publicly discloseour own independent measures.

Showa Denko consults expertsto helpattain targets

¡Showa Denko recognizes visualization ofenvironmental activities as a crucial issue.Starting from this year, we will disclose ourachievements and targets for group GHGemissions, the 2050 roadmap, and the PDCAcycle of activities, at the appropriate times.

¡The CSR Report (report on environmental andsocial activities) discusses our activities alongthe axis of time and the PDCA cycle, seekingto clarify these issues for our stakeholders.

¡As part of these efforts, we are developing aprogram that improves understanding ofGroup businesses, products, and productionactivities through discussions between thehead off ice and stakeholders at eachbusiness site.

¡We will establish a roadmap for Group-wideGHG reductions, including overseas bases.We also incorporate natural energy sourcesinto strategies for achieving the targetsspecified in our roadmap, make use of socialsystems such as emissions trading. Weexamine the appl icat ion of proprietarytechnologies.

¡Showa Denko’s efforts to contribute to theenvironment and society and i tsachievements should be visualized in variousways. To do this, Showa Denko needs tostrengthen activities at overseas productionbases, disclose that information, and clearlypresent its PDCA cycle (see page 28 fordetails) in Japan.

¡While the company engages in voluntaryemissions trading within the Group as ameasure to combat global warming, thecompany should introduce “software”systems for the entire Group, including anemployee assessment and rewards programand participation in NPO programs. I also feelthe company should publ icize the topmanagement’s commitment to the GHGreductions stipulated in the medium-termbusiness plan.

¡ I believe Showa Denko should promoteenhanced communication with individualsand organizations outside the Group toaddress the “perception gap” with respect toShowa Denko between those inside andoutside the company. I suggest appointing aspokesperson (the “face” of Showa Denko),clar i fy ing GHG risks and opportunit iesthrough IR, and holding CSR Report readingsessions.

�Aluminum beverage cansAluminum is light (at one-third the weight of iron),

rust-resistant, conducts heat easily, and is easilyworked. For these reasons, it is an essential material forconserving energy by enabling reductions in the weightof parts and finished products.

Aluminum is produced by applying electrolysis toalumina (aluminum oxide). Because this process, knownas electric smelting, consumes significant amounts ofelectricity, it is also sometimes called “packing electricityinto a can.” However, the amount of energy used toproduce recycled aluminum is just 3% of the amountrequired for electric smelting. The rate of aluminumrecycling in Japan is more than 90%. This is a goodexample of ecologically-sound activities becomingcommon practice in our daily lives.

In 1934, the Showa Denko Group was the first firmto produce aluminum using technology developed inJapan. It produced Japan’s first aluminum cans in1969.

�Recycling waste plastic for chemical production

The issue of waste disposal is one of the mostimportant environmental issues at home, in companies,and for local governments. Showa Denko operates aplant that produces ammonia from waste plastics.

Ammonia is ordinarily produced from hydrogen byreducing crude gasoline (naphtha). At this plant,petroleum-based plastics are reduced to hydrogenthrough gasification, resulting in raw materials forproducing ammonia similar to that produced fromnaphtha. The ammonia produced through this processis known as EcoannTM.

In addition to serving as a raw material for use insynthetic fibers, resins, adhesives, and fertilizers,ammonia helps reduce environmental impact as a

reducing agent for the nitrogen oxide discharged fromthermal power plants and factories.

EcoannTM is designated as a product eligible forgreen procurement at six power companies in Japan.

1413

Introduction to environment-friendly products and services

Produce Ammonia by recycling waste plasticAmmonia is usedin many ways!5 Crush and

Knead!1

Gasify plastic2Produceammonia!3

Ammoniacleans the air4

Recycled wasteplastic Ammonia

Produced byHydrogen and

nitrogen

LowtemperatureGasification

furnace

RPFstockyard

Metal recycle

Metal and Glass

Raw material of road

Raw material of caustic soda

Slag

Sodium hydroxide

Chlorine

Sulfur

Salt

Desulfurization system

CO Conversion system

Gas cleaner

Compositegas

Recycled waste plastic

Crusher

Metal separator

Extruder

Refuse Plastic Fuel

Reform forrecycle

Crush plastics

Remove metals

Form plastics

HightemperatureGasification

furnace

Electrolysis systemElectrolysis system

Ammonia plant

day day

Clear resin

Acrylic fiberAcrylic fiber

Fertilizer

Nylon

GlueGlue

Denitrationmaterial Clean up the gas from

factory and power plantfactory and power plantClean up the gas fromfactory and power plant

�Light-emitting diode (LED)Some of the various LED characteristics currently

attracting attention include:¡Long life: Ideal for applications in which bulb

replacement poses difficulties.¡Low power consumption: For traffic signals, an

LED light only consumes 12 watts of powerwhile a conventional light bulb consumes 70watts.

¡Enables compact dimensions: A superior lightsource in terms of design parameters.

¡Directivity: Since LEDs generate light within arange of specified angles, they enable the mostefficient use of light possible.

In the near future, as manufacturing costs declineand usage broadens to home lighting, LEDs promise tocontribute to energy conservation.

The Showa Denko Group provides a full line ofLEDs covering all wavelengths from infrared throughultraviolet light.

�Fuel cellsWhen an electric current is passed through water,

the water decomposes into hydrogen and oxygen. Afuel cell is a battery that reverses this reaction to deriveelectricity from hydrogen and oxygen. Since no CO2 isgenerated in deriving energy from a fuel cell, this issometimes called “clean energy.”

Although fuel cells were first used in the form ofphosphoric-acid fuel cells used as power supplies forhospitals and office buildings, in recent years, polymer-electrolyte fuel cells (PEFCs), which function at normaltemperatures, have entered use, powering homegenerators and railcars.

Today, the hydrogen produced by Showa Denkois expected to enter use as fuel for fuel cells. Showa

Denko is also developing technologies for massproducing the components used in PEFCs, known ascarbon separators.

Aluminum cans

CO2 emission resulting from production of 1 kg of ammonia(for Showa Denko K.K.)

CO2 emission

Current processUsing city gas and hydrogen from waste plastic(rate of feedstock from waste plastic: 34%)

Traditional processUsing city gas only (collected waste plastic isincineration-disposed of)

2.4kg

3.7kg

Special Feature Achieving a Sustainable Society

Starting as an electrochemical company, Showa Denko has beenproducing a wide variety of products closely linked to everyday life.Showa Denko will continue developing environment-friendlyproducts that reduce greenhouse gas emissions through constantcommunication with its stakeholders.

Showa Denko producing environment-friendly products

Corporatesymbol mark

s

Principle of the waterelectrolysis

Principle of thefuel cell

Solarbattery

OxygenHydrogen

Electron

(Water) (Electron) (Hydrogen) (Oxygen) (Water) (Electron) (Hydrogen) (Oxygen)

Noteworthy activities in 2007 Other important topics are introduced below.

1615

In accordance with the Passion Project, the three-year consolidated business plan coveringthe period from 2006 through 2008, the Showa Denko Group seeks to contribute to the soundgrowth of international society by providing individualized products and services based ontechnologies accumulated over many years. In the second year of this plan, we achieved steadyimplementation of policies targeting sustainable growth.

Progress with the Passion Project Medium-term Consolidated Business Plan

Contributing to the sound growth of international 　societyby providing individualized products and services

*1 D/E ratioThe D/E ratio (debt to equity ratio), the ratio of long-term debt tostockholders’ equity, indicates the relative proportion of debt tocapital. The ratio is expressed by the following formula: D/E ratio =Interest-bearing debt (at the end of fiscal term) ÷ Stockholders’ Equity(at the end of fiscal term)

Achievement of numerical targetsin the second year of the Passion Project

Growth driver: Hard disk mediaDemand for hard disk drives (HDDs) has increased

in recent years, with wide adoption in consumerelectronic products such as HDD-based high-definitionrecorders and video cameras and notebook PCs. Inparticular, orders have leaped for large-capacity HDmedia used in consumer electronic products.

Our advanced technologies lead the industry, withthe launch of the world’s first HD media based on aperpendicular magnetic recording (PMR) technologyand HD media with the world’s largest recordingcapacity. PMR-technology-based products accountedfor approximately 75% of all our HD media shipments atthe end of 2007.

We plan to further increase the recording capacityand added value of our HD media to strengthen oursuperiority in the fast-growing consumer electronicsmarkets. We also plan to expand our already leading

market share, aggressively addressing, based oninnovat ive technologies, the technologicaldevelopments needed for next-generation HD media.

Our HD media plant in Singapore (Showa Denko HD Singapore Pte. Ltd.)

Base business strategy: Rare earth magnetic alloys

Demand for high-performance magnets—used inmotors and electric power steering systems for hybridcars as well as in HDD voice coil motors—has beenexpanding year after year. We manufacture rare earthmagnetic alloys, using neodymium, and supply them tomagnet producers.

In 2007, we began operating a manufacturingplant in Ganzhou, Jiangxi Province, in China to produceneodymium-based magnetic alloys, thereby ensuringstable product supply. Together with the plant operatingin Baotou in Inner Mongolia, China, and the ChichibuPlant, we now have an annual production capacity of8,000 tons.

�Expanded production capacity for large-diameter graphite electrodes

Showa Denko has expanded its production capacity inJapan and the U.S. for large-diameter 30-inch and 32-inchgraphite electrodes for electric steelmaking. Electric steel ismade from scrap iron, helping to conserve both resources andenergy. Thus, electric steel production is increasing worldwide.In 2007, to meet rising demand in Japan and overseas, weincreased annual production capacity for large-diametergraphite electrodes from 15,000 tons to 20,000 tons.

�Strengthened car air-conditionerheat exchanger operations in China

In June 2006, Grand Ocean-Showa Auto AirConditioning (Dalian) Co., Ltd., a manufacturer of car air-condit ioner heat exchangers in China, became our

consolidated subsidiary. In May 2007, the companyincreased production capacity and began production of newNRTⅢTM condensers, offer ing performance gains ofapproximately 20%.

Showa Denko Carbon, Inc. in the U.S.

Rare-earth magnetic alloy productionfacilities in China

Achievements

In all items except for the ratio of operating incometo sales, we exceeded the second-year numericaltargets specified in the Passion Project. Interest-bearingdebt at the end of the term and the D/E ratio*1 alsoimproved significantly over target values.

Business strategies

The Passion Project divides the business portfoliointo three categories: growth drivers, base businesses,and new growth drivers. In the second year of thismanagement plan, we strengthened growth drivers and

base businesses whi le act ively promoting thedevelopment of new products, which will become ournext-generation growth drivers.

New growth driver:Ultrabright LED chips

Showa Denko is a leading manufacturer with thecapacity to supply ultrabright LED chips in all threeprimary colors of red, green, and blue. We will launchfull-scale mass production of InGaN-based ultrabrightblue/green LED chips and AlGaInP ultrabright LEDchips.

With applications emerging for these LEDs invarious fields, including outdoor displays, automobileparts, LCD backlight for flat-panel TVs and PCs, andgeneral lighting, demand for LEDs is expected to growby leaps and bounds. We plan to construct aproduction system with a monthly capacity of 400

million units of these new LED chips. At the same time,we will strive to achieve further quality improvementsand strengthen our competitiveness.

Ultrabright LED chipscovering the wholewavelengths

Target for 2007 in thePassion Project Achievement for 2007

Sales(in 100 million yen)Operating income(in 100 million yen)

Ratio of operatingincome to sales (%)

Interest-bearing debtat term end(in 100 million yen)

D/E ratio (times)

8,700

730

8.4%

4,353

1.6 times

10,232

767

7.5%

3,956

1.4 timesBaotou

Ganzhou

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Active around the world, the Showa Denko Group contributes to the development ofregional communities by ensuring compliance with the laws of the countries in which its facilitiesare located and by paying close attention to the environment, safety, and health of localresidents. In activities related to the international chemicals trade, the Group abides strictly byinternational regulations and procedures, as well as the laws and regulations that apply withinthe respective countries, and further, provides safety information in local languages.

The third All-China Conference

The third All-China Conference was held in 2007,with 16 participants attending from 10 Group membercompanies based in China and from Showa Denko’shead office. The conference addressed topics such asinformation networking and human resource development.

In addition, in July and December, the annual conference of managers assigned overseas was held inTokyo to exchange infor-mation on topics such asCSR and risk manage-ment.

SAT awarded a prize from Thai authority

Showa Aluminum (Thailand) Co., Ltd. (SAT) has wona Labour Welfare and Labour Relations award fromThailand’s Ministry of Labour.

This award, first awarded in 2003, is presented tofirms identified for excellence in labor/managementrelations among the 400,000 operating in Thailand. Thismarks the third consecutive year in which SAT has beenrecognized by this award.

Global Topics 1 Global Topics 2

Scholarship programsat three Chinese universities

Showa Denko has established scholarship programsat China’s Dalian University of Technology (in LiaoningProvince), Zhejiang University (in Zhejiang Province), andShanghai Jiao Tong University (in Shanghai). By establish-ing these scholarship programs, the company willstrengthen its ties with each university and help supporteducational businesses, in addition to contributing tohuman resource develop-ment in China, which con-tinues to experience sus-tained growth.

CSR Office exchanges informationwith overseas subsidiaries

In 2007, Showa Denko’s CSR Office init iatedinformation exchange with overseas subsidiaries withrespect to various issues related to their sites as part ofGroup efforts in the areas of risk management andcommunity relations. In 2007, the Group exchangedinformation on topics such as risks, compliance,community relations, and communication with employees,as well as the cultures and practices in each country, with14 companies in six countries.

These efforts will continue into the future, as theGroup works to identify issues of concern, to performcross-functional efforts groupwide, and to resolve theindividual issues faced by each company.

Global Topics 3 Global Topics 4

ドイツ

Sales offices Showa Denko (Europe) GmbH

Showa Denko Singapore (Pte.) Ltd.

Showa Specialty Gas Singapore (Pte.) Ltd. Showa Specialty Gas (Taiwan) Co., Ltd. Showa Denko (Shanghai) Co., Ltd. Shanghai Showa Chemicals Co., Ltd. Korea Showa Chemicals Co.

Showa Denko HD America Corp. Showa Denko America, Inc.

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Production-companies SHOTIC Europa-Industria de Aluminio Lda. Showa Aluminum Czech,s.r.o. PT. Showa Esterindo Indonesia SHOTIC (Singapore) Pte. Ltd.

Showa Denko HD Singapore Pte. Ltd. Showa Denko HD (Malaysia) Sdn. Bhd. Eternal Showa Highpolymer Co., Ltd. Showa Aluminum (Thailand) Co., Ltd. Showa Aluminum Manufacturing Philippines Corp. Taiwan Showa Chemicals Manufacturing Co., Ltd. Showa Denko HD Trace Corp.

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Ganzhou Zhaori Rare Earth New Material Co., Ltd. Shanghai Showa Highpolymer Co., Ltd. Lianyungang Zaoling Abrasives Co., Ltd. Showa Denko (Dalian) Co., Ltd. Grand Ocean-Showa Auto Air Conditioning (Dalian) Co., Ltd. Baotou Showa Rare Earth Hi-tech New Material Co., Ltd. Crystal Specialties, Inc. Showa Denko Carbon, Inc. Showa Aluminum Corporation of America CVG Venalum Shanghai Showa Specialty Purification Co., Ltd.

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Sales offices Head Office Fukuoka Branch Osaka Branch Nagoya Branch

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Production/R&D facilitiesOita Complex Showa Aluminum Can’s Ohmuta Plant Tokuyama Plant Showa Highpolymer’s Tatsuno Plant Sakai Plant Hikone Plant/Showa Aluminum Can’s Hikone Plant Shiojiri Plant Omachi Plant

Showa Titanium/Showa Denko Kenso Chichibu Plant Yokohama Plant Kawasaki Plant Chiba Plant/Showa Denko Electronics Corporate R&D Center (Chiba) Showa Highpolyme’s Isesaki Plant Oyama Plant/Showa Aluminum Can’s Oyama Plant Nasu Plant Higashinagahara Plant Kitakata Plant

Operation sites overseas Major production/R&D/marketing sites in Japan

Showa Denko Group’s Operation Sites

Promoting Global CSR Management

All-China Conference(Lianyungang, April 2007)

SAT receives commemorativeplaque from Prime Minister

Surayud (September 2007).Signing ceremony at Zhejiang

University (June 2007)

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SHOWA DENKO CSR REPORT 2008

The Showa Denko Group established and implemented the following CSRpolicies in 2007:

All activities to date were reported and summarized at the CSR meetingheld in December 2007 as follows:

“While progress has been made, including improvements in core aspectsof CSR and the promulgation of CSR and CSR awareness through businessactivities among employees, the targeted levels have yet to be attained, asindicated by inadequate establishment at the group level and the discovery ofrisk/compliance-related problems. CSR Development must be enhanced byremedying areas of inadequacy.”

2008 marks the third year of the medium-term CSR plan at the ShowaDenko Group. It also marks the third stage – a stage of expansion – followingthorough promulgation in the first year and building solid foundations in thesecond year.

With regard to the Showa Denko Group’s CSR efforts, we are determinedto do our utmost to gain the understanding and support of all ourstakeholders.

General Policy: Firmly establish CSR-based management,as the second stage

Building a firm foundation for CSR at Group companies in Japan and overseas

Sustained efforts to enhance the following core aspects of CSR: Compliance, comprehensive risk management, Responsible Care

Promoting business activities to meet the expectations of all stakeholders

2007 plans 2007 achievements 2007evaluations 2008 plans

Compliance

Risk management

Internal controlsystem

Sustained improvements in compliancestructure established in 2005/2006

Continuing promotion of the specifiedcompliance training and education

Successful launch of the Risk ManagementCommittee

Confirmation of sustained improvements inrelevant structures at each site through RCactivities and risk assessments

Building a firm foundation for PDCAin RC activities

Continuing training and educationactivities concerning specific lawsand regulations

Introducing the PDCA principle to riskmanagement

Promoting response to BCP and newinfluenza strains

Starting system confirmation prior tofull-scale start-up (January 2009)

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Continuing individualized training andeducation activities for legal, security, andrelated affairs.

Establishment of Risk ManagementCommittee (January)

Promoting countermeasures

Promoting BCP*1 compilation

Listing and assessment of groupwidehazards and risks

Promoting the project on internal controlsrelated to financial reports

Establishing internal control system inresponse to the Financial Instruments andExchange Law

Corporate governance Preparing for outside director systemContinuing improvements to the corporategovernance structure

Communicating withstakeholders

Maintaining lines of communication withcustomers through business transactions

Reducing complaints

Continuing IR activities(Promoting overseas IR)

Continuing IR activities(Promoting overseas IR)Promotions described in IR plans

Maintaining lines of communication with thelabor union

Revision of Guideline for Code of Conductand corresponding training and educationefforts

Development and promotion of theCSR cooperative issues

Promoting awareness of the Code ofConduct

Employee awareness surveys

Starting free-form discussions on CSRcooperative issues

Preparing for CSR procurement and itsstartup

Starting CSR procurement anddialogue with business partners

Investigating and preparing to establish aCSR procurement system

Maintaining community dialogue at differentsites Promoting bilateral dialogueAdvancing community dialogue through

traveling exhibits

Assessing the corporate reputation*2

Implementing medium-term consolidatedbusiness plan

Increased revenues/profits, improvedfinancial strength, achievement of targets

Implementing the medium-termconsolidated business plan (aiming toattain final year targets of the plan)

Increasing corporatevalue

Contributing tosociety’s soundgrowth throughbusiness activities

Preparing CSR reportsfor respective sites

Business sites at which “site CSR reports”were prepared2006 report: 1 ⇒ 2007 report: 7

Continuing preparation of “site CSRreports”

Interactions withsociety

Responding todiversifyingemploymentpractices

Promoting effectiveresponse to diversifyingemployment practices

Launching the project to promote theactivities of female workers

Continuing response to diversifyingemployment practices

Improving human rights programs

Employees

Reported on pages 29, 30Responsible Care (RC)

Gathering opinions through dialogue andquestionnaires

Revision of Guideline for Code of Conduct(January 2008)

Continuing dialogue with customersthrough business transactions

Reducing complaints

Identifying action items through upgrades (at63 sites) and improvement proposals

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Customers and consumers

Shareholders

Employees

Partners

Society

�...Achieved �...Not achieved (exceeding 80%)

The Showa Denko Group seeks to earn society’s full trust and confidence through its products, services, and businesses, in this way fulfilling its corporate social responsibility (CSR).

CSR Management

*1 BCP: Business Continuity Plan. Refers to precautionary measures to minimize production/supply interruptions due to earthquakes, typhoons, andother disaster situations

*2 Corporate reputation: Refers to public perception and assessments of a company; concept extending beyond the brand image

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Showa Denko Group’s Vision

We at the Showa Denko Group will provideproducts and services that are useful and safe andexceed our customers’ expectations, therebyenhancing the value of the Group, givingsatisfaction to our shareholders, and contributingto the sound growth of international society as aresponsible corporate citizen.

Code of Conduct1We will develop and provide useful and safe technologies, products, and services to contribute to the

sound growth of society.2We will observe the laws of Japan and of the foreign countries in which we operate, abide by Company

rules, and strive to maintain the social order. 3We will conduct business in Japan and abroad based on the principle of fair and free competition. 4We will do our best to ensure safety and to protect the global environment. 5We will make sure that we maintain good communications with the public and disclose accurate

information on our Company in a timely manner. 6We will respect human rights and create a cheerful and comfortable working environment. 7We will act as a member of the international society and contribute to the development of the regions in

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Organization for promoting CSR

In July 2005, Showa Denko established a CSRCommittee and a CSR Office to integrate and toaggressively implement Group CSR activities.

The CSR Committee is responsible for consideringand determining basic policies and comprehensivestrategies and for managing all CSR-related activitiesundertaken throughout the Group.

As the secretariat for the CSR Committee and theRisk Management Committee, the CSR Office plans

basic Group CSR policies and strategies, gathers CSR-related information, coordinates efforts to ascertain andevaluate the progress of Group CSR activities, andformulates risk-management strategies for the entireGroup.

In addition, we have assigned CSR managers ateach sector, plant, office, and Group companies toimplement CSR activities throughout the Group.

Group management

The Showa Denko Group has formulated itsVision, Code of Conduct, medium-term business plans,management policies, and annual action plans whilerespecting the independence of affiliate companies.

Group affiliates undertake business activities incooperation with sections in charge of their businessesand report on the execution of their business activities inaccordance with Group management rules.

Risk management is carried out on a Group basisin accordance with Group’s risk-management rules. The

Group works to ensure thorough compl iancethroughout the entire Group by establishing guidelinesfor corporate conduct based on business type andconditions of affiliates.

Showa Denko auditors and internal-audit sectionsaudit and examine the performance of affiliates asnecessary. In addit ion, auditors work to ensurecoordination with corporate auditors of key affiliates invarious ways, including periodic meetings.

Corporate governance

Showa Denko works to ensure the soundness,effectiveness, and transparency of its management andto continually improve its corporate value. To this end,the Group is improving its corporate governance (e.g.,internal control systems and fraud-prevention functions)based on the following strategies:

¡Strengthening compliance¡Strengthening management supervision and

oversight functions¡Clarifying management responsibilities¡Rapid, effect ive decision-making and task

implementation¡Strengthening the information disclosure system

Corporate governance

Corporate Vision

When its medium-term consolidated business planwas formulated in January 2002, Showa Denko definedits Vision. In August 2005, we partially revised itswording to emphasize corporate-wide CSR activitiesand to establish better relationships based on trust withour stakeholders all over the world.

Code of Conduct and Guidelines

In 1998, Showa Denko established its Code ofConduct, which sets forth the behavior expected of thecompany and fundamental goals for its executives andemployees. In 1999, the company further establishedthe Guidelines, which provide specific examples relatedto compliance with the Code of Conduct. In 2005,

these guidelines were revised from a CSR perspective.Based on the Corporate Vision, this Code of Conductand its Guidelines represent fundamental Showa DenkoGroup principles in its CSR efforts and we all strive toput them into practice.

Showa Denko’s management organization

Board of DirectorsShowa Denko separates i ts management

oversight and business executive functions, assigningthe former to the Board of Directors and the latter to itsCorporate Officers.

The Board of Directors consists of 12 directors,including one outside director. Chaired by the Chairmanof the Board of Directors, who does not serve ascorporate officer, the Board both determines thecompany’s fundamental policies and considers andmakes decisions on matters st ipulated in theCompanies Act and the Articles of Incorporation, inaddition to decisions related to key issues regarding theexecution of business operations. The Board ofDirectors also oversees each Director’s executiveactions.

Board of AuditorsShowa Denko employs an auditor system. The

Board of Auditors consists of five auditors, includingthree outside auditors. Auditors attend meetings of theBoard of Directors and other important meetings withinthe company, offer opinions when needed, and auditthe execut ion of business operat ions, offer ingsuggestions and advice to ensure that the Companyoperates in a sound manner. Auditors also seek tostrengthen consolidated Group management byenhancing the overall auditing of Group member

companies.

Corporate OfficersTo ensure swift decision-making in the execution

of business operat ions and to invigorate suchoperations, Showa Denko has adopted a corporateofficers system.

CSR CommitteeShowa Denko has established a CSR Committee

at the highest management level to oversee al lmanagement strategies from a CSR perspective.Chaired by the President & CEO, the CSR Committee’smembership consists of members of the ManagementCommittee.

Management Committee and R&D Committee

Meeting weekly in principle, the ManagementCommittee consults and makes decisions on issues tobe submitted to the Board of Directors and on importantgeneral issues related to company management. TheR&D Committee deliberates and makes decisions onimportant issues related to research and development.

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Decision-making/supervision

Corporate governance structure

Business execution

Corporate Officers

Business sectorsManagement Committee

R&D Committee

Corporate Ethics CommitteeSecurity Export Control Committee

Responsible Care Committee

Safety Measures Committee

IR Committee

Risk Management Committee

CSR Committee

Audit OfficeCooperation

Audit

Business audit

Accounting audit

Accounting office

Shareholders’ meetings

Board of Directors (Presided over by company Chairman)

President & CEO

Board of Auditors

Auditors

Internal audits

The risk-management PDCA cycle

Criteria for assessing potential consequences of risks

Listing risksPromoting countermeasures

Management review

Proposing responses to companywide topics

Organizing companywide topics

Company summaries

Assessing the potential consequences of risks

Analyzing current conditions

Implementing risk countermeasures

Section summariesThe Risk Management Committe identifies and takes measures against top level risk factors.

Frequency

Size (amount) of losses

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B

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Business-sector structureTo clar i fy i ts system of responsibi l i ty for

implementing business operations, Showa Denko hasadopted a structure based on business sectors. Toensure thorough performance evaluations that focus onresults, we have also implemented a system forevaluating the performance of business sectors.

CommitteesShowa Denko has established a number of

committees to handle specific issues central to theexecution of business operations. These include theRisk Management Committee, the Corporate EthicsCommittee, the Responsible Care Committee, theSecuri ty Export Control Committee, and the IRCommittee. Each committee conducts investigation,research, and deliberations related to its areas ofresponsibility.

Audit OfficeAs an organization under the direct authority of the

President, the Audit Office performs internal audits. TheAudit Office investigates the status of execution ofcompany business operations, including those of Groupmember companies, and verif ies their accuracy,appropriateness, efficiency, compatibility with Groupmanagement policies and plans, and soundness.

Legal AdvisorShowa Denko works to ensure compliance with

laws, obtaining advice on legal matters from its LegalAdvisor as needed.

Accounting auditsShowa Denko works to ensure the soundness of

i ts accounting pract ices, undergoing per iodicaccounting audits by certified public accountants.

Risk Management

Showa Denko regards risk management as one ofthe most important aspects of company management.As such, the company seeks to improve, maintain, andpromote its risk management system.

In 2007, we established the Risk ManagementCommittee to promote risk management groupwide.

In addition, specific risks involving matters such asenvironmental protect ion, securi ty and disaster

prevention, chemical substances, quality, intellectualproperty, fair transactions, export controls, andcontractual agreements are managed through a systemof prior examination and decision-making in accordancewith internal regulations. Actions taken in the event ofemergencies, including accidents and disasters, areimplemented as stipulated in the emergency situationaction guidelines and other internal regulations.

Risk Management

Risk Management CommitteeThe Risk Management Committee prioritizes risks

involved in company policies and plans through allGroup member companies, based on evaluations ofeffects and potential frequencies of occurrence. TheCommittee also provides support for the formulation and

promotion of measures to counter such risks. Inaddition, important issues of concern to all Groupmember companies are subject to deliberation anddecision-making from a wide range of perspectiveswithin the CSR Committee.

The risk-management PDCA cycle

Since 2007, the Group has listed its risk factors,assessed the importance of risks, proposed andpromoted risk countermeasures, and implementedannual reviews, all with the goal of promoting thoroughrisk management.

The results of these efforts are summarized andpresented at the meetings of the Risk Management

Committee. The information is organized into specifictopics addressed companywide, based on whichcross-functional efforts are implemented companywide.

In 2007, the results of these summaries were usedto launch companywide efforts in the areas of theBusiness Continuity Plan (BCP) and countermeasuresagainst new influenza strains.

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Achieving a safe, peaceful society starts with everyday dutiesAlthough the topic of security may seem distant from our everyday lives, all

our products can be used in weapons of mass destruction or in ordinaryweapons. For this reason, careful review is required to identify the purpose of useand the users of our products.

Our internal rules, manuals, and electronic account settlement system areamong the most reliable in this field. By complying with these rules and systemsand with applicable laws and regulations, we hope to contribute to a world inwhich we can all live free from worry.

Secretariat Leader, Security Export Control Committee

Kazunori Sakimoto

Supporting the company by protecting important informationLeaks of personal or corporate information can shatter the trust of

stakeholders.The number of recent cases in which individuals have approached

companies with the clear intent to do harm or misappropriate information hasincreased. We need to be ever more vigilant.

Doing so involves considerable responsibilities in which flawless results mustbe achieved day after day. It’s highly rewarding to provide such support to thecompany as a staff member.

Manager, Information Systems Office

Takeshi Onikubo

Corporate-ethics-related brochure

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Information SecurityWith the rapid growth of the Internet, the quality

and volume of the information a company can handleand the speed at which it can do so have growndramatically. At the same time, it is now easier to fallprey to information-related crimes and accidents,including the theft of personal information concerningindividuals, leaks of internal company information, orunauthorized alteration of company websites.

In 2002, Showa Denko established its BasicGuidelines for Information Security and its informationSecurity Regulations. In addition to minimizing businesslosses by limiting the number of accidents involvingdata, it has built a structure to ensure the continuity of

business operations.In 2005, Showa Denko strengthened measures to

prevent unauthorized access from outside the companyand information leaks by upgrading access controls onits network and implementing continuous networkmonitor ing. In addit ion, in response to theimplementation of the Personal Data Protection Law, itestablished Personal Information Protection Guidelinesand implemented an internal control system.

Under its Business Continuity Plan (BCP), ShowaDenko intends to maintain the trust of its stakeholdersby taking appropriate safety measures to protect thecompany’s information assets from the wide range ofthreats they face.

Corporate Ethics Hot LineWe established the Corporate Ethics Hot Line to

serve employees of al l Showa Denko Groupcompanies. This system seeks to prevent or quicklycorrect any incidents such as violations of corporateethics or laws, regulations, or company rules. TheCorporate Ethics Hot Line focuses on a stringentrespect for the pr ivacy of employees seekingconsultation. This system ensures no employees will bepenalized for doing so; further, employees can reportinformation or consult directly via the company intranet,e-mail, telephone, letters, or other means.

Since January 2005, the services have beenmade available at outside law offices, in addition to theiravailability within the company.

Corporate Ethics MonthSince January 2004, we have designated each

January as Corporate Ethics Month.During Corporate Ethics Month, all executives and

employees of each Group member company in Japancarefully read the Code of Conduct and its Guidelines torefresh their understanding of the importance ofcorporate ethics, and each reexamines his or her ownindividual actions. In addition, each executive andemployee signs a declaration of compliance with theCode of Conduct and the corresponding Guidelines.

Compliance

We place adherence to societal norms andbusiness ethics at the top of our management agenda,emphasizing compliance with laws and regulations incarrying out our operations. Although we had alreadyfirmly promoted legally compliant management at allcompanies within the Showa Denko Group, we

established the Corporate Ethics Committee in January2003 to ensure thorough implementation of legallycompl iant management from an organizat ionalperspect ive. In 2005, we further enhanced thecompliance system in each business sector, seeking toproactively prevent misconduct.

Security Export ControlsIn today’s world, with concerns about the

proliferation of weapons of mass destruction andterrorism, we recognize the need to increase security bystrengthening trade controls covering the export ofproducts and technologies.

Showa Denko established the Security ExportControl Committee in 1987 and has undertaken toimplement appropriate export controls. When Japan’sCatch-all Controls*1 went into effect in 2002, ShowaDenko adopted an electronic approval system to handleexport controls appropriately and promptly to satisfy thegoals of the Catch-al l Controls. We have alsoestablished a system in which the Security ExportControl Committee is involved in all relevant exporttransactions to ensure nothing is overlooked with regard

to controls on exports of goods and technologies.In addition, to ensure thorough compliance with

Japan’s Foreign Exchange and Foreign Trade ControlLaw, Showa Denko is pursuing activities (includingraising awareness of security-related export controls)intended to ensure that all personnel in the relevantsections--including those in Group member companies--are aware of export controls and monitor theircompliance with such controls. In this way, ShowaDenko seeks to prevent incidents such as il legalexports.

*1 Catch-all Controls A system under which, in principle, an application for exportapproval must be submitted before exporting any product thatcould be used in the development of weapons of mass destruction.

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The PDCA cycle

The Showa Denko Group works to achievecontinuous improvement in its Responsible Careactivities through the plan-do-check-act (PDCA) cycle offormulating Responsible Care activity plans (plan),implementing these (do), auditing and evaluating theresults (check), and reflecting these via managementreview in the next round of objectives and activity plans(act).

“Responsible Care” is the chemical industry’s global voluntary initiative, representing a commitment to worktogether to continuously improve the environmental, health, and safety performance of chemicals over theirentire life cycles, namely, the development, production, distribution, use, final consumption and disposal.

What is Responsible Care?

Responsible Care Action Guidelines1Throughout the entire life cycle of chemical substances, we shall make our best efforts to review and improve business activities from the

viewpoints of ensuring safety and health and protecting the environment.2In manufacturing activities, we shall make our best efforts to reduce the burden on the global environment not only through conventional

approaches to environmental protection but also through promotion of switching raw materials, energy conservation, waste reduction andrecycling, and reductions in the release of chemical substances.3In the development of new products and businesses and in the establishment, enlargement, and renovation of facilities, we shall

undertake our best efforts to ensure safety and health and to protect the environment.4We shall promote R&D and develop technologies that will contribute to the improvement of safety and health and to the protection of the

environment. We shall also promote the marketing of alternative or new products.5We shall investigate the effects of the products and materials we handle on safety, health, and the environment, and we shall encourage

our employees to develop a deep knowledge of safe use and handling and provide our customers with such information as well.6In overseas business activities, technology transfer, and international trading of chemical products, we shall give full consideration to

ensuring safety and health and to protecting the environment.7We shall comply with international rules and domestic laws and regulations and make our best efforts to cooperate with the relevant

international organizations and both foreign and domestic regulators.8We shall participate proactively in various activities related to environmental protection and make our best efforts to communicate with

society and local communities to achieve better understanding and trust.

Corporate Ethics Committee

Security Export Control Committee

Responsible Care Planning Committee

Secretariat (Environment & Safety Office)

Aluminum Can Recycling Promotion Committee

Energy Saving/Global Warming Issue SubcommitteeResource Saving/Recycling Subcommittee Waste Reduction Subcommittee Chemical Substances Release Control SubcommitteeOccupational Health and Safety SubcommitteeAccident Prevention SubcommitteeCSR Committee

Responsible Care Committee

Risk Management Committee

Safety Measures Committee

President&

CEO

* 16 Group companies Tsurusaki Kyodo Doryoku K.K., Tokyo Liquefied Oxygen Co., Ltd., Showa Titanium Co., Ltd., Shinshu Showa Co., Ltd., Showa Denko PackagingCo., Ltd., Showa Denko Aluminum Trading K.K. (Sheet Fabrication Center), Showa Aluminum Can Corp., Showa Denko Sakai Aluminum Co., Ltd.,Showa Denko Electronics K.K., Showa Engineering Co., Ltd., Showa Highpolymer Co., Ltd., Showa Denko Kenzai K.K., Union Showa K.K., NiigataShowa K.K., Showa Aluminum Can Recycling Center, HI-PACK CO., LTD.

Responsible Care Committee (June 2008)

The Showa Denko Group carries out the followingaudits at each stage, to confirm that activity plansconcerning Responsible Care are implementedaccording to plan.

Self-auditingUsing checklists, the workplaces of Showa Denko

and 16 major Group companies evaluate their ownResponsible Care systems and the status of itsimplementation, promoting continuous improvements byreporting to the Safety Measures Committee on theresults of these self audits and reflecting such results inobjectives and activity plans for the following fiscal year.

Workplace auditingThe Safety Measures Committee conducts on-site

audits of the state of the efforts at respect iveworkplaces described above, provides guidance asneeded, and reports on the results of these audits tothe Responsible Care Committee. The ResponsibleCare Committee examines these results and reflectsthem in companywide policies, objectives, and plans.

At manufacturing companies within the Group,both in Japan and overseas, other than the above 16companies, Responsible Care efforts are subject to on-site checking of their status and to on-site guidance.

Continual improvementActivity plan

P

ImplementationD

Internal audit, evaluationof results

C

Managementreview

A

Formulatingmanagementpolicies andobjectives

Workplace audit at the Omachi Plant (May 2008)

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Responsible Care promotion system

Responsible Care activities are promoted by theResponsible Care Committee, throughout the ShowaDenko organization and throughout the Group.

As of July 2008, Responsible Care activities wereconducted at the head office, five business sectors (12business divisions and 14 regional offices), threebranches, the Corporate R&D Center, and 16 Groupcompanies*.

In addition, as part of its efforts to strengthen theGroup’s Responsible Care activities, Showa Denko isexpanding the scope of such activities by ascertaining

performance and providing on-site guidance concerningResponsible Care for domestic and overseas Groupmember companies involved in manufacturing, inaddition to the 16 companies mentioned above.

In addit ion to establ ishing the new RiskManagement Committee, the organizational reformsconducted in January 2007 placed the ResponsibleCare Committee beneath the CSR Committee, topromote Responsible Care as a key activity included inour CSR efforts.

Responsible Care Action Guidelines

Showa Denko enacted the Responsible CareAction Guidelines in 1995 as its corporate policy relatedto the environment, safety, and health and declared thatit would implement Responsible Care. Since then, allbusiness sectors of the Company have been engagedcontinuously in the relevant activities under these

Guidelines. These activities also are being expandedthroughout the entire Group.

In 2005 we signed the Responsible Care GlobalCharter, which contains international guidelines toResponsible Care activities, declaring our support forand intention to implement Responsible Care.

Overall auditingThe Audit Office audits the status of Responsible

Care measures throughout Showa Denko and reportson the results of these audits to the Responsible CareCommittee.

Third-party verificationShowa Denko asks the Japan Responsible Care

Counci l (JRCC) to conduct Responsible Careverification for its management system, environmentalprotection policies, and other aspects of management.Since 2006, Showa Denko has also had the JRCCcheck its CSR Report.

In the future as well, we plan to work towardcontinued improvement in our Responsible Care systemand performance, by proactively submitting our effortsto checks by third parties.

Auditing structure

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Environmental conservation2007 targets and plans 2007 results and progress 2008 targets and plansRating Page

Zero environmental problems

¡Continuing detailed investigation ofcompliance responses

¡Environmental management system¡System reexamination¡Planning and implementing plans to

reduce potential risks in existingoperations

¡Promoting ISO 14001 certificationacquisition plan

¡Achieved targets by providing all informationrequired by legislation and performing detailedinvestigations of compliance responses

¡Implemented thorough communication ofenvironmental guidelines, reexamination of systemsand structures, and comprehensive facilityinspections to comply with the Air Pollution ControlLaw

¡Continuing soil improvement works atHigashinagahara

¡Preparing documents to be submitted for the ISO14001 environmental management certification(Chiba)

¡Zero environmental problems

27, 28, 45-54

45-47

9, 10, 45-47

53

13, 38

55

Targets

Plans

Security and fire prevention2007 targets and plans 2007 results and progress 2008 targets and plansRating Page

Zero equipment incidents

¡Better equipment reliability¡Enhancing the change management

system¡Promoting voluntary safety initiatives

Implementation, evaluation, and review ofrisk management programs

¡Enhancing risk confirmation withrecurrence prevention check lists

¡Three equipment-related incidents (down fromeight in 2006)Small fire in a pit; small fire in an earth leakagebreaker; damaged substation breaker

¡Oita Plant: High-pressure gas facility allowed tocontinuously operate for four years

¡Formulating risk management standards at allworksites

¡Zero equipment-related incidents

¡Firm foundation for riskmanagement programs

Targets

Plans

Targets

Plans

Response to Kyoto Protocol; greenhousegas emissions not to exceed 100% of1990 levelsResponse to legislative amendments

¡Establishing goals for the commitmentperiod and implementation plans

¡Establishing appropriate monitoringsystem for GHG emissions and makingproper reports

Reducing energy and resourceconsumption: 1% reduction in unit energyconsumption relative to 2006Responding to legislative amendments

¡Reducing energy consumption viaproduction process reviews, optimization,and equipment modifications

¡Regular reporting in accordance with thenewly amended Energy Conservation Law

¡Unit energy consumption: 78.7% relative to 1990level, a 0.5% reduction from 2006

¡Implementation of regular reporting by respectiveworksites

¡Unit energy consumption reducedto 80% or less

¡Compliance with legislativeamendments

¡Establishing plans for attaining thetargets based on Kyoto Protocol inthe SDK Group (without emissiontrading)

¡Compliance with legislativeamendments

Reducing landfill volumes (Showa DenkoK.K.: 8% relative to 1990 levels, Groupcompanies: 2,000 t)

¡Implementing individual waste reductionprograms specific to individual worksites

Promoting recycling initiatives

¡Stable operation of the waste-plastic-based ammonia plant

¡Reducing paper waste generated atoffices

¡Aluminum can recycling: 100%participation rateEach person to bring 100 cans overthree months

¡Production at the waste-plastic-based ammoniaplant: down 24% from 2006 (due to unfavorablebid performance)

¡Reduction in paper waste at head office: down 3.3t relative to the 2006 level

¡Aluminum can recycling: 86% participation rate,250 cans per person over three months

¡Stable operation of the waste-plastic-based ammonia plant

¡Reduced paper waste from offices¡Aluminum can recycling:

participation rate of 100%, 100cans per person over threemonths

¡Landfill volume: Showa Denko K.K..: 2,445 t, anincrease of 250 t from 2006 (12% relative to1990 levels), Group companies: 1,540 t

¡Reducing landfill disposal volumes:Showa Denko K.K.: 1,800t (9%relative to 1990 levels), Groupcompanies: 1,400 t

Targets

Targets

Targets

Targets

Plans

Plans

Targets

Plans

Targets

Plans

Occupational safety and health2007 targets and plans 2007 results and progress 2008 targets and plansRating Page

Zero lost-time injuries

¡Strong worksite focus on safety andtraining

¡Addressing equipment and processdeficiencies

¡Stricter safety standards

¡Seven incidents resulting in lost-time injury (upfrom one in 2006) and six minor incidents (downfrom seven in 2006)

¡Frequency rate: 0.89¡Hikone plant, Shiojiri plant, and Tokyo Liquefied

Oxygen Co., Ltd. won external safety awards¡Seven plants prepared for Occupational Safety and

Health Management System accreditation

¡Zero lost-time injuries, Zero incidents

¡Increasing worksites with theOccupational Safety and HealthManagement System accreditation

Targets

Plans

Zero work-related illness or injuries

¡Expanded hygiene management structure¡Improved worksite environment and

procedures

Promoting Showa Denko Group Health 21Plan

¡Implementing Worksite Heath 21 Plan

¡Zero work-related illnesses

¡Implemented preventive activities against lifestyle-related diseases in accordance with Showa DenkoGroup Health 21 Plan

¡Responded to legal framework for specific healthcheckups and specific medical guidance

¡Presented successful cases at business offices,implemented training sessions for public healthnurses and nurses

¡Zero work-related illnesses

¡Promoting Showa Denko GroupHealth 21 Plan

¡Enhancing health-care-supportsystems

¡Mental healthcare supportinitiatives at each business office

Targets

Plans

Targets

Plans

Chemical safety2007 targets and plans 2007 results and progress 2008 targets and plansRating Page

Zero accidents/incidents involving chemicalsor violations of chemicals legislation

¡Stronger emphasis on chemicalmanagement

Reduced chemical emissions (at least 10%per year)

¡Firmly implement voluntary emissionreduction programs

¡Promoted MSDS*3 amendments in accordancewith GHS*2

¡Chemicals Management Officer to provideinformation on relevant legislation and to givetraining

¡One incident of contact with harmful substances

¡Emission of PRTR listed substances: 422 tons,down by 5 tons (1%) from FY2006

¡Emissions of toxic atmospheric pollutants: 111tons, up by 23 tons from FY2006

¡Zero accidents/incidents involvingchemicals or violations ofchemical legislation

¡ Response to REACH*4 legislation

¡Reduced chemical emissions(down 10% per year)

Targets

Plans

Targets

Plans

Quality assurance2007 targets and plans 2007 results and progress 2008 targets and plansRating Page

Products that offer total safety in use

¡Strong emphasis on product safety (noproduct-related accidents)

¡Strong emphasis on compliance¡Stronger focus on compliance and

adherence to in-house quality assuranceand quality control rules

¡Zero product-related accidents¡Bigger role and greater authority for product safety

screening unit, etc.¡Stronger emphasis on compliance with legal and

in-house quality requirements based on qualitydiagnoses

¡Steadily declining numbers of complaints¡Thorough implementation of green procurement

strategies in response to demand

¡Products that offer total safety inuse

¡Stronger focus on product safety(zero product accidents)

¡Thorough implementation ofcompliance strategies

Targets

Plans

Environmental management

Global warming initiatives

Reducing industrial waste

Equipment safety

Occupational safety

Health care

Chemical management

Quality assurance

......Attained 100%

......Attained 80% or more

......Attained less than 80%, or unattained

*2 GHS: Globally Harmonized System of Classification and Labeling of Chemicals*3 MSDS: Material Safety Data Sheet*4 REACH: The EU’s Regulation for Registration, Evaluation, Authorization and Restriction of Chemicals

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56, 57

44

58

49-51

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Responsible Care Activities PlanResults in 2007 and targets for 2008

¡GHG emissions: 98% of 1990 levels (targetachieved)

¡Established plans to achieve goals for thecommitment period under the Kyoto Protocol(Showa Denko K.K. only)

¡Acquisition of data in accordance with theAmended Law concerning the Promotion of theMeasures to Cope with Global Warming

Every three years, the Company def ines amedium-term Responsible Care activities plan, which isused as the basis for annual action plans during thethree-year period.

All workplaces are required to demonstrate acommitment to Responsible Care, and to produce

detailed action plans based on the comprehensive planbut tailored to local conditions and circumstances.

The table below lists the targets, achievementsand ratings for 2007, together with the targets for 2008.

We will continue working to achieve our targets inthe future.

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Customers

Shareholders,investorsPartners

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Views Company responses and challenges

Business informationCustomer requests and views on individualproducts should be compi led into adatabase.

Providing feedback to business strategies throughindividual productsRepeating the PDCA cycle through the qual i tymanagement system (QMS) and companywide qualitytestingIntegrated methods for measuring customer satisfaction(CS) not yet developed

RC consumerdialogue (May 2008)

The achievements of this plant need to bepromoted more widely throughout society(opinion expressed during a tour of thewaste-plastic-based ammonia plant inKawasaki).

Contact point for plant tours for the general publicopened on website in 2007

SRI evaluationfeedback

Began preparations for CSR purchasing (2008)Considering the methodology, etc. (schedule to bedetermined)Group human-rights efforts under review (through June2008)Revised Guidelines to Code of Conduct (January 2008)Disclosure of policies and targets (this Report)

Safety activities Support for safety activities needs to beenhanced.

Promoting systems at each worksite to support safetyactivities at partner companies (e.g., joint patrols,provision of methods, exchange of views, awardssystems)

Plant tours

These tours should be given at regularintervals.We want to learn more about efforts toaddress environmental, securi ty, anddisaster risks.

Holding periodic plant tours for local communitiesEncouraging the exchange of views through “site CSRreports,” worksite publications, plant tours, and disasterdrills

Mobile exhibitionsurvey These need to be conducted periodically. Preparing sets and slides to be exhibited periodically

(see page 37)

CSR report surveyThe content disclosed needs to beenhanced and explanations made easier tounderstand.

Enhanced coordination between this Report and thewebsiteClear and simplified wording (this Report)

CSR report workshopI ’d suggest clear ly promoting thecharacteristics and social significance ofShowa Denko.

Based on the belief that the environment and climatechange are crucial issues, we will communicate ourresponses in a clear, easily understandable manner.

RC dialogue

I’d like to learn about countermeasures tothe environmental, safety, and disaster risksposed by chemical substances handled atplants.

Continuing regular communication (see page 36)Distributing “site CSR reports” and plant publications

Dialogue with labor union

The CSR activities of the Showa DenkoGroup should be disseminated toemployees in easily understandable ways.CSR-activity themes that can be promotedside by side, under a common banner,need to be developed.

Promoting Group CSR educational activities (beginningJuly 2008)Going on a CO2 diet to initiate these efforts

General meeting ofshareholders

Dividend policies, like payout ratios, need tobe clarified.

Based on the conviction that returns to shareholdersare best served by establishing a stable, sustainable,long-term profit and financial structure through thepursuit of sustainable growth, we currently have no planto provide dividend payout ratios.

IR meetingsWe’d like to learn more about strategies forgrowth-driver businesses such as the HDmedia business.

Explanations of growth-driver businesses, such as theHD media business, were offered at meetings withindividual investors. Similar explanations were alsooffered at meetings with institutional investors.

The Showa Denko Group regards customers, shareholders and investors, partners, employees, and members of the broader society and local communities as significant stakeholders in its business operations. Based on this foundational belief, it seeks to contribute to society in various ways, including the appropriate disclosure and communication of information.

Social CommitmentReport

We strive to ensure customers’ satisfaction with Group productsand services, thereby securing their patronage.

We strive to ensure shareholders’ satisfaction with Group performance and their continued shareholding.

We strive to ensure that local communities and authorities have confidence in our safe and stable operations.

We strive to maintain mutually beneficial relationships with oursuppliers based on their trust in transactions with the Group.

We strive to provide rewarding workplaces in which employees and their families can take pride.

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Stakeholder perspectives

Current CSR efforts targeting the supplychain are not sufficient.CS needs to be measured.The approach toward ILO human-rightsprinciples is not sufficient.Policies on efforts to prevent corruption areunclear.Disclosure of information on GHGemissions needs to be improved.

Relationship with our stakeholders

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Showa Aluminum Can Corporation won the SilverPrize in the two-piece beverage-can section of theCans of the Year 2007 Awards—the most prestigiousmetallic container competition in the world—for itsaluminum cans for PRIME TIME brand beer of AsahiBreweries, Ltd. This annual competition is sponsoredby The Canmaker, an industry journal based in the UK.Intended to recognize bold new designs andtechnological innovation inmetall ic containers, theawards ceremony washeld in October 2007 aspart of the CanmakerSummit 2007 in Chicago.

Communicating with society

Showa Aluminum Can wins SilverPrize in Can of the Year 2007 Awards

Trends in annual numbers of complaints (Covering Showa Denko K.K. only)

0703 04 05 06Year

100

80

60

40

20

0

Index(%)

Quality A

ssurance and Quality C

ontrol Rules

¡Screening before concluding contracts and specifications

¡Screening of sales and PR materials

Sales

¡New-product launch procedures

¡Quality assurance capability screening

¡Procedures for changes in manufacturing conditions

Marketing and manufacture

¡Product safety screening¡Product risk assessment¡Safety tests

Design and development

After-sale¡Management of after-

sale information

Aggressive quality management based on thorough dialogue with customersAt the Yokohama Plant where I work, we experienced significant customer

complaints in succession. But by sharing information on failures throughout theplant, trying to identify the true causes of the problems, and making structuralimprovements, we’ve succeeded in dramatically reducing the number ofcomplaints.

To ensure that our customers can use our products without any concern, Ibelieve it’s vital to take action based on an understanding of customerexpectations. We can do this through comprehensive proactive communications,on top of existing quality-control efforts.

Manager, Quality Assurance SectionProduction Department, Yokohama PlantCeramics Division

Katsuhiko Kamimura

Showa Denko‘s R&D,analysis and safety evaluation centers

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Ensuring product safety

Compliance with laws, regulations, and internal rules

To make it possible for customers to use ShowaDenko Group products in full confidence, product safetymust remain a top-priority issue. With this in mind, wehave established and periodically review the QualityAssurance and Quality Control Rules (see illustration tothe right) as company rules regulating our actions,alongside laws and regulations.

These rules have been established to ensure therational, systematic implementation of product-safetyactivities through all stages, including product designand development, commercial introduct ion andmanufacture, and sales, as well as after-sale informationmanagement.

For products or product ingredients that can beabsorbed directly or indirectly into the human body,including the raw materials used in pharmaceutical andcosmetic products, food additives, and packagingmaterials, we have established systems intended toensure the safety of products for customers at all times.These include rigorous screening mechanisms forproducts brought to market and mechanisms that limitchanges that can be made in manufacturing conditions.

The screening process does more than simplyverify product safety: it alerts screening committees atvarious stages to potential risks associated with eachitem and ways to avoid such risks, from variousperspectives, including properties, intended uses, andusage patterns for each product, as well as usercharacteristics and issues related to disposal.

Customer relations

Efforts to meet environmental and social demands

There is swelling sentiment worldwide, particularlyamong purchasers in the information technology,electronics, and automotive industries, to select andprocure products with the lowest possibleenvironmental impact—products that are environment-friendly through all stages of their life cycle, fromproduction through use and disposal.

The Showa Denko Group does its best to meetrequests from customers for assurance that currentGroup practices seek to reduce use of substancesharmful to the environment and that Group products donot use or incorporate harmful chemical substancescovered by the EU or other regulations.

The Group’s policy is to extend CSR managementto the supply chain, in addition to responding to CSR-related inquiries and surveys from customers.

Improving quality assurance and quality control levels

Quality management systemRather than a defensive approach to quality

assurance that seeks to prevent defects from occurring,the Showa Denko Group implements a proactiveapproach in which customer satisfaction constitutes thekey to the Group’s own satisfaction. The Group doesthis by developing and supplying products that willsatisfy our customers.

The Group’s worksites and Group membercompanies, including overseas companies, haveundergone inspection and registration of their qualitymanagement systems under relevant internationalstandards, such as ISO9001 and ISO/TS16949. Theystrive to improve the quality of their products andservices by effect ively applying these qual i tymanagement systems.

Reducing the number of complaintsTo ensure we minimize any inconvenience to our

customers, Showa Denko Group seeks to reduce thenumber of incidents that give rise to complaints. Wehave reduced complaints from year to year and arecurrently working to increase corporate value by gainingever deeper trust from our customers. We will do this bytaking steps to continue to reduce the number ofcomplaints received and by working to ensure that ourproducts are completely safe and of superior quality.

Activities targeting improved qualitymanagement levels

The Showa Denko Group performs periodic auditsgroupwide across business divisions and worksites toraise quality management levels.

These audits cover a broad range of qualitymanagement issues, including organizational vision,management leadership, activities to ensure customersatisfaction, quality assurance activities, product safetyand risk management, day-to-day administration, andhuman-resource development.

In 2007, we implemented 71 audits at 63worksites, including worksites overseas, identifyingissues to address and providing advice onimprovements.

We also undertook a wide range of educationaland training activities throughout the year, includingperiodic education and training activities to clarifyISO9001 requirements, training seminars for internalauditors, explanations and discussions of QualityAssurance and Quality Control Rules, and product riskseminars, in addition to local seminars intended toimprove the skills of internal auditors.

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Shiojiri Plant tourIn October 2007, the Shiojiri Plant held a meeting

with local residents, giving the outline of its operationsand production processes and providing a plant tour.

We will continue these efforts to strengthen tieswith local communities.

Regional dialogues on Responsible CareThe Japan Responsible Care Council (JRCC)

holds biennial regional dialogue on Responsible Care in15 regions across Japan.

Last year, Showa Denko participated in regionaldialogues on Responsible Care held in the Oita region,Yamaguchi Prefecture, and the Kawasaki area.

In February 2008, in the Oita region, participantswere given a tour of the Group’s Oita Complex, anintroduction to the efforts of chemical companies in theregion to anticipate a large-scale earthquake andaddress global warming, and a panel discussion andexchange of views with local representatives, localadministrative authorities, and participating companies.

On the plant tour, residents asked var iousquestions on topics ranging from pipe corrosion, steamfrom plant smokestacks, and odors to ensuring thesafety of tanker trucks, closely l istening to theresponses given by the personnel. The complex alsoreceived requests to disclose information on topics

such as the status of chemical substances in the plantand safety-related matters.

While continuing its participation in regionaldialogues on Responsible Care, the Oita Complex since2006 has also publ ished a quarter ly newsletterdistributed to each household in the vicinity. Since2007, it has produced a Web-based CSR report, whichit uses as an information outlet to promote mutualdialogue with the community.

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Chemical and environmental educational activities

The Showa Denko Group provides products andservices that harness chemistry to contribute to society.

The Group also works to promote a deeperunderstanding of chemistry in areas such as knowledgeof chemical substances, appreciation of chemistry, and

understanding of its relationship to the environment. Ittakes proactive steps to encourage young people—thefuture generation—to contribute to local communities byproviding various opportunities, including hands-onchemical experiments and environmental education.

Communicating with local communities

As they seek to put down deep roots in their homecommunities, each plant within the Showa DenkoGroup continues to make progress in dialogue withcommunity residents. By providing plant tours in twostages—first to employees’ families and then to localcommunity members—each worksite works tostrengthen efforts to protect health, safety, and theenvironment, together with members of the localcommunity, through mutual dialogue.

Last year, a mobile exhibition traveled to eachworksite in Japan to display the products of the ShowaDenko Group. Over the same period, some worksitesheld “open factories” or “open laboratories,” resulting inan increase of 120% over the previous year in numbersof visitors.

Some comments from guests:“It was fascinating to learn what products are

produced at the plant.”“I loved learning about the environmental measures

taken by the chemical plant.”

“I’d like to attend more events like this.”In addition, the Group engages in proactive

dialogue with local communities through regionaldiscussions on Responsible Care, organized by theJapan Responsible Care Council (JRCC).

Community relations

Chemical and environmental educationin FY 2007

The Showa Denko Group will continue to hostplant tours and accept trainees as it reaches out to localcommunities to explain the products produced at eachplant.

Overseas, the Group implements var iousmeasures to help communities better understand localplants in ways tailored to local practices and culture. PT.Showa Esterindo Indonesia has dispatched a total of 30individuals to lecture at local schools and devotesconsiderable energy to host ing plant tours andaccepting trainees as part of efforts to put down deeproots in the local community.

Waste-plastic-based ammonia productionintroduced at Eco-Products 2007 Exhibition

We introduced our waste-plastic-based ammoniaproduction in Kawasaki at Eco-Products 2007 Exhibitionheld in December 2007. The number of attendeesincreased to 1,295, up 135% over the past year.

Wearing hard hats, elementary-school pupils andjunior-high-school students, totaling 458, took part in avisual plant tour at our booth, learning through a waste-segregation game and visuals how the plastic wastethey sort at home is used as feedstock at our chemicalplant.

This effort was reported in the chi ldren’snewspaper published by the organizer of Eco Products2007.

Classes on demand (Oita Complex)In cooperation with Sumitomo Chemical Co., Ltd.

and Toshiba Corporation, the Oita Complex organizes aprogram of on-demand chemical-experiment classes forlocal elementary and junior high schools. In 2007, a totalof 85 complex employees and retirees visited 12classes, where they led pupi ls and students inexperiments, including making scent bottles and makingthread from PET bottles. Similar programs have beenlaunched in other communities, including Chichibu,Higashinagahara, Kitakata, and in Indonesia. We expectthese programs to expand and grow.

Numbers of plant visitors for educational purposes(Affiliate figures included from 2007)

06 07Year

2,000

1,500

1,000

500

0

(People)

Visitors to worksite for plant tourWorksite traineesVisitors to affiliates for plant tourTrainees at affiliates

Booth tour

On-demand classes in Oita

Numbers of participants in plant tours and explanatory meetings (Affiliate figures included for 2007 and later)

06 07Year

15,000

10,000

5,000

0

(People)

WorksitesAffiliates in JapanOverseas affiliates

Panel discussion in the Oita regional dialogue on Responsible Care

Visitors tour an electric furnace

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The Showa Denko Group is implementing groupwidealuminum-can recycling efforts to contribute to communitieswith which its operations interact.

In October-December 2007, 7,423 individuals fromthroughout the Group took part in these activities, for apart ic ipat ion rate of 91%. Together, they col lectedapproximately 7,490,000 aluminum cans. The Groupdonated 1.9 million yen, raised from the aluminum canrecycling, to local social welfare associations, year-endcharity campaigns, and other charities.

Communicating with society

Aluminum-can recycling activities

Showa Denko representative (left) donating funds from recyclingcampaigns to the Welfare Council, Tokyo’s Minato Ward

Some typical comments from attendees are givenbelow.

SAbout the exhibition:“It was the first opportunity for me to learn about theoverall Showa Denko Group.”“I’d like to see this exhibit become a regular event.”“I wish the exhibition could be held on weekends tomake it easier for employee family members andmembers of the community to attend.”“ I ’d prefer more in-depth versions of theexplanations given here.”

S About the content:“The exhibition clearly shows that many ShowaDenko products are used in familiar, everydayproducts.”“I’d like to see the connections with final productsmade clearer.”“I’d like to see more detailed information, like theproduction processes for each product.”“How about covering environmental efforts, too?”

100 90 80 70 60 50 40 30 20 10 0

(%)

Year03 04 05 06 07

Worksites Group membercompanies

Total

Trends in participation in aluminum-can recycling activities

TechnoCaravan at Oita

TechnoCaravan at Omachi

TechnoCaravan at Chichibu

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Helping stakeholders to understand our products and services

Since the Showa Denko Group produces relativelyfew final products for consumer use, it faces certaindifficulties in clearly explaining the Group’s businessactivities to consumers. Nevertheless, the Group firmlybelieves it cannot advance its operations without gainingthe understanding of consumers, even though these

activities consist of plant production and supplyingGroup products as parts and components. For thisreason, it works to clearly explain to consumers itsproducts and business activities from a wide range ofperspectives.

TechnoCaravanThe TechnoCaravan is a traveling exhibition of

Group products that has been making the rounds ofrespective Group worksites since March 2007. This isthe Group’s first experiment at holding such an event,targeting a wide range of stakeholders, including Groupemployees working at each worksite as well as retired

employees, employee families, individuals living in localcommunities, local government representatives, andcustomers.

To date, the TechnoCaravan has visited 24worksites across Japan, welcoming a total of more than11,000 guests.

Concept

To provide attendees with a deeper understandingof how Showa Denko Group products and technologiescontribute to society, the TechnoCaravan introducesinformation focusing on the roles played by Groupproducts in final end-user products. This is done usingvarious media, including photographs and video/audioequipment. Another goal of the program is to helpproduce a sense of unity by helping Group employeesbetter understand the Group’s businesses.

Content of the exhibition

¡History corner:An introduction to the history of the Showa Denko

Group from its founding, through turbulent years, tocurrent times¡Technological family tree corner:

An introduction to how the technologies of theShowa Denko Group have advanced throughinterconnections, resulting in individualized productsover the years¡Product introduction corner:

An introduction to the Group’s unique, market-leading products and technologies in each of the fieldsof electronics, automotive parts, and personalcare/environmental goods¡Globalization corner:

An introduction to the activities of the Group bothin Japan and around the world

From surveys of attendees

The following is a summary of the results of asurvey conducted at each TechnoCaravan event(number of questionnaires: 3,123; number of worksitessurveyed: 20; analyzed by: Fuluhashi EnvironmentalInstitute Co., Ltd.).

Observations on the exhibition

The highest percentage of respondents (90%)reported that Showa Denko Group products andtechnologies made positive contributions to society. Forthe other four items, 60 –70% of respondents agreedwith this statement. Overall, efforts to communicate theintended message of the exhibition appear to havesucceeded.

On the other hand, some 30% of respondentssaid they were unsure whether the Group’s productionactivities contributed to their local communities, whetherits products and technologies were trusted and wellregarded, or whether its products and technologies tookthe environment into considerat ion. The Grouprecognizes the need to enhance and improvecommunication efforts in these areas.

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Social Commitment Report SHOWA DENKO CSR REPORT 2008

In both 2005 and 2006, the Yokohama Plant saw aseries of lost-time injuries involving employees of partnercompanies. Each incident was the result of disregard of rulesalready in place. In response to these incidents, the worksitehas thoroughly implemented a series of activities, led by thePlant Manager, intended to reach the goal of eliminating allinjuries at work. One example is described below.

Since January 2008, a monthly two-hour class for worksupervisors has been held after working hours, with worksupervisors of all construction companies taking part.Experienced Showa Denko retiree personnel of engineeringwork led these sessions, intended to address the basics oftopics, starting with the meaning of the term “safety.”

Although the course, initially planned to last throughJune, is now complete, participants have expressed interestin its continuation.

The Yokohama Plant will continue to devise creativesafety activities to ensure the safety of employees andpartners.

Communicating with partners

Tackling the challenge of achieving zero injuries at Yokohama Plant

Scene from class for work supervisors at Yokohama Plant

Basic policy on information disclosure

For Showa Denko, disclosure and investorrelat ions const i tute key issues for companymanagement. Not only do we work to discloseinformation swiftly and impartially, we are also activelyexpanding our IR activities. We see such activities asplaying a vital role in deepening shareholder andinvestor understanding of our approach to variousissues, including corporate management, business

activit ies, and strategy, and in enabling them toaccurately assess our corporate value.

We seek to cultivate close ties with shareholdersand investors and improve management transparencythrough our website, financial results meetings, andplant tours, among other efforts.

We also strive to disclose information concerningShowa Denko in a fair, timely, and accurate manner.

Communicating with shareholders and investors

Communicating with institutionalshareholders and investors

We keep domestic institutional investors, securitiesanalysts, and other market participants informed invarious ways, including meetings held to explain annualand semiannual financial results, Internet conferences forannouncements of results for first and third quarters, andmeetings held to outline progress in achieving the goalsset forth in our business plans.

Overseas institutional investors and shareholdersreceive English-language versions of our annual results,transcripts of conferences, and other materials. Inaddition, several times each year, the President and/ormembers of the management team visit Europe, NorthAmerica, and Southeast Asia to report in person onvarious issues, including business results and business

plans.Members of the management team take every

opportunity to participate in individual interviews, smallgroup meetings, and other forums for interacting withinstitutional investors and shareholders.

Shareholder and investor relations

Responsible Care activities with partner companies

It is impossible to conduct business (includingmanufacturing, maintenance, and distribution) at aproduction site without support from partner companies.For this reason, an association of partner companieshas been formed at each worksite to communicateinformation between the Showa Denko Group and its

partner companies and to share information amongpartner companies.

The Responsible Care Activities of each worksiteare intended to achieve the same level of control—zeroaccidents or injuries—in the activities of not justemployees, but all partners working at the site.

Partner relations

Communicating with individual shareholders and investors

Individual shareholders and investors receiveInterim Reports and Business Reports together withannouncements of semiannual and annual results. Theyalso get access via our website to materials used inmeetings held to announce results, as well as video andaudio footage of such meetings. This information ismade available soon after the meetings are held. Inanother effort to improve communications with individualshareholders and investors, we have dedicated an areaof our website to answering IR-related inquiries. Inaddition, each year we hold explanatory meetings for

individual investors, posting information on thesemeetings on the Web, in an effort to enhancecommunications even further.

Shareholders’ meetingsShowa Denko holds a regular general meeting of

shareholders each year at the end of March. In additionto sending out invitations about four weeks before themeeting, we post related information on our website toensure shareholders have enough time to considerproposals. We have adopted a system under whichshareholders can exercise voting rights via the Internet,allowing even greater numbers of shareholders to

exercise their rights.At these meetings, reports are presented on a

giant screen to make the proceedings as easy to followas possible. Matters discussed include progress towardthe goals of the medium-term business plan and otherbusiness issues. Venue space is set aside for displaysintroducing some of the Showa Denko Group’sproducts and technologies.

Meeting held to explain financial results to institutional investors andsecurities analysts

Explanatory meeting on company for individual investors

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CSR purchasing efforts

The Showa Denko Group is continually makingprogress in reflecting the wishes of society andconcerns for the environment throughout the supplychain—from the purchase of raw materials throughmanufacturing and sales.

The company initially started advancing greenpurchasing efforts through the off ice supplies itpurchased, and responding to customer demand forthe environment in areas such as amounts of chemicalsubstances found in products and packaging materialsby surveying its raw-materials suppliers.

As typified by demands from the electronics

industry target ing manufacturers of parts andmaterials*1, the current emphasis falls on purchasingraw materials and parts for consumer products frommanufacturers who give due consideration to societyand the environment.

Following a preparatory period, purchasing staff inthe Showa Denko Group in 2008 began preparationsfor CSR purchasing. Seeking to share informationbased on a dialogue with partners (suppliers), we begandeveloping various approaches to communication.During this year, we plan to launch our dialogue with keypartners.

*1 Electronic Industry Code of Conduct (EICC)A code of conduct established in 2004 to address societal and environmental efforts, primarily within the North American electronics industry. Thecode currently consists of 38 items in the five fields of labor, health and safety, the environment, administration systems, and management ethics.Under this system, suppliers of raw materials and parts are required to implement practices in accordance with this code of conduct and are subjectto surveys and third-party verification.In 2006, the Japan Electronics and Information Technology Industries Association (JEITA) released the Supply-Chain CSR Deployment Guidebook,which requires CSR-related efforts from suppliers and partners.

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�Formation of management and a corporate culturethat accords due respect to diversity�Thorough implementation of a personnel system

based on duties and results�Thorough implementation of management by

objectives(Common evaluation criteria, shared goals andobjectives)

�Transforming diversity awareness�Developing an environment that encourages

realization of diverse ways of work�Reforming ways of work (reducing long working

hours)�Enhancing systems for succeeding in both work

and home life and for configuring flexible ways ofwork

�Proactive hiring and placement of women employees�Achieving a ratio of 10% women employees (2012)

¡Establishing hiring goals (percentages of womenhires)

¡Expanding opportunities for women in all sections�Enhancing ranks of women managers

¡Proactive assignment to management positions�Supporting career and skills development

F Plan

Meeting between President Takahashi and female management personnel

Increased corporate value

Company

Self-realization and self-respect

Opportunities

Requirements

Profits

Profit sharing

Career plan

Commitment

Actions

Agreement

IndividualContract

Employee’s ideal job

Company’s job requirements

Contributions and results

Payment and other compensation and benefits

Showa Denko human resources model

Sharing management vision Innovative and

creative humanresources

High levels of specialized knowledge and skills and professionalism demonstrated in each area and roleCreating new value with

the boldness to thinkoutside the box

Thinking, learning, and acting onone’s own initiativeand takingresponsibility forthe results

Pursuit of organizationalsuccess anddemonstratingone’s own abilitiesin way sideal for theentire organization

Self-motivatedemployees

Employeesoriented towardorganizational

success

F Plan(A plan that encourages women employ-ees to thrive)

We have launched key efforts to promoteopportunities for women to thrive for the purpose ofenlivening the Showa Denko Group. Specific effortsinclude the formulation of the five-year F Plan beingdeployed over the years 2008 through 2012.

In the area of employment systems, we haverevised work rules to enhance our systems for helpingemployees thrive both in their home life and at work. Inresponse to employee requests, we have adoptedseveral new initiatives, including measures that providechildcare leave for men and to extend the timeframespermitted for childcare leave.

In April 2008 we launched the Welcome BackSystem, which provides hiring information to employeeswho have left the Group for various reasons but wish tore-enter the workforce.

Gaining valuable experience across a wide range of issuesthrough study abroad in the UK

Showa Denko provides various programs for furthering one’s career. Thecompany gave me the opportunity to study abroad, allowing me to spend twoyears in the UK earning my MBA. I believe this experience will prove valuable inbuilding my future career.

I currently work in production planning and cost management at the HDDivision. While getting a feel for the entire business, I’ve gradually learned whatmy own section can contribute. In the future, I’d like to use this valuableexperience to act in ever more important capacities.

Changes in percentage of employees with disabilities

2.52

1.51

0.50

(%)

Year

04 05 06 07 08

Showa Denko Legal requirement

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Concepts behind Showa Denko’s personnel system

Showa Denko’s personnel system is based on theidea of according equal status to both the company andindividual employees. We provide motivated andcapable employees with a place to thrive, seeking tocreate a relationship in which both the company andemployees thrive and grow. We work to create anenvironment in which employees can assess theircareer paths and strive energetically toward achievingthese goals.

In addition to clearly identifying the roles andresponsibil it ies expected of each employee, thispersonnel system classifies positions by the scope oftheir roles and responsibilities, reflecting these factors inemployee compensation and benefits. Employees

eager to assume greater roles and responsibilities aregiven the freedom and latitude to do so. The companyprovides proact ive support to encourage thedevelopment of the skills and capabilities needed toassume such roles and responsibilities.

In addit ion, we introduced a system ofmanagement by objectives (MBO) that seeks to clarifywork objectives for all employees. Under this system,each employee meets with management to setobjectives, assess progress, and evaluate performance.We ensure employees are treated fairly, reflectingprogress toward achieving their objectives in theircompensation.

Employee relations

Human resources development

A company draws its strength from its people. Wepromote human resources development because wesee our employees as valuable assets and a vital part ofcompany management, not mere resources.

Our personnel system provides capable,motivated individuals with a place to thrive, while ourtraining programs are designed to improve specifictargeted skills to help employees achieve the careerplans they themselves have created.

Promoting employment of those with disabilities

Seeking to establish an environment in which awide range of individuals can work, Showa Denkopromotes employment opportunities for those withdisabilities, in addition to working aggressively toachieve barrier-free workplaces. Since 2006, theproportion of company employees represented bythose with disabilities has exceeded legal requirements.However, this percentage fell in 2008 from the previousyear, as older employees with disabilities retired. Weplan to continue making every effort to expand theemployment opportunities for those with disabilities.

Production Control Group, Showa Denko Electronics K.K.

Taku Tanaka

Building a hospitable, accepting work environment

Respect for diversityShowa Denko believes company growth can be

driven by a gathering of individuals with differingpersonal backgrounds—differing in age, gender,nationality, and other attributes—who work toward thegoal of contributing to society by strengthening theShowa Denko Group.

We employ overseas students, chiefly from China,and promote the aggressive hiring of personnel withexperience at other companies and from otherindustries. We also strive to build a workplace whereemployees of diverse backgrounds can thrive—forexample, by reemploying retired employees andexpanding opportunities for women.

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1. Respect for diversityShowa Denko emphasizes a respect for diversity innationality, race, gender, age, disability status, andcreed. We seek to achieve a corporate culture thatidentifies value in differences, not uniformity.

2. Promoting global effortsBased on a recognition of the conditions of eachnation, Showa Denko will also promote efforts tofurther respect human rights at Group membercompanies.

3. Developing human resources with a keen awareness of human rights issues

Showa Denko will develop human resources with akeen sense of human rights issues, thereby buildinghospitable, accepting workplaces and passing onsuch awareness to the next generation in their homesand communities.

Key points of focus on human rights

Research Unit LeaderInformation GroupIntellectual Property Office, Technology Headquarters

Chinatsu Tanabe

Mental healthcare protects the mental health ofemployees. Our efforts include (1) helping individuals tomanage their stress (sel f-care) ; and (2) to beconsiderate of others (line care); (3) similar careprovided by worksite healthcare staff; and (4) careprovided off-site by specialized medical institutions,including medical specialists.

Mental-healthcare efforts

Mental healthcareseminor

Social Commitment Report SHOWA DENKO CSR REPORT 2008

Health-guidance meeting at Higashinagahara Yukio Hattori leads a Health 21 Plan seminar A yoga class at the Kawasaki site

07 Year03 04 05 06Average vacation days taken in the manufacturing industry (source: Ministry of Health, Labour, and Welfare general survey of working conditions)

141210

864

(Days)

Annual paid vacation days (Per employee per year)

The generous support structure made it possible for meto raise my child while continuing to work

I gave birth in 2002. The company’s systems to assist women employees provedextremely helpful during my pregnancy. These systems include the flextime system, whichmade it possible for me to avoid crowded rush-hour trains; permission to take time off formaternity care; and reduced requirements for long-distance business travel.

When I returned to work, I took advantage of the discretionary working hours systemto devote myself to my responsibilities free from anxiety, since this system allowed me toreturn home if my child needed me. I think we’ve succeeded in building a workplacecharacterized by strong relationships, in which people support each other and understandthe challenges faced by married employees and employees raising children – not justfemale colleagues, but everyone on the team.

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Stance on human rights

Respect for fundamental human rights is a matterof key significance to management at Showa DenkoGroup, and we cont inual ly seek to eradicatediscrimination, build hospitable, accepting workplaceswhere human rights are respected, and raise employeeawareness of human rights.

In carrying out these activities, in addition tocomplying with the spirit of “respect for fundamentalhuman rights” as stipulated in the Constitution of Japan,we also work with a strong awareness of standardssuch as the Universal Declaration of Human Rights,adopted by the United Nations in 1948 and consideredthe global standard for human r ights, and theInternational Labour Standards set by the InternationalLabour Organization.

The year 2008 marks a turning point in ShowaDenko’s human-rights efforts. To shift our existinghuman-rights education to the next stage, we plan todeploy groupwide efforts on a global basis, restructuringthe management structure that promotes these issuesand establishing key points of focus.

Promoting a sound work-life balance

Showa Denko works to accurately ascertainemployee work hours and to reduce working hours andincrease annual paid vacation time from the perspectiveof achieving a sound work-life balance.

Employee health management

We need to maintain and promote the health ofindividual employees and their families throughout theirlifetimes, thereby giving employees the strength to workenergetically and in full confidence. Based on the themeof building employee health, three years ago, in 2005,we formulated the Showa Denko Group Health 21 Plan.

Specif ic efforts under this plan includedestablishing health targets and formulating plans formeeting them in each worksite; providing healthguidance based on the results of medical examinations;preventing lifestyle-related conditions like metabolicsyndrome and improving the health of individuals at riskfor such conditions; holding nursing seminars; andholding training sessions to increase awareness ofvarious health issues. Each worksite’s meetings forpromotion of the Health 21 Plan checks on progresswith the program and promotes activities to achieve itsgoals.

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*1 Unit energy consumptionA measure of energy efficiency. Total consumption of energynecessary to produce one unit of product.When this value falls, theproduction eff iciency increases whi le environmental impactdecreases.

SHOWA DENKO CSR REPORT 2008

The Oita Petrochemical Complex launched large-scalefacility modifications in 2008 to strengthen measures tocombat global warming and strengthen i ts costcompetitiveness.

We are currently dismantl ing the seven crackingfurnaces for naphtha, a material used in ethylene plants,replacing them with two high-efficiency, state-of-the-artcracking furnaces. Each new furnace will produce 100,000

tons of ethylene a year. In addition, we will increase use ofheat generated by furnaces and modify the distillation systemto further enhance energy efficiency. Together, these effortswill increase energy efficiency by approximately 6% andreduce CO2 emissions by 67,000 tons a year. Thesereductions are equivalent to CO2 emissions generated byapproximately 30,600 people a year in Japan.

Topics

Oita Petrochemical Complex installs new state-of-the-art cracking furnacesto improve energy efficiency

Note: Following a review, we have made several changes in thefigures for this graph published in the 2007 CSR Report; for example,we now exclude electricity sold by the Kawasaki Plant.

Changes in unit energy consumption (Showa Denko K.K.)

120

100

80

60

40

20

0

Index(%)

0190 97 99 03 05 07Fiscal Year

Left:An aerial view of the complexRight:The ethylene plant

We have decided to install GHG decomposition unit atthe Kawasaki Plant. The unit is scheduled to begin operatingin March 2009.

PFC and HFC gases are partially emitted during theirproduction and filling processes at the Kawasaki Plant. Theplant has already implemented measures to reduce theiremissions. To achieve further reductions, the Plant will install

additional facilities that trap, recover, burn, and decomposethese gases. These facilities should eliminate virtually allthese emissions, and most fluorine compounds recovered inthe decomposition unit can be reused as chemicals.

The New Energy and Industrial Technology DevelopmentOrganization (NEDO) has decided to support the project aspart of NEDO’s 2008 program for combating global warming.

Topics

Kawasaki Plant decides to install GHG decomposition unit

Reducing GHG isn’t just a matter for industry. Privatecitizens can also fulfill an important role through efforts athome to reduce GHG emissions. In 2008, the Showa DenkoGroup launched an SDK CO2 Diet campaign to accompanyTeam Minus 6%, a national campaign to f ight globalwarming.

In the SDK CO2 Diet campaign, each employeedeclares his or her efforts to reduce CO2 emissions andposts a monthly self-assessment on the intranet as anincentive for self-betterment. This campaign will involve bothmanagement and employees.

Topics

SDK CO2 Diet

�Unit energy consumption: 78.7% of 1990 levels, down0.5% from 2006

�Greenhouse gas (GHG) emissions: 98% of 1990 levels;target achieved

�Mapped out a plan to achieve the target within the KyotoProtocol’s commitment period (Showa Denko K.K.).

Results in 2007�Unit energy consumption: 80% or less.�Response to legislative amendments.�Map out a plan for the SDK Group to independently

achieve the Kyoto Protocol target.

Goals for 2008

An intranet database

Recognizing environmental conservation as a high-priority management issue, the Showa Denko Group is committed to cutting emissions of chemical substances and reducing industrial waste generation, both factors that contribute to global warming and other environmental problems. Other key components of the Showa Denko management policy include occupational health and safety and Responsible Care-areas where efforts will help reduce accident rates.

Environmental andSafety Efforts

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Measures to prevent global warming

Promoting energy conservation

The Group is taking various measures to conserveenergy by reviewing and opt imizing product ionprocesses and modifying facilities.

In the FY 2007, the Group reduced unit energyconsumption*1 to 78.7% of levels in 1990, thereference year, by improving production facilities andenergy recovery, among other steps.

In addition, the Company operates hydroelectricpower plants near its inland sites. Approximately 16% oftotal electr ic i ty requirements are met by ourhydroelectric power plants, a clean energy source.

Reducing greenhouse gas emissions

The Group’s GHG emissions are down 5% fromreference year (1990) levels. (See page 10.)

We have set numerical targets for reductions inemissions of GHG, including carbon dioxide, nitrousoxide, and CFC substitutes, such as HFC and PFC, in

manufacturing and filling processes. To achieve thesetargets, we established a program to systematicallyrecover gases emitted during filling processes and toinstall GHG decomposition unit.

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Environmental and Safety Efforts SHOWA DENKO CSR REPORT 2008

Shosei Maru (gross tonnage of 696 t) carrying organic chemicals

*1 Supply Chain Management (SCM)An in fo rmat ion- techno logy-basedintegrated process whereby a companymanages the f low of goods andinformation through all stages, from rawmater ials procurement, to productmanufacture, to inventory management,distribution, and sales.

*2 Freight ton-kmWeight of cargo (t) by distance transported(km)

INPUT

Energy

1.24Mkr(crude oil eguivalent )(＋20,000kr)

Water

74.72Mm3

(＋720,000 m3)

Raw materials

OUTPUT

Products

Emissions of air pollutants

Greenhouse gases　 2,796kt-CO2(－80kt-CO2)

SOxNOxSoot and dust

Toxic atmospheric pollutants PRTR-listed substances

Emissions of water pollutants

CODTotal nitrogen

Total phosphorus

PRTR-listed substances

Waste discharge

86,350t(＋25,295t)

Landfill

2,445t(＋250t)

Use outside Showa Denko

47,614t(＋6,284t) Reductions in volume outside Showa Denko

36,291t(＋18,761t)

The figures in parentheses represent increases or decreases relative to the previous year.

Internalutilization

Plants operatedby

Showa Denko

836t(＋81t) 2,291t(－16t)

211t(＋23t) 111t(＋23t) 366t (－3t)

505t (－38t) 696t (－40t) 16t (＋3t) 55t (－3t)

Typical environmental impact index at Group companies*3 in 2007

2007 Reference (figures of 2006)

CO2 emissions (kt-CO2) 430 473

1,715

76

1,540

68

Final waste disposal (t)

Emissions of PRTR-listed substances (t)

�Proportion of means of transport

Freight ton

Freight ton-km

CO2emissions

0 10 20 30 40 50%

60 70 80 90 100

Rail 1%

Rail 1%

Rail 2%

Road 59%

Road 59%

Road 32%

Sea 40%

Sea 40%

Sea 66%

(Showa Denko K.K. only)

�Freight ton-km

<Data on transport > (Showa Denko K.K. only)

680

660

640

620

600

Million ton-km

06

661

07

648

40

38

36

34

Thousandtons 22

21.5

21

20.5

20

Kl per million ton-km(crude oil equivalent)

06

38.6

21.9

07

37.3

Unit energy consumption

for transport

CO2 em

issions bytransport sector

21.6

Fiscal Year Fiscal Year

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Reducing environmental impact through supply chain management (SCM)*1

Improving distribution efficiencyThe Showa Denko Group has worked to reduce

environmental impact through SCM activities-that is, bycontrolling the overall flow of goods from raw materialsprocurement, production, to delivery to customers andconsumers and by minimizing waste generation.

In the transport sector, we’ve encouraged a modalshift to sea and rail, shipping methods that generatelower environmental impact. Transport by sea and railcurrently accounts for approximately 70% of our currentshipments (in freight ton-km*2). We plan to continueefforts to reduce environmental impact and conserve

energy by increasing ship and rail transport.To reduce the overall amount of transport required,

we’ve increased our exchange of petrochemical productswith other companies in the same industry and movedour production base for certain aluminum products fromOyama to Oita, which is closer to our customers.

Working with transport operators, we’ve alsointroduced various energy-saving measures, includingreduced idling times for trucks and improved loadingefficiency via mixed loading of products for differentdestinations en route, in conjunction with various roadsafety initiatives.

Amendments to Energy Conservation Law

As required for the designated shipper under thenew Energy Conservation Law, Showa Denko reportson energy consumption and CO2 emissions associatedwith transport and submits proposals to reduce unitenergy consumption. We also implement independentmeasures to improve unit energy consumption andreduce CO2 emissions.

Resource use and environmental impact

The diagram below summarizes the resource useand environmental impact associated with theoperations of Showa Denko and its Group companies.

To reduce our impact on the environment, theGroup is currently pursuing the efforts described in thefollowing pages.

*3 Total for nine consolidated manufacturing subsidiariesin Japan: Showa Titanium Co., Ltd., Niigata Showa K.K.,Showa Denko Kenzai K.K., Showa Aluminum Can Corp.,Showa Denko Packaging Co., Ltd., Nippon PolytechCorp., Tohoku Metal Chemical Co., Ltd., Showa DenkoKenso Co., Ltd., and Showa Highpolymer Co., Ltd. (CO2

emissions include those for Tsurusaki Kyodo Doryoku K.K.)

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FY2007 list of PRTR-listed substances released and transferred (Showa Denko K.K. only)

PRTRNo.211501771991762511022551119

12473

8986137244111722526311

109664115246298248

Release (t/y)To Air

71.1 46.0 25.7 11.0

7.2 0.1 4.5 0.0 2.8 2.5 1.9 1.6 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.2 0.3 0.0 0.0 0.0 0.0 0.4

176.8 189.4 366.2

To Water0.0 0.0 0.0 0.0 0.0 6.1 0.0 3.3 0.0 0.0 0.1 0.0 1.6 1.6 0.0 0.0 0.6 0.0 0.6 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

14.8 40.7 55.4

To Soil0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total71.1 46.0 25.7 11.0 7.2 6.2 4.5 3.3 2.8 2.5 2.0 1.6 1.6 1.6 1.0 0.0 0.6 0.0 0.6 0.0 0.2 0.9 0.2 0.3 0.0 0.0 0.0 0.0 0.4

191.5 230.1 421.6

Amount oftransfer(t/y)

403.5 328.0

0.0 0.2 0.0 3.8 0.0 6.4 0.0 0.0 1.4

236.2 2.7 0.1 0.0

150.4 16.7 15.2 11.8 11.4

8.5 8.5 6.8 5.0 4.3 1.6 1.4 1.4 1.1

1226.3 1142.1 2368.4

JCIANo.145227268299266304633462812411311244340172232221

335952833

1029922625230985

CAS No.

75-09-2108-88-3106-99-071-43-2

108-95-2***

78-79-5306-83-2123-91-175-07-0

*107-21-1100-41-468-12-2

*107-18-6

*98-83-967-66-3

*79-10-7

108-05-41314-62-1106-49-0

*9016-45-9

75-45-6

Substances

DichloromethaneToluene1,3-ButadieneBenzenePhenolBoric acid and its compoundsXyleneMolybdenum and its compoundsIsoprene2,2-Dichloro-1,1,1-trifluoroethane1,4-DioxaneAcetaldehydeAlkylbenzene sulfonateEthylene glycolEthylbenzeneN,N-DimethylformamideNickel compoundsAllyl alcoholZinc compounds(water-soluble)α-MethylstyreneChloroformHydrogen fluoride and its water-soluble saltsAcrylic acidVinyl acetateVanadium pentaoxide4-ToluidineArsenic and its inorganic compoundsPoly (oxyethylene) nonylpheny etherChlorodifluoromethane

*1 PRTR (Pollutant Release and Transfer Register) is a system for registration of release and transfer of an environmental pollutant, which grasps andreports how chemical substances are released by business entities to the air, water area, soil and in waste during production, use and storage. In1999, the Chemical Substance Release Control Law (PRTR Law) was enacted, and from 2002 all business entities are obligated to examine therelease and transfer in the previous year for 354 substances designated in the Law and report the results of the examination to the nationalgovernment.

Total of the above-listed substancesTotal of the other substances(including JCIA PRTR-listed substances)Total

The amount ofincrease anddecrease forFY2006(t/y)

23.4 -12.6

0.4 -0.7 1.5

-0.4 0.0 0.4 0.5

-0.3

-0.1 0.1

-0.6 -0.2 0.0 0.5 0.0

-0.3 0.0 0.0

-1.2 0.0 0.0 0.0 0.0 0.0

-0.4

11.1 -16.3

-5.2

FY2006 Totalrelease(t/y)

47.7 58.6 25.3 11.7 5.7 6.6 4.5 2.9 2.3

-1.7 1.7 1.5 2.2 1.2 0.0 0.1 0.0 0.9 0.0 0.2 2.1 0.2 0.3 0.0 0.0 0.0

-0.0

180.4 246.4 426.8

FY 2007 release of PRTR-listed substances at respective sites (sites with total release of at least 1 ton) (Showa Denko K.K. only)

Oita(Release of PRTR-listed substances: 29.0t)

1,3-ButadieneBenzeneIsopreneTolueneAcetaldehydeOthers

53%

18%

10%

6%

8%

5%8%

Omachi (Release of PRTR-listed substances:22.1t)

PhenolBenzeneTolueneBoric acid andits compoundsOthers

Shiojiri(Release of PRTR-listed substances:2.4t)

Boric acid andits compoundsOthers

Kitakata(Release of PRTR-listed substances:0.5t)

Hydrogen fluoride andits water-soluble saltsBoric acid andits compounds

Oyama(Release of PRTR-listed substances:22.8t)

Dichloromethane2,2-Dichloro-1,1,1-trifluoroethaneXyleneTolueneOthers

Tokuyama(Release of PRTR-listed substances:2.4t)

1,4-DioxaneChloroformAcetonitrileOthers

Kawasaki(Release of PRTR-listed substances:60.9t)

Toluene1,3-ButadieneMolybdenum and its compoundsAlkylbenzene sulfonateEthylene glycolOthers

Higashinagahara(Release of PRTR-listed substances:56.8t)

DichloromethaneOthers

79%

7%

6%

62%17%

5%3%

10%

99%

1%

32%

26%

16%

14%

12%

100% 89%

11%

63%

10%

11%

10%

3%

6%

PRTR-listed substances released and transferred (FY 2007)

Into air 366t

Into water55t

Total volumereleased 422t

Volumetransferred2,368t

Volume released/transferred

Into soil 0t

(Showa Denko K.K. only)

Release of PRTR-listed substances (Showa Denko K.K. only)

1,000

800

600

400

200

0

Volume released (t)

9895 96 97 99 00 01 02 03 04 05 06 07Fiscal Year

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�Total PRTR release: 422 t, down 5 t or 1% from 2006

Results in 2007�Reduce chemical substance discharges (10% or more

year-on-year).

Goals for 2008

Reducing chemical substance discharge

PRTR*1

As a member of the Japan Chemical IndustryAssociation (JCIA), the Company since 1996 hasundertaken voluntary surveys of volumes of chemicalsubstances discharged and transferred.

In the FY 2007, Showa Denko surveyed 480substances, including PRTR-l isted substances,reporting to the JCIA on 118 substances (of which 102were listed). Total annual release of the PRTR-listedsubstances stood at approximately 422 tons, down 5tons from the previous year.

Showa Denko will continue to make focusedefforts to reduce discharge volumes by preparingreduction plans for each site, covering substancessubject to PRTR Law and substances with highdischarge volumes. The Company is assessing theeffects on the areas surrounding its sites and seeking toimprove communications with local communities andgovernments with a view to reducing dischargevolumes.

PCB control

The status of stored polychlorinated biphenyl(PCB) waste is checked at regular intervals based onthe Company’s checkl ist. This waste is storedappropriately in adequate facilities to prevent leakage. Inaddition, each business unit reports on the status ofstored PCB waste and related matters to the prefectural

governor, as required under the Law ConcerningSpecial Measures Against PCB Waste.

Taking full advantage of the waste processingfacilities of Japan Environmental Safety Corporation, ourmission is the systematic disposal of PCB waste.

5251

Environmental and Safety Efforts SHOWA DENKO CSR REPORT 2008

*1 The 12 substances are the hazardous air pollutants selected by the JCIA for voluntary control, which include acrylonitrile, acetaldehyde, vinylchloride monomer, chloroform, 1,2-dichloroethane, dichloromethane, tetrachloroethylene, trichloroethylene, 1,3-butadiene, benzene, formaldehyde,and ethylene oxide.

Total amounts discharged of harmful atmospheric pollutants

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Amount of discharge (t)

Year90 92 94 96 98 00 02 04 06

SOx NOx Soot and dust

(Showa Denko K.K. only)

Changes in amount discharged

1,000

800

600

400

200

0

100

80

60

40

20

COD and total nitrogen (t) Total phosphorus (t)

Year90 92 94 96 98 00 02 04 06

COD Total nitrogenTotal phosphorus (Applicable units appear in blue in the index.)

(Showa Denko K.K. only)

4

3

2

1

0

Changes in harmful atmospheric (Showa Denko K.K.)

Acrylonitrile1,3-Butadiene

3025201510

50

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

4

3

2

1

0

Fiscal Year02 03 04 0598 99 0100 06 07

4

3

2

1

0

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

Benzene

15

10

5

0

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

15

10

5

0

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

Dichloromethane

500

400

300

200

100

0

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

Acetaldehyde

TrichiloroethyleneEmissions(t)

Chloroform

Kawasaki Oita Tokuyama(from 1999) Higashinagahara

Chichibu Oyama(from 2001) Omachi

*Oita Complex: The volume discharged increased due to problems with the distillation column and scheduled maintenance.

Kawasaki

4

3

2

1

0

TetrachloroethyleneEmissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

Kawasaki Kawasaki

Changes in harmful atmospheric pollutants release

500

400

300

200

100

0

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

Tokuyama15

10

5

0

Emissions(t)

Fiscal Year02 03 04 0598 99 0100 06 07

Formaldehyde

*2 SOx: SOx is generated through the combustion of a sulfur-containing fuel. This pollutant affects the respiratory organts.*3 NOx: NOx generally occurs as a result of oxidation of nitrogen in the air where fuels and wastes are burned. This pollutant is said to contribute to

photochemical smog.

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�Discharge of harmful atmospheric pollutants: 111 t, upby 23 t from 2006

�Reductions in environmental impact: SOx, soot anddust, and total phosphorus increased.

Results in 2007�Reduce discharge of harmful atmospheric pollutants

(10% year-on-year).�Reduce environmental impact.

Goals for 2008

Environmental considerations:Atmosphere, water, and soil

Reducing the discharge of harmful atmospheric pollutants

Having completed the JCIA Phase 2 voluntaryprogram for reducing discharged volumes of 12 harmfulatmospheric pollutants*1, the Showa Denko Group isnow working to achieve a new target: a 10% year-on-year reduction in pollutants released in relatively largevolumes.

In the FY 2007, the total amount discharged ofnine substances handled by the Group wasapproximately 111 tons, an increase of approximately

23 tons from the previous year. This increase isattr ibutable to higher volumes released ofdichloromethane following problems with processes atthe Higashinagahara Plant.

The Group remains committed to achieving itstarget through a combination of various measures,including switching to substitute materials and boostingrecovery and recycling rates.

Reducing environmental impact on the atmosphere

The Group is working to reduce emissions of SOx(sulfur oxides) *2, NOx (nitrogen oxides) *3, and soot anddust through a combination of various measures,including:

¡Fuel conversion¡Modification of combustion processes (e.g., low

NOx burners)¡Appropriate operation and management of

desulphurization and denitration systems¡Reductions in fuel consumption through an

exhaust heat recovery system¡Strengthened monitoring systemThe amount released of SOx and soot and dust

increased over 2006, while the amount released of NOxdecreased. The increase in SOx release resulted mainlyfrom increased production at the Omachi Plant.

The Group wi l l continue working to reduceenvironmental impact on the atmosphere.

*4 COD: Chemical oxygen demand, a common index of water quality, is the amount of oxygen required to fully oxidize chemicals in water.*5 Total nitrogen: Total nitrogen is the sum of inorganic nitrogen (e.g., nitrite, nitrate, and ammonium ions) and organic nitrogen (nitrogen in protein

and various other organic compounds).*6 Total phosphorus: Total phosphorus is the collective term for inorganic and organic phosphorous compounds. Phosphorus is an essential

element for all living things, but excessive phosphorus concentrations can, for example, lead to algae blooms.

Reducing the impact on water quality

The Group is working to reduce the impact onwater quality in terms of chemical oxygen demand(COD) *4, total nitrogen*5, total phosphorus*6, and othersubstances through a combination of various measures,including:

¡Improvements in manufacturing processes¡Improvements in wastewater processing

equipment and proper operation control¡Promoting reuse of water¡Strengthening the monitoring systemDischarge of total phosphorus increased from

2006, while discharged total nitrogen and CODdeclined. The Group will continue to work to reduce itsimpact on water quality.

Measures to prevent soil and groundwater pollution

On occasions such as a change in the use ofplant site or soil disposal as part of site cleanup, theGroup surveys and takes measures in line with SoilContaminat ion Countermeasures Law and theregulations imposed by local governments.

We have performed soil improvements at theHigashinagahara Plant since November 2006. Thecurrent work is scheduled to be completed inDecember 2008.

5453

Total

Environmental and Safety Efforts SHOWA DENKO CSR REPORT 2008

Showa Titanium once generated 400 t of wasteannually: 90% sludge generated in titanium oxide production,7% waste plastics, and 3% rubble.

Showa Titanium began by seeking to reduce moisturecontent in sludge cake (dewatered sludge). Various effortsimproved the performance of the filter press, reduced themoisture content of sludge cakes, and reduced cakegeneration by 20%. Showa Titanium also located a businessthat converts the sludge cake into a soil conditioner (top soilfor forestation), making it possible to recycle the sludge cakeand reducing landfill rates by 25%. Next, Showa Titaniumrecycled sludge as glaze for roof ti les. Coupled withpreceding efforts, these efforts reduced rubble generationand lowered landfill rates to 8%. Showa Titanium alsorecycled waste plastics other than vinyl chloride as a heatsource for cement companies. In 2007, landfill rates dropped

to 0.8%.It took six years to achieve zero emissions, but still one

year ahead of the target year. In addition to maintainingcurrent efforts, Showa Titanium is currently tackling variousremaining problems, including vinyl chloride recycling,targeting a 0% landfill rate.

Topics

Efforts to achieve zero emissions (Showa Titanium Co., Ltd.)

Left: Improved filter press Right: The people of Showa Titanium

Environmental accounting for 2007 (Showa Denko K.K. only)

�Cost �Reducing environmental impact

1990 2007

SOxNOxSoot and dustCODTotal nitrogenTotal phosphorusLandfill disposalUnit energy consumption

3,698 3,522

283 786 607 51

19,723 100%

1,098

426

496

0

46

25

0

14

2,105

443

217

2,664

0

448

542

16

518

4,889

8362,291

211505696 16

2,445 78.7%

Detail Capital investment Expenses

(million yen) (t)

(million yen)

Cost withinbusinesssite

Upstream and downstream costs

Administrative costs

R & D costs

Community outreach costs

Other

Pollutionprevention

Capital investments and expenses associated with prevention ofatmospheric/water/soil pollution, noise, vibration, odor, etc.

Globalenvironmentalprotection

Capital investments and expenses associated with energyconservation and combating global warming and ozone-layerdepletion

Resourcerecycling

Capital investments and expenses associated with resourceconservation and waste treatment

Costs associated with reducing environmental impact in businessoperations upstream and downstream, including green purchasingand recycling of products and packaging

Administrative costs relating to environmental conservation,including environmental issues training, introduction ofenvironmental management systems, and environmental impactevaluations

Costs associated with research and development of environment-friendly products and technologies

Environmental conservation costs for local community outreachactivities not directly linked to business operations, such asenvironmental conservation projects in communities, dialogue withresidents, and plant tours

Compensation for health damages resulting from environmentalpollution, etc.

�Economic benefits

Energy conservationResource recyclingWaste reductionOtherTotal

156404723

635

Investment in the environment (cumulative total from 1990)

20,000

15,000

10,000

5,000

0

Year90 92 94 96 98 00 02 04 06 07

Cum

ulative investment (m

illion yen)

Investment in safety and disaster prevention (cumulative total from 1990)

20,000

15,000

10,000

5,000

090

Year92 94 96 98 00 02 04 06 07

Cum

ulative investment (m

illion yen)

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�Landfill volume: Showa Denko K.K.: 2,445 t, up 250 tfrom 2006 (12% of 1990 levels)Group companies: 1,540 t; target achieved

�Chemical recycling: Decreased 24% from 2006(unsuccessful tenders)

�Reductions in paper waste (head office): Reduced by 3.3t from 2006

�Aluminum can recycling: With 86% of the Groupemployees participating, 250 cans/person werecollected over 3 months.

Results in 2007�Reduce landfill volume: Showa Denko K.K.: 1,800t (9%

of 1990 levels)Group companies: 1,400 t

�Ensure stable operation of the chemical recycling plantfor waste plastic

�Reduce paper waste at offices.�Aluminum can recycling: With full Group employee’s

participation, 100 cans/person to be collected over 3months

Goals for 2008

Reducing waste and encouraging recycling

To reduce its landfill disposal, the Group seeks tocurb waste generation by encouraging reuse andidentifying new uses.

¡Reuse of waste acids and waste alkalis¡Use of waste oil and waste plastics as fuels

(heat recovery)¡Effective use of inorganic sludge (e.g., in

cement)The final landfill volume in 2007 was 2,445 t, an

increase of 250 t over the previous year (Showa DenkoK.K.). Waste increased due to problems in fluoriteregeneration lines and other reasons, and we wereunable to achieve the target figure of 1,600 t. We haveadjusted the target for 2008 (Showa Denko K.K.) to1,800 t (9% of 1990 levels). To date, seven sites haveachieved zero emissions, defined as final landfil ldisposal rates of 1% or less of generated waste. Weplan to continue striving to expand the number of zero-emissions sites.

In addition, the Company is currently assessingcontractors for intermediate processing and finaldisposal to ensure that waste is processed and

disposed of appropriately.With regard to the discharge of bauxite

residue*1into the sea, the Company in 2007 kept thevolume of such discharge at 10% below 2000 levels.The Company will continue to work to reduce dischargevolumes and currently plans to terminate dischargeentirely of bauxite residue into the sea by 2015.

Changes in final landfill volume

25,000

20,000

15,000

10,000

5,000

0

(t)

9690 92 94 98 00 02 04 06 08Year

Target

Showa Denko K.K. Group companies

*1 Bauxite residueUnwanted substance remaining after alumina is extracted from bauxiteore during the alumina production process.

Environmental accounting

Showa Denko is committed to ongoingenvironmental investment designed to reduce energyconsumption and minimize the environmental impact ofour operations. Since 2000, environmental investmentand associated expenses and outcomes have beensubject to evaluation in the form of environmentalaccounting.

In 2007, we invested in facility improvementsintended to reduce 1,3-butadiene emissions at theKawasaki Plant and other facilities and wastewatertreatment systems at the Chichibu and the OyamaPlants. These investments have led to sustainedreductions in environmental impact in terms of COD andtotal nitrogen.

5655

Environmental and Safety Efforts SHOWA DENKO CSR REPORT 2008

*1 Frequency rateNumber of deaths and injuries occurring per one million workinghours, as calculated by the following formula:Frequency rate = (Number of deaths and injuries) / (total workinghours) X 1,000,000*2 For Group company scope, see page 27.

Disaster prevention

Changes in frequency rate*1 of lost time injury

10.0

8.0

6.0

4.0

2.0

0

Year70 75 80 85 90 95 00 05

All industries Chemical industryShowa Denko K.K. Showa Denko Group companies*2

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�Three equipment incidents (eight in 2006)�Seven incidents resulting in lost time injury (one in 2006)

and six incidents not resulting in lost time injury (seven in2006)

�Frequency rate of lost time injury: 0.89

Results in 2007�Zero equipment incidents�Zero lost-time injuries and zero incidents

Goals for 2008

Safety efforts

Equipment safety

Based on analysis of various equipment incidents,including large-scale incidents overseas, the ShowaDenko Group has determined that all equipmentincidents are recurring incidents. Preventing recurrentincidents will help achieve zero equipment incidents.Based on past incidents, the Group has compiled ninechecklists for preventing recurring incidents, and thewhole Group has carried out activities related to thesechecklists since 2006. In 2007, as part of recurrence

prevention activities, the Group’s engineering sectorestablished an Active Safety Study Panel, which met sixtimes.

In 2007, three minor equipment accidentsoccurred; specifically, two small fires and one shortcircuit at a substation. None of these accidents affectedthe local communities. By working through the studypanel, we will strive to ensure safety to achieve our2008 goal of zero equipment incidents.

Seismic safety measures

We engage in systematic assessments of theearthquake resistance of our facilities and seismic safetymeasures.

At the Oita Complex and the Kawasaki Plant,home to a number of chemical plants, the plants areautomatically shut down based on seismometersinstalled at the sites to minimize earthquake damage.

To allow employees to take swift action in theevent of an emergency, we are now establishingsystems to make the most of earthquake warningsissued by the Meteorological Agency at all 19 sites:plants, head office, branch offices, and the CorporateR&D center. The systems will go into effect from thesecond half of 2008.

Utilization of MP information system

The maintenance prevention (MP) informationsystem is a system intended to share equipment-designknow-how and troubleshooting based on cases ofequipment problems and accidents at the Group’sfacilities at home and abroad. The ultimate goal is toprevent accidents and share information on equipmenttechnology.

Approximately 30% of the information available to

Group employees is information from within the Group;the rest comes from external sources. As of April 2008,some 4,600 cases of information were registered in thesystem. The data can be searched by machine type,substance, material, and cause of problems.

In 2007, we selected 300 cases and compiledthem into checklists. The Active Safety Study Panelintroduced these checklists to all Group sectors.

Occupational safety and hygiene

Occupational safety

Occupational accidents at the Group are on thedecline, thanks to continuing safety activities over theyears. In 2007, however, we were unable to achieve ourtarget of zero lost-time injuries. In fact, the number ofaccidents increased.

In the past, our safety activities have tended to bepassive, involving measures based on past accidents.To eradicate occupational accidents, we have decidedto shift to an active safety approach. This meansidentifying sources of hazards and acting proactivelybased on risk assessments to eliminate potentialhazards.

Specifically, we have drawn up an active safetychecklist, going through all cases of accidents that haveoccurred within the Group. Making the most of thischecklist, we plan to identify sources of hazards andimplement corrective action.

To maximize employee preparedness, the Oita Complexperforms joint disaster drills involving each plant and thedisaster control center as well as a general disaster drill. Thejoint drills are scheduled to allow all teams to participate.

A general disaster drill involving the entire Complex isperformed three times a year. This drill is designed tostrengthen employee preparedness against var iousdisasters, and includes a joint dri l l with the local f iredepartment and a public relations drill revolving around thenew press center. In addition, each plant performs its ownemergency dr i l l that is planned to account for thecharacteristics of each plant.

The Complex will continue to devise new dril ls tostrengthen its disaster prevention capabilities.

Topics

Disaster drills at the Oita Complex

General disaster drill(Left: Water spraying exercise, Right: Disaster headquarters)

In June 2008, the Yokohama Plant was recognized by the 2008 Fire andDisaster Management Agency Commissioner award as an outstanding plant inthe area of hazardous materials handling. This award acknowledges that thePlant cooperates with government efforts to ensure safety with hazardousmaterials and that the Plant contributes to the safety of Japanese citizensthrough compliance with laws relating to hazardous materials, voluntary andpositive safety measures related to the location, structure, and equipment forhazardous facilities and the handling of hazardous materials; and comprehensivetraining in safety control of hazardous materials.

Topics

The Yokohama Plant wins 2008 Fire and Disaster Management Agency Commissioner award.

5857

Environmental and Safety Efforts SHOWA DENKO CSR REPORT 2008

The Shiojiri Plant and Tokyo Liquefied Oxygen Co., Ltd.were recognized with the 2008 JCIA/JRCC Safety Award (aprize for effort), while the Hikone Plant won a prize forexcellence in the Worksite Safety Awards sponsored by theJapan Aluminum Association.

While ensuring a firm adherence to basics, the ShiojiriPlant is aggressively undertaking various programs in specificareas-targeting, for example, the reporting of minor incidentsand potential hazards, and keeping an eye out for fellowworkers. These efforts are producing results.

With a workforce numbering 20, Tokyo Liquefied Oxygenhas achieved a zero incident rate for 31 consecutive years,based on a solid foundation for safety activities, including aprogram targeting the reporting of minor incidents andpotential hazards and well-planned safety training. Last year,the company launched a program based on a self-developed approach to risk assessment.

Since 2002, the Hikone Plant has had no lost-timeinjuries. This year marks the third consecutive year in whichthe Plant has been recognized by the Worksite Safety Award.

Topics

Received Safety Awards from JCIA/JRCC and Japan Aluminum Association

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Asbestos

Conditions related to asbestos as of the end ofDecember, 2007, were follows.

Use of asbestos¡The Group neither manufactures nor sells any

products incorporating asbestos.¡The Group uses seal ing mater ia ls containing

asbestos for certain production facilities, includingthose for chemicals. We are currently replacing thesematerials with materials that do not contain asbestos.

Health damage¡For employees who have directly or indirectly handled

asbestos, we perform periodic health checkups asrequired by relevant laws. No incidents of health

damage have been reported to date.¡We also provide asbestos health checkups for former

employees of the Showa Denko Group, in addition toresponding to various inquiries. In 2007, four caseswere recognized as occupational accidents.

¡We have received no reports of injury or damage tohealth from families of employees, former employees,or residents of local communities.

Future policyThe Group will continue to perform surveys to

assess health damage and to take appropriate actionwhile fully complying with all applicable laws andregulations.

Chemical safety efforts

Safety information

The Group provides its customers and consumerswith information on any risks or hazards related to itsproducts via MSDSs*1 prepared for all products basedon JIS standards. By 2008, we will revise all MSDSs toinclude GHS*2 information.

To protect against accidents involving chemicalsubstances during road transport, the Group preparesyellow cards*3. Truck drivers are required to carry thecards at all times.

Japan Challenge Program

Under the Japan Challenge Program initiative,government authorities and private sector entities jointlycol lect safety information on exist ing chemicalsubstances for public dissemination.

In September 2005, Showa Denko registered itselfas a sponsor for six substances. In 2006, the Companybegan gathering and assessing safety information,submitting a plan for two substances.

Responding to international activities and trends

HPV ProgramThe HPV (High Production Volume) Program is

designed to encourage the gathering and assessmentof safety information for high-volume toxic chemicals(defined as chemicals with annual production volumesexceeding 1,000 t).

As an HPV Program participant, Showa Denkoprovides information on 12 substances, including allylalcohol. Safety assessments have already beencompleted for nine of these substances.

The conclusions of safety assessments areincorporated into MSDSs and other literature, along withresults from the Japan Chal lenge Program. Theinformation gathered in these programs is disseminatedin this way to the public.

Foreign laws and regulationsIn response to the EU’s Regulation for Registration,

Evaluation, Authorization and Restriction of Chemicals(REACH), the Company, as a member of the JCIA’sREACH council, is participating in the activities ofworking groups and taskforces. We are currentlyworking on pre-registration activities and on informationexchange within the supply chain, establishing a teamon REACH consisting of personnel from respectivebusiness divisions and staff sections of head office andGroup companies both at home and abroad.

*1 Material Safety Data Sheet (MSDS)This term refers to a written document provided by a chemicals supplier to consumers, covering matters such as the name of the chemicalsubstance(s), information on hazards, physical and chemical characteristics, precautions for handling and storage, and first aid measures.*2 Globally Harmonized System of Classification and Labeling of Chemicals (GHS)This refers to a globally harmonized system covering criteria for classifying chemical substances based on physical and chemical hazards and theirpotential impact on human health and the environment. The system also addresses matters related to the communication of information via labelsand safety data sheets.*3 Yellow cardThis refers to an emergency contact card briefly describing appropriate response by transportation company personnel, police, and fire-fighters in theevent of accidents involving hazardous or toxic substances.

6059

Third-Party Verification and Opinionson CSR Report 2008

July 11, 2008

Mr. Kyohei Takahashi,President and CEO, Showa Denko K.K.

Akio YamamotoChairman of Verification Advisory Committee

Japan Responsible Care Council

Saburo NakataChief Director, Responsible Care Verification Center

�Purpose of verificationThis Responsible Care report verification is intended to express the views of chemical-industry experts on the following matters in regard to CSR Report 2008 prepared by ShowaDenko K.K. (hereinafter the “Report’’):1) The effectiveness of methods of gathering and calculating data for performance indicators

(figures) and the accuracy of such figures2) Consistency between qualitative (non-numerical) data provided in the Report3) Assessment of Responsible Care activities4) Report characteristics

�Verification procedures¡ At the Showa Denko head office, we investigated the effectiveness of methods for

gathering and calculating data for quantitative data reported by each site (regional office orplant), assessing the accuracy of the qualitative (non-numerical) information provided inthe Report. This review was carried out by questioning those responsible for the relevantoperations and for preparing the Report and by having them show and explain relatedmaterials.

¡ At Showa Denko’s sites, we appraised the effectiveness of methods for gathering andcalculating the numerical data reported to the head office and the accuracy of such data,and assessed the accuracy of other information provided in the Report. This examinationwas implemented by questioning those responsible for the relevant tasks and for preparingthe Report; by having related materials shown and explained; and by verifying suchinformation against evidentiary materials and articles.

¡ We verified sampled quantitative data and other information provided in the Report.

�Opinions1) Effectiveness of methods for gathering and calculating performance indicators (figures)

and the accuracy of such figures¡ Both the head office and the Yokohama Plant use valid and effective methods for

gathering and calculating performance indicators.¡ Within the scope of our investigation, performance figures were accurately gathered and

calculated.2) Accuracy of information provided in the Report

¡ We confirmed the accuracy of the information provided in the Report. Although wepointed out at the draft stage minor areas requiring improvement, involving thesuitability of certain expressions and the clarity of the text, these were corrected in theactual Report. We identified no significant matters that currently need to be addressed.

3) Assessment of Responsible Care (RC) activities¡ We value the fact that the Showa Denko Group has established the goal of reducing

greenhouse-gas emissions by 6% with respect to the reference year during the firstcommitment period of the Kyoto Protocol. The Group appears likely to achieve thistarget and is currently seeking to establish guidelines for subsequent efforts.

¡ We value our findings that the company is continuing with groupwide efforts to recyclealuminum cans, in cooperation with affiliate companies, achieving a 2007 employeeparticipation rate of more than 86% (including Group member companies) and a rate of250 cans/employee brought in for recycling per three-month period; and that thecompany is contributing a portion of the returns from such recycling to charitable work,including social-welfare projects.

¡ We value the findings that the Yokohama Plant has made progress in preventingaccidents through sustained efforts toeliminate root causes. The Plant continuesits periodic risk assessments and is workingto ensure zero accident rates at partnercompanies by hosting Training Sessionsfor Work Supervisors. We would like tosee such activities expanded to cover theentire Group, thereby further improvingthe quality of Group safety efforts.

4) Report characteristics¡ We value various Report characteristics,

including the clear manner in which itdescribes various activities affectingsociety, the environment, andeconomic activities from the reader’sperspective and the way in which itintroduces the results of dialoguewith stakeholders. However, wewould prefer to see more detailedinformation on the activities ofGroup member companies.

Third-Party Opinions

6261

Third-party views of Showa Denko’s CSR Report 2008

As it did last year, BSI Management Systems Japan K.K. hereby offers its assessment of theShowa Denko Group’s CSR activities, based on Showa Denko’s CSR Report 2008 and oninformation obtained through interviews conducted at Showa Denko’s head office andShiojiri Plant, and through a review of communications with stakeholders (see page 11).Based on the SIGMA guidelines and British standard BS8900 for CSR managementpractices developed by the British Standards Institution (BSI), BSI Management SystemsJapan K.K. undertook this review from the perspective of a CSR management specialist.

In 2007, Showa Denko enhanced its CSR promotion structures by adopting comprehensiverisk management and stakeholder dialogue in addition to its compliance system andResponsible Care activities. In the second stage of its CSR efforts, it undertook activities toensure CSR efforts took firm root.

Initiating communications to strengthen relations with stakeholders

To strengthen ties with stakeholders, business activities need to be deployed for eachstakeholder by methods demonstrating responsibility in economic, environmental, and socialaspects and to verify that the organization provides benefits over both the short and longterm. Showa Denko has clearly indicated the importance it assigns to the environmentalimpact and risks of the Showa Denko Group’s greenhouse gas emissions, establishing targetsand forecasts for reducing total emissions by 6% over the commitment period under theKyoto Protocol and declaring that it would formulate a medium- to long-term roadmap. TheShiojiri Plant has succeeded in deepening awareness of business activities among employees,their families, and the local community through plant tours for employee families and localresidents, held concurrently with the TechnoCaravan traveling exhibit (see page 37). TheShowa Denko Group plans to maintain this dialogue with stakeholders within the Group.

Identifying business opportunities remains a key topic in working toward stage three, thefurther development of CSR

CSR-related issues represent both risks and opportunities for innovation and development.However, risk assessments carried out in fiscal 2007 primarily addressed companywidehazards. Preparing for the fiscal 2008 CSR development goals will require a deeperunderstanding of both risks and opportunities, based on assessments of the impact ofbusiness activities on the environment and society—positive and negative, direct andindirect. Proposed CSR purchasing efforts also need to be assessed from the perspective ofmaximizing opportunities and minimizing risk, accompanied by the promotion of relatedmeasures.

Although this matter was touched on last year, given the growing importance of overseasoperations for the Showa Denko Group, reporting to stakeholders on CSR-related issues andefforts at overseas sales and production facilities would be desirable. Ideally, the Groupshould establish organizational processes to identify key performance indicators with respectto resource use and environmental impact at production facilities and periodically report onrelated conditions.

We look forward to reviewing the company’s futureproactive CSR activities.

July 2008Mitsumasa Tokunaga

Managing Director,BSI Management Systems Japan K.K.

CSR Report 2008 In response to third-party assessments

The Showa Denko Group is proceeding withefforts in three stages, each corresponding to afocus on establishing a foothold, firm establishment,and further development, respectively, for each of theyears in its medium-term CSR plan covering theperiod from 2006 through 2008.

In 2007, based on the basic policy goal of firmlyestablishing CSR, the entire Group worked to makeprogress with the compliance system it introduced in2006, as well as Responsible Care and expandeddialogue with stakeholders. We also achievedprogress in f i rmly establ ishing groupwide r iskmanagement and developing a comprehensive risk-management system for the entire Showa DenkoGroup.

Despite progress in areas such as r isk-management and compl iance structures andsystems, slight omissions and missteps have beennoted in individual efforts, and there is room forfurther improvement. In the area of dialogue withstakeholders, despite progress in efforts rooted inlocal communities such as “site CSR Reports” andworksite publications, we regard groupwide efforts,including efforts at overseas faci l i t ies, to beincomplete at this stage. We remain committed toproceeding in good faith as a good corporate citizen

in each country and territory of our operation, basedon an understanding of their cultures, practices, andlaws and regulations.

As a business with a major impact ongreenhouse gas emissions, we see reductions insuch emissions to be an important topic of concernfor management. We plan to resolve such issues byexpanding our dialogue with stakeholders.

We began organizing overseas information, asdescribed in views expressed by the JapanResponsible Care Counci l (JRCC) and BSIManagement Systems Japan, in 2007, and we planto make progress in expanding both the precisionand scope of the information disclosed by promotinga dialogue within the Group and sharing bestpractices.

We wish to express our gratitude to the testingand inspection personnel for their diligent inspectionsfrom broad-ranging and specialized perspectives.

Norikuni ImotoRepresentative Director and Senior Managing

Corporate Officer,Chief Risk Management Officer

Showa Denko K.K.

BSI Management Systems Japan’s review ofthe Shiojiri Plant

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We received responses to the 2007 questionnairefrom 347 readers. As the graph shows, concerns aboutglobal warming and other environmental issues aregrowing every year. In response, the 2008 report

focuses on efforts to combat climate change.We thank our readers for their cooperation.

CSR report workshop (April 27, 2008)We sought participants through the Internet, and 15 individuals, includingstudents, participated in the workshop.

Issues readers found interesting

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BCPA Business Continuity Plan (BCP) is a plan for rapidlyrestoring the resources needed for business activity,including employees, facilities, and logistics, in the eventof an interruption in business activities caused by any ofa wide range of risk factors.

CS⇒ Customer satisfaction

CSR⇒ Corporate social responsibility

CSR PurchasingPurchasing raw materials, components, and productsbased on criteria for assessing the CSR efforts ofpartner companies and suppliers.Purchasing based on criteria favoring low environmentalimpact is known as green purchasing.

GRI GuidelinesGuidelines on preparing sustainability reports (includingCSR reports and social and environmental reports) incompliance with global standards. These guidelines areprepared and published by the Global ReportingInitiative (GRI), a non-profit organization based in theNetherlands. The first edition was published in 2000,the third (G3) in 2006.

ILO DeclarationThe International Labour Organization (ILO) Declarationrefers to the ILO Declaration on Fundamental Principlesand Rights at Work. This declaration defines asessential rights (1) the freedom of association and rightto collective bargaining, (2) elimination of forced andcompulsory labor, (3) abolition of child labor, and (4)el imination of discrimination in hir ing and at theworkplace.

NPO/NGONonprofit organization (NPO): Refers to an independentorganization that operates for goals other than profits.Nonprofit organizations are active across a wide rangeof f ields, including disaster rel ief, environmentalprotection, welfare, and community development.Non-governmental organization (NGO): Refers to anonprofit organization addressing issues such asdevelopment, human rights, and the environment on aglobal scale.

SRISocially Responsible Investment (SRI) refers to anapproach to investment that assesses various corporateCSR activities in areas such as the environment andsociety, in addition to traditional metrics such asbusiness performance and revenue based onevaluations of investment and management of funds.The trend toward SRI-focused investment is gatheringmomentum in North America and Europe, particularly inthe area of pension plans and other public-sector funds.

Corporate Social Responsibility(CSR)The roles and responsibilities that must be fulfilled by acompany as a member of society to ensure thesustained development of that society.Triple bottom line (related term): A measure of companybehavior with respect to economic, environmental, andsocial performance.

Global CompactPrinciples of company behavior proposed in 1999 bythen-United Nations Secretary-General Kofi Annan.These consist of 10 principles in the four areas ofhuman rights, labor standards, the environment, andtransparency, based on the Universal Declaration ofHuman Rights, the International Labour Organization’sDeclaration on Fundamental Principles and Rights atWork, and the Rio Declaration on Environment andDevelopment.

Corporate GovernanceNarrowly defined, this refers to relationships betweenshareholders and company management and to acompany’s decision-making and business executionstructures and systems. More broadly defined, it refersto the relationships between a company and itsstakeholders that help define the company’s ultimategoals.

Corporate reputationRefers to public perception and assessments of acompany; concept extending beyond the brand image.

Customer Satisfaction (CS)The foundation of marketing activit ies, based onproviding goods and services based on the principlethat all company actions begin and end with customerand consumer expectations. These activities strive toachieve goals such as ensuring a good balancebetween products, pricing, sales promotion activities,and distribution channels and resolving areas ofdissatisfaction and issues related to satisfaction.

CSR

Questionnaire onCSR Report 2007

To complement the survey by the questionnaire,we held a workshop to read our Group CSR report. OurCSR staff engaged the participants in dialogue both insmall groups and in a plenary session to deepen theirunderstanding of Group CSR activities.

In return, we heard various useful comments: forexample, suggestions that we should focus on CSRthemes more characteristic of Showa Denko Group,highlight what we currently do for the environment andfor society, and compose and word the report moreclearly.

The dialogue was wel l-received amongparticipants, and we plan to repeat it.

2007 CSR report workshop

Glossary

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ComplianceNarrowly defined, this refers to adherence to laws andregulations. Recently, this term has been understood inincreasingly broader terms to encompass adherence tointernal rules, including corporate in-house regulationsand operating manuals, and adherence to the spirit ofthe law and societal norms such as common sense anddecency.

Supply ChainThe entire series of logistics and product-distributionact iv i t ies related to purchase of raw mater ia ls,production, and product sales.Supply-chain management (SCM) refers to activitiesintended to efficiently manage the flow of goods andservices, from the stage of raw materials to thecustomer or consumer, extending beyond the boundsof an individual company.

StakeholderAn individual or group affected by or affecting acompany’s business activities.These include shareholders and investors, employees,customers and consumers, trading partners andsuppliers, regulators and government agencies, andnon-governmental organizations.

Stakeholder EngagementRefers to activities intended to clarify gaps betweenstakeholder expectations for a company and thecompany’s activities and to resolve related issuesthrough stakeholder dialogue. The mutualunderstanding achieved through communication andappropriate information disclosure is a vital componentof stakeholder engagement.

Internal ControlsA process incorporated in business operations andexecuted by all members of an organization to achievethe goals of an organization.An internal-controls system is a system for implementingthis process.

PortfolioOriginal ly a term referr ing to a folder or to a f i lecontaining an architect’s work, this term today hascome to refer to the distribution of an investor’s assetsacross mult iple f inancial instruments and to thecombination of such instruments. A business portfoliorefers to the combination of a company’s businessareas and businesses.

RiskThe potential for or risks presented by hazards orfactors.Risks faced by a company can be roughly divided intothe following two areas: (1) business risks, or risk of lossin cases in which profits were expected; (2) pure risks,or risk of loss under any circumstances.

Risk ManagementThe process of planning, organizing, supervising, andcontrolling required functions and procedures to protecta company’s or organization’s assets, activities, andcapacity to function from the negative effects of risks inthe most financially efficient manner possible.

Climate ChangeThis term refers to changes in climatic componentssuch as rainfall and temperature when monitored overthe long term. In recent years, these changesincreasingly appear to be attributable not just to naturalfactors such as solar or volcanic activity, but to human-generated environmental issues such as deforestationand desertification. In recent years, this term has oftenbeen used to refer to global warming.

Intergovernmental Panel on Climate ChangeThe Intergovernmental Panel on Climate Change (IPCC)is an international organization established in 1988through the cooperat ion between the WorldMeteorological Organization (WMO) and the UnitedNations Environment Programme (UNEP) to study theissue of global warming at the governmental level. Itsgoal is to summarize the latest knowledge on globalwarming, drawing on the natural and social sciences,and to establish a scientific foundation for policies toprevent global warming.

Clean EnergyRefers to pollution-free fuels that release no toxicenvironmental pollutants.

Zero EmissionsThis term refers to a concept whereby society as awhole strives to reuse generated waste to eliminateactual waste generation. It was proposed by the UnitedNations University in 1994 to help achieve a recyclingsociety that releases close to zero emissions into theenvironment by using energy and other resources asefficiently as possible.

Global WarmingRefers to the process whereby carbon dioxide andother greenhouse gases released through humanactivity raise temperatures around the globe. Currentlythe most pressing environmental issue, thisphenomenon is historically believed to have beencaused by massive consumption of fossil fuel duringand after the industrial revolution. Instances of specificdamage attributable to the effects of global warming,such as rising sea levels, have been reported. Globalwarming may be regarded as an urgent issue withimplications for the survival of the human race.

Emissions TradingRefers to an economic instrument for addressingenvironmental problems. Under the emissions tradingsystem, a total emissions amount is determined for anenvironmental pollutant, after which emissions rights areallocated to polluters, who can then trade these rights inthe marketplace. The Kyoto Protocol calls for theadoption of emissions trading for greenhouse gasemissions. A market for emissions trading opened inChicago in 2003. An emissions-trading system wasalso established in Europe in 2005.

Management SystemRefers to a framework and system for managing anorganization’s policies, methods, and processes and forimplementing sustained improvements in these areas.

Modal ShiftSwitching the primary means of transporting goods fromtrucks and aircraft to rail and sea transportation toreduce environmental impact and increasetransportation efficiency.

Life-Cycle AssessmentLife-cycle assessment (LCA) is a method involving thequantification of environmental impact at all stages ofthe production life cycle, from raw materials purchasethrough manufacture, use, and disposal, and forquantifying and evaluating the effects of these stages.

Material Safety Data SheetRefers to a document covering information needed tohandle safely chemical substances as well as rawmaterials and other materials containing chemicalsubstances.

United Nations Framework Conventionon Climate ChangeRefers to a convention adopted at the Earth Summitheld in 1992 and taking effect in 1994. It seeks tostabilize concentrations of greenhouse gases to preventclimate change and global warming.

Kyoto ProtocolRefers to an international agreement intended to preventglobal warming. The Third Conference of the Parties(COP-3) held in Kyoto, Japan in 1997 establishednumerical greenhouse gas emissions targets forindividual countries. The Kyoto Protocol seeks to reduceoverall greenhouse gas emissions by 5.2% from 1990levels over the years 2008–2012, with different targetsfor individual participants, such as a 6% reduction forJapan and an 8% reduction for the European Union.The United States has abstained from ratifying the KyotoProtocol. Although the Protocol at one point appearedto have stalled, it went into effect in 2004 followingratification by Russia. It does not require China, India, orother developing nations to reduce emissions ofgreenhouse gases.

References:Hirofumi Tange. Dictionary of Global Environment, SecondEdition. Chuokeizai-Sha, 2007.Japan Society for Business Ethics Study. Keiei RinriYogo Jiten (Dictionary of Business Ethics Terminology).Hakuto-Shobo, 2008.Kojien, Sixth Edition. Iwanami Shoten, 2008.Kenkyusha’s New College English-Japanese Dictionary, FifthEdition. Kenkyusha, 1985.

IPCC⇒ Intergovernmental Panel on Climate Change

ISOThe International Organization for Standardization (ISO)is a private-sector international organization establishedin 1947 to promote the international standardization ofgoods and services. In 1987, it established theISO9000 series of standards to address quality controland assurance; in 1996, it began establishing theISO14000 series of environmental standards. It currentlyplans to implement the ISO26000 standard on socialresponsibilities as of 2010.

MSDS⇒ Material Safety Data Sheet

PRTR⇒ Pollutant release and transfer register system

Greenhouse Gas(GHG)A gas released into the atmosphere that promotes thegreenhouse effect. When discharged in large volumesby human activity, these gases lead to global warming.These gases include carbon dioxide, methane, nitrousoxide, and chlorofluorocarbons. Greenhouse gasesabsorb infrared light reflected from the earth’s surfacewhen heated by the sun that would otherwise releaseheat from the earth into space, trapping heat andwarming the earth.

Pollutant Release and Transfer RegisterSystemThe pollutant release and transfer register (PRTR)system is a system recommended by the Organizationfor Economic Cooperation and Development (OECD) in1996 and since codified into law in numerous countries.Under this system, companies record volumes ofdesignated chemical substances discharged ordisposed of and report these volumes to theirgovernments, who then release related statistics.

Environmental AccountingA method whereby companies and other organizationsmeasure and manage their effects on the environmentin monetary terms as accurately as possible and reportthe results.

Environment

Showa Denko is striving to reduce greenhouse gas emissions in support of the Ministry of Environment’s campaign to combat global warming.

As a member of GPN, Showa Denko is promoting green purchasing of printing.

We use NON-VOC ink (containing no volatile organic compounds), in which almost 100% of petroleum-based solvent has been replaced with vegetable-oil solvent.

We use the waterless printing process, which requires no dampening water containing such harmful substances as isopropyl alcohol. Thus, we have substantially reduced the generation of VOC.

We have adopted “color universal design” to make every page easier to look at regardless of individual differences in color vision.

The solvent of the ink for this report is based mainly on soybean oil.

This report is printed on paper made from wood originating from appropriately managed forests.

TEL:81-3-5470-3694 FAX:81-3-3431-6442URL:http://www.sdk.co.jp/html/english/csr/index.html

SA-COC-001217

CSR OfficeSHOWA DENKO K.K.