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Social and EnvironmentalReport

2004

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Message from President and CEO . . . . . . . . . . . . . . . . . 2

Business Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Major Topics for Fiscal 2003 . . . . . . . . . . . . . . . . . . . . . . . . 5

Medium-Term Management Policies . . . . . . . . . . . . . . . . 6

Improving Our Corporate Social Responsibility (CSR) . . . . . . . . . . . . 7

Corporate Governance Reforms . . . . . . . . . . . . . . . . . . . . 9

Social Report

Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Human Rights and Equal Opportunities . . . . . . . . . . 11

Human Resource Development: Employee Education and Training . . . . . . . . . . . . . . . 12

Safety, Health, and Disaster Prevention Measures . . . . . . . . . . . . . . . . . . 13

Social Contribution Activities . . . . . . . . . . . . . . . . . . . . . 15

Communication with Stakeholders . . . . . . . . . . . . . . . . 17

Environmental Report

Fundamental Policy toward the Environment. . . . . . . . . . . . . . . . . . . . . . . . . . 19

Environmental Impact of Our Business Operations (Fiscal 2003) . . . . . . . . . . 21

Action Plans and Results . . . . . . . . . . . . . . . . . . . . . . . . . 22

Hitachi Group’s Environmental Activity Assessment: GREEN 21 Version 2. . . . . . . . . . . . . . . 23

Environmental Accounting . . . . . . . . . . . . . . . . . . . . . . . . 24

Development of Green Products . . . . . . . . . . . . . . . . . 25

Examples of Green Products . . . . . . . . . . . . . . . . . . . . . 26

Prevention of Global Warming . . . . . . . . . . . . . . . . . . . . 29

Reducing Air Pollution Impacts . . . . . . . . . . . . . . . . . . . 30

Reducing Water Consumption and Water Pollution Impacts . . . . . . . . . . . . . . . . . . . . . . . . . 31

Reducing Waste Disposal . . . . . . . . . . . . . . . . . . . . . . . . . 32

Reducing Chemical Substance Transfer . . . . . . . . . . 33

Control of Chemical Substances . . . . . . . . . . . . . . . . . 35

Green Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

The Vision of the Hitachi Chemical Group . . . . . . . . 37

Environmental Topics from the Works . . . . . . . . . . . . 38

Environmental Topics from the Group Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

CONTENTS

Period coveredApril 1, 2003 - March 31, 2004

Companies coveredThis report covers environmental information for Hitachi Chemical Co., Ltd. and the 13 major group companies in the Hitachi Chemical Group.

When indicated as “Hitachi Chemical Group” or “consolidated,” the data covers the following companies:Hitachi Chemical Co., Ltd., Shin-Kobe Electric Machinery Co., Ltd., Hitachi Powdered Metals Co., Ltd., Hitachi AIC Inc., Hitachi Housetec Co., Ltd., Japan Brake Industrial Co., Ltd., Hitachi Chemical Automotive Products Co., Ltd., Hitachi Kasei Polymer Co., Ltd., Hitachi Chemical Filtec Inc., Hitachi Chemical Industrial Materials Co., Ltd., Hitachi Chemical Coated Sand Co., Ltd., Hitachi Chemical (Singapore) Pte. Ltd., Hitachi Chemical (Johor) Sdn. Bhd., and Hitachi Chemical Co. (Taiwan) Ltd.

When indicated as “Hitachi Chemical” or “non-consolidated,” the data covers Hitachi Chemical Co., Ltd. only.

• Hitachi Chemical Co., Ltd. is one of the Hitachi Group. The information on Social Contribution Activities (page 15), Action Plans and Results (page 22), and GREEN 21 Version 2 (page 23) is shown as a member of the Hitachi Group.

• Please refer to Hitachi Chemical’s website (http://www.hitachi-chem.co.jp/english) for information on each group company.

Guidelines consultedIn preparing this report, we consulted the Sustainability Reporting Guidelines 2002 by the Global Reporting Initiative (GRI) and Environmental Report Guidelines (fiscal 2003) by the Ministry of the Environment of Japan.

Publication timingEnvironmental reports (in Japanese) have been successively published since the first issue, published in fiscal 1999, which covered data from fiscal 1998. The 2003 edition was published in July 2003 and the 2004 edition in June 2004. We plan to publish the 2005 edition in June 2005.

Editorial PolicyIn this report, we have expanded the range of topics to cover economic and

social activities of the Hitachi Chemical Group, in addition to environmental

issues. This is to enable a whole range of stakeholders — shareholders,

customers, suppliers, local communities, and employees — to become

aware of the policies and activities for corporate social responsibility (CSR)

of the Hitachi Chemical Group. Accordingly, we have changed the title of the

report to “Social and Environmental Report” from “Environmental Report” to

better reflect its broader content.

We will continue our CSR activities and responsible disclosure of information as a mean of contributing to the realization of a sustainable society.

Building a company that embodies the “circle and harmony” of all living things, which can offer a sense of safety and reassurance to both people and the Earth

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Yasuji NagasePresident, Chief Executive Officer and Director

Message fromPresident and CEO

This March, I had the opportunity to visit a client in Korea. A gale-force spring wind was blowing through the city of Seoul, and the sky was covered by yellow sand. The power of nature, which is strong enough to cover the whole area of the East Asia—from the Northeastern China to Japan—with this yellow sand, was overwhelming for me. At our client’s site, I saw for myself just how great the efforts being made to protect their semiconductor and LCD manufacturing processes from the sand-filled air were. I imagined how far-reaching and extreme climate changes and desertification caused by global warming were likely to impose immeasurable impacts on business and social activities. This experience in Korea was another reminder for me that we in the Hitachi Chemical Group must further develop our environmental management schemes to realize a sound coexistence between the group and the Earth’s natural entities. The year 2001 was marked “Year One” of the group’s Environmental Management System. Since then, the Hitachi Chemical Group has been taking a variety of measures with the aims of “contributing to the building of a recycling-oriented society,” to “help realize sustainable development by balancing economic growth and environmental conservation,” and to “pursue group-wide environmental management.” As a result, key group companies acquired ISO 14001 certification in fiscal 2002. In fiscal 2003, all of our manufacturing sites and six sites of group companies successfully achieved the important target of “zero emissions.” As the next step, we will make even more intensive efforts in the development of environmentally friendly products and in the improvement of energy-saving business operations. On April 1, 2004, Hitachi Chemical integrated each departmental function of safety and environment, compliance management, and risk management into a single “CSR Office.” This was aimed at further promoting Hitachi Chemical’s activities with regard to corporate social responsibility. As the slogan for the promotion of CSR activities, we selected “building a company that embodies the ‘circle and harmony’ of all living things, which can offer a sense of safety and reassurance to both people and the Earth.” We are determined to develop a “circle” of all our stakeholders who support us and to nurture “harmony” with them so that we can deliver a sense of safety and reassurance to customers, along with our products and services. “Economic benefit is merely an extra blessing-seek goodness for the three parties.” This is the family creed of the merchants of Omi, a group of successful merchants from the Omi region in the medieval Japan. The “three parties” mentioned are the seller, the buyer, and society. I believe that this is still true even now in the era of globalization, and that we should not lose our long-term goal, “to achieve the sustainable development of the company and society” rather than seek short-term economic benefits. This year, we have re-titled our environmental report as a “Social and Environmental Report” and included information on our environmental conservation activities, as well as social and economic contributions. We hope that this report will help you to better understand the Hitachi Chemical Group’s principles and activities in furthering our social responsibility and environmental management programs. Readers’ comments on this report are very valuable to us, and we sincerely look forward to receiving your candid opinions.

June 2004

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Company Name: Hitachi Chemical Company, Ltd.

Established: October 10, 1962

Commencement of Operation: April 1, 1963

Chairman of the Board: Isao Uchigasaki

President, Chief Executive Officer and Director: Yasuji Nagase

Head Office: 1-1, Nishi-Shinjuku 2-chome, Shinjuku-ku, Tokyo, Japan

Paid-in Capital: 15,288 million yen

Net Sales: 200.5 billion yen (Non-consolidated) 521.4 billion yen (Consolidated)

Number of Employees: 3,212 (Non-consolidated) 16,764 (Consolidated)

Group Companies: 64 consolidated subsidiaries, 9 affiliates accounted for by the equity method

Net sales

Business Profile

Consolidated Financial Data

Company Overview

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(As of March 31,2004)

Operating income

Ordinary income Net income

Overseas sales R&D expenses Net sales by business segment

150

300

450

600

0

544.8586.3

480.8 494.2521.4

1999 2000 2001 2002 2003 (FY)

(Billions of yen)

10

20

30

40

50

0

35.1

45.8

13.0

24.9

33.8

1999 2000 2001 2002 2003 (FY)

(Billions of yen)

10

20

30

40

50

0

28.2

43.8

9.3

19.7

31.6

1999 2000 2001 2002 2003 (FY)

(Billions of yen)

4

8

16

0

12.6 13.0

3.1

8.6

15.8

1999 2000 2001 2002 2003

12

(FY)

(Billions of yen)

50

100

150

0

104.7117.4

99.5107.0

126.6

1999 2000 2001 2002 2003 (FY)

(Billions of yen)

10

20

30

0

21.322.4 22.9 22.9

24.9

1999 2000 2001 2002 2003 (FY)

(Billions of yen)

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Net sales and operating incomeElectronics-Related Products

Main Products•Semiconductor- and Display-Related Materials

Slurry for Chemical Mechanical Planarization, Heat-Resistant Fine Polymers, Die Bonding Materials,

Epoxy Molding Compounds, Anisotropic Conductive Films for Liquid Crystal Displays,

Light Guides for Liquid Crystal Displays

•Printed Wiring Boards and Related Products

Multilayer Printed Wiring Boards, Multiwire Boards, Flexible Printed Wiring Boards,

Package Substrates, Copper-clad Laminates for Printed Wiring Boards,

Glass-epoxy Multilayer Laminates with Inner-layer Circuits,

Photosensitive Dry Films for Printed Wiring Boards, Liquid Photoimageable Solder Resist,

Plating Chemicals for Printed Wiring Boards, Copper Foils for Printed Wiring Boards

•Others

Capacitors

Chemical-Related Products

Housing Equipment and Environmental Facilities

Operating Income

Main Products•Organic Chemical Products

Electrical Insulating Vanishes, Unsaturated Polyester Resins, Synthetic Resin for Paints,

Optical Materials, Epoxy Resin Hardeners, Specialty Chemicals, Expandable Polystyrene Beads,

ASA Resins, Shell Mold Resins, Phenolic Resin Molding Compounds,

Pharmaceuticals and Diagnostics, Microchips for Rapid Electrophoresis Analysis,

Adhesives, Traffic Paints

• Inorganic Chemical Products

Carbon Brushes, Carbon Anode Materials for Lithium Ion Batteries, Carbon Sliding Materials,

Glass-like Carbon, Flexible Graphite Gasket Materials, Silicon Carbide Ceramics, Alumina Ceramics,

Single Crystals, Disc Brake Pads

•Plastic Molded Products

Automotive Molded Parts, Fiber Reinforced Plastic Products, Cross-linked Polyethylene Foam,

Adhesive Films, Electromagnetic Interference Shielding Films for Plasma Display Panels,

Wrapping Films, High-voltage Insulating Molded Parts, Decorative Aluminum Laminates

•Others

Contact-Less IC Cards, Batteries, Power Supply, Golf Carts, Powdered Metal Products,

Molding Materials, Card Readers

Main ProductsPrefabricated Bathroom Units,

Home Bathtubs, System Kitchens,

Compact Sized Kitchen Units, Vanity Tables,

Toilet Seats with Warm Water Cleansing and

Bidet Functions, Home Boilers,

Domestic Wastewater Treatment Systems,

Fiber Reinforced Plastic Water Tanks

Net Sales

Net sales and operating incomeOperating IncomeNet Sales

Net sales and operating incomeOperating IncomeNet Sales

150

300

0

239.7 266.0191.7 205.0 225.8

1999 2000 2001 2002 2003

15

3024.327.7

3.213.7

23.3

(FY)

(Billions of yen)

(Billions of yen)

150

300

0

206.7 226.7 204.9 208.4 213.1

1999 2000 2001 2002 2003

7.5

15.0

7.6

14.1

8.6 9.9 8.7

(FY)

(Billions of yen)

(Billions of yen)

50

100

0

98.5 93.6 84.2 80.8 82.5

1999 2000 2001 2002 2003

2

43.24.0

1.3 1.4 1.7

(FY)

(Billions of yen)

(Billions of yen)

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Topics2003

These are the major topics for

Hitachi Chemical Group’s social

and environmental activities in

fiscal 2003. Please see the page

indicated for further details.

Improving Our Corporate Social Responsibility (CSR)Hitachi Chemical set up a CSR Office, where further development of CSR is ensured through environmental management, compliance management as well as promotion of activities that contribute to society.

See page

7.

Corporate Governance Reforms

In fiscal 2003, Hitachi Chemical and six group companies shifted their structure to a “company with committee system.” The aim is to establish a healthy and transparent management system that enables the corporation to respond promptly to market changes.

Social Contribution Activities

In fiscal 2003, the Hitachi Chemical Group par ticipated in a variety of activities that contribute to society both in Japan and abroad. Local community action program, cultural and sport events, and social welfare and disaster restoration suppor t initiatives are some examples of these activities.

Hitachi Group’s Environmental Activity Assessment: GREEN 21 Version 2GREEN 21 Version 2 is our evaluation system to encourage continuous improvement of environmenta l activities. In 2003, the evaluated grade increased to 474 points from 340 points for the previous year.

Development of Green Products

Our continuous ef for ts to develop green products increased the share of green products to 69% (non-consolidated) and 66% (consolidated) in terms of sales.

Prevention of Global Warming

We have been actively shifting our manufacturing methods to alternative ones in or der to manufacture energy-saving products. In addition, we have been working on fuel reduction thr ough fac i l i ty concentra t ion and installation of co-generation equipment.

Reducing Waste Disposal

Hitachi Chemical Group has been promoting its “zero emissions” campaign. In fiscal 2003, all the manufacturing works of Hitachi Chemical and six sites of group companies achieved the important goal of zero emissions.

Reducing Chemical Substance TransferOur ef for ts to reduce releases of chemical substances, including improvements to our manufacturing processes, reduced the release level in fiscal 2003 to 54% (non-consolidated) and 59% (consolidated) of the fiscal 2000 level.

Zero emissions: Hitachi Chemical defines zero emissions as having less than 5 tons of waste treated in the final landfill per year and having such treated waste account for 1% or less of the total amount of waste generated annually.

Major Topics for Fiscal 2003

See page

9.See page

15.

See page

23.See page

25.

See page

29.See page

32.See page

33.

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Hitachi Chemical, as a “Technologically Innovative Company” that offers the best solutions to its customers, aims to be a business entity that contributes to the realization of a truly prosperous society and enjoys the enduring trust of the capital market, customers, employees, and society. To achieve these goals, we have established the following principles as our medium-term management policies.

1 Create new businesses and products based on strengthening the technology platform on materials(1)Strengthen a wide array of technology platform on materials and promote the development of new products differentiated

by their superiority through the research of polymer technology, which is the source of Hitachi Chemical’s technology.(2)Raise research and development efficiency and increase a ratio of new product sales which play the leading role of the

company’s growth by redeploying research and development resources from a company-wide perspective.(3)Material System Solution (MSS) is a business model that contributes to creating value for customers by providing them

with integrated offerings of the optimum materials, services and solutions for customer requirements. Hitachi Chemical will promote new product development that delivers solutions to customers through the application of MSS.

(4)Proceed with strategic alliances with external entities to acquire technological and other management resources for businesses that complement current operations and for new business creation. This will be a means to accelerate research and development and new business creation.

2 Maximize Group management efficiency by innovating productivity(1)Structure an operating system that produces the maximum benefit with the fewest people by improving net sales per

employee and work to adjust the group employees to appropriate number.(2)Reduce the number of consolidated subsidiaries by pressing forward with consolidation to eliminate overlap among the

group companies and deal with low-profit businesses, at the same time, strive to raise a profit ratio by working to maximize the synergy effect within the group.

3 Strengthen the basis for increased sales and income through optimal deployment of management resources(1)Structure a balanced business portfolio by dispersing business risk by working to develop a diverse array of businesses

with varying life cycles and, at the same time, moving forward with business selection and concentration to utilize limited management resources effectively.

(2)Drastically liquidate unprofitable businesses and products to achieve dramatic improvement in earnings at an early date.

4 Fulfill corporate social responsibility (CSR) and implement environmental management to enable sustainable growth(1)Align management with environmental protection. Implement improved environmental management that links

environmental protection activities to management efficiency.(2)Strengthen corporate governance and compliance, and affirm corporate ethics.(3)Actively contribute to society, and fulfill corporate social responsibility as a good corporate citizen.

5 Cultivate employees to be the next generation of leaders(1)Selectively educate capable employees from the whole group companies in order to cultivate next-generation leaders.(2)Energetically promote interdisciplinary rotation among divisions and group companies. Promote sharing of intellectual

assets and implement knowledge management.

Medium-Term Management Policies

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The social responsibility of a corporation means more than of fering high quality products and services to customers at a reasonable price. It is also important as part of the social responsibility of a corporation to make efforts to reduce the impact that its operational activities may have on the global environment and to carry out appropriate corporate activities that are in line with laws, regulations, and social codes. Originally, Hitachi Chemical assigned various activities related to compliance and environmental protection to each division in charge within its range of responsibilities. In April 2004, a CSR Office was established to integrate these activities and to further enforce socially-responsible activities from a company-wide standpoint.

Hitachi Chemical Co., Ltd. first stipulated Standards of Corporate Conduct in 1983. Since then, we have been raising the awareness of staf f about the Code through various opportunities. We believe that Hitachi Chemical can be a socially responsible company only when al l employees have a common understanding of the Fundamental Philosophy and follow the Action Guidelines in their corporate activities.

Establishment of a CSR Office

Hitachi Chemical’s Standards of Corporate Conduct

Hitachi Chemical’s Standards of Corporate Conduct

Hitachi Chemical is fully aware of its mission and the role it should play, and with the aspiration of sustaining its growth and dynamism as a truly global enterprise, we hereby declare its standards of corporate conduct as follows.

Fundamental PhilosophyThe fundamental philosophy of Hitachi Chemical, since we became independent from Hitachi Ltd. in October 1962 as a separate entity, is to further enhance Hitachi’s founding principles of harmony, sincerity and pioneering spirit. And we take resolute pride to be “the people”(people of Hitachi Chemical) and contribute to the society in which we are taking part through the development of superior original technologies and products with untiring and creative efforts. We fully recognize that a company is a member of a society where it belongs. We implement our commitment to corporate activities in justice and transparency. We strive as a responsible corporate citizen toward bringing about a prosperous society.

Action Guidelines1. The people shall at all times behave with the spirit of working in harmony for a close collaboration within Hitachi

Chemical Co., Ltd. and its consolidated group as well as the Hitachi Group, while endeavoring to create mutual understanding and ties of friendship with all nations of the world.

2. The people shall strive to develop advanced, highly reliable technologies and products to meet the requirements of customers with integrity so as to ascertain accurately the changing needs of the global market.

3. With the pioneering spirit, the people shall work to take an initiative role in research and development activities in the world.

4. The people shall act to cultivate their knowledge for capacity building, but at the same time they shall act according to the rule of law and corporate ethics.

5.Employees shall at all times observe a fair and orderly principle of competition.6. Employees shall give full respect to the value of business and technical information possessed by other

companies. And at the same time, they shall be fully conscious of the value of Hitachi Chemical’s business and technical information, and shall work carefully towards establishing a strict and vigorous system of information management.

7. The people shall understand that maintaining global peace and security is crucial for improving both credibility of Japanese industries and the nation. Therefore they shall strive to comply with laws and regulations relating to international trade at the same time.

8. The people in the management positions of Hitachi Chemical shall, in accordance with this standards of conduct, take the initiative and provide appropriate guidance to their staff, thereby to facilitate the conduct of corporate business affairs, and shall also work toward creating a vigorous working environment in which correct workplace discipline is maintained and employee morale is raised.

Hitachi Chemical Group, as a member of society, promotes activities to fulfill corporate social responsibilities (CSR activities) to contribute to the development of a sustainable society.

As the slogan for the promotion of CSR activities, we selected “building a company that embodies ‘circle and harmony’ of all living things, which can offer a sense of safety and reassurance to both people and the Earth.” We are determined to develop a “circle” of people who support us and to nurture a sense of “harmony” with them so that we can deliver a sense of confidence and safety to customers along with our products.

Slogan for the Promotion of CSR Activities

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Improving Our Corporate Social Responsibility (CSR)

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Compliance: Hitachi Chemical’s Concept

Office Responsible for Compliance

Employee Education on Compliance

The term “compliance” or to “comply” is generally used to mean to “comply with legal regulations.” At Hitachi Chemical, we interpret this term with a broader meaning: to comply with our Standards of Corporate Conduct when making decisions, and acting as a corporation that is a responsible member of society.

In April 2004, Hitachi Chemical established a CSR Office to integrate the tasks of overseeing the full observance of corporate ethics by the Ethics and Business Conduct Office (established in January 1998) and the Compliance Management Office (established May 2002). This will enable us to promote complete compliance and social contribution activities from a company-wide standpoint.

Hitachi Chemical published the Corporate Ethics Guidebook 1 and the Antitrust Law Handbook 2 to ensure that business activities, R&D, and other corporate activities are conducted properly. We are also working to instill awareness of compliance through educational workshops for all employees. In fiscal 2002 and 2003, in-house study sessions on compliance were held for sales personnel in the Hitachi Chemical Group

Safety and Environmental Management

Export Management

The Safety & Environmental Management Group aims to reduce the environmental impact from corporate activities and to secure the safety of local communities and employees. Safety and environmental measures of the whole Hitachi Chemical Group are promoted through various activities, such as the improvement of environmental conditions, the control of chemical substances, safety education from the fundamental standpoint of safety, and measures to increase the intrinsic safety of the working environment.

The Corporate Export Regulation Group ensures legal compliance in expor ting processes. Specifically, the Group focuses on expor t management that promptly responds to changes in regulations, thorough implementation of inspections, improvement of education and monitoring programs, and alliances with other group companies.

Risk Management

The Risk Management Group takes risk countermeasures to proactively prevent risks that would hinder business activities at Hitachi Chemical Group companies in Japan and overseas.

with the aim of thorough compliance awareness in all sales divisions. We wil l continue to provide employees with educat ional oppor tunit ies and awareness-raising activities to maintain our corporate compliance level.

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Hitachi Chemical’s concepts for corporate ethics

1 Corporate Ethics Guidebook: Guidelines for Hitachi Chemical’s corporate ethics, published in 1998, distributed to all company members.

2 Antitrust Law Handbook: Published in 1992 and distributed to sales personnel.

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Corporate Governance Structure

Corporate governance structure of Hitachi Chemical Co., Ltd.

The Board of Directors of Hitachi Chemical, holds regular monthly meetings and extraordinary meetings when necessary. In addition to approving the budget and accounts, the Board of Directors uses the monthly and quarterly performance reports it receives from the Executive Officers to supervise the budget and business results. In order to further ensure the separation of operational and supervisory functions, Hitachi Chemical avoids the situation where the Chairman of the Board serves concurrently as an Executive Officer, and limits the number of Executive Officers concurrently ser ving as Directors to a necessary minimum. Hitachi Chemical has appointed the following individuals as Outside Directors in order to improve the actual supervisory functions of management. All are familiar with the Hitachi Chemical’s management conditions and knowledgeable in relevant fields such as R&D and finance whereH i t a c h i C h e m i c a l h a s i m p o r t a n t management subjects.

The Audit Committee uses full-time staff independent of the Executive Officers to conduct audits in order to ensure independence. In addition, the Auditing Office conducts internal audits ordered by the Chief Executive Officer, and also works with the Audit Committee when instructed by the Committee.

Composed of all Executive Officers, the Executive Officers’ Meeting acts as an advisory body to the Chief Executive Officer in order to facilitate multifaceted studies into and decisions on issues of importance which may af fect the management of Hitachi Chemical or the Hitachi Chemical Group. The Executive Officers’ Meeting holds regular meetings twice a month and extraordinary meetings when necessary to accelerate decision-making and business operations.

Corporate Governance Reforms

•Board of Directors and Outside Directors •Audit System

•Executive Officers’ Meeting

In fiscal 2003, Hitachi Chemical and six group companies shifted their structure to a “company with committee system.” The aim is to establish a healthy and transparent management system that enables the corporation to respond promptly to market changes.

The Hitachi Chemical Group believes that one of its most important management tasks is establishing a management structure that is sound, highly transparent and capable of responding swiftly to changes in the market. As part of these efforts, in June 2003, Hitachi Chemical adopted a “Company with Committees System” that separates operational and supervisory functions by transferring substantial decision-making authority regarding business operations from the Board of Directors to Executive Officers for speedy management with clear accountability. In addition, the new system strengthens the supervisory function of the Board of Directors and ensures highly objective and transparent management by establishing a Nominating Committee, an Audit Committee and a Compensation Committee under the Board of Directors, all of which are composed primarily of Outside Directors. Hi tachi Chemica l i s work ing to implement unified group management and enhance super visor y functions by dispatching its Outside Directors to the companies in the Hitachi Chemical Group that have adopted the Company with Committees System.

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Products of the Hitachi Chemical Group are manufactured under the policy that places the first priority on the manufacture of high quality products that satisfy and are trusted by customers and are beneficial to society.

Improving and Maintaining QualityWe develop our unique new technologies and products based on a careful review of customer needs and market trends. In development processes, thorough validation tests , qual i ty assessment tests and experimental production are carried out on a significant number of sample products. We also build quality into our products by adopting precise product management systems and using the latest and best manufacturing equipment and techniques, as well as by conducting strict product inspections from the customers’ point of view.

Product Safety AssessmentsOur goal is to fulfill corporate social responsibility by providing products that ensure not only their usefulness but also safety for our customers. We guarantee that our products meet the applicable safety regulations and standards. Furthermore, we collect and analyze a wide range of information on product safety assurance in order to ensure that our safety standards are always current.

Employment Training to Improve and Stabilize Product QualityWe provide employees with training in quality assurance and quality improvement. Through these training, we strive for further improvement and stabilization of the quality of our products.

MSDS: Material Safety Data Sheet

Tools for Quality AssuranceWe provide up-to-date safety information by issuing MSDSs so that our chemical products may be handled in an appropriate manner. In addition, “ yellow cards ” (emergency contact information) are issued to ensure safety during transportation and “yellow cards on packaging” are adopted to provide information on first-aid treatment in case of emergency. MSDS Yellow cards Yellow cards on packaging

Our policy on product quality gives the highest priority to quality control and customer satisfaction. We are always trying to further improve product quality through management systems based on ISO 9001 standards.

Quality Assurance

Our Policy on Product Quality

Building high quality into our products during the development processes

Social R

epo

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Respecting Personal Differences and Prohibiting from DiscriminationThe Hitachi Chemical Group has been working to create a safe and comfortable work environment and striving to keep the environment where human rights are respected. To achieve this goal, we provide employees with opportunities to learn to respect each other’s differences and make efforts and cooperate to create discrimination-free work sites. The Hitachi Chemical Group does not allow any types of child labor or forced or obligated labor.

Understanding DiversityWe employ and recr uit people with diverse backgrounds solely based on their knowledge and skills. We do not make any distinction as to race, sex, nationality, physical difference, religions, birth place, personal history, or academic background, etc.

Providing Various Support SystemsThe Hitachi Chemical Group is making its efforts to improve working conditions so that they are suitable for every employee to balance their life between work and family.When they need to spend more time for families at home, many employees satisfy their desire to maintain their jobs by using various support systems, including extended leave, shorter working hours, working from home, and a reemployment system.

Preventing Sexual HarassmentSexual harassment not only damages the dignity of a person but also has a highly adverse impact on the victim’s professional performance. It is a serious issue also for the corporation, for it disrupts the order of the work place and gives the company a bad reputation in society. The Hitachi Chemical Group uses the Guidelines on Corporate Ethics to disseminate knowledge about this issue and to raise the awareness of ever y employee in order to prevent sexual harassment. In addition, consultants and a complaint processing committee are assigned in each work site to ensure a rapid and appropriate response when needed.

Gender EqualityWe be l i eve tha t human r esour ces management should be made according to the will and skills of employees, regardless of their gender. We have made necessary changes to our systems so that female workers can have an equal chance in career advancement.

Equal Opportunities for People with DisabilitiesPeople with disabilities who have intention to work should have equal opportunities to par ticipate in social activities. The Hitachi Chemical Group strives to increase their chances to join the labor force and expand into other job categories. To support successful job applications and performance at work, we willingly provide training to these people before they start their career. After they enter one of the group companies, we make the necessary adaptations to office conditions to support their work performance. These efforts have resulted in a high rate of employees with disabilities among the total number of employees at Hitachi Chemical. In 2003, the rate was 1.99% in Hitachi Chemical while the national average was 1.48%. The employment rate of persons with disabilities by law is 1.80%.

Pregnancy Delivery Child(1 year old)

Pregnancy going to hospital regularly / Obstacle vacation

Maternity leave

Child-care leave

Half-day annual paid holidays

To bring up children

Care start One year Care reason disappearance

Care leave of absence

To care for family members

Human Rights and Equal OpportunitiesThe Hitachi Chemical Group respects human rights and the personal qualities of our employees and all the people doing business with us. We make various efforts to keep our work sites free from any kinds of discrimination.

Employees with disabilities among the total number of employees in 2003

Child(The third grade in an elementary school)

Half-day annual paid holidays

11 12

Human Resource Development

We have been adopting our human resource systems so that each employee can raise their motivation to the job and tackle their tasks more actively, and, ultimately, so that the most efficient use of human resources can be achieved. “Open offering of new positions” is provided, which aims to (1) reform awareness and raise motivation

for workers in skill development, and (2) promote reallocation of human

resources.When needs for an opening occur, notification is sent to all employees through the intranet. Anyone who has more than three years experience at the company is entitled to apply for the position.

The Career Development Plan gives opportunities to employees to discuss their career plans with their supervisors: what kind of positions they would prefer to take and what kind of skills they would like to obtain. The Plan motivates employees to consider their own career development and supervisors to promote the training and education of their staff. We have also adopted systems that enable younger employees to gain temporary work experience in affiliated companies or to study abroad.

An increasing number of senior people have been showing a desire to stay in the workforce, even after reaching the retirement age set in their contract in the background of the starting age of public pension payments being raised. As a system to satisfy their desire and, at the same time, to make the most of the knowledge accumulated through the long experience of older workers, we have started a “senior employment system.” Reemployment can be done where senior people at the set retirement age wish to continue working and a suitable position is available.

Education and TrainingWe offer various training and education programs to our employees. In fiscal 2003, many participated in programs, including those listed below:

For higher skills and abilities

Knowledge and skills necessary to deal with the internationalization of corporations are studied. Examples include programs to prepare employees who are being dispatched to a foreign country and programs to improve the foreign language skills of employees. In fiscal 2003, a total of 3,376 employees took TOEIC (Test of English for International Communication) exams.

Internationalization training programs······

Participants obtain knowledge and skills that are specific to their job fields, such as R&D, cost-reduction technologies, manufacturing technologies, and sales and marketing.

Job-skill-specific training programs·········

Participants obtain the knowledge and skills that are necessary specifically for their ranking, such as training programs for new employees or for specific positions.

472 Average training hours:

Rank-specific training programs·············

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For a higher quality of life

We support the employees’ desire to study by providing financial support for those who complete designated courses. The courses cover a wide area of study fields, from the courses that are helpful at work to those that are entirely related to their own interests.

Correspondence study support················

Raising awareness about environmentalconservation and safety

Training sessions are provided to internal environment auditors based on ISO 14001.

Internal environment auditor training·······

In order to ensure safe and health conditions at the workplace, managers and supervisors receive training sessions specific to their positions.

Safety and health training·····················

An awareness-raising education program is performed through the Internet to promote the environmental consciousness of each employee.

“Eco-mind” education programs·············

This is a seminar series for employees who are aged 45 or above. They and their spouses learn how to prepare for their retirement beginning at an early age. The topics include how to maintain health conditions, how to enjoy a meaningful retired life, and how to take care of financial challenges.

“Nice Life seminars”···························

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Human Resource Development: Employee Education and TrainingTo exhibit the independence and creativity of each employee to the maximum, various programs have been established while a variety of education and training programs are provided so that their motivation and skills can be raised most effectively.

•Open Offering of New Positions •Career Development Plan •Senior Employment System

Number of participants:

294 Average training hours: 20Number of participants:

127 Average training hours: 54Number of participants:

Number of participants: 290





Note: Figures reflected are for FY 2003.

13 14

Safety and HealthThe Hitachi Chemical Group has adopted various safety measures, including the OSH-MS activities, improvement of the intrinsic safety of facilities, the Safety Training Observation Program (STOP) developed by DuPont, Risk Prevention Training (KYT), and the “Hiyari-Hatto” (Near-Miss) program. As a result of these measures, both the casualty rate and the number of employee absences due to work-related illness or injuries decreased in 2003 compared with the previous year. As our next goal, we will work on the promotion of risk assessment based on the observation of actual sites at non-routine work (when an accident occurs, for example), and on risk reduction activities. These are measures to achieve the ultimate goal of basic safety principles to ensure intrinsic safety of working environment. The ef for ts have been producing successful results. In Februar y 2003, Goshomiya Works of Hitachi Chemical achieved zero accident records in category II (zero accidents in 5.4 million hours), and the Research and Development Center also achieved category I (zero accidents in 2.7 million hours) in December 2002, as designated by the Ministry of Health, Labor and Welfare.

Safety and Disaster Prevention InvestmentThe Hitachi Chemical Group has been continuously making investments in safety and disaster prevention measures. In fiscal 2003, Hitachi Chemical alone invested 440 million yen in safety measures, mainly in measures against the aging of facilities. Investments on a consolidated basis amounted to 790 million yen. The accumulated amount of investments since 1990 in safety and disaster prevention measures made by Hitachi Chemical has now reached 5.6 billion yen.

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Hitachi Chemical

All industries

Chemical industry

Non-consolidated

Consolidated

Group companies(19 of them including manufacturers and work contractors)

•The data of safety and health is for calendar year.

Casualty rate: The total number of those killed or injured by a labor accident per 1 million working hours.

Safety, Health, and Disaster Prevention MeasuresAiming at achieving zero accidents and zero disaster damage, we have adopted the Occupational Safety and Health Management System (OSH-MS). Dangerous operations and facilities are identified by on-site risk assessments, and any necessary changes are made to improve safety.

Occupational accident rate

Number of work-loss injuries

Breakdown of safety and disaster prevention investment (Fiscal 2003)

0.5

01999 2000 2001 2002 2003

1.0

1.5

2.0 1.82

1.77

0.21

0.46

0.15

0.92

0.37

0.83

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0.26

0.51

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1.78

0.92

(Calendar year)

5

01999 2000 2001 2002 2003

10

15

4

87

9

12

4

12

1 1

(Injuries)

(Calendar year)

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Environmental Safety AuditThe Hitachi Chemical Group publishes an Environmental and Safety Management Repor t as an original audit ing data document with regard to issues concerning environmental conser vation, disaster prevention, safety and health measures, and chemical substance treatments. Based on this report, the Environmental and Safety Auditing Committee carries out every year, document auditing and site inspections of the manufacturing and R&D divisions, as well as OSH-MS auditing, to audit the manufacturing companies and works.

Company-wide Disaster Prevention DrillsObserving the day when a serious accident occurred at one of its works, November 14, 1982, Hitachi Chemical designated November 14 as a company-wide disaster prevention day to renew our pledge for disaster prevention and safety ef for ts. In addition, May 14 is also designated as a disaster prevention day when events are hold at each work site. For the week including these dates, “disaster prevention week,” we carry out various events, including company-wide disaster prevention drills, reviews of disaster p r e v e n t i o n m a n a g e m e n t s c h e m e s , safety-awareness-raising program for employees, and inspections of disasters prevention and safety facilities.

Fire DrillsThe Hitachi Chemical Group has its own fire fighting crew to prevent and prepare for sudden disasters and accidents, including fires and natural disasters caused by wind and water. In addition to the drills specially per formed in the disaster prevention week in the spring and autumn, the crews undertake regular drills so as to be completely prepared in the event of an emergency. The crew also participates in the city-wide joint drills organized by the local governments.

Safety and Health Discussion SessionEach year, the Hitachi Chemical Group holds a discussion session on safety and health issues in order to improve safety and health standards. In these sessions, examples of where improvements have been made to the systems are presented, information is exchanged, and field trips to sites are organized.

Mental Health CareThe environment surrounding workers, including social settings and employment formats, has been rapidly changing in recent years. These changes can be a serious burden to workers, and may even cause high levels of fatigue and stress. That is why the Hitachi Chemical Group makes the utmost efforts to provide its staff with mental health support, in order to take measures against the above-mentioned issues and to improve the working environment and the general health condition of its employees. In fiscal 2003, we took a variety of approaches to achieving this goal. We

invited specialists to lectures and seminars, published awareness-raising ar ticles in internal newsletters, had company physicians’ inter view with employees, and held Fitness Campaigns to promote physical and mental health. Staff members who are responsible for the mental health care of employees also actively participated in seminars and lectures held outside the company to improve their knowledge and skills, and to gather the most up-to-date information.

Company-wide disaster prevention day: November 14, 2003, at Goi Works.

Fire drills: December, 2003 at Shimodate Works.

Mental health care seminar: February, 2004 at Goi Works.

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Participation in Community ActivitiesThe Hitachi Chemical Group actively participate in many sorts of events and activities—both in Japan and abroad—and cooperate with the local residents to make their communities even better places. Participation in traditional local events, such as local festivals and fireworks, also helps us nurture communications and relationships with neighboring communities. In turn, many residents from surrounding areas join us at the works-festivals and other events that we hold at our sites. We also invite local school children to factory tours and offer table tennis classes to local people. To improve the local environment, we organize employees clean-up campaigns on the streets of neighboring areas. We will continue our efforts to build a profound relationship with local communities through various opportunities.

Support for Cultural and Sports ActivitiesThe Hitachi Chemical Group supports and sponsors cultural and sports activities both in Japan and overseas. These activities range from sponsorship of performing arts and symphony orchestras to support for marathons and youth soccer tournaments. Hitachi Chemical Europe GmbH set up the Hitachi Chemical Europe Environmental Change and Management Scholarship for inter nat ional students studying environment change and management at Oxford University’s Linacre College. The program is designed to foster environmental change and management specialists who will contribute widely to environmental protection and socioeconomic development in their own countries after graduation.

The staff of Hitachi Kasei Polymer joins the Awa-odori Dance Festival, a well-known dance festival held in Tokushima City. Dancing together, they build up and strengthen relationships with local residents.

Clean-up CampaignFiscal 2003 - Goi Works

The staff of manufacturing works and group companies cleans up the streets and beaches in the neighborhood on our “Clean-up Campaign” day.

Social Contribution ActivitiesThe Hitachi Chemical Group is deeply aware of its role as a responsible member of society, and carries out a variety of social contribution activities both in Japan and overseas with the aim of realizing a truly prosperous society.

Awa-odori Dance FestivalAugust 2003 - Hitachi Kasei Polymer Co., Ltd.

As many as 3,600 local people enjoyed a comedy show by “Tetsu and Tomo,” food stalls, and other attractions at “the Fureai (Friendship) Festival” held by Yamazaki Works. Through the event, the sense of community was further strengthened between the Hitachi Chemical staff and local residents. The profits were donated to the Culture and Welfare Foundation of the Ibaraki Shimbun (newspaper).

Fureai (Friendship) FestivalOctober 2003 - Yamazaki Works and group companies in Hitachi area

When the azalea flowers bloomed on the bushes planted around the site, Hitachi Chemical Automotive Products invited local people to “the Azalea Festival.” About 1,100 people enjoyed a variety of attractions, food stalls, and observation tours of the factory.

Azalea FestivalApril 2004 - Hitachi Chemical Automotive Products Co., Ltd.

The Hikone Works of Shin-Kobe Electric Machinery held a ground golf competition in cooperation with a local seniors group and sports promotion group.

Ground Golf CompetitionApril 2003 - Shin-Kobe Electric Machinery Co., Ltd.

15 16

Social Welfare and Support for Disaster VictimsEmployees of the Hitachi Chemical Group may use the multi-purpose paid vacation system to participate in volunteer activities. Information on volunteer activities is provided through the intranet so that employees can find a program to join at any time. In addition to contributions through volunteer work, we also make contributions to society by donating goods, products, and money to social welfare facilities. Some contributions are also sent to overseas, through such media as charity programs for deprived children and relief drives for the victims of wild fires and terrorist attacks. We also make donations of our products to local universities.

Support for the Hitachi Group FoundationsHitachi Group operates six foundations for social contribution activities in and outside of Japan. Out of these six, the Hitachi Chemical Group supports the following four foundations for their activities in helping individuals, corporations, and groups that make efforts in social contribution activities.

Th e Odaira Memorial Hitachi Education Foundation

The Hitachi Environment Foundation The Hitachi Mirai Foundation The Hitachi Foundation (U.S.A.)

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A Japanese archery (Kyudo) event for the Western Region of Ibaraki Prefecture was held at Goou-kan Archery Hall in the Goshomiya Works. Aiming at sharpening their spirit and technique, as well as further popularizing the sport, some 260 archers, mainly from local high schools, joined and promoted mutual exchanges.

Kyudo EventJanuary 2004 - Goshomiya Works

Kendo ClassesFiscal 2003 - Shimodate Works

The members of the Kendo (Japanese fencing) club of the Shimodate Works volunteered to teach kindergarten and elementary school children in Kendo classes. The members also enjoyed teaching the principles of Kendo and the importance of the proprieties in easier language to the local children.

Soccer TournamentAugust 2003 - Shimodate Works

Shimodate Works held “the Lilies Cup Yuki Junior Soccer tournament,” where a total of 230 players in 16 teams enjoyed an exciting tournament. Goshomiya Works also co-sponsors “the Twin Cup” as a way of supporting sports activities.

Donations to Welfare FacilitiesFiscal 2003 - Research & Development Center

The Hitachi Chemical Group makes various types of support, including funding and product donations, to welfare facilities in the local areas. The Research & Development Center makes an additional contribution by collecting waste paper.

Hakone FestivalAugust 2003 - Hitachi Chemical Company America, Ltd. (Headquarters: San Jose, U.S.A.)

Hitachi Chemical Company America co-sponsors “the Hakone Festival,” an annual event held in Saratoga, CA. In 2003, employees volunteered at food stalls and other attractions at the Festival held in the Hakone Garden, one of the few genuine Japanese-style gardens in the U.S.A., which is celebrating its 90 years of history. Any profit made by the volunteers was donated to charitable programs.

17 18

Websites on the InternetOur Websites present a wide range of information, including environmental and socia l contr ibut ion act iv i t ies , profiles of the company and its products, investor relations, job opportunities, and procurement data. Many documents and reports can be downloaded from these Websites.

Public RelationsThe logo of has been gaining consumer recognit ion and promoting the image of the company through adver tisements published in newspapers, magazines, and other media.

ExhibitionsWe par ticipate in various exhibitions to promote the products of the Hitachi Chemical Group. Such exhibit ions include the Eco-Products Exhibition ( a c o m p r e h e n s i v e e x h i b i t i o n f o r environment-related products), the JPCA Show, the FPD R&D and Manufacturing Technology Expo & Conference, FPD International, SEMICON Japan, and the Printed Wiring Boards EXPO.

The Printed Wiring Boards EXPO (January 2004 at the Tokyo Big Site)

Advertisement in the Tokaido Shinkansen super express train.

The Hitachi Chemical Website: http://www.hitachi-chem.co.jp

Timely DisclosureOur account settlement and other important information are disclosed in a timely manner at the Tokyo Stock Exchange and Osaka Securities Exchange, where Hitachi Chemical is listed. Hitachi Chemical was the 36th company out of 1,751 to report their full-year business results for the year ending March 2004.

Documents and ReportsWe issue various reports and documents to let a wide range of people know about our corporate activities. These publications include the Social and Environmental Repor t, Company Brochure, Business Report, Annual Report, Intellectual Property Report, and the Technical Report.

In June 2003, the patents regarding anisotoropic conductive film for LCDs received the “Special Award (Prime Minister’s Award) at the 2003 National Commendations for Inventions” held by the Japan Institute of Invention and Innovation. This is the second highest (only the Imperial Invention Prize is higher) in special award category.

Evaluation from External

In March 2004, Hitachi Chemical ’s ef forts in areas including strengthening compliance and corporate governance, environmental preser vation and social responsibility activities were evaluated and included in the FTSE4Good Index Series, a socially responsible investment (SRI) index prepared by FTSE International, a major stock index company in the United Kingdom.

Hitachi Chemical was ranked 84th in the manufactures category in “the Seventh Environmental Management Sur vey of Corporations” by Nihon Keizai Shimbun Inc., which covered 1,772 manufacturers and 2,154 non-manufacturers and published in December, 2003. In the Companies with Good Working Conditions: 2003, a survey also performed by Nihon Keizai Shimbun, Hitachi Chemical was ranked 10th.

SRI: Socially Responsible Investment

Communication with StakeholdersWe adopt a variety of communication methods to share information with all kinds of stakeholders—shareholders, customers, suppliers, local residents, and employees.

•SRI Index •Corporate Rankings •Prime Minister’s Invention Award

17 18

Communications with Employees

“Nagase Direct” is an intranet site, where Yasuji Nagase, the President and CEO, expresses his thoughts and principles on the operation of the Hitachi Chemical Group to employees of group companies. Using this site, employees in turn can send their opinions and feedback to the president.

“Nagase Direct,” on “HC-NET,” is an intranet site for employees

An internal journal, Hitachi Kasei, is published ever y two months to let all employees know about the visions held by management, messages on important issues, and various other information. Each manufacturing site and group company also publishes its own newsletter.

Each year, we honor employees who have participated in the development of products and the acquisition of patents that have made a significant contribution to the company’s business achievements. In addition, those who made substantial achievement in off-the-job activities, such as sports events and volunteer activities are also honored. A certificate signed by the president and a prize money are given to awarded winners.

Employees can send their complaint messages anonymously to a consultation site on the intranet. In addition, a special consultation desk for measures against sexual harassment is assigned at the headquarters and each worksite.

Dobon-kai Team achieved a successful record at the Japan International Birdman Rally and was commended by the president in 2003.

Feedback on the 2003 Issue of the Environmental Report Last year, Hitachi Chemical published 3,100 copies of the Japanese version and 2,000 copies of the English version of “the Environmental Report: 2003.” Fifty-eight readers returned the sur veys that we enclosed with the report, and some of the answers and opinions received in the survey have been reflected in the current issue, “the Social and Environmental Report: 2004.”

What is your overall impression of this report?

Which column(s) in this report made the most significant impression on you?

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•Social performance of the Group should be included in the report to make it a “Sustainability Report.” From this issue, we have expanded the range of information to cover social aspects. •I would like to know more about the actual measures being taken to improve environmental conditions. In this issue, we have added a column “Environmental Topics from the Works,” which introduces actual cases

where a certain level of improvement was achieved.•“Introduction to Works” needs descriptions in words in addition to the data in numbers and graphs. We have included “Measures to Reduce Environmental Impacts” and “Topics in 2003” in the “Environmental

Topics from the Works” section of the 2004 report.

Example of Feedback from Readers and Our Responses

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• Internal Publications for Communication

• Opinion Exchanges between President and Employees

•Employee Awards

•Consultation Opportunities

Survey results

19 20

Organizational SchemeHitachi Chemical promotes consolidated environmental management with its group companies. In order for smooth and efficient management among the group, issues concerning the environment, safety and disaster prevention are discussed in the Environmental Management Council, chaired by the president and comprising executive managers as members. The decisions made by the Council are reflected in the operations of the group.

Environmental Management Council meeting in March 2004

Environmental Protection Action GuidelinesThe Environmental Protection Action Guidelines were established in March 1993 as a fundamental principle for the actions and measures taken for environmental protection in our business activities. The Hitachi Chemical’s Standards of Corporate Conduct, which was drawn up in 1983, was used as the basis for these guidelines. Each year, we lay down a basic action plan for the year according to the Guidelines as a reference for our efforts to conserve and continuously improve environmental conditions.

Environmental Protection Action Guidelines1. Recognizing there is a growing concern over global environment as common issue for all mankind, harmony

with environment will be given a top management priority in the entire company.2. Officers and site directors in charge of environmental issues will take an initiative in establishing a structure to

promote environmental protection, enacting regulatory measures for environmental stewardship and setting a target for reducing environmental impacts. Environmental auditing will also be implemented to monitor those activities to ensure continuous improvements.

3. By duly understanding needs for solving environmental problems facing the world, we will strive to develop innovative and highly reliable technologies and products which will lead us to contributing to societies.

4. We will take into account all steps in value chains from R&D and product designing, to manufacturing, logistics, fulfillment and disposal in an attempt to reduce the environmental impacts.

5. We will constantly monitor and study impacts on our environment as a result of our business activities and seek new technologies and materials which are superior in environmental safety, energy conservation and resources conservation to reduce overall environmental impacts.

6. We will not only observe regulations set by international regulatory bodies, government and local authorities, but also set our own voluntary standard, when and where necessary, for maintaining environmental stewardship.

7. For business activities abroad and exporting products, we will also take into due consideration their impacts on local environment and implement measures to correspond to needs from local communities.

8. We will continuously raise environmental awareness of our employees and contribute to societies with respect and care for them from a broader viewpoint through environmental protection activities.

9. Should an environmental problem arise as a result of our business activities, we will take proper measures to minimize the impact on the environment.

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Fundamental Policy toward the EnvironmentWe see creation of harmony with the environment as one of our top priorities in management. Our fundamental policy in terms of environmental management is “to realize a recycling-oriented society that enables sustainable development.”

Please see page 7 for the Hitachi Chemical’s Standards of Corporate Conduct.

19 20

ISO 14001 Certificate AcquisitionIn November 1995, Hitachi Chemical became the first chemical manufacturer in Japan to acquire BS 7750 certificate, a British environmental management system standard. Since then, many of the manufacturing and business sites of Hitachi Chemical have been acquiring the international counterpar t of this standard, ISO 14001. By December 1996, all manufacturing sites had acquired ISO 14001 certification, and the Research

& Development Center and sales offices followed soon after. Many of the group companies, including manufacturing and sales companies, have also been acquiring ISO 14001 certification, since Hitachi Powdered Metals Co., Ltd. was certified first in 1997. By the end of fiscal 2002, all the major companies in the group—at home and abroad—had acquired ISO 14001 certification.

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Environmental Impact of Our Business Operations (Fiscal 2003)Energy and resource consumption through business operations and the environmental impact of the manufacturing processes of the Hitachi Chemical Group are summarized below:

Input/output of environmental impact by the Hitachi Chemical Group’s business activities

21 22

Action Plans and ResultsThe following details the environmental action plan (fiscal 2004) and the results (fiscal 2003) of the Hitachi Chemical Group.

Environmental management

CategoryTarget for activities Results of

FY 2003 Rating See atItem Base year

(FY) Target figure Target year (Y)

Environmental activities assessment

Promoting activities on GREEN 21 Version 2

Increasing green points 2002640 points533 points426 points

200520042003

Non-consolidated:511 pointsConsolidated:474 points

◎

Introduction of the environmental management system

Obtaining ISO 14001 certification

—ISO 14001

certification acquired in major group companies

2005 Complete ◎ Page 20

Environmental performance

CategoryTarget for activities Results of

FY 2003 Rating See atItem Base year

(FY) Target figure Target year (FY)

Promotion of the development of green products

Expansion of the scope of green products Ratio of green products — 60% or more 2005 Non-consolidated: 69%

Consolidated: 66% ◎ Page 25

Stopping the use of lead solder for connecting electrical equipment

Consumption of lead solder — 0 2005 Non-consolidated: 0

Consolidated: 0.8 tons △ Page 36

Prevention of global warming

CO2 Emission 1990 93% 2010 Non-consolidated: 79% ◎

Page 29CO2 Unit requirement index 1990 75% or less 2010 Non-consolidated: 88% ○

SF6 Emission — 3% or less of consumption 2005 Non-consolidated: 1% or less ○

Ratio of hybrid vehicles to commercial vehicles — 40% or more 2005 Non-consolidated: 35% ○ Page 30

Control of chemical substances Chemical substances emission 2000 Non-consolidated: 30% or less

Consolidated: 70% or less 2005 Non-consolidated: 54%Consolidated: 59% ○ Page 33

Reducing wastes

Ratio of waste disposed of as landfills — 1% or less 2005 Non-consolidated: 0.03%

Consolidated: 4.6% ○

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Waste disposed of as landfills — Less than

5 tons/year·site 2005

Non-consolidated:2 tons/year·site

Consolidated(domestic):38 tons/year·site

◎

△

Waste produced 1991 100% or less 2010 Non-consolidated: 125% △

Recycling ratio — 90% or more 2010Non-consolidated: 99%

Consolidated: 87%○

Enhancement of environmental communication

Promoting the disclosure of information through the environmental reports and Internet websites

Participating actively in exhibitions, lectures, community activities, and other environmental activities organized by outside associations

○ Page 17

Note: Evaluation ◎: Highly successful results, ○: Results as planned, △: Lower results than planned

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Action Plans and ResultsWe are committed to environmental activities to meet the numerical targets in the action plan with the aim of environmental conservation and continuous improvement in environmental impact.

23 24

About GREEN 21 Version 2From fiscal 1998 to 2001, the Hitachi Group used the GREEN 21 program to evaluate our environmental activities. Numerical standards were set for eight environmental categories, and the evaluations have helped us to continuously improve our operations. In fiscal 2002, GREEN 21 Version 2 was implemented, with higher evaluation levels and additional evaluation criteria. The total points earned in fiscal 2002 (320 points) was defined as the new standard level, and the goal to be achieved by 2005 was set at 640 points. Absolute evaluations are made for 53 items in eight categories.

Evaluation in Fiscal 2003T h e n u m b e r o f p o i n t s e a r n e d i n 2003 increased substantially over the previous year from 373 points to 511 on non-consolidated basis, and from 340 to 474 points on consolidated basis. Among the eight categories, Risk Management and Resource Circulations made the largest levels of improvement. The improvement in Risk Management was made possible by setting a voluntary goal at a stringent level and then using efficient management to move toward the goal. Our efforts to realize zero emission reduced the amount of waste to landfill and increased the recycling rate, resulting in the increased points in the evaluation of the Resource Circulation category. A large improvement was also seen in the Joint Creation with Stakeholders and Sustainable Business Models categories.

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The evaluation points gained for the Eco-products, Prevention of Global Warming, and Sustainable Business Models categories, however, are relatively lower than achieved in other categories. Based on these results, we will make further efforts in the promotion of green procurement, energy-saving practices, and product recycling.

Next Step

No. Category Principal performance indicators

1 Eco-management: Environmental Management Environmental management, Action plans, Environmental accounting

2 Eco-management: Risk Management Compliance of laws, Setting voluntary standards

3 Eco-mind Training and inspiring employees

4 Eco-products Assessment of products and services, Green procurements, Distribution

5 Eco-factories: Prevention of Global Warming Energy saving, Reduction in carbon dioxide

6 Eco-factories: Resource Circulation Waste reduction, Control of chemical substances

7 Joint Creation with Stakeholders Disclosure, Communications, community activities

8 Sustainable Business Models Organization, Plans, Product recycling, Environmental restoration

Hitachi Group’s Environmental Activity Assessment: GREEN 21 Version 2GREEN 21 Version 2 is a revised version of Hitachi Group’s original set of environmental evaluation indices that enable us to evaluate our environmental activities based on certain evaluation standards. This system helps us to continuously improve the level of our environmental activities.

Evaluation criteria

Evaluation points

Evaluation

Non-consolidated Consolidated

200

400

600

0

373

511 533

640

2002 2003 2004 2005

800

340

474

Target

(Points)

(FY)

23 24

Next Step

Costs and EffectsIn fiscal 2003, the Hitachi Chemical Group spent 10,060 million yen on environmental-related costs, which was 16% higher than the previous year. This increase was mainly due to the increase in development expenditure for green products. The total amount of environmental investment in fiscal 2003 was 1,350 million

yen, approximately the same amount as the previous year. The major investment was in the installation of waste gas treatment facilities, aiming to reduce chemical substance emissions into the atmosphere. One major achievement of fiscal 2003 was the substantial reduction in the total amount of waste to landfill from the

The operation of environmental accounting system since fiscal 1999 has shown us the trends in our environmental expenditure. We can use these results to make long-term environmental investment plans, as well as to analyze costs and improve the efficiency of our environmental activities.

ItemNon-consolidated Consolidated

Major descriptionFY 2003 FY 2002 FY 2003 FY 2002

Expenses

Works area costs 3,090 2,370 4,720 4,670 Maintenance cost of equipment for reduction of environmental impacts, and depreciation cost

Upstream/downstream costs 20 30 40 60 Recovery of packaging and recycling expenses

Management activity costs 390 530 830 1,030 Greening, cleaning, and environmental management expenses

Research and development costs 1,920 1,100 4,340 2,770 R&D for the reduction of environmental impacts, and product design expenses

Social activity costs 50 60 60 80 Social contribution programs and publicity expenses

Environmental damage costs 40 40 70 50 Recovery fees, contributions expenses, and charge for soil contamination, etc.

Total costs 5,510 4,130 10,060 8,660

Environmental investment 820 960 1,350 1,480

(Unit: millions of yen)

ItemNon-consolidated Consolidated

Major descriptionFY 2003 FY 2002 FY 2003 FY 2002

Economical effect

Net income effect 50 180 80 600 Profit on sales of recycled wastes, etc.

Expense reduction effect 1,770 1,720 1,820 2,020 Reduction of power expenses and material costs, etc.

Total economical effect 1,820 1,900 1,900 2,620

Volumeeffect

Reduction in energy used (kiloliters) 5,400 18,000 5,600 18,900 Reduction due to energy-saving measures

Reduction of final amount of landfill disposal (tons) 181 660 1,700 1,060 Decrease of ultimate landfills due to waste separation, recycling, and other means

Note: Energy consumption is in terms of crude oil equivalent.

Hitachi Chemical Group, as a result of our zero emission activities. Our energy saving activities were also effective in fiscal 2003. Installation of co-generation units and deodorization systems, as well as heat recovery units, resulted in as much as 5,600 kiloliters of savings in annual energy consumption.

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Environmental AccountingIn order to promote higher efficiency and the continuous improvement of our environmental investments and activities, we adopted an environmental accounting system in 1999 based on the guidelines issued by the Ministry of the Environment.

(Unit: millions of yen)

Environmental investments Breakdown of environmental investmentsNon-consolidated Consolidated

500

1,000

1,500

0

670

460570

820

1999 2000 2001 2002 2003

960

1,390 1,3501,480

(Millions of yen)

(FY)

25 26

Goal and AchievementsThe Hitachi Chemical Group established its Program for Assessing and Registering Green Products in fiscal 2001. Since then, we have been making our utmost efforts to develop and promote environmentally friendly products. At the Hitachi Chemical Group, the products that meet the standards in eight evaluation items are registered as “Green Products.” Having set a goal to increase the sales share of these Green Products to 60% or higher by fiscal 2003, we have been working to reduce the environmental impact of our

products by changing product designing and manufacturing processes, as well as by installing new equipment. By fiscal 2003, the goal was achieved both for Hitachi Chemical alone (69%) and for the whole group (66%). We will continue our efforts to develop materials, components, products, and manufacturing methods that can fur ther reduce the environmental impact of product throughout their life cycles.

Assessment for Green Products

Criteria for evaluation Evaluation points

Product functionality Higher functionality per resource

Resources conservation Resources conservation performance and waste reduction

Resource recycling Resource recycling and a recycling society system

Chemical safety Reducing human health risks of chemicals, hazardous substances

Green chemistry Reducing the environmental impacts of the production processes

Environmental conservation Reducing the environmental impacts

Energy saving performance Energy saving performance during manufacture and use

Information disclosure Provision of information about discarding and disposal

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Development of Green ProductsWe focus on research and development that aims to reduce the impact that our products impose on the Earth and further diversify the items in our environmentally friendly product line.

Ratio of green product sales

Non-consolidated Consolidated

25

50

(%)

0

22

39

6669

100

36

75

2001 2002 2003

60Target

(FY)

Electronics- and chemical-related products Housing equipment and environmental facilities

Criteria for evaluation Evaluation points

Reducing weight Resources conservation, miniaturization, weight reduction, Standardization

Longer service life Durability, reliability, ease of repair

Recycling and reconditioning Use of reconditioned materials

Ease of disassembly Ease of disassembly and separation

Ease of processing Ease of destruction and decomposition

Environmental conservation Reducing the environmental impacts

Energy saving performance Energy saving performance during manufacture and use

Information disclosure Provision of information about waste treatment and disposal

＝Sales of green products

Net sales×100Ratio of green product sales (%)

Evaluations are undertaken for the following items when designing, trial production, and manufacturing products.

25 26

Electronics-Related ProductsExamples of Green Products

Copper clad laminate (CCL) is a base material for printed wiring boards (PWB). To ensure safety, non-flammability is essential for CCL and other PWB materials. Conventional products were given this property by applying bromic flame retardant, which, like other halogen compounds, is known to generate dioxins when incinerated under certain conditions. Hitachi Chemical developed a new non-flammable system that does not use any bromic flame retardant and applied it to MCL-BE-67G(H) and MCL-E-679FG. These materials are also suitable for lead-free soldering processes.

Halogen-free printed wiring board is a high-density printed wiring board produced from materials without halogen-containing compounds. Heat resistance has been increased to accommodate lead-free soldering. Meeting a variety of needs, including those for printed wiring board materials, we can realize lighter, thinner, shorter and smaller components, as well as highly multilayered devices.

CEL-HF Series is an epoxy molding compounds for packaging semiconductor devices. Heat resistance has been increased to make it suitable for lead-free soldering processes. Non-halogen or antimony flame retardants are also available.

TMCP and TMCJ are micro-type tantalum chip capacitors that realize space-saving and resource-saving devices. When compared with TMCA, the conventional type, the volumes of TMCP and TMCJ have been reduced to approximately 1/3 and 1/8, respectively. They are also environmentally friendly products with lead-free electrode terminals.

Tantalum Capacitor Micro type (TMCP, TMCJ)

Hitachi AIC Inc.

Among the eight items for assessment, only those that are rated at 5 (highest score) are shown with a star mark.

Area CharacteristicsProduct

MCL-E-679FG MCL-BE-67(GH) MCL-E-67(FR-4)

EnvironmentSuitability for lead-free soldering processes ○ ○ ○

Halogen-free ○ ○

Reliability

High heat resistance (High Tg) ○ ○

Low CTEXY (horizontal direction) ○

Z (vertical direction) ○ ○

Electric-corrosion resistibility ○ ○ ○

Heat conductivity ○ ○

Stability of dielectric property ○ ○

Epoxy Molding Compounds for SemiconductorsCEL-HF Series

Halogen-free Printed Wiring Boards

TMCP TMCJ

Anisotropic Conductive FilmAC-9000 Series

Anisotropic conductive film (ACF) is an adhesive film featuring dispersed conductive particles. It is suitable for making collective connections between microcircuits, as the application of heat and pressure can secure the conductivity in the vertical direction while maintaining insulation across the in-plane direction. Based on these features, ACF has been used for connections in LCDs circuits as a substitute for soldering. It is an indispensable adhesive product for high-density circuits. The AC-9000 Series is a new series of ACF products, that allow lower temperatures and shorter times for connection than previous products. This series, therefore, contributes to a higher energy efficiency and shorter manufacturing processes. Part using ACF

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Copper-Clad Laminates for Printed Wiring BoardsMCL-BE-67G(H), MCL-E-679FG

Product functionality

Resources conservation


Green chemistry

Chemical safetyChemical safety

1

2

3

4

Green chemistry



Information disclosure

Chemical safetyEnvironmental conservation

Resourcerecycling

Energy saving performance

1

2

3

4

Green chemistry


Resources conservationInformation disclosure


Resource recyclingEnergy saving performance

27 28

Recent concerns for environmental protection and resource conservation urge a reduction in the use of organic solvents. Reduction in the use of formalin is also required as it is a possible cause of “sick-house syndrome.” With its resin synthesizing technologies, the Hitachi Chemical Group developed and offered an ultraviolet curable resin made of acrylic oligomer that does not contain organic solvents or formalin. These products are also an energy-saving material, because unlike conventional products that require heat for curing, they are cured by ultraviolet light. To make the most use of its superior features, we are expanding the application possibilities of the products to printing inks and plastic film coatings.

The molded plastic rear hatch door for automotives is made from compounded materials that can supply superior strength, rigidity, shock resistance, creep features, and good external appearance utilizing the resin’s moldability. When compared with conventional plated steel doors, the plastic doors are 10–20% lighter in weight, contributing to higher fuel efficiency and lower CO2 emissions.

Recently, plasma display panels (PDPs) for large-sized, wall-mounted flat TVs have become commercially available. Hitachi Chemical has developed a clear film as a material to shield the electromagnetic waves emitted from PDPs. The high shielding effect and visible light transmittance are contributing to the rapid rise in popularity of flat-screen TVs.

Automotive manufacturers are now developing the “next-generation” hybrid electric vehicles (HEVs) that contribute to an increased use of “clean energy.” The long-lasting, light-weight and high-performance lithium ion batteries developed by Shin-Kobe Electric Machinery, a Hitachi Chemical Group member, are particularly suitable for HEVs.

Application example of Ultraviolet Curable Resin(Coating of flooring and panels)

Products (resin)

Newly Developed Method to Recycle Expanded Polystyrene Beads

Developing More Recycling Technologies

Since the Law for Promotion of Sorted Collection and Recycling of Containers and Packaging was implemented, many methods to recycle used molded expanded polystyrene (polystyrene foam or “Styrofoam”) have been developed. In fiscal 2003, Hitachi Chemical further increased the performance of recycled polystyrene beads made using conventional methods and launched sales of a new type of recycled polystyrene bead. The product has the same mechanical properties as the virgin materials, as well as the superior appearance of molded products, and meets the Eco Mark standard by containing at least 50% recycled materials. Energy consumption and CO2 emissions during the manufacturing processes were decreased to approximately 60% of the virgin materials. For some types of recycled expanded polystyrene beads, the content of VOCs,

a possible cause of “sick-house syndrome,” has been reduced, and a self-extinguishing property was added so that they can be safely used as building materials.

Molded Products for Automobile Exteriors Molded Plastic Rear Hatch Door

Electromagnetic Interference Shielding Films for Plasma Display Panels

Lithium Ion Battery for Hybrid Electric VehiclesShin-Kobe Electric Machinery Co., Ltd.

Molded product

Recycled expanded polystyrene

Molded expanded polystyrene product after being shrunk

Fine shreds of used polystyrene for recycling

Enlarged image

Hitachi Chemical’s recycling system of expanded polystyrene

VOC: Volatile organic compound.

Chemical-Related ProductsExamples of Green Products

Environmentally Friendly Advanced Performance ResinsUltraviolet Curable Resin


Product functionalityResources conservation

Chemical safety

Resourcesconservation

Resource recycling1

2

3

4

Green chemistry


Resources conservationInformation disclosure



Environmentalconservation

27 28

Compact combined wastewater treatment system KGR2 Series can treat domestic wastewater—from toilet, kitchen, and bathroom—to almost the same level of cleanliness as the wastewater treated by a public treatment plant. Our original biological filtering technologies substantially increased the purifying performance and greatly reduced the size of the tanks, allowing them to be installed in smaller spaces. Less energy is used during the manufacturing processes of the main body. The major material of the body is a special type of resin that has a longer product life and higher strength. In addition, the body does not generate environmental pollutants at the time of disposal.

System bathroom VLP-1616 is a bath system with a washbowl shelf that allows a large floor space and smooth flow of water on the floor. As a further energy-saving feature, a fog-free mirror that requires no electricity was selected. The new materials realize a smaller and lighter form, and reduce energy and resource consumption and use of specific chemical substances. With these features, the product’s overall environmental impact has been reduced.

Waste Treatment of Fiber-Reinforced Plastics(Unsaturated Polyester Resins)

Developing More Recycling Technologies

Fiber-reinforced plastic (FRP) is a hard and strong type of plastic that contains glass fiber and fillers. Because of its strength and high resistance to water and heat, FRPs are used in a wide range of products, including home equipment, automobile parts, and railway car parts. When recycling these products, they need to be sorted according to the different component materials. Sorting, however, has been almost impossible due to the high durability of the unsaturated polyester resins themselves. Hitachi Chemical developed an original technology that enables separated collection of different materials, making recycling of waste FRPs possible. In addition, with this new method the recycling process can be conducted under normal pressure and does not require preliminary treatment, such as crushing or grinding. These properties allow lower costs for waste treatment and recycling, a wider range of uses for the collected materials, and a lower impact in terms of safety and health.

Vanity tables BV series are washstands with a large basin for a wide range of uses, including face washing and shampooing. A functional mirror for makeup, shower faucet, and cabinet are also installed. The hinges are located inside the doors for improved appearance and durability. The amount of vinyl chloride use has also been reduced. The packaging for shipping is made from recyclable materials.

System BathroomVLP-1616 Hitachi Housetec Co., Ltd.

Vanity TablesBV Series Hitachi Housetec Co., Ltd.

Waste FRP

Resin solution Filler Glass fiber

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Housing Equipment and Environmental FacilitiesExamples of Green Products


Compact Combined Wastewater Treatment SystemsKGR2 Series Hitachi Housetec Co., Ltd.

1

2

3

4

Recycling and reconditioning

Ease of processing

Reducing weight

Longer service lifeInformation disclosure

Ease of disassemblyEnvironmental conservation


Ease of processing

Reducing weight

Longer service life

Ease of disassemblyEnvironmental conservation


Ease of processing

Reducing weight

Longer service life

Environmental conservation

29 30

Reduction of CO2 Emissions from Energy ConsumptionIn our efforts to reduce CO2 emissions, the Hitachi Chemical Group has set two target figures to be achieved by fiscal 2010: the actual amount (absolute figure) of CO2 emitted, and the index of CO2 emissions for energy consumption per unit production. In fiscal 2003, Hitachi Chemical reduced the amount of CO2 emissions to 79% of the 1990 level, achieving its target for 2010 (93%) far ahead of schedule. Even though production was higher than the previous year, we were able to successfully reduce CO2 emissions through adopting a variety of measures, including concerted use of high-efficiency facilities, a reduction of fuel consumption by using co-generation equipment, and the installation of waste heat recovery systems. We brought down the index of CO2 emissions for energy use per unit production in fiscal 2003 to 88% of the 1990 level through increasing the proportion of energy-saving electronics-related products

Reduction of other Greenhouse Gas EmissionsIn April 2003, the Hitachi Chemical Group successfully terminated its use of HFCs after developing a new HFC-free manufacturing process. While SF6 is still in use for experimental purposes, installation of a high-efficiency recovery system in fiscal 2003 reduced annual emissions in the same year to 0.3 tons, down from 0.9 tons in the previous year.

At Hitachi Chemical’s Shimodate Works, significant combustion efficiency improvements have been made in order to reduce energy consumption. After switching water-tube boilers to the through-flow type (as suggested by an ESCO

consultancy), the Works were able to control the number of boiler units in operation according to the load. This increased overall efficiency from 84% to 91%. In addition, the through-flow boilers enabled the Works to use inverter controls for the blowers, preventing the lower efficiency levels that could occur at times of low loading. The Shimodate Works is continuing its efforts to further reduce energy consumption and CO2 emissions through a variety of measures, including improvement of production equipment efficiency, reduction of energy consumption levels by machines to maintain operation, and switching fuel types for combustion units.

in total production, and various other measures. The Hitachi Chemical Group will continue its efforts to reduce CO2 emissions for the 2010 target (75% of the 1990 level) by installing large-scale energy-saving equipment and by altering the type of products and their manufacturing methods.

•From this issue, calculated using a coefficient for the average of all power sources for each fiscal year.

CO2 emissions per unit production＝

Amount of CO2 emitted by energy consumption

Net sales

ESCO: Energy Service Company. A business that offers services to help improve energy-saving and guarantee the resulting energy efficiency.

• Indices are calculated using the figures for fiscal 1990 as representing 100

Prevention of Global WarmingThe Hitachi Chemical Group positions the issue of global warming as a serious challenge for us and is taking wide-ranging measures to reduce total energy consumption and the emission of carbon dioxide (CO2), hydrofluorocarbons (HFCs), sulfur hexafluoride (SF6), and other greenhouse gasses.

Amount of CO2 emitted and index of CO2

emissions per unit production

Consolidated

Non-consolidated

Index of CO2 emissions per unit production (Non-consolidated)

200

600

0

（100%） 176207

1990 1999 2000 2001

450

2002 2010・・・・・ 2003

80

100

176

461

155

409

187

503

188

223

（79%）（93%）

92

100

92

100 100

88

75

Am

ount of CO

2 emitted

・・・・・

400Target

(Kilotons/year)

(FY)

Target

Index of CO

2 emissions per unit production

(%)

Approaches at Manufacturing Works

Energy-saving Measures Through Installation of High-performance, Small-sized Through-flow Boilers (Shimodate Works, 2003)

At the Yamazaki Works, efforts to prevent global warming have been made mainly by switching equipment units to types with higher energy efficiencies. Since 2003, when the Works installed waste heat recovery boilers which can recover waste heat as steam, the waste heat, which used to be emitted into the atmosphere from direct-combustion type deodorizing furnaces at a film manufacturing plant, has been used as a heat source for other manufacturing processes. This enabled the Works to reduce the use of heavy oil boilers and in turn save about 900 kiloliters of crude oil per year, the equivalent of a reduction of 2,400 tons of CO2 emissions. As a next step to further reducing CO2 emissions, we are switching from the direct-combustion type of deodorizing furnace to a regenerative deodorizing type, which is even more effective in energy saving.

Installation of Waste Energy Recovery Facility (Yamazaki Works, 2003)

Boiler of direct-combustion type deodorizing furnace to recover waste energy at a film manufacturing plant

Through-flow boiler to control flow rates

In fiscal 2003, we were able to achieve good results in reducing CO2 emissions by using ESCOs to install large-scale equipment units, such as high performance, small-sized, through-flow boilers and waste heat recovery systems. We are continuing to identify other areas where we can install large-scale units with high energy-saving performance to further reduce CO2 emissions.

Next Step

29 30

Air Pollution Reducing Approaches for Distribution Systems

Reduction of Sulfur Oxides (SOx )We have changed the type of boiler fuel we use to one that has lower sulfur content so that the impact of SOx emissions on air quality from our manufacturing processes can be lowered. As a result, SOx emissions by Hitachi Chemical in fiscal 2003 were reduced to 32% of 1990 levels.

Reduction of Nitrogen Oxides (NOx)The overall amount of NOx emissions has been increasing over the last few years, due to the installation of private electric generators and waste heat recover y systems. We will continuously take various measures, including controlled operation of combustion units, to reduce such emissions.

Reduction of Soot and DustThe amount of soot and dust emitted has been increasing as our production increases and installation of new facilities continues in order to meet increasing demand. In order to reverse this trend and reduce the amount of soot and dust, we have been installing dust collectors with higher performances.

Regenerative deodorizing system

In cooperation with the distribution companies that deliver products and materials for us, the Hitachi Chemical Group has been working on the reduction of CO2 emissions during the distribution processes. Specifically, we are promoting modal shifts and improvements to transportation efficiency. Each sales office has been working on reducing exhaust gases from the vehicles used for sales activities. For example, the total number of vehicles has been reduced through a modal shift and some sales vehicles have been replaced by hybrid type vehicles, with the aim of reducing CO2 emissions. We will continue to promote such modal shifts and the use of hybrid cars.

CO2 emissions from hybrid cars are 50% lower than from gasoline-powered vehicles.

Number of commercials vehiclesRatio of hybrid vehicles

30

0

29

15

25

50

2001 2002 20032000 ・・・2005

1015

2335

40

2724 23 22

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Next Step We will continue our efforts to reduce emissions of SOx, NOx, soot and dust, and other air pollutants. We will increase the proportion of hybrid vehicles in the company to at least 40% by fiscal 2005.

Reducing Air Pollution ImpactsWe protect the air quality of our neighborhoods by reducing emissions from the operation of our manufacturing facilities of substances that are possible causes of air pollution. This is another way in which we try to minimize the impact of our operations on the environment.

Amount of SOx emitted Amount of NOx emitted Amount of soot and dust emittedNon-consolidated

50

100

0

107

34

1990 2001 2002 2003

150

38

1999 2000・・・

40 39 43

(Tons/year)

(FY)

Non-consolidated

200

400

0

384

462

1990 2001 2002 2003

600502

1999 2000・・・

467

374437

(Tons/year)

(FY)

Non-consolidated

20

0

19 18

1990 2001 2002 2003

30

11

1999 2000・・・

23

810

10

(Tons/year)

(FY)


Odor Control During Friction Material Manufacturing Procedures (Yamazaki Works, 2002)At the Yamazaki Works, a regenerative deodorizing system was installed for the manufacturing process of automotive disk brake pads. The system has substantially reduced odors in the factory and its surrounding area and improved air quality. This regenerative type of deodorizing system was selected from the energy-saving point of view. The Yamazaki Works is planning to install more regenerative deodorizing systems, as well as waste gas cleaning systems, into other manufacturing processes in order to further improve comfort levels in neighboring areas.

(FY)

Target

(%)Target

Ratio of hybrid vehicles to Hitachi Chemical’s commercial vehicles

Ratio

Num

ber of vehicles

(Vehicles)

31 32

Reduction of Service Water ConsumptionThe Hitachi Chemical Group has been taking various approaches to reducing water consumption, including integration of facilities and increased use of recycled water from cooling systems. In addition, we have been moving water pipes from underground to aboveground as a prevention against water leaks. In order to prevent land subsidence, we have been taking various measures to avoid the overdraft of groundwater, including construction of a water supply system from Kasumigaura Canal and a reduction in overall service water consumption.

Prevention of Water Contamination by WastewaterAs a preventive measure against water pollution, the Hitachi Chemical Group biologically treats the wastewater generated from its production processes and stores in a tank before releasing it into the public sewage system, following pollution control agreements with local governments. The treated water in the storage tank is continuously inspected for BOD

and other index items, ensuring that the concentrations of indexed substances meet full legal standards.

BOD: Biochemical oxygen demand.

Underground water consumption ratio (Non-consolidated)

25

75

0

40 38

1990 2001 2002 2003

100

26

87

1999 2000・・・

27 28 3350

City waterIndustrial waterUnderground water

Reducing Water Consumption and Water Pollution ImpactsConsidering environmental factor, we are reducing the overdraft (overuse) of underground water by increasing the efficiency of industrial water usage and through integrating manufacturing facilities. We are also working to lower the impact of our activities on water quality.

Amount of BOD emitted

Non-consolidated Consolidated(Tons/year)

(FY)

Service water consumption and underground water consumption ratio

City waterIndustrial waterUnderground water

Non-consolidated

Consolidated

＝Underground water consumption

Service water consumption×100Ratio of underground

water consumption (%)


Installation of Industrial Wastewater Treatment System (Goshomiya Works, 1996)The Goshomiya Works switched the source of its industrial water from groundwater to service water from the Kasumigaura Canal as a preventive measure against land subsidence. The water is treated at the industrial water purification facility in a receiving tank (1,500 m3), a sand filtration system (1,500 m3/day), and a treated water storage tank (200 m3). The consumption of industrial water at the Works has been substantially reduced (to 45% of 1995 levels) owing to factory-wide water-saving measures. Aiming at environmental conservation and appropriate preparation for the expanding businesses, the Works is planning to extend the water supply system from the Kasumigaura Canal into a site adjoining to the Works on the North.

Industrial Wastewater Treatment System

As measures to prevent land subsidence and conserve the natural environment, we will further decrease the use of groundwater and improve the rate of recycled water use. We will install more wastewater treatment systems in order to reduce the level of BOD and other pollution indices in the wastewater to be fed into public sewage systems.

Next Step

01990 1999 2000 2001 2002・・・・・・・・・・・ 2003

50

8,127

62

75

59 53 51 52

15,000

10,000

5,000

100

6,413

13,36812,140

6,294 5,592

13,197

5,765

15,535

5,897

(%)

(Kilotons/year)

(FY)

Ratio

Consum

ption

31 32

Zero Emission ActivitiesFrom fiscal 2000 to 2005, the Hitachi Chemical Group has been conducting a Zero Emission Activities as one of the main themes of its environmental activities. The goal is to reduce the annual amount of waste that is sent to the final landfill to less than 5 tons and its ratio to 1% or lower of the total amount of waste generated. In 2003, we focused our ef for ts on the establishment of closer exchanges of information about waste treatment measures among manufacturing sites and on the thorough implementation of sorted waste collections. As a result, zero emission was achieved at all the manufacturing sites of Hitachi Chemical, as well as Hitachi Chemical Filtec Inc., Yuki Works of Hitachi Housetec Co., Ltd., Ishioka Works of Hitachi AIC Inc., Tokushima Works of Hitachi Kasei Polymer Co., Ltd., Ibaraki Factory of Hitachi Chemical Automotive Products Co., Ltd., and Namie Japan Brake Co., Ltd.

Promotion of RecyclingFor the promotion of recycling, the Hitachi Chemical Group set a goal to improve the recycling rate to 90% or higher by fiscal 2010. As of fiscal 2003, the recycling rate achieved 99% by Hitachi Chemical alone and 87% by the consolidated group companies.

• Please see pages 27 and 28 for specific recycling technologies developed by the Hitachi Chemical Group.

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Reducing Waste DisposalIn order to minimize the environmental impact of our business operations, we have been working on “zero emission” of waste through measures such as changing manufacturing methods, separated waste collections, and recycling.

Next StepIn fiscal 2003, many manufacturing works and factories achieved the goal of zero emission. We will continue our efforts to reduce waste generation through promoting recycling and the reduction of waste in manufacturing processes, so that other factories can also achieve zero emission.

Recycled wastes and recycling ratioNon-consolidatedConsolidatedRecycling ratio (Non-consolidated)

50

01991 2001 2002 20101999 2000・・・

100

2003・・・

75

100

16

35 32 3740

86

6472

37

7844

85 87 88 94 9990

25

75 50

(Kilotons/year)

(FY)

(%)TargetR

ecycled wastes

Recycling ratio

＝Recycled wastes

Amount of wastes generation×100Recycling ratio (%)

Wastes to landfill and their ratio

Non-consolidated Consolidated Ratio of wastes disposed of as landfills (Non-consolidated)

01991 1999 2000 2001

4.4

2002 ・・・ 2010・・・ 2003

30

35

6.1

0.9

7.2

1.2

8.5

2.1

13.5

5.0

37.3

2.4

0.03

15

10

5

4

2

～～

1.0

0.020.2

0.5 1

～～

0.008

2.6

0

(%)(Kilotons/year)

Target

(FY)

Wastes to landfill

Ratio of w

astes to landfill

＝Wastes to landfill

Amount of wastes generation×100Ratio of wastes

to landfill (%)


Installation of Activated Sludge Treatment System for Waste Liquids (Goi Works, 2003)In February 2003, the Goi Works installed an activated sludge treatment system for waste liquids in order to reduce the amount of waste liquids treated at landfills and the costs that accompany such treatment. Prior to installation, the wastewater that contains chloride and inorganic substances could not have been treated at the incinerator in the Work site. Instead, these types of waste liquid had to be sent to outside treatment companies, and the residue after incineration (sludge) was sent to landfills. After the installation of the activated sludge treatment system, the amount of sludge sent to landfills was reduced to 10%, and the cost of the treatment was thereby substantially reduced. As the next step, the Works is planning to alter some manufacturing processes so that there will be no waste liquid generated and to promote waste reduction measures at the design and development phases.

Installation of Recycling System for Wastewater and Sludge (Nikka Sumieito Co., Ltd., 1995)Nikka Sumieito contributes to the recycling of industrial waste through developing new treatment methods for certain types of wastewater and oil-contaminated sludge. There used to be no other means of treatment other than to incinerate this type of industrial waste. Now, however, it can be blended and processed—without using heat, water, or chemicals—into a supplementary fuel for the cement kilns. The ash and dust are also blended and processed, and recycled into a cement raw material.

Activated Sludge Treatment System for Waste Liquids

Recycling System for Wastewater and Sludge

33 34

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Since 1994, the Hitachi Chemical has been voluntarily working to reduce the amount of chemicals released from our premises. We selected chemical substances that are subject to our management program and maintain a record of their release amounts. When the PRTR Law was implemented and the disclosure of information on applicable chemical substances became obligator y in 2000, the Hitachi Chemical Group set numerical targets to reduce the release of chemical substances that are subject to PRTR, as well as for our voluntary management. As a result of our efforts to meet targets, the total amount of chemical substances released in fiscal 2003 was reduced to 59% of 2000 levels, achieving the goal for fiscal 2005 (70% or lower of 2000 levels) well ahead of schedule. When compared with the previous year, substantial levels of reduction were achieved for the three major high-release

substances (ethylene glycol monomethyl ether, N,N-dimethylformamide, and methyl ethyl ketone), owning to the installation of solvent recovery and purification systems. The total release of chemical substances to the atmosphere in fiscal 2003 was 30% lower than the previous year. Hitachi Chemical has set a goal to reduce its chemical release to 30% or lower of 2000

levels by fiscal 2005. This is to fur ther contribute to the reduction of chemical releases into the atmosphere by the whole group. Chemical releases into the atmosphere by Hitachi Chemical in fiscal 2003 amounted to 54% of fiscal 2000 levels.

Reducing Chemical Substance Transfer

PRTR: Pollutant Release and Transfer Register. PRTR Law: The Law Concerning Reporting, etc. of Releases to the Environment of Specific Chemical Substances and Promoting Improvements in Their Management (enacted July 1999).


Installation of Solvent Recovery and Purification Systems (Shimodate Works, 2003)The Shimodate Works has been working on reducing chemical substance releases from manufacturing processes since 1996, when they acquired an environmental ISO certificate. Following the installation of the first solvent recovery and purification system in 1998, operation of a second system was started in fiscal 2003. Since then, the amount of chemical substances released into the air has been dramatically cut. The recovered substances are purified and recycled into the manufacturing process, contributing significantly to the reduction of purchases of new substances as well as the reduction of odors in the surrounding area.

In addition to taking measures to recover released chemical substances, we are working to develop new products that emit lower amounts of substances and also reviewing our manufacturing processes in order to further reduce chemical releases.Next Step

Solvent Recovery and Purification System

Reducing Chemical Substance TransferHitachi Chemical actively promotes the reduction of chemical substance release by installing solvent recovery systems and altering manufacturing methods.

Emissions of chemical substances into the atmosphere (Non-consolidated basis)

Emissions of chemical substances into the atmosphere

02001 2002 2003

8,000

2000

6,000

4,000

2,000

6,395

3,761

（100%）

5,320

2,950

5,362

3,122

3,789

2,458

（59%）

5,449

2,838

（100%）

4,451

2,210

4,515

2,514

2,959

1,880

（54%）

(Tons/year)

(FY)

Non-consolidatedVoluntarily controlled substancesSubstances covered by the PRTR Law

ConsolidatedVoluntarily controlled substancesSubstances covered by the PRTR Law

33 34

Control of Hazardous Chemical Substances

Prevention of Soil and Groundwater PollutionTrichloroethylene was once used as a detergent at the Hitachi Chemical Group sites. After use of this substance was discontinued, we conducted a survey of the soil and groundwater in those premises for possible contamination. At areas where some residue was found, decontamination measures have been taken under the

super vision of local governments. In February 2003, when the Soil Contamination Countermeasures Law was enacted, another survey of soil and groundwater was carried out following legal standards. Fur ther decontamination measures have been taken at any areas where the survey revealed remaining contamination. As of today, the

decontamination processes have either been completed or are expected to be completed within a specific time frame, indicating no serious concern. Hitachi Chemical is committed to continuously monitoring the soil and groundwater at all of its sites.

No. Category Chemical substances CAS NoFY 2003 (tons/year)

Amount handled Emissions Amount transferred

1

Substances covered by the P

RTR

Law

Toluene 108-88-3 8,593 1,881 551

2 Ethylene glycol monomethyl ether 109-86-4 1,097 331 232

3 N,N-dimethylformamide 68-12-2 807 25 101

4 Formaldehyde 50-00-0 4,331 14 30

5 Xylene 1330-20-7 2,556 41 64

6 Styrene 100-42-5 43,320 87 182

7 Methyl methacrylate 80-62-6 3,557 6 8

8 Ethylbenzene 100-41-4 1,701 14 59

9 Isoprene 78-79-5 1,512 2 0

10 Acrylonitrile 107-13-1 512 3 0

11 Maleic anhydride 108-31-6 7,289 2 3

12 Phenol 108-95-2 5,736 2 56

13 Phthalic anhydride 85-44-9 3,196 0 1

14 Tetrahydromethylphthalic anhydride 11070-44-3 4,226 0 43

Other PRTR substances 49,351 50 381

Subtotal 137,784 2,458 1,711

15

Voluntarily controlled substances

Methylethylketone 78-93-3 4,607 959 659

16 Methyl alcohol 67-56-1 1,327 68 10

17 Acetone 67-64-1 5,994 47 180

18 Ethyl acetate 141-78-6 2,447 207 72

19 Methyl isobutylketone 108-10-1 179 15 2

20 Cyclohexane 110-82-7 542 17 1

21 N-methylpyrrolidone 872-50-4 1,607 0 3

Other voluntarily controlled substances 27,960 18 94

Subtotal 44,663 1,331 1,021

Total 182,447 3,789 2,732

Specific Chlorofluorocarbons and Chlorinated Organic Solvents

By 1994 we had completely discontinued the use of specific chlorofluorocarbons (CFCs), which were used as expanding agents and detergents, by replacing them with alternative foaming agents and detergents. For example, trichloroethylene and other chlorinated organic solvents, which were used as detergents, were replaced with safer substances in 1996. The use of carbon tetrachloride, which had been used to remove contaminants, was totally discontinued in 1995.

Dioxins

The incinerators at Hitachi Chemical’sfac i l i t ies are sub jec t to the Law Concerning Specific Measures against Dioxins. The concentration of dioxins in the smoke emitted from our incinerators is lower than the legal standard (10ng TEQ/m3).

Polychlorinated biphenyls (PCBs)

We store transformers and capacitors containing PCBs securely in special containers and facilities under appropriate control to prevent any loss or leakage of PCBs.

Enviro

nm

ental R

epo

rtThe Group’s amounts of major chemical substances handled, emitted into the atmosphere, and transferred

35 36

The Hitachi Chemical Group takes various measures for the appropriate control of chemical substances. For example, we founded the Chemical Substances Safety Center inside the group in 1998. We cooperate with national and local gover nments to take administrative measures and participate in voluntary plans with the chemical industry. As a part of those activities, we carry out information collection and study activities concerning risk assessment and risk communication in compliance with the PRTR system, and have joined the Global Initiative on High Production Volume (HPV) Chemicals,

operated by the International Council of Chemical Associations (ICCA). In the HPV Initiative, Hitachi Chemical led the group in preparing a hazard report for tetrahydromethylphthalic anhydride. The report was examined and agreed at the OECD SIDS Initial Assessment Meeting held on October 2002 (SIAM 15).

Control of Chemical Substance

HPV (High Production Volume) Initiative: An international system to carry out hazard assessments and disseminate results on approximately 1,000 chemical substances that are produced in large quantities.

Aiming to further improve its chemical substances control system, the Hitachi Chemical Group has been creating a Comprehensive Control System for Chemical Substances. We accomplished the PRTR control system in 2000 and the MSDS control system in 2002. Together with the Chemical Substance Database, which is now under preparation, these systems will complete the Comprehensive Control System. The PRTR control system is a calculation system that allows quick and accurate aggregative accounting of chemical substances that are subject to PRTR. Based on the input of the release coefficient and other conditions specific to the worksite, the system calculates the aggregated use of specific PRTR chemical substances and the amount of emissions. The system drastically speeds up such calculations and improves the accuracy compared with conventional manual calculation. The MSDS control system contains MSDSs for the chemical materials that we purchase and for the chemical products we manufacture. Anyone can access the data from any location through the company’s internal network and use them to improve the safety conditions when working with specific chemical substances.

Comprehensive Control System for Chemical Substances

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��

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Before star ting to use a new chemical substance or when replacing a chemical material with a dif ferent material, the Hitachi Chemical Group has the substance thoroughly reviewed by the Chemical Substance Committee and other related groups. Through this review processes, the

Review of New Chemical Substances

propriety of the substance and its conditions for use are discussed, based on the MSDS, legal regulations, and hazard information. This is a measure to prevent the unprepared use of hazardous chemicals. In addition, the members of the Chemical Substance Committee also attend

the meetings of the Chemical Substances Safety Management Representatives and chemical substance training sessions to obtain a thorough understanding of legal regulations and new information about chemical substances. These opportunities in turn improve the accuracy of the reviews.

We are completing the Chemical Substance Database that will contain up-to-date and accurate regulations and hazard information on chemical substances. We will use this database to further improve the control level of chemical substances.Next Step

Control of Chemical SubstancesWe have been working on the complete control of chemical substances through participating in the Global Initiative on High Production Volume Chemicals, an international action to assess the hazards of chemical substances, as well as through establishing the Hitachi Chemical Comprehensive Control System of Chemical Substances.

Concept of the comprehensive control system of chemical substances

MSDS control system

PRTR control system

35 36

In order to promote effective environmental activities, the Hitachi Chemical Group participates in “green procurement,” an action to place priority on environmentally friendly products, parts, and materials for procurement. In 2001, we launched the Procurement Plaza on the Hitachi Chemical Web site to explain our ideas and methods on green procurement to existing and potential suppliers and asked them for their cooperation in taking a survey on their acquisition of ISO 14001 certification. According to the survey we conducted, more than half (53%) of the 899 suppliers who answered the survey have already acquired or are planning to acquire ISO 14001 cer tification (as of March 2003). We will continue such cooperation with suppliers to fur ther increase the procurement of environmentally friendly products and materials. Our office equipment is also subject to green procurement efforts. Since fiscal

Green Procurement

We are also striving to increase the eco-friendliness, or “greenness” of the products that we manufacture. For example, we have discontinued or decreased the use of hazardous chemical substances (e.g., hexavalent chromium and lead solder) in our products. This is to lower the adverse influences of products on human health while in use and to reduce the usage of chemical substances that may pollute the environment when discarded. We also cooperate with our customers in their own green purchasing activities by preparing group-wide measures to answer their requests. In 2003, for example, we submitted quality certificates and accepted

The “Greenness” of Our Own Products

inspections for environmental and quality assurance. In European countries, RoHS, a regulation for the use of six chemical substances including hexavalent chromium, polybrominated biphenyl, and other chemical substances in electrical and electronic equipment, will be implemented in 2006. We have been reviewing our products that are exported to European countries, and applicable substances in the designated items have been replaced with other materials so that electrical and electronic manufacturers can safely use our products.

2000, we have been conducting surveys of the goods we purchase for their compliance with the Eco Mark and the Law on Promoting Green Purchasing. In fiscal 2003, the proportion of eco-friendly goods among our purchasing increased substantially (49% for Hitachi Chemical alone and 37% for the consolidated group).

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RoHS: Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment. RoHS Directive: Enforced in February 2003; applicable from July 2006. Regulations to restrict the use of six specific chemical substances used in electrical and electronic equipment within the borders of EU member countries.

Enviro

nm

ental R

epo

rt

We will continue our green purchasing activities to increase the ratio of green goods and services in our purchasing. We will conduct a hazardous substance survey for purchased materials in order to discontinue or reduce the use of these chemicals in our products. To increase the greenness of our own products, we will continue to reduce the use of hazardous substances used in production.

Next Step

Green ProcurementThrough “green procurement,” whenever possible, we purchase products, parts, and materials that have less impact on the environment. We are also actively engaged in manufacturing more amounts of green products.

Acquisition status of certification under ISO 14001 by material suppliers

Green procurement of office equipmenNon-consolidatedConsolidatedRatio of green procurement(Non-consolidated)

75

0

10

27

2001 2002 2003

100

19

58

2000

20

34

1830

50

2524

37 3749

25

50

(Millions of yen)

(FY)

(%)

Am

ount of green procurement

Ratio of green procurem

ent

37 38

As a member of society, the Hitachi Chemical Group aims to be a corporation that thoroughly practices CSR management. This means to maintain a sound relationship with a variety of stakeholders and to protect the global environment, which is the foundation for all activities. We believe in keeping a good balance between the profits of the group and the benefits to society. In other words, not neglecting to seek the welfare of society while pursuing corporate profits will bring the group a higher corporate value and more sustainable development in the long run. The Hitachi Chemical Group also believes that in order for the continuous development of corporate activities, it is necessary to offer a “sense of security” to all stakeholders and to maintain their trust in us. To this end, it may not be enough for even the conventional ideas of CSR such as “pursuit of corporate profits, compliance with laws and regulations, improvement of the local environment, promotion of environmental management, security of employee safety, and social contribution activities in the local communities.” We must see CSR management from a wider perspective and establish practices to realize such ideas. We aim to develop a community of people, to nurture harmony with them, and to share happiness among the community. At the same time, we want to take the best care of the environment for the sound coexistence between humans and the natural world. In this way, we can offer a sense of security to each and every stakeholder, along with our products.

CSR management

Localcommunities

Environmental consciousness

Social contribution

Employees

Incentive to work

Leeway

Formation of sustainable recycling society

200420032002200019991996 199819951993198319731962

2000198019701960 1990

The Vision of the Hitachi Chemical GroupUnder our slogan, “Building a company that embodies the ‘circle and harmony’ of all living things, which can offer a sense of safety and reassurance to both people and the Earth,” we are working for a sound coexistence with the natural environment in cooperation with a variety of stakeholders.

Milestones of social and environmental activities by Hitachi Chemical and the Hitachi Chemical Group

Present

CS

R O

ffice established.

• Seven m

ember com

panies of the Hitachi C

hemical G

roup adopt the C

ompany w

ith Com

mittee S

ystem.

• Ten sites of the Hitachi C

hemical G

roup achieve zero emission.

• Operation of E

nvironmental M

anagement C

ouncil begins.• M

ajor mem

ber companies of the H

itachi Chem

ical Group

acquire ISO

14001.

• Occupational S

afety and Health M

anagement S

ystem

(OS

H-M

S) im

plemented.

• Publication of R

esponsible Care R

eport begins.

•Chem

ical Substances S

afety Center established.

•Corporate E

thics Guidebook published.

•Corporate E

thic Com

mittee established.

•Corporate A

ction Reform

Office established.

•All m

anufacturing sites of Hitachi C

hemical acquire IS

O 14001.

•Risk M

anagem

ent Group established.

•Environm

ental Protection A

ction Guidelines established.

• Hitachi C

hemical C

o., Ltd. Standards of C

orporate Conduct

established.

• Security audits (for environm

ent, safety, and disaster prevention) begin.

•Environm

ental Manag

ement G

roup established.

• Hitachi C

hemical C

o., Ltd. becomes independent from

H

itachi, Ltd.

Environment

Soci

ety

Econom

ic

ShareholdersAppropriate return

of profits

Customers

High quality products

Satisfaction

Suppliers

Best partnership

Building a company that embodies the “circle and harmony” of all living things, which can offer a sense of safety and

reassurance to both people and the Earth

37 38

2003Topics

Yamazaki Works

Chemical substance Atmospheric discharge Transfer Total

Toluene 6.6 29.7 36.3

Ethyl benzene 3.3 59.3 62.6

Methyl methacrylate 3.1 1.9 5.0

Xylene 2.8 59.3 62.1

Styrene 2.1 15.8 17.9

Vinyl acetate 1.2 0 1.2

1. Reduction of chemical substance emissionsIn September 2002, we installed an ultra-low-temperature condenser. This condenser cools waste gases containing acetone and other organic solvents to –60°C or lower, so that the gases can be condensed and recovered. By reducing the emission of organic solvent gases into the air, the Works succeeded in reducing offensive odors and reusing the recovered gases in manufacturing processes.

2. Achievement of zero emissionThe Yamazaki Works achieved the zero emission of waste as a result of various measures, such as reviewing waste generation processes, strengthening monitoring measures (including inspecting the contents of all plastic rubbish bags for non-burnable waste), complete sorting of waste materials, and recycling of burnt residue from incinerators.

3. Clean-up CampaignSince 1991, the employees of the Yamazaki Works have been carrying out clean-up campaigns on the streets around the premises. In 2003, these activities were carried out on a monthly basis.

Reduction of chemical substance emissions combinedwith odor control

1) Installation of an ultra-low-temperature condenser

Solvents: /year (recovered)

Solvents: /year (recovered)

Solvents: /year (reduced)

Concentration of odor: (reduced)

Promotion of energy-saving and waste reduction activities through improving manufacturing methods

Energy-saving: /year (recovered)

Waste: /year (reduced)

Energy-saving: CO2/year(recovered)

40

60

0

51 54

1990 2001 2002 2003

80

53

1999 2000・・・

57 5360

20

1.0

4.0

0

4.54

0.0011991 2001 2002 2003

5.0

0.62

1999 2000・・・

0.440.60

0.06

0.5

～～80

120

0

151

28

2000 2003 2005

160

34

2001 2002 ・・・

3221

40

(FY 2003, in tons/year)

Environmental Topics from the Works

The Yamazaki Works is engaged in the manufacture of products, including semiconductor materials, display and optical materials, printed wiring board processing materials, inorganic chemical materials and products, and medical and pharmaceutical products.

Locations ......... 13-1, Higashi-cho 4-chome, Hitachi-shi, Ibaraki, Japan Yamazaki Works (Sakuragawa) 3-1, Ayukawa-cho 3-chome, Hitachi-shi, Ibaraki, Japan Yamazaki Works (Katsuta) 1380-1, Nishihara, Tarasaki, Hitachinaka-shi, Ibaraki, Japan Yamazaki Works (Kashima) 5-1, Sunayama, Hazaki-cho, Kashima-gun, Ibaraki, JapanSite area .......... 740,049 m2

Employees ....... 913

CO2 emissions Wastes to landfill Atmospheric discharges in PRTR-compliant substances

(Kilotons/year)

(FY)

Target

(Kilotons/year)

(FY)

(Tons/year)

(FY)

Measures to reduce environmental impact

2) Installation of a film regenerative deodorizing system

3) Improvement of painting method for disk brake

1) Improvement of speed and yield of photosensitive dry film coating

2) Improvement of packaging method for photosensitive dry films

3) Continuous graphitization of carbon

4.8kilotons

48tons

99%

129tons

4tons

120tons

15.4kilotons

Atmospheric discharge and transfer of PRTR-compliant substances (Atmospheric discharge: 1 ton or more/year)

39 40

Reduction of chemical substance emissions to the atmosphere

2) Installation of an absorption and desorption system

/year (reduced)

1) Installation of an ammonia absorption refrigerator

Promotion of zero emission by activated sludge treatment of waste liquid

1) Implementation of fluidized carrier method (improved)

Emissions of isoprene:

20

30

0

38

11

2000 2003 2005

40

28

2001 2002 ・・・

28

19

100.05

0.10

0

0.56

0.0021991 2001 2002 2003

0.60

0.09

1999 2000・・・

0.09

0.04

0.02

0.50～～

2) Activated sludge treatment of waste liquid

20

30

0

19 18

1990 2001 2002 2003

40

21

1999 2000・・・

18 1619

10

Goi Works


The Goi Works is engaged in the manufacture of products, including semiconductor materials, materials for protective coat of semiconductors and electronic parts, advanced performance resin and materials, molding resin and materials for molding, and automotive-related products.

Locations ................. 14, Goiminamikaigan, Ichihara-shi, Chiba, Japan Site area .................. 105,853 m2

Employees ............... 236


(Kilotons/year)

(FY)

Target

(Kilotons/year)

(FY)

(Tons/year)

(FY)

2003Topics


Styrene 6.3 0 6.3

Methyl methacrylate 3.3 6.9 10.2

Acrylonitrile 3.2 0 3.2

Isoprene 2.3 0 2.3

Maleic anhydride 1.8 1.9 3.7

Toluene 1.1 31.2 32.3


1. Achievement of zero emissionAn activated sludge treatment system for waste liquid was installed in February 2003. The system can transform waste liquid containing a large amount of salts into a cement material, which used to be incinerated by external waste treatment companies, with the burnt residue then sent to landfills. The installation of the system allowed the Works to recycle the sludge into a cement material, thereby achieving zero emission.

2. Streamlining of ISO 9001 and ISO 14001 procedures By using the same certifying organization (JACO) for ISO 9001 (for the quality management system) and ISO 14001 (for the environmental management system), same-day surveillance became available. This action has increased the efficiency of various procedures. Costs were also reduced by approximately 10%.

3. Improvement of the emergency alarm systemA new fire alarm system was installed to (1) facilitate the accurate location of an accident; (2) allow simultaneous notice of the incident to the whole worksite; and (3) expand the monitoring area to cover the entire Works, including partner companies. As a result, speedier emergency measures became available.



30%

600tons

53tons

5tons

2.5tons

/year (reduced)Emissions of isoprene:

/year (reduced)Amount of waste sent to landfills:

/year (reduced)Amount of waste treated by external companies:

Activated sludge treatment capacity:

39 40

3) Changing the manufacturing method for printed wiring boards (from solder separation method to tenting method)

Waste: /year (reduced)

2) Improvement of boiler combustion efficiency

Energy-saving: /year (reduced)

1) Energy-saving through a second co-generation (ESCO) system Energy-saving: /year (reduced)

3) Coating thinner type of copper clad laminates for printed wiring boards


2) Installation of combustion system for waste gases from solvents


1) Installation of solvent recovery and recycling system Solvents: /year (reduced)

1 EGME: Ethylene glycol monomethyl ether 2 MEK: Methyl ethyl ketone

2003Topics

80

120

0

132

84

1990 2001 2002 2003

160

96

1999 2000・・・

95

70 77

40

1.0

4.0

0

4.05

0.0051991 2001 2002 2003

5.0

0.88

1999 2000・・・

0.44

0.16 0.09

0.5

～～600

900

0

1,132

340

2000 2003 2005

1,200

736

2001 2002 ・・・

748

379

300

Shimodate Works

The Shimodate Works is engaged in the manufacture of products, including printed wiring board materials, printed wiring boards, semiconductor materials, molding resins, and materials.

Locations ...............1500, Ogawa, Shimodate-shi, Ibaraki, Japan Shimodate Works (Minamiyuki) 1772-1, Kanokubo, Yuki-shi, Ibaraki, Japan Shimodate Works (Shimodate kita) 1150, Goshomiya, Shimodate-shi, Ibaraki, Japan Site area ................. 433,862 m2

Employees ............. 664


(Kilotons/year)

(FY)

Target

(Kilotons/year)

(FY)

(Tons/year)

(FY)


EGME 330.9 230.9 561.8

N,N-dimethyl formamide 21.5 95.3 116.8

Formaldehyde 12.3 25.5 37.8

Toluene 11.5 4.4 15.9

Xylene 2.2 0 2.2

Phenol 1.3 50.7 52.0



1. Reduction of emission of solvent gases to the atmosphere by installing a waste solvent gas combustion systemBy installing a waste solvent gas combustion system, combustion of waste gases containing EGME,1 MEK,2 and other organic solvents became possible, and chemical substance emissions were reduced. Also, the recovery of heat from combustion is contributing to energy-saving practices.

2. Lowering environmental impact by increasing the sales share of green products The sales share of green products, such as halogen-free multilayer board materials and epoxy molding compounds, was increased to 67% of total sales (9% higher than the previous year). The Works will continue to increase the sale share of green products.

3. 120 employees from the Works participated in biannual clean-up campaigns in the local community.

Reduction of chemical substance emissions by waste gas treatment measures combined with resource circulation

Energy-saving through the ESCO system and reduction of waste by changing manufacturing methods

6tons

300kiloliters

2,100kiloliters

28tons

300tons

1,500tons


41 42

Energy-saving and waste reduction

3) Construction of energy-saving systems (e.g., ventilation system and 60% recovery of waste heat) in the new guest house, etc.

Energy-saving:

2) Use of heat from waste solvent gas treatment system

1) Improvement of paint liquid treatment and compressor drain treatment Waste generation:

Reduction of chemical substance emissions

3) Promotion of use of alternative, lower hazardous substances in place of organic tin catalysts

Organic tin:

2) Discontinuation of use of alternative CFCs by changing manufacturing methods, etc.

1) Installation of the second waste solvent gas treatment system Solvents: /year of emission

(reduced)

CFCs: Total discontinuation of use

1,000

1,500

0

1,517

310

2000 2003 2005

2,000

1,412

2001 2002 ・・・

1,706

1,461

500

10

15

0

21 20

1990 2001 2002 2003

25

18

1999 2000・・・

17 16

20

5

20

0.2

1.0

0

2.03

0.00021991 2001 2002 2003

2.0

0.18

1999 2000・・・

0.12

0.03 0.02

0.1

～～

Vapor recovery: /year (improved)

Goshomiya Works


The Goshomiya Works is engaged in the manufacture of products, including display and optical materials, automobile-related products, resin-finished products, and films.

Locations .................. 1150, Goshomiya, Shimodate-shi, Ibaraki, Japan Goshomiya Works (Shimodate) 1500, Ogawa, Shimodate-shi, Ibaraki, JapanSite area ................... 259,229 m2

Employees ............... 468


(Kilotons/year)

(FY)

Target

(Kilotons/year)

(FY)

(Tons/year)

(FY)

2003Topics


Toluene 1440.4 442.5 1882.9

Xylene 12.3 0.8 13.1

Ethyl benzene 5.2 0.3 5.5

2-Ethoxyethyl acetate 1.0 0.1 1.1


1. Reduction of emissions of toluene to the atmosphere by installing a waste solvent gas treatment systemFollowing the installation of the first waste solvent gas treatment system in October 2000, a second system was completed in December 2003 to further reduce the environmental impact. The installation of this system allows the Works to treat more than 90% of the toluene emitted to the atmosphere from the Advanced Film Division.

2. Achievement of zero emissionIn fiscal 2003, zero emission was achieved by reviewing the waste generation processes, recycling of composite plastics, and other measures.

3. New guest house recognized in the Comfortable Workplace Promotion PlanThe new guest house (completed in March 2004) was recognized in the Comfortable Workplace Promotion Plan by the Ministry of Health, Labor and Welfare. The Works received a certificate from the Director of the Ibaraki Labor Bureau.



1,320tons

240kg

/year (expected to be substituted)

5tons

900kiloliters

1,500kwh

/year of emission (reduced)

/year (improved)

41 42

2003Topics

1. Launched the sales of a heat-pump water heater with a natural cooling medium (June 2003)2. Toyama Works: Received the Director’s Award from the Chubu Bureau of Economy, Trade,

and Industry (for the zero-accident record at its Power Receiving Unit)3. Yuki Works: Achieved zero emission of waste

2003Topics

Hitachi Chemical (Singapore) Pte. Ltd.

1. Achieved recycling rate of 88% by recycling scrap boards2. Improved reuse rate of solder ink3. Increased reuse rate to 10% by recycling the wastewater from the factory into industrial

water

2003Topics

Hitachi Chemical (Johor) Sdn. Bhd.

1. Reduced the amount of cooling water by 30% by recycling the cooling water for laminate press processes

2. Improved the work environment through odor control measures, including improvement of application methods of raw materials

3. Carried out disaster prevention activities (dangerous material handling practices and emergency drills) in cooperation with the local fire department

• The companies introduced in this page are only a small sample of our group members. Please refer to Hitachi Chemical Website (http://www.hitachi-chem.co.jp) for information about other companies.

Yuki Works

Environmental Topics from the Group Companies

Hitachi Housetec Co., Ltd. is engaged in manufacture and sale of housing equipment and environmental facilities.

Locations .................. 9-7, Itabashi 3-chome, Itabashi-ku, Tokyo, Japan Yuki Works 1250, Shimoezure, Shimodate-shi, Ibaraki, Japan Toyama Works 1010, Ippongi, Toyama-shi, Toyama, Japan Utsunomiya Works 40-8, Hiraide-kogyodanchi, Utsunomiya-shi, Tochigi, Japan Fukuyama Works 127-1 Minooki-cho, Fukuyama-shi, Hiroshima, Japan Site area .................... 401,825 m2

Employees ................ 929

Hitachi Housetec Co., Ltd.

Hitachi Chemical (Singapore) Pte. Ltd. is engaged in the manufacture and sale of various kinds of printed wiring boards.

Locations .................. 32 Loyang Way, Singapore 508730 Bedok Site 20 Bedok South Road, Singapore 469277Site area ................... 61,500 m2

Employees ................ 1,058

Hitachi Chemical (Johor) Sdn. Bhd. is engaged in manufacture and sale of materials and processing materials for printed wiring boards, and functional resins and related materials.

Locations .................. PLO 458, Jalan Keluli 10, 81700 Pasir Gudang, Johor, MalaysiaSite area ................... 121,400 m2

Employees ................ 360

CONTACT

CSR Office

Shinjuku-Mitsui Building, 1-1, Nishi-Shinjuku 2-chome, Shinjuku-kuTokyo 163-0449, JapanPhone:+81-3-5381-2214 Fax:+81-3-3346-3115E-mail: [email protected]

Hitachi Chemical’s Website

http://www.hitachi-chem.co.jp

Soybean oil ink is used for printing.This SOY INK mark is a marking indicating approval by the American Soybean Association. Issued in September 2004

Printed in Japan(SG•H)This report was printed on 100% recycled paper.