DIC's Responsible Care System

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Responsible Care Care Report Report Responsible

2002

Dainippon Ink and Chemicals, Incorporated Corporate Headquarters : DIC Building, 7-20, Nihonbashi 3-chome, Chuo-ku, Tokyo, Japan 103-8233 Date of Foundation : February 15, 1908 Date of Incorporation : March 15, 1937 Paid-in Capital : ¥82,423 million (As of March 31, 2002) Number of Employees : 5,082 (As of March 31, 2002) Net Sales : ¥370,381 million (Fiscal 2001)

CONTENTS A Message from the President

1

Principle and Policy for the Environment, Safety and Health

2

ESH Activities

5

1. Environmental Costs and Safety- and Health-Related Expenses and Investments 2. Safety and Health Record 3. Environmental Load Reduction 4. Safety Control of Chemical Substances 5. Safety during Transportation 6. Green Procurement 7. Soil Analysis at Former Plant Sites

Development of Environment-Friendly Products

12

ESH in Research and Development and New Businesses

14

ESH in International Operations

14

ESH in International Transactions

14

Interaction with the Local Community

15

DIC Plants / R&D Center

15

Introducing the Mikawa Plant

16

History of DIC’s Environment and Safety Program

17

Environment and Safety Awards Received by DIC

17

Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED

A Message from the President Dainippon Ink and Chemicals, Incorporated (DIC), dedicates itself to being a creative and distinctive organization capable of innovating products that enhance the lives of people around the world. In line with this philosophy, we have cultivated operations in our core businesses, notably graphic arts materials and polymers and related products, and currently have subsidiaries and affiliates in 64 countries around the world. We recognize that care for the environment, safety and health (ESH) is fundamental to management and seek to incorporate these concerns in all aspects of our activities. In 1992, we formulated and publicly announced an official principle and policy recognizing the importance of care for the environment, safety and health. The principle and policy were reaffirmed in 1995, when we unveiled and began implementing our Responsible Care program as one of the 74 founding companies of the Japan Responsible Care Council. Since then, we have made substantial progress on several fronts, including reducing environmental load, lowering consumption of energy and resources, minimizing the generation of industrial waste, improving control of chemical substances and eliminating accidents at our plants. Fiscal 2001, ended March 31, 2002, brought a number of notable achievements. For example, efforts to revamp production processes contributed to a reduction in energy consumption of 2.6% per unit (ton) of production from fiscal 2000, and 16% from fiscal 1990. Efforts to reduce environmental load led to a decrease in carbon dioxide emissions of 2.5% from the previous fiscal year, or 22% from fiscal 1990. We also slashed the volume of waste disposed of as landfill 30%, or 57% from 1990. In the area of product development, we introduced Naturalith 100, a series of 100% vegetable oil-based offset inks containing no volatile organic compounds (VOCs) and low-VOC decorative boards that improve room air quality. Naturalith 100 was honored with the Japan Chemical Industry Association (JCIA) Technology Prize for 2002. The DIC Group will continue to address key tasks to promote sustained growth and development, harmony with the environment and awareness of recycling, as well as to earn the trust of people worldwide. I am pleased and proud to present DIC’s Responsible Care Report 2002, which summarizes the results of our ESH activities during fiscal 2001. We welcome and appreciate comments or advice from readers regarding our activities and the content of this report. September 2002

President and CEO

1

Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED Principle and Policy for the Environment, Safety and Health [Principle]

As a responsible corporate citizen, Dainippon Ink and Chemicals, Incorporated (DIC), recognizes that care for the environment, safety and health (ESH) is fundamental to the management of the Company. DIC is committed to the concept of sustainable development and contributes to society by creating environmentally sound products and technology. [Policy] 1.

We establish ESH-related objectives and targets and pursue continual progress.

2.

We comply with laws, regulations and agreements relevant to ESH.

3.

We consider the ESH implications of each of our products throughout their life cycles in accordance with the ideals of Responsible Care.

4.

We instill in our employees a thorough understanding of this fundamental Principle and Policy.

5.

We organize our operations so as to promote the safeguarding of the environment, safety and health and conduct audits to monitor progress throughout the Company.

6.

We ensure that operations are conducted safely and materials are handled properly. We try to prevent environmental pollution and avoid affecting the environment negatively by recycling waste, conserving energy and other resources and using materials that are environmentally friendly.

7.

We place the utmost importance on ESH-related considerations at all stages of the new product planning and production process.

8.

We promote safety by providing customers with detailed instructions on the proper use and handling of all products.

9.

In our overseas activities, we conduct environmental impact assessments and strictly observe local ESH regulations. In the absence of such regulations, we work with local officials and our business partners to develop environmental safeguards. We also follow this procedure when dealing with toxic materials, applying the same stringent standards for their handling as required in Japan. In addition, we promote the transfer of technology and know-how related to environmental protection.

10.

We provide the public and appropriate authorities with ample information about our products and business activities so that they may have an accurate understanding of our efforts to promote health, safety and environmental protection. The above Principle and Policy shall be available to all employees and to the general public. It is our goal that this Principle and Policy be followed at all DIC Group companies.

Established April 1, 1992 Revised February 1, 1996

2

2002 DIC’s Responsible Care System 1. Responsible Care Organization (Environment, Safety and Quality Management) DIC has appointed an executive charged with setting up an Environment, Safety and Quality Management Department and with overseeing Responsible Care activities.

XXXX Branch Office

XXXX Division

XXXX Office

Responsible Care Department

President

Safety and Quality Management Supervisor

XXXX Office Safety and Quality Management Supervisor XXXX Branch Office Safety and Quality Management Supervisor

Director in charge of Responsible Care XXXX Division

Safety and Quality Management Supervisor

DIC Central Research Laboratories Environment, Safety and Quality Management Department XXXX Plant

Domestic subsidiaries and affiliates Overseas subsidiaries and affiliates

Environment, Safety and Quality Management Department XXXX Plant Environment, Safety and Quality Management Section

Fig. 1 DIC’s Environment, Safety and Quality Management Organization

2. Responsible Care Organization DIC’s Responsible Care organization comprises two bodies, which are responsible for decision making and monitoring activities, respectively.

1)Decision-Making System

Environment and Safety Conference As the principal decision-making body for Responsible Care activities, DIC has established the Environment and Safety Conference at its head office. This conference includes the executive vice president, relevant directors, executives in charge of Responsible Care at each DIC plant and general managers of relevant business divisions at the head office.

3

Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED DIC’s Responsible Care System

Divisional System At each DIC plant and research facility, an Environment and Safety Committee has been established and environment, safety and quality control personnel assigned. DIC has also assigned a Safety and Quality Management Supervisor to each sales office. All of DIC’s principal plants have obtained ISO 14001 certification, the International Organization for Standardization’s global benchmark for environmental management systems, allowing them to measure Responsible Care efforts against internationally accepted criteria. Plants and the fiscal year in which each obtained ISO 14001 certification are: Fiscal 1996 Fiscal 1997 Fiscal 1998

Kashima Plant Sakai Plant; Amagasaki Plant; Mikawa Plant; Chiba Plant; Tokyo Plant, Saitama Plant; Yokkaichi Plant; Gunma Plant; Komaki Plant Suita Plant; Warabi Plant; Nagoya Plant

2)Internal Audit System DIC’s internal Responsible Care audit system is overseen by the Responsible Care Review Committee and includes periodic audits by top executives from the head office as well as internal audits.

Responsible Care Review Committee The Responsible Care Review Committee comprises directors and general managers of relevant business divisions of the parent company and monitors the Responsible Care activities of each plant on an annual basis.

Audits by Top Executives Inspection teams consisting of the general manager and staff of the parent company’s Responsible Care Department and led by top executives monitor the Responsible Care activities of each plant through on-site audits.

Internal Audits Individual plants, laboratories and offices conduct periodic internal audits. Board of Managing Directors/Board of Directors

Responsible Care Review Committee Audits by top executives

President

Environment and Safety Conference

Environment, Safety and Quality General Managers’ and Managers’ Committee Safety and Quality Management Supervisors' Committee Plant Environment and Safety Committees (RC Committees) DIC Central Research Laboratories’ Environment and Safety Committee (RC Committees)

4

Fig. 2 DIC’s Responsible Care Organization

Internal audits Internal branch and sales office audits Audits of domestic and overseas subsidiaries and affiliates

2002 ESH Activities 1. Environmental Costs and Safety- and Health-Related Expenses and Investments 1 )Environmental Costs In line with the Preparation for Establishment of an Environmental Accounting System (2000 Report), published by Japan’s Environment Agency, we have calculated amounts for environment-related expenses and investments in fiscal 2001. Environment-related expenses totaled ¥8,958 million, while investments amounted to ¥1,191 million. Of total environment-related expenses, 40% was accounted for by measures to prevent pollution and protect the environment, 53% by environmental R&D, 4% by environmental control measures and the remaining 3% by other measures. Other measures 3% Environmental control measures 4 %

Measures to prevent pollution and protect the environment 40%

Environmental R&D 53%

Fig. 3 Breakdown of Fiscal 2001 Environmental Expenses Millions of yen

Environmental Costs Category

Scope

1. Costs incurred through activities aimed at minimizing environmental load generated within the business area through production and sales activities (costs within the business area)

Investments

Expenses

Costs related to the preservation of air and water quality, maintenance or improvement of waste disposal and recycling activities

¥517

¥3,546

Costs related to the preservation of air and water quality

350

1,811

・ Operating/maintenance expenses related to activities aimed at curbing air pollution (310), global warming (180), water pollution (1,010), soil pollution prevention expenses (3) and other expenses ・ Investments in air pollution prevention activities (227), water pollution prevention activities (120) and other investments

(a) Pollution prevention and environmental protection costs

Costs related to the maintenance or improvement of energy consumption and internal and external waste disposal

167

1,736

・ Operating/maintenance expenses for activities aimed at reducing energy and resource consumption (530), water consumption (2) and waste disposal (1,090), expenses related to the obligatory recycling of used merchandise (0.2) and other expenses

(b) Resource recycling costs

・ Investments in activities aimed at reducing energy consumption (120), waste disposal activities (50) and other investments

2. Environmental costs related to management activities (management activity costs)

3. Environmental costs related to technological activities (technological activity costs) (Note 2)

Costs related to environmental and safety promotion and education; environmental management and auditing related to acquisition of ISO14001 certification ・ Personnel/administrative expenses (250), ISO 14001 maintenance expenses (12), environmental load measurement expenses (64) and other expenses Expenses and investments related to the development of products that reduce environmental burden (including personnel expenses)

( Note 1)

368

665

4,796

9

175

0

73

¥1,191

¥8,958

Costs of plant and office greening programs and shared costs

4. Environmental costs related to social activities (social activity costs)

・ Internal maintenance expenses (55), fees to external organizations (78) and other expenses ・ Investments in greening programs (8)

5. Costs related to damage inflicted on the environment (environmental damage costs)

Environmental clean-up and other expenses ・ Levies on lake development (65) and other expenses

Total

Notes: 1. The investment portion of management activity costs is included in costs within the business area. 2. Technological activity costs are costs related to the development of products that reduce environmental burden and include R&D costs for new products as well as the improvement/customization of existing products.

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Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED

millions of yen Category

Composition

Expenses

Investments in facilities to reduce environmental burden and lower energy and resource consumption; other investments

Environment-related facility investments Percentage of total facility investments

¥1,191

6.2% Investments related to environmental conservation technologies and the development of products that reduce environmental burden

Environment-related technology costs Percentage of total technology costs

5,461

19.0%

See pages 8–11 for detailed data on the impact of DIC’s environmental conservation measures since fiscal 1990. millions of yen Economic Effects of Environmental Conservatioin Measures Category

Expenses

¥390

Income earned by waste recycling

270

Treatment cost reduction through waste recycling Cost reduction through energy conservation

229 ¥889

Total

Table 2

Impact of Measures to Protect the Environment Impact of Measures to Protect the Environment Environmental Load Index

1. Impact of environmental protection measures within the business area

· CO2 emissions (calculated in tons of carbon) per unit of production

78.8% (fiscal 1990=100)

· SOx emissions per unit of production

25.5% (fiscal 1990=100)

· NOx emissions per unit of production

70.7% (fiscal 1990=100)

· COD emissions per unit of production

60.0% (fiscal 1990=100)

· Energy used (calculated in volume of crude oil used) per unit of production

84.4% (fiscal 1990=100)

· Emissions of solid wastes disposed of through burial by external companies

43.1% (of the fiscal 1990 level)

· Fees paid for the disposal of solid wastes through burial by external companies (fiscal 2001 actual payment basis) were ¥830 million lower than in fiscal 1990. (Note 1) · Emissions of Pollutant Release and Transfer Register (PRTR) chemicals were 76.1% of the fiscal 1999 level. (Note 2)

2. Impact of environmental protection upstream and downstream measures

· The reduction in CO2 emissions realized as a result of modal shifts was 35.8% higher in fiscal 2001 than in fiscal 1999. (Note 3)

Notes: 1. The comparison of fees paid for the disposal of solid wastes through burial by external companies (fiscal 2001 actual payment basis) was calculated by subtracting the fiscal 2001 total from the fiscal 1990 total. 2. Figures represent emissions of PRTR chemicals based on a revised list of target chemicals that went into effect in fiscal 2001 and is retroactive to fiscal 1999. (The new list encompasses 480 chemicals, of which DIC uses 120.) 3. Calculations are based on standards set forth by the Japan Federation of Freight Industries in its Report on Survey of Modal Shifts. The aim is to compare how much greater a reduction in CO2 emissions was realized through the use of large-scale transport modes in fiscal 2001 than in fiscal 2000.

2)Safety- and Health-Related Expenses and Investments Safety- and health-related expenses in fiscal 2001 totaled ¥72.0 billion, while safety- and health-related investments were ¥36.1 billion. Pertinent safety and health management activities accounted for 56% of expenses, while fees paid to outside firms for safety data-related tests represented 7%, safety and fire prevention measures totaled 19% and specific safety and health-related measures amounted to 18%. Safety and fire prevention measures 1 9 %

Safety and health management activities 56%

Fees paid to outside firms for safety data-related tests 7 %

Specific safety- and health-related measures 18%

6

Fig. 4 Breakdown of Safety- and Health-Related Expenses

2002 ESH Activities

2. Safety and Health Record

DIC was honored to receive several awards during fiscal 2001 in recognition of its superb safety record and accumulated experience in ensuring employee safety. DIC: Chairman’s Award (Japan Industrial Safety and Health Association) Saitama Plant: Top Hazardous Substance Operation Commendation (Commissioner, Fire Defense Agency) First Prize (Safety) (Minister of Health, Labour and Welfare)

During fiscal 2001, two accidents resulting in an absence of more than one day were reported at DIC plants, one more than in the previous fiscal year. The labor accident frequency rate for the period was 0.52 and the labor accident severity rate was 0.093, compared with 0.12 and 0.010, respectively, in fiscal 2000. Figures 5 and 6 show DIC’s labor accident frequency and severity rates from fiscal 1990 through fiscal 2001. Labor accidents are defined by DIC and the Japan Chemical Industry Association(JCIA) as accidents resulting in a suspension of operations for more than one day and by the chemical industry as accidents resulting in a suspension of operations for more than four days.

DIC

JCIA

Chemical industry

Frequency

1.5 1.0 0.5 0 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001 Fiscal year

Fig. 5 Labor Accident Frequency Rate

DIC

JCIA

Chemical industry

0.25

Severity

0.20 0.15 0.10 0.05 0.00 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001 Fiscal year

Fig. 6 Labor Accident Severity Rate

The first of the two accidents in fiscal 2001 that involved injuries resulting in a suspension of work happened when an employee backed into a piece of equipment on a production line, causing broken ribs. The second accident also involved broken ribs, in this case sustained when an employee was trapped between two pieces of equipment. Both injuries were treated and healed, resulting in no lasting impairment. Note: Labor accident frequency rate = Number of accidents and injuries due to labor accidents per one million hours of labor Example: A labor accident frequency rate of 1.0 corresponds to one accident per year in a workplace with 500 employees. Labor accident severity rate = Number of work hours lost per one thousand hours of labor Example: A labor accident severity rate of 0.1 corresponds to 100 work hours lost per year in a workplace with 500 employees. These terms were developed by the JCIA, which has 197 member companies. “Chemical industry,” as used in these figures, is a classification used by the Ministry of Health, Labour and Welfare for reporting labor accident statistics.

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Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED ESH Activities

3. Environmental Load Reduction 1 ) Emissions of CO2, SOx, NOx and COD

Emissions of CO2 have declined significantly thanks to several factors, including improvements in production processes and the introduction of cogeneration systems at principal plants between fiscal 1990 and fiscal 1998, and to ongoing efforts to reduce energy consumption. The following four figures index DIC’s emissions of carbon dioxide (CO2), sulfur oxide (SO x ), nitrogen oxide (NOx) and chemical oxygen demand (COD) per unit (ton) of production from fiscal 1990 through fiscal 2001 (fiscal 1990=100).

Emission Index

Thousands of tons

100 90

100

Goal

80

80 70 60

60

50 40

40

30 20

20

10

0

Emission Volume

Emission Volume

120

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2010 Fiscal year

Fig. 7 CO2 Emission Index (fiscal 1990=100)

DIC’s SO x, NO x and COD indices remain favorable and stable and are well below legislated or stipulated levels.

Emission Index

120 100 80 60 40 20 0 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001 Fiscal year

2000

2001 Fiscal year

Fig. 8 SOx Emission Index (fiscal 1990=100)

Emission Index

120 100 80 60 40 20 0 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Fig. 9 NOx Emission Index (fiscal 1990=100)

8

2002 ESH Activities Emission Index

120 100 80 60 40 20 0 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Fiscal year

Fig. 10 COD Emission Index (fiscal 1990=100)

2)Energy Consumption Energy consumption peaked in fiscal 1993, owing to the construction of a new plant early in 1990 and the start of operations at the plant in 1993. Between fiscal 1996 and fiscal 1998, DIC installed cogeneration systems at three plants. In fiscal 1999, the Company installed highly productive manufacturing facilities utilizing new energy technologies at the Yokkaichi Plant. As a consequence, energy consumption per unit (ton) of production at the plant decreased approximately 40% in fiscal 1999. The new facilities, together with ongoing efforts to reduce energy consumption, have also contributed to a steady decrease since fiscal 2000.

Consumption Index

Thousands of tons

160 140

100

Goal

80

120 100

60

80

40

60 40

20

20

0

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Consumption Volume

Consumption Volume

120

2010 Fiscal year

Fig. 11 DIC’s Energy Consumption per Unit (ton) of Production from Fiscal 1990 through Fiscal 2001 (fiscal 1990=100).

3) Industrial Waste Figure 12 illustrates the annual volume of industrial waste generated by DIC that has been disposed of as landfill by external companies since fiscal 1990. In line with its commitment to helping promote a more recycling-oriented society, DIC has set forth an industrial waste disposal goal for fiscal 2010 of 5% below the fiscal 1999 level. To this end, in fiscal 2001 DIC established a special project team. As a consequence, the volume of industrial waste generated by DIC disposed of as landfill in fiscal 2001 declined approximately 30% from fiscal 2000.

Volume of Industrial Waste Disposed of as Landfill

Tons/year

16,000 14,000 12,000

Goal

10,000 8,000 6,000 4,000 2,000 0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2010

Fiscal year

Fig. 12 Volume of Industrial Waste Disposed of as Landfill by External Companies

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Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED ESH Activities

4) Polluting Chemical Substance Emissions ① PRTR Chemicals

DIC used 120 of the 480 PRTR chemicals in fiscal 2001. Total emissions of these chemicals during the period amounted to 652 tons, down 13.0% from 749 tons in fiscal 2000. This reduction is attributable to the installation of solvent recovery facilities and the integration of plants, which boosted operating rates for recovery facilities at remaining plants.

t/y 2,500

Emissions of Polluting Chemical Substances

In fiscal 2001, JCIA increased the number of PRTR chemicals—polluting chemical substances for which it requires its member companies to register and monitor emissions—to 480, from 284. As well, JCIA lowered the minimum annual emission volume for PRTR qualification from 10 tons to five tons for most PRTR chemicals and 0.5 tons for those that are carcinogenic.

Based on previous JCIA standards (284 chemicals) Based on current JCIA standards (480 chemicals)

2,000 1,500 1,000 500 0

1996

1997

1998

1999

2000

2001

Fiscal year

Fig. 13 Emissions of Polluting Chemical Substances

Table 3

Figure 13 shows DIC’s emissions of all PRTR chemicals since fiscal 1996. Table 3 shows fiscal 2001 emissions of those PRTR chemicals for which emission levels exceeded 10 tons. The Ministry of Economy, Trade and Industry has issued guidelines for the 12 PRTR chemicals it has designated “ priority ” chemicals, in line with which manufacturers conduct voluntary atmospheric contamination control programs. In fiscal 2001, DIC used six of these “priority” chemicals, the same number as in fiscal 2000, while its emissions of these six chemicals totaled 13 tons, down 13% from the previous term. Note: PRTR chemicals encompass polluting chemical substances for which JCIA requires companies to register and monitor emission levels and chemicals targeted by the Law Concerning Reporting, etc. of Release to the Environment of Specific Chemical Substances and Promoting Improvements in Their Management.

PRTR Chemicals with Emissions in Excess of 10 Tons in Fiscal 2001 Chemical

Volume Manufactured /Used

Volume Emitted

Ethyl acetate

13,725

106

Toluene

13,083

96

Xylene

8,957

81

Methyl ethyl ketone

9,765

78

Methyl ethyl alcohol

4,086

58

23,665

33

N–Methylpyrrolidone

162

23

HCFC–141b (under different names)

379

23

6,779

18

Methyl alcohol

N,N–dimethylformamide Styrene

161,273

13

Butyl alcohol

6,381

14

1,3–butadiene

1,844

12

192

12

1,003

11

Methyl cellosolve Propylene oxide

② Compliance with Dioxin Emission Control Regulations DIC currently has three incinerators at three plants that qualify as “specified facilities” under the Law Concerning Special Measures Against Dioxins. One of these incinerators, which has a maximum hourly capacity of 200 kilograms, is scheduled to cease operating by December 2002, when measures relating to such “specified facilities” will be introduced. The remaining two incinerators, which also have capacities in excess of 200 kilograms per hour, comply with legal standards governing such incinerators. Accordingly, both are slated to remain in operation.

③ Reduction of Use of Ozone-Damaging Chemical Substances DIC currently uses HCFC–141b gas in some of its expandable urethane resins. HCFC–141b was added to the list of designated ozone-damaging chemical substances as the consequence of a revision of the Law Concerning the Protection of the Ozone Layer in June 1994. DIC is developing an alternative to HCFC–141b gas and intends to cease use of the substance by 2004.

10

2002 ESH Activities

4. Safty Control of Chemical Substance

1 )Preparation and Presentation of Safety Information on Chemical Substances The recently revised Labor Safety Hygiene Law and the Poisonous and Deleterious Substances Control Law, as well the newly established Law Concerning Reporting, etc. of Release to the Environment of Specific Chemical Substances and Promoting Improvements in Their Management, call for increased efforts by manufacturers to prepare and distribute product material safety data sheets (MSDSs) for chemical substances. DIC actively advocates the preparation and distribution of MSDSs that comply with new legislation and has finished modifying its own MSDS forms. DIC also prepares MSDSs in local languages for products sold in overseas markets. In fiscal 2001, the Company prepared 5,037 MSDSs in languages other than Japanese, an increase of approximately 700 from fiscal 2000.

2 )Internal Assessment of Chemical Substances and Production Processes In fiscal 2001, DIC conducted 420 internal assessments of chemical substances and production processes, the results of which were incorporated into measures aimed at reducing chemical substance-related risks. With the aim of reinforcing chemical substance-related risk management, DIC has established an internal Chemical Substance Control Committee. The committee is charged with reducing related risks through such measures as promoting education regarding the appropriate use of chemical substances, the reduction of the volume of chemical substances used, the improvement of production processes and the development of alternative substances.

3 )Quality Assurance The DIC quality assurance system allows the Company to immediately suspend production of a chemical substance and take appropriate steps, such as recalling products, should there be a danger of damage to the environment or the safety or health of employees or customers. No such incidents occurred in fiscal 2001.

5. Safety during Transportation DIC has established an emergency notification system to facilitate rapid responses to emergencies occurring during transportation of chemical substances. The system involves the distribution of transportation emergency response cards (“yellow cards”), which are given to drivers of container trucks, lorries and general mixed-freight transport trucks. In fiscal 2001, yellow cards were distributed to 98% of these drivers.

6. Green Procurement In January 2002, the parent company established internal standards for Green Procurement and asked its principal suppliers to conduct voluntary assessments using prepared questionnaires. Based on the results of these evaluations, procurement from suppliers meeting these standards accounted for 89% of total procurement in fiscal 2001. DIC will continue to encourage suppliers who do not meet these standards to implement changes and intends to achieve a 100% Green Procurement rate by the end of fiscal 2005. DIC's Green Procurement rate is calculated as: Total procurement from suppliers that internal Green Procurement standards Total procurement by procurement departments

×100

Table 4 DIC’s Green Procurement Standards (Suppliers must meet standards in both columns to qualify.) Activities A supplier must either ・have earned ISO14001 certification or have a management system  in place and a definite schedule for applying for ISO 14001 certification or ・conduct its operations in accordance with the principal requirements  for ISO 14001.

Materials Procured A supplier must

・supply materials that contain no prohibited substances, e.g., substances  prohibited under the Labor Safety Hygiene Law or Type 1 substances prohibited under the Law Concerning the Examination and Regulation of Manufacture, etc. of Chemical Substances

As well, a supplier must either

・have a program in place for reducing emissions of substances  harmful to the environment or ・recycle containers or otherwise contribute to environmental preservation.

7. Soil Analysis at Former Plant Sites As part of its efforts to reorganize its domestic manufacturing network, DIC closed its Amagasaki and Warabi plants in September 2001 and March 2002, respectively. Subsequently, DIC conducted soil analyses at both sites in accordance with the Ministry of the Environment’s guidelines for measuring soil and groundwater pollution, issued in 1999.

11

Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED Development of Environment-Friendly Products DIC manufactures a number of environment-friendly products. For more information, visit the following page at DIC’s Web site: http://www.dic.co.jp/products/envfprod/index.html

1. Waterborne and Solvent-Free Products ・Water-dispersing urethane resin for use in molding strong, flexible capsules

VONDIC series

・Water-soluble can coatings ・Waterborne gravure ink for flexible packaging (surface printing)

MARINE GLOSS PE

・Waterborne gravure ink for flexible packaging (reverse printing)

ECOFINE; MARINE PLUS SK; HR

・Gravure ink for shrink labels

FINE LAP WPV

・Water-based adhesives

DICDRY WS series

2. Low- and NonVOC Products ・Intermediate offset ink containing aroma-free solvent (less than 1% aromatic ingredients)

New Champion F-Gloss

・100% vegetable oil-based offset ink

Naturalith 100

 Soybean oil-based sheetfed offset ink

New Champion Naturalith 100

 NonVOC sheetfed offset ink

Naturalith 100 POP

・Soybean oil-based news ink

News Zett Naturalith series

・Electron beam-curable top coating for decorative paper

Beam EB300 series

・Hybrid UV-curable ink requiring no special equipment

Daicure Hy-Bryte system

・Fluorine resin for wear-resistant coatings

Fluo-Net FEM series

・Urethane/acrylic composite polymer emulsion

VONCOAT CG series

・Solvent-free waterborne urethane ionomer resin

HYDRAN HW series

・Low formaldehyde-emission phenol resin adhesive

PHENOLITE

・Low-VOC decorative boards that improve room air quality

DIC Ambiente series (Esterboard; V-Shape Board)

Daicure Hy-Bryte system

12

New Champion Naturalith 100

2002 Development of Environment-Friendly Products

3. Recycling-Related Products ・Extrusion coating resin that facilitates recycling of paper

DIC THERM RP-100

・Artificial boards made from waste plastic

DIC WOOD

・Double-sided adhesive tape for molded plastic components

Daitac #8800CH

・Film and adhesive labels made with the same materials

Daiheart S series; Ecocycle series

 as food packaging trays, which therefore do not have  to be removed before recycling

4. Environment Protection ・Intermediate offset ink containing aroma-free solvent (less than 1% aromatic ingredients)

New Champion F-Gloss

・Halogen-free inflammable novolac resin

PHENOLITE 7050 series

・Environment-friendly nonchlorofluorocarbon  rigid polyurethane spray foam

HIPROX RP8000

・Soil control system using oxygen-free water

REVITAR

・Sheet heater for pavement, floor and roof

DAIELEC Heater

・Barium-free red monoazo pigment

SYMULER RED 3119

5. Waste Reduction ・Thick sheet molding compound (SMC) that facilitates  50% reduction of waste film

GMC series

6. Fume Reduction ・ Low-fume liquid urethane water-resistant coatings

Flatone (for flat surfaces); DIC Urethane series (primer)

7. Timber Resource Conservation Products ・Lightweight rigid polyurethane sandwich panel for  truck beds

Decorative surface: PET specialty resin sheet Adhesive layer Base: Medium-density fiberboard (MDF) (EO Evolutionary Computation Framework-compatible) or composite board (FcO-compatible)

DIC Ambiente series (Esterboard)

DIC U-Panel series

Decorative surface: urethane resin sheet Adhesive layer Base: MDF (EO Evolutionary Computation Framework-compatible) or composite board (FcO-compatible)

DIC Ambiente series (V-Shape Board)

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Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED ESH in Research and Development and New Businesses 1. R&D 1 )Safety Training for Employees In line with its Safety in Technology and Research Policy, DIC provides general safety and workplace safety training to employees.

2 )Development of Environment-Friendly Products DIC is also actively committed to the development of environment-friendly products. Achievements to date include emulsions that uses water as a diluent, products with reduced solvent content and decorative boards for residential interiors containing almost no substances identified as causing increased VOC concentrations in rooms. In fiscal 2001, DIC launched a new intermediate offset ink containing aroma-free solvent, while Naturalith 100—a 100% vegetable oil-based offset ink containing no VOCs developed in a cooperative project with electric and information equipment manufacturers—was awarded the JCIA’s Technology Prize. Principal environment-friendly products manufactured by DIC are listed on page 12–13 of this report.

2. New Businesses Prior to preparing its capital investment plan for fiscal 2001, DIC conducted an advance safety assessment aimed at enhancing the safety and reliability of management systems and reducing the margin for human error. Plants were subjected to process safety management (PSM) procedures, while new R&D centers were designed to be energy-efficient and equipped with organic solvent and exhaust gas processing and rainwater recycling facilities.

ESH in International Operations DIC provides extensive Responsible Care training to managers assigned to overseas affiliates prior to sending them abroad. English-language versions of DIC’s Safety Procedures for Static Electricity and Testing and Principles of Safe Conduct: Procedures and Attitudes for a Safe Workplace have been distributed to affiliates in Southeast Asia. The DIC Central Research Laboratories provide safety information on chemical substances to the Company’s R&D facilities overseas, thereby ensuring maintenance of the highest ESH standards.

ESH in International Transactions In addition to adhering to the rules outlined in its Safety Management for International Trade Manual, DIC has prepared a checklist for employees traveling overseas on business to prevent the illegal export of products, regulated substances and technologies. DIC also keeps abreast of information on trafficking in prohibited substances and has established an internal mechanism to ensure adherence with international regulations.

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2002 Interaction with the Local Community Copies of DIC’s Responsible Care Report 2001 were distributed to plants and the DIC Central Research Laboratories, together with the Principle and Policy for the Environment, Safety and Health, for internal use and for handing out to visitors to the Company. The report can also be viewed by visiting DIC’s Web site at http://www.dic.co.jp/eng/rc/index.html. During the period, DIC’s Chiba Plant participated in the Japan Responsible Care Council’s fiscal 2001 Responsible Care Conference as a representative of Chiba Prefecture. DIC invited local residents to visit its plants throughout Japan in an effort to promote effective communication. As well, DIC employees volunteered their time in the community in a variety of capacities, including serving as automobile safety and sports instructors and participating in local clean-up efforts.

DIC Plants / R&D Center

Ishikari Plant

Gunma Plant

Tatebayashi Plant

Saitama Plant

Kashima Plant

Tokyo Plant

Chiba Plant

DIC Central Research Laboratories

Mikawa Plant

Komaki Plant

Yokkaichi Plant

Shiga Plant

Ishikari Plant Mikawa Plant Komaki Plant Shiga Plant Suita Plant

Suita Plant

Gunma Plant Tatebayashi Plant Saitama Plant DIC Central Research Laboratories

Sakai Plant

Fukuoka Plant Sakai Plant

Kashima Plant Tokyo Plant Chiba Plant Yokkaichi Plant

Fukuoka Plant

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Responsible Care Care Responsible DAINIPPON INK AND CHEMICALS, INCORPORATED Introducing the Mikawa Plant Outline The Mikawa Plant is located at the mouth of the Tedori River, which flows from Mt. Hakusan in the Kirigamine range, and close to the Komatsu coast, which is considered one of Japan’s most beautiful coastlines. The plant, which commenced operations in 1959, represents Ishikawa Prefecture’s first successful bid for a manufacturing facility and remains the only synthetic resin plant on the Japan Sea coast. The plant currently has a total floor space of approximately 140,000 square meters and employs 210 people.

Responsible Care Activities at the Mikawa Plant

Takeo Nakamura

Hiroyuki Furukawa

Yasuzo Nakatani

General Manager, Mikawa Plant

General Manager,

Manager in charge of environment and safety management,

Environment, Safety and Quality Control Department,

Mikawa Plant

1 ) Labor Accident Prevention

Mikawa Plant

Efforts to prevent labor accidents at the Mikawa Plant center on stringent observation of three key principles of prevention; employee education involving examination of past emergency situations and their causes; strict checks by general managers and managers; and participation in a DIC Group safety committee. In May 2002, the plant marked 29 consecutive labor accident-free years and 8.1 labor accident-free hours. The Mikawa Plant has also won the Minister of Health, Labour and Welfare’s First Prize (Safety) twice, a national record. 2 ) Industrial Waste Reduction The Mikawa Plant’s industrial waste reduction program focuses on taking steps to minimize output and recycling waste using subcontractors. While the plant has made notable progress on many fronts, measures to reduce the amount of surplus contaminated sludge from wastewater processing facilities disposed of as landfill have been less successful than anticipated. Accordingly, the plant has begun recycling surplus contaminated sludge into fertilizer and fuel and is working to lower output. Through these and other efforts, Mikawa Plant aims to achieve zero emissions by fiscal 2010. The plant’s recycling rate in fiscal 2001 was 65.1%. 3 ) Lower Energy Consumption With the closure of its formalin facility, which played a key role in heat recovery, the Mikawa Plant established an Energy Efficiency and Waste Management Committee and has switched its emphasis to installing energy-efficient facilities and implementing innovative ideas for lowering energy consumption. The plant is also stepping up patrols and otherwise enhancing its monitoring of consumption. In fiscal 2003, the plant plans to introduce a cogeneration system. 4 ) Safety Control of Chemical Substances/Employee Training Because it handles self-reactive substances with low boiling and ignition points, the Mikawa Plant conducts on-site employee training using MSDSs as materials and implements measures aimed at improving the working environment for its employees. These include modifying procedures to, for example, eliminate the causes of accidents. In fiscal 2001, the plant’s collection rate for MSDSs was 91% for raw materials and 100% for finished products. 5 ) Compliance with ISO 14001 The Mikawa Plant obtained ISO 14001 certification in fiscal 1997, together with the Kansai Polymer Plant (Sakai) and the Amagasaki Plant, and in August 2000 completed its first inspection for renewal. In line with DIC’s Principle and Policy for the Environment, Safety and Health, the Mikawa Plant is committed to safety, a low environmental burden, the reuse of resources and the reduction of energy consumption through the full life cycle of chemical products, from development to disposal. The plant has established an internal auditing system to ensure this commitment is met. 6 ) Interaction with the Community The Mikawa Plant is close to the Hokuriku Line’s Komatsu Station, a center of community life. Accordingly, maintaining good relations with local residents is essential. To this end, the plant has installed state-of-the-art exhaust emission reduction equipment and incinerators. As well, the plant has contracted 12 households in the immediate vicinity to monitor air quality and set up a quick-response system to ensure complaints about air quality are addressed promptly and effectively. A plant representative visits these 12 households monthly to gather information. Mikawa Plant employees participate actively in a variety of community activities, including clean-up efforts, the local traffic safety council, fire prevention and safety committees and the town’s chamber of commerce.

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Overview of Mikawa plant

Planting fir tree seedlings as part of a local greening program

2002 History of DIC’s Environment and Safety Program 1973

1974

Environment and Safety Response Department established under direct supervision of DIC’s President

Year

Recipient

Award

1973

Amagasaki Plant

Effort Prize (Minister of Labor)

Internal safety audit conducted

1974

Warabi Plant

Effort Prize (Minister of Labor)

1976

Warabi Plant

First Prize (Hygiene) (Minister of Labor)

1978

Mikawa Plant

Progress Prize (Minister of Labor)

Environment and Safety Management Regulations and Working Regulations for Interim Countermeasures Department established Inspection of environment and safety precautions at major plants undertaken

1977

Large-scale waste incinerator installed at Chiba Plant

1979

Procedures for Using New Chemicals established Questionnaire on Characteristics of Chemicals established

1982

Guidelines for Training Inexperienced Workers ( New Employees) established

1983

Professional sanitary guidance qualifications made mandatory for all managementlevel personnel

1984 1985

Environment and Safety Awards Received by DIC

Sakai Plant

Progress Prize (Minister of Labor)

1979

Hokkaido Plant

Effort Prize (Minister of Labor)

Mikawa Plant

Effort Prize (Minister of Labor)

1981

Tokyo Plant

Effort Prize (Minister of Labor)

1982

Mikawa Plant

First Prize (Safety) (Minister of Labor)

1984

First Prize (Hygiene) (Minister of Labor)

Mikawa Plant

First Prize (Hygiene) (Minister of Labor)

Inspection of environment and safety precautions at branch offices, subbranches and sales offices launched

1987

Sakai Plant

First Prize (Hygiene) (Minister of Labor)

1989

Amagasaki Plant

First Prize (Hygiene) (Minister of Labor)

5 S Procedures and Attitudes for a Safe Workplace and Examples of Emergency Situations published

1991

Sakai Plant

Progress Prize (Minister of Labor)

1992

Chiba Plant

Effort Prize (Minister of Labor)

Sakai Plant

Top Hazardous Substance Operation Commendation

Chiba Plant

Top Plant for High-Pressure Gas Safety Commendation

Mikawa Plant

Top Hazardous Substance Operation Commendation

1987

Campaign to identify potential accidents launched

1988

Environment and Safety Guidelines for the R&D Department published Environment and Safety Management Regulations revised to include section on global environmental preservation

(Commissioner, Fire Defense Agency) 1993

(Minister of International Trade and Industry) (Commissioner, Fire Defense Agency) Safety Effort Award, JCIA 1994

Environment and Safety Philosophy formulated Accident-free year achieved for entire Company

Voluntary Long-Term Environment and Safety Plan formulated

Top Hazardous Substance Operation Commendation

Sakai Plant

First Prize (Safety) (Minister of Labor)

Warabi Plant

Top Hazardous Substance Operation Commendation

Saitama Plant

Progress Prize (Minister of Labor)

Nagoya Plant

Effort Prize (Minister of Labor)

Chemical substance safety information officer appointed in each division

Amagasaki Plant

Top Hazardous Substance Operation Commendation

Various commemorative events held to mark 20th year of DIC’s environment and safety program

Nagoya Plant

Top Hazardous Substance Operation Commendation

Public pledge to uphold principles of Responsible Care announced by DIC in its role as a founding member of Japan's Responsible Care movement

Fukuoka Plant

Special Commendation (JCIA)

Mikawa Plant

Top Plant for High-Pressure Gas Safety Commendation

Procedures and route for reporting and communicating instructions in the event of an accident established for domestic and overseas affiliates

Tokyo Plant

Top Hazardous Substance Operation Commendation

The Aftermath of the Great Hanshin-Awaji Earthquake published, chronicling conditions following the disaster

Tokyo Plant

Safety Award (JCIA)

Fukuoka Plant

Top Hazardous Substance Operation Commendation

Ishikari Plant

Top Hazardous Substance Operation Commendation

Suita Plant

Top Hazardous Substance Operation Commendation

Guidelines for Crisis Management in the Event of an Accident established

Responsible Care audit system established 1996

Effort Prize (Minister of Labor)

Chiba Plant

(Commissioner, Fire Defense Agency) 1996

Guidelines for Preventing Accidents Caused by Static established

1995

Suita Plant

(Commissioner, Fire Defense Agency) 1995

Guidelines for Preparing MSDSs established 1993

First Prize (Hygiene) (Minister of Labor)

Hokkaido Plant

Guidelines for Implementing Management Directives on Key Environment and Safety Issues published

1992

Effort Prize (Minister of Labor)

Tokyo Plant

1986

Campaign to reinforce 5 S Procedures and Attitudes for a Safe Workplace launched following several accidents

1990

Sakai Plant

(Commissioner, Fire Defense Agency) (Commissioner, Fire Defense Agency) 1997

(Minister of International Trade and Industry) (Commissioner, Fire Defense Agency) 1998

(Commissioner, Fire Defense Agency)

Guidelines for Selling Chemical Products established

(Commissioner, Fire Defense Agency)

Safety and Quality Control Supervisor appointed at sales office Responsible Care Report 1996, DIC’s first Responsible Care report, published

1999

(Commissioner, Fire Defense Agency)

ISO 14001 certification obtained by Kashima Plant from Japan Quality Assurance Association

Kansai Polymer Plant Sakai Plant

Safety Effort Award (JCIA)

1997

Sakai, Amagasaki, Mikawa, Chiba, Tokyo, Saitama, Yokkaichi, Gunma and Komaki plants obtain ISO 14001 certification

Nagoya Plant

Progress Prize (Minister of Labor)

1998

PSM Guidelines published First edition of Examples of Accidents and third editions of Examples of Emergency Situations and Procedures and Attitudes for a Safe Workplace published Suita, Warabi and Nagoya plants obtain ISO 14001 certification

  1999

PRTR chemical emission levels announced

2000  Registration and monitoring of chemical emissions are modified in compliance with new PRTR system

2000 2001

Mikawa Plant

Safety Award (JCIA)

Mikawa Plant

First Prize (Safety) (Minister of Health, Labour and Welfare)

DIC

Chairman’s Award (Japan Industrial Safety and Health Association)

Saitama Plant

Top Hazardous Substance Operation Commendation (Commissioner, Fire Defense Agency) First Prize (Safety) (Minister of Health, Labour and Welfare)

Environment-related costs and investments published in line with standards for environmental accounting issued by Japan’s Environment Agency 2001

Emission volumes for “priority” PRTR chemicals, i.e., those for which emissions exceed 10 tons, published

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Printed on nonwood paper (50% bagasse/50% recycled paper fibers) using DIC’s Naturalith 100 vegetable oil-based offset ink

“Responsible Care” refers to activities pledged and carried out by companies that manufacture and/or handle chemical substances with the aim of protecting the environment, safety and health and to the implementation and continual revision of measures to accomplish this aim throughout the full life cycle of chemical products, from development and production through distribution and use to final consumption and disposal.

Enviroment, Safety & Quality Management Department DAINIPPON INK AND CHEMICALS, INCORPORATED DIC Building, 7-20, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8233, Japan PHONE: +81(3)5203-7753 FAX: +81(3)3278-0253 URL: http://www.dic.co.jp/eng/rc/index.html