Idemitsu Kosan : Integrated Report 2025 Evolution of the Business Platform / Innovation Management

CONTENTS

Value Creation Story

Message from Top Management

Business Structure Reforms

Human Capital / Human Capital Strategy

Evolution of the Business Platform / Innovation Management

Sustainability

Corporate Governance

Data Section

Idemitsu Integrated Report 2025 37

• DX Strategy ■ Procurement Transformation Activities ■ Risk Management and Internal Controls ■ Innovation Creation Activities ■ Intellectual Property Activities

  Create new value

  Productivity enhancement 30

  STEP3

  Creating new value

  STEP2

  Business process re-engineering

  STEP1

  Streamlining daily operations

  Evolution of the Business Platform / Innovation Management

  To accelerate our business strategy centered on business structure reforms and human capital strategies, Idemitsu Kosan is developing its DX strategy, procurement transformation, and advancing risk management toward the further evolution of its business platform. Coupled with our proactive efforts in the areas of innovation and intellectual property, we are building a solid foundation for change.

  STEP0

  Data foundation & DX talent development

  Evolution of the Business Platform

  1. DX Strategy

  2. Procurement Transformation Activities

  3. Risk Management and Internal Controls

     Expansion of scope of activities Vision for 2050

     • Domestic group ⚫ Global group companies

       Shaping Change

       2024

       Strengthening advancement system

       From 2025

     • Idemitsu domestic operations

       From 2027 companies

       From 2030

       Achieving transformation of our business portfolio

       • Procurement Headquarters established

       • CPO appointed

  • Expand scope of consolidated procurement

  • Visualize supply chain

  • Start consolidated procurement

  • Introduce new procurement system

    Innovation Management

    42 Innovation Creation Activities

    Three transformation activities

    1

    2

    Enhancing strategic Reforming procurement procurement operations

    Advancing DX in procurement

    3

    Building a supply chain management system

    Fulfilling our four missions: Quality

    Cost Delivery

    Sustainability

    44 Intellectual Property Activities

    Procurement transformation activities

    
    
    

    CONTENTS

    Value Creation Story

    Message from Top Management

    Business Structure Reforms

    Human Capital / Human Capital Strategy

    Evolution of the Business Platform / Innovation Management

    Sustainability

    Corporate Governance

    Data Section

    Idemitsu Integrated Report 2025 38

    
    
    

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• DX Strategy ■ Procurement Transformation Activities ■ Risk Management and Internal Controls ■ Innovation Creation Activities ■ Intellectual Property Activities

  DX Strategy

  Digital innovations

  DX that underpins our business

  With "Shaping Change" as our motto, our Company is working to improve productivity and transform our business models through data-driven and digital innovation.

  We are promoting DX through a three-step process while developing data infrastructure that facilitates easy access and use-the foundation of DX-and nurturing human resources capable of utilizing digital technology. Steps 1 and 2 involve working to improve productivity by streamlining daily operations and re-engineering business processes, while Step 3 focuses on creating new value.

  We aim to deliver even more value for our customers by centralizing and standardizing data and increasing the effectiveness of AI applications, as well as developing DX talent capable of spearheading change.

• DX Promotion Steps Step 0: Data foundation & DX talent development

  We are working to complete the migration of our business systems to the cloud and build data platform that will enable seamless use data and AI.

  We offer training programs tailored to the skill levels of all employees to enable them to use digital technologies independently, and over 4,000 employees have taken our basic course. Furthermore, more than 5,000 have participated in seminars and study sessions on generative AI.

  Step 1: Streamlining daily operations

  More than 10,000 employees are currently using generative AI and AI-enabled office tools. Low-code apps developed by citizens (657 apps) are also becoming more robust, improving the efficiency of daily operations through labor-saving tasks such as document summarization and preparing meeting minutes, as well as handling internal inquiries and retrieving information.

  Step 2: Business process re-engineering

  We are promoting the optimization and streamlining of business processes based on the use of AI. In the area of petroleum shipping, we have developed our own fleet optimization model to improve the efficiency of ship assignment operations. Meanwhile, manufacturing departments are actively working to transform business processes by utilizing an integrated information platform to improve on-site operations.

  Step 3: Creating new value

  We are working to strengthen customer touchpoints for Drive On (a digital platform for service station members), advance the level of research through MI/DX initiatives, develop solutions to increase the utilization rate of CN fuel, and develop an AI-based external corrosion assessment system for production facilities.

  Create new value

  STEP3

  Creating new value

  Productivity enhancement 30

  STEP2

  Business process re-engineering

  STEP1

  Streamlining daily operations

  STEP0

  Data foundation & DX talent development

  Marine Transportation Section,

  Crude & Global Business Department

  S. Hara (left)

  H. Oguri (right) (Affiliations as of June 2025)

  Business process reform case study: introducing a mathematical optimization system for scheduling crude oil tankers

  
  
  

  Our Company has introduced a new system that incorporates mathematical optimization into the scheduling of ocean vessels used to transport crude oil from overseas. Before, experienced staff had spent a massive amount of time devising plans that met complex constraints, but the new system has made it possible to quickly create shipping plans that minimize transportation costs.

  During proof-of-concept testing, we have been able to reduce work time by up to 40%, and we expect to reduce annual costs by hundreds of millions of yen. The process of carefully modeling the experience and knowledge of the staff in charge and incorporating it into our algorithms served as a "challenge for change" made possible through collaboration between staff on the ground and digital technologies.

  We will continue to enhance such functions even more to achieve both the stable supply of petroleum products and improved logistics efficiency.

  CONTENTS

  Value Creation Story

  Message from Top Management

  Business Structure Reforms

  Human Capital / Human Capital Strategy

  Evolution of the Business Platform / Innovation Management

  Sustainability

  Corporate Governance

  Data Section

  Idemitsu Integrated Report 2025 39

  
  
  

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Procurement Transformation Activities

Sustainable procurement

The Need to Transform Procurement

As rising costs driven by inflation, labor shortages, and other factors continue to impact businesses, the procurement environment has become a critical concern. Coupled with the need to address large-scale disasters, ESG challenges, security risks, and more, ensuring sustainable procurement practices and managing the entire supply chain have become increasingly vital.

In response to these challenges, we are redefining our business portfolio to align with our Vision for 2050, "Shaping Change." As part of this effort, we are overhauling our procurement strategy and transforming our procurement activities to broaden their scope and enhance operational effectiveness.

Procurement Transformation Initiatives

We are currently driving procurement transformation initiatives with a focus on three key areas: (1) enhancing strategic procurement, (2) reforming procurement operations, and (3)

business portfolio. Both objectives require stable procurement capabilities, particularly for construction-related activities, while proactively addressing procurement risks. To achieve this, we are conducting market analyses, fostering deeper relationships with suppliers, and working to establish mutually beneficial partnerships aimed at maximizing shared value.

1. Reforming procurement operations

   We are undertaking a comprehensive review of procurement operations company-wide to enhance governance, improve productivity, and reduce and optimize costs. Key measures include unifying procurement rules, digitizing processes through the adoption of standardized systems, consolidating procurement functions for indirect materials under a specialized organization, and leveraging digital transformation to enhance data visibility.

   In FY2024, we began consolidating procurement functions

   
   
   
   • Procurement transformation activities

     and implementing new systems. These systems are expected to go live in July 2025, with a phased rollout of consolidated operations. This approach will enable us to strengthen governance, boost efficiency, and achieve cost optimization.

2. Building a supply chain management system

As a company entrusted with the social responsibility of ensuring a stable supply of energy and materials, strengthening our supply chain is a critical mission. This includes expanding our existing sustainable procurement initiatives, enhancing supply chain visibility to identify and mitigate risks, and establishing a resilient supply chain management system. We are committed to transparency in these efforts and will publish updates on our sustainable procurement initiatives on the Sustainability page of our corporate website as appropriate.

building a supply chain management system. While these ini-

Expansion of scope of activities Vision for 2050

tiatives were initially launched within Idemitsu Kosan's domestic operations, our goal is to extend them across all Idemitsu Group companies, both in Japan and internationally, by 2030.

2024

Strengthening advancement system

From 2025

• Idemitsu domestic operations

  From 2027

• Domestic group companies

  From 2030

  • Global group companies

    Shaping Change

    Achieving transformation of our business portfolio

    To accelerate and ensure the reliable execution of these

    transformation efforts, we established the Procurement Headquarters in April 2024. This centralized structure is supported by managers from all departments, fostering a compa-

• Procurement Headquarters

  established

• CPO appointed

• Expand scope of consolidated procurement

• Visualize supply chain

• Start consolidated procurement

• Introduce new procurement system

ny-wide, coordinated approach. Additionally, a Chief Procurement Officer (CPO) was appointed in July 2024 to lead these efforts. Moving forward, we will continue to strengthen our initiatives under this enhanced framework.

1. Enhancing strategic procurement

Ensuring the safe and stable operation of our existing businesses remains a top priority. Simultaneously, we are at a critical juncture in implementing new initiatives to reshape our

Three transformation activities

1

Enhancing strategic procurement

3

Building a supply chain management system

2

Reforming procurement operations

Advancing DX in procurement Procurement transformation activities

Fulfilling our four missions: Quality

Cost Delivery

Sustainability

CONTENTS

Value Creation Story

Message from Top Management

Business Structure Reforms

Human Capital / Human Capital Strategy

Evolution of the Business Platform / Innovation Management

Sustainability

Corporate Governance

Data Section

Idemitsu Integrated Report 2025 40

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• DX Strategy ■ Procurement Transformation Activities ■ Risk Management and Internal Controls ■ Innovation Creation Activities ■ Intellectual Property Activities

  Risk Management and Internal Controls

  Risk management

  Internal control

  Introducing Enterprise Risk Management to enhance risk response capabilities

  Our company faces a variety of new challenges due to rapidly changing international circumstances, economic and social conditions, climate change, and more. To prepare for these challenges, we are promoting the implementation of Enterprise Risk Management (ERM) as a company-wide initiative. Traditionally, we have relied on each business department to act autonomously in this area, but recent environmental changes have led to increasingly broad and complex risks. ERM will enable us to strengthen our risk response capabilities by centrally identifying risks, and then ensuring our risk responses are coordinated and mutually complementary across management, corporate departments, and business departments.

  Furthermore, we will conduct regular and thorough risk evaluations and assessments to enable rapid response to risks before they manifest, strengthen our information sharing systems, and provide education and training to foster risk awareness among all employees. This will not only increase our ability

  Managing to predict risks, but also build stakeholder trust and strengthen our foundation for sustainable growth.

  Executive Officer We intend to continue developing our ERM on an ongoing basis and strive to bring it to an even more advanced level. I would like to take this opportunity Kenichi to thank all our stakeholders for their understanding that our risk management system is functioning in a more comprehensive and effective manner, and Morishita ask for their continued support.

  
  
  Our Approach to Risk

  To respond appropriately to the various risks that arise as we work toward achieving our management goals, we are introducing Enterprise Risk Management (ERM), with FY2024 serving as a preparatory period and full-scale implementation commencing in FY2025.

  By defining our overall risk profile, putting our risk response status into visual forms, and actively communicating with each other, we will implement risk management tailored to the roles of each office in our business and corporate departments, as well as management, which will in turn lead to the appropriate disclosure of risk-related information.

  Risk Management and Internal Controls

  Report

  Internal controls and risk management are essential elements of sound corporate management. Our company manages these through a three-line system, with the business department handling the first line, corporate department offices handling the second, and the Internal Audit Department handling the third. By implementing risk management from a company-wide perspective based on appropriate internal control processes, and quickly identifying and responding to risks through cooperation from the management level down to on-site employees, we will support the sound operation of the company and aim for sustainable growth.

  Audit

  Report Supervision

  Direction

  President & Representative Director

  Report

  Enterprise Risk Management Committee

  Inquiry Report

  Corporate departments Risk Management and Compliance Com

  2nd line: Monitor risk

  Audit

  Cooperate Three-way audits

  Audit

  Report / Consult Monitor / Support

  Audit

  Accounting Auditor

Board of Directors

• Identify and manage risks in daily operations ■ Design and maintain operational policies and processes

  • Take responsibility for the consequences of risks occurring

1st line: Risk owners (risk-taking and risk control)

Business departments and affiliated companies (including overseas subsidiaries)

• Monitor risks and risk management independently of business execution

• Provide risk management advice for business execution

• Design and maintain risk management system

• Provide reasonable assurance to the President & Representative Director regarding risk management and internal control functions (1st and 2nd lines) from a standpoint independent of business execution and risk management

3rd line: Provide assurance

Internal Audit Department

Audit & Supervisory Board Member

Supervision Direction

• Risk Management and Internal Control Promotion System

  CONTENTS

  Value Creation Story

  Message from Top Management

  Business Structure Reforms

  Human Capital / Human Capital Strategy

  Evolution of the Business Platform / Innovation Management

  Sustainability

  Corporate Governance

  Data Section

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  Risk Management and Internal Controls

  Enterprise Risk Management (ERM)

  We conduct our Enterprise Risk Management (ERM) while facilitating appropriate communication between our Enterprise Risk Management Committee and Risk Management and Compliance Committee. Based on discussions led by management, we will organize risks into (1) risk issues which require urgent response and (2) company-wide risks that require company-wide responses, and then confirm the status of responses to those risks. This will enable us to implement enterprise-level risk management that combines responses to risk issues with company-wide risk management activities.

  Enterprise Risk Management (ERM) Activity Cycle

  In our ERM, we use PDCA cycles to identify, evaluate, and respond to risks, and monitor and improve our responses, based on year-round risk management activities, which include both risk issue-based activities and activities that take into account the status of responses to company-wide risks.

  Risk Management and Compliance Committee Chairperson

Enterprise Risk Management Committee

Instruct Risk Management and Compliance Committee to discuss as a risk requiring company-wide response,

or

instruct response as an individual issue to be addressed immediately

Review and report on the selection and response status of company-wide risks, or

provide information on new risks arising due to changes in the environment

Risk Management and Compliance Committee

Secretariat: Risk Management Section, General Affairs Department

Requests for cooperation Report on response status and issues related to company-wide risk

Corporate departments

Economic Strategy Office, General Affairs Department

• Enterprise Risk Management Activities

  Corporate departments

Risk Management and Compliance Committee

Secretariat: Risk Management Section, General Affairs Department

Risk Management and Compliance Committee Chairperson

Business departments

Report on the status of responses to company-wide

The Risk Management and Compliance Committee, which is at the center of our ERM advancement activities, promotes Enterprise Risk Management while coordinating and observing the two PDCA cycles.

Crisis Management

In the Rules on How to Deal with a Crisis (approved by the President), our Company sets out policies for handling crises, how to determine crisis levels, communication systems, the establishment of task forces, and more. In the event of a crisis, we will implement prompt and appropriate measures and respond as an organization, with a clear chain of command, to minimize social impact and damage.

Approach to Economic Security Issues

Our group is closely monitoring the effects of heightened geopolitical risks and intensifying international power struggles on economic security, and is preparing and responding as necessary. As part of this, we are raising the level of crisis

Formulate/instruct risk management policy for next fiscal year

Support risk response implementation

P D

A C

Improvement

Monitor risk response status

Coordination

Identify/assess risks, formulate risk countermeasures

Implement risk countermeasures

P D

A C

Recognize risks, review risk countermeasures

Risk countermeasure implementation status Monitoring (secondary monitoring, primary self-inspection),

report monitoring results

• Enterprise Risk Management Activity Cycle

  Enterprise Risk Management Committee

Crisis Response Policy (Excerpt from Rules on How to Deal with a Crisis

1. Place top priority on safety of all people.

2. Minimize environmental impact.

3. Sincerely deal with a crisis all the time from the viewpoint of ordinary citizens.

4. Quickly disclose accurate information.

5. Retain Company's reliability by carrying out (1) through (4).

awareness among relevant personnel by having all relevant departments conduct training exercises that simulate various geopolitical risk incidents that could occur overseas, and developing comprehensive response measures to ensure employee safety, protect assets, maintain communications, and more.

Furthermore, we are strengthening measures against cyber-attacks and improving system defenses to ensure that we, as an operator of core infrastructure, can provide a stable supply of energy. We are also strengthening cooperation with relevant government ministries and agencies to both comply with laws and regulations and maintain our corporate value. Moving forward, we will bolster our risk assessment and response measures within the company and across the entire supply

chain, diversify our sources of essential raw materials, and

Risk assessment instructions

risks, and propose risks that require company-wide responses and individual issues to be addressed immediately

improve internal systems related to export control and the transfer of technology. Our group will continue to monitor trends in policy and international affairs, implement flexible and swift risk management responses, and contribute to strengthening Japan's economic security, with the aim of achieving both sustainability in business and international competitiveness.

Business departments

CONTENTS

Value Creation Story

Message from Top Management

Business Structure Reforms

Human Capital / Human Capital Strategy

Evolution of the Business Platform / Innovation Management

Sustainability

Corporate Governance

Data Section

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  Innovation Creation Activities

  Innovation management (research and development)

  Features and Advantages of Idemitsu Kosan's Research and Development

  History of our research laboratories

  We began industrialization research at the same time as our Tokuyama Refinery was completed in 1957, and have contributed to society through industrialization of polymer materials and catalysts. The Central Research Laboratory, established in 1970, took on the challenge of research and development of various materials, and ultimately created organic electroluminescence (EL) materials, which is the world's best blue light-emitting technology. We have steadily acquired technologies in areas ranging from materials development to process engineering. We are making maximum use of these technologies and expertise as core technologies to develop new businesses, including the development of solid electrolytes as key materials for next-generation batteries, innovative polycrystalline oxide semiconductors that contribute to increased sizes and reduced power consumption in displays, and more.

  Strengthening our systems for innovation creation

  To establish a system in which processes for internal and external collaboration toward social implementation can run at a more advanced level, we established the Innovation Center in July 2025. The Center consists of the Advanced Technology Research Laboratory, which promotes mid- to long-term research, the Innovation Strategy Department, which is responsible for creating R&D strategies, and the Intellectual Property Department, which handles intellectual property strategies. This new organization will serve as an innovation hub for the Group, and we will strengthen management to ensure steady R&D efforts even in uncertain environments.

  The Integrated Laboratory, which is scheduled for completion at the end of FY2027 and will consolidate most of our group's domestic research functions, will bring together technologies and expertise in R&D and accelerate co-creation. We will establish an integrated system covering everything from research and development for social implementation to process engineering

  and commercialization, thereby maximizing the technological capabilities of our group.

  New innovations from CVC

  Since 2019, we have been collecting knowledge about startups through investments in venture capital funds in Japan, the United States, and Europe. We established Idemitsu CVC in July 2024 as the next step. We are setting an investment budget of up to 10 billion yen over the three-year period leading up to 2026, and are promoting investment in and collaboration with startups with innovative technologies and business models. As data centers continue to expand to handle the surge in data communication volume and the increased importance of high-speed communication, at the end of FY 2024, we invested in NLM Photonics, a company developing materials for high-speed communication devices, to gain insights into market trends and technological innovations in the field of next-gener-ation communications.

  
  
  
• R&D contribution to social implementation toward realizing the Vision for 2050

  Blue

  Energy one step ahead

  Synthetic fuel/

  chemicals CCUS Idemitsu Green

• Overview of Idemitsu CVC initiatives

  (investment and support for collaborations)

  CVC investment of up to 10 billion yen (over three years)

  
  
  

  Service provision

  Smart Yorozuya

  (Diverse energy & mobility services)

  Blue ammonia

  hydrogen

  Open innovation

  Energy Pellets

  Diverse resource conservation/ circulation solutions

  	Innovative business models and technologies
  Business areas	Energy one step ahead Steady supply of many different types of eco-friendly CN energy	Diverse resource conservation and circulation solutions CN solutions for industrial activities and general consumers
  	Existing businesses
  Social themes		(e.g., battery-related materials)

  • Clean ammonia and hydrogen

  • Next-generation fuels (SAF and e-methanol)

  • Biomass development (raw materials and fuels)

  • Green chemicals and lubricants

  • Negative emissions

  • Bio/Life (e.g., bio-manufacturing)

  • Electrification

  • ICT

  SAF, biodiesel,

  Dispersed power

  MaaS

  Academia

  Crystallization and morphology control

  Core technologies Inorganic and organic catalysts

  SS

  Fundamental technologies

  Polymer synthesis

  
  
  
  
  

  Spin-out

  biochemical products, and lubricants

  Lithium battery materials

  Film formation

  Evaluation analysis

  MI Production

  AI process

  Sales channel

  Composite

  Asphalt

  EV recharging / maintenance

  Start-up

  Photoelectron control

  Additive formulation

  Molding

  Carve-out

  Environmentally friendly agricultural and livestock

  Ultra-compact JV

  EV

  Different SS types

  Resource circulation / recycling

  CVC

  implementation

  Lighter / reinforced mobility

  materials

  
  
  

  High-speed telecommunications / next-generation displays

  R&D at the Innovation Center

  Social implementation of businesses through the integration of fundamental technologies, core technologies, and open innovation

  CONTENTS

  Value Creation Story

  Message from Top Management

  Business Structure Reforms

  Human Capital / Human Capital Strategy

  Evolution of the Business Platform / Innovation Management

  Sustainability

  Corporate Governance

  Data Section

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Innovation Creation Activities

Toward Creating New Value and Businesses

Academia Collaboration

In the initial stages of R&D, which includes exploration and research that is key to creating new businesses, we proactively collaborate with external parties to work on open innovation.

Through the activities of the Idemitsu Kosan Collaborative Research Cluster for Advanced Materials, which we established at the Tokyo Institute of Technology (now known as the Institute of Science Tokyo) in FY2020, we promote the acquisition of technologies in the focus areas of advanced materials and CNX solutions together with the Institute of Science Tokyo. We also established a joint research department with Kobe University and started academic cooperation with the University of California, Santa Barbara, and other institutions. In addition, in 2024, we signed an agreement regarding comprehensive collaborative research with the University of Tokyo's Research Center for Advanced Science and Technology and the Institute of Industrial Science and started joint research with these institutions, aiming to develop

next-generation technologies in the field of carbon neutrality.

Driving MI / DX

We are working to accelerate R&D by spreading Materials

source software, which are essential for MI/DX. We are also building retrieval-augmented generation (RAG) technologies by integrating internal data and generative AI.

Creating New Businesses

1. Development of greenhouse gas fixation plant business using purple photosynthetic bacteria

   We have begun to collaborate with Symbiobe Inc., a start-up

   originating from Kyoto University, regarding CO₂ and N₂ fixation technologies using purple photosynthetic bacteria, which we began to study as a result of our activities to create new businesses. We are moving towards its commercialization.

   We aim to achieve the social implementation of technologies

   for fixation CO₂ and other greenhouse gases and the manufacturing of green biomaterials* by combining technologies related to photosynthetic microorganisms that are owned by Symbiobe Inc. with the process technologies for upscaling that we own.

   * Objects related to food or the field of the environment, among those manufactured by "biomanufacturing" that utilize the metabolism of microorganisms.

2. Development of solar cells for space use

The space industry market is expected to become one trillion dollars by 2040, and the market has been expanding rapidly. We are attempting to develop a solar cell for use in space using the solar cell technologies that we have cultivated to date.

In the high-radiation environment of space, existing solar cells degrade, which is an issue. The CIGS solar cells that we are developing have proven to be high radiation resistant. We will proceed with the development of these solar cells with our partners to implement this innovative technology.

Solar cells for use in space

Informatics (MI) and strengthening DX.

Reskilling: Across all research departments, we continue to implement and promote the sharing of in-house initiative examples, literacy improvement measures through workshops, and practical training on the use of data science and generative AI.

Development of DX solutions: We are accelerating the devel-

opment of solutions to key MI/DX issues related to each R&D theme, such as the digitalization of analysis technologies, by collaborating with domestic and overseas DX consulting firms.

Data science environment: We are building a companywide

cloud environment dedicated to data science that allows us to safely and flexibly leverage open databases and open

Analytical Technology Laboratory 1, Analytical Technology Center, Advanced Technology Research Laboratories

A. Hamano

The challenge of accelerating materials development with MI/DX cutting-edge technologies

I feel that one of our major strengths in R&D is that researchers in each department who are deeply knowledgeable about materials, independently implement and utilize MI. This has been made possible through reskilling initiatives driven by the Innovation Strategy Department and Advanced Technology Research Laboratories.

As a member of the Laboratories, I am exploring how to apply cutting-edge technologies such as quantum computing, which is expected to be the next breakthrough following MI. In addition to understanding the materials, I have occasionally developed unique techniques to suit each theme. In my fourth year at the company, I participated in a three-week training program at a consulting firm in North America to enhance my skills. I collaborated with local engineers and researchers to establish a technology that leverages generative AI to design synthesizable molecules with desired physical properties. Although this field remains uncharted and presents many challenges, I remain committed to reaching the frontier to further accelerate material development.

CONTENTS

Value Creation Story

Message from Top Management

Business Structure Reforms

Human Capital / Human Capital Strategy

Evolution of the Business Platform / Innovation Management

Sustainability

Corporate Governance

Data Section

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  Intellectual Property Activities

  Innovation management (intellectual property activities)

  Overview of Our Intellectual Property Activities in FY2024

  We are reforming our business portfolio based on the Medium-term Management Plan. As intellectual property (IP), which is an intangible asset, plays an essential role in the implementation of these reforms, we are further expanding the utilization of our intellectual property portfolio.

  Specifically, we are analyzing the internal and external environment using the IP Landscape approach, and providing the analysis results to relevant parties in business departments and researchers in the early phases of activities, such as the business planning phase. Through this, we are ascertaining the areas that need to be strengthened in existing businesses and examining the directions of new businesses, while promoting the transformation of our business portfolio.

  IP Governance Structure

  Our intellectual property governance integrates company-wide policies with on-site needs by linking the Intellectual Property Department and business departments to address both corporate issues for the entire company, and issues

  specific to each business department. Through this, we are establishing an effective intellectual property structure that contributes to the growth of Company businesses. We have also recently been working to build a system that incorporates items of concern from the perspective of intellectual property into our responses to economic security issues related to our business.

  Advancement of IP Activities

  Contributing to increased corporate value through IP To maximize corporate value, our company is strategically utilizing intellectual property in a way that advances IP creation and protection through various innovations to secure a com-

  petitive advantage in each business area.

  Specifically, in the Functional Materials and Petroleum segments, we provide business departments with intellectual property information related to alliance partners at an early stage, which makes it easier to select partners that complement our businesses well and increase the likelihood of business success.

  Human Resources Development

  We are also focusing our energy on developing human resources who can utilize intellectual property in management and use it as a tool to enhance our corporate value. In FY2024, we focused on strengthening our internal intellectual property education program and spreading awareness of intellectual property activities among all employees. Specifically, we invited external experts on a regular basis for IP study sessions aimed at managers of business departments, as a way to deepen their understanding of why intellectual property is important and how to utilize it.

  We are also leveraging our system for experience in a secondary job in-house to provide opportunities for non intellectual property departments employees to learn about methods for analyzing and utilizing IP information. In particular, we are working to use such opportunities to improve IP literacy in all employees by ensuring administrative staff have basic knowledge of intellectual property, as well as familiarity with the situation of our and other companies based on the analysis of IP information.

  We are furthermore promoting personnel exchanges with departments not directly involved in intellectual property activities to strengthen systems for sharing information and cooperating in IP-related areas. This creates an environment in which each department can make strategic decisions using intellectual property.

  Intellectual Asset Management: building and promoting a sustainable business model that also utilizes intellectual assets (intellectual property and intangible assets)

  Management

  Company-wide management support (compliance with corporate governance code)

  Business departments

  Support for creating new businesses

  Creation of new themes

  External collaborations (M&A, alliances)

  Support for strengthening existing businesses

  Acquisition/utilization of rights

  Handling rights of other companies (licensing/consulting)

  Enhancing corporate value through disclosure of intellectual assets

  Intellectual Property Department

  Disclosure of the status of intellectual asset management

  External stakeholders

  
  
  

  Vietnam Business Development Department

  Administration & Financial Coordination Section

  C. Kamada

  Reaffirming the potential to enhance corporate value by utilizing IP through a secondary job in-house

  
  
  

  Inspired by Idemitsu's past achievement of receiving the Imperial Invention Prize and the recent

  media focus on intellectual property, I decided to apply for the in-house secondary job program to deepen my understanding of our company's intellectual property. Since the fuel oil business accounts for the majority of our sales, I had been under the impression that it would be difficult to strategically utilize intellectual property at our company. However, when I compared case studies with those of other companies, I realized that our company's strategic use of IP is on par with others. The fuel busi-ness's high profit enables us to expand our business and to steadily develop technologies in other areas, and I realized that IP strategies built within this environment will lead to future increases in corporate value. I think that as more of my colleagues learn how to utilize IP through the in-house secondary job program, IP will be used more extensively in business management, including investment and financing decisions, which in turn will enable us to create even more value.

  CONTENTS

  Value Creation Story

  Message from Top Management

  Business Structure Reforms

  Human Capital / Human Capital Strategy

  Evolution of the Business Platform / Innovation Management

  Sustainability

  Corporate Governance

  Data Section

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  Intellectual Property Activities

  Number of Patent Applications and Registered Patents Held

  Looking at patent applications and registered patents by business segment within our group, applications in the Functional Materials segment, which consists of technology-driven business departments, account for the majority of applications. Although the number of patent applications has been declining since 2022, the number of registered patents held has increased.

  This is due to our focus on improving the quality of our intellectual property rights rather than the quantity, which we achieve by strengthening the open & closed strategy we have been promoting for some time, and executing strategies for filing patent applications in line with our business development.

• Trends in the number of patent applications (published applications)

  (No.) ■ Japan Functional Materials Segment ■ Japan Others Segment

  300 ■ Overseas Functional Materials Segment ■ Overseas OthersSegment

  12

  42

  16

  26

  6

  124

  125

  153

  150

  182

  204

  
  
  

  47

  200

  100

  0

  Japan Overseas Japan Overseas Japan Overseas

  FY2022 FY2023 FY2024

• Trends in the number of patents held

  • Japan Functional Materials Segment ■ Japan Others Segment

    Protection and utilization of IP related to new businesses
    
    

    To advance the business portfolio transformation outlined in our current Medium-term Management Plan, one of our most important intellectual property activities is enhancing our intellectual property portfolio related to new businesses.

    
    
    

    The figure below shows the distribution of published and registered inventions related to our priority businesses of next-generation fuels, lithium battery materials, and solar cells for use in space. Looking at the lithium battery materials business, the number of areas where patent applications are concentrated is much higher in 2024 (the red broken-line box) than in 2014, which is when we started our joint venture with Toyota Motor Corporation. The same applies to the business areas of next-generation fuels and solar cells for use in space. By concentrating our patent applications in our Company's key technological areas and securing the rights thereto, we are protecting our unique technologies and ensuring a competitive advantage, which helps advance commercialization and increases the likelihood of business success.

    WEB

    Idemitsu Kosan-Toyota Motor Corporation joint press conference (video, around 9:10) (Japanese only)

    FY2014

• Comparison of patents (disclosed and registered): FY2014 vs. FY2024

  FY2024

  Protection and utilization of IP related to solar cells for use in space

  Taking solar cells for use in space as a specific example of our innovation creation activities, we are protecting our technologies through a two-part approach. First, we are reviewing the intellectual property related to materials and manufacturing processes accumulated from the development of our ground-based solar cells along with our group member Solar Frontier, and selecting and utilizing the technologies that can be applied to space environments. Meanwhile, we are strategically filing patents for new technologies that address challenges unique to space, such as radiation resistance, to strengthen our portfolio in terms of both quality and quantity.

  We evaluated these patents using the LexisNexis® analysis tool PatentSight®, and the Patent Asset Index (PAI), which is an important indicator, has been improving year by year, reaching a record high in FY2024.

  We will continue to collaborate with our R&D departments to acquire, utilize, and enforce our intellectual property rights to commercialize our space solar cell business and improve our competitiveness.

• Trends in number of patents held and PAI trends in solar cells for use in space

  (No.)

  40

  (No.)

  4,000

  3,000

  2,000

  1,000

• Overseas Functional Materials Segment ■ Overseas Others Segment

  30

  20

  10 15 18 20

  32

  21 22 24

  105

  96

  78

  354

  343

  349

  3,494 3,503

  3,713

  1,621 1,599 1,635

  
  
  

  0

  Japan Overseas Japan Overseas Japan Overseas

  0

  2018

  2019

  2020

  2021

  2022

  2023

  2024 (FY)

  FY2022 FY2023 FY2024

  Solid electrolytes Next-generation fuels Solar cells for use in space
  
  

  • Number of patents held by Idemitsu Group PAI