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Shionogi Environmental Report

Contents

1

2

3

4

6

14

15

16

17

18

19

19

8

9

9

10

11

11

12

13

Editorial Policy and Scope of the Report

Editorial Policy

Period Under Review

Scope of the Report

This environmental report, prepared in accordance with the Ministry of Environment’s Guidelines for Environmental Reports (Fiscal 2000 Edition). Beginning this year, we have started to compile this report to publicize how the range of our business activities from upstream to downstream impacts upon the environment.

Fiscal 2002 (April 1, 2002-March 31, 2003)This information includes some activities in fiscal 2003.

This report is based on the business operations of Shionogi & Co., Ltd. and eight domestic and overseas subsidiaries. Shionogi & Co., Ltd. is referred to as Shionogi, and with subsidiaries as the Shionogi Group.(Scope of subsidiaries covers three domestic subsidiaries with manufacturing facilities (from a total of 11 domestic subsidiaries), two on-site affiliates, and three overseas subsidiaries with manufacturing facilities (from a total of nine overseas subsidiaries).)

R&D and Manufacturing Sites of Shionogi & Co., Ltd.Kanegasaki PlantSettsu PlantKuise PlantAkoh Plant

Shionogi Research Laboratories Developmental Research LaboratoriesAburahi LaboratoriesShionogi Distribution Center

Bushu Pharmaceuticals Ltd.Nichia Pharmaceutical Industries Ltd.Shionogi Qualicaps Co., Ltd.Shionogi Buturyuu Service & Co., Ltd.Shionogi Engineering Service Co., Ltd.

Domestic SubsidiariesTaiwan Shionogi & Co., Ltd.Shionogi Qualicaps, Inc.Shionogi Qualicaps, S.A.

Overseas Subsidiaries

Note: The following businesses were transferred to newly established joint ventures (outside the scope of consolidation) to strengthen our management foundations.

The activities of these businesses will no longer be covered in this environmental report.

Animal Health Products Business

Clinical Testing Services Business

Transferred in April 2002

Transferred in April 2002

Business transferred to new joint venture established with Boehringer Ingelheim GmbH.

Business transferred to new joint venture established with SRL Co., Ltd.

Corporate Profile

Message from the Management

Shionogi’s Policy

Shionogi’s Business and the Environment

Shionogi’s Environmental Objectives, Targets, and Results

Shionogi’s EMS

Environmental Management

Environmental Audit

Environmental Education/Awareness

Emergency Response and Preparation

Compliance with Environmental Laws and Regulations

Communication with Society

Activities Upstream of the Operational Area

Green Purchasing

Activities within the Operational Areas

Waste Reduction

Prevention of Global Warming

Appropriate Control of Chemical Substances

Environmental Activities to Preserve Air and Water

Environmental Conservation at Offices

Activities Downstream of the Operational Areas

Reducing Environmental Impact of Packages

Reducing Environmental Impact in Regards to Medical Representative Activities

Chapter 1 Outline

Chapter 4 Environmental Accounting

Chapter 5 Shionogi’s Main Sites and Their Environmental Data

Chapter 6 Environmental Management Activities of Subsidiaries

Chapter 2 Environmental Management System (EMS)

Chapter 3 Environmental Performance to Reduce Environmental Impacts

Third Party Opinion

Environmental Management Timeline

32

34

20

23

30

Pharmaceutical and related business

Prescription pharmaceuticals

OTC & non-pharmaceutical products

Diagnostics

Capsule business

Industrial chemicals

Real estate rental and other services

Total

Production

147,420

136,707

8,004

2,709

12,060

1,267

－－

160,747

268,382

252,807

11,990

3,585

11,859

2,229

2,760

285,231

Sales

●

●

●

●

●

● ● ●

●

●

●

● ●

●

Key Management Indicators

Fiscal 2002 Production and Sales Results (Consolidated)

Net Sales Ordinary Income / Net Income Number of Employees

0

100,000

200,000

300,000

400,280372,167

412,663 420,1889,169

6,149

400,000

500,000

19991998 2000 2001 2002 2002 20021999 2000 20010

5,000

10,000

15,000

20,000

25,000

30,000

0

2,000

4,000

6,000

8,000

10,000

285,231

9,862 9,579

1

220,743216,747 215,894 206,403 191,155

5,718 5,5404,744

5,237

Non-consolidatedOrdinary incomeNet income

ConsolidatedConsolidated

Non-consolidatedNon-consolidated

●

Head Office

Tokyo Branch Office

Nagoya Branch Office

Shionogi’s over-the counter (OTC) products

Sapporo Branch Office

Head OfficeFukuokaBranch Office

19991998 2000 2001

12,868 12,614 8,456 5,904

26,58124,967

15,65818,098

15,019

3,45610,63911,95813,475

17,663

24,11726,404

9,807

26,402

9,706

25,318

①②⑤

③

⑨

⑥

⑦ ④ ⑧

⑬ ⑫

⑪

⑩

(Millions of yen) (Millions of yen) (Employees)

(Millions of yen)

(FY) (FY)(FY)

Chapter 1

Outline

Corporate Profile (As of March 31, 2003)

Company nameFoundedPaid-in capitalBusinessesHead Office

IncorporatedNumber of employees

June 5, 1919

4,744

SHIONOGI & CO., LTD.

March 17, 1878

¥21,279 million

Manufacture and sale of pharmaceuticals, diagnostics, and industrial chemicals. (as of April 1, 2003)

1-8, Doshomachi 3-chome, Chuo-ku, Osaka 541-0045, Japan Telephone: +81-6-6202-2161

Main Business Sites and Consolidated SubsidiariesBusiness Sites Consolidated Subsidiaries (20 Companies)

Head Office / Branch OfficeHead OfficeTokyo Branch OfficeNagoya Branch OfficeFukuoka Branch OfficeSapporo Branch Office

Distribution CenterShionogi Distribution CenterShionogi Tokyo Distribution CenterShionogi Sapporo Distribution Center

Domestic (11 companies)Shionogi Qualicaps Co., Ltd.Bushu Pharmaceuticals Ltd.Nichia Pharmaceutical Industries Ltd.Shionogi Engineering Service & Co., Ltd.Shionogi Buturyuu Service & Co., Ltd.Shionogi General Service Co., Ltd.Soei Co., Ltd.Daiwa Trading Co., Ltd.Saishin Igaku Co., Ltd.(and two other companies)

⑩ ⑨ ⑧

Overseas (9 companies)Taiwan Shionogi & Co., Ltd.Shionogi Europe B.V. Shionogi Qualicaps, Inc.Shionogi Qualicaps, S.A.Shionogi USA, Inc. SG Holding, Inc. (and three other companies)

⑬ ⑫

⑪ PlantKuise PlantSettsu PlantKanegasaki PlantAkoh Plant ⑦

⑥

④ ⑤

R&DShionogi Research LaboratoriesDevelopmental Research LaboratoriesAburahi Laboratories

② ③

①

ConsolidatedNon-consolidatedConsolidated

Business segment

2

Message from the Management

The realization of a socioeconomic system that incorporates both environmental conservation and sustainable economic development has been a common objective for the international community since the Rio Summit in 1992. Implementing such a system will enable future generations to benefit from an improved global environment and its available resources. To reinforce and implement its commitment to this international understanding, the Japanese Government has underlined its strategy of focusing on the effective utilization of resources; the prevention of global warming; the control of hazardous chemical emissions; and the requirement that businesses strengthen their efforts to improve the environment. The pharmaceutical industry’s impact on the environment is relatively lower than that of other industries. Even though multiple chemical substances are used, actual emissions are minimal. Nevertheless, Shionogi is wholeheartedly committed to reducing emissions in our production activities. Based on the understanding that environmental conservation is an essential management consideration alongside the maintenance of high quality products, we established the Shionogi Charter for Good Behavior and Shionogi’s Basic Environmental Policy to clarify guidelines related to efforts to reduce the environmental impact of our business activities. All of Shionogi’s manufacturing and research sites, and three domestic manufacturing subsidiaries, have obtained ISO 14001 certification, so our group companies can implement environmental conservation activities that are based on common standards. We have also requested our overseas manufacturing subsidiaries to establish systems for environmental management, as well as to provide plans for activities to preserve the environment. As a result, we have reduced the quantity of chemical substances released into the atmosphere through the strengthening of our chemical substance management, and we have reduced the amount of waste disposal through effective use of resources. Energy has been consumed more efficiently through our use of a cogeneration system. We have also continued our efforts to reduce the environmental impact of market-distributed product packaging materials. To establish a strong presence both domestically and internationally, we understand that implementing a management style that incorporates the environment is an important issue. As part of such environmental management efforts, we intend to disclose our environmental conservation efforts for the sake of transparency, and we will continue to communicate with representatives from every sector of society. Our environmental report for this year contains third party opinion to further ensure objectivity. We are open and receptive to your sincere opinions regarding Shionogi's understanding of and actions on behalf of environmental conservation.

Motozo ShionoPresident

Takashi MaedaExecutive Vice-President, Director in Charge of the Environment

Chapter 1 Outline

3

Shionogi’s Policy

Shionogi Charter for Good Behavior (Excerpt) (established in 1998)

Company Policy of Shionogi (Excerpt) (established in 1957)

With its company policy of “striving constantly to provide medicine of the best possible kind essential for protection of the health of the people,” Shionogi is keenly aware that a company is also a member of society. As such, Shionogi will contribute to a richer society by placing priority on environmental protection, pollution prevention and human safety in its pharmaceutical-related business activities.

1. Environmental Management System Shionogi will promote high-quality environmental protection activities by assigning a director in charge of the environment and clarifying organizational responsibilities and authority for environmental management.

2. Compliance with Laws and Regulations Shionogi will work to protect the environment by complying with national and local environmental regulations as well as setting voluntary management standards.

3. Reduction of Environmental ImpactIn its research and development, manufacturing, distribution, marketing and other business activities, Shionogi will set and periodically revise targets in areas such as energy and resource conservation, waste reduction and strengthening management of chemical substances, striving for continuous improvement.

4. Education and Training Shionogi will raise the awareness of all employees toward environmental protection by conducting environmental education and training and providing environment-related information.

5. Coexistence with Society From its standpoint as a corporate citizen, Shionogi will cooperate in environmental protection activities of regional communities. In addition, we will disclose our environmental information to promote mutual understanding with society.

6. Disclosure of Our Basic Environmental Policy Shionogi’s Basic Environmental Policy will be disclosed both inside and outside the company.

Shionogi’s Basic Environmental Policy

Motozo ShionoPresident Shionogi & Co., Ltd.

1. Behavior as Corporate Citizen Shionogi observes laws, rules and regulations of every country in which it operates and follows their social standards such as ethics and morality, and contributes to the development of such countries respecting their respective culture and customs.Shionogi endeavors to decrease burdens on the environment in every business, and contributes to the preservation and improvement of the global environment.

2. Behavior as Pharmaceutical Company Shionogi ensures the stable supply of high quality drugs which have excellent effects and safety profile.

■Shionogi’s purpose:SHIONOGI strives constantly to provide medicine of the best possible kind essential for protection of the health of the people.

Shionogi & Co., Ltd. has followed a corporate mission of continually providing the superior medicines essential to people’s health. Shionogi intends to progress in the twenty-first century based on the aforementioned policy. We also intend to enable people everywhere to receive superior-quality pharmaceuticals as necessary, which is based on our outstanding track record cultivated through high levels of ethics and trust. To accomplish this, we are striving to make our operations more sophisticated, more efficient, and more global in all fields, ranging from research and development to marketing. We will make the best possible effort to establish an even higher level of trust, aiming to become a corporation with a strong presence worldwide.

1.

2.

3.

Revised on September 1, 2001

Waste generated

Landfill

Chemical substances

4

Shionogi’s Business and the Environment

Chemical Substances＊ WaterEnergy

117,062

11,872

7,935,000

3,781

192

MWh

k

m3

ｋ

ｋ

4,756

m3

tons

tons

tons

Atmospheric Emission Discharge intoNatural WaterwaysAmount of Waste

CO2

SOx

NOx

Chemical substances

5,987

52

401

93,514

18

22

255

tons-CO2

tons

tons

tons

tons

tons

tons

1,298,000

23

4

Wastewater

BOD

Chemical substances

766,000

1,262,000

154,000

m3

m3

m3

Public water

Industrial water

Groundwater

Research andDevelopment

Manufacturing

INPUT OUTPUT INPUTElectricity / Fuel oil A / Water / Chemical substances / Office supplies

Basic Research /Original Exploration

Related to Medical Products

Preclinical Test Clinical Trial Application for Approval

Research of Manufacturing

Method

Production of Bulk Pharmaceuticals

Formulation of Drug Product

CO2 / NOx / Wastewater / Waste Electricity / Fuel oil A / Water /Chemical substances / Office supplies

Quantity consumed

OUTPUT

INPUT

Electricity

Fuel oil A

City Gas

Gasoline

Diesel oil

Chapter 1 Outline

Shionogi’s business is related to the research, production, and sale of pharmaceuticals, diagnostic drug products, and industrial chemicals. The primary forms of environmental impact stem from workplace activities including CO2 emissions related to energy consumption; the emission of chemical substances resulting from the research and production of pharmaceuticals; and the waste disposal of incoming containers and packaging materials. From our downstream business, the primary forms of environmental impact include air pollution produced from commercial vehicles, as well as the waste disposal of containers and packaging materials from hospitals and patients.

5

Packages

159

1,098

814

tons

tons

tons

Office/Sales

INPUT OUTPUTOUTPUT

Packaging InspectionOffice Work / Medical Representative Activities

CO2 / NOx / Wastewater / Waste Electricity / Water / Gasoline / Office supplies

CO2 / Car exhaust / Waste / Wastewater

All Industry Types as Objects of Survey 483,700,000

2,180,000

19,200,000

19,200

280,611

2,703

CO2 emissions

t-CO2Section

Waste disposal

tons

PRTR＊ substancesemission

Source) Total amount of CO2 emissions and waste disposal are cited from the results of the Fifth Follow-up Survey of Keidanren Voluntary Action Plan (released in May 2003). Amount of PRTR substances emission is cited from a material released by the Ministry of the Environment (PRTR outline in fiscal 2001).

Hospitals Pharmacies

Glass

Plastic

Paper

Reference Data

＊ Chemical substances to be controlled by Shionogi. ＊ PRTR: Refer to page 16.

Pharmaceutical Industry as Objects of Survey

tons

6

Chapter 1 Outline

Shionogi’s Environmental Objectives, Targets, and Results

＊ Quantitative targets for CO2 emission are set in prospect of future progress in reseach and development, manufacturing, etc.

● Issue 2002 Environmental Report● Revise environment section of website11. Disclose environmental information

10. Contribute to society

9. Expand green purchasing

8. Implement environmental accounting

7. Carry out product Life Cycle Assessment

6. Work toward ISO 14001 certification

5. Expand environmental impact assessments

4. Strengthen system for evaluating safety of chemical substances

3. Strengthen management of chemical substances

2. Implement measures to counter global warming＊

1. Strengthen waste reduction measures

Targets of Phase 2 of Environmental Protection Plan (Fiscal 2000-2004)

● Limit volume of waste generated to benchmark year level (8,590 tons)

● Increase waste recycling volume by 200%(over three times benchmark year level of 5,810 tons)

● Reduce waste sent to landfills by 90%(landfill waste volume of 107 tons or less)

● Work toward zero emission of landfill waste at all business sites

● Reduce CO2 emissions to benchmark year level (109,630 t-CO2)

●Determine and reduce amount of hazardous chemical substances used, emitted, and transferred

● Reduce storage of specific Chlorofluorocarbons (CFCs) by 50%, and totally eliminate them by fiscal 2010 (benchmark year volume： 12,807 kg)

● Set and maintain voluntary standards for release of substances into atmosphere, water, soil, and underground water

● Promote interaction with local communities

● Volume generated: less than 6,894 tons

● Promote operations based on green purchasing policy● Expand purchase of eco-friendly office supplies

● Conduct surveys for environmental accounting system

● Continue with identification labels on packaging and containers of OTC and prescription pharmaceuticals

● Strengthen internal environmental auditing

● Review key management operations

● Survey examples and verify causes of accidents outside the company

● Review safety and hygiene management policies● Prepare procedural manual for safety assessment in pilot

manufacturing that takes the environment into account

● Review voluntary management targets for wastewater

● 32% reduction(storage volume: 7,786 kg)

● Improve accuracy in calculating material balance

● 98,173 t-CO2

● Continuation of zero emission at Kanegasaki Plant and Developmental Research Laboratories

● 92% reduction(landfill volume: 83 tons)

● 180% increase(recycled volume: 5,419 tons)

Fiscal 2002 Targets

Shionogi has established Phase 2 of the Company-Wide Environmental Protection Plan (for fiscal 2000-2004), and it is working to achieve these objectives. Through the utilization of quantitative targets for objectives related to energy, waste materials, and harmful air pollutants stated in the Environmental Voluntary Action Plan of such agencies as the Japan Pharmaceutical Manufacturers Association and Nippon Keidanren, Shionogi set stricter standards related to the achievement of its objectives. In addition, for fiscal 2003, Shionogi set even higher objectives for quantitative targets already achieved.

7

Fiscal 1990 is used as the benchmark year for numerical targets. Evaluation (○=100% or higher; △=70% or higher; ×=under 70%)

● Issue 2003 Environmental Report (Japanese/English)

● Revise environment section of website

● Issued 2002 Environmental Report (Japanese/English) September 2002

● Revised environment section of website

● Participated in local cleaning activities at each business site

● Volume generated: 5,845 tons

● Promote interaction with local communities

● Promote operations based on Green Purchasing Policy

● Expand purchase of eco-friendly office supplies

● Report environmental accounting data in more detail

● Continuation of measures related to the use of containersand packaging materials in consideration of the environment

● Strengthen internal environmental auditing

● Review key management operations(Implementation based on the ISO 14001 system)

● Review safety and hygiene management policies(inclusion of safety assessment for chemical processes)

● Continuation of soil analysis(Kanegasaki Plant)


● Reduce dichloromethane emission to atmosphere

● 94,601 t-CO2

● Achieved at Settsu Plant and Shionogi Research Laboratories

● 99% reduction(landfill volume: 10.2 tons)


20-21

14

14

14

15

19

13

12

－－

－－

－－

9

16

16

15

17-18

Fiscal 2003 Targets

● Volume generated: 5,987 tons

● Set Green Purchasing Policy● Conducted surveys on environmental measures of suppliers● Expanded purchase of eco-friendly office supplies

● Worked on surveys and inspections to increase systemization through internal effort

● Established printing system to indicate packaging materials on all products.

● Implemented internal environmental auditing twice● Implemented training to increase the ability of 55 personnel

involved in internal environmental auditing

● Implemented pre-assessment operations related to the dismantling of buildings● Implemented revisions to key management operations

● Completed survey of examples and verified causes of accidents outside the company (Kuise Plant)

● In process of revising safety and hygiene management policies (Kuise Plant)

● Preparation of safety assessment manual for pilot manufacturing that includes methods to assess environmental impact is in progress. Completion of this is expected in fiscal 2003 (Kuise Plant)

● Revised voluntary management targets for wastewater


● Revised regulations for managing chemical substances and standardized the calculation method among business sites

● 93,514 t-CO2

● Continuously achieved zero emission at Kanegasaki Plant and Development Research Laboratories

● Achieved zero emission at Aburahi Laboratories

● 95% reduction(landfill volume: 52 tons)


RelatedPagesEvaluationFiscal 2002 Results

○ △ ○ ○ ○ ○ ○ △ ○ ○ ○ ○ △ ○ ○ ○

8

Chapter 2

Up to now, we have put a high priority on building up the organizational system of our manufacturing sector, R&D sector, and domestic subsidiaries related to manufacturing. From fiscal 2001 we focused on re-invigorating our Sales Division activities. Domestic subsidiaries have set up their own environmental committees, and they have also participated in the Shionogi Group Central Environmental Committee, and we have set up a system for promoting activities for the Group as a whole. Through an environmental audit of our major overseas manufacturing companies, we have been requesting and guiding them in regard to activities that will keep pace with those of the Group.

President

EnvironmentalManagement Committee(Committee of Persons in

Charge of Implementation)

Shionogi GroupCentral Environmental

CommitteeShionogi CentralEnvironmental

Committee

Environmental Supervisor

(Director in Charge ofthe Environment)

Environmental ManagementSupervisor

(Manager of EnvironmentalManagement Unit)

Environmental Management System (EMS)

Shionogi’s EMS

Head Office &Branch Office

Subsidiaries

Head OfficeTokyo Branch OfficeNagoya Branch OfficeFukuoka Branch OfficeSapporo Branch Office

ManufacturingDivisionKuise PlantSettsu PlantKanegasaki PlantAkoh Plant

Pharmaceutical Research & Development DivisionShionogi Research LaboratoriesDevelopmental Research LaboratoriesAburahi Laboratories

On-site SubsidiariesShionogi Engineering Service Co., Ltd.Shionogi Buturyuu Service & Co., Ltd.

Domestic SubsidiariesBushu Pharmaceuticals Ltd.Nichia Pharmaceutical Industries Ltd.Shionogi Qualicaps Co.,Ltd.

Overseas SubsidiariesTaiwan Shionogi & Co., Ltd.Shionogi Qualicaps, Inc.Shionogi Qualicaps, S.A.

Corporate ExecutiveCommittee

9

The Shionogi Group continues the Environmental Management System based on ISO 14001, an international standards of environmental management system. Previously seven business sites related to R&D and manufacturing and five major domestic subsidiaries obtained ISO 14001 certification.

We undertake three kinds of environmental audit:・ an audit conducted by an in-house environmental auditing team based on the ISO 14001 Management System, ・ an external organization-conducted conservation assessment, which is an outsourced environmental audit at plants and research facilities, ・ an environmental audit focusing on all of our business sites and domestic/overseas subsidiaries undertaken by the Environmental Management Unit.

Results of Environmental Audit for Fiscal 2002・In-House Environmental Audit Undertaken by the In-House Environmental Audit Team

Our system audit and compliance audit were undertaken twice, in July and in December of 2002. We observed no serious deficiencies. We noted a substantial reduction in minor deficiencies, from 41 incidents in July to 31 incidents in December, and in points of observation, from 130 in July to 81 in December. Although there was a minor deficiency in the signs used for waste material storage locations, we confirmed compliance with laws and regulations.

・External Organization-conducted Conservation AssessmentOur audit, which was undertaken by an external organization to confirm the status of the application of the ISO 14001 Management System, determined that standards are being complied with.

・Environmental Audit Undertaken by the Environmental Management Unit We investigated the operations of Bushu Pharmaceuticals, Ltd., Nichia Pharmaceutical Industries, Ltd., Shionogi Qualicaps Co., Ltd., and Taiwan Shionogi & Co., Ltd. The former three domestic subsidiaries have obtained ISO 14001 certification, and we confirmed that each has achieved environmental improvements without serious deficiencies. We observed no major problems with Taiwan Shionogi & Co., Ltd.

Environmental Audit

Shionogi

On-site Subsidiaries

Domestic Subsidiaries


Akoh Plant

Kanegasaki Plant*, Settsu Plant*, Kuise Plant*,

Shionogi Research Laboratories*,

Developmental Research Laboratories*,

Aburahi Laboratories*

Head Office / Branch Offices

Shionogi Engineering Service Co., Ltd.*

Shionogi Buturyuu Service & Co., Ltd.*

Shionogi General Service Co., Ltd.

Nichia Pharmaceutical Industries Ltd.

Bushu Pharmaceuticals Ltd.

Shionogi Qualicaps Co., Ltd.

Taiwan Shionogi & Co., Ltd.

Shionogi Qualicaps, Inc.

Shionogi Qualicaps, S.A.

Obtained ISO 14001 certification


Management system


Management system




Management system

Management system

Management system

May 1999

March 2002

March 2002

November 2001

December 2001

Six business sites and two on-site subsidiaries

ISO 14001 certificationregistration card

Akoh Plant

Environmental audit at Taiwan Shionogi & Co., Ltd.ISO 14001 follow-up audit by TV conference

＊ Shionogi’s six business sites and two on-site subsidiaries obtained ISO 14001 certification at one time.

Environmental Management

Business siteCompany Management system Date of introduction

10

Chapter 2 Environmental Management System

To promote environmental management activities company-wide, we believe that each employee must recognize the importance of implementing environmental activities. To reduce environmental impact in all business areas, we developed activities to promote environment-related education/awareness, such as the Environmental Awareness and General Environmental Education programs, which increase employees’ environmental knowledge and awareness. We also developed Specialized Environmental Education, a program designed to train experts in the environmental field.

Scope and Summary of Environmental Awareness/Education

We undertake annual environment-related training for new employees and for Medical Representatives (MRs) who visit medical institutions. We are making efforts to increase environmental awareness and ensuring that those efforts are made.

General Environmental Education

By providing education for personnel involved with in-house environmental auditing, we are trying to improve their knowledge and auditing capabilities. We are also providing a summary of the latest trends related to environmental regulations to members of the Environmental Management Implementation Committees, who oversee environmental activities at each site, to achieve total environmental compliance. We are further undertaking specialized environmental training when it is needed at each site and department.

Specialized Environmental Education

Classification Name Summary

Medical Representative training materials

Environmental Management Unit Website

In-house newsletter (Environmental column)

Introduction of internal/external trends related to the environment

Explanation of our company’s efforts

Explanation of latest trends and our company’s environment-related efforts

Synopsis of the environment and explanation of company’s efforts

Explanation of latest trends and our company’s environment-related efforts

Training and advanced proficiency of personnel for the In-House Environmental Audit

Training and advanced proficiency of chief personnelin charge of the In-House Environmental Audit

Summary of latest trends relative to environmental laws and regulations

In-House Newsletter (Environmental column)

2002 Environmental Report

Environmental Management Unit Website

Environmental Education for New Employees

Environmental Education for Medical Representatives

Training of Personnel for the In-House Environmental Audit

Training of Personnel In Charge of the In-House Environmental Audit

Training of Personnel in the Environmental Management Implementation Committees

Environmental Education/Awareness

Specialized Environmental Education

General EnvironmentalEducation

EnvironmentalAwareness

11

We are seeking to obtain total compliance, for example, of laws and ordinances as well as ethical actions, with all employees. In connection with this, in July 2002, we published and distributed the “Shionogi Compliance Handbook” to all employees and held a briefing.

At the Akoh Plant, we experienced a problem with an application for the installation of specific facilities in connection with pollution-related laws and regulations. We did not receive any demands for the payment of charges or fines related to environmental laws or regulations.

Areas neighboring various sites filed the following complaints. We made efforts to rapidly deal with each complaint and to prevent their reoccurrence.

Violation of Environmental Laws and Regulations

We have established preventive measures for possible emergency situations, and we have also established emergency procedures and communication to minimize the environmental impact of any emergency. In addition, we conduct drills regularly based on annual drill plans.

Cases of Environment-related Complaints

Aburahi Laboratories

Firefighting drill (Aburahi Laboratories)

Compliance handbook Compliance seminar

Examples of Training

・ Training for a potential explosion or fire due to abnormal reaction (Kuise Plant)

・ Training for incidences of gas rupture, fire, among other things, caused by earthquakes (Settsu, Kanegasaki Plants)

・ Firefighting drill (Developmental Research Laboratories, Aburahi Laboratories)

Emergency Response and Preparation

Compliance with Environmental Laws and Regulations

Site Complaints Our responses

Weeding methods at the Musashiyama Research Farm

Noise from a construction project on non-operation days and early morning hours

It was confirmed that a Shionogi-appointed contractor entrusted with weeding operations decided to disseminate agricultural chemicals. We instructed that herbicides not be used in the future. When their use is absolutely necessary, we must be consulted first.

We made no self-assessment of this small-scale construction project. To ensure that such an assessment takes place, we used part of the construction plan document to confirm prospective impact to the environment.

We made inquiries to police stations and substations regarding the insect-deterring light trap, and we confirmed that there were no problems related to traffic safety. We will investigate the period when the light is on, but the installation of a shading plate or similar countermeasure has not been implemented with the consent of local residents.

We trimmed trees at the pertinent locations.Settsu Plant

Shionogi Research Laboratories

A yellow insect-deterring light trap at the Musashiyama Research Farm caused concern about traffic safety when the light is on. Local residents speculated on whether or not the installation of a shading plate or other countermeasure would be beneficial.

Trees and shrubs blocking sunlight to the neighboring area

12

Chapter 2 Environmental Management System

＊1 Socie, Shionogi’s social contribution organization Working cooperatively, the company, the labor union, and Socie provide assistance to promote activities that support society based on voluntary efforts of its members. In particular, the organization undertakes the following activities: ・Instruction provided for, and appropriate application of, a company-established activity support system for contributions to society (leave of absence for volunteer activities; temporary retirement for volunteer activities; leave of absence for organ transplant donations; among other efforts). ・Based on the established Disaster Relief Law, provide assistance to areas damaged by earthquakes, storms, and volcanic eruptions, among other things, as well as to surrounding areas. Also provide assistance to affected company members. ・Donations to social contribution organizations.

＊2 Organization for Research and Communication on Environmental Risk of Chemicals Inaugurated through the assistance of the Chemical Society of Japan; activities subsequently undertaken as an NPO based on maintaining harmony between chemical substances and the environment.

Clean-up activity (Kanegasaki Plant) Clean-up activity (Settsu Plant)

Communication with Society

Communication

Predominantly at our four plants, we have held a total of 46 exchange activities, for example, plant tours and participation/cooperation in regionally sponsored events.

Social Contributions

・As in previous years, Shionogi’s social contribution organization＊1 again provided donations to the following six organizations: Japan Braille Library, Traffic Orphans Fund, Japan Eye Bank Association, Japan Guide Dog Association, Japan UNICEF Association, Japanese Red Cross Society.

・We continued our membership support of the Organization for Research and Communication on Environmental Risk of Chemicals＊2.

・We participated in Institute for Global Environmental Strategies (IGES) Kansai Research Center’s research, the Project for the Introduction to Industry of Material Flow Cost Accounting (Kanegasaki Plant/Accounting and Finance Division/Environmental Management Unit).

Major Initiatives

Shionogi has contributed funds and cooperated with various organizations.

・We donated used items: 4,121g of stamps, 753 prepaid telephone cards, and 70g of GREEN MARK (Head Office).

・We conducted clean-up activity in neighboring area (Kanegasaki, Settsu and Kuise Plant).

・We undertook weed-cutting during the river protection month at Houan Pond (Aburahi Laboratories).

・We participated in clean-up activities at the Chigusa River (Akoh Plant).

・We cooperated in the early stages of extinguishing fire, when dead grass caught fire because of an agricultural burn in a neighboring vacant field (Aburahi Laboratories).

13

Chapter 3

As action goals to reduce environmental impact differ between Shionogi and its domestic/overseas

subsidiaries, this chapter focuses on Shionogi and Chapter Five focuses on its subsidiaries.

Through the establishment of annual targets, as well as the creation of a medium-term plan to be

completed by fiscal 2004, we are striving to reduce the level of environmental impact stemming

from upstream/downstream and within operational areas. Upstream refers to such activities as the

purchasing of raw materials, services, etc. Downstream refers to activities related to the

production/sales of products and Medical Representative activities, as well as to the distribution of

goods. Moreover, as we achieved fiscal 2004 target levels for reductions in waste material and in

CO2 emissions during fiscal 2002, these target levels are being revised upwards in fiscal 2003.

Green PurchasingTo construct a sustainable cyclical economic system, it is necessary to make preferential purchasing of environmentally friendly products and services (Green Purchasing), besides accounting for price and product quality. This is being promoted at Shionogi through the creation of the “Green Purchasing Management Policies” in September 2001. In addition to the continued implementation of efforts from prior years, we are striving to achieve success with the following initiatives during the current fiscal year.

Activities Upstream of the Operational Areas

＊ Low-emission vehicle A low-emission vehicle is a low-pollution vehicle defined in the Exhaust Emissions Standards by the Ministry of Land, Infrastructure, and Transport. It can be classified into three categories by comparing the amount of regulated substances emissions and the latest standards. Good : A level of 25% reduction on the latest standards Excellent : A level of 50% reduction on the latest standards Ultra : A level of 75% reduction on the latest standards

Hybrid Car

“Excellent” low-emission vehicle（☆☆）

“Good” low-emission vehicle（☆）

Total

3

30

58

91

6

30

134

170

Fiscal 2002Leased vehicles

Number of Low-emission Vehicles

Plan at the and of fiscal 2003

Major Initiatives

Environmental Performance to Reduce Environmental Impacts

・We decided to choose environmentally friendly products for 57% of standard office supplies purchases.

・We use 100% recycled copy papers.

・We adopt wash-free rice at all sites and major domestic subsidiaries that have dining facilities.

・We are surveying retailers based on the green purchasing survey paper required by the green purchasing management policy relative to the status of such issues as their ISO 14001 status, environmental management conditions, and the amount of environmental consideration for supplied goods. As a result of the survey for this fiscal year, we resurveyed five companies for which it was felt improvements were necessary, and we confirmed that improvements had been made.

・We are promoting the leasing of low-emission vehicles＊ for company use in response to the Automobile NOx/PM Control Law.

Green purchasing management policyGreen purchasing survey paper

14

Waste Generated and Recycled

(t) (%)

0 0

2,500

4,000

6,000

8,000

10,000

20

40

60

80

100

1990 19901998 1999 2000 (FY) (FY)

8,590

1,936

8,205

3,21522.5

39.1

74.8 73.28,411

3,486

7,541

5,516

2001

6,585

4,930

2002

5,987

4,385

Waste warehouse (Kanegasaki Plant) Separating storage of waste (Kanegasaki Plant)

73.1

41.4

Waste Sent to Landfills

(t)

0

50

100

200

1,050

1,100

1998 1999 2000 2001 2002

150 150

1,072

199186

101

52

2002 target

2002 actual

2004 target (before revision)

2004 target (revision May 2003)

2010 target (set in May 2003)

Amount generated (t)Fiscal Year

15% reduction as compared with benchmark year

(7,210)

Amount recycled (t)

5,419

4,385

Amount sent to landfills (t)

83

52

Waste Disposal

－

－

(benchmark year: fiscal 1990)

Waste generated

Amount recycled

Recycling rate (%)

6,894

5,987Limit to the same

level as benchmark year(8,590)

10% reduction as compared with benchmark year

(7,630)

200% increase as comparedwith benchmark year

(5,810)

90% reduction as comparedwith benchmark year

(107)98% reduction as compared

with benchmark year(20)

No waste landfilled(0)


1) Waste ReductionMore than 90% of the waste generated by Shionogi consists of waste solvents, sludge, paper/packing cases, waste resulting from office work, and waste plastics. The amount of generated waste was reduced to 5,987 tons-a 9% reduction in comparison to the amount of waste generated during the previous year. The reduction rate was 907 tons greater than the fiscal 2002 target. We believe that the reduction in waste generated at the Kuise and Akoh Plants contributed to the overall reduction, which was accompanied by a reduction in the pharmaceutical manufacturing business. Although the recycling rate was slightly lower-from the 74.8% recorded in fiscal 2001 to 73.2%-this reduction was a simple result of the reduction in the amount of waste generated. The amount of final landfill disposal waste was reduced from 101 tons in fiscal 2001 to 52 tons in fiscal 2002. The contributing factor to this reduction was the 30-ton reduction in ash generated at the Settsu Plant due to recycling and other efforts.

Activities within the Operational Areas

15

Recycled Solvents (total amount of our controlled chemical substances)

Dichloromethane

Acetic ether

Methanol

Isobutanol

Acetonitrile

Amount recycled (t)Solvents

5,695

1,919

1,195

653

454

Isopropylalcohol

Methyl isobutyl ketone

Triethylamine

Acetone

Pyridine

Amount recycled (t)Solvents

347

238

48

26

18

CO2 Emissions(t-CO2)

0

25,000

50,000

75,000

100,000

125,000

1990 1998 1999 2000 2001 2002

109,634114,379 113,882

100,365 95,477 93,514CO2 Emissions

Amount generated (t-CO2)

98,173

93,514


2002 target

2002 actual


2004 target (revision May 2003)

2010 target (set in May 2003)

Fiscal Year

(FY)


(101,510)


(104,780)

Limit to the samelevel as benchmark year

(109,630)

2) Prevention of Global WarmingCarbon dioxide (CO2) emissions-the primary factor that most contributes to global warming-is generated mainly as a result of energy consumption related to the manufacturing process. It is therefore important that reduction of energy consumption is promoted. To conserve energy, Shionogi has been working to ensure though energy management; to shift to the utilization of energy-conservation devices; and to reduce energy consumption by reviewing manufacturing systems. In fiscal 2002, we conducted a total of 111 activities including the introduction of a cogeneration system＊ at the Settsu Plant, which enables the efficient use of energy. Also, we reduced levels of production at the Kuise and Akoh Plants, while we increased production at the Kanegasaki Plant because of increased production of certain items. As a result, carbon dioxide emissions were reduced to 93,514 tons-an amount that is 2.1 percentage points lower than the fiscal 2002 target goal. In Plase 2 of our Environmental Protection Plan, we had planned to reduce carbon dioxide emissions to the fiscal 1990 level by fiscal 2004. However, given that we had already achieved this goal by Shionogi in fiscal 2000, we set a more demanding goal.

As much as is possible, we have been recovering, refining, and recycling organic solvents. As a result, we recycled 10,593 tons of organic solvent in fiscal 2002. We also send waste solvents that cannot be recycled at Shionogi to externally consigned companies capable of conducting heat and resource recovery.

Recycling Solvents

We had already achieved zero emission at the Kanegasaki Plant and at the Developmental Research Laboratories by fiscal 2001. And in fiscal 2002, we also achieved zero emission at Aburahi Laboratories. We are working towards achieving zero emission at both the Settsu Plant and the Shionogi Research Laboratories.

Efforts for Zero Emission

Major Initiatives -Waste Reduction

・By adopting hand dryers, we achieved a 6.2-ton reduction in paper towel waste (Kuise Plant and Developmental Research Laboratories).

・We recycled sludge (9.6 tons) into construction materials (Aburahi Laboratories).

・We reduced combustible materials and metals from accumulated reclaimed mixture and reduced the amount of landfill (Kuise Plant).

・We eliminated defective products by reviewing manufacturing processes (Kanegasaki Plant).

Future Initiatives

Shionogi will work to further reduce the amount of waste that it generates by conserving paper and reusing solvents. We also aim to increase the recycling rate of plastics, etc. to reduce the amount of waste sent to landfills.

＊ Cogeneration System (combined supply of heat and electricity)A system in which more than two types of energy are obtained from a single fuel source. The system is capable of generating electricity through the utilization of engines and turbines, while waste heat generated during the generation process is recovered and utilized for air conditioning and hot water supply (combined supply of heat and electricity). Input energy at levels as great as 65% to 80% is effectively utilized, thus obtaining a significant level of energy conservation.

＊ PRTR Law (Pollutant Release and Transfer Register Law)The Law Concerning Reporting, etc. of Releases to the Environment of Specific Chemical Substances and Promoting Improvements in Their Management regulates systems relative to pollutant release and transfer register. Chemical substances which must be reported are those designated under Class 1, for which the amount of annual usage exceeds one ton (five tons during the first two years following 2001 as a moratorium period), those classified under Specific Class 1 (12 substances), for which the amount of annual usage exceeds 0.5 tons, and dioxin.

16

Specific CFCs

Storage level (kg)

7,786

7,750

50% reduction as compared with benchmark year(6,404)

60% reduction as compared with benchmark year(5,120)

Abolish completely(0)

Chemical Substances Subject to Reporting under the PRTR Law (Figures for each site are provided in Chapter 5, Shionogi’s Main Sites and Their Environmental Data)

Sites Chemical Substances

Kanegasaki Plant

Settsu Plant

Kuise Plant

Developmental Research Laboratories

Akoh Plant

Dichloromethane, Acetonitrile, Benzene, Pyridine, Dioxins

Ethylene oxide, Dioxins

Dichloromethane, Acetonitrile

Dioxins

1,3-dichloropropene, ethylene glycol,α,α,α-trifluoro-2,6-dinitro-N,N-dipropyl-p-toluidine; trifluralin,3,5-diiodo-4-octanoyloxybenzonitrile; ioxynil octanoate, poly (oxyethylene) nonylphenyl ether,o,o-diethyl S-(6-chloro-2,3-dihydro-2-oxobenzoxazolinyl) methyl phosphorodithioate; phosalone, N-(1-ethylpropyl)-2,6-dinitro-3,4-xylidine; pendimethalin, 2-(4-tert-butylphenoxy)cyclohexyl 2-propynyl sulfite; propargite; BPPS


2002 target

2002 actual

Fiscal Year

Major Initiatives -Global Warming

・Introduced cogeneration system at the Settsu Plant (also to be introduced at the Kanegasaki Plant)

・Installed energy-conserving steam trap (at the Kanegasaki Plant)

・During the updating of heat pump controllers, we set them so that the number of controllers is reduced according to load (at the Shionogi Research Laboratories).

・Replaced aging fluorescent lamp stabilizer with a more efficient device (at the Shionogi Research Laboratories and the Developmental Research Laboratories)

・Improved heating efficiency (Kuise Plant) by modifying the steam trap models of the main outside pipes and air conditioning systems (30 locations)

Future Initiatives

＊1 GLP (Good Laboratory Practice) is a set of standards for pharmaceutical research set by the Ministry of Health, Labour and Welfare.

＊2 GMP (Good Manufacturing Practice) is set of standards for pharmaceutical production management and quality management set by the Ministry of Health, Labour and Welfare.

3) Appropriate Control of Chemical Substances

Responses to PRTR Law＊ and Pollution ReductionTo prevent environmental pollution caused by hazardous substances, the PRTR Law was enacted in 2001; 354 types of chemical substances controlled by this regulation are classified under Class 1. Shionogi voluntarily included an additional 266 types of chemical substances; consequently, it controls and recovers environmental impact data for a total of 620 chemical substances. In fiscal 2003, Shionogi will keep ongoing efforts towards the reduction of chemical substances by recycling of solvents, etc.

Countermeasures for Specific Chlorofluorocarbons (CFCs)

To prevent the leakage of coolants into the environment at Shionogi, Shionogi Engineering Service, Inc. has obtained certification of recovery fluorocarbons. Facilities to handle specific CFCs are being installed in steps in accordance with the long-term renewal plan.


Cogeneration system (Settsu Plant)

Manufacturing and research facilities for pharmaceuticals are operated based on regulations such as GLP＊1 and GMP＊2. Therefore, we cannot easily make modifications to operational conditions for air conditioning and other systems, so the reduction of energy consumption is challenging. In spite of these circumstances, however, we continue to introduce energy conservation measures such as the cogeneration system at the Kanegasaki Plant.


2004 target (revision in May 2003)

2010 target

17

Dioxin Concentration in Gas Emitted by Incinerators

Kanegasaki Plant

Settsu Plant


Regulated value(ng-TEQ/Nm3)

Concentration (ng-TEQ/Nm3)＊

10.00

5.00

10.00

0.75

0.62

0.02

NOx and SOx EmissionsNOx(t)

0

10

20

40

30

50

1998 1999 2000 2001 2002

36

43

23

34

SOx

37

18 18

34

20 22

(FY)

(t)

0

100

200

300

400

500

1998199719961995 1999 2000 2001 2002(FY)

204

322

444

350

196 199

117 126 140

Atmospheric Emissions of Dichloromethane

Control and Disposal of PCBSpecial Measures in Regards to Promotion of the Appropriate Disposal of Polychlorinated Biphenyl Waste, enacted in July 2001, requires reporting of the proper status of PCB＊ waste control. Shionogi stored high/low voltage condensers, 117 transducers, and 5,671 fluorescent lamp stabilizers as PCB waste during fiscal 2002.

Preserving the Air Environment・Nitrogen Oxides and Sulfur Oxides

Shionogi changed the fuel it utilizes for boilers from diesel oil to natural and LP gases, which contain less nitrogen and sulfur. Furthermore, through replacing its large-type boilers with multiple compact-size boilers, Shionogi promoted the reduction of fuel consumption through such means as requiring only the minimum amount of heat needed, etc. As a result, the amounts of sulfur oxides (SOx) and nitrogen oxides (NOx) emitted from devices specified as special facilities according to air pollution regulations have been on the decrease. ・Dioxins

Shionogi utilizes three incinerators as intermediate processing facilities for industrial waste; all dioxin levels are lower than regulation values. Furthermore, the Kanegasaki Plant stopped operating its incinerator in December 2002, and the Settsu Plant did likewise in May 2003.

Measures for Harmful Air PollutantsThe Japan Pharmaceutical Manufacturers Association is implementing a voluntary plan for reducing atmospheric emissions＊ of seven substances, including dichloromethane, chloroform, and 1, 2-dichloroethane. Shionogi has formulated reduction plans for chloroform and dichloromethane, which it uses in large amounts, and is taking measures to reduce the volume of these substances it releases into the atmosphere. In 1998, we have already achieved the goal set for chloroform. The target goal for dichloromethane was achieved through the installation of solvent recovery facilities at the Kanegasaki Plant in April 2001. However, emissions of this substance increased slightly during fiscal 2002 as a result of increased manufacturing activities. Shionogi will continuously strive to improve efficiency relative to solvent recovery, while minimizing emissions of this substance into the environment.

＊ PCB (Polychlorinated Biphenyl)Polychlorinated Biphenyl is excellent with respect to heat resistance, chemical-resistance, and insulation performance, this substance was used as an insulator for condensers and heating media. However, as it was found to accumulate in marine life and other organisms, the Ministry of International Trade and Industry ceased production in 1972.

＊ Voluntary Standards for Harmful Air Pollutant Emissions (Revised on November 14, 2001 by the Japan Pharmaceutical Manufacturers Association) Dichloromethane: Reduce emissions to 60% of fiscal 1995 level by fiscal 2003.

＊ Toxicity Equivalency Quantity (TEQ) TEQ expresses the dioxin concentration (toxicity). It is calculated considering the type and amount of toxicity of each isomer.

4) Environmental Activities to Preserve Air and WaterShionogi observes regulations for air and water quality, as well as agreements with municipal governments.

target

Facility

18

Water intake Water discharge(1,000 m3)

0

1,500

500

1,000

2,000

3,000

2,500

3,500(1,000 m3)

0

1,500

500

1,000

2,000

3,000

2,500

3,500

1998 1999 2000 2001 2002 1998 1999 2000 2001 2002

1,694

3,051

2,657

2,2761,974

1,098

258

1,557

2,675

899

220

1,559

2,644

871

214

1,497

2,494

792

205

1,262

2,181

766

1,609

1,048

1,434 1,413

918 952

1,437

839

1,298

676154

Separating trash (Tokyo Branch Office)

2,352 2,365

Public sewerage

Natural waterways

Ground water

Public water

Industrial water

(FY) (FY)

Preserving the Water Environment・Quantity of Water Intake

The quantity of water intake has been on the decrease. Furthermore, the Akoh Plant and Aburahi Laboratories utilize ground water.

・Quantity of Water DischargeThe Kanegasaki and the Akoh Plants, along with Aburahi Laboratories, conduct sewage treatment and drain wastewater into natural waterways. Shionogi voluntarily set its self-control values at levels that are more stringent than official control values for wastewater quality, and is also striving to reduce the quantity of wastewater it produces.


5) Environmental Conservation at OfficesAt Shionogi Head Office, our environmental conservation work conducted mainly by our Environmental Committee is focused on three main areas (right). As a result, we have reduced the amount of copier paper used by 3.6 percentage points. These activities have raised our employees’ awareness of the need to separate trash, and our recycling rate improved to 80.1 percentage points, compared with 76.0 percentage points last year.

Office Activities

① Reduce the amount of copier paper used② Increase the recycling rate and reduce the amount of garbage produced by separation③ Energy conservation activities

Shionogi asked its head office employees for their cooperation relative to the following items as specific actions that they can accomplish in the course of their office work to reduce individual impact on the environment. Branch offices are also making efforts to separate trash.

Processing Industrial Waste at Regional BranchesWaste was illegally dumped at an unauthorized dumping site at the boundary of Aomori and Iwate prefectures. An investigator searching for those involved informed us that the manifest of the illegal dumping companies included Shionogi’s name. Our investigation discovered that the person in charge of disposing specially controlled industrial waste (at our Niigata Branch) signed a contract with a local company for the transportation and intermediate processing of specially controlled industrial waste. This local company contracted another company, which actually dumped the waste illegally, to conduct intermediate and final processing. The amount consigned for disposal was two units of infectious waste (containers of injectors: 21 L). In response, Shionogi has confirmed and checked the disposal sites used by our consigned waste processing companies. We will be even more vigilant with waste disposal in the future.

In addition, Shionogi has been working to streamline its operations in regards to its purchasing and accounting systems by utilizing information technology. As our office operations are converted to IT, the quantity of paper used is expected to grow smaller.

① Reduce the amount of copier paper used Confirm before printing by using preview/ Utilize two-sided printing/ Perform concentrated printing (two pages printed on one sheet)/ Use the backside of copier paper

② Increase the recycling rate and reduce the amount of garbage produced by separation Limit paper towel usage to one sheet/Separate paper waste by type

③ Energy conservation activities Utilize the electric power saving mode for computers not in use

19

Changes in mileage(10,000 km)

0

4,000

3,000

2,000

1,000

1999 2000 2001 2002 (FY)

3,708 3,6383,458 3,394

Change of tray materials Identifying labels

Recycling mark

Activities Downstream of the Operational Areas

1) Reducing Environmental Impact of PackagesShionogi has been continuously implementing environmentally friendly strategies for the packaging of our medical products.

2) Reducing Environmental Impact in Regards to MR ActivitiesMRs (Medical Representatives) must frequently travel by car to collect information and to create reference materials. Shionogi established a system to turn every place into an MR office, so that MRs can eliminate unnecessary automobile trips and instead devote their time to primary activities. In the system’s inauguration, we reduced mileage during fiscal 2002 by 640,000 km compared to the previous year. We also have introduced 91 low-emission vehicles-three hybrid vehicles, 30 “Excellent” low-emission vehicles, and 58 “Good” low-emission vehicles.

Shionogi has been working to reduce the environmental impact of the following within its operational areas related to products that it manufactures and/or sells, markets, and distributes.

・Terminated the use of polychlorinated biphenyl packaging materials, which possibly generate dioxins when incinerated, and initiated the use of polypropylene. 55 out of 63 packaging items currently utilize polypropylene.

・Produced lighter-weight packages by discontinuing the use of all large-sized box packaging, and by starting to use bands. In addition, we have been working to reduce band weight by making them thinner.

・Information and labels regarding the separation and disposal of packaging materials were completed based on Regulations Concerning the Promotion of Effective Resource Utilization.

・Replaced all plastic trays for ampoules, vials, and tubes with paper trays.

Changed tray materials from plastics to papers

20

Chapter 4

Items

Environmental expenses

Investments

Economic benefits

Environmental impact reduction effects

Waste reduction

CO2 emission reduction

Numeric value/year

1,013,640,000

228,590,000

43,360,000

109

778

yen

yen

yen

tons

t-CO2

Environmental Efficiency Indicator (Unit: index)

(FY)1998 1999 2000 2001 20020

10

20

30

40

■26.4

▲ ▲▲21.5

▲21.6

▲20.4

■26.2 ■

■31.3

■31.9

18.919.4

28.6

■ Waste generated ▲ CO2 emission

Unit

Summary

Shionogi is planning to use environmental accounting methods to evaluate our corporate environmental management activities in terms of return on investment and environmental efficiency. For this purpose, in fiscal 2000, we introduced environmental accounting that complies with the guidelines set by the Ministry of the Environment, and we have been working towards obtaining more accurate environmental data.

1) Accounting Method

2) Summary of Results

3) Environmental Efficiency Indicator

・Period and Scope of Accounting Accounting period: April 1, 2002-March 31, 2003 Scope of accounting: Effects resulting from Shionogi’s environmental conservation investment and cost

・Environmental costs are applied only to cases in which the purpose of the activity can be judged to be clearly related to environmental conservation. Categorization is based on the “Fiscal 2002 Environmental Accounting Guideline” released by the Ministry of the Environment in March 2002.・Economic benefits resulting from environmental conservation is calculated only for direct benefits based on reasonable grounds.

There are various “environmental efficiency indicators” that numerically represent the reduction in environmental impact and increase in added value resulting from corporate activities. The environmental efficiency indicator includes a method that depicts each item related to environmental impact according to the figure obtained by the formula: added value divided by environmental impact. In this report, added value is calculated by using the amount of sales, and environmental impact is calculated by using (1) the amount of waste generated, and (2) the amount of carbon dioxide emitted. Environmental Efficiency has shown tendency toward improvement since fiscal 1998.

Environmental Accounting

21

1) Investments and Expenses

2) Environmental Conservation Benefits

Type of cost Key measures

Environmental Conservation Cost

Maintenance and management, etc., of wastewater facilities

Maintenance and management of boilers, incinerators, etc.

Recovery of dichloromethane

Maintenance and management of analysis equipment

Energy-saving measures

Specific CFC measures

Waste solvents recycling

Paper recycling

Industrial waste treatment and disposal

Package recycling consignment

Environmental management system maintenance and operation

Tree planting around business sites

Donation to environmental organizations

Communication activities with local communities

(1) Cost within Business Area

(2) Upstream & Downstream Costs

(3) Management Activities

(4) Research and Development

(5) Social Contribution Activities

(6) Dealing with Environmental Damage

(7) Other Costs [not corresponding to (1)~(6)]

Investment (ten thousand yen)

Expenses(ten thousand yen)

22,859

5,809

17,050

0

0

0

0

0

0

0

22,859

63,794

42,460

2,398

18,936

2,628

34,868

0

74

0

0

101,364

Description of benefits Amount of reduction

1,018

231

62

109

778

Indicator

Electric power

Fuel oil A

City Gas

Volume of waste generated

Emission into atmosphere (CO2)

Total

MWh

k

m3

tons

t-CO2

Benefits related to resource invested in business activitiesBenefits from costs

within business area

Benefits related to environmental impact and waste from business activities

Description of benefits Amount (ten thousand yen)

218

4,118

4,336

Income

Expense reduction

Business income from recycling waste

Reduction of energy used and waste treatment expenses

Total

3) Economic Benefits from Environmental Conservation Activities

Bre

akdo

wn

Environmental Accounting for Fiscal 2002

The amount of environmental investment has largely increased from the previous year due to implementation of energy conservation measures such as the cogeneration system. Costs related to the adoption of ISO 14001 (a requirement from the previous year) decreased; however, depreciation for environmental fixed assets had to be accounted for in fiscal 2002. As a result, total costs decreased by 74 million yen overall from the previous year.

Global Environmental Conservation

Resource Recycling

Pollution Prevention

22

Chapter 4 Environmental Accounting

Material Flow

Pharmaceutical Manufacturing Flow

Discussions between the project team and Prof. Wagner

Shionogi reported the results of the introductory experiment at the International Symposium on Environmental Accounting

Storage Preparation

Medicine manufacture

Recycling Recycling

Incineration

Packaging

Wastewater treatment

Plant

Raw material Reaction Waste

Waste

Substance

Waste

Water tank 1

Water tank 2

Raw material Extraction

Processed inwater tank

Raw material

Waste

WasteSubstance

Waste

ProcessedRaw material

Processing fluid

Waste

Raw material Post-processing

Rinsing fluidRaw material Separation

Drying

Recovery

Pharmaceuticals Recoveredsolvent

:

Working towards Material Flow Cost Accounting

Material Flow Cost Accounting is a corporate environmental management accounting tool developed and promoted by IMU (Institut fur Management und Umwelt) in Germany, which aims to concurrently achieve profit-making corporate activities and environmental conservation through improvements in material productivity. In this method, the flow of raw materials and other materials in manufacturing processes are measured and managed in terms of their physical amounts and costs (The Ministry of Economy, Trade and Industry is currently conducting a pilot study of this method.).

In fiscal 2002, Shionogi participated in a project sponsored by the Kansai Research Center of the Institute for Global Environmental Strategies (IGES) and reported its trial results at the Kanegasaki Plant at an International Symposium on Environmental Accounting held on January 31, 2003. The project’s success and results were highly regarded by Dr. Bernd Wagner, Professor, University of Augsburg, Germany, and IMU representative.

Pilot Study at the Kanegasaki PlantWe conducted a pilot study on one pharmaceutical product manufactured at the Kanegasaki Plant. Based on the knowledge gained from the meeting with the IGES project members, we evaluated processes related to product shipments from the Plant to the disposal of waste and wastewater. For each manufacturing process, we collected data on the physical amounts and costs of raw materials used; the amounts and costs of energy used; the physical amounts and costs of raw materials converted into waste; and disposal costs. By organizing this data, we could calculate a material loss cost ratio to enable us to make cost reductions and to improve the environment.

23

Kuise Plant 1-3, Kuise Terajima 2-chome, Amagasaki,Hyogo 660-0813, Japan

1) Material Balance

Items

Input

Electricity

City Gas

Public water

Industrial water

Chemical substances

Items

Output

Waste generated

Waste sent to landfills

CO2 emissions

NOx

Wastewater ··· public sewerage

Wastewater ··· natural waterways

Chemical substances released into environment

316

3

10,268

2.2

258,000

0

5.7

tons

tons

t-CO2

tons

m3

m3

tons

16,362

2,001,000

84,000

174,000

64.9

MWh

m3

m3

m3

tons

2) Substances Reported under the PRTR Law

Amount released into environment (kg) Amount transferred (kg)

Acetonitrile

Dichloromethane

49.70

5,086.70

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

6,224.33

998.10

Atmosphere Naturalwaterways Soil Landfills Sewerage Off-site

Chemical Substances

Kuise Plant

Amount/year UnitAmount/year Unit

The Kuise Plant was previously used as a business site for manufacturing pharmaceutical products, but it is now being converted into a station to primarily develop new drugs and to manufacture pilot products. While in the process of shifting its manufacturing responsibility, this plant obtained ISO 14001 certification in 2002, and it has been maintaining an appropriate environmental management system. With an enhanced degree of employee awareness relative to environmental conservation, the Plant was able to achieve a level of performance exceeding both the established annual and mid-term environmental targets in terms of activities aimed at reducing the amounts of generated waste, increasing the waste recycling rate, and reducing CO2 emissions. As the Kuise Plant concentrates its operations on the development of pharmaceutical products, it is expected that the total amount of chemical substances handled will decrease and that the total number of chemical substances used will increase. Consequently, we will monitor the management of chemical substances, we will strengthen the managerial organization, and we will improve the system for evaluating chemical process safety so that environmental risks are further reduced (Kuise Plant Environmental Manager).

Chapter 5

Shionogi’s Main Sites and Their Environmental Data

24

Chapter 5 Activities at Main Sites and Environmental Data

Settsu Plant 5-1, Mishima 2-chome, Settsu, Osaka 566-0022, Japan

1) Material Balance

Electricity

City Gas

Public water

Industrial water

Chemical substances


Ethylene oxide 0.00 0.00 0.00 0.00 0.00 0.00

Dioxins 48.13 0.00 0.00 0.00 0.42 146.73

Settsu Plant

Items

InputItems

OutputAmount/year Unit

MWh

m3

m3

m3

tons

33,118

3,980,000

128,000

129,000

8.3

Waste generated


CO2 emissions

NOx





AtmosphereNatural

waterways Soil Landfills Sewerage Off-siteChemical Substances

Amount released into environment (mg-TEQ) Amount transferred (mg-TEQ)

AtmosphereNatural

waterways Soil Landfills Sewerage Off-siteChemical Substances

628

39

21,078

3.2

209,000

0

3.0

tons

tons

t-CO2

tons

m3

m3

tons

Amount/year Unit

The Settsu Plant was originally established as the main operational facility for preparing finished dosage forms and packaging. Presently, departments with different functions, such as the Diagnostics Division and the Logistics Division, also operate here. In fiscal 2002, the Plant thoroughly promoted P-D-C-A activities based on ISO 14001, and it was able to achieve most of its established environmental action targets. The Plant confirmed its compliance to ISO 14001 standards in its first audit. Furthermore, in order to promote energy conservation, we introduced a cogeneration facility in January 2003, so we can expect more effective utilization of energy and further reductions in carbon dioxide emissions. Settsu’s different departments will be working together to observe regulations, to reduce waste, and to promote energy conservation, as well as contribute to environmental preservation in local areas. In addition, we terminated the operations of the Plant’s waste incinerator in May 2003 (Settsu Plant Environmental Manager).

Kanegasaki Plant

25

1) Material Balance

Electricity

Fuel oil A

Public water

Industrial water

Chemical substances


Acetonitrile

Dichloromethane

Pyridine

Benzene

15,011.50

118,623.98

469.80

0.00

0.00

6.16

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

62,985.48

61,998.19

14,053.17

0.47

7, Moriyama, Nishine, Kanegasaki-cho, Isawa-gun,Iwate 029-4503, Japan

Dioxins 1.25 0.00 0.00 0.00 0.00 1.11

Kanegasaki Plant

InputItems

OutputAmount/year UnitItems



Chemical Substances



Chemical Substances

MWh

k

m3

m3

tons

Waste generated


CO2 emissions

NOx




31,410

7,180

32,000

873,000

2,018.8

3,573

0

31,468

4.6

0

856,000

245.8

tons

tons

t-CO2

tons

m3

m3

tons

Amount/year Unit

The Kanegasaki Plant was established primarily for the manufacturing of antibiotics and pain relievers for cancer. Presently, it is one of our primary plants equipped with complete manufacturing facilities for bulk processing to the preparing and packaging of final products. We have added facilities for handling preparations of solid antibiotics and for manufacturing study drugs. Consequently, the types of chemicals handled, along with waste substances, have increased. Thus, environmental impact, as indicated by energy consumption and amounts of generated waste, has increased. As the reduction of environmental impact is an essential task, the Kanegasaki Plant established its environmental management goals based on ISO 14001 standards, and set about to reduce waste, to promote energy conservation, and to reduce amounts of carbon dioxide emissions. We observed no deviations from the regulation-set values at the Plant this year, and the Plant achieved a 12% reduction in the amount of waste generated. In addition, the plant has been actively participating in cooperative activities with local communities, such as clean-up activities held by the local Kanegasaki community. We feel that this kind of contribution best represents the Plant’s commitment to environmental conservation and fostering relations with the community. Through effective teamwork, the Plant will observe regulations, promote waste reduction and energy conservation, and it will further its commitment to environmental conservation activities (Kanegasaki Plant Environmental Manager).

26

Akoh Plant

1) Material Balance

Electricity

Fuel oil A

Kerosene

Public water

Industrial water

Chemical substances


Pendimethalin

Ethylene glycol

1,3-dichloropropene

Phosalone

Ioxynil octanoate

Trifluralin

BPPS

Poly(oxyethylene) nonylphenyl ether

Methyl isothiocyanate

3.00

0.00

116.00

3.00

3.00

7.00

0.00

2.00

75.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

68.00

0.00

0.00

393.00

2.00

0.00

0.00

1125, Kariya, Akoh, Hyogo 678-0239, Japan

Akoh Plant

Items

InputAmount/year Unit Items

Output

7,928

3,591

74

357,000

139,000

2,612.5

MWh

k

k

m3

m3

tons

Waste generated


CO2 emissions

NOx




628

8

12,925

9.1

9,000

420,000

336.0

tons

tons

t-CO2

tons

m3

m3

tons

Amount/year Unit



Chemical Substances


The Akoh Plant was the first business site in the Shionogi group to obtain ISO 14001 certification. We have steadily maintained our environmental management activities based on the P-D-C-A cycle, and achieved most of our environmental targets set for this year. Among our primary results, we achieved targets related to waste reduction in terms of amounts generated and the recycling rate, while the amount sent to landfills was slightly more than the target amount. As for landfill waste, for which final disposal sites are in short supply, methods of re-use will be further discussed in order to improve the recycling rate. At the Plant, we have consistently undertaken energy conservation activities, for example, the switching off of personal computers and lights when not in use, and we have also consistently maintained appropriate temperatures for air conditioning. Although reductions in electrical and fuel usage might have partially resulted from reductions in manufacturing, our daily efforts have greatly contributed to energy conservation. With regards to regulatory observance, we sincerely regret failing to report to the installation of specific facilities involving pollution control regulations to the relevant bodies. We will further strengthen the management system so this is not repeated (Akoh Plant Environmental Manager).

27

Shionogi ResearchLaboratories

1) Material Balance

Electricity

City Gas

Public water

Industrial water

Chemical substances


12-4, Sagisu 5-chome, Fukushima-ku, Osaka 553-0002, Japan

Shionogi Research Laboratories

No reported substances under PRTR Law.

Items


Output

Waste generated


CO2 emissions

NOx




297

2

5,589

0.7

100,000

0

0.0

tons

tons

t-CO2

tons

m3

m3

tons

Amount/year Unit

8,623

1,144,000

48,000

52,000

34.9

MWh

m3

m3

m3

tons

At the Shionogi Research Laboratories, we have been working on environmental conservation activities based on Phase 2 of the Environmental Protection Plan, which focus on the promotion of energy conservation measures and the reduction in retained amounts of specific CFCs. As for waste, we implemented the recycling of silica gel. In fiscal 2003, we expect to be able to achieve zero emissions, thereby eliminating waste sent to landfills. To improve energy conservation, we replaced conventional lights with highly efficient fluorescent lights. We reduced the retained amount of specific CFCs by replacing the air conditioning refrigeration machine with a fluorocarbon-free refrigerating machine. Besides these actions, in order to further reduce environmental impact, we are also planning to update our odor removal facilities and to install wastewater emergency shelter tanks. Moreover, we have been promoting education and awareness of Green Chemistry, which lays the foundation for the design of environmentally friendly methods of synthesis. The business site, through the keen efforts of our workers, has been working towards achieving these goals, as well as to promote mutual understanding with the local communities. We will further continue to balance our research and development activities with our activities related to environmental management (Shionogi Research Laboratories Environmental Manager).

28

Developmental ResearchLaboratories

Electricity

City Gas

Public water

Industrial water

Chemical substances

162

0

5,539

0.8

83,000

0

0.0

tons

tons

t-CO2

tons

m3

m3

tons

10,195

796,000

50,000

33,000

3.7

MWh

m3

m3

m3

tons

Dioxins 0.05 0.00 0.00 0.00 0.00 0.00

1-1, Futaba-cho 3-chome, Toyonaka, Osaka 561-0825, Japan


1) Material Balance

InputItems

Output



Chemical Substances

Amount/year UnitAmount/year UnitItems


Waste generated


CO2 emissions

NOx




At the Developmental Research Laboratories, we have worked on the reduction of waste, the promotion of energy conservation, the maintenance and management of significant environmental areas, and the proper management of hazardous chemical substances, which are all based on Phase 2 of Environmental Protection Plan. Through these activities, we reduced waste to 162 tons-a nine-ton decrease over the previous year. We have achieved reductions at the Research Laboratories for three consecutive years. With regard to energy conservation efforts, the energy utilized (in the form of carbon dioxide) slightly increased to 5,539 tons because of the use of air conditioning systems on holidays in order to speed up new drug applications. We did not observe any problems in significant environmental areas-gas exhaust and wastewater measurements were less than company-set values-so we can safely say that were no regulatory transgressions. As a part of our social contributions, we have been inviting our employees to participate in a seminar on emergency lifesaving. The total number of employee participants during the last three years has exceeded 300, and we were given an award for our participation in these efforts on Fire Fighting Day. It is desirable to participate in such seminars once every three years; therefore, we will continue to provide such opportunities to employees. We have smoothly implemented environmental management based on ISO 14001 at our laboratory, and we will further improve our operations in light of our commitment to environmental conservation (Developmental Research Laboratories Environmental Manager).


29

Aburahi Laboratories 1405, Ooaza -Gotanda, Koka-cho, Koka-gun, Shiga 520-3423, Japan

Electricity

Fuel oil A

Public water

Ground water

Chemical substances

Aburahi Laboratories

1) Material Balance

2) Substances Reported under the PRTR LawNo reported substances under PRTR Law.

Items


OutputAmount/year Unit

Waste generated


CO2 emissions

NOx




158

0

4,886

1.4

0

22,000

0.2

tons

tons

t-CO2

tons

m3

m3

tons

4,906

1,099

49,000

15,000

12.1

MWh

k

m3

m3

tons

At Aburahi Laboratories we conduct exploratory research for new drug with an emphasis on the synthesis/search/assessment of pharmaceuticals for medical use. We also raise animals for laboratory use. Located in a natural environment, our laboratory promotes environmental conservation activities (based around Phase 2 of Environmental Protection Plan) to safeguard the surrounding natural environment. During this year, our laboratory worked towards waste reduction and the proper management of chemical substances as our primary goals. We reduced waste to 158 tons and we reduced the amount of waste sent to landfills to zero, so we can be satisfied that we have made significant progress in environmental conservation. We also recycled lumber, tree branches, and cut grass generated from our grounds by regenerating these materials as chips and fertilizer. In addition, we initiated a central management system for chemical substances, which helped to manage them more appropriately and efficiently. Moreover, we underwent assessment for the maintenance of the ISO 14001certification and received passing marks in March 2003. With effective teamwork, we will drive unerringly towards the achievement of environmental goals and the promotion of environmental conservation activities (Aburahi Laboratories Environmental Manager).

30

Subsidiary

BushuPharmaceuticalsLtd.

Nichia PharmaceuticalsIndustries Ltd.

Shionogi QualicapsCo., Ltd.

Environmental conservation activities

Taiwan Shionogi &Co., Ltd.(Taiwan)

ShionogiQualicaps, Inc.(U.S.A)

ShionogiQualicaps, S.A.(Spain)

Subsidiary Environmental conservation activities

Domestic Subsidiaries


Chapter 6

Environmental Management Activities of Subsidiaries

Shionogi Group subsidiaries that operate manufacturing facilities in Japan and overseas have also been conducting environmental management activities based on Shionogi’s basic environmental policy. To confirm that such environmental management activities are being properly conducted by the subsidiaries, Shionogi requests its subsidiaries to report on their environmental activities, and audits such activities.

・No violations observed with regards to environmental regulations・Qualified in ISO 14001 maintenance assessment・No problems observed in Shionogi’s environmental audit・No substances requiring reporting by PRTR Law were found・Created a series of evaluation procedures to assess environmental impact resulting from new projects, New Project Response Procedures/Records ・Decision made to install cogeneration facilities (operational in May 2003)・Environmental Accounting introduced, and environmental report to be issued

・No violations observed with regards to environmental regulations ・Qualified in ISO 14001 maintenance assessment・No problems observed in Shionogi’s environmental audit・No substances requiring reporting by PRTR Law were found・Tokushima Global Environment Club founded, which Nichia Pharmaceuticals Industries Ltd. has joined・Created Detailed Instructions for Handling Chemical Hazards in Study Drug Laboratories; hazardous substance management is conducted properly

・No violations observed in regards to environmental regulations ・Qualified in ISO 14001 maintenance assessment ・No problems observed in Shionogi’s environmental audit・No substances requiring reporting by PRTR Law were found・With regards to the reduction of deadly poison/poison waste reagents used in chemical trials, we were able to reduce such waste to two-thirds the amount of prior levels by purchasing reagents in small amounts.

・Complies with environmental regulation matters issued by Chilung Environmental Protection Bureau・Shionogi’s environmental audit was conducted, and no problems were observed.・Shionogi’s Basic Environmental Policy was translated and communicated to employees. ・Packaging materials were reduced through the recycling and shrinking of individual packages, along with enlarging the size of unit package.

・Meets each of the standards of regulatory matters in environmental report issued by relevant state agency・Conducts periodic environmental audits ・Checks boilers every day for efficiency analysis to reduce fuel consumption

・Plans to obtain ISO 14001 Certification

0

1,000

2,000

3,000

4,000

5,000

0

1,000

2,000

3,000

4,000

5,000

0

200

400

600

800

31

Obtained ISO 14001 Certification(December 2001)

Obtained ISO 14001 Certification(November 2001)

Obtained ISO 14001 Certification(December 2001)

Corporate Environmental Management Activities

Environmental manager appointed

Environmental manager appointed

Environmental Management System Waste generated (ton) Waste sent to landfills (ton)

0

100

200

300

136

2000 2001 2002

198 182

150

2000 2001 2002

229

171

96

2000 2001 2002

266

204

0

5

10

15

20

1

2000 2001 2002

4 5

12

2000 2001 2002

10

0

15

2000 2001 2002

87

CO2 emissions (t-CO2)

Environmental Management System

0

3,000

6,000

9,000

5,190

2000 2001 2002

6,310 6,722

1,692

2000 2001 2002

1,658870

7,835

2000 2001 2002

7,497 7,043

0

100

200

300

0

5

10

15

20

0

3,000

6,000

9,000

0

100

200

300

0

5

10

15

20

0

3,000

6,000

9,000

Waste generated (ton) Waste sent to landfills (ton)

0

200

400

600

800

2001 2002

55 52

2001 2002

2001 20024 4

45

2001 2002

43

CO2 emissions (t-CO2)

3,106

2000 2001 2002

4,088

3,265

4,060

2000 2001 2002

4,0973,545

0

200

400

800

0

200

400

600

800

0

200

400

600

800

722720

0

200

400

600

800

2001 2002

722720

2001 200200

0

1,000

2,000

3,000

4,000

5,000

1,364

2000 2001 2002

1,235 1,233

(t)

(t)

(t)

(t)

(t)

(t)

(t-CO2)

(t-CO2)

(t-CO2)

(t)

(t)

(t)

(t)

(t)

(t)

(t-CO2)

(t-CO2)

(t-CO2)

(FY) (FY) (FY)

(FY) (FY) (FY)

(FY) (FY) (FY)

(FY) (FY) (FY)

(FY) (FY) (FY)

(FY) (FY) (FY)

Note) Shionogi Qualicaps, S.A. did not account the amount of waste generated from papers.

32

Vice-President interview Field survey at the Kuise Plant

Third Party Opinion

Third Party Opinion

Shionogi believes that it is very important to receive confirmation and feedback from third parties regarding the details of its environmental management and environmental reporting in order to maintain transparency relative to the disclosure of environmental information. For this purpose, we have requested opinions from researchers at the Institute for Environmental Management and Accounting＊, which have been reproduced here. We will discuss the relevant issues for the sake of improvement. ＊ Institute for Environmental Management and Accounting (IEMA) IEMA is a university-launched venture company to support corporate environmental management. It is operated mainly by researchers majoring in environmental accounting/environmental management accounting, and certified public accountants who are familiar with this field also participate in its activities.

August 26, 2003Shionogi & Co., Ltd.,

Institute for Environmental Management Accounting

Michiyasu Nakajima, President(Associate Professor, Faculty of Commerce, Kansai University)

Katsuhiko Kokubu, Director(Professor, Graduate School of Business Administration, Kobe University)

Eriko Nashioka, Project Manager(Chief Researcher, Institute of Global Environmental Strategies/ Certified public accountant)

1. Purpose of OpinionsAs a third party unrelated to Shionogi’s business operations, we have offered our opinions to increase the credibility of the corporate environmental report through evaluating and commenting on the environmental performance in Shionogi.

2. Steps TakenIn order to ensure the credibility of the information stated in the environmental report, we interviewed the Vice President (Director in Charge of the Environment), asked questions of employees in charge of the environment, and visited sites. Thus, we were able to understand how environmental performance, which is the basis for the disclosed information, has been planned, implemented, and evaluated. With regard to the responses obtained from interviews, and whether or not the actual work was conducted as specified according to the procedures of that system, we checked the base reference materials in the original vouchers as necessary. For this investigation, we visited the head office and the Kuise Plant.

3. ResultsTop Management’s intentions regarding environmental conservation are clear. Environmental conservation activities have been well positioned within the corporate management plan. Furthermore, analysis of actions up to the present has been appropriately conducted, and the management has a vision toward the future. To realize this vision, Shionogi needs to discuss whether or not the current organizational system suits its future direction. We can envisage the necessity for a corporate environmental management structure that combines both top-down and bottom-up systems. That safety assurance must be given the highest priority, owing to the type of industry that is in, is a consideration that has been well-instilled. However, in the future Shionogi needs to go beyond the general notion of safety, and consider how it can best contribute to environmental conservation.

33

1. Chemical Substances

<Important Environmental Performance>

<Introduction of Material Flow Cost Accounting>

Chemical substances are strictly controlled in the pharmaceutical industry. Shionogi’s management system has set higher standards than those imposed by regulations. It has added its own list of self-controlled substances to the regulations, and it has managed the amounts of these substances that are used and emitted. Furthermore, environmental management is woven into daily operations. For example, it discloses the safety data sheets of chemical substances on an internal website so that workers can individually view the data at any time through the site. Although the data is only presently available within Shionogi proper, it would be encouraging to share such data with manufacturing subsidiaries, and eventually with the entire Shionogi Group.

2. WasteShionogi’s waste includes many types of chemicals so its waste management system has been well established to ensure safe disposal. It shares information related to the substances that it disposes of with consigned waste disposal companies. It not only disposes of waste, but also considers methods of extraction for disposal companies to recycle such waste, which is a valuable contribution to society. At the research and development level, activities based on Green Chemistry are being conducted. Each plant carefully and consistently conducts environmental management over the long-term with each manufacturing process, from the purchase of chemical substances to their emissions. The disposal of other types of waste is properly undertaken at each plant. In the future, it will require environmental management systems and methods of evaluation that differ from those used at manufacturing sites for offices where environmental impact is lower.

3. Water, Air and EnergyOperational branches report the status of water, air, and energy quality in their annual reports. The reports use the same format; show detailed information; show the carbon dioxide conversions of the main substances; and display energy conservation results in monetary figures. We believe that the utilization of a unified measure is a good method for central management of environmental impact. Furthermore, investments in environmental conservation activities are adjusted based on the monetary comparison, which shows effects on the environment to amounts invested. Such information is not mentioned in performance evaluations of each division. However, by utilizing such information, it can ensure even better environmental management.

4. Environmental AccountingEnvironmental accounting is conducted based on the environmental accounting guidelines of the Ministry of the Environment, Japan. Since emphasis was placed on external disclosure, this method was not used for internal management. Shionogi is considering an accounting system that is effective for managing a corporation through converting information obtained through Material Flow Cost Accounting into numerical figures. As converting performance into numerical figures has been recognized as important from the view of goal management, it will be necessary to construct an environmental efficiency indicator, as well as to refine and expand the environmental accounting information system.

In fiscal 2002, Shionogi participated in a project sponsored by the Kansai Research Center of the Institute for Global Environmental Strategies (IGES), and cooperated in a pilot study of Material Flow Cost Accounting, an environmental management accounting tool that is attracting attention. The pilot study was conducted on one pharmaceutical product at the Kanegasaki Plant, and the research results were presented at an international symposium sponsored by IGES in January 2003, which were subsequently explained in IGES’s report. We note that the elimination of losses resulting from manufacturing activities including factors that have an environmental impact have been evaluated with regard to economic benefit as well, which can be commended. In addition, Shionogi can be commended in its efforts to understand its present state, find new viewpoints on environmental management and strive for further improvement.

<About the Environmental Report>

By providing a self-evaluation column in the environmental goal and target list, the proportion of achievement of a particular goal, as well as the relationship of a particular goal to a goal for the following year, are more effectively displayed. In addition, by providing a page containing information related to each item, it is easier to find relevant information. We can consider any negative information related to waste disposal as a plus for disclosure. Unfortunately, evaluation findings are indicated by symbols, and specific items relative to self-evaluation under each item are not stated in detail. The activities of each plant and subsidiary are stated in detail, which is very positive; however, the management’s evaluation of these activities is not included. It is important to disclose information in detail; however, we believe that “Shionogi & Co., Ltd.” might have been evaluated better if they had added specific information and self-evaluations to their report.

34

Environmental Management Timeline

Wastewater treatment facilities completed atSettsu Plant

Emissions treatment policy formulated･Pollution prevention through responsibility of emitters

Environment and Disaster Prevention Sectionestablished in Manufacturing Division

Kanegasaki Plant completedContact oxidation wastewater treatment equipment and liquid incinerator installed

Shionogi’s Basic Environmental Policy establishedDirector in Charge of the Environment appointedEnvironmental Management Unit established

Phase 1 of Environmental Protection Plan･Company-wide environmental management organization established･Company-wide action objectives set

Akoh Plant acquired ISO 14001 certification

Shionogi’s Basic Environmental Policy revisedPhase 2 of Environmental Protection PlanEnvironmental Report issuedActivities begun for acquisition of ISO 14001 group certification at seven sitesShionogi Group companies (including overseas subsidiaries)began environmental management activities

Shionogi’s Basic Environmental Policy revisedISO 14001 group certification acquiredfor seven research and manufacturing facilitiesThe following group companies also acquired certification:･Bushu Pharmaceuticals Ltd.･Nichia Pharmaceutical Industries Ltd.･Shionogi Qualicaps Co., Ltd.

Cogeneration system began operation at Settsu Plant

Basic Law for Environmental Pollution Control enacted

Air Pollution Control Law enacted

Pollution Session of the DietWaste Management and Public Cleansing Law enactedWater Pollution Control Law enacted

Environment Agency established

Law Concerning Rational Use of Energy enacted

Law Concerning the Protection of the Ozone Layer through the Control of Specified Substances and Other Measures enacted

Keidanren Environmental Charter Basic Environment Law enacted

Environment Agency issues Guidelines on Environment-Friendly Corporate Behavior

Law for Promotion of Sorted Collection and Recycling of Containers and Packaging enacted

International environmental standard ISO 14001

Waste Management and Public Cleansing Law revisedLaw concerning Reporting, etc. of Releases to the Environment of Specific Chemical Substances and Promoting Improvements in Their Management enacted Law concerning Promotion of Measures to Cope with Global Warming enacted Law concerning Special Measures against Dioxins enacted

The Basic Law for Establishing the Recycling-based Society enacted Green Purchasing Law enactedConstruction Materials Recycling Law enactedFood Recycling Law enacted

Law Concerning Special Measure Against PCB Waste enacted

Law concerning Reporting, etc. of Releases to the Environment of Specific Chemical Substances and Promoting Inprovements in their Management impemented fully

Trends in JapanShionogi’s Environmental Management

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196719681970

1971

197519791983

1988

1991

19931994

1995

19961997

1999

2000

2001

2002

Fiscal Year

35

Publication Unit

Issued : November 2003

Next issuance : November 2004

Contact address

1-8, Doshomachi 3-chome, Chuo-ku, Osaka 541-0045, Japan

Telephone: +81-6-6209-7884

Facsimile: +81-6-6205-8810

Environmental Management Unit

Environmental Management Unit1-8, Doshomachi 3-chome, Chuo-ku, Osaka 541-0045, JapanTelephone: +81-6-6209-7884 Facsimile: +81-6-6205-8810

http://www.shionogi.co.jp/E-Mail: [email protected]

For comments or questions about this Environmental Report,please contact the Environmental Management Unit.

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