Compliance
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Promoting Compliance

Message from the Chairperson

Message from the Chairperson of the Compliance Committee

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Inspired by the Sumitomo Spirit, which enjoins us to accord prime importance to integrity and sound management in business conduct and to refrain from imprudently pursuing easy gains, we position ensuring compliance as the foundation of our manufacturing and business operations. Our aim is not only to ensure legal compliance but also to fulfill our corporate social responsibility by always remaining true to the high ethical standards embodied in our corporate philosophy.
The mission of the Compliance Committee, whose membership comprises officers responsible for business units and persons responsible for each business, is to promote Group-wide compliance activities. Through global implementation of such measures as compliance risk assessment, compliance education and training of employees, and monitoring, we are endeavoring to inculcate the importance of compliance throughout the workforce. I believe these initiatives are contributing to enhancement of our corporate value and public value as well as to creation of the Sumitomo Riko Group's social value. These values express the fundamental strengths of the Sumitomo Riko Group, as we steadily advance toward our goal of becoming a "Global Excellent Manufacturing Company."
I request our stakeholders for their understanding and further support concerning the Group's commitment to compliance.

Taro Noda
Chairperson of Compliance Committee
Managing Executive Officer

Basic Approach to Compliance

The Sumitomo Riko Group is developing and operating a compliance structure based on the Sumitomo Spirit with the aim of practicing management that meets the expectations of all stakeholders by creating social values with enhancement of our corporate value and public value. We are placing particular importance on responding to the risk of violating laws and regulations accompanying the globalization of business and development in new fields and creating an open and transparent corporate culture that forms the foundation of compliance.

Compliance Structure

The Sumitomo Riko Group is developing its compliance structure in accordance with the basic policy for internal control. The Compliance Committee, chaired by the Representative Director, periodically reports to the Board of Directors on the status of its activities. In addition, general managers, managers and supervisors in each workplace are appointed compliance leaders to inculcate compliance awareness at workplaces.
Group companies are also developing their own compliance structures suited to their risk situations based on the Basic Regulations on Group Compliance.

Compliance Action Guidelines and Education

Having established the Sumitomo Group Global Compliance Action Guidelines, we are endeavoring to ensure penetration of the guidelines through periodic education for all Group company employees. The Sumitomo Group Global Compliance Action Guidelines are revised periodically. In the revision in April 2019, S.E.C.-Q. (safety, environment, compliance, and quality), which is the basis of our business operations, "Bad News First & Thanks,” "ensuring of reliability of records and reports," and other items with an important bearing on the Group's fulfillment of its social responsibility have been added in line with the Sumitomo Riko Group 2022 Vision. Furthermore, items concerning initiatives to prevent any form of corruption have been added, following our endorsement of the Tokyo Principles for Strengthening Anti-Corruption Practices.
We provide systematic compliance education to all employees when they join the Company and according to positions, from non-managerial personnel to executives. Each year we conduct training on compliance with the principal laws and regulations, such as antitrust laws and anti-bribery and anti-corruption laws, for executive-level employees of Group companies worldwide. A total of 689 employees, 92% of the subject employees, at business sites around the world received this training in fiscal 2018.

* Content of the Sumitomo Group Global Compliance Action Guidelines
The Sumitomo Spirit, Sumitomo Riko Group Management Philosophy, Sumitomo Riko Group Corporate Action Charter, corporate ethics, Bad News First & Thanks, fair trade (compliance with antitrust laws), prohibition of money laundering, elimination of antisocial forces, prevention of bribery, respect of human rights and diversity, prohibition of conflict of interest, quality and safety, information security, co-existence and co-prosperity with communities and society, information on hotlines, etc.

Monitoring

If an important compliance problem arises, it must be promptly reported to the Compliance Committee and the departments concerned in accordance with the Compliance Regulations. Each department of Sumitomo Riko and consolidated Group companies reports the status of compliance problems to the Committee quarterly. Moreover, with "Bad News First & Thanks!"* as a slogan, we are working to cultivate a corporate culture where information on compliance problems is swiftly shared between the people in the field and management.
For the reporting of compliance issues, the Compliance Committee has established a point of contact at an external law office and an internal point of contact for Sumitomo Riko and its Group companies in Japan. A global hotline has also been established as a point of contact for overseas Group companies. No person who reports a compliance issue suffers disadvantage.
The chairperson of the Compliance Committee periodically interviews general managers of key business sites worldwide concerning the state of operation of the compliance structure. In fiscal 2018, interviews were conducted with 43 general managers. The objective of this initiative is to promote sharing of compliance awareness throughout the Group. The Compliance Committee reflects issues identified in interviews in its policies and measures.

* Bad News First & Thanks!:
The Sumitomo Group's slogan meaning that managerial personnel and managers should report bad news first and management and executives should appreciate swift reporting of bad news. In light of lessons learned from the problem at the Matsusaka Plant, Sumitomo Riko is working to inculcate this practice throughout the Group.

Compliance Review Day

On January 25, 2012, the Company and employees of the Company were reported to the Public Prosecutor's Office on the grounds of violation of the notification obligation under the Industrial Safety and Health Act at the Matsusaka Plant. The problems were the according of priority to production over legal compliance and delays in reporting a compliance violation recognized in the workplace and in dealing with the matter. To ensure the lessons learned from this incident are never forgotten, the Company designated January 25 of each year as Compliance Review Day. Measures include messages from the Chairperson and the President & CEO, seminars conducted by external experts, a compliance awareness survey, and provision of basic knowledge.
In 2016, two subsidiaries of the Company were subject to suspension for three months by the Acquisition, Technology & Logistics Agency because of erroneous entries in the inspection record for hose products manufactured and processed by the two subsidiaries. This was identified by internal inspections triggered by an employee report. Sumitomo Riko reported to the Agency voluntarily.
Regarding this matter, the "Bad News First & Thanks!" policy was adhered to in swift reporting of the matter to the authority and in responses. On the other hand, the problem revealed a lack of recognition by certain employees of the importance of ensuring trust in records and reports.
Therefore, from 2017 onward, "reliability of records and reports" is included as an objective in addition to the "the basis of business operation is S.E.C.-Q. (safety, the environment, compliance, and quality)" and "Bad News First & Thanks!" policies, and initiatives have been strengthened to learn lessons from past experience.

Anti-corruption Initiatives

Having endorsed the United Nations Global Compact in 2014 and the Tokyo Principles for Strengthening Anti-Corruption Practices of the Global Compact Network Japan in 2018, Sumitomo Riko is implementing anti-corruption measures as the practical expression of management's commitment. The details of anti-corruption activities are reported to the Board of Directors as part of the Compliance Committee's periodic activity report.
The anti-corruption policy is clarified in the Sumitomo Riko Group Global Compliance Action Guidelines, and concrete measures are implemented throughout the Group based on the Compliance Regulations. The anti-corruption policy and measures are instilled through annual education and training conducted worldwide. When starting transactions with an agent, consultant or other intermediary, we check the appropriateness of the transaction (due diligence). In addition, checking from the anti-corruption perspective is implemented in the routine payment management process.

SUMITOMO RIKO COMPANY LIMITED.

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