Sumitomo Chemical cherishes deeply the Sumitomo Spirit which has been passed down through generations over nearly 400 years, the basic teaching of which is not to seek its own corporate interests alone, but to contribute to society through its business activities. In accord with this business credo, the Company strives to constantly take on the challenges of creating new value by capitalizing on its proprietary technologies toward achieving the Company’s sustained growth while at the same time cultivating a corporate culture full of vigor and growing as a Company that earns trust from the public at large. Recognizing that highly effective corporate governance is vital to attaining these ends, the Company keeps working to further enhance its corporate governance in accordance with the following policies and principles, centering particularly on closer cooperation with shareholders and various other stakeholders, faster decision making, proper oversight of business execution, enhanced systems of compliance and internal control, and active dialogue with stakeholders.

• The Company not only shall respect the rights of shareholders, but shall endeavor to provide an environment where shareholders can exercise their rights smoothly and also to ensure the effectively equal treatment of shareholders.
• Recognizing that cooperation with various stakeholders (including shareholders, employees, customers, business partners, creditors, and local communities) is essential to sustained growth, the Company shall proactively work to fulfill its corporate social responsibility and strive to cultivate the corporate culture of a company that can be trusted by society.
• As part of efforts to build a foundation for constructive dialogue with stakeholders, the Company shall endeavor to provide information that is highly reliable and useful to recipients.
• The Company’s Board of Directors shall fulfill its role and mission properly, based on their fiduciary responsibilities and accountability to shareholders and recognizing the important role of Independent Outside Directors, through such measures as presenting appropriate corporate management policies and business strategies that have taken into account changing socioeconomic conditions, and conducting highly effective oversight over the execution of business.
• The Company shall endeavor to promote constructive dialogue with shareholders with the aim of seeking to attain the Company’s sustained growth and to enhance corporate value in the medium to long term.

Corporate Governance Organization

Internal Control

Sumitomo Chemical established its Basic Policy for the Enhancement of the Internal Control System by a resolution of the Board of Directors, creating a system to ensure the appropriateness of its operations as stipulated in the Companies Act.

As stated in the basic concept of this policy, we recognize that the development of an internal control system is a necessary process for maintaining a sound organization and should be actively utilized to achieve business objectives. To continuously enhance our internal control system, we have formed the Internal Control Committee, which is chaired by the President and consists of Executive Officers responsible for and in charge of each business sector and corporate department with Standing Audit & Supervisory Committee Members as observers. Meetings of the committee are held three times a year, with additional meetings held as needed.

At Sumitomo Chemical, the Internal Control Committee plays a central role in discussing various measures based on the basic policy described above. The committee also operates a PDCA cycle by monitoring the implementation status of those measures, and constantly inspects and strengthens the Group’s internal control system in response to changes in the Group’s business and operating environment, ensuring that the Group’s internal control system can function effectively. Summaries of the matters covered in the committee are reported to the Audit & Supervisory Committee after each meeting. These summaries are then reported to the Board of Directors for deliberation.

The Internal Control & Audit Department, which is separated from other business activities and responsible for conducting the committee’s operations, cooperates to ensure the effectiveness of audits conducted by the Audit & Supervisory Committee by acting upon its instructions as necessary, conducting investigations, and preparing reports.

Organization of the Internal Control Committee

Risk Management

Sumitomo Chemical seeks to improve and enhance our risk management system to detect, at an early stage, risks that have the possibility of hindering the achievement of business objectives and to prevent them from occurring as well as to minimize damage when they do occur.

Systems for Promoting Risk Management

Under a risk management promotion system centered on the Internal Control Committee and supported by collaboration among multiple committees, each of the Group’s organizations appropriately manages the risks associated with its business operations in accordance with group policies. The Internal Control Committee sets policies relating to risk management for the Group as a whole and monitors comprehensively the efforts of each organization in accordance with those policies. Additionally, in coordination with risk response coordination departments, it promotes countermeasures for important risks relating to the foundation for business continuation on a Group-wide level. Risks relating to management strategy that require consideration from both an opportunity and a risk perspective are deliberated on a case-by-case basis, with important management matters concerning the Company and its group companies reviewed by the Management Committee, and sustainability-related matters addressed by the Sustainability Promotion Committee.

Promotion of Group-wide Priority Risk Assessment and Countermeasures

Every year, approximately 110 major organizations, both in Sumitomo Chemical and Group companies in Japan and overseas, conduct risk evaluations, assessing the probability of occurrence and the potential impact of various risks that could hinder the achievement of business objectives. Based on the aggregation of these maps, a Group-wide risk map is created. Based on this risk map, the Internal Control Committee identifies priority risks that require Group-wide countermeasures. In addition, our risk response coordination organizations, which have been established for each priority risk, formulate a response plan for the entire Group, and each organization of the Group implements countermeasures in accordance with this plan. Moreover, the committee regularly receives reports on the progress of countermeasures and provides necessary instructions.

To Review and Strengthen the Effectiveness of Risk Management

In this way, we conduct a PDCA cycle for risk management every fiscal year, centered on the Internal Control Committee. In doing so, we are constantly inspecting and strengthening risk management in response to changes in our business and the surrounding environment so that risk management functions effectively. Summaries of the matters covered in the committee are reported to the Audit & Supervisory Committee after each meeting. These summaries are then reported to the Board of Directors for deliberation.

Cross-organizational Risks and Crisis Response

We established the Risk and Crisis Management Committee to deliberate risks and crisis response policies that affect multiple business sites, departments, and Group companies, such as large-scale disasters (earthquakes, storms, floods, etc.), pandemics, deterioration of security in Japan or overseas (terrorism, riots, wars, etc.), and other issues.

Risk Management Promotion Organization