Compliance

Basic Policy

The Sumitomo Chemical Group places compliance at the bedrock of its corporate management. As we engage in business in many parts of the world, all of the companies in the Sumitomo Chemical Group are devoting earnest efforts to stay in strict compliance with not only laws and regulations, but also ethical principles in a business environment.

Both the spirit and the letter of ensuring compliance in business activities have consistently been enshrined at Sumitomo Chemical ever since its founding. This unwavering resolve towards compliance is embodied succinctly in the “Sumitomo Chemical Charter for Business Conduct,” which serves as the guideline of conduct for every employee to abide by and constitutes the backbone of our day-to-day compliance activities.

In recent years, in particular, companies are expected to fulfill their societal responsibilities more than ever before. Given the circumstances, all companies in the Sumitomo Chemical Group are making concerted efforts to further compliance activities, under the strong leadership of top management, to further enhance compliance in the Group’s business activities on a global basis.

The Sumitomo Chemical Charter for Business Conduct and Code of Ethics Embody the Sumitomo Spirit and Business Philosophy

Sumitomo Chemical has established the Sumitomo Chemical Charter for Business Conduct  to embody the Sumitomo Spirit, Business Philosophy, and Basic Principles for Promoting Sustainability. In addition, to better define the Charter for Business Conduct and more clearly explain it to employees, we established the Sumitomo Chemical Code of Ethics (hereinafter, “the Compliance Manual”) as corporate rules and distributed them to employees.

Compliance System at the Sumitomo Chemical Group

(1) Compliance Committee

Sumitomo Chemical has established a Compliance Committee chaired by the President and holds a Compliance Committee meeting at least once a year (or more frequently as needed). Details discussed by the committee are reported to Board of Directors and Board of Corporate Auditors, and the committee then receives feedback from them.

The committee establishes overarching principles of compliance from a global perspective, and then works with each business sector and Group company, both in Japan and abroad, to build and operate their compliance systems locally in the required manner, according to those global principles.

(2) Group Compliance Structure Focused on Effectiveness (Think globally, Manage regionally, Act locally)

As business globalizes, it becomes more important that the operation of a corporation’s compliance system be fine-tuned to situations specific to individual countries or companies. In light of this, we have established Regional Legal & Compliance Offices (RLCOs) in Sumitomo Chemical’s major business regions. The RLCOs, grasping the concrete needs and tasks of their respective Group companies, provide hands-on support and guidance to them, such as helping to set and implement necessary internal rules and procedures, building a company’s compliance system, and assisting in its operations.

Compliance System at Sumitomo Chemical Group

(3) Introducing and Operating a Compliance System for the Company and its Group Companies

To ensure thorough compliance throughout the entire Sumitomo Chemical Group, it is important that Sumitomo Chemical and its Group companies establish and operate their own compliance systems. Accordingly, we established the Sumitomo Chemical Group Compliance Standards, which outlines the compliance systems and activities that serve as our standards. In line with these standards, Sumitomo Chemical and its Group companies are engaged in the following main initiatives.

  1. Establishment and operation of the Compliance Committee (including responding to internal reports and conducting compliance violation investigations)
  2. Introduction and regular review of the Code of Ethics
  3. Introduction and operation of the Internal Reporting System (Speak-Up Reporting System)
  4. Conduction of compliance activities (education, training, etc.) based on a compliance risk assessment of each group company

Compliance System Operations

Internal Reporting System (Speak-Up Reporting System)

(1) The Internal Reporting System Is the Key to Ensuring Compliance

In order to detect any compliance violations as early as possible or to prevent them from occurring in the future, the Sumitomo Chemical Group has introduced an internal reporting system (the Speak-Up Reporting System) that allows company employees, etc. to report a compliance violation or a suspected violation directly to the Compliance Committee or to external lawyers, either.
Sumitomo Chemical’s executives and employees (including contract employees) and their families, Group companies’ executives and employees, and anyone involved in the Company’s businesses (including trading partners) may use the Speak-Up Reporting System.
Furthermore, to receive a Speak-up report without fail, Sumitomo Chemical have set up Speak-up reporting hotlines to receive reports at ( i ) the Compliance Committees of each Group company, (ii) RLCOs, (iii) the Compliance Committee of Sumitomo Chemical, and (iv) external lawyers designated by these committees. The person reporting can choose the hotline they think most appropriate. In addition, anonymous reports are also accepted and responded to.
Note: Regarding reporting within the European Union, we act in compliance with the various laws and regulations of the European Union or its individual member countries.

How a Report is Processed under the Internal Reporting System (Speak-Up Reporting System)

(2) Guidance and Oversight by the Board of Corporate Auditors, Including Outside Corporate Auditors

On the grounds that Speak-Up reports given to the Compliance Committees of Sumitomo Chemical and the Group companies, as well as compliance violation incidents at each company, are also important from a governance perspective, the Board of Corporate Auditors will regularly, or as needed for important issues, receive reports on these reports and violations, and will provide guidance and oversight.

(3) Promoting Use of the Internal Reporting System (Speak-Up Reporting System)

Sumitomo Chemical Group has established Company rules that the company carry out investigations based on the speak-up report with utmost consideration to protecting the privacy of a reporting person and maintaining confidentiality of information provided and that the company doesn’t put truthful reporting person at any disadvantage, such as dismissal, transfer, or discrimination, on the ground of having made the report. Moreover, to ensure that the Speak-Up Reporting System functions in a truly effective manner, Sumitomo Chemical’s Compliance Committee takes every opportunity to explain to employees that speak-up reporting will never disadvantage a reporting person. In this regard, the Committee has been working to help employees understand clearly that confidentiality about the reporting is maintained and any disadvantageous treatment to a reporting person is strictly prohibited. In addition, the Committee shares with employee’s information about how far the Speak-Up Reporting System is in use by employees.

(4) Latest Results of the Internal Reporting System

As a result of initiatives promoting use of the reporting system, in fiscal 2018, the total number of reports made to the Compliance Committees of Sumitomo Chemical and its Group companies (including listed companies in which the Company holds a stake of 50% or more) was 149, a year-on-year increase of 51 reports. Upon its receipt, each report was worked on, and an investigation was conducted promptly and cautiously into a reported incident. When violations were found or if a situation that might eventually develop into an incident of violation was recognized, corrective measures were taken properly. In addition, information on a violation incident and corrective measures actually taken was shared, as necessary, by other companies of the Group so that they could prevent similar incidents from occurring in their workplace in the future.

Number of Reports (Sumitomo Chemical Group*)

 FY2017FY2018
Number of reports 98 149

* Includes those listed companies in which the Company holds a stake of 50% or more

Response to Compliance Violations

At Sumitomo Chemical, when a compliance violation or suspected violation is discovered within a department, the compliance supervisor in the department promptly reports to the relevant department and the Compliance Committee. After submitting a report, an investigation is carried out, and if any compliance violation is discovered, corrective and preventative measures are formulated and rolled out not just to the offending department but to the entire Sumitomo Chemical Group to ensure a recurrence is thoroughly prevented. In addition, the Internal Control & Audit Department and the Responsible Care Department conduct audits from the perspective of compliance. When compliance violations are discovered through these audits, corrective action is taken directly at that time. In fiscal 2018, there were no major compliance violations related to the Sumitomo Chemical Group’s business continuity.

Results of Main Compliance Activities in the Sumitomo Chemical Group

(1) Compliance Committee Meetings

Sumitomo Chemical and its Group companies have established Compliance Committees, which convene either regularly (at least once a year) or as appropriate. Sumitomo Chemical’s Compliance Committee convened on April 19, 2019, and reported its results to the Board of Directors and Board of Corporate Auditors, from which it received feedback.

(2) Review and Update of the Compliance Manual

Sumitomo Chemical and its Group companies regularly review the Code of Ethics (at least once a year). After conducting a review, if there is need for an update, it is made promptly. Sumitomo Chemical conducted a review of the Code of Ethics at relevant departments. In light of these results, we updated the Code of Ethics in September 2019.

(3) Compliance Promotion Activities

( i ) Compliance Risk Management Activities (Compliance Promotion Month, etc.)
Sumitomo Chemical and some of its Group companies have designated October as Compliance Promotion Month. During this month, all employees in each workplace, including manufacturing, sales, and various intermediate departments, participate in discussions to examine and identify all conceivable compliance risks, major or minor, that might arise in each workplace. They then go on to select those risks that need to be specifically addressed, and formulate concrete measures to prevent the risks from occurring in the future. For those preventive measures that are already in place, they review once again whether or not the measures are effective enough when implemented. Continuous implementation of these measures not only reduces specific compliance risks in the workplace but also helps in raising employees’ compliance consciousness.
During the Compliance Promotion Month initiatives of fiscal 2016, so-called “fraud” risks were made essential topics of discussion. In fiscal 2017, collusion and harassment were essential topics, and, in fiscal 2018, information leaks and management of the company’s assets were essential topics, as all major compliance risks were examined and identified in each department, and then, concrete preventive measures were formulated and implemented. Reports on these activities are submitted by each department, and an evaluation team that includes outside legal counsel objectively evaluated them. With the goal of further raising the level of compliance, we shared information on departments with positive evaluations and the details of their initiatives within the Company.

( ii ) Compliance Training
In line with its firm belief that strict compliance can only be achieved with each employee having high awareness of compliance, Sumitomo Chemical places importance on carrying out compliance education on a continual basis. This includes training programs geared to management executives at Sumitomo Chemical and Group companies as well as class-based training when someone is promoted. In addition, we conduct face-to-face lecture-style training courses and e-learning training, depending on each company’s specific needs and situation.
In fiscal 2018, we conducted compliance e-learning training for all Sumitomo Chemical employees (around 7,000 people), and all employees received the training. In addition, some Group companies in Japan conducted similar e-learning training, and all eligible employees received the training.

Status of Implementation at Sumitomo Chemical and Group Companies

 Status of Implementation
Sumitomo Chemical

Compliance e-learning training (including anti-harassment, corruption prevention, data falsification/manipulation prevention, raising awareness of the internal reporting system)
Participation rate: 100% (conducted at all worksites and departments)
(already conducted training for promoted employees and individual training related to quality assurance, safety, logistics, information security, etc.)

Group Companies

Percentage of companies that conducted training related to compliance
Group companies in Japan: 97.4%
Group companies overseas: 89.6%

(iii) Employee Compliance Awareness Survey
In order to measure the effect of the initiatives listed above, including compliance activities and training, Sumitomo Chemical regularly conducts employee compliance awareness surveys, and in fiscal 2017, a survey of more than 40 Group companies in Japan and overseas were conducted. In fiscal 2018, around 20 Group companies in Japan and overseas were conducted.
Questions about topics such as the compliance awareness among individual employees were designated as key performance indicators (KPIs) for this survey, and observing trends in these KPIs each time a survey is conducted will lead to the discovery of issues and the setting forth of measures aimed at further improvement.

(4) Initiatives to Respect Human Rights, Prevent Corruption and Comply with Competition Laws

An area of our recent focus is to strengthen those initiatives which lead to respect human rights (refer to Respect for Human Rights), and initiatives will more effectively serve to maintain sound business practices in companies’ entire supply chains, through implementing measures to prevent corruption, such as bribes and collusion with business partners (including bribery and collusion with operators; refer to Anti-corruption), as well as initiatives to ensure strict observance of competition laws.
In addition, with regard to competition laws, we implemented a thoroughly revised Competition Law Compliance Manual in fiscal 2017, and we will also promote to introduce the Manual in Group companies going forward. Furthermore, we actively are providing trainings using this Competition Law Compliance Manual.

Status of Implementation for Training Related to Competition Laws

 Status of Implementation
Sumitomo Chemical

Already implemented at eligible worksites and departments
(total of 12 times)

Group Companies

Group companies in Japan (already implemented): 79.5%
Group companies overseas (already implemented): 70.8%

(5) Compliance Audit

As it is also important to conduct audits of whether the operations of the compliance structure and various compliance activities are being appropriately carried out in each department of Sumitomo Chemical, and in each Group company, the Internal Control and Audit Department and the Responsible Care Department conduct compliance audits. (For more details on the Responsible Care Department’s audits, refer to Responsible Care (RC) Audits.) Regarding matters discovered during the compliance audits, appropriate corrective measures are taken.

Sumitomo Chemical Group Compliance Action Policy (FY2019)

Under the Corporate Business Plan, ensuring strict compliance for the entire Sumitomo Chemical Group is a basic policy, Sumitomo Chemical steadily respond to the following issues.

  • New trends, including the SDGs, ESG, sustainability, diversity, and respect for human rights
  • The increasing impact of compliance violations (sanctions, damage of credibility, etc.) associated with our global expansion
  • The growing importance of daily risk control and crisis management

In this way, Sumitomo Chemical will strengthen and improve the Group’s compliance system operations and continue to further enhance its effectiveness.

Fiscal 2019 Sumitomo Chemical Compliance Action Goals

ItemMedium- to Long-Term GoalFY2019 GoalFY2018 Results (Ref.)

Internal Reporting
(speak-up reporting)

100 or fewer employees per report

10% year-on-year improvement
(419 employees per report)

466 employees per report
Compliance Training Continually conduct yearly compliance training at all Group companies Conducted compliance training at all Group companies

Sumitomo Chemical: 100%
Group companies in Japan: 97.4%
Group companies overseas: 89.6%

Looking Ahead

Being a global enterprise, Sumitomo Chemical’s Compliance Committee, RLCOs, and Group companies are deeply committed to fulfilling their corporate citizenship responsibilities as a global corporation by carrying out the Sumitomo Chemical Group Compliance Basic Policy.