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 the company was founded. 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. In fiscal 2019, the South American RLCO was established and started its activities after we acquired businesses in South America.

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.

(ⅰ) Establishing and operating the Compliance Committee (including responding to internal reports and conducting compliance violation investigations)

(ⅱ) Introducing and regularly reviewing the Code of Ethics

(ⅲ) Introducing and operating the Internal Reporting system (the Speak-Up Reporting System)

(ⅳ) Implementation 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.
The Speak-Up Reporting System may be used by Sumitomo Chemical’s executives and employees (including contract employees) and their families, Group companies’ executives and employees and their families, retirees from the Company or Group companies, and anyone involved in the Group’s businesses (including trading partners).
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)

In its Compliance Manual, Sumitomo Chemical Group makes clear that the company carries 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 the truthful reporting person at any disadvantage, such as dismissal, transfer, or discrimination, on the grounds of having made the report. The manual also states that if someone commits a compliance violation but reports it to the company of their own volition and cooperates with the Compliance Committee’s investigation, the person is eligible for leniency regarding the disciplinary action that would ordinarily be proscribed. We are raising awareness of these facts among employees. 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, any disadvantageous treatment to a reporting person is strictly prohibited, and leniency is possible. In addition, the Committee shares with employees 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 2019, 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 151, a year-on-year increase of 2 reports. Upon its receipt, each report was worked on, and an investigation was conducted promptly and cautiously into a reported incident. If compliance 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*)

 FY2017FY2018FY2019
Number of reports 98 149 151

* 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 2019, 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 22, 2020, 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 Code of Ethics

Sumitomo Chemical and its Group companies regularly consider revisions to 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 April 2020.

(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, research, sales, and various intermediate departments, partic-ipate 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; in fiscal 2018, information leaks and management of the company’s assets were essential topics; and in fiscal 2019, compliance with business laws was an essential topic. 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 2019, we conducted compliance e-learning training for all Sumitomo Chemical employees (around 7,000 people), and all employees received the training. In addition, Group companies in Japan conduct compliance training.

FY2019 Compliance Training Status

 Status of Implementation
Sumitomo Chemical

Compliance e-learning training (including prohibition of insider trading and personal data protection)
Participation rate: 100% (conducted at all worksites and departments)
(already conducted training for promoted employees and individual training related to corruption prevention, quality assurance, safety, logistics, information security, etc.)

Sumitomo Chemical Group*

Percentage of employees who received training related to compliance (attendance rate)
Attendance rate at Group companies in Japan: 73.2%
Attendance rate at Group companies overseas: 73.8%

  • Does not include Sumitomo Chemical

(iii) Employee Compliance Awareness Survey
In order to measure the effect of the initiatives listed above, including compliance activities and training, Sumitomo Chemical and Group companies in Japan and overseas regularly conduct employee compliance awareness surveys. In fiscal 2019, Sumitomo Chemical conducted its sixth employee compliance awareness survey. and around 50 Group companies in Japan and overseas conducted similar surveys. Questions about topics such as the compliance awareness among individual employees were desig-nated 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 and Prevent Corruption

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).

(5) Initiatives to Comply with Competition Laws

To fully ensure compliance with competition laws, Sumitomo Chemical has established the Committee on Antitrust Compliance and Corruption Prevention (chaired by the company’s President) to establish and manage competition law compliance systems for the entire Sumitomo Chemical Group under the guidance and supervision of the Board of Directors and Board of Corporate Auditors. In addition, we issued the Competition Law Compliance Manual, and we intend to promote the introduction of the manual by Group companies in Japan and overseas going forward. Furthermore, we are actively providing training using this Competition Law Compliance Manual.
Moreover, as a general rule, we prohibit executives and employees of business departments from interacting with rival operators. We introduced an operator consultation system to permit such interactions only in the event that it is necessary for operations and, in such exceptional cases, that approval has been given in advance. In addition, product sales prices must always be independently set based on our own standards. To ensure this, when revising product sales prices and price formulae, the Company convenes the price deliberation committee, which determines the revisions after thorough deliberation.

Status of Implementation for Training Related to Competition Laws (Including Awareness Raising Activities)

 Status of Implementation
Sumitomo Chemical

Already implemented at eligible worksites and departments
(cumulative total of 14 times since FY2018)

Sumitomo Chemical Group*1

Group companies in Japan*2: 48.6%
Group companies overseas*2: 60.0%

  1. Does not include Sumitomo Chemical
  2. Percentage of companies that conducted training

(6) 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 (FY2020)

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.

FY2020 Sumitomo Chemical Compliance Action Goals

ItemsFY2020 GoalsFY2019 ResultsFY2018 Results

Internal Reporting
(Speak-Up reporting)

Regarding the number of employees per report, maintain 100% compared to the previous fiscal year (280 people per report)

280 people per report

283 people per report
Compliance Training Conduct compliance training at 90% of Group companies

Sumitomo Chemical*1: 100%
Group companies in Japan*2: 97.4%
Group companies overseas*2: 83.6%

Sumitomo Chemical*1: 100%
Group companies in Japan*2: 97.4%
Group companies overseas*2: 89.6%

  1. Attendance rate (percentage of employees)
  2. Percentage of companies that conducted training

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.