Corporate GovernanceLast Update : Sep 21, 2018

Corporate Governance

The Company maintains as its basic policy for corporate governance the promotion of sustainable corporate growth and the increase of corporate value over the medium to long term. To realize this, the Company will enhance the transparency/fairness of management, pursue prompt decision-making, and continue to fulfill the expectations of “customers,” “shareholders,” “employees,” “business partners,” and “local communities and the environment,” the five major categories of stakeholders that the Company values most, through the creation of value to society expressed in its corporate philosophy

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Compliance & Risk Management

While giving consideration to human rights on a global scale, the Sekisui Chemical Group is at the same time strengthening its compliance initiatives that are in tune with the ethics and social norms value by society as it adheres strictly to laws, regulations and internal rules. Moreover, and as far as risk is concerned, the Sekisui Chemical Group is reinforcing its system that unifies risk management, to prevent risks from occurring, and crisis management, which involves responding to major risks.

Compliance

Our Approach to Compliance

The Sekisui Chemical Group carries out compliance management based on fundamental principles, including contributing to society, being a trusted company, and adherence to both the letter and spirit of the law, and principles that are spelled out in its Compliance Declaration announced in 2003. Based on the spirit of the Company Philosophy and our Corporate Code of Ethics, our compliance initiatives are in tune with the ethics and social norms valued by society as we strictly adhere to laws, regulations and internal rules.
Our business and compliance activities support the corporate value of the Sekisui Chemical Group, and compliance is the basis of all management activities. We aim to remain a company in which each individual employee can be proud of our good intentions. To this end, we strive to improve awareness of compliance throughout the Sekisui Chemical Group in order to remain in the trust of society.

Prevent Compliance Issues

In the CSR Medium-term Plan, which we started to implement in fiscal 2017, we carried over "zero incidents of major compliance issues" as a KPI target from the previous medium-term plan. From fiscal 2015 onward, Sekisui Chemical has continually achieved zero incidents of corruption and fraud. In fiscal 2017 as well, no major compliance issues arose.
We will continue strengthening our management of compliance and work to prevent compliance issues before they occur.

Building an Effective Compliance Promotion System

We are building a realistic and effective compliance promotion system to ensure that compliance management is fully put into practice. In addition to having established a Compliance Subcommittee—which reports to the CSR Committee and is chaired by the executive officer who heads the Legal Department—as an organization to oversee Group compliance and to put forward policies and implementation measures, we are also establishing compliance promotion subcommittees at corporate headquarters and at each divisional company, appointing persons responsible for putting compliance promotion into practice and implementing and deploying each measure. In the unlikely event that an important compliance issue arises, we will hold a Compliance Advisory Board meeting to address any problems that have actually occurred and examine measures to prevent a recurrence.

Reinforcement of Global Legal Affairs Structure

The Sekisui Chemical Group has been reinforcing its legal affairs structure by developing and deploying legal personnel, strengthening collaboration among legal departments and enhancing legal functions.
In fiscal 2017, employees responsible for legal affairs at Sekisui Europe B.V. and Sekisui Southeast Asia Co., Ltd., our regional management companies in Europe and Thailand, respectively, took up new posts and commenced, for example, contract screening and the expansion of the internal reporting system.

Compliance Training

As part of our efforts associated with putting compliance management into practice, we also focus on employee compliance education. We continuously provide opportunities for all Group employees to learn about the importance of compliance, such as by conducting e-learning sessions specific to compliance quarterly. These e-learning programs include information about compliance as training for new employees and as rank-specific training.

Upgrade of the Whistle-blowing Program

In 2002, the Sekisui Chemical Group developed the Sekisui Compliance Assist Network (S.C.A.N.) intra-company whistle-blowing system, which is the mechanism that has been made available for use by all Sekisui Chemical Group employees and its business partners. Operated under the supervision of the executive officer in charge of the legal department, S.C.A.N. enables direct reporting not only to the executive officer in charge of the Legal Department but also to an outside law firm. In addition to serving as a reporting system, S.C.A.N. also plays a role as a point of contact for consultations, such as whether a specific act would be classed as a compliance violation. In order to create an organizational culture that maintains full awareness of compliance, the system also prescribes the protection of the whistleblower and stipulates that information on the person who provided the information be kept secret from everyone other than at the point of contact and the prohibition of any prejudicial treatment toward that person.
Moreover, in accordance with the establishment of the Corporate Governance Code, we reconfigured the internal reporting system in fiscal year 2015 as part of the strengthening of governance functions at each Sekisui Chemical Group company and newly put in place points of contact for consultations from, and whistleblowing by, suppliers. This consultation/notification point of contact is intended for use by the executive officers and employees of business partners in Japan who are continuously conducting business transactions with Sekisui Chemical Group companies. We occasionally accept requests for consultations and receive reports via a form made available on Group company websites and, while conducting consultations with business partners, proceed to confirm the facts and take corrective action concerning any alleged “law-violating conduct.” The content of consultations and reports is shared only among the minimum number of people necessary to resolve the “law-violating conduct" concerned, and all parties that need to be involved are obliged to keep that content confidential.

Compliance Reinforcement Month

In fiscal 2014, we decided that October of each year would be Compliance Reinforcement Month, to give all employees the opportunity to reflect on their compliance awareness and actions. In fiscal 2017, under the banner of “actual compliance violation case studies,” a range of initiatives were carried out in Japan based on actual past cases of compliance violations that had occurred inside and outside the Company. We also expanded the area in which Compliance Reinforcement Month is implemented overseas, which resulted in Group companies in North America and China launching Compliance Reinforcement Month initiatives.

Risk Management

Basic Philosophy

Here at the Sekisui Chemical Group, we are working to build a risk management structure that unifies “risk management,” which aims to prevent risks from occurring in the first place, and “crisis management,” which responds to serious risks that have manifested. Through this unification of concepts, we aim to create a system that can be brought to bear on ever-changing risks and crises.

Management Structure

In the Sekisui Chemical Group’s risk management structure, the head of the HR department, who is also a Director and Managing Executive Officer, holds ultimate responsibility, and the Risk Management Group of the HR Department at Corporate handles day-to-day risk-management operations. We are striving to publicize and thoroughly install among the directors, executive officers, and employees of Sekisui Chemical and its Group companies the “Sekisui Chemical Group Risk Management Guidelines,” which were established based on the revised “Basic Philosophy on Internal Corporate Governance Systems” of April 2015, to identify significant risks and to prevent them from manifesting by centrally and comprehensively collecting and evaluating information about risks. In the event that a significant risk does become manifest, an Emergency Response Headquarters will be established based on the “Sekisui Chemical Group Crisis Management Guidelines,” creating a framework capable of swiftly and appropriately handling the situation. In preparation for such rare contingencies, a code of conduct regarding this framework, to be referred to by all employees, has also been shared with all Group employees via the Group intranet and other means.

Bolstering Risk Management (Prevention) Structures

It is extremely difficult to accurately monitor for risks that could foreseeably occur at some point in the future, as our corporate activities become more complex. We at the Sekisui Chemical Group believe that increasing risk sensitivity among employees is essential to handling such risks, and the Group continuously runs PDCA cycles in line with the international standard for risk management ISO 31000. These activities launched during fiscal 2011 among 27 organizations, primarily business units within the Company. The number of organizations engaged in these actions has increased each year, reaching 165 in total, including those in Japanese and overseas affiliates, in fiscal 2017. These organizations collectively account for around 93% of consolidated revenue, and the Group is working to improve the effectiveness of these actions through inter-organizational cooperation and linkages among specialist divisions.

Identifying Risks

To make clear which risks the Group as a whole should prepare itself for, the scope of anticipated risks has been identified comprehensively, going beyond ESG risks alone, and these risks have been compiled into the “Sekisui Chemical Group Risk List.”

Bolstering the Crisis-Management System

Based on its experience during the Great East Japan Earthquake, the Sekisui Chemical Group carried out a full-scale overhaul of its crisis management system in fiscal 2011 and has been refining that system ever since. Specifically, the Group, among other initiatives, has been conducting drills (at least twice yearly) based on the Emergency Response Headquarters Procedures Manual, annual education (for all employees) using the Emergency Situation Initial Response Procedures Manual, and organizing disaster-preparedness systems based on disaster-preparedness checklists in all offices (around 800 within Japan). As of January 2012, the rate of sufficiency regarding disaster-preparedness systems, in reference to the Cabinet Office’s “Table of Self-Evaluation Items,” averaged 41% among all offices. Because of instituting concrete measures, however, the Group has, since fiscal 2015, reached a point where it has been able to maintain an average rate of over 90%.

Basic Philosophy toward Business Continuity Planning (BCP)

BCP is the very essence of business strategy. Therefore, the Sekisui Chemical Group, whose adoption of a company system has made the range of the business in which it engages broad, has decided on a basic posture of having those in charge of each line of business (the heads of business units, the presidents of business companies, etc.) determine the necessity of BCP individually, based on the particulars of the business in which they are engaged. Because of this, the Group has created a support system, such as by establishing “Guidelines for Formulating BCP (BCM)” and drawing up a checklist for performing this formulation. Each person in charge of a line of business is recommended to formulate business-continuity plans and to implement business continuity management (BCM) based on these guidelines and on ISO 22301, a standard for methods of implementing BCM.

Crisis Management Systems Overseas

Based on its corporate regulations “Overseas Safety Management Regulations,” the Sekisui Chemical Group has formed a pyramid-shaped overseas crisis management organization with an officer in charge of overseas crisis management at the peak. (The officer in charge of overseas crisis management is answered to by [the head of the] Overseas Crisis-Management Office, to which the regional heads answer, and to who in turn the heads of locations answer.) It is primarily through this organization that the Group supports employees traveling abroad, those stationed abroad, and locally based employees, using such means as sharing crisis management-related information, issuing advisories in a timely manner, instructing employees about travel restrictions, and implementing other emergency-response measures. As the number of Group locations increases with each passing year, crisis-management manuals have been organized at each factory, office, or other business location based on support provided by the Overseas Crisis-Management Office, and these manuals are revised periodically and whenever deemed necessary. Regarding risks particular to overseas sites, including civil unrest, terrorism, and infectious diseases, the Group has organized a support system based on signing contracts with crisis-management companies, such as those that provide security assistance and medical assistance. Additionally, the Group conducts training sessions for employees seconded overseas before they are dispatched abroad, provides pre-trip e-learning for employees sent on business trips, and explains its overseas crisis management system to its employees; it also issues warnings about risks overseas. In recent years, in particular, business trips and secondments to frontier regions have become more common, and thus the Group has stepped up its partnerships with Japanese diplomatic missions abroad and has created and distributed region-specific crisis management handbooks detailing the types of risks and levels of danger for each region, 20 in total.

Improving the effectiveness of risk management activities

With the aim of improving the effectiveness of risk management activities, the Group conducted risk management training sessions for the risk managers of the risk-management activities organization in fiscal year 2017. There were a total of 14 of these risk management training sessions conducted throughout the year, and there was a 93% participation rate among the risk managers targeted.

Major ESG Risks Faced by the Sekisui Chemical Group