Foundation for Value Creation

Last updated: Sep. 28, 2021

Corporate Governance Initiatives

Basic policy

SEKISUI CHEMICAL Group has put in place a basic philosophy regarding corporate governance that lays out efforts for securing sustainable growth and increasing corporate value over the medium and long terms. To help achieve these goals, we are increasing the transparency and fairness of our management and pursuing swift decision-making and will do so while continuing to meet—through the creation of value for society that is part of our Corporate Philosophy—the needs of the five types of stakeholders the Group emphasizes: customers, shareholders, employees, business partners, and local communities and the environment.

Organizational Structure

As an organizational structure under the Companies Act, the Company has chosen to be a company with an Audit & Supervisory Board. Under the Divisional Company Organization System, the Company has adopted the Executive Officer System to clearly distinguish the business execution function (executive officers) from the supervisory function (directors) in order to respond quickly to changes in the business environment of each divisional company.

(As of June 23, 2021)

Organizational Structure A company with an Audit & Supervisory Board
Total number of directors 10 (In-house: 7; Outside: 3)
including 1 female director
Ratio of outside (independent) directors 30.0%
Ratio of female directors 10.0%
Director’s term of office 1 year
Executive officer system introduced Yes
Organization to assist the president in making decision Policy Committee
Voluntary advisory board to the Board of Directors Nomination and Remuneration Advisory Committee established

Initiatives Taken to Enhance Corporate Governance

2001 Divisional Company Organization System introduced
2003 Quality specialist selected as an Outside Audit & Supervisory Board Member
2007 The term of office of Directors shortened from 2 years to 1 year
2007 Legal, accounting, and quality specialist system implemented for Outside Audit & Supervisory Board Members
2008 Executive officer system introduced
2008 2 independent Outside Directors appointed
2015 Sekisui Corporate Governance Principles established
2016 Nomination and Remuneration Advisory Committee established
2018 Number of independent Outside Directors increased to 3

Group Principles

1959 Corporate Philosophy and 3S Principles established
1999 Corporate Principles established
2009 Group Vision established
2014 Corporate Principles incorporated into the Corporate Philosophy and the Group Vision

Corporate Governance System (As of June 23, 2021)

Corporate Governance System Chart

Board of Directors

The Board of Directors is positioned as the body responsible for decision-making concerning the Company’s fundamental policies, handling upper-level management judgments and supervising the execution of business. The Board of Directors has in place a highly effective supervisory system for Directors by appointing sufficiently independent Outside Directors to ensure transparency in management and fairness in business decisions and operations.

In addition to Directors, Audit & Supervisory Board Members, including outside Audit & Supervisory Board members, shall attend the meetings of the Board of Directors. The Board of Directors is chaired by the Representative Director and Chairman, a non-executive director.The Group ensures diversity among board members and keeps the number of Directors at an optimal level for appropriate decision-making that is commensurate with the business domain and size.

The Board of Directors maintains a balance between diversity, optimal size, and capabilities while effectively fulfilling its role and responsibilities. This includes the appointment of presidents of the divisional companies, who are the top management of each business, as inside Directors, and senior corporate officers with significant experience and strong expertise, as well as independent Outside Directors, who have broad knowledge and experience, and Audit & Supervisory Board Members with strong expertise.

Outside Directors

The Company appoints to the Board three Outside Directors with verified independence from the Company who contribute to the enhancement of corporate value by providing oversight and advice based on their extensive administrative experience and specialized knowledge gained in backgrounds different to those of the Company. Based on their diverse and objective perspectives, the Outside Directors provide counsel especially on priority management issues, such as global development strategy, business model revisions, and the strengthening of ESG management.

The ratio of Independent Outside Directors to total Board of Directors members will be reviewed as appropriate, taking into account any expansion in the scale or scope of SEKISUI CHEMICAL Group’s business, as well as the overall environment in which it operates.

Composition of the Board of Directors (As of June 23, 2021)

  • *1 The solid blue circle indicates the chairman or committee chairman.
  • Note: The list above does not reflect the full range of expertise possessed by the Directors and Audit & Supervisory Board Members

Board of Directors, Audit & Supervisory Board Members, Executive Officers (As of June 23, 2021)[PDF:1.0 MB]

Reference: Number of Directors by Age

The number of Directors shall not exceed 15, and the Board of Directors shall consist of human resources who have an excellent character, insight, and a high moral standard in addition to knowledge, experience, and skills. The Company is continuously seeking to ensure diversity of the Board of Directors.

Management System (As of June 23, 2021)

Note: All Audit & Supervisory Board Members also attend meetings of the Board of Directors.

Other Major Corporate Meetings and Committees

Assessment Relating to the Board’s Effectiveness

The Company evaluates the effectiveness of the Board of Directors every year. Having set an appropriate agenda, the Board of Directors engages in sufficient discussion with opinions and recommendations actively provided by Directors (including Outside Directors) and Audit & Supervisory Board Members. The Company has therefore determined that the current Board of Directors is contributing to enhancing the corporate value of the Group and functioning properly. In addition, the Company evaluates and improves the Board’s function by discussing the effectiveness of the Board and points to improve at the Nomination and Remuneration Advisory Committee, holding regular meetings to exchange views between Outside Directors and the senior executive of the Company, and between Audit & Supervisory Board Members (including outside Audit & Supervisory Board Members) and accounting auditor, as well as Board of Directors Meeting agenda-setting and the status of active participation of each Directors and Audit & Supervisory Board Members.

The Board of Directors met 17 times in fiscal 2020. In addition, discussions of important matters related to our management policies and strategies were carried out at meetings of the Policy Committee, which is made up of inside Director members. Policy decisions were made by the Board of Directions following these discussions

Questionnaires for Evaluating Effectiveness
In fiscal 2020, we implemented questionnaires for Directors and Audit & Supervisory Board Members to evaluate the effectiveness of the Board of Directors. Based on the results, we confirmed that sufficient time for discussions was secured for the Board of Directors and that both Outside and Inside Directors, as well as Audit & Supervisory Board Members, actively exchanged their opinions with one another. With the goal of further improving the effectiveness of the Board of Directors, we are planning to add important management concerns identified in the questionnaire responses to the agenda for future meetings.
The important management issues taken up and deliberated by the Board of Directors in fiscal 2020
Long-term Vision, new Medium-term Management Plan, growth strategies (including R&D, large new businesses, and capital investment), and fundamental strategies (Sustainability Committee reports, digital transformation, safety and CS & quality), etc.

Support for and Collaboration with Outside Directors

To enable the Outside Directors to enhance deliberations at Board of Directors’ meetings, the Company continuously provides opportunities for them to deepen their understanding of the Group’s widerange of businesses. This is done, for example, by the prior distribution of materials for Board of Directors’ meetings and explanations given beforehand by the executive officer in charge of the secretariat, orientation visits at the time Outside Directors are appointed, and inspections of business sites. In April 2021, we conducted an online inspection of the Shiga-Ritto Plant and the General Institute of the Urban Infrastructure & Environmental Products Company.

To further enhance the effectiveness of management supervision by Outside Directors, the Company is making improvements to the deliberations that take place at the Nomination and Remuneration Advisory Committee, where the majority of the members are Outside Directors, and facilitating their dialogue with Audit & Supervisory Board Members and corporate auditors. From the point of view of succession planning, the Company is strengthening contacts between current management and next-generation management candidates, for example, by having Outside Directors give lectures at Executive Officers Liaison Meetings that are held on a quarterly basis and providing opportunities for Directors, Audit & Supervisory Board Members, and Executive Officers to meet when the new management system is inaugurated following the Annual General Meeting of Shareholders.

Audit System

At least one of the Audit & Supervisory Board Member candidates shall be nominated as an individual who has knowledge and expertise in corporate finance and accounting, and at least one other candidate shall be nominated as an individual who has knowledge and expertise in legal systems. Audit & Supervisory Board Members attend not only the Board of Directors meetings but also other important meetings, carrying out confirmation of the maintenance and operating conditions of the internal control system through operations such as investigation of related departments, including at Group companies, and confirmation of approval documents for major projects.

The Audit & Supervisory Board met 19 times in fiscal 2020, during which the members sufficiently shared information and exchanged opinions with each other, including outside Audit & Supervisory Board Members.

The Audit & Supervisory Board regularly holds meetings for exchange of opinions with the Internal Audit Department to understand the current internal issues, while the members personally visit various sites for audits as necessary. The results of the internal audit conducted by the Corporate Audit Department and the improvement status of audit findings are reported to the Audit & Supervisory Board Members on a timely basis. With the assistance of the dedicated support staff, Audit & Supervisory Board also collects information from internal departments and conducts any necessary interviews. Moreover, Audit & Supervisory Board Members confirm the audit plan with accounting auditor Ernst & Young Shin-Nihon LLC and exchange information and opinions periodically with the accounting auditor including receiving audit reports, with the aim of increasing the effectiveness and efficiency of audits through close collaboration. Liaison meetings were held with related corporate auditors to improve coordination with auditors and enhance the quality of auditing.

In addition, Audit & Supervisory Board Members hold a regular meeting with the Representative Directors, Directors, and executive officers to exchange opinions on the issues that the Company should resolve, the status of the improvement of the environment for audit by Audit & Supervisory Board Members, and important audit issues and to make necessary requests to enhance mutual understanding.

Nomination and Remuneration Advisory Committee

The Company has established an optional advisory committee concerning nomination and remuneration to complement the functions of the Board of Directors and to further enhance the fairness and transparency of management. This Committee comprises six members, the majority of whom are independent outside directors. The Chairperson is elected from the independent outside directors. When nominating directors, deliberations are held by the Nomination and Remuneration Advisory Committee, with opinions then reported to the Board of Directors, where the decision on candidates will be made.

Roles of the Nomination and Remuneration Advisory Committee
  • Appoints and dismisses Representative Directors, Directors, and other senior executives; appoints and dismisses Audit & Supervisory Board Member candidates; and appoints and dismisses advisors and executive advisors, including former Representative Directors and Presidents
  • Deliberates on the adequacy of the Director remuneration system and remuneration levels, etc.
  • Deliberates and makes recommendations to the Board of Directors on important management issues as necessary
Fiscal 2020 Activities
The Nomination and Remuneration Advisory Committee met six times and deliberated matters regarding the composition and effectiveness of the Board of Directors, initiatives to strengthen corporate governance, director remuneration, and policy regarding the determination of remuneration levels, etc.

Succession Planning for SEKISUI CHEMICAL Group’s President

Supervision and planning for SEKISUI CHEMICAL Group President’s successor is conducted in appropriate consideration of its management principles and strategies. To enhance the objectivity, timeliness, and transparency of the procedures, the Nomination and Remuneration Advisory Committee deliberates on the eligibility of a candidate for the office of President over an appropriate period of time, and makes recommendations to the Board of Directors, which then makes a final decision regarding succession.

Internal Control System

In May 2006, the Board of Directors resolved to adopt a fundamental policy regarding the establishment of an internal control system for ensuring the appropriateness of the Group’s business activities. Based on the Corporate Activity Guidelines set forth in accordance with the Group corporate philosophy, the Company seeks to realize collaborative interaction concerning the supervision, direction, and communication with Group companies, while providing guidance, advice, and evaluations to Group companies to ensure the appropriateness of business operations for the Group as a whole.

In regard to the business management of Group companies, monitoring is conducted by Audit & Supervisory Board Members, the Corporate Audit Department, etc., and enhancements are made to the system for Group companies to seek approval from and make reports to the Company based on the “Rules for handling affiliated companies” and “Guidelines for final decisions at affiliated companies.” In addition, if a misconduct arises at the Company or a Group company, thoroughgoing efforts will be made to prevent it from occurring again by requiring that a report on the details of the incident be made to the divisional company in charge or the Compliance Promotion Subcommittee at the corporate headquarters without fail and that the Compliance Subcommittee be contacted by the Compliance Promotion Subcommittee so that all information will be collected and brought to the Director or executive officer appointed as the chairperson of the Compliance Subcommittee.

Compliance

The Sustainability Committee, chaired by the President, deliberates on Fundamental Compliance Policies that require the approval of the Board of Director and has established a designated Compliance Subcommittee to plan, consider, and decide on important compliance-related matters, with the aim of establishing and implementing a compliance system for the Company and its Group companies. The Company has also prepared the “SEKISUI CHEMICAL GROUP Compliance Manual,” presenting the guidelines for acting in accordance with laws, regulations, the Articles of Incorporation, and corporate ethics. The Company also conducts training in regards to various laws and regulations and corporate ethics. As part of the whistleblower system, the Company has set up a reporting contact at an external law firm that is independent from the Company in addition to the internal reporting contact in Japan. In addition, the Company has set up points of contact for the employees of foreign affiliates in the United States, China, ASEAN, Europe, and South Korea. The protection of the whistleblower is prescribed by the Corporate Whistleblower Rules to put in place an environment in which whistleblowers do not suffer any disadvantage. For example, the identity of the whistleblower is kept secret from anybody other than the reporting contact.

Learn more Compliance (Legal/Ethical and Accounting)

Risk Management

The Group has implemented a Group-wide risk management structure for integrated management of measures to prevent risk events from occurring (risk management) and to respond when risk events occur (crisis management). Through this unification of concepts, we are creating a system that can be brought to bear on ever-changing risks and crises. Ultimate responsibility has resided with the Managing Director of the ESG Management Department, who also acts as the Head of the Business Strategy Department, since April 2020. The ESG Management Department Risk Management Group serves as a dedicated office that publicizes and thoroughly instills the “SEKISUI CHEMICAL Group Risk Management Guidelines,” which were established based on the “Basic Philosophy on Internal Corporate Governance Systems,” and strives to identify significant risks and to prevent them from manifesting by centrally and comprehensively collecting and evaluating information about risks. In fiscal 2021, the Group implemented these risk management activities at 171 organizations, including affiliated subsidiaries in Japan and overseas, and continuously runs PDCA cycles in line with the ISO 31000 international standard for risk management. A dedicated office classifies and organizes any risks identified by these organizations, and reports to each subcommittee under the Sustainability Committee and deliberates on Group-wide countermeasures as necessary. Moreover, in the Medium-term Plan launched in fiscal 2020, we are deploying an enterprise risk management (ERM) system in a way that integrates our existing organization-specific risk management activities with our Group-wide risk management activities.

In the event that a significant risk does become manifest, the Crisis-management System establishes an Emergency Response Headquarters based on the “SEKISUI CHEMICAL Group Crisis Management Guidelines” and creates a framework capable of swiftly and appropriately handling the situation. The Group also periodically revises this system and holds drills, and has established a framework for appropriately reporting to the Board of Directors when a serious incident, or the risk thereof, occurs. Since fiscal 2021, the Group has been developing and revising an emergency response plan (ERP) that places the protection of human life as the highest priority at all organizations as a new Group-wide initiative. In addition, the Group focuses on establishing BCM in line with the individual characteristics of each business in our diverse lineup of domestic and overseas operations.

Given that our overseas locations have increased in number and importance with each passing year, we established Regional Headquarters in each of the four main regions and appointed the person responsible for the Regional Headquarters as the Regional Head. The Global Crisis Management Office cooperates with the Regional Headquarters and leads the response to any crises that occur overseas.

Learn more Business Continuity Planning (BCP)

Sustainability Initiatives

In order to achieve the Long-term Vision, “Vision 2030,” the Group promotes “ESG management” in aims of realizing both a sustainable society and the sustainable growth of the Group itself. To this end, we are working together with stakeholders on the three steps described below.

  • Development of “three prominences” (Environment, CS & quality, Human Resources) and “internal control”
  • Accelerate the solution of social issues through three approaches (increasing quantity, improving quality, and providing sustainably)
  • Create and expanding the value of “peace of mind for the future” in four business domains

Chaired by the President and served by the Director responsible for the ESG Management Department as deputy chairperson, when implementing these initiatives the Sustainability Committee deliberates on extracting risks and opportunities that the Group might face in the future, Group-wide policies, and strategies. Major items and Group-wide risks determined by the Committee are reported to and deliberated by the Policy Committee and the Board of Directors. These initiatives are then deployed Group-wide following discussions at each of the seven subcommittees and incorporated into the action plans of each organization.

Under the Medium-term Management Plan Drive 2022, which commenced in fiscal 2020, the Group has established the following key issues and advanced specific initiatives in order to build a corporate structure that is capable of practicing ESG management and sustainably enhancing corporate value.

Learn more Strengthening the ESG Management Base Drive 2022

Promotion of Diversity

In addition to differences in outward appearance such as gender, age, and race, the Group focuses on differences based on careers, values, and personality in terms of diversity. In 2015, we formulated the Diversity Management Policy based on the concept of understanding, recognizing, and interpreting the differences between each and every employee as strengths. We have been advancing initiatives to empower women since 2007 in two stages: “established practice and active participation” and “creating managerial positions.” In order to accelerate Diversity Management, we commenced work-style reforms in 2018 and health management activities in 2019. In addition to these, since fiscal 2020 we have worked to expand opportunities to undertake challenges, which enable a diverse range of human resources to play an active role, with the aim of transforming into a “Vibrant Company.”

Learn more Human Resources

Addressing Climate Change Issues by Leveraging TCFD Scenario Analyses

In regard to climate change and other external environmental issues that pose a risk to management, the Group investigates and executes appropriate action policies upon identifying the degree of risk under the Board of Directors’ supervisory system. In order to accelerate our problem-solving and understanding of risks, as well as related coping measures, in 2018 we adopted 2°C and 4°C warming scenarios and conducted risk assessments based on these analyses. Since this time, we have revised these risk assessments each year to reconfirm our position. Based on the results of these revisions, we have also investigated initiatives for businesses in which risks can be converted to opportunities since fiscal 2020 and have managed the progress of these initiatives based on the Medium-term Management Plan and the Environmental Medium-term Plan we formulated.

Learn more Environment

Basic Policy on Cross-Shareholdings and Criteria for the Exercise of Voting Rights

Basic policy on cross-shareholdings

SEKISUI CHEMICAL Group strategically holds shares of other companies, to a limited extent, that are important business partners provided that it made the judgment on such holdings to be beneficial for the purpose of maximizing its medium-to long-term enhancement of corporate value as well as that of business partners. Strategic rationale shall be reviewed in an appropriate and timely manner and SEKISUI CHEMICAL Group reduces those holdings without sufficient strategic benefits or that are inconsistent with its capital policies as necessary.

Verification of the necessity of cross-shareholdings

SEKISUI CHEMICAL conducted an assessment of the individual holdings in accordance with the basic policy to examine specific benefits by such shareholdings (listed companies) and consistency with the risk-benefit evaluation of such individual holdings over the cost-of-capital and other factors, and made a judgment for appropriateness of holding them at the Board meeting held on June 10, 2020. The total number of shareholdings of listed companies was 26 as of the end of March 2021, compared with 28 holdings as of the end of March 2020 as a result of the disposition of two holdings during fiscal 2020.

Number of cross-held stocks, Total Amount of Cross-held Stocks Recorded in the Balance Sheet

Criteria for the exercise of voting rights concerning cross-shareholdings

SEKISUI CHEMICAL performs its monitoring function as a shareholder by exercising voting rights at shareholder meetings of the shareholding companies in accordance with the specific standards with respect to its established voting rights to reflect perspectives of connecting the medium- to long-term enhancement of its corporate value with the corporate value enhancement of the above companies based on the strategic position of such holding and dialogue and so forth with them. As to the exercise of voting rights, SEKISUI CHEMICAL Group applies a judgment standard, considering significance of agendas proposed by companies (including special resolution items, etc.), business performance (equity ratio, profit/loss condition, etc.) in their current fiscal year, and their business sustainability. SEKISUI CHEMICAL then makes the final comprehensive decision on proposals based in part on dialogue with those companies.

Remuneration and Other Compensation for Officers

Policy regarding determination of remuneration and other compensation

Basic policy

The remuneration system policy for officers of the Company is defined as follows in keeping with the corporate philosophy of the Group.

  • The policy should contribute to continuous growth and medium- to long-term improvement of corporate value for the Group
  • Officers of the Company should share value with shareholders and increase their awareness of shareholder-focused management
  • The remuneration policy should be highlyconnected to business performance, providing motivation for officers of the Company to achieve management plan goals
  • The policy should provide a framework and baseline which enables the Company to acquire and keep on staff a diverse variety of management talent in order to increase the competitiveness of the Group
Remuneration mindset

Remuneration and other compensation for executive directors of the Company is made up of basic remuneration, bonuses, and shared-based compensation. For Outside Directors and Audit & Supervisory Board Members, remuneration is made up of basic remuneration only.

Basic Remuneration

Basic remuneration within the framework of officer remuneration is a fixed payment determined by the roles and responsibilities of each Director. For executive directors, a portion of the basic remuneration is required to be used for the purpose of the Company’s stock through the Officers Stock Ownership Plan, increasing the emphasis on and awareness of stock prices in management.

Bonuses

The bonus represents the performance-based remuneration, the amount of which is determined based on the payment standards linked to the business performance of the Company and each divisional company, ROE (return on equity), and dividend policy.

Share-based compensation

The share-based compensation is an incentive plan aimed at further raising motivation to contribute to the improvement of medium- and long-term business performance and improve the Group’s corporate value, under which the number of shares to be granted is determined in accordance with the position of Directors (excluding Outside Directors). Said plan has a structure enabling Directors to receive a benefit at the time of retirement for the results for which they contributed to enhancing the Company’s medium- and long-term corporate value in the form of the Company’s shares reflecting such enhancement in share value, thereby enhancing the link with medium- and long-term shareholders’ value.

Ratio of performance-based and fixed remuneration for directors* (fiscal 2020)

The amount of the officers’ remuneration of the Company is determined based on the roles and responsibilities of the officer. The system has been designed so that the higher the rank of the officer the higher the ratio of the performance-based remuneration component. The responsibilities of each officer also reflect the business performance of the divisional company for which he or she is responsible. Since fiscal 2021, Director bonuses are determined on a performance basis. In addition to the Group’s overall performance, the payment of bonuses reflects such non-financial indicators as the sales ratio of products to enhance sustainability as well as equity to total assets (ROE) trends. Moreover, we have introduced a share-based compensation plan. This incentive plan is designed to further raise the motivation of Directors and is linked closely to shareholders’ value over the medium to long term.

Officer Remuneration in Fiscal 2020

Process of determining officers’ remuneration

In determining the amount of remunerations, etc., to the Company’s Directors and the policy on determining calculation methods, the matter is deliberated by the Nomination and Remuneration Advisory Committee in advance and the results of the deliberation are recommended to the Board of Directors. The Board of Directors determines the policy based on the recommendation of the said advisory committee. The following is a summary of the procedures taken by the Nomination and Remuneration Advisory Committee.

Method for Determining Remuneration Used by the Nomination and Remuneration Advisory Committee

The chairman (Outside Director) convenes the committee, and the agenda items are proposed by each committee member and deliberated by the committee. The results of deliberation by the committee are recommended to the Board of Directors by the chairman. The members of the committee are required to determine these matters from the perspective of whether it contributes to the Company’s corporate value and ultimately to the common interests of the shareholders, and are prohibited from making decisions that would solely benefit the personal interests of oneself or that of third parties, including the management team of the Company. In determining the amount of remuneration, the Nomination and Remuneration Advisory Committee deliberated the Directors’ remuneration levels and other matters including the personnel evaluations and remuneration of each Director and the Board of Directors made a final decision. The specific amount, payment date, payment method, and other matters are left to the discretion of President and Representative Director.

Research & Development/Intellectual Property

SEKISUI CHEMICAL Group recognizes that maintaining prominence in technology is the bedrock for creating value. This is particularly the case in the “Residential and Social Infrastructure Creation” and “Chemical Solutions” fields, where the Group’s technology platform provides the underlying strength of its competitive advantage. In order to further advance this prominence in technology, the Group is committed to consistently strengthening its human resources and organizational structure in the research & development and intellectual property fields.

Research & Development

28 Technological Platforms

Since 2014, SEKISUI CHEMICAL Group has enhanced each of the core technologies in our Technological Platforms (TPF) formulated as the Group-wide basis for technology development, engaged in new innovations that rely on TPF fusion, and advanced the development of engineering personnel. In aiming for sustainable growth amid the changing business environment that encompasses the Group, we periodically revise the TPF when we formulate the Medium-term Management Plan.

Research & Development System

The Group’s Long-term Vision lays out the four domains of residential, advanced lifeline, innovative mobility, and life science, as well as new business domains and next-generation frontiers. In each domain, we undertake the challenge of innovations that leverage our core technologies in aims of expanding existing businesses and creating new businesses. Serving as the R&D system that supports these efforts are the primary R&D centers within the Housing Company, the UIEP Company, the HPP Company, Sekisui Medical Co., Ltd., and the Corporate Headquarters. The three Divisional Companies and Sekisui Medical vigorously promote development while aggressively leveraging open innovation in the four domains related to each, while the Corporate Headquarters does the same with a focus on next-generation frontiers.

R&D and Intellectual Property Management System

Treatment of Human Resources Engaged in R&D

As part of our system for the evaluation and appreciation of superb researchers and engineers, the Group has established the “Technology Award” and “Invention Grand Prize.” The Group has also established a specialist position system for researchers and engineers with highly specialized skills. The system selects exceptional individuals who have been recognized as possessing highly advanced skills and appoints them to uniquely defined specialist positions. The system promotes ongoing development and aims to cultivate outstanding researchers and engineers recognized both inside and outside the Company. As of July 2021, 32 people have been appointed to specialist positions, and we are promoting technology platform strengthening initiatives with a long-term perspective.

Reference: 28 Technological Platforms

Intellectual Property

Fundamental Policy

Intellectual property is the source of competitiveness for companies and is an important management resource that underpins growth and revenue aimed at optimizing corporate value. At SEKISUI CHEMICAL Group, to utilize the prominence of our technology to its fullest potential and contribute to our business, we conduct competition environment analysis using information related to intellectual property, markets, and competition, and this serves as a starting point for our strategy development, intellectual property portfolio management, and other strategic intellectual property promotion activities.

In addition, we have been working on applications for digital transformation for some time and are now proactively branching out into new intellectual property trends such as materials informatics and AI.

Through the activities above, we are contributing to growth and creation for our business in the intellectual property field in the Medium-term Management Plan Drive 2022.

Energizing Intellectual Property Culture

With the goal of increasing employee awareness of intellectual property, we started a system in fiscal 2010 that grants “P-Badges” to those who submitted a certain number of patent applications. Currently, our corporate culture considers it a matter of course for all engineers to earn one. There are a variety of awards systems in place for intellectual property activity achievements, and in addition to awards for inventions that contribute to profits, there are others which use different criteria such as number of patent applications in a year, invention originality, and strength of the application network. We also give awards for actions utilizing licenses and rights, such as earning license revenue and blocking the entry of other companies. These awards systems are intended to increase employee motivation related to intellectual property. Within this awards framework, there is a special company president award called the “Invention Grand Prize”, which recognizes the achievements of inventors whose inventions make major contributions to profit for the Group as a whole. The Invention Grand Prize is divided into four grades ranging from Special Class to 3rd Class, assigned depending on the extent of the invention’s profit contribution, and there are bonuses awarded to winners for each grade. The Special Class bonus has no upper limit and is instead defined as a ratio of the profit contribution amount. This system has been in place since fiscal 1999 and is now in its 21st year. In fiscal 2020, a 1st Class Invention Grand Prize was awarded for a patent related to an in vitro diagnostics product that measures HbA1c in blood and a 2nd Class Invention Grand Prize was awarded for a liquid crystal display element sealant patent.

Intellectual Property Training for Employees

We have established a training program for new engineers during their first three years that covers essential topics ranging from fundamentals of intellectual property to strategy development and is implemented at all companies. In fiscal 2020, lectures were implemented 20 times and roughly all of the target group, approximately 550 engineers, participated. In addition, we provide individual specialized education programs for each divisional company to cultivate practical skills in line with their business. For trademarks and branding issues, the target group for education programs is expanded to include marketing and sales staff as well.

Group-wide Intellectual Property Application (IP Landscaping)

SEKISUI CHEMICAL Group engages in analysis activities that combine markets and technology information with a focus on intellectual property (IP landscaping). This approach supports strategy planning and intellectual property portfolio enhancements in departments that work to strengthen the business competitiveness of existing products, as well as those that create new products and businesses. Meanwhile, it also aids decision-making when undertaking high-level management and business assessments, such as M&As, so we promote the use of this approach throughout the Group.

Performance Data

In the “Patent Asset Scope Ranking” and “Ability to Restrain Other Companies Ranking” released by Patent Result Co., Ltd., our company was ranked fourth in both in 2020, and we have maintained a position in the top 10 of both rankings for the past five years.

Patent Asset Scope 2020 Ranking

Ability to Restrain Other Companies 2020 Ranking

Number of patent applications (domestic)

Number of patents possessed (domestic and international)

Human Rights Initiatives

SEKISUI CHEMICAL Group recognizes that it is our responsibility to protect human rights of all individuals affected by our business activities and is promoting global-scale measures aimed at protecting the human rights of all stakeholders who are impacted by our business activities.

Learn more SEKISUI CHEMICAL Group “Human Rights Policy”

Actions in regard to the UK Modern Slavery Act

We released the SEKISUI CHEMICAL Group Modern Slavery Statement in September 2019 in recognition of the need of the Group as a whole to take action in regard to human rights issues. This statement is pursuant to section 54 (1) of the UK Modern Slavery Act 2015 and sets out the actions taken by SEKISUI CHEMICAL Group to prevent any form of modern slavery or human trafficking in any part of the Group’s business or within its supply chains. Going forward, the Group will take appropriate measures regarding human rights laws and regulations in countries and regions beyond the United Kingdom.

SEKISUI CHEMICAL Group Modern Slavery Statement[PDF:695 KB]

Initiatives to Build a Human Rights
Due Diligence* Framework

In November 2018, we employed an external specialized agency, which conducted an assessment of human rights risks, with the aim of building a human rights due diligence framework. The results of this assessment confirmed that there was a high level of potential occupational health and safety as well as other human rights risks mainly overseas (China, India, Thailand, and Brazil). Since February 2019, interviews of Group employees with experience stationed in Thailand, China, and India, as well as internal staff of related departments, have been conducted. These interviews confirmed that there was no discrepancy with the assessment results.

*Human rights due diligence is the ongoing management process of identifying and assessing any potential negative impact on human rights (human rights risks) from a company’s business activities, and if there are human rights risks, the process of creating mechanisms to prevent or mitigate the impact from such risks.

10 Human Rights Issues in Primary Business Activities*
Assessment Results (2018)

*10 human rights issues: (1) Child labor, (2) Fair wages, (3) Fair working hours, (4) Discrimination in the workplace, (5) Modern slaverys, (6) Freedom of association and right to collective bargaining, (7) Rights of indigenous peoples, (8) Rights relating to property, assets, and housing, (9) Occupational health and safety, and (10) Right to privacy

Interview Results: “Awareness of safety at overseas production companies is high and safety activities have taken hold,” “Positive conditions such as a lack of discrimination toward immigrant laborers, foreigners, and women working there were identified at the Group companies involved in the interviews,” “Although headquarters-led CSR procurement surveys are implemented for suppliers, no supplier checks were performed from the perspective of human rights at the site level,” and “Some overseas production companies have factories that use a large number of temporary workers (fixed-term employees).” As per above, some of the findings indicated issues requiring further confirmation of onsite conditions, and in fiscal 2020 a third-party organization conducted employee interviews at the following sites in Japan in order to understand the severity of the impact.

Targets: Foreign nationality employees (including contract employees) working at Higashi Nihon Sekisui Industry Co., Ltd., an Urban Infrastructure & Environmental Products Company, as well as personnel and labor management supervisors for these foreign nationality employees.
Results: Although no serious human rights risks were identified, a feedback reporting session was implemented to share extracted issues for improvement such as the need for multilingual support for plant internal guidance and notices.

In addition to follow-up evaluations related to the handling of these issues, we will carry out similar human rights interviews at overseas locations in the future. In this way, we will develop a framework for human rights due diligence.

Caring About Human Rights Issues
Across the Entire Supply Chain

Through CSR procurement with our suppliers, we make sure our business partners respect human rights. With regard to suppliers that do not meet the prescribed standards, a request is made to ensure that the necessary steps are taken to resolve any issues. We are making progress with the development of mechanisms, designed specifically for our overseas business partners and suppliers, to encourage improvements via our regional headquarters. We are currently focusing on confirming procurement policies with our direct business partners while also drafting procurement guidelines that incorporate specific content to ensure that SEKISUI CHEMICAL Group policies are being widely adhered to throughout the entire supply chain, including at secondary and tertiary suppliers from fiscal 2021. We are also considering endorsing and participating in accredited supply chain initiatives in order to further improve the quality of human rights due diligence. In addition, SEKISUI CHEMICAL is concerned about the conflict mineral problem, namely the mineral resources controlled by armed forces in the Democratic Republic of Congo and neighboring countries that commit human rights violations and destroy the environment. We conduct surveys on the use of conflict minerals at companies throughout our supply chain from a CSR perspective.

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Conducting Educational Programs
that Include Preventing Harassment

In order to conduct human rights-conscious management, we provide training and education on human rights to our employees. In particular, we incorporate content that raises awareness of human rights-related issues such as forced labor, child labor, and harassment into training programs conducted at milestones such as being hired and promotions. In fiscal 2020, we launched the “Business and Human Rights E-Learning” program using the Company intranet to promote awareness of our stance to respect human rights of all people affected by our business activities. We also conduct annual harassment training to prevent harassment, with 367 employees participating in fiscal 2020.

Stakeholder Engagement

To build relationships of trust with its five stakeholders —customers, shareholders, employees, business partners as well as local communities and the environment—SEKISUI CHEMICAL Group considers that it is important to improve corporate value through constructive dialogue. Positioning its stakeholders as partners in improving corporate value, having constructive dialogue with them, and assessing their expectations and requests, as well as resolving society-wide issues together with them, leads to great opportunities for SEKISUI CHEMICAL Group. We will create a relationship of mutual prosperity with our stakeholders while continuing to promote sustainable growth.

Promoting Constructive Dialogue
with Stakeholders

Dialogue with Stakeholders

Rallying to the catchphrase “we consider customer feedback as the beginning of our manufacturing,” we have worked diligently to realize quality that is always specified by customers. In this regard, SEKISUI CHEMICAL Group conducted Customer And Top (CAT) meetings (held for approximately 50 houses in fiscal 2020), which featured Housing Company executives listening to customer feedback directly.

Dialogue with Employees

Believing that dialogue between management and employees is essential in resolving the problems faced by the Company as well as work-related issues, SEKISUI CHEMICAL Group has been providing opportunities for direct dialogue between employees and top management since fiscal 2002.

In fiscal 2020, we held eight online Vision Caravan 2020 meetings in Japan and five overseas (East Asia, ASEAN, India, Australia, North America, and Europe) to promote awareness of our newly formulated Vision 2030 and ESG management, the key to realizing our Long-term Vision, among all employees throughout the Group. The president and directors outlined their personal thoughts on how to realize Vision 2030 while also explaining the Group’s ESG management. In response, employees discussed among themselves and deepened their understanding toward how they should approach each business activity in order to realize Vision 2030. Taking into consideration a variety of factors, employees also looked into how they can link individual operations to the Group’s ESG management. In response to questions and presentations that arose from deliberations among employees, the president and directors provided comments and feedback, while promoting lively interactive dialogue.

Vision Caravan 2020 event held online

Dialogue with Shareholders and Investors

SEKISUI CHEMICAL Group believes it is important to actively disclose information in a timely and appropriate manner. On the SEKISUI CHEMICAL Group website, we established the Corporate Information Disclosure Regulations, which specify the content and system of disclosure as part of our effort to strengthen our internal information disclosure framework, based on the Principle of Corporate Information Disclosure. Taking full consideration of fair disclosure, SEKISUI CHEMICAL Group posts its financial statements and results briefings on its website in Japanese and English simultaneously and provides recordings of each briefing and a transcript of the question-and-answer sessions. In fiscal 2020, management held online presentations of the Long-term Vision and Medium-term Management Plan, as well as quarterly financial results briefings.

With its business domains so diverse, SEKISUI CHEMICAL Group believes it is important to give clear explanations of its actions to individuals to deepen understanding of the Group’s overall business characteristics and ESG management initiatives. Among a host of initiatives, the Company actively conducts meetings with institutional investors and sell-side analysts. In fiscal 2020, we held a small meeting for sell-side analysts covering the HPP Company’s growth strategy together with each business strategy.

We view active engagement between investors and management as one of our key points of focus, and are actively engaging in constructive dialogue with investors and shareholders, with the feedback reflected in our management efforts. We are also working to improve our IR materials, including the Integrated Report, based on the opinions and questions we receive. In fiscal 2020, we were ranked second in the chemicals and textiles industry in the annual Securities Analysts’ selected companies performing excellent disclosure conducted by the Securities Analysts Association of Japan (SAAJ). This is in recognition of the Company’s proactive approach to the disclosure of ESG and other non-financial information.

We intend to continue focusing on the voice of the capital markets moving forward, and will promote measures aimed at bolstering corporate value and ensuring sustainable growth by providing clear and detailed explanations.

Local Communities and the Environment

SEKISUI CHEMICAL Group emphasizes a perspective that encompasses contributions to the development of communities through our business, coexistence with communities, and environmental conservation. We are collaborating with local communities and working to convey to the next generation the importance of conserving the natural environment. In addition to implementing career educational programs for elementary, middle, and high school students that leverage the characteristics of our business activities, we are promoting a wide range of activities including various environmental preservation activities in an effort to safeguard the natural environment conducted by Group business sites while providing support and assistance for research based on innovations inspired by nature.

Kyusyu Sekisui Children’s Nature Academy

Distributing Value to Stakeholders (Fiscal 2020)

SEKISUI CHEMICAL Group calculates the status of distribution based on financial statements by stakeholder, using GRI and other standards as a reference.