Legal and Ethical Issues

Strengthening Compliance Management on a Global Scale

Basic Concept

Compliance Management

In SEKISUI CHEMICAL Group, we established our Compliance Declaration in 2003 based on principles such as contributing to society, being a trusted company, and adherence to the letter and spirit of the law. In keeping with the spirit of the Group Principles and our Corporate Code of Ethics, we defined our stance for the acquisition of high social trust through compliance. In October 2020, under the leadership of the President of SEKISUI CHEMICAL Group, the Group declared that it regards compliance as the foundation for growth, and that each and every director and employee must act with a high sense of ethics and responsibility and behave in ways that conform to community expectations.
In order to ensure SEKISUI CHEMICAL Group will be widely trusted by society, we will continue to carry out initiatives for improving compliance awareness.

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Prevent Major Compliance Issues

In the Medium-term Plan (FY2020 to FY2022), we carried over zero incidents of major compliance issues as a target from the previous medium-term plan. In fiscal 2021 as well, no cases of major compliance issues arose. In fiscal 2022, we are continuing to strengthen compliance management and are working to prevent compliance issues before they occur.

Growing Awareness Toward Compliance

SEKISUI CHEMICAL Group has created and distributed the Compliance Manual, in which are described the matters with which each Group employee should comply, and also created a pocket version called the Compliance Card in order to instill awareness of compliance in each and every employee. The Compliance Manual includes information on topics such as the prohibitions on corruption and bribery, respect for human rights and the prohibition of discrimination, data management and protection, compliance with antitrust legislation, prohibitions on insider trading, conservation of the global environment and compliance with labor-related laws and regulations, and the internal whistleblowing system; it publicizes, and promotes thorough adherence with these requirements among all employees.
In addition to the existing Compliance Manual, we have created a Global Compliance Manual covering regulations around the world. To allow all overseas Group employees to understand this manual, we have created English, Chinese, Thai, Indonesian, German, Korean, and other editions, and are proceeding with translating the manual into more local languages.
In fiscal 2020, we translated the President’s Compliance Declaration into various languages and included this declaration in the Global Compliance Manuals published in the languages listed above.

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  • The Company’s
    Compliance Manual

  • The Company’s Global Compliance
    Manual (English edition)

  • The conveniently sized Compliance Card

Putting Compliance Management Efforts into Practice

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 Sustainability 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 committees at 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 a major 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.
In fiscal 2021, the Compliance Subcommittee met once in November 2021.

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Compliance Promotion System (from fiscal 2021)

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.
Continuing on from fiscal 2020, we once again enabled employees to participate in paper-based learning programs at the request of Group companies and business sites in fiscal 2021 in order to provide the same learning opportunities for those employees without access to an environment from which they can individually view the intranet, such as those working on production plant floors.

Promotion and Operation of the S.C.A.N. Intra-company Whistle-blowing System

SEKISUI CHEMICAL Group established the Sekisui Compliance Assist Network (S.C.A.N.) intra-company whistle-blowing system. Operated under the supervision of the executive officer in charge of the Legal Department, the system serves as a mechanism for the early detection and revision as well as the prevention of any reoccurrence of compliance problems, including harassment, within the Group.
Group employees can use S.C.A.N. either anonymously or by giving their name. Enabling reports to be made not only to the Legal Department but also to an outside law firm, the system can also be used by business partners.
While strictly stipulating the protection of the whistleblower, such as keeping secret information on the person who provided the information from everyone other than at the point of contact and prohibiting any prejudicial treatment toward or retaliation against that person, under the whistleblower regulations employees are required to report compliance violations when they become aware of them.
When a report is received, interviews are conducted not only with informants but also with the accused, as well as other related parties as necessary. Based on a range of evidence, we confirm the veracity of the facts and, as a reporting point of contact strive to resolve organizational issues from an impartial standpoint.
Globally, we are proceeding with expanding the establishment of reporting points of contact to major overseas areas. So far, we have deployed the system in North America, China, the EU, ASEAN, South Korea, and Taiwan.

Responses to External Notifications

SEKISUI CHEMICAL Group 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.

Prevention of Bribery and Corruption

A signatory to and an approver of the UN Global Compact, which stipulates anti-corruption efforts under its voluntary action principles, SEKISUI CHEMICAL Group is promoting efforts to prevent acts of bribery and corruption in that spirit.
As part of our internal regulations, we have put in place rules to prevent bribery and corruption. These rules have been introduced to all SEKISUI CHEMICAL Group companies. In addition, we have formulated anti-bribery guidelines, which summarize matters concerning bribery and corruption, that employees should observe when doing business in Japan, the United States and China. We have worked to make these regulations and guidelines known via the intranet, so that employees can check them at any time.

Main Measures Relating to the Prevention of Bribery and Corruption

In addition to identifying high-risk cases, SEKISUI CHEMICAL Group has established and implements rules to prevent bribery and corruption. For example, when a government official is to be entertained or presented with a gift, a specified form must be submitted in advance and approval obtained from management. In the event that we appoint an agent or consultant in connection with business transactions, including those involving overseas public officials, we stipulate that this can only be undertaken once we have confirmed that payments of remuneration to that agent or consultant could not be classed as bribes, that there are no reasonable grounds to suspect that payments could constitute bribes and only after a predetermined settlement procedure has been followed.

Identification of High-risk for bribery and corruption Divisions and Employee Training

In the sales and purchasing departments, which are especially at risk for bribery and corruption, we encourage them to learn about regulations and guidelines, such as by conducting training specific to countering graft and corruption, and to make full use of the relevant forms, among other measures.
We also disseminated our policies regarding bribery prevention in the Compliance Manual for domestic use and the Global Compliance Manual for overseas Group companies.
We translated the Global Compliance Manual into English, Chinese, Thai, Indonesian, German, and Korean, and have enabled Group employees to freely check these from the intranet.
In fiscal 2021, bribery-related issues were included in an e-learning program for employees of domestic subsidiary companies. In addition, video training programs on bribery prevention and in-house rules were distributed to domestic subsidiary companies as a part of the Compliance Reinforcement Month initiative.

Initiatives to Strengthen Accounting Compliance

SEKISUI CHEMICAL Group is working to improve accounting skills and financial expertise across the Group as a whole in order to reduce risks related to finance and accounting.
We hold accounting meetings for personnel responsible for accounting at consolidated Group companies in Japan and overseas, to explain and share the rules of accounting and compliance activities. In addition, we conduct accounting workshop meetings as well as e-learning sessions to provide training on accounting skills and financial knowledge, to prevent any incidence of accounting treatment error or accounting fraud, and to enhance the awareness of divisions and employees involved in accounting operations regarding compliance.
Taking into consideration the need to prevent further spread on COVID-19, accounting meetings were held online, with 267 people in Japan and overseas participating in fiscal 2021 in similar fashion to fiscal 2020. The accounting training sessions and workshop meetings were also conducted online, with a total of 75 people participating.

Tax Compliance Initiatives

SEKISUI CHEMICAL Group considers paying taxes as one of the fundamental and important social responsibilities of a company. We comply with the tax laws of each of the countries and regions in which our business activities are conducted and properly pay taxes.
We do not use tax havens for tax avoidance purposes, and pay taxes appropriately in accordance with the economic realities of the countries and regions where we operate. We will contribute to the economies of those countries and regions, aiming for mutual harmonious and stable development.
Transactions with tax risks are confirmed by external specialists as necessary to ensure their proper treatment and to reduce tax risks.
In regard to transfer pricing risks, our transactions are conducted in accordance with arm’s length prices based on local laws and OECD (Organisation for Economic Co-operation and Development) guidelines. To eliminate unstable tax positions, we will use Advance Pricing Arrangements (APAs) only in accordance with the size of the transaction and level of tax risk. In addition to responding sincerely and appropriately to any inspections by tax authorities, the results of such inspections are reported to the Board of Directors and efforts made for improvement as appropriate. Through these efforts we endeavor to maintain good relationships with tax authorities.

Major Initiatives

Compliance Reinforcement Month

SEKISUI CHEMICAL Group has set aside October of each year as Compliance Reinforcement Month, to give all employees the opportunity to reflect on their compliance awareness and actions.
In fiscal 2021, we implemented training in Japan covering four broad themes: power harassment, quality compliance, bribery, and labeling regulations. This training was conducted remotely online to prevent the spread of COVID-19 and to provide learning opportunities for employees who could not attend. A web conference system was employed in the case of power harassment and quality compliance training and video streaming for the remaining two themes.

Initiatives Taken During Compliance Reinforcement Month in Japan (Fiscal 2021)

  • 1.
    Thorough dissemination of the Top Message on Compliance (October 2021) to all Group employees
  • 2.
    Implemented all types of compliance training / Held an open-style legal seminar in which employees participated of their own accord (Web conference system relay training 20 times in total), video streaming (2 themes)
  • 3.
    Introduced the Compliance Reinforcement Month activities and provided class information on educational video programs in SWITCH Group web newsletters
  • 4.
    Conducted e-learning using the Company intranet (setting themes centered on bribery and harassment, including discrimination)
  • 5.
    Dissemination and reporting of compliance messages by frontier leaders to their own organizations
  • 6.
    Initiatives in North America, China, Southeast Asia, and Europe (September to March)

Reinforcement of Global Legal Affairs Structure

SEKISUI CHEMICAL Group is reinforcing its legal affairs structure by developing and deploying legal personnel, strengthening collaboration among legal departments, and enhancing legal functions.
We are also expanding and rolling out horizontally those initiatives undertaken during Compliance Reinforcement Month in Japan on a global scale across a wide range of countries and regions including North America, China, Southeast Asia, and Europe. The themes taken up during Compliance Reinforcement Month are selected with a focus on those issues that are judged by each regional headquarters to be of high risk to the region.

Fiscal 2021 Compliance Reinforcement Month Initiative Themes by Region

  • North America:
    Offsite educational programs using various tools including learning management systems (LMS) and intra-company whistle-blowing system explanatory briefings
  • Note:
    LMS themes selected from the following options:
    • Antitrust legislation
    • Diversity and anti-bias training
    • IT fraud prevention and controls
    • Post-COVID-19 new normal
  • China:
    Group educational programs, compliance training using video teaching materials and tests to assess levels of understanding implemented on the following themes:
    • Fundamentals of compliance
    • Information management
  • Southeast Asia:
    Educational programs implemented on themes of bribery, antitrust legislation, defamation (harassment) and whistleblowing
  • Europe:
    Educational activities regarding the leakage of information, confirmation of personal information management and implementation of educational seminars from perspective of GDPR

Legal Compliance with Antitrust Laws as well as Statutory and Regulatory Requirements Relating to Advertising and Labeling

At SEKISUI CHEMICAL Group, we operate a business organization membership payment system, a pre-application and follow-up report system for competitor contact, and a price revision committee system as a compliance program for antitrust laws. The implementation status of these systems is audited yearly, and the program is revised as needed. This program has also been introduced at domestic business companies with high cartel risk.
In addition, SEKISUI CHEMICAL Group adheres strictly to laws and regulations including the Act against Unjustifiable Premiums and Misleading Presentations while engaging in good faith marketing related to advertising and product labeling when conducting its business activities.

Performance Data

e-Employees Using the e-learning System Over Time

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  • e-Employees Using the e-learning System Over Time

    • Note:1:
      Average values for four sessions conducted in each year. However, the third and fourth sessions were underway during fiscal 2021 when this chart was created, so the average value for sessions one and two is provided for that year.
    • Note:2:
      With the exception of overseas local hires, all SEKISUI CHEMICAL and SEKISUI CHEMICAL Group employees are required to take part in e-learning programs.

List of Results Relating to Compliance Training

Fiscal 2021 List of Results Relating to Compliance Training

Training Training content Trainees Attendance
SEKISUI CHEMICAL Co., Ltd. Group companies
Domestic Overseas
Regular training Training for new employees   424
Newly appointed senior management training   177
Newly appointed executive officer training   3
Training for those responsible for compliance   292
Training for those responsible for promoting compliance   42
Area-specific training Compliance training   3930
Harassment preventing training   1020
Export controls training   311
Act against Delay in Payment of Subcontract Proceed, etc. to Subcontractors training     232
Anti-monopoly law training   1619
Act against Unjustifiable Premiums and Misleading Representations training     188
Personal information protection training   53
Information management training   290
Accounting training     23
Contract fundamentals training   918
Other statutory and regulatory training   425
Global training Training for prior to overseas transfers   18
Compliance Reinforcement Month Domestic training   1365
North America training     1841
China training     776
China training     863

Number of Whistleblowing Cases and Consultations

Fiscal 2021 Number of Whistleblowing Cases and Consultations

Reports/consultations Number of cases
Power harassment 26
Working conditions 35
Sexual harassment 3
Workplace environmental concerns 5
Misuse of expenses 0
Sales methods related 4
Misrepresentation of work performance 3
Collusive relationship with business partners 2
Others 13
Total number of complaints 91

Donations to Political Groups

SEKISUI CHEMICAL Group does not make illegal political contributions.
The amount of donations (made by SEKISUI CHEMICAL on a consolidated basis) to political groups that are intended to encourage the formulation of public policies that benefit society as a whole are as follows:

(Unit: thousands of yen)
Fiscal Year Amount
FY2017 13,232
FY2018 14,429
FY2019 16,936
FY2020 8,705
FY2021 10,690