Legal and Ethical Issues

In Fiscal 2003, SEKISUI CHEMICAL Group established the Compliance Declaration. Based on the concepts of contribution to society, being a trusted company, and complying with the law and its spirit, we have clarified our stance of earning a high level of trust from society through compliance in accordance with our principles and the spirit set forth in our Corporate Activity Guidelines.
We are currently aiming to grow sustainably under our Long-term Vision, Vision 2030, and at the heart of this commitment is compliance. Under the current Medium-term Management Plan, we are working to improve our management ability to sustain business by suppressing the number of major incidents. We are working to raise the awareness of compliance among each and every employee by promoting various compliance programs.
We will continue our efforts to further strengthen compliance management so that the Group can be widely trusted by society.

The Group considers the risk of violating the Antitrust Law, bribery-related laws, security export control and related laws, and the Personal Information Protection Law to be a serious compliance risk, and is focusing its efforts on avoiding violation. In addition, the Group views compliance in a broader sense, which includes not only laws and regulations, but also internal rules and regulations, social norms, and morals. In other words, compliance in the Group means adapting to social demands. We recognize that this social requirement is constantly changing. We believe that there is a risk of non-compliance without being aware of it if we are not able to detect changes sensitively and respond to them.

The Group prepared the Compliance Manual in 2003. It consists of conduct guidelines and detailed explanations of compliance items such as anti-corruption, conflicts of interest, compliance with the Antitrust Law, accounting, and harassment, and has been used for in-house education.
Beginning in 2022, with the purpose of making our Group-wide approach to compliance known to our stakeholders, we have formulated the SEKISUI CHEMICAL Group Compliance Policy by extracting the conduct guides from the Compliance Manual. This policy is posted on our website.

SEKISUI CHEMICAL Group has prepared and distributed to all employees the Compliance Manual, its overseas version, the Global Compliance Manual, and the Compliance Card for portable use, in order to foster an awareness toward compliance in each and every employee.
In fiscal 2023, we conducted a global e-learning program on the subject of the Global Compliance Manual to ensure that it is thoroughly understood.

As part of our efforts to put compliance management into practice, the Group focuses on employee compliance education. Compliance-related content is included in new employee as well as rank-specic training. We also conduct e-learning sessions specic to compliance at least four times a year. In this manner, we provide opportunities for all Group employees to learn about the importance of compliance on an ongoing basis.
In scal 2023, we provided similar learning opportunities to employees who do not have access to the intranet individually, including those working on the production plant floor, by providing paper-based training opportunities at the request of Group companies and business sites.

SEKISUI CHEMICAL Group has established the SEKISUI Compliance Assist Network (S.C.A.N.), an internal whistle-blowing system. Under the supervision of the executive officer in charge of the Legal Department, this system is operated as a mechanism for the early detection, correction, and prevention of compliance problems within the Group, including harassment.
Employees of the Group can use this system, whether anonymously or not. In addition to the internal whistle-blowing system , it is also possible to report to an external independent lawyer.
Internal whistle-blowing regulations strictly protect the whistleblower, including the confidentiality of whistleblower information, and prohibit disadvantageous treatment and retaliation while requiring employees to report compliance violations that come to their attention.
When a report is received via S.C.A.N., a hearing is conducted. Hearings are conducted not only with the whistleblower, but also the subject of the report and related persons as necessary. Based on a variety of evidence, we confirm the veracity of the facts, and as a reporting desk try to solve organizational issues from an impartial standpoint. In addition, if management is involved in a reported case, an independent person from the management team investigates and responds accordingly.
In fiscal 2023, a whistle-blowing hotline was set up in Australia. The development of a system for receiving reports in local languages on a global basis was also completed.
In addition, the Group has established and operates a consultation and reporting desk for business partners.
The reporting desk is open to directors and employees of business partners in Japan who do business with Group companies on an ongoing basis. The hotline can be accessed at any time through a dedicated form on our website. In consultations with business partners, we confirm the facts and take corrective measures regarding alleged violations of laws and regulations, etc. The content of consultations and reports is shared only among the parties concerned to the minimum extent necessary to resolve the subject violation. All involved parties are obliged to keep the content confidential.

SEKISUI CHEMICAL Group is a signatory and endorser of the United Nation's Global Compact, which identifies anti-corruption as a voluntary action principle. In this spirit, and under the supervision of the executive officer in charge of the Legal Department, we have established the Bribery Prevention Regulations in accordance with the United Nations Convention against Corruption as one of our internal regulations, and are promoting efforts to prevent corruption and bribery through various means, including introducing the Regulations throughout the Group. The Bribery Prevention Regulations define bribery as the giving, offering, or promising of money or any other advantage (including but not limited to the giving etc. of checks, gift vouchers, travel, meals, or loans, or education or employment opportunities to friends or relatives. The same definition shall apply hereinafter.) with the intention of (i) causing a public official or an officer or employee of a private company to take or not to take particular action in connection with his/her duties or (ii) causing such public official or such officer or employee to use his/her position to influence other public officials or other officers and employees to take or not to take particular action in connection with their duties, in order to gain an illicit business advantage. The rules to prevent bribery and corruption also define the acceptance of bribes as the acceptance of, or request or promise to receive, money or any other advantage in connection with the recipient's duties for improper purposes.
In addition, we have formulated the Bribery Prevention Guidelines, which summarize the matters that Group employees must comply with when conducting business in Japan, the United States, and China. These rules and guidelines are made widely known through the intranet, and employees can check them at any time.
As a major measure to prevent corruption and bribery, we have established and operate policies to prevent violations before they occur. Specifically, we have identified high-risk cases and established the following rules.

• When entertaining or giving gifts to public officials
  A prescribed advance application form must be submitted to the administrator for approval.
• Appointment of agents, consultants, etc. in connection with transactions with overseas public officials, etc.
  Appointment can only proceed after confirming that payments of remuneration to that agent, consultant, etc. could not be classed as a bribe, that there are no reasonable grounds to suspect that payments could constitute a bribe, and only after a predetermined settlement procedure has been followed.

We also provide specialized training on anti-corruption for departments that are especially susceptible to the risk of corruption and bribery. In this manner, we encourage employees to learn about the relevant rules and guidelines and use the appropriate application forms.
In addition, the Compliance Policy, Compliance Manual, and Global Compliance Manual also convey policies on anti-bribery.
In fiscal 2023, questions on bribery were included in the e-learning program for employees of Group companies in Japan as well as overseas
No serious violations related to corruption or bribery were confirmed in fiscal 2023.

SEKISUI CHEMICAL Group has adopted a policy of "No damage to the company." Based on this policy, when there is a conflict between the interests of the Company and an individual director or employee, we make decisions from the perspective of whether it is in the Company's interest.
In order to thoroughly implement the above policy, we formulated the "Conflict of Interest Guidelines" in 2023. In this way, we operate rules to check in advance any outsourcing transactions that may cause conflicts of interest.

As part of our anti-trust law compliance program, we operate a business organization membership payment system, an advance application system for contacting competitors, and a price revision committee system. Every year, we conduct audits on the operation of the program and review the program as appropriate. We have also introduced this program to domestic business companies with high cartel risk.
In conducting our business activities, we comply with the Act against Unjustifiable Premiums and Misleading Presentations and other laws and regulations in advertising and labeling, and conduct our business activities with integrity.
No significant violations regarding anti-trust laws or advertising and labeling were identified in fiscal 2023.

SEKISUI CHEMICAL Group is working to improve Group-wide accounting skills and financial knowledge in order to reduce risks related to finance and accounting.
Accounting meetings are held for employees in charge of accounting at domestic and overseas companies. At these meetings, fiscal-related rules and accounting compliance activities are explained and shared. We also provide training in accounting and financial literacy through study sessions and e-learning. In addition to preventing accounting treatment errors and accounting improprieties from occurring, we are also working to raise awareness of accounting compliance among divisions and employees involved in accounting. In fiscal 2023, accounting meetings were held in Japan and overseas in a hybrid format of online and face-to-face meetings. A total of 287 employees, mainly personnel in charge of accounting, participated.
Accounting training was conducted online on a specific topic, and a total of 71 employees attended, including video viewers. In addition, a total of 4,852 employees took the e-learning course, which is being conducted for a wider target audience to raise awareness of accounting compliance.

SEKISUI CHEMICAL Group considers the payment of taxes to be one of the fundamental and important social responsibilities that a company should fulfill. We comply with the tax laws of the countries and regions in which we operate, and pay taxes appropriately in accordance with the spirit of those laws.
The Group does not use tax havens for tax avoidance purposes. We will pay taxes appropriately in accordance with the economic conditions of the countries and regions in which we operate, contribute to the economies of those countries and regions, and aim for harmony and stable development together.
Transactions with tax risks are checked with outside experts as necessary to ensure their proper handling and to reduce tax risks.
Furthermore, as a response to transfer pricing risk, transactions within the Group are conducted in compliance with national and regional laws and regulations and arm's length prices in accordance with OECD Guidelines. In addition, in order to resolve unstable tax positions, the Company utilizes Advance Pricing Agreements (APAs) depending on the size of the transaction and the extent of tax risk.
We respond in good faith and appropriately to investigations by tax authorities. Results are reported to the Board of Directors and improvements made as appropriate. Through these initiatives, we strive to maintain good relationships with tax authorities.

SEKISUI CHEMICAL Group has designated October of each year as "Compliance Reinforcement Month." This is an opportunity for all employees to reaffirm the importance of compliance.
In fiscal 2023, we conducted training in Japan on four themes: labor management, contract basics, confidential information management, and vehicle operation management. In order to provide an opportunity for employees who could not participate in person, training was conducted remotely online. For labor management, we used a Web conferencing system. For the other three themes, we used video streaming.

In fiscal 2023, as in fiscal 2022, we implemented Compliance Reinforcement Month activities in North America, China, Southeast Asia, and Europe. Themes taken up are selected with a focus on those issues that are judged by each regional headquarters to be of high risk to the region.

North America :

In the event of a violation of compliance, we will conduct a thorough investigation of the employee who committed the violation. After the investigation, the Company will take disciplinary action, including dismissal, demotion, and salary reduction, as well as reduction of personnel evaluation, depending on the extent and type of violation.
In addition to punishing individuals who have committed compliance violations, we are also working to prevent recurrence by correcting problems in the organizational culture that lie behind them.