Basic Policy

The Sumitomo Forestry Group has established the Sumitomo Forestry Group Code of Conduct as a foundation for its policies and regulations based on its Corporate Philosophy and Our Values. The Sumitomo Forestry Group uses the Code of Conduct for compliance not only at its Group companies but also at its suppliers to prevent corruption such as bribery, engage in fair business practices, maintain informational confidentiality, build healthy relationships with politicians, and respect human rights. In this manner, we ensure that the entire Group’s operations follow the Code of Conduct including in the supply chain.

Compliance Promotion

Sumitomo Forestry established the Compliance Subcommittee as a subordinate organization under the Risk Management Committee, chaired by the general manager of the General Administration Department and comprised of the persons responsible for risk management, including those from the responsible departments at each group company. As a cross-cutting organization across the group, the subcommittee promotes responses to compliance risk. It has established the group standard risk management system and tools to ensure compliance with the Construction Business Act of Japan and other laws throughout the group, for efficient response to compliance risk.

A meeting was held by the committee twice in FY2022 to continuously improve the compliance system through the following activities. Through these efforts, compliance officers of the entire group are able to coordinate their viewpoints from the bottom up and share a sense of crisis.

• Combined inspection of compliance with the Construction Business Act, Act on Architects and Building Engineers, and the Real Estate Brokerage Act
• Combined inspection of safe operation management system
• Combined inspection of compliance with the Subcontracting Act
• Combined inspection of responses to administrative procedures and legal requirements specific to Tsukuba Research Institute and Group companies
• Training led by an outside instructor for employees responding to whistleblowing
• Results and commentary from the compliance survey conducted on all employees of Group companies in Japan

These activities are outlined and reported to the Board of Directors once every quarter to build a system to reflect this information into the execution of our businesses. In addition to making monthly activity reports to auditors and internal audit divisions, any particularly important initiatives or risk information that is common to the group is shared with the auditors in each group company via the meetings of statutory auditors of Sumitomo Forestry and its subsidiary companies. Thus, the group has developed a system for promoting compliance in its lines of business execution using internal and external approaches.

Based on the Sumitomo Group Procurement Policy, Sumitomo Forestry Group responds to compliance risks in supply chains by working with suppliers to ensure that wood procurement is performed legally and in a sustainable manner with consideration of legal compliance, human rights, labor practices, biodiversity conservation, and local communities. The Wood Procurement Committee convened four times in fiscal 2022 led by the officer in charge of sustainability promotion as chairperson and procurement managers from the Timber and Building Materials Division, Housing Division, and each department procuring timber and wood products at affiliates as members. This committee receives reports on results from local interviews and the Sustainability Procurement Survey, including the level of supplier compliance awareness, and requires corrective actions to rectify any supplier issues found.

Compliance Training

In order to heighten awareness among each and every employee about compliance, Sumitomo Forestry Group conducts compliance training for new employees to promote their understanding about general compliance issues, such as information security. In fiscal 2022, training was administered to a total of 321 new graduate recruits, and to 95 mid-career recruits (Sumitomo Forestry). Compliance training was also provided to groups of employees at specific levels, including "Training for New General Managers."

In addition, we have designated e-learning courses such as "Risk Management and Compliance," "Information Security," and "Work and Human Rights," which include topics related to harassment, as mandatory courses. All employees of the Group, including temporary employees and part-time employees, are required to take these courses every year through our intranet. Employees must pass a test to measure the effectiveness of the course.

In FY2022, 12,232 employees of whom 5,611 and 6,621 belong to the parent company and Group companies, respectively, took the class.

Compliance Hotline

The Sumitomo Forestry Group is committed to creating a workplace environment equipped with a self-corrective function for catching any misconduct concealed in day-to-day operations at an early stage. The Group established the Compliance Hotline (advice desks) in 2002 to allow for the reporting of compliance violations. Furthermore, in October 2019, we put in place a whistleblowing mechanism shared with our main overseas Group companies as our Group expands businesses around the world. An external multilingual operator is used for this reporting system to receive reports in English, Chinese, Indonesian, Vietnamese, and Thai.

We received 31 consultations, including cases of suspected misconduct and harassment in fiscal 2022. In addition, we established an internal whistleblower response system pursuant to the Whistleblower Protection Act, which took effect in June the same year.

Compliance Hotline Framework

The Group has two Compliance Hotlines, one within the Group (general manager of the General Administration Department is responsible) and one external to it (lawyer), ready to provide advice and receive reports via telephone or a dedicated email address. Sumitomo Forestry clarified the protection of rights for persons seeking advice or making reports in relevant regulations while publicizing this information on its intranet. We are also striving to create an environment where everyone can easily use this hotline through measures such as the distribution of leaflets including the contact information—internal and external—for the compliance hotline to all employees including those of Group companies.

When a report is received, an investigation will be carefully conducted. If a compliance violation, etc. is confirmed, necessary corrective measures will be taken. The operating performance of the Compliance Hotline is reported to the Board of Directors quarterly, and case studies of reports are used as learning opportunities in training as needed in an effort to prevent recurrence.

Compliance Hotline Framework

Compliance Auditing

The Sumitomo Forestry Group audits compliance-related matters at each business site through internal audits and follows up with guidance on for corrective actions or improvements for any problems that are found.

Preventing Corruption

Based on the Sumitomo Forestry's Regulations for Prevention of Bribery of Officials including Public Servants, we aim preventing corruption both in Japan and overseas. Basic principle of these regulations is to pay attention to facilitation payments (small payments to facilitate ordinary administrative services) and to provide conditions and prior approval for donations such as political contributions. The regulations also stipulate that no offer, promise, implementation, or approval will be made for the provision of money, goods, or other benefits to public officials, etc. We also introduce overseas consolidated subsidiaries common tools such as a Sales Commission Checklist to help prevent bribery. On-site visits to overseas Group companies became difficult due to impact of the coronavirus disease (COVID-19) pandemic. However, we continued to identify risks and educate Group employees by conducting online hearings and training on the status of anti-bribery efforts..

In addition to the above, when appointing a new contractor or agency or renewing a contract, the Company appropriately confirms that there is no risk that contractor will commit acts of bribery. At the same time, when engaging in joint ventures with other companies, the Company appropriately conducts due diligence, including status of corruption.

Furthermore, there were no reports of bribery, including facilitation payments, taking place in the Sumitomo Forestry Group in fiscal 2022.

Promotion of Fair Competition and Appropriate Transactions with Subcontractors

Sumitomo Forestry published the Antimonopoly Act Guide Book, and via articles on its intranet website, e-learning and other methods, it works to enhance understanding and awareness regarding the intent and outline of the Antimonopoly Act and about the risk of cartels stemming from contact with competitors, for the purpose of promoting fair competition. To foster understanding and entrenchment of appropriate subcontracting, every year, we conduct combined inspection of compliance with the Subcontract Act (law for preventing delays in payments to subcontractors) in an effort to improve business and commercial practices.

Furthermore, there were no reports that any breaches or issues related to the Antimonopoly Act and Subcontract Act involving any member of the Sumitomo Forestry Group in fiscal 2022.

Political Contributions Policy

The Sumitomo Forestry Group states in its Code of Conduct: "We shall maintain a healthy and transparent relationship with the government that is in conformance with all laws." This statement has been included to ensure a healthy relationship with the government. The Sumitomo Forestry Group Code of Conduct Handbook distributed to every employee working at Group companies in and outside Japan clarifies "As a general rule and in accordance with relevant laws and company regulations, only the division in charge is permitted to make political contributions” and "If circumstances require another division to make a political contribution, make sure that there is adequate prior consultation with the division in charge or top management."

Restriction of Insider Trading

The Sumitomo Forestry Group adheres to the Financial Instruments and Exchange Act as well as other relevant laws to prevent insider trading. Regulations to prevent insider trading maintains and improves the trust society has for the company in the stock market by clarifying procedures to prevent insider training by executives and employees as well as the management of information and disclosure methods. In addition, executives and employees who have the potential to come into contact with insider information on a daily basis are required as policy to gain the prior approval of the General Manager of the General Administration Department if they plan to buy or sell company stock to ensure the appropriateness. The Group also has published an Insider Trading Prevention Manual and raises awareness through its internal websites in addition to reminding the executives and employees twice a year about the prevention of insider trading as a general rule.

Furthermore, there were no reports of breaches or issues related to insider trading in the Sumitomo Forestry Group in fiscal 2022.

Rejection of Influence from Anti-Social Forces

The Sumitomo Forestry Group's Code of Conduct state that the “influence from anti-social forces will be met with a resolute attitude and no compromises will be tolerated” as its basic policy. The General Administration Department is designated as the division to coordinate overall response and systematically cooperates with external expert bodies such as the police and lawyers in order to gather information about anti-social forces, and when required, gives guidance in issuing warning notices. In addition, in accordance with the enforcement of laws of each prefecture for the exclusion of organized crime, Sumitomo Forestry takes appropriate action including standardization such that all contracts that Group companies enter into with third parties include a clause to exclude anti-social forces.

Furthermore, we have requested that all business partners, including existing contracted partners, provide declarations guaranteeing that neither they nor their parent, subsidiary or subcontracting companies are anti-social forces.

Prevention of Traffic Accidents and Violations

Sumitomo Forestry Group promotes use of a standard Group system for safe driving to manage the risks associated with traffic accidents and violations.

Specifically, Sumitomo Forestry established 10 common items to address, including standardizing accident report forms, acquiring Certified Driving Records*, and rolling out a Safe Driving Management System which centrally manages basic driver and vehicle information. We have also established systems for ensuring that the fulfillment of statutory obligations and driver instruction are carried out in a timely and appropriate manner, and every year, we conduct combined inspections of compliance under these systems.

We also share the results of analyses on monthly traffic accidents with each business division, which helps in formulating measures to prevent accidents and in educational activities.

Moreover, we provide safe driver training throughout the year. This includes uniquely tailored practical driving training and safe driving classes for employees with a higher risk of accidents or infractions due to inexperience or inadequate driving skills (new graduate hires, older employees, and employees who have previously caused an accident or infraction, etc.).

* A certificate issued by the Japan Safe Driving Center showing a driver's violations and administrative disciplinary actions, etc.