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. The Committee addresses compliance risks by sharing information on amendments to various laws and regulations, including the Construction Business Act of Japan, as well as relevant administrative developments. This meeting was held two times in fiscal 2024.

In addition, the following activities were carried out to support the continuous improvement of compliance frameworks at each Group company. Through these efforts, the Group uplifts the baseline of compliance personnel, harmonizes their understanding and fosters a shared sense of risk awareness.

• 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 Group companies
• Sharing of matters for initiatives aimed at strengthening execution of the Subcontract Act and Anti-Monopoly Act (fair transactions with subcontracting SMEs and appropriate price pass-on, etc.)

These activities are outlined and reported to the Board of Directors once every quarter to systemically reflect them to 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. In this fashion, 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 convenes four times every year, chaired by a Director of the Corporate Division, and includes procurement managers from the Timber and Building Materials Division, Housing Division, and each department procuring timber and wood products at affiliates. At meetings, the Committee deliberates on the wood procurement of the entire Group, including procurement standards for wood and risk assessment of illegal logging. 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. In addition, in the risk assessment, we review and revise the risk classification of each logging country once a year with reference to information from the Corruption Perception Index of international NGOs, the FSC's country-specific risk assessments, and reports by environmental NGOs.

Compliance Training

The Sumitomo Forestry Group provides compliance training to newly hired employees covering relevant laws and company rules, to ensure that they understand the importance of compliance and to foster awareness of compliance. In fiscal 2024, training was provided to a total of 450 newly hired graduates and to 137 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. By having employees take the course repeatedly, we aim to establish compliance awareness and enhance corporate value.

In FY2024, 14,804 employees of whom 6,766 and 8,038 belong to the parent company and Group companies, respectively, took the class.

Compliance Auditing

The Sumitomo Forestry Group audits compliance-related matters at each business site through internal audits and follows up with guidance on 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 to prevent corruption both in Japan and overseas. Basic principle of these regulations is to alert 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. We will continue to conduct interviews and training on the status of anti-bribery initiatives to understand risks and educate Group employees.

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 2024.

Promotion of Fair Competition and Appropriate Transactions with Subcontractors

Sumitomo Forestry published the Antimonopoly Act Guide Book, and via articles on its intranet, 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. In addition, we conduct a combined inspection of our compliance system for the Subcontract Act (Act on Prevention of Delay in Payment of Subcontract Proceeds, etc.), and we are working to correct trade and business practices that hinder the building of partnerships with suppliers for the creation of value and coexistence and co-prosperity throughout the supply chain.

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 2024.

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."

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 has established 10 common initiatives, including requiring the submission of traffic accident and administrative penalty reports, acquiring Certified Driving Records*, and rolling out a Safe Driving Management System that centrally manages basic information of drivers and vehicles. We have also developed a system to ensure the timely and appropriate fulfillment of statutory obligations and driver instruction. Each year, we conduct a comprehensive inspection of the status of system implementation.

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

Moreover, we provide safe driving education throughout the year, including tailored practical driving training and safe driving seminars for employees with a higher risk of accidents or violations—such as newly hired graduates, veteran staff members, and those who have repeatedly been involved in accidents or infractions.

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