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 and asks not only Group companies but also suppliers to comply with laws and regulations, 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 are conducted in line with the Code of Conduct across the supply chain.

Compliance Promotion

Sumitomo Forestry established the Compliance Subcommittee as a subordinate organization under the Risk Management Committee. The subcommittee is chaired by the head of the General Administration Department and composed of employees responsible for risk management, including those from the responsible departments at each Group company. As a cross-cutting organization across the Sumitomo Forestry Group, the subcommittee promotes responses to compliance risks. The committee addresses compliance risks by sharing information about the amendments to various laws and regulations, including the Construction Business Act of Japan, as well as relevant administrative developments. The committee met twice in fiscal 2025.

In addition, the following activities were conducted to support the continuous improvement of compliance frameworks at each Group company. Through these efforts, the Group is raising the level of compliance personnel, harmonizing their understanding and fostering 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 systems
• Combined inspection of compliance with the Subcontract Act (Act on Ensuring Proper Transactions in and after January 2026)
• Combined inspection of responses to administrative procedures and legal requirements specific to Group companies
• Alert notification of legal amendments
• Sharing of issues to be addressed to ensure proper transactions (for appropriate price pass-through to offset increases in labor and energy costs and for proper transactions across the supply chain)

These activities are outlined and reported to the Board of Directors once every quarter for reflection in the execution of business. Also, monthly activity reports are submitted to the auditors and internal audit departments, and any particularly important initiatives or risk information that is common to the Group is shared with the auditors of each Group company via the groupwide meetings of corporate auditors of Sumitomo Forestry and its subsidiaries. In this fashion, the Group has developed a system for promoting compliance through the operational management line and other lines.

In accordance with the Sumitomo Group Procurement Policy, the Sumitomo Forestry Group responds to compliance risks in its supply chain 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 meets four times every year, chaired by the head of the Corporate Division, and with the participation of procurement managers from the Timber and Building Materials Division, Housing Division, and each department procuring timber and wood products at affiliates. At its meetings, the committee deliberates on the entire Group’s wood procurement, including the procurement standards for wood and the risk assessment on illegal logging. This committee receives reports on the results of local surveys and the Sustainability Procurement Survey, including the level of suppliers’ compliance awareness. Then the committee asks suppliers facing problems to take corrective actions. In addition, in the risk assessment, we review and revise the risk classification of each logging country once a year with reference to information gained from the Corruption Perceptions Index of an international NGO, the FSC's country-specific risk assessments, and reports by environmental NGOs.

Compliance Training

The Sumitomo Forestry Group provides new employees with compliance training covering relevant laws and company rules, to ensure that they understand the importance of compliance and raise their compliance awareness. In fiscal 2025, training was provided to a total of 616 newly hired graduates and 163 mid-career recruits (of Sumitomo Forestry). Compliance training is also given to employees through level-specific collective training, 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 domestic Group companies, including temporary employees and part-time employees, are required to take these courses every year.

In FY2025, 15,387 employees of whom 7,047 and 8,340 belong to the parent company and Group companies, respectively, attended the courses.

We are working to raise and instill compliance awareness among employees and increase our corporate value by improving our compliance training year on year in reference to the issues identified through the employee compliance awareness surveys and the reoccurrence prevention measures taken against materialized risks.

Compliance Hotline

The Sumitomo Forestry Group is committed to creating a workplace environment equipped with a function to detect and correct any misconduct hidden in day-to-day operations at an early stage. The Group established the Compliance Hotline (grievance desk) 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 23 consultations, including cases of suspected misconduct and harassment in fiscal 2025.

Compliance Hotline Framework

The Group has two points of contact for its Compliance Hotline, an internal one (for which the head of the General Administration Department is responsible) and an external one (lawyer hotline), ready to provide advice and receive reports via telephone or a dedicated email address. Sumitomo Forestry clearly promises the protection of the rights of persons seeking advice or making reports in its relevant regulations, while posting this information on its intranet. We are also striving to create an environment where everyone can easily use this hotline through measures such as distributing 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 the reports made to the Hotline are conducted and utilized in training as needed in an effort to prevent the reoccurrence of similar problems.

Compliance Hotline Framework

Compliance Auditing

The Sumitomo Forestry Group audits compliance-related matters at each of its business sites through internal audits and follows up with guidance on corrective actions or improvements for any identified problems.

Preventing Corruption

Based on Sumitomo Forestry's Regulations for Prevention of Bribery of Officials including Public Servants, we aim to prevent corruption both in Japan and overseas. These regulations are basically intended to warn against facilitation payments (small payments to facilitate ordinary administrative services) and to impose conditions, including requiring prior approval, on political contributions and other donations. 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. Furthermore, we introduce to our 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 at each of our sites to identify risks and educate Group employees about the related issues.

In addition to the above, when appointing a new contractor or agency or renewing a contract, we appropriately confirm that there is no risk that the contractor will commit the act of bribery. At the same time, when engaging in joint ventures with other companies, we appropriately conduct due diligence, including checking for the status of corruption at the companies.

Promotion of Fair Competition and Appropriate Transactions with Subcontractors

Sumitomo Forestry published the Antimonopoly Act Guide Book, and also via articles posted on its intranet, e-learning and other methods, it works to enhance employees’ understanding and awareness regarding the intent and outline of the Antimonopoly Act and about the risk of cartels stemming from contacts with competitors, for the purpose of promoting fair competition. In addition, we conduct a combined inspection of our compliance systems to comply with the Subcontract Act (Act on Proper Transactions in and after January 2026) and are working to correct trade and business practices that hinder the building of partnerships with suppliers towards the creation of value and coexistence and co-prosperity throughout the supply chain.

Policy on Political Contributions

The Sumitomo Forestry Group states in its Code of Conduct as follows: "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 clearly states, "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."

Prevention of Insider Trading

The Sumitomo Forestry Group complies with the Financial Instruments and Exchange Act as well as other relevant laws to prevent insider trading. Our own regulations on insider trading are intended to help us maintain and increase the social trust that we have earned in the stock market by clarifying the procedures to prevent executives and employees from getting involved in insider trading as well as relevant information management 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 to gain the prior approval of the head of the General Administration Department if they plan to buy or sell the stocks of Sumitomo Forestry to ensure the appropriateness of the trading. The Group has also published an Insider Trading Prevention Manual and raises employees’ awareness through its internal websites in addition to reminding executives and employees twice a year of the importance of preventing insider trading.

Elimination of Antisocial Forces

The Sumitomo Forestry Group's Code of Conduct states 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 department to coordinate overall response and systematically cooperates with external expert bodies, such as the police and lawyers, in order to gather information about antisocial forces, and when required, gives warning notices. In addition, in accordance with the organized crime exclusion ordinances set by each prefecture, Sumitomo Forestry takes appropriate measures, such as including the provisions on the exclusion of antisocial forces in all the contracts that its Group companies conclude with third parties.

Furthermore, we have requested all business partners, including existing contracted partners, to provide representations and warranties that neither they nor their parent, subsidiary or subcontracting companies are antisocial forces.

Prevention of Traffic Accidents and Violations

The Sumitomo Forestry Group is working to standardize the management systems for safe driving across the Group to deal with the risks associated with traffic accidents and violations.

Specifically, Sumitomo Forestry has set the 10 requirements to be met across the Group, including submitting traffic accident and administrative penalty reports, acquiring certified driving records,* and introducing a safe driving management system that centrally manages basic information about drivers and vehicles. We have also developed a system to ensure that statutory obligations are fulfilled and instructions to drivers are given in a timely and appropriate manner. Each year, we conduct a comprehensive inspection of the implementation status of the system.

We also share the status of monthly traffic accidents with each of our in-house organizations, in order to help them formulate measures to prevent traffic accidents and conduct relevant educational activities.

Moreover, we conduct 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, elderly employees, and those who have repeatedly been involved in traffic accidents or violations.

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

Non-Compliance Cases

Number of non-compliance cases faced by the Sumitomo Forestry Group on the following issues (FY2025):

• Briberies, including facilitation payments: 0
• Violations or problems concerning the Antimonopoly Act or the Subcontract Act: 0
• Violations or problems concerning insider trading: 0

Non-conformity to the 45-minute semi-fireproof specifications for soffits

It was found that some of the buildings constructed by Sumitomo Forestry did not meet the 45-minute semi-fireproof specifications for soffits that were described in the certificate granted by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). This issue was reported to the MLIT in December 2024.

Specifically, an internal investigation revealed that, for 930 buildings designed with the 45-minute semi-fireproof specifications and completed by Sumitomo Forestry during the period from December 2014 to December 2024, the blending ratio of the soffit material actually used was different from that which was described in the certificate granted by the MLIT. Under the guidance of the MLIT and the relevant authorities, we have been providing explanations to the affected customers and conducting the necessary inspections. We have also asked a third-party organization designated by the MLIT to conduct performance confirmation tests on the soffits of the buildings for each type of eave they cover. For soffits confirmed to provide the required fireproof performance through the tests, we will newly acquire certification for the soffits from the MLIT and report to the relevant customers and the designated administrative agency sequentially. For soffits not confirmed to provide the required performance through the tests, we will examine improvement methods and push ahead with repair work, obtaining certification from the MLIT.

We take this matter very seriously and are committed to promptly taking corrective measures which include making repairs, while making company-wide efforts to prevent the reoccurrence of a similar incident.

Violation of environment-related laws and regulations by Group companies

A Sumitomo Forestry Group company in Japan, which had violated the Act on Waste Management and Public Cleaning of Japan in October 2023, was suspended from bidding for the purchase of forest products for a month (from July 16 to August 15, 2025). Also, the same penalty was imposed on another domestic Group company because it had failed to manage and supervise the environmental measures taken by the violating company. In order to prevent the reoccurrence of a similar incident, personnel from Sumitomo Forestry’s head office carried out on-site inspections and directly gave instructions to the companies. Going forward, we continue to conduct independent audits twice a year and provide online training—including e-learning seminars—across the Group. Through these activities, we will raise employees’ awareness of the importance of following the legal waste disposal and storage procedures.

Also, in July 2025, a Sumitomo Forestry Group company in Vietnam faced a penalty concerning environmental protection laws and regulations. Specifically, it was revealed that a fertilizer company via a transportation company to which the company had outsourced the recycling of wet ash generated from its incineration furnace into fertilizer materials did not have a license to conduct recycling business nor the transportation company. This incident was caused by a misunderstanding of the legal responsibilities to be fulfilled by a company generating wet ash. The misunderstanding was resolved through discussion with the authorities, and the company paid a fine. We will work in a stricter manner to understand and interpret local laws and regulations, check the licenses of outsourcing companies, and conduct regular on-site inspections to prevent the reoccurrence of a similar incident. In light of Sumitomo Forestry’s internal standard, the incident is classified as a serious environment-related non-compliance case (causing the payment of one million yen or more in fines). We have had no other serious non-compliance cases for the past five years.