Governance

Basic Concept

In order to continuously enhance corporate value, Tosoh strives to build an efficient organizational structure that can respond quickly to changes in the business environment and to conduct sound corporate management that is fair and highly transparent. While respecting the purpose and spirit of the Corporate Governance Code, we continuously seek the optimal form of corporate governance for Tosoh.

Corporate Structure (as of June 30, 2022)

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Changes in Corporate Governance

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Overview of Committees (as of June 30, 2022)

Committee

Composition

Frequency of meetings
(actual results for FY2021)

Board of Directors

9 (4 of whom are external directors)
Chaired by the President

Once or twice/month (16 times)

Audit and Supervisory Board

4 (3 of whom are external directors)

Once or twice/month (15 times)

Nomination and
Compensation Advisory Committee

6 (4 of whom are external directors)
Committee chaired by an external director

12 times

Management Committee

Executive officers at the
managing director level and above
Chaired by the President

Once/week in principle (30 times)

Board of Directors

As of June 30, 2022, Tosoh’s Board of Directors consists of nine directors, including four external directors, one of whom is female. In principle, the Board meets at least once a month. Based on laws and regulations, the Articles of Incorporation, and the Board of Directors Regulations, the Board of Directors makes decisions on business planning, strategy, and other important management matters. It also oversees the performance of duties by each director and executive officer. In addition, the board makes decisions concerning appointments, dismissals, and division of duties for executive officers.

Directors and Auditors (after June 24, 2022)

Name Position
Mamoru Kuwada Representative Director and President
Katsushi Tashiro Representative Director and Senior Executive Vice President
Toru Adachi Director and Executive Vice President
Satoru Yonezawa Director and Executive Vice President
Toru Doi Director and Senior Vice President
Tsutomu Abe External Director
Keiichi Miura External Director
Yoshihiro Hombo External Director
Mariko Hidaka External Director
Kouji Kawamoto Internal Auditor
Makoto Okayama Internal Auditor
Tetsuya Teramoto External Auditor
Tsuneyasu Ozaki External Auditor

Attendance at Board of Directors meetings (FY2022)

Name Position Attendance at
board of directors meetings
Mamoru Kuwada Representative Director and President 100% (all 16 meetings)
Katsushi Tashiro Representative Director and
Senior Executive Vice President
100% (all 16 meetings)
Toru Adachi Director and Executive Vice President 100% (all 16 meetings)
Toru Doi* Director and Senior Vice President 100% (all 13 meetings)
Toshinori Yamamoto Director and Adviser 100% (all 16 meetings)
Tsutomu Abe External Director 100% (all 16 meetings)
Keiichi Miura External Director 88% (14 of 16 meetings)
Yoshihiro Hombo External Director 94% (15 of 16 meetings)
Mariko Hidaka External Director 100% (all 16 meetings)

*Appointed on June 25, 2021.

Analysis and Evaluation of the Effectiveness of the Board of Directors

To improve the effectiveness of the Board of Directors as a whole, Tosoh conducts an analysis and evaluation every year and discloses a summary of the results.

A summary of the analysis and evaluation results for fiscal 2022 is as follows.

1. Evaluation method

The evaluation is conducted by requesting all directors and auditors to complete a questionnaire and provide opinions. The questionnaire consists of eight categories, including a new category concerning the discussion and exchange of opinions at Board of Directors meetings. Other items include composition and operation of the Board of Directors, materials and information provided, monitoring and supervision, status of response to issues, others, and overall evaluation. The questionnaire comprises 20 questions, along with a five-point self-assessment system.

In addition, respondents can write their thoughts and opinions regarding the questions in the free opinion section. These, as well as suggestions for improvement, are reflected in future efforts to improve effectiveness.

2. Summary of analysis and evaluation results

The overall result of the analysis and evaluation is that the Board of Directors as a whole is currently fulfilling its roles and responsibilities in an effective manner. The primary reasons the Board of Directors is evaluated as generally fulfilling its roles and responsibilities effectively are as follows:

(1) The composition of the Board of Directors has been strengthened, including expertise by increasing the number of external directors and diversity by appointing female directors

(2) Risk management, based on necessary and sufficient reporting and continued monitoring and supervision of business execution, has been appropriate

(3) Management of the Board of Directors, including the frequency of meetings, scope of agenda, deliberation time, volume of materials, timing of distribution, and related matters, has been optimal

In addition, the main question newly added to the questionnaire was whether discussions and exchanges of opinions on sustainability and the company’s business portfolio are effectively being conducted.

While the responses indicate that a certain amount of discussion is taking place concerning sustainability, there are also comments that call for further efforts for increase the depth of discussion on the business portfolio, which will be reflected in future meetings of the Board of Directors. Moreover, in light of changes in the environment surrounding companies and social demands on the Board of Directors, Tosoh asks respondents to write comments on themes that should be discussed at future Board of Directors meetings in the free opinion column, and these topics will be addressed in light of the most pressing issues.

Furthermore, in terms of operations, while it has been confirmed that the Board’s efforts to date have achieved a certain level of success, it has also been acknowledged that there is some room for improvement in the way information is provided to external directors, which will be reflected in future efforts.

Tosoh will continue to work tirelessly to implement initiatives based on the results of our analysis and evaluation so as to contribute to sustainable growth and the enhancement of corporate value.

Board of Auditors

The Board of Auditors consists of four auditors (as of June 30, 2022), including three external auditors who are familiar with corporate management or have considerable knowledge of legal, financial, and accounting matters. Each auditor attends meetings of the Board of Directors and other important meetings in accordance with the audit policy and allocation of duties determined by the Board of Auditors receives reports from directors and employees regarding the performance of their duties, requests explanations as necessary, inspects important approval documents, and examines the status of operations and assets at headquarters and principal industrial complexes.

With regard to subsidiaries, the company communicates and exchanges information with directors and auditors of subsidiaries and receives reports on their operations as necessary. In addition, the Board of Auditors has established a secretariat in order to strengthen the function of the auditors in the execution of their duties.

Attendance at Board of Auditors meetings (FY2022)

Name Position Attendance at Board of Auditors meetings
Kouji Kawamoto Internal Auditor 100% (all 15 meetings)
Makoto Okayama* Internal Auditor 100% (all 11 meetings)
Tetsuya Teramoto External Auditor 100% (all 15 meetings)
Tsuneyasu Ozaki External Auditor 93% (14 of 15 meetings)

*Appointed on June 25, 2021

External Directors and Auditors

Tosoh appoints independent external officers with exceptional experience and insight to oversee corporate governance. These external officers monitor the execution of company business from a neutral and objective point of view. Tosoh has established its proprietary Criteria for the Independence of External Directors and Corporate Auditors, and refers to these criteria when determining whether independence is ensured. External officers attend meetings of the Board of Directors and other bodies and receive regular explanations and reports to carry out supervision and auditing.

Executive Officer System

Tosoh introduced the Executive Officer System with the aim of separating management decision-making from supervisory and executive functions, thereby accelerating and streamlining decision-making. Clarification of the roles and responsibilities of business execution has made possible a management structure that can respond to rapid changes in the business environment. As of June 30, 2022, there were 27 executive officers, five of whom were also serving as directors.

Nomination and Compensation Advisory Committee

To strengthen corporate governance, Tosoh established the Nomination and Compensation Advisory Committee in June 2019 as an advisory body to the Board of Directors. The committee serves to ensure fair and transparent procedures regarding the nomination and compensation of directors, auditors, and executive officers. As of June 30, 2022, the committee consists of six directors, including four external directors, and is chaired by an external director.

Items to be discussed are as follows.

1. Matters to be proposed at the General Meeting of Shareholders concerning nominations of candidates for directors and corporate auditors
2. Matters concerning the selection and dismissal of representative directors
3. Matters related to the selection and dismissal of executive directors
4. Matters concerning the selection and dismissal of managing directors
5. Matters concerning the appointment and dismissal of executive officers
6. Matters concerning the selection and dismissal of executive officers
7. Matters related to succession planning (including training) of the president and representative director
8. Matters related to remuneration for directors and executive officers
9. Other matters related to nomination and compensation

Activities of the Board of Directors and the Nomination and Compensation Advisory Committee

Activities in the process of determining the amount of compensation for directors and officers in fiscal 2022 included five meetings of the Board of Directors and six meetings of the Nominating and Compensation Advisory Committee. Revision of the amount of compensation, etc. for directors and allocation of restricted stock compensation are decided by the Board of Directors based on the report of the Nomination and Compensation Advisory Committee.

Total Executive Compensation in FY2022

Officer Classification

Total amount of remuneration and other compensation (millions of yen) Total amount of remuneration and other compensation by type (millions of yen) Number of eligible officers

Basic compensation

Performance-based compensation

Non-monetary compensation

Directors (external directors in parentheses)

347
(48)
232
(48)

92
(-)

22
(-)

10
(4)

Auditors (external auditors in parentheses)

69
(39)
69
(39)

-

-

5
(3)

*The above figures include one director and one auditor who retired at the conclusion of the General Meeting of Shareholders held on June 25, 2021.

Management Committee

The Management Committee consists of seven directors and group heads (as of June 30, 2022) who also serve as executive officers, and meets once a week in principle. The Board of Directors deliberates in advance on matters to be discussed at its meetings and on important matters related to the overall management of the Group, and has established a system to facilitate appropriate and efficient management decision-making.

Company-Wide Committees

Tosoh has established various committees to ensure the effective functioning of corporate governance. In addition, they also make regular submissions and reports to the Board of Directors.

Committee

Details of deliberation

Frequency of meetings
(actual results for FY2022)

CSR Committee

Chaired by the president, the CSR Committee consists of members of the Management Committee, the head of the administrative division at headquarters, and chairpersons of company-wide committees, and is responsible for formulating CSR activity policies and managing progress on key CSR issues.

 

2 times

Internal Control Committee

Chaired by an executive vice president of Tosoh Corporation, the Internal Control Committee works to respond to the internal control reporting system for financial reporting under the Financial Instruments and Exchange Act and the internal control system required by the Companies Act. In addition, the committee regularly evaluates and amends the status of the development and operation of internal controls.

4 times

Compliance Committee

Chaired by an executive vice president of Tosoh Corporation, the Compliance Committee is responsible for establishing the compliance system, formulating various measures such as education, and operating the internal reporting system. The committee also periodically evaluates and amends the status of the compliance promotion plan and the operation of the internal reporting system.

 

2 times

RC Committee

Chaired by a senior vice president of Tosoh Corporation, the RC Committee works to establish a system for promoting RC and formulate RC annual policies. The committee also conducts RC audits on a regular basis to understand the activities of each division.

1 time

Export Supervision Committee

Chaired by a senior managing director of Tosoh Corporation, the Export Supervision Committee is responsible for formulating various measures for compliance with the Foreign Exchange and Foreign Trade Act, the basic policy stipulated in security export control regulations. The head of the export department is assigned to also serve as the head of the operational business unit.

1 time

Fair Trade Compliance Committee

Chaired by a senior managing director of Tosoh Corporation, the Fair Trade Compliance Committee is responsible for establishing internal regulations and manuals regarding compliance with the Antimonopoly Act and the Act Against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors, and formulating measures for implementation. The committee also reports and deliberates on specific cases related to compliance with the law and measures to deal with them.

1 time

CO2 Reduction and Effective Use Promotion Committee

Chaired by the president of Tosoh Corporation, the CO2 Reduction and Effective Use Promotion Committee is responsible for planning and formulating policies on important issues related to CO2 reduction and effective use from the perspectives of both technology and cost. In addition, the committee regularly reports and deliberates on specific issues related to planning and measures to deal with them.

2 times


Message from External Directors

Tsutomu Abe

Providing Timely, Appropriate Management Advice as an External Director

I believe that both the management team and employees are extremely earnest and approach their work seriously. We have an appropriate number of board members and a good balance between internal and external directors, and the external directors come from broad-ranging backgrounds. I feel that their experience and knowledge are extremely helpful in the discussions at the board meetings. As an external director, I will continue to strive to deliver management advice that is timely and appropriate.

Anticipating Robust Discussion on Future Investment Plans

We believe that proper advice from a diverse group of external directors will be effective when management finds itself faced with challenging decisions in crucial situations, such as the direction and timing of future growth investments in the company. Since there were few acquisitions and other cases to deliberate in fiscal 2022, I look forward to lively discussions on a host of issues in fiscal 2023.

Cultivating Human Resources to Support the Tosoh of Tomorrow

Tosoh’s efforts in recent years have positioned it well in terms of assembling the people, goods, and capital necessary for the company’s sustainable growth. The key to maintaining and developing this posture is the training of the next generation of personnel. In addition to workplace training for employees, we also need people who can adopt a macro view. It may be necessary to cultivate executives through cross-divisional personnel exchanges.

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Tsutomu Abe
External Director


Yoshihiro Hombo

Achieving Safe, Stable Operations

In discussing various projects, we were particularly impressed by the higher-than-expected budgeted costs for facility maintenance from the complexes. This indicates to us that the concept of safe, stable operation, which positions safety as the highest priority in all aspects of operations, is firmly in place at our workplaces and complexes. I feel once again that the fact that Tosoh achieved record profits amidst an unstable social climate indicates that its commitment to prioritizing safety contributed greatly to its business performance.

Focusing on the Core of the Discussion

I believe that the most important aspect of sustainable growth is to respond to the world's needs with a market-oriented approach. I am also making this statement based on my past involvement in petrochemical-related business at a general trading company. Moreover, we are always conscious of the essence of each topic addressed in our board discussions. For example, when an agenda includes a proposed measure from one of the divisions, we believe it is necessary to confirm the analysis of the reasoning behind the proposed measure.

Importance of Emphasis on Further Consolidation

With regard to governance issues, although Tosoh is a diversified chemical company doing business on a global scale, I feel that there is a strong tendency to emphasize non-consolidated management as a metric. It will have to be accomplished in phases, but we do recognize the need for a focus on consolidation.

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Yoshihiro Hombo
External Director


Keiichi Miura

Commodity Business Requires Balance Between Quality and Price and the Environment

Now that we have a stronger foundation for management, we believe that the environment is perfect for accelerating one of our strengths, the dual management strategy, one of our strengths. Until now, investment in the Commodity business has centered on measures to cope with aging facilities. Going forward, however, we must invest in environmental measures such as the reduction of CO₂ emissions. From a long-term perspective, we will systematically make investment decisions to establish a production system that can balance quality and price with environmental considerations.

Accelerate R&D, Invest Strategically in Specialty Business

Faster R&D and aggressive investment will be key in expanding the Specialty business. We are engaged in a number of fascinating R&D themes. Drawing on my own experience, I intend to make recommendations from the perspective of timing of going to market, intellectual property rights, and investment risk.

Reviewing Materialities in Light of Changes in Society

In fiscal 2022, we reviewed the company’s materialities (key issues and KPIs). All issues nominated were of high importance, but the Board of Directors identified nine particular issues based on the opinions of various stakeholders as well as the medium-term business plan that is currently in effect. We will continue to closely monitor efforts to achieve the KPIs established.

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Keiichi Miura
External Director


Mariko Hidaka

Agenda Items Require Proper Preparation in Advance

As required, the annual schedule and agenda items are prepared and reviewed in advance, and are deliberated and reported on thoroughly. Materials are shared in advance on the day of the meeting and separate briefings are provided by the division senior general managers. Fiscal 2022 marked the start of my second year in office, and I am confident that I made further progress in understanding the issues and agenda items. Meanwhile, as my understanding of the issues progresses, the difficulties become clearer, and I become even more aware of the importance of examining proposals in advance.

Deepening Diversity and Inclusion

We have seen a steady increase in the number of women employed by Tosoh, and I suggested that it would be important to expand the number of females in sales and other positions. Furthermore, we are hiring more women in technical roles at Nanyo and Yokkaichi, and we feel that opportunities for diversity in human resources are increasing. In addition, we are amending our rules in line with revisions to laws and regulations regarding the prevention of various types of harassment. I believe it is necessary to enact sufficient measures at each workplace and, depending on the circumstances, to implement severe penalties to prevent recurrence of such harassment.

Importance of Strengthening Group Governance Going Forward

With 49 domestic and 46 overseas consolidated subsidiaries, I am concerned about whether governance has sufficiently pervaded the entire Group. I am not aware of any immediate risks, but I am naturally concerned about the pandemic, which has limited face-to-face interaction. I think it would be useful to ramp up information sharing and risk management within the Group, and also to exercise closer control over companies where required.

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Mariko Hidaka
External Director


Strengthening of Compliance

Key performance indicators (KPIs) FY2022 Targets FY2022 Results Appraisal
1. Reduce number of serious legal violations Zero Zero Achieved
2. Continue legal compliance and corporate ethics education activities Further disseminate the Group's Code of Conduct and compliance awareness through company-wide education and training at each complex, and conduct training, questionnaires, guidance, and audits. Achieved

Basic Concept

The basic policy of the Tosoh Group is to ensure compliance, pursue profits through fair competition, and continue to be a useful entity for society at large. The basis of the Group's compliance activities is for all employees and each and every officer to practice compliance sincerely, fairly, and ethically.

Tosoh Group Code of Conduct

The Tosoh Group Code of Conduct prohibits all forms of corruption, respects human rights, and describes how to deal with important matters that must be observed in conducting business activities. Based on the acknowledgment by top management that compliance is the foundation of the Tosoh Group's management and should take precedence over all other interests, all employees and officers of the Tosoh Group are obliged to comply with the Tosoh Group Code of Conduct.

The Tosoh Group Code of Conduct was revised in October 2018 to include additional CSR initiatives. In addition to the Japanese, English, Chinese, and Korean versions, the Tosoh Group Code of Conduct has been translated into the languages of the respective regions in which the Group's overseas businesses are located. Pamphlets explaining the Tosoh Group Code of Conduct are distributed to all employees and officers of domestic Group companies.

Tosoh Group Code of Conduct Items

I. Ensuring a Comfortable Workplace Where Every Group Member Can Fully Display His/Her Ability

1. Compliance with Laws, Regulations, and Norms in Society
2. Ensure Safe and Stable Operations
3. Compliance with Rules of Employment
4. Human Rights Protection and Discrimination Prevention and Respect for Diversity
5. Harassment Prevention
6. Healthy Workplace
7. Personal Information Protection
8. Proper Use of Corporate Assets
9. Proper Use of Information Technology Systems


II. Meeting the Trust of Customers and Business Partners, Meeting Shareholders’ Expectations

10. Bribery and Corruption Prevention
11. Prohibition of Inappropriate Gift Exchanges and Entertainment
12. Security Export Control
13. Compliance with Import and Export Laws and Regulations
14. Compliance with Competition Laws and Regulations
15. Fair Procurement Practices
16. Product and Service Quality and Safety Control
17. No Relations with Antisocial Forces
18. Compliance with Noncompetition Laws
19. Financial Integrity, Records Management, and Timely Disclosure
20. Intellectual Property Rights Policy
21. Confidential Information Management and Control
22. Prohibition of Insider Dealings
23. Political Donation Control

III. Contributing to the Development of a Sustainable Society

24. Environmental Conservation and Protection
25. Stewardship of Social Responsibility

Compliance Promotion System

Tosoh believes that practicing compliance, which means following the established rules, not only protects employees from accidents and other disasters, but also strengthens the management structure of the entire Tosoh Group. To this end, the company has established a promotion system to ensure that employees are aware of the importance of compliance and are able to practice it. The Compliance Committee reports the content of its deliberations to the Board of Directors.

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Compliance Committee

The Committee is chaired by an officer appointed by the president with the heads of relevant divisions among its members, and meets twice a year. The Committee formulates and implements compliance and other training plans; investigates, grasps, evaluates, and inspects the status of compliance promotion; and plans and drafts various measures to promote compliance. The decisions made by the Compliance Committee are reported to the Board of Directors, which oversees and directs compliance activities, including the prevention of bribery and corruption.

Compliance Committee Promotion Team

The company submits its opinions to the Compliance Committee and promotes compliance activities in accordance with the Committee's direction. To ensure thorough compliance throughout the Tosoh Group, we hold group meetings once a year with domestic Group companies (held online in fiscal 2022) to confirm the status of compliance-related activities and provide information to support the promotion of compliance. Moreover, the company serves as a contact point for compliance and harassment consultation, and investigates and responds to matters that require consultation.

Complex Compliance Committees

Planning, formulating, and implementing various compliance promotion measures at each complex.

Division Heads

A responsible person has been appointed in each division to promote compliance.

Tosoh conducts compliance training and other activities within departments in accordance with the Committee’s direction to ensure that each employee is in compliance.

Compliance and Harassment Consultation Desk

To prevent or quickly correct compliance violations, the company has established the Compliance and Harassment Consultation Desk for the purpose of swiftly recognizing and responding to actual or potential violations. Tosoh has established three consultation desks: internal, external, and an auditor's desk. Directors and employees of Tosoh and its domestic and overseas Group companies, temporary employees, and employees of partner companies may choose to submit reports or request consultations to any of these desks.

Consultations are accepted regarding general corrupt practices such as violations of laws and regulations, harassment, human rights violations, and bribery. The company confirms the facts, investigates, and takes action, whether the consultation initiated under a real or an anonymous name. For guidance and supervision, the details of each consultation are reported to the auditor. Those eligible to use the consultation service are given a Consultation Desk Pocket Card to make it more convenient to avail themselves of the service at any time.

The company has established internal rules for the protection of the consultants in investigating and responding to consultation matters, and takes all necessary precautions. Moreover, it has set up a contact point on our website for inquiries that can be consulted from outside the company. Furthermore, consultation services have been established at Group companies in Japan and abroad, creating a Group-wide system that facilitates consultation.

Compliance and Harassment Consultation Service Operation Standards (excerpt)

  • The name of the consultant and other personally identifiable information shall not be provided to anyone other than the person in charge of reception and investigation at the Consultation Desk and other related parties—including those involved in the investigation—except when necessary for the investigation or response, or when there is a legitimate reason, such as when required by law.
  • Consultants will not be subject to dismissal, disciplinary action, recommendation for resignation, refusal to renew, de facto harassment, or any other disadvantageous treatment as a result of their having submitted a report in line with applicable rules.
  • Upon confirmation that a consultant has been treated unfavorably, the company takes appropriate remedial and restorative measures.

Compliance and Harassment Consultation Desk: Number of Consultations

FY2020 FY2021 FY2022
Consultations 22 10 15
Overseas* 3 1 2

*Number of reports and consultations from overseas Group companies

In fiscal 2022, the company received 15 consultations (two reports from overseas), but none of the cases were serious enough to affect the company’s business activities. In terms of content, many consultations were related to alleged incidents of harassment. In each case, consultants take necessary actions such as collecting facts and cautioning parties involved, and then following up with them to clarify the situation.

Compliance and Harassment Consultation Desk System Chart

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Compliance Survey

Tosoh conducts a compliance survey annually to ascertain the status of compliance activities and the extent of understanding of the compliance system and consultation services. The company aims to leverage the survey results to further heighten employees' awareness of compliance and promotion of activities, and link this to compliance education and the planning of various related measures.

In fiscal 2022, Tosoh distributed a survey to all its employees in Japan. Some were distributed with an answer sheet to improve efficiency, and the response rate was 90.5%.

Compliance Education

Ensure Employee Awareness of Harassment Prevention

In fiscal 2022, a publication on harassment case studies introducing examples of violations was prepared jointly with Human Resources and distributed to all employees working at Tosoh in Japan as well as to employees of domestic Group companies to raise awareness of legal compliance.

Compliance Training

Training is conducted annually for new employees and employees at all levels—including new employees—on matters related to compliance and the prevention of bribery and corruption. The content of the program is oriented toward heightening awareness by featuring easy-to-understand case studies to enable employees to feel more comfortable with the program. In addition, Tosoh conducts annual compliance training at each workplace to instill awareness and ensure rules are being complied with.

Furthermore, even during the pandemic, the company uses the intranet and e-learning to share information with Group companies and promote Group-wide compliance education.

Legal Briefings

The Antimonopoly Act, the Act Against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors, the Unfair Competition Prevention Act, the Foreign Exchange and Foreign Trade Act (Security Export Control), the prohibition of bribery in various countries, and other important laws and regulations are outlined and explained to employees at all levels and to employees, including those of domestic Group companies, even during the pandemic.

Moreover, the company provides education for employees posted overseas, including points to bear in mind regarding local laws and regulations. The company also continues to educate employees through e-learning and other means on important laws and regulations, as well as by disseminating information via the company intranet.

Internal Audit

The Audit Office is dedicated to conducting internal audits of operations and other activities to improve and strengthen internal controls at Tosoh and its Group companies. It also conducts internal compliance audits to evaluate the promotion systems and operational status of Tosoh and its Group companies. Audit results are reported to the president and corporate auditors as appropriate. 


Cybersecurity

Key performance indicators (KPIs) FY2022 Targets FY2022 Results Appraisal
Number of severe cybersecurity incidents Zero Zero Achieved


Basic Concept and Promotion Structure

Tosoh recognizes that strict protection of its technical and management information, as well as important information on its suppliers and Group companies, is a social responsibility and a vital management issue for maintaining the sustainable development of the company. Toward ensuring and further improving information security, the company has established an information security policy to ensure and further improve information security.

Information Security Policy (excerpt)

  • Tosoh provides ongoing training to ensure that each employee recognizes the significance of information security in their daily work and complies with rules related to information security.
  • It conducts risk assessments for information assets, and appropriate countermeasures are implemented according to the significance of the risk.
  • It ensures compliance with all applicable laws, regulations, and rules.
  • In the event of an information security incident, Tosoh responds promptly and accurately to minimize the impact on its business activities.

Promotion Structure

Tosoh has established an IT Strategy office under the supervision of the director in charge of information security management, to promote information security measures throughout the Tosoh Group. Information security measures are reported to the Board of Directors as appropriate. Moreover, a program to advance systematization has been established in which one or two people in each department are assigned to assist in the rollout of information systems and information security on-site coordination, education, and activities to enhance awareness. And the company is also working to raise the security awareness of all employees by offering rewards for those who acquire certifications related to information security.

Security Countermeasures

To prevent damage to public trust and competitiveness resulting from the leak, loss, or damage of plant control systems, mission-critical systems, confidential information, and personal information, we are using the Cybersecurity Management Guidelines issued by Japan’s Ministry of Economy, Trade and Industry and various other cybersecurity frameworks. The company is formulating response policies and strengthen risk management throughout the organization.

Introduction of Security Products

Tosoh has introduced a system for the decryption and decoding of encrypted communications to check for suspicious activity. In addition, with the aim of responding promptly to cyberattacks—which are becoming more complex every day—the company has established a specialized organization (Security Operation Center) that conducts attack detection and notification 24 hours a day to reduce the risk of cybersecurity incidents at an early stage. The company has further implemented Endpoint Detection and Response throughout the company, which allows for detection and swift response at the endpoint in the event of an intrusion. Tosoh will continue to make the necessary investments to address the ever-increasing cybersecurity threats.

Security Education for Employees

As part of our employee education activities, Tosoh holds regular briefings at the Nanyo and Yokkaichi Complexes on compliance using the Information Security Management Guidelines. The briefings further serve to alert employees on warning and protection measures through incident case studies. This information is intended not only for Tosoh Corporation employees but also for employees of Group companies. The aim is to heighten awareness of the entire supply chain and of case studies based on the latest trends and other information.

Conduct Targeted Attack E-mail Drills

The company conducts attack e-mail drills to allow employees to experience the threat of cyberattacks and to raise awareness of information security. This is a hands-on training program that delivers simulated targeted attack e-mails to all employees to enhance their ability to respond appropriately in a genuine attack situation. Since attack e-mails are becoming more and more sophisticated every year, the company continuously trains each employee to act appropriately.

Participation in Working Groups

The environment surrounding information security changes on a daily basis. Tosoh participates in industry association working groups to keep abreast of the latest information. Information obtained through this process is shared with relevant departments and incorporated into in-house training to bolster the company's security measures.


Business and Other Risks

The Tosoh Group identifies and analyzes risks that may have a significant impact on management and takes appropriate measures to minimize the impact of such risks when they become apparent, and implements initiatives to protect corporate value.


Management Structure

Under the supervision of the Board of Directors, the Tosoh Group has established a system in which each department in charge analyzes risks that may have a significant impact on management and responds appropriately. Each department is responsible for implementing risk countermeasures in a systematic manner, as well as for prompt response to crises. In addition, the company identifies ESG-related risks as important CSR issues, sets targets, and undertakes activities to resolve the issues. The CSR Committee, chaired by the president, confirms the progress of activities and reports on them to the Board of Directors for deliberation.

Major Risk Items

The following is a list of major risks that we recognize as having the potential to significantly impact the Group's financial position, business performance, and cash flow. We have positioned them as important CSR issues and are actively addressing them. Forward-looking statements in the text are based on the judgment of the Tosoh Group as of March 31, 2022.

For details, please refer to the annual Securities Report.

Climate Change

With the adoption of the Paris Accord, efforts are being made worldwide to reduce emissions of greenhouse gases, which are considered to be the major cause of climate change and global warming. If quantitative restrictions or taxes are introduced in the future in relation to CO2 and other emissions or the use of fossil fuels, or if demand for oil-related products declines due to the emergence of nonfossil-fuel alternatives, the Group's business performance and financial position may be affected. For this reason, the Group has established the CO2 Reduction and Effective Use Promotion Committee to promote technological improvements for CO2 reduction and effective use.

In addition, the occurrence of extreme weather conditions such as typhoons and floods caused by climate change that cause damage to production facilities and roads used for transportation could affect the Group's business performance and financial position.

Environmental and Other Legal Regulations

The Tosoh Group's business performance and financial position may be affected by restrictions on business activities, additional capital investment, or new expenses due to the strengthening of domestic and international legal regulations concerning the environment or other matters, or due to demands for social responsibility. For this reason, the Tosoh Group conducts its business activities with the recognition that environmental protection and health and safety and the like are management issues of the highest priority.

Technological Innovation

If we are unable to continuously develop and provide new products that meet customer needs, or if groundbreaking technological innovations are made by competitors, our business performance and financial position may be adversely affected. In the midst of rapid changes in the domestic industrial structure and international social issues, the Tosoh Group is actively engaged in R&D to strengthen and expand its core businesses and create new products and opportunities for the sustainable growth of the company. Especially in the Specialty products business, the speed of technological innovation is remarkable. This is why we believe it is necessary to develop and provide new products in a timely manner.

Intellectual Property

In the course of developing a wide range of businesses, there is a possibility that the Group's intellectual property rights or those held by third parties may be infringed upon. In such a case, the Group's business performance and financial position may be affected. To this end, the Tosoh Group recognizes the importance of intellectual property rights, and is working to acquire rights and prevent infringement of rights held by third parties, both in Japan and overseas.

Information Security

If a problem were to occur in the plant control systems or core systems at our manufacturing complexes, we would be forced to suspend important operations, which could have an impact on our business performance and financial position.

The Tosoh Group has taken various protective measures against cyberattacks. In the event that information is leaked to outside parties due to unforeseen circumstances, the Tosoh Group’s public trust and competitiveness could be compromised. This could affect the Group's business performance and financial position.

Given this risk, the Group strives to appropriately manage confidential and personal information, and has taken appropriate measures that comply with the European Union General Data Protection Regulation.

Quality Issues

Unexpected defects in our products could lead to a loss of public trust, discontinuation of product sales, or even legal action. This could affect the business performance and financial position of our Group. The Tosoh Group has, therefore, established a quality management system for its products and has product liability insurance in place.

Raw Material and Fuel Procurement

Some raw materials and fuels are dependent on specific regions or suppliers. The Group's business performance and financial position may be affected in the event of procurement disruptions due to disasters or accidents at those suppliers. To mitigate this risk, the Group procures raw materials and fuels necessary for production from both domestic and overseas sources. The company is working to ensure stable long-term procurement by diversifying raw material and fuel suppliers, concluding medium- to long-term contracts, and purchasing from the spot market.

Accidents, Disasters, and Infectious Diseases

The effects of natural disasters and unforeseen accidents cannot be completely prevented or sufficiently mitigated. In the unlikely event of an accident or disaster, the Group's business performance and financial position could be affected by losses resulting from the closure of manufacturing facilities, costs associated with compensation for damage to areas surrounding plants, and significant facility repair expenses. Furthermore, the outbreak or spread of infectious diseases such as COVID-19 or influenza in the countries or regions where the Group operates, which forces the suspension of production or sales activities, may affect the Group's business performance and financial position. To this end, the Tosoh Group conducts routine and periodic facility inspections and maintenance, safety-related investments, and other measures to prevent the occurrence of facility accidents and other incidents.

To mitigate the potential spread of COVID-19, the Group is promoting telecommuting and working in staggered shifts, and is implementing measures such as voluntary restraint on business trips, meetings, and interviews. In particular, the company has established a COVID-19 task force at each complex, and are taking countermeasures based on phase management methods according to the infection status.

Tosoh also recognizes the following other risks.

  • Fluctuations in international market prices for products and fuels
  • Issues with acquisitions, capital alliances, and business restructuring
  • Fluctuations in interest rates
  • Valuation of marketable securities
  • Estimates based on construction progress standards
  • Changes in inventory valuations
  • Fluctuations in exchange rates
  • Litigation
  • Reversal of deferred tax assets
  • Recognition of revenue for transactions in which revenue is recognized over a certain period of time for construction contracts
  • Shifts in domestic and international economic conditions, supply and demand, and competition
  • Fluctuations in interest rates
  • Impairment in fixed assets
  • Retirement benefits
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