(Key Sustainability Issues) Ensuring Compliance | Sustainability | the KAYAKU Spirit Nippon Kayaku Co., Ltd.

Policy and Basic Approach

The Nippon Kayaku Group naturally views compliance as a matter of observing laws, internal regulations and industry rules, as is the social norm and as society demands. However, we broaden our interpretation of compliance to include viewing it as a means of continually repaying the trust of our various stakeholders.
Furthermore, by way of a Group code of behavior, we have fixed our Charter of Conduct and Code of Conduct to provide the spirit with which our business activities can help fulfil our social role of contributing to wider society.
We are also working on achieving thorough compliance across our business activities, and further promoting compliance activities under strong top management leadership.

Nippon Kayaku Group Charter of Conduct and Code of Conduct

After underlining compliance as our “top priority for business activities”, we fixed our Nippon Kayaku Group Charter of Conduct and Code of Conduct in the year 2000. We revised the contents in 2011 in line with ISO26000 (Guidance Regulations on the Social Responsibilities of Organizations), and again in 2020 when resolving to voluntarily implement measures towards achieving a sustainable society.

The Nippon Kayaku Group Charter of Conduct

Business activities

The Nippon Kayaku Group will provide products and services that satisfy customers through Communication with customers and the provision of appropriate information, giving due consideration to the safety and reliability of its products and services.
In all its business activities, the Nippon Kayaku Group will comply with all relevant laws and regulations, including competition law, the spirit of these laws, and internal regulations, and will engage in fair, transparent, and free competition. We will also maintain sound relationships with the governing authorities in all regions.
The Nippon Kayaku Group respects human rights in all its business activities, and will not discriminate or tolerate any inappropriately behavior for reasons based on gender, age, nationality, race, religion, or disability.
The Nippon Kayaku Group will appropriately manage and utilize the company’s assets to improve the efficiency of its business activities and strive for continuous development.
The Nippon Kayaku Group implements systematic crisis management in preparation for the actions of anti-social forces that threaten the lives of citizens and corporate activities, as well as for terrorism, cyber attacks, natural disasters, and other events.

Relationship with society

The Nippon Kayaku Group respects the cultures, religions and traditions of each country and region, works in harmony with society, and contributes to the development of society as a good corporate citizen.
The Nippon Kayaku Group will disclose information on its business activities to stakeholders in a timely and appropriate manner based on objective facts. We will also strive to increase corporate value through constructive dialogue with stakeholders.
In order to contribute to a sustainable society and the environment, the Nippon Kayaku Group strives to conduct its business activities in harmony with the natural environment by constantly taking into account the impact on the global environment, not only complying with relevant laws and regulations, but also establishing its own voluntary standards.

Information handling

The Nippon Kayaku Group will appropriately protect the information it possesses through its business activities and take all possible measures for information management. In addition, we recognize the value of information assets and respect the intellectual property rights of others.

Relationships between the company and individuals

The Nippon Kayaku Group complies with labor-related laws and regulations, ensures a safe and comfortable working environment, and respects the basic human rights, diversity, character, and individuality of individuals.

Roles of top management and thorough adherence to this charter

Those involved in the management of the Nippon Kayaku Group recognize that realizing the spirit of this charter is their own role and responsibility, and will thoroughly disseminate it to all employees. In addition, we will listen to the opinions of people inside and outside the group, establish effective systems within the group, and ensure thorough implementation of corporate ethics. In the event of a situation that contravenes the spirit of this charter, we will clarify both inside and outside the company our stance of solving the problem, investigate the cause, and work to prevent any recurrence.

The Nippon Kayaku Group Charter of Conduct and Code of Conduct

System

In order to ensure thorough compliance across the entire Group, we have set up an Ethics Committee as an advisory body to our Sustainable Management Meeting under the guidance and supervision of our Board of Directors. This Committee meets twice a year, and on a further ad hoc basis when necessary.
Led by an Executive Director with an Official Post nominated by our President, the Ethics Committee is comprised of representatives from every business unit’s planning department, and from every section of our General Administration Department which is unattached to any business unit. Its remit is to decide on policies and specifics related to ensuring compliance with our Charter of Conduct, Code of Conduct and Basic Anti-Bribery Policy, thereby preventing conflicts of interest and corruption emanating from unreasonably approaching government employees.
It must also examine and decide upon responses to matters either arising in consultation or actually occurring, and the relevant recurrence prevention measures. The most important matters discussed by this Committee, including anti-corruption matters, are forwarded to the Sustainable Management Meeting and even the Board of Directors, who provide related feedback.

Indicators

Scroll sideways for an overview of the table below.

Key sustainability issues	Corresponding SDGs	Action plans	Indicators (KPI)	FY2025 Targets	Results		FY2023 Initiative-related Topics
Key sustainability issues	Corresponding SDGs	Action plans	Indicators (KPI)	FY2025 Targets	FY2022	FY2023	FY2023 Initiative-related Topics
Ensuring Compliance		Exercise thorough compliance, which is a basic principle for conducting corporate activities, and engaging in fair business operations Maintain and enhance an open corporate culture with a high sense of ethics	Number of serious compliance violations^*	0	0	0	No serious compliance violations. This financial year's compulsory compliance training on Mental Flexibility delivered to all domestic Group companies. Discussions held and options explored with overseas Group companies yet to install a compliance whistleblowing consultation service.
			Compliance training rate	100%	97%	96%
			Percentage of group companies with compliance / whistleblowing hotlines	100%	83%	83%

*Number of serious accidents as judged by the Ethics Committee

Initiatives

Policy and Specifics regarding Observance of The Nippon Kayaku Group Charter of Conduct and Code of Conduct

Internal Instillation

So that the entire Group is instilled with awareness of the need for thorough compliance and secure implementation, and that the contents of our Charter of Conduct and Code of Conduct can be checked at any time, we have produced some portable cards imprinted with both the aforementioned as well as our corporate vision. We have also produced a brochure in the six languages spoken by the countries in which we have set up base (Japanese, English, Chinese, Spanish, Malay and Czech). Both the cards and brochures have been distributed to every Group executive and employee.
It is also the case that every October is Nippon Kayaku’s “Compliance Month,” which sees our Ethics Committee Chairman pen a message aimed at every domestic Group company employee in our internal bulletin. It also sees us conduct a Compliance Consciousness Survey so we can continually monitor the degree of compliance instillation and link to subsequent improvements.
Our Compliance Consciousness Survey has been conducted in conjunction with a contracted consultancy firm since FY2015. From the aggregated results and subsequent analysis do we extract the key compliance promotion issues for each company workplace and provide the relevant feedback, including improvement suggestions. That feedback is then referenced by each workplace when it draws up and fixes its Compliance Action Plan for the following financial year, thereby building PDCAs to improve compliance consciousness.
Compliance activities for our overseas group companies are implemented in accordance with the relevant country’s laws and business customs. In China, for example, all our group company chief executives and persons in-charge of ethics gather each year for an Ethics Managers Meeting. This meeting provides a chance to discuss compliance initiatives, reports of issues, the extraction of problems and issues, and relevant measures to be taken. In addition, legal representatives from our Internal Management Control Division and KSC^* provide onsite compliance training to the employees of each group company. Going forward, based on each country’s situation, we will deepen the links between each group company and section as we aim for yet more effective and efficient global compliance activities.

*KSC is the abbreviation for Kayaku (Shanghai), our administrative company in China

Education and Training

The Nippon Kayaku Group delivers education and training on compliance issues to all executives, employees (including contracted and part-time employees) and temp staff. In addition to deciding upon themes for each year, such as the Group Charter of Conduct and Code of Conduct, how to use our internal whistleblowing system, bribery and anti-corruption issues, basic human rights, and harassment, we turn regular meetings at each workplace into workshops and case-study training sessions. FY2023 saw us deliver compliance training on Mental Flexibility, and sustainability training on Bribery and Anti-Corruption Issues.
We also set up harassment prevention training for every executive and employee on an annual basis. The contents are the same for managers and non-managers alike, and involve sharing awareness of harassment definitions, case studies, preventative measures and responses to actual situations, as part of broader initiatives to increase awareness and prevent before the event.
In addition, to boost thorough compliance across the entire group, we provide compliance training for all group company directors to promote the acquisition of necessary knowledge from a managerial perspective.
So that training opportunities and programs can be provided to every employee, we mainly rely on E-learning methods and large group sessions at Group companies.

Training type	Main contents	Mainly aimed at	FY	Training format	No. of times	Take-up rate
Compliance Training (Yearly, Compulsory)	Regarding mental flexibilty	Executives, employees, (including contracted and part-time employees), temp staff	2023	E-learning, group session	1	95.9%
Compliance Training (Monthly, Compulsory)	Basic Anti-Bribery Policy, Conflicts of Interest, Insider trading	Executives, employees, (including contracted and part-time employees), temp staff	2023	E-learning	1	81.7%
Compliance Training (Monthly)	Harassment Basic human rights A good workplace environment How to use consultation services etc.	Executives, employees, (including contracted and part-time employees), temp staff	2023	E-learning	6	Average of 71.7%
Risk Management Training	Risk perception and sensitivity	Executives, employees, (including contracted and part-time employees), temp staff	2023	E-learning	1	76.7%
Legal Affairs Training	Cookie regulations under the Telecommunications Business Act Third-party submissions; how to make receipt records Personal Information and Personal Identification Information Regarding contracts (2 sessions)	Executives, employees, (including contracted and part-time employees), temp staff	2023	E-learning	5	Average of 84%
New Hire Training^*1	Compliance basics, Charter of Conduct & Code of Conduct, Compliance Hotline etc.	New hires	2023	Group session	2	100%
New Manager Training^*1	Charter of Conduct & Code of Conduct, harassment, Compliance Hotline etc.	New managers	2023	Group session	2	100%
Overseas Transfer Training^*2	Charter of Conduct & Code of Conduct, Basic Anti-Bribery Policy etc.	Employees transferring overseas	2023	Interview, online	5	100%

*1Held every year
*2Pre-departure training set up for employees transferring overseas

Initiatives to Prevent Corruption and Anti-Competitive Practices

The Nippon Kayaku Charter of Conduct and Code of Conduct call for competition law, related laws, the spirit of those laws, and internal company regulations to be observed in all business activities; for competition to be conducted fairly, transparently and freely; and for improper trading practices such as bribes to be banned. Furthermore, so as to clarify our basic approach towards the prevention of bribery, the rules to be observed and their sphere of applicability, we have fixed our Nippon Kayaku Group Basic Anti-Bribery Policy, which is now being diffused and rolled out to all executives and employees.

Nippon Kayaku Group Basic Policy on Anti-Bribery

Established: June 21, 2021
Revised: January 31, 2024

Ⅰ. Preamble

Nippon Kayaku established the Nippon Kayaku Group Basic Policy on Anti-Bribery (hereinafter referred to as the Basic Policy) to clarify the basic concept, scope, and rules to be followed regarding the prevention of bribery, for declaration to both inside and outside the company. This basic policy applies to all officers and employees of the Nippon Kayaku Group (employees, junior employees, contract employees, advisors, contract workers, parttime workers, etc.).

Ⅱ. Overview

The Nippon Kayaku Group established the Nippon Kayaku Group Charter of Conduct and Code of Conduct to implement sustainable management that is integrated with management strategy while maintaining a high level of ethical standards. This is aimed at realizing the corporate vision KAYAKU spirit of "continuing to provide society with the best products through constant progress and the combination of conscience." The Charter of Conduct and Code of Conduct stipulates that; we will "comply with competition laws and other relevant laws and regulations, as well as their spirit and internal regulations, and engage in fair, transparent and free competition in all our business activities; that we will maintain sound relations with politics and the government;" and that we will "comply with relevant laws and regulations in each country and region, and respect international norms, cultures, religions and traditions."
Furthermore, the Nippon Kayaku Group considers the establishment and strengthening of anti-bribery systems both domestically and overseas to be an important issue to be addressed by the Group as a whole as we continue to expand our business globally year by year.

Ⅲ. Declaration

The Nippon Kayaku Group will comply with laws and regulations that prevent bribery in each country and region in which the Nippon Kayaku Group operates, including the Japan Anti-Unfair Competition Act, the U.S. International Anti-Corruption Act (Foreign Corrupt Practices Act:FCPA),the Bribery Act (Bribery Act:UKBA), and the Chinese Commercial Bribery Regulation. In addition, we will not act in a way that violates the Ethical Code for Public Employees of Japan, the Code of Ethics for National Public Employees, the ethical rules stipulated by special public corporations, local governments, etc., and the laws and regulations concerning the public employees^*1, etc. of each country.

Ⅳ. Compliance items

Prohibition of Bribery of Public Officials, etc.
The Nippon Kayaku Group will not provide, offer or promise any illegal entertainment, gifts, benefits or other economic benefits^*2, whether directly or indirectly, to domestic and overseas public employees or persons in similar positions ("public employees, etc.") with the aim of influencing their conduct of duties.
In the event public officials, etc. request the provision of illegal entertainment, gifts, benefits, or other economic benefits domestically or overseas, the Company shall refuse such request and notify the relevant organizations as appropriate.
Payment to agents, etc.
The Nippon Kayaku Group shall not make any payments to agents or consultants (hereinafter referred to as "Agents") in cases where any part of such payments are or may be diverted to illegal approaches to public officials, etc.
Entertainment and gifts to business partners other than public officials, etc.
In compliance with national laws, industry codes and internal regulations, we will not provide entertainment, gifts, or other economic benefits that exceed a reasonable range of social conventions to our domestic and overseas business partners, including their officers and employees.
Entertainment and gift-giving
We do not receive excessive entertainment from business partners or gifts of money that exceed the scope of social convensions.
Donation activity
Donations, such as grants and political contributions, will not be made for the purpose of fraudulently obtaining or securing business benefits.
Control of Records
We will prepare and maintain accounting records of all transactions and dispositions of assets, as appropriate and accurately as possible, to demonstrate that bribery has not occurred.

Requests to business partners

This basic policy summarizes the Nippon Kayaku Group's approach to anti-bribery, and we believe that the understanding and cooperation of our business partners is essential to the implementation of this basic policy. If you encounter or suspect any violations to this basic policy or related laws or regulations, please notify your contact person at the Nippon Kayaku Group.
We also request that you cooperate in investigations by Nippon Kayaku Group companies or relevant authorities regarding alleged violations or violations.

*1"Public officers, etc." refers to those who are in charge of legislative, administrative, judicial, and other public affairs in each country or region, candidates for such services, officials of government agencies, employees of companies and other organizations owned and operated by the government, officers and employees of political parties, and officers and employees of public international organizations composed of countries, regions, and their governments.
*2"Gifts, benefits, and other economic benefits" include all items that are equivalent to cash, such as gifts, services, employment, loans, travel expenses, food and beverage, invitations (sports tours, theatrical tours), donations, daily grants, and rewards, all of which are in profit, whether in their nominal terms. Provided, however, that this shall not apply to acts where the scope of the Anti-Corruption and Anti-Bribery Laws and Regulations applicable to each country or region is moderate in light of lawful and sound business practices and socially accepted norms.

Internal Audits

In line with our basic policy on internal system structure, the Nippon Kayaku Group has set up an Audit Division, under the direct supervision of the President, to contribute towards strengthened corporate governance in the form of anti-corruption stances, prevention of unfair or erroneous practices, business operational reform, and asset safeguarding. Based on the annual audit plan approved by the Sustainable Management Meeting does this Audit Division internally audit every division and section of both domestic and overseas Group companies once every three years. Such internal audits involve assessing the systems for business, operational, financial and legal management, as well as observation of ethical standards and anti-corruption measures. Audit results are not only promptly shared with the President, auditors, and the Audit & Supervisory Board, but periodically reported to the Board of Directors via our internal database.

High Ethical Standards and Transparency in our Medical Business

Pharmaceutical companies are demanded to constantly ensure high ethical standards and transparency; build relationships of mutual trust with external stakeholders such as medical, dental and pharmaceutical researchers, medical professionals, wholesalers and patient groups; and work towards optimal and ethical medical care from the patient’s standpoint.
As the standard by which to judge whether our actions align with the aims of the JPMA Code, we have fixed a Nippon Kayaku Code of Practice. Thus are we further clarifying the corporate ethics and compliance awareness campaigns which form the bedrock of our business activities, and promoting respect for those key areas in the conduct of business and from a high ethical standpoint.

Conducting Compliance Duties based on Nippon Kayaku’s Code of Practice

Initiatives in Overseas Group Companies

The Nippon Kayaku Group’s risk management approach involves identifying risks in each workplace, including overseas companies, on an annual basis, exploring response measures and conducting periodical reviews. For details, please see: “(Key Sustainability Issues) Risk Management – Preventative Measures.”
For Group companies located in countries with high risks of corruption, we have prepared some Anti-Bribery Regulations to aid our comprehensive anti-corruption approach. These regulations serve as a set of standards and rules for gift-giving and hospitality, and are based on each relevant country’s laws and business customs. We periodically confirm the state of compliance through conducting internal audits. Our anti-corruption education and training programs include explanations of the Nippon Kayaku Charter of Conduct and Code of Conduct, and the prohibition of conflicts of interest and insider trading.
Based on each country’s situation, the future will see us deepen links between each group company and section, and strive to deliver global compliance activities which are yet more effective and efficient.

Rooting out Supplier Corruption

All newly-registered suppliers, and those with the biggest trading amounts for the current year, are subjected to the Nippon Kayaku Sustainable Procurement Survey. The Survey contains questions related to preventing corruption and forms part of our effort to combat corrupt practices by getting our suppliers to demonstrate proper compliance.
Furthermore, in order to ensure thorough compliance across the supply chain, we request that any subcontractor, agent, consultant, wholesaler, and any other intermediary who may come into contact with government employees, receives, upon their first commissioned job or whenever their contract is renewed, an explanation of the Nippon Kayaku Group’s Basic Anti-Bribery Policy, and signs a contract pledging to honor it as well as related anti-corruption laws and regulations.

(Key Sustainability Issues) Environmental and Social Considerations in the Supply Chain

Whistleblowing Consultations and Actual Matters Arising: Reponses and Recurrence Prevention

Internal Whistleblowing System

With the installation of its Internal Whistleblowing System and the setting up of its Compliance Hotline, Nippon Kayaku is working on prevention and early detection of unfair practices, and relevant corrective measures.
Our Compliance Hotline is available to all domestic Nippon Kayaku Group executives, employees (including contracted and part-time employees), temp staff and retired employees (up to a year after they have left). Overseas Group companies, meanwhile, have set up their own internal whistleblowing systems.
Whistleblowing reports may pertain to malpractice, such as law violations, unjust practices, violations of internal regulations such as the Group Charter of Conduct and Code of Conduct, and actions contravening corporate morals. They may also pertain to human rights violations, harassment, bribery, unfair trading, and more generic corrupt practices. When it comes to malpractice, or the risk of malpractice occurring in Nippon Kayaku Business, we are ready to accept a whistleblowing report or consultation at any time.
Our Compliance Hotline, meanwhile, runs to both our Ethics Committee Office (the Internal Control Management Division’s Compliance Manager) and an external law firm, and allows whistleblowers to choose anonymity or otherwise when reporting or consulting. Reports may be made via telephone, email, document or interview, with email and document submissions accepted 24/7.
Any report or consultation accepted by the Compliance Hotline reception desk will be examined by the Ethics Committee Office, which will then decide on whether to investigate the facts. If, during any investigation, evidence of malpractice becomes clear, the Ethics Committee Office will promptly devise measures for corrective response and recurrence prevention, and subsequently notify the whistleblower of the investigation results.
Our Internal Whistleblowing System guarantees both confidentiality and anonymity, and our Regulations on Handling Internal Whistleblowing Reports specifically state that the whistleblower shall not receive any kind of negative treatment as a consequence of reporting or consulting.
We are raising awareness of our whistleblowing system and Compliance Hotline through group sessions, E-learning, internal portal site announcements, workplace posters, and the distribution of portable cards.

Flow of Reporting and Consulting

Contents of Reports and Consultations made over the Last Five Years

FY2023 saw a total of 27 reports and consultations made, with the facts of every one investigated and corrective measures deployed where necessary. Of those 27, none were of sufficiently critical nature to impact business operations. Through internal company training will we continue to promote awareness of our Internal Whistleblowing System, and encourage employees to use it as we strive towards prevention, early detection and containment of malpractice and misconduct.

Scroll sideways for an overview of the table below.

Contents of Complaints and Consultations	Covering	Unit	2019	2020	2021	2022	2023
Harrassment (power harrassment, sexual harrassment, etc.)	non-consolidated	cases	8	6	2	7	16
Violations of company rules or manners	non-consolidated	cases	2	0	0	2	3
Work or labor-related	non-consolidated	cases	1	1	1	3	5
Others	non-consolidated	cases	0	0	1	4	3
Total	non-consolidated	cases	11	7	4	16	27

Our Compliance Hotline for Suppliers

The Nippon Kayaku Group has set up a Compliance Hotline for Suppliers for matters related to law violations. We ask that suppliers confirm Points 1 to 5 below before reporting or consulting via Point Number 6.

Available to
Executives and employees who, in the course of business, are involved in trading with domestic Nippon Kayaku Group companies
Focusing on
Law violations or unethical acts committed by executives and staff of domestic Nippon Kayaku Group companies, or the discovery of readiness to commit such acts
Reports and consultations accepted by
The Ethics Committee Office (Internal Control Management Division), Nippon Kayaku Co., Ltd.
Requests regarding reports and consultations
All whistleblowers should state their name, workplace and department. Whistleblowers unable to give their name can make reports and consultation requests anonymously, but this may impede the establishment of facts and the wider investigation, as well as render it impossible to report back on investigation results and recurrence prevention measures taken.
Protection of whistleblowers and consultation-seekers
All users of our Compliance Hotline for Suppliers will have their personal information strictly handled in line with our Policy for Protection of Personal Information. Such information will only be used as necessary in the conduct of the investigation. Furthermore, whistleblowers will not receive any blowback for the act of having made a report or requested a consultation.
To contact us
Reports and consultation requests should be made to the Compliance Hotline for Suppliers.

Numbers of Reports and Consultations

Our Compliance Hotline for Suppliers has been in place since FY2021, during which it received no enquiries. That was also the case in FY2023, while FY2022 saw just the one enquiry, which was duly investigated and had the necessary corrective measures deployed. The case was not of sufficiently critical nature to impact business operations. We will continue to earnestly take on board the comments of our suppliers, and seek to improve the fairness and transparency of our trading activities.

Number of Whistleblowing Complaints and Consultations from Suppliers

Scroll sideways for an overview of the table below.

Whistleblowing	Covering	Unit	2019	2020	2021	2022	2023
Whistleblowing complaints and consultations from suppliers	non-consolidated	cases	-	-	0	1	0

Data

Employees punished, fined or dimissed for causing Anti-Corruption Policy violations

Scroll sideways for an overview of the table below.

Indicators	Covering	Unit
Number of violations of anti-corruption-related policies	non-consolidated	cases
Employee punishments and dismissals	non-consolidated	cases
Corruption-related fines issued	non-consolidated	yen
Applications of corruption-related penalties	non-consolidated	cases

Political Donations

Scroll sideways for an overview of the table below.

Indicators	Covering	Unit	2019	2020	2021	2022	2023
Political donations	non-consolidated	10,000 yen	118	113	104	106	89

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(Key Sustainability Issues)Ensuring Compliance

Policy and Basic Approach

Nippon Kayaku Group Charter of Conduct and Code of Conduct

The Nippon Kayaku Group Charter of Conduct

Business activities

Relationship with society

Information handling

Relationships between the company and individuals

Roles of top management and thorough adherence to this charter

System

Indicators

Initiatives

Policy and Specifics regarding Observance of The Nippon Kayaku Group Charter of Conduct and Code of Conduct

Internal Instillation

Education and Training

Initiatives to Prevent Corruption and Anti-Competitive Practices

Nippon Kayaku Group Basic Policy on Anti-Bribery

Ⅰ. Preamble

Ⅱ. Overview

Ⅲ. Declaration

Ⅳ. Compliance items

Requests to business partners

Internal Audits

High Ethical Standards and Transparency in our Medical Business

Initiatives in Overseas Group Companies

Rooting out Supplier Corruption

Whistleblowing Consultations and Actual Matters Arising: Reponses and Recurrence Prevention

Internal Whistleblowing System

Flow of Reporting and Consulting

Contents of Reports and Consultations made over the Last Five Years

Our Compliance Hotline for Suppliers

Numbers of Reports and Consultations

Number of Whistleblowing Complaints and Consultations from Suppliers

Data

Employees punished, fined or dimissed for causing Anti-Corruption Policy violations

Political Donations

(Key Sustainability Issues)
Ensuring Compliance