Governance

Sumitomo Chemical Sustainability Data Book 2021	For a Sustainable Future	Governance	Environment	Society			Contents

Governance

Contributing to

the SDGs through Governance

Contents

1. Corporate Governance

1. Internal Control

1. Risk Management

1. Compliance

80 Internal Reporting System (Speak-Up Reporting System)

1. Anti-corruption

1. Tax Transparency

1. Responsible Care

1. Information Security

100 Intellectual Property

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Sumitomo Chemical Sustainability Data Book 2021	For a Sustainable Future	Governance	Environment	Society			Contents

Corporate Governance

Sumitomo Chemical has long dedicated itself to improving its corporate governance, and has undertaken a number of initiatives to further that end, including implementing the Corporate Governance Code. The company also makes continual improvements to ensure that the company's governance structures serve their appropriate functions, including with respect to executive nomination and remuneration, and that the Board of Directors is highly effective, with the aim of further improving corporate governance.

Basic Stance

Sumitomo Chemical cherishes deeply the Sumitomo Spirit which has been passed down through generations over nearly 400 years, the basic teaching of which is, among others, not to seek its own interests alone, but to contribute to society through its business activities. In accord with this business credo, the company strives to take on challenges constantly of creating new value by capitalizing on its proprietary technologies toward achieving the company's sustained growth while at the same time cultivating corporate culture full of vigor and growing as a company that earns trust from the public at large. Recognizing that highly effective corporate governance is vital to attaining these ends, the company keeps working to further enhance its corporate governance in accordance with the following policies and principles, centering particularly on closer cooperation with shareholders and various other stakeholders, faster decision-making, proper oversight of business execution, enhanced systems of compliance and internal control, and active dialogue with stakeholders.

• Sumitomo Chemical not only shall respect the rights of shareholders, but shall endeavor to provide an environment where shareholders can exercise their rights smoothly and also to ensure the effectively equal treatment of shareholders.
• Recognizing that cooperation with various stakeholders, including shareholders, employees, customers, business partners, creditors, and local communities, is essential to sustained growth, Sumitomo Chemical shall proactively work to fulfill its corpo- rate social responsibility and strive to cultivate the corporate culture of a company that can be trusted by society.
• As part of efforts to build a foundation for constructive dialogue with stakeholders, Sumitomo Chemical shall endeavor to provide information that is highly reliable and useful to recipients.
• Sumitomo Chemical's Board of Directors shall fulfill its role and mission properly, based on their fiduciary responsibilities and accountability to shareholders and recognizing the important role of Independent Outside Directors & Auditors, through such measures as presenting appropriate corporate management policies and business strategies that have taken into account changing socioeconomic conditions, and conducting highly effective oversight over the execution of business.
• Sumitomo Chemical shall endeavor to promote constructive dialogue with shareholders with the aim of seeking to attain the company's sustained growth and to enhance corporate value in the medium to long term.

Sumitomo Chemical Corporate Governance Guidelines

https://www.sumitomo-chem.co.jp/english/company/files/docs/governance_pdf_01.pdf

• Measures to Date for Strengthening Corporate Governance

	Date	Major Initiatives	Board		Appointment of		Executive		Other
	Composition		Board Members		Remuneration
2003		June	Introduced Executive Officer system (reduced number of Directors from 25 to 10)
		July	Established Compliance Committee
2004		June	Eliminated system of retirement benefits for Directors and Corporate Auditors
2007		May	Established Internal Control Committee
		September	Established Remuneration Advisory Group
2010		September	Established Nomination Advisory Group
2011		November	Drew up standards for appointment of independent outside directors
2012		June	Appointed 1 outside director
2015		June	Selected 3 outside directors (increased by 2)
		October	Established Remuneration Advisory Committee in place of Remuneration Advisory Group
			Established Nomination Advisory Committee in place of Director Nomination Advisory Group
2016		December	Formulated Sumitomo Chemical Corporate Governance Guidelines
2018		June	Selected 4 outside directors (including one woman) (increased by 1)
2021		June	Board of Directors consisting of more than 1/3 Outside Directors

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Sumitomo Chemical Sustainability Data Book 2021	For a Sustainable Future	Governance	Environment	Society			Contents

Corporate Governance

Corporate Governance

Current Corporate Governance Organization

• Corporate Governance Organization (As of July 1, 2021)

			Inside	Outside
	General Meeting of Shareholders
Appointment and removal	Appointment and removal	Appointment and removal	6 Nomination Advisory Committee
2 Board of Corporate Auditors	1 Board of Directors	2 Internal Committee Members,
Accounting Cooperation
Audit		6 4 Outside Committee Members
Auditors			7 Remuneration Advisory Committee
5   2 Auditors, 3 Outside Auditors	12 8 Directors, 4 Outside Directors
Accounting audit	Audit	Appointment and removal,	2 Internal Committee Members,
		and supervision
			6 4 Outside Committee Members

Executive Organization

President

4 Management Meetings

Promotion, awareness raising, management, and

guidance of activities

3 Executive Officers 37

Corporate

Departments,

Plants,

Laboratories, and

Others

Audit

Internal Control &

Management, supervision,

Audit Department

and guidance

Audit and

Group Companies in Japan and Overseas

support

Responsible Care

Department

5 Company-wide Committees

Committee Control Internal		Committee Promotion Sustainability		Committee Care Responsible	Committee Management Crisis Risk	Compliance Antitrust on Committee Prevention Corruption and	Committee Compliance	Committee Promotion Rights Human
							Others

Structure

1 Board of Directors

The Sumitomo Chemical Board of Directors decides important matters concerning the company's management, including management policy and business strategies, in accordance with the law, the Articles of Incorporation, and the Board of Directors' own rules. It also receives reports from Directors and others on the performance of duties, the financial situation, and operating results, and oversees the performance of duties by each Director.

It also analyzes and assesses the effectiveness of the Board of Directors, and follows up on the results to ensure and improve effectiveness. In accordance with the Nomination Advisory Committee's advice, candidates for Director are nominated by the Board of Directors and are elected once a year at the General Meeting of Shareholders.

• Overview of the Board of Directors

	Chairman of		The Chairman of the Board does
Chairperson		not concurrently serve as Executive
the Board
		Officer.
Number of	12		Outside Directors make up one third
Persons		or more of the Board of Directors.
Frequency	Monthly in		Special meetings of the Board of
principle		Directors are convened as needed.
The Term of			The term of office of Directors is
		one year, in order to establish clear
Office of	One year
	administrative responsibility and
Directors
		roles for Directors.

• Breakdown of 12 Directors
  Male Female Total

Inside 8 0 8

Outside* 3 1 4

Total 11 1 12

• Independent Outside Directors having no conflicts of interest with general shareholders

Outside

4

Directors

12

Inside

8

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Sumitomo Chemical Sustainability Data Book 2021	For a Sustainable Future	Governance	Environment	Society			Contents

Corporate Governance

Corporate Governance

• Major Agendas Discussed at Meetings of the Board of Directors in Fiscal 2020
• Financial results, dividends, financing
• Management strategy, sustainability, assessment of the effectiveness of the Board of Directors
• R&D, digital innovation, IT promotion
• Internal controls, responsible care, risk management, compliance
• Nomination, remuneration, important personnel changes, recruitment and training of human resources
• Auditors, accounting auditors
• Important investments

• • Acquisition of the South American business of Nufarm
• • Strategic alliance with Roivant

• Projects relating to Petro Rabigh

etc.

• Other

• • Important matters for operating businesses of listed subsidiaries
• • Carbon neutral strategies

• Plastic resource circulation, etc.	etc.

2 Board of Corporate Auditors

We have a Corporate Auditor system, with a Board of Corporate Auditors consisting of five Corporate Auditors. The Corporate Auditors and the Board of Corporate Auditors play a vital role in our corporate governance by auditing the performance of duties by Directors in accordance with the law and the Articles of Incorporation. The Board of Corporate Auditors meets monthly as a rule and strives to obtain timely information, including important compliance-related information.

Standing Corporate Auditors and Outside Auditors attend meetings of the Board of Directors and the Board of Corporate Auditors. In conducting their audits, they receive reports and explanations as needed from the Internal Control & Audit Department, operating divisions, and accounting auditors. In addition, Standing Corporate Auditors attend meetings of the Internal Control Committee and other important company meetings.

The results of audits and the objective views of Outside Auditors are appropriately reflected in internal audits, corporate audi- tors' audits, and accounting audits, so as to raise the effectiveness and efficiency of auditing.

The Corporate Auditors' Office has been established with staff dedicated to providing assistance in auditing functions under the direction of Corporate Auditors.

• Breakdown of 5 Corporate Auditors

Inside	2		Outside
Outside*	3		3

• Independent Corporate Auditors having no conflicts of interest with general shareholders

Corporate
Auditors
5	Inside
	2

Management Organizations for Decision-making, Execution, and Auditing

3 Executive Officers

We have appointed Executive Officers to expedite the implementation of business operations. Executive Officers are responsible for carrying out operations in accordance with the policies adopted by the Board of Directors. The term of office for Executive Officers is one year.

• Breakdown of 37 Executive Officers
  Male Female Total

Japanese	32	1	33
Non-Japanese	4	0	4
Total	36		1		37

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Sumitomo Chemical Sustainability Data Book 2021	For a Sustainable Future	Governance	Environment	Society			Contents

Corporate Governance

Corporate Governance

4 Management Meetings

Management Meetings support decision making by management as an institution for debating such important issues as corporate strategy and capital investment, including matters to be deliberated in the Board of Directors and reports to be made to the Board. Management Meetings consist of the Executive Officers who are in charge of or who supervise key management functions, the Standing Corporate Auditors, and the Chairman of the Board. In principle, the meetings are held 24 times a year.

5 Company-wide Committees

We have established internal meetings (committees) to deliberate on important matters concerning the management of the Company and the Group from a broad and diverse range of viewpoints. The content of these meetings is reported to the Board of Directors as needed, and the committees receive instructions from the Board of Directors in an effort to enhance business execution and oversight functions. Several of these committees are attended by the Standing Corporate Auditors, who serve as observers, including the Internal Control Committee, the Compliance Committee, and the Responsible Care Committee.

We regard the promotion of sustainability as a core issue for the entire Group. In 2018, we established the Sustainability Promotion Committee to further strengthen our sustainability initiatives. The Responsible Care Committee also examines specific measures to address climate change and other environmental issues. To further promote initiatives related to respect for human rights, the Human Rights Promotion Committee was established in fiscal 2019.

• Overview of Committees and Number of Meetings

Name	Details		Number of Meetings
	Held in FY2020
	By debating various measures to build or expand internal control systems, and monitoring
Internal Control Committee	their implementation status, this committee is intended to continually improve the internal	3
	control systems of the Sumitomo Chemical Group.
Sustainability Promotion	This committee suggests measures to accelerate the Sumitomo Chemical Group's contribu-
tions to sustainability, taking in a comprehensive perspective on risks and opportunities with	2
Committee
regard to medium- to long-term issues in the environment and society.
	This committee formulates annual policies, medium-term plans, and specific measures
Responsible Care Committee	concerning responsible care (safety, health, environment, and quality), including climate	1
	change issues.
Risk and Crisis	This committee deliberates on policies for specific risks and crises, such as earthquakes, wind		7*
Management Committee	and flood damage caused by extreme weather, pandemics, and breakdowns in public security.
	This committee deliberates on the Group's compliance policies and action plans, and the
Compliance Committee	status of the operation of the compliance system, including responses to internal reports and	1
	the results of activities.
Human Rights Promotion	This committee promotes increasing awareness of human rights issues, and drafts and
executes policies to respect human rights in the entire value chain including Sumitomo	1
Committee
Chemical Group.

Note: Each committee separately held subcommittee meetings on specific important topics and secretariat meetings. * The number of meetings increased as we deliberated on preventive measures for the Covid-19 pandemic.

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