Corporate Social Responsibility (CSR) / Environmental and Social Report 2015

Corporate governance framework

Taking into consideration the spirit of Japan’s new Corporate Governance Code, the Board of Directors of Taiyo Nippon Sanso formulated its own principles of corporate governance. We continue to promote efforts to enhance our corporate governance capabilities in line with the following five basic beliefs.

  1. We will respect shareholder rights and ensure equality.
  2. We will consider benefits to shareholders and other stakeholders, and work appropriately in partnership with them.
  3. We will ensure transparency by releasing appropriate corporate information at appropriate times.
  4. By separating supervisory and executive functions, we will improve the effectiveness of the Board of Directors’ supervisory function over the Company’s business executions.
  5. We will engage in constructive dialogue with shareholders with the goal of contributing to sustainable growth for the Group and the medium- to long-term improvement of corporate value.

Management structure

Our Board of Directors consists of 10 members, two of whom are outside directors. (One of our current outside directors is a U.S. national.) To ensure the transparency and objectivity of procedures for appointing and determining remuneration for members of the Board of Directors, an Advisory Committee on Appointments and Remuneration, which consists of the Board’s chairman, the president (CEO) and independent outside directors, has been established as a discretionary body under the Board of Directors. To ensure effective, efficient decision making by the Board of Directors, we have established the Management Committee, which serves as an independent forum for deliberation, to clarify Board rulings and accelerate the decision-making process.

Auditing structure

To ensure adequate monitoring capabilities, our Audit & Supervisory Board comprises four auditors, three of whom are outside auditors. All four are standing auditors. In addition to attending meetings of the Board of Directors and the Management Committee, among others, Audit & Supervisory Board members evaluate the compliance and management efficiency of subsidiaries through operational audits and communication with representative directors. We have also established a Corporate Audit Office, which reports directly to the president and which is charged with assessing the legitimacy and efficiency of operations. This office works to enhance auditing capabilities through close communication with the Audit & Supervisory Board, as well as with our independent auditors.

Internal control system

As prescribed by Japan’s Corporate Law, we established a Basic Policy for Constructing an Internal Control System, i.e., basic guidelines for the creation of an internal control system. In line with this policy, we are reinforcing internal controls by clarifying decision-making authority and business practices, among others. We have also established the Compliance, Risk Assessment and Technological Risk Management committees with the aim of reinforcing compliance and facilitating the comprehensive management of our monitoring of and responses to corporate risks. Each of these committees is required to report periodically to the Board of Directors.

Taiyo Nippon Sanso’s Corporate Governance Framework

Taiyo Nippon Sanso's Corporate Governance Structure

Compliance Committee

Recognizing that an organization must stay faithful to the values and ethics expected of it as a member of society, operate fairly and appropriately, and act in harmony with the wider society as it pursues its corporate mission, the Taiyo Nippon Sanso Group has taken steps to create a robust system for ensuring compliance and to ensure that the Group is regarded as a trusted corporate citizen.

The Compliance Committee, which is chaired by the CCO, meets twice annually, in September and February. In the six months prior to each meeting, the committee hears reports from pertinent departments on any compliance violations that have arisen within the Taiyo Nippon Sanso Group and on the progress of efforts to address previously detected contraventions and prevent the recurrence thereof. The committee also considers remedial strategies for newly reported violations, while individual divisions inform pertinent Group companies, which then implement measures to address related issues. Committee members notify both the divisions to which they are attached and the Group companies overseen by those divisions regarding reported compliance violations and perform relevant checks to prevent similar violations from occurring. The CCO collates information on violations and measures under consideration and briefs the Management Committee and the Board of Directors. The Compliance Committee considers Group responses to revisions made to existing laws and regulations, as well as hears reports from divisions regarding Group companies being prosecuted for legal infringements and oversees the administration of potential contingent liabilities. Through these and other efforts, we continue working to fortify our compliance system.

Risk Assessment Committee

Companies must effectively manage a wide variety of risks with the potential to affect their operating activities. Risks faced by the Taiyo Nippon Sanso Group include, but are not limited to, increases in electric power rates, the price of crude oil and other resources, foreign exchange and interest rate fluctuations, changing demand trends, technological innovation, moves by customers to shift production offshore, product defects, natural disasters, environmental pollution and occupational accidents. The Risk Assessment Committee, which is chaired by the individual responsible for Groupwide internal control management, spearheads risk management for the entire Taiyo Nippon Sanso Group.

The Risk Assessment Committee meets once annually, in February. This committee, which is charged with identifying and assessing risks with the potential to affect Group operations based on risk assessment sheets prepared and submitted by divisions, prepares risk maps illustrating probability on one axis and estimated impact on net income on the other, with the aim of identifying those risks most likely to affect our performance. The Risk Assessment Committee also reports on accidents at production facilities, product defects and other risks that have manifested as actual issues during the period and verifies that appropriate systems have been established to manage both types of risks (i.e., those determined through risk mapping and those that have evolved into issues). Should it determine that risks remain for which management systems do not yet exist, the committee pinpoints the departments responsible and proposes and carries out appropriate responses. The individual responsible for Groupwide internal control management collates information on risks and measures under consideration and briefs the Management Committee and the Board of Directors. The management of risks associated with major earthquakes is the responsibility of our BCP* Taskforce, which goes into action immediately in the wake of a significant tremor, thereby ensuring our ability to continue operating without interruption.

*BCP is an acronym for business continuity planning.

Technological Risk Management Committee

The Taiyo Nippon Sanso Group places a high priority on the management of risks related to security, product quality and safety, the environment and intellectual property, and has established the Technological Risk Management Committee to assess and respond to related issues.

The Technological Risk Management Committee, which is chaired by the general manager of the Technological Affairs Division and encompasses division general managers, branch managers and the general manager of the Human Resources Division, has established dedicated teams to manage risks related to operational safety, product quality and safety, the environment and intellectual property. Charged with coordinating the activities of these teams, the Technological Risk Management Committee promotes the management of technological risks by meeting four times annually to ensure an accurate grasp of technological risk management initiatives, identifying latent risks and addressing risks that have manifested as actual issues. The committee reports on these meetings to the Board of Directors.

Each February, the Technological Risk Management Committee holds the Technological Risk Management Conference. Participation in the conference, which is chaired by the president, encompasses division general managers and senior executives in charge of divisions, branches and affiliated companies. The conference is responsible for making decisions regarding the coordination of risk management for the Group as a whole, as well as for annual technological risk management policies and priority issues. These decisions are mirrored in concrete initiatives promoted by the aforementioned risk management teams and by Group companies.

The Taiyo Nippon Sanso Group thus works tirelessly to ensure effective management of technological risks by clarifying the views of top executives and by promoting management based on consistent awareness across the Group.

Environmental and Social Contribution Initiatives Across the Value Chain

Conscious that the Taiyo Nippon Sanso Group’s value chain-i.e., all of the processes involved in the Group’s business activities, from the development and production through to the supply, sale and use of our products-impacts the environment and society, as well as our stakeholders, we actively implement a wide range of environmental protection and social contribution initiatives. By reinforcing these efforts, working not only independently but also in cooperation with stakeholders, we will continue striving to contribute to the realization of a sustainable world.

Environmental and Social Contribution Initiatives Across the Value Chain