Compliance

Based on the Group Corporate Philosophy, the KOBELCO Group has positioned compliance as one of the key components of the business foundation that supports its business and is working to build organizational structures and implement the initiatives as outlined below.

Under the Group Corporate Philosophy, the KOBELCO Group has established the Six Pledges of KOBELCO that constitute its specific code of conduct to be implemented by all members of the Group in day-to-day operations in order to fulfill the Core Values of KOBELCO, which are the values that should be shared throughout the Group. We have created guidelines to facilitate the correct understanding of applicable laws and regulations as well as social norms relevant to our business operations. Each and every person, regardless of whether they are directors/executive officers or employees, will practice the Six Pledges of KOBELCO in accordance with the guidelines.

Kobe Steel has formulated its Compliance Regulations that set out basic matters related to its compliance system, operations, etc., based on the Group Corporate Philosophy.

The Company has established the Compliance Committee as an advisory body to the Board of Directors. The committee drafts plans for Groupwide compliance activities, monitors the progress of these plans, and makes necessary revisions and improvements. The committee is comprised of the president, two other internal members, and five external members constituting a majority to provide a fair and impartial position, with one of the external members serving as the committee chair. Major Group companies have also established compliance committees.

Compliance activity plans are implemented based on the KOBELCO Group’s Compliance Program. The Internal Control and Audit Department of Kobe Steel carries out the program in coordination with its business divisions and Group companies under the supervision of the director/executive officer overseeing Companywide compliance and the executive officer responsible for Companywide compliance.

The KOBELCO Group’s Compliance Program consists of five pillars: (1) Risk Assessment and Commitment, (2) Setting Rules and Procedures and Securing Resources, (3) Training and Communication, (4) Monitoring and Response to Reports, and (5) Review and Improvement.

By assessing the progress of the compliance activities of the Company and its Group companies with a focus on these five items and implementing them based on the characteristics of respective businesses and regions, we will carry out comprehensive and effective compliance activities throughout the Group.

The KOBELCO Group recognizes that in order to thoroughly prevent all kinds of misconduct, including violations of competition laws, anti-bribery laws, and security trade control laws, top management needs to show its stance of no tolerance to compliance violations. To this end, we regularly deliver messages on compliance from the president to employees. With regard to anti-corruption, we have established the KOBELCO Group’s Anti-Bribery Policy, which is posted on our corporate website.

The Anti-Bribery Policy clearly states the policy to prohibit the provision of money which may lead to corruption of public officials, the provision of benefits such as excessive entertainment, and any similar acts that lead to embezzlement or breach of trust among private individuals. At the time of the formulation of this policy, the president sent a message internally and externally to declare the Group's commitment to thorough prevention of bribery.

As part of its risk management activities, the Group regularly analyzes and assesses compliance risks associated with its business and activities taking into account any internal and/or external trends. In particular, violations of competition laws, anti-bribery laws, and security export control laws are regarded as the top risks that may have a material impact on the Group, and we are working to establish a compliance system. The Compliance Committee formulates a plan for compliancerelated activities and presents it to the Board of Directors.

In order to address compliance risks in each business, our Group has developed necessary rules and procedures for general compliance, compliance with competition laws, prevention of bribery, security trade control, internal whistle-blowing systems, etc. We take strict disciplinary action against violations in accordance with our work rules, investigate the cause, and implement effective preventive measures.

Regarding the prevention of bribery, we have established policies, regulations, various guidelines, and manuals for each country, to prohibit the provision of benefits such as the provision of money or excessive entertainment, which may lead to corruption of public officials, and any similar acts that lead to embezzlement or breach of trust among private individuals. In order to prevent such acts, we have implemented procedures for approval of entertainment expenditures and due diligence of business partners.

Our Group secures necessary human, material and financial resources to implement compliance initiatives at each Group company. We believe that securing the time required for compliance initiatives, such as taking necessary time for education, is part of securing resources. In addition, we are working to enhance our compliance promotion system by requesting Group companies in Japan and overseas to assign a person in charge of compliance.

In order to instill awareness of compliance among all employees, our Group conducts stratified training on compliance.

In addition, for specific areas such as compliance with competition laws, prevention of bribery, security trade control, internal reporting (whistle-blowing) systems, etc., we create educational content and conduct training according to the roles of employees and the risks involved in their operations so that they can understand and comply with the rules and procedures associated with their work.

We continuously offer group training (currently online training) by in-house instructors and e-learning at the Company and its Group companies in Japan and overseas, as well as seminars by external experts.

We disseminate information on amendments to laws and regulations through newsletters and provide manuals on the Company's intranet. We are also making continued efforts to make our internal reporting (whistle-blowing) systems widely known through the distribution of cards, posters, the intranet, Group newsletters, etc.

Our Group has established specific implementation procedures for compliance with competition laws, prevention of bribery, and security trade control, which are positioned as top risks, and regularly monitors the status of implementation. We have gradually introduced the KOBELCO Compliance Program at Group companies, and regularly conduct diagnoses of activities in areas such as compliance systems, competition laws, prevention of bribery, security trade control, etc.

Our Group provides multiple points of contact to receive reports and inquiries from various stakeholders

For example, we have established an internal reporting (whistle-blowing) system with an external law firm as a point of contact to receive anonymous reports and consultations regarding all kinds of misconduct, including bribery, embezzlement, cartels, and harassment, etc. In responding to such reports, we ensure the confidentiality of those involved and the protection of whistle-blowers and take appropriate measures such as conducting investigations, utilizing necessary resources and skills.

We accept anonymous inquiries from stakeholders via an inquiry form on the corporate website. If the inquiry contains any allegation of fraud or corruption involving the Group, we respond appropriately while ensuring the confidentiality of the parties concerned in the same way as in the internal reporting (whistle-blowing) system.

In addition, our Company also provides multiple points of contact for internal and external whistle-blowers and accepts reports and consultations from external business partners. (We received 113 reports in fiscal 2021, including those received at Group companies in Japan and overseas.)

Our Group conducts compliance awareness surveys among employees of the Company and its Group companies in Japan and reviews compliance efforts as appropriate in light of issues that have emerged through monitoring and responding to reports to internal reporting (whistle-blowing) systems, as well as according to internal and external trends. Improvement plans relating to compliance are developed by the Compliance Committee and presented to the Board of Directors.

We also update our compliance efforts in specific areas, taking into account the amendments to laws and regulations as well as initiatives being taken by other companies.

The Compliance Committee, an advisory body to the Board of Directors, met four times to report on the results of activities in the previous fiscal year and formulate/approve the annual plan.

Based on the KOBELCO Group’s Compliance Program, we implemented initiatives focused on top management commitment and training. In addition, we have gradually introduced this program at Group companies, and conducted diagnoses of activities in areas such as compliance systems, competition laws, prevention of bribery, security trade control, etc.

We organized compliance training programs by job grade, applicable laws and regulations, and roles and implemented them as planned, while introducing online training.

We conducted regular monitoring of compliance with competition laws and security trade control laws. We received 113 reports through internal reporting (whistle-blowing) systems, including those received at Group companies in Japan and overseas, and responded to them appropriately. The status of the responses to these reports was reported to the Compliance Committee.

In fiscal 2021, we conducted compliance awareness surveys at the Company and its domestic Group companies. Based on the survey results, we planned compliance promotion activities for fiscal 2022.

The KOBELCO Group’s Anti-Bribery Policy and internal regulations prohibit offering bribes to public officials or business partners, as well prohibit the receipt of bribes from business partners. We will take strict disciplinary action if any violations are committed.

• KOBELCO Group Anti-Bribery Policy

Since the impact of bribery is expected to be particularly serious when an event occurs, we have positioned it as one of the top risks for the Group, and we are working to establish a Groupwide framework to prevent this. The status of activities and progress in developing the framework is reported annually to the Business Activities Council, which is attended by the heads of business divisions, and these reports are used in the drafting of activity plans for the following fiscal year.

The Group requires prior approval for offering entertainment and gifts to public officials and conducts regular monitoring of the status of such expenditures.

In addition, when appointing business partners (including contractors, agents, consultants, etc.), we require them to make an anti-bribery pledge and conduct other due diligence.

We provide regular anti-bribery training (including e-learning) to employees. In addition to this, we create manuals to provide information relating to overseas laws and regulations, such as the Foreign Corrupt Practices Act in the United States and the Bribery act in the United Kingdom.

In fiscal 2021, we reviewed and clarified our due diligence procedures and the responsibility of approvers in relation to the appointment of business partners. No events involving fines, penalties, or out-of-court settlements arose in fiscal 2021 in relation to bribery

The Company's internal rules and regulations prohibit violations of the competition laws. We take strict action if any violations are committed.

Because violations of competition laws are expected to have a particularly serious impact at the time they occur, they are designated a top risk for the KOBELCO Group, which is working as one to develop frameworks to address this. The status of activities and progress in developing frameworks is reported each year to the Business Activities Council, which is attended by the heads of business divisions, and these reports are used in the drafting of activity plans for the following fiscal year.

The content of information exchanged through contact with competitors by sales departments is recorded and reported. The content thus reported is checked by multiple departments, and in cases where the exchange of information is recognized to be problematic, necessary measures are implemented promptly

In addition to creating and publicizing manuals for employees in relation to compliance with competition laws, we implement regular training (including e-learning). Through interviews and other measures we work to maintain an accurate understanding of the status of sales department activities.

In fiscal 2021, we devised training to reflect business practices, and developed frameworks for compliance with competition laws in sales departments. No events involving fines, penalties, or out-of-court settlements arose in fiscal 2021 in relation to competition laws.