2023
ESG Communication Book

ESG Stories

CSO Message
Hirokazu Higashino

Representative Director, Senior Managing Executive Officer,
Offi cer, Chief Strategy Officer
Chairperson of the Corporate Sustainability Committee

The spirit of sustainability management has been passed down for 400 years at the Sumitomo Group.
We aim to realize a sustainable society by connecting that spirit to the future together with our employees who are putting it into practice every day.
“Benet for self and others, private and public interests are one and the same” is a phrase thatis used to express Sumitomo's BusinessPhilosophy, which has been passed down overroughly 400 years. To put it another way, Sumitomo's business, while beneting Sumitomo,must also benet the nation and benefit society. This philosophy is the source of the Sumitomo
Corporation Group's sustainabilitymanagement and has long been placed at the core of its
business activities.

To further enhance our sustainability management, we have identied six key social issues
consisting of two themes: “development and evolution of the society” and “sustainability ofthe society” back in 2020. We have also set medium- and long-term goals for each key social
issue that lay out specic action plans and are implementing initiatives to achieve them.

Our Sustainability Management

Sumitomo's Business Philosophy
In March 2023, we also established the Sustainability Advisory Board, which consists ofexternal experts, to further accelerate our initiatives. Through various dialogue with a wide
range of stakeholders, we will pursue growth strategies that benet both our Company and Ѐ
society, thereby committing ourselves to promoting sustainability management.

Monjuin Shiigaki (Founder's Precepts), a written
work forming the foundation of Sumitomo's
Business Philosophy(Source: Sumitomo Historical Archives)© 2023 Sumitomo Corporation

Business Principles handed down as the basic
points of Sumitomo's Business Philosophy

In ESG Communication Book 2023 (ESG Stories), we highlight employees who strive to realize
a sustainable society through their daily work. Through interviews, our employees who are
working on the front lines of the Group's diverse businesses tell their stories of how each ofthem are tackling social issues and working with business partners and stakeholders toachieve sustainable growth of society and our Company.

I hope you enjoy this publication and please look forward to our further growth in the future.
1

6 Key Social Issues Toward Realizing a Sustainable Future
Humanity now faces a variety of challenges in building a sustainable society.
The Sumitomo Corporation Group drives its sustainability management based on the belief that it
must continue to create value that society truly needs while leveraging its strengths. We are confident
that doing so will lead to the realization of a sustainable society as well as sustainable growth for
Sumitomo Corporation.
In FY2020, we identified six key social issues that are deeply relevant to the Company and set longterm goals and medium-term goals for each issue.
We are working toward resolving these issues to achieve sustainable corporate growth while
contributing to the development of a sustainable society.

© 2023 Sumitomo Corporation2

Development and evolution of the society

Sustainability of the society
Mitigation of climate change

Development of local society and economy

Circular economy

Improvement of living standard

Respect for human rights

Quality education

Our diverse human resources© 2023 Sumitomo Corporation

Multifaceted business expertise

Global networks

Business relations with partners and customers
3Key Social Issue

Mitigation of climate change
Responsibility of the Sumitomo Corporation Group toachieve carbon neutrality by 2050

Long-term goal: Aim for carbon neutrality by 2050 and challenge to realize sustainable energy cycle

Medium-term goals
Reduce the Group's CO2 emissions 50% or more by 2035 (compared to 2019)
Reduce CO2 emissions of the power generation business by 40% or more by 2035 (of which reduce 60% or more for coal- red power generation business);
power generation portfolio in 2035 to comprise 20% coal- red, 50% gas- red and 30% renewables*1 in terms of net ownership generation capacity.
Reduce indirect CO2 emissions*2 associated with the fossil fuel upstream business by 90% or more by 2035.
Reduce CO2 emissions in all other businesses*3.

Establish businesses that will form the foundation for a sustainable energy cycle in society
Develop hydrogen and other forms of carbon-free energy, increase supply of renewable energy (5GW or more by 2030)*4, and expand new power and energy
services.
Expand businesses encouraging electri cation, fuel conversion, improved energy and coal e ciency, and energy conservation.
Capture, store and utilize CO2 via carbon recycling, forestry business, CCS, and emissions credit trading, etc.
*1 As of 2020: Coal 50%, gas 30%, renewables 20% *2 Indirect CO2 emissions generated by others with the use of fossil fuel*3 Contribute to C02 reduction by setting targets for individual businesses. *4 As of 2020: 1.5GW (1GW = 1 billion W)© 2023 Sumitomo Corporation

4

Mitigating climate change by developing a sustainable energy cycle

Mitigating climate change is a serious challenge that must be

While leveraging the business foundation we have established, weovercome to realize a sustainable society. As such, we must makeare developing businesses that contribute to the carbon neutrality ofthe transition to a society that emits as little CO2, methane, andsociety together with a wide range of partners. Our initiatives include

other greenhouse gases as possible by converting to renewablereducing CO2 emissions and energy consumption in manufacturing

energy and other forms of clean energy and conserving energy inbusinesses; contributing to the capture and storage of CO2 throughindustries and households. It will also be necessary to balancesustainable forestry business; developing carbon-free energy

residual emissions and absorption of CO2 to create a sustainablesources such as hydrogen, ammonia, and next-generation biofuels;

energy cycle by maintaining and recovering CO2 absorbed byand establishing carbon-free platforms such as large-storage

forests, marine plants, and other natural capital and capturing,batteries. Through these efforts, the Group will contribute to thestoring, and utilizing CO2 through new technologies and businessrealization of a sustainable society.

models that consider it a resource.

© 2023 Sumitomo Corporation

5

Interview

Key Social Issue | Mitigation of climate change

Reducing the automotive industry's CO22 emissions
Casted automotive parts manufacturer KIRIU taking on the challenge of carbon neutrality at its

manufacturing sites
Against the backdrop of climate change issues and technological innovations such as CASE*, the automotive industry is at a once-in-a-century turning point. In order
for automobiles to remain an essential part of society, decarbonization efforts pose a challenge for the entire automotive industry, and the Sumitomo Corporation
Group, which operates a wide range of businesses within this industry from upstream to downstream, is actively promoting these efforts.
Brake components made by KIRIU CORPORATION, a casted automotive parts manufacturer wholly owned by Sumitomo Corporation, will continue to be essential in
the new automobile society symbolized by electrification and autonomous driving. KIRIU conducts business operations under its mission, “to contribute to therealization of a highly motorized society, by providing safety and comfort to our valued customers through KIRIU's Monozukuri (craftsmanship).” What are thechallenges facing KIRIU and what does it need to do on the front line of its operations to overcome them and provide new value? Here, we will introduce the thoughtsof the Sumitomo Corporation staff member in charge of KIRIU's project for carbon neutrality.
* An acronym for Connected, Autonomous, Shared & Services, and ElectricInterviewee
Kosuke Hatanaka
Automotive Manufacturing Business Dept. No.1
Joined the Company in 2013. He was involved in trading new vehicles in the Middle East, managing automobile
dealerships, and creating next-generation businesses that use batteries. After working at Sumitomo Corporation(Shanghai) , he joined the Automotive Casting Business Team in November 2021, where he plays a central role in
KIRIU's project for carbon neutrality.
© 2023 Sumitomo Corporation

6

Why
Global growth also poses major environmental impacts
KIRIU, which has been in business for more than a century since 1906, is a casted automotive parts maker that
manufactures and sells important brake-related safety components such as brake rotors. Sumitomo
Corporation invested in KIRIU in 2004 and promoted its globalization by leveraging our strengths in overseas
network, management human resources, and funding capabilities. Today, KIRIU has grown into a multinational
corporation with manufacturing bases in eight countries located in Asia and North America.
On the other hand, the casting business requires a production process with a large environmental impact as it
involves melting, solidifying, and processing iron at high temperatures. Sumitomo Corporation is committed tomitigating climate change throughout the Group and has set a target for carbon neutrality by 2050. In 2022, KIRIU
had the highest Scope 1 and Scope 2 emissions among the Group (Sumitomo Corporation and subsidiarybusinesses) excluding the thermal power generation business and fossil fuel upstream business. In order for
KIRIU to continue to grow sustainably, it is critical that the company shifts to a production process with a low
environmental impact and addresses the needs of a decarbonized society.

© 2023 Sumitomo Corporation

7

What&How
KIRIU's path to decarbonization
In the manufacturing industry, QCD, which stands for quality, cost, anddelivery, was a source of competitiveness, but QCDE, which adds
environment, has become indispensable as we are moving toward adecarbonized society.
In April 2023, KIRIU also formulated a roadmap for achieving carbon
neutrality by 2050 and launched a strategy consisting of three steps: (1)energy conservation, (2) electri cation, and (3) shift to renewable energy.
For each step, KIRIU has started initiatives including: (1) nding opportunities
for further improvement in the production process with the support of groupcompany Sumitomo Shoji Machinex Co., Ltd. for energy conservation; (2)introducing electric furnaces that signi cantly reduce CO2 emissions in the
production process at the Ashikaga Headquarters Plant for electri cation;and (3) switching to electricity from renewable energy and consulting on thepurchase of REC*1 and I-REC*2 with the Energy Innovation Initiative (EII)*3 ,Sumitomo Mitsui Finance and Leasing Co., Ltd. (SMFL), and Summit Energy
Corporation for the shift to renewable energy. In addition, to take on thechallenge of implementing new technological innovations such as hydrogenand Carbon dioxide Capture, Utilization and Storage (CCUS) in the future,
Sumitomo Corporation is communicating with the members of related
departments within the company.
*1 An acronym for Renewable Energy Certificate. An electricity certificate adopted as the standard
in North America*2 An acronym for International Renewable Energy Certificate. An electricity certificate widely
available globally*3 A cross-functional business organization that engages in next-generation businessdevelopment in the fields of decarbonization and next-generation energy© 2023 Sumitomo Corporation8

Shift from cupola to electric furnace
A cornerstone of KIRIU's carbon neutrality strategy is the introduction ofelectric furnaces at the Ashikaga Headquarters Plant. In the casting process,raw material iron scrap is melted down in a melting furnace, but theconventional cupola furnace uses coke as a heat source to melt the iron,which emits a large amount of CO2 during manufacturing. Therefore, KIRIU
decided to switch to electric furnaces with a low environmental impact.
Electric furnaces are already being introduced at its overseas production
plants, and the Ashikaga Headquarters Plant is the second plant in Japan toinstall these, following the Oita Plant. The benefits of an electric furnace

involve not only a reduction in CO2 emissions but also stable product quality
and an improvement in the working environment, which provides many
positive factors for the sustainable growth of KIRIU.

Electric furnace at the Ashikaga Headquarters Plant (completed in April 2023)© 2023 Sumitomo Corporation

9

Use of renewable energy and the next phase of
strategy
Direct emissions from plants (Scope 1) can be reduced byswitching to electric furnaces, but indirect emissions fromelectricity use (Scope 2) remain; therefore, the next challenge is toreplace the electricity used with electricity from renewable energy.
Specifically, KIRIU is working to procure electricity generated fromrenewable energy, introduce solar power purchase agreements(PPA) on- and off-site, and purchase REC/I-REC and non-fossil fuelcertificates. Since accessibility to renewable energy differs
depending on the country or region, KIRIU is promoting
decarbonization measures in line with regional uniqueness, forexample, switching to electricity from renewable energy in India and
Mexico, and introducing on-site solar PPAs in Thailand.

© 2023 Sumitomo Corporation

10

Going forward
Taking on the challenge of low environmental impact
manufacturing as a member of an integrated trading
company
Since joining the Company in 2013, I have been consistently involved in theautomotive business. As a member of an integrated trading company, I am
deeply involved in manufacturing and I face the challenge of reducing its
environmental impact.
The automotive industry is currently at a major turning point against the
backdrop of climate change. How will the automotive industry evolve so that
automobiles continue to be a necessary part of society? I believe that
addressing this issue is not something that can be achieved by automobile
manufacturers alone, but rather a challenge for the entire value chain. WithKIRIU’s production oor, we hope to stand between the market and the
production front line and see what kind of value and innovation we cancreate. Through the evolution of sustainability management one step aheadof the industry, we would like to demonstrate the unique value of an
integrated trading company that engages in manufacturing.
Carbon neutrality initiatives are a challenge yet to be answered, but we havereceived support from our various departments and group companies. By
injecting the Group's decarbonized and low-carbon solutions into KIRIU's
manufacturing sites, we will create critical momentum that cannot be
generated by the department in charge alone. Seeing the scale and speed atwhich this momentum is growing, I feel once again the thrill of working for an
integrated trading company.
© 2023 Sumitomo Corporation

11

Interview

Key Social Issue | Mitigation of climate change

Forestry
Contributing to carbon neutrality through forest management looking ahead 100 years
Forestsorests areare essential assets for the planet, contributing toto carbon neutrality
neutrality throughthrough the capture
capture and stor
storageage of CO
CO2,, as well as pro
providing functions such as water
storage and conservation of biodiversity. However, in recent years, the global forest area has been in continuous decline. Over the past 30 years since 1990, the world

has lost 178 million hectares of forests, which is equivalent to about five times the land area of Japan. To maximize the CO2 capture function of forests, which is
becoming increasingly important, and to leave these assets to the next generation, it is essential to manage the business from a long-term perspective, repeating thecycle from afforestation to harvesting over and over again. Based on our 400-year history as the Sumitomo Group and 100-year history as Sumitomo Corporation, welook ahead 100 years from now, taking on the challenge of sustainable forest management in New Zealand. Here, the Managing Director of New Zealand-based
subsidiary Summit Forests New Zealand Limited (SFNZ) shares his thoughts on the significance and future outlook of the business.

Interviewee
Kenji Okawa
Managing Director, Summit Forests New Zealand Limited
Joined Sumitomo Corporation in 2006. After working in the import/export of exterior wall materials in the
Lumber & Building Materials Department of the Construction & Real Estate Division, he went to Russia in 2009 to
study for two years under the language trainee program. After returning to Japan, he was placed in charge ofadministrative and sales work for Russia-related business in the Wood Resources Business Department. Afterthe acquisition of SFNZ by Sumitomo Corporation in 2013, he was in charge of SFNZ's business management at
the Head Office in 2014 and was transferred to SFNZ in 2017 as Manager of the Corporate Planning and© 2023 Sumitomo Corporation

Business Development. In April 2023, he was appointed Managing Director of SFNZ.

12

Why
Focusing on the environmental value of forests andtimber and expanding the business into forest
management
Forests have the function of capturing CO2 from the atmosphereand storing it. Moreover, wood produced by forests is a recyclable
resource that can be perpetually regenerated through the repetitionof planned logging and forest growth. Forests are becoming
increasingly important as the world pursues carbon neutrality toresolve the issue of climate change.
Sumitomo Corporation, which has been involved in the timber
import business since Japan's high economic growth period,
expanded its business into forest management in the 2000s andhas since been working to secure and utilize forest resources in amore sustainable manner. Today, by leveraging the knowledge andexpertise we have cultivated in forest management over the years,
we are working on promoting sustainable forest management andexpanding global forest resources.

© 2023 Sumitomo Corporation

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What&How
Owning vast forest assets amounting to roughly
50,000* hectares in New Zealand
Taking advantage of its mild climate, New Zealand is a country with anadvanced forestry industry where systematic afforestation and logging
are carried out to realize effective use of forest assets and achieve
harmony with the global environment. In 2013, Sumitomo Corporationacquired forests in New Zealand and established Summit Forests New
Zealand Limited (SFNZ)to enter the forestry business there.
SFNZ owns vast forest assets amounting to approximately 50,000
hectares in New Zealand, making it one of the largest trading
companies in the forestry business. Within these Limited forests, weplant and grow radiata pine, a species of pine tree, in a 30-year cycle.
The harvested timber is sold domestically in New Zealand as
packaging material or construction supplies and also exported toChina and South Korea. After logging, we reforest most of the land,
except for some areas where reforestation is not contractuallypermitted, to protect and nurture the forest over a long period of time.
Since its founding, SFNZ has accumulated expertise in forest
management and developed a sustainable forestry business.
* Harvestable area (excluding forest roads and non-commercial forest
areas from the forest area owned)© 2023 Sumitomo Corporation

14

Maintaining healthy forests into the future throughproper management
To grow healthy forests and acquire quality timber, it is not enough tosimply plant seedlings. In addition to tasks such as thinning, where trees
are thinned out to adjust forest density, and pruning, where poorly
developed branches are removed during tree growth, forest
management requires soil management, monitoring of vast forest areas,
management of data on tree growth conditions, and disaster prevention.
Managing forest properly in this way helps to protect healthy forests
over the long term, which also leads to stable capturing of CO2.
Moreover, forest management involves a 30-year cycle from planting toharvesting, so economic benefits are only generated 30 years after
planting. As such, business operations require capital strength to sustain
operations over the long term and a strategy that looks ahead to the
future. It is in these areas that Sumitomo Corporation's cultivatedstrengths come into play. We also believe that there will be
opportunities for further business expansion in the future, including
selling the CO2 capturing function of forests as credits.
In our future business activities, we will focus on automation of logging,planting, pruning, and other operations. We will also put our energy into
the promotion of DX, including introducing drones and automatic
measuring technology, to reduce costs and improve safety. Grounded on
this, we will sustainably manage and operate our vast and rich forests in
New Zealand.
© 2023 Sumitomo Corporation

Thinning in SFNZ forest area

15

Building strong relationships
In the forestry business, Sumitomo Corporation not only considers the
30-year cycle from afforestation to harvesting but also looks ahead tothe next 100 years, taking a long-term approach to business
management. In our business development in New Zealand, it has notbeen simply financial strength but also the ability to articulate thestrategy and vision from a long-term perspective based on history thathas underpinned our business.
The majority of SFNZ's business sites are on land owned by the Maori,
the indigenous people of New Zealand. Building a relationship with themis thus essential for conducting our business. The Maori people hold
both history and this land in extremely high regard. As such, as a way ofcommunicating our Company's stance of business management with along-term perspective, we shared with them the story of the 400-year
history of the Sumitomo Group and about the large-scale afforestation
the Group carried out in response to the air pollution from smoke
produced by the Besshi Copper Mine during the Meiji era (1868–1912).
The Maori people were interested to hear about our history and future
outlook and expressed appreciation for the fact that we will becommitted to efforts over the long term. This is when I feel that we havea mutual interest with the landowners. Discussions based on a longterm perspective also help nourish a sense of trust in business dealings
among our local partner companies entrusted with forest operations.
Furthermore, SFNZ conducts biodiversity conservation activities*, suchas breeding and reintroducing the national bird of New Zealand, the kiwi,
into the forests, as well as promoting coexistence with wild horses. The
local community has expressed appreciation for these activities. Suchinitiatives are the foundation upon which we build strong relationships
with the people of New Zealand.
*The biodiversity conservation initiatives at SFNZ were analyzed as a pilot test for
the Taskforce on Nature-related Financial Disclosures (TNFD). Please refer to the
ESG Communication Book 2023 (ESG Data,page 73) for the details.
© 2023 Sumitomo Corporation

The one hundredth kiwi was released into the Whangapoua forest area in
Coromandel in 2023

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Going forward
Looking ahead to the future and tying daily efforts intobusiness expansion and realization of carbon neutrality
I believe that the forestry business itself cannot be operated without
the perspective of sustainability. When making decisions about thebusiness, I always keep in mind the question, “Is it sustainable?”Every year, SFNZ plants trees on 700–800 hectares of land, roughly
the same size as the area logged. The moment these trees areplanted, we become responsible for their proper management for
the next 30 years. If we cannot keep the business going for 30 years
or manage these trees properly, then we should not plant them.
Each decision comes with great responsibility, so I consider themcarefully. This is a business that must be operated long term, andwhen considering what is important, I think it is looking ahead tothe future and moving forward one day at a time. SFNZ currently
has a good group of people who are serious about the future offorestry. As the Managing Director, I hope to create anorganizational culture in which everyone who has gathered as apart of this group can continue to enjoy their work each and every
day and to make Sumitomo Corporation's presence felt here in New
Zealand. I believe that this will lead to the realization of carbon
neutrality and further business expansion.
© 2023 Sumitomo Corporation

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Interview

Key Social Issue | Mitigation of climate change

Large-scale energy storage business
Providing a platform that stores energy to promote the transition to renewable energy
The main challenge in promoting decarbonization is the transition to renewable energy, and its importance is indisputable. However, the introduction rate ofrenewable energy in Japan is still low compared to European and other countries. One of the main reasons is the insufficient capacity of transmission lines. In
response to this issue, Sumitomo Corporation aims to expand its business of storing energy nationwide in Japan by developing a large-scale energy storage platformthat can compensate for this lack of transmission line capacity. Here, we will delve into our path taken to launch a completely new business and start operation of thefirst large-scale energy storage facility in Japan in 2024, as well as the challenges and future prospects on the front line.

Interviewee
Satoshi Wada
Zero Emission Solution Business Department
Joined the Company in 2013. After being involved in the investment side of the Tubular Business Development
Department of the Tubular Products Division (Metal Products Business Unit), he engaged in the trading of tubular
products for automobile parts in the Mechanical Tubular Business Department in 2015. In 2018, he wasseconded to the Sales Department of Nippon Steel Pipe America, Inc. in the United States. After returning toJapan in 2020, he was assigned to the Mechanical Tubular Business Department and moved to the Zero
Emission Solution Business Department in 2021.
© 2023 Sumitomo Corporation

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Why
Resolving issues facing the spread of renewableenergy with large storage batteries
Despite the global trend toward decarbonization, the share of
renewable energy in Japan remains at a low level of roughly 20%, as it
is an unstable power source whose power generation is greatly
affected by natural conditions, such as sunlight and wind, and because
Japan's current power grid*1 is unable to accommodate this instability.
In order for renewable energy providers to deliver electricity to users(households, factories, etc.), they must be connected to the power grid,but if the required amount of electricity exceeds the assumed amount,it may interfere with the stable supply of electricity. Therefore, even if arenewable energy provider plans to build or expand a solar power plant,
there are cases where the power company that manages the power
grid cannot accept the connection, which hinders the expansion ofrenewable energy.
As one of the solutions to this issue, there is growing interest in theenergy storage business, which connects large storage batteries to thepower grid and adjusts the surplus or deficiency of renewable energy
power generation by charging and discharging these storage batteries.
*1 System integrating power generation and transmission of electricity companies.
Managed by area; i.e., Tokyo Electric Power Company Holdings, Incorporated
manages the Tokyo area.
© 2023 Sumitomo Corporation

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What&How
Building a large storage battery system with reused batteries
Beginning more than a decade ago, Sumitomo Corporation was among thefirst to work on social implementation of large-scale storage batteries thatcan be connected to the power grid. In 2015, we started Japan's first
demonstration project covering energy storage connected to the power gridin the Koshikishima, Satsumasendai City, Kagoshima. This project is still
operating in a stable manner today.
One feature of our grid energy storage system is that it utilizes reusedbatteries from EVs. Although the penetration rate of EVs in Japan is still only
about 1%, the Japanese government aims for 100% of all new passenger
car sales to be EVs by 2035. This, at the same time, means that morebatteries will be discarded. Focusing on this, Sumitomo Corporation
envisioned a sustainable supply chain for an electrified and resource-savingsociety by reusing discarded batteries for large-scale energy storage.
Based on this concept, we have accumulated technical and operational
know-how since the establishment of 4R Energy Corporation jointly with
Nissan Motor Co., Ltd. in 2010 to reuse EV batteries, with the aim ofcommercializing large-scale energy storage systems that are more
economical and have high output and capacity. After more than a decade ofexperiment, we developed the EV Battery Station, a large-scale energy
storage system that combines hundreds of reused batteries to provide highoutput and capacity so that it can be connected to the power grid. In 2024,
we plan to invest our accumulated know-how into the operation of the firstlarge-scale energy storage plant in Japan, to be located in Chitose,
Hokkaido.
© 2023 Sumitomo Corporation

20

Reducing CO2 by efficiently using EV batteries andrenewable electricity
Our grid energy storage business contributes to decarbonizationfrom two major perspectives.
First is the nationwide rollout of an energy storage platform. In
response to the issue that renewable electricity cannot be usede ciently due to insu cient capacity in the power grid, we willdevelop a platform for storing energy using large storage batteries
at the national level. By doing so, we will promote the use ofrenewable electricity, thereby contributing to CO2 reduction.
Second is the reuse of EV batteries. One EV battery is believed toemit approximately three tons of CO2 at the time of production. The
reuse of batteries in the energy storage system means that newbatteries no longer need to be manufactured, which not only
reduces CO2 emissions by the same amount but also contributes tothe life cycle assessment of EVs. In addition, 4R Energy is working
to achieve zero CO2 emissions in the battery reuse process by
installing solar panels and an energy storage system and utilizing
solar power to avoid purchasing grid electricity.
Mr. Satoshi Wada at the energy storage facility of EV Battery Station Namie© 2023 Sumitomo Corporation

21

Balancing CO2 reduction and economics to make thebusiness sustainable
Although the capacity of the power grid needs to be increased in order torealize a sustainable society in which renewable electricity is mainstream,
expanding transmission lines requires enormous time and cost. Therefore,
we believe that infrastructure development using storage batteries
presents a more realistic approach. To develop a sustainable storage
battery infrastructure, it is essential to have a monetization mechanism inplace without relying on subsidies. Our grid energy storage business hasreached the stage where it can be profitable without subsidies. This wasmade possible thanks to our continuous efforts to reduce the cost ofenergy storage facilities and to the source of income provided by the
rapidly evolving supply-demand adjustment market, capacity market, andwholesale electricity market. All of these factors contribute to the
profitability of the business.
In these three markets, as it is important to predict trends in demand andprice of electricity and charge and discharge electricity at the appropriate
time, market forecasts are directly linked to income. Therefore, in parallelwith the expansion of its energy storage facilities, we are also working todevelop a program to maximize profits by forecasting the market.
To realize the transition to renewable energy, it is important to pursue
economic efficiency and make it a sustainable business. We have beendeveloping the business by installing energy storage facilities as a pioneerin the grid energy storage business. Based on this, as a trading company,in the future we aim to provide services such as market forecasting
programs that are under development. While expanding our business area,
we will also work to create a system that pursues greater economic
efficiency and generate greater value.
© 2023 Sumitomo Corporation

22

Going forward
Launching businesses that contribute to the transition to
renewable energy to leave prosperous lifestyles for the future
We still have a long way to go, but I think the main reason why we have madeit this far is because we were allowed to conduct the demonstration
experiments through trial and error. Just because the grid energy storage
business was successful overseas, that did not mean it would be in Japan.
Also, when it came to EV battery reuse, there were no success stories
overseas. Furthermore, since this is a completely new business, there were
frequent conflicts with existing rules. Because of this situation, we talked tovarious people, such as those from the relevant ministries, experts, andbusiness partners, and put forward a hypothesis on the premise of receiving
opposing views from them, which led to the demonstration experiments. The
fact that we were able to spend money on the demonstration experiments
and had a wide network is due to the scale of Sumitomo Corporation's
business and the business foundation built by our predecessors.
I strongly believe that the transition to renewable energy should beaccomplished in our generation, as it is absolutely necessary to leave
prosperous lifestyles for society in the future. When I joined the Company, I
gave myself the goal of creating a new company with a new business andthen releasing what I had created to the world. I am extremely fortunate andhonored to have been involved in this project at this time, with theintroduction of the grid energy storage business that contributes to society's
transition to renewable energy, building on the success of our predecessors. I
will first make this business a success and get it on track, and then continue
to create a new system that contributes to the resolution of social issues.

Please refer to the Integrated Report 2023 (page 59) for the details of Energy Storage business.
© 2023 Sumitomo Corporation

23

Interview

Key Social Issue | Mitigation of climate change

Biomass energy development
Striving to develop new carbon-free energy from wood pulp
There is worldwide demand for the production and stable supply of carbon-free energy, such as hydrogen and ammonia, as an alternative to fossil fuels, as this is essential torealize a carbon-neutral society. While Sumitomo Corporation works on multiple projects for hydrogen and ammonia, the Company is seeking to address the issue of climatechange by producing new carbon-free energy. Together with Nippon Paper Industries Co., Ltd., which we have been doing business with for more than 50 years, we willcontribute to reducing CO2 by
2 y producing bioethanol from wood pulp as a raw material for jet fuel. This could be one of the most advanced endeavors in the world as the
project also seeks to produce non-edible biomass by making use of abundant forest resources in Japan. This project would not have been possible without the firm trust we
had established with our business partners over the last several decades and a history of tenacious and wide-ranging studies on new business development in the field of
next-generation biotechnology. The following is an interview with the members who have been leading this unprecedented project.

Interviewees
Natsuki Omori

Masato Yokoyama

Biomass Energy & Materials Department

Biomass Energy & Materials Department

Joined Sumitomo Corporation in 1994. He was in charge of

Joined Sumitomo Corporation in 2019. He was assigned to thewood pulp imports and domestic sales during his time with the

Wood Chip Team of the Biomass Materials & Fuels Department

Pulp Team of Pulp & Paper Department No. 2. After beingtransferred to the Cement Department in 2008, he was© 2023 Sumitomo Corporationand managed wood chip imports and exports. In 2021, heassigned to a biomass-related development project in

moved to the current Biomass Pellet Team of the Biomass

Lampung, Indonesia in 2013. After working in the biomassrelated business, in 2021 he was placed in charge of the wood

Energy & Materials Department. In addition to importing woodpellet import business and next-generation biomass material
and fuel development in the Biomass Pellet Team of thematerials and the fuels business.

Biomass Energy & Materials Department.

pellets, he is involved in developing next-generation biomass

24

Why
Bioethanol made from non-edible resources
attracting worldwide attention
Bioethanol is currently attracting attention in countries worldwide
striving for a carbon-neutral society as a renewable energy source
and as feedstock for biofuels such as SAF*1 and chemicals with low
environmental impact. Bioethanol produced from edible biomass
such as sugar, starch, and vegetable oil is called “ rst-generation
bioethanol.” Meanwhile, cellulosic bioethanol made from inediblebiomass that does not compete with food consumption, such as
woody biomass and bagasse (i.e., the sugarcane residue after
sugar production), is classi ed as “second-generation bioethanol.”In particular, the latter type of woody biomass has the potential totackle various issues in Japan, including utilizing abundantdomestic forest resources, ensuring energy security, and improving
energy self-su ciency.
*1 An acronym for sustainable aviation fuel. This refers to an aviation fuel thatsigni cantly reduces CO2 emissions compared to conventional fuels throughout its
life cycle, from production and collection to manufacturing and combustion, andcan utilize existing infrastructure without modi cation.

© 2023 Sumitomo Corporation

25

What&How
Joint study together with Nippon Paper Industries
and Green Earth Institute
Sumitomo Corporation, together with Nippon Paper Industries and Green Earth
Institute Co., Ltd., has begun a study on the commercial production of Japan's
first cellulosic bioethanol made from woody biomass and its development into
biochemical products. The project aims to produce bioethanol from domestic
wood resources with an annual production capacity of tens of thousands ofkiloliters.
The production of bioethanol from non-edible resources, especially wood pulp, isa global pioneering initiative. Not only does it contribute to decarbonization as analternative to petroleum fuels but the use of non-edible resources realizes lower
CO2 emissions and has lower environmental impact compared to mainstream
bioethanol production from corn and sugar. In addition, by using black liquor
obtained during pulp production, we aim to achieve exceedingly low CO2
emissions compared to other fuels. Furthermore, by effectively utilizing domestic
thinned wood, it will also lead to the conservation of forest assets in Japan.

This bioethanol will be used mainly as a raw material for domestically produced
SAF, for which demand is expected to increase rapidly in the future. We also plan
to consider the establishment of a carbon recycling system, such as capturing
and utilizing CO2 produced as a by-product of bioethanol production, andconverting the residue of the fermentation process into feed and fuel.
New technologies are needed to use our bioethanol, which we aim forcommercial production, as jet fuel. This is an area that oil companies are working
on. To realize a recycling-oriented carbon-neutral society, various challenges areunderway simultaneously around the world. It is exciting to think that we areplaying a part in this, and we strongly wish to achieve success in the field at all
costs.
© 2023 Sumitomo Corporation

Bioethanol on the far right is produced through the process of using the leftmost
wood chip to create pulp and then saccharification fermentation culture media(courtesy of Nippon Paper Industries and Green Earth Institute)26

Achieving win-win collaboration based on a strong
relationshipOur collaboration with Nippon Paper Industries began with theimport of wood chips from South Africa approximately 50 years
ago, and since then we have continued to collaborate and trade
mainly in the afforestation business in South Africa and SouthAmerica. The second-generation bioethanol business was madepossible based on the solid trust we have earned throughcollaboration over many years. Their expectation toward ourknowledge and know-how in group company management also
helped to make the collaboration happen.
Since this project will make effective use of idle pulp production
facilities in Japan, it is expected to contribute not only to mitigatingclimate change but also to solving the problems faced by the paperindustry and revitalizing the industry as a whole.
Members discussing the direction of the project at a training camp
(Nippon Paper Industries, Green Earth Institute, and Sumitomo Corporation)© 2023 Sumitomo Corporation

27

Continuing to take on the challenges ofcommercialization by harnessing the collective
strengths of Sumitomo Corporation
After the conclusion of the basic agreement in February 2023, there
are still many challenges to address before the start of bioethanol
production, but as we seek to work out these issues, the underlying
strengths of Sumitomo Corporation as an integrated trading
company are helping to create new businesses. The Energy
Innovation Initiative (EII)*2, an individual business organization
newly established in April 2021, brings together experts in energy
and infrastructure, as well as other fields, and provides engineering
advice to Nippon Paper Industries and Green Earth Institute fromtime to time. In addition, since the Group has specialists in various
other fields, we are collaborating with the Green Chemical Business
Development Department, and with SC Foods Co., Ltd. and the
AgriScience Department on the effective utilization of residues
generated in the bioethanol production process.
Sumitomo Corporation's creativity and connections between
businesses as well as its abundance of specialists undoubtedly
serve as a cornerstone for supporting sustainable business growth.
*2 A cross-functional business organization that engages in next-generation
business development in the fields of decarbonization and next-generation energy© 2023 Sumitomo Corporation

28

Going forward
Hoping to bridge to the next generation businesses

Working to resolve social issues throughthat go beyond win-win relationships

collaboration with Nippon Paper Industries

I have a strong attachment to this project. This year, we finally reached a point towhere we could issue a press release on the progress made. This was only possible

Based on my specific research of wood at university, since joining the Company, I

thanks to the diligent work of our many tenacious colleagues, including those whohave already left the department, seeking to do something innovative using wood
resources. I feel a flood of emotions when it comes to working on a new businesswith Nippon Paper Industries because I have had a deep relationship of trust withhave been studying new ways to utilize woody biomass together with mycolleagues and members of the Wood Resources Business Department. I am very
pleased that these studies have borne fruit and that the commercial production ofcellulosic bioethanol will pave the way for pulp utilization outside of papermaking.

them for many years. This business will bring many benefits not only to the threecollaborating companies but also to the domestic forestry industry, the aviationindustry, and the global environment. I personally believe that we can achieve a “winto the 10th power” that goes beyond just a win-win relationship. Since this is a long-

In addition, my first client after joining the Company was Nippon Paper Industries,

term project, I hope to be a bridge to the next generation so that Mr. Yokoyama's
generation can powerfully grow the business. I would like it to eventually develop
into a business that can support the sustainable development and decarbonizationof Japanese industry.

seek business opportunities in the biochemical field, such as producing plastic© 2023 Sumitomo Corporation

so I feel a deep connection and am excited to be able to work together to help solve
social issues. In the future, I would like to not only realize this business but alsobottles derived from wood chips.

29

Key Social Issue

Circular economy
Helping to realize sustainable resource recyclingthat makes effective use of limited resourcesLong-term goal: Shift to recyclable, efficient technologies and products

Medium-term goals
Use renewable and recyclable raw materials, collect waste, and promote improved efficiency of product usage
Expand use of raw materials derived from recycled or renewable resources.
Improve efficiency of product usage and expand businesses that promote longer product life (sharing, sales of used items, leasing, rentals, etc.).

Long-term goal: Sustainable use of natural resources

Medium-term goals
Reinforce the sustainable procurement system for major natural resources used by the Group
Identify major natural resource-related commodities requiring sustainable procurement, establish procurement policy, promote certification, andstrengthen voluntary auditing system.
© 2023 Sumitomo Corporation

30

Interview

Key Social Issue | Circular economy

Aircraft aftermarket businessContributing to the creation of a circular economy in the aviation industry by promoting the effective
utilization of retired aircraft
The aviation industry was heavily impacted by the COVID-19 pandemic, but aircraft demand is growing again now that travel and entry restrictions around the world havebeen eased or lifted. Moreover, in recent years, airlines all over the world have been focusing on sustainability management to achieve a sustainable society and corporate
growth. Against this backdrop, the aircraft aftermarket business, which is one that increases the sustainability of the aircraft life cycle, is gaining traction.
Why has Sumitomo Corporation been focusing on it, and what kind of future does it see for the business? We asked the persons in charge of the aircraft recycling and usedaircraft parts businesses of the Commercial Aviation Department about the current status of the business, its future prospects, and their thoughts on the business.

Interviewees
Arisa Tsukamoto

Toshinori Kondo

Commercial Aviation Department

Executive Vice President, Werner Aero, LLC

Joined the Company in 2006. After working as a representative

Joined the Company in 2008. After working in the aircraft andfor the Japanese market regarding aircraft parts andengine leasing businesses, he was seconded to an engine

maintenance, repair, and overhaul (MRO), and handling portfolio

leasing company in the Netherlands. He has been involved in the

management of an engine leasing group company, she wasused aircraft parts business since 2020 and was seconded to

involved in the establishment of the Group's material issues at

U.S.-based used aircraft parts group company Werner Aero, LLC

the Corporate Planning & Coordination Department. She isin 2022.

currently involved in the aircraft recycling business at the© 2023 Sumitomo Corporation

Commercial Aviation Department.

31

Why
Recycling retired aircraft: A serious environmental
problem for the aviation industry
The life cycle of an aircraft is 25 to 30 years, and more than 700 aircraft
are retired each year. After retirement, many of these aircraft are
neglected in a desert area, an “aircraft graveyard,” in the United States.
There are many challenges when it comes to recycling retired aircraft,
but the need is growing.
Amid these circumstances, global aviation demand is recovering again
as the COVID-19 pandemic comes to an end. In addition, recognizing

the urgency of reducing CO2 emissions and decarbonizing the aviationindustry, airlines are developing and implementing growth strategies
based on sustainability management.
With these market factors, there are calls to increase the sustainabilityof the aircraft life cycle itself.
The Sumitomo Corporation Group is heavily engaged in the aviation
business, and we consider it our responsibility to contribute to thedevelopment of a circular economy through our aviation business,such as selling the recyclable parts retrieved from retired aircraft andreturning metals extracted from the remaining parts in those aircraft tothe market as secondary alloys.
© 2023 Sumitomo Corporation

32

What&How
Sumitomo Corporation's aftermarket businessOver the years, by leveraging its global network, Sumitomo
Corporation has expanded its aircraft-related business portfolio interms of scale and scope, while keeping its core focus on theaircraft leasing field. In recent years, we have been focusing on theaftermarket business, which involves the reuse of aircraft parts,
with the aim of developing businesses that cover the entire aircraft
life cycle.
While the primary lease term for new aircraft in the aircraft leasing
business is 5 to 15 years, the useful life of an aircraft is 25 to 30
years. As aircraft remain active long after the primary lease has
ended, we are not only focused on the entry point of the aircraft life
cycle, or primary leasing, but also on the exit point, or theaftermarket business. This includes the used aircraft parts
business, the aircraft recycling business, and the engine MRO
business as part of our efforts to develop and promote businesses
that will lead to sustainability of the entire aircraft life cycle.

© 2023 Sumitomo Corporation

33

Used aircraft parts business for effective utilizationof parts from retired aircraft
There are more than 1,000 parts that can be removed from a retired

Werner Aero has been involved in the used aircraft parts business inaircraft and reused. These range from large parts, such as thethe United States for approximately 30 years and has a solid working

landing gear and the auxiliary power unit, to the cabin seats and thepanels. Our used aircraft parts business repairs and sells suchparts. At Sumitomo Corporation, we are working to expand ourrelationship with many airlines. It also has a high inventory
management capacity and strong aircraft procurement and parts sales
capabilities. The aircraft aftermarket business is expected to growsteadily, and we plan to further increase the value we create byaftermarket business, and U.S.-based Werner Aero, which weenhancing our human resources and expanding the volume and types

invested in August 2022, plays the central role in this strategy.

of retired aircraft we procure.
Sumitomo Corporation's growth vision for the used aircraft parts
business is to create synergy between this business and our aircraft
and engine leasing businesses, while expanding Werner Aero's
business with our financing capabilities and expertise. Furthermore, byincorporating peripheral businesses such as aircraft recycling, we seek
to become a strong presence in the aircraft aftermarket business.

At Werner Aero© 2023 Sumitomo Corporation

Aircraft parts after dismantling34

Engaging in the challenging task of recycling CFRP in
the aircraft recycling business
The aircraft recycling business begins after the necessary parts

We are also taking on the challenge of recycling carbon fiber

have been removed in the used aircraft parts business. The

reinforced plastic (CFRP), a lightweight and robust special aircraftbusiness involves finely shredding and sorting the remnants ofmaterial that is considered to be particularly difficult to dispose of.

aircraft and then recycling them as secondary metal alloys. At

While the retirement of aircraft made with more than 50% CFRP will

Sumitomo Corporation, we looked into this business opportunity in

begin around 2035, there is no established method for recycling thepartnership with Toyotomi Sangyo Co., Ltd., which has thematerial and it is said that the only option will be to bury it. Taking

technological capability to recycle 99% of metals, plastics, andinto account the forecast that the amount of disposed CFRP inother materials in their automobile recycling operations.

2040 will be nearly 10 times the current level, Sumitomo
Corporation is focusing on establishing a recycling method in

Furthermore, Toyotomi Sangyo is the only comprehensive recycling

cooperation with its Carbon Department and external partners. We

company in Japan that has accreditation from the international

have already confirmed that CFRP can be removed in a sufficiently

Aircraft Fleet Recycling Association (AFRA), which promotes thereusable form in recycling trials using the technology of Carbon

proper recycling of aircraft. In 2022, Sumitomo Corporation and

Fiber Recycle Industry Co., Ltd. in Gifu, Japan. We will study the

Toyotomi Sangyo achieved a 96% recycling rate in jointly conductedsecondary market for this recycled CFRP in cooperation withaircraft recycling trials.

various companies, universities, and research institutions.

Structural components before incineration

Pellets after incineration and processing© 2023 Sumitomo Corporation

35

Going forward
Establishing responsible businesses in the aviationindustry from the point of entry to exit

Creating new aftermarket businesses in the aviationindustry

An aircraft graveyard full of decaying planes in the desert is obviously unsustainable.
I recognize the tremendous importance of transforming the aviation industry into asustainable one, and we are working to realize this by leveraging our network ofpartners' capabilities in proper aircraft recycling alongside Sumitomo Corporation's
own capabilities. Moreover, the aircraft aftermarket business is expected to continue
growing steadily, and the reuse of parts will provide a large return on investment. For
these two reasons, I am excited by the thought that this business will become amajor earning pillar if we succeed in commercialization.

The aviation industry is coming upon a major turning point, and a wide variety ofassets and functions are required to adapt to the changes. In particular, aircraft
recycling requires broad expertise and networks, including for securing aircraft
procurement sources, dismantling and recycling technologies, and knowledge ofmetals. I feel like this is where Sumitomo Corporation, as an integrated trading
company, has its strengths.

I participated in identifying Sumitomo Corporation's material issues when I was in
the Corporate Planning & Coordination Department. At the time, however, I was notaware of it enough to tie it into the actual business. Today, there is a growing
momentum within the division to encourage ESG investment based on the keywordof “circular economy.” While still ensuring nominal pro tability, we can gain
recognition of the social signi cance of the business. I hope to contribute to theestablishment of a portfolio that conducts business from entry to exit in the aviationindustry with responsibility.

I believe the signi cance of the aircraft business, which helps bring people who
are far apart together, lies in its contribution to the happiness and prosperity ofpeople all over the world through the stable supply of aircraft. European andAmerican manufacturers have long led the aviation industry. However,considering the expansion of the aftermarket an opportunity, we will put every
effort into the creation of new aftermarket businesses to lead the market as aJapanese company.

Please refer to the Integrated Report 2023 (page 61) for the details of aviation business.
© 2023 Sumitomo Corporation

36

Key Social Issue

Respect for human rights
Respecting the human rights of everyone involvedin our business activities and supply chain aspart of our corporate social responsibility

Long-term goal: Respect human rights through all of our businesses and supply chains

Medium-term goals
Promote and ensure respect for human rights in accordance with the United Nations Guiding Principles on Businessand Human Rights and Sumitomo Corporation Group's Human Rights Policy
By 2023, achieve 100% participation rate in human rights education based on the Guiding Principles, and 100% implementation rate in regionalorganizations and subsidiaries.
Strengthen risk analysis in human rights due diligence to accurately assess risks in all businesses, including the supply chain, and implement risk
mitigation measures by 2025. Establish a more effective grievance mechanism based on assessment results.

Ensure a safe workplace environment
Strengthen efforts to achieve zero accidents at major business workplaces, focusing on manufacturing, processing, and projects involving large-scale construction.

Achieve a diverse organization grounded in mutual respect
Provide a safe working environment that is free from discrimination and harassment.
Promote human resources management that enables individuals to demonstrate their abilities regardless of nationality, age, gender, sexual orientation,
gender identity, or any other attributes or values.
© 2023 Sumitomo Corporation

37

Discussion

Key Social Issue | Respect for human rights

Roundtable Discussion with External Experts

The current state of Sumitomo Corporation's human rights due diligence and future challenges
We established the Sumitomo Corporation Group's Human Rights Policy in 2020, which states that the Group will respect human rights as part of its corporate social
responsibilities and aim for sustainable growth together with society.
In the same year, to promote its implementation, we identified respect for human rights as one of the six key social issues the Company needs to address. In 2021, weestablished a medium-term goal to accurately assess human rights risks in all businesses, including supply chains, and implement risk mitigation measures by 2025. Since
then, we have begun human rights due diligence at the business-unit level covering all of our business segments.
Today, nearly two years after this process began, how should we evaluate the results of our initiatives and what direction should we take in the future?
To answer these questions, we organized a roundtable discussion on the current state of our human rights due diligence and future challenges. We invited two external
experts in business and human rights serving as members on our Sustainability Advisory Board, and members of the Company's Corporate Sustainability Department
leading human rights due diligence.

Interviewees
Hidemi Tomita

Junko Watanabe

At Sony Corporation, Mr. Hidemi Tomita was involved in research on material physicalproperties and environmental technologies at the Sony Research Center. He worked at
the European Environmental Center, and after his time as Manager of the Environmental
Strategy Office, served as General Manager of the CSR Department, established in 2003,
for approximately 10 years. After joining Lloyd's Register Quality Assurance Limited(LRQA) in 2013, he became a director of Lloyd's Register Japan K.K. (currently LRQA
Sustainability K.K.) in 2016. As part of our human rights due diligence process at thebusiness-unit level, he conducted interviews with each business segment as an external
expert. In March 2023, he was appointed to our Sustainability Advisory Board.

Ms. Junko Watanabe closely assists corporate clients with their sustainability needs whileleveraging her expertise in various legal fields and jurisdictions including M&A, general
corporate law, Asian law, and European law. She also excels at working with various
stakeholders based on her experiences as a consultant for the International Labour
Organization (ILO). Ms. Watanabe provides advice to Japanese corporate clients using
her expertise in business and human rights. In March 2023, she was appointed to our
Sustainability Advisory Board.

Tadafumi Yamaya

Ryota Fujii

Mr. Tadafumi Yamaya began his career in April 2004, when he joined a precisionequipment manufacturer. There, he was responsible for sustainability promotion,
including environmental regulation compliance, establishment of medium-termsustainability plans, and preparation of integrated reports. Later, in June 2016, he moved
to an energy company. He worked in the corporate planning section, where he was
responsible for all aspects of sustainability promotion, including formulating GHG
emissions reduction targets, improving ESG ratings, and addressing human rights
matters. Since he joined Sumitomo Corporation in October 2022, he has been in chargeof social and environmental risk management.

Mr. Ryota Fujii joined Sumitomo Corporation in April 2021 and was assigned to the
Corporate Sustainability Department. Up to September 2022, he assisted withpublication of materials for external release, including the ESG Communication Book,and improving the Company's ESG ratings. Since October 2022, he has been a memberof the social and environmental risk management team, engaging in human rights due
diligence for the departments he covers and analyzing risks of investments.

Managing Director, LRQA Sustainability K.K.

Corporate Sustainability Department, Sumitomo Corporation© 2023 Sumitomo Corporation

Attorney, Nishimura & Asahi

Corporate Sustainability Department, Sumitomo Corporation

38

History of human rights due diligence

Progress (completed for four individual business units)

FY2020: Examined the Group's businesses and value chains, and under the
consultations of Mr. Tomita, identified eight salient human rights issues facing theGroup.

FY2021: Implemented for the Media & Digital Business Unit and the Living Related &Real Estate Business Unit.
FY2022: Implemented for the Infrastructure Business Unit and the Mineral
Resources, Energy, Chemical & Electronics Business Unit.

FY2021 onward: Began human rights due diligence on a business-unit basis fromindividual business units believed to pose a relatively high risk in terms of humanrights. Plan to complete for all seven individual business units (six business units andone initiative) by 2025.
Note: Please refer to ESG Communication Book2023(ESG Data) for details on our actions regarding humanrights due diligence.

Sumitomo Corporation Group frontline employees
have a high awareness of human rights risks―This question is for Mr. Tomita, who was involved in
identifying risks as part of human rights due diligence,and Ms. Watanabe, who has viewed the disclosure. How
do you evaluate Sumitomo Corporation's efforts thus far?
Tomita Sumitomo Corporation has business operations
in a wide range of fields. In addition to businesses withrisks already recognized, such as those that impact local
communities and occupational health and safety inmineral resource concession projects, the Company also
conducts business with new types of human rights risks,
including human rights violations caused by AI in the
media and digital-related business. Therefore, there is no
single answer to the question of what human rights risks
Sumitomo Corporation faces, and it is extremely difficult
to come up with a concise picture of all such risks.
Given this difficulty, the fact that employees close to
the front line took part in my interviews on the risks ofeach business was a strong positive. Generally speaking,in most cases the corporate department of a company
carries out risk assessments. Although I cannot say that
one is necessarily better than the other, the fact that
Sumitomo Corporation adopts this more bottom-up
approach is unique.
© 2023 Sumitomo Corporation

I feel like I was really able to understand the uniquerisks facing each business because the people I
interviewed have a true understanding of frontline
operations. For example, even in the same industrial field,
each business has an individual supply chain andstakeholders, and as a result, they face different risks. An
important outcome of my interviews was that I got a clear
picture of the current situation by talking to people close
to the Company's frontline operations.
Watanabe I think it is great that Sumitomo Corporation
conducted interviews of its many business units and is
working on initiatives to address risk tailored to eachbusiness. The fact that this follows the risk-based
approach advocated in the United Nations Guiding
Principles on Business and Human Rights, which
recommends to work from larger risks to smaller ones,
sets the Company apart from others.
It is also great that the Company already has the culture
to implement human rights due diligence groupwide,using a solid system for collaboration between the
Corporate Sustainability Department and individual
business units.
Tomita I was also impressed with the high degree ofawareness toward human rights risks shown by thepeople I interviewed. They are aware of what needs to bedone now and really recognize areas of concern for the
future. Since risks change as the business landscapeevolves, even if risk management was going well as of thetime of the interview, there is no guarantee that this state
will continue going forward. Therefore, the important
thing is for people on the front line to continue to have ahigh sensitivity toward risk and always be aware ofchanges. The interviews indicated to me that sensitivity torisk is deeply rooted across the entire Company.
―What are the current issues facing the Company?
Watanabe One is providing more detailed informationin disclosures, such as the integrated report. The
Company has mentioned that efforts have already been
initiated to address risks. However, I have found thatdetails are lacking when it comes to its current actions
with regard to businesses found to pose high humanrights risks and the Company's evaluation for adequacy ofsuch efforts.
Tomita I agree. Even if risks are identified, if the Company
cannot show how it is correcting and preventing theserisks, then its human rights due diligence efforts will nothave come full circle.
Watanabe I feel it is also important to disclose howinternal and external stakeholders are involved in humanrights due diligence initiatives. For example, whichstakeholders were involved in the process of formulating
the Human Rights Policy, what types of opinions were39

――Mr. Yamaya and Mr. Fujii, both from the Corporate
Sustainability Department, how do you feel about theevaluation and findings shared right now?
Yamaya I have worked in the sustainability department ofseveral companies previously. I joined Sumitomo
Corporation last year and have been in charge of humanrights due diligence. It was pointed out that our employees
have a high sensitivity toward risks and are extremely
serious when it comes to human rights initiatives. I have felt
the same way since joining the Company.
Fujii How best to disclose our human rights due diligence
initiatives has been an area of concern. Most of the Group'sbusinesses are run with the close collaboration of
investment partners, and thus, we were unsure of theextent to which we should disclose information. At thesame time, we need to show stakeholders that we are firmly
implementing the PDCA cycle in human rights due diligenceand making progress with improvements. We hope toprovide disclosures useful to stakeholders while consultingwith experts, including those on the Sustainability Advisory
Board, with regard to the most appropriate methods.
Yamaya Having people outside the Company point out
shortcomings makes the issues very clear. Human rights
due diligence at the business-unit level will wrap up
soon. Based on the results and the findings today, we willtake action to mitigate future risks, including mappingout high risks.

Ensuring that the entire Group takes the initiativein human rights due diligence――What areas will Sumitomo Corporation work on in
the future?
Yamaya Currently, we identified the eight salient humanrights issues*1 facing the Group and are interviewing eachbusiness unit with a hypothesis in mind. Earlier, Mr. Tomita
praised the fact that he was able to interview persons incharge close to the front line of our businesses. With thatbeing said, the Corporate Sustainability Department leads
overall initiatives for human rights due diligence. Given that
we are an integrated trading company engaged in a wide
range of businesses, it is important for each groupcompany, which identifies and manages risks on the frontline, to proactively implement human rights due diligence.
Meanwhile, even if group companies are able to leadhuman rights due diligence, the corporate group including
the Corporate Sustainability Department still needs to verify
whether sufficient risk assessment and countermeasures
are being undertaken on the front line and elaborately
check that actions are being taken in response to high risks
from a companywide perspective. Therefore, it is necessary
to establish an appropriate design for determining the rolesof each layer, including the corporate group, individual
business units, and group companies we invest in.
*1: Please refer to ESG Communication Book2023 (ESG Data) for
details on the eight salient human rights issues.

―Ms. Watanabe and Mr. Tomita, what are your thoughts
on future initiatives?
Watanabe Watanabe: First, I feel that the further
strengthening of the risk management system groupwide
would be a move in the right direction. Currently, priority
has been given to initiatives depending on the extent of risk
identified in interviews with individual business units. In
order to raise greater risk management awareness on thefront line, I encourage the Company to strengthen its© 2023 Sumitomo Corporation

collaborative system with group companies.I believe theCompany is already implementing a number of initiatives
for events determined to pose a high risk. Nevertheless, I do
recommend that the Company has an expert ininternational human rights check whether initiatives toaddress each issue are truly adequate or not. It would be
ideal for the Company to establish a platform that canshare expertise from these initiatives in high-risk fields
within the Group while further refining its response to risks.
Tomita I believe that dividing roles according to eachlayer, such as corporate group, individual business units,
and group companies, is key to having successful
initiatives for respecting human rights. It is important forindividual business units and group companies tocontinue to implement human rights due diligence on
their own and for the corporate group to supervise theirefforts as appropriate.
To achieve this, the persons in charge of each layer
must undergo training. This should not only teachknowledge but also foster the ability to think on their own.
This process may be a long road, but the only way tosuccess is to see the process through to theend.Approaching risk based on the degree of seriousness ishighly effective, but actual initiatives can be difficult. For
example, it should be difficult to simply compare which
poses a higher risk when it comes to the initiatives ofdifferent business units.
Therefore, even when giving priority to the higher risks
40

with speed in mind, in order to determine risk
appropriately, a comprehensive approach involving theentire business must be taken. The important thing isfor each individual layer to thoroughly follow therisk-based approach. Toward this end, a system must
be in place that empowers each and every employee
to work autonomously.

Priority should be placed on strengthening ourgrievance mechanism――What other initiatives must be implemented?
Fujii We are now in the second half of our human rights
due diligence at the business-unit level. In addition tothoroughly implementing these initiatives, as laid out inour medium-term goals for key social issues, werecognize the need to explore the establishment of amore effective grievance mechanism in the future basedon the evaluation results of our human rights due
diligence on a business-unit basis. Currently, ourcorporate website has contact points available in English
and Japanese, but there is still room for improvement.
However, introducing a grievance mechanism at every
business site will overload operations, so we hope toreceive views from various people, discuss themthoroughly, and explore the optimal format.
© 2023 Sumitomo Corporation

Watanabe Providing services in Japanese and English is notenough, considering the number of business segments andregions where the Company operates. Meanwhile,regarding the level of grievance mechanism and where to
deploy it, the process should also begin with a risk-based
approach, and introducing it from business sites with a highrisk is a realistic and effective method.
Tomita If the current system is applied to the entire Groupin general, the next step should be to consider what kind of
mechanism is best for receiving reports on relatively
high-risk issues. To respond to the human rights risks
associated with a wide range of businesses, it may benecessary to have various complaint-handling mechanisms
according to the rights holders*2 involved in each.
*2: People who have rights. In the context of business and humanrights, it refers to people whose human rights may be violated
through the activities of a company.

Watanabe Many companies in Japan tend to introduce
or strengthen their grievance mechanisms after
completing human rights due diligence. However, it iseffective to start efforts related to the grievancemechanism as soon as possible. This is because there
are many cases where the introduction of thegrievance mechanism has identified new humanrights risks and thus it makes following actions forhuman rights due diligence more efficient. In addition,
I think it will be more effective to cooperate with theLegal Department and the Legal ComplianceDepartment on issues such as upgrading the existing
whistleblower system.
Tomita I would also like to see the Company work on
human rights due diligence and the establishment of amore effective grievance mechanism at the same time. The
expected timeline for human rights initiatives is becoming
clear due to the progress of legislation in Europe, and theneed to strengthen our grievance mechanism at an earlystage is also increasing. For both human rights due
diligence and the grievance mechanism, I think it isimportant to be aware of the timeline and to organize anddisclose what will be completed by when to some extent.

Taking a unique approach that truly works for
Sumitomo Corporation―Mr. Fujii and Mr. Yamaya, how do you feel about the
future approaches provided here as advice?
Fujii The advice about a risk-based approach was extremely
enlightening. When we actually pursue this, even if we tell
the front line that “this is a high risk,” they may often havedoubt as to “how can you say this poses a higher risk for us
than for other business units or departments.” To prevent
this, I feel we need to explain logically how we identify risks,
assign priorities, and decide which actions to take.As for theadvice on dividing roles by layer and conducting employee
training, we have already begun initiatives. Specifically, allof Sumitomo Corporation's employees underwent
e-learning on human rights last year. This year, we willroll this training out to regional organizations andsubsidiaries.
Yamaya Based on the advice provided today, I feel that
there is a lot we need to address and we have a long way
to go. For example, in regard to the risk-based approach,for group companies, we need to increase opportunities
to consistently communicate why the business faces
high risks through detailed explanations, workshops,
and other efforts.
In addition, the Self-Assessment Questionnaire(SAQ), a survey that checks whether suppliers are in41

compliance with our required standards of conduct, isimplemented for specific businesses, but not
uniformly for the Company as a whole. Should weconsider expanding the scope of this in the future?
Tomita Personally, I feel that the conventional formatof the SAQ has resulted in many cases where it does
not function effectively in response to the true goal ofrisk identification, and its necessity is doubtful.
Therefore, when using the SAQ, I would like theCompany to think from scratch about the format thatsuits its business characteristics without thinking thatit has to cover general questionnaire items.To pursue

the essence rather than the form, I would like you toapproach the SAQ with a spirit of “creating acompletely new way.”
Watanabe As Mr. Tomita just said, I feel that the SAQ
is full of abstract survey items and is not particularly
effective. If a response to the question “Do you use
forced labor” simply says “No” and the Company does
not go any further, then you will not be able to identify
actual risks. I agree that the Company should do whatneeds to be done to identify true risks.
Yamaya I understood well the importance of thinking
about what needs to be done to fundamentally reducerisk, without being bogged down by conventional
methods. I feel that many companies want to showthat they are doing “a good job” not only in humanrights but also in general sustainability topics.
However, if we stop there, our initiatives will not evolve,
and we will not be able to meet the level of humanrights initiatives that is currently required worldwide. I
would like to think about what is truly important andwhat is suitable for our Company, communicate witheach internal organization and external stakeholders,
and listen to the opinions of experts as we move
forward. Thank you for your time today.

Comments from four business units(Planning & Coordination Departments*3 or departments in charge of overseeing group companies) where human rights due diligence was carried out
Digital Business Development Department(responsible for overseeing SC Digital Media K. K.),Media & Digital Business Unit

Retail Business Department No. 2(responsible for overseeing Sumisho Montblanc Co., Ltd.),
Living Related & Real Estate Business Unit

SC Digital Media K.K., which offers marketing support, video production, and live streaming services
to client companies, handles a wide range of data, including consumer-related information.
Through dialogue held with SC Digital Media as part of the human rights due diligence carriedout, we recognized that there were potential human rights risks when it comes to their handling ofdata and protection of privacy. To prevent these risks from occurring, we took several measures
including raising internal awareness and implementing operational improvements. We will continue
to address business and human rights with a high level of awareness to properly fulfill our
responsibilities as a corporate citizen.

Sumisho Montblanc Co., Ltd., which designs, manufactures, and sells lab coats and service uniforms,
has always given full consideration to the safety of workers at the overseas and domestic plants
contracted for production. Through the human rights due diligence that was carried out, ourdepartment was reminded of its importance and recognized supply chain issues.
Sumisho Montblanc is working on initiatives that include (1) conducting on-site inspections atoverseas plants, (2) establishing guidelines for CSR auditing activities, and (3) establishing a suppliercode of conduct with external experts and carrying out transactions based on it. In addition, when
our department discusses further enhancement of corporate governance with the company, we areable to utilize the information organized during human rights due diligence.

Planning & Coordination Department, Infrastructure Business Unit*3

Planning & Coordination Department, Mineral Resources, Energy,
Chemical & Electronics Business Unit*3

As our business unit has many projects rooted in local communities, we are committed to protecting
the human rights of the local residents and the occupational safety of the workers on-site. Since thehuman rights due diligence was conducted for all businesses in the unit, it provided an excellent
opportunity to reconfirm our actions to date. It also helped us to take a fresh look at the supply chain
to identify human rights issues and measures to address them. Furthermore, there were also
opportunities for e-learning and to receive advice from outside experts. As a result, the due diligenceprocess also helped raise awareness of those in the department and increase their literacy.

We were able to comprehensively confirm the human rights risks of each business line of the business
unit. For those where risks such as occupational injury and lack of traceability were identified, wedeveloped action plans for preventing and mitigating these risks, and have begun carrying them out.
As for the mining business, we were also able to confirm that there were no major issues with regard toenvironmental impact assessments, impact on local communities, and the working environments at
manufacturing plants. In addition, the proactive risk reduction initiatives for contractors and upstream
suppliers were shared internally as good practices to raise the overall level of efforts.

*3: Departments in charge of strategy, performance management, planning, and human resources for each business unit. The departments serve as the business unit's point of contact and supervising entity for sustainability
initiatives, including human rights due diligence.

© 2023 Sumitomo Corporation

42

Key Social Issue

Development of local society and economy
Contribute to development of local industries, human resources,
and industrial and social infrastructureLong-term goal: Contribute to development of local industries and human resources

Medium-term goals
Develop local industries, create jobs, and develop human resources through the Group's global business operations
Promote sustainable, highly productive and value-added industries, and coexist with local communities through business.
Create employment and develop management and highly skilled human resources at the Group's business sites.

Long-term goal: Develop industrial and social infrastructure

Medium-term goals
Establish industrial and social infrastructure that contributes to the sustainable development of society
Promote infrastructure that enables access to high-quality energy, water, transportation, logistics, communications, and financial services, as well as
businesses that enhance urban functions.
© 2023 Sumitomo Corporation

43

Interview

Key Social Issue | Development of local society and economy

Integrated Telecommunications business in Ethiopia
Supporting Ethiopia's future through the establishment of telecommunications infrastructure and valueadded services
Mobile telecommunications services are becoming an essential social infrastructure that is indispensable to people's everyday lives, just like electricity and water. However,there are still regions of the world where the development of telecommunications infrastructure is lagging behind and the adoption of mobile devices has not progressedsufficiently. One of those is Ethiopia in Africa. The slow spread of telecommunications service is holding back future economic development in the country and is creating abarrier to resolving social issues such as educational disparities and gender inequalities. Together with our partners, Sumitomo Corporation is entering thetelecommunications service market in Ethiopia, which is still in its infancy, leveraging our expertise in launching telecommunications service from scratch in various regionsof the world. Here, we highlight the efforts of experienced and passionate employees in their quest to further expand the telecommunications service area and provide
various value-added services to contribute to medium- to long-term economic development and the betterment of people's lives in the country.

Interviewee
Yukari Soejima
Smart Infrastructure Business Department No. 2
Joined the Company in 2008. She was assigned to the former Telecommunication Business Department in 2011 andhas since been involved in investing in the telecommunications business in emerging countries. In April 2013, she was
assigned to Mongolia for two years and seconded to a local mobile carrier investee, where she was placed in charge ofcorporate planning and marketing. Since January 2022, she has been in charge of the integrated telecommunications© 2023 Sumitomo Corporation

business in Ethiopia and collaboration with Vodafone Group. She is also involved in local group company management.

44

Why
Telecommunications infrastructure development
delays holding back economic growth
Ethiopia is a pivotal country in Africa, and its population of
approximately 120 million is the second largest on the continent. It
has a young population with a median age of approximately 19
years, and in recent years it has enjoyed high economic growth withannual GDP growth rates of 6% to 10%. On the other hand, roughly
80% of the population works in agriculture, and the country is still
one of the poorest in the world due to recent large-scale droughts,
rapid population growth, and low wages.
The mobile penetration rate is only around 50%, significantly lagging
behind not only advanced countries but also many emerging
countries that have achieved penetration rates of over 100% (morethan one device per capita).
The widening of the international digital divide due to the delay inthe development of telecommunications infrastructure will be asignificant barrier for Ethiopia in achieving economic growth andsocial progress. As such, the Ethiopian government has establishedan economic policy called “Digital Ethiopia 2025.” The aim of thepolicy is to achieve sustainable economic growth by expanding
employment and alleviating poverty through digitalization. As partof the policy, the government began opening up thetelecommunications sector in 2019.
© 2023 Sumitomo Corporation

45

What&How
Forming strategic partnerships with leading global players
to launch new telecommunications services from scratch
The mobile market in Ethiopia has long been dominated by a single
company. The absence of competition has hindered incentives fortechnological innovation, expansion of coverage, and service
improvements. This has been a contributing factor to thestagnation of mobile penetration.
To overcome this situation, the Ethiopian government decided toopen up the telecommunications sector and implemented acompetitive bidding process for new market entrants. Sumitomo
Corporation won this bid in a consortium with UK-based Vodafone
Group Plc, its Kenya-based group company Safaricom Plc, South
Africa-based Vodacom Group Ltd., and British International
Investment plc, a UK government-affiliated investment company, togain a new entry into the Ethiopian mobile market.

© 2023 Sumitomo Corporation

Sumitomo Corporation has been in the integrated telecommunications
business for approximately 30 years. Starting with the launch ofoperations in Mongolia in 1995, where no mobile telecom service had
previously existed, we have promoted many projects, including thedevelopment of mobile telecom service in Russia and Myanmar.
Through these projects, we have acquired a great deal of knowledge,
such as in relation to specialized human resources in thetelecommunications field, business networks with leading companies
in Japan and abroad, negotiations with local governments, and project
management skills, including risk management. In Ethiopia, thepartnership between Vodafone Group, which operates
telecommunications businesses in eight African countries and various
other parts of the world, and Sumitomo Corporation, which has
experience in launching overseas telecommunications businesses
from scratch, serves as a driving force for the project.

46

Launching services in major cities despite
intensification of civil conflict and aiming to expand
services across Ethiopia by 2030
The consortium that acquired the integrated telecommunications
business license established a local operating company, Safaricom
Telecommunications Ethiopia Plc, in July 2021 and set to work oncommercialization. Immediately afterward, there were somesetbacks in preparing for operations due to the intensification of thecivil conflict. However, in October 2022, service was launched in 11
major cities, including the capital Addis Ababa. The service area
was subsequently expanded, and by April 2023 it had grown to 22
major cities across the country. The plan is to expand the service
area to smaller cities and major roads and to increase the numberof sales channels, enabling almost everyone in Ethiopia to haveaccess to a mobile network by 2030. The development of thisproject has also contributed to the creation of direct and indirect
employment, with over 5,000 jobs already created as of March2023.

© 2023 Sumitomo Corporation

SIM sales at launch ceremony

47

Providing financial services to support economic
activity in Ethiopian society
In this integrated telecommunications business in Ethiopia, we also

In the future, we hope to see M-PESA used to provide small loans

aim to provide various value-added services utilizing theand other financial services to individuals and small and medium-telecommunications network. As the first step, we will launch thesized businesses to promote business expansion andmobile money service M-PESA in FY2023. Launched in Kenya inentrepreneurship, thereby contributing to local economic

March 2007 by partner Safaricom Plc, M-PESA is a service that

revitalization and employment growth.

allows mobile money transfers to a recipient's mobile phone
number via the user's mobile phone. Not only can it be used for

In addition, easy and reliable billing and payment methods will bemobile payments in stores, but it can also be used to get cash atnecessary for potential future services, such as online education

the nearest store or kiosk when needed. The service quickly gained

and content distribution using the mobile network, so the rollout of

popularity in Kenya, where many people do not have bank accounts,

M-PESA will lay the foundation for future value-added services.

due to the convenience of being able to do financial transactions on

Sumitomo Corporation has the advantage of having businessa mobile phone even without a bank account, and in recent years,

divisions that engage in various industries such as education,

the number of users has been increasing in other African countries

entertainment, agriculture, and healthcare. Furthermore, we

and Eastern Europe.

possess a network to expand the utilization of this platform toexternal entities. While leveraging synergy as an integrated trading

Since the majority of people in Ethiopia still do not have bankcompany, we will provide a variety of value-added services that

accounts, we believe that widely rolling out M-PESA will have acontribute to the establishment of Ethiopia's infrastructure and thesignificant social impact, changing people's lives and economic

country's further development. We will also contribute to economic

activities. The service will enable cashless payments, such as forand human resource development in pursuit of our Corporate

daily purchases and paying public utilities, as well as secure

Message of “Enriching lives and the world.”

transactions, such as for receiving salary payments and sending
money to family members in rural areas.
© 2023 Sumitomo Corporation

48

Going forward
Bringing network access to all in Ethiopia
Network construction is a major part of implementing a mobile
telecommunications service. However, overseas businesses are
subject to problems unique to the country or region in which they arelocated, including security issues and difficulties in obtaining land use
approval. Each time, the challenge must be overcome by revising theplan or continuing to engage in persistent negotiations. During suchtimes, it was reassuring to have a significant number of people within
the Company who had previous experience executing projects in othercountries such as Mongolia and Myanmar. My own previous
experience in Mongolia, where I was involved in the operation of a local
mobile carrier, also proved useful. Among the various businesses of
trading companies, the telecommunications business is one that is
directly tied to people's lives. I have actually been to Ethiopia, and many
people still do not have mobile phones, especially in rural areas, anddevelopment of infrastructure other than telecommunications is also
still underway. After experiencing firsthand the local way of life, I
renewed my determination to change the situation through thetelecommunications infrastructure and financial services we provide.
We will continue to take up the challenge of expanding the network andproviding value-added services so that in the near future we will be able
to see with our own eyes people using their smartphones to enjoy
mobile services such as social media and shopping no matter where
we go in Ethiopia.
© 2023 Sumitomo Corporation

49

Message from Safaricom Ethiopia ESG Manager
Mr. Tewodros Getachew
It has been very exciting to be the part of a company that is committed toTransforming the Lives of our society for a Digital Future. Safaricom Ethiopia's ESG
program is underpinned by solid policies and procedures to ensure end to end
implementation in all our operations through collaboration with our suppliers, vendors,
and the communities where we conduct our business operations.
As an ESG Professional it is very encouraging to witness the changes that ourcompany has brought to our society through direct and indirect job and business
opportunities, network accessibility and high-speed internet connection. The
introduction of mobile money will drive much needed financial and digital inclusion tomillions of Ethiopians and will go a long way in improving lives meaningfully.
In line with our commitment to company's purpose "Transforming the Lives of oursociety for a Digital Future" has already provided direct and indirect employment
opportunities to 5,321 people (among them, 150 are new graduates with over half ofthem being female and from rural areas).
As we continue to expand our operations and reach all of Ethiopia, we pay particularattention and support popular community events like the Women First 5K run,focusing on bringing together 15,000 women every year, and projects that focus onenvironment protection like the annual nationwide tree planting.

Please refer to the Integrated Report 2023 (page 17) for the details of Integrated Telecommunications business in Ethiopia.
© 2023 Sumitomo Corporation

50

Key Social Issue

Improvement of living standard
Aiming to provide advanced services andnew functions through diverse businesses
and new technologies and concepts

Long-term goal: Provide advanced lifestyle-related services

Medium-term goals
Deliver advanced lifestyle services that help to solve social issues such as urbanization and aging populations
Provide more advanced services and new functions that improve the standard of living, such as mobility, media and telecommunications, healthcare
services, and Smart City development, based on new technologies and concepts.

© 2023 Sumitomo Corporation

51

Interview

Key Social Issue | Improvement of living standard

Next-generation agribusinessRealizing sustainable food production through agricultural innovation
As the world's population growth and climate change become more critical, there is a need to eradicate hunger, ensure a stable food supply, and improve nutritional conditions. To
achieve this goal, it is essential to establish a sustainable food production and supply system that balances higher agricultural productivity with less environmental impact.
Sumitomo Corporation has been engaged in agribusiness globally for roughly 70 years. Seeing the current social challenges in food production and supply systems as a mediumto long-term challenge, the Company newly established the Agri-Innovation Department in April 2022. The department is responsible for business development to promote newtechnologies and solutions that will support the future of agriculture. We talked with two employees active on the front lines of agriculture about Sumitomo Corporation's pursuitof realizing sustainable next-generation agriculture and how they can leverage the knowledge the Company has cultivated in the agribusiness over the years.

Interviewees© 2023 Sumitomo Corporation

Keisuke Okada

Aya Kuroe

Agri-Innovation Department

Agri-Innovation Department

Joined the Company in 2008. After working in the mining
and construction equipment sales business and supply
chain management for construction equipment plants at theConstruction & Mining Systems Division, participated in new
business development at the African subsidiary for
approximately three years starting in October 2013. After
returning to Japan, he joined a team business developmentin the field of precision agriculture. He later joined the AgriInnovation Department, which was established in April
2022, and is now responsible for developing new
businesses in the field of smart farming.

Joined the Company in 2008 and worked in the Basic
Chemicals & Electronics Division, where she worked inplastic raw material and semiconductor material trade. In
July 2020, she was transferred to the Energy Division, where
she was involved in the launch of a carbon credit-related
business. In April 2022, she joined the new Agri-Innovation
Department and is currently involved in new businessdevelopment in the clean farming field, including carbon
credit generation.

52

Why
Seeking agriculture and food production that
addresses increasing food demand and climatechange
The environment surrounding agriculture and food production has
become even more severe in recent years. Globally, the demand forfood is increasing as the world's population grows and dietary
habits change. At the same time, however, numerous issues are
emerging as barriers to increased food production. These include
changes in crop growing conditions caused by climate change,
increased droughts and flooding, and soil erosion. Looking
specifically at Japan, there are a mountain of social issues such as
the declining population of farmers, the shortage of successors,
and the increase in fields and rice paddies that have beenabandoned and are no longer cultivated. A sustainable foodproduction system requires new technologies and solutions that
improve agricultural production, automate and reduce the labor
required for the work, and reduce the environmental footprint. Also,
to resolve the social issues, these innovations must be put into
practical use and be widely accessible.

© 2023 Sumitomo Corporation

53

What&How
Developing new businesses from a medium- to longterm perspective with the agribusiness as the focusof the next-generation growth strategy
Since launching imports and exports of crop protection products andfertilizers approximately 70 years ago, Sumitomo Corporation has
promoted businesses that contribute to the sustainable development ofagriculture all over the world and the stable supply of food. This includes
manufacturing and distributing such products and global developmentof the agricultural input & service business, including the sales ofagricultural equipment. Through these long-established businesses, wehave built a global sales network and value chain that covers the major
agricultural regions of the world. At the same time, we have gained theability to address the speci c needs and challenges of our customers,
the producers in each region, through our direct sales system allowing
immediate access to them. These are some of the major strengths of
our agribusiness.
As agriculture and food production are gaining greater attention as
challenges related to human sustainability and food security, Sumitomo
Corporation has positioned its agribusiness as one of the nextgeneration growth elds in its medium-term management plan SHIFT
2023. In the Agribusiness Strategic Business Unit (SBU), the plan is to
grow after-tax pro t (excluding one-off pro ts) from ¥16.5 billion, where
it is now, to more than ¥40.0 billion by FY2030.
Based on this plan, the Agri-Innovation Department is working todevelop smart farming, which aims for highly e cient foodproduction utilizing information and communications technology(ICT); clean farming, which pursues food production with a small
environmental footprint; and next-generation food production, whichleverages genome and culture technologies.
© 2023 Sumitomo Corporation

54

Pursuing the practical application of sustainable next-generation agriculture utilizing ICT, biotechnology,
environmentally friendly technologies, and more
Smart farming is a business for maximizing yield, improving quality, andautomating and streamlining agricultural work. This involves utilizing
cutting-edge information technology such as IoT, ICT, and AI analysis toaggregate and analyze various agricultural information, including
operational data from agricultural equipment, farming records, and soil andweather data, and growth analysis based on satellite and aerial images. We
are also focusing on the contract farming business to promote theseadvanced agricultural technologies and solutions. As part of this, we haveinvested in Nileworks Inc., a company that develops and sells automateddrones for agricultural use in Japan, as well as AI services which provide
growth and disease diagnosis based on image analysis. In the domains
where we are looking into new businesses, we are working to spread
precision agriculture utilizing automation technology and to develop
support services for emerging countries and small farmers, such as
analysis and software subscription services and mobile payment services
for contract farming and agricultural input distribution.

© 2023 Sumitomo Corporation

Regarding clean farming, the focus is placed on regenerative agriculture,
where crops are cultivated while storing CO2 in the ground by increasingorganic matter in the soil to preserve and improve farmland andecosystems, thereby reducing the greenhouse gas emissions fromagriculture. We also aim to achieve sustainable business by trading thecarbon credits generated. In addition, to reduce greenhouse gas emissions
from livestock and dairy farming, we are putting effort into developing
businesses using feed additives that are effective in reducing methane gas
contained in cattle belches. Another example of our projects includes
developing insect-derived proteins as alternative proteins for livestock andaquaculture feed as well as pet food.
Next-generation food production is an initiative to build a circular foodproduction system using next-generation technologies to support plentiful
diets. Specifically, we seek to develop highly functional agricultural productvarieties and bio-agricultural chemicals using genome editing technology, toput edible oils and fuel generated from algae to practical use, and todevelop and produce Cell-based meat and Plant-based meat.

55

Pursuing synergy not only through collaboration withthe existing agribusiness but also with Sumitomo
Corporation's wide range of other businesses
Progress varies depending on the project, but our policy is to set
milestones for each project and steadily achieve them. Even for
projects that have already shown results through proof of concept,
there is a possibility that cost could become a major challenge
when it comes to actual commercialization. As such, forbusinesses with high entry costs, such as for machineries andequipment, we aim to build a business model that can be widelyused by small and medium-scale producers who have difficultywhen it comes to the initial investment. Offering subscription
services is one of the ideas.
Furthermore, when developing new businesses, we collaborate not
Sumit
Sumitomo
omo Corporation
Corporation employ
employees pictur
pictureded with local partners
partners and farmers in India
working ttowar
oward
oward sustainable agriculture
agriculture

only with existing businesses in the Agribusiness SBU but also withother SBUs and internal and cross-organizational teams, such as
the Green Chemical Business Development Department and theEnergy Innovation Initiative (EII),along with regional bases andgroup companies. We believe that being able to contribute to therealization of sustainable next-generation agriculture and foodproduction systems while pursuing synergy with various businesses
within the company is a unique strength of Sumitomo Corporation.

© 2023 Sumitomo Corporation

56

Going forward
Sharing a vision with our partners and solving
challenges one by one

Developing a business model capable of turning
reduced environmental impact in agriculture into profit

In the smart farming project, it is extremely important to have a collaborative
relationship with many partners. This includes not only manufacturers ofequipment, such as farm machines and drones, and IT vendors but also theagricultural producers who are the users, the food processing companies who
are the consumers of the crops, and distributors. It can take six months to morethan a year for proof of concept at farms to yield results. Therefore, I believe it is
crucial that we develop businesses with partners who share the same sense ofurgency to make agriculture more sustainable from a long-term perspective andensure that projects do not come to a halt during the experimentation phase. I go
about my work with the hope that Sumitomo Corporation can play a role inhelping to achieve this. Furthermore, we have offices not only in Japan but also
in various parts of the world, including Asia, Africa, Europe, and South America.
In those locations, we have people who are passionate about contributing to thedevelopment of agriculture and society in their respective countries. I hope tocreate new businesses that will support the next generation of agriculture andfood production together with these colleagues.

The mission of the Agri-Innovation Department is “Innovation for the Earth.” I
am in charge of clean farming, and am convinced that it is an essential initiative
for the future of agriculture and a business of great social significance.
However, because reducing the environmental impact of agriculture does not
immediately translate into profit for the producers under the current
circumstances, I feel that it is crucial to find a balance between reducing
environmental impact and making it successful as a business. For that reason,
we are committed to establishing a business model to monetize clean farming
by such means as introducing mechanisms to convert environmental value into
economic value, including carbon credit generation, and pursuing cost
reductions. Moreover, as individual commercialization by each producer is notefficient, my hope is to coordinate businesses by collaborating with various
industries and regions, working together to generate greater greenhouse gas
reduction effects and bring about a social impact.

Please refer to the Integrated Report 2023 (page 14) for the details of Agribusiness.
© 2023 Sumitomo Corporation

57

Key Social Issue

Quality education
Aiming to “contribute to quality education”
as the basis for resolving all social issues

Long-term goal: Contribute to quality education

Medium-term goals
Provide quality and equal learning opportunities through 100SEED* activities
Quantitatively expand the scope of learning opportunities.
100% satisfaction of beneficiaries.
Continue to have at least 5% of all employees participate annually (scope is Sumitomo Corporation, regional organizations and group companies).
*Social contribution activity program with employee participation at the Sumitomo Corporation Group© 2023 Sumitomo Corporation

58

Interview

Key Social Issue | Quality education

Social contribution activity program 100SEED
Quality education for all～Diverse educational support by Sumitomo Corporation Thailand～
100SEED is a social contribution activity program aimed at solving educational challenges facing each region around the world.
We interviewed members of Sumitomo Corporation Thailand, which promotes 3 projects, BUTTON UP, POWER UP, and LIGHT UP, to provide diverse educational
support.

Interviewees
Ms. Kanitha Thiansing (left)
SCTL* 100SEED Committee Advisor (FY2021 - FY2022)

Ms. Pallapa Wartcheeranon (center)
SCTL 100SEED Committee Advisor (FY2021 - FY2022)

Ms. Chalida Yodkansee(right)
SCTL 100SEED member and Volunteer* Sumitomo Corporation Thailand© 2023 Sumitomo Corporation

59

Why
The reason we work on these projects
Educational Challenges in Thailand
There are two major educational issues in Thailand: First, thegovernment's educational support is concentrated in large urban
schools, while small schools lack infrastructure and teachingmaterials, resulting in an educational disparity. Second, the content
of classes is not linked to real life and society, and students areconcerned what they have learned will be applicable in the realworld. As a result, the performance of students in Thailand is still
lower than the global average.
To address these issues, Sumitomo Corporation Thailand (SCTL)
has established the 100SEED Committee, which has launched threeprojects. We are also working closely with our partners tounderstand the local needs.

© 2023 Sumitomo Corporation

60

What&How
3 projects to improve education from various perspectives
We are engaged in the 3 projects to improve education from broad
perspectives: improving the educational environment in schools,
providing university students with essential skills to become quality
members of society, and developing teachers‘ teaching skills.
Through these activities, we support more than 2,000 students andteachers annually, and we believe that these projects contribute to
the development of society. The LIGHT UP project, which aims tocultivate teachers' skills, plays a particularly significant role as the
program enables their ability to mentor more students each year.

BUTTON UP
Aims to improve the learning environment by providing equipment
to local elementary schools.

POWER UP
Offers seminars and workshops for second through forth year
university students to improve their understanding of business andbridge the gap between student life and working life after graduation.

LIGHT UP
Provides teachers with teaching methods to help children develop
communication, collaboration, and critical thinking skills that suit
21st century skills.
© 2023 Sumitomo Corporation

61

Going forward
Expanding our activities to areas in need of educational support
Each of the 3 projects has its own wish and origin: BUTTON UP is to properly button up thefirst button (i.e., to improve the educational environment for primary schools), so they could
smoothly button the rest of the buttons (i.e., the educational process thereafter will run
successfully). POWER UP is to provide university students with skills, knowledge, mindset, andbetter understanding of real working life to empower them to become the seeds of the future.
And through the LIGHT UP program, we want to focus on training teachers who light up thefuture of students.
We will continue to engage in these 100SEED activities and educational development
initiatives. If possible, we would like to expand our activities to other provinces where support
is especially needed to improve educational disparities. We also hope to expand the scope ofstudents so that we can reach more students and schools to have greater impact to society.
© 2023 Sumitomo Corporation

62

We are engaged in our activities with a sense of social
significance and pride
We believe that Sumitomo Corporation and Sumitomo Corporation Thailand are part ofthe local community. Therefore, Sumitomo Corporation Thailand is engaged in theactivities with a sense of pride that it is playing a key role in fostering the next generation
who will later become part of our company and business partners and contribute to thedevelopment of the country.
The activities have been enthusiastically supported and endorsed by many school
principals and teachers, and after 2 years of activities, our programs have become wellknown in Ang Thong province, which is the focus area of LIGHT UP and BUTTON UP.
POWER UP was introduced in the universities annual meeting held by the Ministry ofHigher Education, Science, Research and Innovation, as a meaningful and effective
program for university students preparing to become working professionals. It has showna greater success than we expected.

Seeing actual positive impact on society
By participating in these programs, I am proud to be a part of an organization that actively
contributes to the development of society, especially in the field of education in Thailand.
Working with various departments and other companies to identify and analyze
educational issues has been a great opportunity to learn and improve my critical thinking,analytical skills, creativity, and teamwork management. I also believe that these acquired
skills can be applied to my work and help me grow and develop as a person. I also feelthat through this activity, I am more motivated, satisfied, and engaged in my work because
I can see how my work can have a positive impact on society.
© 2023 Sumitomo Corporation

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Messages from participants
A student who participated in BUTTON UP
I'm thankful that members from SCTL came anddid many things for the school, especially
improving things that were lost or broken andmaking them better. Thank you.
A teacher who participated in LIGHT UPThis is a very good program because I get tolearn new teaching techniques. My students
look forward to seeing what I will bring to thenext class.

© 2023 Sumitomo Corporation

A three-day training program for teachers as part of the LIGHT UP project64

Interview

Key Social Issue | Quality education

TOMODACHI Sumitomo Corporation
Scholarship Program for development of thenext generation of global leaders
Supporting students wishing to study abroad in the United States through scholarships and humanresources exchange
Sumitomo Corporation launched the TOMODACHI Sumitomo Corporation Scholarship Program in 2014 to develop the next generation of leaders who will be active on
the global stage.
We talked to Ms. Nana Watanobe, a program coordinator who supports operations, and Dr. Natsumi Komatsu, an alumnus of the program, and asked them what kindsof experience and knowledge participants gain through the program and what type of mindset they think students hoping to study abroad should have.

Interviewees
Ms. Nana Watanobe

Dr. Natsumi Komatsu

U.S.-Japan Council (Japan)

Scholarship student of TOMODACHI Alumni

After working for a food company, she participated in the

She participated in the TOMODACHI Sumitomo Corporation

Japan Outreach Initiative (JOI) program and was sent to

Scholarship Program in 2015 while enrolled in the Department

North Carolina in the United States for two years as aof Applied Physics and Physico-Informatics at Keio University's
Faculty of Science and Technology. After receiving her BS

coordinator for Japan-U.S. exchange. Since 2020, she has
been involved in operations of the TOMODACHI Initiative
as program coordinator.
© 2023 Sumitomo Corporation

degree in 2017, she joined a PhD program at Rice University in
the United States and earned her doctorate in the Electrical andComputer Engineering Department in 2022. She is currently a
postdoctoral scholar at the University of California, Berkeley.

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Why
Launching activities after resonating with the missionof the TOMODACHI Initiative
The TOMODACHI Initiative is a public-private partnership that wasborn out of support for reconstruction efforts in Japan after theGreat East Japan Earthquake of 2011. Led by the U.S.-Japan
Council and the U.S. Embassy in Tokyo, the initiative aims todevelop the next generation of Japanese and American leaders
through educational, cultural exchange, and leadership programs.
We began participating in 2013, resonating with the mission of the
TOMODACHI Initiative. The following year, in 2014, we launched the
TOMODACHI Sumitomo Corporation Scholarship Program toprovide aspiring students with the opportunity to take on thechallenge of studying abroad by subsidizing the travel and living
expenses of exchange students.

© 2023 Sumitomo Corporation

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What&How
Sumitomo Corporation's unique support for study abroad
through scholarships and human resources exchange
The TOMODACHI Sumitomo Corporation Scholarship Program isdesigned to further deepen the relationship between Japan and theUnited States and develop the next generation of leaders who willserve as a bridge between the two nations.
Sumitomo Corporation not only provides Japanese university
students studying in the United States with travel and living
expenses for a year but also collaborates with Sumitomo
Corporation of Americas to offer training opportunities on the East
Coast of the United States. Through these opportunities, we seek tooffer a unique leader development program by providing them withexperiences different from what they have at university. We also
select mentors from among our employees, supporting thestudents so they can have a fulfilling study abroad experience.

Ms. Komatsu touring Capitol HillMoreover, we provide ongoing opportunities for exchange after
students have completed their studies, including the TOMODACHI
Alumni Leadership Program run by the TOMODACHI Initiative.
Over the nine years from FY2014 to FY2022, we have supported a
total of 67 students, and this year marks the 10th year of the
program. We are confident that this program strongly promotes
student growth and contributes to the development of future
leaders who will be active on the global stage.

Supported

67 students

over 9 years(FY2014–FY2022)© 2023 Sumitomo Corporation

Interview with SCOA management during East Coast training (January 2023)

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Fulfillment of running TOMODACHI Sumitomo Corporation Scholarship Program
Being greatly inspired by students as a coordinator
As someone involved in running the program, I strongly feel that it provides a wide range of support
beyond scholarship assistance. This frequently comes up in comments from the students themselves.
In my role as a point of contact, I quite often get feedback such as “I had experiences during mytraining on the East Coast that I couldn't have had in my student life” and “I was able to talk with mymentor about my future and resolve my concerns.” For students, it seems to be an opportunity to
deepen their thinking about their goals and career paths.
Based on these reports from students, I'd say if you have 10 people, you'll have 10 different learning
experiences and epiphanies. Many students show amazing growth in a short period of time, and I
myself have been greatly inspired by them. This is one of the most rewarding aspects of my work on
the program.
The COVID-19 pandemic is subsiding, so I hope we can increase the number of opportunities for faceto-face exchange, including between alumni of the program.

Encouraging exposure to different values and broadening of horizons
through study abroad
I'm from a small town, and when I was a child I thought that my environment was representative of allsociety. However, when I went to university, I was exposed to different values, and my experienceoverseas taught me that there were options out there that I had never even considered. The experiencehas become a great asset for me, and I hope that many people will seize the opportunity to study
abroad because I believe that putting yourself in a new environment can greatly expand yourpossibilities in life.
We will continue to cooperate with Sumitomo Corporation, which has many overseas connections andresources, to provide a meaningful scholarship program, so I hope people will take advantage of it.
© 2023 Sumitomo Corporation

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Lessons Learned from Participating in TOMODACHI Sumitomo Corporation Scholarship Program
Three encounters during the program now a great personal asset
The first thing I gained from participating in the program was meeting fellow students that received
the scholarship. During the East Coast training in the United States, I met a fellow student with theremarkable ambition of becoming an astronaut. I also got to have many late night discussion withwonderful peers. These experiences in the program were a significant turning point in my thinking
about my own future.
In addition, I had the opportunity to meet various people during my study abroad, including
Sumitomo Corporation employees, entrepreneurs, and people from NGOs and NPOs. This helped merealize there was a wider range of options available to me than I had imagined when I was anundergraduate student. I feel that these experiences have led to my current choice to pursue adoctoral degree at a U.S. university and work as a researcher.
Actually, coming to the United States and meeting people with diverse backgrounds likewise had asignificant impact on me. It gave me the opportunity to reassess my own unconscious biases formeasuring the world.
Through these encounters, my dream for the future is now becoming a university faculty member
with my own laboratory, something I had never imagined I would do before studying abroad. I hopeto help students reach their full potential regardless of their background or gender.

Study abroad a great opportunity to acquire the ability to think and act
proactively
Participating in this program and receiving an international education exposed me to diverse values
and allowed me to see society from a different perspective than before. I was also able to develop a
proactive approach to my work by thinking about why I was doing what I was doing, rather than justdoing it because I was told to do it. This has greatly benefited me in my current job. I also found it
extremely informative to understand what social goals people at Sumitomo Corporation pursue
through their work. I truly feel that studying abroad provides an opportunity to gain a newperspective on things, so I encourage you to go for it if you have even the slightest interest in it.
© 2023 Sumitomo Corporation

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Sumitomo Corporation of Americas
Message from Vice President and Assistant Chief Strategy Officer
Working with the SC Sustainability team on this program has been a great honor for me. It has
been one of the most rewarding CSR programs that I have had the opportunity to work on in my 30
years with SCOA. It was the first time for SCOA and SC to collaborate together from the beginning,and design a CSR program that requires cross border teamwork between Japan and U.S.
I am proud of the success stories among the alumni, because I know SCOA's interaction with themhad impact. There are young entrepreneurs, college professors, government and non-government
officials, and business professionals.
I realize their U.S. studies influenced their academic futures, but I think their visit with SCOA
inspired them to consider their future from a much broader perspective. For this reason we try toprovide an action packed week with experiences that introduces them to a variety of culture andpeoples, outside of their comfort zones. We designed an agenda that exposes the students toonce-in-lifetime opportunities and allows them to build lasting relationships with people they meet,while having fun at the same time.
It's been rewarding to witness the transformation of these students over the 10 years. I am
fortunate to have met every student that has gone through the program so far, at all different
stages. I have judged their winning essays, attended the SC awards ceremony in Japan, hosted
them during their one week visit, and met them upon their return to Japan. It amazes me to see
how they change and gain greater self-confidence, and a sense of global curiosity. I know someeven changed career choices due to their experience in the U.S.
The mission of the SC TOMODACHI Scholarship program was originally to inspire young Japanese
students to become leaders, and I can say that it has succeeded. We should be proud of the many
lives we have enriched through this program.
Sumitomo Corporation of Americas(SCOA)
Vice President and Assistant Chief Strategy Officer

Jewelle Yamada© 2023 Sumitomo Corporation70