KH Neochem
Sustainable Procurement Guidelines

March 1, 2023
KH Neochem Co., Ltd.

1

Introduction
Based on our Corporate Mission of “Realizing a brighter tomorrow for society through the power ofchemistry,” we have been contributing to society by taking advantage of the know-how we havecultivated as a chemical materials manufacturer to provide premium products to various fields. In
addition, the 4th Medium-Term Business Plan, which began in 2022, sets forth as our basic policy
the pursuit of both “contributing to the realization of a sustainable society by providing solutions to
global environmental and social issues through our business operations” and “sustainably improving
our own corporate value by providing value to society and our stakeholders;” in other words, thepromotion of sustainable management. To this end, we have set forth Seven Promises to ourstakeholders. Of these, we have identified the key issues, or “materialities,” that have the greatest
impact on stakeholders and the Company.

We conduct our procurement activities in accordance with our Procurement Policy, keeping in mind
item 6 of the Seven Promises, “We will promote responsible supply chain management.” However,in recent years, issues that need to be considered have increased and become more complex thanever before, including the environment, human rights and labor, safety and health, and fair businesspractices. We believe that it will be difficult for us alone to achieve procurement that takes into
account the needs of society, that is, sustainable procurement, and that the entire supply chain mustcome together and work as a whole to address these issues.
It was from this perspective that we decided to compile the items that us and our business partners
2need to work on together and establish the Sustainable Procurement Guidelines.
We encourage our business partners to read and understand these guidelines, and proceed withinitiatives in accordance with what we’ve set forth. Furthermore, we consider these guidelines to be
an important matter with regard to our business transactions and would like to regularly check thestatus of initiatives, so we appreciate your cooperation with this as well.
In establishing these guidelines, we have referred to the following standards. We will continue torevise these guidelines in response to revisions to standards and changes in social conditions.
・ JEITA: Responsible Business Conduct Guidelines
・ United Nations: International Bill of Human Rights (Universal Declaration of Human Rights
and Optional Protocol to the International Covenant on Economic, Social and Cultural Rights
and on Civil and Political Rights)
・ International Labour Organization (ILO): Declaration on Fundamental Principles and Rights at
Work
・ United Nations: Guiding Principles on Business and Human Rights
・ ISO 20400: Sustainable procurement - Guidance・ United Nations Global Compact
・ KH Neochem Co., Ltd.

Principles of Corporate Behavior(https://www.khneochem.co.jp/en/company/philosophy/principles/)“Compliance Code”, “Information Security Policy”, “Privacy Policy”,“Bribery Prevention Policy”, “Intellectual Property Policy”, “Environmental Security Policy”,“Quality Assurance Policy”, “Respect for Human Rights Policy”

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KH Neochem Basic Procurement Policy (“Procurement Policy”)
In line with the Compliance Code, our Group's principles of behaviors, KH Neochem Co., Ltd.
(“Company”) has established the Procurement Policy as one of the guiding principles for our corporate
activities. With the understanding and cooperation of our suppliers, The Company will conduct
procurement activities taking into accounts corporate social responsibility.
1. Applicable Scope
This Policy provides the guiding principles on our procurement activities, with which the Company,
including directors, officers, employees, contract employees, and temporary workers ("AllExecutives and Employees") will comply when procuring from outside the Company raw materials,
production facilities, IT, logistics, and other services necessary for our corporate activities.
2. Guiding Principles
The Company will engage in responsible procurement activities based on the following principles:
Ensuring Fairness, Equitability, and Transparency

The Company will conduct fair, equitable, and highly transparent procurement activities.



The Company will provide fair opportunities for entry and introduce the principle ofcompetition in the selection of suppliers. Moreover, the Company will objectively andcomprehensively evaluate and determine a supplier based on technical capabilities andcorporate philosophy (management policies, considerations to human rights, labor, safety andhealth, fair trade, ethics, etc.) in addition to quality, cost competitiveness, and delivery time.

Compliance and Confidentiality


The Company will comply with social norms, laws and regulations related to procurement
activities and the spirit thereof, and our internal regulations, as well as act sincerely and withhigh ethical standards.



The Company will not involve personal interests with any supplier, nor demand undue or
improper advantages, nor select a supplier arbitrarily. The Company will refuse to have any
relationship with antisocial forces.



The Company will maintain confidentiality of and appropriately manage important information
provided by our suppliers.

Consideration for the Environment and Safety


The Company will strive to prevent pollution and reduce our environmental impact bypracticing procurement that considers the global environment.



The Company will aim to achieve zero-accidents and zero-disasters in procurement activities
4such as various construction work and transportation of our products by making intensive andcontinuous efforts to maintain and improve occupational health and safety.
Building Partnerships
The Company will strive to build mutual cooperation and relationships of trust with our
suppliers and aim to contribute to achieve mutual business development.

3. Management System
The Company will establish and continue to improve related rules, standards, and guidelines inconformity with this Policy, thoroughly comply with these rules, and ensure appropriate procurement
activities through management and supervision by our executives in charge of procurement. In
addition, the Company will continuously review the rules, organizations, and systems in response to
future changes in social conditions, business environment, and so forth.
4. Establishment of Regulations related to Procurement


The Company will educate All Executives and Employees and strive to have this Policy
thoroughly implemented and complied.



The Company will strive to make our suppliers more understanding of this Policy, throughaction such as informing and explaining this Policy as required.

5Request for Understanding and Commitment from Business Partners
In order to build a sustainable supply chain, KH Neochem is taking the following initiatives. We ask
for your understanding and commitment to this matter, together with our Procurement Policy andPrinciples of Corporate Behavior.

Table of Contents
1

Social Responsibility ........................................................................................................ 8
1.1

2

3

4

Promotion of social responsibility ........................................................................... 8

Fair Trade and Ethics ........................................................................................................ 8
2.1

Anti-corruption ..................................................................................................... 8

2.2

Prohibition of the improper giving and receiving of benefits ...................................... 8

2.3

Prohibition of acts restricting competition ................................................................ 8

2.4

Prohibition of abuse of a superior position ............................................................... 8

2.5

Severing of relations with antisocial forces............................................................... 8

2.6

Respecting intellectual property rights ..................................................................... 8

2.7

Development of a whistleblowing program .............................................................. 8

2.8

Prohibition of insider trading .................................................................................. 9

2.9

Responsible mineral procurement............................................................................ 9

Human Rights and Labor .................................................................................................. 9
3.1

Prohibition of forced labor...................................................................................... 9

3.2

Prohibition of child labor, considerations for young workers ...................................... 9

3.3

Considerations for working hours............................................................................ 9

3.4

Adequate wages and benefits .................................................................................. 9

3.5

Prohibition of inhumane treatment .......................................................................... 9

3.6

Prohibition of discrimination, respect for diversity .................................................. 10

3.7

Freedom of association, respect for collective bargaining rights................................ 10

Environmental Conservation ........................................................................................... 10
4.1

Environmental licensing and reporting ................................................................... 10

4.2

Reduction and effective use of resources and energy ............................................... 10

4.3

Reduction of greenhouse gas emissions ................................................................. 10

4.4

Minimizing negative environmental impacts .......................................................... 10

4.5

Reduction of industrial waste ................................................................................ 11

4.6

Appropriate management of chemicals .................................................................. 11

4.7Management of chemical substances in products .................................................... 11

4.8

Initiatives to conserve biodiversity ........................................................................ 11

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4.9

Developing technologies and products that contribute to the preservation of the global

environment ...................................................................................................................... 11
4.10
5

6

7

8

Safety and Health ........................................................................................................... 11
5.1

Ensuring occupational safety ................................................................................ 11

5.2

Emergency preparedness ...................................................................................... 12

5.3

Responding to work-related accidents and illnesses................................................. 12

5.4

Ensuring industrial hygiene .................................................................................. 12

5.5

Ensuring health and safety with regard to facilities.................................................. 12

5.6

Worker health care............................................................................................... 12

Quality and Safety .......................................................................................................... 12
6.1

Ensuring the safety of products and services ........................................................... 12

6.2

Provision of accurate product and service information ............................................. 12

6.3

Establishment and operation of a quality management system .................................. 13

Information Security....................................................................................................... 13
7.1

Defense against cyberattacks ................................................................................ 13

7.2

Protection of confidential and personal information ................................................ 13

Social Contributions ....................................................................................................... 13
8.1

9

Establishment and operation of an environmental management system ..................... 11

Participation in social contribution activities .......................................................... 13

Other Management Systems ............................................................................................ 13
9.1

Development of a business continuity plan ............................................................. 13

9.2

Appropriate management and disclosure of information .......................................... 13

9.3

Promotion of supply chain management................................................................. 137

1

Social Responsibility
1.1

Promotion of social responsibility
We shall strive to fulfill corporate social responsibility and establish a promotion system
to realize this, including by establishing corporate policies, basic policies, and basic
behaviors.

2

Fair Trade and Ethics
2.1

Anti-corruption
We shall maintain sound and normal relations with governments and administrative
bodies, both domestic and foreign, and refrain from bribery and illegal politicalcontributions.

2.2

Prohibition of the improper giving and receiving of benefits
We shall not give or receive improper benefits regarding business partners or otherstakeholders.

2.3

Prohibition of acts restricting competition
We shall comply with the competition laws of the countries and regions in which we
conduct business, and shall refrain from conduct that impedes fair, transparent, and freecompetition.

2.4

Prohibition of abuse of a superior position
We shall comply with laws and regulations concerning the abuse of a superior position in
the countries and regions in which we conduct business, and shall not engage in conductthat places business partners at a disadvantage by abusing a superior position.

2.5

Severing of relations with antisocial forces
We shall have no relationship of any kind with antisocial groups or persons who pose athreat to the order or security of a healthy society. We shall also take a firm stand against
antisocial forces and shall not respond to any unreasonable or unjust demands.

2.6

Respecting intellectual property rights
We shall not infringe on the intellectual property rights of third parties.

2.7

Development of a whistleblowing program
We shall establish a whistleblowing program to receive reports of misconduct from both8

inside and outside the Company in order to prevent and detect any wrongdoing at an earlystage. In addition, informants shall be protected from unfair treatment such as retaliation.
2.8

Prohibition of insider trading
We shall not engage in insider trading in which shares, etc., are bought or sold based on
undisclosed information.

2.9

Responsible mineral procurement
We shall promote responsible mineral procurement throughout the supply chain,researching the use of conflict minerals and promptly taking corrective action if conflictminerals are found to be used.

3

Human Rights and Labor
3.1

Prohibition of forced labor
All employees shall be employed of their own free will and we shall eliminate any formof forced labor.

3.2

Prohibition of child labor, considerations for young workers
We shall not employ children below the minimum working age and shall not allow
young workers to work in a way that undermines their development.

3.3

Considerations for working hours
We shall appropriately manage employees’ working hours, holidays, and vacations inorder to comply with the working hours stipulated by the laws and regulations of thecountries and regions in which we conduct business. Efforts shall be made to expand
systems for work-life balance and create a workplace climate that curbs long working
hours.

3.4

Adequate wages and benefits
We shall pay employees at least the legal minimum wage and avoid unfair wage
reductions.

3.5

Prohibition of inhumane treatment
We shall respect the human rights of employees and prohibit inhumane treatment andactions that may be considered as such, including all forms of harassment, whether
mental or physical, language and behavior that is discriminatory against others, language
9and behavior that is threatening or offensive to others, etc.
3.6

Prohibition of discrimination, respect for diversity
We shall strive to eliminate discrimination in recruiting and hiring on grounds ofnationality, race, gender, gender identity, disability, religious or political beliefs, andstrive to achieve fairness in terms of equal opportunity, treatment, and opportunities for
personnel development and career advancement. We shall also promote the creation of awork environment and organizational culture that respects diversity and allows
employees to recognize each other, play an active role, and grow together.

3.7

Freedom of association, respect for collective bargaining rights
In accordance with the laws and regulations of the countries and regions in which we
conduct business, we shall respect the right of employees to organize as a means ofrealizing labor-management consultations regarding working environment, wage levels,
etc., and establish a forum for dialogue and consultation with employees or theirrepresentatives.

4

Environmental Conservation
4.1

Environmental licensing and reportingIn accordance with the laws and regulations of the countries and regions in which we
conduct business, we shall acquire the necessary environmental permits and approvals
from the appropriate authorities and submit the necessary management reports.

4.2

Reduction and effective use of resources and energy
We shall set voluntary goals to conserve resources and energy throughout the lifecycle ofproducts and services, and make effective use of resources and energy on an ongoingbasis.

4.3

Reduction of greenhouse gas emissions
We shall set voluntary targets to reduce greenhouse gas emissions throughout the
lifecycle of products and services and aim to continuously reduce emissions.

4.4

Minimizing negative environmental impacts
We shall strive to minimize negative impacts on the environment throughout the
lifecycle of products and services by complying with the air, water, and soil laws andregulations of the countries and regions in which we conduct business, and, when10

necessary, implementing voluntary standards for further continuous improvement.
4.5

Reduction of industrial waste
We shall set voluntary targets to reduce industrial waste throughout the lifecycle ofproducts and services and aim for continuous reduction.

4.6

Appropriate management of chemicals
We shall appropriately manage chemical substances as designated by the laws andregulations of the countries and regions in which we conduct business in accordancewith laws and regulations in the manufacturing process.

4.7

Management of chemical substances in products
We shall comply with applicable laws and regulations regarding the prohibition andrestriction of the use of certain substances in our products for the countries and regionsin which we conduct business.

4.8

Initiatives to conserve biodiversity
We shall evaluate the impact of business activities on biodiversity, reduce negative
impacts, and work to conserve biodiversity.

4.9

Developing technologies and products that contribute to the preservation of the
global environment
We shall orient ourselves toward developing technologies and products that directly or
indirectly contribute to the preservation of the global environment.

4.10 Establishment and operation of an environmental management system
We shall build and operate an environmental management system in order to promote
environmental activities.

5

Safety and Health
5.1

Ensuring occupational safety
We shall ensure safety through appropriate design, technology, and control measures,such as by assessing risks to workplace safety and implementing safety measures formachinery and equipment used in the Company.

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5.2

Emergency preparedness
We shall prepare emergency response measures based in anticipation of possible
disasters, accidents, etc., and make them known throughout the workplace througheducation and training.

5.3

Responding to work-related accidents and illnesses
We shall strive to understand the situation regarding work-related accidents and diseases
and take appropriate measures.

5.4

Ensuring industrial hygiene
In the workplace, we shall have a strong understanding of the situations in which
employees come into contact with chemicals, organisms, noise, offensive odors, etc.,
which may have harmful effects on the human body. We shall consider all possible
methods, including improvement of equipment, provision of protective equipment,
establishment of procedures, education in the workplace, etc., and take appropriate
measures.

5.5

Ensuring health and safety with regard to facilities
We shall ensure proper health and safety with regard to facilities (dormitories, cafeterias,
toilets, etc.) provided for the lives of employees.

5.6Worker health care
We shall provide all employees with appropriate health care.

6

Quality and Safety
6.1

Ensuring the safety of products and services
We shall provide products and services that meet the safety standards set forth in thelaws and regulations of the countries and regions in which we conduct business, as wellas the quality standards required in advance. When designing products, we shall ensuresufficient product safety and take into consideration our responsibility as the
manufacturer when selling.

6.2

Provision of accurate product and service information
We shall provide customers and consumers with accurate information regarding our
products and services. In the event of an accident or quality defect in a product orservice, efforts shall be made to determine the cause, resolve it, and prevent its
12

recurrence.
6.3

Establishment and operation of a quality management system
We shall build and operate a quality management system that promotes quality assurance
activities.

7

Information Security
7.1

Defense against cyberattacks
We shall take defensive measures against threats on computer networks and manage
them so that no harm befalls the Company or other companies.

7.2

Protection of confidential and personal information
We shall appropriately manage the confidential and personal information received
through business activities.

8

Social Contributions
8.1

Participation in social contribution activities
We shall actively participate in activities that support society, education, and culture incooperation with the government and local communities for the development of society.

9

Other Management Systems
9.1

Development of a business continuity plan
We shall develop a business continuity plan (establishing a recovery period, developing
an emergency contact network, manufacturing at multiple sites, using multiple sources
for parts and materials) in order to continue business operations or quickly recover said
operations while mitigating the damage for our business assets in the event of an
emergency such as a natural disaster, fire, or terrorist attack.

9.2

Appropriate management and disclosure of information
Regardless of whether disclosure is required by laws or regulations, we shall properly
manage information such as the details of our business activities, financial conditions,performance, and risk to stakeholders, and provide and disclose such information in atimely and appropriate manner.

9.3

Promotion of supply chain management
In addition to making the contents of these guidelines known throughout the Company,
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we shall also make them known to business partners to gain their understanding. We
shall also regularly evaluate our business partners’ practice of the requirements of theseguidelines.

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