ESG Management Undertaken by the Sumitomo Rubber Group

Roundtable Talk on Diversity & Inclusion (D&I)

Also, the Sumitomo Rubber Group has periodically conductedin-house questionnaires on organizational culture since 2020. Although
the Group had conducted quarterly questionnaires at the beginning of
the process of reform in order to assess in detail the status of changes incorporate culture, the frequency of these questionnaires has now
decreased to twice a year, based on a judgment that this frequency isappropriate in light of the burden placed on respondents who fill out
questionnaires. Thus far, we have seen overall improvement in the scores
given by employees. On the other hand, we have also identified divisions
that are contending with unique issues and entire job grades whose
members tend to give lower scores. Based on these and other insights,
we need to not only continue implementing improvement measures toaddress the overall workforce but also incorporate more in-detail measures to address individual employees. We also need to reflect these
insights in personnel transfer and otherwise take more specific action totransform our organizational culture.

Outcomes of the BTC Project and Issues to
Be Addressed

Mari Sonoda

Kiyoshi Ikawa

Asli M. Colpan

Outside Director

Executive Officer, Head of the
Human Resources & General Affairs HQ

Outside Audit &Supervisory Board Member

Human Capabilities Remain a Requisite Irrespective of
Changes of the Time
The Sumitomo Rubber Group has positioned “Our Philosophy,” a corporate philosophy structure established in 2020,
as a cornerstone for collective endeavors that consolidate the diverse capabilities of its employees and set them on thesame vector. Through these endeavors, we aim to embody our Purpose, “Through innovation we will create a future ofjoy and well-being for all.” Even before establishing this philosophy, we had launched the “Be the Change (BTC)”
Project in January 2020 to promote corporate culture reforms.
Here, we present the summary of a roundtable talk in which Kiyoshi Ikawa, an Executive Officer who has spearheaded the BTC Project, Outside Director Mari Sonoda and Outside Audit & Supervisory Board Member Asli M. Colpan
together address progress under the corporate culture reforms and ideals regarding what human capital in place at the
Sumitomo Rubber Group should look like. (The event was held on March 27, 2023)

Features of Sumitomo Rubber Group
Employees and Issues They Face
Sonoda If there is a defining personality trait among Sumitomo RubberGroup employees, it is sincerity. Also, individuals tasked with technological development and other endeavors display steadfast determination toachieve robust outcomes. I believe that they could be more active incommunicating their accomplishments to others. Also, I sometimes feelthat if the composition of their teams were a bit more diverse, they could
achieve even better results as they take on variety of challenges.
Being diverse means, of course, securing diversity in gender, as well as
incorporating foreign nationals. Also, important is diversity among
Japanese male employees. This employee group similarly needs to be
diverse in terms of ways of thinking and character.
Colpan As Ms. Sonoda has pointed out, I, too, consider securing
diversity a matter of extreme importance. The Sumitomo Rubber Groupnow engages in operations on a fairly global scale. Accordingly, I thinkoverseas and domestic employees should work together more often.
From the perspective of an outside officer, it is sometimes hard to see
whether foreign national managers operating overseas and the Head
Office in Japan are actually engaging in effective collaboration.
Ikawa With regard to the personal characteristics of employees, mostare quite diligent. They meet an extremely high standard in terms ofaccomplishing the missions assigned to them. On the other hand, there
are only a handful who display independent-minded “wandering samurai”
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necessary and discerning what is truly essential.
Also, many employees seem to believe that they must adhere to precedent and make incremental improvements by building on the present
status. Such an approach is what has led to the prevailing culture ofworking excessive overtime hours.
To rectify this situation, employees should be able to determine priorities
and decisively abolish non-essential tasks. We need to take a drastic
approach and break away from workstyles premised on overtime. I consider these workstyles to constitute a barrier that must be removed as theGroup strives for women’s empowerment in the context of promoting D&I.
In this regard, human skills are key to successful transition. These skills
include communication skills enabling frank exchanges of thoughts withpeers. The Sumitomo Rubber Group has an urgent need to secure individuals with human skills that transcend the scope of business skills.
However, our group has thus far been excessively focused on nurturing“left-brain” type skills. For example, our training programs have largely
emphasized problem-solving and logical thinking.
Although the matters I have just touched on are not necessarily relevant to the question, I think that the Sumitomo Rubber Group should
clearly announce its priorities when it comes to developing human skills
and nurturing individuals who can judge what is truly essential. This, I
believe, is the way our group should accelerate efforts to enhance theoverall capabilities of its human resources.
In terms of globalization, the Sumitomo Rubber Group has rapidly
enhanced its network of bases and expanded the size of its operations
over the past several years. Currently, our group is facing a shortage ofthe kind of human resources who can handle these expanded operations.

Ikawa The “SRI Way,” a component of “Our Philosophy,” clearly
defines the three tenets of “Being reliable and worthy of trust,” “Seeking
out challenge” and “Valuing one another.” Sumitomo Rubber Group
employees are expected to remain conscious of these tenets in thecourse of daily operations.
Of these, “Being reliable and worthy of trust” is a traditional corporatemindset inherited from the former Sumitomo Group. Therefore, I am notworried about the entrenchment of this tenet. Also, to realize the tenet of“Valuing one another,” we not only implement such basic initiatives as preventing harassment and advocating for respect for human rights but alsoutilize 360-degree feedback sessions focused on nurturing human skills. In
particular, senior managers, ranging from President to Executive Officers,
are provided executive coaching to enhance their management capabilities.
On the other hand, how to embody “Seeking out challenge” constitutes
the foremost issue. Efforts to foster a culture of seeking out challenges
have thus far been unsuccessful. There are two factors behind this situation. First, employees’ sense of psychological safety is less than robust.
Many employees are anxious about saying what they really think or afraidof failing in the course of duty. To address this situation, we have held
anti-bias seminars to address unconscious biases and otherwise implemented initiatives on multiple occasions to raise employee awarenessregarding the need to secure psychological safety in the workplace. In
this regard, I feel that these initiatives have begun to yield tangible effects.
However, we are also confronted by another deeply rooted issue arising from employees’ tendency toward maintaining status quo and staying
in their comfort zone. Many employees seem to be content with maintaining the status quo because doing so involves no penalty. I think that
this situation hinders them from seeking out challenges.
Of course, it is essential to provide employees with a sense of security
regarding employment and wages in exchange for their fulfillment of certain performance criteria. However, going forward, the Sumitomo RubberGroup needs to clarify a policy of granting greater rewards to employees
who demonstrate strong drives to attain personal growth and contribute toimprovement in corporate value. By doing so, our group should genuinely
become a workplace of choice for all employees. There must be mutual
relationship in which our group chooses and is chosen by employees.
The aforementioned questionnaires also revealed that the issue that
frustrates employees most is the vagueness of performance evaluations.
Although managers are expected to deliver clear-cut feedback to eachstaff member regarding their performance, we need to provide managers
lacking capabilities to do so with training to help enhance their skills or, if
necessary, consider replacing them with other human resources who arerobustly equipped for managerial positions.
Sonoda Needless to say, the commitment of top management isextremely important to enable a company to move forward and achievetransformation. President Yamamoto is currently communicating strong
messages to employees and otherwise launching various measures. For
the Sumitomo Rubber Group to accomplish reforms, the tireless endeavors of officers and employees are essential. The Group also needs to
update performance evaluation and other human resources systems byincorporating specific mechanisms designed to support such endeavors.
Moreover, it needs to clearly communicate signals to motivate the entire
workforce by, for example, identifying KPIs and setting challenging targets relative to such KPIs.

Colpan To supplement matters being discussed by Ms. Sonoda,
human capital is now becoming the subject of growing attention among
business communities. In step with this, the role of those heading up
human resources departments has become extremely important. In orderto facilitate the initiatives described above, the Sumitomo Rubber Groupneeds to develop a variety of human resources systems, for example, aframework for reducing overtime in exchange for requiring higher productivity. At the same time, it needs to pursue flexible workstyles via the useof flextime and other means. If the Group succeeds in these endeavors, itwould be able to create an environment that is more friendly to womenand other people with diverse attributes.
In addition, I believe that human capital management measures would
be more fruitful if the Sumitomo Rubber Group takes a cross-regional
approach to the management and allocation of all Group employees,
including those operating in countries abroad. In this light, I would like toknow about the status of progress in human resources exchanges
between domestic and overseas bases.
Ikawa Let me explain. Roughly speaking, overseas bases consist of
production bases and sales subsidiaries.
At overseas production bases, the execution of Head Office policies
and plans is initiated by Japanese expatriates. Local employees thenimplement specific measures in line with said policies and plans. Sales
subsidiaries, on the other hand, include both bases overseen by
Japanese expatriates and bases run solely by local employees.
Therefore, compared with production bases, sales subsidiaries are more
likely to confront difficulties in disseminating such important messages as
those related to Head Office policies or to be otherwise affected by communication problems. These are issues we need to tackle.
To date, the greater part of our focus has been on developing ourorganization in Japan rather than development in countries overseas. The
rationale contributing to this focus is attributable to results of the firstround of questionnaires on organizational culture. Specifically, we havefound that domestic employees scored the company much lower, while
those at overseas bases gave pretty much high score. While the results
gleaned via this round of questionnaires prompted us to launch the BTC
Project, we have thus decided to prioritize the improvement of organizational culture in place at domestic bases.
As suggested earlier, we also need to strive further to foster a sense ofunity among domestic and overseas bases. Currently, President
Yamamoto and I are touring domestic bases to brief employees on the
new Midterm Plan and facilitate a robust understanding of said plan among
them. Going forward, we will also engage with those at overseas bases via
the use of remote meetings to secure similarly robust communications.
Looking at the outcomes of the BTC Project, I personally feel that its
greatest success has been in helping senior managers develop a keenawareness of the need to enhance the quality of their execution of duties.
Sources of dividends to be paid to shareholders derive from the creationof good products and services. The success of these undertakings hinges
on employees. Accordingly, I believe, senior managers’ role is to empower
employees to work vibrantly and enable them to achieve high performance. Over past two years, we have been implementing initiatives toenhance the quality of our senior management. As a result, commitment
among senior managers to their missions is more solid than ever before.
Enhancing the quality of senior management leads to more robust corporate leadership. This, in turn, helps improve the accuracy of overall policies to be executed throughout our group, including management plans.

Entrenchment of D&I among the Workforce
Ikawa Similarly, strong leadership is important to the entrenchment of
D&I, as success ultimately depends on managers’ ability to accommodate the individual circumstances of their staff.
As part of D&I-related initiatives, we have striven to ensure that our
Vision of “Uniting our diverse strengths, growing together, driving andthriving on change,” which is a component of “Our Philosophy,” is sharedthroughout the workforce. This represents the distinctive uniqueness of
initiatives undertaken by our group.
These initiatives include a mentoring system in which seasoned
employees serve as mentors for younger female employees to assist
them in the resolution of issues associated with career development andother concerns to help them achieve personal growth. We are expanding
the scope of these and other activities focused on supporting thoseworking on the front lines. I also feel that the pace of initiatives to develop
an inclusive environment in which women can work with confidence has

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ESG Management Undertaken by the Sumitomo Rubber Group

Roundtable Talk on Diversity & Inclusion (D&I)

been accelerating. For example, operational methods at factory worksites
are currently being improved to enable female employees to work
comfortably, while female-specific welfare facilities are being developed.
These are the most visible changes in this area. I consider our group to
have made significant progress as these and other tangible activities continue to steadily move forward.
Colpan Topics Mr. Ikawa has just addressed pertain to inclusion in thecontext of securing a working environment that is friendly to women. In
this regard, although simply increasing the representation of women in
the workforce is a viable means to promote diversity, it is also important
to develop an environment that empowers women to work as successfully as men do.
The Sumitomo Rubber Group has identified a target of raising the ratioof female managers to 7% by 2025. However, I hope to see the Groupaim for a higher target.
In addition to raising the ratio of female managers, the Group needs toformulate specific targets regarding the number of female general managers and officers and develop a framework for systematically nurturing
female manager candidates so that they can one day become executives. Although the mentoring system is steadily taking root, there is stillmuch to do. I know that President Yamamoto and other top management leaders are quite passionate about promoting D&I, so I also expect
them to be strongly focused on achieving tangible results in this area.
In 2023, I launched an executive leader training program at Kyoto
University. Looking ahead, I would like to strive even harder for theempowerment of women in Japan.

Sonoda I personally found that awareness among officers has changed
quite a bit over past several years. Going forward, we should then work
to create an environment in which employees can feel that “our company
has changed.” To this end, each division needs to identify KPIs and otherwise formulate specific measures to ensure that the frameworks andsystems developed thus far can be utilized effectively.
There are numerous rationales for promoting D&I. Among these, theneed to counter labor shortages is becoming the major pressing issue of
this era. If we fail to take a forward-looking approach to promoting D&I,
the Group could one day be confronted by the depletion of humanresources. In sum, the future viability of the Sumitomo Rubber Groupdepends of the success of D&I.
Colpan I have seen a number of instances in which women are inhibited by a “glass ceiling,” an invisible barrier blocking them from pursuing
career advancement. The presence of such a “glass ceiling” is the mostprofound issue that must be addressed to promote D&I. Having also discussed this problem with male businesspeople in a diverse range of corporations, I have been quite surprised by their responses as the majorityof them simply consider this problem to be women’s issue. However,when I engage with female businesspeople, most of them share theirfrustration about a typical situation in which they are not allowed to pursue career advancement despite their willingness to do so. This suggests, I believe, that the absence of viable career options available towomen inhibits them from pursuing career advancement. It’s not a resultof women’s choice of career options.

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As a mother of a child, I, too, have experienced diverse challenges in
the course of my career. I can conclude that female workers will be better
motivated if a company provides them with an inclusive environment andsystems that allow them to continue to work with confidence even as
they take on various life events and child rearing. Certain research has
revealed that changes in male employees’ ways of thinking and theresulting shift in workplace atmosphere and systems will lead to higher
representation of female executives and, ultimately, contribute to corporate innovation and better corporate performance. Accordingly, I expect
the Sumitomo Rubber Group to promote D&I by setting its sights onachieving outcomes like these over the medium to long term.
Sonoda Our group’s target of raising the ratio of female managers to
7% is somewhat higher than similar targets set by competitors. However,I, too, would like to see our group to set its sights higher.
Beneficiaries of workstyle reforms are not limited to women. As mentioned by Mr. Ikawa, these reforms should aim for the creation of a working environment that is friendly to all employees since both fathers andmothers have roles to play in child rearing. Furthermore, it is very important to provide an environment supportive of individuals who suffer frommedical conditions or those requiring special consideration due to theirpost-recovery health conditions irrespective of their gender. In addition,
there could be employees who face restrictions regarding working hours
due to their provision of nursing care to parents or partners. We need tobe highly considerate of such individuals, who are often reticent regarding
their difficult circumstances.
I believe that encouraging male employees to take childcare leave willserve as a great catalyst in the promotion of D&I. Once male employees
gain actual experience in child rearing, they become keenly aware of how
hard it can be. This will, I believe, help them update their perception of
their female colleagues and prompt male managers to shift their styles ofteam management. A paternity leave system is already in place at the
Sumitomo Rubber Group, so it is important to cultivate a culture in which
taking paternity leave is commonplace among male employees.
Workstyle reforms can not be accomplished without abolishing
non-essential operations. These reforms should go in tandem with operational streamlining and rationalization. I believe that the success of thesereforms will naturally result in higher productivity which, in turn, will enable
the Sumitomo Rubber Group to achieve more robust financial results.
Ikawa As stated by Ms. Colpan, D&I-related initiatives are pointless unless
we seriously aim for the creation of workforce in which women’s presence
is commonplace in every job grade, including senior management.
Looking at the age-based composition of employees, women aged 35
or younger account for a significant proportion in our overall female workers. Therefore, we must first develop a framework to improve the retentionof these female workers and empower them to gain diverse experiences
so that they acquire robust capabilities. They are also in immediate need ofrole models. Accordingly, I would like to be part of realizing the first female
executive at our group in the near future. The appointment of a female
executive will be symbolic to other female workers and help convince
them about their potential to assume similar leading positions. I would likethem to be confident that women can pursue careers at the Sumitomo
Rubber Group just as men are usually doing. Moreover, such an appointment will send a profound message of encouragement to not only female
workers but also young male workers and job-seeking students.

The Sumitomo Rubber Group’s Succession Plan
Ikawa To nurture next-generation management human resources, wehave already launched a talent management framework. This frameworksystematically nurtures candidates for future senior managers who willoversee specific functions, for example, the Human Resources & General
Affairs HQ. In short, to identify skill sets for each department with specificfunctions we strive to make the status of human resources visible in linewith the two axes of human skills and problem-identification and solving
capabilities. In this way, we aim to discover optimal candidates while formulating training menus targeting areas in which our human resources
need to enhance their competencies.
In August 2022, we launched a similar framework for nurturing top
management leader candidates. With target candidates being selectedworking at affiliates, are foreign nationals. From the perspective of how tonavigate the Sumitomo Rubber Group’s global operations, individuals
equipped with global experience and capable of demonstrating strength ininternational operations are optimal to our group’s management successors.

Leadership Traits Are Unchanging Regardlessof the Timesfrom among the heads of each department with specific functions or
those in similar positions, this framework not only provides them with lectures and other training programs but also allows them to gain diverse
experience and assigns them challenging missions. Our talent management approach is focused on identifying candidates from among bothmanagement and specialist human resources. For specialist humanresources, we endeavor to enable the systematic acquisition of experiencein differing fields in line with our aim of discovering outstanding candidates.
This will help us secure individuals equipped with strengths in multiple
areas of specialty, which, in turn, empowers them to leverage a broader
perspective independent of conventional wisdom in one specific field.
Colpan Senior managers who oversee specific functions (e.g., the headof Production HQ, Executive Officer in charge of Technology and generalmanagers or Executive Officers in charge of finance) are equipped withoutstanding expertise in their fields of specialty. However, once appointed
as Directors, they will be asked to supervise the operations of the entire
Group and thus need to understand governance, finance and other matters. Therefore, we need to nurture human resources capable of handlinga certain amount of overall business management.
Ikawa This means we need to secure Directors whose skill matrices
indicate their strengths in multiple fields, doesn’t it?
Colpan Exactly. Instead of appointing Directors with single area ofstrength, we need to secure internal directors whose areas of strength
encompass the majority of items listed in the skill matrix. I believe that,
otherwise, the Board of Directors could fail to be fully functional.
Ikawa The other day, the Governance Team of the General Affairs
Department completed the list of requirements for Director candidates.
We are now gearing up our efforts to operate a full-fledged framework for
nurturing top management leaders by targeting those in their 40s or late
30s as candidates.
Sonoda The business environment will continue to change radicallygoing forward. Accordingly, it is imperative to identify candidates fromamong individuals now in their 30s or 40s, a pool of several hundred
employees, as we aim to nurture future leaders capable of navigating ourgroup through the prevailing circumstances of the time. In this light, I
think that enabling candidates to gain diverse experience is essential tosecuring individuals who can leverage a broad perspective and exercise
flexible judgments.
Colpan Some leadership requirements are universally applicable irrespective of the changing times. Also, there are certain individuals who arenaturally endowed with leadership qualities and those who are not. On theother hand, leadership requirements can evolve over time. We need tocomprehensively consider such questions. I believe that it will be beneficial
to develop a diverse range of succession plans incorporating the types ofexperience our candidates are expected to gain and knowledge thatshould be passed down to future generations of leaders upon the clarification of the talent development measures that can be initiated immediately.
Ikawa When it comes to succession planning, we have incorporated ascientific approach, for example, narrowing down candidates via character analysis that employs a database regarding traits of successful corporate managers around the world.
Currently, 32,000 out of our 40,000 Group employees, including those

Ikawa Looking at the time frame leading up to 2050, I believe thatsome leadership traits are universally applicable and will remain relevantin the future. These timeless traits are problem-identification capabilities,
problem-solving capabilities and the ability to persuade and lead others.
As for the relationships between these three traits and top management
leaders, managers and frontline employees, problem identification is the
skill most required of top management leaders. On the other hand, concept building capabilities for problem-solving are what managers mostneed when introducing the use of DX or other measures. Frontline
employees are expected to stably implement such measures to resolve
problems. Also, human skills are of importance for employees in all ranks.
With regard to these skills, individuals in manager positions or higher
must be capable of better motivating their staff. The human communication skills required of frontline employees include the ability to empowerand collaborate with others.
Sonoda It is expected that by 2050, unprecedented changes will havetaken place at a breathtaking speed. With the widespread use of AI,
menial labor will be taken over by AI. Thus, the focus for human workers
will be more on decision making and navigating the future direction ofbusiness. Accordingly, human resources with flexible and agile judgment
capabilities will be sought after.
Therefore, in the coming era, the genuine value of top management
leaders will be dependent on their organizational management andhuman resource development skills.
Nurturing human resources requires a balance between providing themwith input and entrusting them with certain tasks. Providing input refers
to giving general direction or suggestions based on the assessment of
their skills and expertise. Leaders should then entrust them with specifictasks and let them think for themselves. As the environment can change
radically over time, leaders’ experience of success might not be applicable to all problems. Therefore, leaders should turn to their staff and ask,
“This task went like this in my experience, but what do you think?” andentrust them with carrying out the task. A balance between input andentrustment is, I believe, a timeless trait of good leaders.
Ikawa In reality, all leaders have their areas of strength and weakness.
Therefore, empowering each individual to fully realize their competencies
should be at the core of human resource management backed by diversity. In other words, diversity management must aim to empower each
employee to thrive.
Colpan I would like Sumitomo Rubber Group to become, in 2050, a
company with an atmosphere that allows any employee equipped with skills
and leadership to come forward as a candidate for President regardless of
their gender or nationality. Although we still have sufficient time until 2050,
we must begin to develop a framework to that end at this point in time.

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