REPORT2021

APRIL 1.2020-MARCH 31.2021

CONTENTS
03

Top Message

04

Financial Highlights

05

Segment Information

06 “Steel
You Can Count On”technologies
that thrive in a variety of fields
072025 Medium-term Management Plan

08

CSR-conscious Management

Environment
09

Environmental Management

10

Prevention of Climate Change

12Information Disclosure according to
TCFD Recommendations

13 Contributing to resource-recycling Society
14

Environmental load reduction

The corporate philosophy■ Editorial Policy
This report gives a summary of financial
information such as earnings, as well as
ESG (Environmental, Social, andGovernance) initiatives and similar,

Confidence of Society

which provide the foundations for

We aim to acquire the confidence of society by contributing

sustainable growth, to allow a betterto the realization of an affluent and culturally rich society

understanding of Sanyo Special Steeland fulfilling our social responsibilities through our "high-Co., Ltd. “Sanyo(Special Steel”).
■ Period Covered by the Report
This report covers the activities of SanyoSpecial Steel Co., Ltd. and groupcompanies in FY2020 (April 1, 2020 toMarch 31, 2021) but also includes someSocial15

Confidence with Customers

17

Confidence of Suppliers

18

Confidence of Employee

20

Creating a safe workplace

21

Disaster prevention initiatives

Governance
22

Enhancement of Corporate Governance23

Officers

24

Internal Control Systems

25

Company Profile

26

Guidelines for Corporate Behavior andCode of Conduct

Confidence-based Management

information pertaining to matters outside

quality special steel manufacturing."

Confidence of Customers
We aim to earn the confidence of customers by rapidly
ascertaining exactly what their needs are and providingthem with high-quality special steel products.

of the above reporting period.
■ Reference Guidelines and Documents“International Integrated Reporting
Framework”International Integrated
Reporting Council (IIRC)

Confidence among People
We aim to build the confidence among people bydeepening communication with all of our stakeholders andacting autonomously in conformity with social norms.

“Guidance for Integrated Corporate
Disclosure and Company-Investor
Dialogues for Collaborative Value
Creation”Ministry of Economy, Tradeand Industry, Japan“Environmental Reporting Guidelines
2018”Ministry of the Environment2

Ovako Hofors plant (Sweden)

Ovako Imatra plant (Finland)

We will grow into a leading special
steel manufacturer in the world
through“Confidence-based
Management,”which is our
corporate philosophy.
Representative Director and President

MIYAMOTO Katsuhiro

I am Katsuhiro Miyamoto, inaugurated as Representative Director and President of Sanyo Special Steel on June 25, 2021.
Under our corporate philosophy of“Confidence-based Management,”we will conduct business management and increase
trust by putting it into practice. Also, we will further raise the level of our cutting-edge technologies centered on advanced
clean steel technology to develop the Sanyo Special Steel Group into a leading special steel manufacturer in the world.

In terms of business performance in the previous FY2020,
the Group faced an extremely difficult situation, posting
a consolidated ordinary loss as the demand environment
significantly worsened due to the COVID-19 pandemic.
For FY2021, sales volume through the first half exceeded
the initial estimate thanks to the recovery in the key demandindustries, including automotive, industrial machinery, andconstruction machinery. Special steel demand is likely to beaffected by the decline in automobile production caused bysemiconductor shortage and changes in inventories in supply
chains, but it is expected to be stable in general, reflecting
continued strength in demand for industrial and construction
machinery. At the same time, given the ongoing rises in theprice of steel scrap, ferro-alloys, and fuel oil, the Group will
carefully observe its impact on profits and take necessary
measures, including improvement of selling prices such as
raising the base price announced in September.
Recently, businesses are increasingly required to makecontributions towards the realization of a sustainable
society. In particular, climate change is an important issue
that affects the survival of mankind. We have listed realizing
carbon neutrality in 2050 as one of the basic policies of the
management plan, and in July 2021, we announced theroad map towards its achievement. We also declared our
support for TCFD recommendations and decided to disclose
information regarding the impact of climate changes on theGroup’s business activities.
Ovako, the Group’s European subsidiary, decided to shift
to carbon neutral by constructing a carbon-free hydrogenplant utilizing non-fossil fuel electric power generation andcarbon offset programs, engaging in pioneering initiatives in
the world.

Ovako Hällefors plant (Sweden)

We believe that the need for highly reliable special steel
products, which are the Group’s strength, will also further
increase for the purpose of CO₂ emission reduction andenergy efficiency improvement. We consider this as agreat opportunity to demonstrate the Group’s strength.
We will promote creating innovation that contributes tothe realization of a carbon-neutral society as a whole andresponding to new material needs contributing to solving
users’ environmental issues.
It is necessary that all employees are physically andmentally healthy for the Group to grow continuously. The
Group is a manufacturer, and safety and health are the major
premises for its business activities, and it takes priority overeverything else. Under this recognition, the Group formulated
and announced Corporate Health Management Promotion in
August 2021. We will develop a structure to promote healthmanagement headed by the representative director andpresident as the Chief Corporate Health Officer and create
workplaces that are safe, healthy, and rewarding for individual
employees daily.
We believe that building up confidence among all our
stakeholders is a value that the Group should protect; it issomething that we aim to achieve by promoting sincere,fair, and transparent corporate management through ourphilosophy of “Confidence-based Management.”
The Group will continue practicing “Confidence-based
Management” as we aim not only to achieve sustainablegrowth in our own operations in a rapidly changing businessenvironment but also to continue contributing to therealization of a sustainable society. I hope that this report will
provide further insight into the activities of the Group, and
we look forward to your continued support and assistance.

In recent years, we underwent a major transformation—we became part of Nippon Steel Group in 2019 and made Ovako, aprominent European special steel manufacturer, into a wholly-owned subsidiary. The change facilitated a stable managementfoundation and global network of manufacturing and sales, in addition to Sanyo of“Steel You Can Count On,”a brand wehave long worked to establish. In January 2021, the refurbishment work, which was part of the production structure reform
investment of the Small and medium Bar Rolling Mill at the head office plant in Himeji, was completed, enabling a system for
responding to changes in demand structure such as a shift towards products in smaller diameter and orders in small lots.
Under such circumstances, the Group formulated the 2025 Medium-term Management Plan taking into account the mediumto long-term changes in the demand structure surrounding the Group as well as the intensifying international competition.
According to the plan, the Group will establish a solid corporate constitution that enables to ensure stable profits amidchanges in the medium- to long-term demand structure by strengthening the profitability of the overseas business including
Ovako and MSSS, an integrated special steel manufacturer in India, as well as enhancing the competitiveness of the Group
as a whole through full realization of synergies among Sanyo Special Steel, Ovako, and Nippon Steel, and further improve ourcorporate value in the global special steel market.

3

Financial Highlights
Net sales

Operating incomeFY2020 Business Results
Operating results(Millions of yen)

400,000(Millions of yen)

350,000

300,000
200,000

157,485

12,000262,452
210,721

185,818

15,000138,680

10,969

11,685

14,10010,123

9,000
6,000
3,000
0

100,000▲1,417▲5,493-3,00002016 20172018 20192020 2021 (FY)
forecast

Ordinary income

12,00011,736

14,00010,6592020

2021 (FY)

forecast(Millions of yen)

9,000 7,784

7,034

9,100

7,721

0

3,000

-3,00002016 20172018 20192020

2021 (FY)-9,000forecast

Net assets

Financial conditions▲6,87020162017 201820192020 2021 (FY)
forecast

Assets(Millions of yen)

(Millions of yen)

250,000
200,000▲3,717-6,000▲1,521▲4,762-3,000150,0002018 2019

3,000

6,000

-6,000

2017

6,000

9,437

9,000

2016

Profit attributable to ouners of parent(Millions of yen)

15,000-6,000128,959

179,887
200,200
182,202

123,143

400,000

374,246

300,000

319,360
327,963

209,1460

100,000

2016

2017

2018

2019

2020 (End of FY)

0

2016

The Group’s total assets as of the end of FY2020 stood at319,360 million yen, down 8,602 million yen year-on-year due
primarily to a drop in inventory reflecting rapid demand recovery.
Total liabilities stood at 139,472 million yen, down 6,287
million yen year-on-year, owing to a decrease in accounts
payable reflecting payment for facilities and a fall in loans.
Total net assets totaled 179,887 million yen, falling by 2,314
million yen year-on-year. This was mainly due to the recording ofloss attributable to owners of parent and a decline in noncontrolling interests despite an increase in other comprehensive
income owing to fluctuations of stock prices and foreignexchange market.
As a result, net D/E ratio (ratio of interest-bearing debt to total
net assets) as of the end of FY2020 was 0.26 (0.27 as at the endof FY2019).

Cash flows

200,000 183,444

100,000
50,000In FY2020, the Japanese economy continued to face difficult
conditions, as the impact of COVID-19 restricted social andeconomic activities. The outlook is also unpredictable, given theimpact of the infection’s resurgence on Japanese and overseas
economies and the conflict between the U.S. and China on
foreign economies.
In the special steel industry, the demand for special steel in thefirst half of the fiscal year significantly declined due to the impact
of COVID-19. As the second half started, the demand recovered
led by automotive-related applications, but the production
volume level of special hot-rolled steels fell from FY2019.
Net sales of the Group for the fiscal year declined 51,731
million yen from FY2019 to 210,721 million yen, as sales volume
fell due to the impact of COVID-19. In terms of profits, the Group
posted an ordinary loss of 4,762 million yen (a loss of 1,521
million yen in FY2019). This owes to a decline in the Group-widesales volume and a decline in selling prices of Sanyo Special Steelas a result of applying scrap surcharge, even though there werefactors increasing profits such as the effect of the emergency
profit improvement measures, including suspension of operations
utilizing the government subsidies for employment adjustment, adecline in depreciation and amortization reflecting a switch of
depreciation method of property, plant and equipment for SanyoSpecial Steel and Japanese consolidated subsidiaries from thedeclining balance method to straight-line method, price declinesof fuel and raw materials led by scrap iron, and reduction ofvariable costs. Net loss attributable to owners of parent came to
6,870 million yen (3,717 million yen in FY2019) owing to therecording of an impairment loss on non-current assets at MSSS in
India in addition to the ordinary loss.

2017

2018

2019

2020 (End of FY)

Regarding the Group’s cash flows in FY2020, our operating
activities generated 22,313 million yen, while investing activities
used up 19,412 million yen and financing activities used up
5,473 million yen.
As a result, the balance of cash and cash equivalents as at theend of FY2020 stood at 24,881 million yen (down 2,338 million
yen year on year).
Cash flows for each section in FY2020 are summarized below.

(Cash flows from operating activities)
Net cash provided by operating activities was 22,313 million
yen (down 17,111 million yen from FY2019), with a loss before
income taxes (negative 9,519 million yen), depreciation andamortization (14,187 million yen), amortization of goodwill(2,620 million yen), and impairment loss (3,929 million yen)against an increase in trade notes and accounts receivable(negative 1,333 million yen), decrease in inventories (6,364
million yen), increase in trade notes and accounts payable (4,628
million yen), and income taxes refund (1,277 million yen).
(Cash flows from investing activities)
Net cash used in investing activities was 19,412 million yen (up6,949 million yen from FY2019), partly due to expenditure on
the acquisition of property, plant and equipment (negative
19,175 million yen).
(Cash flows from financing activities)
Net cash used in financing activities was 5,473 million yen(down 15,619 million yen from FY2019), reflecting therepayments of long-term loans (negative 5,576 million yen)among other factors.

Outlook
The sales volume through the first half of FY2021 has
exceeded the initial forecast thanks to the recovery in the key
demand industries such as automotive, industrial machinery, andconstruction machinery. Special steel demand is expected toremain generally stable as demand from industrial andconstruction machinery continues to be strong, while changes
are expected in the level of inventory in supply chains due to theimpact of automobile production reduction caused bysemiconductor shortage. At the same time, prices of scrap iron,ferro-alloy, and fuel oil continue to rise, so the Group willcontinue to monitor their impact on future profit and takenecessary measures such as improvement of selling price,including raising the base price announced in September.
As a result, for the fiscal year FY2021 the Group expects net
sales of 350.0 billion yen, operating income of 14.1 billion yen,ordinary income of 14.0 billion yen, and net income of 9.1 billion
yen.

Profit Distribution Policy and Dividends
Our basic policy on profit distribution is to reward ourshareholders by increasing the profits available for distribution
while strengthening our business foundation. Our profit
distribution standard based on the consolidated businessperformance is a consolidated payout ratio of about 30%, anddividend from surplus is calculated by multiplying profit
attributable to owners of parent excluding amortization of
goodwill by the payout ratio at the end of the second quarterand the end of fiscal year.
In FY2020, the Group, with deep regret, suspended thepayment of dividends owing to the recording of 6,870 million
yen loss attributable to owners of parent.
For FY2021, we expect to pay annual dividend of 60.0 yen per
share (45.0 yen per share in interim dividend and 15.0 yen per
share in year-end dividend) based on the earnings forecast anddividend policy.

4◆Metal Powders

Segment Information

In Metal Powders business, we manufacture and sell metal powder products.
In FY2020, net sales declined 669 million yen from FY2019 to 3,455 million yen, as
sales volume declined due to the impact of COVID-19. Operating income totaled
263 million yen, up 0 million yen from FY2019, as sales mix improved despite the* Net sales include internal sales and transfers conducted between segments

decline in sales volume.

Other 0.7%

Metal Powder 1.6%
Formed andFabricatedMaterials
6.3%

Steel
Products
91.4%

FY2020Net Sales（Millions of Yen）
Net Sales

Operating income

Steel Products

199,662▲5,240

Metal Powders

3,455

263

Formed andFabricated Materials

13,735

▲614

Other

1,573

45

Adjustments▲7,705

53

Total

210,721▲5,493(Millions of yen)

(Net sales)

6,000
4,000

4,455

4,894

4,897

(Millions of yen)

1,000
4,125

3,455

(Operating income)
931

925
683

500

2,000
0

2016

2017

2018

2019

2020 (FY)

0

2016

2017

2018

262

263

2019

2020 (FY)◆Formed & Fabricated Materials
In Formed and Fabricated Materials business, we manufacture and sell formed andfabricated materials made from special steel bars and tubes.
In FY2020, net sales declined 4,203 million yen from FY2019 to 13,735 million yen due tosales volume decline caused by the impact of COVID-19. Operating loss expanded to 493◆Steel Products

million yen from FY2019 to 614 million yen.

In the Steel Products business, we manufacture and sell a range of special steel products from

(Millions of yen)bearing steel to engineering steel, stainless steel, heat resistant steel, and tool steel.

20,000In FY2020, net sales of the segment declined 48,706 million yen from FY2019 to 199,662 million

15,000yen due to a decline in sales volume affected by COVID-19. The segment had operating loss of
5,240 million yen, with loss expanding by 3,564 million yen from FY2019, owing to the decline in

10,000sales volume.

5,000
0

(Millions of yen)

(Net sales)

300,000
141,988

200,000
125,009(Millions of yen)

248,367
170,234

12,000199,662

2016

2017

2018

2019

2020 (FY)

▲５，
２４０

2017

2018

794

704

879

13,735
0
▲121

2016

2019

(Millions of yen)

2,000

▲1,676
2016

1,000

2017

2018

2019

2020 (FY)

-1000

▲614
2016

2017

2018

2019

2020 (FY)from FY2019 to 1,573 million yen and operating income fell 22 million yen from FY2019 to 45 million yen.

6,000

-6,00017,938(Operating income)This segment includes information processing services conducted through subsidiaries. In FY2020, net sales declined 300 million yen

8,452

0

100,000
0

9,229

18,430(Millions of yen)

19,983◆Others(Operating income)

9,867

15,789(Net sales)2020 (FY)

1,500

1,678

(Net sales)
1,530

1,641

1,873

(Millions of yen)

1,573

1,000

(Operating income)

100

50

2016

2017

2018

2019

2020 (FY)

0

45

42
27

500
0

67

57

2016

2017

2018

2019

2020 (FY)5

Aerospace

Factries,Plants, Power Stations“Steel You Can Count On”
technologies that thrive in a variety of fields

Dies for forging press,
Dies for high-quality plastics,
Casting dies, Rolls, Tolls, etc.
Tool SteelSanyo Special Steel’s “Steel You Can Count On” is incorporated and used in a variety of industrial products,
including automobiles, railroads, construction machines, electronics products, and information communication devices.
Sanyo Special Steel provides materials that offer high functionality and quality to support developmentof industry and society.

Wind power generation equipment

Bearings

Bolts, Gears, etc.

Bearing SteelEngineering SteelElectrical Cables

High alloy cables:High-strength
low thermal expansion alloy
for high voltage transmission lines

Construction
machineries

Formed &Gears, Shafts, Cylinders,FabricatedSprockets, Swing gears, etc. Materials

High Alloy Steel Wires

Formed &FabricatedMaterials

Formed &FabricatedMaterials

Engineering Steel

Formed &FabricatedMaterials

Bearing steel

Cutting tools, Dies, Injection
molding machine(ex. screw), etc.
Powder Metallurgy
high-speed steel

Shinkansenbullet train

Extra-high-anticorrosion pipes,
Chemical plant piping,Pipes for heat exchanges, etc.

Bearings

Bearing SteelHigh Alloy Steel

Formed &FabricatedMaterials

Bearings, Linear Motion
Bearings, Ball Screws, etc.

Driving parts, etc.

Bearing SteelBearing SteelEngineering SteelEngineering SteelStainless Steel
Metal powders for 3D printing

Tubes for refuse incineration and power generationand power generation boilers, Tubes for waste heatrecovery, Chemical plant piping

Metal powders

Stainless SteelHeat-resistant thermal spray
powder for boiler pipes,
Metal powders for 3D printing
Metal powders

PCs

Motor shafts for OA equipment,
Sleeves, etc.
Stainless Steel

HDDs

Mobile Phone,
Smartphone

Electro-magnetic wave absorber

Powder Metallurgy products

Metal powders

Medical Fields

Buildings

Electrical
Appliances

Parts for dental treatment
devices (hand pieces)

Bolts

Magnetic head for
HDD recorders, etc.

Stainless SteelEngineering Steel

Powder Metallurgy products

Seismic isolation systems
Bearing SteelAutomobiles

Transmission gears, Shafts, Engine parts,
Connecting rods, etc.

Roads

Base course materials,
Asphalt aggregates, etc.
Electric arc furnace slag

Engineering SteelBearings, etc.
Bearing SteelIntake/exhaust valves, etc.

Formed &FabricatedMaterials
Formed &FabricatedMaterials

RobotsHeat resistant steel
EGR cooler, Shot peening
Metal powders

Formed &FabricatedMaterials

Driving parts, etc.
Bearing SteelEngineering Steel

Industrial Machineries

Ships

Spindles, Turrets, etc.

Shafts, Bolts, etc.

Engineering SteelEngineering Steel
Propeller shafts, etc.
Stainless SteelEngine valves
Heat resistant steel
High Alloy SteelThe Group of Sanyo Special Steel's Products

Iron scrap
Bearing SteelEngineering SteelAt Sanyo Special Steel, we use electric arc furnace steel-making (whichuses iron scrap as a main raw material) to manufacture special steel,contributing to the recycling and effective use of iron resources. Comparedto blast furnace steel-making, which makes steel from iron ore, the electricarc furnace method has the advantage of lower CO₂ emissions and lower

RecycleTool Steel

Tubes

Stainless Steel

Forged bars

energy consumption. Approximately 95% of the raw materials used byHeat resistant steel

materials recycled in-house)

High Alloy SteelSanyo Special Steel are recycled materials such as scrap iron (including

Rolled bars

Metal powders

Powder Metallurgy products

Formed & Fabricated Materials

Electric arc furnace slag

62025 Medium-term Management Plan
With the aim to further enhance and reinforce our corporate value in the global specialty steel market, Sanyo Special Steellaunches the 2025 Medium-term management plan for the period from FY2021 to FY2025.
Specialty steel demand in Japan is expected to decrease in the future due to changes in the social structure such as aging
demographics. In addition, exports of specialty steel, whether direct or indirect through products using specialty steel, are also
expected to decline in the medium-to long-term due to the growing needs of overseas consumers for local production for local
consumption and reassessment of the global supply chain.

On global basis, although demand for specialty steel itself is expected to increase mainly in China and India, we consider thatcompetition will intensify with domestic and overseas specialty steel manufacturers due to changes in the social and industrial
structure, such as in crease of electrical vehicles(EV), together with intensifying quest for raw materials, particularly in the area ofsteel scrap due to the surge of electric furnaces operations to lessen carbon emission.
In consideration of these medium-to long-term changes in the demand structure for specialty steel and the intensification ofinternational competition, the fundamental concept of the 2025 Medium-term management plan is to establish a lean and robust
corporate structure securing stable earnings by strengthening the business foundation, and to further enhance corporate value inthe global specialty steel market.

2025

Strengthening the competitiveness of the entire group
Fortifying corporate value in the global specialty steel market

・Based on a compelling sense of crisis and urgency that we face an evident
turning point of the business environment, we will strengthen the costcompetitiveness of the group as a whole by reducing both ﬁxed andvariable costs.
・We will also improve sales margins, upgrade sales mix, and secure andheighten our global market position.

Reinforcing proﬁtability of overseas businesses

・Ovako will reinforce its lean and robust corporate structure, primarily by
reﬁning its cost-competitiveness.
・MSSS will further enhance its position in the Indian market by reinforcing
its sales strategy and cost-competitiveness.

Utilizing synergies with Nippon Steel and Ovako
・We will realize full synergies by FY2024 asplanned by swift implementation ofcollaborative measures in all areas including
sales, production, procurement, etc.

Boosting proﬁtability of Formed & Fabricated Products and Metal Powder Businesses
・We will leverage the advantage of the integrated forging-turning
manufacturing process to enhance the proﬁtability of the Formed &Fabricated Products Business.
・We will develop and expand sales of strategic items in the area ofadvanced information technologies such as 5G and carbon neutrality etc.
to boost the return in the Metal Powder Business.

Further enhance
corporate value
in the global
specialty
steel market.

Net sales :Approx. 280 billion yen
Ordinary income :Approx. 14 billion yen
ROS : Approx. 5%
ROE : Approx. 5%

High-Cleanliness
SteelReduction of oxygen
content in steel
1980s

Reduce the frequency oflarge non-metallic
inclusions
2018

Smaller diameter ofthe largest inclusions
in steel

1990s

Deepening technology
Expanding technological superiority

・With the strength of our high-cleanliness steel, we will aim to respond to
new requirements and environmental challenges arising from changes inthe social and industrial structure.
・In particular, we focus on intensifying technologies that can respond tofurther reliability and consistency requirements in ﬁelds such as EV, wind
power, railways, and hydrogen society, expected to expand globally.

Equity ratio : Approx. 60%
D/E ratio :Approx. 0.2 times
D/EBITDA :Approx. 1 time

Robust corporate
structure securing stableearnings by strengthening
the business foundation
5 years to strongly
solidify the
management base

Capital expenditures 60 billion yen/5 years
Research and development expenses 12.5 billion yen/5 years
Personnel plan Group-wide rationalization of about 5%.
・We will rearrange the global corporate structure through further
reorganization, consolidation and divestment.

Ultra-HighCleanliness SteelSuper-Ultra-HighCleanliness Steel【FY2025 earnings plan】 【FY2025 ﬁnancial indicators】【Major Resource Allocation (Consolidated)】

Rearranging global corporate structure

Improves reliability by increasing
the cleanliness of steel

2021

Environment･Social･GovernanceAchieving carbon neutrality by 2050

・We will aim to achieve carbon neutrality by 2050, through the promotion of"eco-processes (energy conservation and higher eﬃciency in production)","green energy utilization", "eco-products (further reliable and consistentproducts for long-life bearings used in automobiles, wind power, railroads, andmetal powders for 3D printers etc.)", and "eco-solutions" (sharing energy-saving
technologies and productivity improvements among Ovako and MSSS)."・We inaugurated the Zero Carbon Promotion Committee headed by our president
and CEO, for promoting and accomplishing carbon neutrality of the whole group.

Promoting digital transformation (DX)・Utilizing latest digital technologies, we will further promote optimum operations(ex. operational eﬃciency improvement and preventive maintenance by AI and
IoT), quality improvement (ex. detection accuracy improvement by AI), laborproductivity improvement (ex. automation by RPA), safety education (by VR), etc.

Strengthening governance system and promoting diversity and health management
・Strengthen corporate governance system
・Promoting diversity and health management

7

CSR-conscious Management
CSR-conscious management is the aim of the Sanyo Special Steel Group, and its purpose is to realize sustainable growthand contribute to a sustainable society by building relationships of trust with all stakeholders through the practice of“Confidence-based Management,”our corporate philosophy. The practice of“Confidence-based Management”can berephrased as“being a completely honest company.” Companies are members of society and they cannot develop without
confidence from their stakeholders. The Sanyo Special Steel Group contributes to the realization of a sustainable society byhonestly and frankly practicing“Confidence-based Management.”

Realization ofa sustainable
societysorst

The practiceof Conﬁdence-based
ManagementＥmun it i e

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Sanyo Special Steeland SDGs
The relationship between ourGroup’
s key business activities
and the SDGs

Ｓ

In the global economy, people, goods, and capital shift on a global scale and one country’s economic crisis isinstantly linked to another; similarly, in this age, global issues such as climate change and natural disasters also
have global repercussions and severe impact. Given this situation, the 2030 Agenda for Sustainable Development
was adopted by the UN in September 2015 with universal objectives for the entire international community towork towards—both developed and developing countries alike. In the 2030 Agenda, 17 goals and 169 targets
were listed as Sustainable Development Goals (SDGs). The relationship between our Group’s key businessactivities and the SDGs is as follows.

SDGs
Goals
Group
Activities

・Development and ・Health and safety
stable supply ofactivities
highly-functional
・Development ofspecial steel
employees’skills
products
・Welfare scheme

・Support for
the active
participation of
women

・Utilization of scrap ・Promotion of energy saving ・Prevention of water
raw material・Reductions in CO₂ emissions
pollution
・Recycling of by・Modal shift・Re-use of waste
products
・Increase the ratio ofwater
transportation made by ship・Reductions in the emissionof air pollutants
・Development of green spaces
within factory sites
・Chemical substance controls

SocialＧ

Governance

Goals, initiatives

Reference

Prevention of climate change

Aim to realize carbon neutrality by 2050

pp.9–12Contribution toresource-recycling society

Reduce by-products, promote 3Rs

p.13

Environmental load reduction

Comply with regulation standards(Water Pollution Prevention Act, Air Pollution
Control Act, etc.)

p.14

Quality improvement

Continuously improve quality management system

p.15

Expanding technologicalsuperiority

Constantly and quickly create highly reliable
products and new technologies with focus on
globalization

p.16

Realization of sustainableprocurement

Build fair and equitable transactions andpartnership
Build a stable procurement structure
Promote procurement that is environmentallyfriendly and respects human rights

p.17

Promotion of Corporate
health management

Develop workplace environment where each andevery employee finds it fulfilling to work every day

p.18

Promotion of diversity
management

Promote participation of women and senior citizens,support participation of people with disability

p.19

Human resource
development

Nurture global human resources

p.20

Safety, disaster prevention

Achieve total zero accidents (zero labor accidents,
zero accidents while commuting)
Enhance disaster prevention measures and business
continuity management (BCM)

pp.20,21

Corporate governance

Enhance corporate governancepp.22,23Internal control system

Promote risk management and compliance activities

P.24

8

Environmental Management
Sanyo Special Steel formulates an environmental policy that forms the basis of the company’s environmental conservation activities.
Based on this policy, we create plans to improve environmental conservation and use environmental management systems in initiatives
to tackle global warming, recycle by-products, and help prevent environmental pollution in a bid to mitigate environmental risks.
In addition, we not only help recycle metal resources by manufacturing products using scrap iron as the main raw material, but wealso promote goods that are manufactured to help reduce the burden on the environment, using components and mold dies that havea longer life and are smaller in size and lighter in weight.

■ Environmental policy
(Philosophy)
We recognize that environmental issues such as global warming; air, water, and soil contamination; and waste problems are serious
issues shared by all of humanity. As a company located in a richly endowed environment that faces Himeji Castle, a UNESCO World
Heritage Site and a national treasure of Japan in the north, and the Setonaikai National Park in the south, we are committed to caring
for the preservation of the environment and contributing to building a sustainable society in every stage of our business activities.
(Policy)
Bearing in mind that we are a company with plants that manufacture and sell special steel and non-ferrous metals, we undertake
environmental management based on the following policy.
1）We will contribute to the recycling of metal resources by manufacturing steel products using iron scrap as the main raw material.
2）In addition to complying with laws, regulations, and agreements related to the environment, we will make ongoing efforts toenhance our environmental management framework to improve our environmental performance, and we will responsibly control
any business activities that may have an adverse impact on the environment.
3）We will make efforts to reduce our impact on the environment in all stages of our business activities, and we will actively promoteresource and energy savings, the recycling of byproducts and reduction of waste material, and the control of pollutant andgreenhouse gas emissions to contribute to conservation of the environment and mitigation of climate change. Moreover, we will
strive to prevent environmental pollution by developing products that will contribute to reducing our impact on the environment.
4）In our environmental conservation activities, we will pay particular attention to the education of each and every employee inenvironmental awareness.
5）To achieve this environmental policy, we will set environmental targets and review them at least once a year, and we will revise
these targets as necessary.
6）We will ensure that all employees are thoroughly familiar with this environmental policy through education and training, and we will
appoint the General Manager of Environmental Management as the Environmental System Management Officer.

Environmental management structure
Board of Directors

Zero Carbon Promotion Committee

Towards realization of carbon neutrality by 2050, weestablished the Zero Carbon Promotion Committee headed byRepresentative Director and President in April 2021.
All Managing Executive Officers in charge of various divisions
and related Executive Officers and heads of related
departments are its members and the committee is scheduled
to meet about four times a year to deliberate on basic
strategies for zero carbon promotion taking into consideration
climate-related risks and opportunities as well as short- andlong-term themes related to their promotion.

The Environmental Conservation Committee
Each year we hold a meeting of our Environmental
Conservation Committee to enhance environmental
management and mitigate environmental risk. The Committee
is chaired by the Executive Officer in charge of the Environment
Division, and its members also include the General Manager of
the Production Division and the General Manager of the
Administration Division, and it discusses the formulation ofbasic guidelines on environmental conservation and matters on
basic initiatives. The contents of the Committee’s discussions
are reported to the Board.

Acquisition of ISO14001 Certification
We have acquired ISO14001 Certification (the international
standard for environmental management systems) at principal

ReportSupervise

Environmental
Conservation Committee

ReportSupervise

Zero Carbon
Promotion Committee

Head: Chief Oﬃcer for Environmental Systems(Executive Oﬃcer in charge ofenvironmental divisions)
Members: Heads of manufacturing divisions,management divisions

Head: Representative Director and President
Members: Director / Managing Executive Oﬃcers,
related Executive Oﬃcers, head of related
departments

Environmental Management
Dept.(secretariat)

Environmental Management Dept.,
Corporate Planning Dept.(secretariat)

Collaboration,
implementation of measures

Environmental audit,
interviews

Manufacturing divisions, group companies in Japan and abroad
ISO14001
certiﬁcation

Environmental
Liaison Meeting

Environmental
patrols

Response to law
amendments

mill in Himeji, our manufacturing base. We make continued
efforts to establish this standard through our annual internal
audit and external audit. During the internal audit, junior staff
members are also in attendance at audit sites, which helps themunderstand the environmental management system. We are also
making efforts to improve the system. We also focus on on-goingtraining to facilitate the smooth change from one generation toanother of internal auditors. In 2017, an external audit reviewed
our transition to ISO14001:2015 and assessed that ourEnvironmental Management System was being properly
maintained and effectively utilized, allowing us to complete
migration to the standard.

Environmental Liaison MeetingsOnce a month, an Environmental Liaison Meeting is held toshare information on the environment; those attending include
the Chief Officer for Environmental Systems, executive officers,
and department heads. The meetings collate information on thematters listed below and attempt to mitigate environmental
risks.
⒤ Status of responses to points identified in environmental
checksⅱ Results of assessments on compliance with statutory laws
and regulations
We share results on air and effluent measurements, etc.
prescribed by law or under agreed protocols.
ⅲ Status of industrial waste treatment and results of inspections
on industrial waste disposal facilities
We share information on the status of industrial waste
treatment and the results of inspections on industrial
waste disposal facilities run by sub-contractors.
ⅳ Communications regarding environment with administrationand industry associations
ⅴ Amendments to the latest environmental laws

Environmental patrols

Once a month, a team made up of the Chief Officer for
Environmental Systems, executive officers, department managers,
pollution prevention managers, and others conducts patrols,
primarily around our manufacturing sites. We aim to reduce
environmental risks by responding to the issues raised by thepatrols at individual manufacturing sites.
(i) Checks for significant environmental aspects
Patrols are conducted on processes and equipment withsignificant environmental aspects and inspections arecarried out on equipment, management of measuring
devices, and written work standards as we work to improve
management levels and mitigate risk.
(ii) Checks on emergency drills
Emergency drills are carried out to check if there are any
issues with emergency procedures, and in addition, we
verify that there are no defects in equipment andinstruments.
(iii) Patrols attended by the President
Once a year, an environmental patrol is conducted with the
President in attendance. In FY2020, this patrol included
checks on the management of significant environmental
aspects of No.2 Bar & Wire Rod Mill and energy-saving
initiatives.

Responding to amendments in environmental laws

<Example of response to legal amendments>●C abinet Order for partial amendment to Cabinet Order for
the Designation of the Poisonous and Deleterious Substances(amendment in June 2020)
Revision details: some poisonous and deleterious substances wereadded and some deleterious substances were
removed from the designated substances.
Response status: Notified the law amendment details throughout
the company through the Environmental Liaison
Meeting, etc. and ensured storage and managementof poisonous and deleterious substances.

Environmental accounting
We collated the costs for environmental conservation
initiatives undertaken in FY2020 in accordance with theguidelines from the Ministry of the Environment.
Maintenance and administration costs for environmentallyfriendly equipment such as dust collection units and water
treatment facilities and the cost of recycling / disposing of
byproducts amounted to approximately 2,000 million yen.
We also invested approximately 360 million yen in the
improvement of dust collection units, abolition and upgrading oftransformers containing PCB and in energy-saving initiatives suchas changing lighting to LED.
（Million of yen）
Categories
1. Costs within business areas
2. Upstream/downstream costs
3. Cost of administrative activities
4. R&D costs
5. Cost of social activities
6. Cost of addressing environmental damage
Total

Expenses

Investment

2,000

365

0

0

134

0

32

0

4

0

11

0

2,182

365

Activities for developing environmental awarenessWe believe that raising every employee’s awareness of theenvironment is important in tackling our environmental
conservation activities, and we conduct regular training for new
employees and grade-based environmental workshops. We havealso established a reward program to encourage employees toobtain qualifications related to environmental conservation suchas those for pollution prevention managers, and we have also
been working to have employees calculate carbon footprints fortheir own households.

As stated in our environmental policy, compliance withstatutory laws and regulations is a key assumption of ourbusiness activities. If there are any legal amendments related toour business, we revise our in-house environmental standards
and ensure that all stakeholders receive appropriate training,among other initiatives.
June is the“Environment Month”when we hold a“Study
Workshop on Environmental Laws and Regulations”inviting
employees in managerial posts—section managers in FY2018
and managers in FY2019—to ensure that they have a better
understanding of statutory compliance obligations.

9Prevention of Climate Change
Road map to carbon neutrality by 2050

CO₂ emission reduction initiatives

With the recognition that climate change is an important issue that affects the survival of mankind, the Company’s Board of Directors,
at its meeting in April 2021, adopted the policy to aim to realize carbon neutrality by 2050 and announced it internally and externally.
In July 2021, it prepared and announced the road map towards achieving the goal. We aim to reduce CO₂ emissions at all social
stages as well as its own manufacturing processes by saving energy in the manufacturing processes, utilizing green energy, andcontributing with eco-products and eco-solutions.

Promotion of eco-processes (CO₂ reduction in
manufacturing process)

FY2030[Our CO₂ emissions]Eco-processes promotion
Green energy utilization

Reduce CO₂ emissions
50% or more vs. FY2013 level

Contribute to reduction with
eco-products, eco-solutions

Contribute to CO₂ reduction equivalent
to roughly 20% of emission in FY2013

0.84 Down 50% or more

FY2050Eco-processes promotion
Spread of carbon-free electric
power, energy
Utilization of CCUS

■Energy-saving heating
furnace that uses
regenerative burners

Achicving zero
emissions(Million tons)
FY2013

Aim to realize carbon neutrality

FY2030FY2050*Scope 1＋Scope 2 emissions of the Company on a non-consolidated basis*Emissions for each ﬁscal year were calculated based on electricity emission
factor (for calculation of GHG emissions) of electric power companies
that supply power to the Company

Eco-process

Green energy utilization

Company-wide energy-saving measures
mainly in production

Utilization of carbon free electricity/fuels
and natural energy

Development of manufacturing technology
to improve energy efficiency*Refer to Engagement by Ovako

Eco-solutions

Eco-products■Developing long-life
bearing steel for wind
power generation

Eco-products and ecosolutions to contributeroughly 20% reduction in
FY2030

Promoting R&D and supply of special steel
products that contribute to reducing CO₂
emissions in the supply chain and finalusage■Sharing technologies
among group members

Sharing our energy-saving technologies
and productivity improvements among all
Sanyo Group members including Ovako
and MSSS

CO₂ emissions
Breakdown of CO₂ emissions(Million tons)

Others0.78

Coking Coal

0.57
0.5

4％

13％

0.50

FY2020CO₂ emissions

Electricity

48％

0.50million tons*0

Natural Gas
2018

CO₂ emission reduction vs. BAU
Reduction rate
vs. BAU (%)
5.47

-0.49

4.85

2.83
0.95

2019

2020

35％

(FY)

*Scope 1＋Scope 2 emissions of the Company on a non-consolidated basis*Emissions for each ﬁscal year were calculated based on electricity emission
factor (for calculation of GHG emissions) of electric power companies
that supply power to the Company

In addition to CO₂ emission reduction of in-house manufacturing
processes, Sanyo Special Steel is focusing on development of
eco-products, which contribute to CO₂ emission reduction
when the users manufacture parts and use them as an end
product. The needs for products and technologies that
contribute to environmental load reduction, including the
expanded introduction of renewable energy such as wind
power generation and smaller and lighter parts for advancing
electrification of automobiles, are expected to grow. Withadvanced clean steel technology, we will realize and spreadeco-products with further enhanced material properties such as
long life and elimination and simplification of parts
manufacturing processes and contribute to CO₂ emission
reduction at all social stages and realization of carbon-neutral
society.

Stable and long life bearing steel

Reducing nonmetallic inclusions, whichis the source of fatigue fracture, toextreme minimum, improves durability
and reliability. This contributes to
CO₂ emission reduction by making
automobile parts smaller and lighterand reducing failures of wind power
generation facilities by making themlong life and maintenance free.

3.38 Reduction target

Size and weight reduction of products
by improving durability and reliability
Failure ratio reduction
and maintenancefree realization byextending productlifespanvs BAU(2.6% reduction in 2020)

0.39

2014 2015 2016 2017 2018 2019 2020 (FY)

Contribution to CO₂ emission reduction with eco-solutions

Sanyo Special Steel deploys its technologies contributing toenergy saving and reduction in specific energy consumption
such as rapid molting technology for electric furnaces,
technology to improve yield and productivity in the rolling
process to Ovako, MSSS, and other group companies
manufacturing special steel overseas, thus promoting the
reduction of CO₂ emissions at manufacturing bases globally.

Environmental load reduction in product transportation

Amount of CO₂ emissions*
1

Sanyo Special Steel is involved in efforts to reduce CO₂
emissions, which is one of the greenhouse gases (GHG), as partof its initiatives to tackle climate change.
In accordance with the Action Plan for Achieving a Low-carbon
Society by the Japan Iron and Steel Federation, we have beenworking since FY2014 to achieve a 2.6% reduction compared to
BAU (business as usual) in FY2020. The reduction vs. BAU
remained at 0.39% in FY2020 due to the impact of a decline inproduction volume amid the COVID-19 pandemic, and the target
was unachieved. But we had been achieving reductions
exceeding the target through FY2019. During this period, SanyoSpecial Steel promoted using regenerative burners for heating
furnaces, use of inverters in large-scale motors, and changing
lighting of plants to LED. We will continue to work based on the
Action Plan for Achieving a Low-carbon Society by the Japan Iron
and Steel Federation to achieve the 4.6% reduction vs. BAU in
FY2030 in eco-processes.

Contribution to CO₂ emission reduction with eco-products

Reducing CO₂ emissions involves not only manufacturing
processes but also essential initiatives in logistics. Sanyo Special
Steel believes that transportation method for shipping products
is particularly important for reducing environmental loads oflogistics.
Sanyo Special Steel has been striving to promote the use ofrail transport and freight ships, as long as product quality canbe ensured; rail transport allows CO₂ reductions to be reduced
by around 90% compared to transportation by truck, andfreight ships provide a reduction of around 80% compared tothe same. Of all the shipments that Sanyo Special Steel makes,
transport by freight ship accounts for a significantly higher
percentage than the average for the manufacturing sector.

Heat-resistant stainless steel
tubes

Improving corrosion resistance andhigh temperature strength using
our proprietary material technology
enables waste heat recovery at higher
temperatures and improves energy
efficiency by raising temperature andpressure of boilers, thus contributing to
CO₂ emission reduction.

Heat recovery efficiency
improvement by increasing strength
Effective use of thermalenergy in refuse
incinerating power
plants by superior
corrosion resistanceHigh hardness andHigh toughness steel

Our original alloy design and steel heat
treatment technology enable both superior
hardness and toughness in steel, which
contributes to CO₂ emission reduction byenabling to omit or simplify heat treatment
for hardening such as carburization in
automobile parts manufacturing.

Reduction of carbon emissions
in heat hardening process ofcustomers by original alloy design
and advanced heat treatment
technology

Reducing CFCs (Chlorofluorocarbons) 
CFCs are used in air conditioner of offices. As one of theGHGs, CFCs are deemed to contribute to global warming whenreleased into the atmosphere. In accordance with Act on theControl of CFC Emissions, Sanyo Special Steel conducts
inspections for air conditioners and other equipment as wework to ensure proper control of CFC gases.

〈Specific initiatives〉
・Use of rail transport for far-off customers
・Use of freight ships for transport to interim warehouses
・Switch from trucks to barges for transport to Port where
export vessels depart.

10

Prevention of Climate Change
CO₂ emissions in the value chain
The CO₂ emissions generated in the production (Scope 1 and Scope 2) at Sanyo Special Steel and the CO₂ emissions in the
supply chain (Scope 3) calculated utilizing the Green Value Chain Platform by the Ministry of the Environment and otherinformation are as follows:

CO₂ emissions (1,000t-CO₂)
FY2018FY2019FY2020

Scope1

Direct emissions from fuel usage at the company

320

269

244

Scope2

Indirect emissions from usage of energy produced at other companies

457

305

254

Scope1+2

emissions

777

574

498

Scope3

Other indirect emissions equivalent to the company’s supply chain(i) Product or service purchased(ii) Capital goods

344

265

243

28

67

31

Calculation method

See previous pageCalculated by multiplying quantity of raw and othermaterials purchased with CO₂ emissions unit value*

Calculated by multiplying amount of capital
investment with CO₂ emissions unit value*

115

101

26

24

19

Calculated by multiplying the quantity of fuel used reported in accordancewith Act on Rationalizing Energy Use with CO₂ emissions unit value*(v) Waste generated from business

4

4

3

Calculated by multiplying volume of waste with
CO₂ emissions unit value*(vi) Business trips

0

0

0

Calculated by multiplying number of employeeswith CO₂ emissions unit value*(vii) Commuting by employees

3

3

3

Calculated by multiplying number of employeeswith CO₂ emissions unit value*

111

304

260

(xv) Investment

Calculated by multiplying the emissions ofmajor subsidiaries** with capital ratio* Unit value database for accounting of GHG emissions throughout the supply chain by the Ministry of the Environment used for Scope3 calculation.
** Ovako (from FY2019), MSSS, Santoku Tech

Currently under construction in Sweden is a fossil-free hydrogenproduction plant within the Hofors steel mill of Ovako.
This plant will generate 3,500m³ of fossil-free hydrogen per hour
through electrolysis of water using fossil-free electricity.
By using the hydrogen produced at this plant as fuel, Ovako will
be able to reduce the Hofors mill’s CO₂ emissions from the processof heating steel before rolling by approximately 50 percent froman already low level.
In addition, this technical solution will be the first step indevelopment of hydrogen infrastructure that can be utilized in thetransport sector; for example, development of fossil-free freighttransportation using fuel cell-powered trucks. The solution is also
expected tocontribute toimproving stabilityof the power grid.
Moreover, theresidual heat canbe utilized in local
area heating
networks.

Ovako Marcus CEO giving a lecture at an event with Volvo Group“Challenge Zero”is an initiative jointly led by Keidanren and the Government of Japan that aims to proactively publicize andsupport innovative actions taken by companies and organizations towards a "decarbonized society" which the Paris Agreement
In line with the thrust of“Challenge Zero”to solve social issues through business-led innovations, we are working to generate(Innovation Challenge 1)
Contribution to zero CO₂ emissions by developing bearing steel for long-life wind power
generation
Recently, the demand for zero CO₂ emissions against the power generation business is rapidly increasing all over theworld. Wind power generation recognized as one of the effective measures, and is spreading mainly in Europe.
One of the major issues for expanding wind power generation equipment is to make it highly reliable equipment that cancontinuously and stably generate power. This is synonymous with reducing
equipment maintenance frequencies, and in order to achieve this, it is required
to suppress troubles during operation. That is, bearings, which are the corecomponents of wind power generation equipment, are required to have highreliability.
Therefore, based on the high-cleanliness technology for steel that we havecultivated so far, we aim to develop bearing steel for wind power generationthat can obtain stable long-life property. Furthermore, we will contribute tozero CO₂ emissions by its implementation and spread.

Engagement to Carbon Neutrality by Ovako
Fossil-free hydrogen initiative by Ovako(hereinafter, Keidanren).

innovation that aim to contribute to reducing GHG emissions and realizing decarbonized society.

139(iv) Upstream transportation and delivery

In October 2020, we became a participating member of the“Challenge Zero”initiative led by the Japan Business Federation(the international framework on climate change) sets as a long-term goal.

Calculated by multiplying quantity of electricity purchased
and fuel used with CO₂ emissions unit value*(iii) Fuels and energy-related activities not included in Scope 1 or 2

Participating in the“Challenge Zero”Initiative
for the realization of a Decarbonized Society

Ovako’
s steel production to be carbon-neutral from January 2022

Ovako, has decided to be carbon neutral in production from January
2022.
Ovako has been promoting world-leading efforts to achieve sustainablesteel production, and as of 2020, has reduced its own steel productiongenerated CO₂ emissions by 54% from 2015.
In April 2020, at its Hofors mill in Sweden, Ovako became the firststeelmaker in the world to succeed in heating steel before rolling withhydrogen, and in June 2021, Ovako began construction of the largest
non-fossil hydrogen production facility in Sweden at the same Hofors mill
to promote efforts toward further reduction of CO₂ emissions.
In this context, Ovako has decided to utilize carbon credits able to be
applied to Clean Development Mechanism (CDM) projects reducing
greenhouse gas emissions, mainly in developing countries, as stipulated in
the Kyoto Protocol and the Marrakesh Accords, until Ovako will achieve
zero CO₂ emissions from its
own steel production. Ovako
has also started dialogues
with its customers on the
introduction of a climate
surcharge to maintain its
momentum to invest in
sustainable technicalsolutions such as hydrogenfuelled heating.

(Innovation Challenge 2)
Reduction of CO₂ emissions in various industrial furnace operations by developing highstrength heat-resistant steel tubes for heat exchangers
Industrial furnaces for heating and heat-treatment used in the steel andceramics industries utilize so-called fossil fuels such as LNG, heavy oil orcoke, and are one of the major CO₂ emission sources. In order to reduce
fuel consumption and CO₂ emissions, the furnaces are equipped with
waste heat recovery devices to improve their energy efficiency. While theheat conversion type recuperator is widely used as a waste heat recovery
device for industrial furnaces, it is required to improve the heat recovery
efficiency of the device, which leads to further reduction. We willcontribute to the realization of a decarbonized society by developing
high-strength heat-resistant steel tubes for heat exchangers that can
improve energy efficiency and expanding their application to industrial
furnaces.

Structure of Recuperators※Ovako SUSTAINABILITY REPORT 202011

Information Disclosure according to TCFD Recommendations
TCFD scenario analysis
Scenario

Established by the Financial Stability Board (FSB), Task Force on Climate-related Financial Disclosures, or TCFD, in June 2017
announced the final report (TCFD Recommendations) and presented a framework for companies to disclose information on climaterelated risks and opportunities.
Considering the situation of international society that is working to achieve the long-term goals of the Paris Agreement, Sanyo Special
Steel has expressed its support for the TCFD Recommendations. To this end, we will disclose information regarding the impact ofclimate change on our business activities.

Carbon neutral-related
responses by customers(increasing needs for low carbon,
decarbonized steel and products
and technologies leading to
reduction in environmental load,
shift to transportation with less
CO₂ emissions (railroad), shift tohydrogen society, etc.)(Reference) TCFD-recommended disclosure items and where to find in this report
TCFD recommendations

Major climate-related
eventsPage[Governance] The organization’s governance around climate-related risks and opportunitiesa)The board’s oversight of climate-related risks and opportunities

p.9b)Management’s role in assessing and managing climate-related risks and opportunities

p.9

Change in demand
structure due to shift
to EV, increasing needs
for smaller and lighter
automobile parts[Strategy] The actual and potential impacts of climate-related risks and opportunities on the organization’s businesses,
strategy, and financial planning where such information is material
p.12b)The impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial
planning

p.12c)The resilience of the organization’s strategy, taking into consideration different climate-related scenarios,
including a 2°
C or lower scenario

P.12

2

a)The climate-related risks and opportunities the organization has identified over the short, medium, and longterm℃a)The organization’s processes for identifying and assessing climate-related risks

p.9b)The organization’s processes for managing climate-related risks

p.9c)How processes for identifying, assessing, and managing climate-related risks are integrated into theorganization’s overall risk management

p.9

or lower scenario[Risk Management] How the organization identifies, assesses, and manages climate-related risks

Growth of wind power
generation market due toexpansion of renewableenergypp.10,14b)Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.

pp.10,11c)The targets used by the organization to manage climate-related risks and opportunities and performanceagainst targets

pp.10,14

Sanyo Special Steel’s strategies-Increase in demand for EAF steel, whichemits relatively less CO₂ and materials,
technologies and products that lead toCO₂ emission reduction at users (long-life
bearing steel, hydrogen resistant stainlesssteel, etc.)

Opportunity-Rising needs for Sanyo Special Steel’shighly reliable special steel products alongwith EV Shift-Increasing demand for SanyoSpecial Steel’s highly reliable special
steel products that have properties tocontribute to making parts smaller andlighter

Opportunity(deepen technologies that respond to further needs for high reliability
in fields such as EVs, wind power generation, and hydrogen society,and other fields where global growth is expected towards carbon
neutrality, and develop and expand sales of strategic items such as
metal powder for 3D printers)

Risk-Decline in special steel consumption per
automobile-Increase in demand for Sanyo Special
Steel’
s highly reliable bearing steel that
leads to reduced maintenance and failure
prevention of wind power generation
facilities

Opportunity

Intensified competition
for mineral resource

due to changes in electric powerand storage batteries demand

Risk-Instability in procurement of auxiliary
ingredients due to restrictions on rare
metal exports

Introduction of carbon
pricing including carbon
tax

Risk

*Additional burden resulting from carbon
tax, etc. means a loss of funds for researchand development and it may lower theinternational competitiveness of theJapanese industries as a whole-Relative improvement in superiorityof electric furnaces, which havecomparatively less CO2 emissions,and especially of Ovako which is moreadvanced in terms of decarbonization

Opportunity

Risk

℃

scenario*2℃ or lower scenario: a scenario in which necessary measures are taken to limit the temperature rise to 2℃ or lower compared with the levelat the time of the industrial revolution
4℃ scenario: a scenario in which special measures against climate change were not taken and the average temperature increases about 4℃.

Shift to EAF for steel
production and increased
use of scrap iron4

TCFD Recommendations call for disclosure regarding the resilience of the organization’s strategy taking into consideration different
climate-related scenarios, including a 2°
C or lower scenario. In the special steel industry, stakeholders including investors are
increasingly interested in changes in key user industries, such as a shift towards EVs for future significant reduction of CO2 emissions
and introduction of carbon pricing and its impact.
Sanyo Special Steel carried out scenario analysis by examining long-term impacts on the Group through 2050 by referring to theclimate change scenarios (a 2°
C or lower scenario and a 4°
C scenario) by the International Energy Agency (IEA) and International Panelon Climate Change (IPCC).

-With highly clean steel, our strength, at the core,accurately respond to new customer requests andenvironmental issues resulting from changes in social
and industrial structures-Strengthen supply chain competitiveness incollaboration with users-Shed light on the fatigue mechanism underenvironments unique to wind power generation andpromote development and market introduction of
bearing steel for wind power generation that realizes
long life and high reliability-Promote development and offering of highperformance products that save on rare resources(ECOMAX series, Co-free maraging steel powder, etc.)-Increasing needs for Sanyo Special Steel’shigh-performance materials that do not
rely on rare metals-Cost increase of electric power and fuels

TCFD scenario analysis

-Promote development of eco-products that contributeto CO₂ emission reduction in the parts manufacturing
stage at users and during usage as end products

Opportunity[Metrics and Targets] The metrics and targets used to assess and manage relevant climate-related risks and opportunities
where such information is materiala)The metrics used by the organization to assess climate-related risks and opportunities in line with its strategy
and risk management process.

Assumed impacts(key risks and opportunities)

More frequent andserious weather disasters
Rising averagetemperature
Decline in water
resources and rising sea
level-Ensure and expand sources for auxiliary ingredients-Further enhance procurement supply chain
management-Promote CO₂ emission reduction of Sanyo Special
Steel Group with eco-solutions, such as eco-processes
and green energy utilizations-Promote procurement of inexpensive carbonfree electricity and win the understanding of users
regarding the value of low carbon and decarbonizationof steel and necessary costs, and reflect them on toselling price, thereby securing an appropriate margin-Strengthen cost competitiveness of the group throughsynergies with Nippon Steel and Ovako-Intensifying global competition to acquire
superior scraps-Expand and ensure procurement sources for main raw
materials and optimize raw materials mix-Reduce procurement costs for raw materials and fuelsin collaboration with Nippon Steel Group-Damage on production facilities fromserious weather disasters, inundation ofbusiness bases and warehouses in coastal
areas, and obstacles to procurement of
raw ingredients, materials and equipment
as well as product supply-Health hazard such as heat stroke andincreased risks of facility failures-Hindrance to operations caused bydecline in stability of water supply-Continuously improve BCM (business continuity
management), including enhancing disaster prevention
management and natural disaster countermeasures-Ensure measures to raise funds for the recovery
by purchasing insurance and utilizing group CMS(implemented)-Enhance procurement supply chain management,
implement water disaster countermeasures assuming
high tides and other disasters and maintain water
sources for own industrial use (continued)

Risk

12

Contributing to resource-recycling SocietySpecial steel products created from recycled materials

Recycling slag from electric arc furnaceWe use electric arc furnace steel-making (which uses ironscrap as a main ingredient) to manufacture special steel,contributing to the recycling and effective use of iron resources.
Scrap iron accounts for around 80% of our raw materials, andif materials recycled internally are included, around 95% of ourraw materials are recycled products.

We promote the recycling of electric furnace slag generated
as a by-product of the manufacturing process, and by ensuring
reliable quality in the product and responding to a diverse rangeof needs, we have been able to maintain a 100% recycling rateof this resource. Our slag products are used mainly as roadbed
material for roads and as an asphalt aggregate instead ofnatural resources such as stone and sand. Moving forward, we
expect it to be used as a raw material in“inhibitors”to control
foam expansion of molten steel and as a recycled aggregate forpaved surfaces.
We use pressurized steam-aging facilities to pressurize ourslag products to the highest level in Japan in a process that
effectively stabilizes any expansion in the products.
In addition, we use a classification machine that can sort slag
products into six stages simultaneously, from coarse-grained
aggregate to fine grains, and multi-functional classificationequipment made up of a granulator that chamfers aggregate
particles to adjust grain size and improve wear resistance .
Using these manufacturing processes, we provide customers
with high-quality electric furnace slag products.
We intend to focus on realizing a sustainable society as
we continue to comply with the Nippon Slag Association’s“Guidelines for Management of Iron and Steel Slag Products”
and not only deploy management systems across all areas
including manufacturing, quality, and sales, but also submit toreviews by third-party organizations to enhance management
systems and further improve reliability.

Initiatives to reduce by-products
In FY2020, the amount of by-products generated by our
production activities was 162 thousand tons, and the amountprocessed, including the volume sold, was 153 thousand tons.
By-products include electric furnace slag, scale, dust, brickwaste, and sludge. Based on the 3 R (Reduce, Reuse, Recycle)
concept, we encourage recycling of these by-products and,of the amount processed in FY2020, approximately 90% waseither recycled or reduced down by incineration, with theremaining amount, approximately 10%, finally being disposed ofin landfills. Moving forward, we will work to expand the use of
by-products in new applications in order to reduce disposal in
landfills.

ReduceReduce usage ofresources such as
electricity and gas
Reduce generation ofwaste

RecycleUtilize scrap raw

3R

Received Awards for Resources Recirculation
Technologies and Systems supported by METI

Subject: Recycling iron scrap into high-value-added special steel using electric arc furnace
The Awards for Resources Recirculating Technologies and Systems is aimed at promoting recirculating business through theencouragement and popularization gained by commending businesses and initiatives that have features of developing superior
technologies that contribute to limiting the generation of waste and reuse and recycling. It is hosted by Japan Environmental
Management Association for Industry, with the support of the Ministry of Economy, Trade and Industry.
Sanyo Special Steel has been offering high-value-added special steel products that contribute to prolonging product life, making themsmaller and lighter, and reducing parts manufacturing costs by developing a highly productive process for ultra-clean steel and casehardening steel that reduces the use of rare resources in the manufacturing process of special steel in electric furnace steel
manufacturing using scrap iron from factories as raw materials. The award was given in recognition of these initiatives’contributions to
the 3R* activities contributing to the development of a resource recycling society and their potential to contribute to the realization ofcarbon neutrality.
*3R: Reduce, Reuse, Recycle

Reusematerial

Reuse water

Recycle by-products

Reuse by-products■Sanyo Special Steel’s 3R activities (image)■ By-product generation
9%

2%

6%

■ By-product throughput
15 thousand ton
10%

0.4%

FY2020

FY2020thousand ton

thousand ton

17%Electric furnace slag

162

153

138 thousand ton
90%

66%
Electric furnace slag

scale

dust

brick waste

sludgeOther

Recycling

Landﬁll disposal

Recycled road paving in Himeji City

Employee receives meritorious person award forenvironmental conservation
Kenichi Okada, senior expert of the Environmental Management Department received themeritorious person award for environmental conservation from the Hyogo Prefecture Association for
Corporate Environmental Conservation. The award is aimed at raising environmental conservation
awareness by commending persons who made significant contributions to environmental conservation,
including the prevention of pollution.
Okada has been working on reducing CO₂ emissions and introducing energy-saving facilities byutilizing his knowledge and experience regarding facilities that he had accumulated in facility
maintenance and construction operations and contributed to efficient facility operations. Further, he
has served as the manager for preventing air pollution since 2014 and that of water quality since 2016.
He was commended for striving to manage each facility, educate employees, and develop a system toprevent violation of laws and regulations.

13Environmental load reduction
Efficient use of water resources

Reduction of air pollutants

Water is vital for the manufacture of our products. It is used
to cool steel and equipment, and also as a source of power forequipment. Although our manufacturing base (Himeji City,
Hyogo Prefecture) does not lie in an area assessed by WRI
Aqueduct to be facing high water stress, we reuse more than
90% of the water employed in our production process, inrecognition of the fact that water is a limited resource. We also
have our own source of water (groundwater) in addition towater supply from the industrial waterworks. Contaminatedwater that has been used in the factory is sent to an on-site
treatment facility to be purified. After this, the purified water isreused in the factory, while the remainder undergoes further
treatment before being released into public waterways. At the
point where the water drains into public waterways, there is asystem that takes automatic measurements to constantly
monitor pH levels, turbidity, chemical oxygen demand (COD),
nitrogen, and phosphorus, and if levels go beyond our voluntary
in-house management standards then an alert is issued to allow
the person in charge to deal with the issue in a prompt manner.
In addition, the water is regularly analyzed for harmful
substances, by an external organization as part of our efforts tomanage water quality and prevent water pollution.

At facilities that generate soot and smoke, we have achieved
SOx (sulfur oxide) emissions well below the levels agreed onwith the Himeji City council by switching the fuel from heavy
crude oil with high sulfur content to LNG (town gas) whichcontains almost no sulfur. In a bid to reduce NOx (nitrogenoxide) emissions, we are using low NOx burners andimplementing proper combustion controls, among otherinitiatives. We have also introduced units that automaticallymeasure NOx in a system that enables us to constantly monitor
heating furnaces, which produce large volumes of emissions.
Furthermore, revisions to the Air Pollution Control Act in April
2018 stipulated that operators should voluntarily reduce
emissions of mercury concentrations in exhaust gases fromelectric steel-making furnaces. Sanyo Special Steel regularly
measures and records mercury concentrations in accordancewith the voluntary standards recommended by the Japan Iron
and Steel Federation to confirm that the concentrations meetvoluntary control standards.
In terms of dust collection facilities, we are working on
initiatives to increase and enhance equipment capacity, such as
the installation of dust collection units in continuous castingsheds in FY2018.
We also use traditional methods of dealing with dust that
include patrols by water sprinkler vehicles and street sweepers
to help prevent the dust scattering.

Chemical oxygen demand in wastewater（COD）
concentration（mg/ℓ）
12

Prefectural ordinance (addition criteria)

10
8
6
4

2.5

2.5

2.5

2.3

2.4

2019

2020 （FY）

2
0

2016

2017

2018

Suspended particulate matter in wastewater（SS）
concentration（mg/ℓ）
35

Wastewater treatment facility

Appropriate controls on chemical substances
In accordance with the PRTR* Act, we monitor the amount ofchemical substances released and transferred. Volumes arereported to the Ministry of Economy, Trade and Industry, and
we also work on initiatives to curtail the amount released.
Furthermore, PCB waste is properly stored and controlled inaccordance with the PCB Special Measures Act and, in addition,
all applicable equipment is systematically updated/disposed of
to ensure disposal is completed by the deadlines stipulated in
the Act.
High-concentration PCB waste is covered based on well-known
documents from the Ministry of Economy, Trade and Industry.
The final excavation of the equipment was carried out, and all of
the equipment was processed by JESCO within the deadline.The
consignment has been completed.Low-concentration PCB wastesquirts the target equipment.To complete the disposal within thedeadline, make a plan and update the equipment.We areproceeding with the disposal.
* PRTR (Pollutant Release and Transfer Register): a statutory system that
promotes improvements in the monitoring and management of theamounts of specified chemical substances emitted into the environment

5
0

0.8
2016

0.6
2017

0.6
2018

0.6
2019

0.8
2020 （FY）

Nitrogen concentration in wastewate

60

Legal standards (No additional standards for prefectural regulations)

50
40
30
20
10
0

897ｔ

Amount ofemissions into
the atmosphere

180ｔ

Amount of emissions
intopublic waterways

11ｔ

Proper disposal of waste

concentration（mg/ℓ）
70

Amount of transfer
outside the business
place

8.1

7.9

7.5

7.5

7.4

2016

2017

2018

2019

2020 （FY）

Sanyo Special Steel subcontracts services to industrial waste
disposal companies that can dispose of waste in a proper
manner, and we conduct checks to ensure that subcontractors
hold the appropriate licenses as well as preliminary inspectionsof their disposal facilities. In addition, we check that our waste
is being disposed of in an appropriate manner through regularinspections of disposal facilities and by confirming industrial
waste disposal conditions in a manifest. We have introduced amanifest in electronic format to ensure that operations are
running properly, and we make every effort to separate waste
at the sites where waste is generated.

66.5
60

Agreement value with Himeji City

57
40
20
0

2.1

1.5

1.1

0.3

2017

2018

2019

2020（FY）

0.2
2005

2016

Nitrogen oxide emissions（thousand ㎥N）
300

Agreement value with Himeji City

250
200

158.9

120.0

150

148.9

150.0

2017

2018

132.0

116.5

100
50
0

2005

2016

2019

2020（FY）

Target/KPI
Reductions in CO₂ emissions resulting from thepromotion of energy-saving measures

FY 2020 Resultst◦Amount of reduction in CO₂ emissions: 0.39% vs BAU

Self-Assessment◦New heating furnaces using regenerative burners○○

Reduction in volume of dust and sludge sent to landfill◦Outsourcing of dust recycling to sub-contractor○○

Improve percentage of brick waste recycled◦Use of brick waste as heat-resistance raw material○○

Compliance with

Compliance with regulatory standards◦Attainment of regulatory standards in all items

regulations

Pollution Control Act, etc.)

by-products

20
10Energy-saving andRecycling of

25
15

Topicsprevention

Prefectural ordinance (addition criteria)

30（thousand ㎥N）

Improvement Plans for environmental conservation

global warming

・Emissions and movements ofchemical substances

Sulfur oxide emissions

statutory laws and（Goal: 2.6% reduction in FY2020 compared to BAU*）*Business as usual (if no special measures are taken)(Water Pollution Prevention Act, and the Air◦Switch to LED lighting(No violations of, or deviation from, laws, regulations oragreements.)○○○◦Implementation of activities to beautify the local area
Education anddevelopment activities
for employees

Regular education and development activities for
employees

information disclosure○○○

individual households (20 participants)

Increase in the number of staff holding official◦ On-going initiatives to increase the number of staff with○○

Regular publication of environmental reports◦ Release of "Sanyo Special Steel Report" on website○○○◦ Implementation of“Environment Month”events○○○

environmental qualifications
Promotion of(approx. 200 participants)◦ Registration of data into carbon footprint calculator for

Cooperation with environmental agencies such as
local government bodies

managerial qualifications in the prevention of pollution

Self-Assessment: The level to which targets have been achieved are classified under 3 stages○○○：Plans have been met ○○：Good progress is being made to achieve plans○：Further initiatives will be undertaken to achieve plans

14Confidence with Customers
Quality improvement
Quality assurance is about creating a process that allows us to accurately grasp the needs of customers and provide a reliablesupply of products that meet those needs, and is directly linked to our corporate philosophy of“Confidence-based Management.”The
Group has established a quality management system based on ISO9001:2015, and we promote quality control activities that create
product quality by integrating our sales division, engineering division, production division, and quality assurance division to ensure that
we satisfy product standards such as JIS and various overseas standards. Furthermore, the Group aims to continue to be an enterprisethat maintains sustainable growth by placing emphasis not only on controlling product quality but also on ensuring that the quality
management system, which is a key part of our corporate structure, can respond to environmental changes such as globalization andchanging customer needs and address the needs to make improvements to realize a more efficient structure.

Quality Assurance SystemThe Quality Assurance Department plays a central role in the quality
management system maintained and managed by Sanyo Special Steel,which forms the cornerstone of our quality assurance system. The process
for product quality control is developed through collaboration between
various divisions. The Sales Division gains an understanding of customer
needs, the Engineering Division then reflects these requirements in the
manufacturing designs, and the Production Division creates the final
product based on these designs. In addition, Sanyo Special Steel continues
to work to provide products that inspire ever-more confidence, using its
Quality Assurance Department (an independent department responsible
for all aspects of quality assurance) to provide checks and balances ina bid to optimize and enhance quality assurance functions. The Quality
Assurance Committee meets regularly and is chaired by the Director in
Charge of Quality Assurance. The Committee discusses basic policy andplans concerning quality assurance for the fiscal year and implements
improvement activities such as“systematic improvements in key issues,”“prevention of quality complaints,”“enhancement of quality assurance,”
and“improvements in customer satisfaction levels.”

Quality Assurance Initiatives
Under ISO9001:2015, individual organizations need to conduct operational risk assessments to address new requirements for“ riskand opportunity initiatives.”Based on issues at Sanyo Special Steel that have been identified through these assessments, we havebeen rolling-out a medium-to-long term PDCA (Plan-Do-Check-Act) plan in a bid to upgrade our quality assurance. Specifically, we areworking to improve our quality management system by continuously updating our quality manuals, implementing quality patrols, andsharing information between organizations through internal quality audits. In addition, we are promoting educational activities, including
lectures to raise employees’awareness on quality issues and e-learning programs regarding quality compliance in November, which is
National Quality Month.

Promotion of skill transfer activities
We have been organizationally and systematically carrying out skill transfer activities since
FY2015 and consistently promoting one-on-one training by pairing employees to impart theskills with those learning them, creating training materials, and implementing a commendation
system to improve their motivation.
We positioned FY2021 as the first fiscal year of the 2025 medium-term plan for skill transfer
activities. Various section managers presented their workplace vision, which they want torealize through the activities, and are carrying out activities considering the future shape of theirworkplace by sharing it with employees involved in the activities.
Against such a background, this turned out to be the year in which the human resource
development through skill transfer activities done so far bore fruit, as the manufacturing sites
were able to transform the production system smoothly to respond to requests for significant
production increase given order recovery from the beginning of the fiscal year and prevented
recurrence of accidental stoppages despite the tight production situation.
Moving forward, we will promote skill transfer activities as a wide-ranging human resource
activity aimed at nurturing multi-skilled workers and early nurturing of new hires with a focus ontransferring knowledge of skilled employees.

Promotion of TPM (total productive maintenance) activities
The entire production division is working on TPM activities to thoroughly eliminate
losses and waste due to equipment breakdowns and problems, increase production
efficiency, and provide a reliable supply of products.
In terms of activities, we have not only set up the“TPM School”as a place toprovide training on basic knowledge about equipment and machinery to develop
human resources with a good understanding of the equipment. But we are also
creating common-interest groups for individual work categories on topics such as
quality improvement, productivity improvement, safety, and cost to allow us to make
improvements every day. This year, we have been distributing online the in-house
TPM contests held four times a year to present the activity achievements so that more
involved employees can watch them.
Moreover, we are coming up with and introducing new equipment and devices at
TPM School to vitalize TPM activities.

Refurbishment work of Small and medium Bar Rolling Mill completed
The refurbishment work of a Small and medium Bar Rolling Mill, which was being driven forward as the core of the production structure reform,
was completed in January 2021.
This investment was aimed to make the mill capable of responding to changes in the demand structure in the future. We invested a total of 19.5
billion yen in improving the respective capacities in rolling, purifying, testing, and heating furnace. The investment enables the plant to respond,
without lowering production efficiency, to demands for a smaller diameter of rolled steel or smaller lots anticipated in the future. The introduction of
Reducing and Sizing Block mill (RSB) enabled the preparation of materials that users can easily process (reducing hardness of steel by high reduction
rolling and refinement of grain size) and allows users to eliminate the heat treatment process. We will leverage the impact of this investment to the
maximum extent and will continue to strive for further improvement in quality, delivery, and cost competitiveness.

Understanding and reflecting customer needs
Once a year, we survey our customers to have them assess us on
QCDD (Quality, Cost, Delivery, Development). We analyze the results andextract any points with low scores for improvement, leading to even higher
customer satisfaction. Furthermore, in order to understand the needs ofcustomers in a timely manner, we hold meetings to exchange technicalideas with customers and we also take part in exhibitions, both in Japanand overseas. We not only present detailed information on the products
and new technologies we have developed, but we also collect information
on customers’latest needs, which is then used to develop and improve our
products.

2020/01
Addition of cooling bed
and cold shear

2020/01
Addition of SM3 inspection lines at Bar steel inspection plant

2019/07
Introduction of RSB

2021/01
Renewal of heating furnace

2019/07
Addition of bundling lines

15

Confidence with Customers
Expanding Technological superiority

New Lineup of Nickel- and Molybdenum-free High Strength Case-hardening SteelSanyo Special Steel Group is further pursuing technological innovation by strengthening research and development and quality
competitiveness for sustainable growth of the Sanyo brand through globalization. In research and development activities, we clarified
the functions of basic research and product and technology development and strengthened the medium- to long-term research anddevelopment planning function to expand technological innovation in each field of basic research, new product and technology
development, and evaluation technologies in a bid to swiftly and continuously create highly reliable products and new technology withan eye on global expansion. We are also emphasizing on the early realization of synergy effects through collaboration among groupcompanies.

Investigating core principles with a focus on productcharacteristics

Basic
researchthat optimizes
product
performance

New productand technologicaldevelopmentthat serves
society's needs

Evaluation
technology

Serving needs from a multilateral approach

As the pace of technological progress accelerates, customer needs are
becoming increasingly diverse and sophisticated. We look from the customer’sperspective to identify those qualities and characteristics that are the true key
to progress and work on these to optimize our steel from its composition andstructure through to production. We are exploring the very limits of steel’spotential

Earning trust through sophisticated evaluation and analyticaltechniques

When it comes to special steel, even slight differences in composition
can impact the characteristics of the material. The progress of evaluation
technology̶making the invisible visible and the unknown known̶is thesource of new knowledge and the basis for the trust placed in us. R&D thatincorporates cutting-edge evaluation technology earns people’s trust in steel.

Research and development activities
Research and development activities of Sanyo Special Group are promoted by the Research & Development Center. It spent a totalof 2,110 million yen in research and development costs in FY2020. The Group is also engaged in research and development in close
collaboration with universities and research organizations of users.
Below is a table showing research and development activities by segment.

Segment

R&D costs

SCｒ420

Molybdenum casehardening steel

JIS Steel（SCr420,SCM420,etc.）

➡

➡

➡

➡

➡

➡

➡

➡

➡

➡

➡

(Products)

High ← Total cost → Low
In parts manufacturing processes that use case hardening steel, whencold forging, a heat treatment process called "annealing" is used tosoften the material. To anneal alloy steels such as case hardened steel, the material is usually heated to about 800°
C until it
becomes an austenite structure, and then slow-cooled over a long period of time to precipitate spherical carbides, which softens
the material. With ECOMAX5, carbides spheroidize and soften in less than half the processing time of conventional methods
without slow cooling by holding the material in the low temperature range for a short time.
In addition, the presence of evenly dispersed spherical carbides due to annealing facilitates high-precision forming in cold
forging and improves compatibility with near net shaping.
Additionally, because of its superior properties
for preventing grain coarsening during carburizationcompared to typical case hardened steels
and other grades in the ECOMAX series, the
ECOMAX5
normalizing process—usually applied after cold
processhighforging and before carburizing—can be omitted,
shortenedshortened
Simpliﬁcation
omittedprecisionand the processing time can be greatly reduced
due to higher carburizing temperatures.
(Products)

47 million
yen

Contributions to the reduction of CO₂ emissions bysimplifying or omitting parts processes

SCM420Chromium molybdenum
case hardening steel

Finishingmachining-Strengthening of technology competitiveness throughestablishment of rapid design technology for optimum molds-Quality improvement of ring rolling articles by utilizing CAE
analysis technology

100

Finishingmachining-Strengthening of technology and costcompetitiveness of the formed and fabricatedmaterials business

Nickel-chromium
molybdenum casehardening steel

Carburizing
and quenching

Formed andfabricatedmaterials

SNCM420

Carburizing
and quenching

526 million
yen（JIS Steel）

Normalizing-Development of new metal powder products in fields suchas electronic materials, magnetic materials, and industrial
machinery

ECOMAX5500

Coldforging-Technology and product development ofmetal power-related products, which havegrowth potential

More than 5 times
longer pitting fatigue lifeColdforgingMetal
powders

Parts that require high strength are typically made frommaterials with added or increased amounts of rare and costly alloy
elements such as nickel and molybdenum. The ECOMAX series, including
ECOMAX5, is based on advanced clean steel technology that maximizes
the inherent performance of steel. By optimizing the balance of alloy
elements such as chromium and silicon, and the operating conditions
ECOMAX5 achieves significant strength improvements despite using
nickel or molybdenum. It achieves more than five times the life of typicalcase hardened steel (JIS SCM420), particularly against (pitting failure)on gear teeth surfaces. The improved fatigue strength of parts promises
further downsizing and weight reduction of various mechanical units,
including those for automobiles.

Annealing

1,536 million
yen(FY2020)- ECOMAX5 is expected to be used for gears and shafts

Annealing

Steel
products- Development of high-performance products
for promising fields such as automotive,
environment and energy, and robot-relatedindustry-Strengthening of quality and costcompetitiveness through improvementof manufacturing processes of mainstay
products such as bearing steel, engineering
steel, and stainless steel as well as tool steel-Upgrading of bearing steel manufacturing process andmaterial evaluation technology and development of long-life
steel-Development of engineering steel for electrification of
automobile and industrial machinery-Development of high-performance stainless steel for theenvironment and energy field-Development of tool steel suitable for the severev
processing and molding-Upgrading of simulation utilizing CAE technology and its
application to manufacturing process

Contributions to the miniaturization and weight
reduction of automotive parts such as gears and shafts(Raw material)

Key tasks

Sanyo Special Steel has developed ECOMAX5 as a new
addition to its proprietary ECOMAX series of nickel- andmolybdenum-free high-strength case hardening steels. The
developed steel meets the expectations for compact andlightweight designs of parts with excellent strength, which is aprominent feature of the ECOMAX Series. It also features a newalloy design that enables customers to omit or simplify their parts
manufacturing processes, thereby contributing to the reduction of
CO₂ emissions, which has recently become increasingly desirable
in terms of life cycle assessment (LCA).

(Raw material)

Research purpose— Contributes to reduction of cost and CO₂ emissions when manufacturing high-strength parts such as gears and shafts —pitting fatigue lifethat is the sourceof trust anddevelopment

All of our technology is based on the core principles. Now more than everbefore, it is essential that we enhance our core research to more thoroughly
investigate those core principles, given today's demands for ever more advanced
product characteristics and mass-production technology. The researchers gazing
down at the microscopic level have their focus on the performance of the final
product.

ECOMAX5 for Omitting or
Simplifying Parts Manufacturing Processes- Simplification and omission of the manufacturing process for gear and shaft
parts (example)

16

Confidence of Suppliers
Realization of sustainable procurement
The Group promotes procurement activities based on its Basic Procurement Policy, ensures compliance with laws and social norms,
conducts fair and equitable transactions widely, with an open-door policy regardless of whether it be in Japan or overseas, and promotes
environmentally-friendly procurement activities with our suppliers. These days we are required to contribute to the sustainability ofsociety in various forms as part of our corporate social responsibility. The Group has identified principles for“sustainable procurement”
such as accountability, transparency, respect for human rights, and ethical behavior in the procurement of raw materials and services, andthese principles are reflected in our procurement decisions. In addition, we strive to maintain and improve mutual understanding and trustwith our suppliers as we aim for mutual development as business partners; and through stronger partnerships, we endeavor to realize“sustainable procurement”that will contribute to the sustainability of business operations for all our suppliers.

Implementation of a supplier awards (to strengthen partnerships)
Sanyo Special Steel believes that building good trading relationships with suppliers is essential for sustainable procurement andvalues its partnerships with suppliers. As part of this, we have set up an award scheme for suppliers. Under the supplier award
scheme, we comprehensively evaluate a number of factors to select suppliers who have attained outstanding achievements
and present them with an award. The scheme covers raw materials, various other materials, maintenance, and outsourcing
services supplied to each division, and the factors used in evaluations include the quality, cost competitiveness, delivery deadline
management, business status of the supplier, environmental measures taken, and service provided with regard to transactions
carried out with Sanyo Special Steel over a fixed period of time. In fiscal 2021, we also commended Five companies that madeoutstanding achievements.

Procurement of ferro-alloys considered to be“conflict-free”■ Basic procurement policies
In our procurement activities, Sanyo Special Steel complies with all relevant laws, conducts an open-door policy across the board,regardless of whether in Japan or overseas, and conducts fair and equitable transactions as we strive to build partnerships with our
suppliers. We also promote environmentally-friendly procurement activities.
1 ． Compliance with laws, regulations, and social norms
In addition to complying with all relevant laws and regulations, as well as social norms, and acting in good faith, we manage any
information obtained in the course of a transaction in a proper manner. We will also ensure that any relationships with anti-social“Conflict minerals”indicate four minerals mined in the Democratic Republic of Congo (DRC) and its neighboring countries; these are tin,tantalum, tungsten, and gold, and they are referred to as 3TG (from their initials). There are concerns that some of the profits from thetrade in 3TG are used as a source of funding for militia groups, contributing to human rights violations and conflict. While we purchasetantalum and tungsten needed in the manufacture of special steel, we check through our suppliers that any purchases are“DRC conflictfree”(i.e. not used to fund militia groups.) In addition, if customers ask whether our products are“DRC conflict-free,”then we issue astatement declaring them to be so using the“Conflict Mineral Report Template.”

forces posing a threat to the order and security of civil society are not allowed to continue.
2 ． Fair and equitable trading
Regardless of whether in Japan or overseas, Sanyo Special Steel conducts an open-door policy across the board, providing all
suppliers with the opportunity to participate and conducting transactions based on economic rationale.
3 ． Building partnerships
Sanyo Special Steel conducts transactions with all its suppliers on a fair and equal basis as we strive to maintain and improvemutual understanding and trust and aim for mutual development as business partners.
4 ． Promotion of environmentally-friendly procurement activities
In collaboration with our suppliers, we are building a system that ensures we do not purchase raw materials, other materials, or
machine parts that contain hazardous chemicals.

Responsible procurement
Initiatives for the construction of a reliable
procurement framework
Sanyo Special Steel factories are usually in production
24 hours a day. Consequently, with the collaboration of
our suppliers, we use a 24-hour system to take delivery ofscrap iron (our main raw material). We also procure therequired amounts of ferro-alloys and supplementary material
when needed. In anticipation of the risk of disruptions to
supplies due to disasters and other factors, we try to gain
an understanding of production conditions, production
locations, delivery routes, and other information for our key
procurement items through initiatives such as visiting our
suppliers’factories. We also regularly share information on
procurement items with suppliers, and we have establisheda sustainable production system for times of emergency bysecuring prompt replacements in the event of an emergency
and by holding an appropriate amount of stock on our
premises.

3TG
Tin
Tantalum
Ｔungsten

DRC countries

G old

Declaration for the establishment of Partnership relations
Sanyo Special Steel announced a Declaration for the establishment of Partnership relations that aims to improve value addition
throughout our supply chain by working together to co-exist and co-prosper with our supply chain partners.
The Declaration for the establishment of Partnership relations is an initiative for which the framework and system has been affirmedby the“Council on Promoting Partnership Building for Cultivating the Future”comprising representatives from the business circles andthe labor organizations as well as related ministers and promoted by the Cabinet Office and the Small and Medium Enterprise Agency.
The initiative aims to: prevent SMEs and small enterprises from“bearing burdens caused by unfair trade conditions”and continuing
to advance efforts for encouraging companies to introduce appropriate
trade practices, while taking into consideration impacts of the
COVID-19; and to encourage companies to build new partnerships
involving efforts for increasing value added across supply chains andopen innovation across business scales, groups and borders, and others.
We will continue strengthening partnership relations with our
suppliers to seek mutual development as business partners.

17

Confidence of EmployeeCorporate health management

Prevention of mental health issues

Based on the recognition that the safety and health of employees are the major premises of business activities. Sanyo Special Steelconsiders developing a workplace environment where each employee can work every day with a sense of fulfillment as an essential
management task and drafted the Sanyo Special Steel Corporate Health Management Declaration. We extended the retirement age
to 65 in April 2021, but the risk of suffering from lifestyle-related diseases and critical illness increases as we age. Further, poor mental
health affects the vitalization of productivity and the organization quite negatively, so it is essential to prevent it and detect it early on.
From these perspectives, Sanyo Special Steel developed a health and productivity management promotion structure headed by thepresident as the chief health officer and works together with the health insurance association to improve each employee’s lifestyle andcomprehensively prevent poor mental health.

Sanyo Special SteelCorporate Health Management Promotion
Sanyo Special Steel recognizes that its employees' safety and health are the basic premises anda material management issue. Based on the principle, we declare that we will maintain andenhance employees' health through comprehensive eﬀorts, working together with the healthinsurance association. We continuously strive to create a good working environment for our
employees to work with a sense of fulﬁllment every day.

We will maintain and enhance employees’
mental health through measures to prevent
mental health issues.

We will promote employees’health throughlifestyle improvement.

[Key initiatives][Key initiatives]●Strengthen mental health-related measuresthrough line management relationships, such aslabor management seminars and training following
promotion to a managerial position●Hold a“walking event”for employees to make it ahabit to take exercise(offer incentives depending on the number of steps
they take during the period)●Reduce smoking rate through proactive measures
・Set no-smoking day
・Conduct training to quit smoking●Provide specified healthguidance to improve
lifestyle

Hold labor management
seminarSanyo Special Steel Co., Ltd.
Representative Director and President

August , 2021

Line management such as an individualinterview

MIYAMOTO Katsuhiro

For promotion of corporate health management【 Promotion System 】

Chief Corporate Health Officer（President & CEO）

Corporate Health Management
Promotion Committee

Corporate
HealthInsurance

Corporate Health Management
Promotion Officer

Corporate Health Management
Promotion Department

Workplace Health Promotion
General Manager in each Department
Group Manager in each Department

GeneralSafety and
HealthPromotionCouncil

Sanyo Special Steel considers employees’healthmanagement from the perspective of business
management and makes investments in their healthto improve the vitality and productivity of employees
and energize organizations. Poor mental and physicalhealth of employees reduces productivity but also
may lead to an outflow of human resources due toleave of absence, quitting a job, or other reasons. We
offer statutory health check-ups, tests for detecting
metabolic syndrome, and health guidance toemployees, in addition to stress checks, which weremade mandatory in FY2016 regularly. We carry out
group analysis based on the results of these tests andrecommend those suffering from high-stress levels to
see an occupational physician. Moreover, we have amental health consultation counter that counsels for
smoking cessation and dieting treatments.
In August 2021, we developed a health andproductivity management promotion structure
headed by the president as the chief corporate
health officer to promote further initiatives andcontinued improvement. Also, we established a healthand productivity promotion conference involving
occupational doctors, health insurance associations,and labor unions as a meeting body and placed
employees in charge of promoting health at each
workplace. We will develop a working environment
where each employee can work every day with asense of fulfillment through continuous improvement.

Support for lifestyle improvement

Development of a good working environment

Prevention of diseases and infections

We will create a working environment where
employees can work with a sense of fulfillment
through continuous improvement.

We will minimize the risks of employees getting
diseases by carrying out thorough hygiene
management[Key initiatives][Key initiatives]●Take measures to prevent heatstroke
・Provide air-conditioned uniforms
・I nstall water servers at each workplace in thefacilities
・Provide salt supplements and rehydration drinks●Take preventive measures against COVID-19
infections
・Implement workplace vaccination
・Install hand sanitizers at key locations in the facilities
s guidelines for preventing・Formulate the company’
infections●Conduct educational activities for employees, suchas health-related lectures

Provide air-conditioned
work uniform

Install water servers at each workplace●Distribute oral-care goods via the health insurance
association

Workplace vaccination for COVID-19

18

Confidence of Employee
Diversity management
Sanyo Special Steel recognizes that a good working environment for female employees is also ideal for male employees. We
have been creating a workplace where all employees can demonstrate their abilities irrespective of their gender. More recently, theglobalization of business activities has been rapidly advancing, and about 70% of Sanyo Special Steel Group employees are foreign
nationals. Under such circumstances, we established the Diversity Promotion Group in January 2021 as a dedicated organization.
Diversity-related initiatives of businesses need to improve corporate competitiveness by enabling all employees, regardless of gender,
nationality, age, academic background, or career history, to fully demonstrate their ability. We are implementing various initiatives topromote female participation, utilize senior employees after extended retirement age, and employ people with disabilities. For further
growth in individual employees and the development of Sanyo Special Steel, we will vitalize diversity and inclusion where diverse
human resources gather and develop mutually.

Active participation by womenWe have set a goal of raising the ratio of female staff to 25%. We have increased
the business areas where they can work actively by systematically recruiting female
employees and expanding the range of their work. Also, we introduced a system forfemale employees to continue working by alleviating the pressure on them during theirlife events, such as childcare leave, childcare allowances, and shorter working hours.
Under the Plan of Action for General Employers in accordance with the Act on the
Promotion of Female Participation and Career Advancement in the Workplace, wehave set a goal to increase the average length of service of female employees by 15%
in three years from April 2020 to the end of March 2023 compared with March 2020.
We are promoting the awareness of female employees through external training anddeveloping an organizational culture that encourages their participation.

Percentage of female staff（As of the end of March 2021）

13％（Planning jobs25%, Technical jobs6%）

Active participation by senior generation
Extension of retirement age

Ahead of other special steel manufacturers, Sanyo Special Steelextended the retirement age from 60 to 65 in April 2021.
It is to promote experienced employees to further demonstrate
their ability as highly skilled experts in the field where they have
served for many years by boosting their morale and the vitality of
the workplace. We will also promote expertise and skill transfer,
nurture younger employees, and strengthen competitivenessthrough maintenance and improvement of manufacturing abilities.

Extend employment program

Sanyo Special Steel has established an extended employment

program for employees who have reached the age of 65. Making
active use of certain older staff members who are healthy, wanting
to work, and capable of performing their jobs is consistent withthe concept of diversity. Employees who are deemed necessary
in the performance of work and from the viewpoint of technology
and skills transfer as of the time they turn 65 stay on in extended
employment as“senior citizen partners.”As of April 1, 2021, there
were 78“senior partners”active across various work sites.

Employment of people with disabilities
We promote the employment of people with disabilities in a bid to achieve a society where everyone can enjoy an active working life.
We not only promote recruitment initiatives in conjunction with Hello Work (the Japanese government’s Employment Service Center) andspecial support schools, etc., but we are also constantly making efforts to improve the work environment in both hard and soft aspects. In
addition, any employee certified as disabled after joining the company is offered support to keep working, with consideration given to his/herwork content and working hours. As of June 1, 2021, we had 23 employees with disability playing an active role in a range of work sites.

Promotion of work-life balanceTo achieve a work-life balance means to perform one’s duty at work with a senseof fulfillment and satisfaction while at the same time having a free and diverse choiceof lifestyle options in terms of family and community life. The“Work-Style Reform
Related Bill,”a package of legislation to give a push towards better work-life balance,
has been implemented one by one since April 2019.“Work-style reforms”such as
the prohibition of long working hours, properly managed working hours, and theobligation for employees to take a certain number of annual leave days have become
increasingly important in terms of achieving a work-life balance. Sanyo Special Steelpromotes Wednesdays as“no-overtime days.”It promotes increased productivity ina bid to reduce overtime hours, as well as to improve the rate of paid leave taken.
In terms of the paid leave taken by employees, the figure at Sanyo Special Steelremained low (48.4%) in FY2020 due to employment adjustment amid the COVID-19
pandemic, but it has been striving to achieve the goal of 70%. Furthermore, as wellas encouraging employees to take blocks of paid leave or incremental leave andestablishing a system that exceeds statutory requirements for maternity leave,
childcare leave, and nursing care leave, etc., we are also striving to achieve a worklife balance for each employee by creating a work environment and culture thatmakes it easier to take these leaves.

Respect for human rights

In the Guidelines for Corporate Behavior, which describes the actions taken by a company, Sanyo Special Steel Group has
stipulated that it aims to respect human rights inside and outside Japan, abide by the relevant laws and regulations andconform to and respect the spirit of international rules. We also aim to fulfill our social responsibilities to create a sustainable
society based on high ethical standards and promote business activities that respect human rights.

Human rights-related education andrelief mechanisms

Sanyo Special Steel Group, through various educational
opportunities, including grade-based training and labor
management seminars, has been developing a corporate
culture in which each employee’s human rights and diversityof each employee are respected.
The Group also has established a help desk regarding
various compliance issues, including human rights. We notify
employees of the details of the system, contact detailsof the service, and that those who consulted or made areport would not be disadvantaged. We have developed amechanism in which employees and involved parties canseek consultation, and the company can grasp and identify
human rights violations.
In response to individual matters reported to theconsultation service, we investigate the facts and protect
the privacy of the whistleblowers and those who came fora consultation to avoid being disadvantaged and strive toappropriately solve them with advice from lawyers andexternal experts as necessary.

Prevention of child labor and forced labor

Sanyo Special Steel Group ensures compliance with laborrelated laws and regulations in various countries and regionsin accordance with the international norms and corporate
behavior guidelines to prevent child labor and forced laborin business activities.

Building and maintenance ofsound labor-management relationship

Sanyo Special Steel Group respects labor unions’rights
to organize and collective bargaining in line with laws,
regulations, and labor agreements. We strive to build andmaintain sound labor-management relationships and mutual
understanding based on bilateral dialogues, which are thebasis of the relationship with labor unions. The Group has
regular discussions regarding management conditions,safety and health, management-related various issues, labor
conditions such as salary and bonuses, and work-life balance.
We comply with the rules, such as minimum wages,
stipulated by laws and ordinances of various countries andregions and set forth treatments, such as salary, based on
the conditions agreed in sincere negotiations with labor
unions. We have adopted performance-based remuneration
for a bonus. The amount is decided based on the businessperformance of the previous fiscal year based on anagreement with labor unions upon negotiations.

19Confidence of Employee
Human resource development
Sanyo Special Steel systematically offer various training in accordance with job description and career as well as training for all
employees to develop their abilities. We are also encouraging employees of affiliates to participate in such training to promote humanresource development of the Group.

Nurturing of personnel who can think autonomously
Under our basic policy of“developing employees andmake full use of their potential,”we have developed
a meticulous education and training system to nurture
personnel who can think autonomously with anindependent mindset and can-do spirit and are able toset forth tasks on their own and solve them and are also
providing timely training in addition to education throughdaily operations.
We also have an incentive program for acquiring
qualifications, in which reward is given if an employee
acquires a qualification or license, division-based specialized
training such as for patents and sales, and diverse grouptraining as well as dispatch to various external training andcorrespondence education as support systems and training
for employees’self-development.

Creating a safe workplace
As a manufacturing enterprise, our Group believes that“safety”should be afforded top priority above all. Evidence of this is theway that employees greet each other with“Keep Safe!”to impart a sense of safety in one another. In order to put our corporate
philosophy of“Corporate-based Management”into practice, our goal is to achieve“no accidents at all over the year”under theGroup’s safety activities. We believe that we need to achieve a total absence of accidents throughout the year across the entire
Group in order to build relationships of trust with various stakeholders and to achieve sustainable growth for the Group. All
employees need to work together on safety activities, and if even one person is left out, then the goal cannot be achieved. There
are no short-cuts in safety activities. Our objective is to achieve a whole year that is totally free of accidents by building up safety
activities in the Group day-by-day to create a workplace where all employees are safe and can work with peace of mind.

2021 Comprehensive Health and Safety Management Policy■Basic policy
All members of workplace review whether or not they are not blindly believing that the current work method is thesafest and whether their sensitivity to feel what is dangerous as dangerous. Do not take your eyes off hazards, identify
risks, and build safe workplace environment that can be further improved■SloganObviously there are risks hidden in familiar operations
Go back to your first time and assess risks from different angles■Three safety principles
Stop, Step Back, Check Hands & Feet̶then double-check that it is really safe
■Goal
Achieve a total absence of accidents
Occupation accidents“0”Accidents on the way to work“0”Human resource management: 〜Establishing work tasks and training themes through dialog〜During personnel appraisals at the company, we naturally discuss final outcomes, but in addition, we also place emphasis onquestions such as “Did you set high goals and strive to achieve them?”or “Did you carry out a definitive process to achieve yourgoals?”in the appraisal in order to foster self-direction and the spirit to take on a challenge in our employees. Employees’work tasks
and topics are established through dialogue with their line manager, which allows them to clarify goals and make efforts to improvetheir skills. This approach also leads to a strengthening of the relationship of trust between managers and their staff. At Sanyo Special
Steel, we also support the self-realization of each individual through a self-assessment system in which individual employees can state
their own aspirations regarding job and workplace options through career design talks and interviews for junior employees.

Training for international personnel
In response to the globalization of the business environment, we areaccelerating our training of employees capable of performing on theinternational stage.
We are developing a global mindset by offering overseas language
training for Freshers in planning work and short-term language
training overseas for selected employees. At the same time, we areworking on systematic nurturing of international personnel who canconsciously act with diverse perspectives going beyond borders,build favorable relationships through ample communications withusers and involved parties throughout the world, and produce results
through systematic planning, including dispatch to overseas affiliates
based on a role model and to study abroad and dispatch to research
institutions overseas.

Introduction of self-transformation program throughmultifaceted observation
In FY2020, we introduced a self-transformation program
through multifaceted observation. The program targets
the management layer, including officers and division anddepartment managers. Participants confirm their evaluation
by superiors, colleagues, and subordinates to grasp how theiractions are viewed by their subordinates and people aroundthem and thereby objectively grasp their management andbehavioral characteristics and use this as an opportunity for selftransformation.

Occupational health and safety activities
Safety and health management
Sanyo Special Steel has in place a Safety and HealthCommittee chaired by the general safety and health manager(Executive Officer in charge of Safety & Disaster Prevention
Office) that works to secure safety and security of employees in
the workplace. The Committee meets every month to discussmatters such as basic measures to avoid danger to the safety
and health of employees, the cause of industrial accidents andmeasures to prevent their recurrence. Since majority of themembers are the labor union representatives in accordancewith law, the committee reflects the opinion of workers inthe safety and health policies. The state of safety-related
activities for each month is checked by the Corporate Policy
Committee, while the summary of safety and health activities
for the whole year is reported to the Board. We are constantly
making progress through effective use of PDCA cycle (planning,
implementing, monitoring/supervising, and taking steps for
improvement).
For overseas subsidiaries, we identify weak points in terms ofsafety by utilizing safety monitoring at local plants and online
meetings and offer support and instructions for safety activity
promotion by exchanging opinions and sharing information
regarding initiatives by respective companies.

- to ensure safety -and 64) and senior citizen partners (ages 65 and above) in
2020, we included employees of the members of our suppliers’organization.

Simulated experience training center for safety
We have established a simulated experience training centerfor safety that allows us to simulate dangers in a bid toeradicate occupational accidents. In 2020, 2,485 employees
were trained at the center, and to date the total is 28,754. In
2018, we installed VR (virtual reality) equipment to give a more
realistic experience. Moving forward, we will add new training
content to allow us to consider the importance of hazard
avoidance with our members of staff.

Grade-based training
Safety knowledge, risk behavior, and sensitivity to hazards,
etc., vary for each age group and grade. Therefore, we needto conduct specialist training for each respective grade. For
the training targeting rehired employees (between ages 60

20

Creating a safe workplaceDisaster prevention initiatives
Risk management in emergency situations

Safety Proposal Making System
We have launched a Safety Proposal Making System aimed at strengthening measures to prevent accidents by inviting proposals
on ways to identify unsafe spots in each workplace, ideas for safeguarding, and methods for working in safety, based on which we
implement improvements. Sourcing proposals from workers who are actually working on site is not only effective in developing specificsafety measures but also promises improvement in the workers’safety consciousness while preparing a proposal. We believe thatthe system will turn into a safety activity of truly bottom-up nature, which forms the core of our safety activities. In FY2020, 36 safety
proposals were made.
Moreover, we designate Safety Pros from among team leaders of work sites who are expected to lead by example in initiating
improvement in work operations and environments of the team. In this way, we are working to raise safety awareness and create asynergy with the Safety Proposal Making System.

Activities of Safety Promoters
Sanyo Special Steel has been running the Safety Promoter activities since2016 with the goal of“bringing true safety”through an integration of topdown style and bottom-up style safety activities. We select young to midcareer employees from each workplace and educate them on accurate
safety knowledge and the importance of adherence to rules, and thereby
train personnel who can independently judge on safety and take action.
Young and mid-career employees who are designated as a Safety
Promoter will patrol the work sites of their own as well as of others,
through which they notice the strengths and weaknesses of their own
workplace and hone their sensitivity to recognize hazards. They also
engage in risk assessment activities to sort out hazardous works, all ofwhich are combined with improvement measures for facilities to put inplace a state of substantial safety.

Initiatives to heighten disaster prevention and readiness awareness〈Number and Frequency Rate of Industrial Accidents with Lost-worktime Injuries〉
5.00

13

Number of industrial accidents
with lost-worktime injuries
Frequency rate of industrial accidents
with lost-worktime injuries

9

9

2.36

1.77

5

1.04

2

1.67

3

1.10
0.54

0.38
2010

3.00

6

6

0

4.00

2011

2012

2014

2.00

1.26

4
1.00

2
0

2013

7

2015

0.88

0.38
0.00

2016

2017

2018

<For reference> Frequency rate = number of lost-worktime injuries ÷ cumulative hours worked × 1,000,000

2019

2020

0.00
（Year）

Frequency rate

Number of industrial accidents

15

10

Many employees work at our company, where we have various
types of facilities and equipment. In addition to establishing a
regular fire and disaster prevention management system, we takevarious steps to prevent accidents and stop the spread of (minimize)
damage when a disaster does occur. For example, we havedeveloped manuals in preparation for possible plant accidents suchas fires or explosions and natural disasters such as earthquakes, andwe hold regular disaster drills, among other measures.
The basic policy for FY2020 was“to aim to raise awareness offire and disaster prevention measures through drills and training andcreate a workplace culture and staff well able to respond to disastersituations,”with the following four points set as priority items.
“Enhance fire and disaster prevention management”“Enhance management of facilities at high risk of fire, explosion, orleakage”“Improve capacity to respond to disasters through on-goingtraining and drills for fire and disaster prevention”“Enhance disaster prevention measures by using specialist disasterprevention teams.”
In FY2020, we started fire and disaster prevention risk
assessments to improve disaster prevention awareness of
employees at both plants and offices. We will identify new risks andformulate and implement countermeasures to reduce potential risks.

To further enhance disaster prevention and readiness awarenessamong staff, the company holds workshops each year targetingsupervisors and officers responsible for hazardous materials as well
as workshops for fire prevention officers and disaster prevention
officers. We are making efforts to improve the level of controlof small and minute amounts of hazardous materials at licensed
facilities by providing direct instruction to workplace managers
and those responsible for handling hazardous materials and highpressure gas.
In FY2020 at the workshop for supervisors and officers responsible
for hazardous materials held in July, participants were reminded of
the types of hazardous materials regulated under the Fire Service
Act and the current state of hazardous materials facilities, etc.,
on our factory premises. We also raised their awareness of their
responsibilities and duties as supervisors and responsible officers.
At the workshops for fire prevention officers and disasterprevention officers held in September, participants were reminded
to carry out disaster prevention management inspections (once ayear) in each workplace using a voluntary inspection check sheet
to prevent shelves and cabinets from toppling and items fromfalling. They also deepened their understanding of the need of firstaid, cardiopulmonary resuscitation and AED in saving lives fromdisasters, accidents or sudden sickness.
Regarding the management of facilities, we worked on 3S
activities in licensed facilities for hazardous materials and highpressure gas equipment, with June and March designated as themonths for improving controls in the licensed facilities, and Octoberas the designated month for improving controls on high-pressure
gas equipment. Moving forward, we will continue to promotefurther awareness of disaster prevention issues among employees
through these disaster prevention training programs and control
enhancement activities.
In FY2018, we started holding a first-aid course for operating
managers. The course provided training on critical care/
cardiopulmonary resuscitation (chest compressions/use of AED),
preventing blood loss, and other first-aid related topics with help
from nurses.

Conducting disaster drills
The equipment and hazardous materials used at our company
differ from workplace to workplace. Furthermore, awareness of
disaster prevention, as well as experience in disaster prevention,varies widely among employees, not to mention new employees

participating in disaster prevention training for the first time. In
addition, the scale of a disaster may require coordination withaffiliated companies. In view of this, when conducting disasterprevention drills, we identify appropriate emergency situations toensure that drills are more specific and practical.

Typical disaster prevention drills in FY2020

In FY2020, we conducted a large number of drills, including alarge-scale earthquake disaster drill, a joint factory disaster drill with
the Shikama Fire Department, and initial firefighting drills at each
workplace.

Disaster drills carriedout in FY2020

51• Disaster drills for major earthquakes

In FY2020, We conducted a major earthquake disaster drill on
September 2 based on the scenario of a huge earthquake with an
epicenter in the Nankai Trough that has disrupted lifeline systems
providing power, water, gas, and transportation. The goal of thedrill was to“walk home.”At the beginning of the drill, participantsevacuated to the primary evacuation point to be accounted for,and then moved on to the ground, which is the final evacuation
point, split into groups according to the direction of their homes,
formed up in lines, and started walking towards home (up to thefactory gates). Assuming employees who have difficulties returninghome as well as evacuating, the drill was made more practicaland incorporated distribution of emergency rations. When a large
earthquake occurs, transport facilities would be in chaos, and roads
would be disrupted. Through these drills, we will continue working
to raise awareness and readiness of the employees.

• Emergency drill conducted jointly with Shikama fire station

In November 2020, we held a disaster drill at an extrusion plantin conjunction with the Shikama Fire Department, based on the
scenario of a fire occurring at a transformer of an electrical room,
which caused both electric fire and oil fire resulting in a power
outage of the plant.
The drill included a series of training such as initial fire
extinguishment by a local fire fighting team, fire extinguishment byprivate and public fire brigades, rescue of and first aid for injured,and information gathering and communication of instructions by thedisaster task force.
We set forth the main theme of the drill as implementation andconfirmation of cutting power before fire extinguishing activities inelectric fire and practicing foam fire
extinguishment in oil fire. Moving
forward, we will continue to work
towards improving our awarenessand response skills to help prevent
fires/disasters in the workplace bypracticing these kinds of disaster
drills.

Preparing for earthquakes and other wide-area disasters
In the event of a major earthquake and other disasters,
it would be difficult to confirm and consolidate information
on employees’safety and whereabouts by phone or otherconventional means. Sanyo Special Steel, therefore, has
introduced a system that uses the internet to account for theirsafety during emergencies, and has built a system enabling us
to take measures necessary for business continuity.
Further, we have set aside, at our head office plant,
emergency food and drinking water necessary to ensure safe
return to home or standby of the employees working at theplant and other subsidiaries and affiliates located within thepremises. For sales bases situated in urban areas, we havestored disaster prevention equipment assuming it would be
difficult for employees to return home, in preparation for likely
wide-area disasters such as a major earthquake.

21

Enhancement of Corporate Governance
Sanyo Special Steel, under its corporate philosophy“Confidence-based Management,”aims to acquire the confidence of society bycontributing to the realization of an affluent and culturally rich society and fulfilling our social responsibilities through our“high quality
special steel manufacturing.”Moreover, we recognize that earning the confidence of customers by rapidly ascertaining exactly what
their needs are and providing them with high-quality special steel products, and building confidence among people by deepening
communication with all of our stakeholders and acting autonomously in conformity with social norms are essential for the company’ssurvival and consider it as our mission.
In order to realize this, Sanyo Special Steel has developed a corporate governance structure suited to the Group’s business, and wewill work to enhance corporate governance in a bid to improve efficiency, soundness, and transparency in our management.

Overview of corporate governance

General Meeting of Shareholders

Nomination and Compensation
Advisory Committee
Representative
Director and President
Independent
external directors (three)

Board of Directors

Audit Supervisory Board

nine directors
including threeexternal directors

four auditors
including two
external auditors

Number of female directors

1(One out of nine directors is female)

Representative Director and President

Corporate Policy Committee

3)

Companywide Committees
Risk Management Committee
Rewards and Sanctions Committee

Business department

Internal Control &Audit Department（Internal audit）

2)

4)

Subsidiary / Aﬃliate

Measures to improve the functioning of the Board of Directors

1/3

Basic policy of internal control system

Executive Oﬃcers

Board of Directors
The Board of Directors consists of nine directors (of which three
are independent external directors and one person is a female
director) and four Audit & Supervisory Board members (of which twoare external members) and meets once a month as a rule to decide
important matters and supervise business execution by directors.

(Three out of nine directors are independent outside directors)

Accounting Auditors

execution >Risk Management Committee and other company-wide committees
Risk Management Committee is composed of all directors
including external directors, all Audit & Supervisory Board members
and others, with the Representative Director and President serving
as the chairman and is held four times a year in principle. The
committee discusses and exchanges views on matters such as
development and operation status of internal control systems andoperation status of whistle-blowing system.
Besides these, with respect to business execution, we have alsoestablished company-wide committees and meetings that discuss
important business matters such as the Zero Carbon Promotion
Committee to realize carbon neutrality in 2050 and the Safety and
Health Committee.

Ratio of independent external directors< Autonomous internal control >< Business

Sanyo Special Steel is a company with an Audit and Supervisory
Board. By adopting a structure where a Board of Directors that
includes three independent external directors and an Audit &Supervisory Board that includes two external Audit & Supervisory
Board Members audit and supervise the business execution, we
ensure the enhancement of corporate governance and in turn theadequacy and swiftness of decision-making and transparency andfairness in management.
Aiming to set a clear division of responsibilities between“deciding
policies and overseeing the management”and“executing business,”
as well as to be able to make swift decisions amid the changing anddiversifying business environment, we have adopted the executive
officer system.

1)1) Audit of our subsidiaries and aﬃliates are conducted by Accounting Auditor as part of the audit of our consolidated
accounts.
2) Each subsidiary and aﬃliate has a designated section in charge of auditing.
3) Committees and meetings include the Security Trade Control Committee, the Environmental Conservation Committee, theCorporate Budget Committee, among others.
We also have a compliance help-desk, a whistle-blowing system to prevent the occurrence or recurrence of any breach ofcompliance.
4) Members of the Audit & Supervisory Board investigate the operations and assets of subsidiaries as needed.

Audit & Supervisory Board
The Audit and Supervisory Board, which consists of four members
including three full-time members (of which two are full-timeexternal members) and one part-time member, formulates auditing
policy for each year and conducts the audit as needed with a broad
perspective and covering not only the performance of duties by the
directors but also the state of risk management, compliance, andother matters pertaining to internal control. Based on its results,
an audit opinion is presented to the Representative Director andPresident and also to other business execution divisions as needed,
ensuring objectivity and neutrality of management audit function.
Sanyo Special Steel adopts a Senior Audit & Supervisory Board
Member system to further strengthen the auditing structure. In orderto prepare for cases where the number of Audit & Supervisory Board
Members falls below the required number stipulated by laws andregulations, we have appointed one Substitute Audit & Supervisory
Board Member.
Nomination & Compensation Advisory Committee
The Nomination & Compensation Advisory Committee comprisesof the Representative Director and President and independent
external directors and is a non-statutory advisory body independentof other entities such as the Board of Directors. The committee
discusses all matters pertaining to nomination and compensationof directors, and the Representative Director and President advises
the Board of Directors as needed on the contents and opinions
discussed. The Board of Directors resolves regarding the nominationand compensation of directors taking into account the discussions
by the committee.
Corporate Policy Committee
The Corporate Policy Committee consists of the Representative
Director and President and directors who are posted in Japan.
The committee is chaired by the Representative Director andPresident and is held twice a month in principle to confirm the basic
management policy and other important matters.

To improve the functions of the Board of Directors, we also conduct
analyses and evaluation of the Board’s effectiveness. We do thisthrough a questionnaire survey targeting directors and the Audit &Supervisory Board members on all aspects of the Board of Directors,
from its composition to the way it is run, the state of discussions, andhow the cooperation with outside directors is going, among othertopics. The Board then assesses the outcome of the survey.
In FY2020, based on the results of the evaluation of the effectivenessin FY2019, we set the following tasks and took measures.
<FY2020 tasks and measures>（１）
Optimizing the ratio between internal and external directors
The 108th Annual General Meeting of Shareholders held on June25, 2020, approved proposal to appoint nine directors including
three independent external directors, satisfying the requirementof one-third of directors as independent external directors forlisted company with a parent company.
（２）
O ffering of training opportunities for directors and Audit &Supervisory Board members(i) A training session on TSE’s rules regarding governance andrevisions to the Companies Act was held in July 2020.
(ii) A workshop on ESG was held in September 2020.
（３）
Sharing of contents of interaction with shareholders (investors)
In addition to the IR activity report (twice a year) and thereport on the results of the exercise of voting rights at theGeneral Meeting of Shareholders, we shared the details of theinteraction with institutional investors who are our shareholders,with the Board of Directors.
（４）
Establishing a forum for interaction with external directors
In addition to the regular meetings between the Representative
Director and the members of the Audit & Supervisory Board,
aimed at exchange of views from a broad perspective, we held
meeting for exchange of opinions between external directors andAudit & Supervisory Board members in August 2020 and between
outside directors and internal directors in October 2020.
Taking the above measures into account, the evaluation of theeffectiveness for FY2020 concluded that Sanyo Special Steel’s
Board of Directors has been functioning effectively.
For FY2021, we will focus on tackling the following tasks andimplement necessary measures that would contribute to further
improvement in the effectiveness of the Board of Directors.
<Tasks for FY2021>（１）
Further enhancement of discussions from a company-wide,
medium- to long-term perspective（２）
Enhancing ESG-oriented measures（３）
Enhancing the opportunities for interaction between outside
directors, internal directors, and Audit & Supervisory Board
members(continued from FY2020)22

Officers
Policies and procedures upon selection and dismissalof executives and nomination of director and Audit &Supervisory Board member candidates

Representative Director
and President

MIYAMOTO
Katsuhiro

Independent External Director,
Member of the Board

KOBAYASHI
Takashi

Director, Member of the Board
Managing Executive Officer

TAKAHASHI
Kozo

Independent External Director,
Member of the Board

ONISHI
Tamae

Director, Member of the Board
Managing Executive Officer

Director, Member of the Board
Managing Executive Officer

OI
Shigehiro

Independent External Director,
Member of the Board

USUKI
Masaharu

OMAE
Kozo

Senior Audit & Supervisory
Board Member

Director, Member of the Board
Managing Executive Officer

YANAGIMOTO
Katsu

Independent External Audit &Supervisory Board Member

NAGANO
Kazuhiko

OE
KatsuakiDirector and Senior Advisor,
Member of the Board

HIGUCHI
ShinyaIndependent External Audit &Supervisory Board Member

YOGI
Hiroshi

Audit & Supervisory
Board Member

SONODA
HirotoThe expertise and experience of Board membersAiming to have a system for effective corporate governance and agile decision making to keep up with the changes in the businessenvironment, Sanyo Special Steel has set the size of its Board of Directors appropriate for the Group’s business lineup and challenges.
The Board has a well-balanced and diverse mix of members in terms of experience, knowledge, and expertise. We also have appointed
three independent directors, including a female director, expecting opinions and oversight of our management from objective andexpert viewpoints.

expertise and experience
Full name

Corporate
management

Manufacturing,
engineering,
research &development

Sales

Business execution

Director, Member of the Board

Finance andaccounting

Personnel &labor relations

International
experience

Legal

ESG

Other

●

●

●

●

●

●

MIYAMOTO Katsuhiro*

●

●

●

TAKAHASHI Kozo

●

●

●

OI Shigehiro●

OMAE Kozo●

YANAGIMOTO Katsu●●

HIGUCHI Shinya

●

●

●

●

●

●

●

●

●

●

●

●

OutsideKOBAYASHI Takashi* Independent
ONISHI Tamae*

Audit & Supervisory
Board Member

Non-executive

USUKI Masaharu*

OutsideIndependent

OE Katsuaki
YOGI Hiroshi
SONODA Hiroto

●

●

●

●

●

●

●

●

●

●

●
●

●

Outside●●Outside●NAGANO Kazuhiko●●

Independent
Outside●●Independent
Independent

●

●

●

●
●

●
●

●
●

* Miyamoto Katsuhiro, Kobayashi Takashi, Onishi Tamae and Usuki Masaharu are the four directors comprising the Nomination & Compensation
Advisory Committee, a non-statutory advisory body of Sanyo Special Steel.

Our policy for selecting executives is to judge a person byexperience, knowledge, and expertise regardless of their gender,
age, or nationality to create an optimum structure in which each
person can adequately fulfill their roles and responsibilities andaptly address managerial challenges facing the Group. As for thenomination of director and Audit & Supervisory member candidates,in addition to the above conditions, the size and composition of theBoard of Directors and Audit & Supervisory Board, as a policy, aredecided with consideration to the balance among members. The
above policies have been approved by the Board of Directors.
Our policy on dismissal of senior management, in case there has
been any irregularity, serious violation of law or of the Articles ofIncorporation or the person has been deemed as unable to carryout the role or responsibility assigned, is to take the decision after
comprehensively assessing the matter at the Board of Directors
meeting.
Further, the selection or dismissal of senior management or thenomination of director and Audit & Supervisory Board member
candidates are resolved at the Board of Directors meeting after
deliberations at the Nomination & Compensation Advisory
Committee comprising the Representative Director and President
and independent external directors. Nomination of Audit &Supervisory Board member candidates require the prior consent of
the Audit & Supervisory Board.
After the discussions at the Nomination & Compensation Advisory
Committee and resolution at the Board of Directors meeting,a proposal for dismissal is introduced at the Annual General
Meeting of Shareholders, and the dismissal of a director or Audit& Supervisory member is finalized by the resolution of the said
proposal.

Policies and procedures upon deciding the compensationof directors by the Board of Directors
(i) Policy on deciding compensation
The compensation of directors is decided taking into account therequired abilities and responsibilities, contents of the assignments
depending on full-time or part-time, considering which the baseamount is set by position. As for business execution directors, thetotal amount is performance-linked so as to be an incentive to ensuresustainable growth of the Group and improvement of corporate value,with the base amount fluctuating within a certain range corresponding
to the consolidated performance of Sanyo Special Steel, and themonthly compensation for each director is decided within the upper
limit approved at the Annual General Meeting of Shareholders.
The parameters for the performance-linked compensation are
consolidated ordinary income from the perspective of short- andmedium-term performance incentive (considering profit targets, etc. in
the Medium-term Business Plan), and return on equity (ROE) from theperspective of contribution to shareholders. The performance-linked
compensation of Sanyo Special Steel is calculated by multiplying
the base amount stipulated by position with the fluctuation rate
stipulated based on the performance of these parameters. This
fluctuation rate is varied within a ±20％ range and is set to equallyreflect the three factors of short-term performance incentive, mediumto long-term performance incentive and shareholder contribution.
Non-executive directors receive a fixed compensation amount
depending on their work, and the monthly compensation for eachdirector is decided within the upper limit approved at the Annual
General Meeting of Shareholders.

(ii) Procedures to decide the compensation
The policies and the concrete compensations to the directors areresolved at the Board of Directors meeting after deliberations at
the Nomination & Compensation Advisory Committee comprised ofRepresentative Director and President and independent directors.

Standards for of independent directors
Sanyo Special Steel, in order to secure the objectivity andtransparency required for appropriate governance of the company,
considers the human, capital, transactional or other relationships
based on the independence standards stipulated by Tokyo Stock
Exchange, Inc. to judge the independence of external directors.

Transactions with related parties
As for the transactions with the parent company group, theBoard of Directors has resolved to carry out any transaction, basedon appropriate terms similar to general transactions with othercompanies, in accordance with Sanyo Special Steel’s internal rules.
Regarding important transactions such as mutual supply of steel
and cash management system, the Board of Directors confirms thatsuch transactions do not differ markedly from the terms of regulartransactions with third parties as well as that such transactions
contribute to the company’s business and do not harm its interests.
In transactions involving the company and its directors, if thetransaction falls under conflict-of-interest transaction, it is reported
to and approved by the Board of Directors in accordance with thelaws and regulations and company rules governing the Board of
Directors and we confirm that such a transaction is not damaging to
the company.
Transactions involving the company and auditors and other
involved parties are also appropriately disclosed corresponding to
the importance and nature of transaction in accordance with laws
and regulations.

Policy regarding dialog with shareholders
Sanyo Special Steel, from the perspective of ensuring sustainablegrowth and increasing corporate value in the medium to long term,
implements various measures to promote constructive dialog withshareholders. The dialog with shareholders and investors overall
is supervised by the Director in charge of Accounting & Financeand General Administration, and the various departments led by
the Accounting & Finance Department and the General Affairs
Department collaborate and strive to enhance the measures.
Specifically, in addition to actively presenting information andholding detailed Q&A sessions with respect to shareholders at theAnnual General Meeting of Shareholders, we ensure enhanced
dialog with them by holding earnings briefings and plant tours topromote understanding of the management status of the company.
We also work on improving the dialog with securities analysts andinstitutional investors by holding earnings telephone conferences
four times a year and earnings briefings twice a year to explain
our management strategy, business details, performance, etc.
and implementing measures such as interviews and telephonemeetings with investors both within Japan and overseas. We wereforced to cancel the earnings briefings and plant tours in FY2020
due to the impact of COVID-19, but we exchanged views withinstitutional investors utilizing telephone conference and online
meeting systems. The views, etc. obtained through such initiatives
from shareholders and investors are conveyed to the management
layer and are utilized in the management of the company. Further,
insider information (undisclosed important facts) are appropriately
managed in accordance with the company rules.

23

Internal Control Systems
Compliance and Risk Management Systems
Sanyo Special Steel has approved a“Basic Policy on Internal Control Systems”at its Board of Directors meeting and has set
up an Internal Control Department responsible for planning and auditing internal controls as well as functional departments
responsible for risk management in individual sectors to form an organizational structure to run the internal control system in
the Group. In addition, we have assigned risk management officers to each department and group company; these officers are
responsible for planning and promoting autonomous internal control activities in their respective departments / companies.
Based on this organizational structure, we operate the internal control system as described below.

Each year, Sanyo Special Steel formulate a Group-wide
internal control plan based on amendments to statutory laws
and regulations and changes in the business environment This
plan contains basic policies; plans for different functions suchas safety, the environment, disaster prevention, and quality;internal audit plans; and training plans. Each department andgroup company then formulates their respective plans basedon the Group-wide plan.

2

Autonomous internal control activities

Sanyo Special Steel’s individual departments and groupcompanies implement their own autonomous internal control
activities in accordance with internal control plans, based on
the nature of their business operations and inherent risks.
Specifically, they develop operating regulations, manuals, andother materials and conduct training. They also conduct selfinspections and carry out improvements to operations basedon the results.
In the event of an accident, disaster, or situation thatrisks violating the law, the department or group company
concerned immediately reports the fact to the Internal Control
Department; in addition, corrective measures, such as measures
to prevent any recurrence, are taken in collaboration withassociated departments. Furthermore, the Internal Control
Department gathers these cases, including cases at Nippon
Steel Corporation, Sanyo Special Steel’s parent company, andshares them within the Group, allowing individual departments
and group companies to carry out inspections to check forsimilar risks.

3Internal audits, etc.

In internal audits, the Internal Control Department andrespective functional departments check the status of internal
controls using documentation such as internal control checklists
and monitor each department/group company. Internal audit isalso carried out by parent company Nippon Steel Corporation,with which we jointly implement internal control activities.
In addition, as a measure to complement internal controls,
we have established and operated a whistle-blowing help deskthat can be used by employees of Sanyo Special Steel andits group companies, their families, and suppliers’employees.
We also conduct surveys on employee awareness regarding
internal controls and compliance.

4

Assessments and improvements

The Internal Control Department and the Director in chargeof respective functional departments report on the operational
status of the internal control system to the quarterly meetingof the Risk Management Committee, and to the Board of
Directors; in addition, these reports are also shared withindividual departments/group companies at the quarterly
meetings of risk management officers.
The Director in charge of the Internal Control Department
assesses the effectiveness of the internal control system basedon information such as the status of internal control activities
implemented and the results of internal audits, and once theresults of assessments are compiled, they are reported to the
Risk Management Committee and the Board of Directors.
Based on the assessment results, we formulate improvement
initiatives to help make the internal control system more
effective, and these initiatives are reflected in the internal
control plan for the following fiscal year.

5

Sanyo Special Steel Group sets forth Confidence-based
Management as its corporate philosophy and ensures complianceby all officers and employees through regular training while thetop executives disseminate messages.
Specifically, we conduct grade-based internal control training,
hold regular compliance lectures, implement e-learning on
compliance and harassment across the group, and theme-based
training on anti-trust law, security export control, mental health,and labor management. Furthermore, all departments andaffiliated companies conduct compliance training appropriate to
the individual department and ensure that employees are familiar
with laws, regulations, rules, and penal regulations necessary forthe execution of business.

Training and raising awarenessWe have set up courses on internal controls through gradebased training for executives and employees of Sanyo Special
Steel and its group companies. Furthermore, we are proactively working to raise awareness of internal control concepts
and improvements in workplace culture, among other topics,
through talks between the Internal Control Department andrespective departments/group companies.

6■Implementation of internal control training,familiarization activities

Message from top-level executives

Cooperation among external directors, auditors, and accounting auditors

Independent external directors, as members of theNomination & Compensation Advisory Committee—a body
independent from the Board of Directors and other organs—discuss overall issues related to the appointment andcompensation of executives, the content of which, as well as
opinions, are reported as needed to the Board of Directors via
the Representative Director and President.
As members of the Risk Management Committee, the external
directors and members of the Audit & Supervisory Board attend
the committee meetings, where they present and exchange
opinions. external directors and Audit & Supervisory Board
members also hold regular meetings with the Representative
Directors and other officers, through which smooth andappropriate mutual exchange of information is maintained. In
terms of interaction with the accounting auditor, we submit
regular reports on the operating status of the Risk Management
Committee as well as assessment results on internal controls
pertaining to financial reporting and exchange opinions.

Information provider

Provide（Name / Anonymous）

Provide（Name / Anonymous）

Compliancehelp-desk（Internal contact）
Sanyo Special Steel /Head Oﬃce■Compliance help desk (whistle-blowing system)

Sanyo Special Steel Group employees,
and suppliers employees,
as well as their families

Contact

Compliancehelp-desk（Outside contact）
External specialized
agencies, etc.

*No disadvantage will be suffered as a result of a consultation orreport. Secrecy is maintained in strictest confidence.

Survey / Response

Internal control plans

Survey / Response

1

Sanyo Special Steel has established the Guidelines for Corporate Behavior that prescribe the standards of behavior we should
follow as a corporation and a Code of Conduct as guidance on conduct to be observed in the course of business activities within
the framework of the Guidelines for Corporate Behavior. Moreover, we make efforts to ensure officers and employees are thoroughlyfamiliar with these standards. (Guidelines for Corporate Behavior and Code of Conduct can be found on page 27 of this report.)
The Risk Management Committee, chaired by the president, is held every quarter and regularly reports on matters related to risk
management such as formulation of an internal control plan, its implementation status, compliance with laws and regulations, company
rules, labor safety, human rights violations including sexual harassment and abuse of power as well as the environment, disasterprevention, quality, financial reporting, information security, and other such ESG risks. The matters discussed at the Risk Management
Committee meeting are reported to the Risk Management Officers Meeting, attended by the risk management officers of eachdepartment and group company, thus ensuring a structure that enables information sharing.
In order to review the status of compliance with various laws, regulations, and company rules, we use internal control checklists foreach department and group company, have established internal audit and whistle-blowing system and help desk, and regularly conduct
questionnaire survey of all employees.
Sanyo Special Steel will endeavor in the future to cultivate higher ethical standards by continuously implementing such activities
and will make efforts to maintain and improve the management health of not only Sanyo Special Steel but also of the Group as awhole. Sanyo Special Steel is also committed to putting into practice its mission to“fulfill our social contribution through business”bypromoting business activities rooted in high ethical standards.

In response to the recent revision of the Whistle-blower
Protection Act, we set up a compliance help desk as a whistleblowing and consultation system. It aims to prevent an
occurrence or recurrence of incidents or behaviors that seem toviolate or have violated statutory laws, social norms, company
rules, or other regulations. The help desk is available for SanyoSpecial Steel Group employees, casual workers, temporary
workers, suppliers’employees, and their family members. It
provides consultation to those with problems they cannot solveat their workplace or talk to anyone else, so they don’t needto take it all on themselves. They can also consult or reportanonymously so that no one will suffer disadvantage. Besides
our help desk, employees can use the compliance help desk ofour parent Nippon Steel Corporation. Under its company policy,
it responds promptly and appropriately to any consultation orreport. The compliance help desk also has a role in monitoring
the status of internal control activities.

24

Company Profile

Global Business Activities（As of March 31, 2021）

Company Name：Sanyo Special Steel Co., Ltd.
Head Office：3007, Nakashima, Shikama-ku, Himeji, Hyogo
672-8677, Japan
Established：January 11, 1935
President：MIYAMOTO Katsuhiro
Number of Employees：6,441 (consolidated basis)[Domestic 2,060、Overseas 4,381]
1,602 (non-consolidated basis)

Sanyo Special Steel Co., Ltd.

Ovako Group AB

Capital：53,800 million yen

Santoku Tech Co., Ltd.
SANYO SPECIAL STEEL TRADING (SHANGHAI) CO., LTD.

Net Sales：Consolidated basis：210,721 million yen (Fiscal 2020)

Ningbo Sanyo Special Steel Products Co., Ltd.

Sanyo Special
Steel India Pvt. Ltd.

Fiscal Year End：March 31

SANYO SPECIAL STEEL
U.S.A., INC.

SKJ Metal Industries Co., Ltd.

Business Segment：Specialty Steel：Manufacturing and marketing of various special steel products, including
bearing steel, engineering steel, stainless steel, heat resistant steel and tool steel.

Siam Sanyo Special Steel Product Co., Ltd.

Metal powder：Manufacturing and marketing of metal powders and powder metallurgy products.

Sanyo Special Steel Manufacturingde México, S.A. de C.V.

Mahindra SanyoSpecial Steel Pvt. Ltd.

Formed and Fabricated Materials：Manufacturing and marketing of formed and fabricated materials made from
special steel bars and tubes.

P.T. SANYO SPECIAL STEEL INDONESIA

Superior ability to serve our customers, achieved through a tripolar structure

Others：Providing information processing services.

We have built a global network centered on our integrated special steel manufacturing hubs in Japan, Europe, andIndia. Through this network, we can accurately identify customer needs in various areas of the world and thenprovide a stable supply of high-quality products out of our manufacturing hubs.

Greater potential through concentration of technical strength

By combining new technology with the technology we ve built up over many years in operation, we create products
and processes that contribute to the future society.

Stock Information

Promoting our brand globally

Through close coordination between Group hubs, we are rapidly enhancing our brand value and making further strides
forward toward earning global recognition for Sanyo Special Steel - the Conﬁdent Choice.

（As of March 31, 2021）

Total Number of Shares Authorized to be Issue：94,878,400
Total Number of Shares Issued：54,507,307

Formed andFabricated Materials Works

Integrated Special Steel Works

Stock Listings：Tokyo Securities Exchange（1st Section）
Number of Shareholders：10,603
Principal Shareholders

number of stock held

ratio of shareholding

NIPPON STEEL CORPORATION

28,863,000

52.97％

Custody Bank of Japan, Ltd.(trust account)

3,024,000

5.55％

Company's Kyoeikai Association

2,488,000

4.56％

The Master Trust Bank of Japan, Ltd.
(trust account)

1,964,000

3.60％

Company's employee shareholding association

784,000

1.44％

Sumitomo Mitsui Banking Corporation

639,000

1.17％

Marubeni-Itochu Steel Inc.

621,000

1.14％

MUFG Bank, Ltd.

569,000

1.04％

Sumitomo Mitsui Trust Bank, Limited

566,000

1.03％

The Dai-ichi Life Insurance Company, Limited

487,000

0.89％

Foreign investors

8.62%

Securities ﬁrms
0.85%

Individuals
and others
12.49%
Financial
institutions
19.26%

Shareholder
Composition

Japan

Sanyo Special Steel Co., Ltd.

SwedenOvako Group AB

China

India

Mahindra Sanyo Special Steel Pvt. Ltd.

Ningbo Sanyo Special Steel Products Co., Ltd.

ThailandSiam Sanyo Special Steel Product Co., Ltd.

MexicoSanyo Special Steel Manufacturing de México, S.A. de C.V.

Japan

Santoku Tech Co., Ltd.

Secondary Processing Works
ThailandIndonesia

Domestic
corporations
58.78%SKJ Metal Industries Co., Ltd.

P.T. SANYO SPECIAL STEEL INDONESIA

Sales Oﬃce
U.S.A

SANYO SPECIAL STEEL U.S.A., INC.

China

SANYO SPECIAL STEEL TRADING (SHANGHAI) CO., LTD.

India

Sanyo Special Steel India Pvt. Ltd.

※The number of shares held omits fractions of less than 1,000 shares.
※The shareholding ratio is shown after deducting treasury stock and rounding down to the third decimal place

25

Guidelines for Corporate Behavior

The steel industry in Japan, which is the base material industry, is required to carry out the mission of contributing to the improvement of people’s lives anddevelopment of the Japanese economy and society, through constantly supplying steel products that are useful in wide-ranging applications to society.
Based on this mission and a strong awareness that it is a member of society, Sanyo Special Steel has established a trusting relationship with society, throughfaithful and fair business operations.
Business corporations should widely contribute to society and are expected to create added values through fair competition and develop the economy andsociety through generation of jobs. Sanyo Special Steel aims to respect human rights inside and outside Japan, abide by the relevant laws and regulations
and conform to and respect the spirit of international rules. We also aim to fulfill our social responsibilities regarding creation of a sustainable society, basedon high ethical standards.
To fulfill these missions, Sanyo Special Steel has established the“Guidelines for Corporate Behavior”that specify the expected actions in detail.
1. As a company belonging to the basic material industry, Sanyo Special Steel will make efforts to develop and supply high-quality special steel products
constantly, to satisfy customers and consumers and to earn their trust.
2. Sanyo Special Steel will ensure fair, transparent and free competition as well as fair trade. We will also maintain sound and proper relationship with
political parties and the government.
3. Sanyo Special Steel will make efforts to communicate with shareholders and society in general and disclose corporate information in a positive and fairmanner. We will pay careful attention to protecting and administrating information including individual information and customer information.
4. Sanyo Special Steel will respect the versatility, personality and individuality of employees to realize safe and comfortable workplaces with a relaxed andaffluent atmosphere.
5. Sanyo Special Steel will take the initiative in solving environmental issues, based on the notion that environmental measures should be implemented by
the entire human race and are essential for the existence and activities of business corporations.
6. Sanyo Special Steel will positively perform social contribution activities as a“sound corporation in society.”
7. Sanyo Special Steel will handle antisocial forces and groups which pose a threat to the social order and safety in a resolute manner and completely avoid
having relationships with such forces and groups.
8. Sanyo Special Steel will abide by the laws of each country and region and respect human rights and international rules in performing global business
operations. We will also give consideration to cultures and customs in performing business management, aiming to contribute to the development of therelevant country and region.
9. Top-level executives of Sanyo Special Steel will acknowledge that they are responsible for implementing the Guidelines and act as role models, while
making efforts to ensure complete implementation of the guidelines by the group companies and business partners. The executives will also listen
actively to the opinions of employees inside and outside the company and establish an internal control system to realize an effective system.
10. In the event of actions being made that go against the Guidelines, top-level executives will clarify the intention to solve the problem with regards topeople inside and outside the company and make efforts to identify the cause and prevent recurrence of the trouble. The executives will also provide
information promptly and properly and explain the situation, clarify authority and responsibilities, and severely punish the persons involved, including
themselves.

Code of Conduct

This Code of Conduct stipulates in concrete terms matters to be observed by
Sanyo Special Steel and all of its officers and employees (including Counselors,
Senior Advisors, Executive Officers, Executive Councilors, etc. Applies also to
those who work on the basis of a commission contract or temporary staffing
agreement) in each aspect of our business activities with regard to the ten
items set out in the Guidelines for Corporate Behavior. For matters notprescribed in this Code of Conduct, actions should be taken in adherence withthe spirit of the Code of Conduct and the Guidelines for Corporate Behavior.

I. In Business Activities
1. Timely and appropriate provision of excellent products and services
We will contribute to the society through providing excellent products andservices needed by the society in a timely and appropriate manner, andthereby gaining our customers’satisfaction and trust.
Recognizing that high quality and safety are the prerequisites for excellent
products, we will make every effort to achieve them.
(1) Accurate understanding of customer needs
We will constantly gather information as to what is demanded in themarket and grasp the needs and“seeds”of our customers. By doing so, we
aim to provide attractive products and services that meet our customers’
requests in a timely and appropriate manner and thereby improve customer
satisfaction.
(2) Enhancement of customer support system
We will provide after-sales support of our products and services withsincerity, which would help us gain new orders, not to mention successiveorders from existing customers. Each division will strengthen its customer
support system and improve information materials on products andtechnologies.
(3) Compliance with laws and regulations related to safety
We will pay attention to safety at all times throughout the stages
from development of products to manufacturing, storage, sales andtransportation, so that our customers can use our products without worry.
To this end, we will strictly comply with laws, regulations, standards andwork standards regarding product safety.
(4) Preparation of easy-to-understand catalogues and specifications
We will take into consideration the ease of understanding in terms ofindications and descriptions when preparing product catalogues andspecification documents, so as to prevent any accidents that may occur
from wrong usage of products or uses other than their designed use.
(5) Response to accidents, etc.
When we learn of any product defects or accidents caused by productdefects, we will take prompt and appropriate actions including informing
relevant divisions, investigating all facts, and taking measures to prevent
recurrence.
(6) Prevention of accident recurrence
We will investigate the cause of product defects or the accidents caused
by product defects. We will share information on such investigation among
persons involved by appropriately compiling and utilizing its records andstrive to prevent similar accidents in the future.
(7) Protection of personal and customer information
We will pay the closest attention to personal and customer information
during the entire process from collecting to using, storing and destroying,and ensure strict management of such information.

2. Healthy and favorable relationship with our buyers and suppliers
We will conduct sales and purchases with integrity, fairness and equitability
in our business transactions both in and outside of Japan. We will not offer
or demand any unreasonable benefits in the course of business transactions.
(1) Relationship with buyers
We will limit the offer of entertainment and gifts to our buyers within
the socially acceptable and minimum necessary level. We will not offer
personal or arbitrary discounts, commissions, or any other benefits, even
if it is to gain an order. Maintaining healthy and favorable relationship withour buyers and suppliers, we will abide by our corporate rules on internal
approval.
(2) Relationship with suppliers
We will select suppliers with fairness and equitability, basing on reasonable
criteria such as price, quality, delivery, and after-sales services. Whenchoosing a new partner, we inquire into the candidate’s credit standing
and other matters, in addition to applying the above criteria and with
fairness and equitability. We will, whenever possible, decline any offer
of entertainment or gifts from our suppliers. When it is not practicable
to decline, we will make a report to our superior and never leave theboundary of socially acceptable practice.
(3) Relationship with subsidiaries and affiliates
We deal with our subsidiaries and affiliates with good common sense andintegrity. We do not impose on them any conditions unreasonably different
form the terms of business that we apply to a third party in a fair and freecompetition. We will, whenever possible, refrain from offering or accepting
entertainment or gifts to and from our subsidiaries or affiliates. When it isnecessary to offer or accept such entertainment, etc., we will make a reportto our superior and keep it within the socially acceptable and minimum
necessary level.
(4) R elationship with the government, public offices, local authorities and otherpublic organizations
We will not offer any benefits to foreign or domestic government officials or
their equivalents in relation to their execution of duties.
3. Promotion of fair and free competition
The aim of the Antimonopoly Act is to maintain and promote fair and freecompetition, and thereby secure the interest of consumers and promote
the democratic and wholesome development of the national economy.
The Subcontract Act aims to ensure fair transactions between main
subcontracting entrepreneurs and subcontractors. By complying with theselaws and related regulations, we will work to maintain and promote fair andfree competition.
(1) Compliance with Antimonopoly Act
We will not engage in cartels, bid-rigging, maintenance of resale prices,
abuse of superior bargaining position, or any other act in violation of the
Antimonopoly Act, and compete fairly and freely with other companies.
1) We will not engage in any unreasonable restraint of trade, such as
consulting or making agreements on prices, quantities, or production
facilities, or committing bid-rigging, among firms in the same industry or
in industrial associations.
2) W e will not engage in any act that constitute unfair trade practices, suchas refusing to deal with specific firms (discount distributors, etc.) or new
entrants, or posing restriction on the buyer’s selling prices, in concert
with firms in the same industry or industrial associations.
(2) Compliance with the Subcontract Act

We do not use our superior bargaining position against our partners inmanufacturing contracts or repair contracts to request of them any unfair
trade practices or to delay our payments, or any other similar acts.
4. Protection of intellectual property rights
Intellectual property rights are the rights by which inventions, devices,manufacturing know-how, literary works and other creations of the mind, as
well as trademarks and other identification marks of business, are protectedby law. These include the industrial property rights covering patents, utility
models, trademarks, etc., copyrights on artwork, computer program, etc., aswell as trade secrets (technical or business information useful for businessactivities, such as manufacturing or marketing methods, that are kept secret
and that are not publicly known).
(1) T reatment of Sanyo Special Steel’s intellectual property rights
We recognize that the intellectual property rights of Sanyo Special Steelare important assets of the company, and will strive to properly exploit andpreserve such rights.
1) R egarding inventions arising from manufacturing and development
activities, we will file patent application without delay and take othermeasures to preserve our intellectual property rights.
2) R ecognizing that leakage of intellectual property rights and trade
secrets will harm the company’s interest and credibility, we will clearly
demarcate confidential information from the rest and make suchclassified management of information clear to third parties.
(2) Treatment of other firms’intellectual property rights
We will comply with the laws and regulations related to intellectual
properties and the Unfair Competition Prevention Act, and respect the
intellectual property rights owned by other firms as they were our own.
1) We will not for any reason obtain trade secrets owned by other firms
through theft or other illegal means, or exploit such secrets. Moreover,
we will never obtain or exploit them knowing that they have been, or
may have been, obtained through illegal means.
2) Even when we have rightly acquired information owned by other firms,
we will not implement any technologies published in the patent gazettewithout permission, make a copy of purchased computer software
without permission, or conduct any other act that infringes on theintellectual property rights of other firms.
3) We will conclude appropriate agreement before we exploit intellectual
property rights of other firms, and will not abuse them.

II. In relation with the Society
1. Ethical and legal compliance
As a member of the society, we will conduct business activities basedon social norms, social common sense, and, not to mention, laws andregulations. In particular, we will comply with laws and regulations in ourbusiness with regard to matters below, the violation of which would cause
serious consequences.
(1) Security Export Control
1) W e will not engage in exports of arms, weapons, or any relevant
technologies that would disturb the maintenance of world peace andsecurity.
2) With regard to export transactions, we will check the buyer’s corporate
profile and business activities, and confirm, based on our internal
regulations, that the products or technologies to be exported will not be
used in development or manufacturing of weapons of mass destruction.
As for export transactions and service transactions of products andservices that are controlled under relevant laws and regulations, we willtake necessary steps pursuant to relevant laws and regulations.
(2) Prohibition of insider trading
When we come to learn any insider information of Sanyo Special Steel,its subsidiaries, affiliates, or business partners while performing our work,
we will not buy or sell stock of those companies until such information
is officially made public. When buying or selling our own shares, we will
confirm in advance whether or not we are in possession of any insider
information.
(3) Treatment of acts of endowment and political contributions1) W hen making political contributions or endowments to variousorganizations, we will comply with the Public Offices Election Act, thePolitical Funds Control Act, and other relevant laws and regulations, andfollow legitimate procedures.
2) W e will obtain approval based on our internal regulations prior to
making political contributions or endowments.
3) W e will strictly avoid any act that may be mistaken to constitutecollusion with politics or public administration, or, not to mention,bribery, offer of illegal profit, or illegal political contribution.
2. Avoidance of relationship with anti-social forces
We will stay out of any relationship whatsoever with individuals ororganizations that adversely affect social order or impair sound corporate
activities. Moreover, we will take a firm stand against such antisocial forces
without fear.
(1) T o ensure that we do not get involved in any unlawful or antisocial
behavior, we will hold basic knowledge of the law, social common sense
and a sense of justice, and act according to good common sense at all
times.
(2) W e will stand firm against antisocial forces and refuse to have any
relationship whatsoever with such forces. In addition, if we receive any
unreasonable demands from antisocial forces or the like, we will face itwith a firm attitude and will not try to settle the situation by offering moneyor through provision of other unreasonable benefits.
(3) We do not make use of antisocial forces in order to gain benefit for thecompany or ourselves.
(4) W e will not engage in any transaction whatsoever with antisocial forces orwith any business partners that are associated with antisocial forces.

3. Disclosure of corporate information(1) We will disclose corporate information to our shareholders, investors,
customers, business partners, the local community and others in a timely
and appropriate manner and strive to communicate with the society at all
times and improve the transparency of our management. We will also pay
careful attention to protecting and administrating information including
personal information and customer information.
(2) When disclosing financial statements and other corporate information,
we will make every effort to streamline and enhance appropriate internal
control that secure the reliability of such information.
4. Environmental conservation and protection
Recognizing that we are drawing various benefits from the earth including
resources, energy and other factors needed in our business activities, we will
make every effort to preserve the global environment in a better possible
condition.
(1) W e will strive to produce environmentally friendly products, control waste
generation, and ensure proper waste disposal, while fully recognizing theimportance of environmental protection and complying with conventions,laws and regulations related to the environment at all times.
(2) We will work to improve our environmental consciousness and actively
participate in environmental protection activities for energy conservation
and recycling, among others.
5. Social contribution
As a corporate citizen, we will serve our social role through businessactivities and also actively participate in social contribution activities
including support of culture and art, cooperation with local communities,
volunteer activities, among others, and thereby contribute to social
development.

III. In relation with employees
1. Respect of personality and individuality(1) R espect of personality and individuality
We will pay respect to the personality and individuality of each andevery person, and aim to foster personnel for expertise, creativity andindependence.
(2) R espect of human rights and prohibition of discriminatory acts
We will respect the human rights of each and every person, and do notdiscriminate anyone for their nationality, race, religion, gender, age, ordisabilities of any type, or any act that may lead to unjust discrimination.
(3) P rivacy protection
We will respect the privacy of each and every person, and make every
effort towards proper management of personal information.
(4) P rohibition of harassment
We will achieve a fair and positive workplace that do not tolerateharassments.
1) We will not commit unnecessary physical contact, sexual jokes, teasing,or any other act that constitutes sexual harassment.
2) We will not commit bullying, defamation, intimidation, or any other act
that constitutes power harassment.
2. Safe and healthy working environment
We will strive to secure a safe, worker-friendly, and sound workplace as wellas our mental and physical health.
(1) Safety and health in workplace
We will place the highest priority on securing safety and health, comply
with the laws, regulations and rules related to occupational safety andhealth, and endeavor to maintain a safe and healthy work environment.
Also, in performing work, we will train our sensitivity to predict hazard andto sense harm before it occurs, and react to them systematically.
(2) Compliance with laws and regulations related to labor
We will comply with laws and regulations related to labor and strive
to maintain and improve a safe, worker-friendly, and healthy work
environment.
(3) Disaster prevention
To prevent a disaster and stop the spread of damage, we will endeavor
to predict and gauge the scale of hazards that are forecast to occur in the
future, discuss countermeasures, develop manuals, and thereby maintainand improve our disaster prevention management system.
3. Prohibition of acts that impair the company’s interest
As corporate workers, we will perform our work with high ethical standards,
not to mention in compliance with internal rules.
(1) C ompliance with working regulations
We will abide by matters set out in our working regulations and carry out
duties while maintaining order in the workplace. We will not commit any
unjust or dishonest act.
(2) Proper use of corporate assets
We will not make unjust use of corporate assets or mix private interest with
the interest of the company. We will not use corporate assets or expenses
for personal purposes.
(3) Proper use of information systems
We will closely protect IDs and passwords and watch out for theft,
manipulation, and breach of information, and, needless to say, we will not
use the company’s information systems for personal purposes.
(4) Prohibition of conflict of interest
We will give priority to the interest of the company and will not commit any
act that constitutes conflict of interest with the company.
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