Sanyo Special Steel Report 2020
APRIL 1.2019-MARCH 31.2020

CONTENTS
03

Top Message

05

Financial Highlights

07

Segment Data

09 “Steel
You Can Count On”technologies
that thrive in a variety of fields
11FeaturesParticipating in the“Challenge Zero”Initiative
for the realization of a Decarbonized Society13

CSR-conscious Management - the aim of
the Sanyo Special Steel Group

15

Stakeholder Confidence

Environment
17

Environmental Management

19

Initiatives to Prevent Climate Change

20

C ontributing to a Resource-recycling
Society

21 M oves to Reduce the Load on the Environment
22

Environmental Risk Management

Social
23

Confidence of Customers

25

Confidence of Suppliers

27

Confidence of Employee

Governance33

Corporate Governance

37Internal Control Systems

39

Financial Section

75

Company Profile

77

Guidelines for Corporate Behavior andCode of Conduct

01

The corporate philosophy■ Editorial Policy
This report gives a summary of financial

Confidence-based Management

information such as earnings, as well
as ESG (Environmental, Social, andGovernance) initiatives and similar, which
provide the foundations for sustainablegrowth, to allow a better understandingof Sanyo Special Steel Co., Ltd. “Sanyo(Special Steel”).
■ Period Covered by the Report
This report covers the activities of
Sanyo Special Steel Co., Ltd. and groupcompanies in FY2019 (April 1, 2019 toMarch 31, 2020) but also includes someConfidence of Society
We aim to acquire the confidence of society by contributing
to the realization of an affluent and culturally rich society
and fulfilling our social responsibilities through our "highquality 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.

information pertaining to matters outsideof the above reporting period.
■ Reference Guidelines and Documents“International Integrated Reporting
Framework” International Integrated

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.

Reporting Council (IIRC)“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 Environment

02

Top Message

Special steels are produced by adding chromium, nickel,

and independent outside directors. We are constantly

We regard climate change as a particularly importantand other elements to steel to give it special properties

introducing new products and technologies that areissue that has immediate consequences to the survival ofsuch as hardness, strength, toughness, or resistance toin keeping with the trends—such as the shift towards

mankind. The Group has already been engaged in efforts

wear, heat, and corrosion, depending on the use. As

electric vehicles (EVs) and other new technologies as welltowards reducing CO2 emissions by switching fuel types,

they are employed in critical parts and key components

as changes in demand—applying advanced clean steel

and employing energy-saving measures, among others. In

of industrial products in a wide range of sectors—from

technology, in which we have the edge, and the fruits

October 2020, we joined the“Challenge Zero”initiative

automobile to railway, construction machinery, electronicof basic research. Add to this, we are promoting“Sanyo

led by the Japan Business Federation (Keidanren) andproducts and ICT equipment—high quality and reliability

Special Steel—the Confident Choice”as a global brand in

published our initiatives toward realizing a decarbonizedsociety. We will keep on driving innovation that contributes

are required. Demands for special steels are growing

our overseas operations, including through acquisition ofincreasingly diverse and sophisticated as their end

Ovako in Sweden and Mahindra Sanyo Special Steel Pvt.

to reducing GHG emissions from our business activities andproducts become more advanced in functions and more

Ltd. in India as our consolidated subsidiaries.

making decarbonized society a reality.

environmentally friendly. The Group has been providing
high quality special steel products that adequately meet

The Group currently faces an extremely challenging

There is, however, one more thing that the Group mustsuch needs, using the“advanced clean steel technology”itbusiness environment in which we cannot expect an early

keep in mind if it is to continue growing. It is that all of ourhas developed over the years.

recovery of the global economy that is mired in a severe

employees stay mentally and physically healthy. Safety

The major end users of the Group’s products are

situation due to the spread of COVID-19. Moreover, theand health are the essential prerequisite that deservein automotive, industrial machinery, and constructionchanging ways of life, growing disparity between advanced

the highest priority of the Group as a manufacturer

machinery industries. Some of the Group’s products are

and developing countries, and other factors are likely toin conducting its business activities. All of the Groupdelivered directly to car makers, while others are first soldcause drastic transformation in industrial structures acrosscompanies both in Japan and abroad will continue working

to manufacturers of bearings, parts and other firms along

the world.

the supply chain to be processed into various parts andtogether to create a working environment that allows eachand every employee to carry out their day to day work

components, and eventually reach the car assemblers. In

With these situations in mind, the Group believes thatrecent years, international competition in the special steel

it must build a robust corporate structure that turns out

industry has been growing ever tougher as our rivals ramp

profits without failure in any business environment. The

up their production capacity and upgrade quality andentire Group will continue working to rigorously cut fixed

We believe that building up confidence among all our

technologies.

costs, improve the product mix, and reduce variable costs,

stakeholders is a value that the Group should protect

so as to secure the margins and boost its earning power.

moving forward; it is something that we aim to achieve

We will further enhance our overseas business to build aby promoting sincere, fair, and transparent corporate
management through our philosophy of“Confidence-based

Against this background, the Group has been pursuingwith a sense of satisfaction while staying safe and in good
health.

sustained growth, despite adverse circumstances, throughstrong global network that is prepared to cope with theefforts such as (i) establishing a robust corporate structure

prospective trend of users to increase purchase of locallyManagement,”which aims to establish the“Confidence

by strengthening our business foundations, (ii) aiming for

manufactured products. We are committed to enhancingof Society,”“Confidence of Customers,”and“Confidence
among People.”further technological advancements by strengthening

our products’appeal and our development capability

R&D and quality competitiveness, and (iii) promoting—with focus on advanced clean steel technology, our“Sanyo Special Steel—the Confident Choice”as a global

strength area—expanding our technological advancements

The Group will continue practicing“Confidence-based

brand. We have invested in the reform of production

to meet the needs of each buyer in each region on a

Management”as we aim not only to achieve sustainablestructure centering on the clearing of bottleneck in our

global scale in the post-COVID-19 era, and also reaping

growth in our own operations in a rapidly changing

No.2 Bar & Wire Rod mill in order to respond to the shift

the benefits of synergy among Sanyo Special Steel, Ovako

business environment but also to continue to contribute totowards products in smaller diameter and orders in smalland Nippon Steel at an early stage.

the realization of a sustainable society. It is my hope that

lots, and to improve productivity and quality. We havethis report will provide an insight into the activities of thealso raised the ratio of independent outside directors

Furthermore, there has been a rapid spread in the idea

to the total number of directors on board to one-thirdof focusing on SDGs (Sustainable Development Goals)

in order to enhance the independence, objectivity andand ESG (Environment, Society, and Governance) set out

accountability of our Board of Directors. In addition, weby the United Nations, with companies being required tohave set up a Nomination & Compensation Advisory

contribute to a sustainable society.

Group, and we look forward to your continued support
and assistance.

Committee comprising the Representative Director (Chair)

03

04

Financial Highlights
- Operating results
During the fiscal year under review (April 1, 2019 to March
31, 2020), the Japanese economy recovered at a moderatepace on the back of improvements in personal consumption
and employment situation. Nevertheless, the future remains
unclear in light of the spread of COVID-19 since January, on topof the impact of US-China trade conflict on the global economy
and the economic slowdown in China and other emerging
countries.
In the special steel industry, the destocking by customers
in machine tools, robots and semiconductor manufacturing
equipment sectors that had begun in the latter half of 2018
grew into an industry-wide trend covering the key demandindustries including automotive, industrial machinery andconstruction machinery sectors in the summer of 2019. This
led to a decline in orders in the second half of the fiscal year,
causing in the production volume of special hot-rolled steels toremain below the 2018 levels.
The Group sales for the fiscal year increased by 76,634
million yen year-on-year to 262,453 million yen, despite adecline in sales volume on a non-consolidated basis. This waspartially driven by the consolidation of sales of Ovako, ourconsolidated subsidiary in Sweden, in FY2019, among others.
In terms of profits, the operating income fell 11,540 million yen
from FY2018 to a loss of 1,417 million yen, owing to factors
such as the decline in Sanyo Special Steel’s non-consolidated
operating income due to a drop in sales volume and rise in theprice of supplementary materials, a fall in the operating incomeof consolidated subsidiaries, as well as the write-off of goodwill
recorded with respect to Ovako and Mahindra Sanyo Special
Steel Pvt. Ltd., a consolidated subsidiary in India. Net income
attributable to owners of parent decreased 11,438 million yen
from FY2018 to a loss of 3,717 million yen, due partially to thewrite-off of goodwill of Mahindra Sanyo Special Steel Pvt. Ltd.
(as an extraordinary loss), in addition to the operational loss
recorded.
Regarding the goodwill of Mahindra Sanyo Special Steel
Pvt. Ltd., the company’s income had been on an upward
trend thanks to the recovery in automotive sales in India andresumption of shipping to railways, but we amortized the
goodwill in a lump sum at the end of FY2019 in considerationof the likely delay in recovery of the company’s profits due tothe impacts of COVID-19.

- Financial Condition
The Group’s total assets as of the end of FY2019 stood at
327,963 million yen, down 46,282 million yen year-on-year due
partially to a drop in trade notes and accounts receivable andinventories, as well as a rise in property, plant and equipment.
Trade notes and accounts receivable and inventories decreased
as a result of the decline in sales and subsequent drop in
production, as well as a fall in the prices of raw materials
and fuels including scrap iron. Property, plant and equipment
increased as we invested in the clearing of bottleneck in our
No.2 Mill in order to respond to the changes in order mix, suchas a shift towards products in smaller diameter and orders insmall lots, and to improve productivity and quality.
Total liabilities stood at 145,760 million yen, down 28,285
million yen year-on-year, owing to a decrease in trade notes
and accounts payable and also loans and commercial papers.
Trade notes and accounts payable decreased due partiallyto a decline in sales and subsequent drop in production, as
well as a fall in the price of raw materials and fuels. Loans andcommercial papers decreased as a result of allocating the cash
flow gained from operating activities, such as the decrease intrade notes and accounts receivable and inventories, to therepayment of loans payable and redemption of commercial
papers.
Total net assets were 182,203 million yen, falling by
17,997 million yen year-on-year. This was mainly due to therecording of loss attributable to owners of parent, purchaseand retirement of treasury stock, as well as the decline inaccumulated other comprehensive income owing to fluctuations
in stock and foreign exchange markets.
As a result, net D/E ratio (ratio of interest-bearing debt <after
deducting cash and deposits> to total net assets) as of the endof FY2019 was 0.27 (0.34 as at end FY2018).

- Cash Flows
Regarding the Group’s cash flows in FY2019, our operating
activities generated 39,425 million yen, while investing activities
used up 12,463 million yen and financing activities used up
21,093 million yen.
As a result, the balance of cash and cash equivalents as at
the end of FY2019 stood at 27,220 million yen (down by 5,427
million yen year-on-year).
Cash flows for each section in FY2019 is summarized below.

(Cash flows from operating activities)

Net cash provided by operating activities was 39,425 million
yen (up 28,632 million yen from FY2018), with a loss before
income taxes (negative 3,299 million yen), depreciation andamortization (15,033 million yen), amortization of goodwill(4,231 million yen) against a decrease in trade notes andaccounts receivable (31,062 million yen), decrease ininventories (15,442 million yen), decrease in trade notes andaccounts payable (negative 18,680 million yen), and income
taxes paid (negative 4,187 million yen). The decrease in tradenotes and accounts receivable and inventories, which resulted
from the decline in sales and subsequent drop in production
as well as a fall in the price of raw materials and fuels, was afactor in the rise in cash flow provided by operational activities.

(Cash flows from investing activities)

Net cash used in investing activities was 12,463 million
yen (less than in FY2018 by 56,582 million yen), partly due
to expenditure on the acquisition of property, plant andequipment (negative 18,572 million yen).

(Cash flows from financing activities)

Net cash used in financing activities was 21,093 million yen(65,929 million yen in FY2018), reflecting the repayments ofshort-term loans (negative 18,322 million yen), proceed in longterm loans (12,253 million yen), and redemption of commercial
papers (negative 8,000 million yen).

- Profit Distribution Policy and Dividends for FY2019
Our basic policy on profit distribution is to reward ourshareholders by increasing the profits available for distribution
while strengthening our business foundation. Concerning
dividend payment, we intend to meet our shareholders’expectations, primarily by distributing profits based on periodic
business performance, while giving due consideration toboth the payout ratio and the amount of funds required forinvestment and other activities to enhance our corporate value.
Dividends from surplus are based on a consolidated payout
ratio of 25-30% and are paid at the end of the 2nd quarter

Consolidated Results
Business performanceOperatingOperatingincomeOperatingOperatingincome income
incomeNet
Net
Net Sales
Sales
Net Sales
Sales（Millions of（Millions
Yen） of Yen）
（Millionsof（MillionsYen）of Yen）
OperatingOperatingincomeincome（Millions of（Millions
Yen） of Yen）
（Millionsof（Millions
Yen）Salesof Yen）
Net Sales
Net（Millions of（Millions
Yen） of Yen）

300,000
300,000 300,000
300,000

262,453
262,453 262,453
262,453

300,000
300,000
250,000
250,000 250,000
250,000
262,453 262,453
138,681
138,681 138,681
138,681250,000
250,000
185,818
200,000
200,000
185,818 185,818
185,818
200,000 200,000
157,485
157,485
138,681
138,681
149,148
149,148
157,485
157,485
149,148
149,148
185,818
185,818
200,000
200,000
150,000
150,000
150,000 150,000
157,485 157,485
149,148 149,148
150,000
150,000
100,000
100,000
100,000 100,000
100,000
100,000
50,00050,000 50,000
50,00050,0000050,000
0
0
2015
2015
2017
2016
2018
2017
2019（FY）
2018
2015 2016
2016
2015
2017
2016
2018
2017
2019（FY）
2018 2019（FY）
2019（FY）
0
0
2015
2016
2017
2018 2019（FY）
2015 201620172018
2019（FY）

Ordinary
Ordinary
IncomeOrdinary
Ordinary
IncomeIncome
Income（Millions of（Millions
Yen） of Yen）
（Millionsof（MillionsYen）of Yen）
Ordinary
Ordinary
IncomeIncome11,737
11,737 11,737
11,737
12,00012,000
11,540
11,54010,65911,737
11,737
12,000 12,000
10,659 10,659
10,659
9,438
9,438
9,438
9,438
12,000 11,540
12,000 11,540
10,659 10,659
9,000
9,000
9,000
9,000
9,438
9,438
9,000
9,000
6,000
6,000
6,000
6,000

（Millions of（Millions
Yen） of 11,540
Yen）
11,540

6,000
3,000
3,000

6,000
3,000
3,000

3,000
0
0

3,000
0
0

0
△1,521△1,521 △1,521△1,521-3,000-3,000
（FY）
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
（FY）
（FY）
2015 2016
2017
2018
2019
2015
2016
2017
2018
2019（FY）△1,521△1,521-3,000-3,000
2015
2016
2017
2018
2019（FY）
2015 2016
2017
2018
2019
（FY）
0
-3,000-3,000（Millions of（Millions
Yen） 11,686
of Yen） 11,686
11,686
11,68615,00015,00015,00015,00011,686
11,686
12,18812,18812,18812,18815,00015,00010,96912,00012,00010,969 10,969
10,96912,000 12,188
12,000 12,188
10,123
10,123 10,123
10,123
10,96910,96912,00012,000
9,000
9,000
9,000
9,000
10,123 10,123
9,000
6,000
6,000

9,000
6,000
6,000

6,000
3,000
3,000

6,000
3,000
3,000

3,000
0
0

3,000
0
0

△1,4170△1,417 △1,417△1,417-3,000-3,000
2015
2016
2015
2017
2016
2018
2017
2019（FY）
2018
2019（FY）
2015 2016
2015
2017
2016
2018
2017
2019（FY）
2018 △1,417
2019（FY）△1,417-3,000-3,0002015 2016
2015
2017
2016
2018
2017
2019（FY）
2018 2019（FY）
0-3,000-3,000NetNet
Net income
incomeNet income
income（Millions of（Millions
Yen） of Yen）
（Millionsof（Millions
Yen）incomeof Yen）
Net income
Net

7,784
7,784
7,721
8,000
8,000
7,034
7,034 7,721
7,417
8,000 7,417
8,000
7,034
7,784 7,034
7,784
7,721
7,721
7,417
8,000 7,417
8,000
7,034
7,034
6,000
6,000
6,000
6,000

7,721
（Millions of（Millions
Yen） 7,784
of 7,417
Yen） 7,784
7,721
7,417

6,000
4,000
4,000

6,000
4,000
4,000

4,000
2,000
2,000

4,000
2,000
2,000

2,000
0
0

2,000
0
0

0
-2,000-2,0000-2,000-2,000△3,717△3,717△3,717△3,717△3,717 △3,717-2,000-4,000-4,000
（FY）
2015
2015
2017
2016
2018
2017
2019
2018
2019
（FY）
（FY）
2015 2016
2016
2017
2018
2019
2015
2016
2017
2018
2019（FY）-4,000-4,000
2015
2016
2017
2018
2019（FY）
2015 2016
2017
2018
2019
（FY）
-2,000-4,000-4,000Financial condition
Net
Net
Net assets
assetsNet assets
assets（Millions of（Millions
Yen） of Yen）
（Millionsof（Millions
Yen）assets
of Yen）
Net assets
Net（Millions of（Millions
Yen） of Yen）

250,000
250,000 250,000
250,000

Total
Total
Total assets
assetsTotal assets
assets（Millions of（Millions
Yen） of Yen）
（Millionsof（Millions
Yen） assets
of Yen）
Total assets
Total（Millions of（Millions
Yen） of Yen）

400,000
400,000 400,000
400,000

200,200
250,000 250,000
200,200 200,200
200,200
200,000
182,203 182,203
200,000 200,000
200,000
200,200182,203
200,200182,203
123,144
123,144
123,144 123,144 182,203 182,203
200,000 200,000
150,000
128,960
128,960
150,000 150,000
150,000
123,144
123,144
128,960
128,960
113,141
113,141
113,141
113,141
150,000 150,000
128,960 128,960
100,000
100,000
100,000 113,141
100,000 113,141

400,000 400,000

100,000 100,000
50,00050,000 50,000
50,000100,000
100,000 100,000
100,000

50,00000
005

and the end of fiscal year according to our profit distribution
standard based on our consolidated business performance.
In FY2019, dividends of 15.5 yen per share, or 855 million
yen in total, were paid. With a view to enhancing shareholder
returns and improving capital efficiency, we acquired 1,730
thousand shares of treasury stock for 255 million yen andrecorded a retirement of a total of 2,930 thousand shares oftreasury stock, including the 1,200 thousand shares alreadyheld. Owing to the recording of 3,717 million yen loss
attributable to owner of parent, it is with deep regret that wesuspended the payment of year-end dividends.

50,000
0
0
（FY）
2015
2017
2018
2019
2015
2016
2017
2018
2019
（FY）
（FY）
2015 2016
2016
2015
2017
2016
2018
2017
2019
2018
2019（FY）
0
2015
2016
2017
2018
2019（FY）
2015 2016
2017
2018
2019
（FY）

374,246374,246374,246 374,246
327,963
327,963
327,963
327,963374,246374,246

300,000
327,963 327,963
300,000 300,000
300,000
183,445
183,445 183,445
183,445
300,000 300,000
209,147
209,147
209,147
209,147
183,445
183,445
179,899
179,899
200,000
200,000
200,000 179,899
200,000 179,899
209,147 209,147
200,000 179,899
200,000 179,899
100,000 100,000
0
0

0

0
0
（FY）
2015
2017
2018
2019
2015
2016
2017
2018
2019
（FY）
（FY）
2015 2016
2016
2017
2018
2019
2015
2016
2017
2018
2019（FY）
0
2015
2016
2017
2018
2019（FY）
2015 2016
2017
2018
2019
（FY）

06

◆Metal Powder

Segment Data
Metal Powder 1%

In Metal Powder business, we manufacture and sell metal powder products.
Net sales for FY2019 declined by 771 million yen year-on-year to 4,126 million yen due
mainly to a drop in sales volume. Operating income fell by 420 million yen year-on-year
to 263 million yen due partially to a decline in sales volume and drop in unit sales prices,
although fixed costs decreased.

Formed andFabricatedMaterials
7%

FY2019Net Sales

Consolidated
Net Sales

2,000

400

Operating income

1,000

200

Specialty Steel

248,369※▲1,676

Metal Powder

4,126※

263

Formed and17,938※

▲121

Other

1,873

67

Adjustments▲9,853

48

Total

262,453▲1,4170

FY2017 FY2018

170,234

Operating 10,000
8,000
income6,000（Millions of Yen）

100,000

9,230

0FY2019263

FY2017 FY2018

FY2019In Formed and Fabricated Materials business, we manufacture and sell formed andfabricated materials made from special steel bars and tubes.
Net sales for FY2019 decreased by 2,045 million yen year-on-year to 17,938 million yen,
due mainly to a drop in sales volume. Operating income fell by 1,000 million yen year-onyear to a loss of 121 million yen, owing to a decline in sales volume and a fall in operating
income of a subsidiary in formed and fabricated metals business.

4,000▲1,6760
FY2019-2,000（Millions of Yen）

20,000 18,431

19,984

17,93815,000Operating 1,000
800
income600（Millions of Yen）

10,000

879

400
200

5,000
0

704

△121

0
FY2017 FY2018-200

FY2019FY2017 FY2018

FY2019

8,452

2,000

50,000FY2017 FY2018

FY2019◆Others
This segment includes information processing services conducted through subsidiaries. Net sales for FY2019 increased by 232
million yen year-on-year to 1,873 million yen, while operating income was 67 million yen, up 24 million yen from FY2018.

Net Sales 2,000（Millions of Yen）

1,500

1,530

1,642

1,873

500
0

Operatingincome（Millions of Yen）

1,000

07

683

600

◆Formed & Fabricated Materials

Net Sales

248,369

FY2017 FY2018（Millions of Yen）

925

Fabricated Materials

In the Special Steel business, we manufacture and sell a range of special steel products from bearing steel to engineering steel,stainless steel, heat resistant steel, and tool steel.
Net sales for FY2019 was 248,369 million yen, up 78,134 million yen year-on-year owing chiefly to the inclusion of Ovako asa consolidated subsidiary, although Sanyo Special Steel’s non-consolidated sales volume showed a decrease. Operating income
decreased by 10,128 million yen year-on-year to a loss of 1,676 million yen, due to a drop in Sanyo Special Steel’s sales volume,
rise in the price of supplementary materials, surge in costs as volume dropped, as well as an increase in the write-off of goodwill ofOvako and Mahindra Sanyo Special Steel Pvt. Ltd., among other factors.

0

Operating 1,000
800
income（Millions of Yen）

◆Special Steel

150,000 141,988

4,126

3,000

* Net sales include internal sales and transfers conducted between segments（Millions of Yen）200,000

4,897（Millions of Yen） 4,000

Specialty
Steel
91%

Net Sales 250,000

4,895

Net Sales 5,000

Other1%8040
20

FY2017 FY2018

FY2019

67

60

0

43
27

FY2017 FY2018

FY201908

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

Gears, Shafts, Cylinders,
Sprockets, Swing gears, etc.

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
Formed &FabricatedMaterials

Bearings

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 Steel

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

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

High Alloy Steel

Metal powders

Bearing Steel

Formed &FabricatedMaterials

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,

Tool SteelTubes

to blast furnace steel-making, which makes steel from iron ore, the electric

Stainless Steel

Forged bars

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

materials recycled in-house)

High Alloy Steelcontributing to the recycling and effective use of iron resources. Comparedarc furnace method has the advantage of lower CO₂ emissions and lower

Sanyo Special Steel are recycled materials such as scrap iron (including

09

Rolled bars

RecycleMetal powders

Powder Metallurgy products

Formed & Fabricated Materials

Electric arc furnace slag

10Features

Participating in the“Challenge Zero”Initiative
for the realization of a Decarbonized Society
In October 2020, we became a participating member of the“Challenge Zero”initiative led by the Japan Business
Federation (hereinafter, Keidanren).
“Challenge Zero”is an initiative jointly led by Keidanren and the Government of Japan that aims to proactively
publicize and support innovative actions taken by companies and organizations towards a "decarbonized society"which the Paris Agreement (the international framework on climate change) sets as a long-term goal.
In line with the thrust of“Challenge Zero”to solve social issues through business-led innovations, we are working to
generate innovation that aim to contribute to reducing GHG emissions and realizing decarbonized society.

Innovation Challenge 1

Contribution to zero CO₂ emissions by developing bearing steel for
long-life wind power generation
OutlineRecently, the demand for zero CO₂ emissions against the power generation business is rapidly increasing all over the world. Wind power
generation shown in Fig. 1 has begun to be 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 can continuously andstably generate power. This is synonymous with reducing equipment maintenance frequencies, and in order to achieve this, it is required tosuppress troubles during operation. That is, bearings, which are the core components of wind power generation equipment, are required tohave high reliability.
Therefore, based on the high-cleanliness technology for steel that we have cultivated so far, we aim to develop bearing steel for wind power
generation that can obtain stable long-life property. Furthermore, we will contribute to zero CO₂ emissions by its implementation and spread.

Description(1) D etails of challenges in the expansion of wind power generation equipment
There are two major issues for its expansion. One is the reduction of initial
equipment costs. Since it is required to generate stable power with high efficiency,
the equipment is often installed in mountainous areas with good wind conditions orat sea, which ends up with a large initial cost. As for Japan, the lack of land suitablefor wind power generation has forced us to choose the sea, which costs more to
install than the ground, and for this reason it has not been as widespread as in othercountries. Currently, technological development of offshore power generation forcost reduction is being carried out at a rapid pace in various fields.
Another issue is the reduction of the frequency of equipment maintenance. In
order to improve power generation efficiency or to increase the diameter of thewind turbine to generate higher power, the generator power rotating part (mainshaft in the hub, speed increaser and generator) of the core part is installed in a highplace with low maintainability. Operation costs would become higher if a trouble
unexpectedly occurs in this vital part. Therefore, we are required to secure stable
and long-life quality for bearing steel used in the power rotating part in theMain shaft
heart of the wind power generator.

(3) Specific challenge toward the goals

As shown in Fig. 2, the power rotating part, which is generally the key topower generation, is composed of three parts: the spindle part, the speed

11

We will work on development and commercialization of bearing steel for wind power generation that can obtain stable long-life property
by realizing this challenge, and contribute to the expansion by improving the reliability of wind power generation equipment.
Supplementary information

Sanyo Special Steel Co., Ltd. Sanyo Technical Report, Vol.13(2006),p.73.
"Bearings and Bearing Steels for Wind Turbine."

http://www.sanyo-steel.co.jp/technology/images/pdf/13/13_07.pdf

Innovation Challenge 2

Reduction of CO₂ emissions in various industrial furnace operations by
developing high-strength heat-resistant steel tubes for heat exchangers
OutlineIndustrial furnaces for heating and heat-treatment used in the steel and ceramics industries utilize so-called fossil fuels such as LNG, heavy
oil or coke, and are one of the major CO₂ emission sources. In order to reduce fuel consumption and CO₂ emissions, the furnaces areequipped with waste heat recovery devices to improve their energy efficiency. While the heat conversion type recuperator (Fig. 1) is widelyused 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 will contribute to the realization of a decarbonized society by developing high-strength heat-resistant steel tubes forheat exchangers that can improve energy efficiency and expanding their application to industrial furnaces.

Description(1) Specific challenges

Most of the recuperators are installed in the flue. As shown in Fig. 1, thecombustion air is heated (preheated) by the heat of the exhaust gas through theheat transfer tubes, which improves the energy efficiency of the furnace. Since theheat transfer tube is exposed to both high temperature and corrosive combustiongas, and combustion ash, the tube material is particularly required to have hightemperature strength (creep strength) and high temperature corrosion resistance.
The exhaust gas is generally cooled down before recuperators by gas dilution
to the durable temperature level of the heat-transfer tubes in order to prevent the
tubes from thermal damage (creep deformation). In other words, heat loss occurs
due to restrictions on material properties, and there has been a room for efficiency
improvement here.

Fig. 1, Structure of Recuperators

With the background shown above, developing a heat transfer tube steel that can be used in a temperature environment higher thanthe current level can be an effective measure for improving energy efficiency in industrial furnaces. Therefore, we will work on development
and commercialization of a heat-resistant steel tube that has equivalent high-temperature corrosion resistance to existing steel but has
significantly improved creep strength, as shown in Fig. 2, and we aim to make this developed steel usable in an exhaust gas environment thatis about 100 degree Celsius higher than the current level.

Fig. 1, A wind power generation facility
GearboxUltra large
spherical roller
bearing, etc.

Cylindrical Roller
Bearings, etc.

Yaw gearbox

Generator

NacelleTapered Roller
Bearings, etc.

(4) Effect of the realization of this challenge(2) Challenge goal

(2) Challenge goals

In order to overcome the above-mentioned issues, we have set thefollowing two points as contributions from the material supply side.
1) W e will visualize the bearing fatigue (rolling fatigue) mechanism in anenvironment unique to wind power generation equipment, which has
not been clarified at present.
2) B ased on the obtained mechanism, we will develop a long-life bearing
steel that can quantitatively predict the life and then supply it to themarket.

increaser part, and the generator part. Since the bearings of each part have different rotation speeds, loads, lubrication conditions, and soon, each part has a unique usage environment. In addition, because the bearings are used in ever-changing weather conditions, they are ina rolling fatigue environment where the conditions are constantly unstable. The fatigue mechanism of bearings used in these environments
has not been clarified yet due to the complex influencing factors. We aim to figure out the mechanism by combining the most-advanced
rolling fatigue test method and simulation technology. Furthermore, we plan to model the cracking behavior (generation —> transmission—> fracture) and based on the findings, to develop a long-life bearing steel for which life can be quantitatively predicted, and to aim forcommercialization.

Insulation bearing(megaohm), etc.

(3) Specific challenge toward the goal

To achieve the goal, we will adopt the unique structure control (precipitation control
of intermetallic compounds) that we have found. In addition, this development requires
precise structure control throughout the process from the steel tube manufacture to thecustomer's use in the furnace, and the structure prediction by simulation is adopted alongwith the confirmation by the experiment, which is the conventional development method.

(4) Effect of the realization of this challenge

It has been estimated that the industrial furnace equipped with the developed
steel tube would have a CO₂ reduction effect of approximately 10% compared to theconventional steel tube.

Fig. 2, General wind power generator structure and bearings※

Supplementary information※ Reprinted from the following URL by courtesy of NTN Corporation
https://www.ntnglobal.com/en/corporate/digest/business01.html“Successful Development of Heat-Resistant Steel for Use in Next Generation Recuperators”

Sanyo Special Steel Co., Ltd. News Release, March 17, 2020,

http://www.sanyo-steel.co.jp/system/upload/news_en/20200317_e_2.pdf

Fig. 2, Positioning of developed steel with respect
to existing steel

12CSR-conscious Management - the aimof the Sanyo Special Steel Group

CSR-conscious management is the aim of the Sanyo Special Steel Group, and its purpose is to realize sustainablegrowth and contribute to a sustainable society by building relationships of trust with all stakeholders through the practiceof“Confidence-based Management,”our corporate philosophy. The practice of“Confidence-based Management”canbe rephrased 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 by honestly and frankly practicing“Confidence-based Management.”

Customers

ConﬁdencedeFY2019 CSR Management Initiatives
Stakeholder

pl

13

tie s
uni

e

Shareholders &investors

mmnc◦ Presentations at expositions in Japan and overseas◦ Successful Development of Heat-Resistant Steel for Use in Next

◦ Stable supply of high-quality products◦ Sustainable efforts to improve quality◦ Promotion of technology and researchon steel

Generation Recuperators◦ Practical Application of 3D Printer Powder for Manufacturing
Dental Equipment◦ Implementation of a supplier award◦ Financial results briefing for business partners◦ Fair and equitable trading◦ Sustainable procurement activities

informationco

In the global economy, people, goods, and capital shift on a global scale and one country’s economiccrisis is instantly 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 theentire international community to work towards—both developed and developing countries alike. In the2030 Agenda, 17 goals and 169 targets were listed as Sustainable Development Goals (SDGs). The
relationship between our Group’s key business activities and the SDGs is as follows.

investors◦ Promotion of prompt and transparent
management◦ Regional revitalization both in Japan

Local
communities

Employees

and overseas◦ Support activities for volunteer/cultural
promotions◦ Fair personnel system◦ Development of work-friendly environments◦ Eradication of occupational accidents◦ Improvement of disaster prevention
awareness◦ Development of environmentally
Environment(the planet)

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

Results of key CSR activities in FY2019◦ Communication with shareholders andL

E m plo ye es

Sanyo Special Steeland SDGs

Missions to be fulfilled◦ Appropriate disclosure of financialaleConﬁdence

Workplaces andworking conditions
that encourage
the will to work

Customers

Business partners

oc

th

)

nﬁ
de

t(

et

Co

en

g
cin n
du rdeRe buteth the men
on viron
en

on m

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nc

de

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to ntrib
ac regi utin
tiv ong
itie als&nﬁSanyo Special
Steel GroupCo

E n viran

Sustainablegrowth of
Sanyo Special
Steel

Co

Ap
div prop
dis iden riate
inf clos ds/
orma ure o
tio f
n

de

Co

The practiceof Conﬁdence-based
Management

ra

Share
hol
de
rs

ir t

Fa

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s

High-quality
products

s
ner
art
sp
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nc
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Bu
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o
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Realization ofa sustainable
societyfriendly products and technologies◦ Efforts towards environmental preservation◦ Sanyo Special Steel Report delivery◦ Video of financial results briefing distributed on Web page
◦ Investor relations activities abroad◦ Cultural lectures◦ Plant tours held for elementary school pupils◦ Clean up activities in the area around the head office plant◦ Donation of books to elementary schools in Himeji City
◦ Blood donation activity◦ I mplementation of“no overtime days”◦ Language training for new employees in the US◦ Enhancements to the safety experience center◦ Implementation of disaster prevention drills◦ Switch to LED lighting◦ Use of inverters in on-site water supply pumps◦ Use of brick waste as heat-resistance raw material◦ Updating large fans with high-efficiency fans
◦ Replacement of compressor in a factory

SDGs
Goals
Group
Activities

・Development andstable supply ofhighly-functional
special steel
products

・Health and safety
activities
・Development of
employees’skills
・Welfare scheme

・Support for theactive participationof women・Utilization of scrap
raw material・Recycling of byproducts

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

14Our Group contributes to the creation of a sustainable society by ensuring that each and every employee is always
aware of“coexisting with society”and fulfills his/her responsibilities as a member of society.
Moving forward, the Group will also practice its corporate philosophy of“Confidence-based Management”as we aim to
inspire yet more confidence in all our stakeholders. Here we show some results from our activities in FY2019.

Stakeholder Confidence
2019

2020
1Q

Initiatives for shareholders, suppliers and customers◦Announcement of financial results for FY2018 and press conference◦Receipt of“2018 TOP MILL AWARD”from Handy Tube
◦Exhibited in“Advanced 3D Printing Expo Nagoya”◦Exhibited in“RAPID + TCT 2019”(US)◦107th Annual General Meeting of Shareholders◦Exhibits presented at the“6thInitiatives for global society and the environment◦Provision of practice steel materials for Himeji Technical High School◦Cultural lecture organized by the Sanyo Special Steel Cultural

Highlyfunctional Metal Exposition”(Osaka)◦FY2019 announcement of 1Q earnings results◦Exhibited in“High-Precision & Difficult Manufacturing Technology
Show”(Kanagawa)◦Exhibits presented at the“ Taiwan
International 3D Printing Show 2019”(Taiwan)

3Q

4Q◦FY2019 announcement of 2Q earnings results◦Exhibits presented at the 3D printer exhibition“Formnext2019”(Germany)◦Financial results briefing for business partners and shareholders◦Support exhibited in“Motion + Power Technology expo”(US)◦FY2019 announcement of 3Q earnings results◦Exhibits presented at the 3D printer exhibition TCT+Japan2020(Tokyo)◦Exhibits presented at the“6th◦Investor relations activities

Highlyfunctional Metal Exposition”(Chiba)abroad◦Ceremony for the presentationof supplier awards held

Promotion Foundation◦Invitation to a plant tour extended to 5th grade pupils from Himeji◦Yanagitani Akihiko, Fellow of Sanyo Special Steel, served as a lecturer at a

◦Blood donation event(the first of the year)◦Yanagitani Akihiko, Fellow of Sanyo Special Steel, delivered a lecture at◦Blood donation event(the second of the year)◦Participation by the Track and Field Club

Municipal Shikama,Tsuda Elementary School

the opening ceremony of the“New Metallic Materials Research Center”◦Receipt of“Hyogo Prefecture Tax◦Yanagitani Akihiko, Fellow of Sanyo Special

Contributor Award”

Steel, delivered a lecture at the Annual Meetingof the Japan Institute of Metals and Materials

seminar hosted by the Hyogo Metal Belt Consortiumin a marathon contest at Himeji Municipal
Tegara Elementary School Presentation
Ceremony for Donation◦Activities to beautify the local area
◦Invitation to a plant tour extended to 5th grade“Presentation Ceremony for◦◦2020 New Year Concert organized by the Sanyo Special Steel
Cultural Promotion Foundation

Donation Pledges”held forthe book-gifting scheme for
inner-city elementary schools
run by the Sanyo Special Steel
Cultural Promotion Foundation.

pupils from Himeji Municipal Tegara, Takahama
and Harima Municipal Hasuike Elementary School◦Commencement of donations to the International

Students Support Scholarship of the University of Hyogo◦ Improvement of annual leave system*Annual leaves are now available in units of two hours (quarter-day),Initiatives for employees

15

2Q

in addition to full day and half-day.

◦ Safety prayer ritual◦DLabor management◦Disaster drills for major earthquakes

seminar held

◦Compliance lectures◦Security trade control training◦Quality lectures◦Emergency drill conducted jointlywith the Shikama fire station◦Award ceremony for Originality andIngenuity Contributors◦Mental health lectures◦Safety prayaer ritual◦Presentation ceremony of the 2019 zero accident awards andcertificates of appreciation“Year-end Community Fest”hosted by◦
Sanyo Special Steel’s labor union◦Company-wide competition to◦Disaster prevention lecture◦ Internal control lectures

demonstrate skills in crane handlingand slinging

16

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 thathave a longer life and are smaller in size and lighter in weight.

Plans for improvements in environmental conservation
Plans for improvements in environmental conservation and FY2018 results
TopicsMedium-term projections（2017-2019）

Energy-saving and◦Reductions in CO₂ emissions resulting from theglobal warming

promotion of energy-saving measures

prevention■ Environmental policy

（Goal: 2.6% reduction in FY2020 compared to BAU*）

measures(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 inthe 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)*Business as usual (if no special measures are taken)◦Reduction in volume of dust and sludge sent to landfill

Recycling of byproducts◦Improve percentage of brick waste recycled

Compliance with

◦Compliance with regulatory standards

regulations

Pollution Control Act, etc.)

statutory laws and(Water Pollution Prevention Act, and the Air

1) We will contribute to the recycling of metal resources by manufacturing steel products using iron scrap as the main raw

Education and2) In addition to complying with laws, regulations, and agreements related to the environment, we will make ongoing

activities formaterial.

development

efforts to enhance our environmental management framework to improve our environmental performance, and we will

employees◦Regular education and development activities
for employees

environmental qualifications3) We will make efforts to reduce our impact on the environment in all stages of our business activities, and we will

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 in environmental awareness.

5) To achieve this environmental policy, we will set environmental targets and review them at least once a year, and wewill revise these targets as necessary.

6) We will ensure that all employees are thoroughly familiar with this environmental policy through education and training,

Promotion of◦ Regular publication of environmental reports

disclosure◦ Cooperation with environmental agencies

informationsuch as local government bodies

Acquisition of ISO14001 Certification
We have acquired ISO14001 Certification (the international
standard for environmental management systems) at principal
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
them understand the environmental management system. We
are also making efforts to improve the system. We also focus
on on-going training to facilitate the smooth change from one
generation to another of internal auditors. In 2017, an external
audit reviewed our transition to ISO14001:2015 and assessedthat our Environmental Management System was being properly
maintained and effectively utilized, allowing us to complete
migration to the standard.

Promotion of the Environmental Management System
The Environmental Conservation Committee

Each year we hold a meeting of our Environmental
C o n s e r v a t i o n C o mmi t t e e t o e nh a n c e e n v ir o nm e n t al
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

17

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
the matters listed below and attempt to mitigate environmental
risks.
⒤S tatus of responses to points identified in environmental
checksⅱR esults 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 S
 tatus of industrial waste treatment and results ofinspections 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 Amendments to the latest environmental laws

material◦Attainment of regulatory standards in all items(No violations of, or deviation from, laws,
regulations or agreements.)

local area (approx. 250 participants)◦ Registration of data into carbon footprint◦ On-going initiatives to increase the numberof staff with managerial qualifications in the◦ Release of "Sanyo Special Steel Report 2019"and publication on website◦ Implementation of“Environment Month”
events

〇〇
〇〇〇
〇〇〇
〇〇〇
〇
〇〇〇
〇〇〇

Activities for developingenvironmental awareness

Environmental accounting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.

〇〇◦Use of brick waste as heat-resistance raw

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

and we will appoint the General Manager of Environmental Management as the Environmental System Management
Officer.

◦Outsourcing of dust recycling to sub-contractor

prevention of pollution

actively promote resource and energy savings, the recycling of byproducts and reduction of waste material, and theclimate change. Moreover, we will strive to prevent environmental pollution by developing products that will contribute〇〇〇◦Switch to LED lighting

calculator for individual households (20◦ Increase in the number of staff holding official

Self-Assessment◦Replacement of compressors in a factory

participants)

responsibly control any business activities that may have an adverse impact on the environment.

control of pollutant and greenhouse gas emissions to contribute to conservation of the environment and mitigation of◦Amount of reduction in CO₂ emissions: 3.38% vs BAU◦Implementation of activities to beautify the

Bearing in mind that we are a company with plants that manufacture and sell special steel and non-ferrous metals, weundertake environmental management based on the following policy.

FY 2018 Resultst

We collated costs for environmental conservation initiatives
undertaken in FY2019 in accordance with guidelines from the
Ministry of the Environment.
Maintenance and administration costs for environmentally-friendly
equipment such as dust collection units &water treatment facilities
and the cost of recycling/disposing of byproducts amounted toapproximately 2.6 billion yen. We also invested approximately
400 million yen in the improvement of dust collection units &water
treatment facilities and in energy-saving initiatives such as changing
lighting to LED.

We believe that raising every employee’s awareness ofthe environment is important in tackling our environmental
conservation activities, and we conduct regular training for
new employees and grade-based environmental workshops.
We have also established a reward program to encourage
employees to obtain qualifications related to environmental
conservation such as those for pollution prevention managers,
and we have also been working to have employees calculate
carbon footprints for their own households.

（Million of yen）
Categories

Expenses

Investment

2,586

400

0

0

143

0

4 .R&D costs

37

0

5 .Cost of social activities

100

6 .Cost of addressing environmental damage

12

0

2,788

400

1 .Costs within business areas
2 .Upstream/downstream costs
3 .Cost of administrative activities

Total

18

Initiatives to Prevent Climate Change
Initiatives to reduce the amount of CO₂ emissions
Sanyo Special Steel is involved in efforts to reduce
CO₂emissions (one of the greenhouse gases (GHG)) as partof its initiatives on climate change. Under our medium-termbusiness plan (2017-2019), we aim to cut CO₂ emissions
by 2.6% compared to BAU (business as usual - the scenario
where no special measures are taken) by 2020. Results for
FY2019 show a reduction of 3.38% has been achieved, andwe are making renewed efforts to achieve the target for
FY2020. In addition, we have continued to promote energysaving initiatives such as the switch in fuel from heavy crude
oil to LNG, increased use of regenerative burners for heating
furnaces, and the use of inverters in large motors (revolution
controlled), and through these initiatives, we have reduced unit
emissions of CO₂ by 9% per ton of crude steel in comparison
with FY2005. As a result of these initiatives, we have beenrecognized as an“ S-class”business operator (the top rank forcompanies making outstanding energy-savings) for the fives
consecutive year under the assessment program run by the
Ministry of the Economy, Trade and Industry, a program that
grades and classifies business operators.
In October 2020, we joined“Challenge Zero,”a project
led by the Japan Business Federation that encourages
businesses to take up the challenge of creating innovation for adecarbonized society.
We have published our innovation challenges,“Contribution
to zero CO₂ emissions by developing bearing steel for longlife wind power generation”and“Reduction of CO₂ emissions
in various industrial furnace operations by developing highstrength heat-resistant steel tubes for heat exchangers.”(Details
of innovation challenges can be found on pages 11-12 of thisreport.).

CO₂ emissions per unit of crude steel（CO₂-kg/t）
750

700

703

650

637

631

640

636
614

600

608

611

inspections for“specified Class 1 products”on our commercial
air conditioners and other equipment as we work to ensure
proper control of CFC gases.

Reducing the load on the environment 
when transporting products
Reducing CO₂ emissions does not just involve manufacturing
processes but also essential initiatives on the logistics front. We
believe that the choice of transportation method when shipping
products is a particularly important point for reducing the loadon the environment on the logistics front. Consequently, we areworking to promote the use of rail transport and freight ships
on the assumption that product quality can be ensured; railtransport allows CO₂ reductions to be reduced by around 90%
compared to transportation by truck, and freight ships provide
a reduction of around 80% compared to the same. Of all the
shipments that Sanyo Special Steel makes itself, transport byfreight ship accounts for a significantly higher percentage than
the average for the manufacturing sector.

〈Specific initiatives〉
・Use of rail transport for the Tohoku area
・Use of freight ships for transport to interim
warehouses set up in the areas of Kanto, Chubu,
Shikoku, Chugoku, and Kyushu
・Switch from trucks to barges for transport to Kobe
Port where export vessels depart.

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

Recycling slag from electric arc furnaces

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
rate of this resource. Our electric furnace slag products areused mainly as roadbed material for roads and as an asphalt
aggregate instead of natural 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 by
local authorities as a recycled aggregate for paved surfaces.
We use pressurized steam-aging facilities to pressurize
our furnace slag products to the highest level in Japan in aprocess that effectively stabilizes any expansion in the products.
In addition, we use a classification machine that can sortelectric furnace products into six stages simultaneously, fromcoarse-grained aggregate to fine grains, and multi-functionalclassification equipment made up of a granulator that chamfers
aggregate particles to adjust grain size and improve resistanceto wear. Using these manufacturing processes, we provide
customers with high-quality electric furnace slag products.
Moving forward, we intend to focus on realizing asustainable society as we continue to comply with the Nippon
Slag Association’s“Guidelines for Management of Iron andSteel Slag Products”and not only deploy management systems
across all areas including manufacturing, quality, and sales, butalso submit to reviews by third-party organizations to enhance
management systems and further improve reliability.

Initiatives to reduce by-products
In FY2019, the amount of by-products generated by our
production activities was 203,000 tons, and the amountprocessed, including the volume sold, was 212,000 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 FY2019, approximately 89% waseither recycled or reduced down by incineration, with theremaining amount, approximately 11%, 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 of
waste

TopicsOvako, our subsidiary in Europe, became first in
the world to succeed in a trial to heat steel billet
using hydrogen in pit furnace at its Hofors mill. (Ajoint trial with Linde Gas AB)
Production using this technology, which generates
no CO2 from heating and has no impact on steel
quality, can drastically reduce environmentalload compared to existing methods; according toOvako’
s estimation, Hofors mill would save 20,000
tons of CO2 per year.

3R

RecycleOvako succeeds in a trial using hydrogento heat steel in pit furnace

Utilize scrap raw

Reusematerial

Reuse water

Recycle by-products

Reuse by-products■ By-product generation
8%

3%

6%

1%

（thousand t）■ By-product throughput

Electric furnace slag

（thousand t）

11%
23t

550
2005

2013

2014

2015

2016

2017

2018

FY20192019 （FY）

16%

FY2019

203

212

t

t

Reducing CFCs (Chlorofluorocarbons)
CFCs are used in our commercial air conditioners. As one of
the GHGs, CFCs are deemed to contribute to global warming
when released into the atmosphere. In accordance with Act
on the Control of CFC Emissions, Sanyo Special Steel conducts

19

89%
189t

66%
Electric furnace slag
brick waste

scale

dust

sludgeOther

Recycling

Landﬁll disposal

Recycled road paving in Himeji City

20

Moves to Reduce the Load on the Environment
Efficient use of water resources
Water is vital for the manufacture of our products. It is used
to cool steel and equipment, and also as a source of power
for equipment. 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
to water 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 isa system 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 toallow the person in charge to deal with the issue in a prompt
manner. In addition, the water is regularly analyzed for harmful
substances, etc., by an external organization as part of ourefforts to manage water quality and prevent water pollution.

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

Prefectural ordinance (addition criteria)

10
8
6
4

2.6

2.5

2.5

2.9

2015

2016

2017

2018

2.3

2
0

Reduction of emission of air pollutants

Wastewater treatment facility

Appropriate controls on chemical substances
In accordance with the PRTR* Act, we monitor the amountof chemical substances released and transferred. Volumes
are reported to the Ministry of Economy, Trade and Industry,
and we also work on initiatives to curtail the amount released.
Furthermore, PCB waste is pro perly 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.
*P RTR (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 environment2019 （FY）

Suspended particulate matter in wastewater（SS）

・Emissions and movements ofchemical substances

concentration（mg/ℓ）
35

Prefectural ordinance (addition criteria)

30
25

Amount of transfer
outside the business
place

20
15
10
5
0

0.6

0.8

0.6

0.6

0.6

2015

2016

2017

2018

2019 （FY）

Nitrogen concentration in wastewate
concentration（mg/ℓ）
70
60

Legal standards (No additional standards for prefectural regulations)

50
40
30
20
10
0

21

7.0

8.1

7.9

7.5

7.5

2015

2016

2017

2018

2019 （FY）

1,176

t

Amount ofemissions into
the atmosphere

260

Amount of emissions
intopublic waterways

t

14

t

Proper disposal of waste
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 introduceda manifest 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.

At facilities that generate soot and smoke, we haveachieved SOx (sulfur oxide) emissions well below the levels
agreed on with the Himeji City council by switching the fuelfrom heavy crude oil with high sulfur content to LNG (towngas) which contains almost no sulfur. In a bid to reduce NOx(nitrogen oxide) emissions, we are using low NOx burners
and implementing 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 inApril 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, suchas 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.

Sulfur oxide emissions
硫黄酸化物の排出量（thousand ㎥N）
40

66.5

30

Agreement value with Himeji City

57
20
10
0

2005

0.003

0.2

2015

2016

2.1

1.5

1.1

2017

2018

2019（FY）

Nitrogen oxide emissions
窒素酸化物の排出量（thousand ㎥N）
300
250
200

Agreement value with Himeji City

158.9

150

122.2

120.0

2015

2016

148.9

150.0

2017

2018

132.8

100
50
0

2005

2019（FY）

Environmental Risk Management
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 raisedby the patrols at individual manufacturing sites.

Responding to amendments in environmental laws
Responding to amendments in environmental laws

Patrols are conducted on processes and equipment withsignificant environmental aspects and inspections are carriedout on equipment, management of measuring devices, andwritten work standards as we work to improve managementlevels and mitigate risk.

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.

(ii) Checks on emergency drills〈Example of response to a legal amendment〉(i) Checks for significant environmental aspects

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 and instruments.

(iii) Patrols attended by the President
Once a year, an environmental patrol is conducted with the
President in attendance. In FY2019, this patrol included checks
on the management of significant environmental aspects in hotrolled steel tube factory and energy-saving initiatives.

●Fluorocarbons Emission Reduction Act (revised April 2020)
Content of revision: Issuing of a fluorocarbon collection certificate
at the time of disposal of class 1 specified
products was made mandatory.
Status of response: Disseminated the content of the revised law
throughout the company via the Environmental
Liaison Meeting in March and the Study
Workshop on Environmental Laws andRegulations in June.

22

Confidence with Customers 
Quality

Understanding and reflecting customer needs

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 thatcreate product quality by integrating our sales division, engineering division, production division, and quality assurance division toensure that we satisfy product standards such as JIS and various overseas standards. Furthermore, quality assurance is not just about
controlling product quality; it also about ensuring that the quality management system, which is a key part of our corporate structure,
can respond to environmental changes such as globalization and changing customer needs, and also address the need to make
improvements to realize a more efficient structure. The Group aims to continue to be an enterprise that enjoys sustainable growth byplacing emphasis not only on product quality controls but also on maintaining and improving the quality management system, whichforms the cornerstone of the Group’s quality assurance system.

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 ofour quality assurance system. The process for productquality control is developed through collaboration between
various divisions. The Sales Division gains an understandingof customer needs, the Engineering Division then reflects
these requirements in the manufacturing designs, and theProduction 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 in a bid to optimize andenhance quality assurance functions. The Quality AssuranceCommittee meets regularly and is chaired by the Director
in Charge of Quality Assurance. The Committee discusses
basic policy and plans concerning quality assurance for the
fiscal year and implements improvement activities such as“systematic improvements in key issues,”“prevention ofquality 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“ risk and opportunity initiatives.”Basedon issues at Sanyo Special Steel that have been identified through these assessments,
we have been rolling-out a medium-to-long term PDCA (Plan-Do-Check-Act) plan
in a bid to upgrade our quality assurance. Specifically, we are working to improve
our quality management system by continuously updating our quality manuals,
implementing quality patrols, and sharing information between organizations throughinternal quality audits. In addition, we are promoting educational activities including
lectures on quality issues in November, which is the National Quality Month, aimed atraising the quality awareness of employees.

23

Once a year, we survey our customers to have them assess us
on QCDD (Quality, Cost, Delivery, Development). We analyze theresults and extract any points with low scores for improvement,
leading to even higher customer satisfaction. Furthermore, in orderto understand the needs of customers in a timely manner, we holdmeetings to exchange technical ideas with customers and we also
take part in exhibitions, both in Japan and 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.

Promotion of skill transfer activities
On April 1, 2015, Skill Succession Group was established. This group specializes
in the succession of skills and is involved in the planned and systematic training of
employees who will succeed to the relevant roles.
FY2019 was the final year of the three-year activity plan established in FY2017. We
have successfully achieved the plan’s activity targets through continued efforts that
included one-on-one trainings (pairing up employees imparting the skills with thoselearning them), the creation of training materials, and the enhancement of award
programs to improve motivation.
The“Activities to Prevent Recurrence of Accidental Stoppages”* commenced in
FY2019 are beginning to yield results, with an operator succeeding in preventing afacility problem.
The Skills Successionactivities were added to the commitments of our Mid-term
Business Plan from FY2020 onward, giving these activities more weight to carry.
*Activities to address production suspensions and facility halts by adopting the Skills
Succession approach in the whole process, up to completion, of recurrence prevention
measures, from identifying causes to drawing up countermeasures.

Promotion of TPM (Total Productive Maintenance) activities
The entire production division is working on TPM activities with theaim of thoroughly eliminating losses and waste due to equipment
breakdowns and problems, increasing production efficiency, andproviding a reliable supply of products.
In terms of activities, we have not only set up the“TPM School”asa place to provide training on basic knowledge about equipment andmachinery to develop human resources with a good understandingof 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 carry out
improvements every day. By the end of August this fiscal year, 97
people had attended the TPM School, with total attendance at 1,800
since the School started, to acquire the basic skills and knowledge
useful for autonomous maintenance. In addition to this, the outcomesof improvement activities are announced at in-house TPM contests
held four times a year in a bid to enhance TPM activities.
Moreover, we are conducting IoT application training at the TPM School and promoting the introduction of IoT at manufacturing
sites in order to further improving productivity and stabilize operations.

24

Confidence of SuppliersProcurementImplementation of a supplier awards (to strengthen partnerships)
Sanyo Special Steel believes that building good trading relationships with suppliers is essential for 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 thesustainability of society in various forms as part of our corporate social responsibility. The Group has identified principles for“sustainableprocurement”such as accountability, transparency, respect for human rights, and ethical behavior in the procurement of raw materials
and services, and these principles are reflected in our procurement decisions. In addition, we strive to maintain and improve mutual
understanding and trust with 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.

and values its partnerships with suppliers. As part of this, we have set up an award scheme for suppliers. Under the supplieraward scheme, we comprehensively evaluate a number of factors to select suppliers who have attained outstandingachievements and present them with an award. The scheme covers raw materials, various other materials, maintenance, andoutsourcing 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 withregard to transactions carried out with Sanyo Special Steel over a fixed period of time. In fiscal 2020, we also commended six
companies that made outstanding achievements.

■ Basic procurement policies
In our procurement activities, Sanyo Special Steel complies with all relevant laws, conducts an open-door policy acrossthe 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 forces posing a threat to the order and security of civil society are not allowed to continue.
2 ． Fair and equitable trading

Procurement of ferro-alloys considered to be“conflict minerals”“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 the trade in 3TG are used as a source of funding for militia groups, contributing to human rights violations and conflict. While
we purchase tantalum and tungsten needed in the manufacture of special steel, we check through our suppliers that any purchases
are“DRC conflict-free”(i.e. not used to fund militia groups.) In addition, if customers ask whether our products are“DRC conflict-free,”then we issue a statement declaring them to be so using the“Conflict Mineral Report Template.”

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 andimprove mutual 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, othermaterials, 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, weuse a 24-hour system to take delivery of scrap iron (our main
raw material). We also procure the required amounts of ferroalloys and supplementary material when needed. In anticipationof the risk of disruptions to supplies due to disasters and otherfactors, we try to gain an understanding of production conditions,production locations, delivery routes, and other information forour 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 andby holding an appropriate amount of stock on our premises.

25

3TG
Tin
Tantalum
Ｔungsten

DRC countries

G old

Declaration of Partnership Building
Sanyo Special Steel announced a Declaration of Partnership Building 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 of Partnership Building 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 thebusiness circles and the 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 tradeconditions”and continuing to advance efforts for encouraging companies to introduce appropriate trade practices,while taking into consideration impacts of the COVID-19; andto 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 ties with our
suppliers to seek mutual development as business partners.

26

Confidence of EmployeeTo ensure sustainable growth of a company,“human resource development”and“the creation of a worker-friendly environment thattakes health and safety into account”are important. To materialize these, the Group is working to prevent occupational accidents,
provide mental health care and promote a good work-life balance, among other initiatives, to develop an environment where various
talents can play an active part. In addition, and most importantly, as a manufacturing company, we are committed to creating a safe
workplace. Furthermore, the Group needs personnel who can“think autonomously,”regulating themselves and thinking and acting
independently. The requirements for this are self-direction and the spirit to take on a challenge. In order to realize this, under ourbasic policy of“developing employees and make full use of their potential,”we not only offer various training in accordance with jobrole and career, but we have also adopted a personnel system that encourages a strong desire for self-growth and the achievementof goals in our employees and allows them to always challenge high-level problems.

Human resource developmentPersonnel system:

〜Establishing work tasks and training themes through dialog〜
To ensure sustainable growth of a company,“humanresource development”and“the creation of a workerfriendly environment thGroup needs personnel who can“think
autonomously,”regulating themselves and thinking and acting
independently. The requirements for this are self-direction andthe spirit to take on a challenge. In order to realize this, under
our basic policy of“developing employees and make full use of
their potential,”we not only offer various training in accordancewith job role and career, but we have also adopted a personnel
system that encourages a strong desire for self-growth and theachievement of goals in our employees and allows them toalways challenge high-level problems.

Training for international personnel
In response to the globalization of the businessenvironment, we are accelerating our training of employees
capable of performing on the international stage. We arecarrying out various initiatives including the dispatch ofyoung employees to subsidiaries and affiliates, systematicforeign language training for new employees, dispatchof selected candidates to overseas universities, graduate
schools, and research institutes to study or on temporary
assignment, and short-term language study programs abroad
for selected mid-career employees. In addition to efforts toimprove language proficiency, we will enhance our training
programs on themes for acquiring international sensitivity
through experience and promote the development ofinternational human resources.

■ FY2019 training pick-upCreating a work-friendly environment
Active participation of womenWe have set a goal to raise the ratio of female staff to 25%
by the end of March 2028, utilizing them as a valuable asset.
To achieve this goal, we have increased the areas where
women play an active role by systematically recruiting female
employees and expanding the range of their work, while
introducing a system that allows women to continue working
by alleviating pressure on them during life events by offeringchildcare leave, childcare allowances, and shorter working
hours. In addition, we have been conducting inhouse training
to promote awareness of female employees and create anorganizational culture that makes it easier for them to play
active roles.
As a result of these efforts, the percentage of female staff
stood at 13.8% as of March 2020.

Percentage of female staff

13.8%（Planning jobs26.1%, Technical jobs6.9%）

Woman

Pregnancy / Birth / Childcare System Timeline
pregnancybirth

1 year old

2 year old

3 year old■ Management training

We held a management training session targeting those in managerial positions, who are thecandidates for future senior management, with focus on thinking matters through so as to let theparticipants develop“strategic thinking”skills required of a senior management. We have been
conducting this training with the aim of developing personnel who are capable of taking a risk tomake the right decision and judgement even in a situation where the perspective is uncertain, andlooking across the company and business from a viewpoint of total optimization. In the latest training
session, which was themed“developing a business vision for 2033 (the 100th anniversary of our
foundation)”(future prediction), participants thoroughly analyzed the present state, made suppositions
on possible changes that might happen from different angles and without being bound by precedent,
and discussed new business models, which they presented before the management team. Believingthat development and growth of human resources are crucial to the company’s sustained growth, wewill continue efforts towards this.

■ Training for newly-appointed Associate Managers

Sanyo Special Steel conducts grade-based trainings to let our employees acquire the skills andmindset required for each particular job grade. In FY2019, we held a training for newly-appointed
Associate Managers, targeting the grade of employees who were in a gap period between trainings.
The main purpose of this training was to make those who had been newly-appointed as AssociateManager, a core position in each workplace, realize their role as a candidate for the next generationof leaders. We aimed to boost their ability to assist their supervisor and draw support from othermembers, develop their leadership required to guide the organization, and raise their management
capability as future candidates for managerial positions. We will continue improving and offering gradebased trainings.

27

End of 4 year old
year

male
3rd gradeelementary
schoolMan and woman
End ofyear

6rd gradeelementary
schoolEnd ofyear

Breaks for pregnant employees (extended time in addition to normal breaks; up to one hour a day, up to twice a day)Maternity and postpartum leave (early pregnancy to 8 weeks after childbirth)
Leave for maternity check-ups (special leave)
Protection measures for pregnant employees(working considerations such as reassignment and shorter working times)
Maternity leave (special leave; up to 3 days)
Child-rearing break (up to the end of the fiscal year when the child turns 3)
Child-care time (30 minutes at a time, up to twice a day)
Shorter working hours to allow for child-care (up to the end of the fiscal year when the child enters third grade at elementary school)
Leave to nurse a child (limited to 5 days a year for one child, or 10 days a year for two children; reinstated annual leave or special leave)
Exemption from/restrictions to overtime hours (up to 24 hours a month, or 150 hours per year)
Exemption from late night shifts28Confidence of Employee

Creating a safe workplace
Achieving a work-life balanceRate of paid leave taken

77.9

%

To achieve a work-life balance means to perform one’s duty at work witha sense of fulfillment and satisfaction while at the same time have a freeand diverse choice of lifestyle options in terms of family and community life.
The“Work-Style Reform Related Bill,”a package of legislation to give a pushtowards better work-life balance, has been implemented one by one sinceApril 2019.“Work-style reforms”such as the prohibition of long working
hours, properly managed working hours, and the obligation for employees
to take 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”and promotes increased
productivity in a bid to reduce overtime hours, as well as to improve therate of paid leave taken. In terms of the amount of paid leave taken inparticular, the figure at Sanyo Special Steel has already exceeded 70%(77.9% in FY2019), in contrast to the national average (51.1%); and we areworking to keep this figure above the target of“achieving 70% by 2020”
set by the Ministry of Health, Labor and Welfare. Furthermore, as well as
encouraging employees to take blocks of paid leave or incremental leaveand establishing a system that exceeds statutory requirements for maternity
leave, childcare leave, and nursing care leave, etc., we are also striving toachieve a work-life balance for each and every employee by creating awork environment and culture that makes it easier to take these leaves.

■ 2020 Comprehensive Health and Safety Management Policy
■Basic policy■SloganC reate a work environment and culture in which we can carry through decisions madeby the company as a whole and by each workplace.

W ith a sense of ownership, with our minds and eyes aligned, we are all part of the safety
activities.

■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”Occupational health and safety activities - to ensure safety - Promoting health-conscious management
At Sanyo Special Steel, we view employee health management from a business point of view and invest in health initiatives basedon the Industrial Safety and Health Act in order to help revitalize the organization by improving employees’energy and productivity.
Mental and physical disorders among employees not only cause a fall in productivity but may also lead to an outflow of humanresources as employees take leaves of absence or leave the company. Employees are provided with statutory health examinations,metabolic tests, health advice, and similar resources, as well as on-going mandatory stress check-ups since FY2016. The results oftests on staff members are used to conduct an aggregated analysis, and employees with high levels of stress are advised to see an
occupational physician. In addition, we have a mental health help-desk, provide treatment to help employees stop smoking, and also
provide dietary counseling among other initiatives. Moving forward, we aim to be a company that inspires ever-more confidence as
we continue to place the highest priority on the health and safety of our employees (a major assumption of our corporate philosophy
of“Confidence-based Management”) and promote the creation of workplaces that improve the mental and physical health of ouremployees and allow them to work in an energetic manner.

Extend employment program

Employment of Disabled Persons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 arehealthy, wanting to work, and capable of performing their jobs
is consistent with the concept of diversity. Employees who are
deemed necessary in the performance of work and from theviewpoint of technology and skills transfer as of the time theyturn 65 stay on in extended employment as“senior citizen
partners.”As of April 1, 2020, there were 46“senior citizen
partners”active across various work sites.

We promote the employment of people with disabilities ina 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) and special support schools, etc., but we are also
constantly making efforts to improve the work environment inboth 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/her work content andworking hours. As of June 1, 2020, we had 24 employees withdisability playing an active role in a range of work sites.

Percentage of employees with disabilities

2.26

%

29

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.

Safety and health managementGrade-based training

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).

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
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 2018, 2,655 employees
were trained at the center, and to date the total is 23,736. 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.

The new 3S activities
The 3S activities in Sanyo Special Steel had been addressing
issues that had caused accidents or problems that had beenfound during patrols.
In addition, under the existing system for 6S certification,
activities had been seen to increase temporarily in the periodleading up to certification but had not truly taken root as
ongoing efforts. These issues prompted us to put in place astructure for the new 3S activities in which everyone fromsection managers to workers on site take part in making
improvements in the workplace, starting from aroundthemselves, to find and eliminate waste in things, space, andtime, towards the goal of creating an efficient, worker-friendly,and safe workplace that is free of any obstacles to hamper
workers’flow of movement, as well as an environment thatenables its maintenance. So far, one section has obtained acertificate while other sections are working towards it.

30

Confidence of Employee

Disaster prevention initiatives

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
specific safety measures but also promises improvement in the workers’safety consciousness while preparing a proposal. We believethat the system will turn into a safety activity of truly bottom-up nature, which forms the core of our safety activities. In FY2019, 92
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 since 2016 with the goal of“bringing true safety”throughan integration of top-down style and bottom-up style safety
activities. We select young to mid-career employees from each
workplace and educate them on accurate safety knowledge and theimportance 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 theirown workplace and hone their sensitivity to recognize hazards.
They also engage in risk assessment activities to sort out hazardous
works, all of which are combined with improvement measures forfacilities to put in place a state of substantial safety.

3.0
2.6
2.4

Frequency rate of industrial accidents
with lost-worktime injuries

10

2.2
2.0
1.8

8

1.6
1.4

6

1.2
1.0

4

0.8
0.6

2

0.4
0.2

0
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

0.0

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

31Frequency rate

Number of industrial accidents

2.8

Number of industrial accidents
with lost-worktime injuries

12

Conducting disaster drills

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,
and we hold regular disaster drills, among other measures.
The basic policy for FY2018 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, or leakage”“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.”
Based on these priority management items, we have beenworking hard to enhance and strengthen disaster prevention
management systems to prepare for emergencies while, at thesame time, conducting on-going activities that emphasize increased
awareness of disaster prevention.

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.

Initiatives to heighten disaster prevention and readiness awareness〈Number and Frequency Rate of Industrial Accidents with Lost-worktime Injuries〉
14

Risk management in emergency situations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.
At the workshop for supervisors and officers responsible forhazardous 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.

Typical disaster prevention drills in FY2019
In FY2019, 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 FY2019

83•Disaster drills for major earthquakes

We conducted a major earthquake disaster drill on September
2 based on the scenario of a huge earthquake with epicenter in
the Nankai Trough that has caused disruption of 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 a car park on the factory premises, split
into groups according to the direction of their homes, formed
up in lines, and started walking towards home (up to the factory
gates). When a large earthquake actually occurs, it is highly likelythat transport facilities would be in a chaos and roads disrupted.
Through these drills, we will continue working to raise awarenessand readiness of the employees.

•Emergency drill conducted jointly with the Shikama fire station

On November 22, we held a disaster drill at the metal powder
factory in conjunction with the Shikama Fire Department, basedon the scenario of a fire occurring at the plant. In assumption of an
oxygen deficiency hazard due to the leakage of inert gas, in addition
to smoke from the fire, we exercised a series of operations from firstaid fire fighting by our occupational fire-fighting unit to fire fighting by
the self-defense fire brigade and the public fire brigade, rescue andfirst-aid treatment of the injured, and setting up a Disaster Response
Headquarters to collect information and give out instructions. Moving
forward, we will continue to work towards improving our awarenessand response skills to help prevent fires/disasters in the workplaceby practicing these kinds of disaster drills.

Introduction of a system to account for the safety of employees
For a company to properly continue business in the event ofa large earthquake and other wide area disasters, it is importantthat it quickly grasp the situation and safety of its employees andothers concerned.
As part of our business continuity program (BCP) in anticipationof earthquakes and other wide area disasters that are happening
often across Japan in recent years, Sanyo Special Steel introduced asystem to account for the safety of our employees in August 2020.
In the event of a huge earthquake and other disasters, it would
be difficult to confirm and consolidate information on employees’safety and whereabouts by phone or other conventional means.
The system will allow us to do this swiftly and put the information
into use in taking measures required to continue business.

32

Corporate Governance
The Group practices a basic philosophy of“Confidence-based Management”and, by supplying useful steel products to society
at large, we aim to achieve sustainable growth and increase corporate value over the medium- to long-term as we support thedevelopment of the global economy, while also building a recycle-oriented society and focusing on environmental conservation. In
order to establish a management platform required to achieve this goal, we are working to upgrade our corporate governance.

General Meeting of Shareholders

Fundamental thoughts on corporate governanceOverview of corporate governance
Sanyo Special Steel is a company with an Audit and Supervisory Board, which supervises how directors execute their duties,
and a Board of Directors that consists of nine directors including four outside directors (of which, three are independent outside
directors). The Board of Directors meet regularly (at monthly meetings) and as required (at ad hoc meetings) to decide importantmatters concerning the execution of business. We also have in place company-wide committees and meetings to discuss important
operational matters such as the Board of Directors’meetings, which facilitate efficient decision-making on management and the
Corporate Policy Committee (held twice a month in principle), which deals with important matters to discuss, the Risk Management
Committee, which aims to ensure thorough compliance and further enhancements in corporate governance; the Security Trade
Control Committee; and the Rewards and Sanctions Committee. 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
and diversifying business environment, we have adopted the executive officer system.
With regard to audits by the company auditors, the Audit and Supervisory Board makes an auditing policy for each year andconduct the audits as needed according to the policy. An audit is carried out by the four members of the Audit & Supervisory Board,
including two full-time outside members, with a broad perspective and covering not only the performance of duties by the Directors
but also the state of risk management, compliance and other matters pertaining to internal control. Based on its results, an audit
opinion is presented to the Representative Director and also to other business execution divisions as needed. In order to prepare fora case where the number of Audit & Supervisory Board Members falls below the required number stipulated by laws and regulations,
we have appointed one Substitute Audit & Supervisory Board Member.
To improve the functions of the Board of Directors, we also conduct analyses and evaluation of the Board’s effectiveness. We do
this through 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, and how the cooperation with outside directors is going,
among other topics. The Board then assesses the outcome of the survey.

Strengthening the corporate governance system
･ Three independent Directors took office, making up one-third of the board

Aiming to have a system for agile decision making to keep up with the changes in business environment and for effective
corporate governance, Sanyo Special Steel ensures that its Board of Directors has the right size in relation to its businesslineup and challenges, and a well-balanced and diverse mix of members in terms of experience, knowledge and expertise.
We also have independent directors, from whom we expect opinions and oversight of our management from objective
and expert viewpoints. With effect from June 26, 2020, three of the nine members or one-third of our Board of Directors
are independent independent directors. As a listed company with a parent company, we will continue upgrading ourgovernance in conformity with the principles of the Corporate Governance Code.

･ Establishment of the Nomination & Compensation Advisory Committee

We have set up a Nomination & Compensation Advisory Committee, a non-statutory advisory body comprising theRepresentative Director and President and all (three) of the independent outside directors.
This has enabled us to seek the appropriate involvement and advice of our independent outside directors on matters ofparticular importance regarding the nomination and compensation of directors responsible for corporate management, andthereby enhance the independence, objectivity and accountability of our Board of Directors towards a further improvementof its governance function.

･ Increase and improve discussions with outside directors

Our outside directors have been joining the regular meetings between the Representative Director and the members of
the Audit & Supervisory Board. In addition to this, we have created new platforms for exchange of views between internaland outside directors, and between outside directors and the Audit & Supervisory Board Members, so as to facilitate theexchange of information and sharing of understanding between our outside directors and other members via communication
with these groups.

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

Board of Directors

Audit Supervisory Board

nine directors
including four
outside directors

four auditors
including two
outside auditors

Basic policy of internal control system< Autonomous internal control >< Businessexecution >Accounting Auditors

In order to ensure further confidence among our stakeholders, including shareholders, consumers, and the local community, SanyoSpecial Steel has developed a corporate governance structure suited to the Group’s business, and we will work to enhance corporate
governance in a bid to improve efficiency, soundness, and transparency in our management.

Representative Director and President

Corporate Policy Committee

3)

Companywide Committees
Risk Management Committee

Executive Oﬃcers

Rewards and Sanctions Committee

Business department

Internal Control &Audit Department（Internal audit）

2)

4)

Subsidiary / Aﬃliate

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.

･ Training sessions for Directors and Audit & Supervisory Board Members

We offer training sessions by guest lecturers to the members of the Board of Directors and the Audit & Supervisory Boardon their responsibilities required by the Companies Act and other crucial laws and regulations, various systems relevant
to our business, and other topics. These trainings are designed to provide them with continuous opportunities to earn theknowledge they need and deepen their understanding.

33

34

Corporate Governance
Officer

The expertise and experience of Board members
Our policy for selecting the senior management is to judge a person by experience, knowledge and expertise regardless of
their gender, age or nationality, so as to create an optimum structure in which each person can adequately fulfill their role andresponsibility and together aptly address managerial challenges facing the Group. Additionally, the size and composition of the Boardof Directors and Audit & Supervisory Board, as a policy, are decided with consideration to the balance among members.

Full nameexpertise and experience

Corporate
management
Representative Director and President

HIGUCHI Shinya

Director, Member of the Board
Managing Executive Officer

Director, Member of the Board
Managing Executive Officer

Director, Member of the Board
Managing Executive Officer

Supervises the Accounting &Finance Department. In charge of
the Secretarial Office, Corporate
Planning Department, Computer
Systems Planning Office, Personnel& Labor Relations Department,
General Administration Department,Internal Control & Audit
Department, and Procurement
Department.

Supervises the Safety & Disaster Prevention
Office, Environmental Management
Department, and Slag Products
Manufacturing & Sales Office. In charge of
the Production Planning & Administration
Department, Industrial Engineering Office,Equipment Department, Steelmaking
Department, Bar and Wire Manufacturing
Department and Tube Manufacturing
Department. Assists the Director in chargeof Metal Powder Manufacturing & Sales
Division in work related to manufacturing.
Assists the Director in charge of Corporate
Planning Department in matters related tothe manufacturing technologies of Ovako AB.

Supervises the Hiroshima Branch,
Kyushu Sales Office, and Formed& Fabricated Products Division.
In charge of Sales Planning &Administration Department, Sales
Department for Bearings, Sales
Department for Automobiles& Industrial Machinery, Special
Products Sales Department, Overseas
Marketing Department, Osaka Branch,and Nagoya Branch. Commissioned
as the Head of Tokyo Regional Office.
Assists the Director in charge ofMetal Powder Manufacturing & Sales
Division in work related to sales.

In charge of the Metal Powder
Manufacturing & Sales Division,
Research & Development Center,
Technical Planning & Administration
Department, and Quality Assurance
Department. Assists the Director
in charge of Corporate Planning
Department in work related to
Mahindra Sanyo Special Steel
Pvt.Ltd. Assists the Director in
charge of Formed & FabricatedProducts Division in work related totechnologies.

TAKAHASHI Kozo

ONISHI Tamae

Independent Outside Director,
Member of the Board

USUKI Masaharu

YANAGIMOTO Katsu

Outside Director, Member of the Board

MASUMITSU Noriyuki

Senior Audit & Supervisory Board Member

NAGANO Kazuhiko

35

Independent Outside Audit &Supervisory Board Member

OE Katsuaki

Independent Outside Audit &Supervisory Board Member

YOGI Hiroshi

Audit & Supervisory Board Member

TSUGA Hiroshi

Grounds for appointment
Grounds for appointment
Grounds for appointment
Grounds for appointment
・Experience in a wide range of fields as ・R ich experience and broad insight ・Rich experience and broad insight cultivated ・Rich experience and broad insight cultivateda director of Sanyo Special Steelcultivated at Mizuho Bank, or similar
at Sumitomo Mitsui Banking Corporation
at Nippon Steel Corporation, in addition toexperience as director of Sanyo Special Steel

Audit & Supervisory Board
MemberGrounds for appointment
Grounds for appointment
Grounds for appointment
Grounds for appointment
・Extensive experience and expertise ・R i c h e x p e r i e n c e a n d b r o a d i n s i g h t ・Rich experience and broad insight cultivated ・Rich experience and broad insightin legal circles
from key positions held in national
in his career at think tanks, universities, andin management at NIPPON STEEL・Able to supervise and make recommendations
and regional government agencies orby overseeing business execution of executive
TEXENG.CO.,LTD., or similaron the management of the company fromnational universities, etc.
officers at an investment corporationa standpoint that is independent of the ・Able to supervise and make recommendations ・Provision of oversight and suggestions
on the management of the company fromon the management of Sanyo Special
management team responsible for executing
a standpoint that is independent of theSteel from a standpoint independent
businessmanagement team responsible for executing
from the executive teambusiness●

TAKAHASHI
Kozo●

OI Shigehiro●

OMAE Kozo●

YANAGIMOTO
Katsu

●

Sales

●

●

●

Finance and Personnel & International
accounting labor relations experience

●

●

●

●

●

ESG

●

●

●

●

●

●

●

●

●

●

●

(Independent･
Outside)USUKI
Masaharu *●（Outside）
MASUMITSUNoriyuki●

NAGANO
Kazuhiko

●

●

●

●

●

●

●

●

●

(Independent･
Outside)OE Katsuaki●●(Independent･
Outside)YOGI Hiroshi

●

●

●

●

●

Other

●

(Independent･
Outside)ONISHI
Tamae *TSUGA
HiroshiLegal●(Independent･
Outside)KOBAYASHI
Takashi *Non-executive

KOBAYASHI Takashi

Independent Outside Director,
Member of the Board

OMAE Kozo

Director, Member of the Board

Independent Outside Director,
Member of the BoardOI Shigehiro

Business execution

Director, Member of the Board
Managing Executive Officer

HIGUCHI
Shinya *Manufacturing,
engineering,
research &development

●

●

●

●

●

●

●

●

●

●

●

* Higuchi Shinya, 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.

36

Internal Control Systems
Compliance System and Risk Management System
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 all officers and employees arethoroughly familiar with these standards. (Guidelines for Corporate Behavior and Code of Conduct can be found on pages 41-42 of
this report.)
We are building a system to promote compliance by prescribing in our company rules the placement of a compliance help-desk,
regular meetings of the Risk Management Committee, and other matters.
Sanyo Special Steel will endeavor in the future to cultivate higher ethical standards by regularly conducting employee education on
the necessity and significance of complying with various laws, regulations, and rules in corporate management and will make efforts tomaintain and improve the management health of not only Sanyo Special Steel but also of the Group as a whole. Sanyo Special Steel isalso committed to putting into practice its mission to“fulfill our social contribution through business”by promoting business activities
rooted in high ethical standards.。

■Compliance help-desk (Whistle-blowing system)
Sanyo Special Steel Group employees,

Information provider and suppliers’employees,

provide（Name / Anonymous）

provide（Name / Anonymous）

Compliancehelp-desk（Internal contact）
Sanyo Special Steel /Head Oﬃce

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

Survey / Response

as well as their families

We have set up a compliance help-desk to preventthe occurrence or recurrence of circumstances or
actions that violate, or appear to have violated,
statutory laws, social norms, company rules, orsimilar regulations.
The help-desk can be used by anyone, including
Sanyo Special Steel Group employees, casual
workers, temporary workers, and suppliers’
employees, as well as their families, and it provides
a system for consultation to ensure that no-one has
to handle problems alone—whether these concern
issues that are difficult to solve in the workplaceor troubles that people are unable to discuss withanyone else.
Consultations and reporting may be done
anonymously, and no-one will suffer to his/her
disadvantage as a result of any consultation orreport.
It is company policy to respond promptly andappropriately to any consultation or report.

1

Internal control plans

Each year, we 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 such as safety, theenvironment, disaster prevention, and quality; internal audit
plans; and training plans. Each department and group company
then formulates their respective plans based on 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 situationthat risks 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 together and shares themwithin the Group, allowing individual departments and groupcompanies to carry out inspections to check for similar risks.

3Internal audits, etc.

In internal audits, the Internal Control Department andrespective functional departments not only check the status ofinternal controls using documentation such as internal control
checklists but also monitor each department/group company.
In addition, as a measure to complement internal controls, wehave established and operate a whistle-blowing help-desk thatcan be used by employees of Sanyo Special Steel and its groupcompanies, their families, and suppliers’employees.
We also conduct surveys on employee awareness regarding
internal controls and compliance.

■Implementation of compliance training
Every year, the Sanyo Special Steel Group holds compliancelectures to raise awareness of compliance issues among
executive officers and employees.
We conduct training on different topics, such as e-learningcompliance training, compliance training for new employees,
and also grade-based training on harassment. Furthermore,
all departments and affiliated companies conduct compliancetraining appropriate to the individual department and ensurethat employees are familiar with laws, regulations, and rules
necessary for the execution of business.

Compliance lecture37

We have 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. Basedon this organizational structure, we operate the internal control system as described below.

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 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

Training and raising awarenessWe have set up courses on internal controls through gradebased training and other methods to provide training forexecutives and employees of Sanyo Special Steel and its groupcompanies. Furthermore, we are pro-actively working to raiseawareness of internal control concepts and improvements inworkplace culture, among other topics, through talks between
the Internal Control Department and respective departments/group companies.

6

Links with outside directors, corporate auditors, and accounting auditors

Independent outside 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 outside
directors and members of the Audit & Supervisory Board attend
the Committee meetings, where they present and exchange
opinions. Outside directors and Audit & Supervisory Board
members also hold regular meetings with the Representative
Director and other attendees, 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.

38

Financial Section
40

Financial Statements

72

Independent Auditor’s Report

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The accompanying notes are integral parts of these statements.

The accompanying notes are integral parts of these statements.

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The accompanying notes are integral parts of these statements.

The accompanying notes are integral parts of these statements.

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The accompanying notes are integral parts of these statements.

The accompanying notes are integral parts of these statements.

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The accompanying notes are integral parts of these statements.

The accompanying notes are integral parts of these statements.

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The accompanying notes are integral parts of these statements.

The accompanying notes are integral parts of these statements.

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Company Profile（As of March 31, 2020）

Subsidiaries and Affiliates（As of March 31, 2020）

Company Name：Sanyo Special Steel Co., Ltd.
Head Office：3007, Nakashima, Shikama-ku, Himeji, Hyogo
672-8677, Japan

Established：January 11, 1935
President：Higuchi Shinya

3

Number of Employees：6,726 (consolidated basis)
Overseas 4,673][Domestic 2,053、
1,366 (non-consolidated basis)

Head office/Factory Whole view

Capital：53,800 million yen
Net Sales：Consolidated basis：262,452 million yen (Fiscal 2019)
Fiscal Year End：March 31
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.

4
5

6
7

1

2

8

11

12

10

9

Metal powder：Manufacturing and marketing of metal powders and powder metallurgy products.
Formed and Fabricated Materials：Manufacturing and marketing of formed and fabricated materials made from
special steel bars and tubes.
Others：Providing information processing services.

Stock Information（As of March 31, 2020）

Total Number of Shares Issued：54,507,307
Stock Listings：Tokyo Securities Exchange（1st Section）

NIPPON STEEL CORPORATION

28,863,000

52.97%

Company's Kyoeikai Association

2,418,000

4.44%

1,258,000

2.31％

account)

1,206,000

2.21％

Foreign investors

10.37%

Individuals
and others
12.74%
Financial
institutions
16.02%

Securities ﬁrms
0.59%

Domestic
corporations
60.28%

Shareholder
Composition

Manufacturing of special steel product(formed & fabricated materials)

Santoku Computer Service Co., Ltd.
（Himeji City, Hyogo）

Construction, operation,and consulting services for information systems

Santoku Security Service Co., Ltd.
（Himeji City, Hyogo）

Services such as security services and facility management

Involved in businessand sales of special steel products in China

Manufacturing and marketing of special steel products(formed & fabricated materials)⑧Siam Sanyo Special Steel
Product Co., Ltd.
（Thailand）

Manufacturing and marketing of special steel products(formed & fabricated materials)

SKJ Metal Industries Co., Ltd.
（Thailand）

Manufacturing and marketing of special steel products⑨P.T. SANYO SPECIAL STEELINDONESIA（Indonesia）

Manufacturing and marketing of special steel products⑩Sanyo Special Steel
Manufacturing de México,②Santoku Seiken Co., Ltd.
（Tokyo Headquarters）
S.A. de C.V. （Mexico）（Taito-ku,Tokyo）

Sumitomo Mitsui Banking Corporation

1,139,000

2.09％

NORTHERN TRUST CO.(AVFC)RE‐HCR00

953,000

1.72％

NSK Ltd.

772,000

1.42％

Mizuho Bank, Ltd.

728,000

1.34％③Ovako AB（Sweden）

674,000

1.24％④Sanyo Special Steel India Pvt. Ltd.
（India）⑪Advanced Green
Components, LLC（U.S.A）

621,000

1.14％⑤Mahindra Sanyo Special Steel
Pvt. Ltd.
（India）⑫SANYO SPECIALSTEEL U.S.A., INC.
（U.S.A）

Company's employee shareholding
association
Marubeni-Itochu Steel Inc.

*The number of shares omits fractions of less than 1,000 shares.
*The Company holds 1,212 thousand shares of its own stock in treasury, but is excluded
from the above list of principal shareholders.

75⑦Ningbo Sanyo Special Steel
Products Co., Ltd.
（China）

Santoku Tech Co., Ltd.
（Himeji City, Hyogo）

Principal Shareholders

The Master Trust Bank of Japan, Ltd.(trust

Santoku Kogyo Co., Ltd.
（Himeji City, Hyogo）

Processing of special steel and machinery maintenance

Number of Shareholders：11,486(trustaccount)⑥SANYO SPECIAL STEEL TRADING（SHANGHAI）CO., LTD.
（China）

Trading of special steel products,
steelmaking raw materials, and other materials

Total Number of Shares Authorized to be Issue：94,878,400

Japan Trustee Services Bank, Ltd.

①Yohkoh Bussan Co., Ltd.
（Osaka City, Osaka）

Manufacturing and marketing of special steel products
Manufacturing and sales of special steel products
Involved in businessand sales of special steel products in India

Manufacturing and sales of special steel products

Manufacturing and marketing of special steel products(formed & fabricated materials)

Manufacturing and marketing of special steel products(formed & fabricated materials)

Trading of special steel products

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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.

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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) Relationship 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) We 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) Treatment 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) We 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) We 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) Respect 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) Respect 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) Privacy protection
We will respect the privacy of each and every person, and make every
effort towards proper management of personal information.
(4) Prohibition 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) Compliance 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.
End78