ESG Reporting

G GovernanceCompliance

For Daiseki Group, which expands businesses with permissions, assuring complianceand meeting social responsibility and public responsibility are the most important issues
for corporate management.

Basic Approach to Corporate Governance
Daiseki positions corporate activities that comply withlaws and social norms as the most important issue for
improving transparency and soundness in corporate
management. We adopted the Company with Audit andSupervisory Committee system, with an Audit andSupervisory Committee comprising three outside
directors, further enhancing the supervisory function of
directors. One of external directors is a woman, who
gives recommendations from a female perspective.
In May 2020, Daiseki introduced an executive officer
system with the aim of clarifying business execution
responsibilities, streamlining management andaccelerating decision-making. Further, the authority
necessary for conducting daily corporate activities isdelegated to the works managers at each of the six
worksites and the presidents of six Group companies,
with the Management Meeting held with the participationof directors, executive officers, works managers, directorsof consolidated subsidiaries and other staff.
Also, in May 2023 we appointed an additional external
director who has experience with corporate management
in order to strengthen the company’s governance, whichmeans we now have a majority of external directors.

Daiseki's Corporate Governance System
General Meeting of Shareholders
Appointment and dismissal
Audit, etc.

Board of Directors
Proposal and report

Audit and Supervisory Committee
Appointment and Compensation Committee

Selection, dismissal and supervisory

Direction
ReportReport(Directors, Executive Oﬃcers, Works Managers,
Directors of consolidated subsidiaries, etc.)

Cooperation

Accounting audit

Accounting Auditor

Audit Oﬃce

Internal Control System Promotion Committee
Direction
Compliance Committee

Management Meeting

ReportConsultation
ReportRepresentative Director

ReportAppointment and dismissal

Appointment and dismissal

Internal Audit

Sustainability Division Meeting
Risk Management Committee

Direction

Each department, Works, Consolidated subsidiary

Board of Directors
The Board of Directors is comprised of seven members:
three internal directors, one external director, and threeexternal directors who also serve as Audit andSupervisory Committee members. Of these members, one
is a female director, contributing to a more diverse Board
composition. In addition to regular Board of Directors
meetings which are held once per month in principle,
extraordinary Board of Directors meetings are held asnecessary. The Daiseki Group holds Board of Directors
meetings more frequently with the aim of facilitating
prompt and accurate decision-making and efficientorganizational management of the Group as a whole.

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Board of Directors
Internal directors…Men…WomenExternal director

External Directors(Audit and Supervisory
Committee members)

ESG Reporting
Governance

Main accomplishments related to governance of FY2023 (Daiseki)

Board of Directors

Held

Audit and Supervisory
Committee

Ratio of external directors
within all directors

21 times Held 14 times(as of May 25, 2023)

57.1％

Basic Approach to Internal Controls

Compliance System

Based on the Companies Act and the Ordinance for
Enforcement of the Companies Act, Daiseki establishedthe following system for ensuring the appropriateness ofoperations (hereinafter, the“internal control system”).

Daiseki established a Compliance Committee in
May 2002 and formulated an Ethics Charter
announced within and outside the Company.
Compliance Committee chaired by the President andRepresentative Director works on grasping the statusof company-wide compliance systems establishedand its problems, analyzing compliance risks at eachdepartment and embodying countermeasures. For
the cases where the Daiseki Group management orcompliance officers at each department findproblems related to compliance, we have establisheda system to report to compliance committee
immediately and thoroughly operate that system.

❶ W ithin the Daiseki Ethics Charter, Daiseki establishedthree guidelines for corporate behavior that convey its
stance on growing and developing alongside society:Social roles and responsibilities, compliance with laws
and regulations, respect for human rights and thefostering of a free and open corporate culture.
To achieve perpetual development as an industry leader,
Daiseki has developed an internal control system andstrives to embody its Ethics Charter.
❷ T he Board of Directors formulates basic policies forinternal control, provides instructions and supervision on
the implementation status of internal controls, confirms
maintenance and operational status and reviews basic
policies and countermeasures when necessary.
❸ D a i s e k i e s t a b l i s h e d t h e I n t e r n a l C o n t r o l S y s t e m
Promotion Committee chaired by the President andRepresentative Director to ensure reliable financial
reporting through the establishment and maintenance ofinternal control system programs.

Risk Management
Daiseki established Risk Management Regulations in2006 to address various risks including earthquakes andother natural disasters, occupational accidents andinformation leaks. Additionally, we created a risk map andestablished a response system defining responsible
departments for each risk classification.
The Risk Management Committee, which plays a central
role in risk management, is chaired by the President andRepresentative Director and manages risks facing theDaiseki Group thoroughly and comprehensively. The Audit
Office audits the risk management status of eachdepartment, reports the results to the Risk Management
Committee and the Board of Directors on a regular basis,and deliberates and decides on improvement measures.
Our Sustainability Division Meeting and Risk
Management Committee have also deliberated on climatechange risk analysis based on TCFD recommendations
since FY2022, with progress confirmed at management
meetings and results reported to the Board of Directors.

Compliance System
Compliance Committee

Objective
To plan various measures fostering compliance awareness throughout theorganization and conﬁrm the status of awareness among employees.
Composition
Chairman: President and Representative Director
Deputy chairperson: General Manager, Headquarters of Business Generalization;
General Manager, Headquarters of Planning and Management
Member: Director in charge of Headquarters of Business Generalization;
Department Managers of Headquarters & Assistant Department
Managers; Audit Oﬃce

Secretariat
Secretary General: General Manager, Headquarters of Planning and Management
Clerical work: Human Resources Department (in charge of promotion of compliance)

Compliance Oﬃcer:
Department Managers and Heads of Works (ultimate authority in departments and works)

Person to be in charge of compliance: Employees at job levels ofVice Works Manager, Deputy Department Manager or higher

Employees

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ESG Reporting
Governance

A Conversation with Our External Directors

Directionality to achieve Vision 2030,
our long-term management vision
Three of our external directors had a conversation on the current status and future prospects of
Vision 2030, Daiseki’s long-term management vision formulated in 2018, and the efforts necessary
to bring it to fruition.

New, future-oriented businesses take off,
raising expectations for further growth― How do you evaluate Daiseki’s business strategy,
performance, and social outcomes for FY2023?
Sahashi: Regarding new business strategy, I believesigning the cooperative agreement with a municipality(Gamagori, Aichi Pref.) to work toward the realizationof a circular city was a major step toward the future.
The question of how to promote environmental policy
for decarbonization is an issue for many local
governments. I believe that Daiseki, as a leader inresource regeneration in regions in Japan, can play arole by connecting local government bureaus acrossthe board on the topic of the environment, thus
breathing new life into the situation.
Kako: The knowledge and know-how obtained throughsuch initiatives can be expanded horizontally to otherlocal governments. This joint agreement was coveredby various media outlets, and in this way I believe
Daiseki’s visibility will increase across Japan.
Mizuno: For performance, we regarded the large-scalewater leak at Meiji Irrigation Works, an industrial

47

waterworks in the Tokai region, the global shortage ofsemiconductors, and the delayed impact of the
COVID-19 pandemic as points of concern. When thefactory utilization rate falls, demand for liquid waste
recycling also declines. However, the water leak at Meiji
Irrigation Works was remedied in about three months,
and since the COVID-19 pandemic is coming to an end,
I believe we can expect further growth in FY2024.
Kako: Susceptibility to external impact may be an issue
going forward. From the perspective of personnel
utilization, there have been new movements in theengagement of female employees. I have advised regularpersonnel transfers for female employees for quite sometime, and I have heard that the female employees who
have been assigned to work with Gamagori City areplaying an active role in the project. Furthermore, it has
been encouraging to hear directly from other employees
about their enthusiasm for their work.
Sahashi: There has been an increase of three female
employees promoted to management, and this has
invigorated the company, hasn’t it?
Kako: Yes, I think employees also feel that somethingis building. The company should take this opportunity
to be proactive in training and other initiatives for skill

ESG Reporting
Governance

Profiles of External Directors (Audit and Supervisory Committee members)

Norikazu Sahashi

Nobukatsu Mizuno

Mitsuyo KakoFirst election in 1987, heserved on Nagoya City Council
for six consecutive terms.
Chairman of the Nagoya City
Council from 2005 to 2006.
Took on his current role in2016 after being appointed asa Daiseki Auditor in 2012.

Worked with Tohmatsu & Co.
(now Deloitte Touche
Tohmatsu LLC) before
assuming directorship of the
Nobukatsu Mizuno Certified
Public Accountancy Office(ongoing position). Took on his
current role at Daiseki in 2018.

After serving on the staff of Aichi
Prefecture, she was appointed
trustee and board member ofAichi University in 2016 (ongoingrole). Appointed board memberof Chita City Board of Education in2018 (ongoing role). Took on his
current role at Daiseki in 2020.

development of all employees including women. I thinkit’s essential to expand training for managers in order
to raise the level of the organization as a whole.

Achieving Vision 2030: Using numbers andtarget items to visualize and execute a plan
― Please tell us about the status of Vision 2030
initiatives as well as the future outlook and expectations.
Sahashi: We are expecting Vision 2030 to promote thecircular economy. Daiseki will not only recycle waste
produced by companies, but also help circulate moreresources throughout society. Vision 2030 willcontribute to achieving the SDGs and also has thepotential to create a consulting business. We anticipate
that Daiseki, recycling companies, will develop into
circular economy companies.
In light of increasing needs, I believe Daiseki now
needs to sow the various seeds for collaboration withlocal governments and the circular economy, etc. Daiseki
has established“Ideas, Plans, Structures, Actions”asits management principles. Based on new ideas, Daiseki
develops plans and organizes structures to realize theidea and cultivate it into a business. I hope Daiseki will
work hard to explore new business opportunities.
Regarding the collaboration with the city ofGamagori, Daiseki should test the process ofconnecting with other local governments across Japanand create an internal system. In addition toestablishing this as a pillar of new business for Daiseki,I expect this will become a standard for working withlocal governments.
Mizuno: In order to do this, it is important that the board
members further understand Vision 2030. Vision 2030
cannot be achieved by simply continuing on the present
course. Working with local governments might also be
within the scope of established practice. Daiseki needs
to develop new businesses that differ from its existing
businesses. The company must clearly envision the ideal
image of Daiseki for the year 2030, and deliberate,
discuss, and refine the actions it should take now.
FY2024 is the year in which Daiseki should visualize
specific figures and items and put a plan into action.
In Japan there are close to 4,000 listed companies,
but only 480 companies*1 have released a mediumterm business plan, and Daiseki is one of thesecompanies. This shows how Daiseki is a listed company
that places importance on engaging in dialogue withshareholders, but I would like to see the company goeven further and incorporate detailed progress

management for its goals. The number of companies
actually doing this in Japan is likely less than 100.
Kako: Employees may not realize how much attention
Daiseki is attracting both in Japan and internationally.
The company should put even more of a focus on
improving the work environment as a part of humanresource development. Daiseki should continue its
efforts to increase the annual leave utilization rate ofmanagers and engagement of female employees. On
the other hand, the extremely low turnover rate of 3.2%
on a consolidated basis and 1.9% on a Daiseki nonconsolidated basis in FY2023 is highly commendable.
Mizuno: I believe Daiseki is the only company in theenvironmental industry with a turnover rate in the
single digits. It has also earned high scores for laborrelated items in international ESG-related assessments.

Balancing existing and new businesses
through“ambidextrous leadership”― What do you consider the effectiveness of theBoard of Directors?
Mizuno: These changing times call for“ambidextrous
leadership.”*2 In this era, companies who achieve
management combining the deepening of existing
businesses (deepening of knowledge) and the search
for new businesses (searching for knowledge) willgrow and survive. The Board of Directors’role is not
only conducting the company’s present core business,but also strongly supporting the challenge of sowing
the seeds of future businesses. We expect them totake responsibility and action for this.
Sahashi: To that end, we have decided to appoint
someone with management experience as an external
director from FY2024. We hope to not only reinvigorate
the Board of Directors, but also to strengthen thefunctions of continual management supervision andcounsel.
Kako: The Board of Directors is structured such thatexternal directors receive regular business reports fromthe person in charge of each department. As external
directors, we, too, will closely monitor the Board of
Directors and the company itself, and promotecompany-wide efforts to realize Vision 2030.
*1 D aiwa Institute of Research“Recent Trends of Medium-termManagement Plans Sep. 2022”Total for Jan.-Aug. 2022
*2 A management theory proposed by professors Charles A. O'Reilly
and Michael L. Tushman. This management methodology
simultaneously pursues two contrasting aspects: the deepeningof existing businesses and the exploration of new businesses.

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ESG Reporting
Governance

Whistleblower Protections
The Daiseki Group established a complianceconsultation counter where employees can directly
consult with The Daiseki Human Resources
Department or corporate lawyers that is easy for
employees to use, and thoroughly operate it informing
the importance of it. When employees consult, theconsultation counter will investigate the matter,
determine the countermeasure to prevent it fromhappening again with the related departments and
imp l e m e n t i t t h o r o u g hl y , c o mp a n y - w i d e . T h ewhistleblowing system stipulates the protection ofwhistleblowers so that employees who make reportsuffer no adversity. All information from whistleblowers
handled in the strictest confidence only by those who
respond in the whistleblower system so no informationis leaked to the outside.

Information Protection and Management

Preventing corruption

In 2005, we formulated Personal Information
Protection Rules to ensure all officers and employees
maintain a thorough understanding of appropriate
personal information protections in an effort tostrengthen management.
Based on the Information Security Basic Policy, we
strictly manage and control the creation, use, removal
and storage of information. In FY2023, there were no
incidents involving the leak of personal information.

The Daiseki Group has established and abides by
the following items in its Code of Conduct to prevent
corruption.

Respect for Intellectual Property Rights
We formulated employee invention regulations toaddress inventions and other intellectual property
created by employees while on the job. By clarifying
the attribution of rights to employee inventions andguaranteeing inventor rights, we are working toincrease motivation for research and development.
Number of intellectual property rights(FY2023 end) (cases)
Number of intellectual
property rights

Patents holding

Patents pending

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Compliance with the Excellent Industrial
Waste Disposal Company Certiﬁcation System

The purpose of this system is to create an environment
in which generators of industrial waste can easily
outsource treatment to excellent certified businesses andto promote the proper treatment of industrial waste. If an
industrial waste disposal company with a track record of
five years or more meets certain standards, a seal of
excellence will be printed on the permit and introducedon the Industrial Waste Information Net website.
Daiseki was the first operator to be certified under thissystem by the city of Nagoya in 2011, and as of February
28, 2023, we were certified as excellent by a total of 49
local governments (45 prefectures and four cities).

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The Certification of the
Excellent Industrial
Waste Disposal
Company by Nagoya City

(1) Developing sound corporate activities● We engage with all business partners in good faith, justly
and fairly.
● We establish mutually beneficial relationships withbusiness partners and aim for stable growth anddevelopment.
● We conduct corporate activities in accordance withsocial norms and standard business practices.
● We build an internal control system for the purpose of
ensuring the reliability of financial reports.
● We aim to enhance shareholder returns as profits grow.

(2) Compliance with the antimonopoly act● We do not discuss or enter into agreements thatmutually restrict free corporate activities.
● We do not use one’s position to influence business
transactions.
● We do not make inappropriate displays or provide
excessive gifts or prizes.

(3) Appropriate approach to entertainment,
gifts, and similar practices● We don’t entertain or give gifts to business partners andother stakeholders beyond the scope of social
conventions and common courtesies.
● We don’t entertain or give gifts to current or former civil
servant employees, except when permitted by laws andregulations.
● We don’t provide our shareholders with entertainment
or gifts that exceed the scope of social conventions andcommon courtesies.
● We don’t give any favors to antisocial forces (extortionists).

(4) Transactions with public institutions, handlingof political contributions and donations● We act with thorough consideration for sociality,commonality, necessity, etc.
● We do not make illegal political contributions.

ESG Reporting
GovernanceProtecting human rights

Effectiveness evaluation of Board of Directors

We respect the basic human rights of its
employees and strive to prevent discrimination andhuman rights violations on the basis of race, creeds,
gender, physical disabilities or other anomalies. To
this end, power harassment workshops for all
managers are conducted regularly by an outside
lecturer. Additionally, we are conducting training
aimed at preventing sexual and power harassment
for new managers. Further, the Human Resources
Department regularly interviews employees tomonitor for human rights violations.

Effectiveness evaluation of Board of Directors held
in FY2023 was conducted, and its results werereported and discussed at Board of Directors. The
evaluation results are as follows.

❶ Task implemented●Evaluation subject…Board of Directors held in September 2021
through September 2022
●Person in charge of evaluation…All Directors●Overview…Items to be evaluated◦Composition and operation of the Board of Directors◦Management strategy and business strategy◦Discussions at the Board of Directors◦Operation of the Board of Directors◦Dialogue with external directors◦Effectiveness of governance system and the Board of Directors❶W e respect the basic human rights of its employees ands t ri v e t o pr e v en t dis crimina t ion and human ri g h t sviolations on the basis of race, creeds, gender, physicaldisabilities or other anomalies.
❷ We protect personal privacy.
❸W e don’t engage in sexual harassment or other acts that
violate human rights.
❹W e create a corporate culture in which employees havemutual respect for one another.

❷ Analysis and evaluation results

State of human rights protection●Questionnaire results…Generally positive●Effectiveness of Board of Directors…Confirm that it is generally secured

The Daiseki Group does not engage in discrimination,
forced labor, child labor, human trafficking, or any otheracts that are detrimental to human rights. Furthermore,
we do not engage in business with companies ororganizations that may be involved in such acts that are
detrimental to human rights.

❸ Measures to realize effectiveness●Three items pointed out as improvement was
required were as follow.
◦Considering strengthening the governance system
as a company listed on the Prime Market byincreasing the ratio of external directors to over half◦Considering an initiative to hold broader discussions
than before by including external directors withcorporate management experience in the Board of
Directors◦Considering increasing the time spent discussing
Group governanceDirectors skill matrix (as of May 25, 2023)
Name

Title

Age

of
Gender Term
officeCommittee

Tetsuya Yamamoto

Representative
Director

58

Men

28

Yasuo Ito

Representative
Director

50

Men

13

Koji Amano

Directors

62

Men

20

Mitsuru Okada

Independent
66
External Directors

Men—

Norikazu Sahashi

Independent
External Directors

64

Men

7

○

○

Nobukatsu Mizuno

Independent
External Directors

70

Men

5

○

○

●

●

Mitsuyo Kako

Independent
External Directors

69

Women

3

○

○

●

●

C

B

○

●

●

○

●

A

Audit

O

●

G

●

●
●

SA

M

F

S

T

●

●

●

●
●

●
●

H

●

●
●

●
●
●

Note: A: Appointment, Reward Committee C: Corporate management B: Business knowledge O: Operation strategy G: Global SA: Sales marketing
M: Management risk F: Financial accounting S: Sustainability T: Technology innovation H: Human resource, education, diversity50