ESG Management Undertaken by the Sumitomo Rubber GroupA Message from the Director in Charge of ESG
Progress under the Long-Term
Sustainability Policy: “DrivingOur Future Challenge 2050”

Our Philosophy
Purpose: Through innovation we will create a future of joy and well-being for all

Sustainability Vision
Uniting our diverse strengths, we will make our future sustainable and “GENKI” (vibrant) by delivering products andservices that are friendly to the environment and society.

GENKI

Effective
Governance
Framework

Ecological
Sustainability

Next-Generation
Products &Solutions

A Kind Culture
Where EveryoneCan ProsperIntegrityfor Society

Masatsugu Nishino

Note: Our “GENKI” concepts date back to 1988, when employee volunteers first launched community contribution projects to help realize a society in which everyone can thrive. With each letter of “GENKI”
representing one aspect of our ideals for what the Sumitomo Rubber Group should look like in the future, we utilize these concepts in the course of identifying priority issues.

Director, Senior Executive Officer in Charge of ESG

GENKI (literally, “energetic”) stands for the following five concepts: G : GovernanceE : Ecology

N : Next

K : Kindness

I : Integrity

Strategies for Realizing Our Sustainability Vision

Awareness of “Driving Our Future Challenge 2050” Is Being Steadily Entrenched among Our Workforce
It has been two years since we announced our Long-Term
Sustainability Policy in conjunction with the financial results disclosure in August 2021. Following this announcement, we took a topdown approach to disseminating the policy that entailed reporting
sessions for employees as well as one-on-one meetings between
top management and the heads of each department. This waspaired with a bottom-up approach wherein employees who had
been tasked with formulating the policy were empowered to advocate for it at their respective Group companies or departments. As
these efforts have helped raise sustainability literacy among employees, I feel that awareness of our Long-Term Sustainability Policy is
steadily being entrenched in the workforce.
Moreover, indicators associated with ESG management have been
incorporated into performance targets for officers, while theShirakawa Factory initiated the utilization of hydrogen in tire manufacturing. As these and other tangible developments came into playafter the announcement of our Long-Term Sustainability Policy, I am
now acutely aware of the importance of setting long-term targets likethis. In line with this policy, we are currently focused on the three initiatives named below to fully leverage our unique strengths.
First, we are promoting the utilization of hydrogen. This involves
the switching over of fuel used in manufacturing processes fromnatural gas to hydrogen, with the aim of achieving carbon neutrality.
Second, we are working to increase the sustainable raw material
content of our products. Such content is defined as biomass raw
materials that are of biological origin and recycled raw materials. Asof fiscal 2022, our products’ sustainable raw material content ratio
was 33%. We plan to raise this to 40% by 2030. To this end, we areconsidering introducing carbon recycling and employing an evenmore diverse range of recycled raw materials. Technically, we will beable to achieve the target ratio ahead of schedule via current measures. However, there are some issues that must be addressed,including how to translate the resulting rise in costs into sales prices
and whether increased costs could be offset by weight reductions.
Third, we are abiding by the certification system we established forsustainable products based on internal standards. Specifically, wehave defined the assessment standards applied to all offerings in ourTire, Sports, Industrial Products businesses. These standards cover
the ratio of sustainable raw materials used and the amount and typeof energy consumed in the course of manufacturing. Under a twograde system, we determine products deemed worthy of “Standard”
or “Gold” certification based on the degree of their achievement relative to the above standards. Our current aim is to ensure that all
products are certified “Standard” by 2030.

Realizing Japan’s First Carbon-Neutral (Scopes 1 and 2) Manufacturing Process for
Mass-Production Tires
Among the three initiatives I discussed above, our greatest accomplishment has been in hydrogen utilization at factory lines.
The energy used in tire manufacturing comes from two sources:
electric power and natural gas. With regard to electric power, wehave reduced CO2 emissions arising from its use, with our measures
to this end centered on the installation of energy-saving facilities, theexpansion of cogeneration systems, the introduction of solar power
generators and a shift to green energy procured from renewableenergy sources. However, it is technically difficult to replace thesteam used in the curing process, which forms tires by applying heatand pressure, with electricity. Thus, the energy transition of this process has long been an issue.
To resolve this issue, verification testing has been under way at ourShirakawa Factory in Shirakawa City, Fukushima Prefecture, as partof a project subsidized by the New Energy and Industrial Technology
Development Organization (NEDO). This project aims to switch thefuel used to produce steam for curing from natural gas to hydrogen.
In January 2023, this factory began supplying steam produced byhydrogen-fired boilers to the curing process of our leading-edge
NEO-T01 Manufacturing System, which employs a high-precision
metal core and enables the production of tires boasting extremely
high performance with a compact, streamlined process.

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Furthermore, the installation of solar panels has made it possible toobtain a robust output in excess of the volume of electricity used in
NEO-T01 processes. As a result, our Shirakawa Factory has realized
Japan’s first mass-production tires manufactured via a carbon neutral
process as defined in terms of eliminating Scope 1 and 2 emissions.
Going forward, we will conduct verification testing to determine
how to best control the NOx emission volume, a typical issue withhydrogen-fired boilers, as well as to identify and resolve various
issues associated with the around-the-clock operation. In this way,
we will assess the effectiveness of the switchover to hydrogen fuel.
In general, the switchover to hydrogen fuel entails only the replacement of boilers or turbines and does not require changes in othermanufacturing facilities. This is one of the great advantages of hydrogen utilization. Our Shirakawa Factory currently aims to expand thescope of hydrogen utilization to encompass all of its manufacturinglines. Once the use of hydrogen is widespread among our domestic
factories, we will strive to roll it out at our overseas factories.
Also, we are considering the procurement of carbon-free, greenhydrogen. Moreover, in line with our aim to develop a manufacturingmodel featuring the local consumption of locally produced hydrogen,we use hydrogen supplied by a corporation based in Fukushima
Prefecture.

Long-Term Sustainability Policy: “Driving Our Future Challenge 2050”
Promote various measures to embody the above concepts and practice ESG management
Environment

SocialGovernanceProtecting the Global Environment & Safety

Harmonious Coexistence with Society

Reinforcing the Foundations of Our Business

Formulating the Sumitomo Rubber Group’s Unique Business Concept Supporting a Circular Economy
The Sumitomo Rubber Group has announced “TOWANOWA,” aunique business concept designed to support the circular economy
through our Tire business. Today, the realization of a circular economy is a matter of urgency. In response, this business concept aims
to help develop a circular economy in a way that takes full advantageof the Sumitomo Rubber Group’s unique capabilities. Specifically,“TOWANOWA” connects the “Sustainable Ring,” which is the efficient circulation of goods and the recycling of resources within fivekey processes of our Tire business, and the “Data Ring,” which isthe consolidation and sharing via the cloud of data gleaned from theabove five processes using our SENSING CORE Technology.

In Japan’s tire industry, circular economy-related initiatives havemainly focused on thermal recycling, which utilizes waste tires as fuelto obtain heat. As a result, thermal recycling accounts for around 70%
of tire reuse while recycling by retreading accounts for only about 6%.
In contrast, “TOWANOWA” employs an unconventional approachlinking tire data gleaned from vehicles as they are being driven via
the use of our unique sensing technologies with production data tocreate a combined source of data that informs each of the five Tire
Business processes while providing end users with feedback basedon such data. These are the distinctive features that set this business concept apart.

Challenges That Must Be Overcome to Further Promote ESG Management
Tasked with spearheading ESG management, the Sustainability
Promotion Committee holds meetings twice a year attended by theGroup President and all officers. These meetings focus on conducting a
global management review and sharing information among bases.
Meanwhile, meetings of personnel in charge of promoting sustainability
are also convened to discuss specific measures to be implemented.
Among the 48 participants who currently attend these meetings are theproject members who led the formulation of our Long-Term Sustainability
Policy. In 2023, we increased the frequency of these meetings from aquarterly basis to six times per year. Going forward, we intend to expand
the number of meeting attendees and invigorate discussions.
As explained above, the Sumitomo Rubber Group places greatemphasis on ensuring that all of those in top management have an
in-depth understanding of ESG management and take the lead in promoting it. This emphasis is also appreciated by external specialists as
a positive factor that makes it easier for our group to promote ESG.
As an executive in charge of ESG, I have formulated a policy ofmaking the Sustainability Promotion HQ attractive to employees overthe long term. The Sumitomo Rubber Group is currently promoting
in-house postings to sustainability-related projects, which caninvolve environmental management, diversity & inclusion and otherrelevant operations. Employees who participate in these projects are
steadily raising their abilities to apply a sustainability perspective
when undertaking their principal duties. I personally expect thatindividuals who have gained such experience will take the lead inpracticing ESG management at each department.
In order to expand the scope of sustainability initiatives, we needto encourage as many employees as possible to develop a sense ofownership regarding the implementation of relevant measures. The
process of developing a sense of ownership is believed to consist offour stages: (1) Recognition, (2) Understanding, (3) Application and(4) Contribution. However, some employees may face challenges
that inhibit them from developing a sufficiently tangible sense of ownership and reaching the fourth stage of contributing to sustainability
through their own operations. With this in mind, we will initiate thisprocess by disseminating information on initiatives undertaken by theSumitomo Rubber Group among a broad range of employees. We
also intend to develop a framework for supporting ongoing communication with them.
Sustainability initiatives will yield tangible effects only when they
are implemented over the long term. Although some of our initiatives
are likely to result in cost increases, we will carefully judge whether
they can be sustainably implemented even as we give due consideration to their impact on operating results. This is another challengethat must be overcome. To address this challenge, we aim to secure
an even more robust structure capable of enabling both businessdivisions and top management to engage in thorough discussions toreach the best decision for the corporation.
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