Internal Control System

Basic Views

SHI Group has developed an internal control system to secure the appropriateness of operations in the entire SHI Group with the aims of increasing corporate value and earning even greater trust from stakeholders.
To ensure appropriate maintenance and operation of this system, a basic policy for the Internal control system was established.
The SHI Group makes progress on its efforts with compliance and risk management regarded as the key pillars of its internal control system.

Basic policy for the internal control system and its operational status

We conduct appropriate verifications at the Board of Directors and provide an overview of the operational status in the business report for the fiscal year.

Promotion System

In order to promote the internal control of the Group, we have established internal control organizations (general internal control promoters and internal control promoters) at the head office, manufacturing plants, branch offices, business divisions and affiliated companies.
Under the president, the Internal Control System Department of headquarters is in charge of this.
In addition, we established a Compliance Committee and a Risk Management Committee, both chaired by the President, to promote compliance and risk management.


The SHI Group requires officers and employees to comply with laws and corporate ethics, and to always act with high decency.
Furthermore, we established a Basic Compliance Policy in March 2020 and thereby strive to ensure comprehensive compliance throughout the SHI Group.

Basic Compliance Policy
  1. 1Based on Sumitomo's Business Philosophy, we promote compliance in order to achieve sustainable growth and increase corporate value in accordance with its management philosophy.
  2. 2All officers and employees will comply with laws and internal rules based on the Code of Ethics, practice corporate ethics such as social norms, and carry out business in good faith and fairness.
  3. 3Safety and compliance shall take precedence over everything else.

Compliance Committee

Roles and responsibilities

We have the Compliance Committee to raise the trust of the society through compliance-based management practice and to promote compliance activities intended to improve corporate value of the Group as a whole. This committee deliberates on basic policies concerning compliance, problems arising in relation to compliance, and promotion plans, etc., and reports to the Board of Directors.


On the basis of Sumitomo's Business Philosophy and Business Principles, we establish the SHI Group's Ethics Code as the basic behaviors and norms that officers and employees should follow. We encourage our employees to ensure compliance by promoting the Ethics code at each compliance education.

Efforts to Promote Compliance


SHI Group's Ethics Code
On the basis of Sumitomo's Business Philosophy and Business Principles, we establish the SHI Group's Ethics Code as the basic behaviors and norms that officers and employees should follow.
We encourage our employees to ensure compliance by promoting the Ethics code at each compliance education.
Ethics Code
  1. 1Respect for human beings
    We respect the personality and human rights of every person.
  2. 2Compliance with laws and regulations
    We comply with the laws and internal and external rules and regulations having the respect for their spirits.
  3. 3Fair competition and trade
    We engage in business activities based on fair and free competition, and do not pursue profits by unfair means or opaque practices.
  4. 4Severance of relationships with anti-social forces
    We take an uncompromising stance toward any group or individual that poses a threat to the order or safety of civil society, and do not engage in any relationship with them.
  5. 5Environmental conservation
    We strive to conserve the global environment by promoting resource and energy conservation, waste reduction and recycling as well as prevention of environmental pollution.
  6. 6Respect for fair international business and different cultures
    In international business, we respect local culture and customs as well as comply with international rules and laws of each country.

Compliance tools

Ethics cards[PDF:841KB]
We distribute "ethics cards" that describe Sumitomo's Business Philosophy, management philosophy, ethics rules, and ethics hotline reporting contact office to officers and employees to ensure thorough compliance.
Compliance Manual[PDF:815KB]
This manual summarizes specific action guidelines, such as various rules that officers and employees are expected to observe.


Level-specific education
For the purpose of deepening the knowledge about compliance required for each level, we provide education for new employees, newly appointed chiefs, section chiefs, executives and officers.
Workplace-specific education
In order to deepen the basic understanding of compliance, we continuously conduct compliance education and reading sessions of compliance manuals at each workplace.
In addition, employees at each workplace are divided into small groups to discuss and make presentations about compliance-related case studies. Such case-based compliance education method enables employees to gain an understanding of compliance in a convincing manner.
In addition to compliance, we include safety, harassment, and Sustainability as the subject matters of education and conduct across-the-board confirmation tests for all SHI Group employees.
We have also extended e-learning to overseas affiliated companies, and has started to provide it on a periodical basis at all Chinese affiliates and major Southeast Asian affiliates in 2016 and 2018, respectively.
Function-specific education
We provide education for newly assigned employees to the sales division to better understand the compliance risks that sales reps may encounter, contract foundations, and sustainability.

Survey / Request for Submission of a Pledge

Compliance awareness survey
We conduct a compliance awareness survey annually to ascertain the compliance understanding levels of SHI Group employees and the presence of any potential risks and other problems at the workplace, and the targets of this survey include employees of affiliated companies in Japan and China.
We take measures to improve compliance with a focus on trends in survey results not only from the current fiscal year but also from past years, as well.
Submission of pledges of compliance
To ensure the execution of business activities with awareness of compliance, we require each manager of the SHI Group and each director of subsidiaries to submit a pledge of compliance.


In recent years, as our business has further expanded globally, we have been working to strengthen our international anti-bribery system as an important issue for the SHI Group as a whole.
The SHI Group has formulated SHI Group Anti Bribery Basic Policy with the aim of preventing bribery by clearly stating matters such as the basic stance of the SHI Group towards bribery and the rules to be followed by officers and employees. This policy applies to all officers and employees of the SHI Group.
To prevent bribery, we will continue to promote the dissemination of this policy and activities based on the characteristics and risks of each country and region.

Establishment of Whistleblowing and Consultation Channels

Ethics hotline

We have a whistleblowing system called "SHI Group Ethics Hotline" that allows officers and employees of SHI and affiliated companies to report to or consult with the Compliance Committee Secretariat with regard to facts that violate or may violate laws or internal rules.
Since 2017, we have also operated a common external hotline in Japan for all SHI Group company employees for the purpose of facilitating reporting and consultation.
In 2019, we also established a common external hotline in China for employees of major affiliated companies in the country.

figure:SHI Group Ethics Hotline (Whistleblowing System)

Workplace harassment reporting contact office

Aside from the ethics hotline that mainly serves as the whistleblowing channel for general matters related to compliance, an external consultation channel exclusive for workplace harassment was set up in 2020.
This is a channel for consultation that is aimed at maintaining a sound workplace environment and allows employees to anonymously receive consultations on harassment-related concerns or even less serious matters such as small worries about personal relationships at the workplace.

When an employee uses the workplace harassment consultation channel, support is provided to the employee in clarifying/solving the problem in line with the employee's wish.
When receiving a consultation, the protection of privacy of the receiving employee is guaranteed. Additionally, no employee is to be subjected to detrimental treatment for receiving any consultation.

Risk Management

Basic Views

Under Sumitomo's business philosophy and in line with the business principles, the SHI Group properly controls risks in corporate management with consideration given to value creation for all stakeholders, in order to implement optimal management judgments in increasing the SHI Group's corporate value over the medium- to long-term.

  1. 1Reduction of opportunity loses

    With respect to taking risks that may affect the achievement of business targets, we strive to make appropriate decisions to reduce opportunity losses.

  2. 2Reduction in the occurrence of risks

    We prevent the occurrence of risks that may disturb the achievement of business targets and, if any such risk comes to the surface, take swift and appropriate action to keep damage to a minimum.

Risk Management Committee

Roles and responsibilities

We have a Risk Management Committee to drive forward across-the-board, comprehensive risk management by identifying potential risks that may occur, or that we may face, in executing the business operations of the SHI Group, and by properly controlling risks that may cause a significant impact.
This committee formulates risk management policies, designates important risks, deliberates on matters concerning responses to such risks, and reports to the Board of Directors.


In order to deliberate on risks to the SHI Group, which has wide-ranging business areas, in a comprehensive manner, including from the aspects of business operation, technology, and business management, the committee is chaired by the President and consists of relevant executive officers, etc., such as the officer in charge of internal control, the officer in charge of financial affairs, and the officer in charge of technology, and standing corporate auditors serving as observers.

Risk Management System

With the Risk Management Committee established under the governance of the Board of Directors, we promote across-the-board, comprehensive risk management for the SHI Group.
In the medium term, the risk management system of the SHI Group is centered on the prevention of risks with the aim of reducing the likelihood that risks come to the surface, and is developed in terms of risk extraction, risk evaluation, measures against risks, and the monitoring of risk management.
Furthermore, in the long term, we aim to develop optimal, across-the-board risk management including appropriate risk-taking, with an eye on increasing the mid- to long-term corporate value of the SHI Group.

List of Risks Subject to Risk Management

The SHI Group classifies risks into two categories, "business risk" that includes hazards and losses potentially caused in connection with business execution, and "operational risk" that includes hazards and losses potentially caused in the course of each division's execution of daily operations. On the basis of this classification, we manage risks upon appropriately evaluating them.

List of Risks
Business risks Management-level risks Group / Governance
Responding to mid- and long-term management issues Delay in responding to climate change
Next-generation research/development
Information disclosure
Business-level risks External environment
Sales / Servicing
Research / Development / Design
Manufacturing / Procurement / Logistics
Information systems
Human resources
Large-scale project management
Operational risks Workplace environment
Competition / Trading
Financial affairs / Accounting
Business execution
Facility/Asset/Environment management
Relations with communities/society
Internal reporting