Ethics and Compliance

Transparency
In All That
We Do

Ethics, Safety and Quality are essential for NSG Group to be sustainable.

NSG Group has in place the Group Ethics and Compliance (E&C) function and implements ethics and compliance programs in accordance with “Fundamental Policies of the Company on creation of effective internal control system of the Group” established by the Board of Directors.

The Group E&C function supports the Group in achieving its goals by assessing and analyzing ethics and compliance risks and establishing ethics and compliance programs that align with the Group's strategic goals to ensure the success of our business.

In line with these objectives, more specific key performance indicators (KPIs) were developed to help measure the effectiveness of the ethics and compliance programs. Click here for FY2024 targets and results.

Ethics & Compliance is positioned as the Group’s Materiality along with Safety and Quality in the new Medium-Term Plan released in FY2025. As the FY2030 aspiration, we are committed to partnering with stakeholders and gaining trust from them by regularly improving the ethics and compliance programs to address Group risks. We, therefore, have established new targets for FY2027. Please see the following chapters for the specific KPIs.

Code of Ethics and Education

The NSG Group Code of Ethics broadly covers the ethical behavior expected of our employees in the workplace, including compliance with all laws and all major Group policies, procedures, and guidelines. The Code is available in all 19 Group languages.

98.4 percent of Key Roles completed relevant trainings during the annual education campaign in FY2024. 77 percent of managers completed within 5 days before the deadline. The new KPI for FY2027 is 100 percent completion of ethics and compliance education. We will continuously make our best effort to raise the training completion rates.

Ethics and Compliance Development Structure

Group E&C has a direct reporting line to NSG Group Audit Committee. Its responsibilities include the development, implementation and maintenance of an integrated internal ethics and compliance management and control system, as well as the creation and review of relevant Group policies and procedures. In FY2024, NSG Group appointed Chief Ethics and Compliance Officer (CE&CO) who is an Executive Officer. Under the CE&CO’s leadership, E&C Director is responsible for managing the whole E&C program and E&C regional managers in Europe, North America, South America and Asia to embed E&C culture into the whole organization as well as cover risks in each region.

The Ethics and Compliance Committee, chaired by CE&CO and consisting of CEO and other executive members, was established in FY2025 to oversee the ethics and compliance programs and improve further its effectiveness. The first Committee meeting was held in June 2024, and it will meet semi-annually.

A Global Ethics Network is aimed to enhance the ethical culture and monitor compliance risks throughout the Group. The Ethics Network consists of senior managers who have been appointed Regional Ethics Ambassadors and Ethics Champions. Both roles will play a vital part in the communication and promotion of the Code of Ethics by leading and championing ethics and compliance in their local region or function which in turn will help embed ethics into the business. Group E&C puts importance on local communications to reach out to local business/function people, liaising with the relevant Ethics Ambassadors and Champions.

Communication on Ethics and Compliance

The Group has set Ethics and Compliance Week every year since FY2022, which reconfirms our commitment to ethics and compliance, raising awareness of its significance for the Group business. Various events are held throughout the Group organizations such as message videos from the executive officers and senior managers including C-suite, daily communications, regional activities and relevant online educations during the Week. The theme of the FY2024 E&C Week was "Integrity Builds Trust" to discuss what "integrity" meant for us, how it helped us build "trust" and what we should do in our workplace.

The theme for FY2025 is "Transparency In All That We Do." The feedback of E&C Week and other surveys have showed that some people still fear retaliation for reporting concerns. We need to further increase trustworthiness of the Reporting of Concerns system. "Transparency," such as "open communication" or "speak up," is essential to build trust between the company and employees or among employees. Transparency is also related to "integrity," which was the theme for the FY2024 E&C Week. In FY2025, therefore, we will focus on what transparency means for the Group and think of how we should make transparency take root in the organization and put it into practice according to the Group's core values and action plans.

Top level communications regarding ethics and compliance were made four times in FY2024 including the above-mentioned message videos from the top management during E&C Week. Additionally, each E&C regional manager visited major production sites in their regions to reach out to the shop-floor workers there trying to make more direct and better communication with them about ethics and compliance.

Group E&C periodically issues Group Ethics and Compliance Briefings to employees. The Group's communications team translates the briefing into multiple languages and distributes to all NSG Group locations, which is also made available on the Group's Intranet. In addition, each regional E&C manager issues regional E&C newsletter to the relevant local employees.

Group E&C shares with the heads of Strategic Business Units and HR the case details reported via the E&C Hotline system to help improve the workplace environment and even business performance while taking care of its confidentiality.

Respect for Human Rights

NSG Group is an International Company operating in many countries around the World. NSG recognizes business cultures and practices around the world are diverse. The NSG Group's commitment to respecting human rights is reflected in the way we run and operate our business as well as in our polices and guidelines. We respect human rights in accordance with the United Nations (UN) Universal Declaration of Human Rights, the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work, the United Nations Guiding Principles on Business and Human Rights (UNGPs) and, the UN Global Compact including any related conventions.

In FY2024, the Group formulated Human Rights Policy where we identified the most relevant human rights areas for the Group with our commitment in each. (Click here for more information)

Conflict of Interest Disclosure

Under our Code of Ethics, all employees are responsible for acting in the best interest of the Group. Employees are required to disclose any interest, activity or investment which actually or potentially could cause conflict against that of the Group. Group E&C reviews all reported disclosures and discusses certain matters with the relevant business or function managers if necessary. Feedback is provided to all reporters and in some cases, possible plans to mitigate exposure are also provided.

Activities for Competition Law Compliance and Anti-Bribery/Anti-Corruption

Regarding certain high-risk areas in the Group business such as competition law compliance (CC) and anti-bribery and anti-corruption (ABAC), NSG Group establishes and controls relevant policies, procedures and manuals. These internal rules stipulate a wide range of matters accordingly such as specific types of prohibited actions, the necessity and importance of compliance, and the impact of any violations to ensure that the Group conducts business in compliance with relevant laws of all countries where we operate.

There were no violations of competition law and anti-bribery and anti-corruption law in FY2024. The new ethics and compliance KPI for 2027 also includes the target of zero case being fined associated with CC or ABAC violations.

As mentioned in "Code of Ethics and Education" above, employees who meet the Group's criteria for CC and/or ABAC risks are appointed Key Roles accordingly and required to complete the relevant online educations at onboarding and annually, which includes explanations of the applicable laws and regulations and internal policies and requirements under the ethics and compliance programs as well.

Further, to ensure transparency of employees' actions, NSG Group policies provide reporting requirements about CC and ABAC. Group E&C centrally manages an online reporting system where employees are required to document or obtain prior permission from Group E&C whenever they contact our competitors, join a trade association, (CC risk controls), make charitable contributions, give or receive certain amount of gifts and entertainment, do businesses with third parties, and interact with public officials (ABAC risk controls). E&C regional managers confirm or approve the specific requests and notifications considering their regional or countries' risks.

NSG Group is monitoring around 500 third parties such as agents, consultants and joint venture partners that meet certain risk criteria of ABAC. This process includes due diligence, assessment and reputational screening.

Reporting of Concerns – Ethics and Compliance Hotline

NSG Group is committed to maintaining an environment in which employees can report, without fear of retaliation, any conduct they know of or suspect to be in violation of law, Group Code of Ethics policies/procedures or guidelines.

For this purpose, the Ethics and Compliance Hotline system provides an easy and simple way to report concerns, while employees are encouraged to speak to line management, HR or other relevant functions first.

This Hotline system is also available for any stakeholders outside the Group.

Managers who received the report from their colleagues must file the designated reporting form (Manager's Report Form) or report it directly to Group E&C if they believe that it has a potential adverse or negative legal, financial or reputational impact on NSG Group.

Since inception in FY2013 there had been 987 reported concerns managed via the Ethics and Compliance Hotline system as of the end of March 2024. FY2024 experienced 174 allegations reported via the Ethics and Compliance Hotline and Manager's Report Form. Group E&C continues to analyze variance between the number of the actually received reports vs. the benchmark data, as well as details and trends of the reported cases so that the Group will take necessary actions for improvement.

The ratio of reports from Manager's Report Form (MRF) was 27 percent of the total reports in FY2024. (Decrease by 7 points from FY2023) MRF is a platform for handling the cases reported to or consulted with managers first, which indicates some degree of "transparency" in the workplace. The benchmark is that 30 percent cases are reported through MRF. Group E&C continues to promote the Reporting of Concerns system including MRF via various communication channels such as internal bulletins and newsletters.

NSG Group constantly measures the effectiveness of the system by using the metrics against the benchmark region by region.

You can see the general trend of increasing numbers for the last few years. We understand that the recent actions have contributed to such increase of the reported cases; such as creation of or revisions to the relevant policies and our constant and continuous communications regarding the Reporting of Concerns System including Hotline through various channels like the aforementioned newsletters and online educations. NSG Group has set a new KPI for FY2027 of raising the ratio of substantiated reports to 45 percent or more. While seeing consistent numbers of reports ("quantity") as a result of our efforts mentioned above, we are now trying to analyze "quality" of the reports. Even if a report is not substantiated, it is of course still important as being reported. Our aim is to create a work environment in the organization that will enable us to address concerns more effectively by focusing on the ratio of substantiated reports as well.

The Group Policies on Ethics and Compliance and Reporting of Concerns which were revised in FY2021 more clearly define the managers' reporting requirement and the process of the case investigation and its follow-up. We established the Group Anti-Retaliation and Reporter Protection Policy which more explicitly provides that the Group never tolerate any form of retaliation against those who report concerns in good faith. The new KPI for FY2027 is zero retaliation case.

This global Hotline would be also deemed as "Internal Whistleblowing System" for NSG and its consolidated subsidiaries in Japan in the context of the revised Whistleblower Protection Act of Japan coming into effect on June 1, 2022.

We will continuously strive to embed "Transparency In All That We Do" committing to more open corporate culture.

Reports to Management Committee and Audit Committee

Group E&C reports to not only Management Committee but also Audit Committee which consists of Independent External Directors, periodically or on as-needed basis, on status, progress and issues of the above-mentioned ethics and compliance programs.