Compliance

Basic Approach

As any violation of laws and regulations or a scandal would hinder Hitachi High-Tech Group’s basic philosophy of being trusted by all our stakeholders and severely damage corporate value, our Group holds thorough compliance (complying with laws, company rules, social justice, public order, and standards of decency, etc.) as the premise for all our business activities. Through an approach of surely practicing judgement and conduct based on “Kihon-to-Seido (Basics and Ethics)” and “Ethical Grounds Rather Than Immediate Profitability,” we are conducting initiatives including the operation of an internal reporting system and the implementation of compliance education and awareness-raising activities for employees in an effort to promote compliance activities throughout our Group.
In addition, our Group is committed to acting as a member of the Hitachi Group to follow the One Hitachi Compliance approach in our activities. These include complying with into the Hitachi Group Code of Ethics and Business Conduct as a unified Hitachi Group policy, establishing and strengthening our compliance framework, introducing and unifying a compliance notification system, preventing antisocial transactions and money laundering, preventing bribery and corruption, complying with competition laws, implementing rigorous export management, and so on.
Regarding Hitachi Group's compliance initiatives, which include our initiatives, please see here.

Organization

Our Group has established the Compliance Committee, which meets regularly to discuss, on a Company-wide basis, the status of compliance risks, plans for countermeasures to reduce the risks, and the status of implementation of such measures. More specifically, responsibility for addressing each particular type of risk has been assigned to a specific department; the head of the department in charge of tackling a particular type of risk envisages and evaluates that risk, as well as implementing measures to deal with it, such as providing in-house education concerning relevant legislation and internal rules. In addition, the manager concerned identifies new compliance risks that are a concern. If a compliance related incident occurs, the Company will hold an ad hoc meeting to determine the facts, trace the causes, take corrective measures and discuss how to prevent recurrence.

In addition, the heads of business groups, branch offices, and Group companies appoint Compliance Managers for their respective organizations. The Compliance Managers work under the direction of the Chairperson of the Compliance Committee to manage the compliance system of their respective organizations by constructing compliance systems within their respective organizations, implementing compliance measures and reporting to the Compliance Committee. With regard to compliance risk, each organization conducts regular revisions and self-checks whether its risk activities are appropriate.
Our Group has designated October as its annual Corporate Ethics Month, during which each managing unit conducts compliance education and other initiatives aimed at ensuring thorough awareness of the need for corporate ethics and compliance.

The Hitachi High-Tech Group has established the Hitachi Global Compliance Hotline^* as a contact point for internal reporting. The hotline is available 24/7/365 to directors, employees, temporary employees, retirees, business partners (including procurement partners and contractors), and all other stakeholders for the purpose of early detection and handling of legal violations and misconduct. To ensure that whistleblowers are not treated unfairly, unless there is a legal requirement for disclosure, they can report anonymously, and all information received is kept strictly confidential.
The Hitachi Global Compliance Hotline provides consultation and reporting by phone or online for all matters involving possible misconduct, including violations of laws and regulations, violations of the Hitachi Group Code of Ethics and Business Conduct, and human rights violations, including harassment.
Phone numbers for the Hitachi Global Compliance Hotline are available for all employees worldwide and other stakeholders to speak to a representative in their native language. The phone lines are staffed by third-party representatives, with translators in more than 50 languages. Web-based reporting is also available. We store data supplied in a report on secure servers maintained by the third party who administers the hotline.
To address and resolve contacts to the Hitachi Global Compliance Hotline efficiently, we assign inquiries to an investigator who is a subject matter expert.
After a confidential review of the concern, the investigator determines which reports require an investigation. If an investigation is needed, appropriate investigative personnel are assigned.
For concerns that are substantiated, disciplinary actions may be taken. Discipline comes in many forms from warnings to suspensions to termination.
In FY2023, we received 44 reports from all Group companies. Our expert staff handled each case appropriately, under the principle of confidentiality, and took corrective measures after confirming the details of the reports.

In accordance with the fundamental policies of the Hitachi Group, the Hitachi High-Tech Group clearly expresses its stance of not tolerating any corrupt conduct including bribery and kickbacks or any violations of laws and regulations by employees and business partners. As a result of the initiatives described below and others, there were no incidents of corruption (bribery, violations of competition laws, antisocial transactions, and money laundering) in FY2023.

The Hitachi High-Tech Group has implemented the following initiatives for its employees.

• The Board of Directors of each Hitachi High-Tech Group company is involved in the establishment and dissemination of the Hitachi Group Code of Ethics and Business Conduct, a common code for the Hitachi Group that includes provisions on anti-corruption.
• We established the Hitachi Group Anti-Bribery and Anti-Corruption Policy and related regulations to stipulate that, when providing or accepting entertainment or gifts, or making donations or political contributions, executive officers and employees must not exceed the scope of actions permitted by anti-bribery laws and regulations and must comply with Hitachi High-Tech and the Hitachi Group's internal rules. These policies indicate specific spending limits in terms of monetary value and the number of times that entertainment, gifts, and other arrangements may be provided to public officials. We also have policies banning facilitation payments and requiring due diligence procedures for business partners. In addition, we ensure compliance with the anti-bribery laws and regulations of countries and regions, including the U.S. Foreign Corrupt Practices Act (FCPA), which have become increasingly rigorous in recent years.
• To ensure that all employees are familiar with our anti-bribery and anti-corruption policies and rules, we have incorporated training measures that are standardized throughout the Hitachi Group and require all Group employees to participate in training at least once a year.

As part of its commitment to its business partners, the Hitachi High-Tech Group maintains a reputational due diligence program. Specifically, we utilize a risk database provided by a third-party to identify reputational risks associated with bribery, corruption and other factors related to potential business partners with whom Hitachi High-Tech plans to begin business. In doing so, we take into account the risk of corrupt practices by country/region in the screening procedures according to the score of the Corruption Perceptions Index (CPI) published annually by Transparency International and other relevant factors.

The Hitachi High-Tech Group places the highest priority on relationships of trust with our business partners and carries out initiatives so we can continue to grow together. We have compiled our expectations of business partners in a pdf file entitled “Hitachi’s Expectations of Business Partners” and we share this with them to ensure that they understand the Hitachi Group's code of ethics and business conduct and can fulfill their social responsibilities and collaborate with us in sustainable business.

The Hitachi High-Tech Group engages in business in accordance with the law and with business ethics, and we practice fair and open competition. We have also established the Hitachi Group Code of Ethics and Business Conduct, the Hitachi Group Fair Competition Policy, and related operational standards, and the Compliance Committee conducts risk analyses and assessments based on these standards.
For employees, competition law is one of the main topics in our annual business ethics and compliance training as part of our efforts to raise awareness for the need to prevent violations of competition law. In addition, the Hitachi Group Fair Competition Policy clearly states prohibited matters in relation to business partners and competitors, with the aim of ensuring ongoing compliance with all competition laws in force in the countries and regions where we do our business.

The Hitachi High-Tech Group conducts the Hitachi Group's standardized annual business ethics and compliance training to instill business ethics and raise awareness of compliance. This training course covers topics such as business ethics, bribery and corruption, gifts, travel and entertainment, anti-money laundering laws, fraud, fair competition, information owned by others, data protection, conflicts of interest, reporting and non-retaliation, and the Hitachi Global Compliance Hotline.

Response to the Conflict Minerals Issue

The Hitachi High-Tech Group is committed to responsible procurement activities to ensure that its procurement of parts and materials containing conflict minerals (tin, tantalum, tungsten, and gold) and cobalt does not encourage the activity of armed groups, human rights violations including child labor, corruption, and environmental destruction in conflict and high-risk regions.
Our Group also respects the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and conduct investigations and initiatives based on the Guidance while understanding social issues and the expected roles of companies in the regions.
For its suppliers, our Group will continue to inquire into their supply chains, including their minerals' country of origin and their smelters, using internationally recognized tools such as the Conflict Minerals Reporting Template (CMRT) and Extended Minerals Reporting Template (EMRT) issued by the Responsible Minerals Initiative (RMI). We will request our suppliers to procure minerals from smelters certified under RMI's Responsible Minerals Assurance Process.

Export-Import Management

We comply with the Foreign Exchange and Foreign Trade Act (Foreign Trade Act) and agreements related to international trade in order to contribute to international peace and safety through export management.
In addition to respecting the laws, regulations, and other such requirements in foreign countries where we have business connections, at the same time we are also improving our system of control and our in-house regulations, and we are managing our export-related operations.

We have put in place independent export management departments consisting of director with representative authority as chief executives of export management. We also establish auditors and authorizers at each headquarters. They judge whether it is necessary to apply for export permission for products and technology in a department, and they conduct audits of transaction contents.

• We will formulate plans for training and audits.

• We check for concerns about the customer or purpose in all transactions.
• We determine whether any products or technology to be exported are subject to legal restrictions.
• Instructions are issued for appropriate procedures in accordance with the results from audits of transaction contents.

• We regularly carry out audits to confirm conformity with laws and internal regulations concerning exports.
• Upon discovering an event that could lead to an export management incident or grounds for confusion in decision making in terms of only laws and regulations, we investigate the cause, consider necessary measures to avoid risk, and take improvement and corrective actions.

• We provide education on export management to employees in response to the circumstances and considering their knowledge, experience, and field, in line with the latest laws and regulations, in order to increase awareness of export management and prevent incidents. In order to provide flexible support for remote working, we have also introduced e-Learning to make it possible to receive export management education at any time and any place, and we are working to improve the content of that education.
• We are developing infrastructure such as by making a database of information on determining applicability and making an electronic system for internal processes.

• We are improving business management through proactive participation in external organizations’ events related to security export controls, obtaining the latest information and ascertaining industry trends at an early stage and conveying them in the company and throughout our Group, and revising internal regulations when necessary.
• We are working hard to have the opinions of private enterprises and industry reflected in laws and regulations.

FY2023 Activity Results (Export Management)

1. Conducted export management training for employees of the Company and Group companies in Japan (total of more than 15,000 participants)
2. Conducted export management audits at 12 Company and Group Company sites in Japan and overseas (hybrid audits, using both online and in-person auditing, were conducted)

Fundamental Approach Concerning Import Management

We created import management mechanisms to ensure rigorous compliance with domestic laws and regulations concerning import controls. Specifically, we established internal rules on import transactions established clear review procedures requiring confirmation of whether cargo is subject to regulation under domestic laws and regulations before importation and if so, ensuring legal compliance. We also support on-site import-related operations and perform compliance management so that application for permits, approvals, and so on can be applied for without omission in accordance with established laws and regulations.

Results of Activities in FY2023(Import Management)

1. Education to maintain awareness of compliance in import management provided in the company and Group companies in Japan (more than 2,000 participants in all)
2. Consultation on legal research and compliance provided concerning direct import transactions
3. Audits of compliance with import management laws implemented in the company and at four sites in Group companies in Japan (Remote audits conducted online was implemented due to the impact of the COVID-19 pandemic)

Tax Transparency

The Hitachi High-Tech Group is cognizant that ensuring tax transparency is a part of its corporate social responsibility and it is addressing the below matters:

The Hitachi High-Tech Group complies with tax laws and regulations in all countries and regions where it conducts business, it further conforms to standards and guidelines published by OECD and other such organizations, and it pays the proper taxes in observance of the spirit of those laws and regulations.

Our Group does not make improper use of tax havens or countries with low tax burdens or improperly use tax structuring for the purpose of tax avoidance and contributes to the economic development of all countries and regions where it conducts business by fulfilling its duties as a responsible tax payer. With regard to transactions within our Group, it implements management of transfer pricing in accordance with OECD transfer pricing guidelines and the transfer pricing tax systems in the countries or regions where the companies are located.

The Hitachi High-Tech Group strives to build, maintain, and develop honest and positive relations with the tax authorities in all the countries and regions where it conducts business. Our Group further maintains healthy and sound relations with tax authorities and does not engage in the provision of improper benefits.

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