Governance
Basic Concept
To live up to the trust placed in us by our customers and society, as well as to enhance our corporate value, the Daiei Kankyo Group is committed to improving fairness and transparency in management and enhancing the supervisory function of the Board of Directors and the Audit & Supervisory Committee. By doing so, we are working to improve our corporate competitiveness, ensure prompt and rational decision-making, and achieve transparent and sound management. We have also established the Basic Policies for Internal Control. Through the development of an internal control system, we have built a system to execute business legally and efficiently.
Corporate Governance Report
This report describes our corporate governance practices in accordance with the rules and regulations of the Tokyo Stock Exchange.
Corporate Governance Structure
The Company transitioned from the structure of a company with an audit and supervisory board to the structure of a company with an audit and supervisory committee on June 26, 2024. The Members of the Company’s Audit & Supervisory Committee have voting rights on the Board of Directors, and the committee, the majority of which consists of Outside Directors, performs not only legality audits but also validity audits, thereby enhancing the supervisory function of the Board of Directors.
In addition, to strengthen our corporate governance structure, we have established the Risk Management & Compliance Committee and other committees as well as the Group Management Meeting to facilitate prompt decision-making, agile business execution, and Group management.
Corporate governance structure
Overview of corporate governance structure, etc.
Overview of corporate governance structure
1. Board of Directors
The Board of Directors consists of six directors, including two independent outside directors. In principle, the Board of Directors meets once a month, and holds extraordinary meetings as necessary to ensure flexibility. In addition, the Board of Directors makes decisions on inportant management matters, and ensures management transparency through the appointment of independent outside directors. The Board of Directors is also attended by three Audit & Supervisory Board members, who check whether the performance of the duties of the directors is in violation of laws and regulations and the Articles of Incorporation, and express their opinions as necessary.
2. Audit & Supervisory Board
The Audit & Supervisory Board consists of one full-time Audit & Supervisory Board member and two outside Audit & Supervisory Board members, and meets in principle once a month. In addition to sharing information and exchanging opinions on the status of directorsʼ performance of their duties, full-time Audit & Supervisory Board member reports on the status of audits at important meetings and the results of internal document inspections. Also discusses cooperation with the Audit Office and accounting auditor. Outside Audit & Supervisory Board members are certified public accountants with extensive expertise in accounting and lawyers with extensive expertise in legal affairs, which strengthens the auditing and supervisory functions of the Audit & Supervisory Board.
3. Nomination & Compensation Advisory Committee
The Nomination & Compensation Advisory Committee is chaired by an independent outside director and consists of the President and Representative Director and two independent outside directors. To strengthen the fairness, transparency, and objectivity of the procedures related to nomination and remuneration, and to enhance corporate governance, deliberates on matters raised by the Board of Directors, such as the policy and standards for the election and dismissal of directors, the remuneration system for directors, and the policy for determining remuneration, and reports back to the Board of Directors.
4. Group Management Meeting
The Group Management Meeting consists of Daiei Kankyo Co., Ltd.’s full-time directors, full-time Audit & Supervisory Board member, and executive officers stationed at the Group headquarters, and is attended by related parties including group subsidiaries as necessary. In principle, it meets once a month to optimize Group management, makes decisions related to the management of the Group from a companywide perspective.
5. Risk Management & Compliance Committee
The Risk Management & Compliance Committee is chaired by the President and Representative Director and consists of the full-time Audit & Supervisory Board member, the director in charge of business administration, the general manager of the Business Administration Division, the general manager of the General Affairs Department, and the manager of the Audit Office as its members. This committee meets at least once every quarter. By establishing standard items regarding risk management to prevent the occurrence of risks and ensure compliance, the committee strives to minimize the Group’s losses and enhance its social credibility. Moreover, deploys a risk management promotion manager and a person in charge of risk management promotion to each department, thereby ensuring that each department is thoroughly informed of matters related to risk management and compliance.
6. Rewards & Disciplinary Committee
The Rewards & Disciplinary Committee is chaired by the general manager of the Business Administration Division and consists of the full-time Audit & Supervisory Board member, the manager of the Human Resources Department, the manager of the General Affairs Department, and the manager of the Audit Office as its members. This committee strives to ensure sound management through the strict and proper application of the regulations regarding rewards and discipline stipulated in the employment regulations.
7. Sustainability Promotion Committee
The Sustainability Promotion Committee is chaired by the President and Representative Director, and consists of full-time directors, the full-time Audit & Supervisory Board member, the general manager of the Corporate Strategy Planning Division, the manager of the Sustainability Promotion Department, the manager of the Business Administration Division, the general manager of the Enterprise Division, and the General Sales Manager, and meets at least twice a year. The committee is responsible for formulating and revising the Basic Policy for Sustainability, identifying material issues, setting goals and manages progress toward resolving social issues. When receiving a consultation from the Board of Directors, discusses management plans from the perspective of promoting sustainability and reports back to the Board of Directors.
8. Audit Office
The Audit Office conducts internal audits of the Group. As an organization reporting directly to the President and Representative Director, it ensures independence from business execution departments. It also collaborates with Audit & Supervisory Board members and accounting auditors to conduct effective internal audits.
9. Executive Officers
We have introduced an executive officer system to ensure the prompt execution of business operations by separating the decision-making and business execution processes.
Other matters relating to corporate governance
(1) Status of internal control system
The Daiei Kankyo Group’s systems for ensuring the appropriateness of its operations are as follows.
1. System to ensure the appropriateness of operations of the corporate group consisting of Daiei Kankyo Co., Ltd. and its group companies
- ・In order to establish a governance system as a group, we have determined the department in charge of subsidiary management, its authorities, and the director in charge of subsidiary management.
- ・We have established the Affiliate Company Management Rules to clarify our basic policies on the management of subsidiaries, and the subsidiary management departments receive prior approval and reports on important management matters from each subsidiary.
- ・The directors in charge regularly report to our Board of Directors on the status of business execution, financial conditions, and other matters.
- ・Our Audit Office conducts audits of subsidiaries.
- ・We have established systems through which to contact Daiei Kankyo in the event of a crisis.
2. System to ensure that the execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation
- ・In addition to establishing the Daiei Kankyo Group Business Conduct Guidelines as specific standards of conduct to be observed by directors and employees, we carry out our business activities in compliance with our Articles of Incorporation and other internal rules and regulations. In particular, in order to prevent any kind of relationship with anti-social forces, we have established the Rules for the Elimination of Antisocial Forces and other regulations to ensure that the entire company takes a resolute and unified stance against such organizations.
- ・We have established the Whistleblower System Rules as an internal reporting system in the event that any violation of laws, regulations, or the Articles of Incorporation is discovered.
- ・In the event that a director discovers a significant fact concerning a serious violation of laws, regulations, or other internal rules, he or she shall immediately report the matter in question to Daiei Kankyo’s Audit & Supervisory Board (or to an Audit & Supervisory Board member in the case of subsidiaries). In addition, he or she shall also report the matter in question to Daiei Kankyo’s Board of Directors (or to the subsidiary’s Board of Directors and Daiei Kankyo’s Board of Directors in the case of subsidiaries) without delay (for subsidiaries that do not have a Board of Directors, he or she shall immediately report it to the subsidiary’s president and Daiei Kankyo’s Board of Directors without delay).
- ・We have established internal audit systems by the Audit Office.
3. System to ensure the efficient execution of duties by Directors
- ・In addition to stipulating matters concerning the operation of the Board of Directors in the Rules of the Board of Directors, we hold meetings of the Board of Directors on a monthly basis, as well as extraordinary meetings as necessary.
- ・We have established the Rules of Administrative Authority to stipulate decision-making matters that are reserved for the Board of Directors and those that are delegated to the President and Representative Director and general managers of divisions.
4. System for the storage and management of information related to the execution of duties by directors
We store and manage important documents and important information related to management, confidential information, and personal information for a specified period of time in accordance with laws, regulations, and the Document Handling Rules.
5. Basic stance on eliminating antisocial forces and the status of development of such measures
The Daiei Kankyo Group shall not have any involvement with antisocial forces that threaten social order and sound corporate activities, and shall take a resolute stance against any unreasonable demands from such antisocial forces. The General Affairs Department of the Business Administration Division plays a central role in promoting the development of internal systems for the elimination of antisocial forces in cooperation with outside professional organizations such as lawyers and the police, as well as in the collection of information.
6. Rules and other systems for managing risk of loss
- ・We carry out risk management in an effective and comprehensive manner under a consistent policy based on the Risk Management and Compliance Rules.
- ・We have formulated the Internal Control Rules for Financial Reporting as a means of establishing internal control over the financial reporting of our group, thus ensuring the reliability of our financial reporting.
7. System for reporting to Audit & Supervisory Board members
Directors and employees report matters related to the performance of their duties when requested to do so by Audit & Supervisory Board members.
8. Matters related to employees assisting the duties of Audit & Supervisory Board members and matters related to the independence of employees from directors
The Audit & Supervisory Board assigns employees to assist the duties of Audit & Supervisory Board members in accordance with the Rules of the Audit & Supervisory Board.
9. Other systems to ensure that audits by Audit & Supervisory Board members are conducted in an effective manner
- ・Audit & Supervisory Board members attend meetings of the Board of Directors and other meetings in order to understand the processes by which important decisions are made and the state of execution of duties.
- ・Audit & Supervisory Board members conduct timely on-site inspections of the various departments, offices and group subsidiaries in cooperation with Daiei Kankyo’s Audit Office.
(2) Status of risk management systems
The Daiei Kankyo Group’s Risk Management & Compliance Committee, chaired by the President and Representative Director, establishes standard items for risk management (discovery, identification, analysis, and consideration of countermeasures for risks to be addressed by each division) in accordance with the Risk Management and Compliance Rules. This committee manages the risks of the entire group in an integrated manner by bringing up and reporting to the Board of Directors important risks that could have a particularly large impact on the group’s management, such as accidents which cause significant damage to property or a serious health hazard, injury, or death, as well as illegal acts.
In addition, we have established the Daiei Kankyo Group Business Conduct Guidelines as a code of conduct applicable to all executives and employees of the Daiei Kankyo Group, and we conduct compliance training for about 3,000 of all group executives and employees to minimize losses and improve social credibility. For those items that are subject to a Business Continuity Plan (BCP), we set out our response policies in a BCP established separately.
In the event that a risk arises, the Risk Management & Compliance Committee takes the lead in developing countermeasures in coordination with the originating department and department in charge. In addition, if a significant risk arises and it is determined that a company-wide response is necessary, a meeting of the Risk Management & Compliance Committee is convened, and a prompt and appropriate response is taken to minimize any loss or disadvantage to the Group.
In the event that we take measures to prevent the recurrence of risks that have occurred in our group, the Risk Management & Compliance Committee reports them to the Board of Directors and shares them within the Group to ensure that similar risks do not occur.
(3) Outline of the content of liability limitation agreement
Pursuant to Article 427, Paragraph 1 of the Companies Act, Daiei Kankyo has entered into an agreement with its directors (excluding executive directors) and outside Audit & Supervisory Board members to limit their liability for damages under Article 423, Paragraph 1 of the Companies Act. The purpose of this agreement is to create an environment in which directors and Audit & Supervisory Board members can fully demonstrate their abilities and fulfill their expected roles in the execution of their duties. However, the maximum amount of liability based on such contracts is the amount stipulated by laws and regulations.
(4) Outline of the content of indemnity agreement
Daiei Kankyo has entered into an indemnity agreement as stipulated in Article 430-2, Paragraph 1 of the Companies Act with directors Fumio Kaneko, Yoshikazu Inoue, Nariyuki Ohta, Kazumasa Onaka, Kazumasa Murai, and Tomoko Murakami, and with Audit & Supervisory Board members Akira Minemori, Ryuta Uozumi, and Noriko Kitajima. This agreement provides that Daiei Kankyo will compensate them to the extent permitted by law for expenses under Item 1 and losses under Item 2 of the said Paragraph.
However, in order to ensure that the said indemnity agreement does not impair the appropriateness of the performance of duties by all company executives, indemnification is not provided in the following cases: where they seek to gain unjust profits for themselves or third parties; where they are found to have performed their duties with the intent to cause damage to Daiei Kankyo; where compensation is claimed due to malicious intent or gross negligence in performing their duties; and where they fail to provide information or make reports or are late in providing such information or making such reports.
(5) Outline of the content of liability insurance policy for executives, etc.
Daiei Kankyo has concluded a liability insurance contract with an insurance company to cover the liability of executives, etc. as stipulated in Article 430-3, Paragraph 1 of the Companies Act. The scope of those insured under this insurance policy is (i) directors, (ii) managerial employees, and (iii) employees belonging to Daiei Kankyo and its subsidiaries (limited to claims arising from wrongful acts) , and the insured persons do not bear the insurance premiums for this policy. The said insurance policy covers the insured’s liability for damages to Daiei Kankyo and for damages to third parties. However, in order to ensure that the policy does not impair the insured’s proper performance of his or her duties, the policy does not provide coverage in cases where the insured’s conduct was intentional or caused by gross negligence.
(6) Fixed number of Directors
Daiei Kankyo’s Articles of Incorporation stipulate that there shall be no more than eight directors.
(7) Requirements for resolutions for the election of directors
Daiei Kankyo’s Articles of Incorporation stipulate that resolutions for the election of directors shall be passed by a majority of the voting rights of shareholders present at a meeting where shareholders holding one-third or more of the voting rights of shareholders who are entitled to exercise their voting rights are present. The Articles of Incorporation also stipulate that resolutions for the election of directors shall not be made by cumulative voting.
(8) Requirements for special resolutions of the General Meeting of Shareholders
Daiei Kankyo’s Articles of Incorporation stipulate that the requirements for special resolutions of the General Meeting of Shareholders provided in Article 309, Paragraph 2 of the Companies Act shall be passed by two-thirds or more of the votes of shareholders present at a meeting where shareholders holding one-third or more of the voting rights of shareholders who are entitled to exercise their voting rights are present. The purpose of this provision is to ensure the smooth operation of the General Meeting of Shareholders by relaxing the quorum for special resolutions at the General Meeting of Shareholders.
(9) Items to be resolved at the General Meeting of Shareholders that can be resolved by the Board of Directors
- ・Organization for determining the distribution of surplus funds, etc.
Daiei Kankyo’s Articles of Incorporation stipulate that matters listed in Article 459, Paragraph 1 of the Companies Act may be determined by a resolution of the Board of Directors. The purpose of this provision is to provide a flexible return of profits to shareholders by giving the Board of Directors authority over matters such as the distribution of surplus funds, etc. - ・Interim dividends
Pursuant to Article 454, Paragraph 5 of the Companies Act, Daiei Kankyo’s Articles of Incorporation stipulate that it may pay interim dividends with a record date of September 30 of each year by a resolution of the Board of Directors. The purpose of this provision is to enable the flexible return of profits to shareholders. - ・Exemption from liability
Pursuant to Article 426, Paragraph 1 of the Companies Act, Daiei Kankyo’s Articles of Incorporation stipulate that directors (including those who used to be directors) and Audit & Supervisory Board members (including those who used to be Audit & Supervisory Board members) may be exempted from liability for damages due to negligence of their duties by a resolution of the Board of Directors to the extent permitted by laws and regulations. The purpose of this provision is to ensure that directors and Audit & Supervisory Board members can fully perform their expected roles and to secure appropriate human resources on an ongoing basis.
(10) Transition to a stronger governance structure
- April 2020 Established Risk Management & Compliance Committee
- June 2020 Established Group Management Meeting
- June 2021 Established Audit & Supervisory Board
- December 2021 Established Nomination & Compensation Advisory Committee
- September 2022 Established Sustainability Promotion Committee
- June 2024 Transitioned to a company with an audit and supervisory committee
Outline of the results of an evaluation of the effectiveness of the Board of Directors
May 27, 2024
Daiei Kankyo Co., Ltd.
Outline of the results of an evaluation of the effectiveness of the Board of Directors
We hereby announce that we have conducted an evaluation of the effectiveness of the Board of Directors with the aim of verifying whether the Board as a whole is functioning properly and of improving its awareness of issues and its overall functioning. Below is a summary of the results.
1. Evaluation method
In May 2024, all Directors and Audit & Supervisory Board Members were asked to complete a questionnaire regarding the effectiveness of the Board of Directors. The Board of Directors analyzed and discussed the aggregated results, shared assessments and issues, and discussed future initiatives.
The questionnaire evaluated the following items.
- ＜Items for evaluation＞
- 1. Composition of the Board of Directors
- 2. Operation of the Board of Directors
- 3. Agenda of the Board of Directors
- 4. Support system for the Board of Directors
- 5. Overall effectiveness of the Daiei Kankyo Group’s governance structure and Board of Directors (free comments section)
2. Summary of evaluation results
Across all evaluation items, the Board of Directors was found to be functioning appropriately, with due efforts to address the issues identified in the previous year’s evaluation and corresponding improvements made. It was therefore concluded that the effectiveness of the Board of Directors continued to be ensured.
- 1. An appropriate system is in place, with the Board of Directors including Outside Directors and Outside Audit & Supervisory Committee Members equipped with the necessary knowledge and abilities in their respective areas of activity.
- 2. The frequency of meetings, the time allotted for discussion, and the content and volume of materials are appropriate.
- 3. The atmosphere at Board meetings allowed members to speak freely, which result in lively discussion.
In addition, where an agenda item requires detailed explanation, an advance briefing is held for Outside Directors and outside Audit & Supervisory Committee members, creating a system that promotes active discussion. - 4. There is adequate discussion of matters related to internal control and of the development and operation of Companywide risk management systems.
At the same time, it is found that the following items need to be addressed in the future to ensure the ongoing effectiveness of the Board of Directors.
- 1. Some of the materials submitted to the Board of Directors lacked sufficient time for prior review. To enhance discussions at Board meetings, it is necessary to ensure that ample time is provided for prior review by preparing the materials in advance.
- 2. To enhance discussions at Board meetings, it remains essential to select and focus on important deliberation matters. Therefore, it is necessary to continue considering the delegation of authority to the Group Management Meeting and other such bodies.
- 3. To further enhance corporate value, it is crucial to strengthen the Board of Directors supervisory function, enhance corporate governance, and expedite decision-making processes in management.
3. Measures to improve effectiveness
Based on the results of the evaluation of effectiveness, we will take the following measures to further enhance the Board’s discussions and improve effectiveness.
- 1. Regarding the materials submitted to the Board of Directors, we will continue preparing documents that clearly outline the points for discussion. In addition, to ensure sufficient time for prior review, we will prepare the materials well in advance before submitting to the Board.
- 2. We will continue reviewing which matters should be deliberated by the Board of Directors and which should be delegated to the Group Management Meeting or other relevant committees.
- 3. We will strengthen the supervisory function of the Board of Directors and further enhance corporate governance through the transition to a company with an audit and supervisory committee, while also working to speed up the decision-making process.
Executives
Directors
5 male, 2 female (28.6% of executives are female)
| Position | Name |
|---|---|
| President and Representative Director | Fumio Kaneko |
| Director | Nariyuki Ohta |
| Director | Kazumasa Onaka |
| Outside Director | Tomoko Murakami |
| Director / Audit & Supervisory Committee Member | Akira Minemori |
| Outside Director / Audit & Supervisory Committee Member | Kazumasa Murai |
| Outside Director / Audit & Supervisory Committee Member | Noriko Kitajima |
Executive officers
To expedite business execution through its separation from the decision-making process, we have introduced an executive officer system. The Executive Officers are listed below.
| Position | Name | Position and responsibilities |
|---|---|---|
| President and Executive Officer | Fumio Kaneko | - |
| Senior Managing Executive Officer | Nariyuki Ohta | Responsible for Enterprise and Technology |
| Junior Managing Executive Officer | Kazumasa Onaka | General Sales Manager Responsible for Sales |
| Executive Officer | Morihiko Shimoda | General Manager of Corporate Strategy Planning Division Responsible for Corporate Strategy Planning |
| Executive Officer | Kunihiko Idei | Executive Assistant to President Responsible for Special Assignments from the President |
| Executive Officer | Hitoshi Wanibe | General Manager of Business Administration Division Responsible for Business Administration |
| Executive Officer | Hiroaki Shimoji | General Manager of Enterprise Division Responsible for Enterprise |
| Executive Officer | Atsuo Tanaka | General Manager of Miki Recycle Center Responsible for Management of Miki Recycle Center |
| Executive Officer | Toshifumi Hirai | Representative Director of Mie Chuo Kaihatsu Co., Ltd. Responsible for General Management of Mie Chuo Kaihatsu Co., Ltd. |
| Executive Officer | Kenichi Morita | Director of Mie Chuo Kaihatsu Co., Ltd. Responsible for Development of Mie Chuo Kaihatsu Co., Ltd. Representative Director of DINS Kansai Co., Ltd. |
| Executive Officer | Masakatsu Shimoji | Responsible for General Management of DINS Kansai Co., Ltd. |
| Executive Officer | Koichi Ishikawa | Director of Geo-Re Japan Inc. Responsible for Sales of Geo-Re Japan Inc. |
| Executive Officer | Shinichi Kugimiya | Deputy General Manager of Business Administration Division Manager of Accounting Department Responsible for business administration (Deputy) |
| Executive Officer | Kengo Otsuka | Deputy General Manager of Business Administration Division Manager of General Affairs Department Responsible for business administration (Deputy) |
| Executive Officer | Makoto Yamada | Manager of Technical Department Responsible for technology (Deputy) |
| Executive Officer | Hiroyuki Hamashima | Deputy General Manager of Sales Division Responsible for sales (Deputy) |
| Executive Officer | Yasuhiko Maeyama | Director of Mie Chuo Kaihatsu Co., Ltd. Manager of Mie Recycle Center Responsible for management of Mie Chuo Kaihatsu Co., Ltd. |
| Executive Officer | Tatsuo Nakamura | Representative Director of Kyodoh Doboku Co., Ltd. Responsible for business in Kanto area |
Skills matrix of Directors
Our Directors consist of individuals with a good balance of knowledge, experience, and abilities, and with diversity in mind. In order to improve the quality of discussions at meetings of the Board of Directors from multiple perspectives and to strengthen our corporate governance system, we have compiled a list of each executive’s main skills and organized them into a chart.
| Directors | Skills matrix | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Name | Position | Corporate management | Legal affairs and compliance | Risk management | Finance, accounting, and tax affairs | Engineering and facility operations | R&D | Sales and marketing | ESG and sustainability | Human resources development |
| Fumio Kaneko | President and Representative Director | ● | ● | ● | ● | ● | ||||
| Nariyuki Ohta | Director Senior Managing Executive Officer |
● | ● | ● | ● | ● | ||||
| Kazumasa Onaka | Director Junior Managing Executive Officer |
● | ● | |||||||
| Tomoko Murakami | Outside Director | ● | ● | |||||||
| Akira Minemori | Director (Full-time Audit & Supervisory Committee Member) |
● | ● | ● | ● | |||||
| Kazumasa Murai | Outside Director (Audit & Supervisory Committee Member) |
● | ● | |||||||
| Noriko Kitajima | Outside Director (Audit & Supervisory Committee Member) |
● | ● | |||||||
Diversity in the Board of Directors and officers
Our Board of Directors consists of five men and two women, including three Outside Directors with expertise as lawyers, certified public accountants, and tax accountants, ensuring a diverse Board composition. The Board of Directors receives valuable feedback and advice from Independent Outside Directors who bring multifaceted perspectives and specialized knowledge, leading to very active discussions.
We maintain a policy of ensuring that at least one-third of the Directors are Independent Outside Directors. While specific timing and selection of individuals are yet to be determined, we are considering the appointment of Independent Outside Directors with business management experience to further strengthen governance and enhance diversity.
Training for Officers
- ① Training policy
To ensure that Directors, including Outside Directors, appropriately fulfill the roles and responsibilities expected of them as part of the Company’s important governance bodies, we provide opportunities for training, such as for acquisition and appropriate updating of necessary knowledge and deeper understanding of their roles and responsibilities.
- ② Main training content
For the fiscal year ended March 31, 2024, internal and outside Directors and Audit & Supervisory Board Members attended a seminar conducted by an external lawyer on the responsibilities and duties of executives in listed companies, which deepened their understanding of their roles and responsibilities. In addition, internal Directors and Audit & Supervisory Board Members, like employees, completed compliance training covering 18 topics. Outside Directors and Audit & Supervisory Board Members, on the other hand, participated in a training program covering 13 topics, after receiving explanations from relevant departments about the Company’s internal operations (such as site visits, cost management, and sales management systems). Through the program, they enhanced their understanding of the Daiei Kankyo Group's businesses.
For the fiscal year ending March 31, 2025, we will continue to provide compliance training with external instructors for both internal and outside Directors. Outside Directors will also receive explanations from relevant departments about the Company’s internal operations (such as site visits, transportation business management systems, and human capital initiatives), and will participate in a training program with 13 topics to further enrich their understanding of the Group's businesses.
Outside officers
The Company elects three independent outside directors. We have established a policy on independence to elect independent outside directors who have no conflicts of interest with general shareholders, and ensure the independence of management.
When transacting with a controlling shareholder, we handle it in a manner that does not infringe on the interests of minority shareholders by treating the terms and conditions the same as those of general transactions. In addition, a special committee consisting of independent outside directors is established to discuss such transactions. We have also formulated Management Rules for Related Parties to build a framework for making decisions after thorough deliberations on the terms and conditions and the appropriateness of the transactions. Transactions with directors or major shareholders, including new competing transactions or transactions involving conflicts of interest, are subject to resolution by the Board of Directors.
Supervision and audit by Outside Directors and Outside Directors who are Audit & Supervisory Committee Members; their cooperation with the internal audit division, the Audit & Supervisory Committee, and the accounting auditor; and their relationship with internal control divisions
The Outside Directors involve themselves in the management process from an independent standpoint by attending and speaking at meetings of the Board of Directors and enhance supervisory functions by collaborating with the Audit Office, the full-time Audit & Supervisory Committee Members, and Outside Directors who are Audit & Supervisory Committee Members.
Audit & Supervisory Committee Members conduct effective audit by attending and speaking at the meetings of the Board of Directors, studying regulations and other internal documentation, and taking other action. Through Audit & Supervisory Committee meetings, they draft audit plans with the full-time Audit & Supervisory Committee Members and share information with them on the status of conduct of audits.
They additionally receive the accounting audit and internal audit reports of the accounting auditor and the Audit Office, hold regular meetings for sharing opinion and information with the accounting auditor and the Audit Office, and work closely with them to exercise effective supervisory and audit functions.
Audits
The Company transitioned from the structure of a company with an audit and supervisory board to the structure of a company with an audit and supervisory committee on June 26, 2024. The auditing system is structured as follows.
Our audits involve the Audit Office and the Audit & Supervisory Committee (formerly the Audit & Supervisory Board) holding regular meetings with the accounting auditor. This enables the sharing of information regarding internal audit results, Audit & Supervisory Committee Members’ audit findings, and accounting audit results (quarterly reviews and annual audits), facilitating complementary and effective audits.
The business audits conducted by the Audit & Supervisory Committee Members (formerly the Audit & Supervisory Board Members) are carried out by one Full-time Audit & Supervisory Committee Member and two Audit & Supervisory Committee Members who are Outside Directors who are Audit & Supervisory Committee Members. The Audit & Supervisory Committee meets monthly in accordance with the rules of the Audit & Supervisory Committee. In addition to attending important meetings, including meetings of the Board of Directors, Audit & Supervisory Committee Members review important documents and other information related to the execution of business operations, and receive reports from the officers and employees of the Company and its subsidiaries from time to time regarding information necessary for auditing. They also exchange views with the President and Representative Director, and Executive Officer on a regular basis.
Internal audits of the Daiei Kankyo Group are conducted by the Audit Office, which reports directly to the President and Representative Director, and Executive Officer. The Audit Office conducts audits of the business activities of each department and the operation of various systems in light of management objectives. The Audit Office regularly meets and coordinates with the Audit & Supervisory Committee (once a month) and the accounting auditor (twice a year), thereby ensuring efficient internal audits. The office also provides guidance, advice, and recommendations to the audited departments based on the internal audit results. Furthermore, once an audit is completed, an internal audit report is compiled after a comprehensive review and assessment of the audit findings and opinions of the department being audited, and this report is delivered to the Board of Directors, the President and Representative Director, and Executive Officer, and the Audit & Supervisory Committee.
Audits by Audit & Supervisory Board Members
In the fiscal year ended March 31, 2024, audits were conducted at 26 locations (3 companies, 26 departments) on the key audit items of compliance with relevant laws and regulations, prevention of individual company risk, and building and operating an internal control system.
The audits found no material facts indicating fraud or other misconduct relating to the execution of duties by directors or violation of laws, regulations, and the Articles of Incorporation. Appropriate methods for implementing internal controls and evaluating their effectiveness have been established to ensure the trust of stakeholders. According to the evaluation, we have been maintained a consistent level of internal control.
There were two findings of issues. First, despite the fact that quality has improved, a double-check system is still needed to ensure further improvement in the quality of administrative processes for the financial settlement process and therefore we are providing guidance to the relevant departments. The other is deficiencies found in the operating aspects of the overall IT control system and remaining issues with cyber security measures. To address these issues, we have issued instructions on launching companywide cross-organizational consideration.
Internal audits
Up to the fiscal year ended March 31, 2023, internal audits were conducted in all departments. However, the site selection criteria were revised in the fiscal year ended March 31, 2024 to ensure the effectiveness of internal controls and therefore areas of high risk were prioritized for audits. The decision was made to conduct annual internal audits of Daiei Kankyo Co., Ltd. and our main subsidiaries, Mie Chuo Kaihatsu Co., Ltd. and DINS Kansai Co., Ltd., and internal audits once every two years for other subsidiaries. Subsidiaries with many findings in the audit results requiring improvement will undergo internal audits annually at the direction of the President and Representative Director.
In the fiscal year ended March 31, 2024, internal audits were conducted at 51 locations (16 companies, 45 departments) on the key audit items of compliance with relevant laws and regulations, safety and health initiatives and compliance, effectiveness and efficiency of controls and processes, location operation, and findings from past audits. Compared to the fiscal year ended March 31, 2023, the number of departments with “good” and “generally good” increased from 91.1% to 97.7%; however, the number of departments requiring improvement also increased from 8.9% to 15.5%. In new subsidiaries that joined the Group through M&A, internal audits found deficiencies in rules and pointed out the lack of awareness of internal rules, and these subsidiaries established rules at the instruction of the Business Administration Division. In regard to compliance with relevant laws and regulations, which is a key audit item of the Group, no violations of the Waste Management Act, Industrial Safety and Health Act, and other relevant laws and regulations were found.
In the fiscal year ending March 31, 2025, we will ensure the effectiveness of our internal management structure by conducting internal audits at 53 locations (23 companies, 51 departments) on similar key audit items and operating the PDCA cycle.
Accounting audits
Name of accounting auditor: GYOSEI & Co. (Continuous audit period: 3 years)
We have concluded an audit agreement with GYOSEI & Co. as specified in the Financial Instruments and Exchange Act, and they audit our consolidated and non-consolidated financial statements. In the fiscal year ended March 31, 2024, the accounting firm issued an unqualified opinion (indicating that all key audit items were appropriate). The accounting firm also coordinates with the Audit & Supervisory Committee and the Audit Office in maintaining a three-way relationship that enables timely sharing of requisite information as necessary, and rapid building of consensus opinions on what information should be shared and integrated. The Audit & Supervisory Committee takes the lead on convening a three-way liaison meeting twice a year, in July and November, to communicate intentions by exchanging mutual audit plans as well as explaining and reporting on them.
Officer Remuneration
The Articles of Incorporation stipulate that remuneration and other benefits for Directors shall be determined by a resolution of the General Meeting of Shareholders. Based on this, the remuneration and other benefits are determined within the maximum amount resolved at the General Meeting of Shareholders, taking into account position, tenure in office, business performance, and other factors in a comprehensive manner. In addition, to strengthen the fairness, transparency, and objectivity of procedures related to remuneration and other benefits, and to enhance corporate governance, the Nomination & Compensation Advisory Committee has been established, chaired by an Independent Outside Director and consisting of the President and Representative Director / Executive Officer, and two Outside Directors. The Nomination & Remuneration Advisory Committee deliberates on matters raised by the Board of Directors, including the remuneration system for Directors and policies for determining remuneration, and the Board of Directors makes final decisions based on the contents of these deliberations.
For Directors* and Executive Officers, in addition to fixed compensation, we have introduced a performance-linked restricted stock compensation plan with the purpose of further aligning value with our shareholders. In this plan, compensation varies depending on the achievement of performance targets according to our Executive Remuneration Rules. Remuneration for other Directors (Outside Directors and Directors who are Audit & Supervisory Committee Members) consists of fixed compensation and restricted stock compensation.
* Excluding Outside Directors and Directors who are members of the Audit & Supervisory Committee
Amount of officer remuneration (FY2024/3)
| Category of officers | Total amount of remuneration, etc. (Millions of yen) |
Total amount of remuneration, etc., by type (millions of yen) | No. of eligible officers | ||
|---|---|---|---|---|---|
| Fixed compensation | Performance-linked remuneration | Non-monetary remuneration, etc. | |||
| Directors (excluding Outside Directors) |
147 | 137 | - | 9 | 4 |
| Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members) |
10 | 10 | - | - | 1 |
| Outside Directors | 19 | 19 | - | - | 4 |
Note: Non-monetary remuneration, etc. is the amount recorded as an expense in the fiscal year under review (ended March 31, 2024) based on the restricted stock compensation plan
Management of Affiliated Companies
The Daiei Kankyo Group is composed of 50 companies, including Daiei Kankyo Co., Ltd. and its 37 consolidated subsidiaries, 2 non-consolidated subsidiaries, 6 affiliated companies accounted for by the equity method, and 5 affiliated companies not accounted for by the equity method. (As of October 31, 2024)
We have established the Basic Policies for Internal Control and have built a system to ensure the appropriateness of operations within the Group. Regarding the control of affiliated companies, we have established the Affiliate Company Management Rules, and the Company’s Business Administration Division takes the lead in guiding and supporting the smooth operation of affiliated companies in accordance with the Basic Policies on the Management of Subsidiaries.
Important management matters are decided at the Group Management Meeting. To enhance internal checks and balances, we not only dispatch Directors and Audit & Supervisory Committee Members from the Company, but also conduct internal audits by the Audit Office and business audits by the Audit & Supervisory Committee Members.
Cross-Shareholdings
The Company holds shares in its business partners as cross-shareholdings in order to achieve sustainable growth and increase medium- to long-term corporate value, maintain business relationships (e.g., stable funding and financial transactions), and strengthen business transactions in the field of waste management orders. The status of these shareholdings is reported to the Board of Directors once a quarter. Stocks that are no longer meaningful to hold in light of the development of our business will be sold after obtaining the approval stipulated in our regulations, taking into consideration the stock price and market trends as appropriate. It is our policy not to acquire new cross-shareholdings.
In exercising the voting rights associated with the shares we own, we scrutinize the content of proposals from the perspective of whether or not they will contribute to improving the medium- to long-term corporate value of the issuing company.
Compliance
We recognize that compliance is of the utmost importance for the Daiei Kankyo Group to enhance business continuity and continue to evolve as a company with the power to create better environments. In April 2022, we formulated the Daiei Kankyo Group Business Conduct Guidelines. This is a specific code of conduct that all officers and employees of the Daiei Kankyo Group must comply with. The goal is for all our officers and employees to put these guidelines into practice so our Group is trusted and needed more than ever by society, and people can work with a sense of pride.
Diagram of the compliance framework
Compliance Education
In the fiscal year ended March 31, 2024, we carried out education spanning 18 topics.
- • Training on the Daiei Kankyo Group Business Conduct Guidelines and insider trading
Target: All officers and employees and employees assigned long-term from partner companies - • Eleven topics such as whistleblowing system and harassment training
Target: All officers and employees - • Five topics such as the Waste Management Act and Subcontracting Act seminars
Target: Especially related officers and employees
We keep records of all training to ensure that all relevant employees have taken each course.
For the fiscal year ending March 31, 2025, we plan to provide education spanning 18 topics.
Whistleblowing System
To quickly detect and rectify misconduct and strengthen compliance management, the Daiei Kankyo Group has established a system that allows all officers, employees, contracted employees, part-timers, temporary workers (hereinafter, “personnel”), and business partners to use an internal whistleblowing system. We also address consultations regarding organizational or individual violations of internal regulations and compliance issues from all personnel.
The internal contact point is set up in the Audit Office, which is an independent organization. If the matter relates to the Audit Office, it may be reported to the Company’s General Affairs Department Manager or Full-time Audit & Supervisory Committee Member, and if the matter relates to a Director of the Company, it may be reported to an Audit & Supervisory Committee Member of the Company. As an external contact point, an outside attorney designated by the Company is available.
| 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|
| Internal contact point | 3 | 14 | 10 | 24 |
| External contact point | 2 | 1 | 5 | 5 |
| Total | 5 | 15 | 15 | 29 |
| 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|
| Misconduct, etc. | 2 | 1 | 1 | |
| Rules/regulations | 2 | 4 | 8 | |
| Harassment, etc. | 1 | 9 | 9 | 15 |
| Work improvement, etc. | 3 | 1 | 1 | |
| Dissatisfaction with personnel affairs | 2 | 1 | 4 | |
| Total | 5 | 15 | 15 | 29 |
Response when a whistleblowing incident occurs
When a whistleblowing incident occurs, the Audit Office takes the lead on interviewing the relevant individuals and investigates the incident. When an incident that could have a significant impact on business occurs, the Audit Office reports it to the Full-time Audit & Supervisory Committee Member and to Independent Outside Directors and then rapidly investigates and discusses the case at the Risk Management & Compliance Committee meeting. Based on the results of the whistleblowing report, disciplinary action is taken for the employee involved, and compliance training is conducted to prevent recurrence. The results are reported to the Board of Directors and the Audit & Supervisory Committee.
Tax Affairs
The Company complies with all tax-related laws and regulations and places importance on acting with high integrity and transparency. We strictly observe proper procedures for filing tax returns and payment of taxes, and handle tax affairs in a legal and fair manner. We also endeavor to manage and prevent tax risks and strive for smooth communication with tax authorities. When any uncertainties or issues arise concerning taxation, we address them promptly and appropriately, and fulfill our social responsibilities.
Risk Management
The Company has established the Sustainability Promotion Committee, chaired by the President and Representative Director / Executive Officer, which identifies and evaluates risks and opportunities to address sustainability issues such as climate change and human capital. Other risks for the Daiei Kankyo Group as a whole are identified and assessed by the Risk Management & Compliance Committee, chaired by the President and Representative Director / Executive Officer. Each committee determines materiality based on uniform judgment criteria and make additional changes to risk items or revise their materiality in response to changes in the external environment such as laws and regulations. Risks deemed to be of high materiality by each committee are reported or brought to the Board of Directors for discussion, thereby ensuring integrated management of risks for the Daiei Kankyo Group as a whole.
Risks Related to Sustainability Issues
In the fiscal year ended March 31, 2024, the Sustainability Promotion Committee met twice, and identified and evaluated various policies on, and risks and opportunities associated with sustainability.
Up to now, the scope of response to risks and opportunities related to climate change has been at four main companies in the Daiei Kankyo Group in waste management and recycling and soil remediation: Daiei Kankyo Co., Ltd.; Mie Chuo Kaihatsu Co., Ltd.; DINS Kansai Co., Ltd.; and Geo-Re Japan Inc. For those four companies, through scenario analysis using the 1.5°C and 4°C climate change scenarios, we analyzed the business risks and opportunities, and responded to them. However, due to the steadily increasing risks of climate change, the Sustainability Promotion Committee consulted about expanding the scope to the consolidated Group companies and other business segments, after which the Board of Directors decided it based on the recommendations of the committee.
Other Risks across the Group
During the fiscal year ended March 31, 2024, we conducted compliance training for all officers and employees to refresh their understanding of the Daiei Kankyo Group Business Conduct Guidelines, which is the code of conduct for our Group. We added and revised risk categories and reassessed the materiality of risks in response to the legal, regulatory, and other changes in the external environment.
If a risk materializes, the Risk Management & Compliance Committee discusses it and the department responsible for managing the risk then implements measures to prevent recurrence. This is also communicated to the entire Group, not only to the department where the risk emerged, and self-inspections are conducted as necessary to prevent recurrence. Risks deemed to be high material by the committee are reported or referred to the Board of Directors for discussion of how to mitigate Group losses or disadvantages.
Risk matrix
Diagram of risk management structure
Information Security Measures
The Daiei Kankyo Group has established “thorough information management” as a policy in the Daiei Kankyo Group Business Conduct Guidelines, which serves as code of conduct guidelines for all officers and employees within the Group, and ensures that this policy is well-communicated and understood. The Daiei Kankyo Group has also developed and applies internal rules, including rules for the management of confidential information, rules for the protection of personal information, and detailed rules for the implementation of electronic information security.
In the fiscal year ended March 31, 2024, training in Japan’s Personal Information Protection Act was given to all officers and employees. The risk of information leaks and countermeasures was explained to emphasize the importance of information management.
Business Continuity Plan (BCP)
The Daiei Kankyo Group has established a BCP to fulfill its responsibility to continue waste management operations, minimize the impact of business interruption and enable early recovery, and ensure the safety of employees of the Company and partner companies and protect their employment.
The BCP defines the criteria for activating it, as well as the structure and roles of the emergency task force so that it can respond quickly when activated. In the event the headquarters building is damaged and there is no prospect of recovery, the Miki Recycle Center and other sites, which are assumed to be at low risk of damage from earthquakes, have been designated as an alternative base of operations for the emergency task force to prepare for unforeseen events such as loss of the chain of command. The Daiei Kankyo Group has also established procedures for responding to major accidents and other incidents at each of its business sites.
In the future, we plan to fine-tune the contents of these plans to be more practical and combine them so that they work in a coordinated fashion.
We will continue to revise our plans so that the Daiei Kankyo Group can fulfill its expected role as a part of the social infrastructure that supports a recycling society even in the event of a disaster.
