Compliance

Hitachi Construction Machinery Group Codes of Conduct

Within Hitachi Construction Machinery Co., Ltd. (hereinafter referred to as “the Company”) and its consolidated subsidiaries (hereinafter referred to as “Hitachi Construction Machinery Group”), with the core values of Basics and Ethics as its foundation, the “Hitachi Construction Machinery Group Codes of Conduct” (hereinafter referred to as the “Codes of Conduct”) provides the basis for the judgments made by the Group’s officers and employees as they carry out their duties, and set forth the actions to be taken by them.

All officers and employees of the Hitachi Construction Machinery Group understand this Codes of Conduct, have a high sense of ethics, and act in good faith and with fairness.

Hitachi Construction Machinery Group Code of Ethics and Compliance

The Hitachi Construction Machinery Group Code of Ethics and Compliance (hereinafter referred to as the “Code of Ethics and Compliance”) is based on the values of the Hitachi Construction Machinery Group as stipulated in the Codes of Conduct, and consists of the principles and rules to be followed by officers and employees in order to act in good faith and with fairness, and complements the Codes of Conduct. All officers and employees of Hitachi Construction Machinery Group comply with the Code of Ethics and Compliance and act in good faith and with fairness to build relationships of trust with their colleagues, be trusted by business partners, shareholders and local communities, and to win and maintain social credibility.

In order to maintain compliance as our corporate culture, it is important that each individual act responsibly, and in order to foster that corporate culture, the officers and employees of the Hitachi Construction Machinery Group thoroughly implement the followings.

• Provide a working environment where ethical behavior is valued and respected.
• Set an example by yourself and encourage others to comply with the Code of Ethics and Compliance.
• Support colleagues who have questions or concerns about business ethics or compliance.
• Take the designated compliance training required by all officers and employees.
• Cooperate in investigating ethics and compliance code violations upon request.

In recent years there are strong social expectations of efforts to prevent harassment and discrimination, and Hitachi Construction Machinery Group, in accordance with the Code of Ethics and Compliance, is actively working to create a healthy, safe and productive working environment. We always conduct ourselves with respect for our colleagues, and never harass or discriminate against anyone, regardless of race, family, skin color, religion, thought, beliefs, political beliefs, military service, gender, gender identity, sexual orientation, marriage history, family origin, social status, pregnancy status, age, nationality, race, illness, disability or genetic information, etc.

Hitachi Construction Machinery Group considers violations of the Code of Ethics and Compliance, including non-participation in Company designated training, as serious issues. As such, those in violation of these provisions are subject to appropriate disciplinary action, including dismissal and legal action.

Hitachi Construction Machinery Global Compliance Program (HGCP)

Hitachi Construction Machinery Group places the highest priority on having sincerity in the conduct of its business activities and values the trust of all stakeholders, including customers, shareholders and employees. In order to maintain and reinforce this trust, we endeavor to meet the highest ethical standards and comply with all pertinent laws and regulations of every country and region in which the Hitachi Construction Machinery Group does business, and to respect proper business practices. In particular, Hitachi Construction Machinery Group considers three areas to be particularly high risks in terms of compliance directly related to business activities, namely, the prevention of bribery, compliance with competition law and the prevention of money laundering, terrorist financing, and anti-social transactions, and places great importance on preventive measures in these areas. In this connection, rules and guidelines have been established, and the Hitachi Construction Machinery Group operates the "Hitachi Construction Machinery Global Compliance Program (HGCP)" (hereinafter "HGCP") as a systemization of the Codes of Conduct and the Code of Ethics and Compliance.

In addition, the "Hitachi Construction Machinery Group Compliance Program Framework Rules" clarify the responsibilities related to compliance management and the basic policies related to compliance activities.

Hitachi Construction Machinery Group is committed to maintaining and improving an advanced compliance system that satisfies global standards.

Hitachi Construction Machinery Group has established the following important rules within HGCP.

• Hitachi Construction Machinery Group Anti-Bribery and Anti-Corruption Policy

This is a set of regulations which set forth the resolute efforts of Hitachi Construction Machinery Group as it strives to continuously comply with anti-bribery laws enforced in all countries and regions of the world where conducts its business activities, and to always act in good faith and conduct its business in an ethical and legal manner.

• Hitachi Construction Machinery Group Fair Competition Policy

This is a set of regulations which set forth the resolute efforts of Hitachi Construction Machinery Group as it strives to continuously comply with fair competition laws enforced in all countries and regions of the world where conducts its business activities, and to always act in good faith and conduct its business in an ethical and legal manner.

• Hitachi Construction Machinery Group Anti-Money Laundering and Prevention of Anti-Social Transactions Policy

This is a set of regulations which set forth the resolute efforts of Hitachi Construction Machinery Group as it strives to continuously comply with anti-money laundering laws enforced in all countries and regions of the world where conducts its business activities, and to eschew any anti-social transactions.

In FY2022, there were no incidents involving bribery-related, competition laws-related and anti-money laundering-related violations or sanctions. As a result, there were no instances of related disciplinary action, fines, or penalties levied against employees.

Compliance Promotion Systems

Hitachi Construction Machinery Group has established the “Compliance and Risk Management Regulations” (hereinafter referred to as “Management Regulations”), and has established a system for managing compliance violation cases and formulating and operating measures to prevent recurrence.

If an instance of compliance violation occurs within Hitachi Construction Machinery Group, a Compliance and Risk Flash Report (hereinafter referred to as “Flash Report”) is issued to the secretariat established at the Company, in accordance with the Management Regulations.

In the process of issuing Flash Reports, the system is such that an appropriate department of the Company is selected and appointed to act as the department responsible for recurrence prevention, making the initial response to the compliance violation incident and formulating and implementing permanent recurrence prevention measures.

The department responsible for recurrence prevention will publish Flash Reports, as needed, so that the progress, from the initial response to the formulation and operation of final recurrence prevention measures, is reported throughout Hitachi Construction Machinery Group. In addition, Hitachi Construction Machinery Group has established a “Compliance and Risk Management Committee” (hereinafter referred to as “the Committee”) in accordance with the Management Regulations.

Through the Committee meetings held both regularly and irregularly, and notifications issued by the Committee, we share information on instances of legal violations that have occurred within Hitachi Construction Machinery Group, and work to spread recurrence prevention measures and other compliance measures throughout the Group.

The general managers of all of our Head Office divisions and the presidents of the consolidated subsidiaries, who are members of the Committee, have a system in which any information to be shared from any of the Committee is thoroughly disseminated by the divisions and companies.

Compliance Reporting System

With the aim of ensuring thorough statutory compliance and contributing to the conduct business activities with high ethical standards by the Company and its consolidated subsidiaries, Hitachi Construction Machinery Group has established the “Compliance Reporting System Management Regulation” (hereinafter referred to as “Reporting Regulation”).
The Reporting Regulations set forth a system for reporting illegal or inappropriate acts by officers and employees of Hitachi Construction Machinery Group, and mechanisms for appropriately responding to these reports.
The Reporting Regulations stipulate the following items, including items to strongly protect whistle blowers, pursuant to the Whistle-Blower Protection Amendment Act in June 2022 and we operate this system according to the provisions in the Reporting Regulation so that we can enhance the effectiveness of the reporting system and self- purification.

Maintenance of the Internal Reporting System
The Secretariat shall carry out the following duties.
(1) Work to maintain and spread the system throughout the Group, in accordance with the Regulations, and appropriately manage the system by engaging in a series of operations, from receiving reports and fielding inquiries to completing the responses to these.

(2) Periodically report to the Executive Committee, the Board of Directors and the Audit Committee on the status of execution of duties concerning the Regulations.

Information Management
Information obtained from reports from persons using the system must not be shared outside of the minimum range necessary for investigation and correction, unless explicitly agreed in advance.

Investigation
Staff involved in handling reports shall be obliged to maintain confidentiality, in accordance with Whistleblower Protection Act.

Duty of Cooperation
Officers and employees of the Company have a duty to cooperate in investigations when so requested.

Corrective Measures, etc.
If it is determined that corrective measure is necessary, the head of the department involved in the reported incident, or other related persons, shall promptly take corrective measure in accordance with the correction instructions.

Disciplinary Measures, etc.
If, as the result of investigations, a reported incident becomes clear, those officers or employees involved shall be subject to appropriate disciplinary or other action.

Protection of Compliance Reporting System Users
Staff using the system must not be subject to any disadvantageous treatment as a result of their having reported something, and any Company officers or employees who have carried out such unfavorable treatment are to be subject to disciplinary action, and any victims of such treatment offered appropriate restitution.

Prohibition of Searching
Company officers and employees must not engage in searches for the identities of officers and employees who have reported incidents, or which officers and employees have cooperated in the investigation of the reported incident.

Confidentiality
Company officers and employees must not disclose information regarding the reported incident, unless there is a valid reason such as when stipulated by the Regulation or required by law, and must keep said information confidential. Neither may they use said information for any purpose other than the reported incident.

Avoidance of Conflicts of Interest
Officers and employees may not be involved in the investigation of reported incidents in which they are involved, or discussions on corrective measures relating to the reported incident.

Notifications, etc.
The Secretariat must promptly notify the person reporting an incident that their report or inquiry has been received, and must also notify that person appropriately as to what subsequent action is going to be taken.

Protection of Whistleblowers in the Official Reporting Line
Company officers and employees shall not treat whistleblowers or persons who have sought advice in the official reporting line disadvantageously because of their having reported an incident.

Handling of Voluntary Reporting of Matters
Even if officers and employees of the Company involved in the reported incident voluntarily report to Compliance Reporting System or via the official reporting report line, or cooperate with the investigation, they will not be exempted from liability. However, depending on the situation of each case, reduction of or exemption from disciplinary action may be considered.

Evaluation of Reports
The Company shall favorably evaluate whistleblowers and those who have cooperated in investigations contributing to the discovery and correction of serious incidents.

Awareness and Training
The secretariat will report the operational results of the reporting system to the Compliance and Risk Management Committee, and to the officers and employees of the Company, taking care to protect personal information, etc., and ensure that officers and employees are regularly informed and trained on the whistleblowing system.

In addition, persons wishing to report can make use of two reporting routes, the direct reporting system established by the Company, or the route via an external contractor. Reporting can be done by e-mail, telephone, mail, interview, etc., whatever is most convenient for the whistleblowers. Via the external contractor route, reports can be handled in 200 languages and responded to globally.

Reporting results for FY2022 are as follows.
Number of cases: 54 cases
Breakdown:
Harassment-related: 27 cases
Labor-related (other than harassment): 6 cases
Violation of company rules: 14 cases
Law violations: 1 cases
Others: 6 cases

Compliance Education and Training

Hitachi Construction Machinery Group conduct video e-learning “Compliance Instruction Program” (hereinafter, “CIP”) every year, the Representative Executive Officer and President of the Company explains to the officers and employees of Hitachi Construction Machinery Group the importance of compliance and about how to use the Global Compliance Reporting System.

In addition, CIP provides training on the following items that employees should pay particular attention to in the performance of their duties.

(1) Anti-monopoly law violations: In order to prevent any acts that may breach the Anti-monopoly Act, such as cartel activity or bid rigging, training is provided on the risks involved in having contact with competitors, and the in-house procedures that are to be followed in the event of contact with competitors due to business necessity, without violating any laws or regulations.

(2) Anti-bribery law violations: In order to prevent any acts that might violate anti-bribery laws for public officers, training is provided on the risks involved in providing entertainment or gifts to public officers, and the in-house procedures that are to be followed in the event of providing entertainment or gifts to public officers due to business necessity, and without violating any laws or regulations.

(3) Laws and regulations for the prevention of anti-social transactions, money laundering, and terrorist financing: In order to prevent any transactions with anti-social forces or involvement in money laundering and terrorist financing, training is provided on the risks involved in new transactions, and on the in-house procedures that are to be followed in the event of starting new transactions.

(4) In addition, with regard to legal violations that have occurred within Hitachi Construction Machinery Group, as part of recurrence prevention measures, training is provided on specific cases that have occurred and the recurrence prevention measures that were implemented.

In addition to the Japanese version, the training described above is provided throughout Hitachi Construction Machinery Group in the following 10 languages.

Training languages: English, French, Spanish, Portuguese, Russian, Chinese, Thai, Indonesian, Malaysian, Tamil

The implementation status of CIP in FY2022 is as follows for the entire Hitachi Construction Machinery Group.

Compliance Instruction Program participants total: 20,447

Engaging with Environmental Compliance

The Hitachi Construction Machinery Group gives consideration to the impact of business activities on the environment, and endeavors to ensure environmental management by establishing voluntary management standards that are more stringent than laws, regulations and local ordinances. We periodically and continually measure metrics such as water quality and noise at each business location, and conduct management to reduce environmental risk. Furthermore, we are engaged in prevention of recurrences and strengthening of management by sharing information on environmental laws and regulations along with examples of violations within the group.

In addition, we identify environmental risks in the supply chain, and are strengthening management of environmental compliance on overall CSR efforts to eliminate and minimize such risks.

In FY2022, five violations of laws and regulations occurred. All permanent measures have been completed, and there were no fines, penalties, or administrative sanctions. In addition, there were three complaints about noise, but we have completed measures for all of them. We will continue to strengthen environmental management to prevent recurrence and control such issues.