Integrated ReportIntegrated 2020 Integrated Report SUMITOMO RUBBER GROUP 3-6-9, Wakinohama-cho, Chuo-ku, Certified by Minister of Kobe, Hyogo 651-0072, Japan the Environment Sumitomo Rubber Industries, Ltd. has been certified as an Eco-First company by Japan’s Minister http://www.srigroup.co.jp/english/ of the Environment. 2A・20・8・TI 広 26 Integrated Report 2020 The Sumitomo Rubber Group is committed to CONTENTS Section 1 achieving business growth and making contributions Overview of the Sumitomo Rubber Group The Sumitomo Rubber Group and the SRI WAY …………………… 3 to society by offering true value in our areas of The Growth Track ……………………………………………………… 5 business: tires, sports and industrial products. Financial and Non-Financial Highlights ……………………………… 7 Top Commitment ………………………………………………………… 9 Our New Midterm Plan ………………………………………………… 11 Value Creation Model …………………………………………………… 17 Risks and Opportunities ………………………………………………… 19 Value Chain ……………………………………………………………… 21 Tire Business Business Overview ……………………………………………………… 23 Key Management Resources ………………………………………… 29 Corporate Governance ………………………………………………… 35 Section 2 CSR Activities of the Sumitomo Rubber Group CSR Efforts ……………………………………………………………… 43 Fiscal 2019 Targets and Results ……………………………………… 45 Identifying Materiality and Dialogue with Stakeholders …………… 47 Green (Green initiative ) ………………………………………………… 49 Ecology (Ecological process) …………………………………………… 51 Next (Next-generation product development) ………………………… 55 Kindness (Kindness to employees) …………………………………… 57 Integrity (Integrity for stakeholders) …………………………………… 59 Honors and Certifications from Outside Organizations ……………… 61 Section 3 Corporate Data Financial Section ………………………………………………………… 63 Independent Verification Report/Third-Party Comments …………… 67 Industrial and Global Network ………………………………………………………… 69 Sports Business Investor Information …………………………………………………… 70 Other Products The purpose of this report is to generate new opportunities for dialogue with a wide range of stakeholders, by conveying the initiatives we are undertaking to accomplish sustainable growth for the Sumitomo Rubber Group. Editorial Policy Business In 2020, we worked to achieve even more extensive disclosure of information. Information on general efforts by the Company and more detailed information on activities not included in this report can be obtained from the Company’s website. Companies This includes information primarily on Sumitomo Rubber Industries, Ltd. and its six Covered by the factories in Japan but also on some bases and group companies in Japan and The Sumitomo Rubber Group is pulling together in Report overseas. • “Guidance for Collaborative Value Creation” published efforts to fulfill all sorts of social responsibilities and at by the Ministry of Economy, Trade and Industry Referenced • The International <IR> Framework published by the the same time contribute to the creation of a sustainable Guidelines International Integrated Reporting Council (IIRC) • “Sustainability Reporting Standards” published by the Global Reporting Initiative (GRI) society with our future-oriented high technical skills and • “Environmental Reporting Guidelines 2018” published by the Ministry of the Environment research and development capabilities and continue to Period of the Fiscal 2019 (January 1, 2019 to December 31, 2019), with some information from Report outside of this period be truly valuable for people, communities and society. Publishing Date May 2020 Third-Party Comments from an expert are included in order to adopt an objective perspective Comments on the report. (See page 68.) 1 Integrated Report 2020 Integrated Report 2020 2 The Sumitomo Rubber Group and the SRI WAY Contributing extensively to our The SRI Way The Corporate Mission of the Sumitomo Rubber Group communities and to society as a reliable and In order to fulfill our various responsibilities to society as an upstanding corporate citizen, we at the Sumitomo Rubber Group will continuously strive to be a reliable and trusted global corporate group that enriches people’s trusted global corporate group. lives through the creation of new value while at the same time pursuing greater happiness for all of our group employees and contributing At the Sumitomo Rubber Group, the SRI WAY serves as the bedrock for our efforts to fulfill our Corporate Mission. extensively to both our communities and to society as a whole. Founded on the longstanding Sumitomo Business Spirit, the SRI WAY comprises key Values and Action Principles for Key Values Action Principles • Customer First • Genchi-Genbutsu employees to practice in their day-to-day work toward fulfilling our Corporate Mission and achieving our Corporate Vision. Integrity & Soundness • Scientific Approach • Continuous Improvement The four key Values enshrined in the SRI WAY-“Integrity & Soundness,” “Communication,” “Setting the Bar Higher” and • Take an Interest in Others & Get to Know Each Other “Cultivating People”-are intended to answer the fundamental question of “What is important to us?” Communication • Face-to-Face Communication Meanwhile, by clearly defining our basic attitudes in keeping with our key Values, the Action Principles set forth in the SRI • Report, Liaise & Consult at All Levels • Constant Problem Awareness WAY are intended to answer the essential question of “How should we act?” Setting the Bar Higher • Set Benchmarks for Better Results The SRI WAY is founded upon the Sumitomo Business Spirit, the key business principles that have been passed down • Teach/Learn by Doing Cultivating People through generations over the 400-year history of Sumitomo. • Achieve Results through Teamwork Sumitomo Rubber Group CSR The Origins of the Sumitomo Business Spirit CSR Activity Basic Philosophy Masatomo Sumitomo, the founder of the Sumitomo Group, left behind writings known as “Monjuin Shiigaki” (“The Founder’s Precepts”), which provide a set of principles and Through our GENKI Activities for the environment and for society, the guidelines for merchants to abide by. His teachings have supported the business operations of the Sumitomo Group throughout Sumitomo Rubber Group aims to contribute to the realization of a sustainable its 400-year history, passed down from generation to society while remaining a corporate group that has earned and continues to generation in the form of the “Sumitomo Business Spirit,” maintain the trust of society at large. whose essence was more recently condensed into the The Sumitomo modern “Business Principles” of the Sumitomo Group. Containing such principles as, “The business activities of Business Spirit * GENKI stands for the five basic categories of our CSR activities: "Green" (Green CSR Guidelines initiative), "Ecology" (Ecological process), "Next" (Next-generation product Sumitomo must benefit not only Sumitomo, but must also · Integrity and Soundness development), "Kindness" (Kindness to employees) and "Integrity" (Integrity for be of benefit to the nation and to society as a whole,” the stakeholders). The word "genki" also means "energetic" in Japanese. Sumitomo Business Spirit reflects Sumitomo’s strong · A Company Is Its People sense of duty to society. To this day, the Sumitomo · Esteem for Technology Business Spirit still forms the basis for the Sumitomo Rubber Group’s own Corporate Mission. · Mutual Prosperity Monjuin Shiigaki* (Circa 1650) Business Principles* (Enacted 1928) * Sumitomo Historical Archives 3 Integrated Report 2020 Integrated Report 2020 4 The Growth Track Fiscal 2019 Sales Revenue ¥893.3 billion For more than 110 years since the founding of Business Profit* ¥53.9 billion the Company, we have leveraged our proprietary * Business profit = Sales revenue - (Cost of sales + Selling, general and administrative expenses) rubber technology as a tire maker to expand our field of business into sports and industrial products, and helping to achieve a sustainable society. Sales Revenue / Net Sales ■ JGAAP ■ IFRS Net Sales ¥114.0 billion Operating income ¥7.2 billion Great Hanshin Asian Bankruptcy Great East Established Bursting of the Awaji financial of Lehman Japan 1909 Plaza Accord bubble economy Earthquake crisis Brothers Earthquake 1900 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1981 1998 2003 2012 2015 ▶ ‌Newly developed “Digi-Tyre” ▶ ‌Merged with The Ohtsu Tire & ▶ ‌Released “MIRAIE” Vibration Control ▶ ‌Completed the New Materials ▶ Full business tie-up 1888 ‌ using digital rolling simulation Rubber Co., Ltd. Units for Detached Housing. Development Technology “ADVANCED with The Ohtsu Tire & ▶ J.B. Dunlop technology. 4D NANO DESIGN” Rubber Co., Ltd. ▶ ‌Spun off sports business. commercialized the world’s first pneumatic tire. 2017 1999 ▶ ‌Announced the “SMART TYRE ▶ ‌Formed alliance in the tire CONCEPT” for tire technology J.B. Dunlop The world’s first pneumatic tire 1983 business with The Goodyear Tire development & Rubber Company in the USA. ▶ Acquired European tire business from the ‌ 2013 ENASAVE 100 British Dunlop Rubber Company 2018 1954 2007 ▶ ‌Released “ENASAVE 100,” a 1909 1984 100% fossil resource-free tire. ▶ ‌Integrated Sumitomo Rubber Group's ▶ ‌Developed Japan’s first tubeless tire. ▶ ‌Acquired Cleveland Golf. ▶ ‌Commenced operation ▶ ‌Acquired six plants in the U.K., Germany and sports business. of the Kobe Factory. 2000 France as well as Dunlop Tyre Technical Division ▶ Celebrated 130th anniversary