Strengthening Governance

Internal control

In order to establish a structure to ensure operational integrity, NICIGAS has established the Internal Control System Committee (Chairperson: Representative Director, Chief Executive Officer), under which the Company has organized the Group Risk Management Committee (Chairperson: Executive Officer, General Manager, Legal Department), the Group Compliance Committee (Chairperson: Executive Officer, General Manager, Legal Department), the Information Disclosure Committee (Chairperson: Managing Executive Officer, Head of Corporate Headquarters), and the Internal Control Working Group (Chief Supervisor: Executive Officer, General Manager, Legal Department). The Internal Control Working Group is responsible for financial reporting and internal controls, conducting evaluations of each business process and executing entity-level controls. The Company appoints evaluation committees at each Group company, evaluates their respective business processes and proactively discusses improvements based on the evaluation results in coordination with the auditing firm.

We have established a system in which the Legal Department conducts initial assessments for matters requiring legal judgements and, when necessary, seeks guidance from external counsel, ensuring that a robust function contributes to our compliance-driven management.

Internal control system

We have established regulations that respect our stakeholders, such as the Code of Conduct for Nippon Gas Group Officers and Employees, the Basic Policy for Harassment Prevention Measures in the Workplace of the Nippon Gas Group, and the Multi-Stakeholder Policy, among other policies, stipulate respect for stakeholders. The Company also conducts internal compliance awareness surveys and harassment prevention training. In addition, the Company tries to interactively communicate with the stakeholders. As part of its internal reporting system, the Company has established internal and external consultation channels, as well as a contact point for Corporate Auditors, to enable early detection and prevention for cases of harassment, compliance violations, and other related matters. For contractors, we have established a consultation system (NICIGAS Hotline 110) to report issues such as violations of “Act on Preventing Delay in Payment to Small and Medium-Sized Entrusted Business Operators in Relation to Manufacturing Consignment”.

Content of Code of Conduct for Nippon Gas Group Officers and Employees (excerpt) 

• Respect for human rights, prohibition of discrimination (based on gender, age, nationality, race, physical condition, employment status, etc.) 
• Fair trading (no unreasonable requests) 
• Prohibition of corruption and bribery
• Prohibition of insider trading
• No relationships with antisocial forces 
• No harassment

Information Disclosure Committee

Information is disclosed in accordance with laws and stock exchange rules to ensure timely and fair information provision. In addition, we actively disclose non-financial information such as management strategies, capital policies, and ESG strategies that are deemed useful for our stakeholders. The Information Disclosure Committee decides on the significance, necessity, and means of disclosure.

Internal Control Working Group

The Company considers the appropriateness of financial reporting to be a fundamental responsibility, and the Internal Control Working Group oversees internal controls related to financial reporting and selects members to evaluate the maintenance and operation of company-wide controls and individual business processes. Consolidated subsidiaries also select evaluation committee members and discuss policies to improve operations and monitoring. The Internal Control Report under the Financial Instruments and Exchange Act is submitted to the Board of Directors, where the effectiveness of internal controls is evaluated and confirmed.

Internal reporting system

A Group Helpline has been established to prevent compliance violations and their recurrence. Reports are investigated by the Helpline Office, and if corrective actions are required, they are deliberated by the Compliance Committee and necessary measures are taken. Besides protecting the privacy of whistleblowers, the Company takes appropriate measures to prevent unfair treatment, such as dismissal, or deterioration of the work environment. The status of responses is regularly reported to the Board of Directors for discussion. Additionally, self-assessments are conducted to verify that the helpline is being operated appropriately in compliance with relevant laws. In FYE 03/26, there were no cases involving serious legal violations.

We have established NICIGAS Hotline 110 as a point of contact for contractors to report issues such as violations of “Act on Preventing Delay in Payment to Small and Medium-Sized Entrusted Business Operators in Relation to Manufacturing Consignment”. The objective of this hotline is the early detection, prevention, and correction of compliance violations in transactions with the Company’s business partners. NICIGAS strictly ensures the anonymity and confidentiality of whistleblowers and guarantees protection from any disadvantageous treatment. In FYE 03/26, there were no reports submitted to the hotline and no major incidents.

Group Helpline flow

NICIGAS Hotline 110

Risk management

Foundation of the Risk Management System for “Prevention” and “Mitigation”

NICIGAS has established a group-wide risk management system based on a two-pronged approach: “prevention (protection)”
and “mitigation (reactive).” The Risk Management Committee integrates the three functions of “oversight,” “protection,”
and “response,” serving as the central command for company-wide risk management, which includes handling crisis communications and external affairs.

 - Prevention
　　Risk prevention through routine monitoring, forecasting and protection
 - Mitigation 
　　Minimizing impact through the prompt detection, reporting and response to incidents

Shift from “reactive” to “proactive” risk management

The Company is dedicated to analyzing group wide risk events, shifting our approach from reactive to proactive (early detection and future foresight) risk management through the application of AI. We are currently building frameworks and implementing measures for “prevention (protection)” and “mitigation (reactive)”. This is driven by our evaluation of potential risks and likelihood of major accidents, which is based on the various risk event data, including accidents and near-misses.

Compliance

NICIGAS recognizes that practicing compliance is a fundamental requirement for earning the trust of society and ensuring the continued existence of the Nippon Gas Group. Therefore, to ensure that NICIGAS’ operations are conducted fairly and appropriately, and that the Company discharges its social responsibilities, we declared its commitment to promoting compliance in its management.

Initiatives to reduce traffic accidents

NICIGAS Group is strengthening its initiatives to reduce traffic accidents. To prevent accidents, the Company has introduced
AI-equipped dashboard cameras designed specifically for accident reduction, allowing for quick alerts regarding dangerous driving and thorough internal information sharing. In the event of an accident, the Compliance Committee rigorously deliberates, and inappropriate driving behavior is dealt with firmly. The Company committed to continuously raise awareness of safe driving across the Company by sharing actual accidents and near-miss incidents, aiming to further reduce accidents.

Compliance education

The Company conducts compliance education and training for group officers and all employees, including contract and part-time workers, to regularly communicate the importance of compliance, and display the basic policy and training materials on the Company's internal portal site. We organize and conduct comprehensive training and educational programs for our executives and employees across various scenarios. This includes foundational training essential for operations, as well as specialized training on workplace harassment prevention and customer harassment protocols.

An annual compliance awareness survey is conducted to identify issues that should be prioritized by the Company. Based on these findings, the Company implements appropriate promotional activities tailored to the environment surrounding the Group Company, the level of awareness among executives and employees, and broader social conditions. In addition, for the sales division, the legal division and the sales administrative division regularly hold compliance training programs for outsourcing companies. The Company strictly enforces compliance by incorporating interactive practical communication overseen by legal professionals, and passing a confirmation test is mandatory to engage in our sales activities. Furthermore, our contracts also allow for the immediate suspension or termination of business with outsourced sales partners who raise compliance concerns.

A legal Compliance training on the Special Commercial Code supervised by attorneys. This is held on a regular basis, where participants passing a confirmation test is mandatory after the training.

Compliance education