November 22, 2018
Hitachi Chemical Co., Ltd.
After it was revealed that inappropriate product testing, etc. had taken place regarding certain products manufactured by Hitachi Chemical Co., Ltd., the company established a special investigative committee comprised of external experts and other relevant parties, and conducted investigations to confirm the facts surrounding the case and determine the root causes.
On November 20 the company received an investigation report from the special investigative committee. Subsequently, at a meeting of the Board of Directors held on November 21, a resolution was passed to implement the measures to prevent recurrence detailed below.
Going forward, we will do our utmost to restore the trust placed in us by our stakeholders. In addition to steadily implementing the aforementioned countermeasures in order to prevent recurrence, we will also work to strengthen the Hitachi Chemical Group's governance and conduct a comprehensive reform of our quality assurance system.
The special investigative committee's investigation report broadly identified the following four root causes of the inappropriate testing, etc.:
Taking into account the above root causes and the special investigative committee’s recommendations with regard to preventing recurrence, the company drew up the measures to prevent recurrence detailed below, which it will steadily implement.
Senior management deeply regrets that the recent problems regarding inappropriate product testing, etc. were both widespread and long-lasting, and has reaffirmed that quality assurance is an important management issue. Accordingly, senior management will implement the measures below to restore the trust of customers and society at large.
In its Basic Management Policies, the Hitachi Chemical Group will acknowledge that its products and services contribute in a wide range of fields throughout society and will demonstrate its awareness of responsibility for quality assurance that also takes into account the users of end products. The group will clearly state its policies on specification-related agreements with customers and compliance with those agreements, as well as on maintaining sincere dealings with customers and sound relationships with them.
The company president will continuously communicate both internally and externally the message that the company prioritizes safety and compliance including quality assurance in all its business activities.
Senior management will maintain continuous dialogue with employees in order to take the initiative in changing attitudes within the company, particularly with regard to the importance of quality assurance.
Furthermore, heads of business sectors or works and presidents of group companies will use their day-to-day dialogue with employees repeatedly to make all employees aware of the importance of judging situations from a customer-oriented perspective and to establish this approach as the corporate culture.
In addition to revising its Basic Management Policies, the company will review the handbook for the Hitachi Chemical Group Codes of Conduct, which form the behavioral guidelines for all employees, revise the Five Compliance Rules of Hitachi Chemical and organize regular explanatory meetings to promote awareness and understanding. In conjunction with this, the company will conduct training sessions and continuous e-learning, supplementing the key topics covered in compliance training by adding personal awareness of responsibility for quality assurance, and specification-related agreements with customers, as well as compliance with those agreements.
The causes of the recent problems regarding inappropriate testing, etc. were not limited to product testing in quality assurance units, but were also found in product development, sales activities, and elsewhere. Accordingly, we will reinforce employees' awareness that specification-related agreements with customers are important contracts, targeting all units directly involved in customer specifications, etc.—quality assurance, marketing and sales, product development, and manufacturing. In conjunction with this, we will deliver professional training on topics including our responsibility to take the users of end products into account in assuring the quality of the company's products throughout the entire supply chain, and the importance of fulfilling contracts. At the same time, those charged with supervising quality assurance, etc. will seek to establish a quality-oriented approach and behavior in day-to-day operations.
We will also update the attitude survey currently administered to employees by adding a question on quality assurance as a means of monitoring progress made in changing attitudes among all employees.
Having recognized that turning a blind eye to violations of quality assurance-related rules led us to overlook serious violations of written specifications, etc., we will review our internal rules with the aim of strengthening and enforcing compliance with stating no tolerance in any offense against the rules, and ensure transparency in the application of these rules.
The Hitachi Chemical Group currently has a quality assurance unit in each of its four business headquarters—Advanced Performance Materials, Automotive Components, Energy Storage, and Life Science. These units perform quality assurance for each business headquarters as a whole, while all works and group companies have quality assurance departments that assure the quality of products manufactured at each individual site and guarantee conformity to customer specifications. However, this system is problematic in terms of control over quality assurance as a whole and the independence of quality assurance departments at individual works and group companies. To strengthen the quality assurance system's governance, we will implement the changes detailed below to the system as a matter of urgency.
We will appoint a CQO under the direct supervision of the company president to oversee all quality-related governance activities throughout the Hitachi Chemical Group. We will set up a new Quality Assurance Headquarters under the supervision of the CQO by integrating the CSR Quality Assurance Department and the quality assurance units in each of the four business headquarters. In conjunction, we will place the quality assurance departments in each works under the supervision of the newly established Quality Assurance Headquarters. The Quality Assurance Headquarters will also oversee each group company's quality assurance unit, establishing a quality assurance system for the Hitachi Chemical Group as a whole. Thus we will position units that are directly responsible for business results—marketing and sales, development, manufacturing, and business sectors—as the first line of defense in internal control. Meanwhile, we will position the Quality Assurance Headquarters and the quality assurance departments as the second line of defense, being organizations independent of the units directly responsible for business results.
The Quality Assurance Headquarters and the quality assurance departments at each works will be charged with the following tasks:The Role of the Quality Assurance Headquarters
To ensure compliance with specifications agreed with customers and enhance quality we will set up a Quality Committee chaired by the CQO made up of the heads of relevant units including marketing and sales, product development, manufacturing, and business sectors. We will also consider potential options for introducing a third-party perspective, such as bringing in a quality consultant.
For each works and group company, the Quality Committee will review quality management systems, compliance in meeting product specifications and managing “4M” changes, and key issues identified during quality risk assessment. This will enable it to optimize availability of resources including human resources and equipment in order to set and achieve quality targets. At the same time, the committee will review the quality-related items requiring remediation that the Quality Assurance Headquarters notifies to the relevant units including marketing and sales, product development, manufacturing, and business sectors. In this way it will ensure that proper responsibility is taken for quality assurance and enhance quality.
The Quality Committee will invest in resources including human resources and equipment for maintaining quality assurance and provide guidance on remedial action to the relevant units including marketing and sales, product development, manufacturing, and business sectors.
Many of the incidents that occurred during the recent inappropriate product testing, etc. could have been prevented if test data was automatically collected using automated systems for quality control and product assurance at each manufacturing site.
We will therefore launch a task force within the Quality Assurance Headquarters to develop an automated system that can automatically generate and manage test data appropriately with minimal human involvement and to install the system at each manufacturing site over time.
We will invest the necessary management resources, having recognized that our prior failure to allocate adequate management resources to quality assurance and other aspects of quality control was a factor contributing to the recent problems regarding inappropriate testing.
In specific terms, quality risk assessments and quality audits led by the Quality Assurance Headquarters will be employed to regularly identify quality assurance-related risks, including insufficient testing equipment and human resources. The risks identified will be reported to the Quality Committee. The Quality Committee will review these risks, deliberate on investment of the necessary management resources, and take steps to secure the management resources in question.
Our first line of defense for internal control is in marketing and sales, product development, manufacturing, and business sectors. In order to comply with product specifications agreed with customers, we will augment this first line of defense with the second and third lines of defense described below. In addition, we will enhance the efficacy of our internal whistle-blowing system.
The Quality Assurance Headquarters regularly audits the items below with regard to products developed and manufactured at each works and group company and reports the results to the Quality Committee.
The Auditing Office will audit the performance of duties by the Quality Assurance Headquarters, including its verification of the quality assurance process, from an independent, neutral standpoint.
The internal whistle-blowing system is already operated in such a way that it guarantees confidentiality and enables employees to report incidents directly to our compliance unit or to an external attorney. Currently, however, most reported incidents relate to harassment, and although many employees are aware of the system, they often misunderstand its purpose and how it is operated in practice, and do not make full use of it. Accordingly, we will enhance understanding among all employees by again explaining the purpose of the internal whistle-blowing system and the mechanism for protecting whistleblowers. We will also provide examples of cases in which whistleblowing resulted in improvements (e.g., to behavior that violated contracts, laws, etc.). In addition, senior management will address the efficacy of the internal whistle-blowing system to enhance the system's efficacy with the help of an external attorney. We will also improve training for supervisors to cultivate a corporate culture in which even negative information can be passed on as a matter of course.
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