The Company, in terms of its organizational structure, has always strived to run an internal control system encompassing the Company and the Group through initiatives in such areas as compliance, internal audits, and risk management. Moreover, we have created the systems required under the Companies Act and the Ordinance for the Enforcement of the Companies Act by implementing measures aimed at ensuring the effectiveness of audits by Audit & Supervisory Board Members. We work to maintain and enhance the existing corporate structures by periodically reviewing and revising them in order to ensure appropriate execution of business.

We, based on the regulations established by the Board of Directors, have formulated the JT Group Compliance Policy, which summarizes the globally shared values and ethics of the JT Group, to ensure that Directors and employees act appropriately while complying with laws and regulations, the Articles of Incorporation, and social norms. It has also established business unit compliance codes of conduct for corporate and business divisions, and aligns them with the JT Group Compliance Policy while adapting them to their unique environments and characteristics to ensure thorough compliance. In order to realize the compliance management that should be aimed for, we have established the JT Group Compliance Committee, which consists of the President, Executive Vice Presidents, and external experts.

The JT Group Compliance Committee has been a deliberative body to oversee and promote compliance throughout the JT Group and to ensure accountability to the Board of Directors since FY2024. It consists of the President, Executive Vice Presidents and external experts, and is chaired by the President. In addition, an Executive Officer in charge of compliance has been appointed to oversee the Legal and Compliance Division, which is responsible for establishing and implementing a system across the JT Group and identifying problem areas. Furthermore, the divisional compliance committees established within corporate and business divisions autonomously deliberate compliance-related matters within their jurisdictions. The JT Group Compliance Committee, meanwhile, in addition to grasping and deliberating initiatives for the entire JT Group, strengthens ties with the Board of Directors through ample reporting to the Board. Through this framework, we strive for robust and enhanced JT Group compliance in terms of both supervision and promotion. In FY2024, two JT Group Compliance Committee meetings were held under the new compliance structure. The committee deliberated on initiatives to promote compliance and other matters, and reflected the results of the deliberations in the compliance practice plan for FY2025 to be formulated by each department.

The compliance promotion departments of the Company and its subsidiaries (namely, the Legal and Compliance Division in the Company, and corresponding departments in subsidiaries) distribute compliance codes of conduct for every department through their respective departments and organizations to drive awareness among the Directors and employees of the Company, as well as the Directors, employees and others of subsidiaries (hereinafter, collectively called “Directors and employees”). The compliance promotion departments also work on enhancing the effectiveness of compliance through awareness-raising activities by enlightening Directors and employees about compliance through training and other programs.

Compliance Action Plans

Compliance Action Plans formulated by each division include actions to maintain and enhance compliance programs, address priority compliance issues, conduct training and seminars, operate the internal reporting system and implement Compliance Promotion Month.

Compliance surveys

We annually conduct a Group-wide survey to check the status of compliance practices in our Japanese operations. In 2024, 96.3% of employees completed the survey. The results of the survey are reported to Directors and employees, and the relevant departments use these results to evaluate compliance initiatives and formulate and implement improvement measures.

Internal reporting system (whistle-blower system)

Group companies have set up hotlines for Directors and employees and other parties to report acts suspected of being legal/regulatory violations and other such concerns. Compliance promotion departments that receive a report or query via their hotlines investigate its details and then take action, including recurrence prevention measures, as needed. Additionally, we have set up another hotline apart from the one staffed by its Legal and Compliance Division. The second hotline is independent of organizational units involved in operational execution and staffed by Audit & Supervisory Board Members, who investigate the details of any reports or queries received via the hotline. JT then takes action, including recurrence prevention measures, as needed, and refers or reports serious problems involving the JT Group to the divisional compliance committees and the JT Group Compliance Committee for further review as needed.

The JT Group has introduced enterprise risk management (ERM) for the entire Group in order to contribute to the Group’s sustainable profit growth and enhancement of corporate value over the medium to long term, and to strengthen the framework that enables transparent, fair, swift, and definitive decision-making within the Group. By identifying risks that may impact the Group and evaluating them in terms of both impact and likelihood, we select important risks to be addressed as a priority, formulate response plans, and conduct monitoring.

In promoting ERM, we have established a structure where the CEO serves as the responsible officer, and discussions are conducted with the Executive Vice Presidents and the Executive Officer in charge of ERM (Senior Vice President in charge of corporate governance) appointed by the CEO. ERM is also implemented in each business with the division heads of the tobacco, pharmaceutical, and processed food businesses taking responsibility, and the details are reported to the Executive Officer in charge of ERM. The inclusion of the Executive Officer in charge of ERM, who oversees the risk status of the business, in discussions enables the identification of important risks across the Group. These important risks identified through discussions involving the CEO, Executive Vice Presidents, and the Executive Officer in charge of ERM are addressed under the responsibility of the response managers designated by the CEO (each business division head and the Executive Officer in charge of corporate), who formulate response plans and conduct monitoring, and the results are reported to the CEO, Executive Vice Presidents, and the Executive Officer in charge of ERM. The status of these initiatives is reported to the Board of Directors at least once a year. By appropriately managing risks, the Group is able to appropriately seize opportunities for business growth and strategic business development.

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Please see Risk factors for more details on risks facing the JT Group.

We have established information security regulations to clearly demonstrate our commitment to information security and comprehensively promote information security measures on an ongoing basis. Specifically, we have adopted the JT Group IT Governance Policy and JT Group Information Security Standards and mandated and implemented the required IT risk mitigation measures, including access restrictions, antivirus defenses, education, audits, and monitoring. We strive to manage and safeguard our IT systems, data and other information assets in an appropriate manner. We are continuously pursuing initiatives to strengthen our information security with respect to both hardware and software. Hardware-wise, we continually test and improve our key IT systems’ security-related technologies and operations, including requests to suppliers. Software-wise, we conduct security-related educational activities globally to promote proper handling of information assets by all employees. In 2024, 94% of all JT Group company employees attended security training programs. Additionally, we extended a single information classification and protection solution across all our business divisions and established a unified approach to security operations across the JT Group. We are also conducting educational activities across the entire JT Group, having rolled out our internally developed i-SECURE program. The i-SECURE program’s effectiveness is constantly being measured by employee behavior metrics. It has been instrumental in raising awareness of information security among employees.

Our Internal Audit Division conducts internal audits from an objective standpoint independent of organizational units involved in operational execution and reports directly to the CEO. It maintains company property and strives to enhance the efficiency of management through its examination and assessment of controlling/operating systems which relate to all business activities as well as the status of business execution from the perspectives of legality and rationality. To fulfill its responsibilities, it has unrestricted authority to observe all activities, inspect all records and question all personnel on a Group-wide basis.

The Division formulates annual internal audit plans subject to the CEO’s approval. Its head mandatorily reports internal audit results to the CEO, reports to the Board of Directors annually, and may freely and regularly confer with the CEO and our subsidiaries’ senior-most executives about internal audit findings, internal control statuses and risk assessments.

Our subsidiaries may set up internal auditing organizations at their own discretion. Those that have done so include major subsidiaries JTI, TS Network and TableMark. Subsidiaries’ internal audit plans are approved by, and their audit results reported to, their respective presidents or the Board of Directors. JT’s Internal Audit Division coordinates internal audits with subsidiaries’ internal auditing organizations. Subsidiaries’ annual internal audit plans and their internal audit results are reported to the Group CEO and our Board of Directors through our Internal Audit Division. To increase the efficiency and effectiveness of internal audits, we periodically hold meetings to improve audit quality through information sharing among internal auditing staff across the Group. We also conduct joint audits with and provide auditing assistance to subsidiaries as necessary.

We aim for the Group’s sustainable profit growth and increasing corporate value over the medium to long term by pursuing the 4S model, our management principle, and sharing the JT Group Purpose on a Group-wide basis. Based on our belief that better corporate governance contributes to achieving the aforementioned goals, we strive to optimize the Group structure by defining functions and regulations shared in the Group and managing the Group as a whole. In addition, we coordinate compliance (including an internal reporting system), internal auditing, assurance of reliability of financial reporting and more with our subsidiaries and maintain these activities.