Promoting CSR procurement and the diversification of supply sources

Policy

The Group will build a supply chain to conduct fair procurement and to consider the environment.

Awareness of Issues

Environment issues and human rights infringement by raw material suppliers are important management risks. We have been working on CSR procurement more than ever before, and we check the fairness of our suppliers' activities based on our CSR Procurement Guidelines.

We also recognize that the stable procurement of high-quality raw materials at reasonable prices leads to stable production and high-quality products.

Approach to CSR Procurement

The Shin-Etsu Group is working on CSR procurement, and we have created the Basic Procurement Policy, which serves as the basis for the CSR procurement, and have made it known throughout the Group and posted on our website. We ask suppliers to understand the "Basic Procurement Policy" and to incorporate the content of the policy into their supply contracts. To let suppliers better understand the policy, we created the CSR Procurement Guidelines, which is posted on the website. We held meetings to explain the guidelines to suppliers in July 2017 and January 2018, asking suppliers for their understanding and cooperation in promoting CSR. In FY 2022, we also sent the “Basic Procurement Policy” and “CSR Procurement Guidelines” to business partners of our group companies to familiarize them with our group's approach to CSR procurement.

In January 2018, we established the Supplier Hotline to ensure the transparency and fairness of transactions between the Group and suppliers. Business partners of the Group can report by e-mail.

Shin-Etsu Group's Basic Procurement Policy

1. Legal compliance

As the most important of its management objectives, the Company conducts all of its business activities in a law-abiding spirit. Each and every staff member is made fully aware of corporate social responsibilities and they carry out their business activities in strict conformity with the law, business ethics and the various rules and regulations of the Company. In its purchase and procurement activities, the Company acts in good faith and in a fair manner, and does not practice favoritism, nor make improper demands.

In addition, based on mutual trust, not only between the Company and the suppliers that the Company directly procures from, but also with vendors in the linked supply chain, all those companies involved carry out their business activities in strict accordance with the principal labor standards of International Labor Organization (ILO), any laws and regulations related to protection of the environment and business transactions including those of small- and medium-size enterprises.

2. Promotion of corporate social responsibility

The Company places primary importance on corporate social responsibility (CSR) activities.. For the promotion of CSR, the cooperation of all the Company’s suppliers is essential, and we ask you to comply with the Company’s policies in the areas listed below. At the same time, we will strive to maintain mutual trust and close, friendly relationships.

  1. Strive to strengthen and promote conformance with social norms, business ethics and laws.v
  2. Place first priority on assuring safety, protection against disasters and effective environmental preservation (Cooperate in "Green" environmentally friendly purchasing and procurement activities, and at the same time, each person should have a consciousness of the importance of these issues.
  3. Conduct risk management activities such as paying attention for accurate and fair disclosure of information on assuring the delivery of safe and reliable products and taking speedy measures to deal with various contingencies.
  4. Respect for human rights and promote anti-discriminatory practice. Comply with the labor standards of the International Labor Organization (ILO) and prohibit unfair labor practices.
  5. Protect against the disclosure of classified information, personal confidentiality and respect the rights of the third party’s intellectual property.
  6. Pay attention to biodiversity preservation.
  7. Avoid the purchase of Minerals that are clearly involved in conflicts and human rights infringement in conflict-affected and high-risk areas(CHAHRA).

3. Supplier selection

The Company follows an open-door policy regarding its purchasing activities and globally seeks suppliers based on open, fair, impartial and equal-opportunity principles. The company selects suppliers in a rational and comprehensive manner, taking into consideration the following core considerations: 1. Globally competitive in product quality, price, delivery time and supply stability 2. Objective standards such as suppliers’ management stability, reliability and technological superiority. 3. Matters as mentioned in “2. Promotion of corporate social responsibility” above

4. Development and review of the suppliers

The Company provides suppliers with the essential information necessary for transactions and also cooperates with suppliers’ VA and VE improvement activities as well as in activities related to the maintenance and improvement of product and service quality. The Company also routinely or as necessary promotes evaluation and review of suppliers’ performance.

*VA: Value Analysis, VE: Value Engineering
Method for developing high value new products satisfying customers and improving existing products

Initiatives toward CSR Procurement

Compliance with the Subcontract Act

Staff members in charge of purchasing and procurement attend seminars on the Subcontract Act to gain an understanding of it. We also conduct regular internal audits of subcontracting transactions to ensure full compliance with the Subcontract Act. In addition, we make sure that all subcontractors that are subject to the Subcontract Act are in full compliance by periodically checking the details of existing transactions and reports on new transactions. In October 2023, we conducted a self-inspection of our compliance with the Subcontract Act.

Announcing the "Declaration of Partnership Building"

We announced the "Declaration of Partnership Building" in December 2020, agreeing with its concept “Building the mutually beneficial relationships among entirety of the supply chain”. In particular, during a negotiation of the pricing of a deal, we agree to include the appropriate profits of suppliers in the pricing and make sure that we do not make unreasonable cost reduction requests.

Related information

Sustainable Procurement

In our "Basic Procurement Policy," the Group has declared our dedication to eliminating minerals from conflict-affected and high-risk areas (CAHRAs) that are clearly involved in conflicts and human rights infringement in all product procurement. We require our suppliers to comply with this policy and regularly trace relevant minerals including tin, tungsten, tantalum, and gold back to the smelter using the Conflict Minerals Reporting Template (CMRT) issued by the Responsible Minerals Initiative (RMI). In FY2020, we investigated 22 companies in 43 product categories. In the future, we will also consider complying with the Extended Minerals Reporting Template (EMRT), which adds cobalt and natural mica.

Furthermore, in February 2021 Shin-Etsu Chemical participated in the Roundtable on Sustainable Palm Oil (RSPO) and is promoting sustainable palm oil procurement through RSPO certification with the goal of preventing deforestation, preserving biodiversity, and addressing human rights and labor issues. The RSPO is a non-profit organization that promotes sustainable growth and use of palm oil by way of cooperation within the supply chain and open dialogue with interested parties. The Company agreed with the purpose and participated in the RSPO, and obtained mass balance certification in March 2023. We are currently assisting our affiliates in obtaining the certification.

Procurement Audit

By asking suppliers to complete a supplier CSR procurement questionnaire, we confirm whether they conduct business activities in accordance with the Group's "CSR Procurement Guidelines." Additionally, we visit suppliers in Japan and overseas whenever necessary to carry out audits.

Furthermore, seeking to improve Group governance, in 2023 we put in place materials management rules for Group companies, conducted internal audits on their compliance with the rules, and ascertained their compliance with the Subcontract Act.

Procurement Conferences

The Purchasing Department holds a company-wide meeting every six months with all purchasing department personnel to discuss material procurement. In this meeting, we do not only report material procurement, but we also train purchasing department personnel according to the "CSR Procurement Guidelines," check the status of CSR procurement, and learn the latest examples of CSR procurement inside and outside the Company.

Control of Chemical Substances Used as Raw Materials

The Group checks the ISO 14001 acquisition status of business partners and considers prioritizing suppliers that have an ISO certification so as to purchase materials with smaller environmental impact. When signing contracts on specifications for the supply of raw materials, we work to confirm the following:

  • Compliance with relevant laws and regulations regarding the use of chemical substances that affect the environment in products and packaging materials
  • Compliance with the RoHS Directive
  • Substance management using SDS or chemSHERPA

Initiatives of SE Tylose (Germany)

Investigating how to transition to sustainable wood pulp and other raw materials

In 2021, SE Tylose established a team to drive its sustainability strategy. The team includes members of different departments, including Environment and Safety, R&D, Human Resources, and Purchasing as well as the Site Manager. Since 2022, the team has been sending the Shin-Etsu Group's Basic Procurement Policy and CSR Procurement Guidelines to all suppliers and actively auditing the status of their compliance. In terms of purchasing activities, the team is investigating whether it is possible to change from fossil raw materials to sustainable raw materials over the next few years in order to achieve the targets of the European Union for 2030. In particular, for wood pulp, which is a major raw material, the team confirms that all of the plant's suppliers are processing pulp in a sustainable manner through certification. The team is also considering purchasing caustic soda made with green energy. Furthermore, the team is focusing on packing material, and has started several projects to partially replace virgin materials with recycled materials and is exploring ways to reuse them.