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Environmental and Social Considerations in the Supply Chain

Policy and Basic Approach

To ensure that our purchasing activities conform to sustainable management practices, the Nippon Kayaku Group has fixed its Purchasing Principles and Basic Purchasing Policy. By utilizing these can we join forces with our suppliers to work towards realizing a sustainable society.

Basic Procurement Principles

In order to realize the KAYAKU spirit, Nippon Kayaku Group will pursue mutual and sustainable growth with suppliers based on the understanding they are important suppliers who help us produce products of the best quality. We will strive to conduct procurement transactions that are fair, honest, impartial, and in accordance with relevant laws, social norms, and our Basic Procurement Policies.

Basic Procurement Policies

Compliance with relevant laws, social norms, and the Nippon Kayaku Group Charter of Conduct
  1. We will comply with all relevant laws and regulations when conducting procurement operations.
  2. We will judge the propriety of procurement activities based on Nippon Kayaku Group Charter of Conduct and the Nippon Kayaku Group Code of Conduct.
Open-door policy, fairness, impartiality, and transparency in business transactions
  1. We will conduct procurement-related business transactions in a fair, impartial, and transparent manner, and follow an open-door policy with respect to businesses at home and abroad.
  2. In order to ensure transparency in all our procurement activities, we will undertake due procedures based on written documentation or electronic purchasing systems in accordance with the procurement operations standards.
Partnerships with our business partners
  1. We will build partnerships with suppliers based on mutual understanding and trust, and pursue mutual sustainable growth.
Protection of information
  1. We will protect supplier-related information obtained in the course of our operations, and strive to prevent any information leakage.
Concern for the environment
  1. We will promote the procurement of eco-friendly goods and materials.
Basic criteria for selecting suppliers
  1. When selecting goods and materials, we will give due consideration to economic factors such as quality, price, and date of delivery. We will also consider other factors such as the supplier’s operating foundations, technological competitiveness, and stability of supply.
  2. When selecting suppliers, we will give due consideration to their commitment to realization of a sustainable society, including their observance of relevant laws and regulations, respect for human rights, concern for the working environment, disaster preparedness and safety measures, efforts toward environmental conservation, and other efforts designed to fulfill their Sustainable.
  3. In addition to the above, we will give due consideration to whether or not the potential supplier has a risk management system such as BCP (Business Continuity Plan).

Policy on Responsible Mineral Procurement

We are deeply concerned that the profits gained from mineral mining or trading in conflict zones and high-risk territories*1 (henceforth referred to as “highlighted regions”) can become a sizable source of funding for human rights violations such as conflict, child labor and forced labor, risks such as environmental destruction and corruption, and organizations involved in dishonest practices.
In order for us to establish a Responsible Supply Chain, we are using the RMI’s*2 CMRT and EMRT*3 in our efforts to procure minerals with no connection to either conflict or inhumane practices. Furthermore, we make zero use of minerals from the highlighted regions (henceforth referred to as “conflict minerals”) nor any materials containing them. In the unlikely event that use of conflict materials comes to light, we respond with immediate corrective measures. We have gained supplier agreement for this particular policy, and request supplier cooperation in ensuring that the raw materials used in Nippon Kayaku products contain no conflict minerals.

  • *1The EU’s conflict mineral regulations apply to the CAHRAs（Conflict-Affected and High-Risk Areas）
    reference list:https://www.cahraslist.net/cahras
  • *2RMI（Responsible Minerals Initiative）: The international organization taking the lead in responsible mineral procurement initiatives
  • *3CMRT、EMRT：Business survey forms for reporting places of origin for mineral resources and processing conditions within the supply chain.

Sustainable Procurement Guidebook

Our efforts towards realizing a sustainable society have seen us weave together our Nippon Kayaku Charter of Conduct and Code of Conduct, our Purchasing Principles, our Basic Purchasing Policy and our Responsible Mineral Procurement Policy into a Sustainable Purchasing Guidebook, and promote affirmation of such guidelines from a large number of suppliers.

Sustainable Procurement Guidebook

Animal Welfare

The Nippon Kayaku Group’s Sustainable Procurement Guidebook stipulates that consideration must be shown for animal welfare in such matters as animal testing.
（Sustainable Procurement Guidelines Code of Conduct excerpt）to
1.11 Animal Welfare
We will consider animal welfare and handle animals subjected to testing with care, minimizing any distress and stress caused. We will also respect the 3Rs of Replacement, Reduction and Refinement, and strive to set up appropriate animal tests that show consideration for animal care.

System

On the instructions of its Sustainable Management Meeting, Nippon Kayaku is accelerating its sustainable purchasing activities in line with its Purchasing Principles, Basic Purchasing Policy, and Responsible Mineral Procurement Policy.

Targets and Results

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Key sustainability issues Corresponding SDGs Action plans Indicators（KPI） FY2025 Targets Results FY2024 Initiative-related Topics
FY2023 FY2024
Environmental and Social Considerations in the Supply Chain DECENT WORK AND ECONOMIC GROWTHRESPONSIBLE CONSUMPTION AND PRODUCTIONCLIMATE ACTIONPEACE, JUSTICE AND STRONG INSTITUTIONS
  • Practice supply chain management with consideration for environmental and social aspects, based on the Sustainable Procurement Guidelines
Response rate for confirmation of consent to Sustainable Procurement Guidelines (Non-consolidated) 90% (Non-consolidated) 91% (Non-consolidated) 91%
  • FY2024 saw us survey 530 companies from which we had procured raw materials in FY2023, as well as 23 new suppliers from FY2024 based on Sustainable Procurement Guidebook contents. We received responses from 502 companies
  • As no Sustainable Procurement Survey responses revealed suppliers to be causing harm to either human rights or the environment, it was deemed unnecessary to submit an Improvement Request form
Formulation and implementation of improvement plans using questionnaires to suppliers (Non-consolidated) Progress disclosed Published in Topics Published in Topics

Initiatives

With consideration given to respect for human rights, environmental conservation, worker safety and health, legal compliance, and fair trading, we are teaming up with our suppliers to promote sustainable procurement across the entire supply chain, spanning R&D, raw material procurement, manufacturing, selling and distribution.

Initiatives Chart

Principal Activities Activity Details Assessment Frequency
Sustainable Procurement Survey Sending Sustainable Procurement Questionnaires to our main domestic suppliers so as to confirm the status of Nippon Kayaku Group Sustainable Procurement Guidebook initiatives Whenever a new supplier registers
Also set up according to need
Supplier Audit Conducting paper or field audits of supplier manufacturing bases (quality-centred supplier audits) Yearly
BCP Procurement
  • Working towards gathering information on supply chain hazards and accidents, and sharing such information on internal company databases
  • Strengthening moves towards multiple procurement
  • As appropriate, whenever hazards or accidents occur
  • Quarterly status confirmations
Responsible Mineral Procurement Conducting surveys on applicable minerals (gold, tantalum, tungsten, tin, cobalt, natural mica) using CMRT and EMRT provided by RMI Whenever a new supplier registers
Also set up according to need
Financial Evaluation Assessing new suppliers' finances based on information provided by external credit agencies Whenever a new supplier registers

Risk Evaluation

Conducting Sustainable Procurement Questionnaire Surveys

Nippon Kayaku has conducted a Sustainable Procurement Survey on its suppliers in order to confirm the status of environmental and social initiatives. FY2024 saw us survey 530 companies from which we had procured raw materials in FY2023, as well as 23 new suppliers from FY2024 based on Sustainable Procurement Guidebook contents. We received responses from 502 companies, constituting a response rate of 91%. The survey also enabled us to confirm that 507 company respondents (92%) were not causing negative environmental or social impacts with respect to human rights and worker safety and health. The future will see us continue our joint efforts with suppliers to aim for a sustainable society across the entire supply chain.

Numbers of Evaluated Suppliers, Response Rates and Consent Rates for FY2024
Number of Suppliers Response Rate Consenting Rate
FY 2024 553 companies 92% 91%
Main Items on the Sustainable Procurement Survey
Assessment Points Details
Human Rights & Labor Banning of forced labor and child labor, appropriate management of working hours, appropriate payment of wages, humane treatment of employees, eradication of discrimination and harrassment, freedom of association
Safety and Health Workplace safety, emergency preparedness, prevention of industrial hazards and sicknesses, industrial hygiene, due consideration given to physically-challenging labor, machine safety measures, provision of sanitation facilities/ food/dwellings, health and safety communication
Environment Environmental permissions and reports, efficient use of resources and waste management, anti-pollution and resource reduction, management of hazardous materials, solid waste management and reduction, exhaust gas pre-processing, restrictions on materials, water management, reduced energy consumption and greenhouse gas emissions, biodiversity conservation
Ethics Business integrity, eradication of unjustifiable profits, appropriate information disclosure, respect for intellectual property rights, fair business/fair advertising/fair competition, ID protection and prevention of retaliation, responsible mineral procurement, animal welfare, privacy protection
Management System Corporate commitments, managerial accountability and responsbility, legal and customer requirements, appropriate import and export management, risk evaluation and management, improvement objectives, training, communication, worker feedback/participation/complaints responses, audits and assessments, processes for corrective measures, creation and maintenance of a documenting and registration system, supplier responsibility
Product Quality and Safety Guaranteeing product safety, product quality management, provision of accurate product and service information
Information Security Defense against cyber attacks, protection of personal information, prevention of confidential information leaks
BCP Fixing a Business Continuity Plan

Audits of our Suppliers

The Nippon Kayaku Group conducts annual audits of suppliers with the aim of promoting and properly achieving sustainable procurement. These audits see the manager of every Nippon Kayaku plant check and assess their suppliers against various management criteria with respect to plant facilities, processes, health and safety, production and more. We conducted 85 supplier audits in FY2024. Having confirmed information and points of concern in relation to these audits, we provided feedback and demanded improvements from the suppliers in question, but found no instances of serious violations.
Our Fine Chemicals Business Unit is referring to the RBA Code of Conduct when confirming the status of supplier initiatives in the five key areas of: Labor (Human Rights), Safety & Health, Environment, Ethics and Management Systems. FY2024 saw 54 supplier companies undergo such an audit (19 onsite, 35 via document submission).

Response to an RBA Audit

The Responsible Business Alliance (RBA) is a corporate alliance which promotes social responsibility within the global supply chain. The RBA Code of Conduct lays down the necessary standards for certifying that companies are providing safe supply chain working conditions, treating workers with dignity and respect, and showing consideration for the environment in their business activities.
January 2022 saw our Fukuyama Factory undergo a Third-Party RBA Audit. Happily, the factory was recognized for its appropriate management in the five survey areas of Labor, Safety & Health, Environment, Ethics and Management Systems, and duly gained a Silver Certification.
Since FY2023, we have conducted internal audits on an annual basis, and continue to maintain management practices based on the RBA Code of Conduct. February 2025 saw us conduct an audit based on the RBA Code of Conduct Version 8.0 and VAP Operation Manual Version 8.0.1, and duly confirm that RBA standards are being maintained.

Purchasing Division Members Education

Nippon Kayaku provides all members newly transferred to the Purchasing Division with induction training designed to give them a sufficient grounding in our Purchasing Principles, Basic Purchasing Policy, Responsible Mineral Procurement Policy, and Sustainable Procurement Guidelines. Furthermore, in order to guarantee robust supply chain management are we ploughing efforts into education and training sessions for Purchasing Division Members themed around Sustainable Procurement and Responsible Mineral Procurement. We are also promoting further knowledge-acquisition efforts from purchasing managers by buying them procurement qualification textbooks and supporting their efforts to study for CPP (Certified Procurement Professional) or CPSM (Certified Professional in Supply Management).

Supplier Communication and Training

We use briefing sessions, everyday communication and regular business conversations to enhance supplier understanding of our sustainable procurement drives, and periodically ask suppliers to sign pledges to comply with the terms and conditions of our Sustainable Procurement Guidebook. FY2024 has seen us issue every new supplier (raw materials manufacturer) with a copy of our Sustainable Procurement Guidebook, along with a relevant survey, whose results we have now collated in order to confirm the situation on the ground. From now on, we will continue working towards achieving a sustainable society with a supply chain that fulfils its social responsibilities, and towards becoming a familiar, much-loved presence in the eyes of our customers.

Purchasing Briefing Sessions

The Safety Systems Group holds a yearly Purchasing Briefing Session for its regular suppliers. Within the automotive industry supply chain, Nippon Kayaku must, in tandem with its suppliers, rapidly respond to an external environment filled with dizzying changes in domestic and international affairs, and exchange rate fluctuations, all while ensuring that customers suffer no delays and that high-quality low-cost products continue to be supplied. Our Purchasing Briefing Sessions see us cover the Group’s expected results, the business plan for the next financial year, production system status, development plans, medium-to-long-term visions, product quality policies and purchasing policies, with the aim of providing information which suppliers can feed into their own business plans. These sessions also allow us to hand out Outstanding Partner Company Awards to suppliers who are model examples in quality, cost and respecting of deadlines.
We will work to ensure that future briefing sessions continue to serve as valuable information-sharing outlets for our Group and its suppliers, and that beneficial information continues to be presented.

Purchasing Briefing Sessions

Business Continuity Planning (BCP): Procurement Initiatives

Nippon Kayaku regularly works to gather information on supply chain hazards and accidents, and immediately share such information through internal company databases. It also seeks to promptly pick up the charts of the raw materials procured from the relevant country of origin or manufacturer, and thereby confirm the impact on stocks, procurement, factory operation restarts and manufacturing. Although one BCP measure has seen us switch to purchasing many items from multiple suppliers, we still need to strengthen initiatives in order to respond to all manner of situations.

Participation in Initiatives

UN Global Compact: Supply Chain Subcommittee

Since 2022, the Nippon Kayaku Group has sat on the Supply Chain Subcommittee of the UN Global Compact. The knowledge and information gained from such meetings has been shared with our internal purchasing managers and used to update the survey questions we ask of suppliers.

Partnership-building Declaration

Nippon Kayaku has signed up to the Paving Our Future Partnership-Building Promotion Meeting, which counts among its members: the Chair of the Japan Federation of Economic Organizations, the Head of the Japan Chamber of Commerce and Industry, the Chair of the Pension Fund Association, and related ministers from the Cabinet Office, the Ministry of Economy, Trade and Industry, the Ministry of Labor, the Ministry of Agriculture, Forestry and Fisheries, and the Ministry of Land, Infrastructure, Transport and Tourism. We released our own Partnership-building Declaration in 2023.
This Declaration constitutes a vow to build fresh partnerships through links and prosperous coexistence with all suppliers and value-creation-seeking businesspersons within our supply chain. Participation in this Declaration will help us build the sustainable relations which allow us to prosperously coexist with suppliers.

Partnership-building Declaration
The Nippon Kayaku Partnership-building Declaration (Japanese)

Compliance Hotline for Suppliers

The Nippon Kayaku Group has also set up a Compliance Hotline for Suppliers for the reporting of law violations, available to every executive and employee working for our Group’s domestic suppliers. The Ethics Committee Staff Office (specifically, the Person in-charge of the Internal Control Management Division) serves as the reception desk for whistleblower reports and consultations. The system guarantees both confidentiality and anonymity, meaning that no report or consultation will result in blowback against the whistleblower.

Compliance Hotline for Suppliers
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