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

We will comply with all relevant laws and regulations when conducting procurement operations.
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

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.
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

We will build partnerships with suppliers based on mutual understanding and trust, and pursue mutual sustainable growth.

Protection of information

We will protect supplier-related information obtained in the course of our operations, and strive to prevent any information leakage.

Concern for the environment

We will promote the procurement of eco-friendly goods and materials.

Basic criteria for selecting suppliers

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.
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.
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 Guidelines

The Nippon Kayaku Group perceives Responsible Procurement as a key issue for the entire supply chain. As our suppliers are important partners who support our corporate value creation, we have formulated and expanded guidelines for them based on our Charter of Conduct and Code of Conduct, Human Rights Policy and Basic Purchasing Policy. These guidelines clarify what we expect from our suppliers in terms of respect for human rights, environmental considerations and regulatory compliance, and must be observed not only by primary suppliers but across the entire supply chain. Such an initiative has helped reduce risk and increase sustainable purchasing, while feeding in to longer-term corporate value improvements.

Sustainable Procurement Guidelines

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

Under the direction of the Sustainable Management Meeting, the Nippon Kayaku Group is advancing sustainable procurement activities in line with its Purchasing Philosophy, Basic Purchasing Policy and Responsible Mineral Procurement Policy. Our Corporate Planning Division delivers cross-cutting coordination and management across the entire supply chain, gathering and analyzing information on distribution and materials, and monitoring purchasing situations. We are also promoting autonomous management of raw material purchasing functions by each business department, according to their respective characteristics, as well as procurement activities which make the most of expertise. By enabling maximization of expertise and improved work efficiency, our system strengthens coordination and efficiency from an overall optimization perspective.

Targets and Results

Indicators and targets

Scroll sideways for an overview of the table below.

Indicator	FY2028 Target	FY2035 Target	Scope
Sustainability Survey Response Rate	90% or higher	90% or higher	Consolidated
Establishment of a Supplier Human Rights Due Diligence Framework	Establish a risk assessment and management framework	Risks identified and addressed through a Human Rights Due Diligence System across all domestic and overseas sites.	Consolidated
Procurement Rate of Raw Materials Sourced with Environmental and Human Rights Considerations	Establish a risk assessment and management framework	100%	Consolidated
Monitoring of Supplier Occupational Accidents and Safety Training	Establish a risk assessment and management framework	0 occupational accidents 100% safety training implementation rate	Consolidated
Tier 1 Supplier Safety Training Completion Rate	Establish a risk assessment and management framework	100%	Consolidated

FY2025 Sustainability Targets and Results

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 Guideline initiatives	Whenever a new supplier registers Also set up according to need
Supplier Audit	Conducting paper or field audits of supplier manufacturing bases (quality-centered 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, copper, natural graphite, lithium, nickel) 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 Surveys

Nippon Kayaku has conducted a Sustainable Procurement Survey on its suppliers in order to confirm the status of environmental and social initiatives. FY2025 saw us conduct a Sustainable Procurement Survey on our 21 new suppliers for that financial year in line with the contents of our Sustainable Procurement Guidebook. Agreement was obtained from 20 companies (95%). The survey also enabled us to confirm that 21 company respondents (100%) 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 FY2025

	Number of Suppliers	Response Rate	Consenting Rate
FY 2025	21 companies	100%	95%

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 harassment, 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 responsibility, 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 cyberattacks, 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. FY2025 saw us conduct audits upon 74 of our suppliers. Although confirmation of audit results for the 70 responding suppliers led to certain requests for feedback and improvements, no serious violations were noted.
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. FY2025 saw 52 supplier companies undergo such an audit (13 onsite, 39 via document submission).

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

Our Safety Systems Group holds a Purchasing Briefing Session for suppliers on an annual basis, the latest of which was joined by some 60 companies. 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.

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 announced our own Partnership Building Declaration in 2023 and updated it in 2026.
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.

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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Policy and Basic Approach

Basic Procurement Principles

Basic Procurement Policies

Compliance with relevant laws, social norms, and the Nippon Kayaku Group Charter of Conduct

Open-door policy, fairness, impartiality, and transparency in business transactions

Partnerships with our business partners

Protection of information

Concern for the environment

Basic criteria for selecting suppliers

Policy on Responsible Mineral Procurement

Sustainable Procurement Guidelines

Animal Welfare

System

Targets and Results

Indicators and targets

Initiatives

Initiatives Chart

Risk Evaluation

Conducting Sustainable Procurement Surveys

Numbers of Evaluated Suppliers, Response Rates and Consent Rates for FY2025

Main Items on the Sustainable Procurement Survey

Audits of our Suppliers

Purchasing Division Members Education

Supplier Communication and Training

Purchasing Briefing Sessions

Business Continuity Planning (BCP): Procurement Initiatives

Participation in Initiatives

UN Global Compact: Supply Chain Subcommittee

Partnership-building Declaration

Compliance Hotline for Suppliers