Supply Chain Management

Management Approach

Policy and approach

The Toyobo group is contributing to achieve the SDGs, which support the development of a sustainable society, throughout our entire supply chain by establishing an appropriate trading policy and conducting procurement and logistics responsibly.

To realize this, we have formulated CSR Procurement Guidelines that deal with matters such as legal compliance, fair trade, consideration for the environment, and respect for human rights (including the prohibition of child labor or forced labor and discrimination based on gender identity including LGBTQ), and Green Procurement Guidelines that are considerate of the environment. In September 2022, we revised the CSR Procurement Guidelines based on various recent global issues.

Additionally, based on the principle of “2. Fair business practices” in the TOYOBO Group Charter of Corporate Behavior, we practice fair competition and dealings, responsible procurements & logistics and, maintain sound relationships with society and stakeholders, including customers and business partners.

• CSR Procurement Guidelines

CSR procurement

We have formulated our CSR Procurement Guidelines and Green Procurement Guidelines with the aim of fulfilling our social responsibilities, such as ensuring legal compliance, product quality and safety and respect for human rights, and enhancing value throughout our entire supply chain through initiatives such as contributing to regional communities and environmental conservation. In addition to sharing these guidelines through our website, we carry out CSR procurement surveys for business partners requesting their understanding and cooperation in actively advancing initiatives.

• CSR Procurement Guidelines
• Green Procurement Guidelines

Targets and KPIs

< Targets >

Throughout its supply chain, the Toyobo group aims to realize procurement and logistics that involve fair and sincere transactions, respect human rights, are environmentally friendly, and consider impact on both society and the environment.

We will reduce CO₂ emissions by promoting green logistics, such as implementing a modal shift to rail and sea transportation and improving loading efficiency.

< KPIs and Results >

• CO₂ emissions per unit of transportation (in g-CO₂/t-km) represents the number of grams (g) of CO₂ emitted per tonne of goods transported over one kilometer.

Initiatives

CSR Procurement Survey

In the recent context of rapid globalization and the expansion of social issues to be solved, there is an even stronger demand for CSR activities and risk management, as "contribution to the building and development of a sustainable society" is a corporate social responsibility.

In this environment, it is imperative for us to promote procurement activities that place greater emphasis than ever before on CSR factors such as the natural environment and labor environment, and human rights, in addition to the conventional quality, performance, price, and delivery conditions, when procuring products, materials, raw materials, and other items.

Accordingly, we conduct a survey among our key business partners throughout the world, based on the CSR Procurement Guidelines. We evaluate the risks of our business partners regarding social issues through the survey, and familiarize them with the CSR Procurement Guidelines. This survey consists of items related to social issues such as safety, human rights, labor, compliance including anti-corruption such as bribery and embezzlement, and security. We ask the partners to fill out questionnaires, and through improvement activities based on the results of the self-assessment, we will advance "promotion of CSR procurement to enhance social sustainability" with both suppliers and buyers by giving consideration to social and environmental impacts and reducing risks.

We ask new business partners at the start of business and ask existing partners regularly to cooperate with the survey.

In fiscal 2022, the survey response rate from the primary suppliers was 93%. If any issues are in the surveys, we take corrective measures.

• Business partners occupying 90 percent of the whole procure amount

Results obtained in CSR procurement surveys in FY2022

CSR procurement surveys covers social issues such as the environment, safety, human rights, labor, and compliance (including prevention of bribery, embezzlement, and other forms of corruption), as well as information security. Through these surveys, we are able to evaluate suppliers' risk in relation to social issues. We collaborate with suppliers to address the issues identified through risk assessment, and we strive to enhance the overall level of CSR activities throughout the supply chain. When we begin doing business with a new supplier, we ask them to assist us by responding to a survey, and we also ask existing suppliers to collaborate on surveys. If issues are identified through a CSR procurement survey, we take corrective measures.

1. Survey overview

● Aggregation scope and no. of suppliers covered 185 suppliers representing 90% of overall transaction volume

● Breakdown of Suppliers

● Survey content
The survey was drawn up based on the Toyobo group's CSR Procurement Guidelines. The CSR Procurement Guidelines were compiled with reference to SDGs, the UN Global Compact, and the Charter of Corporate Behavior promoted by the Japan Business Federation (Keidanren).

● Survey items
Compliance and ethics / Supply chain management / Stakeholders / Risk management / Environmental activities / Human rights and working conditions / Promotion structure / Product safety

2. Aggregated results

The survey completion and return rate for tier-one suppliers was 93% (172 out of 185 companies).

3. Evaluation results

The survey results showed no compliance violations relating to matters such as the environment or product quality. With regard to supply chain management, an area where evaluation performance tended to be quite low overall, we asked each company to promote measures in this area, emphasizing its importance.

With respect to the five companies that were deemed to have relatively high risk (i.e., those companies ranked as C or D) based on the evaluation results, we undertook verification by engaging in dialogue with these companies. Through this process, we confirmed that two of the companies in question were actually implementing CSR measures without any significant problems. The remaining three companies had been unable to implement CSR measures properly because they did not have a CSR promotion structure in place. We provided them with support and guidance by introducing case studies of measures that we had taken, and we asked them to put in place the necessary systems and promote CSR.

• Secondary suppliers (115 suppliers) were also surveyed, but no suppliers were identified as being at high risk.

Fairness and transparency in trade

We take a rigorous approach to ensuring fairness and transparency, based on sound trading. We do not give or accept gifts or entertainment in order to secure unjust profit or preferential treatment from our business partners, and we have established a prior consent system to strengthen our checking system to ensure that actions that go beyond what is deemed socially acceptable do not occur.

Green procurement

In order to contribute to the creation of a sustainable society, we carry out procurement from suppliers who actively work to conserve the environment and procure materials that have low environmental impact on a priority basis. Additionally, we have formulated Green Procurement Guidelines with the aim of promoting environmentally friendly procurement. We ask our business partners to understand our green procurement approach and provide the following information regarding chemical content.

(1) That the material does not contain any of the prohibited substances specified by Toyobo.

(2) That the content of hazardous substances specified by Toyobo has been identified.

In fiscal 2022, we revised our “Chemical Content Information Sheet” based on the information sharing scheme “chemSHERPA^®”, developed by Japan's Ministry of Economy, and the 'Information Sheet on Chemical Substance Content' has been revised in accordance with amendments to laws and regulations, and the survey has been carried out among suppliers. For general purchased goods, we are promoting green purchasing with the use of environmental labels.

• "chemSHERPA^®" is a registered trademark of the Japan Environmental Management Association for Industry (JEMAI).

• Green Procurement Guidelines

Educational activities for sustainable procurement

As training, we have all personnel (100%) with responsibilities for procurement and logistics read through the TOYOBO Group Compliance Manual -including the CSR Procurement Guidelines—together on an annual basis. During these training activities, each Procurement and Logistics Department group manager ensures that relevant personnel are familiar with the CSR Procurement Guidelines.

We also guide and foster our procurement and logistics staff by setting "contribution to sustainable procurement (stable procurement)" as a target in their personnel performance evaluation and managing their progress.

In addition, we call for improvement proposals on sustainable procurement activities, etc., and award prizes for outstanding proposals.

Participation in initiatives

In January 2020, we joined the "Global Compact Network Japan", and since fiscal 2020, through participation in its supply chain subcommittee, we have been gathering information and applying it to our daily activities.

Resolving social issues in logistics

To resolve social issues in logistics, we are pushing forward with initiatives to reduce the environmental impact and reform the work style in logistics. To reduce our impact on the environment, we are shortening the transportation distance by using the ports closest to our business sites, implementing a modal shift, and improving loading efficiency. We are also sharing logistics and storage with other companies (including joint shipment, making use of returning trucks, securing joint storage space), and are encouraging the introduction of systems that enable visualization of the logistics situation.

Additionally, we formulated a voluntary action declaration in support of the “White Logistics Movement”* advocated by Japan's Ministry of Land, Infrastructure, Transport and Tourism, Ministry of Economy, Trade and Industry and Ministry of Agriculture, Forestry and Fisheries. We disclose our various initiatives, including “Logistics improvement proposals and cooperation,” “Utilization of pallets, etc.,” “Modal shift to sea and rail transport,” “Consideration of compliance with applicable legislation when selecting logistics operators,” and “Safety measures for freight handling.”

• A movement in which all the parties involved in logistics cooperate to propose and implement mutually beneficial improvements

Toyobo's Voluntary Action Declaration in Support of the “White Logistics Movement”

Response to natural disasters, etc.

In recent years, various areas have experienced significant damage from earthquakes, typhoons, and sudden localized rainstorms. We have gained knowledge in the process of responding to these events, and aim to realize even more stable procurement and logistics.

As part of our Business Continuity Plan (BCP), we strive to identify and manage risks throughout the supply chain. For procurement, we are looking to procure raw materials from multiple regions, and for logistics, we are establishing alternative transportation means and routes in collaboration with logistics operators.