Sustainability / Social Report Sustainable Procurement

In its purchasing activities, the Daicel Group carefully evaluates quality, pricing, and delivery dates while also considering social impact, in such areas as the environment, human rights, and the labor force. We have established our views on purchasing in the Basic Purchasing Policy and the Daicel Group CSR Purchasing Guidelines, and we seek compliance from our suppliers as we work together toward realizing a sustainable society in an effort that extends across the entire supply chain.

Basic Purchasing Policy

To achieve the goals of its Basic Philosophy, the Daicel Group adheres to its Conduct Policy and practices the following basic policies in its purchasing activities.

  1. 1Fairness and Rationality of Transactions
    • We shall be fair in providing prospective suppliers with opportunities for participating in business transactions. Also we shall conduct our purchasing activities in an open manner with no regard for previous dealings and with no preference for companies domiciled in Japan.
    • Our overall considerations shall be limited to matters of quality, price, stability of supply, state of technological development, environmental considerations, and the assurance of safety. We shall consider these aspects in a comprehensive manner.
  2. 2Legal Compliance and Confidentiality
    • We shall comply with laws and corporate ethics in our business operations.
    • We shall strictly protect confidential information obtained through business activities and shall never infringe on the intellectual property rights of third parties.
  3. 3Establishing Relationships of Trust
    • We shall strive to establish better partnerships with our suppliers in consideration of mutual benefit, trust, and good faith.
  4. 4Adherence to CSR Initiatives
    • We shall promote sustainable development with our suppliers through our activities for corporate social responsibility and value improvement

Established May 7, 2018

Daicel Group CSR Purchasing Guidelines

The Daicel Group has established the Daicel Group CSR Purchasing Guidelines in line with its Basic Purchasing Policy.
These guidelines forms the basis of purchasing transactions, and they are adhered to by the Daicel Group and its suppliers around the world in a proactive effort toward realizing a sustainable society that extends across the entire supply chain.
By FY2023/3, we had distributed Certificates of Confirmation to 768 of Daicel’s major suppliers (accounting for over 85% of total procurement) in order to confirm that they understood the content of the Daicel Group CSR Purchasing Guidelines, and we received signatures from 678 companies (a response rate of 88%).
Since FY2021/3, when we create a contract with new suppliers, we make it a rule to ask that they sign the Certificate of Confirmation as well, and 100% of them have done so.

Daicel Group CSR Purchasing Guidelines

  1. 1Compliance with laws, regulations, and social norms
    • In the course of business activities, we shall comply with laws, regulations, and social norms with regard to such matters as business transactions, labor management, environmental preservation, safe operations, and intellectual property, thereby living up to higher standards of corporate ethics and fair business conduct.
    • In addition to complying with laws and regulations enforced in the countries and regions where we operate, we shall respect the cultures and customs of those local communities.
    • We shall not provide or receive entertainment or gifts that could be deemed to exceed the scope of sound commercial practice and social norms.
  2. 2Respect for human rights and the working environment
    • We shall not condone forced labor, child labor, underpaid labor, or any other inhuman labor practices.
    • We shall eliminate discrimination within our workforce and strive to offer equal opportunities and realize the fair treatment of employees.
    • We shall prevent workplace harassment, bullying, and violence.
    • We shall respect the rights of our employees and, to this end, provide adequate wages while appropriately managing their working hours.
  3. 3Occupational health and safety
    • We shall prevent occupational accidents and diseases by offering a safe and sanitized working environment and paying close attention to the management of employee health.
    • We shall formulate emergency countermeasures by anticipating possible accidents and disasters with the aim of protecting employee safety.
  4. 4Environmental considerations
    • We shall strive to reduce the environmental impact of our operations by, for example, reducing resource and energy consumption in the course of production, packaging, and distribution and by curbing emissions of CO2 and industrial waste.
    • We shall pursue business operations that give due consideration to the protection of the global environment and the conservation of biodiversity.
  5. 5Sound business management
    • We shall strive to engage in sound and transparent business management and appropriately disclose corporate information with stakeholders with the aim of establishing sincere relationships based on a spirit of mutual interest, respect, and trust.
    • We shall not provide any benefit to antisocial forces while also strictly prohibiting the provision or receipt of undue gains attributable to such fraudulent activities as insider trading.
  6. 6The pursuit of product quality and safety as well as improvements in technologies
    • We shall strive to meet customers’ requirements with regard to product quality and safety in addition to providing accurate information about our products and services.
    • We shall strive to develop products and solutions through the pursuit of new technologies and better quality.
  7. 7Maintaining stable supplies and the flexibility to remain responsive to changes
    • We shall deliver our products on time and strive to maintain stable supplies.
    • We shall formulate business continuity plans to secure our preparedness for emergencies, including natural disasters and operational accidents.
  8. 8Information security
    • We shall put in place security measures to combat network threats with the aim of ensuring that none of our systems are damaged by such threats or exploited by hackers to harm the systems of others.
    • We shall appropriately protect the personal information we handle whether it pertains to customers, employees, or other third parties.
    • We shall maintain the appropriate management of confidential information we receive from customers or other third parties, and striving to prevent the leakage of such information.
  9. 9Contribution to communities and society
    • We shall develop collaborative relationships with local communities and strive to contribute to the development of society.
  10. 10Promotion of CSR initiatives in which all supply chain constituents play their roles
    • We shall proactively push ahead with CSR initiatives while also disclosing the status of such initiatives.
    • We shall ask our business partners to join our efforts to promote CSR with the aim of encouraging our entire supply chain to engage in CSR.
    • We shall engage in responsible purchasing practices and observing purchasing regulations that are in place to address social issues related to specific materials such as conflict minerals regulations.

Established June 2018

Our Structure for Promoting Sustainable Procurement

In FY2021/3, the Daicel Group launched a Procurement Subcommittee under the Sustainable Management Committee, chaired by the President and CEO, for promoting sustainable procurement with a sense of unity throughout the Group. The subcommittee comprises individuals charged with supervising procurement from the Raw Materials Purchasing Division and major Group companies, Corporate Sustainability, Investor Relations and Corporate Communications, each SBU and quality assurance department, and it meets periodically to engage in discussions encompassing the entire Group with regard to procurement operations that have been conducted by each business site or Group company in the past. The subcommittee met 13 times from FY2021/3 to FY2023/3.

During these meetings, the discussion are reported to the Sustainable Management Committee, which provides feedback on its own deliberations and debates and then reflects the results of the activities of the subcommittee.

  • Setting targets related to sustainable procurement to be addressed by the Group as a whole, in addition to verifying progress on issues and exchanging information
  • Discussing action on conflict minerals, palm oil, and human rights issues, and establishing targets and implementation plans, etc.

Sustainable Management System

Initiatives for Sustainable Procurement

Selection Process for New Suppliers

The Group has been conducting CSR procurement assessments since FY2021/3 when adopting new suppliers for the purchase of major raw materials and fuels.
In conducting the CSR assessment, we make use of a CSR assessment sheet which is a self-assessment questionnaire (SAQ) that we have created with reference to the questionnaire produced by the United Nations Global Compact Network, Japan. The questions include items concerned with supplier’s activities across a wide range of areas related to quality assurance and stable supply, corporate governance, human rights, health and safety, environmental measures, information security, and so on. We evaluate suppliers’ results comprehensively in line with the Group’s standards and make decisions about the possibility of doing business with them.

Communication with Current Suppliers

When purchasing raw materials, fuel, parts, and equipment the Daicel Group conducts quality audits of our current suppliers according to the content of the transaction. We work to make improvements for any supplier that falls short of our standards or that is deemed to be a high risk.

Addition of CSR Clauses to Basic Purchasing and Sales Contracts for Raw Materials, Fuel, Parts, and Equipment

Beginning in FY2023/3, the Raw Materials Purchasing Division, the organization within the Daicel Group that procures raw materials, fuel, parts, and equipment produced a CSR clause for basic purchasing and sales contracts. It asks suppliers to abide by Daicel’s Basic CSR Purchasing Guidelines. This CSR clause includes a wide range of items, including adherence to laws and social norms. The Raw Materials Purchasing Division is working to incorporate the CSR clause into all newly concluded purchasing and sales contracts and all such contracts that come up for renewal.

Self-Assessment-Questionnaire (SAQ) on CSR Procurement

To assess the sustainability initiatives of suppliers, the Daicel Group periodically conducts assessment using SAQ (CSR procurement assessment sheet). By providing assessments and offering feedback on their responses, we seek to raise awareness among suppliers and reduce environmental and social risks.
As for items concerning environmental measures, we check and evaluate suppliers’ progress on developing targets for reducing greenhouse gases.
Also, we conduct interviews with suppliers who may not meet the Daicel Group’s standards as a result of assessment, and we share the issues and work on initiatives for improvements.

Self-Assessment Questionnaire on CSR Procurement: Main Assessment Items

Self-Assessment Questionnaire on CSR Procurement: Main Assessment Items

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Assessment Item Details
Compliance with laws, regulations and social norms Establishment of management policies, legal compliance, establishment of whistleblowing system, and restrictions on offering gifts and entertainment
Respect for human rights and the working environment Prohibitions of discrimination, forced labor, child labor and inhumane treatment, while ensuring adequate pay and appropriate management of working hours
Occupational health and safety Occupational health and safety and management of workplace hygiene and responses to occupational injuries, illnesses and emergencies
Environmental considerations Prevention of environmental pollution, effective use of energy, reduction of greenhouse gases, reduction of waste, and initiatives on preserving biodiversity
Sound business management Information disclosure, elimination of inappropriate profit-taking, respect for intellectual property, and elimination of antisocial forces
The pursuit of product quality and safety as well as improvements in technologies Provision of information on products and services, quality assurance for products and services, and management of chemical substances
Stable supplies and the flexibility to remain responsive to changes Stable supplies, and BCP management
Information security Defensive measures against network threats and measures for preventing leakage of personal information and confidential information we receive from customers and third parties
Contributions to the community and society Contributing to the global community and local communities
Promotion of CSR initiatives in which all supply chain constituents play their roles Sustainable procurement of minerals and promotion of CSR initiatives

Survey Results and Initiatives for Improvement

In the end of FY2023/3, we conducted an SAQ targeting 768 major suppliers of the Daicel Group, accounting for over 85% of total procurement, and received responses from 678 companies, a response rate of 88%.
Based on the SAQ results, we conducted interviews with 73 of the 189 companies that we deemed to be in need of improvement and identified 161 issues. We identified a relatively large number of issues in the areas of stable supply and promotion of CSR initiatives, and worked with the relevant suppliers in FY2023/3 to make improvements in 82 cases.

Survey Issues of Major Raw Materials and Fuel Suppliers

Survey Issues of Major Raw Materials and Fuel Suppliers

*It shows the average scores for each issue.

Human Rights Due Diligence

Based on the “human rights due diligence” concept, we prepared a risk map and identified the priority areas to be addressed. In addition to that, we conducted assessments of 28 domestic suppliers in FY2023/3. In FY2024/3, we will engage in discussions with each company and provide support for making improvements.

We also plan to conduct assessments of overseas suppliers and consideration of this is underway.

Responsible Sourcing of Minerals

Profits gained from minerals commonly known as 3TG, which are mined in the Democratic Republic of Congo and neighboring countries, are being used to fund the activities of armed groups and anti-government organizations responsible for serious human rights violations. Under Section 1502 of the Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) enacted in January 2013, companies listed on U.S. stock exchanges are required to investigate and report on procurement status, particularly for tin, tantalum, tungsten, and gold (commonly known as 3TG). The Daicel Group is not listed on the U.S. stock exchange and is not required to report its activities, but throughout its supply chain, the Daicel Group will not, by any means, tolerate the procurement of the minerals which results in human rights violations or environmental destruction.
The Daicel Group considers such minerals to be an important issue, and in addition to the SAQ, we have conducted a conflict minerals reporting template (CMRT) survey that focuses on these minerals. In FY2023/3, we conducted a CMRT*1 survey of suppliers (a total of 39 companies) that handle items including 3TG out of the raw materials and parts we procured. As a result, we confirmed that there were no issues of concern (100% response rate). In addition, we used the EMRT*2 to survey suppliers of raw materials that include cobalt (a total of 24 companies), and we received a 100% response rate and found no problematic cases. We will continue to expand the minerals surveyed in order to meet the growing expectations of society.

  • *1Conflict Minerals Reporting Template. An international format for smooth collection of information on conflict minerals used throughout the supply chain.
  • *2Extended Minerals Reporting Template. A format that extends the target minerals from the CMRT. Included cobalt and natural mica as of June 2022.

Sustainable Procurement of Palm Oil Products

Progressive development of large-scale plantations of oil palms from which palm oil is extracted in Southeast Asia has led to the destruction of rain forests with a serious impact on the ecosystem and has therefore raised public concern. Recognizing the responsibility of a company that uses chemical products derived from palm oil as a raw material, the Daicel Group joined the RSPO* in August 2018 and is seeking to switch to palm oil-derived raw materials certified by the RSPO. In 2019, we began selling RSPO-certified products as raw materials for use in cosmetics, and we are gradually expanding this product line. As of the end of FY2023/3, about 11% of our chemical products derived from palm oil are RSPO certified. We will continue to play our role in realizing a sustainable society through our supply chain.

*Roundtable on Sustainable Palm Oil: An international certification system aimed at the sustainable production and use of palm oil.

Efforts to Regulate Chemicals

The Daicel Group uses domestic and overseas searchable databases of laws and regulations concerning chemicals not only in Japan but also Europe, the U.S., and the Asia-Pacific region, to acquire information about regulatory trends and revisions and to act in an appropriate and legal manner.
In particular, Europe is the world leader in the area of laws and regulations, and our response to their REACH regulations* includes not only appropriate legal registration of our products but also appropriate management of our supply chain.

*Registration, Evaluation, Authorization and Restriction of Chemicals: Regulations established by the European Union and required for producers and importers of chemicals, regarding the registration, safety evaluation, limits on use, and permissions for use of these products.

Chemical and Product Safety

BCP Procurement

In view of the procurement risks and impact on the supply chain, the Daicel Group implements measures with regard to BCP for our main raw materials and fuel by gradually adopting multi-sourcing and accumulating safety stock, on a priority basis. As of the end of FY2023/3, measures were complete for 48% of our main raw materials, and we will continue to implement measures for the remaining 52% of our main raw materials.

Procurement Helpline Line

To promote fair transactions in line with our Basic Purchasing Policy, the Daicel Group has set up a help line to receive reports from suppliers. We ask our suppliers to report on legal violations and deviations from the Basic Purchasing Policy that occur within the Daicel Group during the course of business with the Group so that we can resolve any issues. The Basic Purchasing Policy explicitly states that there will be no adverse treatment for individuals consulting or reporting on issues through the help line.

Inquiries about our business (including procurement)

Internal Education and Training

In FY2023/3, we held study groups for purchasing staff handling raw materials and fuel nine times on topics such as the long-term outlook for energy supply and demand, effective utilization of biomass raw materials and fuel and industrial waste, management of greenhouse gas emissions, and responding to external evaluation agencies. A total of 84 staff participated in the study groups. We also held study groups during meetings of the Procurement Subcommittee, comprising staff from each SBU as well as divisions handling the purchasing of raw materials, fuel, and materials at Group companies. Study group topics included issues related to RSPO certification and introductions to case studies at other companies in the industry. A total of 45 staff participated in these study groups. We have also incorporated personal goals for sustainable procurement initiatives in the evaluation of all purchasing staff to encourage everyone to exercise initiative.