corporate social responsibility for supplier(2016) · corporate social responsibility for suppliers...

Corporate Social Responsibility for Suppliers

July, 2016

Procurement & Logistics GroupTDK Corporation

Copyright© 2016 TDK Corporation. All rights reserved. - 1 -

Agenda

1. What is CSR?

2. What is “minimizing the negative impact on society”?- Examples of negative impact on society

3. What is “making a positive contribution to society”?- Communication with stakeholders- Practice of CSR in the supply chain

- What is CSR? Summary

4. What is “CSR procurement”?- The request that is demanded by CSR procurement

5. Non-conformance examples in CSR On-site Audit

6. Request to suppliers.

7. CSR purchasing policy of the TDK group


What is CSR?

Making a positive contribution to society

CSR is the abbreviation of “Corporate Social Responsibility.”

Minimizing the negative impact on society

Simply speaking, CSR consists of the following two aspects:

1

2

What is CSR?

Not recognized from society. It is a matter of course.

Recognized from society. It enhances competitiveness.


What is “minimizing the negative impact on society”?

Let’s take a look at some specific cases in the following pages.

For example . . .

Examples of negative impact on society

Minimizing the negative impact on society1In its daily activities, even if not intentionally, a company may exert a bad impact on society.It is important to take preventive steps so as not to cause such negative impact.


Examples of negative impact on society 1

A worker protection group revealed that five children aged 14–15 years, which is under the legal working age, were working at a plant of a Chinese supplier manufacturing cell phone parts for company A. The children were engaged in the assembly of smartphone parts and allegedly often worked for 11 hours at night.

After conducting an investigation that raised suspicions of illegal child labor, company A announced a temporary suspension of business with that plant.

China Labor Watch, “Another Supplier Exploiting Child Labor,” July 10, 2014

Child labor at a Chinese supplier of household electric appliance maker A

Forced labor in Malaysia’s electronics industryIn Malaysia, where there are many foreign workers from Nepal, Myanmar, and Indonesia, the problem of forced labor (also known as modern slavery) has been highlighted internationally.

A survey of the situation in the electronics industry, conducted by an international NGO, revealed that 28% of workers were in a state of forced labor. These workers had to pay illegal fees to employment agencies. They were forced to work without freedom of choice in order to repay these debts, and in many cases their passports were taken away from them.

The Electronics Industry Citizenship Coalition (EICC), to which leading makers are affiliated, is making efforts to tackle this problem in the electronics industry’s supply chain.

Verité, “Forced Labor in the Production of Electronic Goods in Malaysia,” September 2014

There is a possibility that workers who support production around the world are being forced to work under harsh conditions.

Violation of human rights of workers

Children engaged in mobile phone assembly



Substandard working environmentin manufacturing contractor of apparel maker B

An NGO in Hong Kong conducted an undercover investigation of two Chinese suppliers engaged in manufacturing for company B. According to the report of the investigation, workers at the two companies engaged in severe overwork. While the legal standard for overtime is 36 hours per month, at these plants the figures were over 134 hours and 112 hours, respectively. Moreover, the work environment was substandard too. Although the temperature rises to around 38 degrees Celsius in the summer, there was no air conditioner. One workers who was interviewed said that some people fainted because of the summer heat. Furthermore, the report mentioned, among other things, the use of harmful chemical substances, the lack of measures to prevent accidents, etc., and the adoption of heavy penalties in order to maintain product quality.

Company B immediately conducted its own investigation, which confirmed the facts regarding several problems. Company B strongly requested the two companies to make prompt corrections and announced the implementation of an improvement program.

Students and Scholars Against Corporate Misbehavior (SACOM), “Report on an Investigation of the Working Environment at Subcontracting Plants in China,” January 2015 A worker is stripped to the waist

because of the heat.

Dusty workplace

Health and safety


An international environmental protection organization pointed out that harmful chemical substances had been detected in wastewater discharged from a Chinese textile processing plant that did business with garment makers. The group criticized the ordering makers, saying that they should stipulate a comprehensive policy regarding chemical substances and strengthen supply chain management. It also instigated a series of boycott campaigns around the world.

In response, six makers who were the targets of criticism announced that they would jointly study a roadmap for reducing the discharge of harmful chemical substance in the supply chain to zero by 2020.


Chemical plant in Dalian closes after large-scale demonstrations by residents

More than 10,000 local residents held large-scale demonstrations calling for the transfer of a chemical plant producing paraxylene, a chemical industry material, out of concern for environmental pollution and the possible health damage that could occur as a consequence. The authorities decided on the plant’s immediate suspension of production and transfer. China Entrepreneur Club, August 2011

Once an accident occurs, if management is mistaken, it can exert an enormous impact on local residents and the environment.

Impact on environment and health

Chinese textile industry: environmental pollution in the supply chain

Greenpeace, “Dirty Laundry,” July 3, 2011



Conflict MineralsDo you know the term “conflict minerals”? Among mineral resources extracted in conflict regions, conflict minerals are a general term for minerals that are a source of funds for armed groups engaging in inhumane behavior.

There is a possibility that a company’s supply chain provides funds to armed groups, which in turn encourages conflicts and human rights violations. Therefore, companies are required to ascertain where and how their resources are being extracted and to engage in responsible procurement activities.

Region Thought to Be Hotbed of Conflict Minerals

In the United States, with the aim of cutting off the financial sources of armed groups,companies that use conflict minerals, such as tin, gold, tantalum, and tungsten, obtainedfrom the Democratic Republic of the Congo or neighboring countries in their products orproduction processes are obligated to investigate every year whether such procurementleads to funding for armed groups and to disclose and report the information.

Controls

Weapons

Minerals

Money

Conflicts and human rights violations


What is “making a positive contribution to society”?

On the other hand, companies can contribute to the sustained development of society through their business. Much hope is being placed in corporate technologies, organizational strength, human resource capabilities, etc. to help solve the problems facing society.

Making a positive contribution to society2

Examples of positive contribution to society


Communication with stakeholders In promoting CSR, stakeholders are an important perspective. It is essential to listen to the opinions of stakeholders, understand their expectations and requests, and then engage in responsible corporate activities.

Stakeholders are all of the people involved in and influenced by corporate activities.

Customers圧力

Company

Employees

GovernmentShareholders (investors)

Suppliers

• Apt information disclosure• Accountability• Apt corporate management• Increased dividends

• Product liability• Quality improvement• Stable supply of products/services• Private information protection

• Respect for human rights

• Fair hiring• Stable jobs• Apt work

environment

• Fair and reasonable business

• Compliance with laws and ordinances

•Work-life balance

• Respect for diversity• Training opportunities

Local residents• Apt information disclosure• Disaster prevention• Prevention of pollution• Exchange• Contributions


Practice of CSR in the supply chain 1Furthermore, CSR efforts are necessary not only within single companies but throughout the entire supply chain.

Mining of resources

Material processing Manufacturing

Distribution

SalesUseRecycling/

disposal

Supply chain

Are environmental Are environmental measures being taken in mines?

Are the rights of mine Are the rights of mine district residents being protected?

Are any harmful substances being used?

Are the human rights of workers being protected?

in the production process?

Are environmental measures being taken

in the production process?

Are transportation methods Are transportation methods with little CO2 emission

being used?Is the work environment

appropriate?Are products safe?

What is the energy saving What is the energy-saving performance during use?

Is recycling taking place?


Practice of CSR in the supply chain 2

When companies engage in business, auditing is conducted to check CSR conditions at suppliers. Internationally, the Electronic Industry Citizenship Coalition (EICC) has compiled a code of conduct that related companies and their suppliers should obey. Most companies in the industry follow this code of conduct when carrying out CSR plant auditing.

CSR plant auditing in the electronics industry

Example of the EICC code of conduct

The EICC is an alliance of companies in the electronics industry that has compiled a code of conduct in order to fulfill CSR in the industry’s supply chains. The code of conduct examines, for example, whether the supply chain work environment is safe, whether workers are being treated with respect and dignity, and whether consideration for the environment is being practiced in the manufacturing process. More than 100 companies are members, including Microsoft, Sony, Lenovo, and Apple.


Stakeholders increasingly request companies to . . .

CSR

What is CSR? Summary

minimize their negative impacton society and

make a positive contribution to society (problem solving)

The environmental and social issues facing the world are becoming increasingly serious, and the influence of companies is expanding. In these circumstances, companies are being asked both to minimize their negative impact on society and to increase their positive contribution to society (problem solving). CSR is the positive response of companies to these expectations.

Expanding influence of companies

Expanding influence of companies

Environmental and social issues faced

by the world

Corporate

Social R

esponsibility


What is “CSR procurement”?Company sets an index and a standard about CSR for a supplier and requests for the compliance and cooperation. CSR activity was not a problem only for the company and group companies, and the social request came to need the correspondence in the supply chain(supplier, subcontractors, temporary employment agency, etc.). CSR procurement means this, and the green procurement requests are included in a part of the CSR procurement, too.

CSR procurement is the very important requirements to a customer in business.Importance of the CSR procurement in the global supply-chain is performed a close-up of more and more for a supplier. Approach to an environmental problem and human rights problem are particularly important.

By this situation, led by an American global electronics company, Electronic Industry Citizenship Coalition(EICC) started in 2004.

The corporate members of EICC increased year by year and were comprised of a Set-maker and EMS of 89 companies (at March, 2014) of Europe / America / Asia / Japan. And ”EICC Code of Conduct” established here is becoming the global standards in the CSR procurement of this industry virtually.

In the electronics industry, there are the present conditions carrying out this activity ahead of the world. In addition, as a social request, the purchasing at the CSR point of view (a social factor and environmental factor) is regarded as important more in addition to QCDE (Quality, Cost, Delivery, Environmental product, etc.) of the past purchasing standard.


Main item to confirm to a supplier in CSR Audit

The request that is demanded by CSR procurement

Classification No. Confirmation item

1 Prohibit forced labor2 Prohibit inhuman treatments and infringements of human rights3 Prohibit child labor

Human Rights 4 Prohibit discrimination5 Pay appropriate wages6 Working hours and holiday1 Ethic policy and Code of conduct

Ethics 2 Help line (Internal reporting system)3 Conflict minerals1 Safety measures of equipment2 Safety of workplace3 Health of workplace

Occupational 4 Workers' accidentHealth and

Safety 5 Emergency correspondence

6 Be careful about physically demanding work7 Safety and hygiene of institutions8 Employee's health care administration 1 Industrial wastewater

Environment 2 Atmospheric pollution 3 waste4 Hazardous substance

1 Management systems in labor, ethics, safety and hygiene, and environment

Management 2 PDCA cycleSystem 3 Education and Training

Main international standard

SA8000

OHSAS18000

ISO14001

IEC QC080000

Other than the above, Information security (ISO/IEC27001:ISMS) and Quality (ISO9001/TS16949) may be included.


Child labor and young worker

There is not a policy of Prohibited child labor, or Protection procedure after the discovery is not determined.

Age verification procedure too weak – heavily reliant on applicants honesty.

The dangerous work that a young worker should avoid is not defined by the rule of the company.

Young workers work at deep night shift and excessive overtime.

Forced labor

Company does not do an employment agreement with a worker. The details of working conditions are notconveyed beforehand, too.

When an employee hopes for resignation, it is a rule to limit freedom of the resignation.

When the employment of the foreign worker, company will request to submit the original ID card or a passport.

Workers are not allowed to go back to dorm rooms during lunch break.

Working hours

Cleaning and exercises or a morning gathering before the opening hour are not included in working hours.

The report of real working hours is a self-administration, and the restraint of the overtime depends on theunpaid overtime.

The management of monthly working hours is only an overtime hour, and cannot inspect the EICC standard.(EICC standard : 60 hours labor / week).

At least one day off not provided following six consecutive days of working.

Non-conformance examples in CSR On-site Audit


Non-conformance examples in CSR On-site AuditWage and Payment

Workers charged for uniform and ID badge.

Deductions from wages made for disciplinary purposes.

Discrimination

Date of birth, race, political affiliation and marital status required in the job application form.

Pre-job pregnancy test or hepatitis-B or HIV test conducted.

Safety of the workplace

Approvals/licenses expired for safety equipment and/or operators.

A protection tool (earplugs, gloves, mask, safety boots, protection glasses) is used by mistake.

Emergency correspondence

Insufficient number, unclear presence and/or distant access of first aid kits, eye washers, emergencyexit signage, fire extinguishers/hydrants.

The fire drill at the time of the night shift is not done. / For a fire drill non-participant without a follow-up.

Ergonomics

No systematic identification, evaluation or control of physically demanding work.

Health and Safety

The container of the subdivided chemical substance does not have label. And contents are unclear.

The work place does not have SDS. It is written by other languages that a worker cannot understand.


CSR activities are very important requirements in business continuation.

CSR activities should enforce not only a company but also all supply chains.Example: The requirements of the supply chain management will accelerate by the trend of the

international standard in future.

CSR request the activity of across the company, and the activity in each factory are indispensable.

Approach for labor, human rights, ethics, health and safely, environmental and those management systems are important points. When nonconformance was found, Company have to remove these problem at immediately.

Like other management systems, risk management and preventive action are important in CSR. It is necessary to clarify a procedure or a standard before nonconformance is find or occur.

When suppliers continue TDK group and business, please accept CSR procurement request.If it is not accepted, Including the possibility of "new business restrictions" or "a business stop".

The TDK group demands an approach for the CSR activity by a supplier in our purchasing policy.

Understand the purchasing activity of the TDK group, and please cooperate as a good partner.

Request to suppliers


Purchasing Policies

･ComplianceAll applicable laws and regulations are followed in purchasing activities. Moreover, TDK strives not only to follow the letter of the law, but its spirit as well.

･Respect for Human DignityTDK respects the human dignity of workers who are active in all stages of the supply chain.

･CSRThe procurement divisions of the TDK Group implement CSR activities on a continuous basis, while performing

evaluations of suppliers at regular intervals using the CSR Check Sheet, to promote understanding of our CSR concept and raise recognition of our initiatives.

･Green ProcurementAs one aspect of its company wide environmental protection activities and in the pursuit of harmony with the global

environment, TDK engages in green procurement, i.e., the purchase of environment-conscious products.･Fair and Open Business

TDK conducts fair business regardless of company size or nationality. TDK bases its purchasing decisions on comprehensive evaluations of quality, price, delivery time, ability to provide a stable supply, and other factors.TDK does not accept gifts of any kind from business partners, including summer and winter gifts and complimentary presents.TDK does not accept dining or other forms of entertainment from business partners.

･PartnershipTDK seeks to build mutually beneficial relationships with suppliers based on shared goals.

･VA*ActivitiesTDK values suppliers that can lower costs and provide new materials and technologies through VA activities.

･IT UtilizationInformation exchanges with suppliers using IT and networks are essential for accelerating the pace of business and reinforcing ties.

･Quality, Delivery Time and Stable SupplyTDK always considers quality, delivery time and stable supply by establishing solid partnerships with its suppliers.

*VA:Abbreviation of "Value Analysis," often used in a similar meaning as "Value Engineering" (VE). Describes a new methodical approach to reducing costs, formulated in the U.S. in 1946. Product value is analyzed from various angles in order to obtain the desired functionality while minimizing the cost of materials and resources.

The TDK group demands an approach for the CSR activity by a supplier in our purchasing policy.

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