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Fair, Proper and Transparent Procurement Activities

Promote CSR Throughout Supply Chain

Fundamental Approach for Fair, Proper and Transparent Procurement Activities

The Nabtesco Group does business with about 1,000 suppliers of various scales, centering around the purchase of metal parts, and electronic and electrical components, outsourced machining, assembly and processing. Our business with suppliers is an important factor that affects the Nabtesco Group’s cost structure and QCD performance. It is indispensable to secure the supply chain continuously in order to achieve medium- to long-term growth. Therefore, we develop collaboration systems through fair, proper and transparent business transactions based on the proper cost structure, and close partnerships with suppliers.

Also, we are well aware of the importance of meeting the demands and expectations of society regarding social and environmental impacts of activities in our supply chain. By developing mutual trust relationships with suppliers through fair, proper, and transparent transactions, we are committed to meeting our social responsibilities not just through the efforts of the Nabtesco Group alone but with the cooperation of the entire supply chain, placing emphasis on local procurement and local employment.

Material Procurement in Japan
Material Procurement in Japan
Percentage of Procurement Cost per Supplier in Japan
Percentage of Procurement Cost per Supplier in Japan
Corporate Communications Department, Procurement Planning Department, 1, 2

Promotion Framework for Nabtesco Group’s CSR-Oriented Procurement

We at the Nabtesco Group have been taking measures for manufacturing innovation by pursuing collaboration with suppliers with the aim of strengthening our comprehensive procurement capabilities from the perspectives of sustainability, including quality, cost and delivery (QCD) and technological development. In order to achieve medium- to long-term growth for the Group, it is essential to secure a sustainable supply chain. We are promoting CSR-oriented procurement by recognizing fair, proper and transparent procurement activities as one of our material CSR issues (materiality).

In order to promote CSR-oriented procurement, we need to have expertise and know-how on environment- and human rights-related issues, which are not conventionally handled by procurement departments. Therefore, the Procurement Planning Department of the Production Innovation Division, in collaboration with the head office departments, plays a central role in promoting CSR-oriented procurement, including supporting the activities conducted to this end by the in-house companies and Group companies. The Procurement Planning Department discusses and decides on the related policies and measures at the Group Procurement Meeting held with the participation of the procurement departments of each in-house and Group company, providing education and training for procurement managers. Through these Group-wide efforts, we endeavor to fulfill our social responsibility throughout the supply chain in cooperation with our suppliers.

Promotion Framework for Nabtesco Group’s CSR-Oriented Procurement
Corporate Communications Department, Procurement Planning Department, 1, 2

Establishment of Nabtesco Group CSR-Oriented Procurement Policy

In accordance with the globalization of our business, we increasingly need to respond appropriately in our supply chain to the worldwide demands related to the environment and human rights. On April 1, 2014, aiming to further foster CSR activities across the supply chain, we established the Nabtesco Group CSR-Oriented Procurement Policy. In formulating this policy, we referred to the ISO 26000 standard, the United Nations Guiding Principles on Business and Human Rights, the Electronic Industry Citizenship Coalition (EICC) Code of Conduct, and other international guidelines, and also incorporated into the policy the ideas expressed in the Nabtesco Group Code of Ethics. (Revisions currently being internally discussed)

Nabtesco Group’s CSR-Oriented Procurement Policy
  1. Compliance with Laws and Regulations and the Establishment of Corporate Ethics
    1. (1) Compliance with the laws, regulations and social norms implemented in the countries and regions where the company conducts business activities
    2. (2) Transparent transactions, which are based on fair and free competition and in compliance with the antimonopoly-related laws and regulations
    3. (3) Appropriate export and import control based on the related laws and regulations
    4. (4) Prohibition of the inappropriate transfer of money and other benefits and of illegal political contribution and donation
    5. (5) Prohibition of the inappropriate treatment of confidential information, personal information and intellectual property rights in relation to business activities
    6. (6) Assurance of accountability and transparency to society through proactive disclosure of information
  2. Respect for Human Rights
    1. (1) Prohibition of inhumane labor, including forced labor and child labor
    2. (2) Elimination of all forms of discrimination based on race, nationality, religion, age, gender and others
  3. Consideration to Employees
    1. (1) Respect for workers’ rights, including the payment of appropriate salaries and proper management of working hours
    2. (2) Provision of safe and clean workplaces where employees can work healthily and with ease of mind
  4. Provision of Valuable Products and Services
    1. (1) Establishment of a business process to ensure the provision of safe and comfortable products and services that people can use with a sense of security
    2. (2) Establishment of a system to ensure the stable supply of products and services that are competitive in the market in terms of quality, pricing and delivery deadlines
  5. Consideration to the Environment
    1. (1) Establishment of an environmental management system to foster sustainable business activities
    2. (2) Reduction of environmental impact through the development of environmentally friendly products, contribution to the mitigation of climate change, reduction of waste and strict management of chemical substances
  6. Consideration to Local Communities and Society
    1. (1) Respect for cultures and customs of the regions and society where the company conducts business activities
    2. (2) Harmony with local communities and society and contribution to the communities and society

Internal Training Based on Nabtesco Group CSR-Oriented Procurement Policy

We provide practical training to procurement managers of in-house companies and Group companies to deepen their understanding of the Nabtesco Group CSR-Oriented Procurement Policy, which stipulates the norms for working on social issues including the environment, and how to ask for cooperation from suppliers with regard to the survey research and interview visits. Upon completion of the training, the procurement managers, equipped with a full understanding of CSR-oriented procurement, work to ensure that the Policy is thoroughly implemented by gaining support from the suppliers.

Corporate Communications Department, Procurement Planning Department, 2

CSR Procurement in Collaboration with Suppliers

Organization of Briefing Sessions for Suppliers in Japan and Abroad

Briefing session for suppliersBriefing session for suppliers

Regarding Nabtesco Group's CSR-Oriented Procurement Policy, since the latter half of FY2014 we have visited local sites in China, Thailand, and South Korea and provided briefings to the relevant employees of our suppliers to accelerate the penetration of our global  policy. Since then, we have held the briefings for approximately 600 suppliers annually. Based on the  policy, the entire group will work as one to promote and implement CSR-oriented procurement activities to fulfill the expectations of customers and other stakeholders, while facilitating the understanding of new suppliers and strengthening our partnership with existing suppliers.

Implementation of SAQ* to suppliers

No. of Suppliers Briefed on the Policy (in FY2019)Approx. 600 companies No. of Respondents to the SAQ (in FY2019) 950companies

The Nabtesco group identifies the important suppliers for our business sustainability based on their trade volume, QCD (Quality, Cost, and Delivery compliance) performance, technical development capability, financial health, and other factors. To enhance our CSR-oriented procurement, we have implemented SAQ for the primary suppliers, including key suppliers in and outside Japan every year since FY2014.

In FY2019, we implemented a SAQ-style questionnaire based on our CSR-Oriented Procurement Policy for all first-tier suppliers, totaling around 1,000. The suppliers who responded account for over 90% of procurement by transaction amount. The questions in the questionnaire comprise six large categories and 41 middle categories based on the items in the CSR-oriented Procurement Policy. We performed an evaluation according to the weight of each middle category item. We have revised the questions in the environment field in accordance with our SBT (Science Based Targets). We analyzed and evaluated the questionnaire survey responses (average score 79, target score 80) for each supplier individually and provided feedback to each of them. We continuously monitor the risks identified in the questionnaire survey and take measures to address them.

Moreover, in FY2019, we visited nine suppliers individually and made necessary corrections, such as extracting risks regarding the environment, safety, and health, and proposing improvement measures. We will continue to refine the SAQ by, for example, considering items to include in the questions, and methods for responding.

ESG risk reduction flow in collaboration with suppliers
Step 1 Implement regular ESG assessments using a SAQ for suppliers once a year. Identify potential ESG risks by analyzing the survey.
Step 2 Visit selected suppliers and interview them on-site.
Step 3 Propose improvement measures as needed.
Step 4 Follow up with them.

In FY2019, we received no reports of serious violations related to labor or the environment in our supply chain.

  • *SAQ = Self Assessment Questionnaire (self-check sheet)
Corporate Communications Department, Procurement Planning Department, 2

Fair Trade with New and Existing Suppliers

In the Basic Purchase Agreement that we conclude with new suppliers, we list not only compliance, including the prevention of any form of corruption such as bid rigging or bribery, but also consideration to the environment and occupational health and safety and the elimination of anti-social forces as the most important items to be observed by our suppliers.


Basic Purchase Agreement

(Examples)

  • Article 10: Ensuring occupational health and safety and appropriate working conditions (including prohibiting forced labor and child labor)
  • Article 29: Obligation to prevent pollution, manage the environment, and manage the use of specified hazardous substances
  • Article 30: Obligation to prevent workplace disasters
  • Article 32: Prohibition of bid rigging and bribery
  • Article 47: Elimination of anti-social forces

In FY2019, we received no reports of serious violations (including regarding social issues such as the environment) in our supply chain.

We have requested that even existing suppliers comply with our Basic Purchase Agreement, as well as consideration of the environment, safety, and health through the SAQ. Through the penetration of a CSR-Oriented Procurement Policy within our supply chain, on-site briefings, and the SAQ, we have taken proper actions to encourage new and existing suppliers to conduct themselves in accordance with social norms.

Corporate Communications Department, Procurement Planning Department, 2

Participation in United Nations Global Compact

Nabtesco signed the United Nations Global Compact in April 2014 to show that it supports this international initiative, and has since been proactively participating in the activities conducted by the Global Compact Network Japan. We have worked to set norms and criteria and to solve problems for global CSR-oriented procurement (including themes on the environment, labor, and human rights) in cooperation with peers and companies in other industries in the study group on supply chains. In FY2017, Nabtesco was appointed a corporate leader for the supply chain study group again and contributed to the completion of an SAQ (self-assessment tool for CSR-oriented procurement) that can be used across the industry. In FY2019, we contributed to creating the Chinese version of the SAQ.  We will continue to work on the enhancement of the SAQ while promoting its use in collaboration with external initiatives in the future.

Corporate Communications Department, Procurement Planning Department, 2

Measures for Conflict Minerals*

As neither Nabtesco Corporation nor its Group companies are listed on US stock markets, we are not subject to the Dodd-Frank Act or the reporting obligation with regard to the use of conflict minerals. The Nabtesco Group, however, is focused on strategic measures for conflict minerals from the perspective of risk management through establishing a sustainable supply chain system while keeping an eye on maintaining international peace and security. To this end, we will conduct the Reasonable Country of Origin Inquiry (RCOI) in cooperation with our suppliers in response to requests from customers to conduct surveys on conflict minerals. Furthermore, questions regarding conflict materials are included in the SAQ. At Nabtesco, we aim to establish a responsible procurement system to avoid becoming complicit in the activities of armed groups and conflicts by working closely with our suppliers and Group companies.

  • * The term “conflict minerals”refers to four mined minerals (gold, tantalum, tin and tungsten), which may be partially used to fund armed groups and exacerbate conflicts in the Democratic Republic of the Congo and surrounding countries. In the United States, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act established in 2010, companies using these minerals are required to report such use to the Securities and Exchange Commission.
Corporate Communications Department, Procurement Planning Department, 2

Partnership with Suppliers

VE-based training conducted at a supplier’s facility.VE-based training conducted at a supplier’s facility.

At the Nabtesco Group, we have been actively advancing initiatives to contribute to suppliers in terms of improvements in their manufacturing and administrative capabilities. We conduct audits of suppliers’ factories before they start to manufacture products for us, providing instructions on improvement measures from quality control perspectives such as strict compliance with operations standards, the installation of foolproof devices, and the removal of defective products, while also supporting the establishment of 5S (Sorting, Setting-in-Order, Shining, Standardizing, Sustaining the Discipline) activities from the perspective of overall factory operations.
Regarding the enhancement of administrative capabilities, we provide value engineering (VE)-based practical training programs at suppliers’ facilities to ensure that they can effectively conduct functional analyses of products and daily operations.

Corporate Communications Department, Procurement Planning Department, 2

Nabtesco's Initiatives to Support Suppliers with BCP (Business Continuity Plan) Development

Japan’s Cabinet Secretariat certification for companies contributing to national resilience (30th certification in the domestic manufacturing industry)Japan’s Cabinet Secretariat certification for companies contributing to national resilience (30th certification in the domestic manufacturing industry)

The Nabtesco Group works to bolster its business continuity plan (BCP), to ensure the ability to quickly resume business should a major location of operation be seriously damaged in a major disaster. We have held BCP sessions for employees centered on education and training at key sites and have redesigned the previous BCP. As evidence of our commitment to an effective BCP, our nine domestic plants obtained the certification for companies contributing to national resilience (Resilience Certification) from the government of Japan.

We also recognize that possible damage to our suppliers caused by a disaster is a material risk factor for business continuity and are positively supporting their BCP development. With the objective of helping 10 suppliers obtain the Resilience Certification in 2021, we offer a range of training, such as development seminars, courses on preparing a BCP and training courses, as well as individualized support for key suppliers. Moreover, we launched a human resource development program for fostering buyers (in the procurement departments), in order to accelerate the support of the suppliers in their BCP initiatives. The first 13 BCP buyers have graduated from the program.

The government of Japan (the Ministry of Economy, Trade and Industry and the Small and Medium Enterprise Agency) took notice of these initiatives by the Nabtesco Group before its legislation for small and medium enterprise resilience was passed in 2019 to facilitate the enhancement of business continuity capabilities for SMEs. Consequently, our BCP activities were highlighted through media interviews, symposium appearances and articles in the “White Paper on Small and Medium Enterprises,” which has further facilitated BCP development among our suppliers.

Through these BCP activities, the Nabtesco Group aims at becoming a resilient organization that can respond promptly to disasters and crises. We will adopt BCP initiatives that better reflect the characteristics of our field sites and local communities. From 2020, we will position the establishment of a global BCP structure as a priority subject and begin supporting the BCP of our overseas sites.

First graduates of the BCP buyers (support personnel) program, upon completion of training First graduates of the BCP buyers (support personnel) program, upon completion of training
Presentation by Toyo Jidoki at the Small and Medium-sized Enterprises Resilience Symposium (in Hiroshima) Presentation by Toyo Jidoki at the Small and Medium-sized Enterprises Resilience Symposium (in Hiroshima)
Corporate Communications Department, Procurement Planning Department, 1, 2
Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Fundamental Approach for Fair, Proper and Transparent Procurement Activities

The Nabtesco Group does business with about 1,000 suppliers of various scal...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Promotion Framework for Nabtesco Group’s CSR-Oriented Procurement

We at the Nabtesco Group have been taking measures for manufacturing innova...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Establishment of Nabtesco Group CSR-Oriented Procurement Policy

In accordance with the globalization of our business, we increasingly need ...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

CSR Procurement in Collaboration with Suppliers

Organization of Briefing Sessions for Suppliers in Japan and Abroad Br...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Fair Trade with New and Existing Suppliers

In the Basic Purchase Agreement that we conclude with new suppliers, we lis...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Participation in United Nations Global Compact

Nabtesco signed the United Nations Global Compact in April 2014 to show tha...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Measures for Conflict Minerals*

As neither Nabtesco Corporation nor its Group companies are listed on US st...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Partnership with Suppliers

VE-based training conducted at a supplier’s facility. At the Nabtesc...

Fair, Proper and Transparent Procurement Activities
Promote CSR Throughout Supply Chain

Nabtesco's Initiatives to Support Suppliers with BCP (Business Continuity Plan) Development

Japan’s Cabinet Secretariat certification for companies contributing to n...