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Partnering with our suppliers [DMA,LA15,HR11,SO10]

Kao acts legally and ethically as it engages in fair and impartial procurement activities. While aiming to contribute to the realization of a society with sustainable development, we fulfill our corporate responsibilities with consideration for resource protection, environmental conservation, safety and human rights.

2015 activities
Besides undertaking procurement of sustainable raw materials, in 2015, Kao began asking Group companies outside Japan to request that their suppliers join Sedex and establish the relevant data access privileges.
Kao has also been responding to society’s expectations in other ways, for example by responding to requests for information from the CDP Forest Program and proceeding with assessment.

Policies/structures

In fulfilling its corporate responsibility, Kao views its materials and equipment suppliers as vital partners who have an important role to play in the realization of Yoki-Monozukuri. We communicate Kao’s philosophy and corporate objectives, maintaining Policies for Procurement conforming to standards of fairness, compliance and ethics, and social responsibility, as we pursue our procurement activities.

Kao has formulated Guidelines for Supplier’s Assessment to facilitate the practical implementation of procurement activities in accordance with our Policies for Procurement. In our procurement activities, we give priority to those suppliers that place importance on social responsibilities, including compliance with laws, regulations and social norms, protection of human rights, assurance of health and safety and fair trade, and to those suppliers that collaborate fully on environmental issues such as Environmental Management System, etc. that Kao considers to be important. Kao also gives priority to purchasing items the procurement and packaging of which give due consideration to environmental concern issues.
Kao’s standard contract with its suppliers has clarified provisions concerning issues such as the environment, human rights and labor. It is used when the contracts are newly concluded or renewed.
In order to realize Yoki-Monozukuri, Quality Improvement Meetings are held with those suppliers whose quality requires improvement. These meetings allow suppliers and Kao to unify their efforts to improve and prevent defect recurrences.

Goals

Through close collaboration with suppliers, Kao is able to monitor compliance with the Guidelines for Supplier’s Assessment through self-assessment. Target ratios are set for the percentage of suppliers meeting environmental and social responsibility standards.
If a supplier does not meet our standards, we visit the supplier, share our concerns about the issues in question, and consult with the supplier to realize improvements.
In 2014, Kao joined Sedex,*1 the largest organization in the world working to promote the sharing of corporate ethical data. In 2015, Kao has been instructing overseas affiliates to request that their suppliers also join Sedex, and that they establish the relevant data access privileges. In the future, we will also be notifying suppliers in Japan and requesting that they join Sedex and establish data access privileges. This will help to expand the scope of the self-assessment results currently being implemented in Japan and the supplier risk assessment reports compiled by our buyers.
We have also been undertaking a number of self-assessment activities in relation to the environment. In the areas of climate change prevention and water resource use, Kao is implementing risk management through participation in the CDP Supply Chain Program, *2 and through implementing a response to the CDP Forests Program*3 relating to forest resources.

  • *1 Sedex (Supplier Ethical Data Exchange)
    A large-scale, global platform for the sharing and verification of information relating to labor standards, health and safety, environmental protection and business practices, aimed at promoting the adoption and maintenance of ethical business practices in global supply chains.
  • *2 CDP (Carbon Disclosure Project) Supply Chain Program
    CDP is an international NPO (with its headquarters in London) that is sponsored by institutional investors; CDP implements various activities to encourage business enterprises etc. to disclose information relating to climate change, water use and forest resource use. The CDP Supply Chain Program is an initiative in which participating enterprises ask the firms that make up their supply chain to disclose information relating to climate change and water resource use via the CDP platform.
  • *3 CDP Forest Program
    A CDP initiative in which enterprises are asked to disclose information regarding forest resource management and usage status, etc.

Global

Status of the Guidelines for Supplier’s Assessment

Social: Number of suppliers monitored and percentage meeting CSR Procurement Standards
  Suppliers to Kao Corporation Suppliers to the Asian Kao Group
2011 796 (99%) 504 (97%)
2012 860 (99%) 610 (97%)
2013 883 (99%) 726 (98%)
2014 906 (99%) 823 (98%)
2015 1,168 (96%) 994 (98%)
Environmental: Number of supplier plants monitored and percentage meeting CSR Procurement Standards
  Supplier plants
to Kao Corporation
Supplier plants to
the Asian Kao Group
2011 685 (99.6%) 383 (98%)
2012 767 (99.6%) 463 (98%)
2013 818 (99.5%) 541 (98%)
2014 879 (99%) 608 (97%)
2015 1,254 (97%) 750 (97%)

Japan

Supplier satisfaction survey

Kao conducts supplier satisfaction surveys every three years in order to ensure that procurement activities are carried out fairly and equitably. The most recent supplier satisfaction survey was implemented in 2013. These surveys are conducted anonymously by an outside institution, and the results are incorporated into our policies.

Global

Implementation of vendor summits

Each year, we hold vendor summits to provide a place to share information and exchange opinions on selected themes.
We also hold them for our partners at main Kao group companies overseas. There, we strengthen partnerships with suppliers.

The 2015 vendor summit saw a detailed explanation of the measures that Kao is implementing to strengthen collaboration with suppliers, including a request for suppliers to cooperate actively with us on the CDP Supply Chain Program, and an advance announcement of the supplier commendation system that is being launched in 2016, etc.

Number of companies that participated in the vendor summit(Number of companies)
  Held in Japan Held outside Japan Total
2011 183 187 370
2012 - 205 205
2013 184 151 335
2014 183 233 416
2015 214 285 499
  • * Due to Kao Corporation’s change in the fiscal year end, a vendor summit was not held in Japan during FY 2012.

Japan

Employee training and education

Kao has educated its 25 new Procurement Division employees in our basic approach to procurement such as fairness and equity, adherence to laws and ethics, and social responsibilities. Through such training, we strive to encourage our employees in understanding of global social issues such as human rights and labor which are required ISO26000 and United Nations Global Compact (UNGC) principles.

In 2015, Kao has implemented training for Procurement Division employees in our Human Rights Policy and in the utilization of Sedex to implement effective verification of human rights risk.

Japan

Promoting certification testing

With the aim of educating all Procurement Division employees in the relationship between business operations, society and the environment, and encouraging them to modify their behavior accordingly, starting from 2012 Procurement Division employees have been encouraged to take the Certification Test for Environmental Specialists (Eco Test*1). The Division’s target of having 70% of Procurement Division employees certified has already been exceeded.

Starting from 2015, we are encouraging Procurement Division employees to take the Examination of Compliance Proficiency for Practical Business (ECPPB)®.*2 In the first year of implementation, a total of 33 employees passed the ECPPB exam.

  • *1 Eco Test
    The Certification Test for Environmental Specialists (Eco Test) promotes an environmentally and economically sustainable society through development of human capital able to address environmental issues based on a broad understanding of the environment. The Eco Test has been administered by the Tokyo Chamber of Commerce and Industry since 2006.
  • *2 ECPPB
    The Examination of Compliance Proficiency for Practical Business (ECPPB)® aims to cultivate compliance skills that embody an awareness of the social expectations that underpin compliance-related laws and regulations, and a systematic understanding of the laws and regulations that are particularly important for business enterprises. The ECPPB was launched in 2005 by Japan’s Certify Competence Examination Committee.

Global

Promoting the sustainable procurement of raw materials

Responding to risks to sustainable development such as resource constraints, environmental issues (such as degradation of biodiversity and global warming), and human rights issues, Kao implements initiatives toward sustainable procurement of raw materials. As entire supply chain management is important, Kao participates in the CDP Supply Chain Program, which seeks to curtail climate change, asking its main suppliers to disclose and curtail GHG emissions. Kao also cooperates with suppliers to rationalize logistics and reduce the environmental impact created by its procurements.
Kao recognizes that its business depends on natural capital, and commits to zero deforestation at the source in its procurement of raw materials including palm oil and paper. Over the medium and long term, Kao will be taking measures to reduce the amount of raw materials that need to be used, and will be taking measures to switch over to the use of non-food biomass sources such as algae, etc., striving to promote sustainable procurement that gives due consideration to the ethical issues that have been thrown into relief by the process of globalization.

Kao has undertaken the following specific initiatives.

  1. Procurement of certified sustainable raw materials
    The revised version of the Guidelines for Sustainable Procurement of Raw Materials that was compiled in 2014 included a declaration that, with the aim of zero deforestation, Kao was aiming to switch over to procuring palm oil, paper and pulp from sustainable sources by 2020.
    With regard to procurement of palm oil and palm kernel oil, besides joining the Roundtable on Sustainable Palm Oil (RSPO) and promoting the obtaining of supply chain certification and the procurement of certified sustainable palm oil, we are also taking measures to ensure traceability (all the way back to the source) of all palm oil and palm kernel oil that the company purchases, by 2020. As of the end of 2015, we had completed confirmation of mills. However, as there are still some cases of derivative products purchased from external suppliers where the mill that produced the original raw material cannot be confirmed, we will continue to undertake further confirmation work, and will also be purchasing RSPO certified materials as a supplementary measure.
    Regarding procurement of paper and pulp, we are aiming to ensure that, by 2020, all paper, pulp and packaging materials used in Kao products, and all paper used in Kao offices, are either recycled paper or paper from a sustainable source. In particular, in the case of pulp, by 2020 Kao aims to be purchasing only pulp that has traceability back to the area where the timber was logged. As of the end of 2015, 96% of the material procured (by weight) was from sustainable sources.
  2. Sustainable sourcing of natural plant resources
    As the scarcity of natural plant resources and the problems relating to resource capture have become clear, Kao is promoting natural plant resource procurement that reflects ABS* concerns. We are also continuing with initiatives to diversify sourcing routes and to convert from natural plants to artificially cultivated materials, giving due consideration to the natural environment in the producing areas.
  3. Initiatives to reduce dependence on fossil-based resources in packaging
    Kao continues efforts to reduce total volume of plastics used through minimization of container size and development of refill packaging, while promoting use of biomass materials such as bio-polyethylene in containers and packaging.
  4. Green procurement
    With regard to the procurement of indirect materials such as stationery and office supplies, in line with the Ministry of the Environment’s calls to implement green procurement, Kao has formulated Green Procurement Standards, which give priority to the purchasing of environmentally conscious products. The Standard achievement rate in 2015 was 75%; Kao is working to raise this figure to 100% as soon as possible.
  • * ABS (Access and Benefit Sharing)
    ABS is one of the goals of the Convention on Biological Diversity (CBD). It relates to the fair and equitable sharing of the benefits deriving from the exploration, development and use of genetic resources in relation to the issue of the capture of the bio-resources (genetic resources) of producer nations (which are generally developing nations) by advanced nations and multi-national corporations.
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