Working with Suppliers

Management Approach

In the Kawasaki Group's business activities, it is essential that our procurement activities are conducted in line with our stance toward the concept of sustainability, which includes consideration for compliance, human rights, labor, occupational safety and health, and the global environment. To this end, we must work together with not only the entire Group but also our suppliers, which are important partners in our business activities, to actively promote sustainability initiatives throughout the entire supply chain. We will respond to the demands of our customers and society by identifying risks related to sustainability throughout the supply chain, and by promoting sustainability activities together with our suppliers.

The Kawasaki Group set forth the Kawasaki Group Policies for Material Procurement, which contains the Group's sustainable-procurement philosophy, and its expectations for its suppliers in that regard, as well as the Kawasaki Group Sustainable Procurement Guidelines, which further fleshes out the content of the aforementioned policy by stipulating by-laws on its expectations for its suppliers. In fiscal 2022, based on growing social demands for sustainability initiatives in the supply chain, the name of these guidelines was changed from its initial name of the Kawasaki Group CSR Procurement Guidelines, and the contents were revised. When revising the guidelines, the RBA* Code of Conduct was referred to, every aspect, including consideration for compliance, human rights, labor, occupational safety and health, and the global environment, was covered, and the Kawasaki Group Code of Conduct was incorporated to clarify the Group’s policy to enhance the sustainability of its entire supply chain.

^* Responsible Business Alliance (RBA): International initiative promoting corporate social responsibilities across the global supply chain.

The Kawasaki Group and our suppliers

Procurement activities in our daily operations are carried out under the responsibility and authority of each internal company.
　As a cross-company body, we hold the Procurement Department Head Meeting, attended also by the director in charge of procurement, twice a year. At this meeting, in addition to deciding on common Group-wide procurement measures and policies, including those related to sustainable procurement, participants monitor the procurement-related KPIs set by each internal company and share their annual plans.

Director in charge of procurement: Hiroshi Nakatani, Representative Director, Senior Corporate Executive Officer

The Kawasaki Group’s Supply-Chain Management

The Kawasaki Group Policies for Material Procurement and Sustainable Procurement Guidelines can be viewed on our website. These policies and guidelines have been disseminated among related divisions, including Group companies.
　The basic agreement that Kawasaki forms with suppliers includes provisions specifying that both parties should recognize the importance of corporate social responsibility and will voluntarily and proactively engage in business and social activities with due consideration given to the sustainable development of the environment and society. In this basic agreement, Kawasaki demands that its suppliers comply with the Kawasaki Group Sustainable Procurement Guidelines. Kawasaki also directly distributes a copy of the guidelines to its suppliers.
　Furthermore, Kawasaki creates opportunities to directly explain its concept of sustainability to its suppliers. At these briefings, Kawasaki explains important issues in supply-chain management, such as human rights and environmental issues, and requests its suppliers to strengthen their sustainability initiatives.

• From fiscal 2018 through fiscal 2019, sustainability-themed 10 supplier briefings were held, which were attended by a total of about 1,000 people from approximately 700 companies.
• In fiscal 2019, Kawasaki sent out a document titled “Toward the Further Promotion of Sustainability Activities Involving the Entire Supply Chain” to its suppliers in Japan.

Furthermore, Kawasaki also provides training on sustainable procurement for its employees to increase the awareness of those in charge. Specifically, Kawasaki conducts training every year for the Group’s procurement divisions to improve their understanding of sustainability efforts in the supply chain, such as the status of the company's sustainable procurement initiatives and the role that procurement staff should play.
　Furthermore, domestic and overseas subsidiaries engaged in material procurement disclose their Sustainable procurement policies on their websites as suited to their specific businesses. Through such efforts, we pursue sustainable procurement on a global and our Group-wide basis. Going forward, the Kawasaki Group will continue to promote sustainability initiatives throughout the supply chain in cooperation with suppliers.

The Kawasaki Group does business on a global scale with a diverse range of suppliers at around 5,800 companies. We analyze the procurement costs for each item procured at each internal company. Together with these suppliers, we are promoting sustainability initiatives throughout our entire supply chain.

Significant suppliers are selected suitable for each internal company's products based on such criteria as amount of procurement, importance of the parts and equipment, and volume of CO₂ emissions.

^* As of March 2023

Since fiscal 2016 Kawasaki has conducted surveys of domestic and overseas suppliers to assess their compliance with the Kawasaki Group Sustainable Procurement Guidelines and evaluate our supply-chain risks. In fiscal 2016 we conducted a survey of domestic suppliers to assess their compliance based on these guidelines. About 1,400 suppliers responded to the survey. In addition, since fiscal 2018 we have conducted surveys of domestic and overseas suppliers, and in fiscal 2021 we implemented a survey of major suppliers in Japan and received replies from 395 companies.
　These 39-question surveys question suppliers’ initiatives in each of seven categories, including corporate governance regarding sustainability, human rights and labor, the environment, fair corporate practices, and quality and safety.
　Based on the survey results, we will implement measures meant to bolster sustainability initiatives throughout the entire supply chain, such as by providing guidance on improvements to suppliers so that the evaluations of each item reach the levels that we demand.

The Kawasaki Group procures materials across a wide range of fields organized into three groupings: Land & Air Transportation Systems, Motion Control & Motor Vehicles, and Energy & Marine Engineering. Depending on the needs of each business, for our suppliers we offer training sessions and awards programs aimed at improving performance with respect to quality, delivery, and sustainability.

In keeping with the "CO₂ Free" laid out in the Kawasaki Global Environmental Vision 2050, we are aiming to eliminate all CO₂ emissions throughout the entire Group by 2050. We report on the state of our own initiatives in seminars on SDGs to ensure that our business partners understand this policy. In the Kawasaki Group Sustainable Procurement Guidelines, we also ask our suppliers to reduce emissions of such greenhouse gases as CO₂, methane, and chlorofluorocarbons in their own business activities; pursue energy efficiency improvements; and make efforts toward protecting the global environment.

• In July 2022, we carried out a survey of our main suppliers on CO₂ emissions, getting answers on the management of CO₂ emissions at 89 of them.
• In February 2023, at a briefing organized by a certain financial institution, Kawasaki reported on the status of its initiatives aimed at the realization of a carbon-neutral, low-carbon society to the 93 persons in attendance, including representatives from 22 of Kawasaki’s suppliers.
• In June 2023, our Robot Business Division held a briefing on initiatives aimed at achieving carbon neutrality for 108 of our suppliers. The presenters provided an explanation of methods for managing CO₂ emissions and initiatives aimed at reducing them, and encouraged working together with suppliers.

Each year, Kawasaki holds workshops for Group procurement divisions to ensure compliance with procurement-related laws and regulations, particularly the Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors (the Subcontract Act) and the Construction Industry Law. Of note, Kawasaki continues to actively promote awareness and knowledge of the Subcontract Act, as outlined below, beyond just its procurement divisions.

• In October 2009, we published a collection of examples of Subcontract Act violations, citing actual cases in which other companies had contravened this law.
• In April 2013, we posted a checklist for compliance self-auditing pursuant to the Subcontract Act on our company intranet. All employees were broadly educated about the checklist which functions as a tool for checking and correcting administrative activities prone to violations of the Subcontract Act.
• Since fiscal 2011 we have held group training sessions every year, mainly for design and manufacturing divisions at our plants and major affiliated companies. A total of about 7,000 employees have received this training so far. In addition, in fiscal 2022 we implemented e-learning training to make as many employees as possible aware of the Subcontract Act; about 18,000 employees have taken this e-learning course so far.

In December 2013, the Kawasaki Group posted its Policy Regarding Procurement of Conflict Minerals on its website. This policy states that the Group has no intention whatsoever of being party to conflicts or inhumane acts in the Democratic Republic of the Congo and neighboring countries through the procurement or use of the tin, tantalum, tungsten, and gold—the so-called conflict minerals—that are produced in these countries.
　We also ask our suppliers to make similar efforts in the Kawasaki Group Sustainable Procurement Guidelines.
　In fiscal 2021, based on customer requests, Kawasaki Motors carried out a survey of not only tin, tantalum, tungsten, and gold but also cobalt in its general-purpose engines business.

Armed groups that repeatedly commit inhumane acts such as killings, looting and sexual violence may derive capital from the four minerals of tin, tantalum, tungsten and gold (known as "conflict minerals") being produced in the Democratic Republic of the Congo and its neighboring countries. As a result, there is a concern that these conflict minerals will lead to an escalation of problems.
　The Kawasaki Heavy Industries Group has no intention whatsoever of being party to such conflicts or inhumane acts through the procurement or use of these conflict minerals in consideration of respect for human rights. Going forward, efforts will be made to tackle the issue of conflict minerals in close liaison with customers and suppliers.

To promote procurement activities that conform to our thinking about sustainability such as compliance and giving consideration to human rights, labor, occupational safety and health, and the global environment, we have created a point of access (supplier hotline) for receiving reports from business partners when they become aware of (or have concerns about) any behavior by any Group officers or employees with whom they are involved that violate any laws or regulations, the Kawasaki Group Code of Conduct, the Kawasaki Group Polices for Material Procurement, or the Kawasaki Group Sustainable Procurement Guidelines.