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 business segment.
As a cross-company body, we hold the Procurement Department Head Meeting, attended also by the director in charge of procurement, once 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 business segment 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. Furthermore, we assess the compliance of our suppliers with both policies through the sustainable procurement survey, and continuously confirm the consistency between both policies and the Group’s purchasing activities for suppliers, thereby endeavoring to avoid conflicts with the demands of our customers and society regarding sustainability.
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 contribution 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, domestic and overseas subsidiaries engaged in material procurement disclose their Sustainable procurement policies and guidelines 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 5,400 companies. We analyze the procurement costs for each item procured at each business segment. Together with these suppliers, we are promoting sustainability initiatives throughout our entire supply chain.

Significant suppliers are selected in accordance with each business segment’s products based on various standards. These benchmarks include the scale of procurement above a certain transaction amount, the importance of the parts and equipment in key products, and the existence or otherwise of alternative suppliers. The selection is also informed by the results of a survey on the status of sustainability initiatives in line with the Kawasaki Group Sustainable Procurement Guidelines, which stipulate requirements related to ESG and other issues.

^* As of March 2024

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. The fiscal 2023 survey was implemented following a revision of the content of the survey based on the fiscal 2022 revision of the guidelines.
This survey is comprised of a total of 65 questions, comprehensively covering each item of the RBA Code of Conduct in a format designed to inquire into suppliers’ initiatives in each of nine major categories. These categories include corporate governance regarding sustainability, compliance, consideration for human rights, labor, and occupational safety and health, consideration for the global environment, and harmonious co-existence with society. In fiscal 2023, we identified compliance and human rights as priority management categories and performed assessments on the promotion status regarding these categories based on the results of the survey. We then formulated corrective action plans mutually agreed between the two companies for some suppliers that had failed to achieve Kawasaki’s required levels, subsequently supporting the implementation of these plans and conducting on-site assessments aimed at confirming the status of sustainability-related initiatives where needed. Going forward, we will continue to conduct surveys and provide support for corrective action plans to further enhance sustainability initiatives throughout the supply chain.

In fiscal 2023 we implemented a survey of major suppliers in Japan and received replies from 533 companies, which included 531 significant suppliers.

The Kawasaki Group procures materials across a wide range of fields organized into four 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. We also provide opportunities for direct briefings on Kawasaki’s approaches to sustainability; inform suppliers of the important issues in supply chain management, such as human rights and the environment; and request that suppliers enhance 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.

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.
• In April 2024, we held a briefing on carbon neutrality for our main suppliers, with 102 suppliers (175 persons total) attending. The President appeared in person to give overviews of the Kawasaki Group’s initiatives and guidelines toward the realization of a carbon-neutral society. Meanwhile we are also promoting collaboration with our suppliers, such as those involving requests that they undertake initiatives to reduce their CO₂ emissions.

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.

Each year, the Group holds workshops for 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 2023 we implemented e-learning training to make as many employees as possible aware of the Subcontract Act; about 19,000 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 2022, based on customer requests, we carried out a survey of tin, tantalum, tungsten, and gold, etc. in its aero engines and general-purpose engines business. The survey confirmed that 220 smelters were certified under the Responsible Minerals Assurance Process (RMAP).

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.

Supplier Hotline

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 Policies for Material Procurement, or the Kawasaki Group Sustainable Procurement Guidelines.