Supply Chain Management

Working toward a sustainable supply chain, in FY2023 we established our Sustainable Procurement Policy, setting out the Group’s basic approach to procurement. On the basis of that Policy we have drawn up the Sustainable Procurement Guidelines, in order to share the Group’s thinking on building a sustainable supply chain with our business partners. The Guidelines were distributed to business partners in FY2024, and we are aiming to ensure that Zeon’s approach to sustainability and our strategy for related initiatives are disseminated throughout the supply chain. In addition, to promote understanding and internalization of the Guidelines within the Company, we continue to conduct training sessions and briefings for procurement personnel to enhance their understanding and share key points for practical implementation.

We conduct regular surveys of our existing business partners in order to understand the status of their sustainability initiatives and to assess potential risks. We use the Zeon Corporation CSR Procurement Self-Assessment Questionnaire (SAQ), which the Company developed based on the common SAQ provided by the Global Compact Network Japan (GCNJ). The purchasing departments for raw materials, other materials, and logistics select the suppliers that together account for the top 80% of procurement value, as well as suppliers considered to present elevated human rights or other sustainability-related risks. In FY2024, the relevant departments distributed SAQs to 140 suppliers, of which 134 (96%) completed and returned the questionnaire. For the six nonresponding suppliers, we reviewed sustainability information on each company’s website and found no apparent major risks at present.

Based on the survey results, we analyzed the risks associated with each supplier and clearly identified areas requiring improvement.

We provide all suppliers that completed the common SAQ with a feedback sheet based on the analysis described in section 3. The sheet includes scores for each assessment area, including human rights, labor practices, and environmental protection, as well as the overall average score, a comparison with the previous survey, and an overall evaluation. In this way we support our business partners in gaining an objective picture of their own progress and putting it to use in the continuous improvement of their CSR activities. We also conduct on-site assessments and feedback interviews with suppliers that score relatively low on the common SAQ and may present higher CSR risks, as well as suppliers handling raw materials considered particularly high-risk from a CSR perspective. During the interviews, we explain the importance of sustainable procurement, confirm the status of initiatives based on the common SAQ, and request improvements where necessary. The average score of the five companies that underwent on-site assessments and feedback interviews increased substantially from 283 out of 900 points in FY2022 to 488 points in FY2024.

Comparison of percentage scores between FY2022 and FY2024

In FY2024, we also conducted feedback interviews with 11 companies. Through the dialogue summarized in the table below, we are advancing continuous improvement initiatives.

As part of the due diligence described above, we monitor overall changes in common SAQ percentage scores and the progress of companies with low scores. As necessary, we conduct on-site assessments and additional feedback interviews to support improvement. Through these and other efforts, we advance sustainability risk mitigation and work to strengthen our sustainable supply chain.

Zeon Group conducts due diligence on new business partners before commencing transactions. The review covers environmental and social issues, including human rights and labor, as well as corruption risks such as bribery. Zeon Group uses the same SAQ as it uses for existing partners to assess environmental measures, including greenhouse gas reduction and chemical pollution prevention, and initiatives concerning respect for human rights, occupational health and safety, legal compliance, and anti-corruption. This process helps identify potential environmental, social, and governance risks. In addition, Zeon Group conducts standard transaction reviews covering quality, price, delivery, and supply stability and determines whether to proceed from a comprehensive perspective. If issues are identified before business begins, Zeon Group engages in dialogue as necessary and encourages corrective action and improvement, thereby supporting the development of a sustainable supply chain.

We participate annually in the GCNJ Supply Chain Subcommittee and gain diverse insights through our involvement. We also actively contribute to preparing and publishing the Subcommittee’s deliverables and incorporate the resulting insights into our initiatives.