Promoting Sustainable and Responsible Procurement

At Shiseido, we utilize the world’s natural resources to develop products and operate our business. We understand these resources are limited, and as such, we place the utmost importance on the sustainable and responsible procurement of raw materials at every stage of the supply chain. This includes the reduction and reuse of resources from the perspective of environmental protection, biodiversity, and in support of a circular economy. In all our activities, we also work to address and strengthen our response to other sustainability issues, such as human rights.

Shiseido’s business activities rely on nature’s rich biodiversity.
In recent years, many scientists and non-governmental organizations have warned of rapid biodiversity loss. As a result, from both a species conservation and sustainable business perspective, companies are being called upon to ensure transparent information disclosure regarding the relationship between business and the natural environment and to engage in biodiversity conservation activities.
Generally, in raw material production areas, there are concerns over not only the loss of biodiversity caused by overexploitation but also violations of the human rights of the people working there.

At Shiseido, we have analyzed the relationship of our business with terrestrial, freshwater and marine biodiversity and found that our business has a significant dependence and impact on terrestrial ecosystems, especially in the procurement of raw materials. In particular, palm oil and paper have a material impact, so companies are required to be proactive in taking measures. In 2020, we published our medium- to long-term targets for the sustainable procurement of palm oil and paper, and we are currently in the process of switching to more sustainable raw materials.
For the procurement of palm oil and paper, we support the principles of the No Deforestation, No Peat, No Exploitation (NDPE). We request suppliers to ensure compliance with NDPE as stated in the Shiseido Group Sustainable Raw Materials Procurement Guidelines.
We are also strengthening our efforts to solve issues related to the mining of mica. By clarifying our own procurement policy and building a support system in collaboration with other companies, we aim to create positive change in the mica mining industry.

At Shiseido, we use the Taskforce on Nature-related Financial Disclosures’ (TNFD) framework and the LEAP Approach to analyze risks and opportunities around our business activities' dependence and impact on nature. To fulfill the responsibilities of business site managers, we requested MS&AD InterRisk Research & Consulting, Inc., which has TNFD members, to conduct detailed surveys focused on rare species' habitats and reserves and the status of water resources in areas around our sites, including factory premises. We analyzed them from the perspectives of preciousness and importance (identified sensitive locations and material locations). We also analyzed them by means of a Life Cycle Assessment for the purpose of assessing indirect impacts given via the value chain. For raw materials originating from agricultural products, which were identified as a factor with a significant impact, we converted the value of ecosystem services by pollinators, such as honey bees, into monetary values and thus visualized the level of our dependence on biodiversity in procurement. We summarized and disclosed results of these analyses in a Shiseido Climate/Nature-related Financial Disclosure Report in 2023.

Based on the results of the analyses we conducted, going forward we will drive sustainable business activities which are in harmony with nature and biodiversity by working together with suppliers, external experts, and other stakeholders, with a strong awareness that recovering and regenerating biodiversity is essential.

Bees play an important role in the pollination of crops. There are concerns around the declining population of honeybees. So our Val de Loire and Gien factories in France have incorporated the protection of honeybees and the conservation of ecosystems into their sustainability plans. As well as setting up beehives onsite, both factories prohibit the use of agrochemicals on factory grounds. In 2023, the factories’ beehives produced around 179 kg of honey.

Due to its light-reflecting properties and excellent heat resistance, mica is used in a wide range of industries, including cosmetics. In 2017, Shiseido joined the Responsible Mica Initiative (RMI), which aims to eliminate child labor and forced labor at mining sites in the mica-producing countries to establish mica as a sustainably and responsibly produced raw material. We endeavor to ensure responsible procurement of mica produced in India, which has risk of human right issues such as child labor, by sourcing from RMI member companies and confirming that there are no human right issues.
In collaboration with non-governmental organizations, the Indian Government, and its member companies, among others, RMI implemented community empowerment programs in 180 mica-dependent villages during the six years from 2018 to 2023. This program supported activities, such as helping to improve incomes and livelihoods of approx. 95,000 people from approx. 19,500 households in the villages.
We will continue to strive to procure mica sourced from producers with no social responsibility issues.

At Shiseido, we strive to grow our business as well as stimulate the growth of the societies in which we work. But we want this growth to be sustainable and responsible. In all our activities, we seek ways to prevent human rights problems and preserve the environment.

In recent years, as social and environmental issues have become more serious, companies are strongly urged to not only comply with the laws and regulations of each country, but also respect international treaties and conventions and work toward the realization of a sustainable society and world throughout their supply chains. To this end, Shiseido has established standards and policies for procurement.

We have issued the Shiseido Group Supplier Code of Conduct and the Shiseido Group Procurement Policy and conduct supplier assessments and monitoring on a regular basis to ensure an ethical supply chain. In addition, the Shiseido Group Sustainable Raw Materials Procurement Guidelines have been enforced across the Group to ensure the procurement of sustainable raw materials (e.g., palm oil and paper) on a global scale.

We strive to share and resolve issues with our stakeholders and liaise with wide-ranging experts such as international human rights experts and people working in raw material producing regions to make sure our actions always rely on expert knowledge.

Our procurement policy is to respect all our suppliers as well as ensure sustainable procurement taking society and the environment into account. This is because we aim to provide safe products with high quality which satisfy our customers.

We state a policy to create social value with suppliers in addition to economic one such as cost and quality. We define social value as fair transactions, compliance with laws and regulations, respecting different cultures and set of values, respecting human rights and protection of the environment.

To actively promote more sustainable and responsible procurement together with our suppliers, we revised the policy and announced it in February 2022. In the new Procurement Policy, we formulated requirements for our suppliers regarding the environment and human rights as well as introducing a strict, objective risk identification and correction process through third-party audits, clearly stating that we will evaluate our suppliers from the perspective of sustainability.

We joined The United Nations Global Compact and took this opportunity to establish the Shiseido Group Supplier Code of Conduct. This code of conduct articulates norms related to human rights, compliance with laws and regulations, labor practices, protection of intellectual properties, protection of confidentiality, protection of the environment and fair transactions. We request all suppliers who have transactions with us to comply with these standards.
To ensure sustainable procurement together with our suppliers, we regularly conduct supplier assessment and the supplier assessment program, which includes corrective actions after the assessment.
In the event that any supplier is identified to have violated the code of conduct, they are requested to implement corrective actions, and we support and educate them.

We take actions to resolve issues of raw materials that are determined to have a high probability of serious environmental and human rights issues in the country of origin, such as switching to materials with third party certification of zero involvement and joining international initiatives.

In particular, palm oil-derived raw materials, paper and mica cause deforestation and labor issues which have been frequently revisited. Therefore, we announced targets and measures to resolve the issues and set out a guideline to ensure sustainable procurement.

We identify strategic suppliers once a year by the following process

Our aim is to create a sustainable supply chain built on responsible procurement and to minimize risk across the entire supply chain. To do so, we are promoting the implementation of the Supplier Assessment Program.

At Shiseido, we implement the program based on the Shiseido Group Procurement Policy which was revised in 2022. We don’t work with suppliers, if they are categorized as high-risk by the assessment and don’t correct non-conformances identified by audits.

We conduct a self-assessment for all suppliers when starting business from the perspective of sustainability (human rights, occupational health and safety, environment, and business ethics) using either EcoVadis, Sedex, or our original Self-Assessment Questionnaire (SAQ) ^*1.
We start business with new suppliers after conducting supplier assessments, confirming that they are non-high-risk and then agree to Shiseido Group Supplier Code of Conduct.

For existing suppliers, we continuously confirm compliance with Shiseido Group Supplier Code of Conduct using the above assessments.
We screen significant suppliers^*2 based on their degree of risk and importance to our business to prioritize assessments. The screening process considers the risks of suppliers (ESG risks, risks specific to country, industry, commodity), spend, QCDST^*3 performance, etc.

Activities in 2023

Tier 1 Suppliers Assessment
In 2023, we conducted the Supplier Assessment Program globally for all 860 Tier 1 suppliers (categories: direct materials, OEM products, contract manufacturing goods, and sales support tools). It was since 2020 that we conducted the program covering all Tier 1 suppliers. As a result, we completed the self-assessment of all 860 suppliers^*1.

Assessment of Upstream Suppliers（Tier 2 supplier and beyond）
Same as previous year, we assessed five Tier 2 strategic suppliers in 2023, and none were categorized as high-risk. In addition, we expanded the assessment scope and began to assess upstream suppliers (Tier 2 supplier and beyond). First, we requested our strategic suppliers (Tier 1 and Tier 2) to identify important manufacturing suppliers that they work with and confirm the risks of these suppliers using such as EcoVadis and Sedex etc. As a result, we completed an assessment of 169 upstream suppliers in total and identified one high-risk supplier. Together with our Tier 1 and Tier 2 strategic suppliers, we will continue identifying suppliers to assess and correct the issues of the high-risk supplier.

Shiseido invites the top management of suppliers that have shown high performance to Shiseido Suppliers' Day, in order to share information about Shiseido's Medium-Term Strategy, policies on procurement activities and expectations of suppliers. 2021 was the first time the Shiseido Suppliers' Day was held online globally. As part of this event, we requested the understanding and cooperation of suppliers, explaining our sustainability medium-term targets and action, in addition to describing what we expect from them in terms of human rights, the environment and society.

To implement sustainable and responsible procurement, Shiseido provides various training directed at employees of procurement departments from perspectives including human rights, occupational health and safety and the environment.

Shiseido has been a member of the Responsible Beauty Initiative (RBI) since 2022. RBI is an initiative related to sustainability in the cosmetics industry. Through the sharing of best practices among member companies and discussions about issues that affect the entire industry, RBI works to improve sustainability throughout the supply chain.