Promoting Sustainable and Responsible Procurement

The planet’s ecosystems are the basis of our lives and industries. They support the economy with food production, water sources, and tourism, and are also a source of bioactive substances and biomimicry which can be used to create new beauty products. We rely on natural resources for the production of cosmetics, and we aim to sustain harmony with nature, using approaches based on sustainability . We believe that materials that have fulfilled their role in products should be returned to the Earth in a harmless manner.

In addition to our values of quality, safety, and efficacy, we take a holistic approach by anticipating possible issues in our entire global supply chain. We believe it is important to anticipate changes that can affect the environment and society to realize our value of sustainability.

Preserving the Earth’s biodiversity is critical. Rainforests are a treasure trove of biodiversity and must be protected from unsustainable wood pulp and palm oil procurement. We are pursuing initiatives to ensure the future of ecosystems and are working to mitigate climate change by minimizing the release of carbon accumulated in rainforests into the atmosphere.

Palm oil is a highly versatile raw material used in a variety of products, from food to cosmetics. Consumption has been increasing year by year, and it is considered to be one of the main causes of rainforest destruction in Asia. As well as environmental issues, such as forest conservation and biodiversity, there are also human rights issues associated with palm oil production areas. Therefore, sustainable and responsible procurement is essential.

To make the switch to RSPO-certified sustainable palm oil (physical supply chain options, identity preserved, segregated, and/or mass balance), the relevant teams in our global and regional headquarters worked together to compile a list of all targeted raw materials, created a roadmap toward 2026, and developed an implementation scheme. We collaborated with suppliers regarding the timing of the switch to certified palm oil content in raw materials. We then began the implementation scheme, moving away from raw materials with a high palm oil content to certified raw materials based on RSPO’s physical supply chain model.
In order to use these certified raw materials, we acquired RSPO Supply Chain Certification System (SCCS) at all of our factories. We also asked our suppliers to acquire the certification as they handle certified raw materials.

Since 2019, we’ve been part of the Japan Sustainable Palm Oil Network (JaSPON)，and the palm oil working group of the Consumer Goods Forum (CGF), an international industry group consisting of food and consumer goods manufacturers and retailers, in order to solve issues relating to palm oil by strengthening collaboration with other companies.

Through these activities, we will contribute to the promotion of sustainable palm oil procurement and consumption, and to the resolution of environmental and social issues related to palm oil.

In order to ensure sustainable and responsible procurement and respect for human rights in the course of our business activities, we work with various stakeholders to discuss environmental and social issues, share information, and create solutions.

●Working with NGOs/NPOs and oil palm smallholder farmers

To understand human rights issues in palm oil procurement, we participated in the Stakeholder Engagement Program in 2019. This program was held in Indonesia and hosted by Caux Round Table, Japan. Through conversations with NGOs/NPOs and oil palm smallholder farmers, we deepened our understanding of the human rights risks, abuses, and labor issues involved in palm oil production. In order to be a company that fulfils our responsibility to human rights, we will act on these discussions by setting up an ethical supply chain.

●Working with human rights experts

In October 2019, we had a series of talks with World Benchmarking Alliance/ Corporate Human Rights Benchmark, the leading research company, Verisk Maplecroft, and Rishi Sher Singh—business and human rights experts and supply chain experts in India. Their experts advised us on key areas and elements we should investigate in our company. We are currently working to implement this knowledge through our supply chain following the results of our Self-Assessment Questionnaire.

Our relationship with our suppliers is based on the following philosophies stated in the Shiseido Group Procurement Policy: “Building a Good Partnership,” “Fair Purchasing Transactions,” “Performance of contract”, “Promoting sustainable procurement”, and “Respecting diverse values”.

We purchase materials for our products from over 900 suppliers^*1,2 spanning countries and regions.

We assess our suppliers every year with a purpose to build a sustainable supply chain and ensure responsible procurement. Our target is to eliminate high-risk suppliers, and we assess particularly critical suppliers as a priority.

Before entering into business with a new supplier, credibility, business policy and attitude, level of confidentiality, and other important factors are thoroughly reviewed. We then sign a purchase agreement only with those who consent to the Shiseido Group Supplier Code of Conduct. After starting business, we evaluate their efforts related to sustainability and risks once a year using one of the following methods: Sedex^*1, EcoVadis, or Shiseido SAQ^*2,3.

Based on results of this assessment, we categorize our suppliers into four groups; low-risk, medium-risk, high-risk, and non-assessable. To those ranked as high-risk, we provide feedback and request that they implement corrective action plans. Furthermore, given the assessment result and significance of suppliers, we conduct a third-party audit or visit selected suppliers. If we cannot evaluate a supplier due to insufficient information or response, we ask them to supplement the information or response accordingly.

Until fiscal 2018, we assessed suppliers of Global Headquarter which provide product materials, sales support tools and OEM suppliers. In fiscal 2019 , we expanded our scope and started assessment in EMEA Regional Headquarter.

In fiscal 2020, we expanded the scope further. From a category perspective, we assessed suppliers which provide product materials, sales support tools^*, OEM suppliers, commissioned manufacturing suppliers and from geographical perspective, we conducted the assessment globally.

Given the expansion of the scope, we revised our KPIs and targets.

We assessed 791 Tier 1 suppliers^* at an assessment rate of 94%. Of Tier 2 critical suppliers, we assessed 15 suppliers.

(KPI1) % of suppliers assessed (number of Tier 1 suppliers)

(KPI2) % of critical suppliers assessed (number of Tier 1 suppliers)

In fiscal 2020, 132 suppliers were categorized into high-risk and main risks are not conducting evacuation drills and inspections by health and safety committee, lack of company policy etc. We explained challenges and requested improvements to all the high-risk suppliers via supplier visit or online meeting^*. Suppliers made corrective action plans such as conducting regular health and safety inspections, establishment of sustainability department and enactment of company policy. We confirmed that issues were resolved through the assessment.

Furthermore, 22 suppliers were audited. Most were critical suppliers with risks. Through these audits, we identified issues with certain suppliers in relation to regular inspection of machinery, and management of chemical substances. We requested those suppliers to correct the issues within a determined period.

Within 12 months after our feedback and audits, levels of 30 suppliers were revised from high to medium or low. Of Tier 2 critical suppliers, a total of 15 suppliers were also assessed, with none categorized as high-risk.

Actions towards high-risk suppliers in fiscal 2020

Number of audited suppliers in fiscal 2020

(KPI) % of employees in procurement departments who participated in ESG training

Protecting human rights, and compliance with laws that protect people’s rights, are critical to everyone. In 2013, we set up the Business Partner Hotline to deepen our understanding of human rights compliance at our suppliers; promote fair transactions; and nurture a culture of transparency. When we are made aware of a compliance violation, either by email or other documents, we deal with it appropriately and rapidly. In 2020, there were no reports of non-compliance.