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 issues such as human rights.

The production of raw materials may lead to environmental destruction and human rights violations. Raw materials such as palm oil and paper have a large impact on biodiversity, therefore it is important for companies to procure materials that are produced under sustainable conditions.

In 2020, we published our medium-term targets for the sustainable procurement of palm oil and paper, and we are in the process of switching to more sustainable raw materials. We are also strengthening our efforts to solve issues related to the mining of mica. As for mica, by clarifying our own procurement policy and building a support system in collaboration with other companies, we aim to make a positive change.

We rely on natural resources for the production of cosmetics, and we recognize that the activities of the Shiseido Group have a considerable impact on the biodiversity of our planet — from the procurement of raw materials, through sales and distribution, to the disposal of our products.

In recent years, environmental destruction has led to a rapid loss of biodiversity. We recognize this as an issue that must be addressed throughout the entire value chain. We support zero deforestation and are working to conserve and restore biodiversity.

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 forest soil into the atmosphere. We are also actively engaged in the conservation and restoration of activities for biodiversity through our brands and regional businesses.

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.

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.

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 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.

Items to be purchased include direct materials such as raw materials and packaging for our products, sales support tools, OEM products and contract manufacturing goods.

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 a 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.

For new suppliers, we conduct a self-assessment^* from the perspective of sustainability (human rights, occupational health and safety, environment, and business ethics) using either Sedex (Supplier Ethical Data Exchange), EcoVadis, or our original Self-Assessment Questionnaire (SAQ). We start business with new suppliers after conducting supplier assessment, confirming that they are not high-risk and then agree to the Shiseido Group Supplier Code of Conduct.

For existing suppliers, we continuously confirm compliance with the Shiseido Group Supplier Code of Conduct using the above assessments. We categorize suppliers into three groups according to the degree of risk: low-risk, medium-risk, and high-risk. If a supplier is categorized as high-risk, we conduct third-party audits.

During third-party audits, employee interviews and verification of required documentation are conducted. High-risk suppliers are then requested to implement corrective action plans, and in the event of critical non-conformance, we conduct further third-party audits to confirm correction status. If issues are not corrected within a set period, we consider suspension of business.

* About self-assessment tool

Since 2018, we have strengthened our supplier assessment program and expanded the scope gradually from a category, country, and Tier (a measure of the distance of a supplier from companies).

From a category perspective, we assess suppliers which provide direct materials, limited sales support tools, OEM suppliers, contract manufactuiring suppliers, and from a geographical perspective, we conduct the assessment globally.

From a Tier perspective, we cover suppliers not only in Tier1 but also strategic Tier2 suppliers.

Our activities in 2021

Due to logistic difficulties arising from the spread of COVID-19, we were only able to conduct the third-party audits of 5 suppliers in 2021. In total, we identified 18 issues and requested that the relevant suppliers correct them. Furthermore, we conducted further third-party audits by which we confirmed 12 of the issues had been remedied. As for those which had not been corrected, we will continue to monitor the progress.

Furthermore, in 2021, we conducted supplier visits and verified documents online to prove if issues were corrected, on top of third-party audits. Through these activities, we endeavored to understand suppliers’ issues and corrective action status.
Please see Our activities in 2021 for the details of status of remediation of high-risk suppliers.

To keep pace with the changing times and respond to social requirements, Shiseido considers it important to communicate our concept of procurement with business partners in a timely and accurate manner.
Therefore, with the aim of widespread dissemination of the procurement policy, the procurement departments in the Global Headquarters and China Regional Headquarters hold an annual Supplier's Day to share purchasing activities and strategies with suppliers.
Taking this opportunity, our Global Headquarters procurement department promulgates Shiseido’s procurement policy, various tasks, and requests in the fields of raw materials, packaging, and indirect materials, and responds to questions and requests from business partners.