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  4. Promoting Sustainable and Responsible Procurement

Promoting Sustainable and Responsible Procurement

It is no secret that the world’s natural resources are limited. At Shiseido, we place the utmost importance on the responsible procurement of raw materials and the reduction and reuse of resources. We operate from the perspective of a circular economy, and view environmental conservation and biodiversity as the key to a more sustainable world.

In all our activities, from procurement to production, we also seek ways to strengthen our response to human rights issues. Sustainable and responsible procurement requires close collaboration with all of our partner companies and suppliers. In 2020, we disclosed our medium term target for the procurement of raw materials (palm oil and paper)in consideration of both the environment – such as forest conservation– and human rights. In addition, we expanded our supplier assessment program globally and made efforts to resolve existing issues.

Sustainable Procurement of Raw Materials

The production of raw materials can result in environmental destruction and human rights violations. Raw materials such as palm oil and paper pulp have a large impact on biodiversity, and it is important that companies 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 mica.

By clarifying our own procurement policy, and building a support system in collaboration with other companies, we aim to make a positive change.

Biodiversity

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

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.

As part of our efforts in this area, in 2010, we joined the RSPO (Roundtable on Sustainable Palm Oil), an international non-profit organization. In order to support the sustainable production of palm oil in 2018, we began purchasing RSPO certificates (credits) equivalent to 100% of palm-derived raw materials. And in 2020, we disclosed our medium-term target of reaching 100% sustainable palm oil by 2026.

RSPO

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.

Paper

We actively promote the use of paper for secondary packaging, such as boxes, aiming to responsibly use resources and reduce single-use plastics.

In 2020, approximately 90% of the cartons we used was made of paper. We aim to be using 100% sustainable paper by 2023 — not only for use in secondary packaging, but also product packaging.

We also promoted the switch to environmentally friendly paper in 2020, developing a new base paper, which resulted in a 64% (weight) shift to sustainable paper.*

Cosmetics packaging must satisfy various expectations. It must be strong, environment-friendly, and sophisticated in design. In collaboration with paper manufacturers, we are developing innovative paper packaging solutions that meet such expectation sand even go beyond. We are also promoting the switch to sustainable paper for promotional materials such as product displays, bags, leaflets, and copy paper in our offices.

  • * The total percentage of FSC certified paper and recycled paper is 51% (by weight ).
FSC-certified ELIXIR packaging

FSC-certified ELIXIR packaging

Mica

Mica is used not only in beauty, but across a wide range of industries due to its light reflecting properties and excellent heat resistance.

In 2017, we joined the Responsible Mica Initiative (RMI), which ensures sustainable mica procurement. RMI works with participating companies from a variety of industries to eliminate child labor and forced labor at Indian mica mining sites, and to establish Indian mica as a sustainably produced raw material by 2022.

Responsible Mica Initiative

In 2020, in collaboration with NGOs and the Indian Government, RMI contributed to the improvement of income sources for 1,166 households across 80 villages through alternative employment, such as agriculture and livestock. More than 44%of children who were previously unable to attend educational establishments found regular schooling, and more than 50% of malnourished children received adequate nutrition. Our participation in RMI initiatives focused on two areas: Traceability and Workplace Standards, supporting activities aimed at improving the traceability of the mica supply chain in India, and improving working conditions — including the issue of child labor.

Dialogues with Stakeholders

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.

Afforestation in Nagasaki, Japan

We promoted camellia planting and conservation activities at the abandoned farmlands of the Goto Islands in Nagasaki Prefecture.

Over nine years, 352 Shiseido employees have joined this activity and planted 738 seedlings of camellia japonica across 0.194 hectares of land.

Afforestation in Nagasaki, Japan

Honeybee protection in production sites in France

Many crops rely on bees to be pollinated. But in Europe, there are concerns about the decline in the number of bees*1. At our Val de Loire Factory and Gien Factory (Shiseido International France S.A.S.), we have included the conservation of bees and the ecosystem of the local community in our sustainability plan. Along with setting up beehives, we have banned the use of agrochemicals on the factory premises. About 125kg of honey was produced in only a year from the beehives installed*2.

  • *1:Regarding the bee population, a beehive counts around 15,000 bees in winter and 80,000 in summer
  • *2:The beekeeper gives 600 jars of honey each year, which are distributed to employees
Honeybee Protection in Production Facilities in France

Responsible Procurement

Ethical Supply Chain Policies and Standards

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

We have issued the Shiseido Group Supplier Code of Conduct 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 international human rights experts and people working in raw material producing regions to make sure our actions always rely on expert knowledge.

Shiseido Group Supplier Code of Conduct

The business partners that are subject to the Shiseido Group Supplier Code of Conduct have agreed to the standards. In this code, suppliers are required to accept periodic monitoring through surveys and audits. In the event that any supplier is identified to have violated it, they are requested to implement corrective actions by following guidance.

Shiseido Group Supplier Code of Conduct (Issued in Jun 2019)[ PDF : 876KB ]

Shiseido Group Procurement Policy

We established this policy in 2018 based on positive collaboration with consumers, business partners, and society. Our procurement policy is based on a consumer-oriented perspective, including the following principles:

  • ・we carry out procurement activities to create better products, through co-creation with business partners
  • ・we comply with all relevant laws and regulations, prioritizing respect for human rights and protection of the global environment

Shiseido Group Procurement Policy[ PDF : 136KB ]

Shiseido Group Sustainable Raw Materials Procurement Guidelines

we created guidelines for palm-derived materials and paper, which exacerbate environmental and human rights problems in the countries of origin.

Shiseido Group Sustainable Raw Materials Procurement Guidelines[ PDF : 95KB ]

Overview of our Suppliers and Purchasing Commodities

Purchasing Commodities

Items to be purchased include packaging for our products (cosmetics, personal care products, pharmaceuticals), cosmetic tools (raw materials and processed products such as resin, glass, paper, metal), production materials such as raw materials, sales support tools (POPs, premiums), OEM products, and commissioned manufacturing goods.

Overview of our suppliers

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.

  • *1:Companies belonging to the same corporate group are counted as one supplier. (Tier 1 suppliers only)
  • *2:Each company is counted only once even if it appears in more than one category.

Suppliers by region/category

 suppliers by purchasing category

  • *3:“Others” refers to the sum of suppliers which conduct commissioned manufacturing and/or provide sales support tools. The data includes sales support tools suppliers for Global headquarters only.

suppliers by region (location of suppliers)

Critical Suppliers

Identification of critical suppliers

We identify critical suppliers once a year by the following process:

Critical Suppliers

Number of critical suppliers in fiscal 2020


Suppliers
Tier 1* 250 companies
Non-Tier 1 31 companies
Total 281 companies
  • * Suppliers of procurement departments in all regions and commissioned manufacturing suppliers

Starting New Business with Shiseido

Below is the process followed when we start business with new suppliers.

Starting New Business with Shiseido

Supplier Assessment

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.

  • *1:Joined in August 2017
  • *2:Self-Assessment Questionnaire
  • *3:SAQ is used to assess suppliers that are not a member of either Sedex or EcoVadis.

Supplier audits

We select suppliers to audit, taking into account results of assessment, importance of suppliers and purchase amounts, and other factors. We explain the purpose of our audit and what we are assessing to suppliers and ask them to prepare required documents. During the audit, in addition to onsite inspection, employee interviews are conducted and required documents are verified. When we find issues, we ask suppliers to establish a corrective action plan and confirm whether issues are resolved through the plan.

Shiseido's supplier assessment flow

Shiseido's supplier assessment flow

Supplier assessment results

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.

  • * Sales support tool suppliers with which Global Headquarter, China Regional Headquarter and EMEA Regional Headquarter have business. For EMEA Regional Headquarter, the scope of assessment is partial.

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

  • * Companies belonging to the same corporate group are counted as one supplier.

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


2018 2019 2020 2021 (target) 2023 (target)
% of suppliers assessed
(number of suppliers assessed)*
89%(229) 72%(356) 94%(791) 70% 80%
  • * % of suppliers assessed = number of suppliers assessed / total number of suppliers in scope of assessment

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


2019 2020 2021 (target) 2023 (target)
% of critical suppliers assessed
(number of suppliers assessed)
77%(131) 96% (239) 100% 100%

Identifying and mitigating risks

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.

  • * Due to the spread of COVID-19, meetings were conducted online as a priority.

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

High-risk suppliers 132
Suppliers which received feedback 132
Suppliers which were audited 7
High-risk suppliers which have corrective action plans 31
Suppliers which improved assessment results through feedback and audits 30

Number of audited suppliers in fiscal 2020


High-risk Medium or low-risk
Critical suppliers 2 15
Non-critical suppliers 4 1
Total 6 16

Partnership with Suppliers

Supplier’s Day

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 Global Headquarter and China Regional Headquarter hold an annual Supplier's Day to share purchasing activities and strategies with suppliers. Taking this opportunity, our procurement department in Global Headquarter 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.
In fiscal 2019, 209 suppliers participated in the session held in Global Headquarter, and 89 suppliers in China Regional Headquarter. We respect all our suppliers, who share our credo and join us on the journey for sustainable growth.

Supplier’s Day

Shiseido Suppliers’ Awards

High-performing suppliers in conformity with our purchasing policy are invited to the annual Shiseido Suppliers’ Awards. In fiscal 2019, 43 suppliers participated in the event held at “S/PARK,” which was newly opened in the Minato-Mirai area, Yokohama in April. The top five suppliers were awarded in fiscal 2019 based on QCDEST evaluation. We expressed our gratitude to our suppliers, shared our view for the future and reaffirmed our commitment to forge a strong partnership.

Shiseido Suppliers’ Awards

Shiseido Suppliers’ Awards

Global Purchasing Collaboration and Education for Buyers

Global purchasing collaboration

Every year, we host the Shiseido International Procurement Meeting (SIPM) attended by purchasing leaders from each of our global facilities. We share not only immediate issues but also medium-to-long-term goals, and discuss global purchasing strategies. We also promote the global implementation of sustainability activities through this meeting.

Global purchasing collaboration

Education for buyers

To ensure responsible procurement throughout the company, we proactively provide education on relevant issues mainly to staff members of procurement departments.

Education on sustainability and responsible procurement (December 2019)

Education on sustainability and responsible procurement (December 2019)

Education provided for members of Procurement departments

Date Theme Participants
September 2019 Responsible procurement and supplier assessment programs (internal seminar) EMEA Regional Headquarter : Buyers
October 2019 Business and Human Rights Conference (CRT Round Table Japan) Global Headquarter: Staff in charge of sustainability
November 2019 Labor/human rights audit to suppliers
(external consultant and NPO)
Global Headquarter: Category managers, Staff in charge of sustainability
December 2019 RSPO and palm oil (external lecturer) Global Headquarter: Buyers of raw materials
December 2019 Sustainability and responsible procurement (external lecturer) Global Headquarter: Buyers involved in supplier management
May, October 2020 Opportunities and challenges in sustainability (internal seminar) EMEA Regional Headquarter: Procurement department
November 2020 RSPO and RSPO certified products (internal seminar) Global Headquarter: Buyers in charge of procurement of palm oil
December 2020 Trends in responsible procurement and supplier assessment (external lecturer) Global Headquarter and China Regional Headquarter: Buyers in charge of supplier assessment

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


2019 2020 2022 (target)
Departmental ESG education participation rate 85% 86% 90%

Reporting and Consultation Center for Suppliers

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.

CDP Supplier Engagement Rating

We have been highly praised for our efforts to manage greenhouse gas emissions and reduce risks throughout the supply chain by CDP, an international environmental NGO. In 2020, we were selected for the Supplier Engagement Leaderboard for coming out at the top of CDP’s Supplier Engagement Rating.
Going forward, we will continue to promote activities that help reduce our environmental footprint, in collaboration with our suppliers.

CDP