Promoting Sustainable and Responsible Procurement

Shiseido is committed to sustainable manufacturing across the entire value chain. To ensure that our consumers can choose our products with confidence and peace of mind, we believe that sustainable and responsible procurement is crucial in the supply chain of cosmetic raw materials, which face environmental and social challenges. Among the raw materials, we are particularly focused on transitioning to certified and highly sustainable materials for those that have been assessed as having a significant impact on biodiversity.

We are taking a top-down approach to ensure transparency and clearer raw material traceability. We combine this with a bottom-up approach involving the implementation of the Supplier Assessment Program, which applies the PDCA cycle to identify and resolve environmental and social issues such as human rights, to create a sustainable supply chain built on responsible procurement.

Taking responsibility for addressing various sustainability challenges, such as human rights violations, biodiversity, and the efficient use of resources in raw material procurement, contributes to enhancing the long-term resilience of Shiseido's raw material procurement and the entire supply chain. We present a procurement policy, code of conduct, and guidelines to our suppliers to ensure responsible procurement. We are working to clarify the traceability of raw materials that are believed to have a negative impact on human rights and the environment so that issues can be identified and resolved.

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) and we request that suppliers ensure they are NDPE compliant. The Shiseido Group Sustainable Raw Material Procurement Guidelines clearly state that both environmental and social issues, such as human rights, must be taken into account in ensuring responsible procurement.

Due to its light-reflecting properties and excellent heat resistance, mica is used in a wide range of industries, including cosmetics. However, it has been pointed out that mica sourced from India, used in cosmetics, may be associated with child labor during its mining.
Shiseido has been a member of the Responsible Mica Initiative (RMI) since its establishment in 2017, in order to effectively handle human rights issues within the supply chain of mica sourced from India.
RMI aims to eliminate child labor and forced labor at mining sites in mica-producing countries to establish mica as a sustainably and responsibly produced raw material. In collaboration with non-governmental organizations, the Indian Government, its member companies, and others, RMI implemented community empowerment programs during the seven years from 2018 to 2024. Specifically, this program helped to improve the incomes and livelihoods of approximately 91,100 people from approximately 16,500 households in 180 mica-dependent villages. RMI initially focused on two states in India. Currently it is implementing initiatives in Madagascar as well.

Sourcing mica produced in India from RMI member companies allows us to confirm that there are no human rights issues. We will continue to strive to procure mica sourced from producers with no social responsibility issues.

Shiseido’s business activities rely on nature's rich biodiversity.

Through a TNFD analysis, we have examined the relationship between our business and biodiversity and identified raw material procurement as the area of greatest impact, as our dependence and influence on terrestrial ecosystems is particularly high. The findings of this analysis have been disclosed in the Shiseido Climate/Nature-related Financial Disclosure Report.
To promote biodiversity conservation globally, we implement corporate-led initiatives in each region while also encouraging brand-specific activities that reflect each brand's unique identity.

In Japan in 2022, we began nature conservation activities on Mt. Ibuki^*1, an area where medicinal herbs have been cultivated for centuries. In addition to opening our own medicinal herb garden and cultivating herbs, we are working alongside the Reiho Ibukiyama Association―which works to protect the nature around the mountain—to restore vegetation and preserve the abundant nature in the mountain’s foothills. In 2023, to make full use of unused herbs from Mt. Ibuki, we developed herb bath powder SOYU jointly with Matsuda Chemical Industries. We used this product as a reciprocal gift in crowdfunding for nature conservation activities on Mt. Ibuki. In addition, extracts from Japanese ENMEI herb cultivated in a medicinal herb garden are incorporated into the Future Solution LX series within our brand SHISEIDO.

Shiseido engages in a wide range of biodiversity protection activities through many of its brands and business operations in regions.
Since 2019, brand SHISEIDO has been implementing the "SHISEIDO BLUE PROJECT," a global initiative to protect the oceans under the theme "Respect for the Ocean.” To help create more beautiful oceans, the brand has been working continuously with Shiseido teams in many different countries and regions, local communities, and NGOs on beach clean-ups, dune planting, and other environmental activities. In its sixth year, 2024, on World Oceans Day, June 8th, we conducted beach clean-up activities and conservation efforts for marine life and ecosystems in the Mediterranean across 9 locations in 5 countries.

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 be compliant with 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 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 2024

Tier 1 Suppliers Assessment

In 2024, we expanded the categories of suppliers that undergo the Supplier Assessment Program and started assessing indirect material^*1 suppliers, in addition to the program of direct material and POSM^*2 suppliers.

For direct material and POSM suppliers, we conducted corrective actions in 2024 for three high-risk suppliers whose corrections were not completed by the end of 2023. We also conducted the Supplier Assessment Program globally for 35 significant Tier 1 suppliers according to the degree of risk and importance to our business. One supplier was identified as high-risk in the self-assessment. The necessary corrections were made by the suppliers and confirmed through third-party audits.
For indirect materials, in preparation for starting self-assessment in 2025, we conducted risk screening for approximately 20,000 companies globally in 2024. As a result, we identified 156 companies that will be subject to self-assessment^*3.

Assessment of Upstream Suppliers（Tier 2 supplier and beyond）
We also implement the Supplier Assessment Program for upstream suppliers (Tier 2 supplier and beyond), in addition to Tier 1 suppliers. Due to the large number of upstream suppliers, we made a prioritization and based on this, we defined the target suppliers that would go through the assessment program.
Specifically, important manufacturing suppliers that our strategic suppliers (Tier 1 and Tier 2) identified are in the scope. We then requested our strategic suppliers to confirm the risks of these manufacturing suppliers using EcoVadis or Sedex.
As a result, we completed an assessment of 220 upstream suppliers in 2024 and found that none of them was categorized as high-risk. Furthermore, the one supplier categorized as high-risk in 2023 was no longer a high-risk supplier in 2024. This was confirmed through a third-party audits.

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 across the Shiseido Group, 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. The Vice President of the Procurement Department of the EMEA Regional Headquarters is a member of the RBI's steering committee, which is its highest decision-making body.