Sustainable Procurement: Policies and Initiatives by Product Type

Resource Sourcing that Requires Forest Conservation Initiatives

ITOCHU handles each of the following commodities, which require careful consideration of forest conservation initiatives. In addition to the Sustainability Action Guidelines for Supply Chains, the following Procurement Policy establishes our approach to protecting and preserving natural forests our commitment to the sustainable use of natural resources. At minimum the Policy is subject to an annual review, with revisions made as necessary.

Commodities relevant to forest conservation

  • Timber, timber products, raw materials for papermaking and paper products
  • Natural rubber
  • Palm oil

Policy and Management Approach to the Preservation of Natural Forests and the Sustainable Sourcing of Forest Resources

Sustainable procurement policy on natural forests and forest resources

Organizational scope

ITOCHU Corporation and its group subsidiaries

Sustainable procurement policy on natural forests and forest resources
  1. We shall aim to make improvements in the transparency and traceability of our supply chain in order to ensure that we can take necessary measures to prevent sourcing activities that can contribute to deforestation.
  2. We support the conservation and preservation of High Conservation Value (HCV) areas, High Carbon Stock (HCS) areas, and peat areas. Additionally, we are committed to respecting the Community and Social Considerations (free, prior and informed consent – FPIC), and will continually strive to reduce our impact on the environment.
  3. We will not procure from suppliers involved in major environmental and social issues, such as deforestation of areas with high conservation value.
  4. We support the standardization of a reliable forest certification systems and will proactively seek opportunities to prioritize certified products when procuring timber, timber products, raw materials for papermaking, and paper products.
  5. Regarding natural rubber, raw materials for papermaking, and paper products, which requires extensive water use, at minimum we commit to complying with all applicable wastewater laws and regulations. We will also commit to properly treating wastewater to exceed legal requirements where possible and strive to reduce total water consumption by recycling water resources where possible.
  6. In carrying out palm oil-related projects, we will strive to procure from suppliers taking necessary measures to minimize and eliminate chemical substance use, especially those related to paraquat, 1A/1B class insecticides as defined by the World Health Organization (WHO), and chemicals listed in the Stockholm Convention and the Rotterdam Convention.

Items related to forest conservation and the corresponding "Sustainable procurement policy on natural forests and forest resources" are as follows.

Items under the Policy Items related to forest conservation
Timber, timber products Raw materials for papermaking and paper products Natural rubber Palm oil
1. Zero deforestation and traceability

2. Protection and preservation of production areas and consideration for local residents

3. Elimination of suppliers involved in major environmental and social issues

4. Standardization of forest certification systems

5. Consideration for wastewater and water resources

6. Minimization or non-use of chemical substances

In cooperation with our Group companies and suppliers, we will engage in sustainable procurement of forestry resources based on the Sustainability Action Guidelines for Supply Chains and this Policy, especially by taking necessary measures to ensure the traceability of procured items.
In order to promote this Policy, each company and corresponding Group companies are required to conduct a sustainability survey on critical suppliers. If any non-compliance with this Policy is identified, we will conduct supplier engagements to resolve the issue and request measures for improvement. If timely improvements are not made by suppliers, we will re-consider any business agreements with them.
As for the survey results obtained through the supplier survey, we will regularly disclose information to our stakeholders. We will also promote sustainable use of forest resources to the wider society through appropriate communication with stakeholders, particularly our suppliers and customers.

Management approach

Every year, we report and receive approval on our targets and progress made to senior management. We also share suggestions from stakeholders including NGOs, and if any issue is identified, we review our measures and this Policy, as necessary.
Regarding palm oil, procurement based on this Policy is carried out by the Oil, Fats & Cacao Department of the Food Division within the Food Company – this department is therefore also responsible for the compliant procurement of palm oil.
Regarding timber, timber products, raw materials for papermaking and paper products, our Group ESG Managerprovide training to members who handle these products at least once a year. The training aims to educate them on domestic and international trends and issues related to forest resource development and sustainable forest resource utilization.

Wood, Wood Products, Papermaking Raw Material, and Paper Products

ITOCHU is engaged in the procurement, manufacturing, and distribution of materials for pulp and paper products, wood and wood products, and woodchips. In order to ensure the protection of natural forests and sustainable use of forest resources, we aim for 100% use of certified material or material for which advanced management can be verified until 2025.

Celulose Nipo-Brasileira S.A.

[Photo]
Vast plantation of Celulose Nipo-Brasileira

ITOCHU invested in Celulose Nipo-Brasileira, the world's eighth largest manufacturer of commercial hardwood pulp, together with a major Japanese pulp manufacturer and others and sells 1.2 million tons of the company's pulp produced 100% from plantation trees as a worldwide export distributor. Celulose Nipo-Brasileira has obtained Forest Management certification and CoC certification (a certification for management of the processing and distribution processes) from the Forest Stewardship Council (FSC) and handles everything up to pulp manufacturing through sustainable plantation-based forest management. The company plants trees on roughly 130,000ha out of the approximately 250,000ha (about the size of Kanagawa Prefecture) of land it owns to produce pulp. The remaining roughly 100,000ha is left as permanently protected forest or legally protected forest, and they are working to maintain the ecosystem.
They also plant 70,000 saplings of four kinds of trees found in natural forests in the region annually for the purpose of regenerating forests in areas where there have been soil disruptions, landslides or withering of vegetation. These tree planting activities take place on 300ha of land per year. At Macedonia Farm, a natural forest preserve, the company engages in activities to protect endangered birds and ensure that they reproduce, protecting, breeding, and releasing rare wild birds like the "mutum" (a pheasant-like bird).

Metsä Fibre

[Photo]
New Äänekoski Plant commissioned in 2017

ITOCHU has a stake in Metsä Fibre, a world-class softwood pulp manufacturer based out of Finland. Metsä Fibre boasts an annual pulp production capacity of around 3.2 million tons (including the Äänekoski Plant, which was expanded in August 2017 and has begun new operations). They have tapped ITOCHU as the exclusive distributor for their softwood pulp destined for Asian markets. The company manufactures pulp from 100% traceable forest resources of which 80% have received two certifications, namely the Forest Stewardship Council (FSC) and the Program for the Endorsement of Forest Certification Schemes (PEFC).
In Finland, pulpwood growth exceeds consumption, which allows for a long-term, stable supply of pulpwood. Additionally, Metsä Fibre generates electricity in the pulp manufacturing process. What is not used in-house is supplied to neighboring communities, contributing to a reduction of fossil fuel consumption in the area. Through efforts carried out with excellent partners such as this, we will promote the use of sustainable forest resources and continue to promote further strengthening of our business.

Certification of Traceability for Chinese Timber

Since 2013, ITOCHU KENZAI has been working to create a system for certifying the traceability of plywood manufactured in China. In 2017, we were audited by Japan Gas Appliances Inspection Association (JIA), a certification body, and we received certification of timber traceability in our main supply chain. The Timber Traceability Certificate ensures traceability and that timber is managed throughout all processes within the supply chain, from the logging areas to the veneer and plywood factories, by obtaining logging permits and other evidence, auditing factories, observing the logging areas, and other means. With this, ITOCHU KENZAI was able to reliably ensure that no timber from illegal logging is used in around 40% of the plywood manufactured in China for which forest certification has not been obtained.

Sustainability Survey and Supplier Engagement

Every year, we conduct a survey of our suppliers and those of our main business companies in relation to our products. We include suppliers that have been deemed low risk according to the guidelines so that we can engage in continuous dialog with a broader scope of suppliers.
In addition to the sustainability survey, we work to ascertain the situation through on-site inspections and due diligence at those suppliers that have received suggestions from non-governmental organizations and actively urge them to obtain forest certification or certification by a third party agency.

Sarawak, Malaysia
[Photo]
Interview with indigenous community in Anap Muput Forest Management

A non-governmental organization has pointed out problems with illegal logging and human rights in Sarawak, Malaysia. Every year, we work to ascertain the situation through interview surveys of our supplier, the local government, a timber association, human rights lawyers with the human rights committee, local residents, local non-governmental organizations, forest consultants, and others.
We have not found the problems pointed out by the non-governmental organization through these surveys, but to eliminate concern, we have repeatedly requested that the supplier engage in specific efforts. As a result, in recent years, the supplier has actively worked to obtain forest certification, and the number of certified forest areas has increased. Changes have also occurred in the local government in Sarawak, including reinforcement of regulations to eliminate illegal logging and announcement of measures to promote forest certification.

Romanian Supplier (Schweighofer)
[Photo]
Interview with Romania Water and Forest Ministry

Romanian supplier Schweighofer is one of ITOCHU KENZAI's lumber suppliers and was alleged by a non-governmental organization to be engaged in illegal logging. ITOCHU KENZAI called on the supplier to make efforts to eliminate the concern and referred to advice given by the non-governmental organization to select sites to visit. Every year, ITOCHU KENZAI conducts interview surveys with various stakeholders, including local government agencies, industry groups, forest certification organizations, and local non-governmental organizations, to ascertain the situation.
Schweighofer possesses PEFC certification and conducts risk assessments of its supply chain to make sure that no lumber from illegal logging finds its way into the supply chain. In 2016 Indufor, an international forestry consulting firm, certified the effectiveness of this risk assessment. In 2017, the company introduced a timber traceability system called "Timflow" that ensures traceability from all of its timber collecting points to its sawmills for the purpose of eliminating any timber produced by illegal logging from its operations. The following year, they announced an open-door policy to improve communication with non-governmental organizations, allowing representatives from pre-registered non-governmental organizations to visit their sawmills without notice. Through on-site visits, ITOCHU KENZAI was able to verify that timber produced by illegal logging has been eliminated and that efforts to increase transparency have improved year after year.

Performance regarding forest certification and legal compliance

ITOCHU evaluates its performance by classifying its timber and timber products into the following four categories based on forest certification and legal compliance. Category (A) signifies the highest level of sustainable procurement compliance, requiring FSC certification and/or PEFC certification – more specifically, it is defined as "(A) Timber handled by a certified forest supplier or timber approved by a certification body".

Classification based on legality Item FYE 2018 FYE 2019 FYE 2020
Certified materials or advanced management can be confirmed Forest certification system

(A) Timber handled by a certified forest supplier or timber approved as a management material by a certification body (acquired FSC or PEFC certification)

43%

36%

64%

(B) Timber harvested in countries or regions assessed as "Low Risk" based on the forest certification system

36%

44%

25%

Certification of legality in a clean timber method

(C) Timber whose legality has been confirmed by documents proving that it was cut in compliance with the laws of the place of origin*1

18%

17%

10%

N/A

(D) Materials whose legality has been confirmed by "additional measures"*2

3%

3%

0%

  1. Specifically, materials confirmed by an export license, certificate of origin, etc.
  2. Specifically, timber that was confirmed to be in compliance with laws by asking suppliers to provide a distribution channel

Sustainable procurement performance of raw materials for papermaking

All raw materials for papermaking such as chips and pulp handled by ITOCHU have acquired FSC or PEFC certification as "materials handled by certified forest suppliers or materials approved as management materials by a certification body".

Classification based on legality Item FYE 2018 FYE 2019 FYE 2020
Certified materials or advanced management can be confirmed Forest certification system

Timber handled by a certified forest supplier or timber approved as a management material by a certification body (acquired FSC or PEFC certification)

Chips

100%

100%

100%

Pulp

100%

100%

100%

Natural Rubber

ITOCHU is engaged in the business of processing and trading natural rubber. Natural rubber is mainly produced in Southeast Asian countries such as Thailand and Indonesia, and about 70% of it is used for making tires. While the demand for natural rubber is projected to continue growing, internationally concerns are being raised on deforestation and the human rights violations of indigenous people with regard to procurement activities. In its distribution from raw materials procurers to tire manufacturers, natural rubber passes through the hands of many intermediary businesses (such as collectors and transporters), making environmental and social impacts difficult to manage. This is why increasing the traceability and transparency of natural rubber procurement is an increasingly important issue for ITOCHU.
In response, ITOCHU has joined as a founding member of the Global Platform for Sustainable Natural Rubber (GPSNR), which was established in October 2018. We agree on the 12 principles stipulated by GPSNR and cooperate in the development and operation of the Platform's standards.

Participation in the GPSNR

In October 2018, ITOCHU joined the new Global Platform for Sustainable Natural Rubber as the only Japanese trading company founding member. This organization was established by car manufacturers, tire manufacturers and natural rubber processing companies involved in the natural rubber industry. Its members work together throughout their supply chain to establish traceability and achieve higher levels of sustainability.

Initiatives for demonstration of traceability using blockchain

In February 2019, ITOCHU started a trial of a traceability system using blockchain technology to ensure stable procurement and supply of resources on the supply chain of business investments and products handled, and to ensure transparency in their distribution.

The trial test was conducted based on a system designed by ITOCHU Techno-Solutions Co., Ltd. (Headquarters: Chiyoda-ku, Tokyo; President: Satoshi Kikuchi; hereinafter "CTC"), which leveraged the natural rubber raw materials supply chain of PT. Aneka Bumi Pratama (HQ: Indonesial, President: Hisashi Yajima; hereafter "ABP"), a 100% group subsidiary to ITOCHU.

[Figure]
Conceptual diagram of the natural rubber supply chain and this trial test

The content of transactions in the trial are mutually authenticated between the transferees using a smartphone application, and recorded on the blockchain together with the date, time, location information, etc. Ensuring that these data points are gathered makes the distribution of natural rubber up to the processing plant more transparent. In order to encourage and incentivize the cooperation of each business, we will prepare a mechanism allowing to financial compensation for correctly recorded transactions.
ITOCHU aims to achieve sustainable growth through a new era of "Sampo-yoshi" by working on the progressive innovation of business, which constitutes a fundamental policy of our medium-term management plan. We also anticipate that these efforts will contribute to the achievement of the Sustainable Development Goals (SDGs) of the United Nations by 2030 by innovating leading sustainable procurement practices.

Palm Oil

Palm oil has been widely associated to environmental destruction and human rights violations in relation to the development and production of plantations. ITOCHU is extensively engaged in the trade and distribution of palm oil but is not involved in the palm plantation business. Therefore, though we recognize the gravity of social and environmental implication of palm oil, we are engaging in the issue from our position as a distribution player. For example, are a member of the Roundtable on Palm Oil (RSPO) and are working to fulfill our corporate social responsibility by taking responsibility and standing as a bridge between producers and consumers. We are also cooperating in the spread of certified oil other than RSPO, such as MSPO*1 and ISPO*2, in cooperation with industry groups.

In addition to having formulated the Sustainable Procurement Policy for Palm Oil, we aim to preserve natural forests and ensure sustainable consumption of forest resources by promoting transparency in the supply chain and strengthening the sustainable palm oil procurement system.

  1. Malaysian Sustainable Palm Oil
  2. Indonesian Sustainable Palm Oil

Establishing transparency

ITOCHU will inspect its supply chain as a way to fulfil our corporate social responsibility. In doing so, we will identify issues and strive to solve them with the aim to achieve sustainable procurement and supply of palm oil. Our goal is to achieve 100% traceability at the mill level by 2021 and to switch all palm oil procured by the Company to sustainable palm oil*1 by 2025. In particular, we aim to base our procurement on the NDPE principle (No Deforestation, No Peat, No Exploitation)*2.

  1. Sustainable palm oil: palm oil supplied from the supply chain according to RSPO and equivalent standards
  2. No Deforestation, No Peat, No Exploitation (NDPE): zero deforestation, zero peatland development, zero exploitation

Membership to the Roundtable on Sustainable Palm Oil (RSPO)

We joined the Roundtable on Sustainable Palm Oil (RSPO) in 2006, and respect the principles and standards set by the RSPO (such as the Principles and Criteria for the Production of Palm Oil) to promote transparency in the supply chain. We are working to strengthen the sustainable palm oil procurement system by expanding transactions with suppliers of raw material that have improved their traceability.
We confirm priority items and utilize them in procurement through sustainable procurement surveys, including on-site examinations, and direct engagement with suppliers.
In the course of our operations, we regularly review our procurement policy in cooperation with stakeholders such as business partners and experts. Information regarding this matter will be disclosed through the ESG Report, the Sustainability Action Plan, and the Annual Communication of Progress (ACOP).

Please also refer to the disclosed information below regarding ITOCHU's efforts.

Performance data regarding sustainable palm oil procurement

Our goal is to achieve 100% traceability at the mill level by 2021 and to transition all procured palm oil to sustainable palm oil by 2025. The following table shows the current progress information, actual results and target information.

Category Performance Target
2017 2018 2019 2021 2025
Volume of handled palm oil

360,000mt

277,000mt

(Currently gathering data)

<Main suplier>

Malaysia

Malaysia

Malaysia

Malaysia

Malaysia

Indonesia

Indonesia

Indonesia

Indonesia

Indonesia

RSPO Members

9/9 (100%)

10/10 (100%)

100%

100%

Suppliers under NDPE policy

9/9 (100%)

10/10 (100%)

100%

100%

<Certified Sustainable Palm Oil>

RSPO certified sustainable palm oil

0.30%

1.10%

(Currently gathering data)

<Traceability>

Traceable to the mills

99.80%

(Currently gathering data)

100%

100%

Dairy Products, Meat, Marine Products, Fiber Raw Materials

Dairy Products

In terms of the dairy product and supply structure in Japan, the domestic production and supply structure has been established with a focus on Hokkaido. Meanwhile, import opportunities have steadily been increasing. This is due to the formation of the TPP that was established at the end of 2018 and the Japan-EU EPA that is scheduled to commence on February 1, 2019. Currently, Japan imports dairy products from multiple countries and regions – New Zealand, Australia, European countries, North America and South America. The agricultural policies and production structures in each country and region have been reflected in efforts for the sustainable growth production structure in dairy products. Producer organizations and companies have also started efforts toward gradually building a sustainable growth production structure. We are striving to grasp the efforts of major producing areas and major suppliers. We will then work to build close communication and relationships with major suppliers so that it is possible to provide even safer dairy products with greater peace of mind.

Ensuring the safety of raw milk

The most important efforts in securing the safety of dairy products are those to ensure the safety of raw milk. The structure for this is as follows. Raw milk is milked from cows and collected by dairy farmers before being brought to dairy product factories. Antibiotic contamination tests are then conducted at the acceptance stage. Only raw milk confirmed to be safe is used.
Cheese and butter is individually wrapped in cardboard boxes of 10 kg or 20 kg. Meanwhile, powdered skim milk (not including milk powder) is produced in manufacturing factories mainly in 25 kg paper bags. The manufacturing date is printed on these boxes and bags. This means it is possible to trace products up to their date of production in their manufacturing factory.

  • The standards for hormones and antibiotics used in raising beef and dairy cows are stipulated by the relevant organizations of each country. Dairy product manufacturers have established voluntary management rules based on those standards. A check is also performed each time to see whether there are any residual substances other than raw milk in the transportation vehicles used when bringing it from farmers to factories.

Measures to ensure the sustainable cultivation of land

In New Zealand, which has an important position as a supply base for Japan, dairy cows are basically raised with a focus on grazing. Efforts are made on a routine basis from the point of view of improving productivity. For example, dairy cows are raised while regularly changing their field so that these fields do not become ruined.

The development and distribution of grass-fed* butter and other products has started as a new experiment in New Zealand and elsewhere.

  • Grass-fed refers to beef and dairy cows raised only by eating grass. Regular butter is made using the milk of cows raised by eating mainly grains. In contrast to this, grass-fed butter is made with the milk of cows raised only by eating grass or only by eating grass above a certain rate. This has the advantage of being less of an economic burden compared to raising cows mainly on grains.

The Netherlands is engaged in the overall management of its number of breeding cows as a nation. This is being done in consideration of the impact the phosphate contained in the excreta of dairy cows has on the soil.

Meat

[Photo]
Teys Australia Condamine's Cattle Fattening Farm

The Meat Products Department in the ITOCHU Food Company imports and procures raw meat ingredients (beef, pork and chicken) from various countries around the world. It handles pork in the greatest quantities with raw ingredients primarily being procured from North America and Europe. Meanwhile, it imports beef from Australia and the U.S. We have jointly invested in Teys Australia Condamine Pty Ltd. in the cattle fattening business in Australia together with an Australian beef supplier called Teys and Prima Meat Packers.
The following is our basic policy for performing inter-company efforts when procuring raw meat ingredients from overseas: Production suppliers who do business with ITOCHU should be aware of environmental aspects at the production stage. They should take into consideration the workers involved in production. Finally, above all, they should construct production operations including traceability that can guarantee safety and peace of mind.
ITOCHU regularly visits factories that are our supply sources. We do this under a commitment to responsible meat procurement. We establish good relationships through close communication with overseas suppliers.

Ensuring traceability at HyLife Group Holdings

[Photo]
Pork Processing Process

HyLife is capable of supply chain management and coordination in-house because it performs integrated production that includes pig farms, mixed feed factories and pork processing. The company has utilized this production structure to realize a stable supply of safe, high-quality and traceable products with peace of mind. In addition, it is possible to feedback the individual needs of customers to pig farms through such integrated production. The firm has established a specialty program customized for Japan – a program that has received a high appraisal in the market. Currently, it is the number one company in Canada in terms of refrigerated pork exports to Japan.

Teys Australia Condamine's Global Warming Countermeasures

[Photo]
Installed Solar Panels

Teys Australia Condamine introduced 1,034 solar panels in 2015. This has made it possible to generate approximately 506,000 kWh of power annually. Accordingly, approximately 50% of the power used in this facility comes from renewable energy. The introduction of solar power generation has reduced CO2 emissions by approximately 395 tons. Consequently, a reduction in CO2 emissions of approximately 49% has been realized compared with before the introduction of solar power generation.

We also procure beef to be slaughtered and processed from Teys – our joint investment partner in Australia. This firm has formed sustainable operations. It extracts methane gas generated in the slaughter process and reuses it as heat for its factory.

Initiative Participation

Companies in wide-ranging lines of businesses – from producers to retailers – are participating in an initiative called the Global Round Table for Sustainable Beef (GRSB) with the aim of sustainable beef production. ITOCHU has built business relationships with multiple companies participating in the GRSB. We are exchanging information with them on the latest trends.

Performance Data of traceability

The major premise for ITOCHU is to be able to thoroughly trace the products we deliver to our customers back to their producers above all else while considering the safety and peace of mind of food as our number one priority.
We have a 100% "traceback" system for all meat (beef, pork, chicken) produced by suppliers (mainly overseas) and handled by ITOCHU allowing us to trace back products up to their production stage.

Content Performance
2017 2018 2019
Volume of handled meat (tons)*

About 160,000

About 150,000

About 130,000

  • Beef, pork and chicken are 100% traceable back to the production stage

Animal Welfare

The ITOCHU Group raises livestock in a comfortable environment to reduce livestock stress and disease. The following measures have been taken to handle livestock humanely, based on the belief that it will increase productivity and produce safe livestock products.

Teys Australia is committed to ensuring that all cattle are treated humanely.As part of our commitment to animal welfare, all Teys Australia processing facilities operate under the Australian Livestock Processing Industry Animal Welfare Certification System (AAWCS). An independently certified animal welfare program that ensures that livestock under our control (from receipt to humane processing) are managed in accordance with best practice animal welfare standards.
Teys Australia operates its feedlots in strict compliance with the independently audited National Feedlot Accreditation Scheme.

Respecting Animals is a HyLife Core Value and the obligation and responsibility of all employees.
HyLife provides optimal environmental conditions for the animals in our care providing climate controlled housing, nutritionally balanced diets and veterinary animal health oversight.
All employees receive comprehensive training in the proper care and handling of animals and farms are operated in accordance with the Canadian Code of Practice for the Care & Handling of Pigs and are certified under the Canadian Quality Assurance Program.

Marine Products

We mainly handle skipjack and yellowfin as marine products. In Indonesia, we operate the PT. Aneka Tuna Indonesia (ATI) canned tuna factory in a joint venture with partners. We have established voluntary management regulations for tuna. We thoroughly stick to our policy of only procuring skipjack and yellowfin that has been appropriately managed by fishing organizations.

Targets

The acquisition of MSC*1 certification is limited among fishermen for the highly migratory fish of skipjack and yellowfin at present. Under these circumstances, we handle 4,500 tons of MSC raw ingredients per year at present in the trade of skipjack and yellowfin for canned raw material. We are also aiming to encourage fishermen to acquire MSC so that we handle 10,000 tons per year within five years.
The rate of pole and line fished*2 products in our canned tuna handling was 7% in FYE 2014. However, this rate exceeded 14% in FYE 2019. We would like to continue maintaining and expanding this rate with the aim of reaching 20%.
The usage rate and quantity of pole and line fished raw material in ATI more than doubled from 20% at 8,000 tons in 2013 to 40% at 20,000 tons in 2018. It has become one of the few canned tuna factories in the world that uses pole and line fished raw material. We will continue striving to secure, maintain and expand pole and line fished raw material.

  1. The Marine Stewardship Council (MSC) is an international NPO established in 1997 to work on spreading sustainable fishing. Its headquarters are located in London, England.
  2. Pole and line fishing is a method of fishing by catching one fish at a time. It is a sustainable fishing method that does not involve the catch of large quantities of fish at one time. It is said that it is an environmentally friendly fishing method because it is also possible to avoid the bycatch of non-targeted fish.

Sustainability surveys for marine resource suppliers to ensure responsible procurement practices

We regularly visit and survey our suppliers. This is so that we responsibly procure marine resources for all the marine products we handle. We also promote cooperation with various fishing organizations. Every year, those in charge of sales visit and survey 45 suppliers applicable to our internal selection criteria in cooperation with our Food Safety and Compliance Management Office. This is for the regular visits and surveys on our suppliers to responsibly procure marine resources. We also engage in business after confirming that suppliers are appropriate from a viewpoint of ESG.

Regarding bonito tuna, which we handle in vast quantities, in September 2017 we established a voluntary management rule called "Tuna Handling Management Rules", which prohibits procurement from IUU fishing (concerning illegal fishing: "Illegal, Unreported and Unregulated"). We only procure and purchase marine products whose origin is clearly traceable to fisheries that are properly managed by the Western & Central Pacific Fisheries Commission (WCPFC).

Certifications and external stakeholder and initiative participation

[Photo]
Pole and Line Fishing

We acquired distributor certification and chain of custody certificate (CoC)*1 certification from the Marine Stewardship Council (MSC) in March 2018.
We joined the Organization for the Promotion of Responsible Tuna Fisheries (OPRT) in 2012 in the tuna business. This is an organization that was established for the sustainable use of tuna resources. We are now promoting efforts that comply with our aforementioned voluntary management regulations.
ATI is strengthening its handling of pole and line fished raw material– considered to be the most environmentally friendly skipjack and yellowfin fishing method. The need for products made with pole and line fished raw material is growing every year in markets with a high interest in sustainability (e.g., the U.K. and Australia) for the canned tuna market as well. It is our policy to strengthen our handling of pole and line fished products manufactured by ATI.
ATI joined the Indonesian Association of Pole & Line and Hand Line in 2014. It is offering its cooperation such as by providing data. This data is used in the Fishery Improvement Program (FIP)*2. ATI is also cooperating for the acquisition of MSC in Indonesia. Moreover, it joined an international organization called the International Seafood Sustainability Foundation (ISSF)*3 in 2016. The firm is offering its cooperation such as by providing information in the same way as it does with the Indonesian Association of Pole & Line and Hand Line.

  1. Chain of custody certificate (CoC) is certification for processors and distributors. This is to ensure the traceability of MSC certified marine products and other products in the management of processing and distribution processes specified by MSC.
  2. The Fishery Improvement Program (FIP) is a project in which small fishermen finding it difficult to acquire MSC certification and market stakeholders cooperate and work together aiming for sustainable fishing under the goal of future MSC acquisition with MSC compliant fishing methods.
  3. The International Seafood Sustainability Foundation (ISSF) is an organization running under the aim of sustainable skipjack and yellowfin fishing. It was launched in response to an appeal by major canned tuna operators in 2009.

Performance Data related to certification

Item 2013 results 2019 forecast Target (next 5 years)
Bonito tuna for canned tuna Obtained MSC and/or COC certification MSC, COC quantity

N/A

7,600 tons

10,000 tons

MSC, COC%

0%

4%

5%

ATI fishing line ATI Single Fishing Raw Material Quantity

8,000 tons

23,000 tons

25,000 tons

Single fishing tuna product ratio

7%

17%

20%

Textile Raw Materials

In recent years, the trend for sustainability has been gradually penetrating the fashion market. For example, global fashion brands have declared that they will switch to using environmentally friendly materials (e.g., organic cotton, recycled polyester etc.) for the materials they procure as an effort to develop the labor environment in the supply chain and to deal with the disposal of clothing and other problems. This issue is particularly important to us given that ITOCHU was founded as a textile raw materials trading business, which remains a cornerstone of our company to this day as a part of the Fashion Apparel Division. Therefore, in our textile business we have made it our policy to shift our raw materials portfolio to environmentally friendly resources and build traceability capacity from raw materials procurement to distribution to manufacturers. Our target for this policy will be to make 50% of the textile raw materials that we handle traceable and environmentally friendly by 2025.

Organic cotton procurement in India

  • Traceability in organic cotton procurement in India
[Figure]
  • Traceability in the recycled polyester business utilizing the technologies of JEPLAN
[Figure]

When we procure organic cotton in India, we first purchase raw organic cotton that comes with a certificate from a ginning (work to separate the seeds and fibers after harvesting raw cotton) factory in India that has acquired GOTS certification. We deliver that raw organic cotton to spinning factories that have acquired GOTS certification in India or Asia. Finally, we purchase the yarn spun in those spinning factories and sell it to weaving/knitting factories in Japan and overseas. Furthermore, with regards to the traceability of organic cotton, we have implemented measures to leveraging our vast network and experiences to facilitate our cotton farmers in India to shift toward organic farming methods and to support certification acquirements (such as the GOTS certification*) at our cotton mills and ginning factories. Given these initiatives, we have achieved 100% traceability in the organic cotton that we handle among the cotton we have procured during the 3 year transition period.
Leveraging this experience, the "RENU" project started full-scale operation in 2019 and has quickly acquired GRS (Global Recycle Standard) certification for recycled polyester yarn.

  • GOTS certification: a set of comprehensive standards that certifies products made from organic textile. The standards cover the following items: use of certified raw materials and their traceability, control systems to limit or prohibit designated chemical inputs (dyes and auxiliaries) and accessories, separation and identification systems, environmental management, contamination and residue testing, and social criteria (possible sources of information: interview with management, confidential interviews with workers, personnel documents, physical on-site inspection, unions/stakeholders).

Expansion of environmentally friendly materials

[Photo][Photo]
"RENU" project aimed at realizing a circular economy

The Apparel Division is building a value chain that originates with the raw materials for which we have assumed a leadership role. This is part of our attempt to reinvent our businesses for the next generation — the basic policy in our current mid-term management plan. We have been making efforts for several years to brand, commercialize our original raw material brands of natural fibers such as HAMILTON LAMBS WOOL and ONE Cotton.
In October 2018, we agreed to establish a pilot plant for eco-friendly cellulose fiber jointly with the Finnish forest industry leader Metsa Group, and in February 2019, we invested in LYCRA in the United States with Shandong Ruyi Technology Group in China. Furthermore, in the spring of 2019, we launched a project called "RENU", which aims to innovate ways to realize a circular economy – the first product under development through this initiative is a recycled polyester material.
We will continue to accelerate the pace of our cooperation with global companies toward our increasing use of environmentally friendly materials in the future. At the same time, we will work to acquire certification in the spinning, weaving/knitting and sewing processes and to expand internal cross-company business toward establishing branding and traceability up to commercialization – our medium term target.

Performance Data of Organic Cotton Procurement

All organic cotton is GOTS certified and traceable

Item 2015 2016 2017 2018
Organic cotton handled (1,000 kg)

269

449

556

900

Percentage of cotton trade

6%

7%

9%

71%

Traceability of organic cotton

100%

100%

100%

100%

GOTS certification of organic cotton

100%

100%

100%

100%