Structures and Systems

Supply Chain

Against a backdrop of an expansion in our business areas, ITOCHU's supply chain has become wider and more complex. There is now a further need for risk management concerning human rights, labor and the environment in the procurement of raw materials, producing areas, intermediate distribution and regions of consumption in addition to in the processes directly managed by us. We pay particular attention to the on-site management of suppliers who account for a relatively high share of our purchases. We view our consideration and sense of responsibility for these areas as matters of great importance to be addressed with high priority.
ITOCHU has established the Sustainability Action Guidelines for Supply Chains. We strive to prevent the occurrence of problems by conducting investigations and reviews as below. If we discover a problem, we aim for improvement through dialogue with the concerned supplier.

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Figure of Supply Chain Management Promotion

Sustainability Surveys

Since FYE 2009, we have set the seven core subjects of ISO26000 as essential survey items to understand the actual conditions of suppliers. Following on from that, each company and applicable group company selects important suppliers based on certain guidelines (e.g., high risk countries, products handled and monetary value handled). The sales representatives of those companies and representatives from overseas subsidiaries and operating companies then visit those suppliers to conduct interviews. They also conduct sustainability surveys in a questionnaire format (sustainability checklist).

Sustainability Checklist

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Supply Chain Communication Handbook

The Sustainability Checklist is used to conduct supplier surveys on their management of relevant sustainability risks. The Checklist is based on the seven ISO26000 core topics (organizational governance, human rights, labor practices, environment, fair business practices, consumer issues, community involvement and development) and is supplemented by department and product specific issues that we identified as relevant to our business and by extension our suppliers (see table below for our list of supplementary topics. Furthermore, based on opinions provided by external subject matter experts, we have constructed the survey questionnaire to consist of 19 core items centered around human rights and labor and environmental topics particularly associated to high sustainability risks – these items are our priority in supplier engagements.

Department and product specific supplementary sustainability items
Procured resource type Additional survey items
Paper, wood-chips, timber, timber products
  • Implementation of forest conservation measures
  • Third-party certification
Livestock products (meat)
  • Implementation of food safety measures
  • Management of traceability
Textile (including raw materials)
  • Management chemical substance
Agricultural products (including palm oil)
  • Management of traceability
  • Management of chemical fertilizers and pesticides
Seafood
  • Management of traceability
  • Management of fisheries

We have also prepared a handbook on communication with suppliers. We are using this to inform our employees of how to communicate with suppliers. At the same time, we have set up a check system that enables those in charge to understand concretely the management situation in terms of the environment, human rights, labor practices and corruption prevention in important suppliers to give advice on making improvements. We will continue to conduct surveys and communicate with suppliers in the future to improve the awareness of our employees and to seek understanding and implementation from our suppliers.

Example Excerpt from the Handbook

Prohibition on forced labor: Companies must not force employees to work

Forced labor means all labor forced on a person against his or her will. Examples include restrictions on an employee's freedom to leave his or her job until he or she repays a debt to the company or restricting an employee's freedom to leave his or her worksite under contract. Forced labor may be identified by asking employees what their work shifts are like, whether they have break times and whether they are able to eat meals. It may also be ascertained by observing their facial expressions. In a worst-case scenario, people are deprived of the freedom to live their lives; they have to live in a dormitory on the premises of the company's factory and are not allowed to go outside those premises. It is also effective to check whether there are employees who have come to work from areas far away or other countries in a company. Employers must be prohibited from taking the originals of passports, IDs and work permits because this can lead to force labor.

Reference

It is necessary to check for forced labor in factories in Japan as well as in emerging nations. In recent years, Japan's Technical Intern Training Program (TITP) has been criticized by some from overseas. Accordingly, please also check whether suppliers in Japan employ anyone from overseas and whether there are problems in terms of working hours and wages.

FYE 2020 Sustainability Surveys

We conducted surveys on a total of 316 companies, including 72 suppliers of overseas offices and group companies, in FYE 2020. We did not discover any serious problems requiring an immediate response from those results. We have also checked the prompt improvement measures and countermeasures taken by our business partners on problems raised as concerns at the time of the survey. We will continue to seek understanding for the concept of ITOCHU from our business partners and to communicate with them in the future.

FYE 2020 Results Applicable Criteria No. of Companies Surveyed Survey Items
Textile
  • High risk countries
  • Over a certain amount of money
  • Handling of certain product groups

50

・Main Questions Common to All Companies

  1. Organizational governance: Establishment of a responsibility-taking structure and internal report system
  2. Human rights: Risk assessments of human rights violations in business, abolition of child labor, forced labor, harassment and discrimination, and payment of appropriate wages
  3. Labor practices: Working hour management, health and safety management, and worker health
  4. Environment: Waste and drainage treatment, handling of hazardous substances, and climate change and biodiversity efforts
  5. Fair operating practices: Prevention of corruption, information management, prevention of intellectual property right infringements and a sustainable procurement policy
  6. Consumer issues: Quality control and traceability
  7. Community involvement and development: Dialogue with consumers and neighboring residents

・Department and product specific supplementary sustainability items

  • Paper, wood-chips, timber, timber products: implementation of forest conservation measures; third-party certification
  • Livestock products (meat): implementation of food safety measures; management of traceability
  • Textile (including raw materials): management chemical substance
  • Agricultural products (including palm oil): management of traceability; management of chemical fertilizers and pesticides
  • Seafood: management of traceability; management of fisheries
Machinery

15

Metals & Minerals

20

Energy & Chemicals

39

Food

102

General Products & Realty

85

ICT & Financial Business

5

Total

316

 

In addition to the supplier survey based on our Sustainability Checklist as introduced above, our Textile Company conducted a domestic supplier survey in FYE 2019 on their management of technical intern trainees. For more information, please refer to Foreign Technical Intern Trainee Survey on Working Environment.

The Sustainability Management Department also visits and surveys important suppliers together with external experts as necessary.

Results of survey for department and product specific supplementary sustainability items
Procured resource type No. of Companies Surveyed
Paper, wood-chips, timber, timber products

64

Livestock products (meat)

19

Textile (including raw materials)

6

Agricultural products (including palm oil)

4

Seafood

22

Human Rights Audits in the Poultry Industry in Thailand

Inspection of the CPF Saraburi Factory

We conducted a human rights audit targeting foreign workers in the Saraburi Factory (a chicken meat processed product factory) of Charoen Pokphand Foods Public Company Limited (CPF) — one of the main suppliers of the Food Company — accompanied by external auditors.
Recent years have seen an increase in cases where Japanese companies with Thai firms in their supply chain have been warned by NGO groups about human rights violations of foreign workers in the livestock and fishing industries in Thailand. We checked the factory for human rights risks in our supply chain through this audit.
This factory (slaughterhouse and food processing site) employs 3,400 Cambodians — equivalent to approximately 50% of its workers. That makes them an important part of the factory's labor force. We checked a number of items in this audit. These included the extent of signage in Cambodian in facilities in the factory, a check of the evacuation routes, the attendance management situation, and the personal storage situation of passports and work permits. In addition, we also randomly chose some Cambodian employees actually working there and interviewed them about their actual working conditions.
This audit did not find any violations of the human rights of foreign workers, and reaffirmed there is sufficient consideration for human rights and the proac-tive approach CPF takes toward sustainability.

CPF has developed a safe working environment for its foreign workers.

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CPF Saraburi Factory
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Those from CPF Who Cooperated with the Audit
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Interview with a Cambodian Worker on His Actual Working Conditions
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All Signs in Cambodian on Fire Prevention Facilities
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Advice Not to Over-stack Auxiliary Feedstock

Regular Visits and Surveys of Food Processing Factories

The Food Company has been regularly visiting and surveying the food processing factories of its overseas suppliers since FYE 2012 in regards to imported foods under the initiative of the Food Safety and Compliance Management Office. In FYE 2019, we visited 196 overseas suppliers and deployed preventive measures to ensure safety in food transactions. We established a China Food Safety Management Team in Beijing in January 2015. With this, we have set up a structure to be able to audit our Chinese suppliers. We conducted regular audits and follow-up audits on 57 companies in FYE 2019. Please refer to Responsibilities to Customers to learn about our efforts in detail

Response to Suppliers in Violation of This Policy

When we have confirmed a case in which there has been a violation of the intent of this policy, we request corrective action from the applicable supplier. Together with this, we conduct an on-site investigation to give guidance and improvement support as necessary. We made 18 requests for correction to suppliers with an inadequate response to human rights in our surveys in FYE 2019. We are continuing to make requests in this way to non-compliant suppliers. If it is judged that correction is difficult even though we have made continuous requests for correction, we deal with this under a stance of reviewing our business with that supplier.

Business Investment Management

The business activities of companies in which we invest must recognize and deal with their possible impact on the environment and society. To that end, we strive to understand ESG risks and work on preventative activities. We perform risk assessments on ESG in general through the utilization of a checklist and visits and surveys to formulate the necessary measures. These are continuously reviewed and improved in the framework of our environmental management system.

ESG Risk Assessment for New Business Investment Projects

It is compulsory in new business investment projects for the division making the application to use the ESG Checklist for Investments to evaluate the project in advance (perform due diligence). The division making the application looks at whether policies and structures have been established from a perspective of ESG. It also looks for the risk of a significant adverse effect on the environment, violation of laws and ordinances, and complaints from stakeholders. This checklist consists of 33 check items. These include elements of the seven core subjects* in ISO26000 — the CSR international guidelines.
The division making the application also then refers to review opinions based on risk analysis from relevant functional divisions (management divisions). If there are any concerns, it requests additional due diligence from external specialist organizations for matters requiring a professional point of view. The project is then only undertaken upon confirming that there are no problems in those results.

  • Organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development

Group Company Fact-finding Investigations

We have continued to conduct on-site visits and surveys in group companies since 2001 to prevent environmental pollution. We visited and surveyed a total of two companies in FYE 2020. We did this together with external experts upon consideration for the environmental and social risks of each company. We have completed investigations into a total of 285 offices as of the end of March 2019.
These investigations inspect the factory and warehouse facilities, the situation of drainage to rivers, the environmental law and regulation compliance situation, labor safety and human rights, and communication with the local community in addition to holding a question and answer session with management. We identify problems or demonstrate preventative measures. We then check to see whether the situation has been corrected.

Visit and Survey Report: DOLE THAILAND Fact-finding Investigation

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We visited and surveyed the Hua Hin Factory of DOLE THAILAND, a company which manufactures pineapple and other fruit cans and pouches in Thailand, on the 7 and 8 December, 2016. We performed a detailed check concerning the environment and labor safety related risk management and legal compliance situation (e.g., soil pollution, waste, chemical substance management and safety measures) based on the findings of external experts well-versed in the local laws and regulations. We confirmed that these matters are being appropriately managed. In addition, we confirmed that the company takes measures important in ESG — including the establishment of an internal occupational health committee, the setting and steady implementation of environmental targets, guarantees of purchases from farmers under contract, and regular dialogue with the local government. The company has appropriately responded to advice relating to measures to prevent accidents resulting from the operation of food processing machinery and is working to further improve its management level.