ºÚÁÏÍø

Companies are required to carry out socially and environmentally conscious business activities throughout the entire supply chain. In addition, in order to ensure a stable supply of products, it is necessary for them to make continuous efforts to identify and mitigate sustainability risks in the supply chain. In the spirit of coexistence and co-prosperity, we are strengthening cooperation with business partners such as raw material suppliers, manufacturing contractors, subcontractors, trading companies and wholesalers, and promoting “sustainable procurement” initiatives with them to contribute to the realization of a sustainable society and to increase the corporate value of both parties under the responsibility of Cooperate Officer in charge.

Sustainable Procurement Program

Our sustainable procurement is carried out by the following fourth-step scheme.

(1) Explanation of our sustainability policy and sustainable procurement implementation program to suppliers ^*1

(2) Receipt of a signed agreement from suppliers to comply with the "ºÚÁÏÍø Global Code of Conduct for Business Partners"

(3) Monitoring and evaluating the sustainability performance of suppliers using EcoVadis third-party evaluation platform ^*2

(4) Improvement of the sustainability of suppliers through feedback of the assessment results via interviews

• ^*1

  We conduct sustainable procurement program with suppliers by narrowing down targets considering business relevance, like transaction values, history of previous sustainable procurement program.

• ^*2

  A comprehensive corporate social responsibility assessment platform provided by EcoVadis SAS. The EcoVadis assessment program consists of assessments of the environment, human rights and labor, ethics, and sustainable material procurement, covering the items of the Code of Conduct. As part of our supplier assessment program, we conduct self-assessments using the EcoVadis evaluation program. In order to continuously monitor the progress of sustainability improvement, we judge the degree of risk by the EcoVadis score. For suppliers which are below a certain score, we are asking the improvement of the weak points of sustainability. We also request suppliers to re-evaluate their performance after a certain period of time according to the degree of risk determined based on the evaluation score (for low-risk suppliers, re-evaluation period is 3 years).

PSCI: Pharmaceutical Supply Chain Initiative

It makes sense for both pharmaceutical companies and suppliers to tackle sustainability issues and share the information and the results in the whole industry. In January 2021, we joined PSCI, a global non-profit organization that aims to promote responsible procurement of supply chains in the pharmaceutical industry.

ºÚÁÏÍø Global Code of Conduct for Business Partners

The minimum requirements for business partners are summarized in the ºÚÁÏÍø Global Code of Conduct for Business Partners (hereinafter referred to as "Code of Conduct"). It sets the standards for legal compliance, ethics, human rights and labor, health and safety, environment, as well as management system. The Code of Conduct complies with the PSCI Principles that is the Pharmaceutical Industry Principles for Responsible Supply Chain Management issued by the PSCI.

Promoting Sustainable Procurement

Supply chain of production sites in Japan

FY2020-FY2023 Initiatives

For the supply chain of our plants in Japan, we have started sustainable procurement from FY2020 for Tier-1 suppliers of major direct materials (including raw materials for pharmaceuticals, manufacturing contractors and subcontractors) in Japan and overseas, and for Tier-2 suppliers upstream (raw materials suppliers) if the Tier-1 suppliers are wholesalers or trading companies. During the four years through FY2023, we held 5 briefing sessions for sustainable procurement via online, which were attended by 203 suppliers in Japan. In addition, 28 major overseas suppliers were individually addressed. To date, we have received signed agreements to comply the Code of Conduct from 135 Tier-1 suppliers (75.7% on a trading volume basis). As for Tier-2 suppliers (manufacture companies when Tier-1 suppliers are wholesalers/trading companies), we received agreements to comply the Code of Conduct from 68 of the 143 targeted companies.

The number of suppliers that participated in the EcoVadis sustainability assessment was 95 Tier-1 suppliers (73.1% on a trading volume basis) and 48 Tier-2 suppliers. As a result of the evaluation, no company was classified as high risk based on our EcoVadis rating scoring criteria for overall score or individual score of human rights, environment and ethics. We aim to raise the level of sustainability throughout our supply chain through engagement with suppliers, and conducted individual interviews with 31 suppliers over the three-year period from FY2020 to FY2023. In the interviews we have shared improvements and promote corrective actions based on mutual understanding.

FY2024 Initiative Plans

We plan to continue holding briefing sessions for sustainable procurement to deepen our suppliers' understanding of the importance of sustainability and ºÚÁÏÍø's policies. At that briefing, outside experts will be invited to speak about the growing demand for sustainability initiatives in the international community and the progress of environmental and human rights legislation.

We also started sustainable procurement for our group companies in FY2023 in Japan.

Supply chain of overseas production sites

FY2022-FY2023 Initiative

Regarding the supply chain of our overseas plants, we have started sustainable procurement for major Tier-1 suppliers of direct materials at the Vizag plant in India, the Suzhou plant in China, and the Bogor plant in Indonesia. We have received agreements to comply the Code of Conduct from 56 suppliers of the Vizag plant and 19 suppliers of the Suzhou plant. Coverage on a trading volume basis (excluding transactions within the ºÚÁÏÍø Group) is approximately 94.0% in the Vizag plant, approximately 59.9% in the Suzhou plant, and approximately 89.4% in the Bogor plant including suppliers whose agreements have already been received at the head office in Japan. EcoVadis evaluations were completed for 31, 12, and 1 companies in the Vizag, the Suzhou, and the Bogor plants respectively. As for the Hatfield plant in the U.K., we received agreements to comply the Code of Conduct from Tier-1 suppliers of direct materials at the time of contracting.

FY2024 Initiative Plans

Based on the results of the EcoVadis evaluation, 2 suppliers were classified in Vizag and one in Suzhou that are considered high risk based on our EcoVadis rating scoring criteria. To strengthen engagement, we will prioritize to request improvements to suppliers which was classified high risk in overall score or individual scores, including human rights and environment and high need for improvement in our criteria, through individual interviews.

We also plan to start a sustainable procurement program for overseas factories such as the Hatfield plant in UK.

Sustainable procurement of indirect materials

In FY2023, we continued to promote activities in order to increase the effectiveness of the items specified to be complied with the "ENW Global Procurement Standards" prepared in FY2022 for all procurement activities of ºÚÁÏÍø group companies. Regarding indirect materials, in the case that the transaction amount exceeds a certain standard, we have sequentially requested that our business partners agree to our ``Code of Conduct'' when renewing or newly contracting. In FY2024, we plan to continue "improving the effectiveness of compliance with procurement standards" and "requesting consent to action guidelines for indirect materials".

Supplier Selection / Collaboration with Suppliers