Supply Chain Management

Basic Approach

To earn the trust of international community while operating business globally, both the Group and the entire supply chain must responsibly take actions. Our Group's major businesses are currently positioned in the midstream of the supply chain. We believe that promotion of their activities together with suppliers in the upper stream will lead to the sustainable development of the whole supply chain.

Measures for Supply Chain Management

IBIDEN Group Supply Chain CSR Guidelines

IBIDEN disclosed requests to suppliers based on its basic purchasing policies in 2008, and issued "the IBIDEN Group Green Procurement Guidelines" in 2009 as a system for green procurement, designed to procure parts and materials that feature reduced environment impact. In addition, IBIDEN published "the IBIDEN Group Supplier CSR Guidelines" in 2011. These CSR guidelines generally cover the requirements of the industry organization RBA's code of conduct, and they are regularly revised in line with developments in the international community and industry organizations. Currently, in order to meet the demands of the international community, which aims for sustainable development, we have changed the name of the Guidelines to the "IBIDEN Group Supply Chain CSR Guidelines" as a policy to be addressed by the entire IBIDEN Group and its supply chain. We made the foregoing guidelines accessible to our suppliers in Japan and overseas, seeking their compliance. These two guidelines are also available under Procurement Policy on our company's website.
Furthermore, the Company provides training to the person in charge in the procurement division in order to ensure the implementation of supply chain management under the CSR Guidelines. This training provides education on the CSR Guidelines, etc., which are the expectations for the supply chain, facilitates understanding of the recent global, social issues, risks and opportunities surrounding the supply chain in terms of the environment, such as climate change, and those surrounding society and governance, such as human rights and labor, and deepens awareness on how the Company should manage such issues, risks and opportunities.

Communication and Cooperation with Suppliers

We conduct CSR surveys for suppliers to check the actual situation of suppliers and promote improvements. If deemed necessary for any of the suppliers to improve on any important items, we conduct audits and site visits to confirm the status and request that such supplier make corrections and improvements as needed. We ask new suppliers to pledge to comply with the CSR Guidelines, and check the status of ethical efforts including labor, environment, safety and anti-corruption of suppliers using the CSR survey described below before commencing business transactions.　
Furthermore, we manage risks in the supply chain by evaluating the questions in the CSR survey using a five-level rating system based on each company's responses.
Also, the IBIDEN Group controls the whole supply chain, not limited to the suppliers from whom we procure materials. In Japan, with regard to contractors and dispatched workers, labor management is becoming complicated by various factors such as the increased number of foreign workers. Amid such circumstances, risk management of the supply chain has become increasingly crucial for us. To ensure the soundness of the supply chain, we periodically share information through personal interviews and confirm the current status in cooperation with our suppliers. We also hold presentations on ESG initiatives for suppliers to explain the Group's ideas and the background to our initiatives, including changes in the business environment, and convey what we expect of suppliers in terms of ESG. We will continue to make efforts to address matters that need to be implemented, and to strengthen the cooperation system with suppliers toward solving social issues through continuous communication with our suppliers.

Confirmation of Efforts Made by Our Suppliers

Our company, after considering risks such as the contents, amount, importance of the transactions and impact on ESG (environment, society, governance), has specified important business partners from among materials suppliers, process contractors, on-site construction contractors, and labor dispatch companies with which we have conducted business. For all specified important business partners, we conduct a CSR survey every year to confirm the status of their efforts. (The survey targets cover approximately 50% of all transaction amounts.) As a result of the surveys, if any suppliers have items for which they have not sufficiently conducted compliance activities, we request them to submit an improvement plan and ask them to improve their activities. As an example, in the case where any suppliers ask a new employee to submit his/her health certificate at the time of employment, we request that these suppliers eliminate the procedure as it may lead to discrimination. In addition, especially for important suppliers, we have confirmed and improved the actual efforts by directly visiting the actual sites.
In FY2022, we conducted a CSR survey on about 300 suppliers with the goal of eliminating business partners with high risks of serious human rights violations related to child labor and forced labor. As a result, we did not confirm any applicable business partners or incidents leading to serious human rights violations.

IBIDEN Suppliers' Compliance Counter

We set up a compliance counter for our suppliers to which suppliers can report any compliance problem including legal violation, fraud and human rights violation while dealing with the Company. As with the compliance counter for our internal employees, information will be handled with the utmost care for privacy and the supplier will never suffer prejudicial treatment for contacting the counter. As a separate function from this counter, we also installed a consultation counter for suppliers so that they can express their opinions or seek advice on problems in a more unreserved manner. Through these initiatives, we have put an environment in place to facilitate communication with our suppliers.
As a result of our efforts to ensure that suppliers are well informed on the compliance counter and the consultation counter, the recognition and use of such services by the suppliers are progressing well. We will continue working to make these counters known to every supplier at briefing sessions for suppliers toward achieving early detection and resolution of issues.

Responsible Sourcing of Resources

Illegal mining of resources in conflict areas and high-risk areas has become a major international issue as it abets human rights violations and environmental destruction. The Group is very concerned about the issue of responsible sourcing of conflict minerals and is addressing the situation with a sense of social responsibility toward the products it offers.
Our "CSR Guidelines" clearly state that the suppliers should refrain from illegal mining in conflict areas as well as procuring resources that may support human rights violations. The Company tries its best to avoid contributing to illegal operations and human rights violations by not utilizing minerals illegally mined in conflict areas. Furthermore, we will conduct reasonable investigations into the mineral supply routes and disclose the findings in good faith.

Procedure for Supply Chain Control

Responding to the issue of responsible sourcing of resources is carried out mainly by the division in charge of ESG Promotion in cooperation with the division in charge of purchasing. The division in charge of ESG Promotion consolidates information collected by the division in charge of purchasing, confirms and analyzes the content and compiles the status of use of resources in which the Company is involved.^*1 The business administrative division accepts inquiries from the outside and provides information after obtaining approval of the Group Manager in charge of ESG Promotion.
The Company carries out its activities by referring to the OECD Due Diligence Guidance. We have been sharing with its suppliers the issues involving responsible sourcing of resources as well as the Company's approach during a briefing session. We also conduct supplier surveys to verify their supply routes, including the identification of smelters and refiners. Furthermore, we conduct sequential visits at some of our suppliers' facilities and other related refining companies to explain the extent of the effort as well as verify the supply routes and their traceability (history of materials, parts, and process).The Company uses CMRT^*2 and EMRT^*3 of the RMI^*4 in its investigations into subject material supply routes, and asks suppliers that use subject minerals to update their data on a regular basis.
Moreover, when conducting CSR surveys annually, we clearly demand that suppliers observe the CSR Guidelines, including those related to responsible sourcing of minerals, and obtain consent from the suppliers in writing.

*1：In addition to tin, tantalum, tungsten and gold, we conduct surveys on cobalt.
*2：CMRT: Conflict Minerals Reporting Template
*3：EMRT: Extended Mineral Reporting Template. A survey template for reporting on cobalt and natural mica.
*4：RMI (Responsible Mineral Initiative): An international organization with over 350 member companies and organizations that promotes procurement of responsibly sourced minerals.

Actual Situation of the Supply Chains

Although the products that IBIDEN supplies from its Ceramics and other businesses do not contain the subject minerals, some of its IC Package Substrates and printed circuit boards from its electronics business contain tin and gold. In FY2022, we conducted annual due diligence surveys on suppliers continually and verified all smelters from which minerals supplied by our suppliers were derived. Tin was mainly derived from smelters in Southeast Asia, while gold was derived from ores coming from refineries of mainly Japanese recycling manufacturers. The conflict minerals we used have been verified, by a third-party organization, to be derived from smelters/refiners that are compliant with the Conflict Minerals Free Program of RMI or another equivalent program (as of July 2023).
The Company can thus declare that no evidence has been found that the minerals we use are derived from mines that play a part in illegal mining in conflict zones and high-risk areas. We will continuously implement risk management to avoid sourcing minerals from mines that play a part in conflict and human rights violations within our supply chain by updating information on the supply chain on a regular basis and promoting the use of certified smelters.