One priority in the 2012 Mid-Term Management Plan is to expand our global procurement ratio, particularly by stepping up purchasing in emerging nations. This will reinforce our global competitiveness and operational foundation. For global procurement, we respect the human rights and the basic work rights of everyone in the supply chain. We collaborate with suppliers in promoting CSR by sharing guidelines and communicating proactively.
Using the 2012 Mid-Term Management Plan, we intend to raise the Group’s global procurement ratio from 36 percent to 50 percent by fiscal 2012. We therefore formulated the Hitachi Group Medium-Term Procurement Strategic Plan. The key aims are to establish global partnerships to create Group procurement strategies, to stabilize the supply of materials, and to reinforce CSR and sustainability within the supply chain. In order to accelerate these Group-wide activities, we set up the Global Procurement Promotion Department within the Corporate Procurement Division to boost the global procurement ratio. We are continuing to reinforce our responsiveness to CSR risk, a growing concern as the global supply chain expands.
We revised the Hitachi Guidelines for Procurement Activities in June 2009 in line with the United Nations Global Compact.* These guidelines are the basis of our procurement activities. The revision added the elimination of discrimination in employment and occupations as well as all forms of child and forced labor. We will share global supply chain issues within the Group and reinforce procurement in line with the Hitachi Guidelines for Procurement Activities.
The Hitachi Group values partnerships and an open-door policy with suppliers. We strive to maintain and reinforce mutual understanding and trust over the long term. We also employ worldwide perspectives, choosing suppliers in line with the principles of free competition and equal opportunity. One special priority is to cultivate and expand the pool of suppliers in the emerging nations that we have positioned as major markets.
Following a 2009 initiative, we dispatched another team in October 2010 to seek new suppliers in Vietnam. We gathered information from the Japan External Trade Organization and other countries’ trade bodies on companies that were the focus of our research. We are reinforcing procurement in Southeast Asia, China, South Korea, India, and Eastern Europe to build our Social Innovation Business. We also set up a procurement unit in Brazil in April 2010 to broaden our South American supplier network.
Guidelines on Supply Chain Sustainability
As a founding member of the advisory group for the United Nations Global Compact on Sustainable Supply Chains, we support initiatives to build and foster sustainable supply chains that follow UN principles on human rights, labor, the environment, and anti-corruption. In fiscal 2010, we helped formulate guidelines on supply chain sustainability, supply chain Web sites, and on-line assessment and study tools for organizations participating in the UN Global Compact. We will keep serving as an opinion leader by supporting these UN activities, drawing on our expertise from our global operations in dealing with sustainability issues, such as human rights and the environment.
In fiscal 2009, we produced the Hitachi Group Supply-Chain CSR Deployment Guidebook, which conforms to the guidelines of the Japan Electronics and Information Technology Industries Association. We distributed this publication both throughout the Group and to our suppliers. We plan to evaluate progress on CSR among suppliers worldwide to reinforce mutual understanding and communication about social issues.
In keeping with our commitment to monozukuri craftsmanship, we use green procurement in our supply chain.
We developed Green Procurement Guidelines to secure the understanding and cooperation of suppliers in conservation and in reducing environmental burdens when developing and making their products. There are six specific supplier requirements: (1) conserve resources, (2) conserve energy, (3) pursue the 3Rs,* (4) reduce packaging, (5) rigorously manage chemical substances, and (6) fully disclose information. For requirements (1) through (4), we present case studies of initiatives that have benefited both the environment and suppliers because they have cut costs and improved product functionality. For requirement (5), we specify the chemicals used in products from suppliers and have them register those substances in the Green Procurement System.
New MMM Club General Meeting
To promote green procurement, we ask suppliers to develop environmental management systems that third parties can certify. Suppliers with these certifications become Green Suppliers. With these Green Suppliers, we launched the New MMM Club,* where members exchange information on advanced environmental technologies, regulations, and outstanding environmental initiatives by suppliers. We will continue to encourage suppliers to lower environmental risk and costs, while we keep building win-win relationships with these suppliers through green procurement.
Hitachi, Ltd. business sites and Group companies held a supplier orientation on REACH compliance. To ensure compliance with Europe’s REACH regulations, they focused on surveys of chemical substances in products.
Suppliers found the event stimulating. We explained our response and other REACH-related initiatives to the over 900 participants at the fiscal 2010 gathering.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in the United States in July 2010. One provision under the Act obliges companies with securities registered in the U.S. that use in their products any conflict minerals produced in the Democratic Republic of Congo (the “DRC”) and adjoining countries (together the “DRC countries”) to report this to the U.S. Securities and Exchange Commission (SEC). The aim of the provision is to cut off revenues from armed groups that are engaged in violence and other serious breaches of human rights in the conflict-ridden DRC countries. Pursuant to the Act, the SEC plans to promulgate regulations requiring that companies using any conflict minerals in their products disclose in their annual reports whether these conflict minerals originated in the DRC countries.
Hitachi is committed to the pursuit of responsible procurement practices and has no intention, directly or indirectly, of abetting the human rights violations identified in the DRC countries. Accordingly, we are working with Group companies and suppliers to boost supply chain transparency and to ensure that the minerals we procure do not finance or benefit armed groups committing human rights violations.
