Sustainability | GovernanceSustainable Procurement

Sustainable-procurement education

The procurement department has created an e-learning course titled "Sustainability and CSR" that is available to all employees. This course aims to promote understanding of the importance of sustainable procurement among procurement stakeholders.

Course: "Sustainability and CSR"

1. 1. What sustainability means
      The role of sustainability, procurement, and purchasing
   2. What CSR (corporate social responsibility) means
      The positioning of CSR and the role of procurement and purchasing
      Establishing purchasing ethics—CSR in procurement and purchasing
   3. Risk management in procurement and purchasing
      The causes of procurement risk
      Assumptions associated with risk—Assumptions regarding frequency of occurrence, nature of impact, scale of impact
      Preparation during normal times—Prevention; preparation for emergency response

Additionally, to promote the reduction of CO₂ emissions in Scope 3, we organized webinars for procurement department stakeholders both domestically and internationally, featuring lecturers from CDP. These webinars highlighted the importance of collecting primary data on suppliers' CO₂ emissions.

Furthermore, in 2024, we plan to hold training sessions for in-house CSR field auditors, inviting lecturers from third-party organizations.

Membership of the RBA

In February 2020, the TDK Group joined the Responsible Business Alliance (RBA), ^* the world’s largest industrial coalition dedicated to CSR in the global supply chain. Accordingly, the TDK Group made a commitment to society that it fully supports the RBA’s vision and mission and, in accordance with the RBA’s code of conduct (labor, health and safety, environment, ethics, management systems), will continuously improve the human rights of workers, health and safety, and the environment in the TDK Group and primary suppliers.
In accordance with the RBA standards, the TDK Group will endeavor to make continuous improvements in two stages, self-assessment and audit, depending on the transaction status with suppliers (primary production materials), sub-contractors, and worker dispatch and labor agencies and the nature of their business.

• RBA : The Responsible Business Alliance (RBA) is a global industrial coalition embracing over 200 companies dealing in electronics, retail, automobiles, and toys. It stipulates standards of conduct related to the improvement of industrial health and safety, the protection of human rights, consideration of the environment, and fulfillment of ethical responsibilities in the supply chain and calls on affiliated companies and their suppliers to practice these standards.

• Vision:
  A coalition of companies driving sustainable value for workers, the environment and business throughout the global supply chain.
• Mission:
  Members, suppliers and stakeholders collaborate to improve working and environmental conditions and business performance through leading standards and practices.

Evaluations and Future Activities

In fiscal 2024 TDK’s CSR compliant supplier rate, including newly affiliated Group companies, exceeded our target to reach 100%.
In addition, we conducted on-site CSR audits of 22 suppliers in fiscal 2024, and plan to conduct on-site CSR audits of 25 suppliers in fiscal 2025.

(1) Sustainability Requirements

TDK Group communicates the sustainability requirements it expects all suppliers to comply with in their transactions by incorporating CSR-related clauses such as legal compliance, environmental conservation, prohibition of forced labor, respect for human rights, and product safety into their basic transaction agreements.

(2) Supplier Screening

TDK Group identifies critical suppliers for each business, taking into account the following requirements:

• Suppliers with large purchase amounts
• Suppliers providing materials or components that are difficult to substitute
• Suppliers providing materials or components critical to the business
• Suppliers selected from an ESG perspective, etc.

As of March 2024, we have identified approximately 540 companies as key suppliers, accounting for 78% of the total annual purchase amount across the group. Additionally, we have identified 42 secondary and subsequent suppliers as key suppliers. The review of key suppliers is conducted annually.

(3) Assessment

TDK Group conducts CSR self-checks for all suppliers at the start of business relationships to confirm their CSR initiatives, and only begins transactions with companies that pass the evaluation. From 2024, we will conduct evaluations of critical suppliers in principle once every two years to determine whether to continue business relationships.
Regarding implementation methods, each company adopts appropriate techniques. However, the CSR self-check sheet created by the headquarters' procurement function consists of 61 items based on RBA standards, focusing on areas that we consider particularly important: "Human Rights and Labor," "Environment," "Safety and Health," "Fair Trade and Ethics," "Information Security," and "Management Systems." We request reports on management systems and implementation status for each item.
In fiscal 2024, we conducted CSR self-checks on 1,417 companies and confirmed that approximately 4,200 material suppliers (excluding non-production material suppliers such as office supplies) are CSR-compliant suppliers.

Supplier evaluations

In addition to CSR self-checks focused on CSR, the TDK Group conducts management system assessments of material suppliers at the time of new registration and periodically to ensure healthy transactions. These assessments determine whether to initiate or continue transactions. Each company adopts appropriate methods, and transactions are conducted only with companies that have no issues based on the assessment results.
The main categories covered by the evaluation are quality management, chemical substances^*management, environmental management, and corporate social responsibility (CSR) including strict observation of human rights and other legal obligations as well as compliance with social norms. Any problems that come to light through the evaluation are disclosed to the supplier with a request for corrections or improvements.

• The chemical substances in the evaluation are based on the “TDK Green Procurement Standards.”

Related link

Supplier Partnership System

TDK requires its suppliers to reply to a CSR check sheet through the Supplier Partnership System. This Supplier Partnership System is a system by which the management of company information, distribution of purchase specification forms, sharing of agreement documents, and so on, which previously was conducted by paper or magnetic recording media, are managed uniformly online. It benefits both sides by speeding up and boosting the efficiency of work. To raise both supplier awareness and motivation to make improvements, the check sheet is designed to immediately display the results on-screen when answering questions. If problems occur with responses, individual requests are issued for improvements.

(4) Audit　(5) Corrective Actions and Improvement Plans　(6) Capacity Building

TDK conducts the CSR-specific on-site auditing of critical suppliers based on RBA auditing standards.
When violations of laws and regulations are discovered, we require suppliers to take “corrective actions” and monitor them from the development of corrective action plans to their completion. If necessary, we also provide support on implementation of corrective actions. If there are opportunities for improvement that do not result in legal violations, we make a "request for improvement".
In fiscal 2024 we carried out such audits on 22 companies both in Japan and elsewhere. No legal violations were discovered, but we did make improvement requests to suppliers where issues concerning health and safety, etc. were spotted, and we are implementing follow-up as necessary.

Re-evaluation

As part of our series of initiatives, we terminate contracts with suppliers who are unable to meet minimum requirements within a specified period.

Green procurement

In order to promote green procurement aimed at the priority purchase of products that contribute to reducing the environmental load and fulfill social responsibility, TDK has been implementing Green procurement, and each group company has been taking their own appropriate measures. In April 1999, TDK established the TDK Green Procurement Standards. These standards are revised as necessary to take account of laws and regulations in Japan and other countries, changes in social requirements, and other factors. They can be viewed on the TDK website.
We issued version 9.1 of the TDK Green Procurement Standards in April 2020 and distributed them to all of our suppliers. Version 9.1 incorporates the TDK Environmental Vision 2035 as well as a review for compliance with relevant laws and regulations. It urges suppliers to cooperate with environmental measures to ensure a uniformly compliant supply chain.
TDK’s procurement master provides links to data consistent with TDK’s green procurement standards, firmly controls the content of prohibited substances and chemical substances requiring content management, and discloses and provides information as necessary.

Strengthening of BCP/BCM in the supply chain

In unforeseen circumstances, such as the outbreak of a large-scale natural disaster, TDK, as a member of the supply chain, has a duty to share social responsibility with suppliers and meet demands so as to ensure the stable supply of products required by customers.
Recognizing that the securing of stable supplies is an important responsibility, TDK addresses this issue in three main ways:

1. BCP/BCM surveys of suppliers
2. Advance collection and arrangement of information to use in an emergency
3. Prompt initial responses using a BCP Confirmation System

In particular, regarding BCP/BCM surveys of suppliers, a joint industrial initiative has begun, and TDK implements the supplier BCP/BCM surveys utilizing the Supply-Chain Business Continuity Questionnaire of the Japan Electronics and Information Technology Industries Association (JEITA). Furthermore, TDK endeavors to strengthen supply chain BCP/BCM by, among other activities, holding BCP/BCM seminars for business partners. Additionally, we send individual feedback sheets to each company to encourage improvement.

Strengthening of compliance (TDK Corporation)

TDK has clarified a company-wide policy regarding offers of gifts and entertainment from suppliers, publicized that policy throughout the Group, and requested the understanding and cooperation of suppliers.
Furthermore, regarding the exclusion of antisocial forces, TDK conducts preliminary surveys of suppliers when starting or restarting business with them.

Education and Capacity Building for Suppliers (TDK Corporation)

TDK organizes seminars and offers individual support on several CSR-related topics with the aim of strengthening the initiatives of our suppliers. In recent years, we have held BCP/BCM seminars and provided individual support to dozens of companies to enhance information security. These two efforts are introduced as best practices on the official portal site of the government- and industry-supported “Declaration of Partnership Building” framework, which is explained below.
Furthermore, TDK conducts environmental-initiative surveys of suppliers relating to their efforts to reduce CO₂ emissions. Based on the results of these surveys, we have been conducting supplier awards and feedback sessions on the results for four consecutive years. This feedback provides not only the results of the assessment, but also information on where each company's performance stands within its peer group. We expect this to help them identify opportunities for further improvement and encourage them to take action. Furthermore, starting in fiscal 2024, with the aim of deepening participants' awareness and understanding of CDP, we invited lecturers from CDP and conducted webinars for approximately 160 companies. These webinars explained the CDP Supply Chain Program and the overview of the CDP questionnaire, through which we requested collaboration on activities to reduce environmental impact, including CO2 emissions reduction. Additionally, we conducted energy-saving on-site diagnostics for several suppliers. Recognizing these activities, TDK has received an A rating in the CDP Supplier Engagement Assessment for four consecutive years.

Declaration of Partnership Building

In May 2021 TDK issued its "Declaration of Partnership Building" as a means of building relationships of coexistence and co-prosperity with its suppliers. "Declaration of Partnership Building," used as a general term, is an initiative launched by the Council on Promoting Partnership Building for Cultivating the Future, whose membership consists of the chairman of the Japan Business Federation (Keidanren); the chairman of the Japan Chamber of Commerce and Industry; the president of the Japanese Trade Union Confederation; the Minister of State for Economic and Fiscal Policy ; the Minister of Economy, Trade and Industry; the Minister of Health, Labour and Welfare; the Minister of Agriculture, Forestry and Fisheries; and the Minister of Land, Infrastructure, Transport and Tourism. Each participating company issues its own declaration under the name of a corporate representative, the aim of each declaration being to build new partnerships by promoting cooperation, co-existence, and co-prosperity between the issuing company and its suppliers and other business partners seeking to create added value. A company issuing a declaration states that it will seek coexistence and co-prosperity across its supply chain, promote new forms of cooperation irrespective of such factors as size or relationship to the supply chain, and observe appropriate transaction practices between main subcontracting entrepreneurs and subcontractors, all in an effort to boost the added value of the entire supply chain.

Initiatives for Suppliers Other Than Material Suppliers

CSR Self-Check and Audits for Contract Manufacturers

For contract manufacturing companies, we conduct CSR self-checks based on RBA criteria, similar to our material suppliers. From fiscal 2023 to 2024, we aimed to complete 100% of these assessments. As a result, we confirmed that 97.0% of the 253 target contract manufacturers are CSR-compliant suppliers.
Additionally, in the Japan area, we conduct CSR audits based on RBA audit standards for contract manufacturers that have a high dependency on our company. In fiscal 2024, we conducted these audits for four companies.

CSR Self-Check for Staffing and Employment Agencies

Regarding worker dispatch and labor agencies, it was recognized that inappropriate responses in such agencies were an issue in certain countries in Asia where risks relating to human rights and recruitment are thought to be high. For this reason, the CSR self-check is implemented for labor agencies used by manufacturing sites in high-risk countries in Asia, excluding Japan. With the aim of confirming management control relating to human rights and ethics, the self-check list consists of specified content related to the prohibition of forced labor, prevention of child labor, humane treatment and elimination of discrimination, fair wages and working hours; prevention of corruption and ethical violations; prevention of information leakage and risk avoidance; etc. In fiscal 2024, self-checks were conducted at all 49 targeted labor agencies (100%). Regarding agencies that failed to achieve a certain level of results in the survey, the manufacturing sites using those agencies carry out improvements.