117 Sumitomo Chemical Sustainability Data Book 2019 Procurement https//www.sumitomo-chem.co.jp/english/sustainability/society/partners/ Detailed Ination Basic Stance Policy on Responsible Procurement The Sumitomo Chemical Group is committed to building mutually beneficial and sound relationships with business partners. In addition to, ensuring fairness, equitability, and transparency in our transactions with business partners, we are promoting responsible procurement activities throughout the supply chain with an emphasis on compliance and respecting human rights, which will encourage our partners to also engage in CSR activities. Furthermore, Sumitomo Chemical’s stance toward and policy on responsible procurement is clarified in the Basic Procurement Principles and the Group Business Standards of Procurement, which provide guidelines for procurement operating activities for Group companies in Japan and overseas. Policy Related to Conflict Minerals The Sumitomo Chemical Group is working to ensure responsible procurement to build sound relationships with suppliers and fulfill its corporate social responsibility regarding procurement activities. There is a social expectation of compliance to a U.S. rule* on conflict minerals from a CSR and compliance perspective, and we are therefore promoting responsible raw material procurement. * Rule on conflict minerals A final rule applying to companies that are publicly listed in the United States that was adopted by the U.S. government in August 2012 pursuant to Section 1502 of the Dodd Frank Wall Street Re and Consumer Protection Act, which is known as the Conflict Minerals provision. The rule requires companies to disclose and report to the U.S. Securities and Exchange Commission the use in their products or production processes of conflict minerals, including tantalum, tin, gold, or tungsten, originating from the Democratic Republic of Congo or adjoining countries. 1. The Procurement Section shall strive to conduct procurement transactions on the basis of fair, equitable, transparent and free competition without involving personal interests or arbitrary considerations. 2. The Procurement Section shall strive to select suppliers to transact with in accordance with the most appropriate and economically rational s and shall pursue the maintenance of sound business relationships with suppliers, aiming for mutual growth and development. 3. The Procurement Section shall strive to provide corporate services globally throughout the entire Group. 4. In its procurement, the Procurement Section shall give preference to those suppliers that are active in CSR initiatives, with the aim of fulfilling its corporate social responsibilities and building sound relationships with suppliers. 5. The Procurement Section shall strive always to meet the quality requirements of Sumitomo Chemical’s internal sections that request purchases of Goods and Services. 6. In pering Procurement Operations, the highest priority shall be given to safe and stable operations in order to realize zero-accident and zero-injury operations. 7. In pering Procurement Operations, the highest consideration shall be given to customer satisfaction. 8. The Procurement Section shall ensure the transparency of Procurement Operations. Basic Procurement Principles Outline118 Sumitomo Chemical Sustainability Data Book 2019 Procurement FY2018 Group-wide Initiatives FY2018 Initiative for Business Partners Main Initiatives Details Group purchasing ination exchange meetings Japan 2 times Participating companies 21 Shared ination and held discussions regarding the importance of sustainability measures, including those related to human rights and the environment; our stance toward and policy on responsible procurement; and specific initiatives Group purchasing ination exchange meeting overseas 1 time Participating companies 5 Group companies ing the base in various regions like Asia and the United States participated in the meeting Gave an introduction to sustainability measures and Group companies’ responsible procurement initiatives Company-wide procurement liaison meetings 2 times Participants Representatives responsible for procurement of Business Sectors Discussed the importance of sustainability measures, including those related to human rights and the environment; our stance toward and policy on responsible procurement; and specific initiatives Procurement staff education Participants All procurement staff including new employees and transferees Learned about the importance of sustainability measures, including those related to human rights and the environ- ment; our stance toward and policy on responsible procurement; and specific initiatives Main Initiatives Details Business Partner Dialogues 4 times Participating companies 32 Gave introductions on sustainability initiatives and shared ination regarding human rights child labor, etc. and occupational safety Using the CSR Deployment Guidebook and Check Sheets New business partners Acquisition rate 100 Business partners who were rated “good” and with whom business began 100 Established business partners Conducted monitoring and solicited feedback mainly in line with quality assurance audit plans Goals and Results Management System In line with the policy on responsible procurement, we ulate and implement plans related to responsible procurement, share these plans with Group companies, and carry out these plans in cooperation with Business Sectors. Furthermore, Sumitomo Chemical’s stance toward and policy on responsible procurement is clarified in the Group Business Standards of Procurement, which provide guidelines for procurement operating activities for Group companies in Japan and overseas. We are promoting relevant initiatives across the entire Group.119 Sumitomo Chemical Sustainability Data Book 2019 Procurement https//www.sumitomo-chem.co.jp/english/sustainability/files/docs/cp_csr_guidebook_e.pdf Procurement Ination, “Sumitomo Chemical Supply-Chain CSR Deployment Guidebook” https//www.sumitomo-chem.co.jp/english/sustainability/files/docs/cp_csr_check_list_e.pdf Procurement Ination, “Sumitomo Chemical Supply-Chain CSR Deployment Check Sheets” Examples of Initiatives Responsible Procurement Activities Sumitomo Chemical has added a webpage about CSR procurement to its Procurement Ination page on its official website to in more stakeholders of its responsible procurement initiatives. The webpage features the Sumitomo Chemical Supply-Chain CSR Deployment Guidebook, which explains those CSR promotion items that the Company asks suppliers to follow. Moreover, Sumitomo Chemical has ulated the Sumitomo Chemical Supply-Chain CSR Deployment Check Sheets to enable suppliers to conduct self-uations regarding all items. Suppliers can now download the guidebook and check sheets and report the results of their self-uations. Sumitomo Chemical Supply-Chain CSR Deployment Check Sheets CSR Criteria Explanation 0 Overall Promotion of Corporate Social Responsibility CSR The questionnaire begins with a confirmation of the company’s perance regarding clearly declaring the importance of CSR as a business policy; designating an organization and manager responsible for CSR promotion; publicly announcing the status of its CSR promotion efforts; having a system in place; and deploying its own CSR program to suppliers. I Compliance with Laws and Ethics Questions in this chapter focus on whether the company properly ensures compliance with various business laws including laws and regulations in Japan and overseas, such as REACH; prohibits impediments to free competition; prohibits abuse of a superior position; prohibits corruption and bribery; prohibits the offering and receiving of inappropriate profits and advantages; ensures respect for intellectual property; detects and prevents injustice promptly; and prevents the leakage of personal ina- tion as well as customer and third-party confidential ination. II Human Rights and Labor Questions in this chapter focus on whether the company properly ensures respect for human rights; prohibits discrimination; regulates working hours; respects the rights to freedom of association; prohibits forced labor; prohibits child labor; and pays appropriate wages. III Accident Prevention and Occupational Health and Safety Questions in this chapter focus on whether the company properly ensures proper disaster and accident management; applies safety measures for equipment and instruments; promotes safety in the workplace; promotes hygiene in the workplace; and promotes health maintenance programs for employees. IV Environmental Conservation Questions in this chapter focus on whether the company properly establishes and implements an environmental management system; controls hazardous chemicals in manufacturing; obtains environmental and government permits; minimizes environ- mental pollution water, soil, air; promotes waste reduction; and promotes resource and energy saving by reducing, reusing, and recycling 3Rs. V Product Quality and Safety Questions in this chapter focus on whether the company properly establishes and implements a quality management system; controls hazardous chemicals in products; provides accurate ination on products and services; and furnishes prior consulta- tion on manufacturing process change and compliance with standards and specifications.120 Sumitomo Chemical Sustainability Data Book 2019 Procurement Looking Ahead In line with the Basic Principles for Promoting Sustainability, the Sumitomo Chemical Group will continue to strengthen coop- eration with business partners and promote responsible procurement in the spirit of respecting human rights and ensuring compliance. Promoting Responsible Procurement throughout the Supply Chain We have every new supplier gain a better understanding of Sumitomo Chemical’s policies and stances through the Sumitomo Chemical Supply-Chain CSR Deployment Guidebook. We also have them fill out and the Sumitomo Chemical Supply-Chain CSR Deployment Check Sheets. This enables us to do our due diligence regarding their compliance status, and, upon confirmation of satisfactory uation results, we begin doing business with them. Following that, we regularly monitor their compliance status and strive to prioritize procurement from those suppliers who are working hard to ensure responsible procurement. We manage the data from the monitoring and periodically assess the content. For suppliers who need to follow-up on problems revealed by the monitoring, we furnish feedback to raise awareness of and cooperation in ensuring responsible procurement. Promoting Responsible Procurement throughout the Group We periodically hold Group purchasing ination exchange meetings that gather together responsible purchasing represen- tatives from each Group company in Japan and overseas to discuss promoting responsible procurement throughout the Group. In addition, to ensure smooth communication, we set up a website with the Group companies to reciprocally share ination as we strive to promote and encourage responsible procurement as a unified Group. Initiatives Related to Conflict Minerals There is a social expectation of compliance to a U.S. rule on conflict minerals from a CSR and compliance perspective, and we are therefore confirming that the minerals in the raw materials we procure are conflict-free. We do this through cooperation between relevant internal sectors and the periodic distribution and collection of questionnaires to all suppliers of raw materials that contain these substances. If we determine there is a problem after confirming the results with the supplier, we take appropriate measures, which could be a request for improvement or the suspension of procurement of conflict minerals. Suppliers trading companies and manufacturers Sumitomo Chemical Creating an improvement plan Fulfilling CSR Self uation and reporting System for dissemination and compliance Feedback on the report Explaining the CSR items Monitoring and support CSR Deployment Guidebook Ination exchange meeting at Group companies in Japan and overseas