Dialogue with Suppliers

Policies of Supply Chain Sustainable Management

In a trend of growing interest in corporate social responsibilities worldwide, Hitachi Construction Machinery Group is promoting sustainable activities throughout the entire supply chain including procurement partners. We believe it is important to share the same sustainable awareness with our business partners to prevent supply chain risks.

In October 2022, Hitachi Construction Machinery Group established “Hitachi Construction Machinery Group Sustainable Procurement Guidelines (1st Edition)”. We have also published “Hitachi Construction Machinery Group Green Procurement Guidelines (Ver.1.0)”. These Guidelines were established based on the Hitachi Construction Machinery Group’s efforts for sustainability including the policies, initiatives, and widely recognized latest global standards. This guideline sets out a code of conduct to be observed by suppliers and Hitachi Construction Machinery Group’s policies and code of conduct.
The purpose of those revisions is for suppliers to easily understand Hitachi Construction Machinery Group policies and requests. We have integrated the Policies and Code of Conduct into “Hitachi Construction Machinery Group Sustainable Procurement Guidelines” and separately publish the manual as “Hitachi Construction Machinery Group Green Procurement Guidelines (Ver.1.0)”. Hitachi Construction Machinery Group has distributed them to our suppliers and requested to be carefully read, in order to follow these Guidelines. These Guidelines are expected to be fully implemented by all our suppliers.

Through a designated supplier selection process at Procurement department, we implement sustainable procurement by comprehensively assessing whether the supplier is fulfilling social responsibilities or not. In addition to supplier evaluation by product quality, reliability, delivery, price, business stability and R&D ability, the below factors which are specified in “Guidelines for Procurement Activities” are also taken in consideration to realize sustainable in Procurement; fair and highly transparent information disclosure, compliance with laws and social norms, respect for human rights, elimination of discrimination, elimination of child and forced labor, environmental preservation activities, social contributions, good working environment, and recognition of social responsibilities with procurement partners.

In addition, to reinforce compliance efforts, we revised procedures for internal audits in November 2017. We do rigorous audits on new suppliers which include confirmation of environmental and CSR factors, such as anti-bribery measures.

Supply Chain Sustainable Management

Because business operations are becoming more global, there is a growing possibility that risks in the supply chain could result in heavy management issues. Hitachi Construction Machinery takes steps to identify and minimize the risks as much as possible in beforehand.

In 1998, Hitachi Construction Machinery Group was the first in the industry to establish “Green Procurement Guidelines”, which sets its fundamental policies to realize environmentally friendly procurement of parts and products, and requests to procurement partners. The Guidelines cover contents related to suppliers’ environmental preservation activities (establishment of environmental management systems, introduction of recommended certification standards, etc.) and contents related to reduction of the environmental impact of products supplied to Hitachi Construction Machinery Group (saving resources and energy, recycling, proper management of chemical substances contained in products, dissemination of suitable information, etc.).

Implementation of supply chain sustainable survey

From 2010, Hitachi Construction Machinery Group has conducted Supplier CSR Survey every year, as a first step towards CSR procurement. The targeted suppliers are suppliers which are recognized to have significant impact to our supply chains; tier-1 supplier to the Group companies with large annual purchasing volume, and supplying important parts or materials.

The survey covers seven areas; human rights and labor, health and safety, environment, fair trade and ethics, quality and safety, information security and contribution to the community.

From FY2014, we put efforts to implement supply chain sustainable survey within the Group companies, and we started the survey to suppliers of Hitachi Construction Machinery China.

In FY 2021, we conducted the sustainable survey targeting suppliers who account for approximately 90% of Hitachi Construction Machinery’s purchase of products. 66.0% of suppliers has responded to the survey. Suppliers that do not meet the minimum score set by the Group are identified as suppliers with high risk regarding sustainability. We have requested those suppliers to improve their performance through the implementation of corrective action plans^(*).

We will continue to conduct continuous sustainable investigations, now focusing on Hitachi Construction Machinery China, and will keep improving our procurement activities. We will also promote completion of Business Continuity Plan within the whole supply chain.

^(*) Suppliers are evaluated according to the “Purchase Transaction Action Guideline” when concluding and revising Basic Agreements.
In FY2021, 3.7% suppliers did not satisfy our standards in the sustainable survey, but they have conducted corrective action plans that have improved their ESG performance.

Exclusion of Conflict Minerals

In accordance with the Hitachi Construction Machinery Group’s policy for Responsible Supply Chain of Minerals, Hitachi Construction Machinery Group conducts conversation with suppliers on the exclusion of conflict minerals.

Hitachi Construction Machinery Group Conflict Minerals Procurement Policy

Hitachi Construction Machinery Group has a policy for procurement activities not to purchase parts which include Conflict Minerals, which could lead to aid of armed forces. Additionally, we will continue to support the practice of due diligence based on the “OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas” among Group Companies.

Environmental Initiatives: Green Procurement

Hitachi Construction Machinery Group has set a KPI of 100% “Green Supplier Ratio”, a ratio of major suppliers achieving environment management system such as ISO 14001 and EcoStage, to promote sustainable activities of whole supply chain including our suppliers.

“Green Supplier Ratio” in FY2021 was 100% among partner suppliers. Also, we will continue to collect JAPIA Sheet^(*) survey for following environmental restrictions. In FY2021, we conducted a survey following the 25th SVHC (Substances of Very High Concern) disclosed by the European Chemicals Agency. In FY 2022, we will continue to aim for complete investigation.

In the near future, we will continue asking suppliers to fully participate in the JAPIA Sheet survey and provide us with their completed JAPIA Sheets.

^(*) JAPIA Sheet: Standard data sheet in the industry to collect information on chemical substances included in products and parts as stipulated by the Japan Automobile Manufacturers Association.

Partnerships with Suppliers; Chikuhou-kai, Tokiwa-kai and Wakaba-kai

Hitachi Construction Machinery aims to build and maintain partnerships with its suppliers. To this end, suppliers with regular purchases are invited to become members of either Chikuhou-kai, consisted of 60 companies, or Tokiwa-kai, consisted of 49 companies (as of April 2022).

These two organizations host a wide range of activities to promote understanding of Hitachi Construction Machinery policies and efforts regarding safety, quality, environment, etc.

This includes joint lectures, joint presentations, presentations on examples of streamlining in their factories, skill competitions, and mutual safety inspections. In addition, regular supplier presentations are held, where Chikuhou-kai and Tokiwa-kai suppliers participate and promote their CSR activities.

In June 2020, we established the Wakaba-Kai, a group of executives who are responsible for the next-generation management of suppliers in order to further strengthen suppliers ‘ Management base. MONOZUKURI Technology of suppliers is the foundation of the Hitachi Construction Machinery Group’s production and, from a sustainable management standpoint, support for supplier business continuity and Management base reinforcement is essential. In this Wakaba-kai, we cooperate with Organization for Small & Medium Enterprises and Regional Innovation, JAPAN and implement educational support programs for further Management base reinforcement.