Promoting Supply Chain CSR

As Sharp's business philosophy states, “Our future prosperity is directly linked to the prosperity of our customers, dealers and shareholders,” Sharp aims for sustainable growth and mutual prosperity with all of its suppliers.

To these ends, Sharp emphasizes maintaining impartiality and fairness in all purchasing activities and chooses who it will procure local parts, materials, and equipment from by providing Japanese and overseas suppliers with an equal opportunity to do business with Sharp. This opportunity includes a fair evaluation of whether a supplier meets Sharp's requirements for quality, standards, and performance.

To ensure sustainable growth and mutual prosperity with its suppliers, Sharp is going beyond initiatives related to the quality, price, and delivery of parts and materials. Sharp is also seeking to fulfill its social responsibilities over a wide range of areas across the entire supply chain. These areas include product safety, environmental protection, human rights and labor, and health and safety.

Sharp's basic concept, concrete policies, and requests to suppliers pertaining to procurement activities are set out in the Basic Purchasing Principles. And in the Sharp Supply-Chain CSR Deployment Guidebook, which is based on the Basic Purchasing Principles, Sharp clearly declares the implementation of CSR initiatives—such as complying with all laws, regulations, and social standards, and protecting the environment—as one of its procurement policies. Specifically, these include elimination of child/forced labor and discrimination, as well as compliance with labor related laws, such as those dealing with employees' right to organize and their right to collective bargaining. Sharp also asks its business partners to actively promote such activities.

To deepen the understanding between Sharp and its business partners, Sharp communicates actively with supplier sales representatives on a daily basis.

The Sharp Group Charter of Corporate Behavior and the Sharp Code of Conduct were formulated as the group’s basic CSR policies and have been thoroughly engrained into all employees.

In December 2021, Sharp joined the RBA (Responsible Business Alliance), an alliance of companies that pursue social responsibility across the global supply chain. The RBA’s vision and mission are shared throughout the entire Sharp Group.

To disseminate these policies throughout the supply chain, the Sharp Global SER Committee, which is chaired by the president of Sharp, set supply-chain CSR deployment as a key initiative. At committee meetings, members from relevant head office departments such as CSR, environment, and HR, along with business units and subsidiaries, share their policies and measures. The committee also monitors and manages progress on supply chain CSR-related measures.

Sharp periodically carries out supply-chain CSR surveys to confirm how well suppliers are carrying out CSR based on the Sharp Supply-Chain CSR Deployment Guidebook and to identify, assess, and reduce CSR risk in the supply chain.

On the survey form, there are areas that conform to the RBA self-assessment questionnaire—labor, health and safety, environment, and ethics—as well as Sharp’s own areas, which are biodiversity/chemical substances management and business continuity planning (BCP). In fiscal 2020, Sharp added another area, information security, to deal with the rise in cyber security risks across the supply chain. Through such efforts, Sharp assesses risk in a wider range of areas in response to changing conditions inside and outside of the company.

Sharp also improves the survey form by adding things like guidance on the questions, thus making the survey a medium that prompts suppliers to further their understanding of, and efforts to achieve, international CSR standards.

The survey is carried out separately at each factory that makes products for Sharp. Survey scorecards are given to participating suppliers and those with low-scoring areas are asked to submit corrective action plans. Through such post-survey communication with suppliers, Sharp is continuously working to improve CSR across the supply chain.

There has been increasing concern around the world in recent years about issues such as slave labor and forced labor. Europe and North America have led the way in enacting, enforcing, or discussing laws promoting due diligence of human rights in the supply chain. One example is the Uyghur Forced Labor Prevention Act. In the context of global factors such as the US–China rivalry and the war in Ukraine, companies need to further enhance their supply-chain CSR efforts.

In fiscal 2021, Sharp worked on building a CSR/Green procurement survey system to make supply chain CSR surveys and risk analyses more efficient and effective. The next survey will use the new system and will be run in the second half of fiscal 2022.

At production and procurement bases in China and ASEAN countries, since fiscal 2017 Sharp has been introducing two types of supplier management systems through which it has been carrying out ongoing risk management equivalent to that of Sharp in Japan.

Through such ongoing efforts, Sharp has found that across its supply chain there are no serious problems such as forced labor or child labor. In the unlikely event that such a problem did arise, we would immediately take the necessary corrective and relief measures. This would be done as outlined in our contracts with suppliers. If no remediation is expected, we will take strict measures, such as suspending transactions.

Sharp will continue to step up its efforts in response to trends in international human rights due diligence as it fulfills its corporate social responsibility in every facet of the supply chain.

To help all those in procurement positions improve their understanding and implementation of CSR, information about the Basic Purchasing Principles and supply chain CSR is included in training materials for new employees, transferred employees, and management skills improvement. All Sharp Group employees take compliance-related training based on the Sharp Code of Conduct, which covers topics such as respect for human rights.

Since February 2022 we have been using the RBA e-Learning Academy to provide education on the RBA Code of Conduct. Seventy-five procurement staff members in Japan have completed a total of 375 courses. The aim is to deepen their understanding of international CSR standards.

In fiscal 2022, we plan to extend this training to procurement staff members at overseas bases.

To ensure that corporate procurement departments secure a stable supply of parts and materials at fair prices, Sharp continuously strengthens partnerships with suppliers regarding long-term supply contracts and other matters, and also purchases from multiple suppliers. Sharp also formulated the Rules of Business Risk Management, which it uses to create and periodically revise BCPs. As part of this, Sharp requires suppliers to periodically check and update the BCPs of the factories that produce items delivered to Sharp. It also carries out CSR/Green procurement surveys to confirm how well suppliers are making and maintaining BCPs.

• * BCP: Business continuity plan

To comply with the Subcontract Act (Act Against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors) in Japan, Sharp Corporation and its affiliated companies implement compliance checks and in-house education on an ongoing basis.

Sharp encourages internal voluntary reporting of compliance issues and further strengthened precautionary measures to prevent the recurrence of problems. Business units, procurement departments, Head Office departments, and domestic affiliated companies conduct self-audits in which they check how well they are complying with the Subcontract Act. Sharp also holds internal training sessions for domestic affiliated companies, has employees take part in outside seminars, and performs periodic internal audits to raise awareness among employees of the importance of complying with the Subcontract Act.

In recent years, companies have had to expand the scope of their efforts regarding the minerals, regions, and risks involved in the responsible procurement of minerals. This means not only abiding by legal frameworks such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of the United States and the EU’s Conflict Minerals Regulation but also taking a firm CSR stand in light of issues such as child labor and environmental destruction at mining sites.

In the supply chain for procuring minerals from conflict-affected and high-risk areas, Sharp has a basic policy in place to ensure it is not complicit in human rights abuses and environmental destruction, and so that it does not inhibit sound, legitimate business activities.

Based on this basic policy and the Sharp Global SER Committee (SGSC) , which is chaired by the president of Sharp, we have made responsible minerals procurement a key theme. A survey system has been created in major business units and production subsidiaries and we constantly check on the progress of relevant measures under this system.

To ensure that responsible minerals procurement is carried out effectively, Sharp believes in the importance of collaborating with industries in Japan and other countries and acting based on widespread consensus. Since fiscal 2012, Sharp has been a member of the Responsible Minerals Trade Working Group of the Japan Electronics and Information Technology Industries Association (JEITA).

We also actively take part in JEITA’s Responsible Minerals Sourcing Inquiry Briefings by helping in planning, creating documents, and joining the briefings as part of our efforts to spread understanding of responsible minerals procurement in the industry supply chain and boosting the capabilities of downstream companies. Together with JEITA, we periodically send outreach letters to smelters or refiners that are not yet participants of the RMAP*1 created and operated by the RMI*2 urging them to undergo audits. These efforts are part of our contribution to effectively stamping out human rights abuses and other problems in the global procurement of minerals.

Furthermore, since December 2021, Sharp has been a member of the RMI, working to deepen our global collaboration and due diligence initiatives while ensuring we stay abreast of the latest international developments relating to responsible minerals procurement.

• *1 RMAP (Responsible Minerals Assurance Process) is an RMI program for validating conformance of RMI-listed smelters or refiners.
• *2 RMI: Responsible Minerals Initiative

Sharp uses the RMI’s industry standard reporting templates (CMRT*3, CRT*4, and MRT*5) to conduct surveys on 3TG (tantalum, tin, tungsten, and gold), as well as minerals such as cobalt and mica if requested by customers.

In the surveys, primary suppliers are urged to procure minerals from RMAP-conformant smelters or refiners. And based on the CMRT, CRT, and MRT returned by survey participants, we identify and evaluate risk based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance).

In fiscal 2021, as a result of about 450 surveys carried out at major business units and production subsidiaries, 366*6. smelters and refiners were identified and the RMAP conformance rate was about 63%*6.

For smelters and refiners that are not yet conformant with RMAP and those with high risk levels, we urge their participation in RMAP through our primary suppliers. If any smelters or refiners have been found to be dealing with militant forces or complicit in serious human rights abuses, this information is shared with suppliers, with whom we discuss measures such as switching to RMAP-conformant smelters or refiners.

• *3 CMRT (Conflict Minerals Reporting Template) is a free, standardized reporting template developed by the RMI.
• *4 CRT (Cobalt Reporting Template) is a free, standardized reporting template developed by the RMI.
• *5 MRT (Mica Reporting Template) is a free, standardized reporting template developed by the RMI.
• *6 3TG smelters or refiners that are involved with major business units and production subsidiaries. Conformance rate as of March 2022.

To deepen employees’ understanding of responsible minerals procurement, as a rule we hold monthly meetings with those in charge of surveys at major business units and production subsidiaries, where participants share information on the latest international developments and discuss practical survey issues and how to improve the survey system.

Procurement personnel and new employees take part in periodic supply chain CSR training, which covers responsible minerals procurement. Another way we further employees’ understanding on responsible minerals procurement is by uploading new and relevant material to the management skills improvement training page on the Sharp intranet.

To carry out responsible minerals procurement, Sharp integrates into its management a five-step framework for risk-based due diligence recommended in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.