Supply Chain Management

Our Approach

At LIXIL, supply chain management, defined as one of our material issues, forms the foundation of our Impact Strategy. We are committed to promoting our responsible procurement and ensuring a stable supply of products. Stemming from this belief, we base our procurement on the Ten Principles of the United Nations Global Compact (UNGC) in the four areas of human rights, labor, environment, and anti-corruption. In accordance with the UNGC principles as well as our Procurement Principles and our Global Policy on Third Party Compliance for Suppliers, we focus on building sound partnerships with global suppliers to carry out procurement activities. Our Code of Conduct also specifies the ethical behavior that is required of all employees and officers, including prohibition of bribery. Based on the LIXIL Human Rights Principles, we strive to ensure that our business partners and suppliers uphold the human rights within their own organization.

In addition, the principles state that we also expect our suppliers to support the content of the principles and to adopt similar principles. Our Supplier Code of Conduct has been translated into multiple languages and distributed to suppliers, requiring them to respect human rights, observe international labor standards, conserve the global environment, and ensure fair business conduct. In FYE2023, we revised the Code to add stipulations related to factors such as human rights, labor and the environment, and strengthened our risk management system by specifying the reporting hotline for violations and other concerns. The Code now goes beyond addressing our direct suppliers to also state our expectation that their own suppliers adhere to the same standards.

Additionally, we created Green Procurement Guidelines outlining our policy and standards for procuring parts and materials that exert the least adverse impacts on the environment. We ask suppliers to understand and support our environmental initiatives and procurement activities based on these guidelines in collaboration with our environmental management department.

Green Procurement Activities Pursued by LIXIL

① Establishment of Environmental Management System
② Abidance by Environmental Compliance
③ Thorough Management of Chemical Substances
④ Reduction of Greenhouse Gas Emissions
⑤ Conservation of Water Resources
⑥ Promotion of Resource Recycling
⑦ Conservation of Biodiversity

To meet the expectations of society and respond to changes in our supply chain, we continuously review our procurement practices and policies. When revising the Procurement Principles, we ensure alignment with our procurement practices and the Supplier Code of Conduct and the Green Procurement Guidelines, which state that we require suppliers to address sustainability issues.

In Japan, we endorsed the objectives of the Council on Promoting Partnership Building for the Future promoted by the Cabinet Office and the Small and Medium Enterprise Agency (an agency of the Ministry of Economy, Trade and Industry) and announced the Declaration for Building Partnerships. We aim to build a sustainable relationship of co-existence and co-prosperity throughout the supply chain, and we are making all employees and business partners aware of what is stated in the declaration. Following guidelines set by the Japan Fair Trade Commission and other government agencies, we established our Policy on Arrangements for Appropriate Transaction Prices in January 2024 to share with our business partners and throughout the company. Going forward, we plan to monitor the implementation of the policy to ensure it is properly used.

Human Rights >
LIXIL Procurement Principles (A new page will open) PDF: 46KB >
Supplier Code of Conduct (A new page will open) PDF: 116 KB >
Green Procurement Guidelines (A new page will open) PDF: 241KB >
Declaration for Building Partnerships (Japanese only, a new page will open) PDF: 145KB >
Policy on Arrangements for Appropriate Transaction Prices (Japanese only, a new page will open) PDF: 302KB >

Management Framework for Responsible Procurement

LIXIL engages with a global network of suppliers with 65% of our procurement transactions by country occurring in Japan, followed by China, Germany, and Thailand.

Procurement Transaction Amount Breakdown by Country

To select new suppliers and monitor existing suppliers, we assess their performance on the requirements of our Supplier Code of Conduct, with the aim of building a sustainable supply chain with all our suppliers as well as promoting responsible procurement that upholds human rights and the environment. For suppliers identified from the assessment to require remediation, we conduct site visits, online interviews, and provide other opportunities for dialogue to discuss remediation plans and offer support in carrying them out. If remedial action is not taken within a set time frame, or if it has proven to be difficult to mitigate or prevent adverse impacts on human rights and the environment, we may consider the option of ending our business relationship.

Supply Chain Management Cycle

Working with New Suppliers

To select and screen new suppliers, we established our supplier assessment criteria, which include the following areas: quality, cost, delivery, technical capabilities, and ability to deliver stable supply; environmental consciousness, such as sustainable use of resources and proper control of chemical substances; human rights; and occupational safety. At the same time, we conduct compliance risk assessments and, depending on the results of an initial risk screening, which are based on risks arising from the relationship with suppliers (e.g. products and services, characteristics, industry and geographic locations), we also ask about their measures for anti-corruption, labor management, occupational health and safety, and human rights.

Before starting business with new suppliers, we share our Supplier Code of Conduct and require them to accept and follow the Code. We then conduct assessments of their products, after which we actually enter into a business relationship with them.

To comply with the German Supply Chain Act (GSCA), which came into effect in January 2023, we introduced Integrity Next,* a third-party evaluation platform, to conduct due diligence on human rights and the environment when selecting new suppliers in Europe. We require suppliers to meet our minimum ESG requirements for contracting. Even after becoming business partners, we use the system as a monitoring tool to keep track of suppliers’ progress in addressing sustainability issues and work to identify, assess, and reduce or eliminate direct and indirect adverse impacts on human rights and the environment across the supply chain.

* Integrity Next (A new page will open) >

A comprehensive risk management system aligned with the guidelines published by the Federal Office for Economic Affairs and Export Control in Germany to comply with the requirements of the GSCA.

Working with Existing Suppliers

In Japan, we hold annual meetings for major suppliers to explain our Procurement Principles, Supplier Code of Conduct, and supply chain management strategy, as well as to give awards particularly to our outstanding suppliers.

FYE2024 Annual Meeting for Suppliers

Number of participating companies: 472
Number of awarded companies: 11

For important suppliers we have identified according to the process outlined below, we give priority to conducting a responsible procurement survey and monitoring as well as providing remediation and offering support for remedial action.

Identifying Important Suppliers

At LIXIL, we identify important suppliers according to the process outlined below, based on whether they provide a critical component and product, the difficulty of getting substitutes, the scale of transactions in monetary terms.

Flowchart for Important Suppliers Identification

Responsible Procurement Survey, Remediation, and Support

LIXIL identifies supply chain risks by conducting a responsible procurement survey and monitoring subsequent progress. Survey results form part of the basis for selecting suppliers or determining whether to continue business with an existing partner.

Details of the process are outlined below.

1) Select suppliers to be surveyed based on the previous year’s transaction value, etc.

2) Conduct a responsible procurement survey for selected suppliers, covering CSR management, fair business, human rights, labor, occupational health and safety, conservation of the global environment, and contribution to the community.

3) Compile survey results, identifying suppliers with substandard conformity rates as high-risk.

4) Manage high-risk suppliers individually for improvement.

We are conducting an online survey* that consists of 50 questions online survey* that closely aligned with the Supplier Code of Conduct to facilitate prompt response.

When we identify issues requiring remediation through the responsible procurement survey or a site visit, we work together with the supplier to discuss a remediation plan and then offer support in carrying it out.

Examples of Remedial Actions

・For a supplier that had issues implementing a human rights training program for their employees, we obtained free training materials and movies from reliable public sources and shared it with them. They then used these materials to provide a human rights training program for their employees.
・For a supplier that had issues formulating a written employee code of conduct, we considered key aspects covered by our Code of Conduct and prepared a template that we provided to the supplier. They used this to help review and revise their own code of conduct. This also helped us prevent discrepancies between the company’s code of conduct and our own Supplier Code of Conduct that we require all suppliers to comply with.

In Japan, we have been carrying out a five-year plan for expanding the survey coverage to include secondary suppliers, and have been gradually expanding the scope of the survey since FYE2023.

In the Americas region and in China in the Asia region, we conduct a survey of our primary suppliers. We are also taking similar steps to identify risks and implement remedial measures in Europe.

* In FYE2025, the number of questions was increased in the fair business and human rights sections of the responsible procurement survey in Japan. Hence, the Japanese version of the survey and those in other languages differ in the number of questions. The revised survey will be released in other languages in FYE2026.

Number of Items in the Responsible Procurement Survey

CSR management	5
Fair business	14
Human rights	9
Labor	6
Occupational health and safety	7
Conservation of the global environment	7
Contribution to the community	2
Total	50

Survey form (A new page will open) PDF: 447KB >

Responsible Procurement Survey Results

Activities	KPI		FYE2022		FYE2023		FYE2024
Activities	KPI		Targets	Results	Targets	Results	Targets	Results
Distribute Procurement Principles, follow up on survey results and related activities	Coverage ratio (based on purchased amount)	Japan	90%	90% (1,357)	90%	90% (1,185)	90%	90% (1,216)
	Coverage ratio (based on purchased amount)	Overseas	90%	90% (415)	90%	90% (421)	90%	90% (427)
	Total conformity rate	Japan	90%	91%	90%	92%	90%	92%
	Total conformity rate	Overseas	-	89%	-	92%	-^*	91%
	Improvement rate	Japan	100%	100%	100%	100%	100%	100%

Scope: Suppliers to LIXIL Corporation and its subsidiaries. Figures in parentheses represent the number of applicable companies.

Japan: Procurement by operating sites in Japan

Overseas: Procurement by operating sites outside Japan

* Not fixed yet as the scope is now under reconsideration.

Supplier Engagement

We provide our global suppliers with a variety of information to address issues and risks identified by the responsible procurement survey. We also offer support through dialogues, including onsite visits and online interviews.

Furthermore, we put particular emphasis on providing support that encourages action, such as giving advice on information disclosure and communication related to sustainability, taking into account the initiatives taken by the supplier.

Number of Suppliers Visited and Interviewed Online in FYE2024

In Japan: 13
Outside Japan: 37

Reducing CO₂ Emissions from the Supply Chain

To promote our efforts to reduce CO₂ emissions throughout our supply chain, we surveyed suppliers who account for the top 80% of our total procurement-related CO₂ emissions inside and outside of Japan. The survey was aimed to assess the status of their CO₂ emissions data collection and target setting.

Using the survey results, we are currently providing support to our suppliers in their efforts to reduce their CO₂ emissions.

Learn more about Reducing CO₂ Emissions from Procurement >

Training Our Buyers

Our employees in procurement departments select suppliers and conduct purchasing in compliance with our Procurement Principles and Global Policy on Third Party Compliance for Suppliers. They play an important role in addressing sustainability issues in our supply chain.

At LIXIL, we provide purchasing compliance training led by members of the headquarters procurement department to buyers at operating sites globally three times a year. At least one of these training sessions is focused on human rights.

Examples of training topics:

Guidelines on Respecting Human Rights in Responsible Supply Chains
Best practices for respecting human rights by leading Japanese companies
Preventing forced labor
Japan’s 2024 Logistics Problem
Revisions to the Implementing Order of the Subcontract Act and our Policy on Arrangements for Appropriate Transaction Prices

In addition, for a more hands-on training, headquarters procurement department personnel visit suppliers together with the local buyers to provide the necessary support to suppliers as part of promoting responsible procurement across the company.

At our factories in China, headquarters procurement department members conducted training for local procurement departments. The headquarters procurement team shared the importance of responsible procurement and related social trends to enhance awareness of our company’s challenges under our Procurement Principles. In addition to that, as part of practical on-the-job training, personnel from local and headquarters procurement departments jointly visited supplier factories to assist them on aspects requiring improvement.

After training, the procurement departments at local factories make their own plans and conduct their own independent follow-up activities such as supplier visits or enhancing support for capability building in suppliers. As a result of their follow-up activities, we are seeing more examples where those activities have led to concrete improvements, with greater safety, better disaster risk reduction, and other measures addressing sustainability issues in suppliers.

Health and safety education for suppliers

Visiting a supplier and checking the management of a pressure pump used for firefighting

Concern-Raising System

We receive reports on any potential compliance violations by LIXIL from external stakeholders including material suppliers and service providers through LIXIL Compliance Hotline – Speak Up!, which is available online in 18 languages. In Japan, we have also established a contact point via an external law firm. We accept anonymous reporting through either channel. We are committed to mitigating and remediating risks by accepting reports through this system.

LIXIL Compliance Hotline – Speak Up! (A new page will open) >
Contact through a law firm (Japanese only, a new page will open) >

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