LIXIL makes pioneering water and housing products that solve everyday, real-life challenges, making better homes a reality for everyone, everywhere.
We seek to enhance compliance across our entire supply chain, and provide stronger management and support for our suppliers.
LIXIL promotes the stable supply of products and responsible procurement across our supply chain as the foundation of our CR activities, and considers supply chain management to be one of our material issues. 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 Procurement Compliance Policy, we seek to build sound partnerships with global suppliers to carry out procurement activities. Our LIXIL Code of Conduct also specifies the ethical behavior that is expected of all our staff, including prohibition of bribery.
Meanwhile, our Supplier Code of Conduct compiled in FYE2018 requires that suppliers respect human rights, observe international labor standards, conserve the global environment, and ensure fair business conduct. At the same time, we request that they demand equivalent standards from their own suppliers.
Additionally, in January 2020, we created Green Procurement Guidelines outlining our policy and standards for procuring parts and materials that exert the least impact on the environment. In collaboration with our environmental management department, we ask suppliers to understand and support our environmental initiatives and procurement activities based on these guidelines.
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
In Japan, we endorsed the objectives of the "Conference on Promoting Partnership Building for the Future" promoted by the Cabinet Office and the Small and Medium Enterprise Agency and announced the "Declaration for Building Partnerships." Through this initiative, we aim to build a sustainable relationship of co-existence and co-prosperity throughout the supply chain.
Our Supplier Assessment Standards used to select suppliers include criteria in 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 labor safety. We require new suppliers to understand and accept our Supplier Code of Conduct. Once suppliers are selected, we also conduct assessments of their products.
LIXIL ascertains the compliance of new suppliers by checking written responses to surveys of labor management, occupational health and safety, anti-corruption, and other practices.
In addition, we have established the Green Procurement Guidelines, which set policies and standards for procurement of parts and raw materials with less impact on the global environment, and ask for the understanding and cooperation to our environmental activities and procurement activities in line with the guidelines.
We also conduct regular inspections of our existing suppliers.
LIXIL employs the process outlined below to designate important suppliers, which will be prioritized when sharing procurement policies, conducting surveys, and checking progress toward improvement.
Based on transaction value, 71% of LIXIL suppliers are located in Japan, followed by China, Germany, and Thailand. For major suppliers in Japan, we hold annual meetings to explain responsible procurement principles and request cooperation with surveys.
LIXIL identifies supply chain risks by conducting a responsible procurement survey and checking 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 previous year’s transaction value, etc.
2) Conduct a responsible procurement survey for chosen 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, classifying suppliers with substandard conformity rates as high-risk.
4) Manage high-risk suppliers individually to encourage improvement.
For suppliers classified as high-risk through this process, we provide site visits and other forms of individual guidance that help promote sustainable partnerships and strengthen our supplier base, the primary goals of our supply chain management strategy.
LIXIL reviewed our responsible procurement survey in FYE2019. The new 47-question survey is easier to understand because it dovetails more closely with our Supplier Code of Conduct, revised in FYE2018, and enables online responses. This has lightened the survey load for both suppliers and LIXIL’s procurement department, allowing efforts to be focused on improving any problems that are uncovered.
In Japan, we conducted a trial survey of some of our secondary suppliers in FYE2021. Then, in FYE2022, we determined a five-year plan and specific targets for expanding the coverage of secondary suppliers. We plan to gradually expand the scope of the survey starting in FYE2023.
Outside Japan, we had LIXIL Asia, which had already surveyed some of its suppliers, conduct a full-scale survey of its primary suppliers in China in FYE2022. In FYE2023, we will also implement a full-scale survey of primary suppliers to LIXIL Americas. We are also taking similar steps to identify risks and implement remedial measures in the EMENA region.
LIXIL provides training for procurement staff at factories outside Japan as part of efforts to deepen understanding of responsible procurement and support suppliers. We are also strengthening the support we offer to suppliers in Japan, mainly from the head office procurement department.
In FYE2019, we conducted training for procurement departments at our factories in China. Lectures led by members of the head office procurement department provided information on the importance of responsible procurement and related social trends, enhancing the understanding of the company’s challenges under our Procurement Principles. In addition to that, personnel from local and head office procurement departments jointly visited supplier factories to provide on-the-job training and assist with aspects requiring improvement.
Local staff commented on how the experience reinforced their understanding of the importance of CR, and inspired them to utilize insights gained through the training to help their suppliers with improvement activities.
The procurement departments at factories outside Japan where the above training took place make their own plans and conduct their own independent follow-up activities such as supplier visits and support.
We receive regular reports from Chinese factories that experienced onsite training in FYE2019 about their follow-up activities with suppliers, and we are seeing more examples of where those activities have led to concrete improvements in safety, disaster risk reduction, and other measures. We plan to further strengthen these follow-up activities and introduce them in other regions as well.
Chinese factory team that provides supplier support
Suppliers working to strengthen safety and disaster risk reduction
We follow up with suppliers in Japan through onsite visits and online interviews. The COVID-19 pandemic has prompted us to hold more virtual dialogues with suppliers, which made our follow-up process more systematic and efficient.
We share with them information on issues and risks uncovered through our responsible procurement survey. We also support them with their own corporate responsibility initiatives, such as by providing guidance on information disclosure and communication related to community development.
An employee from headquarters procurement department, which is in charge of follow-up activities inside and outside Japan, said, “Responsible procurement initiatives are the first step toward strengthening compliance. We take the long view by emphasizing the significant upsides of responsible procurement to suppliers and getting to know the suppliers as closely as possible so that we can extend any necessary support.”