2018 Performance

Revision of the Shiseido Group Supplier Code of Conduct

In April 2018, it was revised in order to require business partners to comply with laws and regulations, prevent corruption, respect human rights, provide a safe and healthy working environment, and protect the environment.

Please check the details in the Responsible Procurement, Ethical Supply Chain Policies, and Standards.

Understanding risks throughout the supply chain

In 2018, we discussed the use of Sedex (platform to share supplier ethical data) with our primary suppliers to have them share their ethical information (compliance, environment, human rights, and occupational safety and health) from 45 sites in 31 companies. In addition, we conducted a briefing session on the theme of “Human rights across the businesses” and shared a document describing the theme with our 295 suppliers^*1. Specifically, we explained our intentions and changes in the revised version of our supplier behavior standard aimed at realizing responsible procurement in the supply chain, as well as detailing the effectiveness of Sedex.
Furthermore, we shared information based on the Shiseido Group Supplier Code of Conduct Compliance Survey (Shiseido's proprietary SAQ^*2), which confirms the compliance status of suppliers with Shiseido Group Supplier Code of Conduct as well as evaluation results of other accreditation organizations and the acquisition status of international standards certifications.

• *1Suppliers with a trading record with the Global Headquarters in 2017.
• *2SAQ: Self-Assessment Questionnaire

• *Excludes 3 duplicated suppliers

Procurement of sustainable palm oil

In order to procure sustainable palm oil, we joined RSPO^*1 (Roundtable on Sustainable Palm Oil) in 2010 and have reduced risks since then by procuring RSPO-certified raw materials, which take into consideration environmental protection and human rights during production in the places of origin. In 2018, we worked on the following:

• We formulated the Shiseido Group Sustainable Raw Materials Procurement Guidelines for sustainable procurement of palm oil and palm kernel oil and disclosed targets up to 2020.
• In order to support the sustainable production of palm oil, we purchased certificates (credits) equivalent to 100% palm oil and palm-derived materials (achieved targets up to 2020).
• We had a dialogue with palm oil producers in Indonesia
• We obtained RSPO supply chain certification^*2 for the Shiseido Kuki factory and also for Shiseido Vietnam Inc. (As of June 2019, 7 factories have obtained the certification.)

In addition, changes in palm oil consumption were as follows.

Changes in Palm Oil Consumption

• *1RSPO: Roundtable on Sustainable Palm Oil
• *2RSPO Supply Chain Certification: Certification to ensure logistically reliable delivery of RSPO-certified raw materials.
• *3Book & Claim system: A system of trading the production of palm oil and palm kernel oil produced on RSPO-certified farms as certified credits. As in Energy Green, purchasing a credit is considered equivalent to purchasing RSPO-certified oil.

Please check the details in Responsible procurement - Procurement of sustainable raw materials (palm oil/mica).

Procurement of sustainable mica

In order to procure sustainable mineral mica, we joined the RMI* initiative with the aim of achieving a responsible mica supply chain in 2017. In 2018, we worked on the following:

• We expanded the survey target to include mica used by the Shiseido Group and began collecting information on mica procured from home and abroad through various suppliers.
• We attended the RMI Annual General Meeting held in New Delhi, India. (Oct. 30-Nov. 1)
• We had dialogues with local mica mining companies.
• We consulted with NGOs and RMI members to improve the education system of local children.
• We discussed and formulated the activities to be addressed in 2019. Please check the progress on the RMI website.

• *RMI: Responsible Mica Initiative

Please check the details in Responsible procurement - Procurement of sustainable raw materials (palm oil/mica).

Dialogues with stakeholders

In order to ensure sustainable and responsible procurement and respect for human rights in the course of our business activities, Shiseido works with various stakeholders to discuss both the environment and society and share and resolve issues.

Dialogues with NGOs/NPOs and small palm oil farmers

In August 2018, in order to understand human rights issues in palm oil procurement, we participated in Stakeholder Engagement Program in Indonesia held by Caux Round Table, Japan. Through dialogues with NGOs/NPOs and small palm oil farmers, we deepened our understanding of the human rights risks, violations, and labor issues. In order to be a company that fulfills our responsibility to human rights, we will reflect these dialogues with various stakeholders in the construction of an ethical supply chain.

Dialogues with human rights experts

In September 2018, we talked with human rights experts (Danish Institute for Human Rights, Institute for Human Rights and Business, and Verisk Maplecroft) and received advice on how to proceed with human rights due diligence in our company. We are implementing this knowledge in our efforts.

Please check the details in Responsible Procurement - Dialogue with Stakeholders.

Human rights risk assessment

Since FY2017, Shiseido has been conducting the Shiseido Group Engagement Survey for employees throughout Shiseido Group, encompassing Japan and overseas countries, to investigate human rights risks in the workplace, such as discrimination and harassment.

Reporting and consultation center for employees

A consultation center was set up to handle consultations and reports on various employee human rights and labor issues. We set up the In-house Shiseido Consultation Office and the External Shiseido Hotline to receive a broad range of consultations and reports from various workplaces. The Compliance Committee Hotline specializes in receiving reports and Report Mail to Auditors receives reporting on officers.

Operating performance of reporting and the consultation center for employees（The reporting and consultation numbers include consultations on issues other than human rights）

Human rights education training for employees

Since human rights issues are diverse, the Human Resources Department, Risk Management Department, and Social Value Creation Division are playing the central role in the initiative, working in partnership with the Shiseido Group companies. With regard to the Shiseido Group Standards of Business Conduct and Ethics and related policies and rules, we conduct regular training and education according to position and job type to deepen our understanding of the human rights of employees and to work to reduce human rights risks. We hold training sessions for top-level employees including the Global Headquarters officers and department directors in Japan, division/department heads of domestic and overseas offices, employees in various divisions/departments, and new employees once a year.

Achievements of human rights education and training for top management

Target and performance of human rights education training for employees

Other human rights education training performance

Challenges to reducing human rights risks

Our challenge is to apply the results of human rights risk assessment (employee engagement surveys and performance evaluations for suppliers) conducted internally and externally by each department to various human rights risk reduction efforts.