HIGHLIGHT 1 Enhancing Our Timber and Materials Procurement  to More Effectively Embrace Human Rights and the Environment

With increasing awareness of human rights and environmental issues in the supply chain, measures to ensure a sustainable society over the entire supply chain are being sought. In accordance with the Sumitomo Forestry Group Procurement Policy, we are promoting the procurement of timber and wood products from properly managed forests and reinforcing responsible procurement measures for non-wood materials as well.

Responsible Procurement in Our Housing and Construction Business

In 2002, Sumitomo Forestry Group formulated its Green Procurement Guidelines to build a sustainable supply chain. In 2015, our Timber Procurement Philosophy and Policy was revised and renamed to the Sumitomo Forestry Group Procurement Policy. In 2017, we drew up the Sumitomo Forestry Group Code of Conduct, which was expanded to include the supply chain . Through this and other measures, we have reinforced our efforts to build a sustainable supply chain.

In the Housing and Construction Business, one of the main pillars of our Group’s operations, sustainable materials procurement is positioned as one of our material issues for management. The structural materials and small cross-sectional wood slabs called hagarazai* are procured through our trading arm, the Timber and Building Materials Division, which confirms legality and sustainability of timber and wood products. In addition, we have been responding to the Clean Wood Act, which seeks to promote the distribution and utilization of legally harvested wood and related products from May 2017. The Housing and Building Materials Division registered as a Type 2 Registered Timber-Related Operator under the Clean Wood Act in March 2018. For housing equipment, insulation, resin parts and other building materials, procurement is conducted in accordance with the Sumitomo Forestry Group Green Procurement Guidelines. Before we begin transactions with a new supplier, we first conduct checks of their various practices at our supplier evaluation meetings. Areas for examination include quality, cost and delivery times as well as environmental conservation, human rights, labor safety, information security and a wide range of other categories.

In an aim to further enhance our practices at Sumitomo Forestry, in May 2019 in our Mid-Term Sustainability Targets, we set out a goal to build a sustainable supply chain and are regularly conducting sustainability surveys and other efforts to reinforce our management system.

* Structural materials are a wooden house’s foundation, posts, beams and other wood materials used for the structure. Hagarazai are materials and base materials used to supplement the structural materials of a wooden house.

Engaged in procurement activities based on the Sumitomo Group Procurement Policy

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Conducting Sustainability Procurement Survey

Starting in fiscal 2019, the Housing and Construction Division began subjecting new suppliers to an annual Sustainability Procurement Survey in addition to the Green Procurement Survey that was required in the past. This Sustainability Procurement Survey was originally aimed for existing building materials and housing equipment manufacturers and suppliers. In addition, we conduct surveys of 30 companies we transact with directly (making up for about 86% of our total fiscal 2018 purchase amount) and the top 12 companies (in terms of fiscal 2018 purchase amount ) that we transact indirectly with. These surveys cover a total of 53 categories and help us grasp each company’s status regarding governance, human rights, labor safety, environmental initiatives as well as sustainable wood procurement and other relevant issues.

In October 2019, we held a sustainability survey briefing to all suppliers who were asked to respond to our survey. Approximately 50 people attended, and we shared with them the Sumitomo Forestry Group Code of Conduct, the Sumitomo Forestry Group Procurement Policy and our thinking regarding responsible procurement to promote mutual understanding.

The survey conducted had a 100% response rate, and based on their responses, suppliers were evaluated on a four-scale ranking of S, A, B or C.

Through the surveys, we were able to confirm that many suppliers share our own understanding of what responsible procurement means. On the other hand, some suppliers fell short of our expectations and after discussions at our supplier evaluation meetings, we provided feedback, which we will continue to follow up on to ensure ongoing improvement.

Fiscal 2019 Sustainability Survey Results (100% indicates a perfect score)

A sustainability procurement survey explanatory meeting

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Towards Building an Even Better Partnership

The surveys provided us with feedback, as well. Our suppliers commented that the surveys prompted them to advance their own measures and gave them impetus to improve on areas that fell short of expectations. In addition, we realized that we were not able to get valid responses on some of the survey questions because they were difficult to understand. To enhance mutual understanding, we will continue to devise new methods and work in cooperation with the relevant divisions to make improvements. With the expansion of our survey subjects and the improvement of its content, we will work to foster positive partnerships with our suppliers to build a strong supply chain.

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A Comment from One of Our Suppliers

The TOTO Group is striving to be an ongoing presence that contributes to societies and the global environment. For this purpose, TOTO has integrated management and CSR and is working to create value that harnesses its strengths for the benefit of all stakeholders. At Sumitomo Forestry Group’s procurement seminar, we were able to get information about the company’s ESG initiatives and stance, how ESG surveys are handled to confirm responsible procurement and specific checklist items. This enabled us to better understand Sumitomo Forestry’s thinking regarding a sustainable supply chain.

In its business activities, the TOTO Group will fulfill its responsibilities by balancing management, the environment and society for the sustainable development of the company, of societies and the earth.

Masami Sasaki,
sales chief,
Housing Marketing Department 1,
Housing Company Marketing Division,
Special Sales Division,
TOTO Ltd.

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Sustainability Report