Supply Chain Management in the Distribution and Manufacturing Businesses

Basic Policy

The Sumitomo Forestry Group strives to contribute to building a sustainable and prosperous society through business activities that use wood, a renewable natural resource. To do so, we engage in responsible wood procurement activities in accordance with our Wood Procurement Basic Policy formulated in 2005 and our Wood Procurement Principles and Policies formulated in 2007. To deliver legal and sustainable wood, we are committed to responsible wood procurement.

In 2015, we revised the policies as the Sumitomo Forestry Group Procurement Policy, which covers not only timber but also various other procured products, such as metals, ceramics, resin and other building materials. We are presently engaged in procurement activities that take into consideration the economy, society and environment based on this policy.

As part of its effort for sustainable wood procurement, the Sumitomo Forestry Group has been responding to growing concerns about deforestation, which is regarded as one of the climate change factors, with the introduction of its unique “wood procurement due diligence.” In May 2019, we newly formulated an action plan for wood procurement due diligence and started to use stricter evaluation standards on sustainability.

Definition of Sustainable Timber and Wood Products

The Sumitomo Forestry Group defines “sustainable timber and wood products” as timber and wood products that are legal and to which any of the following applies.

Definition of "sustainable timber and wood products"
Environmental aspects: Not contributing to deforestation

Definition of "sustainable timber and wood products"
Social aspects: Not violating human rights concerning occupational safety, forced labor, indigenous peoples’ rights, etc.

Certified timber and materials sourced from certified forests: FSC, PEFC, and SGEC
（Regardless of the chain of custody (CoC), we place emphasis on certification at time of production and promote a shift to certified timber）
Wood from planted forests
Wood from natural forests where forest management and distribution can be evaluated as sustainable.
（This does not include wood from conversion forests = wood harvested from natural forests that were converted to farm land such as oil palm plantations）
Recycled wood

Click here for related information

Promoting the Use of Certified Timber

Structure of Wood Procurement Management

The Sumitomo Forestry Group established the Wood Procurement Committee, which is chaired by the head of Sumitomo Forestry ‘s Corporate Division and comprises managers from the departments in charge of wood procurement. The committee discusses issues related to group-wide wood procurement, including the procurement standards and risk assessment concerning illegal logging.

In fiscal 2025, the Wood Procurement Committee met four times, as planned, to check the legality and sustainability of all 290 direct overseas suppliers as well as suppliers of overseas Group companies (distribution or manufacturing companies) and conducted the Sustainability Procurement Survey on the suppliers. We check the legality and sustainability of our suppliers, including both new and existing ones, regularly (once a year or once every two years depending upon their country risks.)

Procurement of Sustainable Timber and Wood Products

Due Diligence in Wood Procurement

The Timber and Building Materials Division, the Housing Division, and the wood procurement division of each Group company confirm that the wood provided by suppliers has been legally harvested, and that the timber and wood products they provide have been made by using only legally harvested wood as a raw material.

Confirmation of Legality of Wood Procurement

Each person in charge of procurement is required to follow the Wood Procurement Due Diligence Manual, gather necessary information as shown in the table, cross-check relevant documents for each location and tree species, and confirm the traceability of the entire supply chain all the way to the logging site. The Sustainability Procurement Survey consists of 52 items that are selected by referring to items used in other surveys, such as those on forest certification, cross-sector sustainability and suppliers.

No.	Category name
1	Supplier name
2	Supplier address
3	Wood type
4	Tree species of timber and wood products
5	Country or region of logging of timber and wood products
6	Annual procurement volume (weight, area, volume or quantity)
7	If sold to a legal entity, the name and address of that legal entity
8	Results of supplier surveys and other, inspection records and other
9	Documents certifying that harvesting was conducted in accordance with laws and regulations of the logging country

Risk level

Based on the information collected and sorted by country, region, tree species, and wood type, our staff in charge conduct risk assessments in line with the risk standards determined for illegal logging, including human rights violations, by the Wood Procurement Committee. In the assessment, risks are categorized into A (low), B (medium) and C (high) in reference to information sourced from Transparency International’s Corruption Perceptions Index (CPI), the FSC’s national risk assessment, the United Nations Environment Programme (UNEP) World Conservation Monitoring Centre (WCMC), and reports from environmental NGOs. We audit even suppliers of products rated as A, regardless of the transaction volume or the duration of the contract. This is our policy as our business is centered on wood, and all timber and wood product suppliers are regarded as our significant business partners. For timber and wood products in the B and C categories, we do not simply rely on documents as proof that the materials are legally harvested according to the producing country’s laws and regulations. When necessary, we send our staff in charge of wood procurement to conduct on-site inspections in which they trace the products back to the logging site. In fiscal 2025, we audited 53 companies in Category A, 46 companies in Category B, and 191 companies in Category C.

Timber and wood products: Breakdown of imports by region (for fiscal 2025)

Ensuring Sustainability of Wood Procurement

Consideration for Biodiversity Conservation, Labor Practices and Human Rights, and Local Communities

We check the following items regarding the timber and wood products that we procure by conducting the Sustainability Procurement Survey of suppliers, on-site inspections, and interviews:

Whether the rights of workers and local communities are not abused in the area where we procure the products and their raw materials. In addition, whether suppliers ensure that their logging is conducted with consideration of the rights of workers and local residents.
Whether high conservation value forests are included in the area where we procure the products and their raw materials. In addition, whether suppliers ensure that their logging practices are conducted with consideration for forests with high conservation value.
Whether wood from forests being converted into oil palm plantations and the like is used.

Sustainability procurement survey implementation rate at suppliers of imported timber^*

100%

* The percentage of suppliers that have undergone the Sustainability Procurement Survey to the total number of suppliers subject to wood procurement due diligence by the Wood Procurement Committee during the year under review

Initiatives for Sustainable Wood Procurement

Sumitomo Forestry made an action plan to shift to alternative materials (materials from selective logging of natural forests and planted forests) and to gradually stop handling wood products that do not meet the definition of "sustainable timber and wood products" even if their legality is ensured.

In September 2021, we suspended the contracts with suppliers who did not meet our procurement standards and whose sustainability could not be confirmed even through repeated dialogues. For example, we have stopped handling some raw materials harvested in Indonesia, Malaysia and Russia. As a result, we achieved 100% handling of sustainable timber and wood products on a contract basis. We will continue to ensure sustainable wood procurement going forward.

Percentage of sustainable timber and wood products handled
FY2025 result^*

100%

* Sustainable timber and wood products: Certified timber, timber in the process of certification, and timber from forestation or from natural forests that are recognized as sustainable in terms of forestry and distribution (excluding timber from converted forests), and recycled timber

Review of Legal Compliance and Sustainability by the Wood Procurement Committee

Each procurement department reports the progress of these initiatives to the Wood Procurement Committee and is allowed to procure only from the suppliers that are judged to have no issues regarding legality and sustainability. We will continue to make improvements for the reduction of risks across our supply chain.

Due Diligence in Wood Procurement

Use of Sustainable Wood

Initiatives in the Manufacturing Business

Sinar Rimba Pasifik (SRP) uses environment-friendly, sustainable wood to manufacture high-quality wood interior materials (floors, stairs, counters, etc.) of a consistent design, and supplies these products primarily for “Sumitomo Forestry homes.” SRP procures only sustainable wood as the main material for its products and is promoting the use of plantation wood.

Approximately 70% of wood used by the company is imported from North America, all of which is certified wood from member companies of the American Hardwood Export Council (AHEC) or the Quebec Wood Export Bureau (QWEB), which promote sustainable forest management.

Moreover, from Europe (France), SRP imports wood legally harvested mainly in PEFC-certified forests as part of its effort to increase the number of procurement regions for the sustainability of its business.

The company also procures plantation wood from Indonesia (Perum Perhutani), all of which has received SVLK (Sistem Verificasi Legalitas Kayu) certification.

We will continuously commit ourselves to responsible wood procurement and manufacture and sell high-value-added products by using only wood that is verified to be legal and sustainable.

Promoting Sales of KIKORIN-PLYWOOD

The Sumitomo Forestry Group promotes sales of products made from certified wood and wood from planted forests to increase their sales composition ratios among plywood and other wooden boards imported from overseas. In particular, we have been selling JAS plywood that is composed of 50% or more FSC- or PEFC-certified timber and sustainable planted forest wood as KIKORIN-PLYWOOD. We have invested part of the revenue in our tree planting project in Indonesia. In fiscal 2021, according to the Sumitomo Forestry Group’s Wood Procurement Standards, we redefined KIKORIN-PLYWOOD as “plywood made with 100% sustainable certified timber.” In fiscal 2025, its sales reached 306,410 m³. We will strive to further promote sales of this product.

Education of Personnel in Charge of Procurement

The Sumitomo Forestry Group’s Wood Procurement Committee annually holds a study meeting for employees in charge of wood procurement to learn about the global trends and get the latest information from external experts in the field.

Sustainability in Wood

In December 2025, the Sumitomo Forestry Group, with support from Forest Stewardship Council (FSC) Japan, held a study meeting on FSC certification and its effective use.

Participants in the meeting were briefed on the FSC certification system and how the certification was recognized and is growing, as well as on new FSC services. They also learned about measures that companies are expected to take going forward.

	Theme	Description	Lecturer
FY2020	Recent trends and the nature of ESG investment	The major trends behind "why ESG investment?"	Professor, Takasaki City University of Economics Professor Takeshi Mizuguchi
FY2021	Sustainable wood procurement from a financial perspective	Main outcomes of COP26, forests in ESG investment and financing policies of financial institutions, forest certification from a financial perspective, TNFD, etc.	WWF Japan Head of Financial Group Mutai Hashimoto
FY2022	Supply Chain and Human Rights	Covered the background of the issue of business and human rights, international codes of conduct, tightening international standards, and domestic and international trends such as legislation on human rights and due diligence in various countries.	LRQA Sustainability K.K. Representative Director Hidemi Tomita
FY2023	Biodiversity, Nature Positive, and Timber Procurement	The current state of biodiversity, global trends, and international trends that are shifting from climate change to nature.	WWF Japan General Manager of the Nature Conservation Department Mr. Shinichi Kawae
FY2024	Sustainability of wood	Outline of the revised Clean Wood Act, which became effective on April 1, 2025, sustainability of wooden biomass fuel, guidance on evaluation concerning the use of wood for buildings, and guidelines on forest management that will help enhance forest biodiversity	Wood Utilization Division, Forestry Department, Forestry Agency Auditor Ms. Aya Saito

On-site Surveys for Wood Procurement

Wood Procurement in Indonesia

In June 2025, Sumitomo Forestry conducted on-site surveys on its affiliated company PT. Kutai Timber Indonesia (KTI) and its equity method affiliate PT. Biomassa Lestari Nusantara (BLN). In Indonesia, a timber legality assurance system called “SVLK” is operated. Timber and wood product exporters are required to obtain a SVLK certificate from an independent certification body accredited by the National Accreditation Committee (KAN) and have the certificate registered. Exporters meeting this requirement will obtain a V-Legal Document, in which the independent certification body certifies the legality of the exporter’s supply chain—from logging and factory processing through to exporting. The legality of the wood procured by KTI from companies registered with SVLK was confirmed through the V-Legal Documents. For wood procured by KTI from nearby planted forests owned by farmers who were not registered with SVLK, the legality and sustainability were confirmed based on the fact that new seedlings were purchased and planted by the farmers for reforestation.

Also, for BLN, the legality and sustainability of wood procured from nearby farmers for the manufacture of pellets were confirmed based on the fact that the wood was scrap from the orchards owned by the farmers.

Confirming the legality of the wood based on the V-Legal Document

Scrap wood collected from nearby lumbermills for delivery to BLN

Communication with Our Business Partners

In the Timber and Building Materials Business, given that it is a regional business, Sumitomo Forestry maintains close communication with local suppliers and purchasers of timber and building materials in each region.

Name/Scale	Description
The Sumirin club -a membership organization to communicate with regional suppliers of timber and building materials Number of members: 890 companies (as of July 2025)	Established in different regions around Japan as a forum for communication with business partners for distribution operations of timber and building materials. Training sessions and informational exchange meetings are held two or three times a year in each region, allowing members to deepen mutual friendships, promote product R&D, enhance production and distribution, and support improvements in the industry as a whole.
Publication of Building Materials Monthly Number of copies printed: About 4,100 per issue	This monthly magazine has a history spanning more than half a century. We have been publishing it to distribute information and topics regarding timber, building materials and the housing industry in a timely manner and from our own unique perspective.

Name/Scale

Description

The Sumirin club
-a membership organization to communicate with regional suppliers of timber and building materials
Number of members: 890 companies (as of July 2025)

Established in different regions around Japan as a forum for communication with business partners for distribution operations of timber and building materials. Training sessions and informational exchange meetings are held two or three times a year in each region, allowing members to deepen mutual friendships, promote product R&D, enhance production and distribution, and support improvements in the industry as a whole.

Publication of Building Materials Monthly
Number of copies printed: About 4,100 per issue

This monthly magazine has a history spanning more than half a century. We have been publishing it to distribute information and topics regarding timber, building materials and the housing industry in a timely manner and from our own unique perspective.

Dennagon (Digital Delivery Slip and Invoice Transmission Service)

The Timber and Building Materials Division launched the Dennagon service in October 2016. This online service allows customers to receive digital versions of delivery slips and invoices, which were traditionally exchanged on paper.

Using the Dennagon service provides the following benefits:

Purchasers can now receive the delivery slips and invoices the morning after they are issued by the Company instead of waiting for them to be delivered at an unknown time several times a week. The service also enables the purchasers to handle the delivery slips at their own pace, leading to the leveling of workload.
The work of checking the content of the delivery slips is made more efficient through a sorting function of the delivery data in Excel, with which the purchasers can easily find the desired data.
The Dennagon service stores delivery slips for ten years and eliminates filing tasks by allowing users to conduct various searches, thereby helping increase work efficiency and reducing the costs of operations at purchasers.

The Dennagon service allows purchasers to check our delivery data without being in the office, such as when they work from home. As of fiscal 2025, more than 1,100 of our business partners are using the service.

Responsible Material Procurement

Since fiscal 2022, the Sumitomo Forestry Group has been conducting the Sustainability Procurement Survey on its suppliers of building materials and housing equipment in its domestic timber and building materials business.

The main purposes of conducting this survey are (1) to ensure that the goods and services provided by the Sumitomo Forestry Group comply with various environmental and social laws and regulations throughout the supply chain, and (2) to share the Sumitomo Forestry Group's policies including the Procurement Policy and the Human Rights Policy with its suppliers and build better partnerships with them.

Conventional supply chain management items are related to quality, cost and delivery, but in addition to these items, items about risks related to workers' rights, occupational safety and environmental issues must also be recognized and managed.

The Sustainability Procurement Survey consists of questions on governance, human rights, occupational health and safety, the environment, ethics, information security, supply chain and social contribution, which we selected based on international norms and the Sumitomo Forestry Group policies. Particularly regarding climate-related matters, we engage with our suppliers by reviewing their actual greenhouse gas emission figures and, where reduction plans have been formulated, the specific details of such plans, with the aim of achieving carbon neutrality across our Group by 2050.

In fiscal 2025, we sent the questionnaire form to 78 companies—the same number as in fiscal 2024—and all 78 responded. The collection rate was 90.9% in terms of the sales share, exceeding last year’s 87.0%.

Supply Chain Management