High-priority Management Themes at Fuji Xerox
Strengthening supply chain management (implementing CSR/expanding ethical procurement at Fuji Xerox manufacturing sites)
In order to make its supply chains more competitive, Fuji Xerox wants to ensure that its suppliers understand the importance of CSR management and continue to make improvements. We therefore closely communicate with our suppliers at all levels, from top management to those directly carrying out the work, and seek their understanding of the importance of CSR and the need for improvements as we strive to take our CSR engagement to a higher level throughout the supply chain.
To foster ethical procurement, Fuji Xerox supports its suppliers in conducting improvement activities more proactively and effectively by providing them with briefings and executive seminars, introducing the management guidelines and CSR self-checklists, and carrying out onsite inspections at their sites.
The CSR Assessment System
Cooperative Initiatives to Improve QCD
Fuji Xerox is cooperating with its suppliers for the continuous improvement of QCD (quality, cost, and delivery) and the enhancement of green procurement at the suppliers' sites.
Mutual Consensus Assessment
In addition to the annual QCD assessment, Fuji Xerox enhanced its assessment methods by introducing a mutual consensus assessment in fiscal 2006; by adding CSR/green procurement in fiscal 2007 and adding the cooperation of the supplier management team with Fuji Xerox's procurement activities to the assessment items in fiscal 2011.
The mutual consensus assessment is a system whereby our suppliers conduct their own self-evaluation of their operations alongside assessments by Fuji Xerox. The system seeks to achieve mutual consensus assessments - that is, to resolve discrepancies between the two perspectives through discussion, with the goal of reaching an agreement on assessment scores. This system is thus designed to give assessments in a manner that is more acceptable to our suppliers and encourage them to voluntarily make improvements in reference to the assessment results.
Selection of Premier Partners
We select premier partners from among suppliers who achieved high scores in the mutual consensus assessment, thereby strengthening partnership with the suppliers. Each April, we explain our management policies to our business partners and certify premier partners.
In addition to giving premier partners priority for orders of parts for new products, we ask premier partners to work with us to improve quality, cost, and delivery times, along with joint efforts in CSR/green procurement. This is intended to achieve mutual growth, as a group of true partners. Suppliers not certified as premier partners can strive to achieve such certification in the next fiscal year by undertaking improvement activities as partners.
Specific Measures for Ethical Procurement
Fuji Xerox has a high rate of overseas production (around 90%), with its overseas bases located mainly in China and Vietnam. It is often said that in areas of Asia where production bases are concentrated, on-site labor issues and insufficient environmental measures tend to result in labor disputes and factory fires. Not being immune to this rule, Fuji Xerox of Shenzhen has faced issues regarding stable operation and supply, including suspension of the company’s production line due to delayed delivery of components, which was caused by suppliers’ CSR risks regarding labor affairs, human rights, the environment and corporate ethics.
To help minimize these risks, Fuji Xerox has been implementing measures for ethical procurement since 2007. As a result of suppliers having made improvements to their CSR management thanks to our ethical procurement activities, the number of production line suspensions caused by suppliers’ CSR risks was reduced to zero in fiscal 2015 and remained at zero in fiscal 2016 at Fuji Xerox of Shenzhen.
Like Fuji Xerox of Shenzhen, Fuji Xerox of Shanghai and Fuji Xerox Hai Phong also cut suspensions of their production lines caused by suppliers’ CSR risks down to zero.
We will enhance measures to minimize suppliers’ CSR management-related risks also at other production bases to reach the goal of zero suspensions of our production lines and achieve coexistence and co-prosperity with suppliers.
Suspension of Fuji Xerox of Shenzhen’s Production Line Caused by CSR Risks Faced by Suppliers
Environment, Safety and Health and Practical Labor Management Seminars for Suppliers
Among the ethical procurement measures Fuji Xerox launched in 2007, the onsite inspections carried out by a team of experts in the environment, personnel affairs and other areas at the suppliers of Fuji Xerox of Shenzhen were particularly effective. Many of the suppliers made improvements by receiving advice on the points to be improved from the inspectors.
The suppliers requested the expert team to continue giving them advice for improvement in a timely manner. However, it was difficult for the team to give them more advice only by revisiting each of them again.
Accordingly, in fiscal 2014, Fuji Xerox of Shenzhen began holding environment, safety and health, and practical labor management seminars for the suppliers under a three-year plan, in addition to visiting their sites. Fuji Xerox of Shenzhen completed implementation of the plan in fiscal 2016.
Executives and managers at the suppliers' production bases are invited to the seminars to learn from the staff of the company about the know-how to implement measures for the environment, human rights and labor, and corporate ethics and to comply with new laws and regulations. In the first year, we held three seminars on safety and health and invited managers of the suppliers to it. The suppliers highly appreciated the seminars as being useful to make improvements.
In fiscal 2015 we held 11 seminars (for a total of 13 times) on labor management, environmental conservation, and the support program held for employees by the company. Over 1,000 managers from the supplier companies participated in the seminars to learn the relevant know-how. Many suppliers voluntarily participated in the seminars and all the seminars were rated by them as "satisfactory" at a very high rate (98% or higher).
In fiscal 2016, we briefed participants on legal requirements and introduced examples of improvement on 4 themes, including the management of corporate ethics. About 1,800 people participated in the seminars.
Tools to Support Ethical Procurement
Fuji Xerox requests its suppliers to conduct CSR activities voluntarily for the environment, human rights and labor, and business ethics issues, for which we have prepared the Management Guideline and the Ethical Procurement Self-checklist. The Management Guideline describes the social background, including the related laws, regulations and international standards, the level of measures to be taken for the issues, and specific examples, and the Ethical Procurement Self-checklist is used by our suppliers to check the measures they are implementing.
1．Ethical Procurement in Production Materials
Since 2007, we have been asking suppliers to evaluate themselves in terms of ethical procurement by using the aforementioned Ethical Procurement Self-checklist. Fuji Xerox expects all suppliers to meet the requirements for the "very important" items listed in the Self-checklist at a rate of 90% or higher.
The requirements on companies (production plants) to fulfill their CSR have recently tightened. For example, for environmental conservation, companies are now required to identify and record their energy consumption and greenhouse gas emissions. In response, we annually review the Fuji Xerox Ethical Procurement Self-checklist for production materials.
For suppliers to take the same approach as we do to make improvements for ethical procurement, Fuji Xerox of Shanghai also began conducting on-site checks and improvement support for its suppliers in fiscal 2016, and Fuji Xerox Hai Phong will start the activity within fiscal 2017.
In pursuit of a Self-checklist compliance rate of 90% or higher, Fuji Xerox will continue to cooperate with suppliers for ongoing improvements.
Ratio of Suppliers with Compliance rate of 90% or higher on "very important" items
2．Ethical Procurement in the Product Logistics
In Japan, in the area of logistics, Fuji Xerox has been working together with Fujifilm Logistics Co., Ltd., to which Fuji Xerox subcontracts some of its operations, to promote ethical procurement activities at the companies that handle our logistics. Also, in fiscal 2016 we continued giving improvement advice for items for which the companies did not meet the requirements by visiting them individually and fostered the sharing of best practices with them. As a result, 100% of the companies achieved the target (Self-checklist compliance rate of 90% or higher) in fiscal 2016 as in the previous fiscal years. Moreover, since fiscal 2015, we have been visiting the companies with a Self-checklist compliance rate of less than 90% among those collecting and transporting industrial waste from our bases in Japan, with a view to helping them make improvements.
Outside Japan, all of our suppliers in the field of product logistics achieved a Self-checklist compliance rate of 90% or higher except for one company. We therefore reviewed the action plan to shift the focus of our ethical procurement activity to transporters serving our production bases (companies that transport products from our production bases to the loading ports). Accordingly, in fiscal 2016, we conducted the ethical procurement activity with another two transporters serving our production bases.
We will continue to support the improvement activities of the suppliers to further promote ethical procurement.
3．Ethical Procurement for Indirect-Materials
Fuji Xerox has been fostering ethical procurement activities giving priority to suppliers who are important for its production activities and business continuity.
In fiscal 2016, to further enhance governance, we visited the suppliers who had conducted Self-checklist assessments in our capacity as a buyer, and fostered the ethical procurement activity not only for CSR but also for BCP. The percentage of suppliers with a Self-checklist compliance rate of 90% or higher increased to 90.7%, up 9.1 percentage points year on year.
We will continue to support the improvement activities of our suppliers in consideration of their industry-specific challenges, thereby further promoting ethical procurement.
Engaging with the Conflict Minerals Issue
Our policy is to avoid business activities that support conflicts or human rights abuses, whether directly or indirectly. In response to the issue of conflict minerals Note 1, the mining of which represents a leading cause of conflict and human rights abuses, we conducted research and confirmed that there were no conflict mineral issues in our supply chain. The result has been reported to our OEM customers since 2013 to make it possible to respond to requests from customers, as required under the final rules adopted by the U.S. Securities and Exchange Commission pursuant to Article 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In fiscal 2016, the ratio of suppliers submitting conflict minerals report was 96.5%, and the rate of smelters with conflict-free certification Note 2 in our supply chain was 40%, up 20.5 percentage points from the previous fiscal year.
In fiscal 2017, we will strive to improve the survey response rate to 95% or higher and improve data accuracy in order to further respond to customer requests.
- Note 1 Minerals considered problematic due to human rights violations at mining sites or unethical actions supported by funds earned from mining.
- Note 2 The ratio of conflict-free smelter in our supply chain, which is certified by the third party assurance organizations.
Procurement Aimed at Local Development
At Fuji Xerox, we aim not only to promote fair, impartial procurement with our suppliers, but to contribute to the local economy in Japan and abroad, where our production bases are located and to pursue optimal quality and prices. Our procurement plans include optimizing the local procurement rate of raw materials and parts. At the same time, however, we have been careful not to hastily transfer overseas some of our technologies and the production of certain parts. Instead, these parts are produced at and procured from the Japanese production sites of our suppliers.
We will deploy appropriate local procurement activities while seeking to optimize local content rates, thereby contributing to economic growth in the regions where we have production sites.
Fuji Xerox has conducted procurement activities according to its Purchasing Transaction Guidelines since they were first established in 1990. We subsequently revised our Purchasing Transaction Guidelines and Basic Procurement Policy for Fuji Xerox and its Affiliates in 2011 to further increase the fairness and transparency of our purchasing activities in line with increased societal expectations. In the same year, we also established the Purchasing Transaction Basic Rules, which reflect the ethical procurement perspective, to improve the societal aspects of our purchasing activities ranging from the environment and human rights to labor practices and corporate ethics, and announced our purchasing policy in and outside the organization.
In fiscal 2012, we also established the Transaction Standards for Paper Suppliers, which reflect perspectives of the environment, rights of people in the community, and corporate ethics. We also undertook a written survey of suppliers to assess their compliance with these standards. Particularly for our primary overseas suppliers, our activities included site audits and assessments of the status of their environmental efforts, including the traceability of raw materials used to make paper.
In fiscal 2013, in full recognition of the grave issue of conflict minerals Note 1, the mining of which is a leading cause of conflict and human rights abuses in certain areas, we added to the Basic Procurement Policy for Fuji Xerox and its affiliates the policy of requesting parts suppliers to identify the origins of minerals contained in parts supplied to us and to take corrective action when needed.
- Note 1 Minerals considered problematic due to human rights violations at the mining sites or unethical actions supported by funds earned from mining.
System for Ensuring Fair Procurement Practices
In fiscal 2008 Fuji Xerox established an "All Fuji Xerox Compliance Help Line" as a consultation service for quickly comprehending and resolving the compliance problems that occur in the workplace and in operations. This help line is open to any employee engaged in the operations of Fuji Xerox or its affiliates. We accept whistle-blowing reports and queries regarding legal violations or violations of our code of conduct in purchasing.