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 such problems as 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 (with considerations toward labor affairs, human rights, the environment, and corporate ethics) thanks to our ethical procurement activities, the number of production line stops caused by suppliers’ CSR risks was reduced to zero in fiscal 2015 at Fuji Xerox of Shenzhen and this condition has continued for the three years since fiscal 2015 to fiscal 2017.
Like Fuji Xerox of Shenzhen, Fuji Xerox of Shanghai and Fuji Xerox Hai Phong also cut their production line stops caused by suppliers’ CSR risks down to zero for two consecutive years, in both fiscal 2016 and 2017.
We will continue to enhance our activities to minimize suppliers’ CSR management-related risks also at other production sites to consistently realize zero line stops and achieve coexistence and co-prosperity with suppliers.
Production Line Stops of Fuji Xerox of Shenzhen Caused by CSR Risks Faced by Suppliers
Strengthening Expert Teams for Ethical Procurement at Overseas Sites
Among the ethical procurement measures Fuji Xerox launched in 2007, the onsite visits and checks carried out by teams 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 to risks attributed to CSR by receiving advice on the points to be improved from our experts.
Procurement risks (risks attributable to CSR, such as the environment, human rights, labor conditions, and corporate ethics on the side of the suppliers) are increasing in other countries and areas. In answer to this situation, we expanded the initiatives that have been practiced at Fuji Xerox of Shenzhen to other sites in fiscal 2017, for the purpose of building an even stronger supply chain.
Specifically, the following measures have been implemented in Shanghai (China), Vietnam, and South Korea: (1) building a framework for nurturing expert staffs (establishing a process for nurturing experts through education, certification testing, trial visits, etc.), (2) developing checking standards that reflect the laws and customs of each country, and (3) conducting regular workshops attended by personnel involved in ethical procurement in each country.
As a result, we were able to build a team of experts on ethical procurement at each site. In Shanghai and Vietnam, teams of experts on ethical procurement have started visiting our suppliers from fiscal 2017, and this is scheduled to begin in South Korea as well during fiscal 2018.
We will continue to work in partnership with the different sites to continuously strengthen our efforts to develop our human resources and to check the situation at our suppliers through visits made by our expert teams, so that we can work closely together with the suppliers to resolve the issues in our supply chain.
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, in continuation from Fuji Xerox of Shenzhen and Shanghai, Fuji Xerox Hai Phong also began conducting on-site checks and improvement support for its suppliers in fiscal 2017.
The same activities toward suppliers will start at Fuji Xerox in South Korea within fiscal 2018.
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, Fuji Xerox has been working together with Fujifilm Logistics Co., Ltd. since 2009 to promote ethical procurement activities at logistics companies that handle the delivery of our products to our customers.We visited companies that had achieved the self-check list compliance rate of less than 90%, and gave improvement advice for items for which the companies did not meet the requirements. As a result, all companies reached a final compliance rate of 90% or higher for fiscal 2011 to 2016.
In fiscal 2017, some out of 78 companies that conducted the self-check failed to reach a compliance rate of 90%, but this was found to have been the result of mistakenly submitted answers; thus, we did not conduct visits and checks to these companies for the purpose of giving improvement advice.
Outside Japan, Fuji Xerox promoted ethical procurement activities from fiscal 2013 to fiscal 2015 at logistics companies that handle the delivery of our products to our customers.
From fiscal 2016, we shifted the focus of our ethical procurement activity to logistics companies that deal with transporting the finished products from our production sites.
In fiscal 2017, we asked 34 companies at the five production sites in China, Vietnam, and Thailand to perform the self-check and, as a result, 97.1% of the companies achieved the self-checklist compliance rate of 90% or higher.
We will continue our efforts in fiscal 2018 to further promote ethical procurement in the area of logistics, both in and outside of Japan.
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 2017, we strengthened education for our buyers, and advanced efforts to enable buyers to foresee risks in suppliers. We also continued our efforts toward suppliers to build awareness on the importance of adopting CSR initiatives.The percentage of suppliers with a Self-checklist compliance rate of 90% or higher increased to 91.4%, up 0.7 percentage points year on year.
In the future, we will work closely with all those involved in the area of production materials. We will promote activities that strengthen the implementation of efficient ethical procurement measures that are developed in accordance with the level and details of each risk.
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 have been conducting a survey to research the situation in our supply chain. The result has been reported annually 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 2017, the ratio of suppliers submitting a conflict minerals report reached 100% as a result of the increased understanding and cooperation of our suppliers. The rate of smelters with conflict-free certification Note 2 in our supply chain was 46.2%, up 6.2 percentage points from the previous fiscal year.
We will continue in fiscal 2018 to strive toward achieving a survey response rate of 95% or higher and improve data accuracy in order to further respond to customer requests.
We will also encourage our suppliers to use conflict-free smelters and refiners certified by such organizations as the RBA (Responsible Business Alliance).
- Note 1 Minerals considered problematic due to human rights violations at mining sites or unethical actions supported by funds earned from mining (tantalum, tungsten, tin, gold).
- Note 2 The ratio of conflict-free smelter in our supply chain, which is certified by RBA (Responsible Business Alliance) and other 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.
Approach of Future Initiatives
Ever since Fuji Xerox started ethical procurement in 2007, we have been expanding the scope of our activities, with placing importance on how attention to ethical procurement provides benefits not only to our company but to our suppliers by the understanding we have gained from them.
We will continue our ethical procurement activities in fiscal 2018, based on our own compliant procurement practices.