Supply Chain Management

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• S ●
• G

• Basic Perspective
• Guidelines
• Risk Management for Sustainable Procurement
• Targets and Results
• Initiatives to Resolve Issues

Basic Perspective

• The Sumitomo Rubber Group

The Sumitomo Rubber Group aims for fair and transparent corporate activities, striving to be a good partner to our suppliers. To that end, we pursue sustainable procurement through initiatives such as the formulation and implementation of Procurement Guidelines and their revision in response to legal amendments or changes in the external environment.
We also actively accept proposals for improvement (value analysis (VA)) and proposals conceived at the design stage (value engineering (VE)) from suppliers.

Furthermore, the raw materials of tires used for our mainstay products, also include natural rubber, which is produced with the blessings of nature. To make this natural rubber sustainable, we will make efforts to resolve issues in our supply chain, including collaboration with all people involved in natural rubber. Through these efforts, we will provide our customers with joy and well-being.

Sumitomo Rubber Group Sustainable Natural Rubber (SNR) Policy

Guidelines

• The Sumitomo Rubber Group

Procurement Guidelines

With the aim of realizing sustainable procurement, the Sumitomo Rubber Group updated its Procurement Guidelines to the 8th Edition in July 2024.
In the new edition, we have provided additional information regarding our activities relating to natural rubber and guidelines that we would like our business partners to follow to ask for their support. We have particularly focused on efforts to help our business partners fully understand our initiatives toward carbon neutrality and implement the guidelines.

Procurement Guidelines 8th Edition [Raw materials for tire](WEB Edition)(Japanese)

Procurement Guidelines 8th Edition [Raw materials for tire](WEB Edition)(English)

采购指南第8版【轮胎原材料用】（中国語版）

Diretrizes de aquisição 8ª Edição [Para matérias primas de pneus](Versão Web)

Pedoman Pengadaan Edisi ke-8 [Bahan baku mentah untuk ban](Edisi Web)

แนวทางการจัดซื้อจัดจ้าง ฉบับที่ 8 [สาหรับวัตถุดิบยางรถยนต์](รูปแบบอิเล็กทรอนิกส์)

Green Logistics Guidelines

• The Sumitomo Rubber Group

Risk Management for Sustainable Procurement

• The Sumitomo Rubber Group

The Group prioritizes the purchase of raw materials from companies that have acquired ISO 14001 certification. In addition, we are strengthening our environmental management system to reduce harmful substances in raw materials and assessing procurement risks related to environmental regulations in China.
To efficiently monitor and assess human rights, governance, and environmental performance within our supply chain, we have been working with EcoVadis, an international third-party assessment organization, since January 2022. EcoVadis operates a platform for sustainability assessment, evaluating suppliers based on sustainability standards.
Moreover, the Group is not only aiming to achieve carbon neutrality in Scope 1 and 2, but is also working to reduce greenhouse gas emissions across the entire supply chain, including Scope 3. Going forward, we will be asking our suppliers to cooperate with us in cutting CO₂ emissions and adopting sustainable materials.

Social Risks at Natural Rubber Farms

The world’s demand for natural rubber has increased nearly three-fold over the past 40 years. This is attributable mainly to population growth and the rapid spread of motorization worldwide. In the face of these trends, people are concerned about issues such as illegal deforestation, land grabbing, and violation of human rights; and the possible impact of forest destruction and illegal deforestation on biodiversity.
Approximately 85% of natural rubber is produced by small-scale farmers, called smallholders, rather than plantation operators. These smallholders are faced with issues such as poverty due to the shortage of knowledge and know-how on harvesting rubber, and the increasing burden on ecosystems.
Moreover, many of the regions where natural rubber is produced are located in tropical rainforests adjacent to fertile lands that are home to many rare species. The expansion of natural rubber plantations may endanger the lives of these species.

Based on the website of Automobile Business Association of Japan

Difficulty and Importance of Traceability

Handling of Chemical Substance

Our Procurement Guidelines set forth a chemical substance management structure in conformity with the GADSL.^*

*Global Automotive Declarable Substance List Global Automotive Declarable Substance List: A list of environmental load substances compiled by major automobile, machinery parts and chemical manufacturers in Japan, Europe and the United States to establish the industry standards.

Assessment of Procurement Risks, Including Environmental Regulatory Risks in China

To determine environmental changes and procurement risks related to environmental regulations in China and incorporate them into our procurement strategy, our procurement departments conducts comprehensive assessments of suppliers of tire raw materials with factories in China. These assessments look at factors such as ISO 14001 certification acquisition, business conditions, compliance, frontline management, and environmental improvement efforts.
We launched this initiative in March 2018, and as of the end of 2023, we had conducted environmental impact assessments of 65 companies, primarily through on-site visits for verification and evaluation. Following the assessments, we provide feedback and improvement suggestions based on ISO 14001 requirements, such as methods for ensuring compliance (clarifying responsibilities, document retention, etc.), and for managing the frontline (4S practices, equipment maintenance, etc.).

Targets and Results

• The Sumitomo Rubber Group

Targets of Long-Term Sustainability Policy: “Driving Our Future Challenge 2050”

Procurement of Raw Materials That Comply with the Sustainable Natural Rubber (SNR) Policy

Until 2030:Applies to major suppliers
Until 2050:Applies to all suppliers

Realization of Sustainable Procurement Through Utilization of Third-party Assessment Organization (EcoVadis)

Procurement of 95% (purchase value basis) of tire raw materials from suppliers that meet or exceed standard score of 45 points (by 2030)）

* Planning the phased rollout of this procurement approach to businesses other than the Tire Business.

For 2023 results, please refer to “Fiscal 2023 Targets and Results” (PDF file).

Initiatives to Resolve Issues

• The Sumitomo Rubber Group

In September 2018, the Company participated in Global Platform for Sustainable Natural Rubber (GPSNR). In November 2018, we also formulated our Sustainable Natural Rubber (SNR) Policy which reflects a policy framework approved by the GPSNR, with the aim of gearing up efforts to resolve issues in regions where natural rubber is produced, such as environmental problems caused by the destruction of forests and human rights problems in the working environment (updated in August 2021). Based on this updated SNR Policy, we proactively promote collaborative initiatives with all companies in our supply chain to realize the sustainable procurement of natural rubber.

Introduction of RubberWay^®, an Environmental and Social Risk Assessment Tool Dedicated to Natural Rubber

To ensure sustainable natural rubber procurement, the Sumitomo Rubber Group believes it is extremely important that we identify risks in our natural rubber supply chain. Therefore, we have implemented RubberWay^®, the environmental and social risk assessment tool dedicated to natural rubber since July 2023. This tool statistically analyzes huge amounts of questionnaire data to assess the magnitude of environmental and social issues and displays the assessment results on the map. This tool covers 10 natural rubber-producing countries, and the assessment items include, but not limited to, deforestation, water resource management, forced labor, and child labor.
From now on, by using RubberWay^® effectively, we will assess/identify risks in the natural rubber supply chain and develop measures to mitigate such risks to contribute to the sustainable procurement of natural rubber.

* An application software developed by Michelin, Continental, and the software developer SMAG

Responding to EU Deforestation Regulation (EUDR)

Beginning at the end of fiscal 2024, we are obliged to comply with EUDR, which is expected to significantly affect our sales of tires and other rubber products in the EU markets. All Directors, officers, and employees of the Company, from the management team to front-line employees, understand their commitment to the sustainability of natural rubber and will work to ensure the Company’s compliance with EUDR through measures such as collaborations across the industry and system development. We will make group-wide efforts to strengthen governance and push forward with efforts in connection with the sustainability of natural rubber.

Assessments with EcoVadis

Working with EcoVadis, the Group verifies and assesses various sustainability efforts by our suppliers, such as initiatives related to the environment, human rights, corruption, and fair trade.
For new suppliers as well, we perform due diligence in a similar fashion, with an emphasis on assessing and mitigating corruption risks. Among the Long-Term Sustainability Policy goals, we have set a target of “procurement of 95% (purchase value basis) of tire raw materials from suppliers that meet or exceed the standard score of 45 points (by 2030).” In 2023, the purchase value of tire raw materials procured from such suppliers reached 87%.
If the results of our due diligence and assessment of a supplier fail to meet certain criteria, we ask that they make improvements. As a result of working with EcoVadis, the assessment criteria have been standardized, and we expect our assessment results and improvement recommendations to help our suppliers pursue sustainability efficiently.

Resuming the Pilot Project in Indonesia (since September 2022)

SUMITOMO RUBBER SINGAPORE has been undertaking the Pilot Project in Jambi Province, Indonesia. Although the project had been temporarily suspended in the face of the COVID-19 pandemic, the subsidiary has now resumed it, once again launching such activities as surveys to assess the status of natural rubber farms and their raw material distribution routes, the provision of training to farmers and the free-of-charge provision of fertilizers. Acting in collaboration with Halcyon Agri, a natural rubber supplier in Singapore, the subsidiary strives to support smallholders in a way that takes heed of their real-life circumstances and needs while assessing the status of natural rubber distribution routes as well as risks associated with natural rubber supply. In this way, we are pushing ahead with improving the traceability and transparency of our natural rubber procurement.

Initiating Procurement through the Agridence Rubber Platform (since November 2022)

We initiated natural rubber procurement employing the Agridence Rubber Platform provided by Singapore-based Agridence Rubber to trace natural rubber distribution routes, which are often complex. This platform not only keeps us well-informed about the status of natural rubber processors, it also enables us to trace upstream processes that take place in locations where natural rubber is produced.

Furnishing Financial Assistance to the Capacity Building Project in Thailand

We are providing financial assistance to the Capacity Building Project undertaken by the GPSNR in Thailand to support smallholders. The objectives of this project include helping farmers achieve higher incomes and promoting Good Agricultural Practices (GAP).

Providing Training to Neighboring Farmers in Thailand

We support farmers operating in the neighborhood of Sumirubber Thai Eastern Corporation Co., Ltd., one of the Sumitomo Rubber Group’s natural rubber processing bases. Specifically, we offer them seedlings and share our knowledge of fertilization and other farming practices, with the ultimate goal of improving their standard of living.

TOPICS：Initiatives for Elucidating Natural Rubber Biosynthesis

The Company was chosen to receive awards in the following two categories for its excellent research results at the “Tire Technology International Awards for Innovation and Excellence,” a program held as part of “Tire Technology Expo 2023” held in Hanover, Germany.

Initiative to Increase Production Efficiency of Natural Rubber Through Improvement of Technique to Produce Rubber Tree Seedlings (Joint Research with Khon Kaen University of Thailand)

The Sumitomo Rubber Group has been making efforts to improve yields of natural rubber in line with its Sustainable Natural Rubber Policy. As part of such efforts, the Group launched a joint research with Khon Kaen University of Thailand in March 2024. This joint research is aimed at investigating the mechanism that leads to differences in the pace of growth and yield improvement by examining the growth and leaf shapes of rubber tree saplings derived from tissue culture and those derived from ordinary grafting and comparing their plant physiological responses. Through this research, we will improve the production efficiency of natural rubber and accelerate our initiatives for sustainable natural rubber procurement.

Logistics Quality Improvement

The so-called “Logistics 2024 Problem,” and other challenges such as the shortage of and aging of drivers, have led to issues in securing vehicles. To secure sufficient trucks and also ensure compliance, we (as the owner of the cargo) view reducing the burden on drivers and improving their working conditions as critical tasks, and are therefore working to reduce the time between the entry of the truck through the gate and the completion of loading.
We have implemented various measures, such as introducing and systematizing specified entry times and reducing the number of trips between factories and warehouses, as we aim to reduce waiting and loading times.
These efforts are also contributing to CO₂ emission reduction, and we will continue to pursue improvements in logistics quality to ensure co-existence and co-prosperity in the future.