Social Report
Supply Chain Management

Message from the General Manager of Procurement Strategy Planning

Building Beneficial Relationships with Business Partners

Nobuko Mizumoto

Managing Executive Officer
General Manager of Procurement Strategy Planning

The IHI Group's Basic Procurement Policy, established in FY2012, focuses on three principles: (1) fair and impartial procurement, (2) mutually beneficial partnerships with business partners and (3) compliance with laws and the fulfillment of social requirements.
We asked major suppliers in Japan to respond to a CSR questionnaire, after which we contacted these respondents to work on improving our procurement process.
In FY2016, we will intensify our efforts to raise our overseas companies’ understanding of the IHI procurement policy.
Our procurement personnel must understand our social responsibility correctly and be able to communicate it effectively with all parties concerned. Otherwise, we will not be able to address evolving issues and needs concerning the environment and human rights, such as complying with conflict mineral regulations and the UK’s Modern Slavery Act.
We work tirelessly to ensure that these needs are communicated to employees and shared with business partners, ultimately to strengthen relationships with our partners.

Basic Policy on Procurement

IHI regards suppliers of goods and services, both in Japan and overseas, as key partners sharing similar goals.
We ensure that our procurement teams comply with domestic and foreign laws and regulations, and meet other social requirements as part of their basic code of conduct. Our suppliers are selected through a fair and impartial evaluation process, and our procurement activities help to enhance the competitiveness and prosperity of these partners, as well as IHI.

Related link: IHI Group Basic Procurement Policy

Responsibilities regarding supply chain

The IHI procurement policy ensures that both IHI and business partners correctly understand the needs of society. For procurement in Japan, IHI and its business partners share information on their supply chains, including tier-two and tier-three suppliers. This also helps IHI to evaluate the status of its supply chains following natural disasters, such as earthquakes.
To facilitate procurement overseas, we are setting up bases around the world, mainly in Southeast Asia, to optimize our supply chains. We provide technical assistance and quality guidance to business partners in emerging nations.

Corporate Social Responsibility in Procurement

Since releasing the IHI Group Basic Procurement Policy in FY2012, we have circulated the policy to major business partners and asked them to respond to a CSR questionnaire to ensure compliance. Based on the results of the questionnaire, we have been helping certain business partners to engage in more responsible procurement.
Some 4,700 IHI group employees involved with procurement have taken e-learning courses on responsible procurement, including Japan’s Subcontract Act, practices for fair subcontracts and information security. Employees involved with global procurement also receive lectures about laws, tax systems and related conditions in foreign countries.
In FY2016, we will intensify efforts to raise awareness of responsible procurement among affiliated companies in Japan and overseas, confident that these measures will help to improve the competitiveness of both IHI and its business partners.

IHI Group Policy on Conflict Minerals

We have established the IHI Group Policy on Conflict Minerals as part of the IHI Group's Basic Procurement Policy. As a company policy, IHI will not procure raw materials, parts, or products that contain conflict minerals produced in the Democratic Republic of the Congo or its adjoining countries.
We have also conveyed this policy to our major business partners to ask for their cooperation in disclosing related procurement information if requested by our clients.

Fair and Appropriate Trade

IHI contributes to society by conducting fair and appropriate trade. To provide products and services that respond to societal needs, we advise business partners on technical and managerial issues, if requested, after evaluating the technology, quality and price considerations. Global procurement activities are carried out at procurement bases in each region, so to ensure adherence to local standards and compliance with import/export regulations, awareness training is conducted throughout the Group. Training also is provided on meeting requirements related to the environment, human rights, labor, health and safety.

Training and Inspection Regarding Procurement-related Legislation

IHI conducts internal training on procurement-related laws, such as Japan’s Act Against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (Subcontractors Act) and the Construction Business Act. Internal training courses designed to ensure compliance with procurement-related laws are now offered to all related divisions, helping to increase understanding and awareness of proper procurement procedures.
In FY2015, 354 employees attended the Subcontractors Act course and 85 took part in the Construction Business Act course.
To comply with foreign procurement legislation, we support voluntary post-clearance inspections for all relevant IHI divisions.
We also offer training in the procurement laws and tax systems of key emerging countries and provide local personnel with training on our procurement policy to ensure global compliance.
IHI internally audits procurement divisions to determine if they are in compliance with Japan’s Subcontractors Act, and then offers guidance as required. Voluntary inspections and improvements have been encouraged since FY2012.

Organized Crime Countermeasures

IHI rejects any involvement with organized crime in its procurement activities. We clearly stipulate to our business partners that no relationship with such groups is permissible, especially in the case of partners from industries that are sometimes alleged to have links with organized crime. By so doing, we strive to eliminate any involvement with organized crime.

Building Relationships with Business Partners

IHI is constantly striving to enhance its procurement activities by sharing information and policies with business partners. We work to strengthen relationships with our partners through value engineering* and other initiatives for sharing information on quality, costs and delivery deadlines.

*Value engineering is a professional, function-oriented, systematic team approach to analyzing and improving value in products, facility designs, systems or services. It can be applied to any business and has been proven useful for long-term business strategy, increasing customer satisfaction and adding value to investments.

Comment from Chinese supplier

We are from Jiangsu Chang Bao Steel Tube Co., Ltd., a top-class high-pressure boiler tube manufacturer in China. We specialize in R&D in high-pressure rifled boiler tubes. Since the beginning of our partnership in 2010, we have continuously improved our product quality and created a service framework for flexible deliveries with the guidance of IHI. As a result, we have earned IHI's trust and achieved growth as well.
In 2016, we were presented with a letter of gratitude for swift delivery, and we have grown close to IHI. We will continue our management philosophy of "quality is #1" and create a bright future where both companies can achieve a win-win relationship.

Supplier Award for Jiangsu Chang Bao Steel Tube Co., Ltd.

Plans for FY2016

In FY2016, IHI will provide group companies in Japan and overseas with addition assistance to strengthen their compliance with procurement rules. We will implement a range of measures, including raising their awareness of the IHI Group Basic Procurement Policy, educating procurement staff about compliance and providing lectures to affiliated companies overseas.