Sustainability
Supply Chain Management
Basic Approach
Our basic policy centers on the three principles of open and fair, partnership, and relationship with society. In line with this, the NGK Group has established a Basic Purchasing Policy to promote fair and honest business transactions and help ensure prosperous relationships with the suppliers in our supply chain.
In 2021 we submitted a Declaration of Partnership Building as advanced by the Cabinet Office Small and Medium Enterprise Agency. We continue to promote partnership with our suppliers as well as fair and honest dealing.
Supply Chain Management Promotion Framework
At NGK, the Purchasing Department is responsible for managing tier 1 suppliers. It also manages suppliers in tier 2 and beyond who provide critical items such as raw materials. We manage approximately 800 suppliers in line with NGK’s Supplier Management Regulations.
Enhancement of Group-Wide Cooperation and Procurement Capabilities
Within the NGK Group, we work to strengthen the procurement capabilities and ensure good governance for the Group as a whole through a number of approaches, including sharing information among Group companies and undertaking joint initiatives aimed at various procurement matters. Based on each company’s purchasing system and transaction situation, we clarify issues and provide support and reinforcement, such as collective purchasing of common materials, sharing cost and supplier information, and introducing domestic supplier management methods to Group companies.
We will continue expanding the use of collective purchasing, standardizing supplier management methods, and developing other approaches that will contribute to improved procurement functions Group-wide, both in terms of cost and governance.
NGK Group Purchasing Liaison Meeting
Introduction of General Indirect Materials Purchasing System
Typically, each department has performed general indirect materials purchasing, using an offline, piecemeal approach. However, in June 2021 we introduced a global transaction network system to centrally integrate indirect materials spending and make it more transparent.
In addition to an expenditure check conducted by the Purchasing Department, we review the supplier, specification, and other details for large-scale expenses based on the available data. In FY2022, we were able to save approximately 380 million yen through cost reductions.
In FY2023, we expanded the scope of this review to the outsourcing of highly specialized work, and are working to further strengthen management and purchasing.
Promoting CSR Procurement
The NGK Group promotes CSR procurement as a response to rising social expectations for CSR-oriented supply chain management. We preferentially select CSR-conscious companies as suppliers and purchase CSR-sensitive raw-materials and services.
Supply-Chain CSR Guideline
The NGK Group created the NGK Group’s Supply-Chain CSR Guideline in FY2010 as a guide to promote CSR procurement across the Group.
The Guideline specifically describes our obligations as a socially responsible buyer as well as our requirements for socially responsible suppliers, such as specifying environmental obligations like greenhouse gas emissions reductions.
In 2013, the Guideline was expanded by being integrated with the previous Green Procurement Guideline, which sets forth rules for preferential purchase of environmentally friendly products and services. Thereafter, they were revised based on changes in social conditions and new global challenges. New points of compliance are being added as well.
Every year we ask all suppliers to submit a written agreement to comply with this guideline, and when we start working with a new supplier, we ask them to comply with the guideline.
The Supply-Chain CSR Guideline is publicly available on our website in multiple languages (Japanese, English, and Chinese).
NGK Group’s Supply-Chain CSR Guideline
(PDF:141KB)
Supplier Assessment
Identifying Important Suppliers
Within NGK, we identify important suppliers from the following point of view.
- Handling of important items: Raw materials and molding molds for main production items* are considered critical items
- Transaction volume: Accounts for 80% or more of raw materials and molds supply for main production items
- BCP: single company supply ratio of 70% or more
As of March 2023, 38 companies (22 Tier 1 companies, 16 Tier 2 companies) are considered important suppliers.
Main production items: ceramics for purifying automobile exhaust, insulators and related devices for electric power, ceramics for electronic and electrical devices and ceramics for semiconductor manufacturing equipment
New Supplier Assessment
At NGK, when we start working with new suppliers, we rate them from the perspective of QCD (quality, cost, delivery) and stable procurement based on our Basic Purchasing Policy of “Open, fair, and honest procurement” and “Pursuit of competition principles and profitability.” In order to fulfill our social responsibilities throughout our entire supply chain, we consider an understanding of and agreement with the essential tenets of the Supply-Chain CSR Guidelines which includes ESG elements to be a requirement for selection as a new supplier.
Existing Supplier Assessment
At NGK, every year we ask existing suppliers to submit written consent to comply with our Supply-Chain CSR Guidelines. And since 2021 we have conducted fact-finding surveys consisting of 114 questions on nine topics, including human rights, labor, and the environment. This allows us to perform a detailed CSR assessment of each supplier and assess risk according to transaction details. From the perspective of impact on our business, we are first conducting these surveys for direct suppliers of NGK. Next, we plan to gradually expand them to the main suppliers of our Group companies in Japan, and then to the main suppliers of our Group companies overseas in FY2023.
Main SAQ Items
| Main Items | Details |
|---|---|
| Corporate Governance | Promotion framework, internal control, BCP framework, internal whistleblower system, information dissemination both internally and externally |
| Human rights/Labor | Basic stance; respect for human rights; prohibition and prevention of discrimination/violation; provision of equal opportunities for hiring, training, and career advancement; fair wages, fair implementation of hours and leave; prohibition of forced or child labor; health and safety/health management; freedom of association |
| Environment | Basic stance; chemical substance management; waste reduction; effective resource utilization (water recycling, raw materials recycling) and preservation; prevention of global warming; biodiversity |
| Fair Business Practices | Basic stance; appropriate relationship with government and public officials; preventing inappropriate sharing of benefits with related parties; preventing violations of competition law; elimination of relationships with anti-social organizations; protecting intellectual property and copyrights; relief system; prohibition of insider trading and conflict of interest |
| Quality/Safety | Basic stance; ensuring quality and safety of products and services; appropriate handling of accidents and defective products |
| Information Security | Basic stance; defending against cyber threats; protecting individual data and privacy; preventing unauthorized use of confidential information |
| Co-existence of Supply Chair with Local Communities | Basic stance; initiatives concerning conflict minerals; reducing negative influence on local society; initiatives in cooperation with local society towards sustainable development |
Communication Activities with Procurement Partners
Explanation of Earnings to Suppliers
Because of the risks posed by the COVID-19 pandemic, NGK’s annual earnings presentation for suppliers was conducted online, just as it was last year. We explained our earnings and materials procurement policy to 175 supplier companies. We also asked for their continued compliance with CSR procurement, and shared information and goals meant to facilitate the continuation and expansion of business throughout our entire supply chain.
Ongoing Operation of the Supplier Helpline
In 2008, NGK established the supplier helpline system. Upon receiving consultation via e-mail, fax, and telephone, we make an effort to respond with solutions quickly.
Visiting and Monitoring Individual Suppliers in Japan and Overseas
In order to ensure procurement from the most appropriate suppliers, NGK visits individual suppliers in Japan and overseas to conduct on-site audits and evaluate their QCD (quality, cost, and delivery) performance in a fair and equitable manner. In FY2022, we visited existing suppliers, with due consideration given to the COVID-19 pandemic. We also conducted audits at 43 of our main raw materials suppliers in-line with our evaluation plan.
Not only did we provide feedback and assessments during these audits, but we also used visits for other objectives such as surveying plants and adjusting delivery times as opportunities to listen to a wide variety of feedback concerning suppliers’ QCD management frameworks, CSR approach, and the state of their organization. In addition to this kind of direct communication with suppliers, we communicate through the web as well to build and strengthen better relationships of mutual trust.
Supplier Training-Driven Support Efforts
The NGK Safety Cooperation Conference hosts meetings for facilities and equipment construction-related supplier members. These meetings are used as opportunities to share accident and disaster case studies, as well as to provide safety-related lectures.
The FY2022 meeting was attended by 61 people from 55 conference member companies. The keynote address was on the topic of on-site work risks (fall risk).
Procuring Resources and Raw Materials Responsibly
The NGK Group conducts procurement activities that consider impacts on regional communities stemming from the use of raw materials (e.g. conflict minerals*) with the potential to cause social issues such as human rights violations and poverty, and takes steps to avoid using such materials.
Additionally, in response to requests from customers, we investigate suppliers regarding their responsible procurement of resources and raw materials.
Minerals including tin, tantalum, tungsten, and gold produced in the Democratic Republic of the Congo and surrounding countries, and used as a source of funding for armed conflict in the area.