Toray Group Supply Chain

Toray Group’s supply chain extends to diverse countries and regions around the world. In fiscal 2022, the Group’s purchasing by region was 45% in Japan, 38% in the rest of Asia, 11% in the Americas, and 6% in Europe. Purchasing by business segment was 32% for Fibers & Textiles, 23% for Plastics & Chemicals, 15% for Films, 12% for Carbon Fibers Composite Materials, and 18% for others.

Fiscal 2022 Purchasing Breakdowns by Region and Business Segment (Based on Transaction Value)

Socially Responsible Procurement Initiatives at Toray Group

With its global supply chain, Toray Group places top priority on ascertaining suppliers' CSR activities and requesting them to implement the necessary initiatives. Toray Group is facilitating CSR initiatives across its supply chains, including at group companies in Japan and around the world. These efforts include developing a socially responsible procurement system, responding to customers’ requests for CSR practices, ascertaining supplier CSR initiatives, educating suppliers, carrying out CSR surveys of suppliers, requesting compliance with the Toray Group CSR Procurement Guidelines, and conducting activities to obtain written agreements on these guidelines.
In fiscal 2022, the number of group companies requesting their suppliers to practice CSR was 148 (93%) out of the 160 applicable companies (group companies whose production activities include purchasing and/or outsourcing production).
In addition, Toray Group uses its own questionnaire survey system to conduct CSR surveys of suppliers. The Group has established a plan-do-check-action (PDCA) cycle by regularly monitoring suppliers’ CSR initiatives, assessing suppliers based on uniform group standards, providing feedback on the results to suppliers, and following up on poor-performing suppliers. In this way, the Group endeavors to raise suppliers’ awareness and efficiently and effectively ascertain, prevent, and lower CSR risks across the supply chain. Moreover, Toray Group has created its own Supply Chain CSR Promotion Guidebook, which is regularly distributed to suppliers as a reference material, along with feedback concerning the periodic CSR procurement surveys.
Through these initiatives, in fiscal 2022, of major suppliers that Toray Group identified as in need of confirmation of their CSR practices, 88% were confirmed to be meeting Toray Group’s standards in their work on CSR.

Every two years, in principle, Toray Industries carries out a CSR survey of major suppliers, business partners and distribution companies which together are responsible for 90% of the Company’s total procurement value. Questions are established based on the Toray Group CSR Procurement Policies and the Toray Group CSR Procurement Guidelines. The surveys exhaustively confirm the extent to which suppliers are addressing CSR, requesting actions on a variety of social issues such as respect for human rights, reduction of greenhouse gas emissions, consideration for water resources and biodiversity, and implementation of environmental assessments.
In fiscal 2022, Toray Industries carried out CSR surveys of major suppliers and received 448 responses (137 raw material suppliers, 157 equipment and material suppliers, 40 logistics companies, as well as 114 production and processing contractors). The results indicated that about 99% of companies surveyed were rated S, A or B¹ for CSR practices, thus meeting the Company’s standards for business partners. The companies surveyed rated C or D, requiring further investigation of their CSR practices, accounted for just 1%. Analysis revealed that the average scores for the 448 companies improved compared to the previous survey with respect to most survey items such as environmental conservation, product safety and quality assurance activities, and human rights and labor. The results have reaffirmed that each company is promoting CSR initiatives. In addition, 80% of the companies that were rated C or D in the previous survey, visited to confirm actual conditions, and requested to make improvements earned to a B or higher rating in the current survey. The assessment results from the current survey have been shared with each company along with the contents of the analysis. In fiscal 2023, the Company will individually visit all six suppliers that were rated C or D to confirm actual conditions, discuss measures for improvement, and check the status of measure implementation.
In addition, suppliers that received low scores in the fiscal 2020 survey have made various improvements. These include establishing a corporate CSR policy and sharing it on the company's website and with their own suppliers, reviewing employment rules to allow considerations for individual employee health conditions, family circumstances, and social conditions, as well as diversifying suppliers to help mitigate disaster risks.
In parallel with those efforts, Toray Industries is mitigating CSR-related risks by asking its suppliers to understand and comply with the Toray Group CSR Procurement Guidelines, as part of efforts to further enhance CSR activities throughout the entire supply chain. These guidelines outline specific and detailed requirements for areas such as ethics, compliance, safety, accident prevention, risk management, environmental preservation, product quality and safety, and human rights promotion. In fiscal 2022, the Company sent the Toray Group CSR Procurement Guidelines to the 476 major suppliers surveyed and requested their understanding and compliance. Efforts are underway to obtain written agreements from suppliers stating that they will adhere to the guidelines.
In addition, rules for responses to CSR surveys from customers are set and a system is in place to facilitate prompt and accurate responses.

1. 1 Survey responses are assessed on a 10-point scale for each of the nine survey items. Taking the average score for the nine items as the overall score, 8 or more points is rated as S, 6 or more points but less than 8 is rated as A, 5 or more points but less than 6 is rated as B, 3 or more points but less than 5 is rated as C, and less than 3 points is rated as D.

Toray Group Companies in and outside Japan have also established their own internal systems and rules and are conducting CSR procurement surveys of their suppliers. They also ask suppliers to comply with the Toray Group CSR Procurement Guidelines, while conducting audits and other measures to continually ascertain the status of supplier CSR initiatives and to request improvements. Group companies outside Japan ask their suppliers to implement CSR initiatives. For suppliers that have not received such requests, Toray Industries conducts CSR procurement surveys and other measures to support CSR procurement at overseas group companies.
In fiscal 2022, 80 group companies outside Japan sent the Toray Group CSR Procurement Guidelines to 2,212 of their major suppliers. In addition to requesting cooperation and compliance, the group companies are working to obtain written agreements from them on adherence to the guidelines. With the support of Toray Industries, overseas affiliates will continue to obtain written agreements from existing and new suppliers. Group companies in Japan also continued to request CSR procurement measures from their suppliers. In fiscal 2022, these companies conducted a CSR procurement survey among their major suppliers and received 466 responses. In addition to checking the CSR promotion situation at each supplier using the questionnaire, the relevant evaluation results were shared with each supplier as feedback. The suppliers requiring further investigation of their CSR practices were subject to such investigation, and Toray Group companies in Japan requested that suppliers requiring further investigation of their CSR practices make improvements. In fiscal 2022, 41 group companies in Japan sent the Toray Group CSR Procurement Guidelines to 1,539 major suppliers and requested their cooperation and compliance. The affiliates will continue to carry out activities to obtain written agreements from suppliers on adherence to the guidelines.

Toray Group believes that respect for human rights and environmental preservation are especially crucial elements in ensuring that the supply chain is stable and sustainable.
The Toray Group CSR Procurement Policies state that Toray will work to build a supply chain that promotes human rights and preserves the environment. The Group requests that suppliers comply with the Toray Group CSR Procurement Guidelines and take measures to respect human rights; prohibit forced labor, slave labor, child labor, and unfair low-wage labor; and to protect the environment, including by reducing GHG emissions and conserving biodiversity.
With the CSR procurement questionnaire, the Company strives to understand and evaluate suppliers' initiatives related to human rights, labor practices, and environmental preservation. It also ascertains and prevents issues from arising in the supply chain.

Results of Fiscal 2022 CSR Survey of Suppliers Regarding Respect for Human Rights

The survey conducted by Toray Industries in fiscal 2022 confirmed a high rate of implementation of initiatives on 12 survey items, excluding those related to requests to secondary suppliers, out of 13 items related to human rights and labor. In fiscal 2023, the Company will again conduct individual status checks and request responses from those suppliers who answered “Will address in one year” ([1] in the table below) and “Not addressed” ([0] in the table below).
In addition, CSR procurement surveys have been used since fiscal 2020 to investigate whether suppliers had been responding appropriately to various issues related to human rights, such as employment and labor issues that could have arisen due to the pandemic, and to identify and prevent issues within the supply chain.

Results of Fiscal 2022 CSR Survey of Suppliers Regarding Environmental Preservation

Toray Group considers the reduction of greenhouse gas emissions and biodiversity conservation to be important issues for preserving the global environment. Using CSR procurement surveys, the Group also checks the situation for supplier compliance with environmental laws, as well as supplier efforts to reduce GHG emissions and preserve biodiversity. The survey conducted by Toray Industries in fiscal 2022 confirmed a high rate of implementation of initiatives on 11 survey items, excluding those related to requests to secondary suppliers, out of 12 items related to environmental preservation. For example, the Company confirmed that 84% of its major suppliers are taking steps to reduce GHG emissions. Each supplier is provided with feedback on their questionnaire results, and those with insufficient CSR measures are asked to improve their compliance efforts.
In fiscal 2023, the Company will conduct individual status checks of those suppliers who answered “Will address in one year” ([1] in the table below) and “Not addressed” ([0] in the table below) in the fiscal 2022 questionnaire on questions concerning compliance with environmental laws, GHG emissions reduction, and biodiversity conservation initiatives. In this way, the Company will continue to promote environmental preservation efforts throughout its supply chain and procure environmentally friendly raw materials.

As part of efforts to promote human rights protections and environmental conservation in the supply chain, the Company enables individuals to report relevant issues at any time via the Toray website. Out of a total of 279 inquiries and consultations received in fiscal 2022 via the CSR inquiry form on the Toray website, none were related to human rights in the supply chain.

Toray Group outsources security services to companies specialized in that field, depending on the situation in the area where a business site is located.
In addition to training on the guard services required, the Group also provides training on human rights as necessary when contracting services.

The Toray Group CSR Procurement Policies prohibit the use of minerals that come from conflict zones or high-risk areas, as well as those that are clearly tied to armed conflict or human rights violations.
To comply with the rules, Toray Industries investigates whether conflict minerals are used in any of the raw materials and production equipment used for its products. If conflict minerals are used, the Company investigates the suppliers to determine the locations of smelters and mines.
In fiscal 2022, the Company also investigated products made with four raw materials: tin, tantalum, tungsten, and gold. It confirmed that none of the raw materials used were from conflict areas. Toray Industries has also set up an internal system for surveys and responses so that it can respond promptly and appropriately to requests from customers in regard to surveys on conflict minerals.