In accordance with the Sumitomo Spirit, the Sumitomo Electric Group Corporate Principles, the Sumitomo Electric Group Charter of Corporate Behavior and the Basic Procurement Policies and based on mutual trust and cooperation with its suppliers, the Group is conducting sustainable procurement activities that are fair, equitable, compliance-focused, and friendly to the global environment and human rights. In addition, we are working to optimize procurement, manufacturing, sales, and logistics as a whole, and to build a resilient supply chain with a focus on BCP management to strengthen our response to supply chain risks and ensure rapid response in the event of natural disasters and sudden changes in the global circumstances.

We position procurement activities as operations that support the foundation of our business activities, and in 2006 we established our Basic Procurement Policies. In 2010, we formulated the Sumitomo Electric Group CSR Procurement Guidelines to promote CSR initiatives in our procurement activities. We also established the Sumitomo Electric Group Policy on Human Rights in 2019 and the Supplier Code of Conduct in 2021, clarifying specific policies on our initiatives regarding human rights, climate change, and other issues. We inform our suppliers, including the Group companies, of these policies and ask for their understanding and cooperation with the Group’s procurement activities.

The Planning and System Response Subcommittee, established under the CSR Promotion Committee, collects information on regulations and systems, sets targets, and promotes various initiatives to build a sustainable supply chain.
Specifically with regard to procurement in Japan, we have set up the Group Procurement Collaboration Office in the Procurement Division. The office comprises staff in charge of procurement in 22 divisions and companies, including Sumitomo Electric’s production divisions and group companies, such as Sumitomo Riko Company Ltd. and Nissin Electric Co., Ltd. We ensure that the Basic Procurement Policies are thoroughly implemented and proceed with group-wide measures and activities based on the policies.
Overseas, we promote coordinated procurement on a regional basis under the initiative of the International Procurement Offices (IPOs) of the Procurement Division located in China, ASEAN and the United States.

We are formulating and implementing business continuity plans (BCPs) , which prepare for large-scale disasters, outbreaks of infectious diseases and other emergency situations, to ensure a stable supply of products and services, and avoid adverse impacts on the production activities of our customers.

Our BCP for procurement activities assumes that our suppliers will be affected by a disaster. In order to minimize the impact on production due to a supply stoppage of the relevant materials and enable a prompt recovery, we are taking measures to ensure stable procurement, such as considering alternative suppliers and products, switching to general-purpose products, and securing inventory of materials that are difficult to substitute. In addition, in the event of a disaster, we strive to minimize the impact by sending and receiving emails with emergency contacts of suppliers who have been registered in advance in the system, and by quickly and accurately grasping the extent of the damage.　

Needless to say, compliance is also more important than any procurement activities. It is particularly crucial to comply with the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (hereinafter the "Subcontract Act") in regard to appropriate dealings with subcontractors as well as the Customs Law in regard to appropriate payment of customs duties on items we directly import from overseas companies. In regard to these two priority issues, we annually organize training seminars, encourage self-examination, and provide tours for instructional purposes in our divisions and domestic affiliates so that our employees can gain expertise and ensure full compliance with procurement-related laws.

Whistle-blowing System (Speak-Up System)
The Sumitomo Electric Group has established the Speak Up System and has set up the compliance hotline to identify early signs of compliance issues and to allow us to address them promptly and appropriately.

We provide training across the Group to improve procurement skills and compliance.

1) Compliance training for the Production Group and the Corporate Staff Group
In fiscal 2024, we provided training focusing on explaining the Subcontract Act in addition to compliance training for sections in charge of making contracts and training on import operations for sections in charge of purchase requests. This type of compliance training is provided every year to further deepen trainees’ understanding and to establish and improve their compliance awareness.

2) Procurement training for the Procurement Divisions in Japan
We implement an OFF-JT program for staff in the field with the aim of developing reliable procurement staff and handing down procurement ethics, knowledge, and expertise. By combining this program with conventional OJT, we aim to improve procurement skills through the synergistic effects of both.
We also have to make the Subcontract Act known widely not only in divisions in charge of procurement but also in the manufacturing and development divisions. To establish an autonomous system for compliance with this act in each division and Group company, we implement a training program aimed at systematically developing personnel who will play a key role in ensuring compliance with the Subcontract Act.

3) Procurement training for the Procurement Divisions globally
Since fiscal 2017, we have been providing training for overseas purchasing managers to improve our global procurement capabilities. The training covers not only purchasing skills, such as skills in cost reduction and risk management, but also a review of the Basic Procurement Policies from the perspectives of the Sumitomo Spirit and CSR. This training aims to raise the trainees’ individual skills and to encourage them to share what they have learned with the procurement staff of their companies.

To proceed with CSR procurement, it is necessary not only to inform suppliers of the Basic Procurement Policies, the Policy on Human Rights, the Supplier Code of Conduct, and the CSR Procurement Guidelines, but also to check the progress in the penetration of these policies through self-assessment surveys of suppliers and to promote improvement activities in full coordination with suppliers.

In the Sumitomo Electric Group, we have surveyed more than 4,800 suppliers that represent 90% of the value of domestic procurement. We have also begun to survey suppliers of our overseas affiliates, mainly those in China and the ASEAN region, with the total number of surveyed companies reaching about 1,000. As a new initiative in fiscal 2022, in order to thoroughly disseminate “the Supplier Code of Conduct” established in fiscal 2021, we substantially revised the questions to be asked in the interviews in consideration of the latest topics based on the contents of the code of conduct. For example, more in-depth questions based on the human rights due diligence efforts carried out by the Human Resources Division have been added to the questions on “Human Rights and Considerations of Occupational Health and Safety” in the the CSR-based procurement self-assessment questionnaire. In addition, for “Contribution to Preservation of the Global Environment,” we added questions on GHG reduction targets. If a survey reveals that there is concern about a supplier in certain important aspects, such as compliance with laws and regulations, we will conduct an interview, on-site inspection, etc. with the relevant supplier and proceed with an improvement activity in unison with the supplier.
We will continue to expand our survey and improvement activities to our affiliates in Japan and overseas sites, with the aim of improving our CSR procurement levels.

To promote CSR procurement, it is necessary to ensure that our suppliers also fully understand CSR and make the necessary efforts in unison. For this reason, we provide training for domestic suppliers with an especially high sales ratio to the Sumitomo Electric Group in order to raise their awareness of CSR.

For training to suppliers, we intend to gradually expand the scope of the training targets and content.

(Encouraging Our Suppliers to Improve Their Product Quality)

Our group is engaged in several different fields of business, and the requirements for product quality vary depending on the product and customer. In the course of our production, we purchase a wide variety of products including raw materials, electronic parts, equipment and software, and therefore, the quality control of our purchases is very important for our business operation.
Although the requirements from our customers and expectations for our suppliers differ, our philosophy on product quality is basically the same. In this regard, we developed "Quality Control Guidelines for Suppliers (*)" in September 2010 to ask our suppliers for the quality assurance of their products. Based on ISO9001, the guidelines state our policies for the quality assurance of our purchases and the requirements for our suppliers.
Through cooperation with our suppliers, we will continue our efforts to secure product quality and safety.

In response to environmental issues in the supply chain, the Group has positioned green procurement as part of essential quality standards and continues to strive for it.
Since we formulated the Green Procurement Guidelines in fiscal 2003, we have been committed to eliminating the use of banned substances in our products and strengthening management of other chemical substances contained in our products.
We also promote the circular economy through measures such as recycling procurement, that is, the use of recycled resources and materials as raw materials.
In addition, since 2009, Sumitomo Electric has been working with Sumitomo Mitsui Banking Corporation to operate the ECO Factoring System*. This system supports our suppliers committed to environmental conservation activities at a certain level or higher by applying preferential interest rates and other means. In fiscal 2024, 55 suppliers applied to use the system, and 46 of them used it.

*ECO Factoring: A trademark or registered trademark of Sumitomo Mitsui Banking Corporation

The Sumitomo Electric Group, which is “Promoting compliance-based procurement activities” as stated in the Basic Procurement Policies, recognizes that risks listed in Annex II of the Organization for Economic Co-operation and Development (OECD) such as the matter of conflict minerals(*) illegally traded by armed groups in the Democratic Republic of the Congo and its neighboring countries, cobalt mining, which is feared to be the worst form of child labor, and human rights violations and labor issues in conflict areas and high-risk areas (CAHRAs) are among the serious social issues in the supply chain. To fulfil our social responsibility in procurement activities, we aim to realize “responsible minerals sourcing” involving such illegal or dishonest acts as raw materials. To this end, we investigate the supply chain on the use of conflict minerals involving such illegal or dishonest acts when necessary.
In the event that the use of minerals that may cause human rights issues and other types of social problems or serve as fund for armed groups is found, we will take measures to avoid their use.

In accordance with the principle of “Promoting procurement activities based on mutual trust and cooperation with suppliers” in the Basic Procurement Policies, we will ask suppliers to understand the approach of the Sumitomo Electric Group and cooperate with our investigation mentioned above. In case that the use of minerals of concern is found, the relevant suppliers will be requested to take measures to avoid their use as we do in the Group to cooperate with us to realize “responsible minerals sourcing.”

*the matter of conflict minerals :Issue in which the trade of tantalum, tungsten, tin, gold, or their derivatives produced in the Democratic Republic of the Congo and surrounding countries is a source of funding for armed groups carrying out serious human rights violations