Encouraging Business Partners in CSR Efforts

Concept and Policy

In our pursuit of sustainable business, we place strong emphasis on the environment, society and governance (ESG) in our management practices. Realizing this requires not only efforts within the Daiwa House Group but also measures across the entire supply chain, meaning with our business partners, too. And, by seriously fulfilling our corporate social responsibilities (CSR) and getting our business partners to do so as well, we are able to meet the hopes and expectations of society on the one hand and contain the adverse impacts we have on the environment to a minimum and build between us and our business partners relations of "co-existence and co-prosperity" that society will support on the other.

Guided by our "Principles of Corporate Ethics and Code of Conduct," our Group employees know to build relations of "co-existence and co-prosperity" with business partners. We also have, in the "Business Partner Code of Conduct" that we adopted in 2006, laid out a comprehensive policy on human rights, compliance and other matters we expect from our business partners. Furthermore, in 2015, we rearranged some CSR criteria we had been using until then as a new "CSR Procurement Guidelines."

CSR Procurement Guidelines

Our "CSR Procurement Guidelines" set forth 7 social and environmental principles via a "Business Partner Code of Conduct." And, based on this code of conduct, our "Corporate Activity Guidelines" elucidate 20 specific social and environmental items.

The "compliance" requirement in the "Business Partner Code of Conduct" stipulates that business partners are expected to act ethically and in full compliance with laws and regulations, in order to keep business free of graft and corruption. Where the code of conduct requires "considerations for occupational safety and health," business partners are expected to concern themselves about health and safety, by preventing industrial accidents, assiduously managing sanitation and hygiene, and being prepared for unforeseeable events like natural disasters. And, the section on "respecting human rights" outright disavows forced labor, child labor, harassment and infringements of human rights by way of discrimination, etc.

Besides all of that, the Guidelines for Products specify our control policy concerning construction aterials and other chemical substances, biodiversity concerning wood procurement, and other materials/issues that involve high risks in our supply chain but can be audited toward the upstream.

Related subject

CSR Procurement Guidelines

(1) Business Partner Code of Conduct
Seven principles concerning social & environmental responsibility
1) Establish a relationship of trust with customers
2) Secure legal compliance
3) Considerations for occupational safety and health
4) Fair business activities
5) Environmental conservation
6) "Co-creating a Brighter Future" with local communities and
7) Respect for human rights
(2) Corporate Activity Guidelines
Twenty specific requirements concerning social & environmental responsibility
(3) Guidelines for Products
Standards for social & environmental responsibility concerning construction materials and other products that our business partners procure, and delivery to Daiwa House Industry, consisting of the two guidelines below:
1) Chemical Substance Management Guidelines [Basics]
2) Biodiversity Guidelines [Wood Procurement]

Management

At Daiwa House Industry, we assist 3 member organizations that operate in our supply chains, in the interest of "Co-creating a Brighter Future" with our material suppliers, etc. Through these organizations, we learn of demands and issues our business partners have with us. Together, we promote CSRs via closely knit communications, e.g., conveying to our business partners from time to time things we want them to respect in business processes.

With regard to risk information, we seek out, identify and improve ethical and compliance problems of our Group employees, as well as issues between primary and secondary subcontractors, by way of a questionnaire survey we send to our business partners and a "Partners Hotline" that they can use to contact us. These tools help our business partners to keep business free of graft and corruption, and prevent human rights infringements.

To promote CSR-oriented procurement, we established the CSR Procurement Subcommittee in 2010, consisting of representatives from Procurement, Construction and other related departments. Through this subcommittee, we have established a system for collaboration with order placement personnel at individual offices.

Application of the CSR Procurement Guidelines

When contracting new business partners, we explain to them the purpose of our "CSR Procurement Guidelines" and have them submit a letter of consent that they will honor the guidelines.

As part and parcel to doing business with us, we require business partners to analyze and report the chemical substances found in the parts and materials we purchase from them for use in single-family houses and low-rise rental housing. We use our "Chemical Substance Management Guidelines" (Guidelines for Products) for this. With all other parts and materials we purchase as well, we require business partners to honor our guidelines by way of information briefings, design documents, etc.

Moreover, every year since fiscal 2011, we have audited wood suppliers and made those results public as per our "Biodiversity Guidelines" [Wood Procurement] (Guidelines for Products). They are required to verify the legality and sustainability of wood they procured in the previous fiscal year and then are instructed to make improvements highlighted in audit results.

Beginning in fiscal 2017, we started monitoring all matters raised in our "CSR Procurement Guidelines" by having our business partners conduct self-assessments.

CSR-related policy and management for business partners

Date of
implementation
Item Contents
February 2006 Management Started the annual questionnaire survey toward business partners
October 2006 Policies Business Partner Code of Conduct took effect
(Collected letters of agreement from partners)
July 2009 Management Started the operation of a Partners Hotline
October 2010 Policies
Management
Chemical Substance Management Guidelines took effect
Started chemical substance survey for centralized procurement (at the time of contract)
October 2010 Policies Biodiversity Guidelines took effect
(Collected letters of consent from partners)
January 2011 Management Started annual wood procurement survey
July 2015 Policies CSR Procurement Guidelines took effect
(Daiwa House Industry only)
(Collected letters of consent from partners)
April 2016 Policies "CSR Procurement Guidelines" Used across the Daiwa House Group
April 2017 Management Self-assessments based on our "CSR Procurement Guidelines"

Member organizations in our supply chains(Production volume as of the end of June 2017)

At Daiwa House Industry, we assist the below member organizations with their operations.

The Confederation of Partner Companies (4,653 companies):

The Confederation of Partner Companies, consisting of 83 branches nationwide, was formed by our partner subcontractors engaged in manufacturing and construction/installation work. Its activities have focused on the improvement of safety, quality, technology and work efficiency, as well as the promotion of environmental conservation efforts. The Confederation members have been enhancing their mutual trust by promoting the sharing of information through the information site "WEB Ren."

The Trillion Club (239 companies):

Composed of material suppliers, the Trillion Club serves to improve the financial standing of both member businesses and Daiwa House Industry, by enhancing material quality, respecting delivery schedules, developing new construction materials and innovating technologies.
It promotes mutual development and friendly relations by taking full advantage of regional characteristics and facilitating information sharing, through two categories of promotional activities.

The Setsuwa Club (146 companies):

The Setsuwa Club, which is composed of housing equipment manufacturers and sales companies we have had dealings with, has enhanced cooperation and collaboration among the member companies, by participating in exhibitions and various other activities and promoting the sharing of information on equipment technology. The Club has four branches in the Kansai, Kanto, Chubu and Kyushu regions.

Managing business partners in terms of QCDMSE

At Daiwa House Industry, we select and manage new business partners in terms of Quality, Cost, Delivery, Morals, Safety and Ecology (QCDMSE).

In selecting new suppliers, we first screen documented evidence of their quality, environmental considerations, delivery performance, costs and management against our regulations on purchasing operations. Then, for those that pass this initial step, we audit and assess their quality management policy and system, and additionally evaluate safety and health conditions and practices at their plants, considerations they take for nearby residents, and their environmental measures, claim handling and employee training programs. We only conduct business with suppliers who clear a certain level of evaluation. And, after commencing business with them, we use the same approach for follow-up assessments.

In selecting new construction subcontractors, we review their application against QCDMSE criteria and interview them as per our regulations on managing subcontractors. These processes help us to verify the candidate company's compliance record, safety and health assurances, their distancing from antisocial forces, legal permits in their possession, their participation in Japan's public health insurance program, and other defining features. With those that pass, we conclude a Basic Subcontractor Agreement and obtain a trade name proof of registration from them. All regulations and standards apply to the new subcontractor. At construction sites, alongside managing the site in terms of QCDMSE, we clarify the roles that we and the subcontractors play in that process.


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