• Supply Chain Management
• Supplier Evaluation Program
• Socially Responsible Procurement Program
• Human Rights Initiatives
• Supply Chain Environmental Initiatives
• Partnerships with External Organizations

Epson considers suppliers to be important partners in its business activities. As such, our procurement activities are designed to develop mutually beneficial trusting relationships with our business partners based on fairness, transparency, and respect.

Epson procures goods from around the world. Domestic Japanese procurement accounts for about 39% of our total procurement spend. Asia accounts for the large majority of the remaining 61%.
Our procurement spent for direct materials (production materials and outsourced manufacturing) accounts for about 61% of the spend and indirect materials (including factory consumables, machinery, public relations, logistics, and staffing) for about 39%.
Epson has business with 1,700 direct material suppliers mainly in Asia where our main manufacturing sites are located, and about half of our indirect materials spend is in Japan.

Procurement Over View

Epson evaluates both direct and indirect materials suppliers based on a comprehensive supplier evaluation program. The program consists of multiple evaluations. The primary components are an indirect evaluation, which is based on information from a third-party credit investigation, and a direct evaluation (annual evaluation), which is a self-check that suppliers do to evaluate their own QCD and other performance metrics.

See here for more information about Green Purchasing.

Direct Evaluation Results

Evaluation of Prospective New Suppliers

New suppliers are asked to sign a Supplier Agreement under which they pledge to observe the Epson Group Supplier Guidelines/RBA Code of Conduct (covering human rights, health and safety, environment, and ethics expectations). They are also asked to complete a self-assessment, the content of which is based on the annual evaluation. Both of these conditions must be met before transactions can begin. If they score fewer than 70 points, we ask them to correct issues before doing business with them.

The detailed CSR evaluation is a part of Epson’s supplier CSR due diligence program. We are endeavoring to improve the level of CSR across our global supply chains. Toward this end, we have revised the scope, frequency, and some other aspects of our program to meet our obligations¹ as a Regular Member of the Responsible Business Alliance (RBA).

Every year, Epson evaluates supplier compliance with the Epson Supplier Code of Conduct (RBA Code of Conduct) based on a detailed self-assessment questionnaire (SAQ). Suppliers are asked to take corrective action, depending on the results of the SAQ. We also have a process for verifying supplier answers via audits, site observations, and interviews.

Suppliers can choose to answer either an online SAQ provided by the RBA or an SAQ prepared by Epson that is based on the RBA’s Validated Audit Program (VAP) audit criteria. The Epson SAQ is designed to thoroughly check the human rights situation at suppliers’ sites has many questions in the labor section as well as questions about the protection of the rights of indigenous peoples and foreign immigrants. Epson’s SAQ form is available in multiple languages² to ensure that local suppliers of Epson's overseas manufacturing sites understand the questions on the SAQ and provide accurate answers.
Suppliers who are deemed high risk are audited in accordance with RBA criteria and are asked to take corrective action as needed.

² The SAQ for direct material suppliers is available in five languages and that for indirect material suppliers is available in six languages.

Epson SAQ Scores and Risk Ranks

* The risk rank of suppliers who complete RBA's online SAQ is determined in accordance with RBA's risk ratings.

2023 SAQ

In 2023, we conducted a detailed CSR evaluation (SAQ and corrective actions) of major suppliers.

Scope of 2023 SAQ

¹ Epson’s Tier 1 (direct) suppliers are arranged in descending order based on transaction amounts and selected until 80% of the total spend is reached. If a tier 1 supplier is a trading company, the manufacturer that supplies the trading company is asked to complete an SAQ.
² Contractors who provide security, food service(canteen), and other services at Epson sites.

Direct material suppliers

In 2023, Epson collected a completed SAQ from all the 270 major tier 1 direct materials suppliers (547 sites) who asked to complete one. Epson also asked single-source suppliers and other key suppliers to complete a SAQ and collected one from each. When our tier 1 supplier was a trading company, we also had tier 2 suppliers complete an SAQ.
The number of suppliers who choose to complete RBA’s online SAQ has been growing each year. These suppliers now account for about 25% of the total.
All suppliers who completed the Epson SAQ were notified of their results. In addition to their SAQ scores, we prepared a feedback sheet that included advice on correcting identified issues. We also monitored the formulation of and progress of corrective actions plan for critical items related to human rights* and provided assistance as needed.

* Critical items related to human rights (partial excerpt):

• Prohibition of child labor (none detected)
• Prohibition of slave labor, and forced labor (conclusion of appropriate employment contracts, freedom of movement, limits on company loans)
• Proper management of working hours (no more than six consecutive work days and a limit on working hours of 60 hours/week)
• Proper payment of wages (payment of at least the legal minimum wages and overtime, and timely payment of wages)
• Prohibition on charging workers recruitment fees, humane treatment, harassment
• Humane treatment (prohibition of harassment)
• Evacuation drills (with full participation enterprise wide, nighttime, dormitories, etc.)
• Provision of suitable personal protective equipment at no cost to workers
• Provision of safety measures for pregnant and nursing mothers, and provision of a clean lactation room

Evaluation Results for Direct Material Suppliers

¹ Corporate group

Indirect Material Suppliers

Indirect materials suppliers are essential business partners, so Epson asks them to understand and comply with the RBA’s requirements.
Since 2019, we have asked our major indirect material suppliers, including on-site service vendors, staffing/recruitment agencies, and logistics warehouse operators, to complete the SAQ and take corrective actions depending on the SAQ results. In 2023, we further expanded the number of companies asked to complete an SAQ.
In addition to the SAQ, we conduct audits at production sites to check the working environment and employment conditions of on-site service vendors. We provide support until we can verify that identified issues have been corrected in areas such as long working hours, granting of time off, consecutive days worked, and proper payment of overtime wages. SAQ scores have risen because of these efforts.
In 2023, we received a completed SAQ from all 277 companies (100% collection rate) with operations at Seiko Epson plants and offices and at Epson’s main production sites. As with direct material suppliers, when issues are detected in critical items related to human rights, we ask suppliers to formulate and carry out a corrective action plan, and we confirm that the issues have in fact been addressed.

Example of a corrective action that was confirmed: A on-site manufacturing contractor reimbursed foreign workers for expenses incurred (for Japanese language education, VISA acquisition fees, etc.) in their country of origin.

¹ Given the results of the 2022 risk assessment, call center contractors were asked to complete an SAQ.

Epson supports the corrective action efforts of high-risk and medium-risk suppliers.
Epson schedules field audits and on-site verification primarily of major suppliers because it believes that it is important, as part of the detailed CSR evaluation due diligence process, to understand the situation. We provide assistance for corrective action taken by suppliers who are found to be at risk.

Third-Party Audits

On-site verification, and corrective action support

Epson manufacturing company staff members visit suppliers to verify conditions on-site and provide help for corrective actions.
For direct material suppliers, we not only help them address CSR issues but also support them when they struggle in other areas, such as in introducing fire prevention measures or establishing business continuity plans.
For on-site service vendors, Epson employees conducted a second-party audit to improve the working conditions by, for example, tracking and reducing working hours, granting time off, paying appropriate overtime wages, and ensuring that workers are not made to pay recruitment fees.

¹ Priority closure audit included

Epson drives business continuity management (BCM) programs across the supply chain so that it can resume supply within the target period and fulfill its supply responsibilities in the event of a disaster, accident, pandemic, or other contingency in the supply chain.

See here for more information about Epson's business continuity management.

Within our supply chain BCM activities, we encourage our suppliers to implement their own BCM programs to prevent a disruption in the supply of goods we procure from them. We regularly ask suppliers to self-evaluate their emergency response capabilities. We provide them with feedback on the results of these assessments and support their efforts to improve.
Using emergency response capability evaluations, we identify suppliers who have not yet established a BCM program or prepared a business continuity plan (BCP) and offer them BCM support to prepare for contingencies. The goal is to ensure that all key suppliers have a BCM program in place.

In fiscal 2022, we revised the content of the evaluation and the criteria for selecting which direct and indirect material suppliers would be asked to evaluate their emergency response capability. The selection criteria below are used. Those suppliers meeting the criteria (approximately 1,000 companies) were further prioritized and evaluated over a two-year period from 2022 to 2023, and the results were fed back.

Selection Criteria
• Suppliers with whom we had transactions in the previous fiscal year
• Suppliers who have not been evaluated for the past three years
• Suppliers that are critical to Epson’s operations divisions

Fires at suppliers’ facilities have disrupted supplies in the past. In response, Epson has been evaluating the safety management of direct and indirect material suppliers by asking them to complete a self-inspection. The goal is to enhance their ability to control risks that lead to accidents such as fires, explosions, and chemical leaks. In fiscal 2022, the criteria below were used to select which suppliers to evaluate. Those suppliers meeting the criteria (approximately 1,000 companies) were further prioritized and evaluated over a two-year period from 2022 to 2023.

Selection Criteria
• Suppliers with whom we had transactions in the previous fiscal year
• Suppliers who have not been evaluated for the past three years
• Suppliers that are critical to Epson’s operations divisions

Recognizing that supplier safety management is an important element of supply chain BCP, Epson added safety management evaluations as a condition for initiating new transactions in FY2024.

Supplier support through site safety inspections

In addition to asking suppliers to evaluate their own safety management, Epson has been sending personnel with safety management expertise to suppliers' sites since 2017 to conduct safety inspections and provide support needed to raise the effectiveness with which safety is managed. To date, Epson has helped over 500 companies.
Epson evaluates the results of site safety inspections and assigns suppliers one of the levels that Epson has created.

Levels
Level 1: Requirements met
Level 2: Some requirements not met
Level 3: Requirements not met

All 93 suppliers who conducted site safety inspections in fiscal 2023 were found to be at Level 1 (requirements met). To ensure that all key suppliers attain Level 1, in fiscal 2024 we will continue to support the two companies that were assessed Level 2 (some requirements not met) in 2022 and plan to conduct site safety inspections at 83 companies. This will bring the total number of companies at which site safety inspections have been completed to 631.

Epson has declared in its Human Rights Policy that both Epson and its suppliers shall respect human rights. As stated in our policy, we commit to comply with the United Nations Guiding Principles on Business and Human Rights and respecting internationally recognized human rights as stated in the Universal Declaration of Human Rights and other relevant instruments. Moreover, we support the purpose of the RBA and, as a member, seek to ensure that our suppliers also comply with the RBA Code of Conduct. Through these initiatives, we aim to ensure that rights are respected throughout the Epson product supply chain.

We have a program that covers the entire supply chain and includes the following:
1. Fostering an understanding of human rights and requirements (conferences and education)
2. Making suppliers aware of the need to implement a human rights program
3. Checking the programs of suppliers by (1) conducting self-assessments and audits
4. Checking the programs of suppliers by (2) providing support for the remediation of individuals and communities and addressing human rights impacts

To foster understanding of human rights, we ask suppliers to read the Epson Group Supplier Guidelines. We also hold supplier conferences and human rights seminars that many suppliers attend.

An SAQ is used to assess how closely suppliers are adhering to the RBA Code of Conduct in the area of human rights. We provide feedback to each supplier site regarding the remediation of human rights abuses and other issues that need to be addressed, and we request that they take corrective action.

The RBA Code of Conduct covers a wide range of human rights related issues, particularly the Labor section. Taking into account the ILO Declaration on Fundamental Principles and Rights at Work and the principles of the United Nations Global Compact, we identify priority human rights issues and make addressing these issues mandatory.

In addition, when we become aware of an adverse impact on human rights through an audit or a report by a whistleblower employed by a supplier, we provide support until remediation is provided for.

Examples of Remediation
- Working hours were not recorded by an on-site manufacturing contractor due to a malfunction of the recording device, resulting in unpaid overtime wages for that period. Remedial action: Verified the payment of the missing wages.
- An on-site security services company was not paying overtime wages or holiday allowances and was not granting days off. Remedial action: Verified the payment of the respective allowances and the granting of days off.

Epson has established supplier compliance hotlines that suppliers and their employees can use to seek remediation. The supplier compliance hotlines are recommended for use in reporting and consulting about human rights related issues.

See here for more information about the Whistleblowing system for suppliers.
See here for more information about the Epson Group Human Rights Policy.Human Rights Due Diligence in the Supply Chain
See here Human Rights Due Diligence in the Supply Chain.

Epson's Supplier Guidelines include a code of conduct that suppliers are required to adhere to. In addition to requests related to quality, cost, delivery (QCD), and compliance, the Supplier Guidelines set forth the Supplier Code of Conduct on CSR (aligned with the RBA Code of Conduct). Regarding the reduction of environmental impact, Epson requires its suppliers not only to comply with the RBA Code of Conduct (covering pollution prevention and resource conservation, hazardous substances, solid waste, and air emissions, etc.) but also to address environmental issues such as reducing greenhouse gas emissions, promoting resource circulation, managing water resources, managing chemicals, and preserving biodiversity. Additionally, Epson requests that suppliers manage chemical substances contained in products and ensure compliance with environmental regulations at their factories.

See here for more information about Epson's Supplier Guidelines.

Epson has established specific greenhouse gas (GHG) reduction targets for the next 5 to 10 years, aligned with the scientific target-setting methodology proposed by the Science Based Targets initiative (SBTi). These targets are based on the GHG emissions quantified in accordance with the GHG Protocol, encompassing Scope 1, 2, and 3 emissions. Scope 3 emissions represent indirect emissions from the entire value chain, and Epson has set a medium-to long-term reduction target to reduce GHG emissions per unit of business profit by 2025.
Additionally, Epson has joined the international initiative RE100, which aims to use 100% renewable energy for electricity in business operations by 2050. The company has committed to achieving 100% renewable energy for all its global group facilities¹ by 2023, and this transition was successfully completed in December 2023. This change will reduce Epson’s GHG emissions by approximately 400,000 tons per year.
Going forward, Epson will work on reducing emissions throughout its entire supply chain to achieve more ambitious total emissions reduction targets in line with the 1.5°C scenario.
¹ Excludes some sales sites and leased properties where the amount of electricity consumed cannot be determined.

Supplier Conferences and Seminars Held in FY2024 (Japan)

* Briefings and seminars for major overseas suppliers are also planned during FY2024.

Epson uses supplier conferences and other opportunities to ask its suppliers for cooperation in reducing the environmental impact of business activities across its supply chains. We also periodically evaluate our suppliers' environmental programs and the results of their environmental impact mitigation efforts. We assist them as needed to improve.

Direct Evaluation (Annual Evaluations) and Detailed CSR Evaluations for Suppliers
Suppliers are asked to complete direct evaluations (annual evaluations) and detailed CSR evaluations that include questions about the environment. We collect and analyze their answers and provide feedback on the detailed CSR evaluations. Suppliers whose scores put them in the high-risk category are visited for on-site verification or audits and are aided to correct issues.

Environmental Impact Survey
In addition, we survey the suppliers who account for 80% of the value of Epson's procurement spending to find out about their policies and status on renewable electricity initiatives, use of recycled materials, water usage, and awareness of biodiversity, etc.

As part of activities to mitigate climate change, it is essential to promote the use of renewable electricity and supplier engagement. At the same time, it is urgent to address the physical risks posed by the increasingly visible effects of climate change. Epson has suppliers across Asia, including in Thailand, where severe floods are a regular occurrence, and in China, where there is high potential water risk. Epson recognizes that interrupted or delayed deliveries from suppliers due to floods and droughts, two typical climate risks, could seriously impact the manufacture and sale of Epson products and need to be addressed to avoid inconveniencing customers.

See here for more information about Epson's environment initiatives.

In addition to our own initiatives, Epson supports and actively participates in alliance activities in order to resolve CSR issues, including human rights issues in the supply chain. We have joined the RBA and JEITA to work on solving societal issues around the world and improving supply chain CSR through industry collaboration.

【Domestic Japanese industry initiative】

The Japan Electronics and Information Technology Industries Association (JEITA), CSR Committee
Member companies: 29 (as of 4/2024)

Example activities:
● Issuing and promoting the Responsible Business Conduct Guidance
● Study of human rights due diligence and grievance mechanisms
● Study of the global regulatory situation