• Supply Chain Overview
• Supplier Evaluation Program
• Socially Responsible Procurement Program
• Human Rights Initiatives
• Supply Chain Environmental Initiatives

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 and services from all over the world. Domestic Japanese procurement accounts for about 41% of our total procurement spend. Asia accounts for the large majority of the remaining 59%.

Our procurement spent for direct materials (production materials and outsourced manufacturing) accounts for about 65% and indirect materials (including factory consumables, machinery, public relations, logistics, and staffing) for about 35%. 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 all suppliers, both direct materials suppliers and indirect materials suppliers. Suppliers are evaluated from multiple angles on the basis of a supplier evaluation program. The program consists primarily of an indirect evaluation and a direct evaluation (periodic evaluation). The indirect evaluation is based on information from a credit investigation service. The direct evaluation 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

The detailed CSR evaluation is a part of Epson's supplier CSR due diligence program. 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, field checks, and direct questioning.

Each supplier chooses and answers an SAQ from either RBA online or an SAQ prepared by Epson that is based on the site audit standards of the Responsible Business Alliance (RBA). The Epson SAQ is designed to thoroughly check labor conditions (respect for human rights) and has many questions in the labor section.

As a regular member of the RBA, Epson asks major suppliers (direct material suppliers, on-site service vendors, and HR agents) to complete an SAQ every year.

Suppliers who are deemed high risk are audited in accordance with RBA standards and asked to take corrective action as needed.

Risk Rank by SAQ

Scope of SAQ (2021)

In 2021, we conducted a detailed CSR evaluation of major direct materials suppliers and indirect material suppliers including on-site service vendors, HR agents and logistic warehouse operators at key manufacturing sites.

1) Major direct suppliers
-80% of the Group-wide spend
-Selected by a business unit, including single source suppliers
2) Indirect material suppliers
(a) On-site service vendors
- Vendors on Seiko Epson and production sites, regardless of the value of transactions and number of workers.
(b) HR agencies
- Recruitment agency and HR contractors used by Seiko Epson and production sites, regardless of the value of transactions and number of workers.
(c) Logistics warehouse operators
- Warehousers at Seiko Epson and production sites, regardless of the value of transactions and number of workers

Direct material suppliers

In 2021, we asked 297 critical Tier 1 direct material suppliers to complete the SAQ (Self assessment questioners). We received completed questionnaires from 293 of them (497 facilities). We also asked Tier 2 suppliers to complete the SAQ when the Tier 1 supplier was a trading company.

Epson provides suppliers and vendors with their SAQ score as well as with feedback, including advice on corrective actions. We monitor the progress of critical corrective action items.

SAQ Evaluation Results (Direct material suppliers)

*We ask suppliers who have problems and/or issues to take corrective actions.

Indirect material suppliers

Service vendors are essential business partners for running our production operations, so Epson requires them to understand and follow the RBA code requirements. Since 2019, we have asked our major indirect material suppliers, including on-site service vendors, HR agents, and logistics warehouse operators, to complete the SAQ and take corrective action depending on the SAQ results.

In addition to the SAQ, we conduct audits to check the working environment and employment conditions of on-site service vendors, and we request improvements where needed. We provide support until we can verify that issues found in areas such as long working hours, granting time off, consecutive days worked, and paying appropriate overtime have been corrected. SAQ scores have risen because of these efforts.

In 2021, we received a completed SAQ from all 220 companies with operations at Seiko Epson plants and offices and at Epson's key production sites.

* 2020 results are included in the on-site service vendors category, under "Others."

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. Since 2020, COVID-19 has made it difficult to travel to suppliers' production sites, so we have been performing checks online and doing additional follow-up verification of SAQ answers. We provide corrective action support to at-risk suppliers.

Third-party audits

Second party audits, on-site verification, and support for corrective action

For suppliers that are not asked to undergo a third-party audit, Epson manufacturing company staff members visit their sites to verify conditions on-site and help them improve. Through these activities, 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, closely monitoring working hours, granting time off, paying appropriate overtime, and ensuring that workers are not made to pay hiring fees.

Epson promotes business continuity management (BCM) across the supply chain to ensure that it is able to fulfill its delivery commitments to customers by restoring supplies within a target recovery time in the event of a disaster, accident, epidemic, or other disruption.

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

As part of our supply chain BCM program, we ask suppliers to manage their own business continuity so that supplies of products we procure from them are not disrupted. We check their preparedness by having them periodically complete a self-evaluation of their ability to respond to emergencies, and we provide them with feedback on the results as well as with any support they need to make improvements.

* Up to FY2020, we only provided data on the number of sites. This year we broke the data down into number of companies and number of sites to provide a clearer picture.

Epson also conducts an annual safety management evaluation to evaluate the ability of suppliers to respond in the event of a fire or other emergency. After suppliers conduct a self-assessment covering things such as electrical hazards, hazardous materials, and fire prevention, members of Epson's safety management staff verify their answers on-site and discuss corrective actions.

* Up to FY2020, we only provided data on the number of sites. This year we broke the data down into number of companies and number of sites to provide a clearer picture.

Epson has declared in its Human Rights Policy that both Epson and its suppliers shall respect human rights.The policy also states that we shall observe the United Nations Charter of Human Rights and principles of conduct relating to business and human rights. Moreover, we support the purpose of the RBA and, as a member, we seek to ensure that our suppliers also comply with the RBA Code of Conduct.

Through these initiatives, we aim to ensure that workers' rights are respected throughout the Epson product supply chain, and 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) *1
2. Making suppliers aware of the need to implement a human rights program
3. Checking of human rights performance via self-assessments and audits
4. Requesting corrective action where needed

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.

A self-assessment questionnaire (SAQ) is used to ascertain how closely suppliers are adhering to the RBA Code of Conduct in the areas of human rights. We provide feedback to each supplier site regarding issues that need to be addressed, and we request that they take corrective action.

The RBA Code of Conduct (the RBA CoC) covers a wide range of human rights issues, particularly the Labor section. Taking into account the ILO core labor standards and the principles of the United Nations Global Compact, we have identified the following priority human rights issues and have made improvement in these areas mandatory:

When we become aware of a human rights issue through an audit or a report by a whistleblower employed by a supplier, we provide support until the issue is resolved. Issues have been resolved in cases involving things such as working hour records, payment of overtime and holiday allowances, and granting of time off.

Epson encourages the reporting of human rights issues so that it can provide relief and protection to suppliers and their employees.

See here for more information about Respecting Human Rights.

GHG Emissions Targets

Epson has set greenhouse gas (GHG) emissions targets in line with an approach championed by the Science Based Targets initiative (SBTi). The SBTi has validated Epson's 2025 targets for scopes 1, 2, and 3 GHG emissions measured in accordance with the GHG Protocol. Epson's validated target for scope 3 emissions, which are emissions from an organization's value chain, is to reduce GHG emissions as a percentage of business profit out to 2025.

Epson joined the international initiative RE100, which aims to drive a transition on the part of corporations to the use of 100% renewable electricity for their business activities by 2050, and we have set a goal of switching to 100% renewable energy to meet the electricity needs at all Epson Group sites^*1 around the world by 2023. In the future, we will switch to a more ambitious reduction target that is in line with the 1.5℃ scenario and will endeavor to reduce emissions throughout the supply chain.
^*1 Excludes some sales sites and other leased properties

Response to Climate Risk

There is a shared global awareness that climate change poses serious and urgent business risks that must be addressed. 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.

Supplier Support Initiative

Under its supplier engagement program, Epson asks suppliers to complete a self-assessment questionnaire (SAQ). Suppliers are sorted by risk level based on their SAQ score and given feedback on the results. Epson helps high-risk suppliers improve through on-site verification and audits. Moreover, to encourage the pursuit of environmental sustainability, Epson selects the suppliers who account for 80% of the value of Epson's procurement spending and, in conjunction with a detailed CSR evaluation, asks them to report the policy and initiatives for renewable energy use, their water use, and the amount of electricity, gas, and other sources of CO2 emissions actually consumed for parts they sell to Epson. Epson shares this data with its suppliers and engages them to help drive production line improvements that reduce the amount of electricity and water used and improvements that will reduce the environmental impact of transport.

Requests made at the Annual Supplier Conference (April 2022)

Decarbonization　　　　　　: Set GHG emissions reduction targets and implement reduction measures.
(For example, reduce emissions by 4.2% a year, introduce renewable electricity)
Closed resource loops　　　: Evaluate products and improve processes to make use of recycled and biomass materials.
Product substance control　: Manage compliance in line with the latest version of the Epson Group Green Purchasing Standard for Production Materials.

Introduction of Environmental Management² by Suppliers

Note: The figures in the table represent only the direct material suppliers of Seiko Epson, who were evaluated on the annual evaluation program in 2021.
² Environmental management systems such as those prescribed by ISO 14001, Ecostage, EcoAction 21, etc.


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 social 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

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