• 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 38% of our total procurement spend. Asia accounts for the large majority of the remaining 62%.
Our procurement spent for direct materials (production materials and outsourced manufacturing) accounts for about 65% of the spend 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 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

Prospective new suppliers are also evaluated via self-evaluation. They must receive a score of at least 70 points. 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 obligations 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 labor conditions (respect for human rights) and has many questions in the labor section.
Suppliers who are deemed high risk are audited in accordance with RBA criteria and are asked to take corrective action as needed.

Epson SAQ Scores and Risk Ranks

2022 SAQ

In 2022, we conducted a detailed CSR evaluation (SAQ and corrective actions) of major suppliers.

Scope of 2022 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 2022, Epson collected a completed SAQ from all the 164* major tier 1 direct materials suppliers (449 sites) requested. 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 progress of corrective actions on critical items related to human rights* and provided assistance as needed.
* Critical items related to human rights (partial excerpt):

• Prohibition of child labor, slave labor, and forced labor (none detected)
• Proper management of working hours (a 60-hour maximum workweek and at least one day off every seven days)
• Proper payment of wages (proper payment of the legal minimum wages and overtime wages, and timely payment of wages)
• Charging workers recruitment fees, humane treatment, 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 2022, we further expanded the number of companies asked to complete an SAQ.
In addition to the SAQ, we conduct audits at manufacturing 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. SAQ scores have risen because of these efforts.
In 2022, we received a completed SAQ from all 247 companies with operations at Seiko Epson plants and offices and at Epson’s main manufacturing sites.

¹ 2020 results are included in the on-site service vendors category, under "Others."
² 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. 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.

Third-Party Audits

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

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.
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, closely monitoring working hours, granting time off, paying appropriate overtime, and ensuring that workers are not made to pay recruitment 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.

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. As stated in our policy, we strive for complying 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 and protection. The supplier compliance hotlines are recommended for use in reporting human rights related issues.

See here for more information about Whistleblowing system for suppliers.
See here for more information about Epson Group Human Rights Policy.https://cms.epson.jp/iw-cc/command/iw.formspub.preview

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.

Strengthening Engagement to Reduce Environmental Impact in Supply Chains

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.
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. In addition, we survey the suppliers who account for 80% of the value of Epson's procurement spending to find out about their renewable electricity policy and actual use of renewables, as well as about their GHG emissions from electricity and gas and water consumed in the production of parts for Epson.
We demonstrate our commitment to collaborating with suppliers to address challenges at each step of the GHG emissions reduction process and make calls for cooperation. We will continue to act in concert with suppliers to achieve the goal of the decarbonization of society as a whole.

What We Ask of Suppliers ²

• Visually represent GHG emissions reductions, set reduction targets, and select and implement reduction measures.
• Use recycled and biomass materials.
• Observe regulations regarding substances in products.

² Excerpted from the April 2023 supplier conference materials

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
Participating companies: 28 (as of 4/2023)

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