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Supply Chain Management

Philosophy on Suppliers

Basic Policy

Dealings Based on Our Purchasing Policy

Daikin formulated a Purchasing Policy in 1992 that is the basis for fair dealings with suppliers.

Purchasing Philosophy and Purchasing Policy

Purchasing Philosophy:

"Respect Independence" and "Cooperation and Competition"

Purchasing Policy:
  • Fair relations based on an open door policy
    Provide open, equal, and fair opportunities for all companies, regardless of their locality, size, and sales results.
  • Mutual growth through mutual trust
    Create open conditions for business dealings and respect free competition.
  • Look for good partners
    In procuring from overseas, look for companies to share common profit and offer useful products to society.
  • Observe laws, and maintain confidentiality
    Observe laws on business dealings and respect the spirit of these laws.

Responsible procurement

Daikin is working with suppliers worldwide in ensuring responsible procurement in order to fulfill its social responsibility across the entire supply chain. We consider our suppliers for raw materials and parts as important partners, with whom we are promoting relationships of trust through open, equal, and fair trade. At the same time, Daikin promotes CSR procurement with consideration for the environment, quality, occupational safety, and human rights within its supply chain including our suppliers in order to earn society's trust as a global company.

Transactions by region (%)

Transactions by region (%)

*As of April 2020

Transaction by industry (%)

Transaction by industry (%)

*As of April 2020

Management System

Giving All Suppliers an Equal Opportunity through an Open Door Policy

Daikin has an open door policy on choosing suppliers in which we welcome bids from any company, regardless of nationality, size, or transaction results.

In our air conditioning divisions, information on product specifications, quality and target cost, and delivery times is posted on our website in order to achieve equality of opportunity. All companies satisfying our criteria become eligible to do business with us.

In our chemicals divisions as well, we do business with any supplier meeting our criteria for specifications, quality, price, and delivery time.

Evaluation of Supplier

Conducting Regular Evaluations of Suppliers

Before starting business dealings in Daikin, we ensure potential partners understand our Purchasing Policy, and we assess them on consistent standards. After business dealings begin, we conduct assessments based on ISO 9001 and then review the business relationship accordingly.

In the air conditioning divisions, to ascertain the ability of suppliers to address ESG related risks, we investigate their compliance with the CSR Promotion Guidelines, which represent standards used globally by the Group, and determine whether the business relationship with suppliers can be continued. Before we start transactions with new suppliers, we use the Supplier Assessment Standard Sheet, which takes region-specific risks into account, to judge companies based on five criteria of administration, quality, price, delivery, and environmental measures. Suppliers are re-assessed every year at our business sites globally based on our Assessment System for Continuation of Business. We use the same standards globally to evaluate environmental aspects.
Companies that do not meet our assessment standards or companies that pose a high risk are required to make improvement plans that we assist them in implementing.

In the chemicals divisions, we assess new and existing suppliers based on ISO 9001 from the perspective of five criteria: management control, safety control, quality control, environmental control, and production control. We also strive to ascertain the status of suppliers' CSR initiatives. In fiscal 2020, such assessments resulted in Daikin bringing on 11 new suppliers. After starting business relationships, we strive to fairly assess suppliers from multiple perspectives, having numerous Daikin representatives negotiate with them and making regular visits to their companies.

CSR Procurement

Rolling Out Supply Chain CSR Promotion Guidelines

Daikin formulated CSR Action Plan 2020, which is a medium-term plan taking up key CSR themes, as an initiative for the sustainable development of business together with suppliers that runs alongside 'look for good partners' pursuant to our Purchasing Policy. This plan proclaims that we will conduct socially responsible procurement as we tackle issues like the environment, human rights, and labor throughout the supply chain.

In April 2017, Daikin formulated its Supply Chain CSR Promotion Guidelines. These guidelines aim to further CSR at suppliers and other partners through stable and ongoing growth. In addition to standard requirements such as proper management and abidance with laws and regulations, the guidelines urge suppliers to strive to be better in every aspect of CSR, such as improving performance in the environment, quality, occupational safety, and human rights, and abstaining from dealing with companies in war-torn regions, targeting a compliance rate of 100% with the above among both domestic and overseas suppliers. Training based on these guidelines is held internally and at suppliers.
We have conducted CSR questionnaires among the top 80% suppliers by procurement cost in Japan and overseas for monitoring compliance with these guidelines and provide the results of questionnaires to suppliers as feedback. In addition, we evaluate suppliers by ranking their CSR initiatives according to our own standards and then recommend improvements or provide guidance to suppliers, in order to improve the quality of their CSR initiatives. These rankings are A, for suppliers with excellent CSR initiatives, B, for suppliers currently implementing CSR initiatives, C, for suppliers with certain challenges in terms of CSR initiative themes, and D, for suppliers who do not implement CSR initiatives and face many challenges. We have designated the percentage of suppliers between A and C ranks who have satisfied our company standards as the "CSR procurement implementation rate*." In fiscal 2020, the CSR procurement implementation rate is 99%.

*
Percentage of procurement value from suppliers that satisfy Daikin’s standards of total procurement value.

Promotion structure

Promotion structure

Targets and Results

Quantitative target FY2021
Target
FY2018
Results
FY2019
Results
FY2020
Results
Percentage of requests made to suppliers to implement initiatives based on the Guidelines 100% 100% 100% 100%
Increase of CSR procurement implementation rate 94% (Japan) 99% 99 %

Results of CSR Questionnaires for Fiscal 2020

Results of CSR Questionnaires for Fiscal 2020

Supply Chain CSR Promotion Guidelines

  1. Policy regarding social responsibility in business practices
    Have written rules to inform employees of their social responsibilities and ensure they strictly fulfill such social responsibilities in areas such as business policy and code of conduct in business practices.

    Specific Guidelines

  2. Provision of safe, high-quality products and services
    Always strive to ensure safety and quality of products for end users. If problems regarding safety arise, take action promptly and appropriately.

    Specific Guidelines

  3. Free competition and fair trading
    Conduct company business activities in a fair manner by being compliant with laws and regulations related to free competition and fair trading, including antitrust laws in each country and region.

    Specific Guidelines

  4. Compliance with trade-related laws and regulations
    Comply with trade-related laws and regulations of each country and region, and under no circumstances get involved in dealings that risk endangering world peace and safety and the maintenance of world order.

    Specific Guidelines

  5. Respect and protection of intellectual property rights
    Respect the intellectual property rights of other companies and ensure not to infringe upon them.

    Specific Guidelines

  6. Proper management and utilization of information
    Properly manage and efficiently utilize confidential information and personal information of your own and other companies, and always ensure that such information is obtained under lawful means.

    Specific Guidelines

  7. Prohibition of insider trading
    To maintain trust as company, do not take a part in the buying and selling of stockshares with the aid of non-disclosed information obtained from your own or other companies (insider trading).

    Specific Guidelines

  8. Timely and proper disclosure of corporate information
    When Daikin, based on appropriate reasons and situations, requests that you disclose information on your company, respond earnestly and in a timely manner, and strive for earnest two-way communication with Daikin.

    Specific Guidelines

  9. Preservation of the global environment
    Comply with environment-related laws and regulations in each country and region, and implement activities to sustain and improve the global environment in all areas of business, including development, production, sales, logistics, and services.

    Specific Guidelines

  10. Guarantee of safe operations
    Besides ensuring safety in the workplace, obtain the trust of stakeholders in the community by always putting "safety first" and by making every effort to ensure safe operations.

    Specific Guidelines

  11. Respect for human rights and diversity, and compliance with labor-related laws
    Respect the human rights of each and every individual; do not in any way discriminate against people based on their nationality, race, ethnicity, religion, skin color, age, gender, birth, or disability; and respect people's diverse values and approaches to work. In addition, observe both the letter and spirit of all labor laws and regulations of each country and region, and under no circumstances sanction the labor of underage employees, minors who do not meet the minimum legal age requirements (child labor), or labor performed under compulsion or against a person’s will (forced labor).

    Specific Guidelines

  12. Protection of Company Assets
    We shall properly manage the tangible and intangible assets of our company to protect and utilize effectively these assets.

    Specific Guidelines

  13. Proper handling of accounting procedures
    Perform accounting procedures lawfully and properly according to accounting standards and tax laws, and strive for a high level of internal control.

    Specific Guidelines

  14. Moderation in entertainment and gift exchanges
    Exercise moderation and perform within the acceptable range of social norms and obey the laws and regulations of each country and region in regards to entertainment and the exchange of gifts related to business activities.

    Specific Guidelines

  15. Firm stance toward anti-social behavior
    Take a firm stance against anti-social forces or organizations that threaten the safety and order of citizens and society.

    Specific Guidelines

  16. Compliance with industry laws and regulations
    Accurately comprehend and observe all business laws and regulations applicable to your company's business activities.

    Specific Guidelines

  17. Proper grasp of industry risks and implementation of business continuity plans
    Conduct appropriate risk management in your company's business activities, and have a business continuity plan (BCP) in place.

    Specific Guidelines

Green Procurement Ensures Thorough Chemicals Management

Refer to Green Procurement (Environmental Management)

Dealings Based on Our Basic Policy Regarding Conflict Minerals

Under "11. Respect for human rights and diversity, and compliance with labor-related laws" of the Supply Chain CSR Promotion Guidelines, the Daikin Group strives to identify materials from the Democratic Republic of the Congo and its surrounding countries and recommends suppliers to procure minerals from smelters with conflict-free certification. In addition, in July 2013, we established our Basic Policy Regarding Conflict Minerals.

In our air conditioning divisions, in fiscal 2016 we started an online registration system for results of conflict mineral surveys based on the latest system or tool designed by RMI*. This strengthens our system for surveying the procurement sources of conflict minerals.

*
RMI: Responsible Minerals Initiative

Basic Policy Regarding Conflict Minerals

To ensure that Daikin does not inadvertently provide assistance to inhuman acts of armed groups in the Democratic Republic of the Congo and surrounding countries, we are taking active measures to uphold appropriate mineral procurement by raising transparency of the supply chain in cooperation with our global business partners.

Risk Management in the Supply Chain

Risk Management in the Supply Chain

Daikin is working to mitigate growing procurement risks due to the globalization of its business operations.

We regularly evaluate suppliers to identify risk and have created an in-house system for making quick decisions on suppliers affected by risk, and we update our databases as needed in order to improve our ability to deal with problems when they arise.

We encourage the use of multiple suppliers across different regions and the commonization and/or standardization of parts in order to ensure raw materials and parts are supplied in a stable and timely manner at reasonable prices even if one supplier faces a deterioration in financial situation or in case of a natural disaster or accident.

Suppliers that carry parts and materials matching Daikin's core technologies are designated as "Critical Supplier" considering the three categories of “substitution difficulty," "size of transactional value", and "importance of items supplied." Moreover, from among these, suppliers that further meet the following criteria at a certain level are designated as "Global Supplier," with whom we promote business on a global scale.

Definition of Global Supplier

  1. Supplier with a business location targeting one of Daikin's global locations
  2. Capability to manage the sales price demanded by Daikin
  3. Capability to conclude a contract or agreement demanded by Daikin

In fiscal 2020, 23 companies around the world have been designated as Global Suppliers to Daikin. Through our Global Supplier Conference, we work to adjust order volume, streamline costs, and ensure stable procurement in dealings with these 23 supplier companies. In addition, following the spread of the COVID-19 pandemic, we are promoting greater procurement locally.

Participating in Initiatives

Participation in the UN Global Compact

Since October 2008, Daikin Industries, Ltd. has been an official member of the UN Global Compact, an initiative of the United Nations. It is also a member of the local body Global Compact Network Japan. We take part in the subcommittee on supply chains, a subcommittee comprising representatives of member companies and organizations. Subcommittee members meet to discuss and exchange information on CSR efforts in the supply chain, and to collaborate and cooperate in order to advance these efforts and thus strengthen supply chain management.

Sustainability

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