Basic approach and policies
Due to the rapid globalization of business in recent years, supply chains have become more extensive and complex than ever before. As a result, companies are required to take responsibility for compliance with laws and regulations, respect for human rights, global environmental conservation, occupational safety, information management, and more throughout the supply chain, including stakeholders, and the results of these efforts are now directly linked to the company’s social value.
Under such circumstances, Murata seeks to generate a positive cycle of social and economic values by working on environmental, social, and governance (ESG) issues throughout the supply chain, including in-house plants, to “contribute to the development of culture” that it declares as its philosophy.
Murata's approach to procurement activities
Based on the Procurement Policy underpinned by the principles of honesty, fairness, and sincerity, Murata has been building partnerships with its suppliers, working to realize mutually satisfying and prosperous relationships across our supply chain. In particular, regarding quality, we have worked with suppliers to improve unique technologies and management technologies in order to increase the technological capabilities, decrease the defect ratio, and improve yield.
We are also required to extend our CSR activities to the entire supply chain, addressing issues such as human rights, child labor, forced labor, gender or religious discrimination as well as responsible procurement of minerals. Murata considers that CSR procurement is one of these issues and takes measures to mitigate risk in daily operations.
Link: Click here if you wish to newly transact with Murata
Procurement Policy, Supplier selection criteria and CSR Procurement Guidelines
Following its philosophy, Murata aims to be a company that is trusted in society by taking on factors such as highly transparent governance, respect for human rights, health and safety, social contribution, and environmental conservation based on its high ethical standards while ensuring compliance with laws. To this end, Murata established the CSR Charter as rules that all people working for Murata should observe. In addition, Murata formulated the Procurement Policy for the purpose of promoting propriety and improvement of Quality (Q), Cost (C), and Delivery (D). The Procurement Policy consist of the “Basic Procurement Policies” and “Procurement Code of Conduct,” both of which present the concept of and action/judgment standards for Murata’s procurement activities, as well as “Murata Group Supply Chain CSR Procurement Guidelines” which present the concept of and action/judgment standards for CSR procurement expected of our suppliers.
CSR procurement policy system diagram
Supplier selection criteria
We fairly and equitably evaluate and select suppliers based on rational criteria such as consideration for quality, delivery date, continuation of supply, business conditions, product technical capabilities, human rights and labor, environmental conservation, safety and health, ethics (including the prevention of corruption), BCP, and information security.
Link: Supplier selection criteria (Japanese) (PDF: 136KB)
Link: Supplier selection criteria (English) (PDF: 43KB)
Link: Supplier selection criteria (Chinese) (PDF: 159KB)
CSR Procurement Guidelines
We have adopted the RBA (Responsible Business Alliance) Code of Conduct aimed at achieving CSR procurement. Based on the RBA Code of Conduct, we established the Murata Group Supply Chain CSR Procurement Guidelines (hereinafter, the “Guidelines”) in 2020, which add information security, business continuity planning (BCP), and import and export controls, etc. In 2022, we released the second, revised edition of the Guidelines, based on revisions to the RBA Code of Conduct. The Guidelines have been distributed to all of Murata’s suppliers.
When starting business with a supplier, Murata and the supplier sign a CSR agreement, and we ask suppliers to implement the Guidelines both internally and throughout the supply chain.
Link: Murata Group Supply Chain CSR Procurement Guidelines (Japanese) (PDF: 1.26MB)
Link: Murata Group Supply Chain CSR Procurement Guidelines (English) (PDF: 427KB)
Link: Murata Group Supply Chain CSR Procurement Guidelines (Chinese) (PDF: 918KB)
Items included in the Guidelines
| (1) LABOR |
- ① Freely Chosen Employment
- ② Young Workers
- ③ Working Hours
- ④ Wages and Benefits
- ⑤ Humane Treatment
- ⑥ Non-Discrimination / Non-Harassment
- ⑦ Freedom of Association
|
| (2) HEALTH and SAFETY |
- ① Occupational Safety
- ② Emergency Preparedness
- ③ Occupational Injury and Illness
- ④ Industrial Hygiene
- ⑤ Physically Demanding Work
- ⑥ Machine Safeguarding
- ⑦ Sanitation, Food, and Housing
- ⑧ Health and Safety Communication
- ⑨ Employee Health Management
|
| (3) ENVIRONMENT |
- ① Environmental Permits and Reporting
- ② Pollution Prevention and Resource Reduction
- ③ Hazardous Substances
- ④ Solid Waste
- ⑤ Air Emissions
- ⑥ Materials Restrictions
- ⑦ Water Management
- ⑧ Energy Consumption and Greenhouse Gas Emissions
|
| (4) ETHICS |
- ① Prevention of Corruption
- ② No Improper Advantage
- ③ Disclosure of Information
- ④ Intellectual Property
- ⑤ Fair Business, Advertising and Competition
- ⑥ Protection of Identity and Non-Retaliation
- ⑦ Responsible Sourcing of Minerals
- ⑧ Privacy
- ⑨ Appropriate Import/Export Controls
|
| (5) BUSINESS CONTINUITY PLAN (BCP) |
- ① Development and Management of a BCP
- ② Identification of Important Materials and Risk Measures
- ③ Understanding of the Supply Chain
|
| (6) INFORMATION SECURITY |
| (7) MANAGEMENT SYSTEM |
- ① Company Commitment
- ② Management Accountability and Responsibility
- ③ Legal and Customer Requirements
- ④ Risk Assessment and Risk Management
- ⑤ Improvement Objectives
- ⑥ Training
- ⑦ Communication
- ⑧ Worker Feedback, Participation and Grievance
- ⑨ Audits and Assessments
- ⑩ Corrective Action Process
- ⑪ Documentation and Records
- ⑫ Supplier Responsibility
|
In June 2022, Murata became a Participant of the Responsible Business Alliance (RBA), which establishes international standards on CSR. The RBA is a business alliance that promotes corporate social responsibility in global supply chains. By sharing the RBA’s vision and mission with suppliers, based on the RBA Code of Conduct, we aim to contribute to achieving a sustainable society.
In terms of supply chain management, we implement reviews using the VAP and other RBA methods and techniques, as well as initiatives to guide improvements.
Link: Murata member organization
CSR procurement promotion system
Murata has issued the "Murata Group Supply Chain CSR Procurement Guidelines" and is working to instill the CSR procurement approach that we have our suppliers observe and put into practice. In addition, information on the states of compliance and any issues with the different areas of CSR procurement within the company are shared with top management, and decisions are made regarding these matters. The different areas of CSR procurement involved include namely "human rights and labor," "health and safety," "environment," "ethics," and "management systems" under the CSR Management Committee established directly under the president and areas including "BCP" and "information security" under the Risk Management Committee. Topics discussed by each Committee are supervised by the Board of Directors.
CSR procurement promotion system
Link: Overview of Murata’s Corporate Governance System
Supplier evaluation and correction
Murata conducts CSR evaluations in order to help deepen the suppliers’ understanding of Murata’s procurement policies and guidelines, as well as enable them to spontaneously recognize CSR risks and make improvements. Specifically, we have our suppliers conduct self-assessments based on the guidelines, and if deemed necessary according to the result, we also conduct on-site audits. For any risks that were found through self-assessments or on-site audits, Murata requests improvements from the supplier and offers support for such improvements when necessary.
Supply chain conditions
Conditions within the Murata group supply chain are as follows. (as of fiscal 2022)
Ratio of the number of suppliers by region
Ratio of the supplier transaction amount by region
Identification of significant suppliers
Murata requires a CSR self-assessment every year from significant suppliers that supply important procurement parts and materials or that are not easily substituted, among suppliers with a large transaction amount accounting for 80% or more of Murata’s purchases from the previous fiscal year.
Prerequisites when starting to do business
Environmental and quality risks
- EMS (Environmental Management System)
- CMS (Chemical Substance Management System)
- QMS (Quality Management System)
Various certifications and audits, evaluations, etc.
Social risks
- Signing of a basic agreement
(regarding transactions and quality assurance)
- CSR Agreement
(Agreement on compliance with CSR requirements)
- CSR evaluation and audit
- Other, BCM, secure export controls, Supply capabilities, etc.
Economic risks
Financial evaluation
Identification of significant suppliers
- (1)Size of transaction amount
- (2)Significance to the product’s functions
(core parts, materials, etc.)
- (3)Substitutability (Non-substitutable)
Other issues identified Procurement strategy
CSR evaluation of suppliers
At Murata, we carry out CSR evaluations (audits) of both new suppliers and existing significant suppliers based on the procedure shown below. These are aimed at helping suppliers to gain a deeper understanding of Murata’s procurement policies and the Guidelines, raising suppliers’ awareness of their own CSR-related risks, and encouraging them to engage in improvements.
All significant suppliers are required to complete an annual self-assessment based on the Guidelines. We also organize on-site audits based on the results of this assessment, and in multi-year cycles. We provide suppliers with support for these audits, including study sessions and preparations for audit, based on their circumstances. On-site audits are carried out by third-party auditors, who are supported by members of the Murata group. In addition to requesting improvements to address any risks that emerged through document checks, interviews, and site tours, we work together with suppliers to make improvements. In this way, we aim to raise the level of suppliers’ CSR compliance and mitigate Murata’s own procurement risks.
CSR evaluation process
CSR procurement targets and performance
Specific future targets for CSR procurement (KPI) and fiscal 2022 performance
Murata has set target values for fiscal 2022 to 2024 in order to promote CSR procurement and is engaged in CSR evaluation initiatives based on procurement policies. The set target values were mostly accomplished for fiscal 2022. We will also continue to aim to reduce risks for CSR procurement issues to accomplish our set target values.
We also worked to promote CSR procurement by focusing on CSR audit confirmations for our suppliers in fiscal 2022. In addition to have those working at local sites acknowledge the gap between circumstances against the RBA requirements, which are international industry standards, if there are insufficient responses, we will continue to present possible improvements and requests as well as provide support for improvement during the audit and post audit discussions. This audit led to the improvement of compliance levels for requirements that suit the Codes of Conduct, including the RBA Code of Conduct, Murata demands from suppliers. As a result, this has improved the suppliers’ CSR compliance level and reduced Murata’s CSR risks.
Self-assessment
At Murata, all significant suppliers are required to complete an annual self-assessment based on the Guidelines.
The assessment includes items on human rights and labor, health and safety, environment, ethics, responsible mineral procurement, procurement BCP, information security, and the management system. It confirms aspects such as compatibility with the various laws and regulations related to international trade, corruption, and other matters, control systems for the chemical substances contained in products, and the handling of personal information. It also includes checks related to information security as measures to address issues such as cyberattacks and data leaks, which have become more prevalent in recent years.
CSR audit
Murata commenced CSR audits on significant suppliers in March 2022. Using the RBA-VAP audit standards as reference, the CSR audits are conducted by third-party organizations, and we plan to audit all significant suppliers over the next several years. CSR audits confirm compliance with the guidelines. In addition to document checks, we also conduct on-site inspections and interviews with employees to get a more accurate picture of the actual situation. Furthermore, prior to conducting CSR audits, we hold briefings for suppliers on the guidelines and CSR audits, and provide Q&A before and after the audits and support for improvement initiatives to deepen their understanding of the guidelines and CSR audits. During fiscal 2022, we completed audits for 44 suppliers.
When conducting on-site audits, Murata presents possible improvements and requests on the day of the audit, as well as holds post-audit discussions and shares advice from experts, to which we have received words of gratitude from suppliers.
Through CSR audits, Murata will continue to promote suppliers’ awareness of the RBA Code of Conduct, global standards, and Murata’s requirements and conduct efforts to improve the suppliers’ CSR compliance level and reduce Murata’s CSR risks.
Corrective action
Supplier’s CSR risk evaluation results are managed in a ranking from A to C to prevent risks from arising while also taking measures according to rank, especially when a supplier ranks C, which is perceived to be at high risk. Additionally, irrespective of the rank from the evaluation results, Murata requests and supports improvements wherever and whenever an issue comes to light. If sufficient improvement is not confirmed, we will enter into discussion regarding the ongoing partnership and business relationship.
Results
During fiscal 2022, we focused our efforts on visiting suppliers for first-hand, on-site inspections and discussions, and conducted a total of 144 CSR audits (CSR evaluations). The result was 83% ranking A (low risk) and 17% ranking B (middle risk). We believe this owes to the reinforcement of on-site audits in addition to self-assessment.
Improvement items/corrective action examples
Audits in fiscal 2022 were partially conducted remotely due to restrictions deriving from COVID-19 during the first half. Murata implemented corrective actions on a total of 44 suppliers in and outside of Japan. As a result, we confirmed that there is a difference in non-conformity between suppliers in Japan and those abroad. Specifically, more non-conformities related to labor and human rights were found among suppliers in Japan, and while there were few problems in actual operation, policies and guidelines were not made clear and did not meet the level of compliance required by the RBA.
Specific examples in Japan
- Examples of newly formulated policies and rules
No employment of children, protection of young workers, protection of the rights of student workers, considerations for religions, etc.
- Examples of responding to statutory and non-statutory requirements
No more than 60 work hours weekly, improvement of access to exits in an emergency, etc.
While different non-conformities were sporadically found abroad, steady improvements are seen through efforts according to the specific situation of each supplier both in Japan and abroad.