Supplier risk assessment and engagement

The Group conducts supplier risk assessment at each partner company using the questionnaire sheet based on the Code of Conduct. For suppliers who are determined not to comply with the criteria, we conduct supplier engagement activities for risk improvement.

NIPSEA Group & Japan Group

Since 2022, we have decided to adopt Supplier Sustainability Questionnaire newly developed by our group to standardize survey method globally. If nonconformance is found at a supplier site, we discuss and agree with the supplier in question on corrective actions to be implemented within a specified period of time.

DuluxGroup

We manage modern slavery risks throughout our supply chain through our the Supplier Procurement Program. The program is designed to accord with standard global supply chain systems and guidance, including International Labour Organization (ILO) conventions, the Ethical Trading Initiative (ETI) base code, ISO 14001 and the SEDEX code, with the aim of identifying and addressing modern slavery risks and maintaining a responsible and transparent supply chain. The program includes undertaking on-site audits of suppliers (and their facilities) to verify compliance with our Sustainable Procurement Standard and identify any required improvement actions.

Dunn-Edwards

We respect the inherent worth of each individual, and we strive to conduct all our business with the highest sense of ethics, integrity and responsibility. To that end, our partners with suppliers that share the same values - working together to ensure the supply chain is free from forced labor, child labor, human trafficking and slavery. This effort includes initiatives aimed to clearly articulate our shared expectations and audit for compliance through our Supplier Code of Conduct initiative.

Supplier Audit and Results: Japan Group

Japan Group regularly conducts on-site audits of factories of key raw material suppliers. These audits also target suppliers and production contractors where quality issues have arisen. Our audit teams, comprising members from the design, quality control, and procurement departments, evaluate suppliers from multiple perspectives, including quality control, business continuity, environmental protection, and safety. The objective is to mitigate risks through direct engagement with suppliers at their raw material manufacturing facilities. In 2024, we continued to conduct on-site audits. When non-conformance issues are identified, we request corrective actions with specified deadlines to ensure timely improvements.

Supplier Sustainability Questionnaire results

In conjunction with the Supplier Code of Conduct 2022, we have developed a Supplier Sustainability Questionnaire to survey suppliers on their ESG commitment. The group survey started from October 2022, and to date more than 166 suppliers have responded in agreement to our Supplier Code of Conduct. These suppliers represents about 22% of Nippon Paint’s total procurement value. Prior to this group survey, various countries have conducted similar sustainability surveys. Altogether 481 suppliers are deemed approved and they represent about 61% of Nippon Paint’s total procurement value. We have achieved our target of 40% for 2023. Our target is to increase this ratio to 90% by 2025.。

Results of supplier sustainability questionnaire^*1

*1 Exclude Cromology, JUB, NPAE, Allina
*2 The total figure for each partner company is a unique value without double counting

Supplier Training

Japan Group has been conducting training programs for suppliers since 2020 to share information and promote our policies. In 2020, the training focused on introducing our ESG management and key points to check when preparing raw material specification sheets.

While explaining our ESG management, we shared Japan Group’s environmental, social, and governance issues and policies, striving to build trust with suppliers and address ESG challenges across the entire supply chain. For instance, regarding environmental concerns, we highlighted initiatives to reduce the environmental impact throughout the supply chain. On the social front, we outlined the demands and expectations of various stakeholders. In 2021, we developed the RMS (Raw Material Management System) to strengthen cooperation with suppliers and held introductory briefings for major suppliers. Since 2022, we have continued to hold sessions on using the RMS. Additionally, we initiated the supplier sustainability survey targeting the top 100 suppliers by raw material purchase value, and we conduct interviews with five lowest-scoring suppliers to drive improvements. In 2024, more than 90% of all suppliers responded to the survey. We strive to disseminate the Supplier Code of Conduct and continue our proactive engagement by requesting suppliers to disclose GHG emissions from raw materials, aiming to reduce the greenhouse gas (GHG) emissions and thereby lessen the environmental impact. When a disaster occurs or chemical substance laws and regulations are revised, we swiftly conduct impact assessments and work closely with suppliers to ensure the stable supply of raw materials.