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〔Fair operating practices〕Supply Chain Management

Relationship with Business Partners is the Foundation of Our Business Activities

Since its foundation, KOSÉ has aimed at “co-existence and co-prosperity” management, emphasizing cooperative relationships with business partners.
Together with our suppliers, we are committed to sustainable and responsible procurement throughout the entire supply chain in Japan and overseas while providing our customers with a stable supply of safe, reliable, and high-quality products and services.

Our Relationship with Business Partners in the Supply Chain

Our company cannot achieve sustainable, safe, secure, and high-quality manufacturing alone; it is based on the cooperative relationships with all of our business partners.
To provide better products and services at each step of procurement, manufacturing, distribution, and sales, and to promote initiatives for sustainable procurement, it is essential to strengthen cooperation with a wide range of suppliers in Japan and overseas, and we place the most significant emphasis on this matter.

Product supply flow, from procurement to sales

Sustainable Procurement

KOSÉ’s basic approach to procurement activities is summarized and disclosed in our Basic Procurement Policy: Ensuring quality and safety, Fairness and impartiality, Compliance with laws, regulations, and social norms, Coexistence and co-prosperity, and Maintaining information security. We work toward sustainable procurement, considering global environmental conservation, resource protection, safety, human rights, and more.

Basic Procurement Policy (Raw Material Procurement Information)

We have implemented various initiatives to provide our customers with products that they can use with peace of mind and promote sustainable procurement in consideration of society and the environment as the following

Training of Employees Involved in Procurement

In the Procurement Division, we are committed to fair, responsible, and sustainable procurement based on our Basic Procurement Policy. Employees assigned to divisions in charge of procurement must attend training sessions on the “Subcontracting Act” and learn about fair trade and the protection of the interests of business operators before conducting procurement activities. We also provide education within the division to help employees understand the company’s supply chain management, basic procurement policy, global social issues such as consideration for the global environment, human rights, and labor, and more, and to realize the “KOSÉ Sustainability Plan” with the aim of responsible and sustainable procurement.
We also invite lecturers to conduct seminars for members of procurement divisions as appropriate.

Information Exchange Meetings with Suppliers

Individual information exchanges are conducted regularly to deepen mutual understanding with domestic and overseas suppliers of cosmetic raw materials and fragrances, containers and packaging, and outsourced production (hereinafter referred to as “OEMs”). We will confirm our response to sustainability in addition to quality and delivery time at this meeting, including environmental and social issues, and exchange information and opinions on further quality improvement and stabilization of procurement. Such communication contributes to mutual development by improving quality and procurement efficiency and joint development with suppliers, such as the use of raw materials with lower environmental impact and taking human rights issues of each region and producer into consideration.

Monitoring for Sustainable Procurement

We have established “Sustainable Procurement Guidelines” and work with our suppliers.
Once a year, we ask our leading suppliers in Japan and overseas to complete a Self-Assessment Questionnaire (SAQ) using the CSR Procurement Self-Assessment Questionnaire of the United Nations Global Compact Network Japan (GCNJ). We work with our suppliers toward sustainable procurement by providing feedback based on numerical tabulations of the results. We began this monitoring in FY2016 and have generally received responses from suppliers representing more than 90% of our purchases.
In FY2021 (evaluation of FY2020 activities), the scope of the survey was expanded by adding questions related to human rights. (Response rate: 100% (148 suppliers; 94.7% of total purchases)) In addition, we plan to interview some suppliers with low score rates regarding their responses to the SAQ and request improvements for the next fiscal year as appropriate. (Due to the change in the fiscal year-end, FY2021 will be implemented over the next fiscal year, as FY2021 is a 9-month fiscal year.)

<Items to be confirmed in the Survey>

Social Responsibility and Respect for Human Rights
  • Compliance with laws and corporate ethics policy
  • Provide a safe and healthy work environment
  • Eliminate discrimination based on race, nationality, religion, creed, disability, gender, age, birthplace, sexual orientation, child labor, forced labor and exercise consideration towards the socially vulnerable.
  • Corruption prevention, bribery prohibition, etc.

Response to global environmental protection and resource conservation

  • Identify the water/energy usage, amount of subsequent waste, and manage reduction targets.
  • Prevent pollution by managing regulated chemical substances and emissions.

<Results of 2021 Questionnaires>

LevelScore %Supplier TypeMeasures
Level 3
(Score %: >70%)
112 Suppliers
75.7%
Raw Materials:54
Materials:32
Subcontractor:26
Provided feedback along with category averages, respondent scores, and charts
Level 2
(Score %: 50% – 70%)
28 Suppliers
18.9%
Raw Materials:6
Materials:14
Subcontractor:8
Examine and confirm responses and, if necessary, conduct interviews or make proposals for improvement.
Level 1
(Score %: <50%)
5 Suppliers
5.4%
Raw Materials:2
Materials:4
Subcontractor:2
Examine and confirm responses, conduct interviews, and make recommendations for improvement.

148 Respondents (Raw Materials: 62, Materials: 50, Subcontractors: 36) Response Rate: 100%
94.7% is covered on a purchase value basis.

Appreciation Party for Dear Suppliers

An Appreciation Party for Dear Suppliers

KOSÉ holds an annual purchasing policy briefing meeting to explain the group’s policy, management plan, and purchasing policy, and also holds an appreciation meeting for all participating suppliers, presenting awards to suppliers who have made particularly significant contributions to business performance, quality improvement, environmental friendliness, and other areas. Due to the spread of COVID-19, the FY2020 and FY2021 meetings (awards and appreciation for activities in each of the previous fiscal years and the purchasing policy briefing) were not held. Instead, we sent a booklet summarizing our purchasing policy and a thank-you gift to 99 domestic and overseas suppliers of perfume raw materials, materials, OEM, and various production and advertising materials to encourage their active cooperation in quality improvement and environmental and sustainability considerations. The 99 companies covered represent 89% of the FY2020 purchases.
As mentioned above, we communicate with our suppliers through various opportunities and means to garner their understanding of our basic policies and critical measures.

Number of Suppliers participated in Procurement Policy Briefing: Sustainability data

Factory Inspection

We visit domestic and international suppliers’ facilities as needed. We evaluate and exchange opinions on quality stability, occupational health and safety, environmental measures, and information maintenance, and request improvements in areas that need to be corrected.

Number of Calls to Compliance Consultation Desks: Sustainability data

Contracts with New Dear Suppliers

For new transactions, we examine the research report by an external research firm and conduct on-site audits to ensure that the transaction conforms to our basic procurement policy before entering into a sales transaction agreement and a human rights compliance agreement. If we deem an existing supplier to be high risk due to lack of management stability, violation of social, labor, human rights, environmental, or other laws and regulations, severe quality defects, or nonperformance of the contract with us, we will demand that the supplier correct the situation. If the situation does not improve, transactions with that supplier may be suspended.

♦ You can apply through the web form on the “Materials Procurement Information” page below for cosmetic materials and OEM.

“High risk” means a lack of management stability, violation of social, labor, human rights, environmental, or other laws and regulations, severe quality defects, or nonperformance of contract, making it difficult for us to continue doing business.

The Basic Procurement Policy(The Material Procurement Information)

Relationship with Production Contractors

KOSÉ’s high quality standards are constantly achieved

When requesting OEM, KOSÉ always maintains a relationship system that ensures KOSÉ’s high quality standards are constantly achieved whenever consigning production externally, whether domestic or abroad. Audits regarding factory environment and processes are conducted based on the GMP standards to guarantee sanitary production whenever consigning production to a new contractor. Quality audits are also regularly conducted thereafter.Through our relationships to maintain high quality, we strive for mutual development with our OEM suppliers.

Identifying Human Rights Issues in the Supply Chain

The close examination of human rights issues that KOSÉ should consider addressing has identified the following issues as important in the supply chain (jointly conducted with the Japan Committee of the CRT from August to October 2021). We will survey the situation and work on these issues in the future.

Ongoing understanding of human rights issues in the raw material procurement supply chain

  • Human rights of raw material suppliers: Human rights issues among small-scale farmers producing palm oil
  • Working conditions of foreign workers at contract manufacturing sites in Japan

Human Rights

Participation in Sedex

KOSÉ joined Sedex(Supplier Ethical Data Exchange; https://www.sedex.com/ja/) in October 2021, becoming the 15th AB member in Japan to advance efforts to address human rights and other issues in the supply chain. We will continue to work with our suppliers to address human rights and other issues to build a sustainable and responsible supply chain utilizing the various resources of Sedex.

Sedex: One of the world’s largest collaborative platforms for buyers and suppliers to share and verify information on labor practices, health and safety, environment, and business.
Established to promote ethical and responsible business practices in the global supply chain.

Response to Sustainable Palm Oil

Palm oil is a vegetable oil extracted from oil palms produced in Southeast Asia and other regions. It is used in large quantities worldwide for various purposes, including food products, some of which are also widely used as cosmetic ingredients. On the other hand, the destruction of tropical rainforests and human rights issues related to the development of plantations have been identified. Issues related to palm oil have long been raised in the cosmetics industry. KOSÉ recognizes the palm oil issue as a high-risk human right and environmental issue as a cosmetics manufacturer, and is continuously gathering information and addressing this issue.
KOSÉ joined the RSPO in 2019 and is working to adopt certified oils to procure sustainable palm oil. Since 2020, we have also participated in JaSPON, the Japanese Network for Sustainable Palm Oil, and are working with JaSPON members to promote sustainable palm oil procurement and consumption. The “KOSÉ Sustainability Plan,” announced in April 2020, sets the following goals and promotes systematic efforts.

[Target] By FY2030, the entire KOSÉ Group aims to procure 100% sustainable palm oil for all palm oil-derived raw materials used in its products.
[Achievement] As of FY2021, we have switched to RSPO-certified products for 20% of the palm-derived raw materials used in our products.

Purchases for January-December 2021. The target companies are group companies except for Tarte and KOSÉ India. (Equivalent to approximately 90% of total group sales)

RSPO:Roundtable on Sustainable Palm Oil

A visit to a small farm in Malaysia and dialogue about its operations during the “Sustainable Palm Training” organized by JaSPON (November 2019).

In November 2019, we visited local environmental NGOs, small-scale farms, collection points, oil mills, and refineries in Malaysia to engage in dialogue with various stakeholders on the current situation, challenges, and needs on the field, and to discuss issues through participation in the “Sustainable Palm Training” organized by JaSPON in Malaysia. This visit has deepened our awareness on issues around palm oil. KOSÉ will continue to engage in dialogue with stakeholders.

SCCS Certification *

As part of its commitment to sustainable raw material procurement, KOSÉ has obtained an RSPO Supply Chain Certification for its leading factories in Gunma and Sayama, its head office, and related sites in 2021.
We will continue to promote the active procurement of RSPO-certified raw materials in the future.

SCCS Certification: A system that certifies whether the manufacturing, processing, and distribution processes that handle products made with certified palm oil meet the requirements of the SCCS certification.

Activities in Logistics

High-quality and efficient logistics services

KOSÉ used to handle domestic logistics on its own, but as a part of our business structure reform, we have been outsourcing domestic logistics to Hitachi Transport System and Hitachi Collabonext Transport System since October 2011. Through outsourcing, we were able to improve operational efficiency as well as improve logistics efficiency, speed up response to changing logistical needs, and reduce environmental effects through logistics streamlining. We are still continuing to make remarkable progress in efficiency through the joint usage of charter vehicles with other companies and delivery load optimization to country-wide logistics hubs. Furthermore, we are promoting modal shift to reduce environmental effects –we are using railway transport from Kanto region to Hokkaido and Kyushu areas.

Efforts at offices, logistics, operations, and shops

In 1997, representatives from the logistics departments of six cosmetics manufacturers participated in the “Cosmetic Logistics Forum 21” and started to implement joint order and delivery in several areas across Japan (Hokkaido, Tohoku, Kita-Kanto, Hokuriku, Chubu, Chugoku, Shikoku, Kyushu, and Okinawa). For all of these areas we are taking part in the joint delivery and contributing to the reduction of work of retailers in receiving goods as well as the reduction of CO2 emissions by decreasing the number of times delivery vehicles have to travel. Steps to further increase the target areas of this activity is ongoing.

Declaration of voluntary action for the White Logistics Movement

In September 2019, Kosé stated its support for the purposes of the “White Logistics” movement, which aims to secure the logistics necessary for people’s lives and industrial activities, and will take voluntary actions to contribute to the realization of sustainable logistics. In the future, we will continue to actively work on reducing CO2 emissions as well as improving distribution efficiency.

=Kosé Efforts and Activities=

  • Proposal and cooperation with suppliers and logistics companies to improve logistics
  • Modal shift to ships and railways
  • Promotion of joint deliveries
  • Respect for the suspension and interruption of operations during abnormal weather to ensure drivers’ safety
  • Adopt and promote packaging materials for transportation that reduce environmental impact

About “White Logistics” movement
In response to the increasingly severe shortage of truck drivers, this movement was led by the Ministry of Land, Infrastructure, Transport and Tourism, the Ministry of Economy, Trade and Industry, and the Ministry of Agriculture, Forestry and Fisheries with the purpose of contributing to economic growth by securing the stable logistics necessary for people’s lives and industrial activities.

“Co-existence and Co-prosperity” with Retailers

Introductory training on brand characteristics

The KOSÉ group since its foundation has maintained a system of close cooperation with retailers designed not only to provide them with products but also to support their sales efforts, for example, by sending KOSÉ’s beauty advisors out to stores and making proposals about in-store display fixtures. KOSÉ is continuing to strengthen its bond with retailers through the KOSÉ Club, a country-wide organization of retailers, as well as through social events attended by our company’s officers and managers from retailers. Although times are changing with the diversification of distribution and increase in self-service sales through distributors, the spirit of Harmonious Management will never change.
Several seminars are also being held for retailers and their employees to enable them to conduct counseling in their respective stores. Trainings to improve the skills of employees for their careers are regularly conducted. These seminars for the retailers include trainings to promote better understanding of the brand and improve counseling skills. Since 2013, we have also included business behavior and fundamentals of beauty as an employee in the beauty industry in the trainings for newly hired employees in companies and retailers that we conduct business with to support them in becoming professionals as early as possible.
Retailers are important partners for KOSÉ in improving our relationship with localities. As an example, we collaborated with a retailer to hold a makeup lecture for local elderly people. The KOSÉ Group will continue its efforts in developing trust with our partners and delivering responsive customer service through beauty skills they can depend on.

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