Responsible Procurement

• Basic Procurement Policy
• Sustainable Procurement Management Framework
• Sustainable Procurement
• Internal Training
• Human Rights Due Diligence (HRDD) Initiatives for Procurement Partners
• Encouraging Procurement Partners to Reduce Their Environmental Footprint
• Participating in Supply Chain-related Initiatives
• Strengthening Global Partnerships
• Responding to the Conflict Mineral Issue
• Implementing Procurement BCP Initiatives

Basic Procurement Policy

Approach & Policy

Hitachi believes that putting sustainability at the core of our business throughout our value chain will lead to mutual prosperity for procurement partners and the Hitachi Group. To achieve this, we pursue sustainable procurement, identifying and mitigating procurement risks associated with the globalization of business as far ahead as possible. These risks include human rights violations and greenhouse gas emissions in the supply chain.
We established the Hitachi Group Global Procurement Code as our highest-level code of conduct to be followed in our procurement activities. This code clearly states that Hitachi must give due consideration to human rights, labor practices, safety, ethics, quality, and security in the supply chain, and that it requests its procurement partners to do the same.
We also established the Hitachi Group Sustainable Procurement Guidelines as a code of conduct for procurement partners. The guidelines cover the items that procurement partners are required to comply with in the Hitachi Group Supplier Code of Conduct, which is made up of seven major categories: labor, health and safety, environment, business ethics, management system, product quality and safety, and prevention of personal and confidential information leakage. We also use the guidelines as a communication tool to inform procurement partners about Hitachi Group initiatives and share our policies and activities related to sustainability.
We aim to develop a sustainable society and business together with procurement partners by promoting procurement activities that adhere to these codes.

Examples of the Hitachi Group Supplier Code of Conduct

Sustainable Procurement Management Framework

Structure

Hitachi established the Sustainable Procurement Office within the Value Integration Division (an organization reporting directly to the President & CEO). The Sustainable Procurement Office is responsible for procurement activities at our head office, and it plays a central role in deliberating and deciding various policies related to sustainable procurement.
Policies and initiatives adopted are communicated in detail throughout the Hitachi Group by means of meetings including the Sustainable Procurement Conference. This conference, attended by the heads of the procurement divisions at Business Units (BUs) and major group companies addresses groupwide procurement initiatives related to overall sustainability, including the environment and human rights by developing strategies for sustainable procurement activities and by sharing best practices across our organization.
In addition, the Value Integration Division reports regularly to the Senior Executive Committee on key procurement strategies and on sustainable procurement activities. Each year, the division reports on priority procurement measures to the Audit Committee, which consists of members of the Board of Directors. These reports include matters identified and addressed in the previous year, and feedback from the Audit Committee is reflected in activities in the following year.

Sustainable Procurement Conference

Hitachi holds the Sustainable Procurement Conference twice a year to improve BU and Group companies’ understanding of sustainable procurement, as well as to provide practical support. This conference is open to all procurement division members, including the heads of procurement divisions at all global locations. Approximately 550 people participated in fiscal 2023. The conference provides an opportunity to develop a human rights due diligence process, gain a better understanding of the status of Scope 1, 2, and upstream Scope 3 efforts toward carbon neutrality, and share the latest internal efforts toward carbon neutrality.

Sustainable Procurement

Activities

Strengthening Engagement with Procurement Partners

Raising Awareness of the Hitachi Group Sustainable Procurement Guidelines

Hitachi provides sustainable procurement guidelines in four languages (Japanese, English, Chinese, and Thai) and distributes these guidelines to approximately 30,000 procurement partners. We conduct sustainable procurement seminars and other means to communicate matters with which we expect procurement partners to comply.

Regional Sustainability Procurement Seminars

Hitachi invites our procurement partners in Southeast Asia, China, and India to the Regional Sustainability Procurement Seminar to address social issues proactively together with our procurement partners. Approximately 270 procurement partners participated in the fiscal 2023 seminar. We strive to communicate the Hitachi Group Sustainable Procurement Policy to each region.

Regional Sustainability Procurement Seminars

*1EcoVadis: A sustainability assessment service platform that evaluates companies in the four areas of the environment, labor and human rights, ethics, and sustainable procurement.

Posting Content on the Procurement Website

Hitachi upgraded its procurement website for external use in fiscal 2022, expanding the contents related to sustainable procurement. The website is regularly updated to provide information on sustainable procurement to external stakeholders including procurement partners, in a detailed, systematic, and straight-forward manner.

Procurement Website

Sustainability Assessments of Procurement Partners

With the purpose of strengthening risk management and engagement with procurement partners, Hitachi evaluates and analyzes the state of sustainability initiatives among procurement partners through surveys.
Starting in fiscal 2022, we adopted the EcoVadis third-party evaluation platform for monitoring and evaluating the sustainability performance of our procurement partners. We perform assessments regarding procurement partners who represent a large portion of our procurement and who are important to our business strategy. We confirm sustainability efforts based on a checklist covering four areas: environment, labor and human rights, ethics, and sustainable procurement.
In fiscal 2023, we conducted sustainability assessments of approximately 3,000 procurement partners across the Hitachi Group. Based on the information obtained from these assessments, we are conducting the following activities.

• Set a benchmark EcoVadis score and request corrective actions from target companies
• Provide improvement methods and conduct monitoring using the EcoVadis platform
• Set a benchmark EcoVadis score and conduct sustainability audits of target companies

We will continue to further expand the number of companies assessed by EcoVadis to strengthen risk management and engagement with our procurement partners.

Sustainability Audits and Monitoring

Hitachi conducts sustainability audits of the manufacturing bases of our global procurement partners on a regular basis. We use external evaluation organizations to conduct sustainability audits.^*2 Sustainability audits consist of document surveys, employee interviews, and facility inspections to confirm sustainability initiatives at procurement partners from the perspectives of labor and human rights, health and safety, the environment, and ethics.
Partners that are audited are chosen based on the results of document surveys and the scale and importance of procurement dealings with Hitachi. In fiscal 2023, sustainability audits were conducted on 150 procurement partners. For any matters identified during the audit, we explain the details to our procurement partners. In particular, when high-risk matters are identified, we ask our procurement partners to take corrective action, including identifying the cause of the occurrence and formulating an improvement plan. After which, we continue to provide guidance and monitor improvements.
Going forward, Hitachi will continue to expand its sustainability initiatives and reduce sustainability risks in the value chain by giving training to support improvements and conducting follow-up audits in-person for procurement partners who are deemed to be at high risk as a result of these audits.

*2Some group companies conduct sustainability audits by internal auditors

Examples of Matters Identified for Improvement

Procurement Partner Hotline

In order to promote honest and fair dealings with procurement partners, Hitachi accepts consultations and reports from all stakeholders, including procurement partners, on all matters involving potential misconduct, such as violations of laws and regulations and the Hitachi Group Business Ethics and Codes of Conduct. We established the Hitachi Global Compliance Hotline as a help desk, and we publicize the help desk and procedures on our website. The hotline is accessible 24 hours a day, seven days a week, online or via telephone.

Internal Training

Activities

Hitachi conducts a variety of training and education programs on sustainable procurement globally to further its internal understanding of sustainable procurement.

Internal Training through Conferences in FY2023

Internal Education and Training on Sustainable Procurement

Hitachi provides training by position to procurement personnel in Japan and overseas, raising awareness across divisions responsible for sustainable procurement practices.
Specifically, we offer e-learning on sustainable procurement to encourage a complete understanding of various policies that include the Sustainable Procurement Guidelines, Green Procurement Guidelines, and Responsible Mineral Procurement Policy. The content also covers important sustainability initiatives such as carbon neutrality and human rights due diligence. We also provide the same training on sustainable procurement to newly appointed managers. In fiscal 2023, 1,745 employees completed our training.
In addition, in fiscal 2023, we invited ACE (Action against Child Exploitation), a non-profit corporation, to provide education on child labor to raise awareness of human rights among our employees, including those in the procurement division.

Human Rights Education and Raising Awareness among Employees and Executive Officers

Human Rights Due Diligence (HRDD) Initiatives for Procurement Partners

Hitachi is implementing human rights due diligence initiatives for its procurement partners. Our initiatives include strengthening engagement with and assessing the sustainability of procurement partners, sustainability audits and monitoring, and creating a hotline for procurement partners. In such a way, we strive to reduce human rights risks by helping our partners understand Hitachi's approach to respecting human rights.

Encouraging Procurement Partners to Conduct Activities

Encouraging Procurement Partners to Reduce Their Environmental Footprint

Activities

To create sustainable societies, Hitachi pursues its own environmental initiatives under the long-term environmental target, Hitachi Environmental Innovation 2050. This target calls for the creation of decarbonized societies, resource-efficient societies, and societies harmonized with nature.
At the same time, Hitachi’s businesses cover a broad range of business domains. Our procurement is supported by many procurement partners from whom we source various products and parts. In order to encourage these procurement partners to reduce their impact on the environment, we are working to ensure that relevant guidelines are widely known and Hitachi's environmental policy is shared through briefings. In particular, we set a target to achieve carbon neutrality by fiscal 2050 throughout our value chain as we pursue our goal of creating decarbonized societies. To this end, we encourage collaboration and cooperation with procurement partners on initiatives upstream in the value chain.

Efforts Toward Carbon Neutrality in the Value Chain Upstream

CO₂ Emissions Measurement in the Value Chain Upstream

In order to calculate CO₂ emissions of Scope 3 Category 1, Purchased Goods and Services, in the value chain upstream, Hitachi uses a calculation method that covers the entire procurement amount based on spend and also partially reflects primary data from procurement partners. We ensure that the primary data collection from procurement partners are through our engagement and utilize a third-party sustainability evaluation platform, EcoVadis.
The calculation result for Scope 3 Category 1 in fiscal 2023 is 21,794,738 tons.

“Environmental Vision” and “Hitachi Environmental Innovation 2050”

CO₂ Emissions Reduction Efforts Upstream in the Value Chain

In order to promote the CO₂ reduction activities of Hitachi’s procurement partners, we selected 21 companies as environmental advanced partners in fiscal 2022. We held discussions with these partners regarding CO₂ reduction and calculation methods, information collection and analysis methods, and how to use such methods. Making use of this knowledge and methods, we expanded our target to approximately 100 companies in fiscal 2023 to promote reduction activities.
Target procurement partners were selected from those with the highest Scope 3 Category 1 emissions, and key procurement partners in Hitachi's business activities. Our selected procurement partners are located in a wide range of countries and regions, and in a variety of industries, including raw materials, parts, and equipment. In terms of scale, our partners include not only large companies but also small and medium-sized companies. Hitachi has been working to understand the amount of CO₂ reductions upstream in Hitachi's value chain by obtaining reduction plans from procurement partners and analyzing the details of these plans. In the future, we will further increase the number of scoped procurement partners and expand our activities to reduce CO₂ emissions.
In addition, all new aluminum ingots (AL≥99.7%, standard block) procured for domestic use beginning in fiscal 2023 will be, in principle, manufactured using hydroelectric power generation to contribute to reduced CO₂ emissions for products and services of Hitachi group. In this way, we incorporate and give consideration to environmentally friendly procurement, including product materials that utilize renewable energy, new technologies, and recycled materials.

Sharing Our Green Procurement Guidelines and Related Initiative

Hitachi distributes the Green Procurement Guidelines that define our basic position on procuring environmentally friendly parts and products as well as our requirements of procurement partners.
The guidelines set out requirements, such as establishing environmental management and recommend obtaining environmental certificates. They also address environmental conservation reducing the impact of products supplied to Hitachi, such as conserving resources and energy, recycling, managing chemical substances in products, and appropriate disclosures of related information.
To address the issue of chemical substances in products, we recommend using chemSHERPA^*1 CI/AI, a standardized format for communicating information on chemical substances in products throughout the supply chain.

*1chemSHERPA: Developed by the Japanese Ministry of Economy, Trade and Industry to facilitate the management of chemical substances in products by creating a standardized format throughout the supply chain. The chemSHERPA- CI standard is applicable to chemical substances contained in chemical products and chemSHERPA-AI to those contained in molded products.

Participating in Supply Chain-related Initiatives

Hitachi participates in the United Nations Global Compact Network Japan (GCNJ). In fiscal 2023, we took part in the supply chain workshop and HRDD workshop, actively exchanging opinions with Japanese companies on best practices regarding sustainable procurement.
Hitachi also continued, in fiscal 2023, to participate in the human rights due diligence (HRDD) training for Japanese companies, hosted by the United Nations Development Program (UNDP), and shared best practices with Japanese companies and their procurement partners on how to respond to human rights risks they may face.

Main Initiatives and Groups Hitachi Is Involved with

Strengthening Global Partnerships

Activities

With the worldwide expansion of Hitachi’s business, our procurement partners have become increasingly globalized as well. We now deal with some 30,000 procurement partners in over 60 countries. Accordingly, we appoint procurement officers to oversee procurement activities locally in main regions (China, other Asian countries, Europe, and the Americas) in order to encourage procurement from locally based partners in line with the principle of promoting local production for local consumption. These officers carry out activities including sustainability monitoring, sustainability audits, and sustainable procurement seminars for procurement partners in their respective regions to strengthen sustainable procurement.

Responding to the Conflict Mineral Issue

Approach & Policy

In fiscal 2013, Hitachi formulated a Conflict Minerals Procurement Policy, declaring our stance and commitments regarding conflict minerals. The policy was revised in fiscal 2016 to lay out explicit measures to be implemented to ensure responsible procurement. Expanding the scope of corporate responsibilities for the procurement of minerals is a global trend, Companies are increasingly expected to address broader overall risks to human rights beyond the risk of being complicit in conflicts, and recognize responsibilities that extend beyond the countries adjoining the Democratic Republic of the Congo to a wider area where the risks are high. In consideration of these developments, we revised this policy to formulate the Hitachi Group’s policy for Responsible Supply Chain of Minerals in fiscal 2021.

Hitachi Group’s Policy for Responsible Supply Chain of Minerals

System and Initiatives

Sales divisions, business groups, manufacturing sites, procurement divisions, and other divisions within individual BUs and group companies work together to respond to investigation requests and inquiries relating to conflict minerals. We also strive to grasp developments in conflict mineral-related laws and regulations in each country and region and what global society demands of enterprises, and work to share information within the group.
Each BU and group company investigates its use of conflict minerals and reports the results to customers when requested. We carry out supply chain investigations with the cooperation of the relevant BUs’ and group companies’ sales, procurement, and sustainability divisions. In addition, Hitachi, Ltd. is a member of the Japan Electronics and Information Technology Industries Association (JEITA)’s Responsible Minerals Trade Working Group. This working group addresses the issues of conflict minerals with other members of the association. In fiscal 2023, the working group held an online information session targeted at personnel in charge of investigating conflict minerals at companies and organizations that face common issues related to responsible minerals. The working group explained the background behind responsible minerals to 2,800 people from 1,270 companies.

Sustainability Leadership

Implementing Procurement BCP Initiatives

Activities

We work to enhance procurement-related business continuity plans (BCPs) groupwide to ensure that significant incidents^*1 do not disrupt our business or seriously impact society.

*1Events such as natural disasters (including major earthquakes) serious enough to disrupt business

Procurement BCPs Initiatives

Note :Hitachi normally refers to suppliers (including vendors or providers) as procurement partners who build business together on an equal footing.