Promoting Sustainability throughout the Supply Chain

In order to efficiently promote sustainability together with its suppliers, DENSO has established the Supplier Sustainability Guidelines, which are based on requests from the industry and customers in Japan and overseas and are shared with all of its suppliers. Also, we regularly ask our suppliers to assess their own sustainability practices through a Sustainability Self-Assessment Check Sheet based on these guidelines, who have agreed to promote activities in line with the objectives of these guidelines. We also ask suppliers to make improvements to particularly important items.
Additionally, we ask our suppliers to request the implementation of similar initiatives from their suppliers (Tier 2 suppliers for the DENSO Group). We also carry out such initiatives across the entire supply chain.

For new suppliers seeking to engage in business with the Company, we have established and operate a set of guidelines that serve as internal rules for selecting such suppliers.
Decisions on whether or not to do business with new suppliers are made based on an examination of their financial status, in addition to confirming the acquisition status of ISO 9001, IATF 16949, and other certifications related to quality management and verifying whether activities laid out in the DENSO Group Supplier Sustainability Guidelines are being adopted.

The operating environment of corporations is changing at a rapid speed. Realizing the importance of ensuring that this trend is fully understood throughout the supply chain and that the appropriate actions are taken in response, we at DENSO offer training programs to our major suppliers.

In November 2024, we held a sustainability briefing for roughly 350 domestic suppliers to discuss recent trends and needs and expectations with regard to human rights, labor, the environment, corporate ethics, and other topics.
We also hold briefing sessions as appropriate on topics such as achieving carbon neutrality and strengthening information security in order to ensure thorough awareness of the significance of addressing these issues throughout the supply chain.

Supply chains are becoming more global and diverse following the continued globalization of corporations’ businesses. However, we recognize that there are still situations around the world in which the rights of workers are not considered, including forced labor, child labor, and poor working environments. DENSO CORPORATION and its Group companies recognize that minerals (such as 3TG metals, cobalt, and mica), mined in countries and regions where there is a high risk of conflict and human rights violations, represents one of the most significant social issues within the supply chain.
As for specific initiatives, we have established the Guidelines for the Procurement of Resources and Materials , which is a responsibility we have as a company, and revised the Supplier Sustainability Guidelines. We also ask all of our suppliers to procure materials from RMI-certified* smelters. In addition, we have all relevant suppliers cooperate with us on these efforts by conducting a minerals (term applies to 3TG and other minerals) survey each year.
Through cooperation with our business partners, we will continue to make efforts to avoid the use of minerals suspected of being procured through non-humanitarian acts going forward.

* RMI: Responsible Minerals Initiative, an international industry organization that promotes responsible mineral procurement.

In keeping with DENSO Eco Vision 2025, DENSO has established the DENSO Group’s Green Procurement Guidelines, which are designed to guide efforts to reduce the use and emissions of environmentally hazardous substances on an ongoing basis. To this end, we have been requesting the following initiatives to our suppliers.

It has been proven using data that the Earth’s global average temperature has been increasing since the Industrial Revolution, and containing this temperature rise presents a significant challenge for DENSO in the years ahead. To resolve this issue, it is imperative that DENSO and its suppliers work together to overcome this major obstacle.

Accordingly, we have shared with suppliers our medium-term goal of reducing CO₂ emissions by 25% by fiscal 2031 (a reduction of 2.5% each year) compared with fiscal 2021 levels, as well as our long-term goal of realizing carbon neutrality by fiscal 2051, and requested their cooperation to that end. Also, we offer support to suppliers through measures that are tailored to their individual needs by monitoring their CO₂ emissions and related issues. More specifically, DENSO has been supporting the efforts of suppliers on multiple fronts, such as by sharing its approach to energy conservation, in the form of loaning devices that measure energy use, reducing CO₂ emissions from logistics processes, transitioning to the use of materials that generate fewer CO₂ emissions, and sharing methods of renewable energy procurement, with a view to achieving a carbon-neutral supply chain.

In addition, we confirm the situations and plans of suppliers and promote activities in cooperation with them by organizing carbon neutrality briefings, offering tours of carbon-neutral plants, in which participants can observe on-site improvement efforts, and providing other opportunities for communication as appropriate.

In order to promote green procurement activities together with its suppliers, DENSO holds training sessions each year for all employees belonging to procurement divisions that focus on the content of the Group’s Green Procurement Guidelines.

DENSO has ensured thorough compliance with anti-bribery regulations under the DENSO Global Anti-Bribery Policy and Anti-Bribery Compliance Committee by introducing anti-bribery internal rules and engaging in educational activities with employees, etc.
We must require all those involved in our business not to engage in acts of bribery in relationships with political parties or administrative bodies and not to engage in giving or receiving gifts, entertainment, or money with third parties with the intention to acquire or maintain unjust interest or wrongful preferential treatment.

DENSO participates in industrial associations, such as the Japan Auto Parts Industries Association (JAPIA) and Japan Electronics and Information Technology Industries Association (JEITA). Since May 2023, the Company’s president has served as a director of JAPIA and has played a leading role in the organization’s efforts to address the issues of not only its own but also the supply chain as a whole through the strengthening of partnerships with companies in the automotive, electronic component, and semiconductor industries.

Moreover, on a practical basis, we participate in working groups organized by these associations.
Furthermore, collaborative initiatives across the entire automotive industry are crucial to achieving the carbon neutrality of society as a whole. To that extent, we participated in the formulation of the JAPIA LCI Guidelines*¹ and the development of calculation tools in order to efficiently calculate the environmental impact within the complex supply chains of the automotive industry, from the manufacturing stage through to the stage of use. Our involvement in this activity was highly praised, helping us win the Award of the Director-General of the Industrial Science and Technology Policy and Environment Bureau, Ministry of Economy, Trade and Industry, from the LCA*² Society of Japan in March 2018. Moreover, we have continued to promote activities to realize carbon neutrality across the industry, such as by creating guidelines for achieving net-zero emissions, materializing requests to the government, and strengthening cooperation with other organizations.

*¹ Life Cycle Inventory (LCI): Method for calculating the amount of environmental impact from a targeted product throughout its life cycle
*² Life Cycle Assessment (LCA): Method for evaluating the environmental impact of a product using the results calculated through LCI

Our customers, investors, and other stakeholders continue to have greater expectations regarding our sustainability initiatives in the supply chain, including initiatives toward the environment, workplace safety and health, and human rights.

Accordingly, with the aim of establishing the plan do check act (PDCA) cycle comprising self-diagnosis, inspection, and improvement under the Supplier Sustainability Guidelines, we will continue to work with our suppliers to constantly raise the level of sustainability activities while making efforts to strengthen our partnerships with them.