When determining whether to start a business with a new business partner, we conduct a preliminary evaluation of the company by researching public information, performing interviews, and conducting on-site audits. We also utilize the new supplier evaluation checklist to assess both the basic SLQDC criteria and ESG aspects of the company.
Understanding of the aforementioned CSR Procurement Guidelines and Green Procurement Guidelines are also included in the evaluation items.
Weight of points for new supplier evaluation by item
| Category | Evaluation item | Weight (%) |
|---|---|---|
| General management | Management policy, organization, financial structure, employee training | 28% |
| Quality | Assurance system, on-site management, first article management | 12% |
| Production capacity | Planning, progress management, delivery management system, procurement capacity, outsourcing management | 24% |
| Competitiveness | Technological development, cost, facility maintenance capability | 8% |
| ESG | Occupational health and safety, environment, compliance, export control, information security | 28% |
| Total | 100% | |
We conduct regular risk assessments using specialized external databases to screen new and existing business partners for compliance purposes. This process includes verifying whether suppliers are associated with high-risk customers, regulated countries, items, and technologies in terms of export control and whether they have any connections with or involvement in anti-social forces. We utilize public information and quarterly surveys to evaluate the financial and management status of potential suppliers. If companies of concern are identified, we employ credit reporting agencies to conduct further verification. In terms of CSR and ESG, we regularly verify compliance with occupational health, environmental laws and regulations, antimonopoly acts, subcontracting laws, and immigration acts through government agencies and related local authorities' websites. As part of our risk management processes for raw material procurement in the construction machinery industry, we also continue to conduct investigations on the countries of origin of conflict minerals.
Risk assessment process for business partners
Major screening and implementation status for suppliers
| Category | No | Objective | Content | Measures to check | Frequency | Target (○ to be implemented) | Implementation status in FY2022*1 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Critical suppliers (Tier 1 suppliers only) | Other Tier 1 suppliers | Number of companies | Number of companies subject to individual follow-up | Number of companies with completed or planned corrective actions | ||||||||||
| Level-1 | Level-2 | Level-3 | Japan | Overseas | ||||||||||
| Compliance | 1 | Determine companies of concern for export control. | Check whether the company falls under or is related to the list of companies of concern published by Japanese and overseas government agencies. | Chaser search in the CISTEC database. | Once a year | 〇 | 〇 | 〇 | 〇 | 〇 | 2,176 | 0 | - | |
| 2 | Determine association with anti-social forces. | Check whether the company falls under or is related to anti-social forces. | Verify through public information and specialized agencies. | Twice a year | 〇 | 〇 | 〇 | 〇 | 2,235 | 0 | - | |||
| Management | 3 | Confirm management status. | Credit investigation | Confirm management and financial status. | Public financial information and reports from private credit investigation agencies. | As needed | 〇 | 〇 | 〇 | 〇 | 〇 | 2,235 | 3 | 3 |
| 4 | Periodic survey of business conditions | Surveys on profit and loss, employment, operation rate, investment, and overall management. | Questionnaires | Quarterly | 〇 | 〇 | ||||||||
| ESG | 5 | Check for violations of labor, environment, antitrust, subcontracting, immigration, and other laws and regulations. | Search for cases of violations announced by the Labor Standards Bureau, local governments, Japan Fair Trade Commission, Immigration Bureau, etc. | Monthly | 〇 (Japan) |
〇 (Japan) |
〇 (Japan) |
〇 | 2,235 | 2 | 2 | |||
| BCP | 6 | Identify any risk of natural disasters (flooding, tsunami, landslide, etc.) based on business location. | Check hazard maps published by the Ministry of Land, Infrastructure, Transportation and Tourism, and Aqueduct. | Once every 3 years | 〇 | 〇 | 〇 | 〇 | 〇 | 1,385 (Japan) |
11 | 11*2 | ||
To address any potential risks identified in the supply chain, Komatsu's experts conduct risk assessments and audits for individual areas of business activities based on the importance of our business partners. These risk assessments and audits are conducted through desktop surveys such as self-assessment questionnaire, and on-site surveys. The table below shows the content, scope, and implementation status of the assessments and audits in FY2022.
We report to our business partners on the apparent and potential risks identified through these risk assessments and audits and request them to implement appropriate corrective measures within a reasonable period. If it is deemed difficult for the subject company to take corrective measures independently, Komatsu's experts provide guidance and support upon request from the company concerned.
The Procurement Division reports the status and results of the implementation of these processes, especially for risks considered significant, to Komatsu's top management monthly, along with the details of any risks deemed to be particularly important and the progress of corrective measures.
We then feed the results of these assessments and audits back into our actual purchasing policies to maintain consistency between our supplier code of conduct and purchasing activities.
In parallel with these individual corrective activities, we open and provide various in-house education and training programs and e-learning materials to support our business partners in improving their understanding and responsiveness in their CSR activities.
We also encourage them to obtain official certification from external third-party organizations to improve their environmental management and health and safety promotion systems.
Major individual risk assessments and audits of business partners
| Category | Form of survey | No. | Content | Measures to check | Freuency | Target (○ to be implemented) | Implementation status in FY2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Desktop | On-site | Critical suppliers (Tier 1 suppliers only) | Other Tier 1 suppliers | Number of companies | Number of companies subject to individual follow-up | Number of companies with completed or planned corrective actions | |||||||||
| Level-1 | Level-2 | Level-3 | Japan | Overseas | |||||||||||
| General | 〇 | 1 | Strengthen interactive communication through Midori-kai activities | (1) Interaction among company leaders at regular meetings. | Meeting | Twice a year | 〇 | 〇 | 〇 | 333 | - | - | |||
| (2) Promote activities to improve productivity, energy conservation, etc. through subcommittees. | Plant visit, activity briefing, etc. | all-year | 216 | - | - | ||||||||||
| Management and QCD | ○ | 2 | Corporate evaluation | Evaluate annual SLQDC performance and factors related to corporate management. | KPI result, management interview | Annually | 〇 | 〇 | 99 | 0 | 0 | ||||
| ○ | ○ | 3 | Quality audit and heat treatment audit (only for companies with safety parts and heat treatment processes) | Confirm quality assurance system and process control status. | Written survey, onsite audit, voucher check, etc. | Annually (designated companies) | 〇 | 〇 | 〇 | 〇 | 〇 | Heat treatment audit 337 |
Onsite audit 337 |
0 | |
| ○ | 4 | Monthly operation capacity check | Confirm monthly operation capacity forecast and the way to forecast. | Written survey, management interview | Monthly | 〇 Japan |
〇 Japan |
166+α(*1) | 7 | 7 | |||||
| Compliance and ESG | ○ | ○ | 5 | Compliance risk (CR) audit on important process | Identify potential risks in the areas of accounting and finance, labor management, procurement (subcontracting law), and information security. | Written survey, onsite audit, voucher check, etc. | Once every 2 years | 〇 | 7 | 2 | 2 | ||||
| ○ | 6 | Survey on the employment status of overseas workers | Survey on compliance with laws and regulations regarding employment of overseas workers (including trainees). | Questionnaire and interview | Annually | 〇 | 〇 | 99 | 9 | 9 | |||||
| ○ | ○ | 7 | Occupational health and safety level assessment (including compliance check) | Confirm organizational structure to promote occupational safety and health activities, compliance with labor-related laws and regulations, and evaluation of activities. | Onsite audit such as safety patrol, interview with management and safety managers, etc. | Twice a year | 〇 | 〇 | 99 | 15 | 15 | ||||
| ○ | ○ | 8 | Promotion of environmental management system (EMS) acquisition and environmental audits (including legal compliance checks) | Mandate acquisition of third-party certification for environmental management, and check and evaluate the status of compliance with environmental laws and regulations and the status of activities. | Written survey, onsite audit, Interview with management and environmental officers, etc. | Annually | 〇 | 〇 | 〇 EMS |
Environmental audit 2 |
2 | 2 | |||
| ○ | 9 | CSR SAQ survey | Self-assessment of overall CSR using a checklist. | Questionnaire and interview | Once every 3 years | 〇 | 〇 | 〇 | 156 | 8 | 8 | ||||
| ○ | 10 | Risk survey on human rights | Self-assessment focused on human rights and occupational health and safety using a checklist. | Once every 2 years | 〇 | 〇 | 〇 | 292 | 8 | 8 | |||||
| BCP | ○ | ○ | 11 | Information security self-assessment | Self-assessment on the status of cyber security measures | Annually | 〇 | 〇 | 〇 | 156 | 14 | 14 | |||
| ○ | 12 | Check the damage & ability of supply in case of occurrence of natural disasters & pandemic | Identify the risk of damage to suppliers through the supply chain risk management system (KS-Link) linked to earthquake and typhoon information, etc. Then, confirm the damage situation by phone or e-mail, conduct onsite inspections, and provide support for restoration. | As needed | 〇 | 〇 | 〇 | 〇 | 7,662 Including Tier 2 and subsequent suppliers |
Numerous applicable | Restoration support 1 | ||||
Examples of corrective action support for business partners
| Category | No. | Major support | Content |
|---|---|---|---|
| Management | 1 | Cash management support | Advance payment, cash payment, etc. |
| Purchase of excess inventory, advanced ordering & receiving, etc. | |||
| Purchase of production equipment, lending, etc. | |||
| 2 | Human resource support | Dispatch of managers and technical instructors on secondment, acceptance of training at our company, etc. | |
| 3 | Provision of education and training programs | For managers and general employees |