Our business partners are important members of our value chain, who supply the materials, parts and components necessary for the continued operation of our manufacturing enterprise. At Komatsu, we aim to build a Win-Win relationship with our business partners by making interactive efforts under a relationship of mutual trust. Along with the expansion of our global operation, our supply chain has also been expanding all over the world. Taking seriously the recent gain of momentum for the spread of CSR in the overall supply chain, we are working to realize CSR procurement globally by being proactive in providing intense support for the CSR initiatives of our business partners.
Komatsu's procurement policy is based on the philosophy of aiming to build a Win-Win relationship with our business partners, who are on an equal footing with us, and encouraging each other. The policy aims to evaluate and select suppliers in a fair and equitable manner from a SLQDC (Occupational health & Safety, Compliance with the Law, Quality, Production capacity & delivery and Cost competitiveness) and ESG perspective.
As evaluation criteria for selecting suppliers and evaluating ongoing transactions, Komatsu has established CSR Procurement Guidelines and Green Procurement Guidelines, which are published on our website. In addition to making these guidelines known to our suppliers, we strive to ensure that their business activities align with these guidelines by providing necessary support and guidance. Our support and guidance include the following examples:
To promote CSR activities throughout the supply chain, we established and released the "CSR Procurement Guidelines" in 2011. These guidelines, in line with international standards such as ISO 26000 and the 10 principles of the United Nations Global Compact, integrate Komatsu's code of conduct and the Komatsu Way. They outline the expectations we have for our business partners, covering a broad range of ESG issues, including corporate governance, compliance, environmental protection, human rights and labor, corporate ethics, social contribution, and coexistence with local communities. Efforts to comply with these guidelines are incorporated into our business contracts with partners. In the event that a clear violation of these guidelines is identified at a partner company and appropriate corrective measures are not taken within a reasonable period, we may suspend or terminate our business relationship with that company.
In accordance with the Komatsu Code of Worldwide Business Conduct (established in 1988), all companies of the Komatsu Group have worked together in pursuit of thorough compliance. Moreover, Komatsu has focused on corporate social responsibility (CSR) in its business management with the aim of coexisting with society and achieving sustainable growth. As part of this effort, Komatsu has participated in the Global Compact, a voluntary principle of action in relation to “human rights, labor, environment and prevention of corruption” advocated by the United Nations, since November 2008 and has also expressed its position as a global enterprise on critical issues confronting international society faces.
Against this backdrop, ISO26000 was officially issued in November 2010 to provide international guidance on social responsibility. Komatsu sincerely reacts to the issues set forth in ISO26000 and will exercise leadership so that social responsibility will be borne throughout the entire value chain.
According to the Komatsu Code of Worldwide Business Conduct, we shall “seek to establish long-lasting stable relationships on the basis of mutual trust” by considering business partners to be important partners of the Komatsu Group. The revision in April 2011 added statements that we shall encourage business partners to follow the spirit of Komatsu Code of Worldwide Business Conduct and that the criteria for the selection of business partners shall include their compliance with rules of business society.
The CSR Procurement Guidelines contain a list of practices recommended for our business partners in line with the basic policy above, covering compliance and CSR. Since its establishment in 2011, we have revised it to address new issues that meet the social needs. Companies of the Komatsu Group are kindly requested to take note of and incorporate the guidelines into their management principles and unfailingly promote CSR. Moreover, we hope that these companies make similar requests to their suppliers.
April 1, 2021
Goro Senda, President of Komatsu Procurement Division
(Established on August 30, 2011; Revised on April 1, 2019, on April 1, 2021 and on April 1, 2024)
(1) Build a system or operational structure designed to meet various risks.
(2) Establish legal and transparent decision-making processes concerning management.
(3) Conduct appropriate accounting procedures, tax ling and settlement of accounts.
(4) Place importance on communication with stakeholders (customers, shareholders, business partners,employees, community etc.).
(5) Ensure that top management will be notied promptly when any abnormal condition develops and that your company will be able to promptly and accurately respond to the situation(s).
(6) Fulll accountability to society through active disclosure of corporate information.
(7) Properly handle the personal information of customers, business partners and employees. Take appropriate measures for information security to ensure that the condential business information provided by Komatsu or by business partners will not be leaked, lost or destroyed.
(8) Create an eective BCP so that, even in the event of large-scale natural disaster, infectious disease pandemic or any other emergency, we can appropriately take initial measures to ensure the safety of employees, quickly restore business operations and fulll our responsibility to supply customers with products.
(1) Engage in business operations while complying with the laws and regulations, as well as the rules of the business community in the countries and regions where we conduct business operations. In addition, make eorts to respect internationally accepted standards.
(2) Dene a code of conduct, comprising company rules, under the leadership of senior management, and develop a corporate climate that places top priority on compliance.
(3) Establish a compliance regime, in accordance with the scale and characteristics of the company, that prevents the company, executives, and employees from engaging in illegal conduct, and promptly addresses situations where issues have occurred (e.g. a whistle-blowing system).
(1) Comply with the laws and regulations concerning product safety and deliver products and services which will oer safety and peace of mind to customers.
(2) In addition to maintaining the quality and cost competitiveness of products and services which your company delivers to customers, stand by the agreed upon date of delivery and supply your products in a stable manner.
(3) Establish a quality management system and make eorts to maintain and improve it.
(4) Constantly engage in technology development and provide innovative, safe and environmental-friendly products and services.
(1) Continue efforts to reduce environmental impact resulting from business operations.
(2) Appropriately manage chemical substances contained in products.
(3) Build up environmental management systems such as the ISO14000 series and "Eco Stage."
(4) Pollutant air and water, other wastes, noise, vibration, etc. that affect the health and living environment of community, must be appropriately managed and disposed of in accordance with relevant laws and regulations.
(1) Respect human rights including the rights to freedom of association and collective bargaining.
(2) Never get involved, directly or indirectly, in any child or forced labor.
(3) Create a work environment where there is no discrimination or harassment in any aspect of employment.
(4) Respect the rights of workers, through payment of fair wages and proper working hours management.
(5) Establish a system for occupational labor health and safety, under the leadership of top management, and create a working environment where all employees can work safely and healthily.
(6) Establish fair and equitable human resource system, and pay attention to human resource development and employee education as well.
(7) Give consideration to improving communication between top management and employees.
(8) Prevent using raw materials (such as conflict minerals, deforestation, etc.) that may cause social issues by combining environment and human rights.
(1) Comply with all related laws and regulations and engage in free and fair competition and business transactions.
(2) Respect intellectual properties of other parties and work to prevent infringement thereof.
(3) Never accept inappropriate cash, gifts or other favors from any civil servant or stakeholder (customer or business partner) either domestically or internationally.
(4) Carry out proper foreign trade transactions (goods and technologies) while complying with the related laws and regulations.
(5) Never have any relationship with antisocial forces or groups.
(6) Never engage in any transactions that may result in a conflict of interest or that may have the potential.
(1) Engage in social contribution activities based on your company's management principle(s) and support employees' volunteer activities.
(2) Place importance on co-existence with local communities which is the foundation of your business, and proactively support the growth of local communities.
(1) Encourage business partners of the company to observe the items stipulated in the guidelines. Make efforts to encourage the spread of these guidelines into the entire supply chain.
The Green Procurement Guidelines are a supplementary addition to the environment-related issues included in the CSR Procurement Guidelines. In 1992, Komatsu established the "Komatsu Earth and Environment Policy," declaring its commitment to environmentally conscious business activities to achieve a sustainable society.
Through these guidelines, we prioritize green procurement of raw materials and procured components/parts, which are essential elements in our production. We also encourage our business partners to engage in environmental management and activities to reduce environmental impact.
In relation to these guidelines, we have also conducted the following surveys in our supply chain.
From a CSR perspective, Komatsu has a policy of not using "conflict minerals," such as tin, tantalum, tungsten, and gold (3TG), sourced from the Democratic Republic of Congo and surrounding countries. This policy is communicated to our business partners through the "Green Procurement Guidelines." Between 2011 and 2014, using the Japan Auto Parts Industries Association (JAPIA) survey template (JAPIA sheet), we conducted investigations on the content and origin (upstream smelters) of these minerals in parts supplied by our partners. The results indicated that the amount of these minerals used in our products is negligible, and we have not used any "conflict minerals." Since then, we have continued to monitor this issue through CSR-related SAQ questionnaires and human rights due diligence surveys.
In the future, if the use of "conflict minerals" is identified in our company or among our business partners, we will promptly switch to procurement from smelters certified by RMI.
The REACH regulation governs the registration, evaluation, authorization, and restriction of chemical substances in the EU. Companies that manufacture target chemical substances in the EU or export finished products containing target chemical substances to the EU must comply with this regulation and apply for registration and authorization if the annual use of these substances exceeds certain amounts. Substances subject to the regulation, especially those classified as Substances of Very High Concern (SVHC), are updated annually. Like our approach to conflict minerals, Komatsu uses JAPIA sheets to survey the content of regulated substances in each component from our business partners and reports the findings to the EU authorities. Additionally, we work closely with our partners to reduce the use of SVHCs and to transition to verified safe alternative substances.
Komatsu's general production policy is to manufacture products directly within the area of demand. We have 46 of our 58 plants related to construction or mining equipment overseas.
Concerning components, parts, materials and other items, we are promoting local procurement proactively based on production and procurement policies that we set in accordance with the characteristics of each. Above all, for Components B and C listed below, we are expanding cross sourcing between regions to respond flexibly to changes in the international trade environment such as exchange rate fluctuations, FTA and EPA, and import/export regulations aiming for globally optimal procurement.
Policy on Production and Procurement of Components and Parts for Construction and Mining Machinery
| Category | Definition | Production and procurement policy | Examples of parts |
|---|---|---|---|
| Components A | Key components for differentiation that determine product quality and functions | Permanent development and production in Japan (supply from Japan to the world) | Engines, transmissions, axles, hydraulic equipment, and electronic equipment |
| Components B | Components that we need to purchase intensively from certified suppliers from the viewpoints of functions, quality, and investment | Optimal procurement from 2 or 3 regions in the world | Floor parts of cabin, cooling parts, undercarriage parts, cylinders, high-pressure hoses, tires, rims, and operator's seats |
| Components C | Parts with relatively low levels of technological difficulty, which should desirably be produced or procured close to the assembly plant | Local procurement | Thick/ thin sheet-metal parts, machined parts, and cast and wrought products as materials |
The breakdown of procurement in monetary terms in the construction and mining equipment business of the Komatsu Group in FY2023 is shown below.
Components Types by Percentage of Procurement in Monetary Terms
Origin of components by Percentage of Procurement in Monetary Terms
In the construction and mining equipment business, Komatsu collaborates with approximately 2,700 partner companies (primary suppliers) worldwide. From this pool, we select priority suppliers through a screening process that considers ESG, country, industry, product-specific risks, and business relevance. These evaluations include factors such as the management philosophy and ethos of top management, SLQDC* performance including development and proposal capabilities in transactions with Komatsu, the strategic and technical importance of supplied items, transaction history, and scale with Komatsu. We then form the Komatsu Midori-kai, a group of particularly critical partners, from this evaluation. The Komatsu Midori-kai currently operates in five regions: Japan, China, Thailand, North America, and Europe. The procurement from these member companies accounts for 74% (as of FY2024) of Komatsu's total procurement. Each regional Midori-kai collaborates with local Komatsu manufacturing plants to promote region-specific activities, holding regular meetings to enhance understanding of Komatsu's business and facilitate communication between Komatsu executives and member company leaders. The annual Komatsu Midori-kai General Meeting held in Japan in November attracts participation from both Japanese and many overseas member companies. During this meeting, Komatsu executives provide business briefings and outline our global procurement policies and priority activities. To support member companies in enhancing their competitiveness, the Komatsu Midori-kai in Japan and China organizes members into groups (subcommittees) by their supply items. These groups engage in cooperative improvement activities focused on common themes such as safety, the environment, and advanced production technology. Successful improvement cases are shared among companies within the same group to facilitate the horizontal spread of knowledge and best practices.
Detail of critical suppliers
| Area | Number of Critical Suppliers | |||||||
|---|---|---|---|---|---|---|---|---|
| Total | Sub-contracted*1 | Proprietary parts*2 | ||||||
| Invested by Komatsu | Highly depend on business w/t Komatsu | Invested by Komatsu | Highly depend on business w/t Komatsu | Big enterprise | Trading firm, Material | |||
| Midori-kai | Japan | 156 | 6 | 87 | 2 | 7 | 43 | 11 |
| China | 63 | 2 | 37 | 1 | 4 | 14 | 5 | |
| Thailand | 32 | 19 | 1 | 10 | 2 | |||
| USA | 44 | 1 | 15 | 1 | 19 | 8 | ||
| EU | 40 | 4 | 34 | 2 | ||||
| sub total | 335 | 9 | 162 | 4 | 12 | 120 | 28 | |
| Non Midori-kai | Japan | 1 | 1 | |||||
| USA | 1 | 1 | ||||||
| EU | 1 | 1 | ||||||
| Indonesia | 4 | 1 | 1 | 2 | ||||
| India | 18 | 4 | 14 | |||||
| Vietnum | 4 | 3 | 1 | |||||
| Philippines | 1 | 1 | ||||||
| sub total | 30 | 2 | 8 | 0 | 1 | 17 | 2 | |
| G.Total | 365 | 11 | 170 | 4 | 13 | 137 | 30 | |
Classification and breakdown of critical suppliers
| Category | Number of Company | Annual Purchase amount | |||
|---|---|---|---|---|---|
| 1 | Total Tier 1 suppliers | 2,709 | 100% | 100% | |
| 2 | Critical suppliers* |
Level-3 | 365 | 13% | 74% |
| 3 | Level-2 | 198 | 7% | 63% | |
| 4 | Level-1 | 15 | 1% | 8% | |