Procurement from business partners accounts for a substantial percentage of Komatsu’s manufacturing costs, reaching nearly 90% for medium-sized hydraulic excavators, a representative type of construction equipment. Therefore, to ensure the stable continuation of its business activities, it is essential for Komatsu to identify and respond to supply chain risks at an early stage. Supply chain risks are wide-ranging and include the management and SLQDC status of individual business partners, natural disasters and pandemics, international trade friction, and import and export restrictions. Komatsu visualizes risks through regular risk assessments, particularly for critical suppliers, and undertakes activities to mitigate those risks.
In Japan, Komatsu monitors the workload levels of Midori-kai (cooperating supplier companies) on a monthly basis, closely monitors the impact on the management of each company, and provides support as necessary. In 2024, caps on overtime work were extended to the transportation industry, raising concerns about a nationwide shortage of transportation capacity. In 2020, Komatsu announced a voluntary action declaration to improve logistics through mutual understanding and cooperation with business partners and logistics service providers and joined the “White Logistics” promotion campaign led by the Ministry of Land, Infrastructure, Transport and Tourism. Komatsu continues to work toward sustainable logistics by reducing long-distance transportation through modal shifts, optimizing unloading-area layouts to reduce drivers’ working hours, and striving to establish appropriate freight rates.
When determining whether to commence business with a new business partner, Komatsu conducts a preliminary assessment of the prospective company using the new supplier evaluation checklist. The assessment covers not only the basic SLQDC criteria but also ESG considerations and is conducted through the review of publicly available information, interviews with the prospective company, on-site audits of its business locations, and other means.
Compliance with the aforementioned CSR Procurement Guidelines and an understanding of the Green Procurement Guidelines are also included in the evaluation criteria. The ESG category is assigned the highest weighting among the evaluation categories. Komatsu gives priority to commencing procurement from business partners with strong ESG performance.
Weighting of criteria for new supplier evaluations
| Category | Evaluation criteria | Weight (%) |
|---|---|---|
| ESG | Occupational health and safety, environment, compliance, export control, and information security | 26% |
| General management | Management policy, organizational structure, financial soundness, employee education and training, etc. |
25% |
| Production capacity | Systems for production planning, progress control, and delivery management; procurement capabilities; subcontractor management, etc. | 21% |
| Technical superiority | Development capabilities, cost competitiveness, equipment maintenance capabilities, etc. | 16% |
| Quality |
Quality assurance systems, on-site management, initial product management, etc. |
12% |
| Total | 100% | |
We conduct regular risk assessments of new and existing business partners from a compliance perspective, using specialized external databases. These assessments verify whether business partners are classified as high-risk customers, located in regulated countries, or associated with regulated items and technologies in terms of export control, and whether they are connected with or involved in anti-social forces. For management status, mainly from a financial perspective, we conduct verification using publicly available information and questionnaire surveys as appropriate. For new business partners and existing companies of concern, we also use private credit research companies and other sources to conduct additional verification. From CSR and ESG perspectives, we regularly check the websites of government agencies and relevant local authorities to verify whether there have been any violations of occupational health and environmental laws and regulations, antimonopoly laws, subcontracting laws, immigration laws, and other applicable laws and regulations. In addition, as part of our response to risks related to raw material procurement in the construction and mining equipment industry, we continue to conduct country-of-origin surveys for conflict minerals.
Risk assessment process for business partners
Key risk assessments and implementation status for suppliers
| Category | No | Objective | Content | Measures to check | Frequency | Target (○ to be implemented) | Implementation status in FY2025*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 | 1,108 | 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 | 2,246 | 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 | 1,398 | 0 | - |
| 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 | 2,246 | 0 | - | |||
| 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 | 1,326 (Japan) |
0 | - | ||
To address potential risks in the supply chain, Komatsu conducts risk assessments and audits in individual areas of business activities, in addition to the assessments described above, according to the importance of each business partner to Komatsu. These risk assessments and audits are conducted by Komatsu experts through desktop surveys and on-site surveys. The table below outlines the content, scope, and implementation status of these assessments and audits in FY2025.
Actual and potential ESG risks identified through these risk assessments and audits are reported to the relevant business partners based on verification through on-site audits. Komatsu requests these business partners to develop corrective plans, implement appropriate measures within a reasonable period, and monitors their progress. If it is determined that it would be difficult for the relevant business partner to take corrective action independently, Komatsu provides improvement guidance and support upon request from the business partner, with the cooperation of Komatsu experts. In FY2025, Komatsu provided support to nine companies. In FY2025, no business partners had their transactions terminated due to significant negative impacts identified through risk assessments, audits, or corrective actions.
The status and results of these processes are reported regularly by the Procurement Division to Komatsu management through monthly reports. For risks deemed particularly important, the reports also include details of the risks and the progress of corrective measures.
Komatsu also strives to maintain consistency between its supplier code of conduct and purchasing activities by feeding back the results of these assessments and audits into its actual purchasing policies.
In parallel with these individual corrective activities, Komatsu also supports business partners in improving their overall understanding of, and response capabilities for, CSR activities by providing various education and training programs for employees, as well as publishing and providing e-learning materials.
In FY2025, Komatsu also provided training on human rights and D&I to 510 employees as part of employee education.
For environmental management and occupational safety and health activities, Komatsu also recommends obtaining official certifications from external third-party organizations to enhance each company’s promotion system.
Major individual risk assessments and audits of business partners
| Category | No. | Content | Methods | Frequency | Target (○ to be implemented) | Implementation status in FY2025 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Critical suppliers (Tier 1 suppliers only) | Other Tier 1 suppliers | Number of companies | Number of companies with corrective action plans formulated | Number of companies with corrective actions completed | |||||||||
| Level-1 | Level-2 | Level-3 | Japan | Overseas | |||||||||
| General | 1 | Strengthen interactive communication through Midori-kai activities | (1) Interaction among company leaders at regular meetings. | Meeting | Twice a year | 〇 | 〇 | 〇 | 321 | - | - | ||
| (2) Promote activities to improve productivity, energy conservation, etc. through subcommittees. | Plant visit, activity briefing, etc. | all-year | 212 | - | - | ||||||||
| Management and QCD | 2 | Corporate evaluation | Evaluate annual SLQDC and ESG performance | KPI result | Annually | 〇 | 〇 | 〇 | 321 | 0 | 0 | ||
| Evaluate the factor about the above and corporate management | KPI result, management interview | 〇 | 〇 | 98 | 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 339 |
0 | 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 |
80*1 | 0 | 0 | ||||
| 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 | 9 | 6 | 6 | ||||
| 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 | 2 | 0 | 0 | ||||
| 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 | 98 | 3 | 3 | ||||
| 8 | Promote acquisition of environmental management system (EMS) and environmental education | Mandate acquisition of third-party certification for environmental management | Written survey, onsite audit, Interview with management and environmental officers, etc. | Annually | 〇 | 〇 | 〇 EMS |
155 | 0 | 0 | |||
| Dissemination of the latest revisions to environmental laws and regulations | Operational liaison meetings and bulletin boards | Monthly | 〇 | 〇 | 155*1 | - | - | ||||||
| 9 | CSR SAQ survey | Self-assessment of overall CSR using a checklist. | Questionnaire and interview | Once every 3 years | 〇 | 〇 | 〇 | - | - | - | |||
| 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 | 4 | 0 | 0 | ||||
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 |
Komatsu established a whistleblowing system for suppliers in March 2017 to receive reports on compliance violations in the procurement activities of the Komatsu Group and on the use of conflict minerals. Matters reported through dedicated internal and external reporting channels are verified and investigated by a department in a neutral position, leading promptly to corrective measures. Komatsu declares that it will not treat partner companies that submit reports disadvantageously because they have made such reports.
Changes in reported cases
In recent years, risks surrounding the supply chain have become increasingly diverse and complex. In addition to natural disasters such as earthquakes, tsunamis, typhoons, and heavy rainfall, these risks include the spread of infectious diseases, geopolitical risks, and disruptions to logistics networks. To minimize the impact of these risks on our business and maintain stable production activities, we had been operating a proprietary supply chain risk management system developed in-house following the Great East Japan Earthquake. To further enhance its capabilities, we replaced this system with “Spectee SCR” in 2025.
Approximately 24,000 business partners in Japan and overseas are registered in Spectee SCR. The system centrally manages information such as company locations and production sites and links this information with data on earthquakes, tsunamis, typhoons, heavy rainfall, landslides, volcanic activity, and other disasters. By quickly identifying business partners that may be affected and assessing potential impacts on logistics networks, the system enables the early detection of supply chain risks and a faster initial response.
For critical components, we are also working to visualize information on secondary and subsequent suppliers in addition to Tier 1 suppliers. At the same time, we continuously monitor components and processes with a high risk of supply disruption. Drawing on our experience of past disasters, we consider alternative suppliers, review inventory strategies as necessary, and take measures to reduce the risk of supply interruptions.
For semiconductors, electronic components, and other critical parts that are particularly susceptible to geopolitical risks, we are strengthening our stable procurement structure by promoting multi-sourcing, evaluating and adopting alternative components, and maintaining appropriate inventory levels. We are also optimizing our global procurement network and promoting geographically diversified procurement to reduce the risks associated with dependence on specific regions.
Going forward, we will continue to visualize supply chain risks and conduct ongoing monitoring as we build a resilient supply chain capable of withstanding disasters and changes in social conditions, thereby further enhancing our business continuity capabilities.
Information security measures in the supply chain are also an urgent issue. In 2021, Komatsu established information security guidelines for business partners to clarify the standards we require of our suppliers. We also provided e-learning education to 155 Midori-kai companies in Japan. At the same time, we conducted security assessments using self-check sheets, and followed up individually with suppliers where issues were identified. Starting in 2024, we have also begun recommending and promoting the implementation of Endpoint Detection and Response (EDR) solutions—which include behavior-based threat detection—to Midori-kai subcontractors in Japan, further strengthening security measures across the entire supply chain.
Implementation status of information security self-check
| FY2022 | FY2023 | FY2024 | |
|---|---|---|---|
| Number of companies implementing self-check sheets | 156 | 156 | 155 |
To raise our business partners' awareness of Komatsu's CSR procurement guidelines, we are carrying out awareness building activities around Compliance and BCP at the Komatsu Midori-kai meetings and monthly business meetings held in each office. In addition, "CSR Report" issued for Midori-kai member companies shares CSR-related "Everybody's Compliance" articles which are published for the employees of the Komatsu Group, and information regarding the revision of related laws and regulations in Japan and other countries. To ensure the further penetration of CSR in the supply chain, from FY2021 onward, we have conducted an SAQ survey on CSR activities using the standard survey tool released by the Global Compact Network Japan (GCNJ), of which Komatsu is a participant. The survey targeted 156 Midori-kai companies in Japan, and responses were received from 153 companies. Through this survey, we confirmed that 95% of the responding companies were aware of our CSR Procurement Guidelines.
Moreover, in FY2022, as part of our human rights due diligence, we conducted a human rights risk survey across a total of 292 Midori-kai companies in Japan and overseas. Based on the UN Guiding Principles on Business and Human Rights and other international norms, we collected responses on a dedicated website regarding the status of human rights initiatives in 11 categories, including human rights management, occupational safety and health, and working conditions. To ensure objectivity, the entire survey process from question formulation to results analysis was conducted and overseen by outside experts. We prepared company-specific reports translated into the respective local languages, outlining the issues identified through the assessment and the corresponding responses, and provided individual feedback.
In FY2023, we visited five Midori-kai companies in Japan and conducted interviews and discussions, together with external experts, to develop human rights guidelines for our business partners. In FY2024, under the guidance of external experts, we began preparatory activities to address disclosure requirements and due diligence expectations, particularly in Europe. In FY2025, as part of our preparations to respond to the EU Corporate Sustainability Due Diligence Directive (CSDDD), we visited the Japanese headquarters of four companies within Japan Midori-kai that have production sites in India and Indonesia. Through interviews and discussions, we exchanged views on how they manage human rights and environmental matters in those regions.
Questionnaire items
| No | Themes | Questionnaire items |
|---|---|---|
| 1 | Human rights management | Commitment to human rights, establishing human rights due diligence system, complaint handling mechanisms |
| 2 | Work environment and human rights | Prohibition of discrimination and inhumane treatment, prohibition of child labor and consideration for young workers, prohibition of forced labor Employment and labor relations, personal information protection, proper management of working hours, welfare, wages, respect for workers' rights to organize |
| 3 | Occupational health and safety | Occupational health and safety policies and management, workplace safety measures and environmental improvements, measures to address workers' health risks |
| 4 | Community impact | Impact on the community |