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Material Issues 5Building an Ethical Society and Improving Resource Sustainability Together with Customers and Business Partners

Strengthening the Business Partner Action Guidelines

Seven & i Holdings is strengthening implementation of the Business Partner Action Guidelines to provide customers with safe, reliable products and fulfill our societal responsibilities in cooperation with our suppliers on matters such as human rights, labor issues and the environment.

Ensure Implementation of Business Partner Action Guidelines

Seven & i Holdings has formulated the Seven & i Holdings Business Partner Action Guidelines (the "Guidelines") and requires all business partners to understand and complyobserve them. These guidelines are designed to not only guarantee the safety and quality of products and services, but also consideration for promote legal compliance, environmental conservation and labor conditions throughout the supply chain so that we can fulfil our corporate social responsibility together with our business partners. The Guideline is communicated to business partners of Group companies through various meetings.

SDGs7 AFFORDABLE AND CLEAN ENERGY
SDGs8 DECENT WORK AND ECONOMIC GROWTH
SDGs10 REDUCED INEQUALITIES
SDGs12 RESPONSIBLE CONSUMPTION AND PRODUCTION
SDGs13 CLIMATE ACTION
SDGs15 LIFE ON LAND
SDGs16 PEACE, JUSTICE AND STRONG INSTITUTIONS

Seven & i Holdings Business Partner Action Guidelines (Excerpt)

  1. 1. Legal Compliance
  2. 2. Respect for Human Rights and Dignity
  3. 3. Human Resources and Workplace Environment
  4. 4. Environmental Management
  5. 5. Relationship with Society and Local Communities
  6. 6. Information Management
  7. 7. Products Safety Assurance
  8. 8. Fair Business Practices
  9. 9. Monitoring
At a briefing on the Business Partner Action Guidelines for business partners

Compliance with the Guideline through the Self Check Sheet

To ensure that business partners understand the Guidelines and to assist with effective CSR initiatives, Seven & i Holdings administers a self-check sheet for business partners, explaining all of the specific requirements of the Guidelines.
In drafting the check sheet, we referred to sources such as the ISO 26000 standard, the Japanese Business Federation's Charter of Corporate Behavior, and the OECD Guidelines for Multinational Enterprises. Business partners asked to submit the check sheet annually include manufacturers of the Group's universal strategic private-brand products Seven Premium and Seven-Eleven original daily manufacturers, as well as distribution centers and IY's direct import suppliers overseas. We administer these check sheets to ascertain the status of our business partners' CSR activities.
In the check sheets, the respondents answer 61 questions, including whether there are any breaches in compliance, whether a consulting desk is available to plant workers, whether a business partner requests that its own suppliers comply with the Seven & i Holdings Business Partner Action Guidelines, and whether the formation of labor unions is permitted. The check sheet also asks business partners to confirm the CSR-related certifications (SA8000, BCSI, SMETA, ICS, ICTI, WRAP, EICC) that its factories have obtained.
Responses to this check sheet are entered into a database, and can be confirmed at any time by all employees in the relevant departments, not just the buyers directly involved in transactions with a given plant. Buyers determine whether or not to continue doing business with a business partner based partly on the business partner's level of engagement in CSR, which is shown in the database.

Self Check Sheet Items (Excerpt)

  1. 1. Legal Compliance
  2. 2. Respect for Human Rights and Dignity
  3. 3. Human Resources and Workplace Environment
  4. 4. Environmental Management
  5. 5. Relationship with Society and Local Communities
  6. 6. Information Management
  7. 7. Products Safety Assurance
  8. 8. Fair Business Practices
  9. 9. Monitoring

(Questions about whether a business partner has prepared documentation and implementation records that prove compliance with the Guideline.)

The Flow of Business Partner Action Guidelines: Seven Premium as an example

Conducting Business Partners' CSR Audits

Since the fiscal year ended February 28, 2013, Seven & i Holdings has conducted CSR audits to determine the status of compliance with the Guidelines at a selection of factories of the business partners we have asked to submit check sheets. The CSR audits are performed annually, mainly targeting factories of business partners producing private-brand products in developing countries.
The CSR audit is performed by an external third-party auditing organization based on our independently established CSR audit program (about 114 items in 16 categories.) The CSR audit items are based on the content of ISO 26000, and the audit examines whether a factory complies with the principles laid out in the Business Partner Action Guidelines in the following 16 categories. These categories are aligned with the international labor standards established by the International Labour Organization (ILO).

CSR Audit Category (16 Categories)

1. Implementation of Management System and Rules
  • Organizations must implement and maintain a system in compliance with all items of the Business Partner Action Guidelines of Seven & i Holdings.
  • To the extent feasible, organizations should expand the Guidelines to their own supply chains.
  • Organizations must monitor and comply with the relevant laws and regulations, as well as international treaties and so forth.
2. Forced Labor
  • There must be no forced, bonded or coerced prison labor.
  • Employers must not force workers to make a financial deposit or submit their identification documents. After giving adequate notice, workers may resign freely as they wish.
  • National and regional laws pertaining to forced labor are recognized.
3. Freedom of Association
  • Workers have the right to establish or join labor unions of their own choosing without being subject to discrimination, and hold the right to collective bargaining.
  • Local laws and workers' rights concerning freedom of association are recognized.
4. Health and Safety
  • Safety protection measures must be applied to equipment and machinery and preventive maintenance must be undertaken.
  • Chemicals must be handled and stored appropriately.
  • All necessary protective equipment must be purchased and regularly replaced.
5. Child Labor and Young Underage Workers
  • Children must not be put to work.
  • Children and young workers under the age of 18 must not be put to work at night, or in a hazardous environment. This work includes tasks using chemical substances, work near such substances, or work where there is hazardous machinery, heavy labor, or excessive noise. Night shifts and work for long hours are also included.
6. Wages
  • Overtime allowances must be paid at the required statutory ratio.
  • All allowances and benefits must be provided to workers as required by law.
7. Working Time
  • Workers must not be habitually required to work over 48 hours per week. On average, workers must be given a rest period of one day every 7 days. Overtime must be voluntary and must not exceed 12 hours per week. Overtime must not be habitually requested and additional fees must always be paid.
8. Discrimination
  • Discrimination in the course of recruitment, remuneration, provision of training, pay raises, dismissal and retirement is prohibited with respect to race, class, nationality, religion, age, disability, gender, marital status, sexual orientation, union membership, or political party affiliation.
9. Regular Employment
  • To the extent possible, operations must be executed on the basis of generally accepted employment relationships based on national laws and regulations.
10. Subcontracting Agreements, Domestic Industry, Outsourced Processing
  • Subcontracting is not permitted without the prior consent of customers.
11. Disciplinary Action
  • Physical abuse or punishment, threats of physical abuse, sexual or other forms of harassment, or verbal abuse or threats, must be prohibited.
  • Disciplinary methods must be fair and effective and must not be arbitrary.
  • Employers must show respect for the mental, emotional and physical health of workers in connection with the necessary disciplinary action.
12. Environment
  • Organizations must pursue continuous improvement in their environmental performance and, at the very least, comply with local requirements and international laws and regulations.
  • Chemical substances prohibited by international treaties, or laws and regulations, must not be used.
13. Fair Business Practices
  • Laws and regulations related to fair business practices must be understood and complied with.
14. Ensuring Product Safety
  • Products delivered to each Seven & i operating company must comply with the quality standards requested by each relevant operating company and comply with relevant legal standards established in Japan.
15. Security Management
  • Security systems must be in place to ensure protection from access with malicious intent.
16. Interests of Local Communities
  • Relationships with anti-social forces must be severed.

Factories are given prior notice before being visited for audits, and compliance with CSR audit items is confirmed through interviews with managers and workers. If the audit finds items that do not comply with the audit program (unacceptable items), the external audit organization provides guidance to the business partner concerned. The business partners must submit a corrective action plan (CAP) to the auditing organization within 10 days of the audit being completed, and must take immediate action to improve the items. After receiving a report on the completion of improvements for the relevant items, the completion of improvements is confirmed based on the submission of photos showing the improvements, guarantee documents and other materials. However, in cases that exceed certain standards, such as when numerous serious unacceptable items are found, the resolution of issues is confirmed by performing a re-audit, in which conditions are verified by revisiting the factory.
When the unacceptable items are remedied or the auditing organization and Seven & i Holdings judge that the content of the CAP to be satisfactory, a Certificate is issued to the relevant business partner.

Compliance certificate

Audit Results for the Fiscal Year Ended February 29, 2016

In the fiscal year ended February 29, 2016, CSR audits were conducted at 322 factories in 11 countries, including China, Vietnam, Thailand, Indonesia, Cambodia and Myanmar. The average compliance rate across all audited factories was 90%, with re-audits at 31 factories. The majority of items for improvement were due to insufficient recognition or misinterpretation of items required under local laws and regulations, and mainly involved labor environment, safety and hygiene, and approvals and authorizations. After their audits, each factory provided a CAP that included photos showing the improvements, guarantee documents, and a re-audit, enabling us to confirm that improvements were successfully made.

Examples of Cases Requiring Re-audits in the Fiscal Year Ended February 29, 2016

(All problem items have now been remedied)

  • Non-notification of long work hours or hours in excess of legal limits
  • Incorrect handling and storage of hazardous chemicals
  • Operation and driving of machinery without a license
  • Non-performance of environmental assessment
  • Use of an unlicensed waste disposal contractor
Number of factories for audit Number audited Re-audit rate Number of re-audits
FY2013 374 17 5.9% 1
FY2014 29 20.7% 6
FY2015 256 11.3% 29
FY2016 322 322 9.6% 31
FY2017 263 263 10.6% 28
FY2018 target 238 238

Employee Education and Incentives

Buyers and all other employees involved in procurement-related duties receive training on the Seven & i Holdings Corporate Action Guidelines. They are also educated about the Company's CSR audit requirements to enable them to consider product manufacturing sites in terms of environmental, social, and governance aspects.

The evaluation standard used for all buyers in the quarterly personnel evaluation review includes questions not only about product quality, but also about the manufacturing site audit results. In this way, the level of CSR performance at the business partners covered by each buyer is reflected in the buyer's compensation.

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