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

Strengthening Implementation of 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 its social responsibilities in cooperation with business partners on matters such as human rights, labor issues, and the environment.

Ensure Implementation of Business Partner Action Guidelines

In April 2017, Seven & i Holdings revised the "Seven & i Holdings Business Partner Action Guidelines (hereafter, the “Guidelines”)" established in 2007; in December 2019, we revised the Guidelines again as the "Seven & i Group Business Partner Sustainable Action Guidelines", which all business partners are requested to understand and observe. The Guidelines are designed not only to guarantee the safety and quality of the Group’s products and services but also to promote consideration for legal and regulatory compliance, global environmental conservation, and labor environment throughout the supply chain so that we can fulfill our corporate social responsibility together with our business partners. The Guidelines are communicated to business partners of the 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 Group Business Partner Sustainable Action Guidelines (Excerpt)

  1. Respect and Protection of Human Rights
  2. Legal Compliance
  3. No Child labour and Protection for Young Workers
  4. No Forced Labour
  5. Payment of Living Wages
  6. Elimination of Abuse, Harassment, Discrimination and Punishment
  7. Employment and Protection of Workers
  8. Preservation of Global Environment
  9. Prevention of Confidential Information Leakage and Information Management
  10. Management of Personal Information
  11. Quality Control and Ethical Response
  12. Relationship with Local and International Communities
  13. Anti-corruption and Fair Business Practices
  14. Protection of Intellectual Property
  15. Export and Import Management
  16. Development of Internal Reporting Systems
  17. Disaster Preparedness
  18. Development into Supply Chain
  19. Monitoring

Promoting the Seven & i Group Business Partner Sustainable Action Guidelines

Seven & i Group will promote the Group’s Business Partner Sustainable Action Guidelines in accordance with the spirit of trust and sincerity stated in the Group’s corporate creed for mutual benefit and sustainable growth together with business partners.

For the purpose of contributing to the SDGs and responding to ESG, the Group will seek business partners’ understanding of the Guidelines, and promote effective and sustainable activities. With understanding, awareness, and practice of the Seven & i Group Business Partner Sustainable Action Guidelines as the policy, the following items are incorporated into the PDCA cycle mainly for business partners tasked with producing the private brand products of Seven & i Group companies.

  • Awareness and spread: Organizing of briefings
  • Confirmation of implementation: Administering of self-check sheet
  • Support for implementation: Organizing of compliance training
  • Validation of implementation: Conduct of CSR audits and encouraging the taking of corrective action

Supplier risk is categorized into five levels (R1 to 5) by region from viewpoints such as human rights, labor environment, and global environmental conservation. R1 is the region with the highest risk, which is positioned as “China and emerging regions in Southeast Asia,” and the Group will focus on responses for this region.

Distributing and Disseminating the Seven & i Group Business Partner Sustainable Action Guidelines

From June to October 2018, product development staff of Seven & i Group companies distributed and disseminated the Business Partner Action Guidelines to 18,484 business partners.

Organizing Briefings about the Seven & i Group Business Partner Sustainable Action Guidelines and the Quality Policy

Of the business partners contracted for private brand products, local briefings about the Guidelines and related policies are conducted for those in China and the Southeast Asian region for which CSR risk is expected to be high. In April and October 2018, briefings were organized at three venues in China—Qingdao, Shanghai, and Shenzhen—as well as three venues in Southeast Asia—Thailand (Bangkok), Cambodia (Phnom Penh), and Vietnam (Ho Chi Minh City)—with 402 participants from 260 factories (94.9% of the total number of the overseas factories subject to CSR audits in FY2018). In March and April 2019, briefings were organized at four venues in China—Dalian, Qingdao, Shanghai, and Shenzhen—as well as five venues in Southeast Asia—Myanmar (Yangon), Thailand (Bangkok), Cambodia (Phnom Penh), Vietnam (Ho Chi Minh City), and Indonesia (Jakarta)—with 482 participants from 287 factories (94.4% of the total number of the overseas factories subject to CSR audits in FY2019).

In addition, at the briefings, certificates and trophies were awarded to business partners who are excellent in quality management and CSR management.

Scenes from Business Partner Action Guidelines Briefings

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March 2019 at Shanghai

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April 2019 at Jakarta

Conducting Self-Checks

To check the state of promotion of the Business Partner Action Guidelines and support corrective actions, the Seven & i Group administers a self-check sheet for business partners. In drafting the check sheet, we referred to sources such as the ISO 26000 standard, the Japan Business Federation's Charter of Corporate Behavior, the OECD Guidelines for Multinational Enterprises, and the ILO International Labour Standards. In November 2018, checks on 61 items—including human rights, labor environment, global environmental conservation, and information management—were conducted for companies contracted to manufacture private brand products of the Seven & i Group companies.

State of Self-Check Replies

Item

Business partners targeted No. of replies Reply rate Total no. of factories replied No. of factories in Japan No. of overseas factories
Value 1,437 companies 1,050 companies 73.1% 1,902 factories 1,468 factories 434 factories


Self Check Sheet Items (Excerpt)

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

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

Conducting Compliance Training for Business Partners

Compliance training is conducted for business partners in China and Southeast Asia—for which CSR risk is high—contracted to manufacture private brand products for the purposes of raising awareness about human rights, labor environment, global environmental conservation, and other issues; understanding and promoting relevant basic laws and regulations; and thoroughly ensuring compliance with laws and regulations. The training covers the Seven & i Business Partner Action Guidelines, ILO International Labour Conventions, ISO 26000, labor safety laws and regulations of each country, facility management, chemical substance management, and consultation on corrective actions in view of CSR audit results. Preparation and operation of the training is contracted to TÜV Rheinland Japan Ltd. 

 

State of Participation in FY2018

Period Venue No. of participants No. of participating factories
April 2018

       China (Shanghai)

          33      22
July 2018             China (Qingdao)         44      28
       China (Shanghai)         50      37
      Thailand (Bangkok)         48      30
September 2018         China (Qingdao)         24      18
       China (Shanghai)         28      25

      Thailand (Bangkok)

        17

     11

 

State of Participation  in FY2019 (as of October 2019)

Period Venue No. of participants No. of participating factories
April 2019  China (1st time) 3 venues      185      123
May 2019  Southeast Asia (1st time) 4 countries      117        67
June 2019  China (2nd time) 3 venues      135        96
July 2019  Southeast Asia (2nd time) 3 countries        42        24
August 2019  China (3rd time) 3 venues      176      116
September 2019  Southeast Asia (3rd time) 4 countries      113        59
Total times conducted

20

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April 2019 at Qingdao

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May 2019 at Bangkok

Conducting Compliance Training for Group Employees

Seven & i Holdings had established a subcommittee to report the results of CSR audits conducted in the previous year and to discuss improvement plans. In the subcommittee, compliance training sessions and study meetings are held. For the study meeting, we invite a representative of CSR audits from TÜV Rheinland Japan Ltd., which has been commissioned to conduct CSR audits. The representative provides explanations about information and laws and regulations of the areas in which our business partners operate their factories through specific examples to the participants who are managers and persons in charge of product development and purchasing.


Period Outlines No.of participants

January 2019

 Consumer Affairs and Fair Business Practices   Subcommittee with executives of 28 Group companies

 ・Overview of CSR audits in 2018

61

June 2019

(held twice)

 CSR Audit Workshop 59
July 2019

 Consumer Affairs and Fair Business Practices   Subcommittee with executives of 28 Group companies 

 ・Overview of CSR audits for the first quarter of 2019

 ・Draft plans for 2020

49
November 2019

 Consumer Affairs and Fair Business Practices   Subcommittee with executives of 28 Group companies 

 ・Overview of CSR audits for the second quarter of

      2019

 ・Preparation for measures in 2020

50
December 2019

 Seven & i Group CSR Audits Report and Study Meeting 

 ・Supply chain management and CSR audits results

 ・Trend of global and Japanese supply chain       

      management

 ・Report on the current situation of CSR audits in China

79
January 2020

 Consumer Affairs and Fair Business Practices   Subcommittee with executives of 28 Group companies

 ・Overview of CSR audits for the third quarter of 2019

 ・Measures in FY 2020

63

February 2020

(held 3 times)

 Study meetings for Business Partner Sustainable Action

 Guidelines

 Representatives of CSR audit from Group companies

19


Collaboration with Human Rights and Economic Organizations

Seven & i Holdings is working to collect and disseminate information on supply chain management in cooperation with human rights and economic organizations.

  Main Activities:

・September 2019: Global Compact Network Japan
We explained the “Seven & i Group Business Partner Action Guidelines” and our CSR audits at a "Basic Seminar" of Global Compact Network Japan.
・November 2019: OECD Advisory Committee of the Japan Business Federation, Corporate Behavior and SDGs Committee, and representatives of BIAC Japan
We participated in the event, "Responsible Supply Chains in Asia ~Promoting Decent Work and Responsible Business Conduct in Global Supply Chains~" held by OECD, EU, the Japanese government, and ILO, to collect information.
・January 2020: Public interest incorporated association Council for Better Corporate Citizenship (CBCC)
We shared information at “Round-table Conference on Issues for Promoting CSR in the Supply Chain” held by CBCC.

Conducting Business Partners’ CSR Audits

The Seven & i Group conducts CSR audits to ensure the safety and reliability of products being provided to customers, for mutual benefit and sustainable growth with business partners, and to promote the Seven & i Business Partner Sustainable Action Guidelines, and to verify the effectiveness of the Guidelines.

Seven & i Group CSR Audit Category

The CSR audits are performed by a third-party organization based on our independently established CSR audit program (114 items in 16 categories.) The CSR audit items are based on the contents of ISO 26000 and international treaties, such as ILO Conventions, which are the global standards. They include the Seven & i Group Business Partner Sustainable Action Guidelines, Human Rights Protection, Legal Compliance, Occupational Health and Safety, and Environmental Protection.

CSR Audit 16 Categories and 114 Items (Excerpt)

1. Implementation of Management System and Rules

  • Organizations must implement and maintain a system in compliance with all items of the Seven & i Group Business Partner Action Guidelines
  • To the extent feasible, organizations should extend 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 passports, or other identification documents, and their freedom of movement is ensured.
  • Workers may resign freely as they wish, after giving adequate notice.
  • 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.
  • 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. Living Wages

  • Wages must be paid at or above the national/regional legal standards.
  • Overtime allowances must be paid at the required statutory ratio.
  • All allowances and benefits must be provided to workers as required by law.
  • Documents detailing the labor conditions of workers, such as wage slips, information of labor recruiters, and contracts must be disclosed to workers.

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.
  • Recruitment fees for workers to get a job must be borne by employers, not by the workers ("Employer Pays Principle") unless allowed by local labor law.

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 rejected.

Flow of CSR Audits

Factories are given prior notice before being visited for audits, and compliance with CSR audit items is confirmed by checking sites, documents, and data as well as through interviews with managers and workers. Interviews with workers are conducted only by auditors in separate rooms to prevent instructions and retaliation from employers. In principle, an on-site audit will be conducted for a day between 9:00 a.m. and 6:00 p.m. However, in some cases, the time may be extended to ensure that people in the factory are satisfied with explanations for their questions. Materials and images submitted at the time of the audit will not be disclosed to the outside based on the confidentiality agreement.

Confirmation of Corrective Actions after Audits

If the audit finds items that do not comply with the audit program (non-conformity), the third-party 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 actions 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 non-compliance items are found, the resolution of issues is confirmed by revisiting the factory to perform a re-audit.


  ● Flow of Submission of the Corrective Action Plan (CAP)

   (1)Report the cause of non-conformity and prepare a CAP: Submit the CAP to the auditor within 10 days

   (2)Implementation of the corrective actions: Submit evidence to auditors within 90 days

   (3)Appropriate CAP:Accepted by auditor→Confirmed and approved by Seven & i HLDGS.

                                   → Issuing a Certificate of Conformity

        Inappropriate CAP: → Return

  • If no evidence of corrective actions is submitted within 90 days after the completion of the audit, a follow-up audit will be conducted.

Measures to Critical Major Non-Conformity

If Seven & i Holdings identifies any non-conformity with “Forced Labor”, “Child Labor and Young Underage Workers”, “Living Wages”, or “Disciplinary Action” of the 16 audit categories listed above, Seven & i Holdings will classify them as "Critical 1 Major Non-Conformity", and advise its group's operating company, that has a contract with the factory in question, to stop business with it.

In addition, non-compliance with laws and regulations regarding any category of "Health and Safety", "Working Time", "Subcontracting Agreement", "Environment" or "Ensuring Product Safety" will be classified as "Critical 2 Major Non-Conformity, In these cases, Seven & i Holdings will notify its group's operating company that has a contract with the factory to reconsider continuing business with it.

In either "Critical 1" or "Critical 2", we will conduct a re-audit (follow-up audit) to confirm the corrective actions before continuing the business.

CSR Audit Certificate of Conformity

If the results of the CSR audit are determined as acceptable, Seven & i Holdings and the auditing organization will issue a Certificate fo Conformity to the business partner. If a non-conformity is discovered, after Seven & i Holdings and the auditing organization determine that the corrective actions have been completed or that the plans described in the CAP are effective, a Certificate of Conformity will be issued to the business partners.

Certificate of Assessment 2020(見本)R2.jpg

Certificate of Conformity

Results of Business Partners’ CSR Audits

Seven & i Holdings has contracted TÜV Rheinland Japan Ltd., a third-party organization, to conduct on-site audit on factories both overseas and in Japan.

CSR Audits of Overseas Factories

Since the fiscal year ended February 28, 2013, Seven & i Holdings has conducted CSR audits annually to determine the status of compliance with the Seven & i Group Sustainable Action Guidelines at a selection of factories* that we judged particularly important from the standpoint of risk management as critical suppliers, among those whom we have asked to submit self-check sheets.

  • Factories contracted to manufacture Seven Premium (private brand) products as well as factories in China and Southeast Asia (13 countries) contracted to manufacture private brand products of Group companies.


Number of CSR Audits (Overseas Factories)

Fiscal year

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

FY2019

FY2020

Plan

No. of factories

         17

       28     328     226     245     215     274

  304※1

apploximately

600※2


  • 1 The number of factories was revised because the 2019 audit results had included the number of re-audits.
  • 2 Figures for 2020 may decrease due to the impact of the new coronaviral infections (COVID-19).

The audit results showed some form of legal infractions at 80.0% of factories in the fiscal year ended February 29, 2020, and corrective actions are being taken. For the cases of non-compliance, 80 cases were confirmed to be related to environmental response, 76 cases related to working hours, 44 cases related to facility safety and maintenance, 42 cases related to overtime pay, 36 cases related to legal allowances, and 33 cases related to the handling of chemicals.

All corrective actions were taken. In addition, forced labor was not confirmed.

CSR Audits of Factories in Japan

Seven-Eleven Japan conducts CSR audits of some of its business partners in Japan based on the same standards as the Seven & i Group CSR audits, and the audits are conducted by the same third-party organization. This initiative began in the fiscal year ended February 28, 2017, and audits have been conducted on 54 factories as of February 28, 2019. Going forward, the supply chain will continue to be involved in the promotion of CSR.

Seven & i Holdings started to conduct CSR audits on factories in Japan contracted to manufacture Seven Premium products in 2018 in order to appropriately respond to issues such as changing workstyles for employees, hiring non-Japanese workers, and protecting the global environment. Regarding the number of audits, tests were conducted at 50 factories in the fiscal year ended February 28, 2019, and 327 factories (approximately 30% of the total number of the factories contracted to manufacture Seven Premium) were audited in the fiscal year ending February 29, 2020. The audit results of the fiscal year ended February 29, 2020, showed some 90% of our factories were audited for non-conformity, and corrective actions are being undertaken. There was no discrimination relating to foreign workers nor non-compliance concerning forced labor.

Future Responses

Renewal of Contracts with Business Partners and New Contracts

The Seven & i Group will continue to promote the Business Partner Sustainable Action Guidelines and strengthen responses to SDGs and ESG. Together with business partners, the Group will aim to realize decent work, the eradication of forced labor, and prohibition and elimination of child labor as stated in Goal 8 of the SDGs. In addition, the Group will actively work on the improvement and maintenance of the labor environment in the supply chain. Going forward, the Group will continue to contribute toward the realization of a sustainable society together with business partners who support such initiatives.

CSR Audits and Operation of Certification Systems

To our business partners who operate the contracted factories of our private brand products (Seven Premium) or those of the Group companies' private brand products in regions, which have high infringement risks of human rights and laws and regulations (mainly in China and Southeast Asia), Seven & i Holdings will continue to ask them to be CSR audited. We will also continue to share information on the progress of implementing the Seven & i Group Business Partner Sustainable Action Guidelines and support corrective actions.

・ We issue a Certificate of Conformity to business partners based on the results of CSR audits and the status of corrective actions. In order to continue business with us, we will request partners to obtain the Certificate of Conformity.

・ When starting a new business, we will ask potential business partners to understand and comply with the Seven & i Group Business Partner Sustainable Action Guidelines and start doing business only after they obtain the Certificate of Conformity of the CSR audit. 

Initiatives for Material Issue 5