Supply Chain CSR

• Socially Responsible Procurement Program
• FY2017 Action Items and Results
• Communications with Suppliers
• CSR Evaluations and Improvement Activities
• Supplier BCP Initiative
• Internal Education
• Compliance & Procurement Initiatives
• Partnerships with External Organizations

Under Epson's socially responsible procurement program, suppliers are asked at supplier briefings to practice socially responsible procurement and complete an SAQ (Self Assessment Questionnaire) to assess their own observance of the Epson Supplier Code of Conduct. Answers are verified on-site and audits are performed to share issues and drive improvement. In addition to conducting periodic evaluations of all new and current suppliers, we apply a more detailed socially responsible procurement program to key suppliers, which we define as large suppliers, mission-critical parts suppliers, and sole-source suppliers.

Under Epson's socially responsible procurement program, suppliers are asked at supplier briefings to practice socially responsible procurement and complete an SAQ to assess their own observance of the Epson Supplier Code of Conduct. Answers are verified on-site and audits are performed to share issues and drive improvement.

Since FY2016, we have held socially responsible procurement briefings for suppliers to share information on Epson's socially responsible procurement programs with suppliers. In FY2017, we held a total of eleven briefings in Japan, China, and Indonesia. Briefings were attended by 613 people from 453 suppliers to share the following information:

1. Epson's CSR activities
2. Practicing CSR in the supply chain
   - Detailed evaluation
   - Improving accuracy of conflict mineral surveys
   - Supplier BCP initiatives
   - Establishment of compliance hotlines
3. Product substance control

Epson evaluates all suppliers, both direct materials suppliers and indirect materials suppliers such as logistics, construction, and staffing companies. Suppliers are evaluated from multiple angles on the basis of a supplier evaluation program. The program consists primarily of an indirect evaluation and a direct evaluation (periodic evaluation). The indirect evaluation is based on information from a credit investigation service. The direct evaluation is a self-check that suppliers do to evaluate their own QCD and other performance metrics.

Self-assessments

The Epson Group requires that suppliers to conduct self-assessments regarding their status of compliance with the Epson Supplier Code of Conduct. Based on those results, we work with suppliers to implement improvements. To facilitate assessments, we have established the Epson Group Detailed Supplier Evaluation Guideline as internal standards for conducting fair assessments and ensuring efficient and appropriate socially responsible procurement in the supply chain.

Audits and Corrective Action

In FY2017, an independent firm was hired to audit one supplier in Japan and one in Indonesia. We revisited the Japanese supplier after the audit to explain the content of the audit report and discuss an improvement plan. The supplier will implement improvements based on the plan while receiving support from Epson.

In FY2016, two Chinese suppliers were independently audited. We conducted a follow-up audit upon completion of the planned improvements and confirmed that all improvements were completed. Both companies were asked to continue efforts to ensure socially responsible procurement.

We have established Guidelines for Supply Chain BCP and are improving business continuity and resilience throughout the supply chain so that even if a disaster, accident, epidemic, or other event should cause disruption, we can fulfill our responsibility to customers by recovering and providing products and services within a target recovery time.

The Epson supply chain BCP is divided into five categories.

Epson is working with suppliers to ensure that they establish their own BCP systems so that the supply of parts to Epson is not disrupted.

In FY2017, a fire that had occurred at an overseas supplier had an impact on our product shipments. From that experience, we launched special activities focused on promoting workplace safety inspections at supplier facilities.

(Unit: companies)

Worker Interview Training

During on-site verification, we conduct worker interviews in addition to document reviews and site tours to better ascertain labor and human rights risks at supplier plants.

Aimed at developing the skills to identify worker concerns and dissatisfaction within a limited amount of time, we invited outside instructors to conduct worker interview training for Epson employees responsible for on-site verification. Training curriculum includes instructor lectures as well as roleplaying conducted by the trainees to help learn interview techniques, procedures, and points of caution. At Epson, we position this training as required training for employees who implement on-site verification to improve the accuracy of verification.

Socially Responsible Procurement Training at an Indonesian Affiliate

Epson believes that it is vital to understand the Epson Supplier Code of Conduct (RBA compliant), SAQ, and other initiatives in addition to international CSR trends when promoting socially responsible procurement and, therefore, it provides socially responsible procurement education conducted by external instructors. In FY2017, we conducted training to procurement department members at our Indonesian affiliate on topics including CSR issues, RBA framework, and SAQ.

We have committed ourselves to exercising high ethical standards and a social conscience, and we have declared that we will conduct our procurement activities in strict compliance with both the letter and spirit of laws and regulations in region in which we operate. As such, employee training is an important part of this commitment.

All employees in Japan are required to take the Introduction to Procurement (Ethics & Code of Conduct) and the Introduction to Procurement (Subcontract Act) online training courses. Employees directly involved in procurement must successfully complete procurement and compliance management training based on an in-house certification system. Renewal training is also conducted every five years to ensure that employees learn the latest information and knowledge. Moving forward, we will expand the scope of these initiatives to include overseas Group companies as we further elevate the level of our compliance and procurement initiatives.

FY2017 Training Results

Epson is a member of the Global Compact Network Japan Supply Chain Subcommittee and a member of the Japan Electronics and Information Technology Industries Association (JEITA) CSR Committee. We partner with various industry corporations to help permeate and elevate socially responsible procurement.