Sustainable Procurement in Cooperation with Suppliers
Basic Policy
The Otsuka group is a signatory to the 2016 United Nations Global Compact (UNGC),and considers the compact’s positions on human rights, labor, the environment, and anti-corruption to be universal values. Our procurement is guided by the Otsuka Group Procurement Policy, which sets out the direction for consistently upholding the UNGC’s values, maintaining sustainable procurement practices in accordance with our corporate philosophy, “Otsuka-people creating new products for better health worldwide,” and improving corporate value while making a contribution to society.
To promote sustainable procurement, we established the Otsuka Group Procurement Policy across the Group and the Otsuka Group Sustainable Procurement Guidelines in September 2020, which we expect our suppliers to follow. These guidelines are formed from six items: Quality, Safety, and Stable Supply; Human Rights and Labor Standards; Environment; Anti-Corruption; Intellectual Property and Information Security; Business and Development Proposals; throughout the supply chain involved in procurement.
Otsuka Group Procurement Policy
The Otsuka group of companies, in accordance with our corporate vision, “Otsuka-people creating new products for better health worldwide”, and international norms, conducts procurement activities in a responsible way. Otsuka delivers innovative, safe, secure, and high-quality products in order to contribute to the construction and maintenance of a sustainable society, as well as to the health of people around the world.
- Relationships with suppliers
As a collaborator with many suppliers, the Otsuka group aims to build good relationships for mutual sustainable development through shared understanding, based on a fair exchange of appropriate information and opinions. - Supplier selection
The Otsuka group selects suppliers in a fair, and transparent manner based on comprehensive assessments of supplier quality, costs, quantity, delivery terms, compliance with laws and regulations, promotion of environment preservation, etc.. - Responsibilities toward society
For the realization of sustainable society, the Otsuka group strives to maintain procurement activities that reflect consideration for human rights, labor, the environment, and non-tolerance of corruption. - Compliance
The Otsuka group of companies observes all applicable laws and rules, and all Otsuka employees and supplier employees must act at all times with the highest level of ethics, consistent with social norms.
Otsuka Holdings Co., Ltd.
September, 2020
Promotion System
Otsuka group companies have, as a general rule, long conducted due diligence on new suppliers and risk assessments of key raw materials, clarified possible risks, and implemented measures such as purchasing from multiple suppliers. In 2022, the Otsuka Group launched the Otsuka Group Sustainable Procurement Project*1, headed by the director in charge of sustainability at Otsuka Holdings, and in addition to the four existing UNGC areas, the Group launched a Group-wide effort to ensure stable procurement in response to natural disasters and geopolitical risks.
The project holds quarterly meetings to discuss the progress of initiatives and share issues, and promotes sustainable procurement. In addition, Otsuka Holdings and five Otsuka group companies announced that they submitted a declaration of partnership building*2 to the government to build trust with supplier companies.
- *1Directors, procurement and IT staff from Otsuka Holdings, Otsuka Pharmaceutical, Otsuka Pharmaceutical Factory, Taiho Pharmaceutical, Otsuka Chemical, Otsuka Foods, Otsuka Techno, EN Otsuka Pharmaceutical, and Otsuka Packaging participated.
- *2This is a declaration aimed at building new partnerships by promoting collaboration, coexistence, and co-prosperity with supply chain business partners and value-creating businesses. Otsuka Holdings (November 2022), Otsuka Pharmaceutical, Otsuka Pharmaceutical Factory, Taiho Pharmaceutical, Otsuka Foods, and Otsuka Chemical (February 2023) have made announcements
Approach
Embedding Sustainable Procurement through Training
We conduct training for sustainable procurement for new purchasing staff to make sure that our policy spreads throughout the group. In 2022, including existing staff, we intended to renew the understanding of issues related to human rights, labor, the environment, and anti-corruption based on the Global Compact Network Japan’s (GCNJ) CSR Procurement SAQ (self-assessment questionnaire).
Implementation of Briefings on Sustainable Procurement Practices
For our primary suppliers of direct materials, in 2022 we held on-demand explanatory meetings for all these suppliers, under the Sustainable Procurement Project. At the meetings, we provided training on the Otsuka Group Procurement Policy, Otsuka Group Sustainable Procurement Guidelines, and Otsuka Group Environmental Vision 2050, as well as on the Guidelines on Respecting Human Rights in Responsible Supply Chains that was announced in autumn 2022, etc.
Implementation of Self-Assessment Questionnaire (SAQ) on Sustainable Procurement
Suppliers that sign the pledge conduct a self-assessment, which consists of the common SAQ published by Global Compact Network Japan, and the Human Rights SAQ and Environmental SAQ that we have developed taking into account characteristics of the Otsuka group business activities. Based on the results, we then conduct interviews with suppliers. Seven companies were interviewed in fiscal 2021, with the interviews conducted remotely as a pandemic measure. The sharing of examples of sustainable procurement practices are opportunities to learn from successful case studies, and cooperating to address specific concerns ensures that we and our suppliers can make tangible progress toward sustainable procurement.
Initiatives of Supplier Companies to Promote Sustainable Procurement
After implementing the SAQ, we interview suppliers by telephone or through the Internet to gauge their activities. By communicating with suppliers, we are able to gain a fuller appreciation of suppliers' situations and to promote sustainable procurement more thoroughly.
| Item | Results | 2022 initiatives |
|---|---|---|
| Procurement staff training | New + Existing staff, 58 in total | Learn about issues in the four UNGC areas based on the Global Compact Network Japan’s (GCNJ) CSR Procurement SAQ. |
| Sustainable procurement briefing | Suppliers in Japan: 583 companies Consented: 583 companies |
Provided on-demand e-learning training on the Otsuka Group Procurement Policy, Otsuka Group Sustainable Procurement Guidelines, and Otsuka Group Environmental Vision 2050, as well as on the Guidelines on Respecting Human Rights in Responsible Supply Chains, etc. Obtained consent from supplier companies that understood the above content and agreed to cooperatively promote sustainable procurement. |
| Sustainable procurement SAQ | Suppliers worldwide: 597 companies (in Japan: 577, overseas: 20) |
In addition to GCNJ’s CSR Procurement SAQ, a Human Rights SAQ and an Environmental SAQ were independently developed based on the Otsuka group’s business activities. In addition, a review of the survey results and risk identification were also conducted. |
| Confirmation of activities | Telephone interviews: 112 companies Web interviews: 13 companies |
Telephone interviews were conducted with 112 suppliers to understand their actual activities. Web interviews were also conducted with 13 companies for deeper dialogue. We were able to confirm activities and understand suppliers' status more deeply. |
Further Promoting Sustainable Procurement
From 2023 onward, we intend to accelerate this project through a comprehensive overhaul of our strategy including reassessing evaluation tools and criteria, improving supplier engagement, the global expansion of briefings and assessments, and improved in-house education.
Promoting Sustainable Procurement across the Group
Yuki Kato
Supply Chain Services
Supply Chain Management
Taiho Pharmaceutical
The subcommittee of the Sustainable Procurement Project is promoting procurement activities that take into consideration the four areas of UNGC together with our partners in the procurement side of the supply chain. To maintain stable procurement of raw materials and stably supply products to be able to continue contributing to people’s health into the future, we always consider what we should do as a procurement department and try to make efforts to achieve benefits for us, our customers, and society, through close discussions with our partners to solve problems. We are very grateful to our suppliers for their understanding and cooperation in our sustainable procurement activities and for helping us to build good relationships with them.
Robust Supply Chain Network for the Stable Supply of Prescription Drugs
Otsuka Pharmaceutical established the Global Supply Chain Committee (GSCC) in 2017 to make decisions on important production and supply-related issues for anticancer drugs, orphan drugs, tuberculosis drugs and others to ensure a stable supply of pharmaceuticals in the global market. Otsuka Pharmaceutical and our overseas subsidiaries are cooperating to strengthen the supply chain. This includes the addition of manufacturing bases in 2022 to bolster the supply chain in the global market for core products.
Joint Business Partner Audits by Pharmaceutical Companies
In the Otsuka group, four pharmaceutical companies conduct joint business partner audits for shared suppliers of raw materials. This unique initiative, launched in 2016, is operated with shared systems, such as common auditor training and an auditor certification program.
Yasumasa Omote
Director of Quality Assurance Division
Otsuka Pharmaceutical
Joint Business Partner Audits
Through joint efforts by the Otsuka group’s pharmaceutical-related companies, we standardized business partner audits and improved the skills of our auditors. This helps us respond to misconduct in the area of quality, which leads to more trusting relationships with raw material suppliers.