Supply Chain Management
Initiatives
Initiatives with Suppliers
Supplier Evaluation
Before starting business dealings with a new supplier, Canon conducts an assessment based on the Canon Supplier Code of Conduct and other reference standards of whether the company fulfills all requisite standards in terms of corporate ethics (legal compliance, product safety, management of confidential information, human rights, labor, health and safety, intellectual property rights protection, etc.), environmental conservation (chemical substance management, prevention of air pollution and water pollution, proper disposal of waste, initiatives aimed at conserving energy and resources, reduction of GHG, and biodiversity conservation), finance, and production structure (quality, cost, delivery, manufacturing capacity, and management).
Only those suppliers who meet these criteria are accepted onto the Supplier List. Canon conducts an annual survey of suppliers registered on the list and makes a comprehensive evaluation based on the survey results, performance as a supplier, and other factors. The results are then reflected in the supplier list, enabling us to preferentially deal with suppliers with high evaluations. We conduct on-site audits of suppliers with low evaluations and provide guidance and instruction for improvement. In particular, Canon may choose to terminate business with suppliers if they are not complying with laws and social norms covering areas such as human rights, labor, and the environment.
- * Corporate ethics covers areas including legal compliance, product safety, management of confidential information, human rights, labor, health and safety, and intellectual property right protection.
For parts and materials suppliers of its main business products (“major suppliers”), Canon uses the RBA’s SAQ to identify their labor, health and safety, environmental, and ethical risks. Our 2023 survey of 385 companies elicited responses from 378 companies (representing 512 sites). Suppliers that did not reply to the survey were followed up individually. No businesses were identified as high risk among these suppliers, but we provided feedback on the results of labor, health and safety, the environment and ethics to our major suppliers and requested that they identify weaknesses and improve on them.
We also take appropriate steps to verify the SAQ responses received from a limited number of major suppliers in Japan and Asia, including on-site checks.
We also request major suppliers to sign an agreement concerning the RBA Code of Conduct. In 2023, agreements were signed with 373 of 385 major suppliers, equating to a consent rate of 96.9%.
Since 2022, at our core business production sites, we have also been carrying out risk assessments relating to labor, health and safety, the environment, and ethics, focusing specifically on onsite service providers related to security, cleaning, and cafeteria, labor agencies, and facility or dormitory management companies. The assessments conducted in 2023 identified risks mainly in the following areas, and we worked toward improvement in collaboration with suppliers.
Charging for Work Uniforms
We confirmed a case in which workers required to wear work uniforms and other items purchased these items themselves and received a refund only when they left the company. Canon instructed the supplier not to make workers pay for uniforms and other items, revising the supplier agreement to include these conditions.
Frequency of Evacuation Drills
With some suppliers that were not conducting at least an annual evacuation drill, Canon requested that evacuation drills be conducted at least once a year, and confirmed the plans implementing these drills.
Document and Record Management
Some suppliers reported not having up-to-date documentation on legal permits and licenses relating to the environment. Canon requested these suppliers to identify applicable laws, regulations and licenses, and establish a mechanism for maintaining up-to-date records.
Safety Signage and Communications
Canon requested suppliers with work involving hazards such as heights or high voltage to conduct risk assessments and use personal protective equipment. Canon also requested suppliers to display hazard information in a language that workers can understand.
Management of Personal Information
Some suppliers reported that they did not manage personal information through encryption or other appropriate access controls. Canon requested these suppliers to manage information appropriately such as by setting passwords and locking storage rooms.
Green Procurement and Guidance to Suppliers
In the environmental area, Canon has established Canon Green Procurement Standards, which outline its environment-related requests to suppliers. Suppliers must comply with these standards to do business with Canon. Specifically, we view a supplier’s environmental management as consisting of two interrelated elements: management of business activities, and management of parts and materials. We require that the supplier must operate effective environmental management in each of the four frameworks labeled A–D in the diagram below. If a supplier is found to have a negative impact on the environment, we immediately demand corrective action be taken and check the status of improvements made.
To promote environmental conservation activities, we require Canon suppliers throughout the supply chain to work for environmental impact reduction in their business activities by putting in place and operating an environmental management system. Specifically regarding the chemical substance content of products, alongside the requirements of our Green Procurement Standards, we have put in place an in-house system for centralized management of information on the content of such substances in parts and materials so as to exclude the possibility of product contamination with prohibited substances.
It was already Canon’s practice to check the organization and environmental performance of a supplier’s business activities and any corrective measures taken. Now, we have further strengthened our risk management to help prevent pollution in our supply chain. For example, in order to ensure compliance with stricter regulations, we are taking measures to boost information gathering and analysis activities regarding laws and regulations on wastewater and emissions in emerging countries. We are also reinforcing risk management in plating processes, where there is a relatively high risk of environmental pollution associated with wastewater treatment as a certain volume of heavy metals is used. As some of our plating contractors, who constitute tier-two suppliers, lack an in-house wastewater treatment facility and subcontract services to a wastewater treatment provider, Canon now also verifies the compliance status of these subcontractors. Expanding the scope of risk management in this way helps ensure pollution prevention.
Reduction of Supply Chain Environmental Risk in Partnership with China’s Institute of Public & Environmental Affairs (IPE)
Based on supply chain information published by the Institute of Public & Environmental Affairs (IPE), a Chinese environmental NGO, we help secondary and tertiary suppliers and other Chinese businesses located in the upstream of the supply chain to reduce environmental risk by making recommendations and carrying out improvements. By sharing information regularly and communicating with the IPE on best practice, we contribute to reducing environmental risk throughout the supply chain.
Comment from the Director of the IPE
For many years now, Canon has engaged in supply chain management with the use of the IPE’s Blue Map Database to promote the remediation of environmental violations by suppliers and to actively contribute to reducing the environmental impact of the entire supply chain. In the IPE’s Green Supply Chain CITI (Corporate Information Transparency Index), Canon has been ranked in the industry’s top 10 for 10 years in a row. It has also been ranked among the best in the industry in CATI—the Corporate Climate Action Transparency Index—which evaluates actions to address climate change in the company itself and across its supply chains. Going forward, IPE looks forward to working with Canon to further accelerate its efforts in reducing its environmental footprint.
Director, the Institute of Public & Environmental Affairs (IPE)
Cooperation with Suppliers
Canon is enhancing its cooperative relationships with suppliers through implementation of the EQCD concept.
Specifically, as part of our environmental initiatives, at the annual conference on procurement policies, we explain to suppliers the measures Canon is targeting to achieve net zero by 2050, including visualization of CO2 emissions across the entire supply chain; promoting steps by suppliers to reduce CO2 emissions; and adopting parts and materials with lower CO2 emissions.
To help improve quality, we also work with suppliers to analyze defective items and related causal factors as part of improving processes.
Through these types of communication, we aim to share information with suppliers, strengthen collaboration, and grow together.
Hotline for Risks in the Supply Chain
Canon has set up a hotline to allow anyone inside or outside the company to anonymously report any concerns about the supply chain. This enables whistleblowers to share any specific concerns or information relating to issues such as child labor, forced labor, or other problems in the areas of human rights and occupational health and safety. This process is detailed in the Canon Supplier Code of Conduct and publicized.
Addressing the Issue of Responsible Minerals Sourcing
Products manufactured and sold by the Canon Group and numerous other corporations contain materials that originate from a variety of minerals. These materials are sourced through diverse supply chains from their places of origin throughout the world. Mineral mining sites, smelters or other processing sites for some of those materials have been shown to have links to armed groups, serious human rights violations or environmental destruction. Corporations are therefore being called upon to exercise their social responsibility by identifying conflict/high-risk regions and avoiding the use of materials supplied from business operators disrespecting human rights or environmental conservation in those regions.
To reassure customers using Canon products, we are working with suppliers and industry bodies on responsible mineral sourcing initiatives.
Canon Group Basic Policy on Responsible Minerals Sourcing
Due Diligence
Canon investigates the countries of origin of minerals and exercises due diligence, following the 5-step framework recommended by the Organization for Economic Co-operation and Development (OECD) in its Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance).
Based on a common Group-wide policy and survey reporting system, Canon identifies products that could contain certain metals or minerals and then conducts investigations of the parts and materials in question, tracing up the supply chain to determine places of origin. Canon exercises due diligence to identify human rights and environmental risks in conflict-affected and high-risk areas around the world.
Risk Identification and Evaluation
Tin, tantalum, tungsten and gold (3TG) produced in the Democratic Republic of the Congo (DRC) and neighboring countries are said to have been used in some cases to provide funding for armed groups allegedly responsible for serious human rights violations, environmental destruction, illegal mining, and other issues. This is generally referred to as the “conflict minerals.” Canon has been conducting 3TG-related risk assessments in Africa for the DRC and neighboring countries since 2013.
The Conflict Minerals Regulation came into force in the EU in 2021. Although this regulation does not apply to Canon, we have broadened the scope of our 3TG risk assessments beyond the DRC and neighboring countries to include other conflict-affected and high-risk areas.
Moreover, there has been heightened worldwide attention in recent years to the procurement risk associated with non-3TG mineral substances. Specifically, cobalt — used in lithium-ion batteries and other applications — is the focus of concern over potential human rights violations, including child labor, at mining locations. Canon began assessing cobalt procurement risks in 2021.
In identifying the above risks, Canon’s due diligence surveys utilize the Conflict Minerals Reporting Template (CMRT) and the Extended Minerals Reporting Template (EMRT) published by the Responsible Minerals Initiative (RMI*). In addition, we use internally developed formats to identify mineral sourcing risks where necessary.
- * An international program that plays a leading role in the response to conflict minerals.
Initiatives to Reduce Risk
Supplier cooperation is essential in identifying places of origin for minerals and related smelters. We assist suppliers by compiling a guidance manual for the surveys. Where significant risk is found, we seek to mitigate it by requesting that suppliers switch to a supply chain with lower mineral procurement risk.
Canon established a page entitled “Procedure for the Submission of Concerns Regarding Mineral Risk” on its official website to recognize such risks in the early stage. Parties with specific concerns and/or information regarding circumstances of extraction, trade, handling and export of minerals in conflict-affected and high-risk areas as they pertain to Canon product supply chains (such as facts indicating that those minerals are the source of funds for armed groups in conflict-affected areas and human rights violations) can contact Canon through this page.
Procedure for the Submission of Concerns Regarding Mineral Risk
Cooperation with Industry Groups
Since April 2015, Canon has supported the activities of the RMI, an international program focused on addressing the issue of conflict minerals.
In Japan, Canon is active as a leading member of the Responsible Minerals Trade Working Group (RMTWG) of the Japan Electronics and Information Technology Industries Association (JEITA). Canon is also a member of the Conflict Free Sourcing Working Group (CFSWG), which cooperates with JEITA and leading Japanese automakers.
2023 Surveys and Disclosure
In 2023, Canon sent CMRT/EMRT-based surveys to eligible suppliers. The response rates were approximately 94% for CMRT and 88% for EMRT (all figures as of March 31, 2024).
Based on the survey responses, there is no evidence pointing towards significant human rights or environmental risks in Canon’s supply chain. However, the complex nature of the supply chain makes it difficult to identify specific smelters or in many cases to obtain clear responses. Given these and a range of other survey challenges, Canon is working for further risk identification and improvement.
In line with OECD Guidance, the results of Canon Group surveys, the assessment framework, risk analyses and information relating to specific smelters are published annually in the Conflict Mineral Report on Canon’s website.
The Conflict Mineral Report is audited by independent private-sector experts to provide some assurance that the Group’s initiatives on conflict minerals investigation conform to international standards in the form of the OECD Guidance.
A total of eight Canon Group production sites underwent VAP audits by the RBA in 2023. Canon was recognized as being compliant with standards for responsible sourcing of minerals as listed in the RBA Code of Conduct (Section D. Ethics (7) Responsible Sourcing of Minerals).
Compliance with Modern Slavery Act
The Modern Slavery Act 2015 enacted in the United Kingdom in 2015 mandates that enterprises of a certain scale operating in the UK publish annual statements detailing the risk of forced labor, human trafficking and child labor within their own operations and supply chain. In 2018, Australia enacted a Modern Slavery Act, under which companies above a certain size operating in Australia are required to evaluate the risk of forced labor and other issues in the supply chain and in their own business activities and to disclose measures taken to reduce the risk.
Annual statements are published by Canon Group companies that fall within the scope of the law, based on the information on human rights risk assessments conducted by Canon Group production sites and suppliers.
Annual statements are also published by Canon Medical and Axis in compliance with this legislation.
Canon Europa N.V., Canon Europe Ltd., and Canon (UK) Ltd. Modern Slavery Act Statement
Canon Australia Pty Ltd. Modern Slavery Statement