The TDK Group's Important CSR Issues

Consider the Societal and Environmental Impact of the Supply Chain

Consider the Societal and Environmental Impact of the Supply Chain■ Consider the work environment at manufacturing sites
ImportantThemes

Response to Conflict Minerals■ Consider the work environment of suppliers■ Response to conflict minerals

Against the backdrop of rising interest in responsible mineral sourcing, we act in the capacity of a midstream
company to promote problem-solving initiatives throughout the entire supply chain.

TDK’s Approaches

TDK’s Supply Chain Responsibility
Upstream company(Supplier)

Midstream company (TDK)

Downstream company(Customer)

Human rights issues surrounding mineral procurement have emerged as a crucial social challenge worldwide, prompting keen
and rising interest in responsible procurement of such resources. For example, there are cases when minerals mined in theDemocratic Republic of the Congo (DRC) and adjoining countries serve as the source of funding for armed groups. This brought
notice to how such minerals are used to bankroll conflict, resulting in human rights violations against local residents and othercrises. At TDK, in April 2013, the TDK Group Policy on Conflict Minerals*1 was issued. This prompted each company to set up
survey response systems based on the new rules, along with efforts in compliance with the OECD due diligence guidelines.
*1 Details of the TDK Group Policy on Conflict Minerals, please refer to the following website:
https://www.global.tdk.com/corp/en/csr/social/supplier_responsibility/csr02210.htm

Automotive

Raw materials

Fiscal 2017 Goals and Achievements
Sub materials

Communicationequipment

Electrodematerials

Industrialequipment

Mechanicalcomponents

Electronic componentsInfrastructures

GoalAchievement● Confirmed DRC conflict-free● Confirmed DRC conflict-free

Main activities andmeasures● Implementing surveys at Groupsupplier ratio: over 85%

supplier ratio: 92.3%● Monitor number of customer● Implement monitoring

responses

companies and promotion of DRC
conflict-free initiatives based onGroup common KPI● Promotion of issue solutions

in collaboration with industry
associations

Responses to Surveys and Promotion of DRC Conflict-free at Each Group Company
Executing Our Responsibility as a Midstream Company
TDK offers high-value-added solutions based on materials and components technologies. As globalization
accelerates and we expand our target markets, we develop ongoing relationships with a wide range ofcustomers and business partners. Buyer and supplier relationships with other companies are not uncommon
in some business areas.
Responsible management of supply chains is coming under strict scrutiny with the strengthening of legal
systems and international industry initiatives. For example, the United Kingdom passed the Modern Slavery
Act in March 2015, and the Electronic Industry Citizenship Coalition (EICC) changed its name to theResponsible Business Alliance (RBA) in October 2017. Because these trends greatly affect TDK’s businessenvironment, it is vital that we take suitable measures in our business supply chains.
A shared understanding of social issues and common investigative practices is essential for the practicaland effective implementation of CSR in the supply chain. To bring improvements in efficiency to the entire
supply chain, TDK is working with other organizations from the stage of formulating rules, cooperating with
the industry as a whole, and proposing the standardization of investigative methods.

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TDK is calling upon suppliers to be DRC conflict-free and uses the Conflict Minerals Reporting Template (CMRT) developedby the Responsible Minerals Initiative (RMI)*2 to facilitate the collection of sourcing information relating to conflict minerals. Infiscal 2017, according to the conflict mineral survey conducted by our group companies, 92.3% of TDK's suppliers are DRC
conflict-free, exceeding the year's goal of 85%. At this point in time, no minerals suspected of being involved in the funding ofarmed forces in the DRC and adjoining countries have been confirmed. Furthermore, TDK has been responding appropriately
to requests from customers, and is monitoring the number of responses.
* 2 Responsible Minerals Initiative (RMI): An organization of over 350 companies and associations that leads the effort for responsible mineral sourcing.

Promotion of Issue Solutions in Collaboration with Industry
Associations
TDK is a founding member of the Japan Electronics and Information Technology
Industries Association (JEITA)’s Responsible Minerals Trade Working Group.*3In fiscal 2017 TDK helped to lead JEITA’s Conflict Minerals Inquiry Briefing. We havebeen cooperating with efforts to revise the EU’s Conflict Mineral Data ExchangeStandard (IPC-1755) and have been working on conflict-free certification for smelters.
* 3 For details on JEITA’s Responsible Minerals Trade Working Group, please refer to following website:
http://home.jeita.or.jp/mineral/eng/index_e.html

JEITA’s Conflict Minerals Inquiry Briefing (June 20l7)

26

The TDK Group's Important CSR Issues

Consider the Societal and Environmental Impact of the Supply Chain

Upstream company

Midstream company

Downstream company

Upstream company

Midstream company

Supplier

TDKCustomer

Supplier

TDKSupplier

Procurement

Buyer
Supplier

ProcurementSupplier

Procurement

Buyer

Buyer
Supplier

Downstream company
Customer
Procurement

Buyer

Efforts as a Supplier (Consider the work environment at manufacturing sites)

Efforts as a Buyer (Consider the Work Environment of Suppliers)

As a supplier from which customers procure products, TDK channels tireless efforts into fulfilling its social

As a buyer procuring materials, TDK engages in CSR procurement, emphasizing communication and building

and environmental responsibilities at all of our sites.

strong relationships of trust. We believe that these efforts enhance the corporate value of both suppliers and TDK.

TDK’s Approach

TDK’s Approach (Purchasing Principles, Purchasing Policies)

As a supplier from which customers procure products, TDK is aware that making efforts to consider social and environmental
factors at the Group’s production sites and fulfilling its social responsibility are important also for the continuation of business.
TDK strives to identify issues and make improvements by, for example, implementing CSR self-checks and conducting CSR
audits in response to risks in the countries where sites are located.

TDK engages in global production with production bases in Japan and other Asian countries, the Americas, and Europe. Within
the procurement activities that support production, the development of global procurement structures are crucial, and westrive to use those systems to develop products rapidly to remain competitive in the race to be ﬁrst to market in the electronics
industry. Production bases engage in local procurement, but in todayʼs society with ubiquitous IT networks, materials
procurement activities require close collaboration with suppliers in ways that overcome time and distance. In addition, measures

Fiscal 2017 Goals and Achievements

to fulﬁll corporate social responsibilities such as compliance with applicable laws and regulations, observance of social norms,and preservation of the global environment are promoted actively through partnerships between TDK and its suppliers. TDKGoalAchievement

Main activities andmeasuresputs these principles into practice by engaging in purchasing activities that adhere to our Purchasing Policies.*1*1 Details of the TDK Purchasing Policies, please refer to the following website: https://www.global.tdk.com/corp/en/about_tdk/procurement/pro02.htm● Implement CSR self-checks at all 82 sites● Perform 100% CSR self-checks

at manufacturing sites● Secure 100% opportunities forthird-party CSR audits once
every two years (China andAsia region)● 100% implementation● 100% implementation● Of the 39 targeted sites in the China and Asia region,

implement independent third-party CSR audits ateight sites that have not undergone CSR audits bycustomers in the last two years● Implement CSR internal auditor training in Japan(received by a total of 217 persons up to andincluding fiscal 2017)

GoalAchievement

Main activities and measures● CSR-compliant supplier● CSR-compliant supplier● Request CSR check sheet returns or implement CSR

ratio: over 95%

ratio: 91.2%

audits in response to conditions at Group companies
based on Group-wide shared KPIs

Self-checks, Audits and Ongoing Improvement Efforts

Promotion of CSR procurement

TDK has compiled the TDK CSR Self-Check Sheet, based on the self-assessment requirement for membership in the RBA withthe aims of identifying issues in CSR activities and replying speedily to customers. This self-assessment is implemented annuallyat all targeted manufacturing sites. Furthermore, TDK responds to requests from customers for CSR audits, seeing it as a goodopportunity to further raise the level of CSR activities. Regarding manufacturing sites in high-risk regions of China and Asia, once
every two years we conduct CSR self-audits using third-party auditing companies, including customer CSR audits. TDK has also
been conducting CSR workshops and internal auditor training regularly to convey a systemic understanding of the requirementsof CSR audits to employees and enhance CSR activities at manufacturing sites.

TDK treats CSR as a key component of its purchasing policy, while striving to earn
understanding of the importance of CSR from suppliers and encourage increased
awareness in that area. We incorporate provisions into contractual agreements keyed tothe specific conditions at each of our Group companies, while industriously advancing
evaluations based on CSR check sheets, CSR audits, and other efforts. When problems
are found in the details, individual requests for improvements are issued. In fiscal 2017,
audits confirmed that 91.2% of suppliers of our Group companies were CSR compliant,an 8.8% improvement over fiscal 2016, but still short of the 95% target. We will continue
to strengthen our efforts with regard to Group companies and suppliers.

CSR Trainings in Japan, China and Malaysia

CSR Audits of Major Contract Manufacturers

In fiscal 2017, CSR training was conducted in Japan, China, and Malaysia to further
enhance CSR activities. In Japan, 19 people participated, with RBA internal auditor
training carried out. In China, 28 people participated, deepening understanding of therevised RBA Code of Conduct and the training system. In addition, 14 people participated in Malaysia, with a local CSR voluntary audit carried out, along with practical training
on CSR auditing methods.

Since fiscal 2015, TDK has been conducting CSR audits of major contract manufacturers
upon whom TDK has high dependence in China, a country in which there is high risk inthe labor environment. In fiscal 2017, three CSR audits were conducted, and 21 issues
were identified in total. One important item was a deficiency in protective equipment forworkers, and requests were made for improvements in this area.
CSR training in Malaysia (December 2017）27

Fiscal 2017 Goals and Achievements

Group CSR procurement training(November, 2017; Japan)

Breakdown of CSR audits at
Chinese contractor locations■ Labor 24%■ Health andsafety 66 %■ Environment

10 %28