Miki Shoko Co., Ltd. Modern Slavery Act Statement for Financial Year 2018

Introduction
This modern slavery statement (the ‘Statement’) is published by Miki Shoko Co., Ltd.
(‘Miki Shoko’) in accordance with the UK Modern Slavery Act 2015 (the ‘Act’) 1. The
Statement covers Miki Shoko and all of the subsidiary companies detailed below. It
sets out the steps we have taken to comply with the Act and to prevent modernslavery (including human trafficking) in our business and supply chain.

Organizational Structure, Business Description and Supply Chain
The Miki House Group develops, produces and sells children’s clothing and familyrelated goods. We also deliver cultural services including publication, education andchild rearing support. Our primary brand is Miki House.
The Miki House Group is comprised of the following companies: Miki Shoko Co.,
Ltd., Miki House Co., Ltd., Miki House Trade Co., Ltd., Miki House France S.A.R.L.,
Miki House Americas Inc., Miki House U.K. Ltd., Miki House Kosodate Soken Co.,
Ltd. and Miki House & Shogakukan Production Co. Ltd.
The Miki House Group has business operations in Japan, the United Kingdom, theUnited States, France, China, Taiwan, South Korea, Thailand, the RussianFederation, Ukraine, Canada, Indonesia, Australia, New Zealand and Singapore.
The Miki House Group procures goods and services from around the world.
However, most of our suppliers are located in Japan, China and Vietnam. We are in
the process of mapping our primary supply chain as part of our due diligenceprocess outlined below.
As of August 2019, the supply chain for Miki Shoko has been confirmed to haveminimum of 151 supplier factories. Looking at these in more detail, the suppliers canbe broadly grouped into three types: those that perform in-house manufacturing,those with in-house manufacturing as well as outsourcing, or those that function as
so-called trading houses and for only outsourced manufacturing. Miki Shoko iscurrently working to identify supplier factories. And in the future, it is also underconsideration to identify 2-Tier supplier factories and suppliers of raw materials.

1

All information and data used in this statement refer to those obtained by October 15, 2019.

The Supply Chain Structure of Miki Shoko (Final Assembly Only)

Additionally, there are 23,624 workers currently identified worldwide engaged at oursupplier factories. By country, it was confirmed that there were 3,860 people
engaged in manufacturing bases in Japan, and there were 10,881 in China, 8,324 in
Vietnam, 900 in Myanmar, and 352 in Thailand. These numbers include foreign
workers where the risk of modern slavery is high. (Refer to 7. Risks Related toForeign Workers in Due Diligence and Risk Management for Modern Slavery).

Workers at factories producing Miki Shokoʼs products

China 10,188
Japan 3,860

Myanmar 900
Thailand 352

Vietnam 8,324
名Total 23,624

Policies Related to Modern Slavery and Human Trafficking
We recognize that the adoption of a clear policy framework is an essential foundation
to mitigate the risk of modern slavery and have adopted since 2017 the followingpolicies:•••Policy on Human Rights for Suppliers
Code of Conduct for Suppliers
CSR Procurement Policy

The Policy on Human Rights for Suppliers outlines Miki Shoko’s commitment torespect human rights and sets out the steps we are taking to realize ourcommitment. Our Code of Conduct for Suppliers prohibits the use of forced labor andchild labor and outlines standards to ensure ethical recruitment practices.
In the assessment by RightsDD Limited (‘RightsDD’), it was proposed to incorporate
additional topics into the policy such as: the grievance mechanism; protection offoreign workers; dormitories; extending Code of Conduct to the 2-Tier suppliers andbeyond, etc. Steps for these will be taken based on priority.

Due Diligence for Modern Slavery and Risk Management
Miki Shoko is committed to conducting due diligence to identify and address the risks
of modern slavery in its supply chain. In order to meet these commitments, weengaged The Global Alliance for Sustainable Supply Chain (‘ASSC’) and RightsDDin July 2019 to conduct due diligence of approximately 100 factories which supply
Miki Shoko to assess risk of modern slavery.
As part of the due diligence process, ASSC and RightsDD will identify risks andstrategies to manage and remediate the respective risks.
Furthermore, the due diligence process seeks to identify risks to workers, consistent
with the United Nations Guiding Principles on Business & Human Rights.
Using proprietary technology from RightsDD and analysis of data obtained fromquestionnaire surveys of suppliers in August 2019 by ASSC, ASSC and RightsDD
assessed primary supplier factories on the risk of modern slavery. ASSC andRightsDD assessed and prioritized supplier factories for risk of modern slavery toboth identify a trend and prioritize by using a three-stage process (1. Implement due
diligence on risk of modern slavery at Miki Shoko and its supply chain, 2. Propose
risk handling measures, 3. Issue a statement on modern slavery) together with thesupplier questionnaire survey results. Risks have been categorized based on six
criteria: country, industry, product/service, adverse media reporting, risk mitigationand employment type risk.

In addition, the evaluation of supplier factories obtained through SAQ surveys andvisitation surveys to supplier factories conducted jointly by Miki Shoko and ASSC isalso used as risk assessment information, which is described in detail below.

1. Country
Looking at the number of supplier factories by country for Miki Shoko and thecountry-specific risks of supplier production bases, the largest number of supplierfactories was identified to be in Japan with 66, followed by China with 38, Vietnamwith 5, Thailand with 2 and Myanmar with one. Including their suppliers, it became
clear that Indonesia and others were part of the supply chain. Looking at the risk
indicators from RightsDD's own analysis of the countries where suppliers'
production bases are located, it showed that the highest number of suppliers werein Myanmar, Thailand, Indonesia, Vietnam, Bangladesh, and China in that order.
The geographical risks on the Miki Shoko supply chain can be mapped as shownin the diagram below.
Geographical Risks in the Supply Chainlowhigh

Estimated prevalence of modern slavery victims in Miki Shoko’s supplier’s countries of operations(victims per 1,000 population). Larger circles indicate a greater number of suppliers.

Highest Risk Countries related with Miki Shoko Supply Chain

Supplier factories have production operations in 15 countries. The following five countries are rated withthe highest risk (victims per 1,000 population):2. Industries
Miki Shoko currently operates businesses in 15 industries from the industries
category list provided by RightsDD. Many of these, when viewed by industry andproduct from the perspective of risks of modern slavery based on data on humanrights risks provided by US NGO Verité and US Department of Labor, “Leather &Leather Products”, “Rubber & Plastic Footwear”, “Footwear ( No rubber)” and“Dolls & Stuffed Toys” are identified as the industry sectors with the highest riskof modern slavery.

3. Products/Services
Looking at the trends for risks by product, the risks in three product categories ofapparel, footwear and toys were particularly high, where these products weremainly manufactured in China, Vietnam, and Thailand. The table below shows
the number of suppliers by high-risk product area.

Number of Supplier Factories with Enhanced Product Risk by ProductProduct Categories
FootwearApparelToys

No. of Supplier Factory
12293

4. Adverse MediaMiki Shoko was confronted with a report in 2016 that revealed serious humanrights violations against workers at supplier factories operating in Myanmar for
Miki House Trade. In response, Miki Shoko established a third-party committee
and conducted a survey and published a detailed report. Since then, Miki Shoko
understands the need to pay close attention to the labor environment and respectfor human rights in the supply chain and the importance of an effective monitoring
system, so that since 2017 we have been cooperating with NGOs and otherstakeholders to formulate CSR procurement policies, request compliance withsuppliers and conduct fact-finding surveys.

5. Risk Mitigation
In order for Miki Shoko to reduce the risk of modern slavery in the supply chain it
is important for suppliers to take steps to ensure that modern slavery does notexist in their business activities and supply chains. These governance evaluations
for risk reduction were categorized into four levels on policy, process andcertification/initiative.
•••

Policy: Is there a clear policy/framework to mitigate risk of modern slavery?
Process: Are there any programs to enhance training programs, complaints handlingmechanisms or effectiveness of policies?
Certification/Initiatives: Are you a member of a multi-stakeholder initiative?

The chart below shows the results of this analysis. 14% of all supplier factories rated
Tier 1 had the highest level of governance, and more than half (53%) were rated at
the lowest level of governance.

Supplier factories are analyzed into one of four governance tiers:

14%
11%

Tier 1 – highest level of governance
Tier 2Tier 353%
22%

Tier 4 – weakest governanceIn order to reduce the risk of modern slavery, it is important to raise the level ofgovernance that establishes and maintains a system to prevent the existence ofmodern slavery. For this, it is important to develop policies that specifically prohibit
forced labor and child labor, develop and implement training programs that educate
workers about payments over minimum wages and modern labor risks, participate
in initiatives to handle complaint handling and improvement mechanisms,independent audits, obtaining certification and address problems with modernslavery. Based on due diligence evaluations we will promote these practices
together with our supplier factories.

6. Type of Employment
In the assessment for “Risks regarding Type of Employment,” the points verified
with three questions are used as indicators. The points were 1) Are the workers
employed at the supplier as permanent or non-permanent employees? 2) Are
placement agencies (agents) used to hire workers? and 3) Employment of foreign
workers.
Attempting to identify these three points through questionnaires with suppliers
yielded the following results.

ARE EMPLOYMENT AGENCIES USED TO HIRE EMPLOYEES (INCLUDING
SENDING ORGANIZATIONS)
①はい
①YES

NO ANSWER
③無回答

②いいえ
②NO

22%

60%

18%

PERCENTAGES OF NON-REGULAR EMPLOYEES BY FACTORY①0−25%②26-50%34.8%③51-75%

13.4%④76-100%

9.8%

33.9%

無回答
NO ANSWER

8.0%

ARE THERE HIRINGS OF FOREIGN WORKERS?
①はい
①YES

25.0%

②いいえ
②NO

75.0%

7. Risks Regarding Foreign Workers
If you look at Miki Shoko's supply chain, foreign workers, which account forapproximately 5% of the total, are engaged at factories of primary suppliers.
It has been found that there are at least 26 supplier factories hiring foreign
workers with due diligence processes on human rights. It should be noted that
22 of these are supplier factories located in Japan that employ technical interns,
where they are mainly from China and Vietnam. Considering the percentage outof the total for Miki Shoko that these supplier factories comprise and together
with the risk assessment obtained from the “Supplier Factories Survey on
Technical Intern Training Program” described later, we can conclude that thepriority for placing such measures in Japan is relatively high. When employing
foreign workers, the risk of being complicit to forced labor is thought to berelatively high, so we believe it is important to continue to engage with factories
that we outsource manufacturing.

Number of Foreign Workers in Miki Shoko Supply Chain (by nationality)
Worker TypeTechnicalInterns(in Japan)
ForeignWorkers (inJapan)
ForeignWorkers(locatedoutside ofJapan)
ForeignWorkers Totalby Nationality(engaged inthe country ofdestination)

Japan

China

VietnamPhilippines

Myanmar099

12500016981001115134

Nepal

Cambodia

Total

01225030360700071870

31332

8. Research for Technical Intern Trainees in Japan
Regarding the above-mentioned issues related to the technical intern training
program in the supply chain in Japan, Miki Shoko conducted a questionnaire survey
in 2017 and on-site survey on 25 supplier factories from February 2018 to October
20192. In the survey, on-site surveys were made on the working environment andworking conditions of technical interns based on the Supplier Code of Conduct, andany current issues that were recognized were shared with the managers andadministrators of the supplier factories. A drafting of an action plan to reduce risk
will now be studied. The following is an overview of the risks revealed through thefact-finding survey.
・ Risk that foreign workers bear various expenses incurred for technical training
・ Risk of “debt-bondage” due to the above-mentioned worker burden
・ Inconsistencies to the practical training plan and the training being conducted
at a different location than in the filing, which are prohibited by the program・ Limited guarantee on freedom of association
・ Unclear deductions from wages
・ Geographical restrictions on municipal services and their associated isolation(social isolation)
・ Infringement on freedom to change jobs (due to the legal system of Japan)
・ Registering a subsidiary company with the same location to increase thenumber of technical interns

2

The difference in the number of “companies that employ technical intern trainees” mentioned above is due to changes at the suppliers
since the time of the July 2019 SAQ survey.

Training on Modern Slavery and Whistleblowing System
Employees can approach the HR/labor department for any reporting within the Miki
Shoko Group and have individual consultations about them.
Regarding the current state of the whistleblowing system at the supplier factories,
according to the results of the 2019 SAQ questionnaire survey, 58% of supplierfactories responded that they had some kind of consultation desk, including internaland external consultation desks and opinion boxes. However, it has become clearthat only 8% of supplier factories responded that they had set up a consultation desk
by a third-party organization and are accepting consultations via telephone or SNS.
We regard this as an area that needs to be improved.
DO YOU HAVE A CONSULTATION DESK FOR WORKERS?

A third-party consultation desk has been set up to receive consultations via telephone and SNS.
①第三者機関による相談窓⼝を設置し、電話やSNS等で相談を受け付けている。
②社内に相談窓⼝を設置し、電話やSNS等で相談を受け付けている。
A consultation desk is set up in the company, and consultations are accepted via telephone and SNS.
There is no telephone or SNS, but there is an opinion box in the company.
③電話やSNS等は無いが、社内に意⾒箱を設置している。
④相談窓⼝は無いが、概ね1年以内に対応する。
There is no consultation desk, but we will do so within a year.
⑤相談窓⼝は無く、当⾯対応の予定なし。
There is no consultation desk and there is no plan for the time being.
回答なし
No Answer

8.0%

32.1%

17.9%

4.5%

27.7%

9.8%

In addition, a training session on modern slavery was held, where Board Directors
and director-level managers of Miki Shoko attended NGO-sponsored learning
sessions (such as the Foreign Workers Roundtable, organized by the Global Alliancefor Sustainable Supply Chain3). In the future, we believe it is necessary to expand
the scope of the training and consider support for employees to be able to develop
knowledge about modern slavery. Furthermore, we trained the production managers
with hands-on experience by accompanying field surveys conducted at supplierfactories.

3

http://g-assc.org/en/foreign-labor-round-table/

Roadmap for the Mitigation of Risk of Modern Slavery
Based on the above assessment, Miki Shoko has identified the following initiatives aspriorities:✔ Countries and products that should be prioritizedØ Japan, followed by China and Vietnam as location of suppliersØ Apparel, footwear and toys as high-risk product categories.
✔ Policies: Review of related policies and supplier code of conductØ Additional notes on dormitoryØ Additional notes on grievance mechanismØ Additional consideration of notes for reducing burden to workers onrecruitment fees
Ø Request 2-Tier and beyond supplier factories to also comply with similar
standards✔ Engagement with supplier factories
Ø Provision of training opportunities on modern slavery
Ø Follow-up after conducting a fact-finding survey
Ø Follow-up after SAQ survey² Further improve transparency in the supply chain (specifying outsourcedfactories)² Share survey results and future issues with supplier factories✔ Build a grievance mechanism for workers on the supply chain that is highly
effective and reliableØ Supplier factory/Worker Training Session
Ø Utilization of Workers Voice Application

Effectiveness in Ensuring Slavery is not Taking Place and Performance
Indicators
Since Miki Shoko commenced its modern slavery due diligence process in July
2019, we expect to conduct an assessment on the effectiveness of these measures
after a certain period of time has passed.
Authorization
This Statement on Modern Slavery was approved by Miki Shoko’s Board of Directors
on 25 November 2019.

Exective Director / General Manager of President’s Office
Akio Mitsukawa