Procurement

We value a trust-based relationship with oursuppliers and collaborate together formutual growth.
Manufacturing high value-added products is TEL’ s unwavering goal, achieved only if all components
and materials function as planned to enhance overall product quality. We seek to be fair with oursuppliers, and value mutual trust and growth.
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TOKYO ELECTRON Sustainability Report 2016

Highlights
Percentage ofsuppliers who showed
improvements inthe supply chain CSR
assessment

34

Number of
CFSP-certified
smelters

Percentage ofsuppliers who showed
improvements in thesupply chain BCPassessment

204

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companies％％

Goals and results for fiscal year 2016
ThemeGoals

Promotion ofCSR program●Conflict minerals●

Conduct the third Supplier CSR Survey with key suppliers, thosesuppliers that account for more than 80% of our procurement
spend.

Results
●

●

●

●

BCP

Conduct the second conflict minerals survey.
Improve data accuracy.

Conduct the fifth procurement BCP survey with key suppliers, those accounting for more than 80% of our procurement
spend.

●

Conducted Supply Chain CSR Assessment with key suppliers, those accounting for more than 80% of procurement spend. Improvements were observedin 34% of suppliers.

Conducted a conflict minerals survey with our principal suppliers using theCFSI1 reporting template. Identified 204 CFSP2-certified smelters.
Improved the percentage of known CFSP-certified smelters covered in ouroperations (99.5%).

Conducted a Supply Chain BCP Assessment with key suppliers accounting for
more than 80% of our procurement. Improvements were observed in 27% ofsuppliers.
●
Implemented improvement activities at suppliers with low scores.
●1 CFSI: Conflict-Free Sourcing Initiative. Founded by members of the EICC and GeSI (Global e-Sustainability Initiative),
the CFSI inspects 3TG smelters to certify they do not have conflict minerals.
2 CFSP: Conflict-Free Smelter Program. The CFSP is promoted and led by the CFSI.

Framework
To maintain a robust supply chain capable of supporting streamlined product manufacturing, TEL has instituted a procurement
policy and established a system for administering fair procurement practices based on mutual trust with suppliers. Under theTEL Representative Director and President as the top of the procurement system along with the Senior Executive Vice President
in charge of development & production, the manufacturing
companies presidents’ council and the purchasing department
manager council are convened to share information on various
procurement issues.
The council also serves as a venue to address current problems
and discuss approaches to improve partnership with suppliers.

Representative Director, President & CEO

Senior Executive Vice President, General Manager,
Development & Production Division

Development & Production Division
Manufacturing companies presidents’council

Purchasing department manager council

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Procurement
Sustainable supply chainBCP framework
As part of its business continuity plan (BCP), TEL collaborates with its suppliers for disaster preparation.
When crises arise, a database of our suppliers’ production sites plays a major role in our response. The database is updated annually to help promptly identify impacted suppliers and quickly take recovery steps
following a disaster. The system was introduced in 2011 and is now firmly established with our suppliers. In
fiscal year 2016, the database contained information about 14,000 locations. The information was used toassess the impact of six disasters that occurred during the year.
TEL also conducts an annual survey on our suppliers’ business continuity plans. In fiscal year 2016, keysuppliers, accounting for more than 80% of our procurement spend, were asked to participate in a procurement BCP survey. We found that 27% of suppliers showed improvement over the previous year. Survey
results were shared with suppliers to promote further improvement.

CSR procurement
TEL aims to build and maintain a robust and sustainable supply chain. To achieve this goal, we have established a procurement policy that requires strict compliance with labor laws and regulations and respect
for fundamental human rights (including prohibitions against child labor and forced labor). Suppliers arerequired to abide by this policy. Additional documents regarding our compliance with the EICC Code of
Conduct are posted on the TEL website where information about our “green” procurement guideline-based
environmental activities is also available.
In fiscal year 2016, we conducted a Supply Chain CSR Assessment for our key suppliers, who account for
more than 80% of our procurement spending. The assessment, which evaluates the compliance with theEICC Code of Conduct, showed year-over-year improvements in 34% of suppliers. The assessment included
a questionnaire on child labor, forced labor, bonded labor, inhumane treatment, false reports, falsification ofrecords, and bribery. The answers we received indicated that none of our suppliers were engaged in thesepractices. Also, none of our suppliers had a sufficient number of employees* to be considered high risk interms of compliance. As with the BCP survey, the assessment results were shared with suppliers to encourage additional improvement.
* 500 employees or more

Conflict minerals
TEL considers taking action against conflict minerals1 an important part of its corporate social responsibility.
Conflict minerals are illegally mined and give rise to poor working conditions and human rights violations.
Our goal is to eliminate the use of raw materials and components containing conflict minerals.
In fiscal year 2016, we conducted our second annual survey on countries of origin and smelters of potential conflict minerals (3TG: tantalum, tin, tungsten, and gold), using the CFSI reporting template. As a result,we identified 204 CFSP-certified smelters, providing us confidence that 3TG sourced from these smelters
were conflict-free. None of the materials that TEL procured were found to contain conflict 3TG. This survey
will continue every year, with the cooperation of our suppliers, to further improve the quality and accuracyof the survey.

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TOKYO ELECTRON Sustainability Report 2016

1 Conflict minerals: Minerals minedin the Democratic Republic of theCongo (DRC) and neighboring
countries used to finance armed
groups or minerals mined inother conditions where humanrights abuses and labor problems occur. The term commonlyapplies to four minerals: tantalum, tin, tungsten, and gold.

Supply chain communication
Cooperation with suppliers
In addition to daily communications, TEL holds Production Update Briefings and a TEL Partners Day toenhance relationships with suppliers. At these events, we present and exchange information on the management plans, market trends, business policies, and CSR initiatives. We also ask for continued cooperationin strengthening our supply chain, and honor outstanding suppliers to express our appreciation for theirconstant support.
Strong quality management at suppliers is essential to improve product quality. Since 2000, we have regularly conducted a Supplier Total Quality Assessment (STQA) to clarify what is expected of our suppliers interms of maintaining and improving quality. Before starting business with new suppliers, an STQA is conducted to evaluate their handling of product quality, cost, information security, and CSR issues (including humanrights, ethics, safety, and the environment). The entire management system is comprehensively assessed.
After we have an existing business relationship with suppliers, they are asked for a similar self-assessment
every three years. If the results do not meet TEL standards, TEL-certified auditors visit the supplier to explain the problems revealed by the assessment. Once the supplier understands the issues, they are asked to
implement improvement measures in line with our written requests for improvement. TEL internally keeps
track of all requests and improvement measures, offering continual support to suppliers until all necessary
improvements have been made.
TEL is also partnering with our suppliers to implement a TPM program. The production of any piece ofequipment involves a number of supplier processes. In the TPM program, supplier shop floor improvement
teams collaborate with TEL employees to enhance productivity and product quality. In one example, theprogram led to a 30% reduction in the number of steps required to assemble modules and systems. The
program also plays a key role in educating supplier improvement team members.

TEL Partners Day

Cooperation with industry organizations
In June 2015, TEL joined the EICC, an electronics industry coalition on CSR. EICC participation includes
adopting the EICC Code of Conduct, a set of standards to improve labor practices, health and safety, environmental impact, and ethics in the electronics supply chain. TEL adheres to the EICC Code of Conduct tomaintain and strengthen its supply chain, in cooperation with other EICC member companies.

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