Supply Chain Management

Responses to ESG Issues in the Supply Chain

Daiwa Securities Group has established a "Suppliers' Code of Conduct" so that our suppliers can understand and cooperate with our ESG initiatives.

Daiwa Securities Group Suppliers' Code of Conduct

(Established on May 1, 2023)

I. Introduction

Daiwa Securities Group aims to contribute to the sustainable development of society with high ethical standards, raising "contributing to society" as one of its Corporate Principles. Based on this, our group conducts procurement activities that take into consideration social responsibilities such as human rights, labor standards, and the environment throughout the supply chain in order to contribute to the realization of a sustainable society. We expect our suppliers to do the same for ethical business and responsible procurement activities.

Daiwa Securities Group has recently established the Daiwa Securities Group Suppliers' Code of Conduct (hereinafter referred to as the "Code of Conduct") in order to further strengthen our relationships with suppliers. The Code of Conduct establishes basic guidelines with which all suppliers who provide products and services to our group must comply. Each item has been established based on the 10 Principles of the United Nations Global Compact, the Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises.

We would like to ask all of our suppliers for their understanding and cooperation regarding the items listed below. Note that "supplier" refers to third parties (including subcontractors from third parties) and their employees who provide products, services, and labor to our group.

II. Daiwa Securities Group Suppliers' Code of Conduct

  1. 1.Compliance
    1. 1.1.Comply with the applicable laws and regulations in the countries and regions where business is conducted.
    2. 1.2.Comply with the laws and regulations related to fair trade, such as the Antimonopoly Act and the Subcontract Act.
    3. 1.3.Comply with anti-corruption laws and regulations, and do not accept or provide bribes, unjustifiable entertainment, gifts, benefits, etc.
    4. 1.4.Do not engage in any transactions with anti-social forces.
    5. 1.5.Never engage in money laundering or terrorist financing.
    6. 1.6.Do not engage in any acts that seek interests of yourself, business partners, or third parties against your company's interests.
    7. 1.7.Establish a whistle-blowing system and thoroughly protect whistleblowers.
  2. 2.Information Security/Cyber Security
    1. 2.1.Strictly manage and protect confidential and important information (including personal information) entrusted by our Group, as well as confidential and important information, including the personal information of your own company, customers, and third parties.
    2. 2.2.Strictly manage confidential information and important information (including personal information) obtained through business with our Group and other customers, and do not divulge the information to third parties without permission.
    3. 2.3.Protect against and take measures against network risks and threats such as computer viruses and unauthorized access.
  3. 3.Human rights
    1. 3.1.Respect human rights in all business activities, including the supply chain.
    2. 3.2.Do not engage in child labor, forced labor, or human trafficking.
    3. 3.3.Pay salaries to employees in compliance with the minimum wages and other laws and regulations regarding salaries, etc.
    4. 3.4.Comply with applicable laws and regulations of each country governing employee working hours (including overtime).
    5. 3.5.Provide employees with a healthy and safe working environment.
    6. 3.6.Respect employees' right to freely associate or not to associate in accordance with laws and regulations, and the right to collective bargaining.
    7. 3.7.Do not discriminate on the grounds of race, nationality, origin, creed, religion, politics, gender, sexual orientation, gender identity, social status, physical characteristics, disability, etc., in all aspects of work.
    8. 3.8.Do not engage in harassment such as sexual harassment or power harassment.
    9. 3.9.Promote diversity and inclusion to ensure diversity in the workplace.
  4. 4.Quality and safety of products and services
    1. 4.1.Supply products that meet safety standards stipulated by laws and regulations.
    2. 4.2.Establish and strictly operate a quality assurance system.
    3. 4.3.Provide accurate information about products and services.
  5. 5.Environment
    1. 5.1.Establish environmentally friendly policies and goals with the aim of reducing the environmental impact of all business activities, including the supply chain.
    2. 5.2.Work to reduce greenhouse gas emissions.
    3. 5.3.Work on effective use of resources and energy.
    4. 5.4.Comply with the laws and regulations of each country and region regarding proper treatment and recycling of waste, and work to reduce waste.
    5. 5.5.Comply with the relevant laws and regulations of each country and region and manage chemical substances.
  6. 6.Information disclosure
    1. 6.1.Disclose information such as financial status, performance, and details of business activities to stakeholders in a timely and appropriate manner.

We also disclose statements on the prevention of slavery and human trafficking based on the U.K. Modern Slavery Act 2015.

For our business operations we also formulated the Environmental and Social Policy Framework to strengthen our system for managing environmental and social risks in new investments and loans, and the underwriting of bonds and stocks issuance (hereinafter, financing). We will carry out ESG due diligence for businesses that may have significant negative impacts on the environment and society to determine whether or not to provide financing according to the Framework.

When underwriting an initial public offering, we carry out due diligence in accordance with the items stipulated in the Rules Concerning Underwriting, etc. of Securities by the Japan Securities Dealers Association. In such due diligence, we incorporate an ESG perspective as well as the Environmental and Social Policy Framework and focus not only on business performance and financial aspects but also on other items as key issues, such as the issuer's business model, social reputation, the status of compliance with laws and regulations, the implementation of a compliance system and corporate governance, and the planned uses of the proceeds. We conduct more thorough due diligence on these issues by undertaking field work, meetings and other initiatives, and sometimes make proposals for improvement to the issuer. If major concerns remain even after taking such measures, we report them to the Chief Risk Officer (CRO).
We also collect information provided by public institutions within and outside Japan and exchange information with external parties to be aware of ESG issues existing in the countries and regions where the Group conducts business operations. We then consider taking appropriate measures for important issues.

Partnership

"Declaration of Partnership Building"

  1. Daiwa Securities Group Inc. ("the Company") declares that we will focus on the following items in order to build a new partnership by promoting cooperation, coexistence and co-prosperity with business partners in the supply chain and businesses aiming to create value.
  2. 1.Coexistence and co-prosperity of the entire supply chain and new cooperation beyond scale and affiliate
  3. By working with the other business partners through direct business partners (from "Tier N" to "Tier N + 1"), we will work to increase the added value of the entire supply chain, and at the same time, we aim to build coexistence and co-prosperity with our business partners through collaboration that goes beyond scale and existing business relationships. At that time, from the perspective of business continuity in the event of a disaster and work style reform, we will also promote support such as the introduction of telework for business partners and advice on BCP (Business Continuity Plan) formulation.
  4. (Individual item)
    a. Cooperation between companies

    Our mission is to contribute to the development of society and the economy through financial and capital markets, and we are focusing on solving social issues that are becoming more complex and diversified with the times. By providing all of our solutions, including support for industrial development and reorganization, discovery and development of new industries, funding support for solving social issues, and business succession consulting, we aim to maximize value and utility to all stakeholders including business partners.

    d. Greening efforts

    It is also necessary to solve environmental problems in order to create a sustainable and prosperous society. We have formulated the "The Daiwa Securities Group Net Zero Carbon Declaration", and we support a smooth transition to a carbon-free society through financial businesses, including support the realization of a decarbonized society through finance, support for new technologies that contribute to the realization of a decarbonized society, the provision of investment opportunities for them, promoting solution businesses such as advisory businesses for customers in the field of renewable energy. In addition, in order to reduce the environmental load of society as a whole, including the supply chain, we have announced "Our Approach to Green Procurement" that stipulates environmental considerations in procurement activities. Furthermore, in order to strengthen the management system for environmental and social risks in our business, we have formulated the "Environmental and Social Policy Framework" and will work with our suppliers and business partners to solve environmental problems throughout the supply chain.

    e. Efforts on health management

    We will work on practicing health management, public awareness, and health management support for business partners.
  5. 2.Compliance with "Promotion Standards"
    We will comply with desirable business practices between main subcontracting enterprise and subcontractors ("Promotion Standards" based on the Act on the Promotion of Subcontracting Small and Medium-sized Enterprises), and we will actively correct business practices that hinder the establishment of partnerships with business partners.

    (1) Price determination method

    We will not make unreasonable cost reduction requests. When deciding price, if there is a request for consultation from the subcontractor, we will respond to the consultation and fully discuss it so as to include the appropriate profit of the subcontractor, such as considering the impact of the increase in labor costs. When making a contract, including the determination of price, the parent company will clearly indicate and deliver the contract conditions in writing, etc.

    (2) Payment terms such as bills

    The subcontract price will be paid in cash if possible. When paying by bill, we will try not to bear the discount fee etc. on the subcontractor and make the payment terms within 60 days.

    (3)Intellectual property and know-how

    We will conduct the transaction based on the guidelines and contract templates for intellectual property transactions, and we will not request to make a one-sided nondisclosure agreement, disclose know-how using the transaction position, and transfer intellectual property rights without compensation.

    (4) Wrinkles due to work style reforms, etc.

    In order for our business partners to harmonize to work style reforms, we will not place orders for short delivery times or make sudden changes in specifications to subcontractors without appropriate cost burden. In the event of a disaster, we will not impose a one-sided burden on subcontractors in terms of transactions, and when resuming business, we will give consideration to the continuation of business relationships if possible.
  6. 3.Others (optional description)
    We have "Contributing to society" as one of our Corporate Principles, and we believe that it is our mission to contribute to the development of society and economy through financial and capital markets. With a high sense of morality and duty, we aim to contribute to the sustainable development of the society. We will pursue both social and economic value by emphasizing communication with all stakeholders, including our business partners, and solving social issues that we have grasped through the active communication.

February 8, 2022
(Updated October 14, 2022)
Daiwa Securities Group Inc.
President and CEO,

Seiji Nakata