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Strengthening risk management of the upstream supply chain in 2023
Recently, stakeholders' interest and regulations regarding human rights and environment issues in our supply chain has been becoming stricter. The procurement environment is becoming more challenging due to increasing geopolitical risks, depreciating yen and increasing prices of raw materials, among other factors. Consequently, the significance of risk management in the upstream supply chain is continuously increasing.
Kirin Group considers human rights and environmental issues, procurement costs, and supply disruptions to be major risks. As the Group's procurement department, we are working with subsidiaries and suppliers to strengthen risk management upstream in the supply chain in response to changes in the internal and external environment.
In terms of sustainability risk management in supply chain, we formulated Kirin Group Sustainable Procurement Policy in 2017, which supports a set of essential values in the areas of human rights, labor, environment, and anti-corruption as defined by the United Nations Global Compact.
This procurement policy consists of steady focus on quality, compliance, respect for human rights, environmental conservation, and coexistence and co-prosperity with suppliers, and we have declared that we will conduct our procurement activities in accordance with these five themes.
In 2023, we will establish a "Sustainable Supplier Code of Conduct" covering the entire Kirin Group, with content consistent with global standards in line with revisions to Kirin Group Human Rights Policy and changes in the business environment, aiming to strengthen each Group company’s risk management.
In conducting our human rights due diligence, we assessed and prioritized risks in our supply chain.
In 2023, we worked with our suppliers to conduct third-party on-site audits of Argentine grape juice supply chain, which we identified as high-risk, to confirm that there were no significant issues.
We also participate in Sedex Working Team established by the Japanese food and beverage industry to promote human rights due diligence efforts with other companies.,.
Regarding the risk of fluctuations in procurement costs, we strive to stabilize costs through long-term contracts with suppliers and foreign exchange forward contracts.
As for the risk of supply disruptions due to climate change and geopolitical issues, we are working to enhance the resilience of the supply chain for each item by multi-sourcing and increasing inventories.
We will continue to enhance our sustainability with a global perspective, thereby increasing our corporate value and contributing to society.
Quality initiatives In 2022
The Kirin Group is pursuing Group-wide initiatives to foster a "Culture that values quality" as outlined in the 2022-2024 Mid-term Business Plan. The Group defines quality as "satisfying consumers by providing products and services that meet their expectations."
We have established the Kirin group Global Quality Management Principles (KGQMP), which represent the Kirin Group’s Quality Policy and Action Principles based on the Kirin Group's management principles of "consumer-first approach" and "steady focus on quality" in order to achieve higher quality.
This principle is the basis of quality management that the Kirin Group values throughout the entire value chain, from raw material procurement, to delivery of products and services to consumers through product development, manufacturing, and logistics. This concept is reflected in the quality management systems of each Group company in the food & beverages domain, health science domain, and pharmaceutical domain, both in Japan and overseas, and leads to products and services of reliable quality.
The Quality Assurance Department of Kirin Holdings Company, Limited carries out activities to understand the quality assurance status of each Group company and pursue improvements through regular dialogues on quality assurance with major Group operating companies in Japan and overseas, in order to further enhance the autonomous quality assurance activities of each company. We set common indicators (KH indicators)for quality assurance that are measurable across all entities, including input indicators such as the status of international certification and the sufficiency of resources for quality assurance operations, as well as output indicators such as the number of quality incidents and consumer complaints, and exchange opinions for monitoring and improvement. The status of each Group company is discussed by the Group Executive Committee and reported annually to the Board of Directors.
We have established "Guidelines for assurance of raw material safety in the Kirin Group (food business in Japan)" for the procurement of raw materials in the value chain that the Kirin Group is responsible for, and ensure the safety of the raw materials we use by assessing risks to raw materials handled by Group companies and taking appropriate measures based on a wide range of risk information, including information from government and research institutions in Japan and abroad that is regularly collected by the Quality Assurance Department of Kirin Holdings Company, Limited. In addition, we operate food quality management systems (ISO9001) and food safety management systems (FSSC22000, etc.) that incorporate the concept of international standards as part of our quality assurance initiatives in development, manufacturing, and logistics, and define "Food Defense Guidelines" and "Microbial Assurance Guidelines" to ensure the quality and safety of the products we deliver to consumers.
In the quality management system for the alcoholic and beverage business in Japan, we horizontally deploy examples and measures to prevent recurrence through meetings attended by quality assurance managers of each operating company, so that quality problems that occur in a particular business are not kept within that particular company.
In addition, the Food Safety and Quality Assurance Center, a specialized organization within the Group responsible for product inspection and analysis, provides technical support for the Group's advanced quality assurance system.
We will continue to deliver safe and reliable products and services to our consumers through these Group-wide initiatives, as well as by fostering a culture that values quality.
Making BCP all hazardous In 2021
In the past, the Group has developed a Business Continuity Plan (BCP) for each disaster, such as earthquakes and highly virulent influenza, with each company considering its own countermeasures. However, in recent years, in addition to earthquakes, torrential rains, and infectious diseases, various crisis events have been occurring around the world, such as heightened geopolitical risks and cyber attacks, which not only affect our business in isolation but also have a combined impact on our business, creating a highly uncertain business environment. Therefore, since 2021, we have been working to improve the resilience of our business continuity plan by reviewing our approach to individual crisis events and shifting to an "all-hazards BCP" that focuses on the loss of management resources, including damage to employees and facilities and the temporary suspension of head office functions.
While taking into account the basic approach that has been in place for some time, we have established the Group BCP Basic Policy as the content common to all Kirin Group companies, reiterating that respect for human life is the top priority, and organizing operations related to employee safety and safety confirmation in the event of an emergency as an initial response plan. In addition, with regard to the maintenance and continuation of corporate activities at each group company, we confirmed the status of BCP creation, and in the domestic food domain, we established a recovery plan and target recovery time, identified priority operations to achieve them, and formulated a new business continuity plan for an all-hazard type situation. In formulating the plan, we have assumed a situation in which management resources that we normally take for granted, such as personnel, facilities, and equipment, would be restricted from normal use, and we have clarified decision makers and substitutes, examined alternative means, and otherwise developed a system and structure to ensure a certain level of business continuity in the event of an emergency.
We recognize that the expansion of our business continuity plan is a never-ending effort, and we plan to continue to make constant improvements by establishing an annual PDCA cycle, including regular opportunities to review the contents of the plan. In addition, as a contingency preparedness measure, we will strive to improve the accuracy and effectiveness of the BCP itself by ensuring that it is well understood and widely understood within the group through drills, training, and annual reviews of priority operations, as well as by addressing new issues as they arise. We will continue to improve the flexibility and effectiveness of our business continuity plan so that we can fulfill our social responsibilities by strengthening our ability to respond to various crisis events, minimizing the impact of damage, and maintaining and quickly restoring our business.