Responsible Procurement

The JAL Group will conduct procurement in a fair and open manner in order to build the trust of stakeholders and corporate citizenship activities toward the realization of a sustainable society in the course of our air transportation business and other various businesses. We will promote responsible procurement not only from the perspectives of quality, price, and delivery time, but also with the aim of coexistence and co-prosperity with our business partners, and with an environmentally friendly approach to sustainability, including global environmental conservation, respect for human rights, and appropriate labor practices.

In order to promote responsible procurement activities that take sustainability into consideration, we have established the "JAL Group Supplier Code of Conduct" as items that we ask our business partners to understand and comply with.

The JAL Group Supplier Code of Conduct was established in 2016 and substantially revised in 2019. In formulating this Code, we paid close attention to the ten principles of the United Nations Global Compact in the four areas of human rights, labor, environment, and anti-corruption, as well as international agreements and norms in each area related to sustainability. The code of conduct incorporates the following elements. Through understanding and compliance with this Code of Conduct, we aim to build a sound supply chain that takes sustainability into consideration together with our business partners.

We have issued a declaration in support of the "Declaration of Partnership Building" led by the Cabinet Office and the Small and Medium Enterprise Agency, which aims to increase added value throughout the supply chain and promote coexistence and co-prosperity among companies. In order to build good partnerships with our business partners, we exchange opinions and confirm issues through regular face-to-face meetings, e-mails, and online meetings.

The JAL Group's business, including air transportation business, is supported by the supply chains of a wide variety of business partners. We operate a supply chain ESG program to promote responsible procurement activities that take sustainability into consideration throughout the supply chain and to identify and address significant risks and impacts from an ESG perspective.

Goals are set at the Board of Directors, the Sustainability Promotion Council and the Risk Management Council chaired by the President and group CEO (Representative Director), where progress is monitored and risks are managed to promote the program.

For details, please refer to the "Promotion Organization" below.

For our business partners, we verify compliance with the "JAL Group Supplier Code of Conduct" through annual desk reviews and on-site inspections as outlined in the supplier assessments indicated in the following main initiatives, and we conduct purchasing activities accordingly.

In our purchasing activities, we provide advice and support to ensure that our business partners understand and comply with the "JAL Group Supplier Code of Conduct." However, if a business partner cannot achieve the minimum ESG requirements within a set timeframe and no improvement is observed, we will review the relationship, which may include excluding the transaction (contract).

We give priority to suppliers that handle certified products with confirmed ESG compliance. For example, we have begun to use internationally certified wood and paper products that take forest resources into consideration, as well as MSC^*1 and ASC^*2 certified products, and we continue to promote procurement to expand the use of certified products.

*1 An international certification system by the Marine Stewardship Council for sustainable fisheries that are appropriately managed in an environmentally friendly manner.
*2 An international certification system by the Aquaculture Stewardship Council for aquaculture operations that do not burden the environment and that take the local community into consideration.

We regularly conduct training to inform company’s buyers and internal stakeholders (approximately 200 people) within the JAL Group about the significance of responsible procurement activities, the Supply Chain ESG Program, the importance of climate change and biodiversity initiatives, and sustainability-related issues such as the Declaration on Partnership Building and the Guiding Principles on Business and Human Rights. The JAL Group is united in its efforts to build a sound supply chain.

In the Supply Chain ESG Program, we conduct assessments and provide support to our suppliers based on the level of ESG risks associated with them and the products they handle.

We present the "JAL Group Supplier Code of Conduct" and request suppliers to understand and comply with it. In addition, we conduct supplier assessment using external indicators as appropriate.

From FY2019, we have selected 461 critical suppliers based on factors such as transaction scale, the importance of the products, and irreplaceability, and have completed confirmation of their compliance with the JAL Group Supplier Code of Conduct.

Based on the results of this check and the increasing emphasis on human rights in the supply chain, starting from FY2023, we have selected 60 significant suppliers who have ESG (environmental, human rights, labor, anti-corruption, etc.) risks and business relevance on the JAL Group. We are advancing activities that contribute more to solving social issues, and by FY2025, we will conduct the following desk reviews, on-site inspections, and support activities.

In supplier screening, ESG risks are considered based on country-specific risks such as concerns about child labor in the countries where the products are ultimately manufactured, sector-specific risks such as concerns about technical interns, migrant workers, and long working hours, and commodity-specific risks such as forced labor in the apparel industry.

For significant suppliers, we conduct the following assessments to confirm compliance.

To confirm compliance with the JAL Group Supplier Code of Conduct, we use the CSR information platform provided by Sedex Information Exchange Limited (Sedex^*3), which we joined in 2015, and ask our business partners to complete the Sedex self-assessment questionnaire. Alternatively, we ask our business partners to respond to our own self-assessment questionnaire (JAL Questionnaire).

In addition, starting from FY2023, we are collaborating with 60 significant suppliers to verify the soundness of significant secondary suppliers through the JAL questionnaire.

We are also continuing to disseminate and confirm the JAL Group Supplier Code of Conduct online through SAP Ariba, which was newly introduced in FY2021. We will continue to confirm compliance with the JAL Group Supplier Code of Conduct through questionnaires to ensure that our business partners are not violating the standards we require (ESG requirements).

*3 Supplier Ethical Data Exchange, a non-profit organization established in the UK in 2004 that provides a platform for managing and sharing corporate ethics information with the aim of achieving responsible business practices in the supply chain.

In addition to desk assessments, we have conducted workshops with external experts to perform on-site assessments specifically focused on human rights risks. Based on the insights gained from the workshops, we have established methodologies for on-site assessments and have started operations from FY2024. Based on the results of the JAL questionnaire, we prioritize and select significant suppliers for visits. Our procurement staff will visit these business partners on-site to verify compliance through on-site inspections, document reviews, and worker interviews, checking for any areas of concern.

As part of the assessment flow within the JAL Group, we conduct audits by external organizations. When there is a high potential risk based on factors such as the location (country) of the factories where the products are manufactured, the risks inherent in the production of the products themselves, and the risks associated with the industry, we conduct SMETA audits^*4. In our supply chain, this applies to business partners who handle uniforms. In preparation for the uniform renewal in FY2020, we commissioned a third-party organization to conduct SMETA audits for our business partners providing uniforms starting from FY2019. In FY2023, we conducted SMETA audits for five companies. For one company, we identified areas for improvement, requested corrective actions, and promptly verified the corrections through an on-site visit.

*4 SMETA audit (Sedex Members Ethical Trade Audit) is an audit scheme designed to improve corporate ethics in the global supply chain and is widely accepted as an international standard. This audit enables companies to identify their strengths and weaknesses (non-conformities) against international standards and to identify necessary actions for further improvement of the company. For more information, please visit the official Sedex website.

In order to build a sound supply chain, we believe that it is essential not only to deepen the understanding of the JAL Group Supplier Code of Conduct by our business partners, but also to develop skills of the business partners themselves. To this end, we are taking the following measures for all business partners.

We inform all business partners of this initiative on our website. We also hold regular liaison meetings to share information and exchange opinions with business partners,and in FY2019, we invited an external lecturer to conduct educational activities on ESG/SDGs. From FY2020 onward, we held an online briefing session to ask for understanding and compliance with the JAL Group Supplier Code of Conduct, and to inform employees of initiatives being promoted throughout the JAL Group, such as SAF procurement to reduce CO2 emissions. In FY2023, when requesting JAL survey sheets, we will ask our significant suppliers (60 companies) to participate in the program through either actual place visits or online meetings to promote the supply chain ESG program and to inform them of the guidelines on human rights and other issues. We are striving to further improve business partners' understanding of ESG/SDGs through dissemination of human rights guidelines and other information.

Details of Notification to Suppliers

  - Supply Chain ESG Program
  - JAL Supplier Hotline (Complaint Handling Desk)
  - UN Guiding Principles on Business and Human Rights.
  - Ministry of Economy, Trade and Industry "Guidelines for Respecting Human Rights in Responsible Supply Chains, etc
  - Cases of human rights violations, etc.

In order for business partners to demonstrate better ESG performance, we believe it is also important to understand the activities against peers. We evaluate the results of the Self-Assessment Questionnaire and provide feedback, including comparisons against peers. In FY2022, we provided benchmarks to suppliers that provide inflight meals, and introduced examples of our efforts at other companies. We will continue to provide business partners with access to benchmarks.

[Benchmarking Case Studies]

We evaluate the results of the JAL questionnaire and the Sedex self-assessment questionnaire completed by our business partners. For those partners whose evaluations do not meet our required standards (considered to have ESG risks), we communicate with them and collaborate to develop improvement measures through daily meetings, phone calls, emails, and visits to ensure they meet the standards of the "JAL Group Supplier Code of Conduct." Additionally, during the on-site assessment, starting from FY2024, we request business partners with identified issues to submit a "Corrective Action Plan." We support them by providing information on the reasons for the issues and the necessary actions for improvement.
Furthermore, starting from FY2023, we have been collaborating with significant suppliers to verify the soundness of secondary suppliers through self-assessment questionnaires and other means. We also support the skill enhancement of our business partners by providing the necessary JAL questionnaires for verifying the soundness of secondary suppliers and disclosing information related to ESG initiatives.

The JAL Group, together with its business partners, strives to build a sustainable supply chain that is compliant with laws and regulations, protects the global environment, respects human rights, and has appropriate labor and fair business practices. In addition to supplier assessments, we have established the "JAL Supplier Hotline" to receive consultations and reports from business partners and their employees, and have put in place a system for employees of business partners to deliver consultations and reports directly to the JAL Group. The hotline is available in Japanese and English.

In FY2023, two reports were received and responded to. For details, please refer to the "JAL Supplier Hotline" below.

■KPIs for Supplier screening

■KPIs for Supplier Assessment and Development

Coverage and progress of our supplier assessment program

■Coverage and progress of suppliers with corrective action plans

■Coverage and progress of suppliers in capacity building programs

* Disclosure items in the results of initiatives are disclosed in reference to GRI Standard 414-2, "Negative Social Impacts in the Supply Chain and Measures Taken.