Supply Chain Management

Policies and Concepts

In recent years, companies find themselves required to monitor the ESG risks and impact on sustainability, including consideration of human rights and mitigation of environmental impacts, of not only their own group companies but also throughout the entire value chain, from raw materials and supplies procurement to disposal and recycling.

Also, we expect our value chain to experience further expansion on a global scale and become more sophisticated, requiring us to enhance our value chain management initiatives.

The NTT Group aims to take an independent and proactive stance in achieving a sustainable society, by enhancing mutual understanding and building relationships of trust with all suppliers that make up the supply chain, and working together with high ethical standards to develop and maintain a safe and secure supply chain. With this in mind, we have formulated the NTT Group Basic Procurement Policy and conduct procurement based on this policy.

NTT Group Supply Chain Sustainability Promotion Guidelines

A number of supply chain issues have recently come to light, including serious human rights violations such as forced labor and child labor, unlawful disposal of waste, response to stricter regulations on controlling chemical substances, bribery, and other examples of malpractice.

In light of this, we formulated the NTT Group Supply Chain Sustainability Promotion Guidelines in 2022 that contain detailed requirements for suppliers in the seven areas of human rights/labor, health/safety, the environment, fair trade/ethics, quality/safety, and information security to guide our efforts as we work together with suppliers in order to conduct procurement activities in a socially responsible manner.

We have published these Guidelines in Japanese and English as a way of communicating to a broad range of the NTT Group's suppliers both in Japan and overseas, and we have incorporated them into supplier contracts to ensure compliance.

If any actions or incidents that do not meet the requirements described in these guidelines are identified through an audit or other review, the relevant supplier will be requested to make improvements to comply with ESG standards within a specified period. If no improvement is observed, the contract with the supplier will be terminated.

In addition, we have also published the NTT Group Green Procurement Standards as a supplement to our environmental guidelines, and are advancing efforts to reduce greenhouse gas emissions throughout the supply chain.

• Procurement
• NTT Group Basic Procurement Policy

• NTT Group Supply Chain Sustainability Promotion Guidelines
• NTT Group Green Procurement Guidelines

Organization for Implementation

At the NTT Group, the management are responsible for supervising efforts regarding the promotion of sustainable supply chain management. Thus, the NTT Group has a management structure in which there are a Sustainability Committee and a Group Sustainability Committee (attended by the executive vice presidents of main companies, etc.) under the Board of Directors, with the President and CEO as chairperson. In these committees, basic strategy, the activity implementation situation, and information disclosure regarding supply chain management for the Group as a whole are discussed and decided.

To promote cooperation and coexistence and mutual prosperity with value-creating stakeholders and clients in the supply chain, the NTT Group enforces necessary internal systems and procedures to avoid making inappropriate demands (such as low prices or tight deadlines) on suppliers.

Targets and Performance

(8) Rate of direct dialogue with suppliers requiring improvement requests [ethical]
Fiscal 2024 target: 100% (NTT Group-wide)

(14) Rate of direct dialogue with suppliers who require improvement requests [human rights]
Fiscal 2024 target: 100% (NTT Group-wide)

Main Initiatives

Supplier Engagement Initiatives

Based on various guidelines, etc., we are engaged in various activities with the goal of building partnerships of trust with our suppliers.

To this point, we had given the Supply Chain Sustainability Survey, an original questionnaire created of NTT, to the NTT Group's major suppliers, but from fiscal 2022, we have newly begun ESG risk assessments by a third part evaluation organization (EcoVadis).

Based on the results of these surveys, we are engaged in activities to strengthen supplier engagement, such as direct dialogues with suppliers,.

The direct dialogue covers subjects such as the environment, information security, and BCP (business continuation plans) as well as issues related to forced labor and human rights risks. In the dialogue meetings, we exchange opinions with all our suppliers, and check with our suppliers about occupational health and safety at the workplace and other factors.

In July 2022, NTT joined an alliance of telecommunications companies who globally perform CSR audits on ICT suppliers (JAC: Joint Alliance for CSR) as the first Asian telecommunications company to do so. From fiscal 2023, the NTT Group began performing CSR audits on its suppliers based on JAC auditing standards.

In cases in which, based on risk assessment results, corrective measures are necessary, we plan to have suppliers create a corrective measures plan, and to monitor the execution of that plan.

By continuing to perform such supplier engagement activities with our suppliers, we are making efforts toward risk management of the NTT Group's supply chain as a whole.

Definitions of Major Suppliers at NTT Group

The NTT Group identifies major suppliers based on procurement amount, importance of goods, and irreplaceability, as described below.

^*With regard to the above description, corrective measures are drawn up for suppliers with high environmental, social, and/or governance-related risk, and the execution of those measures is monitored.

• EcoVadis
• JAC

Cooperation in Communications Industry

The three companies of NTT, KDDI, and Softbank have announced that they will jointly engage in the standardization of supplier engagement activities and in various initiatives with the goal of realizing a sustainable supply chain in the communications industry.

From fiscal 2023, sustainability questionnaires for suppliers have been standardized, and SAQs^* (self-assessment questionnaires) common to the three companies are being utilized for the supplier engagement activities of each company.

We plan to continue partnering with various industries and companies to work toward the realization of a sustainable supply chain.

ESG Assessments when Selecting Suppliers

As a way of promoting a sustainable supply chain, in transaction selections, the NTT Group adds additional points in evaluations of suppliers engaged in superior ESG-related initiatives.

Specifically, we prioritize procurement from suppliers promoting initiatives to reduce greenhouse gases, based on green procurement standards.

Furthermore, Group companies have progressively introduced an internal carbon pricing system^*, a system of promoting a reduction in the environmental burden by performing cost conversions of CO2 emissions, and add that converted cost onto proposed product prices for evaluations.

^*Overview of Internal Carbon Pricing System
A system in which when it comes to decarbonization-related project decisions and procurement (product selection, etc.), decisions are made while taking CO₂ emission costs into consideration.

Request to Business Partners for Compliance in Fair Trade Practices

The NTT Group Supply Chain Sustainability Promotion Guidelines clearly outline prohibited items in fair trade practices and business ethics (seven articles), and of these, we request that procurement transactions are conducted in an honest, just, and fair manner based on agreements and so forth, and that behavior such as the abuse of a superior position is not practiced.

As an initiative to help achieve a sustainable society, we hold briefings expounding on the NTT Group Supply Chain Sustainability Promotion Guidelines to explain our requirements, processes, and initiatives to suppliers.

Moreover, we encourage suppliers to take a questionnaire provided by Ecovadis, a sustainability assessment service, allowing the suppliers to compare their sustainability performance with their industry peers, and we provide support such as advice while they implement corrective measures.

Going forward, we plan to conduct a common SAQ among the three major telecommunications operators to review our suppliers' efforts, and work with suppliers to make further improvements while providing feedback on the results.

Supplier Screening KPIs

Supplier evaluation program coverage and progress

Scope and progress of suppliers with corrective action plans

Coverage and progress of suppliers participating in capacity building programs

ESG Education for Procurement Department Staff

The NTT Group implements training on ESG for staff in procurement departments to reduce the burden of procurement activities on the environment and ensure they persistently comply with the laws, regulations, and norms of society.

Highest rating in 2022 Supplier Engagement Ratings by CDP

The NTT Group was praised for its efforts aimed at reducing CO2 emissions throughout its entire supply chain, and has been selected as the highest "Supplier Engagement Leader" in the "Supplier Engagement Survey^*" run by CDP, an international non-governmental organization assessing environmental-related matters.

^*Supplier Engagement Survey: Assesses company supply chain activities that affect climate change. Companies assessed with the highest ratings are selected as "Supplier Engagement Leaders."