NEC has designated “supply chain sustainability” as its materiality and is enhancing cooperative ties with its business partners through collaboration and co-creation. In this dialogue, participants looked back on sustainable procurement activities over the past year and discussed issues related to human rights initiatives. Experts also gave their opinions on what initiatives are needed going forward and their expectations of NEC over the medium to long term amid ongoing legislation regarding human rights centered mainly in the United States and Europe.

Note: This dialogue was held online.

Responsible Procurement in Fiscal 2022

Enhancing Initiatives in Light of the Latest Global Trends

Tanaka　The Government of Japan has established a new administrative unit, the Business and Human Rights Policy Office in the Ministry of Economy, Trade and Industry. Meanwhile, major challenges remain in promoting responsible business among small and medium-sized enterprises (SMEs) in Japan. SMEs sometimes have limited knowledge and scarce resources to fulfill the requirements of domestic legal compliance as well as of corporate social responsibility aligned with international standards. Large companies have roles to play in supporting SMEs’ efforts toward upgrading entire supply chains.

Takahashi　There is a growing movement in Europe to make human rights due diligence mandatory. The European Commission’s draft of its Corporate Sustainability Due Diligence Directive as it relates to human rights and the environment is more in-depth than similar laws and regulations, and makes it the duty of company directors to maintain due diligence. In countries around the world, there is also an emphasis on sustainable governance and management that is mindful of sustainability.

Nagai　NEC should also keep an eye on U.S. import restrictions, which are growing tighter based on concerns over forced labour and other human rights violations. NEC should further look into issues related to foreign technical intern trainees at domestic suppliers. Also, as major changes in legislation, social demands, and geopolitical risks take place, and as things around us progress at a breakneck pace, NEC must proactively employ backcasting with a view to its goals three to five years in the future; otherwise, the Company will be left behind. Responsible procurement needs a strategy. Management needs to make decisions—it needs to ascertain the essential resources for executing the Company’s strategic plans and invest if there are not enough resources available.

Obata　NEC has positioned human rights in the supply chain as an important management issue, and we are focusing our efforts in kind. We would like to ramp up these efforts as they relate to management, particularly with regard to regular monitoring and follow-up activities conducted by the Risk Control and Compliance Committee and increased discussion at Board meetings.

Creating Social Value through Collaboration with Business Partners

Tanaka　There is a trend in the U.S. and Europe to introduce mandatory legislation for businesses with penalties incurred. Although being affected by the laws and regulations, the business community generally seeks a market environment where business activities aligned with the UN Guiding Principles on Business and Human Rights (UNGPs) can receive legitimate recognition. Companies should increase accountability of their own business activities showing adherence with the UNGPs and meaningful collaboration with stakeholders, which eventually contributes to improved business sustainability.

Takahashi　It is very important to promote both “compliance with rules” and “voluntary efforts by companies” rather than choosing just one. The more we incorporate due diligence, the more we tend to lean into monitoring of corrective actions and contract clauses, but the purpose of due diligence is respecting stakeholders’ human rights. I would like NEC to value the concepts of collaboration and co-creation and emphasize communication with stakeholders. Creating a guidebook aimed at suppliers that explains why sustainability efforts will increase their corporate value will help facilitate co-creation and collaboration with them.

Tanaka　I expect NEC to convey a message to its suppliers—tell them how business can bring about a positive impact on human rights. For instance, how supplier diversity can reduce gender inequality, and how workers’ skill development can improve productivity and lead to a better working environment. From a medium- to long-term perspective, it is important to pursue engagement with trade unions, NGOs, and other stakeholders in earlier stages of human rights due diligence, such as when designing measures to ensure respect for human rights. That is because awareness of trade unions and worker representatives is still not sufficient, and thus I recommend helping to increase awareness through labour-management dialogue. Aiming for co-creating social value by working with diverse stakeholders is also recommended.