Supply Chain Management Framework

At NEC, the Chief Supply Chain Officer (CSCO) is responsible for sustainable procurement across the entire NEC Group, and decisions are made through a decision-making body chaired by the head of procurement in the SCM Strategy Division.

At NEC and its major consolidated subsidiaries in Japan, individuals appointed as compliance promoters for purchasing-related laws and regulations ensure strict compliance within their respective companies and divisions. In addition, compliance promoter conferences are held twice a year, during which compliance promoters share responses to changes in the sustainable procurement landscape, training programs for procurement personnel, and web-based training materials.

For affiliated companies abroad, NEC works with procurement managers at regional headquarters in North America, Latin America, Europe, and ASEAN and major local subsidiaries directly controlled by NEC Corporation to conduct periodic operational reviews in line with their annual activity policies and plans, and to promote sustainable procurement in accordance with the culture and business practices of each country, as well as with the basic policies and guidelines mandated by NEC Corporation.

In addition, NEC endeavors to enhance governance both in and outside Japan based on reports at these meetings.

Risks and Opportunities with Supply Chain Management

In terms of implementation among suppliers, the NEC Group Procurement Policy and the Guidelines for Responsible Business Conduct in Supply Chains identify the following six priority risks:

NEC requires its suppliers, including Tier 2 suppliers and further upstream, to implement responsible business conduct.

Supply Chain Management Policy

In the course of doing business, NEC endeavors to work not only internally, but also through collaboration and co-creation with suppliers while paying careful attention to its impacts on the environment and society as a whole, with the intention of gaining the trust of society and helping to create sustainable social value.

Specifically, NEC formulated the NEC Group Procurement Policy based on its concept of Management for Sustainability and on the ISO 26000 and ISO 20400 international guidance standards for social responsibility and sustainable procurement. We are developing a policy for internal control pertaining to sustainable procurement, and rolling it out among suppliers. Regarding internal controls such as purchasing ethics, NEC has established the Basic Rules for Procurement and ensures that all employees comply with these rules. Furthermore, to strengthen internal controls, NEC has also devised concrete operational rules for its procurement processes and conducts regular training to ensure that the rules are disseminated among procurement-related personnel.

Managing Risk with Supply Chain Management

NEC manages the identified risks as outlined below.
With regard to human rights, the NEC Group Procurement Policy clearly rejects slavery and human trafficking, and the Guidelines for Responsible Business Conduct in Supply Chains prohibit forced labour and child labour, while respecting workers’ right to organize. The policy and guidelines also require appropriate wages and management of work hours.

Moreover, we perform due diligence on human rights in accordance with OECD’s guidance process, identify and evaluate risks, and take steps to mitigate risks.
With regard to the environment, our Guidelines for Responsible Business Conduct in Supply Chains call for a combined effort between NEC and its suppliers to realize environmental management. At the same time, we have also set out the Environmental Specifications Pertaining to Procurement Restrictions for the Inclusion of Chemical Substances in Products, which require compliance with regulations on chemical substances in products in and outside Japan.

Regarding information security, NEC sets out security measures to be observed by companies we outsource to in Basic Rules for Customer-Related Work. We ensure thorough implementation by requiring these workers to formally pledge to abide by these requirements.

At NEC, we promote activities in close collaboration with our suppliers based on procurement and security policies and guidelines, working to deepen mutual understanding. In addition to evaluating suppliers based on quality, cost and delivery (QCD), we also assess them from a sustainability perspective in an integrated manner, continuously striving to build stronger long-term partnerships.

Through these supply chain management activities, we are working to improve the value we provide to our customers through our business.

Supply Chain Due Diligence

Due Diligence Steps in a Risk-based Approach

Risk-based Approach

The Japanese government published the Guidelines on Respect for Human Rights in Responsible Supply Chains, and legal frameworks for preventing human rights abuses in supply chains have been updated abroad. With labour in supply chains being identified as a salient human rights issue, NEC has improved its efforts in human rights due diligence.

Supply Chain Due Diligence

NEC is taking the following steps in accordance with OECD Due Diligence Guidance for Responsible Business Conduct.

Step 1

Collect and evaluate information on each risk from the perspectives of the ICT sector, region, and business characteristics, based on The ICT Sector Guide on Implementing the UN Guiding Principles on Business and Human Rights, the International Trade Union Confederation (ITUC)’s ITUC GLOBAL RIGHTS INDEX, other external research reports, and internal analysis of our procurement structure.

Step 2

Combining the insights from Step 1 with the results of a human rights impact assessment conducted by BSR, an international NPO, we identify high-priority risks within key business domains. Examples include human rights risks to workers in manufacturing processes at plants of suppliers outside Japan (including outsourced production), human rights risks to foreign technical intern trainees in manufacturing processes at plants of suppliers in Japan, risk of long working hours in software development, and occupational health and safety risks during construction, maintenance and inspection.

Step 3

Map suppliers related to the above risks, evaluate the nature and scope of potential impacts, and conduct third-party audits by an external auditing firm specializing in human rights and occupational health and safety, as well as secondparty audits conducted by NEC, for selected suppliers (22 companies from fiscal year 2022 through fiscal year 2025).

Incidents of nonconformance identified in these audits (long working hours or inadequate evacuation routes, etc.) are evaluated and ranked according to the following four categories from the viewpoints of human rights and occupational health and safety under Japanese law and global standards. We provide feedback to suppliers and request corrective action.

For suppliers identified with high-risk items for correction in the fiscal year 2024 audit, we provided corrective guidance and follow-up until correction was completed.

Supply Chain Risk Assessment Results and Corrective Action

Document Checks

NEC continuously conducts document checks to assess the sustainability initiatives of its suppliers. In fiscal year 2025, we conducted the following checks.

In the fiscal year 2025 Sustainable Procurement Self-assessment, we focused on higher-risk areas by re-evaluating the progress of suppliers that scored low in past assessments and newly surveying approximately 400 suppliers that had not been assessed over the past four years. The suppliers assessed in fiscal year 2024 and fiscal year 2025 account for 60% of our consolidated procurement value. The assessment also covers details on the acceptance of foreign technical intern trainees and the handling of human rights issues by Tier 2 suppliers and further upstream.

In the fiscal year 2025 review, we received responses from 1,206 out of 1,354 Tier 1 suppliers approached. Each supplier’s efforts were evaluated on a five-point scale (A, B, C, D, Z) for each inspection theme—human rights, occupational health and safety, environment, fair trade, and other—based on their “score rate” and “critical points”¹ evaluation criteria.

We issued feedback sheets to all suppliers that provided responses, indicating their score for each inspection theme and comparison to the average score for each procurement category, and shared the evaluation results with them. In the fiscal year 2025 survey, 36 suppliers received a Z rating, indicating the existence of potential risks. Through supplier engagement, such as NEC’s understanding of the conditions and provision of correctional guidance, we will support suppliers that received the Z rating, with the aim of completing the correction of identified issues during the first half of fiscal year 2026.

For suppliers identified with high-risk items for correction in the fiscal year 2024 surveys, we provided corrective guidance and follow-up until correction was completed.

Furthermore, we carried out inspections of six Tier 2 suppliers with the cooperation of five Tier 1 suppliers to enhance our ability to address upstream supply chain risks.

Regional headquarters and key local subsidiaries outside Japan reviewed the inspection themes of “human rights” and “occupational health and safety” with 26 local suppliers.

For suppliers identified as having a significant environmental impact within NEC’s supply chain, we conduct an annual Survey on Decarbonization and Natural Capital Initiatives to confirm progress on CO2 reduction and other efforts related to natural capital. The survey results are used to strengthen support and collaborative initiatives with suppliers on environmental issues, including decarbonization, as part of our efforts to reduce the negative environmental impact of NEC’s businesses.

We implemented document checks for 1,838 companies through a dedicated inspection system using information security check sheets. Information security is essential for NEC, which is responsible for building information systems that are the foundation of society. In our supplier relationships, we place importance not only on technical capabilities but also on whether suppliers meet NEC’s standards for information security. Therefore, we have adopted a system in which we classify the information security levels of suppliers according to the status of their information security measures based on the results of the document checks, and select and entrust work to appropriate suppliers in line with NEC’s standards.

On-site Assessments

Since fiscal year 2019, the Procurement Division has implemented the Supplier Visit Record (SVR) initiative, in which sustainable procurement requirements, such as those related to human rights, labour, occupational health and safety, and the environment, are assessed when visiting suppliers in high-risk regions. The results are recorded and accumulated. In fiscal year 2025, 93 records were collected, and no issues were identified.

In the field of information security, we select suppliers for on-site assessments not only based on transaction volume, but also by comprehensively evaluating the importance and confidentiality of the information handled and the results of document checks. In fiscal year 2025, we conducted on-site assessments or remote inspections of 350 suppliers.

During these inspections, we verified that supplier employees comply with NEC’s information security instructions and requests through interviews, confirmation on internal regulations, and on-site observations, in order to prevent information security incidents. Although no major deficiencies were found, corrective guidance was provided to suppliers where minor improvements were deemed necessary in areas such as subcontractor management, labeling of confidential information, disposal and return of confidential materials, and countermeasures against cyberattacks.

For both kinds of on-site assessment, NEC shares the items that require improvement with its suppliers and supports them in implementing improvement measures.

Initiatives for Responsible Mineral Procurement

NEC seeks the understanding and cooperation of its suppliers for responsible mineral procurement based on its Responsible Mineral Procurement Policy. Using the Conflict Minerals Reporting Template (CMRT) and the Extended Minerals Reporting Template (EMRT),² NEC conducts surveys of its suppliers to verify information about smelters and their use of tin, tantalum, tungsten and gold (3TG), cobalt and mica. In fiscal year 2025, CMRT and EMRT surveys were conducted at suppliers representing approximately 60% of consolidated procurement amount.

NEC continues to participate in industry cooperation initiatives as a member of the Responsible Mineral Trade Working Group led by JEITA, including participation in the working group’s Education and PR Team, to help promote supplier understanding of responsible minerals sourcing.

Supply Chain Status

Critical Suppliers

NEC designates suppliers that account for a high total value in procurement transactions, suppliers of rare products and suppliers that cannot be easily replaced as critical suppliers, and focuses on engaging in sustainable procurement measures. We are strengthening initiatives to deal with the risks we have identified in each region, sector and procurement category.

Supplier Engagement

Dissemination

NEC presents the NEC Group Procurement Policy, the Guidelines for Responsible Business Conduct in Supply Chains, and various other guidelines to its suppliers. We also hold exchange meetings with strategic supply chain partners and Sustainability/Information Security Sessions, where we explain our policies and guidelines directly to suppliers and ensure dissemination of the latest measures.

NEC disseminated information to suppliers about its sustainable procurement policies and measures at an exchange meeting with strategic supply chain partners held in June 2024, and at the Sustainability/Information Security Sessions, held in July 2024.

Evaluation Prior to the Start of Procurement

Prior to initiating procurement, we assess the prospective company’s financial health, product and service quality and pricing, delivery timelines, and technical capabilities, as well as sustainability-related risks such as environmental impact and issues related to human rights, labour, and occupational health and safety. We also confirm the company’s intention to comply with the contents of the Guidelines for Responsible Business Conduct in Supply Chains and to sign the declaration form. Based on these factors, we make a comprehensive decision on whether to proceed with the new transaction.

Initiatives for the Environment

NEC has been recognized on CDP’s Supplier Engagement Leader, the highest Supplier Engagement Rating,³ for the fifth consecutive year. We recognized that this certification reflects recognition of our various initiatives aimed at reducing CO₂ emissions from our supply chain to achieve net zero.

Signing of Declarations by Suppliers

NEC requires suppliers to enter into master contracts and to sign declarations stating their commitment to the Guidelines for Responsible Business Conduct in Supply Chains. As an indicator for the materiality item “supply chain sustainability,” we set a target of having suppliers who have signed declarations account for 75% of our total procurement amount by the end of fiscal year 2026. We also require all prospective suppliers to submit a declaration prior to commencing any business transactions.

As of the end of fiscal year 2025, we have obtained declarations from approximately 14,000 suppliers in and out of Japan, covering 87% of our consolidated procurement value. We aim to continue covering at least 75% of procurement value in subsequent years.

Strategic Supply Chain Partner Exchange Meetings

NEC holds exchange meetings with its main strategically important supply chain partners each year. We require these suppliers to understand and cooperate with the NEC Group’s sustainable procurement activities, centered mainly on human rights, labour, occupational health and safety, the environment and information security. Moreover, during the meetings, NEC presents Sustainability Awards to suppliers that have made particularly significant contributions to advancing sustainability initiatives.

A total of 388 members of executive management at 200 suppliers in Japan and around the world participated in the meeting held in June 2024.

Supplier Education and Awareness Training Activities

To support sustainability initiatives among its suppliers, NEC provides training opportunities and conducts awarenessraising activities on key topics such as human rights, labour, occupational health and safety, the environment, and information security.

Human Rights

In Japan, awareness of the need for human rights due diligence is gradually increasing among small and mediumsized enterprises. However, due to limited resources, it remains difficult for individual companies to undertake such initiatives on their own. In response, NEC held a workshop in March 2025, with the support of an external lecturer, that allowed participants to experience the “risk identification” process of human rights due diligence based on the Japanese government’s Reference Material on Practical Approaches for Business Enterprises to Respect Human Rights in Responsible Supply Chains. Thirty-two of NEC’s critical suppliers participated in this workshop, and the satisfaction rate based on participant surveys was 97%.

NEC also provides information about seminars on “business and human rights” hosted by international organizations, government bodies, and industry associations on its supplier portal.

Occupational Health and Safety

To support health management among suppliers, NEC hosted lectures and online exercise seminars in fiscal year 2025 for key software suppliers as part of its Well-being promotion efforts. A total of 125 companies attended the lectures, and 14 companies participated in the online exercises. In participant surveys, all respondents found the lectures “meaningful” and 91% expressed an interest in applying the initiatives at their own companies.

Environment

NEC continues to hold briefing sessions and provide information related to climate change measures, and also offers educational materials that suppliers can use to train their employees on environmental topics.

Information Security

We hold Sustainability/Information Security Sessions for our suppliers, where we share the latest trends in information security and personal information protection, along with key considerations for business operations. These sessions also include training on cybersecurity measures and awareness activities to prevent information security incidents.

Enhancing Information Security Management at Partner Companies

The NEC Group requires suppliers to implement information security measures classified into seven categories: 1) contract management, 2) subcontracting management, 3) staff management, 4) information management, 5) technical deployment, 6) security implementation, and 7) the execution of assessments. Especially regarding subcontracting management, the basic contract stipulates that suppliers may not subcontract to third parties without prior written approval from NEC.

In addition, the Group has clarified the framework for each project by obligating business partners to submit subcontractor confirmation documents. If subcontracting is unavoidable, the Group requires the same level of security for subcontractors that it requires for business partners in order to reduce the risk of information security incidents.

In 2022, NEC revised its information security standards based on NIST SP800-171, which requires the establishment of incident response capabilities, in order to strengthen its cybersecurity measures. Suppliers are required to prepare system security plans to confirm their compliance with NEC’s information security standards.

For aspects that are difficult for suppliers to handle alone, NEC hosts cybersecurity training sessions and discloses third-party evaluation results to critical suppliers with the aim of reducing attack risks and improving security levels to support their efforts in reducing risks.

Engagement with Employees

NEC and its consolidated subsidiaries conduct regular training programs for procurement personnel in accordance with internal procurement regulations. In addition, targeted training sessions on specific topics are held as needed to address new regulations or emerging risks, helping maintain proper operational execution.

Training for All Employees of NEC and Consolidated Subsidiaries

To raise awareness of sustainable procurement, NEC conducts web-based training on “business and human rights” and “environmental education” that informs employees about human rights and environmental risks in the supply chain and NEC’s sustainable procurement initiatives.

Awareness Programs for Procurement Staff of NEC and Consolidated Subsidiaries in Japan

In February 2025, NEC invited an external lecturer to conduct a human rights workshop for senior procurement staff at NEC and its consolidated subsidiaries in Japan to deepen their understanding of human rights issues in the supply chain. Thirty participants attended the workshop, and both the comprehension and satisfaction rates in the post-event survey were 100%.

Training for Consolidated Subsidiaries Outside Japan

NEC provided training on sustainable procurement to procurement staff (or in some companies, all employees) at its regional headquarters and major local subsidiaries abroad. A total of 1,040 employees received the training, and the post-training survey showed a 97% comprehension rate.

Participation in Stakeholder Engagement Initiatives

Participation in Activities with Other Companies

As a member of the Supply Chain Working Group of Global Compact Network Japan, we frequently discuss the ideal form of sustainable procurement with various members such as companies in different industries and NGOs, to define best practices in sustainable procurement and improve the quality of related initiatives.

NEC is also a lead company in the task force under the JEITA CSR Committee, working to launch the Sustainable Procurement Partnership (SPP), which promotes responsible corporate behavior across the electrical and electronics industries. In fiscal year 2025, the task force launched a small-scale pilot project called the SPP Trial, offering support menus to assist small and medium-sized enterprises in developing human rights policies.

Grievance Mechanism

NEC has established a multilingual whistleblowing system that suppliers can use to consult not only on compliance issues, but also on matters related to responsible procurement more broadly, including human rights, labour, and occupational health and safety. To protect the privacy of whistleblowers, NEC allows anonymous reporting and has developed a system for responding to complaints and inquiries related to transactions. Additionally, every year, NEC Corporation sends a written Request for Cooperation toward Thorough Compliance and Responsible Procurement to our suppliers to request their cooperation in reporting potential compliance violations by NEC employees so that violations can be detected early and corrected, and to let them know NEC has a whistleblowing system available to provide consultation on responsible procurement in general.

In fiscal year 2025, a total of six reports regarding procurement issues were accepted via the NEC whistleblowing system. After verifying the relevant facts, all six reports were dealt with appropriately.

From fiscal year 2023, NEC has been participating in an industry-wide initiative for a collective grievance mechanism (JaCER) and working to improve the effectiveness of the system in accordance with UNGP requirements.

Medium- to Long-term Goals, Priority Activities and Progress, and Achievements

Medium- to Long-term Goals, and Priority Activities

(Scope: NEC Corporation unless otherwise specified) Period: April 2021 to March 2026
M: Indicates the main non-financial targets related to materiality

FY2025 Goals and Progress, Achievements, and FY2026 Goals

FY2025 Goals

Progress and Achievements

FY2026 Goals