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  5. Dialogue 2019

Dialogue 2019

Towards Reducing Human Rights Risks in the Supply Chain

With its business expanding globally, Asahi Group will implement human rights risk management to adequately address our business activities’ implications for human rights. This risk management will also apply to its supply chain. To this end, Asahi Group held a consultation meeting in December 2019 with experts, receiving opinions from them concerning its needed initiatives.

Development of Medium- to Long-Term Environmental Targets

Participants

Experts (in alphabetical order)

  • Miwa YamadaMiwa Yamada
    Director, Law and Institution Studies Group. Inter-disciplinary Studies Center, Institute of Developing Economies,
    Japan External Trade Organization
  • Hidemi TomitaHidemi Tomita
    Director,
    Lloyd’s Register Japan K.K.

Asahi Group Holdings, Ltd.

  • Atsushi KatsukiAtsushi Katsuki
    Managing Director, Managing Corporate Officer and CFO (in charge of sustainability)
    Asahi Group Holdings, Ltd.
  • Yutaka HemmiYutaka Hemmi
    Director and Corporate Officer (in charge of procurement)
    Asahi Group Holdings, Ltd.
  • Kaoru SakitaKaoru Sakita
    Corporate Officer, General Manager of Procurement Section and Director of Global Procurement Strategy Center
    Asahi Group Holdings, Ltd.
  • Kayoko KondoKayoko Kondo
    General Manager of Sustainability Section
    Asahi Group Holdings, Ltd.

Importance of Risk Approach to Initiatives Implementation

Katsuki:Asahi Group is proactively globalizing its business including through large-scale M&As in Europe, Australia and other regions. We also source raw materials from various parts of the world. Against this background, it is imperative to grasp risks—where risks are and what kinds of risks are anticipated—in conducting business activities. We are strengthening its efforts in human rights-related initiatives including human rights due diligence, a process to identify human rights risks—where they are and what kinds of human rights risks are anticipated.
Going forward, to promptly achieve a state where we are trusted by both internal and external stakeholders and to continue and expedite our human rights-related initiatives, what do you think should we pay attention to?

Katsuki

Yamada:A supply chain has many human rights-related issues. Therefore, in implementing initiatives, it is necessary to identify in the early stage human rights risks associated with raw materials and regions and take a risk approach with priorities. Also, because business environment changes every day, it is important to continually run a PDCA cycle and to disclose information adequately.

Yamada

Tomita:Given M&As of overseas companies serve as a growth driver for Asahi Group, I would like to encourage it to renew its awareness that human rights risks could occur on a global scale. In doing so, it is also imperative to identify stakeholders whose rights could be breached or affected. Specifically, it should identify human rights risks including in their scope employees, people in local communities relating to its supply chain, consumers and customers. Internally, too, Group-level commitment to risk management is necessary involving not only sustainability, procurement and personnel divisions but many other divisions.

Katsuki:It is understood that fulfilling responsibilities of a global company entails implementing and disclosing initiatives starting from high-priority areas including in their scope all the stakeholders involved in our business.

Necessity of Grasping the Actual Status of Work Environment

Hemmi:Based on my experience of frequently visiting our company’s production centers, I think the degree of workplace vitality and performance are correlated. We will continue making efforts to improve work environment that would enable our employees at every site to stay positive and produce high performance. To this end, it is considered to be necessary to listen to individuals working in the fields to identify essential issues. We plan to continue management based on the on-going initiatives we are implementing while running PDCA cycles.

Hemmi

Yamada:In addition to workplace vitality, it is important that workers feel that their capabilities are recognized and utilized. We were told that frequent site visits are conducted to understand their actual situations. Going forward, it would be even more desirable if multiple individuals with a range of attributes, such as different nationalities and genders, visit the sites together to reflect multiple perspectives.
In terms of communications with suppliers, I recommend that attention be paid to communicating key points that Asahi Group emphasizes. To this end, I suggest that Asahi Group get suppliers to consider rationale behind its requests and that, if they could not figure it out, suppliers’ and Asahi Group’s employees have dialogues and consider it together. For example, if a questionnaire survey is conducted to grasp suppliers’ initiatives, it is important that the survey is implemented and used as an engagement tool so as to lead to improvements.

Tomita:In many cases, there are gaps between what questionnaire survey results indicate on the one hand and actual field situations and/or audit results on the other. Therefore, I think it is necessary to check the on-site conditions. If questionnaire is to be prepared, it is necessary to set questions based on thorough consideration including reflecting knowledge held by individuals with field experiences such as Hemmi-san.
Another important point is to clarify the purposes of the supply chain’s initiatives for human rights. The following three purposes are considered common to businesses’ human rights initiatives: improved ESG assessment results, mitigated business risks, and mitigated human rights risks pursuant to the Guiding Principles on Business and Human Rights. In the case of Asahi Group, though I think it is aware of all of these purposes, approaches will differ based on its priorities and goals, which need to be identified.

Tomita

Kondo:In implementing the initiatives, we would like to clarify their purposes, including “mitigated human rights risks,” and continue emphasizing information disclosure so as to communicate the purposes externally as well. Also, we appreciated the importance, as pointed out, of involving individuals with field knowledge on procurement etc.

Sakita:I recently had a chance to visit a farm producing raw materials for us. I frankly felt that, in many cases, visiting is the only way to understanding situations.
I used to think of human rights in terms of rights of farm and plant workers. Now I am aware that the human rights theme includes implications for residents in the local communities. Therefore, I think it is necessary to monitor human rights risks in a multi-layered manner.
We presently hold meetings explaining our annual business policy to our suppliers as part of communications with them. Going forward, we would like to be more conscious about communicating more fundamental messages in a multi-layered manner.

Sakita

Tomita:Approaches to communications with suppliers may differ depending on whether their purpose is to identify risks inherent in suppliers or to generate educational effects. Either way, maintaining regular communications with the suppliers’ corporate managers is very important for risk management in terms of understanding the suppliers’ ideas.

Hemmi:In terms of risk management, I think attention should be also paid to measures relating to liquidity in employment market. Overseas employment markets are relatively more liquid; as is often the case, a supplier’s corporate and other managers get changed, which leads to lost contact. Therefore, we need to catch up with such changes consistently so that we can respond to external inquiries about the status of our approaches to human rights risks anytime.

Yamada:OECD Due Diligence Guidance for Responsible Business Conduct* recommends that an enterprise first identify risks associated with its key players. In this sense, I suggest that, as soon as a change in personnel occurs at a player and is known to Asahi Group, its monitoring put a focus on risks associated with that player.
*The OECD Due Diligence Guidance for Responsible Business Conduct was adopted in May 2018 as a practical guidance for implementing OECD Guidelines for Multinational Enterprises. It “provides practical support to enterprises on the implementation of the OECD Guidelines for Multinational Enterprises by providing plain language explanations of its due diligence recommendations and associated provisions.” (Quoted from OECD’s website)

Kondo:Listening to the experts’ opinions, I have renewed my awareness on the necessity of understanding in detail the work environment including of the supply chain through visiting and interviewing them and of developing a structure and system for that purpose.

Expectations Regarding Asahi Group’s Future

Kondo:If you have any expectations regarding Asahi Group implementing human risk management for its supply chain, please share them with us.

Tomita:I suggest that Asahi Group take a robust approach to farms growing major high-risk raw materials the modern slavery risk analysis has identified. Risks arising from the manufacturing processes (Tiers 1 and 2 suppliers) and major raw materials to be procured are completely different from risks associated with suppliers. Therefore, approaches should be considered based on sorting them.

Tomita

Yamada:Regarding human rights risks specific to a major raw material to be procured, common structural risks are chronically present, as in the case of child labor in Ghana and Cote d’Ivoire, cacao producing countries.
Against these backdrops, I suggest that Asahi Group implement initiatives for identifying risks and approach relevant governments and local communities in corporation with other companies in the same industry procuring the same major raw materials.

Kondo:The problems are so big, and regions involved are so diverse, that we should address them in cooperation with other companies instead of acting by ourselves. Also, regarding the grievance mechanism being developed, it would be appreciated if you could share with us any attention points.

Yamada:The Guiding Principles on Business and Human Rights sets out the following criteria for grievance mechanisms, which should be: (1) legitimate, (2) accessible, (3) predictable; providing a clear procedure and clarity on available processes (including indicative time frame for provision of replies by companies), (4) equitable in engaging in the grievance process; and (5) transparent. Furthermore, it states that mechanisms should be based on engagement and dialogue. In developing such mechanisms, Asahi Group should create robust contents based on such interactions and make it explainable to stakeholders.

Tomita:As Yamada-san said, I think it is necessary, based on the Guiding Principles, to clarify contact points, establish a reporting process, and improve transparency. At the same time, we should be aware that there is no such thing as a perfect solution. Even if we set up a wonderful contact desk, unless it is known that the supplier’s raw materials are used in Asahi Group’s products, this contact desk cannot be reached. It is, therefore, a difficult task to develop a grievance mechanism. Yet, I would like efforts to be continued.

Tomita

Kondo:Thank you. We would like to continue working to develop a grievance mechanism, keeping societal demands in minds.

Yamada:Asahi Group’s initiatives in creating global corporate value are classified into two categories: “elimination of negative impacts” and “expansion of positive impacts.” This is an important approach that is easy to understand. Given positive impacts include job creation and skill improvement, Asahi Group is already making positive impacts on the society. On the other hand, if we make negative human rights impacts, that would deteriorate our corporate value. We are handling a very difficult area.

Tomita:Though human rights management is highlighted in terms of elimination of negative impacts, I suggest attention be also paid to its positive side, such as improved productivity, in addressing it.
Furthermore, I would like Asahi Group to expedite its efforts towards being a “responsible company” in terms of not only human rights but also environment and other societal elements.

Yamada:According to companies’ personnel who have been promoting supply chain management including human rights management, it necessitates securing some human resources. I have no worry about Asahi Group given the commitment already made by its top management. Yet, the cross-company nature of human rights management and diversity of raw materials to be procured and of related regions might necessitate securing even more budget, skills and human resources.

Yamada

Katsuki:The human rights-related matters we have discussed today, in today’s world, directly relate to business strategy and corporate value. A single mistake in handling them could deteriorate corporate value. Based on the two experts’ advice, we would like to continue our efforts throughout the Group while maintaining strong awareness on the purposes of our initiatives. Thank you very much for today.