Sustainable Supply Chain
Rakuten's Approach
Being home to more than 70 products and service offerings worldwide, first and foremost, we value a transparent and responsible supply chain. We work with our
global network of suppliers hand in hand to mitigate risks, protect the environment and human rights and monitor the supply chain to ensure that the products
customers purchase on our platform are delivered swiftly and ethically.
Our commitment to sustainable supply chains is formalized in our
Rakuten Group Sustainable Procurement Instruction, while the
Rakuten Group Sustainable Procurement Code of Conduct for Suppliers
outlines more detailed actions expected from our suppliers.
Governance
At Rakuten, our commitment to a sustainable supply chain is overseen by a robust governance structure. The department in charge of procurement under the guidance of the Group COO (Chief Operating Officer), selects suppliers based on their ability to meet Rakuten's minimum criteria. Concurrently, the Sustainability Department ensures that all procurement activities align with our comprehensive ESG criteria listed in the aforementioned policies.
We regularly report the status of these initiatives to the Human Rights Subcommittee and the Group Sustainability Committee. Both committees are overseen by the Board of Directors, our highest decision-making authority, ensuring accountability and transparency in our supply chain practices.
Find out more about the management system of the Human Rights Subcommittee.
Rakuten's Supply Chain at a Glance
A supply chain is the network of all the entities involved in the creation and delivery of a product or service, from raw materials to the end users. Rakuten's supply chain consists of numerous stages in its cycle, starting from design & engineering down to product assembly and logistics, depending on the types of products and services. In the process, we procure tangibles such as raw materials, parts and equipment; intangibles such as software, systems, and digital content; and partner with staffing and consulting services.
Supplier Selection
At Rakuten, we understand that outsourcing our manufacturing, services, or business processes also means outsourcing corporate responsibilities and reputational risks. Therefore, we are committed to preventing any negative impact on all stakeholders, from consumers to contractors, ensuring our supply chain remains sustainable. This commitment begins with the careful selection of suppliers who share our values and dedication.
We evaluate our suppliers based on the following minimum criteria:
- Financial stability: We ensure that our suppliers have sufficient financial stability. For example, we refer to information provided by external credit agencies.
- Non-affiliation with anti-social forces: We confirm that our suppliers have no connections with anti-social forces or organizations.
- Technical capability: Our suppliers must possess the technical capability to deliver services of sufficient quality, including durability, stability, and information security measures.
- Competitive conditions: We ensure that the conditions offered by our suppliers, such as service prices, delivery and quality are competitive compared to those offered by other vendors.
- Fair and proper transactions: All transactions must be based on fair competition and adhere to proper business practices, including avoiding conflicts of interest and strictly prohibiting bribery.
- Compliance with suspension criteria: Suppliers must not meet any criteria that would warrant the suspension of business relations.
- Additional considerations: For some of our services, we may also take into account aspects related to human rights and environmental issues.
Suppliers who cannot adhere to these criteria are excluded from contracting with the Rakuten Group. For suppliers who do engage in business with us, we strive to build strong, reliable, and ethical partnerships by addressing all ESG requirements outlined in our Code of Conduct for Suppliers.
Critical Supplier Identification
An important first step in supply chain management is to identify our critical suppliers.
At Rakuten, critical suppliers are defined as:
| Suppliers of critical products & businesses |
|
|---|---|
| Suppliers with high transaction volume | Suppliers that have transactions above a certain amount. |
| Suppliers involved in industries and operations with high risks | Industries, operations and countries with high environmental, social and ethical risks. Industries include for example consumer goods production. Operations typically include the use of conflict minerals or waste disposal. Countries typically includes those with weak environmental regulations, inadequate social protection measures, limited respect for human rights, corruption, and more. |
Strategy
Given the vast number of suppliers we collaborate with, implementing our commitment to sustainability across all our businesses is a complex task. To address this, we execute our supply chain management strategy in stages, categorized by business characteristics, starting with businesses that offer Rakuten-branded products.
Supplier assessments are conducted on a yearly basis. The insights gained from these assessments, including audit findings, are shared with upper management, as well as the department and employees in charge of procurement. This ensures alignment between our outsourcing practices and the ESG requirements in our Code of Conduct for Suppliers, preventing any potential conflicts.
Communication of Policies
We hold briefings to promote awareness and understanding of the Rakuten Group Sustainable Procurement Instruction and the Rakuten Group Sustainable Procurement
Code of Conduct for Suppliers. Suppliers are asked to sign a written pledge and comply with the policies incorporated into outsourcing contracts.
Rakuten
employees also undergo related e-learning training regularly to deepen their understanding of our policies. The training is suitable for all employees,
regardless of their employment status, since all of our employees can potentially be involved in procurement and purchasing activities in their daily work
activity.
Supplier Surveys and Monitoring
We aim to identify and resolve issues in the supply chain using the following steps, checking the status of supplier initiatives in high-priority businesses.
Rather than removing non-compliant suppliers from the supply chain, we hold our suppliers accountable for damages caused and aim to resolve any issues together.
The steps below showcase our engagement flow:
Supplier Risk Classification
We assign a risk level to suppliers based on several criteria, including the results of their Self-Assessment Questionnaires (SAQ). Our engagement methods varies according to the assigned risk level, ranging from feedback via email to on-site audits.
| Risk Classification Criteria | Risk Level | Engagement Method | |||
|---|---|---|---|---|---|
| 1 or more major non- conformance revealed by SAQ |
Branded products / critical component supplier |
Annual transaction amount of JPY 10 million or more |
Factory operations |
||
| ✓ | ✓ | ✓ | ✓ | high | 1 day audit |
| ✓ | ✓ | ✓ | - | medium | interview |
| ✓ | - | - | - | low | feedback by email |
Feedback Provision and Capacity Building
Regardless of the engagement method, we ensure that all critical suppliers receive comprehensive feedback. This feedback serves as an opportunity for them to adopt more sustainable business practices.
Suppliers who undergo audits are required to develop corrective action plans (CAP) for any major breaches of our policies. We provide reference materials and guidelines to assist in this process. The Sustainability department carefully reviews the content and completion of these CAP.
Through these efforts, we aim to build sustainable supply chains tailored to the specific circumstances of our suppliers.
Case Study
Supplier Engagement in 2023
In 2023, we identified 201 critical Tier-1 suppliers among a total of 206 eligible suppliers, along with 18 non-Tier-1 suppliers. They accounted for 56.35% of our total outsourcing spend. Of these, 152 participated in our briefing sessions, and 104 answered the SAQ.
The average SAQ score was 67.4%, showing a modest improvement of 1.1 points compared to the previous year. The findings revealed that “Respect for Human Rights” achieved the highest score at 74.6%, while “Environmental Protection” received the lowest score at 51.9%. Additionally, suppliers with fewer than 99 employees consistently scored below average across all topics.
We identified 89 with substantial actual or potential negative impacts, as their responses did not meet our expectations outlined in our Code of Conduct for Suppliers (9 high risk, 2 medium risk and 78 low risk).
Audits were conducted at the facilities of four high-risk suppliers, revealing non-conformances with our Code of Conduct for Suppliers, such as issues related to operational health and safety or chemical substance management. Audit reports were communicated to these suppliers, who are currently executing their CAPs.
Consequently, no relationship with suppliers considered to have substantial actual or potential negative impacts were terminated last year.
Employee Training
All Rakuten employees are required to take sustainability-related e-learning courses at least one a year. These courses cover human rights, environmental risks, and related policies, particularly across supply chains. This training is essential for all employees, regardless of their employment status, as they may be involved in procurement activities in their daily work. Employees specifically assigned to procurement roles receive additional training to ensure compliance with Rakuten's procurement processes, internal regulations and relevant laws.
Supplier Hotline
Rakuten Group has established a Supplier Hotline as a consultation service for our suppliers. Rakuten executives, employees, or related parties can use the Hotline to report existing or potential violations of the Rakuten Group Sustainable Procurement Instruction.