Materiality : Supply Chain Management

Basic Concept

Mizuno acknowledges the crucial role of supply chain management. In light of this, we have instituted the "Mizuno CSR Procurement Code of Conduct" and are implementing CSR procurement activities that strictly adhere to this code.
By conducting CSR audits in collaboration with our domestic and international suppliers, we ensure compliance with laws and regulations, as well as adherence to standards related to human rights, working conditions, safety, hygiene, and environmental preservation. In the event of any issues, we are committed to addressing and correcting them.

Supply Chain Status

Mizuno manufactures products such as sports shoes, sportswear, and golf clubs at its own factories as well as at contracted factories (suppliers).
The main supplier countries, in addition to Japan, include China, South Korea, Taiwan, Indonesia, Vietnam, Thailand, the Philippines, Myanmar, and Cambodia.

Status of the entire Supply chain

Please refer to our ESG data for the breakdown of our Tier 1 suppliers by procurement category, as well as by country and region.

Status of important suppliers

From the perspective of annual transaction amount, occupancy rate, and the importance of procured goods, we categorize suppliers that have a significant impact on our business continuity and business value as important suppliers. Please refer to our ESG data for the status of these important suppliers (Tier 1 suppliers).

Disclosure of Supplier Information

To help understand the status of Mizuno's supply chain, we have been disclosing our factory list since the fiscal year 2017. Additionally, starting from the fiscal year 2023, we have begun disclosing the following new items:

1.Parent company
2.Percentage of female workers
3.Percentage of migrant workers
4.Presence of labor unions

List of Major Suppliers(October 2023)

Implementation of CSR Procurement Audits and Improvement Efforts Domestically and Internationally

Mizuno's CSR procurement audits cover not only the company itself but also overseas branches, domestic and international subsidiaries, as well as procurement sources of licensees and sales agents. Our CSR procurement efforts include two forms: pre-evaluation conducted before starting transactions with suppliers and regular audits of ongoing suppliers.

Additionally, we recognize the importance of collaborating with external organizations knowledgeable in this field to improve the CSR procurement status at overseas contracted factories. This is considered a key challenge for the future.

CSR evaluation of new candidate supplier factories before the commencement of business

We believe that evaluation of suppliers before the commencement of business is important to ensure CSR procurement. To this end, we have established a system for a CSR evaluation of new suppliers before the commencement of business based on the Mizuno CSR Procurement Regulations and have evaluated major new candidate supplier factories in terms of human rights, labor practices, and the environment before commencing production. Before conducting an audit for a CSR evaluation before the commencement of business, we present new candidate supplier factories with three documents – the Mizuno Code of Conduct for Suppliers, the Mizuno CSR Pledge Statement, and the Mizuno CSR Self-Assessment Check List – and ask for a signature on the CSR Pledge Statement.
In addition, we hold a briefing session using the Mizuno Group CSR Procurement Guidelines, which explain our CSR procurement policy, to seek their understanding of CSR procurement before an audit. For factories that do not reach Evaluation B (Evaluation:80–89) in an audit, which is requisite to commence business, we send a corrective action plan and report created based on the CSR audit report. Subsequently, we discuss with them about the content of the corrective action plan, provide corrective guidance and, in some cases, visit the relevant factories. To ensure CSR procurement, we do not start business until we confirm that they meet the conditions required by us through these corrective actions.

Flow of CSR evaluation of new candidate supplier factories before the commencement of business

Implementation Rate of CSR Pre-Evaluation for New Supplier Candidate Factories (Monitoring Rate in Terms of Human Rights, Labor Practices, and Environmental Aspects)

In FY 2023, we conducted pre-evaluations (audits) for 27 new supplier candidate factories. The results were as follows: 2 suppliers were rated A, 1 supplier was rated B, and 24 suppliers, evaluated through other audit processes by external audit organizations, were rated equivalent to B or higher.
There is a growing trend of new supplier candidates having already undergone CSR audits by other organizations in recent years. Mizuno analyzes, reviews, and compares the results of these external audits with our standards to determine if new supplier candidates meet the requirements for starting business with us.

Corrective Action When the CSR Audit Result is Below B

If a factory receives a rating below B in the prior evaluation, we provide feedback on the results and discuss specific and feasible corrective and improvement measures with the supplier for the items deemed non-compliant. While respecting the supplier's autonomy in creating corrective and improvement plans, we conduct periodic checks and offer advice as needed, following up until they achieve a rating of B or higher, which is a prerequisite for commencing business.

Translation of the Mizuno Code of Conduct for Suppliers into the local language of the respective countries and its distribution

The "Mizuno CSR Procurement Code of Conduct" is available in three languages: Japanese, Traditional Chinese, Simplified Chinese, and English, and is distributed to our suppliers. In recent years, to enhance understanding among employees working in overseas factories, we have translated the code into various languages, considering both the local languages of the factory locations and the languages spoken by foreign workers. Currently, translations are available in the following languages:
Italian, Indonesian, Urdu, Korean, Khmer, Spanish, Thai, German, Turkish, Bulgarian, Vietnamese, Portuguese, Bengali, Malayalam, Myanmar, Lao, Lithuanian, Romanian (in alphabetical order)

Additionally, to ensure that the purpose of the "Mizuno CSR Procurement Code of Conduct" is well understood by supplier employees, we conduct awareness activities with product divisions and domestic subsidiaries that directly interact with suppliers. This supports the improvement of organizational capacity within suppliers.*

*This effort is often referred to as "capacity building."

For translations of the "Mizuno CSR Procurement Code of Conduct," please refer to this document.

Implementation of CSR Audits for Suppliers and Improvement Efforts

For CSR audits of suppliers doing business with us, we conduct regular monitoring (CSR audits on a three-year cycle) of compliance with the Mizuno CSR Procurement Code of Conduct based on the Mizuno CSR Procurement Regulations, targeting more than 150 factories that serve as our major suppliers. In FY 2023, 35 factories (34 Tier 1 factories, including 4 in Japan and 30 overseas, and 1 Tier 2 factory) were audited.
Since a CSR audit consists of on-site audits, document audits, and employee interviews, it is usually conducted by multiple auditors over one to several days. To check the compliance status of suppliers, a globally common monitoring sheet based on ISO 26000 is used. The audit items on the monitoring sheet are classified into three categories – “critical,” “major,” and “general” – depending on the degree of importance and urgency. If the item requirements are met, the points set for each category are aggregated and quantified for evaluation.

System for CSR audits and corrective actions

One of the Conditions for Selecting CSR Audit Targets

Mizuno uses the "Worldwide Governance Indicators" published by the World Bank, along with our own perspectives, to identify countries considered to have a high risk of human rights issues as targets for CSR audits. Therefore, we review the latest indicators annually.
Countries that rank high in the indicators "Voice and Accountability," "Political Stability and Absence of Violence," "Government Effectiveness," "Regulatory Quality," "Rule of Law," and "Control of Corruption" are designated as audit target countries based on the purpose of these indicators.
Although Japan is not classified as an audit target country, we conduct audits on factories employing foreign technical interns, as cases of human rights issues concerning these workers have been noted.

For more details on the "Worldwide Governance Indicators," please refer to this document.

Survey on Factories Employing Foreign Technical Interns

As of April 1, 2023, there are 132 factories in Japan that are contracted to manufacture for Mizuno, and 29 of these factories employ a total of 314 foreign technical interns. Among these, 14 factories employing 177 foreign technical interns were selected as audit targets based on our criteria.
In FY 2023, audits were conducted at 4 of these factories. Of the 4 factories audited, 3 received an A rating and 1 received a B rating. The main nationalities of the foreign technical interns working at these 4 factories were 15 from Vietnam and 13 from China.

Number of audits conducted and Average score by country

Main Monitoring Contents

We conduct audits by establishing items in the fields of human rights, labor practices, safety and health, and the environment. In FY 2023, as shown in the table below, some factories had items judged as critical or major, but consultations for improvements and corrections with each factory have been completed.

Number and Percentage of Factories with Non-Conformities in Critical and Major Items in Audits (FY2023)

Items	Audit item	Number of Critical Items	Number of Major Items	Total	Number of Factories with Non-Conformities	Percentage
Human Rights	Child and underage workers	0	2	2	2	5.7%
	Slave labor / Forced labor / Migrant labor	0	1	1	1	2.9%
	Freedom of association	0	8	8	7	20.0%
Labor Practices	Employment contract / Employment conditions	0	7	7	5	14.3%
	Working hours	0	40	40	22	62.9%
	Compensation	4	30	34	17	48.6%
Safety and Health	Work environment	0	30	30	19	54.3%
	Chemical substances	0	17	17	13	37.1%
	Fire safety	5	51	56	22	62.9%
	Dormitory	1	0	1	1	2.9%
Environment	Management system	0	10	10	9	25.7%
	Pollution prevention	0	18	18	11	31.4%
	Chemical substances	0	9	9	6	17.1%

Non-conformities with the requirements related to human rights

Item	Requirements	Nonconformity	complete	Incomplete	remarks	Country name	Products
freedom of association	Are mechanisms fair and effective to ventilate and resolve grievances of workers in place?	4	4	0	Correction completed	Vietnam/3 Japan/1	Ball for Baseball Apparel
freedom of association	Do workers elect their own representatives / spokesperson?	4	3	1	corrections of 3 non compliances have been completed. One will be corrented withing 1st half in FY2024	China/1 Japan/3	Apparel
Child and Juvenile Workers	Does the factory register all the young workers working at the factory with the local labor bureau?	2	2	0	Correction completed	China/1 Vietnam/1	Apparel
Bonded Labor/Forced Labor/Migrant Labor	Are mechanisms fair and effective to ventilate and resolve grievances of workers in place?	1	1	0	Correction completed	Vietnam/1	Apparel

Evaluation rank of the audit results

We evaluate the CSR audit results in four stages based on the evaluation index. We consider an evaluation index of 90 or higher as A, an evaluation index of 80-89 as B, an evaluation index of 70-79 as C, and an evaluation index of 69 or less, or a case where child labor or forced labor is found, as D.

The evaluation ranks of the factories subject to an audit in FY 2023 are as follows.

Evaluation rank	No. of factories
A	22
B	9
C	3
D	1
Total	35

Corrective action status of suppliers where violations were confirmed

Items with Frequent Non-Conformities

In the FY 2023 audits, non-conformities were detected in areas such as safety and health (electrical/mechanical/equipment, fire safety, first aid, work environment, chemicals), labor practices (working hours, compensation), and environment (pollution prevention, resource use/climate change mitigation).
Specifically, the issues included the installation of protective devices on hazardous parts of machinery, signage and indicator lights for exits and emergency exits, provision of first aid kits, removal of obstacles from emergency exits and evacuation routes, supply of personal protective equipment (PPE) to workers, storage methods for hazardous/harmful substances and industrial materials, fire-fighting equipment for chemical and hazardous waste storage areas, permits such as fire inspection certificates, regular health check-ups for workers exposed to hazardous environments, management of working hours and overtime, leave acquisition, overtime pay, and management and reduction of energy consumption.

Requirement	No. of Non-conformity	Ratio
<Safety and Health> Electricity/Machinery/Equipment	Are adequate guards or devices installed for moving/rotating parts of machine, pulleys and belts or any other dangerous parts of machines?	60.0％
<Labor practices> Working hours	Does the working hour of factory meet law requirements?	54.3％
<Occupational Health> Working Environment	Does the factory arrange regular health examination for workers exposed to hazardous environment?	40.0％
<Labor Practices> Compensation	Are all workers provided social insurance met local legal requirements?	37.1％
<Safety and Health> Firefighting	Are exits and fire exits identified with sign or indicator lamps?	37.1％
<Safety and health> Chemical substances	Does hazardous chemicals being properly labeled?	34.3％
<Labor practices> Working hours	Are workers available to take one day off in seven?	28.6％
<Safety and Health> Working Environment	Is personal protective equipment (PPE) in fully acceptable condition provided for workers?	28.6％
<Safety and Health> Firefighting	Are all site buildings structurally safe, inspected and have certificate/license issued by local government authority?	25.7％
<Labor Practices> Compensation	Are all compensation paid to workers themselves in cash / cheque / direct to bank? Is the payment frequency reasonable and legal?	25.7％
<Safety and health> Chemical substances	Are dangerous / hazardous substances safely and securely stored? And is fire-extinguishing equipment appropriate there?	25.7％
<Safety and health> Chemical substances	Does the factory have emergency shower, eye showers where hazardous chemical being used?	25.7％
<Safety and Health> Firefighting	Does the factory have valid fire inspection have certificate/license issued by local fire service authority?	25.7％

Corrective action status for non-conformities

In the CSR audits conducted in FY 2023, 233 critical or major non-conformities were detected. Of these, 93 items (42%) had been confirmed corrected as of March 31, 2024. For the status of non-conformity corrections, please refer to the ESG data.

Cases of Termination of Business Relationships

In FY 2023, there were no cases where we terminated business relationships with suppliers due to failure to meet CSR audit requirements. If a supplier does not meet the specified standards, we follow up until they achieve a rating of B or higher.

Response to Secondary and Tertiary Suppliers

For our primary suppliers, with whom we have direct business relationships, we focus on understanding and managing human rights, labor, and environmental impacts. We request improvements and corrections as necessary to build a better supply chain. Additionally, for secondary and tertiary suppliers, who do not have direct business relationships with us but supply raw materials or components to our primary suppliers, we monitor them if there are significant concerns regarding human rights, labor, or environmental impacts.
Since FY 2017, we have expanded the scope of our audits to include secondary and tertiary suppliers. The main targets include plating factories for golf iron heads and tanning factories for leather used in baseball gloves and shoes.

FY	Content
2017	We audited two factories that manufacture golf components. In order to understand the realities of the metal processing factories in Japan and the fabric dyeing and processing factories in Thailand, which are our Tier 2 and Tier 3 suppliers apart from component factories, we visited the local areas and inspected the sites.
2018	We conducted CSR audits at a total of five factories: a golf club component factory in China, a golf club plating factory, a leather tanning factory in Vietnam, a shoe upper (vamp material) factory, and a rubber sole factory for shoes.
2019	We carried out CSR audits at a total of six factories that included golf component factories and factories manufacturing vamp materials and sole materials for shoes. Among these, the audit results for three factories - a golf component factory and factories processing sole materials and vamp materials - fell below Mizuno's passing standards.
2020	In FY 2018 and 2019, we conducted follow-up audits at two of the three factories that fell below our standards. The two factories subject to the follow-up audits corrected their non-compliant items and achieved an A rank evaluation. In FY 2020, we conducted an audit at one golf club component factory.
2021	Due to preventative measures against the novel coronavirus, such as visitor restrictions from outside, we were unable to conduct audits of our Tier 2 and Tier 3 suppliers.
2022	We conducted an audit at one golf component factory. Since this factory fell below Mizuno's passing standards, we will conduct a follow-up audit in FY 2023.
2023	We conducted an audit of one golf component factory. A follow-up audit was performed on a golf club component factory that did not meet the specified standards in the 2022 audit. Upon checking the corrective actions, it was confirmed that the factory had surpassed the standards. We also reviewed the transaction status of secondary and tertiary suppliers for apparel, footwear, and equipment, and assessed the necessity of future audits. Based on this, we considered management methods for 2024 and beyond.

* in FY 2021, audits could not be conducted due to COVID-19 prevention measures implemented by the factories.

Responses other than CSR audits

Currently, in Southeast Asia, where many of our suppliers are located, rapid local economic growth has created a situation where environmental issues and labor disputes are more likely to occur. Under these circumstances of societal change, merely correcting non-conformities identified in CSR audits is becoming increasingly difficult to fundamentally resolve human rights, labor, and environmental issues. Therefore, we believe it is necessary to focus on capacity building (enhancing organizational capabilities) for factories beyond CSR audits.
In FY 2023, externally, we participated in ESG seminars hosted by the Japan Department Stores Association and business partners, as well as the Kansai CFE (Certified Fraud Examiners) Study Group, where we presented Mizuno's CSR activity reports and an overview of CSR procurement management.
Within our group, we explained the importance of CSR through various educational programs tailored to different levels and positions (all group employees, new employees, overseas trainees, newly appointed managers, etc.).
Additionally, we conducted awareness activities such as explaining the significance and mechanisms of CSR procurement to our domestic subsidiary, Sharp Sangyo Co., Ltd.

Participation in the Japan Platform for Migrant Workers towards Responsible and Inclusive Society

It has been reported that there are approximately 2.05 million foreign workers in Japan, including about 410,000 technical intern trainees, and approximately 320,000 establishments employing foreign workers (as of the end of October 2023, according to the Ministry of Health, Labour and Welfare). These workers have become essential members of Japan’s economy and society.
Aiming towards the SDGs' target year of 2030, Mizuno intends to contribute to improving the environment for responsibly and stably accepting foreign workers. This will be done through participation in initiatives like JP-MIRAI and by adhering to the "Platform Action Principles" that meet international standards, ensuring that employers and accepting organizations comply with the law.

Approach to the Grievance Mechanism

While CSR audits allow us to understand the situation at the time of the audit, it is not possible to constantly monitor suppliers. To supplement CSR audits and to detect potential issues in the supply chain at an early stage, we are considering the introduction of a "grievance mechanism" and are actively collecting information.

Efforts to Prohibit Child Labor

Sports products such as apparel and shoes are produced in the Asia-Pacific region, where wage levels for workers are relatively low. Recent trends, influenced by the poverty effects of COVID-19, suggest that child labor may increase, necessitating heightened monitoring of child labor. Therefore, Mizuno needs to intensify its monitoring of child labor in the Asia-Pacific region, where many of its contracted manufacturing factories are located.

Mizuno explicitly states in the "Mizuno Code of Ethics" that child labor is prohibited. In the "Mizuno CSR Procurement Code of Conduct," we require our suppliers to respect the International Labour Organization (ILO) core labor standards, including Convention No. 138 on the Minimum Age for Admission to Employment and Convention No. 182 on the Worst Forms of Child Labor.
To identify countries and regions with a high risk of child labor, we use the previously mentioned "Worldwide Governance Indicators" to classify countries where audits are necessary and those where they are not.
We place the utmost importance on the prohibition of child labor in our audit items. If child labor is discovered during a CSR audit, we will immediately consider the appropriate response and take swift action. Additionally, recognizing that child labor often arises from underlying social issues such as poverty, we aim to address not only the immediate issue but also the root causes in collaboration with the factory.
In the audits conducted in FY 2023, no instances of child labor were detected. However, at a factory in China, it was found that young workers (ages 16-18) were employed without the necessary registration procedures with the local authorities. We promptly urged the factory to correct this issue, and the corrective measures have already been completed.

Response to Modern Slavery (or Forced Labor)

In the Asia-Pacific region, similar to child labor, modern slavery and forced labor also require vigilant monitoring. In Japan, many factories in labor-intensive manufacturing industries, such as apparel sewing, employ foreign workers through the Technical Intern Training Program. Mizuno procures products from such suppliers as well.

In recent years, the treatment of foreign technical interns in Japan has become a social issue, particularly concerning human rights and working conditions. To help ensure the elimination of forced labor practices, we designate factories employing foreign technical interns in Japan as audit targets and conduct direct audits by CSR procurement officers.

In FY 2023, there were no cases of forced labor found in domestic audits. However, during an audit of a factory in Thailand, legal violations and improper treatment of migrant workers were discovered, and corrective actions were taken.

For more details on the actual conditions of audit target factories employing foreign technical interns, please refer to this document.

Initiatives on conflict minerals

What are conflict minerals?

Conflict minerals are mineral resources mined in conflict areas mainly in African countries. Residents living near the relevant minerals are forced to engage in mining operations through the use of violence, and this is considered a human rights issue. In addition, it is seen problematic that the revenue from the mining and trading of these minerals is a source of funding for armed groups.
Under the Dodd-Frank U.S. Financial Regulatory Reform Act, in particular, the following four substances are defined as regulated mineral resources: tin, tantalum, tungsten, and gold (3TG). Listed companies in the U.S. are required to report to the U.S. Securities and Exchange Commission (SEC) on whether they manufacture or outsource products using these minerals and to disclose such information on their website.

Efforts Regarding Conflict Minerals

Although we are not a publicly traded company in the United States and therefore not subject to reporting and disclosure obligations, we conducted an investigation in 2018 to identify products using substances defined as conflict minerals. Specifically, tungsten was found to be used in the heads of golf clubs, the weights for balance in soft tennis rackets, and the tips of baseball carbide spikes.

In 2022, we conducted a survey using the unified survey form provided by the Responsible Minerals Initiative (RMI), known as the Conflict Minerals Reporting Template (CMRT), to trace the tungsten used in golf club heads, identifying all smelters. We confirmed that these smelters were listed in the RMI’s Conformant Tungsten Smelters list.

Smelters listed in the RMI’s Conformant Smelter List have been verified through the Responsible Minerals Assurance Process (RMAP) audit as having no illegalities in their conflict minerals procurement management processes.

In addition to the survey using the CMRT, we implemented traceability up to the smelters for tungsten used in golf products and created a supply chain map. This ensures transparency in the tungsten procurement routes and requests business partners not to use minerals from non-conforming smelters.

* The Responsible Minerals Initiative (RMI) was established in 2008 and has over 400 member companies. It develops tools and resources to support responsible mineral sourcing in supply chains.

Compliance with Overseas Laws Regarding Human Rights Respect

We compile with laws in various countries and regions that require companies to disclose their efforts to eliminate human trafficking and slave labor. We actively disclose information in response to the codification of human rights respect, such as the "California Supply Chain Transparency Act" enacted in the United States in 2012 and the "UK Modern Slavery Act" enacted in 2015.

Translation of specified terms:
「California Supply Chain Transparency Act」

UK Modern Slavery Act

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2023

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2022

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2021

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2020

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2019

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2018

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2017

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2016

MIZUNO CORPORATION MODERN SLAVERY STATEMENT FY2015

Future issues to be addressed

With the globalization of business, the globalization of the supply chain is also progressing. As procurement from suppliers in new countries and regions is expected to increase further, we will ensure thorough and precise responses, including pre-evaluations, for these new suppliers.

Through regular monitoring via CSR procurement audits, it is crucial to ensure that issues identified during audits are corrected and do not recur. We will continue to work on ensuring the integrity of our supply chain in the future.

Materiality Supply Chain Management