Promoting Sustainable Procurement

1. Fair and transparent trading:
   For the procurement of articles and services, besides quality, price, and delivery date, we select our partners based on ethical standards by measuring their compliance with laws and regulations as well as social norms.
2. Compliance with laws, regulations, and social norms:
   We will comply with the laws, regulations, and social norms of each country.
3. Respect for human rights and consideration of the work environment:
   We respect internationally declared human rights standards and promote procurement activities with consideration for the work environment.
4. Promotion of green procurement with consideration for the environment:
   To promote environmentally-friendly manufacturing, we adopt components with less environmental loads in a preferential manner, to contribute to the reduction of loads on the global environment.
5. Existence and co-prosperity with partners:
   We will build better partnerships with all our partners to achieve common goals, both domestically and overseas.

Introduction

The CITIZEN Group (CITIZEN WATCH Co., Ltd. and its group companies) aims to contribute to the wellbeing of the world’s population through "manufacturing activities that are well-loved by and friendly to citizens", by adhering to the corporate philosophy of being "Loved by citizens, working for citizens." With this corporate philosophy as its slogan, The CITIZEN Group intends to create strong partnerships with its business partners who give due consideration to social issues and actively promote CSR, based on the spirit of the United Nations Global Compact concerning human rights, labor issues, the environment and corruption prevention, and by strictly abiding by the "Code of Behavior Charter of The CITIZEN Group".

While we have been encouraging our business partners to be involved in CSR initiatives, we have revised our "The CITIZEN Group’s CSR Procurement Guidelines" in order to further develop the relationships of mutual trust with our business partners and to proceed with responsible procurement activities, towards the realization of a sustainable society.

We sincerely ask all our partners to understand and agree to the aims of the Guidelines and cooperate with us in promoting CSR procurement activities, including further propagation of the initiatives in their supply chains.

Corporate Governance

1. Establishment of a CSR promotion system

   We endeavor to conduct business activities to achieve a sustainable society while observing the law as a responsible company, abiding by social norms, meeting society’s expectations, and taking care not to have a negative impact on society and the environment. To this end, we have established a system for the management of ESG (environment, social, and governance) risks related to CSR and for implementing the PDCA (plan, do, check, and act) cycle.

2. Healthy business activities

   With a view to establishing an organizational structure for sound corporate management, we have established management systems and schemes within our company to ensure compliance with laws and regulations related to our business activities, the effectiveness and efficiency of our operations as a company, and the reliability of financial reporting and asset protection. We hereby also secure proper and effective business execution, transparency of management, and a multifaceted management monitoring system.

3. Risk management

   Toward the enhancement of our corporate governance and product quality compliance, we have secured and established schemes to verify the progress of our addressing risks and our response status against important risks as well as to respond to new risks, including ESG risks such as those related to compliance and the BCP (Business Continuity Plan), trade secrets, intellectual property, information security, labor practices, and environmental problems, in addition to financial risks.

4. Establishment of a whistleblower system

   For prevention, early detection, and improvement in the self-cleaning functions of compliance-related problems in our company’s business activities, such as legal violations or wrongful acts or acts that could be a compliance problem, or for our employees who themselves have suffered human rights or labor abuses, we have secured a system for our employees to directly report to or consult with a dedicated department or outside contact, even anonymously. We have also secured a system to ensure confidentiality and to make sure that the whistleblower or the persons who have consulted will not be treated unfavorably.

5. Disclosure of information

   We place importance on the relationships with society and stakeholders in our business activities, and we promptly and accurately disclose financial information and nonfinancial information in response to requests for transparency and accountability.

Human Rights

1. Respect for human rights and the prohibition of discrimination

   We support and respect the protection of internationally declared human rights*, and strongly denounce any kind of discrimination (including but not limited to any discrimination based on gender, sexual orientation, sexual expression, age, existence of a disability, nationality, race, skin color, religion, and marital history).

   • * The Universal Declaration of Human Rights, International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, Ten Principles of the UN Global Compact, UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, and UK Modern Slavery Act, etc.

2. Avoidance of complicity in human rights abuses

   We take due care so that none of our business activities, products or services will ever cause human rights abuses or lead to complicity in human rights abuses. Should it become clear, however, that we have happened to be involved in any of such issues, we will promptly make corrections and remedy the situation by undertaking appropriate procedures.

3. Prohibition of inhumane treatment

   We respect the human rights of our employees and prohibit any kind of inhumane treatment such as abuse, physical punishment, and harassment.

Labor

1. Corruption prevention

   Maintain sound relationships, including the proper management of hospitality, with government agencies and public officials in the countries and regions where we conduct business activities.

2. Prevention of the giving and receiving of improper advantages

   We maintain healthy relationships with our customers and trade partners, etc. in sales and purchasing activities, etc., by preventing the giving and receiving of improper advantages among ourselves.

3. Basic attitude toward labor practices

   We prevent unfair business practices such as bid-rigging, cartels, abuse of dominant bargaining positions, and other unfair trading practices from occurring.

4. Provision of equal opportunities

   We recognize that the labor principles presented in international norms* are universal values and adopt them as our basic workplace principles.

   • * The Universal Declaration of Human Rights, International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, Ten Principles of the UN Global Compact, UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, UK Modern Slavery Act, etc.

5. Payment of fair wages

   We abide by the legal minimum wage of the countries and regions where our business activities are conducted and will not reduce wages unreasonably. We abide by the laws and regulations of the countries and regions where our business activities are conducted regarding overtime work, payroll deduction, piecework wage, other benefits, etc. At the time of paying wages, we deliver pay slips that can confirm the accurate rewards corresponding to the work performed, at the appropriate time.

6. Fair application of working hours, time off, paid time, etc.

   We abide by the working hours agreed upon with the employees in advance and ensure that employees’ working hours are managed appropriately so that they do not exceed the statutory limit in the countries and regions where our business activities are conducted, and we also seek to prevent excessive overtime work. All our employees are given the right to take paid time off and also given at least one day off per week.

7. Prohibition of forced labor

   We avoid making people work against their will and making people do work that restricts their freedom to leave their jobs. We ensure that work coercion using unjustified means of restraint, compulsory overtime work and bonded labor, slave labor, prison labor, etc. are not practiced and that the unjustified retention of identification documents and the unjustified collection of deposits are not practiced.

8. Prohibition of child labor

   We avoid employing children under the legal working age in the country and region where our business activities are conducted. We ensure that children are not made to perform night work, dangerous work, etc. that could harm their health, development, safety, or morals.

9. Recognition of the freedom of association and the right to collective bargaining

   We respect the basic labor rights of our employees, such as their freedom of association, freedom to join a labor union, and their right to collective bargaining.

10. Proper management of employees’ health and safety

    We secure the safety of the work environment and perform inspections and proper maintenance of our facilities thoroughly so as to prevent unforeseen accidents and disasters. We understand the risks of harmful chemical substances, noise, odors, etc. on the human body, and ensure sanitary, safe, and healthy work environments. We promote the creation of a workplace that is considerate of employees’ mental and physical health.

The Environment

1. Basic attitude toward environmental initiatives

   We should be aware of environmental issues in business processes and establish systems to resolve them. We also identify factors that have an impact on the environment and properly manage them.

2. Management of chemical substances

   We manage chemical substances indicated in the laws and regulations of the countries and regions where our business activities are conducted and ascertain and report the amount of handled chemical substances to the government properly.

3. Reduction of the environmental burden

   We endeavor to prevent the occurrence of pollution, monitor and control wastewater, sludge, and air emissions, etc., and reduce outflow. We also set our independent reduction targets for the reduction of the environmental burden at the level prescribed by law in the countries or regions where our business activities are conducted or set even more rigorous voluntary environmental impact reduction targets and make further improvements thereof.

4. Sustainable and efficient utilization of resources (energy, water, raw materials, etc.)

   We set our independent reduction targets for implementing resource conservation and energy savings, and make efforts to use resources and energies effectively and continuously.

5. Reduction of GHG (greenhouse gas) emissions

   As a means to combat climate change, we set our independent reduction targets for greenhouse gases such as CO₂, methane, and fluorocarbons, and endeavor to reduce them continuously.

6. Reduction of waste

   We set our independent reduction targets for waste, and endeavor to conduct the responsible disposal or recycling of waste.

7. Protection of biodiversity

   We conduct investigations into the direct and indirect impacts of our business on the ecosystem, and endeavor to protect biodiversity and ensure the sustainable utilization of the environment.

Fair Business Practices

1. Corruption prevention

   We maintain healthy relationships with national/local governments and public officials in the countries and regions where our business activities are conducted by establishing appropriate relationships with them.

2. Prevention of the giving and receiving of improper advantages

   We maintain healthy relationships with our customers and trade partners, etc. in sales and purchasing activities, etc., by preventing the giving and receiving of improper advantages among ourselves.

3. Prevention of competition law violations

   We prevent unfair business practices, such as bid-rigging, cartels, abuse of dominant bargaining position, and other unfair trading practices, from occurring.

4. Rejection of relationships with antisocial forces

   We prohibit our employees from contacting and giving any benefits to antisocial forces.

5. Respect for a third party’s intellectual property

   We respect intellectual property rights, including patent rights, copyrights, and trademark rights, and do not infringe on others’ intellectual property rights.

6. Prohibition of insider trading

   We prohibit persons involved with a listed company, etc. from using undisclosed company information to trade that company’s stocks, etc.

7. Prohibition of acts with conflicting interests

   We prohibit our employees from enjoying personal benefits at the expense of the company’s benefits. Any act that may be interpreted as such must be avoided and appropriate trading must be pursued.

8. Services for responding to complaints from outside the company and for consultations

   Our trade partners or customers who have knowledge of important risk information can directly report or consult with a dedicated outside contact department of our company. We have established a system to ensure confidentiality and to ensure that the informant will not be treated unfavorably.

9. Establishment of a BCP (Business Continuity Plan) system

   We have established a system wherein in the event of an emergency such as a natural disaster, quick restoration is realized while important duties and businesses can continue.

10. Management of confidential information and protection of private information

    We perform proper management to ensure that none of the confidential information of our customers, business partners, our own company, etc. is ever leaked. We also properly manage and protect the private information of our customers, trade partners, employees, etc.

Quality and Safety

1. Ensuring product and service quality and safety

   We provide products and services that meet the necessary quality and safety standards as stipulated in the laws and regulations of the countries and regions where our business activities are conducted.

2. Appropriate response to product and service accidents

   In order to prepare for situations where any accident relating to our product or service has occurred or where any defective goods of our company have been circulated, we have established a system through which we disclose information promptly, notify the relevant authorities of the situation, recall the product in question, take safety measures for our supply destinations, and strive to prevent a recurrence.

3. Response to our customers’ need

   We provide environmentally friendly and socially beneficial goods and services that pursue quality and costs acceptable to our customers by correctly grasping the social needs.

Information Security

1. Basic attitude toward information security

   We properly manage and protect information obtained through our business activities and take defensive measures against threats to our computer networks.

2. Defense against attacks on computer networks

   We take defensive measures against attacks on our computer networks and ensure the effective management of threats to avoid damage to our company and any other companies.

Supply Chain

1. Basic attitude toward the supply chain

   In order to fulfill social responsibility regarding not only our company but also the whole supply chain, we endeavor to make the importance of a sustainable procurement policy widely known among our trade partners.

2. Responsible procurement of minerals

   We make it our company’s policy not to purchase or use raw materials containing tantalum (Ta), tin (Sn), tungsten (W) or gold (Au), which are conflict minerals linked to inhumane acts committed by local armed groups in the Democratic Republic of the Congo and its surrounding regions.

Harmonious Coexistence with Local Communities

1. Contribution to local communities

   We respect the culture and customs in the countries and regions where our business activities are conducted and carry out initiatives that can contribute to the sustainable development of local communities.

To fulfill our social responsibilities in the supply chain in cooperation with our business partners, The CITIZEN Group, as a policy, will not use target minerals^*1 that may contribute to any risk of human rights abuses such as child labor or forced labor, environmental destruction, conflict, terrorist financing, money laundering, corruption, or fraudulent financing in mining, trading, handling, export, and our other business activities.

This does not mean, however, that any and all minerals mined and traded in conflict areas and high-risk areas should not be used, and we may use minerals mined and traded in these areas if they are not related to human rights violations, environmental destruction, conflicts, corruption, or other wrongdoings.

If a potential target risk^*2 is confirmed, we will ask the relevant business partners to take corrective actions.

• Target minerals: 3TGs (tantalum, tin, tungsten, and gold) and cobalt
• Target risks: Risks included Annex II of the OECD Guidance and the risk of environmental destruction