Supply Chain : Addressing the Issues of Confict Minerals

Basic Stance toward Conflict Minerals

Panasonic recognizes that for the Democratic Republic of the Congo (DRC) and neighboring nations (hereinafter "covered countries"), the issue of conflict minerals* as a source of funding for organizations that are involved in human rights abuses, environmental destruction, bribery, and other unlawful activities is a grave concern.

In order to fulfill its social responsibility in its procurement practices, Panasonic therefore has adopted a policy of non-use of conflict-affected minerals as raw materials. In the unlikely event that Panasonic discovers that it is inadvertently using conflict-affected minerals, the Company will immediately take steps toward their non-use.

To put this system in place, Panasonic sent a communication to all members of the Panasonic Group in December 2010, ordering them to make sure that they are not using conflict-affected minerals. In February 2011, Panasonic began encouraging its main suppliers to identify their mineral sources.

However, in covered countries there are still companies and individuals who are engaged in legitimate business. The Company must make every effort to ensure that its decision not to use illegal minerals does not harm the business activities of these legitimate operators.

This is why it is important for Panasonic to maintain contact with the various stakeholders in the building of a legitimate mineral supply chain in covered countries, including government, corporation, and NPOs. With this understanding, Panasonic participated in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals in Conflict-Affected and High-Risk Areas project that the Organization for Economic Co-operation and Development (OECD) began in August 2011.

By participating in this and other projects, following OECD guidelines, and adopting a management process that is in accordance with global standards, Panasonic is contributing to international efforts that seek to overcome the conflict minerals problem.

* Tin, tantalum, tungsten, gold

Panasonic's Structure to Address Conflict Minerals

Panasonic has built a corporate structure that puts the Global Manufacturing Division in charge of Group-wide administration with the director responsible for quality and the environment as the chief executive. Panasonic adopted a four-company structure in April 2013, and designated an officer in charge of conflict mineral investigations and reporting in each company. Under the direction of the officer responsible for conflict mineral investigations and reporting in each company, we have been building systems and conducting surveys in accordance with the particular traits of each business.

Due Diligence

In addition to communicating our policies to suppliers, we also ask them to make reasonable efforts toward a conflict-free DRC and to procure from Conflict Free Smelter (CFS) to the greatest extent possible.

Since we require the cooperation of all suppliers from smelters to refiners in our conflict mineral surveys, sharing investigative tools and briefing materials is an effective means of reducing the burden placed on suppliers and improving their survey efficiency. For this reason, Panasonic uses a survey tool called the Conflict Mineral Reporting Template (CMRT) that is published by the Conflict Free Sourcing Initiative (CFSI). Moreover, Panasonic participates as an explainer in investigative briefings held by JEITA's Responsible Minerals Trade Working Group. We proactively utilize survey manuals and guidelines commonly used by automakers and the Japan Auto Parts Industries Association.

Status of Surveys

In the responses we received from suppliers surveyed in fiscal 2014, there were some issues with accuracy at certain suppliers. For instance, we noticed the names of companies that are not smelters mixed in the information we received about smelters. We assume these errors in the conflict mineral survey were due to a variety of factors. For example, errors can be attributed to the fact that many of our suppliers are parts makers that deal with multiple layers of intermediaries from smelters, that 2013 was the first fiscal year for SEC reporting, and that respondents lacked a proper understanding of the survey.

In the responses from suppliers listing "covered countries as the origin of production," many of the smelters that were identified as a part of the supply chain for parts and materials were CFS-validated smelters, but some suppliers were unable to identify their smelters, making it impossible to determine the origin of the minerals used in production. We continue to help these suppliers as they try to identify their smelters. However, we believe it would be premature to demand that these parts and materials suppliers immediately change their subcontractors. Making such a demand while so few smelters have been validated as CFS would in effect impose a de facto embargo on the covered countries, and impede efforts to responsibly procure minerals from covered countries. At this juncture, Panasonic is involved in industrywide initiatives to get smelters to obtain CFS validation, while encouraging its suppliers to continue to perform due diligence. In the event that minerals have been discovered to support a conflict, Panasonic demands that its supplier change subcontractors and otherwise discontinue their use.

Participation in Forum for Implementing Due Diligence for Responsible Mineral Procurement

Since 2011, Panasonic has participated in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals in Conflict-Affected and High-Risk Areas project. In November 2013, Panasonic participated in the sixth forum held for the first time in one of the covered countries, the Republic of Rwanda, that was sponsored by International Conference on the Great Lakes Region (ICGLR), OECD, and the United Nations Group of Experts (UNGoE) on the DRC. We came away with a greater understanding of the mines and exchanges that are working toward responsible mineral sourcing in Rwanda, as well as efforts being made to establish a mineral traceability system and efforts to identify mines through analysis of mineral composition and age.

Efforts at Industry Collaboration

Conflict mineral surveys require the cooperation of suppliers along the entirety of our supply chain. For this reason, Panasonic works as joint chief examiner and joint leader on Japan Electronics and Information Technology Industries Association's (JEITA) Responsible Minerals Trade Working Group in order to help spread the word throughout supply chains via industry collaboration and to help improve survey efficiency.

More specifically, Panasonic held seminars and survey briefings with industry groups inside and outside Japan in order to facilitate the correct way of addressing conflict minerals. Panasonic also participated in the analysis of data about smelters and refiners, as well as the creation of IPC-1755, a data transmission protocol for conflict minerals in the US. Together with Japanese automakers, the Responsible Minerals Trade Working Group inaugurated the Conflict Free Sourcing Working Group in November 2013, thereby promoting dialog with the smelting industry and accelerating efforts to analyze data about smelters and refiners. Panasonic continues to participate in these activities as well.

Supporting Initiatives in the Democratic Republic of the Congo and Neighboring Nations

Panasonic performs due diligence along its supply chain as a part of its social responsibility as a downstream company. In order to resolve the issue of conflict minerals, we believe the most important action that can be taken is establishing a framework for responsibly procuring minerals in covered areas.

Based on this belief, we joined the Public-Private Alliance for Responsible Minerals Trade (PPA), a select group of industry, government, and civil society leaders in March 2013.

The PPA is an initiative that provides multifaceted support including assistance in putting in place assurance and traceability mechanisms as well as encourages capability development with respect to conflict-free minerals in the great lakes Region of Central Africa. The PPA also provides a platform for alliance stakeholders to discuss and collaborate on initiatives to achieve sustainable, responsible minerals trade in the region.

By joining the PPA, Panasonic aims to contribute to the healthy economic development of the areas by supporting initiatives for responsible mineral sourcing.

Related information

Supporting Sustainable Development in Covered Countries

As part of our corporate citizenship activities in this region, we established the Panasonic NPO Support Fund for Africa in 2010 to strengthen the advertising foundations for NPO/NGOs working to resolve social problems in African nations. From 2011 to 2013, Panasonic has provided support to groups like Terra Renaissance, which is working to prevent use of land mines, small arms, and child soldiers in Uganda, the Democratic Republic of the Congo and other areas. In 2014, Panasonic provided support to groups including the NPO Reborn Kyoto, which fosters economic independence by providing opportunities for women to receive occupational training in Rwanda.

Through the 100 Thousand Solar Lantern Project, an initiative at Panasonic to deliver 100,000 solar lanterns to regions without electricity by 2018 to commemorate its 100th year of operations, Panasonic donated about 1,500 solar lanterns to hospitals in Uganda, Burundi and other countries through the Japan Red Cross.