Modern Slavery and Human Trafficking Transparency Statement

The information in this Statement has been approved by the Board of Directors of Hitachi Energy Ltd

The information in this Statement has been approved by the Board of Directors of Hitachi Energy Ltd (herein after referred as Hitachi Energy [1]) and relates to the period April 01, 2021, to March 31, 2022. The scope of markets included in this Statement covers our operations worldwide, including those of our direct and indirect subsidiaries.

About Hitachi Energy 

Hitachi Energy is a pioneering technology leader. Our leading power and digital technologies, advanced automation systems and open digital platforms transform our customers’ businesses and deliver significant operational and business value. We are contributing pioneering solutions that are making the world’s power grids stronger, smarter, and greener. Through Hitachi Energy’s advanced portfolio of sustainable, digital energy solutions, we will create even more value for customers spanning the energy (utilities) and industry sectors, to mobility, IT and Life (Cities) sectors.

Hitachi Energy operates in more than 90 countries with about 36,000 employees. With manufacturing operations in about 70 countries, Hitachi Energy has approximately 20,000 direct material and project service suppliers. We view these suppliers as an extension of our global enterprise and integral to our long-term success.

Hitachi Energy has 4 Operating Units – Grid Automation (including the Enterprise Software offering), Grid Integration, Transformers, and High Voltage.

Company approach and principles

We fully acknowledge our responsibility to respect human rights as set out in the International Bill of Human Rights and are committed to implementing the United Nations Guiding Principles on Business and Human Rights throughout our operations. Respect for the dignity of the individual and for the importance of human rights forms the basis of the behaviors we expect from everyone who works for us, either as a direct Hitachi Energy em­ployee or indirectly through our supply chain. We do not accept any form of discrimination, harassment or bully­ing within Hitachi Energy or its supply chain. To this end we require all our managers to implement processes designed to ensure equality of opportunity and inclusion for all Hitachi Energy employees as well as for individuals employed in our supply chain. These include requiring suppliers to take measures to avoid any form of forced, bonded or compulsory labor (or any other kind of modern slavery or human trafficking). Recognizing the extremely com­plex nature of modern slavery, we continue to emphasize the importance of collaboration and learning from oth­ers. We propose to engage with human rights NGOs and assess the opportunity to join internationally recog­nized organizations (UN Global Compact, RMI-Responsible Minerals Initiatives). 

Codes and policies 

We fully acknowledge our responsibility to respect human rights as set out in the International Bill of Human Rights and are committed to implementing the United Nations Guiding Principles on Business and Human Rights throughout our operations. Respect for the dignity of the individual and for the importance of human rights forms the basis of the behaviors we expect from everyone who works for us, either as a direct Hitachi Energy employee or indirectly through our supply chain. We do not accept any form of discrimination, harassment or bullying within Hitachi Energy or its supply chain. To this end we require all our managers to implement processes designed to ensure equality of opportunity and inclusion for all Hitachi Energy employees as well as for individuals employed in our supply chain. These include requiring suppliers to take measures to avoid any form of forced, bonded or compulsory labor (or any other kind of modern slavery or human trafficking). Recognizing the extremely complex nature of modern slavery, we continue to emphasize the importance of collaboration and learning from others. We propose to engage with human rights NGOs and assess the opportunity to join internationally recognized organizations (UN Global Compact, RMI-Responsible Minerals Initiatives). 

Risk assessment 

At the core of the risk management is the Human Rights Due Diligence (HRDD) process, which focuses on assessing where human rights impacts may exist, the severity and likelihood of impacts leading to the prioritisation of actions, tracking responses, and communicating how impacts are addressed.

Hitachi Energy is committed to conducting business ethically and to minimizing human rights impacts in its own business and supply chains. Its risk management is structured around the following 4 processes:

–     carrying out HRDD based on a risk-based approach, assessing actual and potential human rights impacts originating from the salient issues;

–     raising awareness and building in-house expertise in Hitachi Energy;

–     learning and collaborating with external organizations and stakeholders; and

–     monitoring progress for continuous improvement through gap identification, acting upon the findings and communicating how impacts are addressed.

Hitachi Energy acknowledges that reaching excellence in human rights compliance is a journey which requires partnerships with various stakeholders including suppliers as well as transparency and accountability.

Our salient human rights issues

The UN Guiding Principles on Business and Human Rights (UNGPs) defines salient human rights issues as 'the human rights that are at risk of the most severe negative impacts through a company’s activities or business relationships.'

Identifying our salient human rights issues helps us prioritize how we address human rights impacts across our operations and extended value chain. During 2021, and after an extensive process involving wide-ranging consultation within and beyond our business, we have identified the following salient issues:

To ensure that salient human rights risks are understood and managed across Hitachi Energy, we mapped existing processes and tools that support the mitigation of those risks. We identified areas for improvement, and we are currently working on action plans with the collaboration of various internal functions such as Legal and Integrity, Human Resources, Supply Chain and Risk Management to monitor and minimize those risks. We plan to regularly communicate and report our progress in those actions plans

Supply chain 

Hitachi Energy Supplier Code of Conduct, published in 10 different languages, communicates our expectations and performance standards to existing and potential business partners. Suppliers must comply with the Hitachi Energy Supplier Code of Conduct as part of Hitachi Energy general terms and conditions of business. The new version provides clearer expectations/guidance and sets high standards for ethical business conduct. It includes relevant topics ranging from human rights, fair labor conditions, personal data protection, material compliance to health, safety, and environmental & sustainability management. Our updated Supplier Code of Conduct sets high standards for ethical business conduct and is aligned with Hitachi Group Compliance Program (HGCP).

Hitachi Energy operates a supplier registration and prequalification system for new suppliers. The qualification process evaluates potential suppliers on their quality systems, operational parameters, financial stability along with broad sustainability parameters including health & safety, environment and working conditions. This process requires supplier acknowledgement of our supplier code of conduct covering topics related to forced labor, modern slavery, and human trafficking. There is also an optional step of onsite assessment to review the supplier responses on all the above topics

For existing suppliers, we have a robust supplier sustainability development program that focuses on suppliers with a higher sustainability risk, which includes the risk of modern slavery and human trafficking. This Supplier Sustainability Development Program (SSDP) prioritizes suppliers according to a risk matrix combining country risk, commodity risks based on operations characteristics, criticality of the supplier and spend volume. The program consists of three main elements: training, assessment, and monitoring. Training on sustainability priorities is provided for both suppliers and Hitachi Energy employees, on-site assessments evaluate performance status, and improvement plans are monitored to ensure timely completion. Risks related to modern slavery and human trafficking are specifically addressed in the training programs and assessment protocols. We focus on Tier 1 suppliers in priority countries and each year work to expand the reach of the program.

In 2021-2022, we assessed 88 high risk suppliers under the SSDP. As of March 2022, we had identified 374 risks and mitigated 233 of them. In other activities to support supplier sustainability development, we trained 60 Hitachi Energy employees and 102 suppliers during the year.

During the worldwide COVID-19 pandemic, Hitachi Energy took a proactive approach and adopted several measures to conduct the supplier assessments within the “new norm” by adopting remote audits as one of the methods.

For every area of noncompliance identified during our supplier assessments, Hitachi Energy launched a supplier support action to systematically address each issue in turn. Our support actions include capacity building, customized participatory workshops, sharing best practices, jointly implemented collaborative programs, and transfer of knowledge and expertise.

During our assessments, neither the on-site assessments nor our other supplier due diligence processes in FY2021 indicated the presence or use of modern slavery or human trafficking in Hitachi Energy’s supply chain.Before qualifying new suppliers, we obtain an undertaking from them to declare usage of forced labor, if any existing, in their own supply chains. We believe in working with suppliers to address non-compliances to improve performance. We apply timelines for corrective action according to the severity of the finding, regularly monitor progress and there are consequences for suppliers who are unwilling to align their performance standards with our requirements.

Hitachi Energy also continues to work to understand and limit our exposure to Conflict Minerals, as defined by section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Our commitment is outlined in the Hitachi Energy Policy on Conflict Minerals.

Hitachi Energy supports responsible minerals sourcing. There is growing interest in responsible sourcing of minerals other than 3TG, otherwise known as Conflict Minerals. Besides the problems of 3TG mining, NGO reports in the past few years have also highlighted the serious environmental pollution and human rights violations associated with cobalt mining. Hence, we have expanded our efforts to also address human rights issues and geographies in our supply chain on cobalt mining.

We have established a Conflict Minerals and Cobalt Program in line with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, identifying the impacted suppliers and working together with our suppliers to identify the source of origin of the minerals mined in conditions where armed conflict and human rights abuses occur.

We also from time to time ascertain our compliance to the EU regulation on Conflict Minerals. We have earlier ascertained that all our units importing small quantities of 3TG fall well within the specified thresholds of the EU Conflict Mineral regulation’s importing limits.

Further information on our sourcing policy on conflict minerals and cobalt can be found in our Material Compliance Policy at Material Compliance | Hitachi Energy

As part of our yearly conflict minerals program, all identified suppliers are invited to take the Hitachi Energy specific web-based training course on Conflict Minerals that covers the highlights of the relevant law and the importance of ethical sourcing to the industry and communicates our policy on Conflict Minerals. The training also includes guidance for our suppliers on how to complete the Conflict Minerals Reporting Template (CMRT) as developed and issued by the Responsible Minerals Initiative (RMI) of the Responsible Business Alliance (RBA) and the Global eSustainability Initiative (GeSI). In addition, all identified suppliers are required to make an initial conflict minerals self-assessment which indicates if the supplier has taken this training course or an equivalent training. 

Training

Raising awareness and building expertise is another process used by Hitachi Energy to manage human rights risks, this being fully aligned with the UN Guiding Principles on Business and Human Rights and the UN Sustainable Development Goals. On this topic, Hitachi Energy focuses its efforts on:

- training the management team members at various levels of the organization to provide decision makers with the relevant background on identifying and managing such risks;

- providing training such as e-learnings and webinars for all our employees to increase awareness and the business linkage to the topics;

- building internal capabilities by further developing the Human Rights champion network acting as an advocate and first point of contact within the businesses;

- developing awareness on such topics within the Tier 1 supply chain through the Supplier Sustainability Development Program; and

- promoting the open reporting and transparency culture via internal communication campaigns including events with other organizations.

We recognize that reaching excellence in human rights compliance is a journey which requires partnerships with various stakeholders including suppliers as well as transparency and accountability.

_¹ Since Hitachi Energy financial year is now changed from Jan-Dec to April -March, and Hitachi Energy, a joint venture (JV) of Hitachi Ltd and ABB Ltd, came into existence on July 01, 2020, this statement relates the period July 01, 2020 to March 31, 2021.