Supply Chain Management Underlying Philosophy

Sony approaches CSR in procurement from two perspectives. One relates to materials procurement procedures and involves creating and maintaining sound business partnerships with suppliers, regarded as Sony's stakeholders, in line not only with relevant laws and regulations but also with internal policies. The other relates to production processes and involves providing the necessary support to realize CSR from such standpoints as the environment, human rights and labor conditions.

CSR in Procurement

Procurement Activities, Education and Training Sony is committed to undertaking procurement activities based on fair business practices, transparency and equal opportunity. Sony's procurement agents are not permitted to form personal ties or relationships based on potential personal gain with any supplier. In Japan, procurement agents in the electronics business are required to participate in e-learning programs designed to ensure a thorough understanding of the company's handbook, "Working Principles for Procurement Personnel." The content of these programs is translated into English and Chinese to help train overseas procurement agents, thereby ensuring the highest ethical standards on a global basis. Training programs employing case studies illustrating acceptable and prohibited behaviors and other approaches are used to enhance the business capabilities of newly appointed procurement agents.

Supplier Hotlines Sony Corporation has also installed a hotline for suppliers to report compliance violations on the part of Sony Group company employees or executives. Appropriate actions are taken in response to such reports once veracity has been confirmed.

Basic Approach to CSR in the Supply Chain

In addition to the quality of the products it delivers to consumers, Sony also ensures appropriate standards throughout its production processes from such standpoints as the environment, human rights and labor conditions. As a part of policy for product quality, Sony views appropriates standards in environment, human rights and labor condition this as a vital issue in relation to its CSR activities. In particular, as supply chains have expanded to include developing countries, this interest has broadened to encompass not only the company's own production lines, but also those of the companies that supply it with parts and materials and the companies to which it subcontracts work. While working together with other companies in the industry to develop a common framework, Sony is seeking to introduce "CSR procurement," namely, CSR management programs through our supply chain that include legal compliance, employment, occupational health and safety, and environmental protection.

Basic Structure of the Supply Chain

Policy for CSR in the Supply Chain

(Updated on September 28th, 2009)

Sony's expectations of its suppliers include compliance with laws, regulations and social standards and an environmental program.

Given the global nature of its suppliers, Sony has led the industry by introducing our own global standards for management of chemical substances, called "Management regulations for environment-related substances to be controlled which are included in parts and materials" (SS-00259). Sony has also established the Green Partner Environmental Quality Approval Program for Sony suppliers. Sony maintains a common global quality standard for parts by purchasing electronic parts only from suppliers who have passed an audit and have been certified as Green Partners.

Stakeholders's interests have risen sharply in companies' overall responsibility for their products, including such issues as human rights, labor conditions and environmental protection of OEM/ODM companies and parts suppliers. In response, we established the Sony Supplier Code of Conduct, which is based on the Electronic Industry Citizenship Coalition (EICC) Code of Conduct and is centered on the premise that since suppliers are engaged in the manufacture of Sony products, they should adhere to the Code and address such issues, and thus comply with Sony's standards.

Sony's basic procurement contract with material suppliers lays down observing related laws and regulations and the Sony Supplier Code of Conduct. Sony requests all potential new suppliers to comply with the Code, as well as to conduct assessments as a part of requirements of a preliminary examination.

It is Sony's basic policy to reconsider its business relationship with the supplier in the event that an existing supplier is confirmed to have committed a major violation of the Sony Supplier Code of Conduct, or not exhibit an appropriate level of cooperation to studies and audits. In the event that a violation of the Sony Supplier Code of Conduct is reported by a third party and a violation be confirmed, Sony will ask the supplier to take corrective actions and report back on the

progress. If the violation has been committed by a secondary supplier, Sony will work in cooperation with the relevant primary supplier to urger corrective action.

 Sony Supplier Code of Conduct

Basic Framework
(Updated on September 28th, 2009)

Participation in the Electronic Industry Citizenship Coalition (EICC) Supply chain overlap considerably in the electronics industry, with multiple manufacturers of finished products sharing the same subcontractors and parts suppliers. Accordingly, there are fears that the introduction of independent, company-specific standards for socially responsible management will cause confusion and constitute a significant burden on companies in the supply chain.

With the aim of improving processes in the electronics industry supply chain, Sony, as one of the member companies, participate in the establishment of the Electronic Industry Citizenship Coalition (EICC) in 2004. The EICC formulated a basic code of conduct based on industry best practices and is working to develop the tools and Web-based system, as well as the skills development programs for suppliers, necessary to create a framework for ensuring the code is upheld. As of June 2009, the EICC consisted of 40 participating companies from Europe, the Americas and Asia. Members include manufacturers, OEM companies. In cooperation with the Global e-Sustainability Initiative (GeSI) Supply Chain Working Group, consisting mainly of the European telecoms sector and other electronics industry organizations, the EICC is currently promoting social responsibility across the global supply chain.

The EICC continues to address a number of crucial issues. As part of this effort, Sony is participating in the Supplier Carbon Reporting Project, an environmental sustainability working group of the coalition that promotes the awareness and reporting of CO2 emissions.

Basic Framework
(Updated on September 28th, 2009)

Principal EICC Activities

Formulation and revision of the EICC code of conduct Development of common implementation tools Risk assessment tool

A tool designed to help companies identify areas of risk and prioritize activities Supplier self-assessment questionnaire

A self-administered survey for suppliers to provide information on their CSR efforts and management systems Audits Standardization of audit procedures Identification of qualified third-party firms to conduct audits Development and administration of a Web-based system A Web-based information system for collecting, managing and analyzing CSR data provided by

individual suppliers Education and training Stakeholder engagement

Work groups relating particular subjects Environmental Sustainability work group (Supplier Carbon Reporting Project) Extractive work group

Electronic Industry Citizenship Coalition (EICC) Website:

Sony's Structure for Promoting Supply Chain Management Sony's head office division, CSR, procurement operations and manufacturing operations groups, are mainly promoting supply chain management in CSR initiative, in cooperation with other head office-

related groups, business groups and manufacturing sites. The head office's CSR group keeps abreast of external trends and communicates with stakeholders, drawing on both to formulate company-wide basic supply chain management policies. The procurement group is responsible for implementation to suppliers, ensuring that suppliers comply with the Sony Supplier Code of Conduct by requesting compliance to the code, conducting necessary studies and audits, analyzing the results thereof and implementing necessary measures.

Implementation Framework
(Updated on September 28th, 2009)

Formulation of the Sony Supplier Code of Conduct In 2005, Sony established the Sony Supplier Code of Conduct, based on industry best practices as highlighted in the EICC Code of Conduct, to ensure that suppliers understand Sony's expectations in more detail and that the code is observed by suppliers of products and materials around the world.

Promoting Initiatives by Suppliers As part of its effort to assess supplier compliance with the Sony Supplier Code of Conduct, in fiscal year 2007 Sony has introduced assessment questionnaires and explanatory meetings for its approximately 2,500* suppliers region by region.

As of the end of fiscal year 2008, Sony had conducted 30 of these explanatory meetings to suppliers in Japan, Mainland China, Pan-Asia and the United States. Sony continues to support efforts for suppliers to conduct their business in a socially responsible manner by conducting assessments and further inquires of follow-up measures.

As of March 31, 2009, assessments had been conducted in approximately 90% of the areas where Sony has suppliers and Sony had received the results of assessments from almost all of its suppliers worldwide. The results of these assessments indicate several overall trends, including that organizational

development, i.e., the establishment of labor and ethical management systems, remains at a transitional stage. Sony will continue to support the efforts of suppliers to improve their activities.

The EICC also conducts shared supplier audits based on the EICC Code of Conduct it has formulated for the electronics industry. Taking stakeholder opinions into account, such audits currently focus on suppliers in regions where risk of violation is considered high. As of the end of fiscal 2008, Sony's suppliers have also undergone audits based on EICC standards through the EICC's pilot shared audit program. The results of these audits identified a comparatively substantial number of non-conformance issues in the categories of labor and ethical management systems, health and safety, and labor.

*Corporate group unit

Findings from EICC supplier joint audits:

(Number of findings by section)

Reference: EICC 2008 Annual Report

38 suppliers of EICC member companies from mainland China which participated in the EICC pilot shared audit program, from 2007 to 2008.

Stakeholder Engagement
(Updated on September 28th, 2009)

With the aim of developing a framework for promoting effective supply chain management, the EICC holds discussions periodically with NGOs, socially responsible investors and other stakeholders, in which Sony is also participating. Between April 2006 and May 2009, a total of eight such discussions were held, in Mexico, the United States, Switzerland, Mainland China and the Netherlands.

Challenges
(Updated on September 28th, 2009)

Labor Issues, Human Rights and Conflicts in Metal Extraction Process The EICC and the GeSI also keep a watchful eye on common issues facing the electronics industry. In response to heightened stakeholder interest, these organizations investigate such issues as environmental degradation, the human rights of laborers and conflicts related to the extraction of rare metals essential in the manufacture of electronics products. The EICC and the GeSI have established a working group to address these issues, and are exploring options for industrywide responses. As of the end of 2008, this working group had completed a study of the current use of metals in the electronics industry as a whole and the potential for efficient industrywide action. Based on the results of this study, the EICC and the GeSI will announce a common industry stance and implement joint studies to identify what rare metals are currently used and to develop a supply chain for these raw metals. Sony will continue to collaborate in industrywide efforts to address this issue.