NF10 Sustainable supplier management
Sandvik has about 52,000 suppliers located in 98 countries, from which we source raw materials, components, products and services. In 2020, we started to develop working processes within Sustainable Supplier Management to support our commitment to our 2030 Sustainability Goals. A focus area has been to increase internal knowledge and communication related to the sustainability goals within our sourcing network, and to communicate them with suppliers.
Identified key suppliers
During the year we identified 450 potential key suppliers to achieving our sustainability goals. The criteria for and number of suppliers defined as key will change over time, based on the natural supplier lifecycle and depending on the selected suppliers’ commitment to meet Sandvik requirements and achieve the targets. A supplier may be selected as key based on their category, spend, criticality or their potential for building partnerships related to our sustainability targets. Discussions on the sustainability targets were initiated with identified key suppliers and are still ongoing.
For Sandvik, circular use of raw materials, for example in our buy-back programs for cemented carbide, has been part of our business model for many years. With this sustainability goal we are strengthening our ambitions within the circular supply chain. During the year, we initiated a discussion with suppliers about new sustainable packaging solutions, including for example recycled materials. In 2020, we made an agreement with a Swedish supplier providing us with corrugated plastic that consists of 80 percent recycled material, with ongoing development projects to reach 100 percent. Another example is the Central Warehouse in Sandviken, Sweden that exchanged their custom-made pallets to refurbished standard pallets.
Our logistics suppliers are important for achieving the climate goal. In 2020, a logistics working group for all Sandvik business areas was established to understand, analyze and optimize our logistics from a climate perspective. We started collecting baseline data of our CO2 emissions from our key logistics suppliers and initiated dialogues with them on CO2 reduction programs. In some cases, we have taken control of transportation for in and outflow of materials, which led to a reduction of packaging material and reduced CO2 emissions.
Health and safety plans are part of the requirements on our suppliers in the Sandvik Supplier Code of Conduct (SSCoC). Suppliers are requested to provide a safe and healthy working environment and take all practicable steps to prevent incidents and injuries. Follow-up on the People goal is included in the Supplier Code of Conduct audits.
The Sandvik Supplier Code of Conduct places requirements on our suppliers in the areas of health and safety, compliance with relevant laws, labor and human rights, environment and anti-corruption. As part of the Code, suppliers are requested to cascade Sandvik requirements to their own supply chain.
Sandvik suppliers are assessed for risk of violating the requirements in the Code based on country and category risks and segmented as high, medium or low risk. In 2020, approximately 3.8 percent of our supplier spend was rated as high risk.
By signing the Code, the supplier gives Sandvik the right to perform compliance audits. Due to the global pandemic, it was not possible to perform on-site audits to the same extent as in previous years. During the year, two supplier Code of Conduct audits were performed, both by independent third-party auditors. The pandemic has given us reason to evaluate traditional compliance tools for Code compliance and we are looking into revised methods for the future.
We performed nine follow-up activities and closed 127 of identified audit findings from audits conducted in 2019. Out of 1,877 audit findings identified in 2019, 353 were closed by the end of 2020.
During the year one supplier relation was terminated due to violations of the minimum wage requirement in the Code.
Responsible sourcing of minerals
Sandvik condemns all activities in the raw material sector connected to illegal or unlawful exploitation of ores, that directly or indirectly finances or benefits armed groups in conflict areas, or that contribute to serious human rights violations, including child labor, and has adopted measures to manage and mitigate these risks.
Wolfram Bergbau und Hütten, a Sandvik subsidiary based in Austria, is a Conformant Tungsten Smelter that has maintained its compliant status since the company successfully completed the Responsible Minerals Assurance Program (former Conflict-Free Smelter Program) audit in March 2015. It continued to supply the majority of Sandvik’s total tungsten in 2020.
Sandvik annually performs a reasonable country of origin enquiry to identify smelters and refiners associated with our supply chain, based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. As of 2020, Sandvik participates in the Responsible Minerals initiative.