Sustainable supply chain management

A robust process based on sound environmental practices and respect for human rights can only be truly effective with the direct involvement of all suppliers, which represent strategic partners for the Group in producing technologically advanced vehicles that meet the highest standards of quality.

The supplier selection process is based on objective assessment criteria that guarantee impartiality and equal opportunity in the process itself. At the same time, conduct which is environmentally responsible, ethical and respects human rights is given the same value in the selection process as competitiveness and quality of products and services. Group Purchasing, which is responsible for procurement activities worldwide, manages about €45 billion in direct materials purchases through a base of 2,884 direct materials suppliers. The supplier base is highly concentrated, with the top 184 suppliers, which account for approximately 57% of the total value of purchases, considered strategic suppliers.

Approximately 69% of the direct materials purchases, by value, are for plants in NAFTA, 19% for plants in EMEA, and 12% for plants in LATAM. By supplier, 73% are located in NAFTA, 19% in EMEA, 3% in LATAM, and 5% in APAC (based on the value of direct material purchases). Where possible, the Group uses local suppliers in order to generate opportunities for direct and indirect employment and support economic growth in local communities, as well as limiting environmental impacts, including those associated with transport and the use of natural resources.

Environmental and Social Impacts of Suppliers

Following the 2009 introduction of supplier evaluation and selection procedures that incorporate sustainability‑related criteria, clauses have been gradually introduced to new supply agreements requiring adherence to the Group’s Code of Conduct and specific Sustainability Guidelines. Those clauses are also included in all new project-specific supply agreements, in addition to the general purchasing terms and conditions.

Group Purchasing uses self-assessment questionnaires and on-site audits to monitor compliance with the Group’s sustainability standards and, where necessary, implement measures for improvement or alignment. The questionnaires address supplier practices in areas such as human rights, the environment, health and safety, ethics, anti-corruption, and employee training and development. In 2013, more than 1,200 suppliers, representing 43% of the value of purchases managed by Group Purchasing for the year, responded to the self-assessment questionnaires. In addition, in-depth audits were conducted by internal and external personnel, on the basis of which no significant issues were identified, no suppliers were placed on watch status, and no supplier agreements were suspended or terminated. However, where areas for potential improvement were identified, corrective action plans were formulated in collaboration with the supplier(s) concerned.

Given the nature and intensity of economic change, in addition to the existing monitoring programs, the Group has also adopted models of consultation and collaboration with suppliers based on effective, interactive communication processes. Initiatives such as local seminars, discussion forums and training programs have been developed over the years to facilitate the exchange of ideas and know-how and increase the level of collaboration.

On the environmental front, for example, suppliers are encouraged to develop internal policies and guidelines and adopt a certified environmental management system. In 2013, as part of the Group’s commitment to supporting suppliers in addressing climate change issues and focusing their attention on the importance of reducing greenhouse gas emissions, a select number of suppliers were invited to participate in the Carbon Disclosure Project’s Supply Chain program, which each year collects information from participating suppliers on the strategies and initiatives they have implemented to address climate change and manage water resources. The 45 suppliers that participated (out of 68 selected) achieved a score of 68/100 for transparency in disclosure and placed in the ‘C’ performance band for commitment toward reducing carbon emissions. The results revealed that measures implemented by those suppliers had yielded a 39 million ton reduction in CO2 emissions. The Group has also initiated a series of consultations with several strategic suppliers to monitor water management within the supply chain and, over the next few years, develop a risk management strategy for areas where water resources are scarce.

Another important area of long-term focus for the Group, in collaboration with industry peers and stakeholders, is the respect of human rights and working conditions at all levels in the supply chain. One of the greatest challenges is extending Group practices beyond the first level of suppliers, where the risk of sub-standard working conditions may exist. To address that potential risk, Tier 1 suppliers are required to implement a system of supply chain management. In addition, in 2013, a free online training course on responsible working conditions was also extended to Tier 2 suppliers, with approximately 100 companies participating, predominantly from the EMEA region. The Group’s objective is to develop new approaches to involve downstream suppliers with which there is no direct contractual relationship. This will improve the ability to evaluate the overall level of commitment, conformity and effectiveness and, as a consequence, the ability to ensure sustainable practices throughout the supply chain.