Our procurement practices aim to reduce negative consequences in the supply chain and reinforce positive consequences. To this end, all suppliers are audited with regard to their environmental impact, among other things.
Detailed assessments are currently being performed to establish where SFS’s suppliers stand in terms of defined environmental and social criteria. An initial evaluation, and therefore also a valid summary of potential opportunities and risks in the supply chain, will be available to SFS by the end of 2023. We introduced this new, standardized supplier assessment not only in an effort to more firmly exercise our duty of care, but also to expand our knowledge (scope and sources) of Scope 3 emissions through greater transparency and an expanded data basis. It is also connected to our long-term objective of reducing indirect emissions by ≥90% by 2040.
In keeping with our “local-for-local” strategy, SFS is steadily building up its global development and production platform. Business partners benefit from superior supply reliability thanks to short and robust supply chains.
SFS’s supplier network, including Hoffmann, currently comprises around 11,500 contacts domiciled and with operations in North America, Europe and Asia. With respect to the (raw) materials it purchases, the company differentiates between the following seven main product groups:
- WOM: Wire and other Materials
- FC: Finished Components
- OCE: Oil, Chemistry/Energy
- ME: Machines and Equipment
- PACK: Packing Material
- SP: Service Provider
Global procurement, including Hoffmann since May 1, 2022, amounted to more than CHF 1.4 billion in the year under review (PY over CHF 800 million; without Hoffmann), with procured items stemming from the following three regions:
- Europe 66.1% (PY 55%, without Hoffmann)
- Asia 23.4% (PY 32%, without Hoffmann)
- America 10.5% (PY 10%, without Hoffmann)
Through the inclusion of our stakeholder groups, the topic of “Procurement” was also identified as one of the new material topics at the stakeholder workshops.
Transparent supply chains and active supplier management
About 90% of our emissions occur in Scope 3. In order for us to be able to check and reduce our emissions along the entire value chain in the future, including upstream and downstream processes, we need to focus on Scope 3 emissions. To that end, suppliers will be evaluated according to defined social and environmental criteria on an online platform, thereby enabling SFS to identify potential opportunities and risks and ideally work with the suppliers to set reduction targets.
Initial assessment successfully conducted with pilot group
A first pilot group of 40 suppliers was successfully certified through the platform in the fourth quarter of 2022 as part of a proof of concept. Suppliers from Taiwan and China that serve the Distribution & Logistics segment were selected to be in the pilot group. Most of these suppliers fall under NACE code 25 (manufacturer of fabricated metal products, except machinery and equipment), a group which has been found to have a higher industrial risk with respect to various ESG topics (e.g., environmental protection, working conditions and occupational safety).
SFS’s supplier network currently comprises around 11,500 contacts domiciled and with operations in America, Europe and Asia. Group-wide supplier onboarding began across all divisions in January 2023. The goal is to use the platform to certify a substantial share of the suppliers by the end of 2023.
In light of the new legal requirements enacted in 2023 by Switzerland through its counterproposal to the Responsible Business Initiative (VSoTr) and Germany through its new Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz, LkSG) and also based on the sustainability strategy and goals of SFS, the supplier assessment currently comprises the following key topics:
- Environmental protection
- Human rights and labor rights
- Occupational safety
- Responsibility in the supply chain
- Conflict minerals
Supply partners responded very positively to the assessment, with the result that a very high response rate of >85% was achieved within 30 days. A follow-up e-mail or phone call only became necessary for 15% of the supply partners.
Once the individual assessments had been validated in full by strategic purchasing, the pilot group was classified using a traffic light system (green, amber, red) with 100% of suppliers rated as “green”.
While some results on individual topics received an “amber” rating, these did not negatively impact the respective suppliers’ overall score. These discrepancies are addressed during our regular communications with suppliers and suitable corrective measures defined where necessary.
Supplier management outlook
Once the onboarding of direct suppliers has been completed, we will also gradually transfer indirect suppliers to the platform from 2024 onwards so that we can also evaluate the upstream supply chain. Sustainability assessments are to become a permanent part of supplier management.