Note 5: Supplier sustainability

Mr. Le Anh Dung, National Sales Director at AkzoNobel Vietnam (photo)

During 2019, we were ranked as one of top 100 most sustainable businesses in Vietnam for the third consecutive year. Mr. Le Anh Dung, National Sales Director at AkzoNobel Vietnam, received the award.

We work closely with our suppliers to identify and minimize supply chain risks, create value through continuous improvement and seek out collaboration and joint development opportunities in order to ensure a secure and sustainable supply of our products.

Business Partner Code of Conduct

Our business partners are expected to follow the company’s core principles of safety, integrity and sustainability, as specified by our (CoC). Suppliers sign the code to confirm their compliance with environmental, social, human rights and governance requirements. Signatories cover 98% of the product related (PR) spend and 84% of the non-product related (NPR) spend.

Supplier risk management

As a member of Together for Sustainability (TfS) we have been proactively managing the sustainability performance and risk management of our suppliers for six years.

TfS, which now has 22 members, is a chemicals sector initiative which aims to assess and improve the sustainability practices in its members’ global supply chains. We request our suppliers to perform online assessments, which are conducted by TfS partner EcoVadis, and TfS on-site audits.

Through this program, suppliers are assessed on the overall score in their EcoVadis online assessment, as well as their score on labor and human rights. To meet our expectations, suppliers need to achieve an overall EcoVadis score of at least 45 and a labor and human rights score of at least 50. Suppliers not meeting our expectations are requested to improve through annual re-assessments.

Depending on a supplier’s maturity level when joining our program, it can take several years of improvement to reach our threshold. We also verify our own activities against industry best practices and achieved the EcoVadis Gold rating in 2019 for the fifth time, with an overall score of 75.

To bring this program to the next level, we started a multi-year program in 2019 and have lowered our spend threshold from €1 million to €250,000. By lowering the threshold and looking at the suppliers’ country and industry risk level, we have now identified around 1,000 suppliers who are expected to participate in the program. We focus our efforts by taking a risk-based approach. A supplier’s risk level is determined by the spend, country and industry, among other factors.

Close to 60% of the identified suppliers already participated in the 2018 EcoVadis assessments. In 2019, we increased this to 65% by adding suppliers prioritized by risk. In the coming years, we aim to further increase the number of suppliers in the program. Currently 460 (47%) suppliers meet our expectations. In 2020, we aim to accelerate our program by continuing to request improvements and inviting additional suppliers to take part in the assessment.

Supplier performance management

Our supplier performance management process includes suppliers who have a contractual relationship with us and/or have an impact on our resource productivity agenda. The sustainability performance of suppliers in this group is measured using our Supplier Sustainability Balanced Scorecard (SSBS). The SSBS is designed to measure and improve our suppliers’ performance, focusing on those topics most material for our agenda.

Suppliers in sustainability program

in %

Supplier sustainability – Suppliers in sustainability program (bar chart)

Baseline of 982 suppliers across all procurement spend categories who meet our new risk criteria.

Supplier sustainability

 

2018

2019

1

Third party online assessment on our suppliers’ CSR (Corporate Social Responsibility) performance.

2

Baseline includes suppliers across all procurement categories above €250,000 and with specific country and category risks.

3

Suppliers meet our expectations on their CSR performance if they achieve a total score of 45 and a labor and human rights score of 50 in the online assessment.

Suppliers participating in CSR program1 in % against baseline2

60

65

Suppliers in line with our expectations3 in % against baseline3

38

47

High risk raw materials

We further accelerated our due diligence program of several high risk raw materials. Initiated in 2017, these raw materials were identified as possibly impacting human rights in our supply chain, in particular regarding health and safety, working conditions and modern slavery. After analysis and prioritization, materials in scope are cobalt, mica minerals and tin, which are used in the manufacture of some additives, pigments, resins and tin packaging material that we source. In 2019, we published a conflict mineral statement. Visit our website for more information.

With regard to mica minerals, we collaborated with our suppliers to map their entire supply chain back to the mines of origin. For cobalt and tin, we have surveyed all 188 identified suppliers, using templates supplied by the Responsible Minerals Initiative. Of those suppliers who confirmed using high risk materials necessary to the functionality of the product, 83% disclosed their smelters. A total of 38% of these smelters are conformant with the Responsible Mineral Assurance Process (RMAP) standard, or an equivalent standard. Suppliers with a “conflict free statement”, but who did not disclose the smelters in their supply chain, were not regarded as being conformant, since our due diligence is based on the Organization for Economic Cooperation and Development (OECD) Guidance for Responsible Mineral Supply Chains. In 2020, we will continue our due diligence process to ensure our suppliers steer their supply chains towards using only smelters validated via RMAP (or equivalent).

During 2019, we introduced Interpon Structura Flex (photo)

During 2019, we introduced Interpon Structura Flex, the first and only powder coatings range on the market to combine the weatherability of superdurable powder coatings with the mechanical performance advantages of standard durable systems. Specifiers and architects are increasingly moving towards superior durability, so we’ve developed a pioneering solution which sets a new standard in the market.

Capability building

Having started in December 2018, we continued to train our procurement organization on our sustainability programs and human rights. In total, 96% of our buyers in scope have participated in the training.

The indicators that fall within the scope of limited assurance of our external auditor are marked with this symbol

Business Partner Code of Conduct

Explains what we stand for as a company, what we value and how we run our business. It brings our core principles of safety, integrity and sustainability to life and shows what they mean in practice.