Focus Topics – Social Issues

Sustainable purchasing 

Upholding ethical standards in the supply chain

Management approach

To achieve sustainable purchasing practices, we need to extend our sustainability standards to our entire value chain. The key instrument in this regard is our Supplier Code of Conduct¹ in effect since 2021. We require suppliers to sign a binding commitment to our Supplier Code of Conduct or an equivalent standard. The Supplier Code of Conduct covers all Environmental, Social and Governance (ESG) pillars and focuses particularly on supply-related risks concerning human rights, corruption as well as health and safety. Our Supplier Code of Conduct is based on the Zehnder Group Code of Conduct as well as external standards such as the UN Universal Declaration of Human Rights, the International Labour Organization (ILO) and the principles of the UNGC. We also systematically train our own employees in this regard to raise their awareness of fair business practices, ensuring that our values are embedded in our day-to-day business practices and along our value chain. We audit suppliers related to a risk assessment – and new direct material suppliers if necessary – before doing business with them. Moreover, we expand our auditing processes to include social and environmental aspects. This way we ensure that the suppliers’ commitments are effectively applied.

We do not use financial pressure to implement the Supplier Code of Conduct but focus on cooperation and dialogue with our suppliers. If a supplier hesitates to sign, we seek to find a solution that satisfies both parties’ needs. We want to ensure that our suppliers live up to our Supplier Code of Conduct, be it acting on their own initiative or by implementing ours. We communicate with them directly, which allows for a more efficient process of improvement.

To optimise our resource allocation and focus on the suppliers with the highest potential risk, we conduct a high-level risk screening. This screening involves using various publicly available indices from third parties. Countries assessed receive a risk score, which allows us to pay extra attention to the risks inherent to them. As an additional step, our internal assessment assigns risk scores to purchasing categories. Suppliers scoring highly in both assessments are prioritised and receive more resources. In those cases, we implement additional measures to investigate and validate the identified potential risks thoroughly. In addition, we constantly work on integrating sustainability topics into our existing tools for risk assessment and audits to ensure the commitment goes beyond signing the Supplier Code of Conduct.

The next step for us is to verify that our suppliers actively comply with and implement the Supplier Code of Conduct. Our suppliers are key to us reaching our targets for sustainable procurement and we are convinced that trust and partnership provide the best conditions for change. That is why we focus on assisting their development towards better environmental stewardship, fair labour practices and strong and transparent governance.

Supply chain transparency is set to be a game changer in how we manage and collaborate with our suppliers. Close collaboration with our strategic supply partners, based on trust and mutual sustainability targets, will bring us one significant step closer to our tier 2 suppliers.

The responsibility for reaching our sustainable purchasing targets lies with Group and local Procurement. The procurement team is represented by the CFO and COOs in the Sustainability Steering Committee. It manages and coordinates the implementation of measures across the Group, aggregates and analyses the respective KPIs and regularly reports to the Sustainability Steering Committee. Due diligence processes include supplier risk assessments, a defined onboarding process that includes ESG criteria and audits of high-risk suppliers as well as other tools to manage suppliers such as supplier relationship management tools, sustainability platforms, etc. 

¹ Available at www.zehndergroup.com/en/common/supplier-code-of-conduct

Implementation and outlook

To implement the above management approach and policies, we defined an ambition which is underpinned by five targets and monitored via specific KPIs.

Ambition: Ensure suppliers apply the same sustainability ambitions as we do and are transparent about their environmental and social impacts along the value chain

Set up a Zehnder supply chain due diligence and risk management standard operating procedure
Status:
As a decentralised organisation, we require unambiguous processes that all our sites and partners can follow. In 2023, we updated the risk screening and the processes of our procurement handbook.
Outlook:
Within the next two years, we aim to implement the defined supply chain due diligence and risk management standard operating procedure. We also want to implement the “Ethical Trading Initiative – Guide to buying responsibly” for sustainable purchasing.

Signed Supplier Code of Conduct by significant direct suppliers
Status: 
In 2023, 406 suppliers signed the Supplier Code of Conduct.
Outlook:
All medium- and high-risk direct material and logistics suppliers are to sign our Supplier Code of Conduct or adhere to a similar standard by 2025.

On-site audit of high-risk suppliers
Status:
Based on an individual assessment, our high-risk suppliers are subject to sustainability audits. Using our audit template, which includes ESG topics, we can assess if our suppliers fulfil our Supplier Code of Conduct. Depending on the results, suppliers are recommended improvement measures and are expected to implement them within a reasonable time frame. In 2023, we identified 34 high-risk suppliers through our risk screening, of whom 22 have been audited.
Outlook:
Our target is to conduct on-site audits of 25 medium- and high-risk suppliers over the years 2024 and 2025.

Build capacity for sustainability knowledge
Status:
Internal capacity building is an essential part of our strategy. To ensure that all members of our procurement team are well-versed in sustainability topics, we conduct internal training regarding material topics.
Outlook: 
We will continue to focus on capacity building, utilising both external and internal resources. In 2024, we aim to provide at least one full day of training on audits based on the material topics of Zehnder Group for our Group Procurement, while local training will take place following a “train the trainer” approach.

Onboard Supplier Ethical Data Exchange platform of high-risk suppliers
Status:
In November 2023, we started the onboarding of our high-risk suppliers onto the Supplier Ethical Data Exchange (SEDEX) risk assessment platform. Only a few suppliers have onboarded so far. 
Outlook:
We expect the number of high-risk suppliers joining the SEDEX platform to increase in the coming months. Our target is to onboard 80% of our high-risk suppliers by the end of 2025 onto SEDEX or another similar platform.

GRI 204: Procurement Practices 2016
Disclosure 204-1 Proportion of spending on local suppliers

GRI 308: Supplier Environmental Assessment 2016
Disclosure 308-1 New suppliers that were screened using environmental criteria

GRI 308: Supplier Environmental Assessment 2016
Disclosure 308-2 Negative environmental impacts in the supply chain and actions taken

GRI 414: Supplier Social Assessment 2016
Disclosure 414-1 New suppliers that were screened using social criteria

GRI 414: Supplier Social Assessment 2016
Disclosure 414-2 Negative social impacts in the supply chain and actions taken

Suppliers that have signed the Supplier Code of Conduct

High-risk suppliers onboarded on SEDEX