"As a recognized industry leader in sustainability," says Peter Truyens, Senior Vice President Group Purchasing, "we are about to take things to the next level. Until now, we have focused on supplier code of conduct performance and energy management, but the next phase will require engaging with suppliers even more. The aim is not only that they comply with our standards but also that they commit to taking the essentials of our For the Better agenda to their partners."
The Electrolux Responsible Sourcing team's assessment, audit and capacity-building work focuses on:
Some 700 suppliers were the focus of attention during 2017.
Additionally, we are engaging with important supplier partners to help them manage their environmental footprint. For several years, Electrolux has cooperated with its main original equipment manufacturer (OEM) suppliers on energy, encouraging them to understand their own energy footprint and establish energy-saving measures.
Starting in 2018, Electrolux will track suppliers' energy and water management and performance more closely. "The time is ripe," says Cecilia Nord, Director Responsible Sourcing. "We - Group Sustainability, Global Sourcing Operations and our OEM suppliers - all understand that we need to join forces to make a difference."
Conflict minerals under the microscope
To prevent the use of conflict minerals among suppliers, we want to make certain that the materials come from trustworthy sources. Conflict minerals are referred to as such because in the regions where they are sourced from, conflicts are often present, and mines might be controlled by armed groups, which can lead to human rights violations.
In 2017, Electrolux surveyed almost 300 key suppliers and reached an 82% response rate. There are over 400 smelters/refiners in the supply chain of our suppliers. Around 60% of them have been certified by the Conflict Free Smelter Program, on behalf of the Global Organization Responsible Minerals Initiative. The survey will be continued and strengthened in 2018 in order to encourage certification of all smelters/refiners.
Long-time Electrolux supplier H&T won an Supplier Excellence Award.
Every Electrolux supplier acknowledges and promises to fulfill the Group’s high expectations on sustainability. Electrolux Purchasing teams ensure that prospective and current suppliers’ capacity to meet these standards is evaluated mandatorily. The Responsible Sourcing team, consisting of 14 dedicated professionals, supports Purchasing by evaluating, auditing and training suppliers and supplier candidates in all sourcing regions.
Suppliers considered critical are audited a minimum of every other year by the team or by external professional auditing companies. The audits assess whether Electrolux environmental health and safety and human rights requirements are met. The audit grade is an input for sourcing decisions. If a supplier's performance is not satisfactory, on-site audits or other types of follow-up procedures are used to secure improvement.
The Responsible Sourcing team also provides physical and online training on general Electrolux sustainability requirements and areas of special concern throughout our supply markets.
Responsible sourcing everywhere
In many cases, Electrolux has higher requirements than the local legislation and practices in place, which means that we raise the bar for suppliers when we start auditing them. This also means that suggestions and demands for improvement mainly come from us, not from other customers or the local society, impacting on the pace of change. In 2017, we conducted a total of 387 on-site supplier audits:
Latin America and North America: In 2017, the number of findings per audit at suppliers increased to 12.25 (from 9.73 in 2016) due to a focus on previously not audited suppliers. The rate of findings in Mexico almost doubled. Still it was possible to reach a satisfactory improvement rate of 60% between initial and follow-up audit, comparing to the global average of 48%. In the United States, the program is in its infancy and findings per audit are therefore, as expected, high. Improvement rate, however, is at an encouraging 73%. In Brazil, the situation was similar to 2016.
Europe, Middle East and Africa: EMEA continues to see a significant drop in supplier findings per audit, from 10.01 in 2016 to 7.16. The improvement rate is however only 46%, below the global average.
China: The findings per audit have improved slightly, but there is a persistent high occurrence of certain kinds of findings – for instance, regarding violations in working hour and compensation management – and the improvement rate dropped in 2017 to 39%.
South and Southeast Asia: The findings per audit are, as can be expected, high since the program has just been deployed. Findings are especially common in environmental management. We expect the findings to continue to be high in 2018, as we are expanding our coverage of Southeast Asia.
This case study is related to our promise Improve sustainability in the supply chain.