BETTER Society
Improve sustainability in the supply chain
Our products are to be made in the same way throughout our global supply chain – with respect for the people who made them and care for the environment.
Our promise
Electrolux will ensure that all suppliers live up to our high expectations, no matter where they are located, and we will support the transition to more sustainable practices.
Roadmap 2015 to 2020
- Monitor and secure minimum performance at our direct suppliers of components, finished goods, licensed products and services. Engage selectively further up the supply chain and promote responsibility among all suppliers toward their own supply chain.
- Screen prospective suppliers to ensure they can live up to the Group's expectations.
- Increase awareness and capabilities among our prospective and existing suppliers through training and dialogue.
- Drive the improvement of supplier ecological footprints.
- Leverage our influence over logistics companies to improve the CO2 efficiency of our transportation by 15% by 2020.
The case for action
We have a duty to drive improvements in our supply chain, particularly as a substantial part of our business is conducted in emerging markets. Our experience shows that enhanced sustainability performance, particularly in energy use, and health and safety, improves the bottom line. We pass on this knowledge by working together with our suppliers to strengthen relationships, and ultimately create mutual benefit.
Logistics is also a key area in our supply chain as Electrolux emits more CO2 in distributing its goods than is emitted through the energy consumed in Group operations. Around 310,000 metric tons are annually emitted through the global transportation of goods via sea, air and land.
Our approach
Responsible sourcing
Our +3,000 direct suppliers are required to live up to our Supplier Workplace Standard and Workplace Directive, which are equivalent to the Workplace Policy and Workplace Directive that apply to our own entities. They cover our environmental, health and safety and human rights requirements for suppliers to follow.
All of our critical suppliers are audited at least every other year by our internal teams or external auditing companies. The Electrolux Responsible Sourcing Program is managed by a team of in-house supply chain specialists and consists of four types of activities:
- Policy awareness and initial evaluations – to communicate our policies, conduct initial sustainability and risk evaluations of prospective suppliers, and potentially conduct an audit of each supplier as part of the initial sourcing decision.
- Regular Supplier risk assessment – conducted annually with a focus on suppliers in high (and medium) risk countries and based on our Responsible Sourcing criteria and sourcing data. The assessments help the Electrolux Responsible Sourcing team to decide which suppliers should participate in audits or other activities. Prioritized suppliers should be subject to an audit at least every second year with follow-ups as needed to secure improvement. Audits are carried out by our internal team or external auditing companies.
- Supplier capacity building – online and in-person capacity building initiatives.
- Making performance count – supplier evaluations and audits are used in formal sourcing decisions, and disqualified and uncooperative suppliers are subject to an escalation process. This process involves reporting serious supplier non-compliances to the top management in the region, and addressing non-compliances through mandatory corrective actions, as well as beyond compliance support activities such as capacity building.
Conflict minerals
The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas is embedded into our policies and activities to avoid sourcing conflict minerals.
Greenhouse gas emissions
We work to reduce greenhouse gas emissions throughout our value chain.
Logistics
We use our purchasing power to influence the logistics industry by developing more sustainable transport solutions together with our logistics partners. We also set environmental requirements in the tender process, and all shipping companies must be members of the BSR Clean Cargo initiative.
Challenges
- Ensuring high sustainability performance throughout our value chain beyond direct suppliers remains a challenge
- Adopting a collaborative approach with industry peers to bring about greater positive change among our shared suppliers
The progress on our promise
How we measure progress
- Proportion of critical suppliers audited in the last 12 months.
- Proportion of critical suppliers with an audit rating of ‘approved’, i.e. no serious findings.
- Proportion of critical suppliers participating in training in the last 12 months.
- Transport emission intensity, CO2 emissions / m3km
Responsible Sourcing Program
During the year, the Responsible Sourcing team worked more closely with the Global Purchasing team to better influence suppliers to follow our sustainability agenda.
576 of our suppliers were considered to be critical and were the focus of our Responsible Sourcing Program in 2018. These include suppliers located in regions, or using production processes, that pose higher risks for environmental, labor and human rights violations or corrupt practices. During 2018, the program was fully deployed in Southeast Asia with extensive auditing and training activities primarily in Thailand.
In total, 399 (387) supplier audits were performed, including 328 (351) by internal auditors and 71 (36) by third party assurers. In 2018, 66% (50) of our critical suppliers were audited, which also included verifying that our expectations were communicated to Tier 2 suppliers.
Through our audits, we see that health and safety as well as environmental governance continue to be the areas with the greatest challenges. Deviations related to our policy on working hours is a persistent problem as well as findings related to compensation and benefits.
A total of 20 (45) zero-tolerance findings were uncovered in 2018, which represents a significant improvement. The most common zero-tolerance findings were related to inconsistent working hour records and discrimination. These two types of findings represent 35% and 25% of the severe findings respectively. The discrimination cases involved four instances of pregnancy testing identified in China, and one case of unequal onboarding principles for males and females in Cambodia. In Mexico, four audits reported cases of harassment. In all instances, management practices at the respective supplier were amended. All zero-tolerance cases are reported to senior Purchasing management, who also monitor remediation actions or ultimately take the decision to phase out the supplier. There were no cases involving under-age labor during 2018. The number of less severe findings related to the management of young workers decreased by almost 50% but still requires attention.
During the year, we also further detailed our approach to migrant labor. This will be launched among suppliers in Thailand in early 2019.
Responsible sourcing audit findings
There are large regional differences in the status of audited suppliers. The prevalence of serious findings is high in some markets, due to societal issues, such as working hours in Asia, and significant discrepancies between local legislation and Electrolux requirements – including environmental management findings in Latin and North America. See the distribution of findings per region table below.
We also monitored energy and water data from suppliers – covering 77% of our Original Equipment Manufacturer spend in Asia.
During the year, we have updated our Supplier Workplace Standard e-learning, and will launch it in all regions in early 2019. In total, we have provided classroom training for 229 (152) supplier representatives from 126 (59) suppliers. Our purchasers are also trained on the Electrolux Workplace Policy and Supplier Workplace Standard, with 209 (154) trained in 2018.
A new approach to training is being tested in China, together with suppliers and with the help of an external e-learning company, and reached over 6,200 workers in 2018. See the case story ‘Involving suppliers in our sustainability agenda’.
Conflict minerals
Following a pilot assessment on conflict minerals in 2017, we investigated 400 suppliers during 2018 and the results have been made public. The report is inspired by recent US legislation and was conducted voluntarily by Electrolux to disclose where our key minerals are sourced from. We are also a member of the Responsible Mineral Initiative, which allows us to influence beyond our tier-one suppliers, and map supplier compliance in line with the related OECD due diligence guidance.
Our proactive work with conflict minerals demonstrates that we want to go beyond compliance – to minimize our supply chain risks and help us to further improve our supply chain. See the table ‘Responsible sourcing audit findings’ above.
Greenhouse gas emissions
We reduce greenhouse gas emissions throughout our value chain by promoting our internal approach to monitoring and reducing energy consumption among key suppliers.
Logistics
Approximately 310,000 metric tons of CO2 are emitted through the distribution of our goods by sea, land and air in Europe, North America and Brazil.
However, our efforts have resulted in an improvement in our CO2 efficiency in our sea transportation of almost 25% since 2013. In 2018, we have also improved our CO2 efficiency for land transportation by more than 9% compared to 2015. Our goal is to improve CO2 efficiency across all modes of transport by 15% by 2020 compared with 2015.
We continue to track and evaluate environmental performance through our logistics dashboard, which is also used as a tool to support our decision-making processes. The dashboard is used to identify where the CO2 impacts arise and can compare the benefits of using rail and intermodal (when more than one mode of transport is used) transport.
We are rolling out a Group-wide system for tracking and evaluating the environmental performance of road freight carriers.
Distribution of findings in each region (%)
The distribution of significant findings, expressed as a % according to our Supplier Workplace Standard chapter, varies between our different supply regions. Regional variations are due to differences in EHS legislation, legal enforcement as well as societal differences.
| Chapter | Asia Pacific including SE Asia | Latin and North America | Europe, Middle East and Africa | TOTAL |
|---|---|---|---|---|
| 1. General requirements | 0.0% | 0.0% | 0.0% | 0% |
| 2. Laws and regulations | 0.1% | 6.0% | 1.6% | 2% |
| 3. Suppliers and subcontractors | 0.0% | 0.0% | 0.0% | 0% |
| 4. Corruption, bribery and business ethics | 0.0% | 0.0% | 0.0% | 0% |
| 5. Child labor | 2.6% | 0.0% | 0.0% | 2% |
| 6. Forced labor | 1.2% | 0.0% | 0.0% | 1% |
| 7. Security arrangements | 0.0% | 0.0% | 0.0% | 0% |
| 8. Worker H&S | 54.1% | 66.4% | 79.7% | 60% |
| 9. Non-discrimination | 0.7% | 0.0% | 0.0% | 0% |
| 10. Harassment and abuse | 0.0% | 1.8% | 0.0% | 0% |
| 11. Disciplinary actions and grievances | 2.8% | 0.0% | 1.6% | 2% |
| 12. Working hours | 27.4% | 11.1% | 7.8% | 22% |
| 13. Compensation and employment conditions | 3.5% | 1.8% | 3.9% | 3% |
| 14. Freedom of Association and collective bargaining | 0.0% | 0.0% | 0.0% | 0% |
| 15. Environmental governance and procedures | 7.5% | 12.4% | 3.9% | 8% |
| 16. Monitoring and compliances | 0.0% | 0.5% | 1.6% | 0% |
| number of audits included in sample | 231 | 94 | 74 | 399 |
Next steps
| Roadmap 2015 to 2020 | Next steps in 2019 | Status |
|---|---|---|
| Monitor and secure minimum performance at our direct suppliers of components, finished goods, licensed products and services. Engage selectively further up the supply chain and promote responsibility among all suppliers toward their own supply chain. | Increase coverage of our supply base by differentiating and developing new methods of engagement and monitoring. | dot2 |
| Screen prospective suppliers to ensure they can live up to the Group's expectations. | Implement standards for supplier minimum pace of improvement as well as the associated sanctions. | dot2 |
| Increase awareness and capabilities among our prospective and existing suppliers through training and dialogue. | Develop next generation e-learning with special focus on areas with a high number of findings. | dot2 |
| Drive the improvement of supplier ecological footprints. | Implement and deploy self-assessment and improvement tools for our main suppliers. | dot2 |
| Leverage our influence over logistics companies to improve the CO2 efficiency of our transportation by 15% by 2020. | Continue the implementation of an environmental scorecard in the tendering process for dedicated transport services in 2019. Set up supplier meetings to share/discuss best practice and action plans.Proactively contribute to the BSR Clean Cargo initiative, which aims to improve the environmental performance of marine container transport. | dot2 |
On track
Additional effort is required
Off track
Work has not yet begun
Electrolux
Electrolux shapes living for the better by reinventing taste, care and wellbeing experiences that make life more enjoyable and sustainable for millions of people. Through our brands, including Electrolux, AEG and Frigidaire, we sell more than 60 million household and professional products in more than 150 markets every year.
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