Mar 12, 2019 Corporate blog

Supplier sustainability assessment and development

Harald Huppe
Harald Huppe
Senior Manager, Responsible Supply Chain
Human and labor rights, as well as the health, safety and environmental performance of suppliers are key elements of a responsible supplier development strategy. We at Metso are committed to ensuring the sustainability of our supply chain. The procurement and supplier quality organization are the key players when screening and developing suppliers.
Safety tag in chain at a factory.

It has been well acknowledged that sustainability of operations is a shared concern and we have seen increased interest from our customers to conduct sustainability audits of Metso. It is important for them and us that Metso's suppliers and sub-suppliers follow our sustainability criteria, and it is our responsibility to make sure of that. Also, as we defined in our previous blog post, there are several business drivers for responsible procurement.

Therefore, we have clearly defined our sustainability criteria for suppliers. These standards are the foundation for any business relationship. Suppliers are expected to comply with the standards set for topics such as health and safety, human and labor rights, compliance with laws and regulations, and environmental efficiency.

Risk mapping to maximize our impact

We carry out a risk mapping of sustainability-related risks within our existing suppliers to determine the ones to be audited each year. By defining risk levels, we can focus on the suppliers with the highest potential risks in their operations. The risk assessment takes into account several factors, such as the business relation with the supplier, the supplier category availability of supplier sustainability information and the country risk perspective. The supplier category communicates what type of supplier it is: a component, casting or raw material supplier. To determine the country risk, we look at risks related to human rights, health and safety, corruption or the country’s environmental regulatory framework.

By identifying the higher-risk suppliers, we can allocate our resources to suppliers where we can have the greatest impact and support them in improving their sustainability practices and performance.

Sustainability is equal to financials, delivery and quality

It is essential that we consider a supplier sustainability assessment as an integrated part of a performance evaluation, right next to financials, delivery and quality. For this to happen, we need the commitment of our people as well as tools and processes. Only this way can we assess and monitor suppliers’ sustainability performance.

We promote responsible procurement internally at Metso. We have increased internal competence with training sessions and eLearning courses that enhance our skills in sustainability assessments. We have a procurement management tool that enables us to monitor improvements related to suppliers’ sustainability performance. Especially for the follow-up of sustainability audit findings, it is important that all audits and corrective actions are input in our common tool.

Supplier commitment shows in on-site improvements

All new suppliers register on the procurement management tool and complete a profile. As a part of the on-boarding process, there is a self-assessment that includes a sustainability section with about 30 questions. In addition, all suppliers need to accept Metso’s supplier sustainability criteria. Based on this information and the risk assessment, we determine if an on-site sustainability audit is needed. With the audit, we get an unbiased opinion on a supplier’s sustainability performance.

We have set an annual target for 15 third-party supplier sustainability audits and 50 audits organized by Metso’s own procurement and quality assurance people. The focus is on both existing and new suppliers located in higher-risk areas, e.g. Brazil, China, India, Mexico, South Africa and Turkey. In 2018, we exceeded our targets: 16 third-party audits and 83 internal audits were carried out. To improve sustainability performance, we agree on corrective action plans together with the supplier after each audit. They are required to provide Metso with evidence of the corrective actions that have been implemented and are subject to a re-audit, where necessary. By the end of 2018, 73 percent of the corrective actions from years 2017–2018 had been implemented.

Developing corrective action plans together with the supplier and continuously improving their sustainability performance are important elements of our supplier sustainability development actions. By defining roles and responsibilities, developing processes and tools, and establishing a monthly progress reporting of responsible procurement indicators, we have taken a systematic approach to supplier sustainability development.

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We work to ensure the sustainability of our own operations and the operations of the third parties we conduct business.