Responsible Procurement
Corporate responsibility in purchasing
In fiscal year 2022, NORMA Group purchased goods and services worth EUR 538.9 million. It is ensured that aspects of CR are considered in this context. The purchasing department pursues the goal of making contractual relationships with suppliers socially and environmentally compatible and ensures that human rights, labor, and environmental standards are adhered to.
The purchasing process is aimed at ensuring and improving NORMA Group’s high quality standards and managing external supplier costs competitively in order to achieve maximum value creation for the company. However, it also entails risks with regard to negative impacts on the environment and social standards in the supply chain. For this reason, not only pure price factors are taken into account in purchasing processes, the quality, logistics and sustainability of suppliers are also assessed. ECONOMIC REPORT
Managing sustainability in purchasing is the responsibility of the global purchasing organization, which reports to the Chief Operating Officer. CORPORATE GOVERNANCE REPORT Every team member of the purchasing organization contributes to it in the course of making sourcing and nomination decisions.
Supplier Code of Conduct forms the framework
NORMA Group expects its suppliers to conduct their business in compliance with laws, ethics, and respect for human rights, as well as occupational safety and environmental standards.
For these reasons, the purchasing department has integrated social and ecological sustainability aspects into its processes and organization. One key example is the purchasing manual, which describes all essential processes and procedures used as a framework for the global organization. The basis for sustainable supplier relations is the SUPPLIER CODE OF CONDUCT. This globally valid Code of Conduct outlines NORMA Group’s expectations for the sustainable management of its suppliers in the areas of human rights, occupational health and safety, the environment and business integrity. With respect to human rights, the Supplier Code of Conduct is based on regulations issued by the ILO, the Universal Declaration of Human Rights, the UN Global Compact and the standard SA8000
The commitment to the Supplier Code of Conduct plays an important role in the normal purchasing processes. Only a supplier who signs the Supplier Code of Conduct can be classified as “preferred” within commodity group management. The number of "preferred" suppliers in the area of production materials was 15 in 2022 (2021: 17). The share of total production material sales decreased to 18.3% in fiscal 2022 compared to 25% in the previous year. This was mainly due to the dislocations in the supply chains in 2022, as a result of which alternative suppliers had to be used or new supplier relationships were developed in order to cover requirements. As a result, the spend share of preferred suppliers declined slightly. Approval of the Supplier Code of Conduct is a binding criterion in the catalogue of requirements when selecting new suppliers.
Supplier Code of Conduct:
basic understanding of sustainability management
in purchasing, signing is a condition to be
graded “preferred” supplier
Supplier Scoring:
carried out once a year, environmental and health
and safety certificates as well as sustainability
self-assessment are criteria in the scoring
Commodity Strategies:
contain sustainability fact sheets that quantify
impacts on climate and water and identify
improvement potentials
Training:
training of Purchasing employees
on sustainability tools in purchasing
Sustainability in commodity management
An important way of supporting sustainability in purchasing is the introduction of a new Commodity Strategy Template. These strategy documents include Sustainability Fact Sheets as an analytical approach to assess sustainability throughout the supplier base. The Sustainability Fact Sheets include information on suppliers’ environmental and health and safety certificates (ISO 14001 and OHSAS 18001 or comparable standards). The fact sheets are in line with NORMA Group’s ENVIRONMENTAL STRATEGY. They quantify each commodity’s impact on greenhouse gas emissions and water consumption in the supply chain and show commodity managers improvement measures. A large proportion of the commodity strategies already contain this sustainability information.
Sustainability self-assessment for suppliers
To be able to better assess, compare and manage suppliers, NORMA Group uses Group-wide supplier scoring. In addition to the price, numerous other factors are also considered, such as quality, cost transparency and logistics services. One of the four pillars is “sustainability”, in which environmental and occupational safety certifications are included in the score.
In 2022, the voluntary sustainability self-assessment again formed part of the supplier scoring. NORMA Group asked its suppliers for information on social issues (freedom of association, grievance mechanisms and accidents), environmental issues (including CO2 emissions, water consumption and waste management) and compliance issues. The evaluation of the self-assessment showed that it was completed by 33.5% of the suppliers included in the scoring. This was a decrease of 7.5 percentage points compared to last year (2021: 41.0%). One of the reasons for this decrease may be that suppliers who had already completed the Sustainability Self-Assessment were no longer relevant for scoring out of strategic reasons.
Sustainability criteria in risk management
Besides the annual supplier performance evaluation, supplier risks are constantly monitored by means of an automated risk management software. It is the responsibility of all buyers to review risk reports, this includes contacting affected suppliers and reporting relevant and critical risks to commodity managers. This helps the purchasing organization to maintain an overview of resilience in the supply chain and to initiate the necessary measures in good time.
Besides human rights and working condition risks, the software also monitors environmental risks as well as corruption and bribery risks at the national level. Supplier risks with regard to the occurrence of fines and sanctions, including those related to corruption, bribery or price fixing, are also covered by the software.
Excluding conflict minerals from the supply chain whenever possible
NORMA Group also purchases minor amounts of components that contain what are known as “3TG raw materials” – tin, tantalum, tungsten, and gold in small quantities. These raw materials are particularly controversial in that a large part of the ore deposits lie in conflict regions (particularly those of the Democratic Republic of Congo), where they are partially mined and processed under serious violations of international law. NORMA Group aims to exclude these conflict minerals from its supply chains as far as possible. NORMA Group does not buy these minerals directly. However, they are partially included in components from suppliers. For example, small amounts of gold are used in urea lines, and some components are finished with a coating consisting of tin.
NORMA Group has therefore launched the ‘Conflict Minerals Roadmap,’ which aims to create maximum transparency within the supplier base. The NORMA Group purchasing organization is committed to the principles of the Responsible Minerals Initiative, including the use of due diligence processes provided by the initiative. The due diligence processes are based on the Conflict Minerals Reporting Template (CMRT) of the Responsible Minerals Initiative, which all relevant suppliers must provide. The management of the CMRT is integrated into the Group-wide e-sourcing platform.
The Group purchasing organization has trained purchasers at all sites on the importance of the issues of conflict minerals and the potential risk related to the materials coming from suppliers who might be involved. In addition, NORMA Group ensures that 100% of affected suppliers have signed the Supplier Code of Conduct, which requires them to confirm that they cooperate with conducting due diligence on conflict minerals issues.
NORMA Group shares the information it receives with its customers as transparently as possible. Given the large number of products, suppliers, and subcontractors, it is usually not possible with a reasonable amount of effort to make any detailed traceability statements as to which melting operation or mine the raw materials come from for a specific product for a particular customer.
Furthermore, the initial sanctions list check for new suppliers is established in the purchasing processes. The sanctions list check is carried out in the Visual Compliance Tool DESCARTES, for which NORMA Group’s Trade Compliance team is responsible. If risks related to conflict materials are detected, corrective actions are initiated immediately. In addition to the initial check, the current supplier base is also reviewed on a regular basis by conducting batch screening.
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These contents are part of the Non-financial Group Report and were subject to a separate limited assurance examination.