Responsible sourcing at Oerlikon involves an ongoing investment in strong supplier partnerships. These are key to ensuring that we maintain our research and production timetables, sustain uninterrupted operations, deliver on our obligations to customers and employees and try to minimize environmental impact and risk.
Responsible Sourcing & Human Rights
GRI 3-3
Supplier chain & supplier social assessment
GRI 2-6; GRI 414-1,2
Oerlikon’s supplier engagement model supports these objectives in a manner consistent with our guiding principles:
- Sharing risk.
- Embracing best practices and the open exchange of ideas.
- Conducting open and regular discussions to foster unified expectations.
- Streamlining processes to deliver excellence.
- Cultivating trust and mutual satisfaction in meeting challenges together.
We select suppliers who share our values and demonstrate an unwavering commitment to
upholding high ethical standards. Their operations and processes must integrate seamlessly with our own in terms of sustainability and upholding worldclass standards of management.
Once identified, all prospective and new suppliers are invited to go through our five-stage relationship management process. Oerlikon pursues relationships only with suppliers that complete this process and agree to comply with our Supplier Code of Conduct.
The Oerlikon Supplier Code of Conduct, which is published in English, German, Spanish, Italian, Chinese, French, Hindi and Portuguese, is publicly available for download on our corporate website and sets out our baseline requirements for supplier and subcontractor business ethics as well as legal and regulatory compliance, including:
- Compliance with laws, regulations and internationally recognized standards.
- Material and conflict minerals compliance.
- Business integrity.
- Human rights, fair labor conditions and child labor.
- Health, safety and environmental management.
- Protection of tangible and intangible assets.
- Trade control.
At Oerlikon, responsible sourcing entails obtaining the best value for the materials, goods and services we purchase and maintaining the highest ethical standards in dealing with suppliers. Value includes total cost of ownership, price, quality, logistics and service. This is essential to achieve sustained cost reduction and innovative capabilities, while mitigating risks in our supply chain and optimizing our net working capital.
A defined set of direct and indirect material (DM and IM) categories is managed by an integrated global organization in a project-driven approach to maximize efficiency and to continually reduce costs in order to enhance Oerlikon’s profitability.
Closely collaborating with divisions and sites, the Global Category Leader is responsible for defining DM or IM category strategies and monitoring their implementation. The Key Procurement Manager, the Regional Head of Procurement and the Category Buyer are responsible for executing the relevant sourcing projects in line with the category strategy. The Regional Procurement Organization is defined in five main regions: the Americas, Europe, Northeast Asia, Southeast Asia and Japan. Hence, this footprint represents the geographic locations of our suppliers. Due to confidentiality constraints, we do not disclose the proportion of spending on local suppliers. Generally, 65% of our total spend is on direct materials and 35% for indirect materials.
Due Diligence
In 2022, we audited 216 of our suppliers to ensure that our Supplier Code of Conduct is respected. This was a significant increase from 2021, when we audited 162 suppliers.
100% of our global team of procurement colleagues are trained in the Supplier Code of Conduct, and they strictly apply these standards in their assessment and selection of new suppliers. All of our suppliers must agree to Oerlikon’s Supplier Code of Conduct and to the general terms and conditions. In the event that there are areas identified as non-compliant, we address the issue with the suppliers and retain the right to terminate the relationship if the non-conformance issue persist.
EcoVadis
In 2021, we began the process of elevating our responsible sourcing to the next level by using EcoVadis as our partner and framework for assessing Oerlikon’s suppliers.
EcoVadis provides companies with the means to assess the corporate sustainability performance of their suppliers and other companies that decided to share their ratings within the EcoVadis network. By collecting data from suppliers and validating it through independent means, we can obtain aggregated performance reports, as well as individual scorecards with holistic risk profiles using EcoVadis’ corporate social responsibility (CSR) risk profiling IQ module.
Our collaboration with EcoVadis enables us to tap into their resources to enhance the transparency of our supply chain, ensure compliance with regard to global regulations and laws and strengthen the mitigation of potential risks.
Firstly, we completed the Sustainable Procurement Maturity Review with EcoVadis. The maturity review refers to the maturity of each of the defined five roots: Vision & Goals, Governance & Resources, Policies, Procedures & Processes, Capacity Building & Continuous Improvement and Reporting.
The review identified governance and resources as “the most mature root” at Oerlikon and noted our “strong program sponsorship and a robust procurement program.” The areas of improvement identified from the review include the development of our sustainable procurement strategy and goals, cascading sustainability as a mandatory requirement within the global procurement organization and setting internal KPIs/targets, as well as formalizing and monitoring the progress.
This result reflects the fact that our procurement strategy over the years has been focused on ensuring the quality and reliability of suppliers and their compliance with the international and local laws and regulations. With EcoVadis, we are essentially expanding our procurement strategy to make sustainable procurement another key criterion in managing our supply chain.
As the next step in our sustainability journey, we mapped out our goals from 2022 to 2030 in our Sustainable Procurement Roadmap to provide us with a plan on how we want to evolve our sustainable procurement over the next few years. The roadmap covers our intentions to develop the program, to build captaincy through training and engagement, as well as setting improvement goals and individual KPIs.
In 2022, we made significant progress. 100% of Oerlikon commodity managers completed sustainable procurement training via an EcoVadis webinar, and the program is to be cascaded within the divisions. In addition, we will provide education to the procurement team regarding the differences between EcoVadis IQ (risk mapping) and EcoVadis Rating (performance monitoring and corrective action plans) as part of our expanded procurement strategy.
We also completed the EcoVadis rating process for rated suppliers covering 20% of mapped spending (key and strategic suppliers). Our goal is to cover 100% of our mapped spend by 2030.
Since our assessment process for all key and strategic suppliers using EcoVadis is still in its preliminary phase, it is premature to speculate on the negative social impact and the actions that need to be taken in the event of such negative impacts. In general, the EcoVadis tool covers corrective actions such as additional due diligence, contract clauses and monitoring, as well as on-site audit for suppliers with severe risks or specific needs.
Toward the end of 2022, we updated our Supplier Code of Conduct to formalize our commitment to include sustainability as an essential part of our procurement strategy. The updated Supplier Code of Conduct is available on our website (www.oerlikon.com/en/sustainability/our-policies/) and will be rolled out to the divisions in 2023.
EcoVadis Assessment Process
Risk and measures undertaken
We address the main risks and required measures regarding suppliers by way of our collaboration with EcoVadis. The EcoVadis methodology covers 21 ESG criteria (see box).
Similarly, the 21 ESG criteria in the EcoVadis methodology provide us with the framework for addressing anti-corruption risks and measures, including ethics, anti-competitive practices and responsible information management.
| Environmental Issues | Social Issues | Governance Issues |
|---|---|---|
| Climate change and carbon emissions | Customer satisfaction | Board composition |
| Air and water pollution | Data protection and privacy | Audit committee structure |
| Biodiversity | Gender and diversity | Bribery and corruption |
| Deforestation | Employee engagement | Executive compensation |
| Energy efficiency | Community relations | Lobbying |
| Waste management | Human rights | Political contributions |
| Water scarcity | Labor standards | Whistleblower schemes |
Conflict minerals & the management of risks associated with the use of critical materials
SASB RT-IG-440a.1
The EU’s import directive, Conflict Minerals Regulation (2017/821), went into effect in January 2021. It regulates trade in minerals – in particular tin, tantalum, tungsten and gold (3TG) – that have been extracted from mines in politically unstable or conflict-affected areas. The regulation targets the human rights practices of armed movements that finance their campaigns and their weapons purchases by running mining operations that rely on forced and/or child labor.
Under the EU Conflict Minerals Regulation, EU importers of 3TG minerals must comply with and report on their supply chain due diligence obligations if they import minerals that originate from conflict-affected areas.
The EU regulation was inspired in part by the Dodd-Frank Act, a US law regarding transparency and accountability that took effect in 2010. However, it takes a more comprehensive view of conflict mining and trade. While the US law was specific to minerals sourced from the Democratic Republic of Congo and adjoining countries, the EU rule targets all countries exporting 3TG minerals to the EU and does not contain language that limits its impact to specified locations. This extends its impact beyond current conflict areas to countries or regions that may become conflict-affected in the future.
At Oerlikon, we support this regulation and have in fact taken steps that anticipated its concerns. We have instituted a Conflict Mineral policy and due diligence measures across our supply chain in accordance with voluntary efforts, such as those advocated by the OECD in its Due Diligence Guidance for Responsible Supply Chains from Conflict-Affected and High-Risk Areas, as well as US legislation.
We are aware that some of Oerlikon Metco Materials’ suppliers have a history of acquiring conflict minerals in trade from multiple sources worldwide. In keeping with our commitment to corporate responsibility and upholding human rights across all operations, we are seeking to ensure that our suppliers source 3TG minerals exclusively from mines in conflict-free areas.
We expect our suppliers to establish and implement policies and due diligence measures that assure they supply us with conflict-free 3TG products and components in compliance with the Electronic Industry Citizenship Coalition (EICC) Code of Conduct and our Conflict Mineral policy, which is a part of our Supplier Code of Conduct.
In support of this policy, the Oerlikon Metco Materials Business Unit will:
- Exercise due diligence with relevant suppliers consistent with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and encourage our suppliers to do the same with their own suppliers.
- Expect our suppliers to cooperate in providing due diligence information to confirm that the 3TG minerals they are providing are conflict-free.
- Collaborate with suppliers and others on industry-wide solutions to ensure products containing 3TG minerals are conflict-free.
- Consistently implement this policy and make reports available, upon request, to relevant stakeholders.
We are encouraged by the EU’s regulation on the sourcing of 3TG minerals as a mechanism for barring illicit trade and boosting supply chain transparency. We take pride in having enacted our own human rights measures before being required to do so by law and assure our stakeholders and investors that we will continue to integrate ESG factors across our supply chain.
Furthermore, Oerlikon is a member of the global Responsible Minerals Initiative (RMI), which is one of the most utilized and respected resources for companies from a range of industries addressing responsible mineral sourcing issues in their supply chain (see page 62 for details on the RMI program).
Moreover, the described downstream and upstream assessment program of the RMI is designed to provide a robust validation for customer requirements across mineral and metal value chains, and to meet the EU Responsible Minerals Regulation (EU Regulation 2017/821) requirements for EU importers of 3TG that do not meet the definition of a smelter or refiner.
RMI program
| Responsible Minerals Assurance Process (RMAP): | The RMI identifies smelters and refiners that produce responsibly sourced materials. To confirm this status, they use specially trained third-party auditors to independently verify that these smelters and refiners have systems in place to responsibly source minerals in conformance with the RMAP. A list of smelters and refiners that meet the requirements of the audit standards are published online. The audit standards are developed according to global standards including the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from conflict-affected and high-risk areas and the US Dodd-Frank Wall Street Reform and Consumer Protection Act. |
| Conflict Minerals Reporting Template (CMRT): | The RMI offers a free, standardized reporting template that facilitates the transfer of information through the supply chain regarding mineral country of origin and smelters and refiners being utilized. The template also facilitates the identification of new smelters and refiners to potentially undergo an audit via the RMAP. |
| Due Diligence Guidance: | The due diligence working group from the RMI focuses on producing white papers and other analyses and guidance for companies about best practices and various standards to address responsibly sourced minerals in the supply chain and reporting. |
| Stakeholder Engagement: | The RMI regularly participates in public forums to provide information about the RMI and RMAP and share tools, best practices and mechanisms to identify and mitigate risks in the mineral supply chain. The RMI engages a variety of non-governmental organizations, responsible investor groups, governments and multilateral institutions to discuss emerging issues, best practices and work on addressing shared challenges. The RMI also participates in a range of multi-stakeholder groups and hosts an annual workshop to provide a forum for dialogue with stakeholders. |
