Transparency in the supply chain

The purchasing terms and conditions and Code of Conduct apply to all suppliers and include numerous points creating standards for responsible procurement. voestalpine is applying its Sustainable Supply Chain Management (SSCM) project in order to analyze raw materials procurement–the most important area of purchasing–for its compliance with corporate responsibility, and to establish the appropriate operational criteria. The first phase was completed at the end of 2017.

The voestalpine Purchasing Board is the steering body for corporate procurement, and is supported by the Purchasing Committee as the implementation body. It bears responsibility for the corporate procurement strategy and has overall control of purchasing within the Group. The Purchasing Board meets once each quarter and develops the framework conditions for the purchasing structure, passes resolutions on strategy content, decides in the case of escalation procedures, and actively communicates its decisions and resolutions.

The Purchasing Committee meets monthly, carrying out the Purchasing Board’s instructions to implement strategy and control purchasing within the Group:

• Monitoring and developing the purchasing structure, in particular the Lead Buyer structure
• Making decisions with respect to escalations arising from the purchasing and Lead Buyer structure
• Strategic prioritization of projects, requests, and topics
• Group-wide harmonization of the commodity group structure
• Coordination on procedures with cross-divisional suppliers
• Regular status reports to the Purchasing Board

The Group Catalogue Purchasers are responsible for particular catalogues and suppliers across the Group, i.e., they establish uniform prices and conditions in the catalogues within the Group. This offers the benefits of pooling, reducing the pressure on resources in the individual companies.

voestalpine’s purchasing responsibilities and relevant purchasing principles are described in the Corporate Responsibility Strategy as follows:

General procurement

SDG 4 – Quality EducationSDG 16 – Peace, Justice and strong InstitutionsSDG 17 – Partnerships for the Goals

Supplier management

When selecting its suppliers, voestalpine ensures their adherence to ecological and social principles. We have integrated sustainable supplier management into our procurement processes in order to create long-term partnerships.

Training and continuing education

With information events such as the Purchasing Power Day, and the three-stage Purchasing Power Academy established by the Group, voestalpine ensures continuing professional development is available for employees working in purchasing.

Procurement processes

The procurement process is continuously optimized in order to ensure its compliance. The Code of Conduct forms the basis for social actions and decisions.

Raw materials procurement

SDG 12 – Responsible Consumption and ProductionSDG 16 – Peace, Justice and strong InstitutionsSDG 17 – Partnerships for the Goals

An integrated approach to lifecycle concepts

Applying a lifecycle approach (Closed Loop) together with our customers guarantees the highest levels of efficiency in the process of recycling our raw and reusable materials.

Suppliers

Together with our suppliers we have set ourselves the challenge of permanently optimizing our supply chains. Regular visits to the sources of raw materials and prematerials, especially mines and deposits, are a fixed element in this process. Together we develop methods for designing an efficient supply chain which meets the CR guidelines. New suppliers are assessed in terms of CR, quality, performance, and– depending on the outcome–included in the portfolio. The project SSCM (Sustainable Supply Chain Management) screens our raw material supply chains, examining the key factors which determine compliance with corporate responsibility. voestalpine ensures that all raw materials are subject to this process, thereby minimizing risk over the long term.

Conflict Minerals

We oblige all suppliers from whom we source materials and who are subject to the Dodd-Frank Act to operate in accordance with its provisions. A cfsi report ensures that all materials procured on behalf of the Group are „conflict free“.

Securing supplies

A key task of raw materials procurement management is to secure the long-term, competitive supply of raw materials and energy. A high degree of integration into upstream and downstream processes, scenario planning, and adaptive supply concepts serve to minimize potential risks.

Lead buying is the process of pooling similar materials and raw materials from different companies into material groups which are then purchased by the Lead Buyer. The advantages of lead buying can be combined with those of a decentralized purchasing organization (regional purchasing competence remains at the production sites) in order to optimize purchasing power in negotiations with suppliers when determining quality and price. Lead buying is an important part of the corporate purchasing structure, and has established itself as a significant value creation factor within the company over the past years.

Local suppliers

Where reasonable and feasible, voestalpine purchases from suppliers located close to the sites. As a result, around 68.55% of all suppliers to voestalpine companies in Austria also have their headquarters in Austria. However, local or regional supplies are not always possible. For example, the majority of raw materials are mined in distant locations.

Local suppliers

Share of domestic suppliers in each country (in %)

Sustainable Supply Chain Management project

The first phase of the Sustainable Supply Chain Management (SSCM) project introduced in the last voestalpine CR Report has been successfully concluded. During this phase typical supply chains in the steel production sector were examined for risks associated with materials, countries of origin, and suppliers.

Example supply chain: The steel production sector

Key materials considered during the project:

The following countries of origin for these materials were included when examining the supply chain (in alphabetical order):

The raw materials, country of origin, and suppliers were examined with respect to:

In addition, intensive discussions were held with experts both within (from Corporate Responsibility, Purchasing and Raw Materials Purchasing, Risk Management, Quality Assurance, and health & safety) and outside voestalpine (from associations, research institutions, NGOs, and selected customers), with their results also included in the evaluation. After working in partnership with suppliers over many years, and with the close contacts that result, many issues could be considered and dealt with in personal discussions.

Results of the SSCM project

The project findings were entered into a matrix indicating potential risks, or “hotspots”.

This allowed human rights hotspots, particularly child labor and forced labor, to be ruled out for all suppliers.

In terms of environmental challenges faced by suppliers, the suppliers are requested to present and offer solutions which will then be examined during on-site visits.

All suppliers in the steel supply chain are certified according to ISO 9001. The majority of suppliers–where they are producers–are already ISO 14001 or OHSAS 18001 certified, or are currently in the process of acquiring this certification.

The results of the on-site visits, which take place at least once a year and are the basis for supplier evaluations, are also included in the SSCM project and can help to clarify any potential uncertainties with respect to risks.

The evaluation scheme groups suppliers into categories A, B, and C, with A denoting the best possible evaluation. Where a supplier fails to achieve, or no longer achieves, grade A, then voestalpine works together with the supplier to determine the reasons and to develop measures to restore their previous status. Where the supplier development measures fail to have the desired effect, or suppliers are not willing to implement the measures, then the business relationship is brought to a structured end, and a new supplier chosen.

The results of this project are regularly examined, with new suppliers or countries of origin also considered. It is intended that SSCM be expanded to cover other supply chains within the Group over the medium term.