Transparency in the Supply Chain

      World Water Day (Photo)

      voestalpine procures a very wide range of materials and products as well as services from a multitude of suppliers. The company’s supply chain management involves systematically collecting data on, and evaluating, the social and environmental effects and risks of suppliers’ activities as well as considering them in the development of supplier relationships. voestalpine’s Sustainability Strategy defines principles that govern both general procurement and raw materials procurement.

      General Procurement

      SDG 4 – Quality education SDG 16 – Peace, justice, and strong institutions SDG 17 – Partnerships for the goals

      In voestalpine’s view, the consistent implementation of sustainable supply chains makes a very important contribution to the pursuit of the Sustainability Strategy within the Group. Hence its purchasing organization has started to put the roadmap for “Sustainability in the Supply Chain” into practice.

      voestalpine ensures when selecting suppliers that they comply with environmental and social principles. Sustainable supplier management is integrated into the procurement processes in view of maintaining long-term partnerships.

      The company ensures that those of its employees who work in purchasing receive ongoing training through informational events such as the Purchasing Power Day as well as the three-stage Purchasing Power Academy, which was developed in-house. These offerings also serve to sensitize the given employees to issues of sustainability and compliance.

      The procurement process is continually optimized in order to ensure compliance. The voestalpine Code of Conduct forms the basis of business actions and decisions in this respect.

      Raw Materials Procurement

      SDG 12 – Responsible consumption and production SDG 16 – Peace, justice, and strong institutions SDG 17 – Partnerships for the goals

      Applying “closed loop” life cycle approaches together with our customers guarantees the highest efficiency in the process of recycling our raw and reusable materials.

      We face the challenge of permanently optimizing our supply chains jointly with our suppliers. Regular visits to the sources of raw materials and pre-materials, especially mines and deposits, are a fixed element of this process. Together, we develop methods for designing an efficient supply chain. New suppliers are evaluated as to corporate responsibility, quality, and performance and are included in our supplier portfolio if the assessment’s outcome is positive. We used the Sustainable Supply Chain Management (SSCM) project to screen our raw material supply chains from the bottom up, examining key factors pertaining to corporate responsibility. voestalpine ensures that absolutely all of its raw materials are subjected to this process, thus mitigating risk over the long term.

      The primary responsibility of raw materials procurement management is to secure the long-term, competitive supply of both raw materials and energy. High levels of integration into upstream and downstream processes, scenario planning, and adaptive supply concepts serve to minimize potential risks.

      Supply chain management in general procurement

      voestalpine’s Purchasing Board is the decision-making and steering body for Group Purchasing. It is responsible for the Group’s purchasing strategy and has the authority to manage general procurement in the Group. The Purchasing Board meets once every quarter and continually fleshes out the parameters of the purchasing structure, adopts resolutions on strategic content, decides escalation procedures, and communicates current decisions and resolutions.

      It is supported by the Purchasing Committee, which is tasked with both operational implementation of the purchasing strategy and Group-wide management of purchasing. This Committee meets monthly and carries out the following tasks at the behest of the Purchasing Board:

      • Monitor and continually develop the purchasing structure, especially the lead buyer structure
      • Bring about decisions arising from escalation processes at the level of the purchasing and lead buyer structure
      • Strategically prioritize projects, requests, and issues
      • Harmonize the commodity group structure Group-wide
      • Coordinate approaches with cross-divisional suppliers
      • Submit regular status reports to the Purchasing Board

      In the business year 2021/22, the Purchasing Committee not only developed a strategic plan that contains measurable milestones for ensuring transparency and sustainability in the supply chain, but also started to implement the roadmap for Sustainability in the Supply Chain. Over and above compliance with applicable statutory requirements such as the German Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz), the roadmap is designed to ensure compliance with environmental, social, and governance (ESG) criteria and reductions in (Scope 3) CO2 emissions.

      Sustainable supply chain management for raw materials

      Both the Group’s Purchasing Terms and Conditions and the Code of Conduct that apply to all suppliers contain numerous criteria aimed at sustainable procurement and, in particular, compliance with human rights.

      In addition, voestalpine implemented a process in connection with the procurement of raw materials that serves to identify sustainability risks in the supply chain and to avoid and/or minimize potentially adverse effects.

      This was based on the Sustainable Supply Chain Management project (SSCM Project) that involved conducting detailed analyses of a typical supply chain in steel production as to materials, countries of origin, and suppliers. As early as in 2016, voestalpine included both external and internal experts in the project and conducted personal conversations with many long-term suppliers in order to identify potentially negative effects in the supply chain.

      Example of a supply chain: steel production

      Example of a supply chain: steel production (graphic)

      The following source countries (listed alphabetically) for these materials were included in the examination of the supply chain:

      Albania • Australia • Austria • Brazil • Canada • China • Czech Republic • Finland • Germany • Norway • Poland • Russia • South Africa • Sweden • Turkey • Ukraine • USA

      Raw materials, countries of origin, and suppliers were reviewed as to the following issues:

      Supply chain management at voestalpine (organizational chart)

      The insights gained in the project were entered into a matrix that highlights potential risks, i.e., so-called hot spots. This made it possible, for example, to ensure that none of voestalpine’s suppliers are hot spots with respect to human rights, particularly child and forced labor.

      Whenever the matrix points to challenges at suppliers with respect to environmental issues, the given supplier is asked both to describe the situation and suggest solutions; on-site supplier visits are conducted for verification purposes. Most suppliers—to the extent that they are producers—have already obtained ISO 14001 or ISO 45001 certifications or are in the process of completing the procedure.

      CR and compliance checklist

      A questionnaire that asks suppliers to provide information about themselves—the “CR and Compliance Checklist”—was developed simultaneously with the SSCM Project. Besides questions about general corporate information, it especially contains detailed questions about a number of sustainability issues, such as human rights, occupational safety, environmental policies, and compliance. For the time being, the analyses of these questionnaires are stored in an internal database; going forward, however, they are to be embedded in existing IT systems. The Checklist, which so far has been used chiefly in connection with raw materials purchases, is gradually being rolled out to all merchandise categories. It is evaluated on a regular basis and adjusted to changing parameters, such as supply chain legislation.

      While on-site visits are conducted regularly at least once a year, this did not happen during the COVID-19 pandemic. Such visits expand the supplier assessment in conjunction with the CR Checklist and can help to eliminate any lingering issues as to potential risks.

      Supplier assessment

      The companies that supply those raw materials, products, and services to the voestalpine Group that directly affect its end products are selected pursuant to a systematic process that comprises personal meetings, a standardized questionnaire, and a quality assessment of the materials. Raw materials suppliers are evaluated once a year and subsequently rated as A, B, or C suppliers. Depending on the raw materials category, different parameters are used to this end, e.g., environmental management, innovation, quality assurance, even flexibility and ability to stick to deadlines. Suppliers that achieve an A or B rating are given preference in the procurement process. Corrective measures are jointly defined with B and C suppliers and set forth in writing; they must be implemented within one year.

      Local suppliers

      Whenever possible, voestalpine Group companies make their purchases regionally and locally, thus boosting host country economies. The following graph shows the respective share of local suppliers. Suppliers are considered local if their business is domiciled in the same country as the voestalpine company they supply.

      Local suppliers, business year 2021/22

      Local suppliers (barchart)

      Initiatives and supply chain transparency projects

      voestalpine is active in a number of advocacy organizations that work on issues of supply chain transparency. For example, experts from a number of different departments participate in working groups set up by ResponsibleSteel in order to help develop both the organization’s certification standard and product-specific requirements pertaining particularly to input materials and greenhouse gas emissions (GGE) reductions. Following a detailed inspection by independent auditors, the entire plant complex in Linz, Austria, was awarded ResponsibleSteel’s Certificate in November 2021.

      The collaboration of the World Steel Association with TDI, a provider of a platform that systematically compiles risks related to materials and source countries, allows voestalpine to contribute its pertinent expertise in this connection, too.

      Internally, the Group has already established suitable working groups tasked with analyzing current supply chain transparency regulations and preparing the company for the EU’s forthcoming supply chain legislation.

      Fallout of the covid-19 pandemic on raw materials procurement

      All activities of Rohstoffbeschaffungs GmbH, a Group company responsible for raw materials procurement, were shifted to the relevant individuals’ homes on the very first day of Austria’s lockdown in March 2020. Daily video conference calls involving executive and departmental management enabled a smooth flow of information nonetheless. A comprehensive document that analyzes pandemic-related developments as well as the global raw materials markets was prepared every day for both the executive management and the Management Board. Thanks to the steps taken, there were no production delays due to the lack of raw materials at any time during the pandemic.