Transparency in the Supply Chain

General Procurement

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

Entrepreneurial activity also entails the responsibility to satisfy both corporate and social requirements. For many years now, the steel industry has considered voestalpine to be the benchmark in matters related to the environment and efficiency. The consistent implementation of sustainable supply chains makes an important contribution to the Group’s Sustainability Strategy. The purchasing organization is successfully continuing implementation of the roadmap for “Sustainability in the Supply Chain.”

Compliance with environmental and social principles is an important factor in the selection of voestalpine’s suppliers. Sustainable supplier management is integrated into the procurement processes in the aim of maintaining long-term partnerships.

voestalpine ensures through informational events such as the Purchasing Power Day as well as the three-stage Purchasing Power Academy (which was developed in house) that its employees in procurement are given ongoing training and continued professional development (CPD) opportunities with respect to topics including sustainability and compliance.

Procurement processes are continually updated and optimized in keeping with statutory as well as corporate requirements. voestalpine’s relevant economic actions and decisions are based on its Code of Conduct for Business Partners.

Raw Materials Procurement

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

Applying life cycle approaches in cooperation with our customers guarantees the highest efficiency in the process of recycling our raw and reusable materials.

We face the challenge of continually optimizing our supply chains jointly with our suppliers. Regular visits to the sources of raw materials and pre-materials, especially mines, deposits, and production facilities, are a fixed element of this process. Together, we develop methods for designing an efficient and transparent supply chain. New suppliers are assessed in terms of corporate responsibility, quality, and performance. The suppliers are included in the voestalpine portfolio when the due diligence review is positive. The structured due diligence process involves a step-by-step approach. The review is based on the Code of Conduct for Business Partners. Additional data, allowances and certificates, and evidence are requested in greater detail from suppliers with a significant risk. voestalpine ensures that all of its purchases are subjected to this process, thus mitigating risk over the long term.

Securing the long-term competitive supply of both raw materials and energy remains the key task. A high degree of integration into upstream and downstream processes, scenario planning, and adaptive supply concepts serve to minimize supply risks.

Supply Chain Management

The Purchasing Board is the steering and decision-making body for Group purchasing and is supported by the Purchasing Committee as the implementation body.

The responsibility of the Group purchasing structure extends across the entire voestalpine Group in relation to the procurement of products and services. Its focus is on the areas listed below, which require Group-wide and overarching management in order to achieve the strategic goals of voestalpine Purchasing (see diagram).

The following areas of responsibility fall within the direct remit of the Group purchasing structure bodies:

• Preparation and further development of the purchasing strategy
• Governance structure/Group roles and responsibilities incl. Group lead buyer
• Shared systems and tools in purchasing
• Definition of the uniform and harmonized purchasing process
• Development and formation of the purchasing community within the Group and subsequently the purchasing culture and a shared mindset
• Training and further education on technical matters (Purchasing Power Academy)

The Purchasing Board and Purchasing Committee have consistently pursued the strategic plan in recent business years in an attempt to ensure transparency and sustainability in the supply chain, thereby achieving important milestones on the roadmap. The focus in the 2023/24 business year was on compliance with the statutory provisions of the German Supply Chain Duty of Care Act while continuously taking developments in the EU Supply Chain Directive into account.

Sustainability in the supply chain

voestalpine uses a risk analysis to determine whether and where human rights could be in danger or negative environmental impacts could arise in its supply chains.

The first step in the risk analysis involved developing a filter system based on country-specific information as well as industry-specific and product group-specific risk factors. Application of the filter system allows inspection mechanisms to be applied specifically to suppliers that are subject to risk and preventive measures to be derived. The defined filter system among other things includes the following factors:

• Human rights violations
• Child labor
• Fair remuneration
• Forced or compulsory labor

Based on the risk assessment, voestalpine, as already stated, requests specific proof from its business partners regarding the extent to which they meet the requirements of the Code of Conduct for Business Partners. voestalpine supports them in implementing the requirements if required. Where necessary, training measures are carried out at suppliers’ premises or on-site visits are made to increase suppliers’ understanding and ensure that improvement measures are being carefully implemented. This requires the cooperation and participation of the business partners.

voestalpine reserves the right to take appropriate measures in the event of violations and an unwillingness to cooperate on the part of suppliers, which may ultimately lead to suspension or termination of the supply relationship. This risk analysis is updated annually and the due diligence review is currently only carried out in full by those companies that are required to report in accordance with the German Supply Chain Act. The review is carried out on a random basis based on spot checks for the remaining voestalpine companies.

Sustainable Supply Chain Management (SSCM)

Both voestalpine’s purchasing terms and conditions and its Code of Conduct for Business Partners, which apply to all suppliers, contain numerous criteria aimed at sustainable procurement and, in particular, compliance with human rights.

In addition, voestalpine has 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 SSCM Project that examined a typical supply chain in steelmaking for risks associated with materials, countries of origin, and suppliers. voestalpine included both external and internal experts in the project as early as in 2016 and has conducted personal conversations with many long-term suppliers since then in order to identify potentially negative effects in the supply chain.

Example of a supply chain: steel production

Key materials that were analyzed as part of the project:

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

Albania • Australia • Austria • Brazil • Canada • China • Czechia • Finland • Germany • Norway • Poland • South Africa • Sweden • Türkiye • Ukraine • USA

Raw materials, countries of origin, and suppliers were examined with respect to:

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 to rule out human rights hot spots, particularly regarding child labor and forced labor, for all suppliers.

Whenever there are challenges among suppliers with respect to environmental issues, the suppliers concerned are asked to clarify the situation and suggest solutions; on-site supplier visits are conducted for verification purposes. The majority of suppliers (if they are producers) have already obtained their ISO 14001 or ISO 45001 certification.

COMPLIANCE CHECKLIST

voestalpine has developed the questionnaire from the SSCM project further in order to meet the requirements under the German Supply Chain Due Diligence Act. Detailed questions were included on various sustainability topics such as human rights, occupational safety, environmental aspects, and compliance, in addition to the general company information. This checklist is regularly evaluated and adapted to changing conditions and regulations.

Communication with the suppliers on compiling the questions, further development, and evaluating the questionnaires is based on user-friendly IT systems.

SUPPLIER ASSESSMENT

A systematic process based on personal meetings, a standardized questionnaire, and a quality assessment of the materials is used to select companies commissioned to supply those raw materials, products, and services to the voestalpine Group that directly affect the end products.

Suppliers must also undergo a mandatory acceptance process pursuant to the Responsible Sourcing Policy for them to be included in the supplier portfolio of voestalpine Rohstoffbeschaffungs GmbH. Deliveries to voestalpine are precluded until this process has been successfully completed.

Schematic overview of the process:

The 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, and quality management, or 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

For the most part, voestalpine Group companies procure the range of products they need from producers, traders, and wholesalers. Whenever possible, the companies make their purchases regionally, thus boosting host country economies. Regional proximity is pronounced, especially in connection with the procurement of services. The following graph shows the respective share of local suppliers. Suppliers whose businesses are domiciled in the same country as the voestalpine company they supply are considered local.

Local suppliers business year 2023/24

CODE OF CONDUCT FOR BUSINESS PARTNERS

The Management Board of voestalpine AG adopted an updated Code of Conduct for Business Partners effective as of the end of business year 2022/23. This Code defines voestalpine’s principles and requirements. It is designed to ensure that business partners’ practices conform to both voestalpine’s values as well as applicable laws and regulations.

The principles and requirements are rooted in the Human Rights Policy and the voestalpine Code of Conduct as well as on the UN Guiding Principles (UNGPs) on Business and Human Rights; the principles enshrined in the UN Global Compact (UNGC); the International Bill of Human Rights; and the United Nations Convention against Corruption.

The Code of Conduct for Business Partners regulates the following issues:

• Compliance and responsible corporate governance
  • Compliance with laws
  • Prohibition of active and passive corruption
  • Prohibition of bribery (e.g., making gifts to employees)
  • Money laundering
  • Fair competition
  • Protection of information, intellectual property, and data
  • Trade restrictions and sanctions
• Social responsibility
  • Respect for human rights and fair working conditions
  • Prohibition of child labor
  • Prohibition of forced and bonded labor, human trafficking, and modern slavery
  • Collective bargaining and right to freedom of association
  • Diversity, equal opportunity, and prohibition of discrimination
  • Compensation and working hours
  • Health and workplace protections
  • Training of security staff
  • Local communities and indigenous peoples
• Environmental protection and climate action
  • CO₂ footprint
• Supply Chain Management
  • Raw materials and source minerals
• Misconduct reporting
• Cooperation and collaboration

ADVOCACY ORGANIZATIONS 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, related in particular to input materials and greenhouse gas (GHG) emissions. In November 2021, voestalpine’s plant in Linz in Austria was awarded the ResponsibleSteel Certificate following a detailed audit conducted by independent auditors. The ResponsibleSteel surveillance audit was successfully completed in March 2023.

The collaboration of the World Steel Association with TD International (TDI)—which provides a platform for the systematic compilation of risks related to materials and source countries—also allows voestalpine to contribute its expertise.

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

In the past business year, voestalpine’s suppliers were informed of the company’s basic policies on responsible procurement and notified of the steps it intends to take with respect to climate action and environmental protection as well as human rights. Over the course of the business year 2024/25, suppliers will be asked to confirm that their business activities are in line with the voestalpine Code of Conduct for Business Partners in accordance with the risk analysis described and internal sets of priorities.