H13. Supply chain management
Essity’s target for responsible sourcing is that we shall evaluate all of our supply streams from a risk perspective. By 2020, we aim to source 100% of our procurement spend from suppliers committed to the criteria specified in our Global Supplier Standard.
In 2017, 64% (43) of the procurement spend was sourced from suppliers who fulfil these criteria. The target for 2017 was 61%. Furthermore, Essity’s target is to use established procedures to conduct risk evaluations of relevant sourcing categories, where the target is 53 sourcing categories by 2020. During 2017, 35 sourcing categories (66%) were evaluated, which was in line with the target for 2017.
Ethical audit results
During the year, Essity evaluated the outcome from 25 ethical supplier audits, of which 16 were carried out by SGS on Essity’s behalf in India, China, Turkey, Saudi Arabia, Brazil, Russia and Mexico. In addition, nine ethical audits performed by another customer of the supplier were approved by Essity.
If critical findings are identified, Essity is informed within 24 hours. To date, this kind of reaction has been the result of excessive overtime, overtime not being paid at a premium, no evidence of fire drills being conducted in the last 12 months or insufficient or non-existing procedures for verifying workers’ age upon recruitment. No agreements with global suppliers were terminated on the grounds of sustainability-related non-compliance in 2017.
Approximately 81% of the hygiene operations’ supplier base for raw materials and products is located in Europe, 18% in the Americas and 1% in Asia/Middle East. Many of the global, strategic suppliers’ production facilities located in Asia and Latin America belong to large multinational corporations based in Europe and the US, a conscious choice by Essity to reduce ethical risks within our supply chain.
Global and regional suppliers of raw materials and merchandise represent about 61% (50) of the hygiene operations’ procurement spend. 22% (21) of suppliers’ manufacturing units are located in high-risk countries according to the Maplecroft Human Rights Index. These suppliers are in scope for ethical audits with a focus on health and safety, human rights, employment conditions and corruption. An ethical audit of a supplier can also be triggered by other indicators, such as a low rating in Sedex, a low health and safety score in Essity’s supplier qualification audit or the outcome from Essity’s risk assessments. Sedex is an online database that enables suppliers to share information with their customers on their status in areas such as labor conditions, health and safety and business ethics. After 2017, we have a total of 481 supplier plants that share this type of data via Sedex.