H7. Supply chain and human rights

To ensure responsible business methods and respect for human rights in Essity’s supply chain, Essity’s target is that all sourcing is to be from suppliers that share the company’s values. The target for 2020 was that 100% of all strategically important sourcing categories and sourcing from high-risk areas, which corresponds to 90% of Essity’s total purchase cost, is to be from suppliers that comply with Essity’s Global Supplier Standard. In 2020, 92% (85; 71) of the procurement spend was sourced from suppliers who fulfill these criteria.

The COVID-19 situation had an adverse impact on work to ensure that the company’s suppliers fulfill the requirements of Essity’s Global Supplier Standard, and required Essity to instead concentrate on securing deliveries and minimizing delivery risks. The continuous work linked to Sedex and ethical audits, as described below, was also impacted by COVID-19 and could not be carried out to the same extent as in previous years.

Risk analysis

Essity has an established process to perform continuous risk assessments of the company’s suppliers and sourcing categories. Approximately 60% of Essity’s strategic suppliers for raw materials and finished products are located in Europe, 32% in North and South America and 8% in Asia and Africa. Many of the strategic suppliers’ production facilities located in Asia and Latin America are part of large multinational corporations based in Europe and the US. This is a conscious choice by Essity to reduce the social and ethical risks within the supply chain.

23% (19; 21) of strategic suppliers’ manufacturing units are located in high-risk countries according to the Sedex definition. These suppliers are in scope for ethical audits with a focus on health and safety, human rights, employment conditions and corruption. At the end of 2020, Essity had a total of 1,008 (929; 694) suppliers that share data via Sedex.

Certain materials, such as cotton and wood fiber, are considered to primarily have risks lower down in the value chain. Essity takes further measures here, such as audits of subcontractors, or chooses certified raw materials that guarantee more sustainable extraction and production.

Geographical distribution of strategic suppliers 2020

Ethical audits conducted

The preferred audit format is SMETA, which is the most popular method in the world for social and ethical audits.

Travel restrictions related to COVID-19 have limited the number of audits conducted. During 2020, Essity evaluated the outcome from 37 (52; 59) ethical supplier audits, of which 31 (45; 30) were carried out in Sri Lanka, Turkey, Colombia, China, Malaysia, Brazil, South Africa, Thailand, Mexico, Russia and Peru. Of these audits, 12 were carried out by Essity using an independent audit firm. The other 25 (19; 29) ethical audits, which meet Essity’s requirements, were carried out by other customers to suppliers and were approved by Essity.

Essity is informed within 24 hours in cases of critical observations. No agreements with strategic suppliers were terminated on the grounds of sustainability-related non-compliance in 2020.

Read more about how Essity works with the supply chain and human rights in the chapter Business ethics and human rights.