Procurement of key products
In 2018, the procurement spend of Covestro’s main sites in Germany, the United States and China accounted for just under 79% of Covestro’s global spend. Most of this amount – around 78% – went to local suppliers in the individual countries.
Supplier audits and online assessments
For Covestro, adherence to sustainability standards along the entire supply chain is a crucial factor in value creation and a key lever for minimizing risk. Auditing and assessing suppliers with regard to sustainability criteria is a key element of making procurement decisions.
The sustainability practices of our suppliers are regularly assessed in accordance with the standardized global “Together for Sustainability” (TfS) program. Since the launch of the TfS industry initiative, co-founded with five partners by Covestro predecessor Bayer MaterialScience in 2011, the now 22 members have evaluated the sustainability performance of a total of 10,566 suppliers through online assessments and 1,526 through on-site supplier audits.
All results of the sustainability assessments and audits are available to TfS members on an online platform. This platform provides members with information that enables them to continually monitor suppliers with a view to driving improvements. The TfS initiative also benefits suppliers because their standardized assessment can be viewed by all TfS members. This means they do not have to complete multiple assessment surveys by various potential customers.
In 2018, TfS members conducted a total of 1,491 online assessments and 358 audits across the globe.
The CPO representatives of all TfS member companies gathered for their annual meeting in April 2018. Discussions focused on optimizing the measurement of sustainability-related improvements in the supply chain and strategies for growing the membership and partnerships. New targets and KPIs were defined to increase transparency and boost the impact of the initiative as a whole. Two more members joined the TfS initiative in 2018 in order to improve sustainability in their supply chains. Its continually growing membership has allowed the initiative to extend its global reach still further. By extending their partnership agreement, TfS and EcoVadis confirmed their shared commitment to further advancing the development of sustainable practices in chemical industry supply chains.
2018 saw further intensification of the collaboration between the TfS initiative and both the Responsible Care initiative and the China Petroleum and Chemical Industry Federation (CPCIF). Collaborative projects included supplier training on the topic of sustainability which was organized with Covestro’s support and held jointly with CPCIF in Shanghai in September 2018.
At the “More than a Market” gala held in China in May 2018, the TfS initiative was a finalist in the “Supply Chain Management” category, and in September 2018 it received a further prize from the Chartered Institute of Procurement & Supply (CIPS) in the “Best third sector/not-for-profit procurement project” category.
Covestro selects suppliers for assessment based on a combination of country and material risk, along with their strategic importance in relation to our corporate goals.
Covestro aims to reassess suppliers at least every three years, or earlier if indicated. Reassessments are performed by independent, TfS-accredited audit firms.
Covestro discusses improvements and measures to be taken directly with suppliers and agrees appropriate targets. Whether and how the required improvements are being implemented is reviewed on an ongoing basis. Based on these results, reassessments were conducted at 368 suppliers (previous year: 284) during the year under review, and approximately 67% (previous year: 66%) of these had improved their sustainability performance.
Results of audits and online assessments
None of the audits conducted revealed any indication of child or forced labor. The results did not indicate any substantial actual or potential negative impacts for the company or the environment. In China, some assessments identified deviations relating to matters of human rights, such as working hours, and aspects of health and safety. Appropriate corrective action was requested from the affected suppliers and implementation was verified in follow-up audits.
Sustainability training and dialog
It is also important for our own procurement staff to have a comprehensive understanding of the significance of sustainability in the supply chain. Along with sustainability road shows, company-wide sustainability training plus region- and country-specific training on the topic of sustainability audits communicated the necessary information to employees once again in 2018.
Dialog and close collaboration are essential in enabling suppliers to successfully comply with Covestro’s sustainability requirements. We therefore offer a range of opportunities for training and dialog. This provides the foundation for building reliable relationships and enables us to identify and eliminate any issues at an early stage.
Supplier performance development is one of the goals of Covestro and the TfS initiative, which regularly organizes Supplier Days and promotes further training. TfS provides a wide range of information materials and online training courses on its website.
International regulations such as the Dodd-Frank Act in the United States obligate companies to disclose the origin of certain raw materials to ensure that “conflict minerals” such as tin, tungsten, tantalum and gold from the Democratic Republic of Congo or neighboring states do not enter their products through the supply chain. Covestro uses tin-containing compounds in production and therefore monitors all suppliers to make sure they do not source raw materials containing tin from the affected regions through their own supply chains.
Using a structured survey process, we verify that our suppliers and their upstream suppliers are obtaining tin-containing material free from conflict minerals. Confirmations of conflict mineral-free procurement are documented centrally in the respective material/supplier pairs in our Global Substance List Online (GSLO) database.
In order to clearly communicate our requirements regarding conflict minerals, we also included these in our Supplier Code of Conduct. Covestro has obtained confirmations of compliance as regards conflict minerals from 100% of suppliers from which it actively purchases such minerals (55 material/supplier pairs) and which were identified as potentially affected by this issue. A list of potentially affected suppliers is updated on an ongoing basis, and the validity of all existing supplier confirmations is permanently monitored. To date, there have been no critical results and no need for action regarding this issue.