SFS has sharpened its focus on supply chain management in order to comply with its due diligence more consistently: Through systematic supplier assessments on ecological and social criteria as well as the introduction of a separate Supplier Code of Conduct, SFS is striving to improve transparency and traceability in its supply chain. These efforts are aimed in part at enabling the Group to measure all upstream Scope 3 emissions more accurately going forward and reduce them in the long term.
The focus topic “Procurement” is gaining importance for several reasons: Not only do increasing regulatory requirements call for systematic sustainability management along the entire supply chain, but this is also crucial for identifying and reducing Scope 3 emissions, which account for the largest share of emissions at SFS. The decisions we make with respect to procurement have major impacts – from both a social and an environmental perspective. Conversely, suppliers and their activities also impact SFS’s environmental footprint and ethical integrity. In the materiality analysis workshops, this topic was therefore classified as one of the most important issues. It includes two GRI Standards: “Supplier Environmental Assessment” and “Supplier Social Assessment”. The standard “Procurement Practices” also falls under the topic but stakeholders did not classify it as material.
We use our procurement practices to reduce negative consequences in the supply chain and reinforce positive consequences. This includes compliance with and respect for human rights, the ban on child labor and the responsible procurement and processing of minerals and metals from areas of conflict. We also expect our suppliers to conduct themselves in accordance with both our principles and the Supplier Code of Conduct. Moreover, suppliers – in all business activities within their own sphere of influence – are expected to work toward ensuring that their business partners and suppliers acknowledge these principles as well.
In this context, SFS has formulated the following principles, which will be binding for all suppliers and business partners from 2024 onward and form part of the Supplier Code of Conduct:
In keeping with our “local-for-local” strategy, SFS is steadily expanding its global development and production platform. This helps stakeholder groups benefit from superior supply reliability thanks to short, robust, environmentally sustainable and traceable supply chains.
SFS’s supplier network, including Hoffmann, currently comprises around 11,700 organizations (PY: 11,500) that are domiciled and have operations in North America, Europe and Asia. The (raw) materials purchased can be broken down into the following main product groups:
Global procurement amounted to more than CHF 1.5 billion in the year under review (PY: more than CHF 1.4 billion), with the procured goods stemming from the following three regions:
The first shifts attributable to the first-time consolidation of Hoffmann for a full year were seen in 2023 in both the main product groups (shift from WOM to FC) as well as the global procurement volume (shift from Asia toward Europe).
New legal requirements entered into force in 2023 with the counterproposal to the Responsible Business Initiative (VSoTr) in Switzerland as well as the new Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz, LkSG) in Germany. We additionally decided to implement a software solution to comply with these and systematically enforce our procurement-related sustainability strategy and goals. This solution perfectly complements our current risk management and helps us fulfill our due diligence obligations with the following instruments:
The new software solution helps improve transparency in our supply chains and ensure the traceability of individual raw materials. Going forward, this solution combined with an online analytics platform will enable us to:
supplier_assessment_results
Our supplier assessment takes social and ecological criteria into consideration and covered the following key topics during the year under review:
The assessment is based on the self-declaration principle and carried out by means of standardized questionnaires. During the year under review, SFS examined a total of 3,821 suppliers and invited them to participate in the sustainability assessment. The response rate was at around 55% at the end of the reporting period. An analysis of the sustainability monitoring revealed that 96% of the suppliers examined did not report any critical news during the year under review.
The results of the environmental and social assessment of suppliers can be summarized as follows:
Procurement_308-1_308-2_414-1_414-2
SFS launched a supply chain monitoring initiative in 2023 and is currently still in the start-up phase of that initiative. Our goal is to survey around 85% of all strategic direct suppliers in 2024.
Strategic suppliers have an enormous impact on SFS’s performance contribution and usually account for a significant percentage of the procurement volume (all in all, around 80% of the total procurement volume). They are frequently characterized by materials with unique selling points as well as highly integrated and automated business processes.
Additionally, all suspected cases of negative environmental or social impacts that were identified in 2023 are to be investigated and measures agreed to make corresponding improvements where necessary. The announced software expansion will let us access our suppliers’ emission data in the future and trace the upstream emissions of purchased goods and services. This will take us one large step closer to reaching our goal of calculating our products’ carbon footprints and ultimately working together with our suppliers to agree specific reduction targets for the upstream Scope 3 emissions. We expect some initial progress to be made on this front in 2024.