Procurement

Increase in transparency

The SFS Group made vital progress in supply chain management in the year under review. Of the total number of 12,173 suppliers, some 51.2% (PY 33.7%) are registered on the online assessment platform. The number of suppliers that have been assessed on the basis of environmental and social criteria has risen by approximately 74%. In 2024, the new Supplier Code of Conduct was rolled out on a mandatory basis. This will also be included in our Terms and Conditions of Purchase as of 2025.

The topic of "Procurement" is very important to SFS for multiple reasons: On the one hand, we need to meet the increasing regulatory requirements for sustainable supply chain management; on the other hand, the supplier assessments help us to quantify Scope 3 emissions, which account for over 90% of SFS’s emissions. 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 carried out in 2022, this topic was therefore classified as one of the most important issues. It includes the 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.

Clear guidelines promote sustainable procurement practices

With our procurement practices we reduce negative and increase positive impacts in the supply chain. This includes compliance with human rights, the ban on child labor and the responsible procurement of minerals and metals from conflict areas. We expect our suppliers to conduct themselves in line with our principles and the Supplier Code of Conduct and ensure that their business partners and suppliers adhere to these principles as well.

Local-for-local: Our procurement strategy

Within the framework of our local-for-local strategy, SFS is steadily expanding its global development and production platform. This provides our stakeholders with superior supply reliability thanks to short, robust, environmentally sustainable and traceable supply chains.

The (raw) materials purchased are broken down by SFS into the following main product groups:

• FC (finished components): 67.6% (PY 70.1%)
• ME (machines and equipment): 4.4% (PY 4.4%)
• OCE (oil, chemistry, energy): 2.5% (PY 1.6%)
• PACK (packing materials): 1.3% (PY 1.2%)
• SP (service providers): 6.7% (PY 7.0%)
• Tools: 3.0% (PY 1.9%)
• WOM (wire and other materials): 14.5% (PY 13.8%)

Global procurement amounted to approximately CHF 1.5 billion (PY >CHF 1.5 billion) in the year under review, with the procured goods coming from the following three regions:

• Asia 16.0% (PY 14.7%)
• Europe 70.9% (PY 77.9%)
• North America 13.1% (PY 7.4%)

Systematic supply chain management

In order to manage our supply chains as effectively as possible and continuously increase transparency along the entire value chain, we have implemented systematic supplier assessments. These help us to:

• Carry out risk assessments by means of abstract analyses before establishing a supplier relationship.
• Obtain a real-time overview of the sustainability status.
• Evaluate suppliers based on country- and sector-specific risks as well as critical news.
• Identify critical suppliers as well as potential opportunities and risks.
• Implement, monitor and document preventive and corrective measures.
• Share information with suppliers and ensure regular communication.
• Measure key figures related to supply chain management.

The supplier assessment is supplemented by the following instruments:

• Anonymous whistleblowing system for internal and external stakeholders
• Application of recognized standards and certification systems (e.g. ISO 14001 and ISO 45001)
• Cooperation with authorities, international organizations and business partners
• Regular consultation of experts
• Regular on-site supplier audits (carried out by SFS or an independent partner company)

These instruments help SFS to systematically manage supply chains and, at a higher level, to implement its sustainability strategy and goals in the area of procurement. They complement our risk management approach and help us to fulfill our due diligence obligations.

Content of the supplier assessments

Our supplier assessment takes social and environmental criteria into consideration and is carried out using standardized questionnaires based on the principle of self-declaration. In the year under review, the assessment covered the following key topics:

• Anti-corruption and anti-bribery
• Carbon footprint (new as of 2024)
• Conflict minerals
• Cybersecurity
• Environmental protection
• Human and labor rights
• Occupational safety
• REACH (new as of 2024)
• Responsibility in the supply chain
• RoHS (new as of 2024)
• Supplier Code of Conduct (new as of 2024)

Increase in number of assessed suppliers

In the year under review, the SFS supplier network comprised 12,173 contacts (PY 11,700), 51.2% of which (PY 33.7%) are registered on the online assessment platform and monitored in an abstract or concrete risk analysis. The abstract analysis offers a risk assessment based on country- and sector-specific codes as well as publicly accessible ESG key figures.

In 2024, we monitored 3,924 suppliers (PY 3,821) by means of a concrete risk analysis. In the concrete risk analysis, suppliers are invited to take part in a supplier assessment that addresses specific topics (see “Content of the supplier assessments”). At the end of the reporting period, the response rate for the concrete risk analysis was 81% (PY 55%).

The sustainability monitoring also revealed that 98.6% (PY 96%) of the registered suppliers did not have any critical news.

Results of the concrete risk analysis

The results of the concrete risk analysis with reference to environmental and social topics can be summarized as follows:

Supplier Code of Conduct rolled out on mandatory basis

The Supplier Code of Conduct was rolled out primarily according to a risk-based approach and was sent to both existing and new suppliers. In 2024, 1,551 suppliers that are responsible for 90% of our purchasing volume were subject to an ESG-based risk analysis. At the end of the year under review, 427 of these identified suppliers and 2,227 suppliers in total acknowledged the Supplier Code of Conduct. To speed up the roll out, the Supplier Code of Conduct will also be integrated into our Terms and Conditions of Purchase in 2025.

Outlook

SFS launched the supply chain monitoring initiative in 2023 and is currently in the consolidation phase. At the end of the year under review, we had monitored approximately 81% of our strategic suppliers. In 2025, we will continue work on expanding the supplier assessments so that we can achieve our goal of monitoring 85% of all strategic direct suppliers.

Strategic suppliers have an enormous impact on SFS’s performance contribution and account for around 80% of the procurement volume. They are frequently characterized by materials with unique selling points as well as highly integrated and automated business processes.

In addition to the intention to increase transparency in our supply chains, we also consider it our duty of due diligence to investigate all suspected cases of potentially negative environmental or social impacts that were identified in 2024. If necessary, we will come to an agreement with our suppliers on appropriate measures to make improvements by the end of 2025.

The SFS Group is making initial progress with the identification of upstream Scope 3 emissions. As of 2024, we have been able to request emission data from our suppliers and trace upstream emissions via our assessment platform. In the year under review, we were in contact on this matter with the first suppliers. The majority of these business partners are willing to work together with us to increase transparency with respect to upstream Scope 3 emissions and to improve the dataset on the carbon footprint of our products. SFS will also continue to press ahead with this project in 2025.