Suppliers and the supply chain

The Sofidel Group’s strategic goal is to have a supply chain with no reputational risk.

This goal has been broken down into two lines of action:

  • the adoption of a sustainable procurement model;
  • assessment of supplier sustainability strategies and performance.

Sofidel has structured its sustainable purchasing model in line with the ISO 20400 Sustainable Procurement guidelines.

In 2019, the Sofidel Group obtained renewed certification from SGS Italia confirming that its sustainable purchasing model complies with the reference standard.

Sofidel has identified 13 product categories with reputational risk that define the portfolio of critical suppliers and critical expenditure (expenditure associated with product categories with reputational risk).

The product categories with reputational risk can be classified according to the Kraljic matrix, shown below.

Kraljic matrix: distribution of risk categories

The tool chosen for supplier sustainability assessment is the TenP platform. Developed by the Global Compact Network Italy Foundation, TenP provides a prequalification system for assessing individual suppliers in terms of working conditions, respect for human rights, environmental protection and the fight against corruption.

The Sofidel Group has developed a rating system which puts each supplier into a different category (green, yellow and red) based on the score obtained during the prequalification assessment.

The summary index adopted measures effectiveness in pursuing the objective and the percentage of the Group's total expenditure attributable to suppliers evaluated through the TenP platform (coverage ratio): this ratio is broken down in terms of merit categories and may refer to a subset of expenditure on specific product categories.

In 2019 the improvement taking place within the Group’s set of suppliers was confirmed, with a rise in the percentage of suppliers assessed as excellent in terms of sustainability (green category).

Sofidel Group suppliers

The detailed analysis of the suppliers' portfolio, shown opposite, shows that:

  • Suppliers who need an improvement plan (red category) are on average in the upper end of the range;
  • the Environment and Human Rights areas are critical for suppliers who need an improvement plan (red category) and sustainable suppliers (yellow category): performance in these areas is significantly lower than the average performance for the category;
  • Labour is a strong point for suppliers who need an improvement plan (red category) and, more generally, for all suppliers, regardless of their category: performance in this area is significantly higher than the average performance for each category.

The coverage ratio in terms of Sofidel Group's total expenditure for the 2019 year is 81%: in other words, 81% of the Group's expenditure relates to commercial relationships with suppliers who have a valid self-assessment report on the TenP platform. In particular, the coverage ratio for Suppliers in need of improvement (red category) is 2%.

The coverage ratio for critical expenditure remained almost unchanged in 2019 at 85% (-1% vs. 2018).

The target for 2019 has been set in terms of the coverage ratio to be achieved for each of the product categories with reputational risk: for all categories the threshold value has been set at 85%.

The categories Cellulose, Adhesives, Polyethylene and Chemicals have reached the required coverage ratio. Details of the coverage achieved for the 13 product categories are given on the following page.

Average score analysis

Sofidel Group coverage ratios (Europe + United States)

In aggregate form, previous results can be related to the Kralijc matrix:

Kraljic matrix: distribution of critical spend covered by TenP

There was a particularly significant increase in the Bottleneck area, produced by improvement in the Waste Disposal category (+17% vs. 2018) and growth in the Leverage area (+4% vs. 2018) induced by the Transport category (+6% vs. 2018).

In 2019 the Sofidel Suppliers Sustainability Award event, usually held by Sofidel to award suppliers who have distinguished themselves for environmental and social sustainability actions, was not organized. The particular situation experienced by the Sofidel Group during 2019, in terms of the volume of work on significant investments and the desire to give suppliers more time to focus on improvement projects, underlie the choice made by the Group.

The target for 2020 has been set in terms of the coverage ratio to be achieved for each of the product categories with reputational risk: for all categories the threshold value has been set at 90%.

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