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The Group’s standard supplier business contract requires that each supplier acknowledges and promises to fulfill the Electrolux Code of Conduct.
Electrolux has over 3,000 suppliers and they are all expected to live up to the Group’s high standards for environment, labor and human rights. As part of its Responsible Sourcing Program, Electrolux carries out audits to check that these suppliers’ practices are aligned with the CoC.
The proportion of procurement from low-cost regions increased from 30% in 2004 to approximately 61% (65%) in 2014.
Sustainability risks such as human rights, labor and environmental standards are part of the screening process and/or integration process during acquisitions.
In total, 361 (376) audits were performed among suppliers this year, 350 (328) by Group sustainability auditors and 11 (48) by third-party assurers. A total of 31 (46) findings of a 'zero tolerance' nature were found, which led to further cooperation to implement immediate improvements. A majority of the zero tolerance findings relate to inconsistent working hour records.
In total, the number of physical audits decreased by15 compared to 2013 due to operational constraints. A new type of desk-top review to verify mainly missing documentation was tested, and in total 22 such reviews were completed. The average number of findings per audit is relatively constant year-on-year due to a changing supplier base, and decreased slightly in 2014. There is still a need for hands-on engagement to address violations.
Health and safety issues continue to be the area with the greatest number of non-compliances, followed by environmental non-compliances.
Audit findings of 361 physical supplier audits conducted during 2014. Health and safety issues continue to be the area with most non-compliance. Environment is the second largest area of non-compliance. These requirements, which are stricter than legal requirements in many countries, were introduced in 2009. Working hour violations, primarily a problem in China, is the third largest category of findings.
The improvement ratio between initial and follow-up audits fell compared to last year. Follow-up audits that were carried out at 127 (87) suppliers indicate considerable improvement by most audited suppliers in Latin America and Europe. In China, where the improvement level fell, the way labor practices are structured makes some types of findings more difficult to influence. For instance, when it comes to working hours, local practices and employee preferences differ greatly from the expectations of foreign companies and national legislation. Complementary activities such as training and practical advice are necessary to support improvements in the way these suppliers manage employees.
Follow-up audits that were carried out at 127 (87) suppliers indicate considerable improvement by suppliers, particularly in Latin America and Europe.
The Responsible Sourcing Program has been a forerunner in applying a ‘beyond monitoring’ approach, by providing supplier training through the Workplace Standard and by developing projects and training for specific, strategic suppliers.
During 2014, the focus of supplier training was in China as well as Chile and Egypt with the aim of raising awareness and knowledge of the importance of high sustainability standards. Training was conducted in parallel to the CoC roll out, particularly focusing on the Group’s requirements on ethical business, anti-corruption and the Responsible Sourcing strategy. A total of 197 suppliers were trained during the year.
In 2014 new guidelines for assessing all supplier candidates were developed for purchasing. Over 345 Electrolux employees in key positions in procurement have received between one and eight hours of dedicated training on policies and procedures concerning compliance to the updated CoC. Employees within quality, logistics, product management and sales were also targeted.