Improve sustainability in the supply chain

How we measure progress

1. Proportion of critical suppliers audited in the last 12 months.
2. Proportion of critical suppliers participating in training in the last 12 months.
3. Proportion of critical suppliers with an audit rating ‘approved’, meaning with no finding of a serious nature.
4. Emission intensity of transports, CO₂ emissions / m³km.

Focusing on our direct suppliers

Electrolux has over 3,000 direct material suppliers throughout its markets, more than 150 OEM (original equipment manufacturing) suppliers as well as a large number of indirect material partners.

It’s important that we choose suppliers that reflect our own high standards. Sustainability performance has been part of the vetting process for new suppliers for many years. Since 2015, the Responsible Sourcing team is represented in sourcing boards in all Group organizations, which facilitates integration in decision-making processes for each regional purchasing organization. Purchasers are trained on the Code of Conduct, with 79 trained in 2016.

Auditing critical suppliers

Around 700 of our suppliers are considered ‘critical’ and have been the focus of our responsible sourcing program this year. These include suppliers located in regions or using production processes that pose high and medium risks for environmental, labor or human rights violations, and corrupt practices.

In 2016, we added resources to our South East Asian organization that works with suppliers based in Thailand and neighboring countries to gain a more comprehensive coverage of our supplier base. We have also intensified our focus on North America by relocating a resource to our North American headquarters.

Our critical suppliers are reviewed on their sustainability performance at least every second year. In total, 471 (427) audits were performed among suppliers, including 396 (366) by internal auditors and 75 (61) by third-party assurers. This year, 60% (51%) of our critical suppliers were audited.

As part of our audits, we also monitor that our expectations are communicated to Tier 2 suppliers. During 2016, we evaluated the possibility to engage more directly with Tier 2 suppliers. A study of the supply base of eight of our strategic printed circuit board assembly suppliers revealed 1,244 potential Tier 2 suppliers, making it evident that engagement beyond Tier 1 requires strict prioritization principles and automated processes. We will continue to explore these aspects in 2017.

Improving conditions and reducing impacts

Through our audits, we see that health and safety as well as environmental issues continue to be the areas with the greatest challenges. Deviations related to our policy on working hours is still increasing.

A total of 44 (47) findings of a serious nature were uncovered in 2016, and the number of findings per audit had also decreased. The most common zero-tolerance findings were related to legal violations and inconsistent working hour records. These two types of findings represent more than half of the serious findings, and are part of a trend. There were 4 cases of forced labor in China and SEA involving the improper management of wages and worker passports. Cases involving discrimination increased, including 5 findings of pregnancy-testing in China. In all instances, management practices at the respective supplier were amended.  All zero-tolerance cases are reported to senior Purchasing management, who also monitors remediation actions. There was no case involving under-age labor during 2016, however there were 38 deficiencies related to the management of young workers. Suppliers were required to strengthen their procedures for notifying authorities of the presence of young workers. Suppliers were also required to provide special health examinations required for such workers.

Our share of disqualified suppliers is still high in selected markets due to societal issues, such as in Egypt, and there are large regional differences in supplier status. In EMEA (Europe, the Middle East and Africa) 24% of suppliers are “Preferred” (only minor findings) or “Active” (only findings of non-critical character). The corresponding figure in Latin America is 30%, whereas the Asia Pacific region has a low proportion of “Preferred” or “Active” suppliers, with excess working hours as the most common obstacle to reaching “Active” status.

Our promise to improve sustainability among our suppliers means going beyond auditing and monitoring. We have been collecting data on the environmental performance of suppliers - representing 56% of our OEM spend - since 2011, to promote better control of critical environmental impacts caused by their operations. In 2016, this has included introducing a new energy report and requiring suppliers to work toward set energy targets, as well as measure their water use. In 2016, we have deployed an e-learning program on our Code of Conduct requirements for suppliers in 5 languages across seven key supplier markets. Through this program, we reached over 100 key decision makers at 98 of our suppliers. In total, we have trained 223 supplier representatives from 189 suppliers in several sustainability capacity building initiatives.

Electrolux has engaged with suppliers that source from countries affected by conflicts. Our approach is based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, and is embedded in our policies and activities. In line with this guidance, Electrolux is tracking country of origin for specific critical minerals throughout its supply chain. This approach also agrees with the US legislation on Conflict Minerals. Electrolux has joined the Conflict-Free Sourcing Initiative (CFSI), allowing us to influence actors in the supply chains beyond tier-one suppliers.