Supplier Sustainability Index

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The “Sustainable Supplier Index” project was launched in 2018 for the assessment of sustainability risks of all our suppliers. With this project, it is aimed to identify risky and high risk suppliers in terms of sustainability. Up to now, %91 of the suppliers covered have been evaluated. 1% of the evaluated suppliers are in the category of "High Risk" and 8% are in the category of "Middle Risk". These suppliers are included in the 2020 business ethics audit plan.

When determining the companies for sustainability index assessment, the criteria under Table 1 are taken into consideration.

  Table 1. Supplier Determination Criteria

Criteria

Explanation

All suppliers to be commissioned

Covers all suppliers

Suppliers which constitute 80% of the annual purchasing volume of Arçelik

The purchasing volume for the previous year is taken into consideration

Critical suppliers in supplier positioning

Kraljic methodology is utilised

Kraljic methodology assessment criteria;

  • Suppliers within the 80% volume in Arçelik annual procurement volume

  • Supplier performance (Quality, Delivery, Finance)

  • Supplier dependency level

  • Price level of the supplier compared to alternatives

  • Technical and innovation expertise of the supplier

  • Response and cooperation speed of the supplier

The suppliers under “Critical” and “Strategic” under Figure 1 are taken into consideration in Sustainability index assessment. These suppliers are defined as our Critical Suppliers.

Figure1. Kraljic Methodology

Supplier.

After the questions are uploaded to the software program, the questions are sent automatically to the mail addresses of the suppliers to be assessed. This assessment is made in the first quarter of each year and 1 month is given for the completion of the survey. In this period, if there is no response from the suppliers, the system sends an automatic reminder.

Sustainability index assessment questions sent to the supplier include three dimensions;

  1. Economical Dimension

  2. Environmental Dimension

  3. Social Dimension

Table 2. Assessment Questions Sub-Headings

Economical Dimension

Risk analysis

Internal rules/policies

Reporting of violations

Customer satisfaction

Supplier sustainability risks

Sub-supplier performance measurement criteria

Environmental Dimension

Environmental reporting

Environmental policy/management system/scope

Compliance with Environment/Arçelik legislation

Measurement (Greenhouse gas, energy, waste, chemical, fuel, water)

Environmental voluntary activities

Social Dimension

Social reporting

Compliance with Universal Declaration of Human Rights

Corporate Business Ethics Policy

Arçelik Responsible Procurement Policy Compliance

Human Capital Performance Indicators

Conflict Minerals Management

 

High-score subjects in the index;

  • Economic, Social and Environmental risk management asset

  • Business ethics policy and contents

  • Transparency

  • Measurement of parameters below that impact the environment (greenhouse gas, waste, water, energy etc.)

  • Environment and Energy management system

  • Human rights activities

The evaluation of the answers from the supplier is made over 100 points. The weights of the main sections during the evaluation is as below.

  1. Economical Dimension  30%

  2. Environmental Dimension 40%

  3. Social Dimension 30% 

Each question asked to the supplier has a point and weight. The sustainability risks in the industry is taken into consideration while determining the weights. Report is automatically created in the system and the total score of the supplier is calculated. Risk levels regarding the supplier sustainability index points are given under Table 3:

Table 3. Supplier Sustainability Index Points and Risk Level

The answers given by suppliers are reviewed by the Purchasing Directorate or the Product Procurement Directorate. Evidence documents may be requested in this process. Where necessary, Quality, Sustainability and Official Affairs Directorate provides technical support.

If the assessment results of potential companies during the new supplier commissioning activity are determined as “High Risk” and “Moderate Risk”, they are not commissioned. The action plans to be determined with the current suppliers according to the risk levels are given under below

Survey assessment results are reviewed every six months by the Value Chain Management Board.

Generally missing issues in our high-risk suppliers in 2019;

Economy

  • No risk analysis

  • Supplier sustainability risks are not evaluated

Environment

  • No environmental reporting

  • No environmental policy

  • Lack of ISO50001 certification and management system

  • Our greenhouse gas emissions are not measured

  • Energy and water consumption is not measured

  • Waste not measured

Social

  • Lack of business ethics policies

  • Not knowing the Conflict Minerals system

Supplier Sustainability Action Plans

The workflow and action plans for suppliers according to sustainability index point and risk level are explained below;

Figure 2. Supplier Sustainability Index Assessment Methodology

“High Risk” Suppliers:

An action plan is requested from the supplier for closing the nonconformities determined in the survey questions and a business ethics audit is planned for the supplier.

The suppliers whose audit result is not found to be suitable are not worked with.

The supplier whose audit result is found to be suitable, an action plan is requested from the supplier for closing the nonconformities determined in the survey questions. The action plan must be prepared with the aim to reach “Acceptable” risk level within 3 months.  If the supplier fails to reach this level within 3 months, this supplier is not worked with. Action plan is approved by Arçelik. Nonconformities are closed by the supplier within the scope of the approved action plan and are reported to Arçelik. If Arçelik considers the actions taken suitable, the supplier score is revised.

Current Suppliers with “Moderate Risk”:

By sending a notification mail, the suppliers are requested to prepare an action plan on the activities to be carried out in order to reach at least “Acceptable” risk level.

If the plan given is not deemed suitable by the Value Chain Management Board, a business ethics audit is conducted to the supplier.

The supplier whose audit result is found to be suitable, an action plan is requested from the supplier for closing the nonconformities determined in the survey questions. The action plan must be prepared with the aim to reach “Acceptable” risk level within 6 months.  If the supplier fails to reach this level within 6 months, this supplier is not worked with. Action plan is approved by Arçelik. Nonconformities are closed by the supplier within the scope of the approved action plan and are reported to Arçelik. If Arçelik considers the actions taken suitable, the supplier score is revised.

Suppliers under “Acceptable Risk” Category:

By sending a notification mail, the suppliers are requested to prepare an action plan on the activities to be carried out in order to reach at least “Good” risk level.

The action plan must be prepared with the aim to reach “Good” risk level at minimum within 8 months. Action plan is approved by Arçelik. Nonconformities are closed by the supplier within the scope of the approved action plan and are reported to Arçelik. If Arçelik considers the actions taken suitable, the supplier score is revised.

Business ethics audit is planned for suppliers who fail to reach at least “Good” risk level within 2 years.

Suppliers under “Good” Category:

Business ethics audit is planned every 3 years for suppliers with a “Good” risk level.

By sending a notification mail, the suppliers are requested to prepare an action plan on the activities to be carried out in order to reach at least “Excellent” risk level.

The action plan must be prepared with the aim to reach “Excellent” risk level within 10 months. Action plan is approved by Arçelik. Nonconformities are closed by the supplier within the scope of the approved action plan and are reported to Arçelik. If Arçelik considers the actions taken suitable, the supplier score is revised.

Suppliers under “Excellent” Category:

The suppliers under “Excellent” risk level are included to the rewarding process, in this context, an assessment is rendered for ArGreen certificate process by Arçelik, which is detailed under Annex-4.

Business ethics audit is planned every 3 years for suppliers with a “Excellent” risk level.

By sending a notification mail, the suppliers are requested to prepare an action plan on the activities to be carried out for the nonconformities detected in the audit result and survey responses.

The action plan must be prepared within 12 months. Action plan is approved by Arçelik. Nonconformities are closed by the supplier within the scope of the approved action plan and are reported to Arçelik. If Arçelik considers the actions taken suitable, the supplier score is revised.