Sustainable Supplier Management

Sandvik is committed to sustainable procurement practices that minimize our social and environmental negative impacts, improve the sustainability performance of our supply base and generate value for business, our customers and society at large.

As a global company with operations around the world, Sandvik has a diverse supply base, totaling in 2018 approximately 78,000 suppliers located in 99 countries, from which we source raw materials, components, products and services. In 2018, 12.2¹⁾ percent of our supplier spend occurred in countries with a high risk of Sandvik Supplier Code violations such as China (5 percent), India (3.4 percent), Brazil (1.9 percent) and Mexico (0.8 percent).

Supplier sustainability program

We are constantly focused on initiatives that enhance sustainability performance, recognizing the potential for progress in this area. In 2018 our program encompassed activities aimed to create supplier commitment, increase knowledge and monitor our suppliers’ performance, particularly in high-risk areas. We require our suppliers to make every effort to comply with Sandvik’s Supplier Code of Conduct.

Building knowledge

In 2018, we continued our knowledge building activities. We trained all 202 audited suppliers in the Code of Conduct and our way of working. An additional 42 suppliers received similar training as part of two supplier events organized in India. In most cases we also supported our suppliers to develop corrective actions plans for addressing the deviations from the Supplier Code.

Suppliers monitoring

We assess the risk related to violations of our Supplier Code, primarily based on the suppliers’ location and activities involved in the production, delivery of goods and services to us. Going forward, we intend to further refine our risk assessment and diversify our response to risk.

In 2018, we identified 1,670 suppliers (out of 41,588 assessed) located in high-risk countries and developing activities deemed of high risk. A total number of 202 suppliers were audited, out of which 100 are located in India, 87 in China, 10 in Chile, four in South Africa and one in Brazil. All were audited either by our own auditors (142 suppliers) or by independent third-party auditors selected and trained by Sandvik (60 suppliers). All audits were conducted on site.

Follow up on the corrective actions agreed to with the suppliers is essential to ensure that deviations are rectified. 117 corrective action plans (58 percent of total) were agreed to with the suppliers audited in 2018, out of which 36 were implemented partly or fully. The remaining 54 are within the time limit agreed to with the suppliers. For about 85 audits, conducted at the end of 2018, corrective action plans are being discussed with the supplier.

In 2018, we identified no deviation related to child labor or underaged workers exposed to hazardous working conditions. Deviations related to young workers refer to incomplete physical health examinations, recruitment policies/ procedures/missing proof of age while those regarding forced labour relate to financial penalties imposed on employees at our suppliers in China. Legal compliance deviations relate primarily to missing or expired health and safety or environmental certificates/licenses. Competition Law, Anti-corruption and Conflict Minerals deviations refer to a lack of relevant policies. Deviations related to environment, health and safety refer to a range of issues from missing relevant policies to lack of fire safety measures and/or risk assessments. Deviations related to employment conditions mostly refer to contracts missing mandatory clauses. In 2018 no supplier relationship was terminated due to audit results.

Conflict minerals

During 2018, we carried out a reasonable country of origin enquiry to identify smelters and refiners associated with our supply chain. This was based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.

A large part of Sandvik’s total tungsten supply comes from our own subsidiary, Wolfram Bergbau und Hütten in Austria, a Conformant Tungsten Smelter that has maintained its compliant status since the company successfully completed the Responsible Minerals Assurance Program (former Conflict-Free Smelter Program) audit in March 2015.