Note 44. Sustainable supplier management

Sandvik has about 65,376 suppliers located in approximately 91 countries, from which we source raw materials, components, products and services. Our commitment to provide sustainable products implies that we expect our suppliers to comply with Sandvik’s Supplier Code of Conduct. In 2019, approximately 9.6 percent of our supplier spend occurred in countries with a high risk of Sandvik Supplier Code violations such as China (3.7 percent), India (2.9 percent), Brazil (1.5 percent), Indonesia and Mexico (0.6 percent each).

In 2019, the capacity building activities continued to be a key part of our efforts in building a sustainable supply base. We trained 707 Sandvik employees and all 115 audited suppliers in the Code of Conduct and our way of working with it. We also provided additional training on more specific topics, such as conflict minerals.

Supplier monitoring

In 2019, we identified 1,171 supplier entities (out of 42,505 fully risk assessed) located in high-risk countries and developing activities deemed to be at high risk. A total number of 115 suppliers were audited, out of which 74 are located in India, 12 in China, 12 in Argentina, 5 in South Africa, 5 in Brazil, 3 in Chile, 2 in Russia and one in the UK as well as Malaysia. All were audited either by independent third-party auditors, selected and trained by Sandvik (90 suppliers), or by our own auditors (25 suppliers). All audits were conducted on site.

We had 99 corrective action plans agreed to with the suppliers audited in 2019 (86 percent of total audited). During the year, we have prioritized the cases according to its severity and based on that, we have closed the year with 37 partly or fully implemented corrective action plans and one supplier terminated. For the remaining cases, 45 had the timeline extended for implementation in 2020 and 16 cases have not been implemented yet. All cases (61) will be followed up in 2020.

In 2019, we identified no deviations related to child labor or underaged workers exposed to hazardous working conditions. Deviations related to forced labor relate to financial penalties imposed on employees at our suppliers in China. Those regarding discrimination refer to unequal payment of employees with the same experience and qualification who performed the same work in Chile. Legal compliance deviations relate primarily to missing safety or environmental certificates/licenses. Competition Law, Anti-corruption and Conflict Minerals deviations refer to a lack of relevant policies/training/processes. 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. Right-to-property-related deviations refer primarily to lacking impacts assessment on the previous user(s) caused by the facility taking over lease/ownership of the property. In 2019 one supplier relationship was terminated due to audit results.

Conflict minerals

In 2019, we performed a reasonable country of origin enquiry to identify smelters and refiners associated with our supply chain, based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.

Wolfram Bergbau und Hütten, a Sandvik subsidiary based in Austria, is 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. It continued to supply the majority of Sandvik’s total tungsten in 2019.