NF9 Sustainable supplier management

Our sourcing activities play an important role in reaching our sustainability goals and we focus on identifying, preventing, mitigating and accounting for adverse risks in our supply chain. Sandvik has 47,000 suppliers located in 83 countries, from which we source raw materials, components, products and services.

The Sandvik Supplier Code of Conduct (home.sandvik/suppliermanagement) puts sustainability requirements on our suppliers. We strive towards continual improvement together with our suppliers in building a sustainable future.

In 2022, we continued our internal training of purchasers (48 percent trained) to support them in following up on suppliers’ sustainability requirements. We also organized trainings targeting procurement staff in sustainable value chains, conducted by external experts.

During the year we implemented a more efficient way of working for evaluating and approving suppliers to be compliant with the Supplier Code. We also strengthened our work with responsible sourcing of minerals and metals due diligence in accordance with the OECD Due Diligence Guidance and the EU legislation 2017/821, including training of employees working with supplier management.

Climate

As we drive value chain climate mitigation, one important aspect is reducing supply chain greenhouse gas emissions. In our Supplier Code, we encourage suppliers to adopt climate targets in line with the Paris Climate Agreement, requiring them to control, measure, document and plan their work to minimize their business climate impact. Our commitment to the Science Based Targets initiative shows our determination to reduce climate impact.

During the year, we did a Scope 3 inventory to set a baseline and a process to ensure yearly supplier GHG measurement and track reduction as part of our supplier performance follow-up. In collaboration with our suppliers, we will continuously work to improve data quality and take proactive actions for GHG emission reductions.

Circularity

Circular use of raw materials and reducing the climate impact from our supply chain is continuous work, strengthening our ambitions for a circular supply chain. The Supplier Code covers requirements on suppliers to minimize the environmental impact of their business from a circularity perspective. It guides them to transition from a linear to a circular system, conserving finite resources and selecting materials and resources that can be reused and recycled.

Our buyback programs for cemented carbide have been part of our business model for many years. In our metal-cutting operations we have, together with our suppliers, developed a packaging solution enabling us to convert from virgin plastic raw material to recycled plastic.

People

Health and safety plans are part of the requirements on our suppliers in the Supplier Code, evaluated through self-assessment questionnaires and supplier audits. Suppliers are requested to provide a safe and healthy working environment and take all feasible steps to prevent incidents and injuries.

Fair play

The Supplier Code places requirements on our suppliers in the areas of health and safety, compliance with relevant laws, labor and human rights, environment and anti-corruption. Suppliers are requested to cascade Sandvik requirements to their own supply chain.

Suppliers are assessed for risk of violating the requirements in the Supplier Code based on country and category risks (high, medium or low risk). In 2022, approximately 4 percent of our supplier spend (1,207 suppliers) was rated as high risk, with the distribution China (2.4 percent), India (0.8 percent), Brazil (0.3 percent) and Mexico (0.2 percent). High risk suppliers are prioritized for on-site audits. By signing the Supplier Code, the supplier gives Sandvik the right to perform social compliance audits. In 2022, 21 on-site audits were performed, all conducted by independent third-party auditors. No supplier contracts were terminated due to breaches of the Supplier Code.

As part of our sustainability strategy we have a commitment to ensure that all suppliers comply with our Supplier Code by 2030. Besides conducting audits, Sandvik focused on implementing new ways of working. These include the use of EcoVadis, a sustainability rater that conducts impartial remote assessments of sustainability management practices and produces a supplier risk screening and rating.

Supplier spend by region

Responsible sourcing of minerals and metals

Sandvik condemns all activities in the raw material sector that are connected to illegal or unlawful exploitation of ores, that directly or indirectly finance or benefit armed groups in conflict areas, or that contribute to serious human rights violations, including child labor. The Supplier Code and Sandvik Statement on Responsible sourcing of minerals and metals (home.sandvik/responsiblesourcing) reflect our commitment to responsible sourcing of minerals and metals in accordance with the OECD Due Diligence Guidance. The two documents also cover the sourcing of cobalt. Annually, we perform a reasonable country of origin inquiry to identify smelters and refiners associated with our supply chain, based on the OECD Due Diligence Guidance. In 2022, we focused on strengthening our due diligence processes and risk mitigation measures with support from an external service provider.

Wolfram Bergbau und Hütten AG (WBH), a Sandvik subsidiary based in Austria, operates one of the world’s largest tungsten refineries and is listed as a Responsible Mineral Initiative (RMI) Responsible Minerals Assurance Process compliant tungsten facility (RMAP Conformant Tungsten Smelters at responsiblemineralsinitiative.org). WBH has its own Responsible Sourcing Statement, reports annually according to the OECD Step 5 guideline and undergoes annual third-party assurance assessments.