NF9 Sustainable supplier management

At Sandvik, we are committed to sustainable procurement practices, with a focus on minimizing social and environmental impacts while concurrently enhancing the sustainability performance of our suppliers. This dedication is designed to create value for our business, customers, and society at large. Our sourcing and procurement operations are pivotal in realizing our Sandvik sustainability goals.

We focus on proactively identifying, preventing, mitigating, and accounting for adverse risks within our supply chain. With 46,000 suppliers spanning 104 countries, we strategically source raw materials, components, products, and services with sustainability in consideration.

The Sandvik Supplier Code of Conduct, accessible at home.sandvik/supplier-code-of-conduct, imposes sustainability requirements on our suppliers. We pursue continuous improvement in collaboration with our suppliers.

Sandvik collaborates with EcoVadis, a global sustainability rating and risk screening provider. EcoVadis supports us in evaluating our supplier base in a systematic way, and in communicating with our customers, investors, and media. EcoVadis provides us with updated information about risks in our supply chain, monitors suppliers’ compliance with the Sandvik Supplier Code of Conduct, and supports the due diligence process. Sandvik also maintains a rating scorecard with EcoVadis, where our performance in sustainability areas such as environment, human rights, and sustainable procurement practices is evaluated. Our sustainable procurement scores have improved from the previous year due to, for example, improved documentation and transparency.

Throughout the year, 31 percent of our procurement team underwent internal training, enhancing their competence in our supplier sustainability requirements. Additionally, we organized two webinars with key suppliers to communicate our sustainability requirements and targets. Across the organization, we organized supplier days and various activities aimed at our suppliers.

Supplier Risk Management

As an integral component of our sustainability strategy, we are dedicated to ensuring that all suppliers align with our Supplier Code of Conduct by 2030. It outlines our sustainability expectations for suppliers in health and safety, compliance with applicable laws, labor and human rights, environment, and anti-corruption. Suppliers are urged to transmit our requirements throughout their respective supply chains. Suppliers neglecting to address critical issues run the risk of not being rewarded contracts or facing termination of their existing contracts. In 2023, two supplier contracts were terminated due to violations of the Supplier Code of Conduct. A responsible exit plan is currently being discussed.

In 2023, approximately 4 percent of our supplier spend (1,362 suppliers) was rated as high risk, distributed among China (2.3 percent), India (1 percent), Brazil (0.4 percent) and Mexico (0.4 percent).

Throughout the year, we worked on implementing a more efficient way of evaluating and approving suppliers to be compliant with our Supplier Code of Conduct. We continued the implementation of EcoVadis, to systematically screen suppliers for ethical, social, and environmental risks based on industry affiliation and country, as well as impartial remote assessments.

Given the vast number of suppliers and the complexity of our supply chain, we implement a risk-based approach. We prioritize suppliers with high-risk profiles for proactive measures and further due diligence. So far, approximately 27,000 suppliers have undergone risk screening in EcoVadis.

High-risk suppliers are prioritized for on-site audits and further due diligence. By signing the Supplier Code of Conduct, the supplier grants Sandvik the right to conduct social compliance audits. In 2023, 22 on-site audits were carried out, all conducted by independent third-party auditors. While issues may vary across the supply chain, depending on country and business, we have identified a number of risks related to human rights, the majority related to working hours and compensation. The responsibility for improvements and corrective actions lies with the supplier, with non-compliance cases managed by the responsible buyer alongside the audit coordinator until resolved.

Our overarching focus remains on developing a sustainable supply base, responsible sourcing practices, and fostering strong partnerships with our suppliers.

Responsible sourcing of minerals and metals

Sandvik is committed to contributing to sustainable development for present and future generations, including the ethical sourcing of minerals and metals. Sandvik condemns any activities in the raw material sector associated with illegal or unlawful exploitation of ores, which directly or indirectly finance armed groups in conflict areas, or contribute to human rights violations, including child labor. Our commitment to responsible sourcing is reflected in the Supplier Code of Conduct and the Sandvik Statement on Responsible Sourcing of Minerals and Metals (home.sandvik/mineralsourcing), both aligning with the OECD Due Diligence Guidance. These documents serve as the foundation for responsible sourcing and outline supplier requirements for 3TG (Tantalum, Tin, Tungsten, and Gold) and cobalt.

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

Our commitment to responsible sourcing for 3TG and cobalt, along with associated due diligence activities, is geared towards increasing supply chain transparency and mitigating potential risks, while also fostering continuous improvement in supplier performance. We work continuously with selected suppliers to proactively prevent and mitigate risk. We regularly communicate externally, and Sandvik annually publishes a Report on Responsible Sourcing of Minerals and Metals.

Sandvik actively participates in industry forums to advocate for the responsible sourcing of minerals and collaborates in the development of common industry tools and standards to amplify impact. This engagement includes conflict-affected and high-risk areas, either directly or through our subsidiaries. Our involvement includes memberships in the Responsible Minerals Initiative, the Cobalt Institute, and The Tungsten Industry Conflict Minerals Council.

The company’s efforts in 2023 were concentrated on reviewing suppliers within scope and strengthening due diligence efforts.

New and upcoming legislation

In light of the evolving legislative landscape related to sustainability and supply chains, the procurement organization at Sandvik is preparing for upcoming changes. Throughout the year, focus was on reinforcing and developing our due diligence processes and ensuring alignment with reporting requirements. A key activity, for example, mapping potential and actual impacts in our upstream value chain through the double materiality assessment as part of CSRD requirements. See more under Sustainability Governance.