NF9 Sustainable supplier management

At Sandvik, we are committed to sustainable procurement practices, with a focus on minimizing negative social and environmental impacts while enhancing the sustainability performance of our suppliers. Our sourcing and procurement operations are crucial in realizing our Sandvik sustainability goals. We focus on managing risk and opportunities, addressing adverse sustainability impacts through due diligence and setting priorities, exercising positive influence.

It is important for us to partner with suppliers who understand and embrace our sustainability standards. The standards include environmental protection, climate-change mitigating, building circularity as well as respecting human and labor rights and conducting business with high ethical integrity. The Sandvik Supplier Code of Conduct, accessible at Supplier Code of Conduct (home.sandvik), imposes sustainability requirements on our suppliers. We also pursue continuous improvement in collaboration and partnership with our suppliers.

With a global presence and a vast supply chain comprising approximately 45,000 suppliers across 100 countries, Sandvik places a strong emphasis on a risk-based approach and responsible procurement practices. We strategically source raw materials, components, products and services, integrating sustainability in a comprehensive manner. In this work, Sandvik collaborates with EcoVadis, a globally recognized assessment platform that rates businesses’ sustainability risk and performance. This solution supports our due diligence process and in evaluating our supplier base. It provides us with updated risk mapping of our supply chain and monitors suppliers’ compliance with the Sandvik Supplier Code of Conduct. We consider digitalization and data management important when systematically screening suppliers for risk related to environmental, labor and human rights, ethics, and procurement risks.

Supplier risk management

In 2024, 33,098 of our suppliers, representing 91 percent of our supplier spend, underwent sustainability risk screening. Furthermore, 1,675 of these suppliers completed (remote) deep sustainability assessments. Approximately 7 percent of our supplier spend (4,099 suppliers) was identified as high risk, with most of it located in China, India, Brazil, South Africa and Indonesia.

An integral component of our sustainability strategy, we are dedicated to ensuring that all suppliers accept and comply with our Supplier Code of Conduct. The Supplier Code of Conduct outlines our expectations for suppliers in the areas of health and safety, labor and human rights, environment, compliance with applicable laws, 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 2024, no supplier contracts were terminated due to violations of the Supplier Code of Conduct. A supplier in compliance with our Supplier Code of Conduct is one that is identified as low risk based on inherent risk screening, or has been audited for compliance, or meets our scoring criteria when undergone a deep sustainability assessment in EcoVadis. A deep sustainability assessment is based on a comprehensive questionnaire, supporting documentation, expert analysis and publicly available resources such as media articles and stakeholder reports.

We prioritize suppliers with high-risk profiles for proactive and mitigation measures, such as on-site audits and corrective actions. As a result of these assessments, we have gained comprehensive insights into our suppliers’ sustainability practices, enabling us to identify areas for improvement and collaboration with our supply chain in the upcoming year.

On-site audits are an effective way to assess the alignment of a supplier’s practices with our sustainability principles and to identify actions to address any risk. The advantage of on-site audits is that they reveal opportunities that may not be visible through remote or self-assessments. In 2024, 24 on-site audits (22) were carried out, all conducted by independent third-party auditors. While issues may vary across the supply chain, depending on country and business, the majority of identified risks were related to labor rights, particularly working hours and compensation. The supplier is responsible for improvements and corrective actions related to audit findings, while the responsible buyer and the audit coordinator manage and monitor non-compliance cases until they are resolved.

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 2024 focused on risk mitigation plans and engaging with stakeholders.

Navigating the legislative landscape

In anticipation of evolving sustainability and supply chain legislation, Sandvik is proactively enhancing data management and software support to ensure future compliance. Throughout 2024, substantial effort was put on ensuring alignment with CSRD social standards for workers in the supply chain. A gap analysis and roadmap for improving processes and transparency in relation to labor rights was put in place. We have worked to update our Procurement Policy and Sustainable Supplier Evaluation Procedure, and deepened the analysis on salient human rights to reflect the work that is already ongoing but also need more focus. CSRD and the upcoming CSDDD requirement will continuously guide our work in the coming year.

We steadily work to develop sustainable procurement practices. Throughout the year, 32 percent (33) of our procurement team underwent internal training, enhancing their competence in our supplier sustainability requirements. Several trainings focused on the implementation of tools and procedures and strengthen due diligence through analyzing supplier performance, risks and impacts, and corrective actions. Throughout the organization, we coordinated a range of activities aimed at our suppliers to convey our sustainability requirements and objectives as well as mutual learning on shared sustainability challenges and opportunities.

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