Case study: How Axalta promotes sustainability among its suppliers
Axalta Coating Systems (Axalta) is a leading global coatings company serving more than 100,000 customers in 130 countries, dedicated to the development, manufacture and sale of liquid and powder coatings used for a wide array of surfaces and applications around the world. Axalta depends on hundreds of companies around the globe to supply it with the raw materials, products and services used to manufacture the highest quality products. Promoting sustainability across its supply chain is, thus, a top priority.
This case study is based on the 2016-2017 Sustainability Report by Axalta published on the Global Reporting Initiative Sustainability Disclosure Database that can be found at this link. Through all case studies we aim to demonstrate what CSR/ ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.
Abstract
In addition to meeting its exacting standards for performance every day, Axalta also expects its suppliers to behave ethically Tweet This! and holds them to the same standards it has set for itself. In order to promote sustainability among its suppliers Axalta took action to:
- implement a Supplier Code of Conduct
- promote respect for human rights
- require suppliers to purchase conflict- free minerals
- evaluate suppliers
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With this case study you will see:
- Which are the most important impacts (material issues) Axalta has identified;
- How Axalta proceeded with stakeholder engagement, and
- What actions were taken by Axalta to promote sustainability among its suppliers
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What are the material issues the company has identified?
In its 2016-2017 Sustainability Report Axalta identified a range of material issues, such as air quality, compliance, economic performance, ethics and integrity, human rights. Among these, promoting sustainability among its suppliers stands out as a key material issue for Axalta.
Stakeholder engagement in accordance with the GRI Standards
The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:
Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.
Key stakeholder groups Axalta engages with:
| Stakeholder Group | Method of engagement |
| Customers
| · Customer learning and development centres · Sales meetings · R&D and technology partnerships |
| Employees
| · Town hall meetings · Employee intranet and newsletters · Training and development sessions · Ethics hotline |
| Communities
| · Community meetings · Axalta CSR Summit · Corporate giving |
| Investors
| · Annual meeting · Quarterly and annual reports · Capital Markets Day |
| Board of Directors | · EHS and Sustainability Committee meetings · Materiality assessment |
| Suppliers
| · Supplier portal · Supplier screening and contracting process · Supplier Code of Conduct · Supplier of the Year evaluation |
How stakeholder engagement was made to identify material issues
To identify and prioritise material topics Axalta carried out approximately 30 interviews with both internal and external stakeholders – Sustainability Council members, members of the Axalta Leadership Team including the CEO, representatives from all business lines and regions, customers, a director of Axalta’s Board, NGO representatives – to hear their perspectives.
What actions were taken by Axalta to promote sustainability among its suppliers?
In its 2016-2017 Sustainability Report Axalta reports that it took the following actions for promoting sustainability among its suppliers:
- Implementing a Supplier Code of Conduct
- The backbone of Axalta’s commitment to sustainable sourcing is the Axalta Supplier Code of Conduct, which ensures that Axalta’s suppliers adhere to the same values and behaviours that Axalta Axalta expects its suppliers to adhere to the provisions of the Code and reserves the right to take the appropriate steps to ensure compliance with the Code, including the use of third-party audits and, if necessary, termination of its relationship with a supplier. The provisions of the Code are also reflected in Axalta’s standard supplier contract terms and conditions.
- Promoting respect for human rights
- A fundamental respect for human rights underlies both Axalta’s Supplier Code of Conduct and Code of Business Conduct and Ethics, to which all Axalta employees must adhere. Axalta abhors and condemns the use of child labour, forced labour or slave labour and is committed to treat workers fairly, with dignity and respect. Axalta’s own operations and those of its suppliers must comply with national and international laws and norms designed to respect human rights. This includes an understanding that Axalta’s suppliers comply with the California Transparency in Supply Chains Act of 2010 and the U.K. Modern Slavery Act of 2015.
- Requiring suppliers to purchase conflict- free minerals
- Axalta is committed to the responsible sourcing of minerals and requires suppliers to purchase conflict- free minerals. Axalta’s views and requirements of suppliers, are set forth in the Axalta Conflict Minerals Policy. As Axalta does not purchase directly from smelters, it works diligently with its suppliers and relies on them to identify sources of conflict or 3TG minerals and declare the conflict minerals status of the products they sell to Axalta. Axalta is also a member of the Responsible Minerals Initiative (formerly the Conflict-Free Sourcing Initiative) and its commitment to sourcing minerals responsibly is reflected in its response to allegations of child labour used in the mining of mica, which is used in many automotive components. Axalta and other coatings companies use pearlescent pigments to provide special effects in selected vehicle coatings. These effects can rely on the use of natural mica, which has been associated with the use of child labour. Axalta requires suppliers to purchase mica and other minerals that have not been mined in an environment that permits child labour or any other labour practices that infringe on human rights. Additionally, Axalta has worked closely with its pigment suppliers to map their supply chains and understand the systems they have in place, to make sure that their supply chains are free of child labour and other human rights abuses. Axalta has also engaged with and provided additional guidance and support to suppliers to enable them to meet its requirements. To further address concerns about child labour, in 2016 Axalta was among the first companies to help establish the Responsible Mica Initiative (RMI), a multi-stakeholder organisation composed of companies in the cosmetics, clothing, coatings and electronics industries and which also includes non-governmental organisations among its members. The RMI characterises itself as a “do-tank” whose goal is to empower local communities where mica is mined in India to prevent child labour by enhancing enforcement of child labour laws, providing education programmes for children and improving transparency of the local mica supply chain.
- Evaluating suppliers
- Axalta’s Supplier Sustainability Risk Management Programme evaluates potential suppliers to make sure they will meet Axalta’s standards. The programme also enables Axalta to review existing suppliers and build capacity on sustainability risk management. In the event of non-conformities, remediation measures will be requested. Axalta buyers are also trained in the application of the methodology used to evaluate suppliers.
Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?
The GRI Standards addressed in this case are:
1) Disclosure 308-1 New suppliers that were screened using environmental criteria
2) Disclosure 414-1 New suppliers that were screened using social criteria
3) Disclosure 414-2 Negative social impacts in the supply chain and actions taken
Disclosure 308-1 New suppliers that were screened using environmental criteria does not correspond to any SDG.
Disclosure 414-1 New suppliers that were screened using social criteria corresponds to:
- Sustainable Development Goal (SDG) 5: Achieve gender equality and empower all women and girls
- Business theme: Workplace violence and harassment
- Sustainable Development Goal (SDG) 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
- Business theme: Labor practices in the supply chain
- Sustainable Development Goal (SDG) 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
- Business theme: Workplace violence and harassment
Disclosure 414-2 Negative social impacts in the supply chain and actions taken corresponds to:
- Sustainable Development Goal (SDG) 5: Achieve gender equality and empower all women and girls
- Business theme: Workplace violence and harassment
- Sustainable Development Goal (SDG) 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
- Business theme: Labor practices in the supply chain
- Sustainable Development Goal (SDG) 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
- Business theme: Workplace violence and harassment
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References:
1) This case study is based on published information by Axalta, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original, please revert to the original on the Global Reporting Initiative’s Sustainability Disclosure Database at the link:
http://database.globalreporting.org/
2) https://www.globalreporting.org/standards/gri-standards-download-center/
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