Case study: How CAF promotes sustainability across its supply chain

What are the material issues the company has identified? 

In its 2021 Sustainability Report CAF identified a range of material issues, such as quality and safety of products and services, sustainable and efficient mobility, respect for human rights, health and safety in the workplace. Among these, promoting sustainability across its supply chain stands out as a key material issue for CAF.

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:

“The reporting organization shall identify its stakeholders, and explain how it has responded to their reasonable expectations and interests.”

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 CAF engages with:

How stakeholder engagement was made to identify material issues

To identify and prioritise material topics CAF conducted interviews with a range of stakeholders, including shareholders, investors, customers and civil society representatives, among others.

What actions were taken by CAF to promote sustainability across its supply chain?

In its 2021 Sustainability Report CAF reports that it took the following actions for promoting sustainability across its supply chain:

• Implementing a Supplier Code of Conduct
• CAF requires all suppliers to comply with the ethical principles set out in the CAF Code of Conduct published on the corporate website, including social, ethical and environmental commitments. In addition, the commitments to comply with the general principles of the Code of Conduct, working conditions, health and safety, the environment, commercial ethics and confidentiality are implemented in the Corporate Suppliers Code of Conduct available on the corporate website and via the usual means of internal communication. The Supplier Code of Conduct requires CAF suppliers to transfer the same sustainability standards to their own supply chain. CAF reserves the right to verify compliance by its direct suppliers. This verification may be through assessments conducted by ESG (environmental, social and governance) rating agencies, self-assessment questionnaires, or audits at supplier facilities. If a supplier’s behaviour does not comply with the principles of the general Code of Conduct or this Supplier Code of Conduct, either in its activity with CAF or in the market with third parties, CAF is entitled to take the appropriate measures and may refuse to collaborate with the supplier in the future, or even terminate the current relationship depending on the circumstances. In 2021 work continued on the implementation of the requirement that all suppliers in the process of qualifying for CAF’s various activities must accept this Code. The supplier qualification processes guarantee that CAF’s suppliers contractually commit to the Supplier Code of Conduct and incorporate sustainability checks of the following aspects:
  • Sustainability, Environment and Occupational Health and Safety management certifications, among others
  • Product Quality Management related to IRIS certification
  • Compliance with the CAF Code of Conduct
  • Compliance with the Sustainability Policy
• In 2021, a specific questionnaire on sustainability was incorporated into the mandatory quality audits for approval as a supplier of railway equipment and material for the railway vehicles and buses activity. Based on this initiative, aspects of sustainability were checked in 41 on-site audits. Meanwhile, quality inspections at origin make it possible to identify any deviations from the principles of the Supplier Code of Conduct.

• Evaluating suppliers
• In CAF’s monitoring of sustainability criteria in its supply chain, the evaluation effort prioritises those suppliers that represent the greatest environmental, social and ethical risks, whether due to the potential environmental impact of the product or because they are located in countries with a higher level of exposure to such risks. Based on these criteria, the evaluation effort is focused on 427 target suppliers out of a total of approximately 10,000 suppliers. The evaluations are carried out by Ecovadis, the world leader in this field. Ecovadis adapts the evaluation questionnaire to each supplier based on the locations in which it operates, its sector and its size to evaluate 21 aspects of sustainability aligned with the most demanding international norms, regulations and standards, including those of the Global Reporting Initiative (GRI), the International Labour Organisation (ILO), the UN Global Compact and ISO 26000. Suppliers’ responses are evaluated by specialised analysts who check whether the documentary evidence is consistent, recent and evidences a dynamic review of the policies, actions and results in the different subjects. This analysis results in a general rating with a maximum score of 100 points, which represents excellent sustainability management. If the result of an evaluation does not meet the requirements established by CAF (a general score of 45 out of 100 in sustainability management), the supplier is required to implement an action plan to improve the weaknesses identified. If the supplier does not raise its assessment to acceptable levels or does not show a commitment to improve, they are audited by experts in the field.

Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?

The GRI Standards addressed in this case are:

1) Disclosure 308-2 Negative environmental impacts in the supply chain and actions taken

2) Disclosure 414-2 Negative social impacts in the supply chain and actions taken

Disclosure 308-2 Negative environmental impacts in the supply chain and actions taken does not correspond to any SDG.

Disclosure 414-2 Negative social impacts in the supply chain and actions taken corresponds to:

• Sustainable Development Goal (SDG) 5: Gender Equality
• Targets: 5.2
• Sustainable Development Goal (SDG) 8: Decent Work and Economic Growth
• Targets: 8.8
• Sustainable Development Goal (SDG) 16: Peace, Justice and Strong Institutions
• Targets: 16.1

78% of the world’s 250 largest companies report in accordance with the GRI Standards

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References:

This case study is based on published information by CAF, 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 following link:

https://www.caf.net/upload/accionista/Informe-Sostenibilidad_EN.pdf

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