The case for CSR/ Sustainability Reporting Done Responsibly


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Case study: How Fortum promotes supply chain sustainability

As a leading clean-energy company with core operations in 10 countries around the globe, developing and providing solutions for customers in electricity, heating, and cooling, along with solutions for improving resource efficiency, Fortum seeks to conduct business with viable companies that operate responsibly.  Tweet This!

This case study is based on the 2016 Sustainability Report by Fortum 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/ 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.

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Abstract

Fortum expects its business partners to act responsibly, complying with both the Fortum Code of Conduct and the Supplier Code of Conduct. In order to promote supply chain sustainability, Fortum took action to:

  • set sustainability requirements for suppliers through the Supplier Code of Conduct
  • pre-select suppliers
  • conduct supplier audits

What are the material issues the company has identified?

In its 2016 Sustainability Report Fortum identified a range of material issues, such as customer satisfaction, business ethics and compliance, operational and occupational safety, energy and resource efficiency, reduction of environmental impacts. Among these, promoting supply chain sustainability stands out as a key material issue for Fortum.

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 organization should identify its stakeholders, and explain how it has responded to their reasonable expectations.”

Stakeholders must be consulted in the process s 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 Fortum engages with:

Stakeholder Group
Lenders and shareholders
Customers
Personnel
Service and goods suppliers
Authorities and decision makers
Media
Energy sector organisations
Non-governmental organisations
Local communities

How stakeholder engagement was made to identify material issues

To identify and prioritise material issues Fortum conducted a stakeholder survey (carried out annually) and, also, carried out a separate sustainability survey among a total of 2,133 stakeholder representatives, representing decision makers, organisations, employees and the general public.

What actions were taken by Fortum to promote supply chain sustainability?

In its 2016 Sustainability Report Fortum reports that it took the following actions for promoting supply chain sustainability:

  • Setting sustainability requirements for suppliers through the Supplier Code of Conduct
  • Fortum’s Supplier Code of Conduct comprises the sustainability requirements for suppliers. The Supplier Code of Conduct is based on the principles of the United Nations Global Compact. It includes four sections: business practices, human rights, labour standards and the environment. Fortum implements the Code in all countries where it operates, as part of all purchase agreements over EUR 50,000. In addition, training on the Supplier Code of Conduct took place in all countries of operation, except Norway and Russia.
  • Pre-selecting suppliers
  • Fortum applies a pre-selection process, when purchase volume exceeds EUR 50,000. During the first phase of the pre-selection, Fortum carries out a credit check and the supplier receives a short written questionnaire. The questionnaire surveys the supplier’s possible operations in risk countries, certified management systems and the contractors’ occupational safety level. Additionally, Fortum pays special attention to anti-corruption practices. In case possible risks in the supplier’s operations are identified through the questionnaire, Fortum may use a more extensive self-assessment questionnaire or carry out a supplier audit.
  • Conducting supplier audits
  • During supplier audits, Fortum assesses suppliers’ compliance with its Supplier Code of Conduct. Fortum always carries out audits on-site and they include production inspections, employee interviews and reviews of documents. In cases of non-compliance, the supplier makes a plan for corrective actions and Fortum monitors their implementation. In addition, in 2016 Fortum signed an agreement for an external service provider to carry out supplier audits. By working together with an international auditing company, Fortum aims to use the expertise of local auditors and, if need be, increase the number of audits. Moreover, Fortum’s personnel also conducts supplier audits, especially in the company’s operating countries. In 2016 Fortum audited a total of 13 suppliers in China, India, Russia, Poland, Latvia, Lithuania and Finland.

Which GRI indicators/Standards have been addressed?

The GRI indicators/Standards addressed in this case are:

1) G4-EN33: Significant actual and potential negative environmental impacts in the supply chain and actions taken the updated GRI Standard is: Disclosure 308-2 Negative environmental impacts in the supply chain and actions taken

2) G4-LA15: Significant actual and potential negative impacts for labor practices in the supply chain and actions taken – the updated GRI Standard is: Disclosure 414-2 Negative social impacts in the supply chain and actions taken

3) G4-HR11: Significant actual and potential negative human rights impacts in the supply chain and actions taken – the updated GRI Standard is: Disclosure 414-2 Negative social impacts in the supply chain and actions taken

 

References:

1) This case study is based on published information by Fortum, 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) http://www.fbrh.co.uk/en/global-reporting-initiative-gri-g4-guidelines-download-page

3) https://g4.globalreporting.org/Pages/default.aspx

4) https://www.globalreporting.org/standards/gri-standards-download-center/

Note to Fortum: With each case study we send out an email requesting a comment on this case study. If you have not received such an email please contact us.

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