Case study: How Voith promotes sustainability across its supply chain

What are the material issues the company has identified?

In its 2020 Sustainability Report Voith identified a range of material issues, such as transparency regarding business practices, minimising environmental impacts, strategic personnel development and further training, innovative, high-quality products and services. Among these, promoting sustainability across its supply chain stands out as a key material issue for Voith.

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 Voith engages with: 

How stakeholder engagement was made to identify material issues

To identify and prioritise material topics Voith engaged with its stakeholders through a stakeholder survey.

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

In its 2020 Sustainability Report Voith reports that it took the following actions for promoting sustainability across its supply chain:

• Implementing a Code of Conduct
• Voith’s Code of Conduct (CoC) is the core guide for all its purchasing activities. Together with its General Purchasing Conditions (GPC), the CoC defines Voith’s understanding of partnership-based collaboration and sets out guidelines on dealing with issues regarding compliance as well as environmental and social standards. Voith rejects all forms of discrimination, forced or child labour, as well as the obstruction of legitimate employee representation. If a supplier violates these rules, Voith reserves the right to terminate the business relationship. In addition, the GPC contain requirements for the declaration of hazardous substances and the handling of substances of concern and conflict materials. Voith’s CoC and GPC are freely accessible online. They serve as the basis for the contractual agreement with its suppliers, who are encouraged to pass on the requirements to their subcontractors. Furthermore, during the assessments and audits carried out by Quality Management, attention is paid to compliance with social and environmental standards in accordance with the Code of Conduct. By drawing up country-specific versions of its GPC Voith makes sure that its Purchasing organisation takes national particularities into account, for instance with regard to payment conditions, environmental requirements, and customs regulations. In the reporting period, specific versions were put in place for two additional countries, while eight were updated. This means that a total of 35 country-specific GPC are available, either in the national language or in English, and in most cases even in both languages. In China, Voith also conducted a survey of the 200 suppliers with the highest purchasing volumes and obtained written confirmation of their compliance with the CoC. The corresponding document (Commitment of Honest Cooperation) will in the future be requested from every new supplier in China and is available online for download.

• Responding to violations
• If a supplier violates applicable laws, or the Voith Code of Conduct, or loses its creditworthiness, Voith’s Purchasing organisation will carry out an in-depth investigation or terminate the business relationship immediately, and the supplier concerned will be placed on the Group’s central blacklist. Violations of Voith’s occupational safety, health, and environmental protection standards can also trigger Group-wide blacklisting. Such procedures also take place in coordination with the Voith Legal Department in order to be able to assess the violation from a legal and compliance perspective. In the course of such action, a process is used that has been specifically drawn up for the purpose: this defines the appropriate threshold levels and also sets out specific reporting structures on local and central levels. Violations are reported differently depending on their severity: while minor violations are reported to the local Compliance Officers, with major incidents the Compliance Officers of the respective Group Division are consulted. In cases of corruption or particularly serious incidents, the central Compliance Committee is called in. The actual blacklisting is then carried out by Voith’s central Master Data Governance Department, which has had organisational representation in all Voith regions since 2019 and has assumed technical responsibility there. To this end, a central Master Data Governance System is being introduced to support the processes technically. This project started in the 2018/19 fiscal year and is now being progressively implemented. Suppliers as well as all other external stakeholders can also report violations of sustainability standards in the supply chain on their own initiative. The Voith whistleblower hotlines (Whistleblower Scheme and Compliance Helpdesk) are available to them, just as they are to Voith’s own employees. The Compliance Helpdesk is divided into five local Compliance Helpdesks; staffed by local multilingual contacts and present in all key Voith regions – China, North America, South America, Austria, and Germany – this system is available to both internal and external whistleblowers. The Compliance Helpdesk and the Whistleblower Scheme are also available via the Voith website. The anonymity of whistleblowers is always assured.

• Assessing suppliers
• To minimise risks in the overall purchasing process Voith requires regular Compliance and Sustainability Self-assessment documentation from its suppliers. The Group-wide standardised Supplier Questionnaires ensure that the relevant data are collated and processed in a logical and optimally coordinated way. As at the end of the reporting period, the system already contained a valid Compliance and Sustainability Check for over 6,405 Voith suppliers. The suppliers assessed thus represented 64% of Voith’s overall supplier expenditure in the 2019/20 fiscal year. Alongside material-specific questionnaires, the Supplier Self-assessment on HSE (health, safety and environment) complements Voith’s Supplier Self-assessment initiatives. Voith’s employees in the specialist departments work together with its Purchasing staff to assess active suppliers, complementing their Supplier Self-assessments. A standardised procedure with transparent criteria ensures cross-Group comparability of the results. Voith is gradually switching to case- and classification-based assessment. In the 2018/19 fiscal year Voith reviewed the criteria for production material, simplified these further, and standardised them across the worldwide Group. This increases the transparency and improves the comparability of the results. There are currently over 1,128 individual evaluations for 963 defined suppliers, which can be viewed worldwide in the system. The topic area of sustainability is also included as a criterion in this supplier evaluation; the weighting differs depending on the overall scope of the criteria set. In addition to working conditions and occupational safety standards, occupational health and environmental protection are also assessed. Furthermore, the Sustainability Ratio shows Voith’s specialists’ subjective assessment of its suppliers regarding compliance with environmental and social standards. The business partners Voith assessed in the reporting period reached an average ratio of 83.2 %, which broadly matches the ratio achieved in the previous year.

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

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: 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

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References:

This case study is based on published information by Voith, 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://voith.com/corp-en/VZ_sustainability-report-2020_en.pdf

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