Supply chain and raw materials
Elkem sources raw materials, capital goods and services for our operations around the world. Elkem sets high ethical, environmental and social standards that companies must meet to become our suppliers.
Elkem’s corporate supply chain function holds the overall global responsibility for outlining and maintaining Elkem’s procurement and logistics strategies and policies. Elkem’s main purchasing categories are raw materials, equipment and construction and maintenance services on site. The function is working internationally across all divisions in the company, and the focus is to improve Elkem’s total procurement and logistics cost in a sustainable way.
Elkem’s total procurement spend in 2019 was approximately NOK 16 billion, covering supplies of raw materials, materials, energy, goods, services and logistics. The active supply base consists of about 15,000 suppliers globally – of which almost 70% in Europe.
All new suppliers of raw materials, goods and services are subject to pre-qualification based on corporate requirements within environment, health and safety, social responsibility, anti-corruption and compliance with laws and regulations. Risk assessments are done before suppliers are approved. Risk-exposed suppliers are subject to detailed requirements from Elkem. Elkem also requires that suppliers and their sub-contractors follow Elkem’s principles. Elkem is implementing improved database and contract management systems to ensure compliance and governance
in these areas.
Elkem has developed detailed requirements for high risk suppliers and contractors regarding health, safety and environmental standards for operations like mining, transportation, storage and loading, and is actively involved in the promotion and monitoring of safe and decent working conditions. This includes health and safety training and providing correct personal protection equipment for suppliers’ employees when necessary. Age control to prevent child labour and ensure responsible working conditions for young employees is also carried out. Elkem requires suppliers and contractors to engage their employees with written contracts on fair terms, and to give them information about their right to organise and collectively bargain with management where this is legally possible.
Elkem’s requirements are regularly discussed in meetings with suppliers. High-risk suppliers must document their understanding of legal requirements and hazards in their operations and present plans showing how risk will be eliminated or controlled while working for Elkem. Elkem performs audits and inspections, both in connection with routine visits for quality, technical and business follow-up, and as unannounced site visits. External auditors also conduct supplier audits on Elkem’s behalf.
Violations of Elkem’s requirements are registered and addressed with verbal or written warnings in addition to requests for improvements when necessary. Repeated violations may lead to requirements for speedy implementation of improvement plans, financial penalties, or termination of contracts with immediate effect.
The procurement function is responsible for carrying out pre-qualification and risk assessments of suppliers based on corporate requirements within environment, health and safety, social responsibility, anti-corruption and compliance with laws and regulations. Where the risk is identified as high, additional due diligence(integrity due diligence) or on-site audits are required.
In 2019, 73% (ex. China) of new suppliers of raw material were screened against environmental and social criteria. For high risk suppliers, additional due diligence was conducted (integrity due diligence). One supplier was excluded based on due diligence findings. In 2020/2021, Elkem is updating its supplier due diligence process, aiming for a harmonised approach to screening using social criteria. All new suppliers will be screened against the topics in the GRI 400 series.
The number of raw material suppliers is relatively low. A structured auditing program is in place to ensure all suppliers receive regular audits. For suppliers of goods and services such as hardware, plant equipment and services, the number of suppliers is high. Regular audits are performed by plant personnel or corporate personnel, focusing on supplies that are associated with risk.
Relevant Elkem policies on responsible sourcing are:
- EHS and CSR approval of Elkem’s suppliers and business
partners: Outlines Elkem’s procedure for pre-qualification
and management of suppliers.
- Corporate standard for sourcing bio-carbon: Outlines
Elkem’s commitment to sustainable forest management
and the requirements for procuring bio-based reductants
Code of conduct for Elkem’s business partners
In October 2019, Elkem launched the code of conduct for Elkem’s business partners (“the business partner code”). The business partner code sets out Elkem’s expectations of our suppliers with regards to ethics, labour rights and social and environmental issues.
We require all new suppliers to endorse the business partner code and maintain their commitment throughout the relationship. The business partner code is considered an integral part of any agreement that regulates the relationship between Elkem and a supplier.