We continuously evaluate supplier performance in relation to our requirements. To ensure that our processes are robust, a third-party auditor and representatives from the Volvo Group visited suppliers in 2010 to verify that the assessment process yields the expected result. Focused audits were conducted in 2011 for certain purchasing organizations to follow up the implementation of the requirements. These findings are used to enhance guidelines on assessment, development of the process and training materials.
Organization and responsibilities
All relevant instructions, including requirements and information about the evaluation process and the Volvo Group’s Code of Conduct are available at the Supplier Portal website. Each company in the Volvo Group is responsible for requiring that the suppliers fill in the self-assessment as well as for ensuring that there is a contact person to maintain an ongoing dialogue with the supplier.
We have developed guidelines and checklists to help rate performance consistently across the Group. Purchasing organizations in the Volvo Group are organized in a Purchasing CSR Supply Chain Network. This network coordinates and monitors CSR requirements and improves CSR processes, communication and education. The network is coordinated by a purchasing representative who reports to the Global Purchasing Council and the Volvo Group CSR and Sustainability Committee.
The CSR requirements are integrated into the Volvo Group's sourcing process.
Evaluating our suppliers’ CSR performance
The CSR requirements are integrated into the sourcing process in each company within the Group to enable us to track, evaluate and communicate the CSR performance of our suppliers. The Volvo Group’s suppliers can be divided into two groups:
- suppliers of automotive products (direct material used in our hard products such as trucks, buses and construction equipment)
- suppliers of non-automotive products (indirect material).
In the centralized purchasing, more than 39,000 suppliers delivered products and services to the Volvo Group in 2011. Approximately 6,000 are suppliers of direct material. We have opted for a self-assessment approach as opposed to conducting large numbers of site audits.
Suppliers are asked to fill in a self-assessment form covering CSR requirements to evaluate CSR performance. If the suppliers do not fulfil our requirements, the issue must be advocately adressed which in many cases includes a remedy plan.
Potential suppliers are evaluated by a quality engineer using the Group's Supplier Evaluation Model, which includes environmental and CSR requirements. Since 2009, most of the new suppliers must be approved by the Global Sourcing Committee.
Potential suppliers are evaluated using the Volvo Group's Supplier Evaluation Model.
Results from the assessments conducted in 2011
Automotive product purchasing
Some 63% of our purchasing spend derives from suppliers that completed the self-assessment during 2010 and 2011. 73% of the suppliers that completed the assessment passed. Almost exclusively, the main reason for not passing the requirements is due to a lack of adequate systems at the supplier to pass on the requirements to their suppliers.
83% of the suppliers from countries considered to be high risk from a CSR perspective completed the self-assessment.
When examining expenditure in terms of suppliers of direct materials, more than 85% derived from suppliers that are certified in accordance with ISO 14001:2004 or equivalent.
Non-automotive products include any products or services that are not directly used in our automotive products. This includes everything from cleaning services to office furniture, travels, education or training, communication services and merchandise and so forth.
Because of the large number of suppliers in this category, we have focused on suppliers in high- and medium-risk countries according to the Volvo Group's risk model. During 2011, approximately 2,000 requests for suppliers to fill in the self-assessment were sent out. More than 1,100 suppliers completed the assesment of which 64% passed.
As a way of encouraging and highlighting suppliers’ compliance with the Volvo Group’s requirements, we instituted an award for ‘premium suppliers’ in 2006. This award should be regarded as a seal of quality and requires compliance with all aspects of the CSR requirements.
As an important tool for purchasing departments, we have developed a risk-methodology for identifying suppliers located in risky countries from a CSR perspective. The country risk assessment is based on human rights, labour standard ratings and the incidence of corruption. The aggregated scores produce a risk classification; high, medium or low risk.
For non-automotive products, we also take into account the risk level of each product or service segment. For instance, merchandise, personal safety equipment, temporary labor, construction and waste management are associated with high risks.
In 2012, we will continue to focus on assessing suppliers in identified high- and medium-risk countries from a CSR perspective and to work with the non-approved suppliers to ensure that our requirements are met.