Responsible sourcing

Responsible supply chain management enables the Volvo Group to meet growing customer expectations, and reduce the risk of incidents that may interrupt supply flow or damage the Group’s reputation.

The Volvo Group’s responsible sourcing processes aim to manage risk, promote responsible behavior and build long-term relationships with suppliers to improve social, environmental and business ethics across our supply chain.

Strategy and implementation

Our long-term CSR supply chain strategy was developed in March 2012, and updated in February 2013. We publish an annual plan covering supplier processes and systems, communication, measurement and targets, evaluation process, and benchmarking.

A new Volvo Group CSR Supply Chain Steering Group was formed in September 2013, with members of management teams from the Group’s different purchasing organizations and the chair of the Group’s CSR and Sustainability Committee. The steering group oversees the Volvo Group CSR Supply Chain Network, which includes representatives from all the Group’s purchasing organizations.

Minerals extraction

In 2013, a Swedwatch report on human rights issues in the platinum extraction industry in South Africa highlighted the issue of platinum extraction. The report aimed to investigate stakeholder responsibilities based on the principles in the UN report on Human Rights. The Volvo Group’s responsibility as one part in the value chain was investigated. The report concluded that we have limited opportunity to affect the human rights situation in and around mining operations, but more could be done in the form of collaboration with various networks and trade organizations to try to influence the situation. The Volvo Group has initiated activities based on these recommendations.

CSR purchasing roadshow

In 2013, the Volvo Group launched a brand new series of global roadshows to train purchasers on CSR issues. Attendees were trained mostly on business ethics and social issues, but also some environmental issues affecting our supply chain. We conducted training in Ageo in Japan, Shanghai in China, Bangalore in India, Eskilstuna in Sweden, and in Greensboro, Hagerstown and Shippensburg in the US – covering 60 percent of the total number of purchasers.

As well as buyers, we also invited selected quality people and managers. Additional training was given for those preparing to become key contacts for their site and deliver training to other employees. Its rollout will continue and be completed in 2014.

European Automotive Working Group

The Volvo Group became one of the nine founding members of the European Automotive Working Group on Supply Chain Sustainability, established in 2013 and overseen by the European Automobile Manufacturers’ Association (ACEA).

It is of great importance to the members of this Working Group that the individuals making vehicles, components, or providing services, are afforded decent working conditions and are treated with dignity and respect, while minimizing the environmental impact of the industry. The group believes in the benefits of a common approach in this regard, such as training and common messages, while maintaining the management of their independent supply chains and complying strictly with competition law.

The group’s goal is to develop common tools to improve sustainability in the supply chain.

Requirements on suppliers

The Volvo Group’s supplier requirements are based on the principles contained in the Group’s Code of Conduct. All suppliers are requested to appoint a senior executive as their contact person for the Volvo Group. They are also responsible for deploying the same requirements on their own suppliers.

Environmentally, the Volvo Group requires most suppliers to be certified by a third-party environmental management system – such as ISO 14001 – and to be committed to our objectives of continuous improvement. More than 94 percent of Volvo Group spending on automotive products comes from suppliers that are certified in accordance with ISO 14001 or its equivalent.

In the EU, suppliers must also comply with the Volvo Group’s position on chemicals and harmful substances, in accordance with REACH legislation.

Full information for suppliers is available on the Volvo Supplier Portal website.

Country risk assessments include factors such as human rights, labor standards and perceived corruption

Risk evaluation

Approximately 13 percent of our automotive products suppliers are located in countries assessed as ‘high risk’. Risk assessments are based on analyses conducted by internationally recognized institutions and include factors such as human rights, labor standards and perceived corruption.

For indirect products and services, the Volvo Group also takes into account the risk level of each product or service segment. For instance, merchandise, personal safety equipment, construction work and waste management are associated with high risks.

Assessments

Since 2009, most new suppliers to our company have to be approved by the Group’s Global Sourcing Committee. Potential suppliers of automotive products are evaluated by a quality engineer, using the Group’s Supplier Evaluation Model.

As the Volvo Group’s purchases should not account for more than 30 percent of any supplier’s total business, many of our suppliers also supply our competitors, who demand equally high standards. In line with general automotive industry practice, the Volvo Group uses a self-assessment approach to evaluate supplier performance and compliance with the Group’s ethical requirements.

The supplier assessment poses approximately 40 questions on issues relating to:

  • social performance
  • work environment and conditions
  • workforce rights, including freedom of association and non-discrimination
  • child and forced labor
  • environmental care
  • business ethics.

The assessment includes minimum standards of performance and a requirement for an action plan where a supplier does not achieve the critical aspects. In addition to these assessments, we conduct regular site visits during product development, which gives us more direct control over our supply chain.

Automotive product suppliers

Some 72 percent of the Volvo Group purchasing spend derives from suppliers that completed the self-assessment during 2010–2013. Eighty-seven percent of suppliers that completed the assessment passed it.

The main reason for not passing was a lack of adequate systems to enforce the requirements down the chain to their sub-suppliers. The rest failed due to a lack of other processes to comply with requirements.

Sixty-eight percent of suppliers from countries considered to be ‘high risk’ from a CSR perspective completed the self-assessment. Of these suppliers, 87 percent were approved. In terms of spend, 62 percent of the goods bought came from suppliers that passed in the self-assessment.

Indirect products and services suppliers

Owing to the large number of suppliers in this category – more than 30,000 – the focus is on suppliers in high and medium-risk countries, as well as on high-risk segments, according to the Volvo Group’s risk model.

In 2013, the Group sent out approximately 600 requests to fill in the self-assessment form to prioritized suppliers, suppliers in high risk countries or those operating in high-risk segments. All of these suppliers completed the assessment and 58 percent passed.

In 2014, the Volvo Group will continue with supplier self-assessments in identified high and medium-risk countries and work with non-compliant suppliers to ensure our requirements are met.