Supply Chain Management
During the year, the in-scope group companies worked with 524 suppliers of which, in terms of turnover, the manufacturers make up 72% of the volumes purchased while the distributors accounted for the other 28%, in line with the previous year.
CAREL promotes the use of local suppliers. Specifically, roughly 75% of its suppliers are located in Europe, roughly 22% in Asia and 3% in America, the Middle East and Africa, based on its total purchases made in 2019. This allocation is due to the fact that the European and Chinese suppliers work with both EU and non-EU sites. The CAREL Suzhou site centralises its purchases of materials from Chinese and Asian suppliers to then distribute them to all the group’s production sites. The inclusion of Recuperator and Hygromatik has not changed this confirmation. They work with 59 and 182 suppliers, respectively, all based in Europe to guarantee quality and prompt deliveries and reduce the risk of supply discontinuities and non-compliance with the principles of sustainability.
CAREL selects its supplies based on principles of impartiality, competence, competitiveness and price, as well as transparency and excellence in accordance with the highest quality standards. The supply transactions comply with the law and regulations about labour, human rights, health and safety, the environment and anti-corruption ruling in the different countries and the principles set out in the Code of Ethics. Each supplier is required to ensure compliance with fundamental human rights, the principles of equal treatment and non-discrimination and prevention of child and forced labour.
CAREL screens its suppliers considering their technical skills, the quality of their goods/services, delivery times, prices and payment conditions and the purchase conditions in general. It requires high performance standards in terms of costs, quality, service and sustainability and, specifically, its suppliers’ quality management systems must be ISO 9001:2015 certified.
CAREL deems it fundamental to have ongoing dialogue with its suppliers and the exchange of good practices and skills as this is essential to obtain quality products and services within the requested timeframes. This interaction takes different forms: visits by technical staff and quality control specialists and IT platforms (e.g., IUNGO, etc.) used to share information, including the management and update of orders.
In 2020, the in-scope group companies purchased operations materials from a total of 532 suppliers. The new group companies, Recuperator and HygroMatik, work with 48 and 170 suppliers, respectively, all based in Europe.
In 2020, faced with the disruption caused by the pandemic, CAREL re-focused its sourcing policy, with the aim of guaranteeing business continuity. The group promotes the use of suppliers with regional production or logistics bases for all of its production sites. The goal is to guarantee a better service and supplier continuity, also as a means of overcoming logistical issues, natural events or lockdowns in foreign countries. As a direct consequence of this policy, the group has used less intercontinental transport and in turn reduced its environmental impact. At the same time, it has worked to make all production sites independent of each other from a sourcing point of view, thus reducing the risk of a remote disruption affecting the related destination market.
In 2020, the supply chain localisation index was introduced, which shows regional acquisitions (from the same continent as the production site) as a percentage of the production sites’ total acquisitions, net of intercompany trading.
In July 2020, CAREL created a new sustainability survey for its supply-chain, as set out in the two-year ESG plan.
Also in 2021, a number of suppliers were asked to fill out a self-assessment questionnaire, with the goal of promoting awareness about social responsibility and environmental responsibility in order to collect information about their systems and management practices. The aim of the questionnaire is to create a metric and a point of reference in relation to the suppliers’ accreditation and, to increase their awareness about sustainability issues on the supply chain.
Controversial Sourcing
CAREL is committed to implementing a socially responsible supply policy that respects human rights and avoids contributing to conflict through minerals procurement decisions and practices within its supply chain. It intends to reduce the quantity of raw materials that are not fully traceable as defined by law.
As proof if its commitment, in 2020, the group joined the Responsible Minerals Initiative (RMI), one of the resources most used and respected by companies which are involved in the responsible procurement of minerals in their own supply chains.
CAREL has voluntarily chosen to comply with regulations on the use of conflict minerals (minerals from countries undergoing conflict or with extensive violations of human rights, such as the Democratic Republic of the Congo and its neighbouring countries, Ruanda, Burundi, Angola, the Central African Republic, Sudan, Tanzania, Uganda and Zambia) as part of the Dodd-Frank Wall Street Reform Act.
The parent wrote a Conflict Minerals Policy about the use of the 3TGs: tungsten, tantalum, tin and gold (which are wolframite, coltan, tin and gold ore), and an internal standard for the collection and processing of data about these minerals. It has identified the macro categories of articles that may contain the 3TGs so as to facilitate its assessment. It subsequently requested its production units and suppliers to provide information about their use of conflict minerals and used the feedback to draw up a CMRT (Conflict Minerals Reporting Template) which includes over 600 smelters and refineries certified in its supply chain.
CAREL oversees its supply chain on a continuous basis to minimise risks related to the purchase of materials that include conflict minerals or mining activities involved in the violation of human rights.
