Scania believes in a proactive approach in relationships with suppliers and collaboration in sector-wide initiatives. They are the key elements that drive positive development across the whole value chain and minimise risk of environmental, ethics and human rights issues.
In an increasingly transparent marketplace, Scania’s suppliers must meet the same standards we demand of ourselves. With more than 1 000 direct and 10 000 indirect suppliers, robust and comprehensive management of sustainability risks is a challenge, but essential. Sustainability performance is not an add-on; it influences sourcing decisions alongside technology, quality, delivery and cost.
Global supplier requirements
Scania is committed to upholding the United Nations Global Compact’s principles relating to labour practices, human rights, environment and anti-corruption in our own operations as well as in its supply chain. Scania Supplier Code of Conduct outlines our expectations and minimum requirements on suppliers concerning labour and human rights, health and safety, environment, business ethics and management. With this as a starting point we work with those suppliers in our global supply chain who maintain fair conditions, and in return we strongly believe that we benefit from higher supplier quality and productivity, while minimising the negative impact during the lifecycle of our products.
Scania is sourcing globally, with the majority of our suppliers located in Europe, South America and Asia and different sustainability challenges exists within countries and industries. To deal with these challenges, we have implemented robust processes for our Tier 1 supplier base. We demand a certain standard of sustainability performance from our suppliers in compliance with our Supplier Code of Conduct and expect the same process for our suppliers to have for their suppliers. There exists greater challenges further down in Scania’s supply chain with an increasing amount of companies located in countries with a high sustainability risk profile according to most risk indices. Through external cooperation with other OEM’s and partnerships, we collectively put pressure to responsibility beyond or tier 1 suppliers to affect and install improvements.
Way of working – key elements
To ensure compliance to our Supplier Code of Conduct, we use a Sustainability “Self-Assessment Questionnaire” tool (SAQ) which is a documents based evidence collecting tool. The suppliers are expected to fill the questionnaire to demonstrate their sustainability performance in various sections of Health & Safety, Human Rights & Working Conditions, Environment, Ethics and Management. The questionnaire is then used to assess the sustainability risk based on a score.
The SAQ is combined with country risk indices taken from Maplecroft to have a more complete view of the sustainability risk. In cases where the risk appears high, a sustainability audit is performed. Depending on the circumstances the audits are either conducted by a third party or by our own SA8000 certified auditors.
Together, these factors are combined to form a “S-Rating” which is common to the entire Volkswagen Group. Here, we give the supplier a A/B/C rating depending on how well they have performed in the SAQ and the other factors of country risk and audit score if present are taken as well. The rating is used as a selection criteria in our sourcing decisions. Audits are performed and taken into consideration both to identify the risk and to mitigate it as well. In case of deviations between a supplier’s sustainability performance and our requirements, a corrective action plan is developed and followed up accordingly. The whole Volkswagen brands and regions network are used to gain efficiency in deviation handling. A characteristic of Scania’s way of working in regard to supplier sustainability is to develop suppliers and thereby also improve Scania’s sustainability performance.
To support this, a key element is to build capacity for the employees who are close to the processes where the risks and improvement potential appear, and hence can influence the most. This approach is reflected in the effort we put in education and training.
All employees within the whole global purchasing organisation receives a mandatory full day sustainability training. We also have persons within the line organisation that has the role of sustainability ambassadors. The purpose of the ambassador role is for these employees to act as intermediators between the sustainability team and the line functions. With the train-the-trainer concept in mind, the sustainability ambassadors receive extra sustainability training to be able to support colleagues to raise awareness.
To have effect upstream the supply chain we are not only building capacity internally, focus is also put on providing sustainability trainings for our suppliers. Scania invites suppliers to participate in sustainability trainings and segment-specific workshops coordinated by DRIVE Sustainability held in different countries around the globe. In addition to this we also conduct trainings in the Scania-specific demands.
A collaborative approach
Scania works in close interaction with customers, suppliers and participates in both sector-wide and cross-sector initiatives on supply chain sustainability. An example is DRIVE Sustainability, a working group on supply chain sustainability within the automotive industry where Scania acts as lead partner.
An example of successful internal collaboration is the Volkswagen Group’s Human Rights Due Diligence Management System developed during 2020. It is built on the OCED General Due Diligence Guidance and the UN Guiding Principles for Business and Human Rights, and seeks to identify, assess, and mitigate human rights risks in its supply chains so as to: 1) reduce actual and potential negative impacts on people and planet; and 2) ensure that the Group’s sourcing practices are in conformance with international good practice. In 2020 a management system for raw materials was established and in 2021 the approach was further developed with a system for human rights due diligence covering other materials outside the raw materials scope.
Supply chain decarbonisation
Certain activities in our supply chain, such as battery or steel production, is carbon intensive, and account for a significant proportion of our overall carbon footprint. Alongside our efforts to decrease the carbon impact of our operations and our products in use, we are also committed to decreasing greenhouse gas emissions from our supply chain. We have carried out a life cycle analysis on our European production-related supply chain and identified the hotspots (material or components with a large climate impact such as batteries, steel, cast iron, aluminum e.g.). Based on the findings, we have developed a supply chain decarbonisation strategy and targets for 2030, including specific targets for each hotspot aiming for emissions reductions of between 35 and 90 percent depending on type of material. The reductions will be achieved through a range of measures, including adopting new technologies, switching to renewable energy and a greater use of recycled materials in production. This is just the beginning of our supply chain decarbonisation journey. We are working to extend the scope of our efforts so that our strategy will eventually cover our entire supply chain.