RAW MATERIAL PROCUREMENT
The main raw material groups in tire manufacturing are synthetic rubbers, fillers, chemicals, reinforcing materials and natural rubber.
Tire raw materials originate from all over the world, and we have more than 200 active raw material suppliers from over 30 different countries. Nokian Tyres’ supplier governance model includes risk assessment on several factors of all suppliers. Sustainability critical suppliers are committed to our Supplier Code of Conduct, which requires compliance with international human rights, and labor rights and anti-corruption measures. Following the same logic, suppliers with identified potential quality risk must, at a minimum, have an ISO 9001 certified quality management system in place. We also prefer suppliers with an ISO 14001 certified environmental management system in critical categories. The supplier governance model is approved and overseen by the Vice president, Procurement.
Supplier share in quantities, including both raw material and indirect suppliers
Total Tier-1 suppliers: 3992
Total significant Tier-1 suppliers: 28
Percentage of total procurement spend on significant suppliers in Tier-1: 15
Total significant suppliers in non Tier-1: 12
Significant suppliers in this context are suppliers that are identified as having substantial risks of negative ESG impacts or significant business relevance to the company or a combination of both.
SUSTAINABLE PROCUREMENT – FROM RAW MATERIALS TO PREMIUM TiRES
The long and complex journey from raw materials to finished premium tires involves the effort and quality assurance of thousands of professionals. It is, therefore, justified to say that all of our personnel are linked to product responsibility.
The work of Nokian Tyres’ own procurement unit is guided by the internal purchasing policy, which establishes the general principles of sustainable procurement. As a participant in the UN Global Compact initiative, we follow the UNGC’s ethical principles as well as our own, which also address the issues of responsibility in the supply chain.
Furthermore, we require all of our sustainability critical raw material suppliers to adhere to our Supplier Code of Conduct. Nokian Tyres has published its new completely updated Supplier Code of Conduct in 2021, and all new suppliers proposing themselves as a supplier for Nokian Tyres must accept the Supplier Code of Conduct before approval. In addition, suppliers are strongly advised to have in place a code of conduct of their own that covers their own operations as well as their suppliers.
We evaluate the supply chain risks in order to understand where improvements are needed the most and for the purpose of allocating resources for audits and other evaluation measures.
In 2019, Nokian Tyres developed and implemented a supplier due diligence process that covers classification and assessment of our global supplier risks, including raw material suppliers. The model was implemented in 2019. During 2020, all the suppliers were risk assessed according to the new classification model, and all new suppliers will go through this process. The assessment has four categories: quality, sustainability, business/strategic criticality and safety at work. Applicable actions are taken to mitigate any identified risks in any of the four categories of the classification model. The actions are for example self-assessments, sustainability on-site audits, management system certification requirements and corrective actions for these. Furthermore, the supplier due diligence process includes know-your-counterparty process to identify suppliers' ultimate beneficial owners and to screen and monitor them using third-party data.
Each raw material category has its own category strategy, which is reviewed annually. The category strategy includes various topics, such as commercial, risk management, sustainability and market analysis. Sustainability topics include both procurement-level and category-level sustainability KPIs and analysis of suppliers’ alignment on the Nokian Tyres sustainability requirements.
Sustainability training is provided for the purchasing and other relevant personnel. One example of this is the Nokian Tyres internal CO2 and product carbon footprint trainings held during spring 2023 for raw material procurement and R&D material development teams.
EXTERNAL AUDITS HELP PARTNERS IMPROVE THEIR SUSTAINABILITY
One of the basic raw materials of tires is natural rubber. As an agricultural product, it is the livelihood of many families living in countries where the local legislation and working conditions have not been fully developed. We only purchase natural rubber from processors approved by Nokian Tyres. We supervise their activities through audits, among other things.
Nokian Tyres started a partnership with an external auditor already in 2016 to improve sustainability in its natural rubber value chain. The natural rubber sustainability auditing process has been developed together with a consulting company, and it is based on Nokian Tyres’ Supplier Code of Conduct and principles that comply with the UN Global Compact goals. The audit model was updated in 2022 to evaluate the suppliers’ alignment with the Nokian Tyres Sustainable Natural Rubber Policy. For our company, the audits aim to guarantee that our requirements are followed in the best possible way, and they provide an opportunity for the audited companies to improve the ESG point of views of their operations. If non-conformances are identified during the audit, these are fed back to supplier and corrective actions are required. When supplier shows active improvement, the business can continue as usual. In exceptional cases, if supplier cooperation and development was not successful, the business relationship with the supplier has been discontinued. Suppliers are given at least one month time to create a first corrective action plan after receiving the audit report.
In 2017, we audited four locations and initiated comprehensive corrective action programs to address the shortcomings identified in the process. Among other things, the programs include providing first aid training and revising employment contracts as well as the repair and cleaning of accommodation facilities.
In 2018, we audited four more locations and initiated corrective programs to address the shortcomings identified in the process. Four reaudited producers have made significant improvements on weaknesses highlighted during our first sustainability audits.
In 2019, we performed in total nine audits: five new sites and four follow-up audits to verify the implemented improvement actions. We set a goal to audit all our major rubber processor partners by 2020, comprising at least 80% of our natural rubber purchasing volume, and this target was exceeded as 90% of our natural rubber purchasing volume was audited.
Unfortunately, all the planned sustainability audits for 2020 were cancelled due to COVID situation globally, but in 2021 Nokian Tyres was able to re-establish the sustainability audits after the break. The company conducted two follow-up audits and two new sustainability audits of natural rubber processing plants that are suppliers of Nokian Tyres.
In 2022, Nokian Tyres performed three new audits at supplier's sites and for 2023 the target is to perform at least five audits.
SELF-ASSESSMENTS AND QUALITY AUDITS FOCUS THE ATTENTION ON OCCUPATIONAL SAFETY, QUALITY AND HUMAN RIGHTS
In addition to the audits by external parties, we also keep the sustainability topics in mind during our supplier site visits and quality audits, and by having some sustainability-related questions also in generic self-assessment questionnaires.
During the quality audits, we review the supplier’s production and evaluate the company’s quality management system. The audits specifically focus on the quality of the activities and raw materials. Furthermore, our purchasing personnel conduct supplier site quick assessments that assesses factors such as overall working conditions, environmental factors and orderliness.