Raw material procurement
The main raw material groups in tyre manufacturing are synthetic rubbers, fillers, chemicals, reinforcing materials and natural rubber, which makes up for approximately one fourth of a tyre’s raw materials.
We have some 115 active raw material suppliers from more than 30 different countries that all follow the same rules. The raw materials for tyres come from all over the world, and all of our suppliers are committed to our Supplier Code of Conduct, which requires compliance with international human rights, labour rights and anti-corruption measures. All raw material suppliers must, at a minimum, have an ISO 9001certified quality management system in place. We also prefer suppliers with an ISO 14001certified environmental management system.
Sustainable procurement – from raw materials to premium tyres
The long and complex journey from raw materials to finished premium tyres 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 raw material suppliers to adhere to our Supplier Code of Conduct. In May 2017, we updated the Supplier Code of Conduct to include environmental aspects and revised the existing content. Our new Ethics Guidelines have been submitted to our raw material suppliers for approval, and the process will continue in 2018. 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.
All raw material suppliers 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 2017, 71% of our raw material suppliers had the ISO 14001 certification. The new updated target is that at least 75% of the suppliers are ISO 14001 certified by the end of 2020. Our previous target was 70%.
We evaluate the supply chain risks in order to understand where improvements are needed the most and for the purposes of allocating resources for audits and other evaluation measures. We categorise suppliers according to their sustainability risk (low, medium or high). The categorisation is based on the source location, nature of the product, level of certification, audits, site visits and self-evaluation.
EXTERNAL AUDITS HELP PARTNERS IMPROVE THEIR SUSTAINABILITY
One of the basic raw materials of tyres 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.
In order to improve supply chain sustainability, we started a partnership with an external auditor in 2016. Our separate sustainability auditing process has been developed together with a consulting company and it is based, among other things, on Nokian Tyres’ Supplier Code of Conduct and principles that comply with the UN Global Compact goals. For our company, the audits guarantee that our requirements are followed in the best possible way, and they provide an opportunity for the audited companies to improve their activities and occupational safety.
The audits enable the processor companies to improve their occupational safety and develop their operations further, for example. In 2017, we audited four locations and initiated comprehensive corrective action programmes to address the shortcomings identified in the process. Among other things, the programmes include providing first aid training and revising employment contracts as well as the repair and cleaning of accommodation facilities.
We will review the implementation of the corrective actions in 2018 and we intend to conduct at least four new audits in 2018. We have set a goal to audit all of our major rubber processor partners by 2020, comprising at least 80% of our natural rubber purchasing volume. The current audit coverage is 37%.
SELF-ASSESSMENTS AND QUALITY AUDITS FOCUS THE ATTENTION ON OCCUPATIONAL SAFETY, QUALITY AND HUMAN RIGHTS
In addition to the audits by external parties, we track the sustainability of our raw material suppliers in connection with quality audits and site visits by our procurement professionals and raw material suppliers’ self-assessments.
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 visits that include an assessment of the working conditions, among other things. Our target is to conduct a minimum of 20 supplier audits or site visits per year. In 2016 and 2017, we conducted 22 and 26 audits or visits, respectively.
We sent out a self-assessment survey to all material suppliers in 2017. 85% of the suppliers responded. The supplier self-assessments discuss sustainability topics important to Nokian Tyres, including human rights and occupational safety. The assessments also seek to determine whether the supplier has set targets for developing their operations, tracks the progress of the goals and supervises their own suppliers’ activities. This work will continue in 2018.