From logistics to chemicals, and fuels to spare parts – Stora Enso is dependent on various goods and services purchased from over 20 000 suppliers around the world. How do we ensure that sustainability is considered in such an extensive sourcing operation? Johanna Hagelberg, EVP, Sourcing and Logistics, and Johanna Pirinen, VP, Sustainable Sourcing at Stora Enso, explain how we work with supply chain sustainability.
How does a company with over 20 000 suppliers work with supply chain sustainability?
Johanna Hagelberg: “Sustainability is high on our sourcing agenda. The key is ensuring we have clear and systematic sourcing processes with sustainability deeply embedded – and to apply the same standards to all our suppliers. We expect our suppliers to respect our sustainability requirements, and we ensure our purchasers are well-trained in sustainability.”
How do you ensure that the various suppliers around the world fulfil Stora Enso’s sustainability requirements?
Johanna Pirinen: “The company’s Supplier Code of Conduct is a legally binding document that imposes minimum sustainability requirements on environmental, economic, and social issues for all our suppliers – including human and labour rights, business ethics, and environmental commitments. Before receiving a contract with Stora Enso, each potential supplier needs to pass a pre-qualification process, which includes for instance signing our Supplier Code of Conduct. As a precautionary measure, we also conduct audits on potential higher risk suppliers.”
What kind of suppliers might have higher sustainability risks?
Pirinen: “Our risk assessment process takes into account the supplier’s geographical location and sourcing category – for example chemicals are a carefully considered category due to the potential for environmental damage. The same risk assessment is applied both to potential new suppliers and existing ones, and we continuously develop the process to even better acknowledge different categories.”
How do you audit suppliers?
Pirinen: “Around 50 of Stora Enso’s direct suppliers are annually audited by an external party to assess if the supplier meets our requirements as defined in our Supplier Code of Conduct. In practice, this means visiting the supplier’s premises, reviewing key documents and discussing sustainability practices with their management.
We follow an annual audit plan that is developed according to business needs and our own risk assessments. So conducting an audit does not automatically mean that we suspect violations of our sustainability requirements. In 2017 our audits have particularly focused on our logistics and chemical suppliers with human rights topics particularly high on our agenda.”
Hagelberg: “We want to be seen as a sustainability mentor rather than a sustainability police, and the audits provide good opportunities for this. For example, we believe that improving occupational health and safety conditions also offers great opportunities for the supplier’s long-term business.”
What happens if you identify a supplier in violation of Stora Enso’s sustainability requirements?
Pirinen: “The seriousness of a violation varies case by case but our overall approach is always the same – we react and investigate. Suspected violations are discussed with the supplier, followed by corrective action plans and follow-up audits.
In recent years, there have been some cases where a supplier was not willing to take corrective action. As a consequence, the supplier relationship has been terminated and Stora Enso has looked for another supplier to work with. This of course is our last resort, but sustainability is an area that we are not willing to compromise on.”
What are the most common violations of Stora Enso’s sustainability requirements?
Pirinen: “Many of our suppliers are large companies with well-established approaches to sustainability. But we also work in countries where for instance occupational health and safety practices are still being developed. Other labour practices such as working hours are also often discussed with suppliers as local legislation may allow different practices to our own strict requirements.”
How deep into the supply chain can you track sustainability?
Hagelberg: “We believe in a chain of sustainable business partners. We demand that our direct suppliers also carefully select and monitor the suppliers they work with. We also sometimes work with the next tier of suppliers together with our direct supplier.”
Pirinen: “We also regularly conduct so-called ‘deep dives’ into selected supply chains. This year we have for instance cooperated with our supplier of bio-based coating materials that are used in liquid packaging board to thoroughly assess their supply chain. Such visits provide greater understanding of the operations, opportunities and challenges of a particular supply chain – both for us and our customers.”
How interested are Stora Enso’s customers in the company’s supply chain?
Pirinen: “Many of our customers are extremely interested in sustainability, which gives us additional motivation to further develop our supply chain sustainability work. In particular, customers working closely with end consumers are very keen on supply chain transparency and sustainability.”
What are the greatest challenges for Stora Enso’s supply chain sustainability?
Pirinen: “One of the most common challenges in supply chain sustainability for companies is how to make sure that bad apples do not pass screening processes and enter the basket. The risk is still there even with good processes in place. At Stora Enso, we also want to focus more on measuring and credibly reporting on how we drive change throughout our supply chain.”
How are global megatrends affecting supply chain sustainability?
Pirinen: “In the near future, digitalisation offers many interesting opportunities for further enhancing supply chain transparency. Traceability is also a big trend that requires cooperation with other companies. In the forest industry, we are well positioned to meet high standards of traceability as we already trace the wood we purchase all the way back to the stump.”
“We also see sustainability performance becoming an evaluation criterion in the tender process, which will of course benefit suppliers that have already embedded sustainability into their operations.”