Due Diligence for Responsible Procurement

Country of Origin

Essity has global manufacturing, however most production sites are located in Europe and North America. Some sites are located in Australasia, India, South Africa and South America. Essity sources many raw materials and chemicals locally, often from supplier sites that are part of large multinational corporations based in Europe and the USA. This is conscious choice by Essity to reduce social and ethical risks throughout the supplier base, as best practices and relevant certifications and standards have been implemented across all sites throughout the entire supplier company. 

Some raw materials are closely associated with specific regions due to natural reasons, such as wood pulp or cotton. Many times, those materials are considered to primarily have risks several tiers away, in the beginning of the value chain. Essity takes further measures here, such as audits of sub suppliers, or chooses certified raw materials that guarantee more sustainable extraction and production.

Origin and Risks

Essity is taking location of supplier and origin of raw material into consideration when assessing risks. The same material can entail different risks depending on the area where it is manufactured or grown, whereas other items can have similar risks regardless of where they are produced and delivered, such as certain services.

Sustainability Risk Assessment Well Embedded in Established Routines 

To safeguard sustainability considerations and to minimize any environmental or social impact related to our procurement activities and suppliers, we have integrated the requirements into our standard processes and normal routines. For Essity, there are several checkpoints in the mandatory supplier qualification process that are covering sustainability issues and risks.

Essity Global Procurement has a risk-based approach when assessing individual suppliers as part of the supplier qualification process as well as when evaluating the entire supplier base in the yearly strategy work.

1) Set the Requirements

Essity’s requirements on our suppliers are spelled out in our Global Supplier Standard which also contains our Supplier Code of Conduct. Suppliers should commit in writing that they will honor the requirements in this document and pass on similar requirements towards their own suppliers. Failing to respect our Standard can lead to discontinued business relations. Essity is following up share of total spend with suppliers who have committed to our Standard and report on this KPI in our Annual and Sustainability Report: Responsible Sourcing in ASR 2021.

2) Sustainability Risk Assessment

All suppliers are assessed from an inherent risk point of view, i.e. the risks that often are associated with the kind of business activity, raw material, technology or region of the supplier. Potential suppliers can also be screened against various sanction lists or adverse media data banks.

Essity requires that suppliers use Sedex (Supplier Ethical Data Exchange) to conduct a self-assessment linked to working conditions, environment, business ethics and health and safety. A risk profile of the supplier is obtained through a combination of a questionnaire and several different risk indexes.

All suppliers are screened related to ethical business, and we use Dow Jones Risk Center to secure anti-corruption and sanction screening. 

3) Ethical Audit

If there are indications of sustainability risks coming out of the detailed risk assessment, Essity requests an ethical audit to be performed at the premises of the supplier. The preferred format is SMETA 4 pillar that focuses on areas such as human rights, employment conditions and corruption. The result from this audit is used in the decision to continue business relation with supplier qualification, to perform corrective actions or, worst-case, cease collaboration

4) Risk Prevention and Mitigation

Based on the overall risk score calculated for the supplier the procurement manager decides if the supplier is to be approved or not. In addition, different types of mitigating actions can be agreed for the suppliers, such as an corrective action plan in case of non-conformities.

A detailed analysis of a supplier or a material can also conclude that the main risk is not with the direct supplier, but that it is laying further upstream in the supply chain. If this is the case, there are several different mitigation alternatives. One can be to go for certifications where external bodies using audits and chain of custody safeguard certain standards. Other possibilities involve inspections and collaboration with sub suppliers, joint business initiatives or team up with Non-governmental organizations (NGO) who are addressing particular issues. Even if there is not always a guarantee that the actions, taken will have a direct impact on the exact material bought t, it will improve the situation for the business as a whole. 

Essity’s general approach is that it is better to remain with suppliers and improve the situation, rather than walking away from a business relation and potentially leave the workers in an even worse situation. Terminating a relationship should be the last option.

Identified Sustainability and Workers’ Rights Risks