Clearly Communicate Expectations
No company can alone confront and solve all risks in the market. Therefore, Essity is very clear to communicate Essity expectations to all suppliers through the Essity Global Supplier Standard and our Supplier Code of Conduct. Suppliers are requested to commit in writing to operate in accordance with the requirements. Compliance with our Standard is a key sustainability target for Essity (more info: Responsible Sourcing in ASR 2022, page 139). Suppliers are also expected to pass on similar requirements down their own supplier base.
In Essity standard contracts there is a clause stating that repeated material breaches against the Global Supplier Standard gives us the right to discontinue the business relationship. However, in most cases, it is better for all parties to discuss the problem and to improve the situation, rather than just walk out. This is particular true when human rights issues are involved.
Stringent Supplier Selection
One of the most efficient ways to reduce supplier risk is to not start doing business with high risk suppliers from the very beginning. Therefore, Essity has a strict supplier selection procedure with several control points taking also sustainability into consideration. All through the onboarding process, different functions participate with their expertise to allow for a thorough screening – quality, sustainability, product safety, financial solidity etc.
Informed Quality and Country of Origin Decisions
Certain raw materials are often associated with risks. In these cases, extra care is needed when selecting suppliers and evaluating origin of raw material. Suppliers in some areas or countries must undergo an ethical audit prior to any business activity, and a few areas or origins are avoided all together due to the complexity to perform verifications and proper due diligence. The same logic can be applied on materials: A good knowledge of the upstream supply chain and the current practice at the different stages permits insightful material quality selection and manufacturing technology, contributing to reduced or even eliminated risks.
Certified Raw Materials
Some raw materials are not easy to substitute, or they come predominantly from areas where certain risks are common. One way to reduce risks and to contribute to the overall improvement of the business is by selecting certified raw materials. This is particularly efficient when the main risks are beyond the direct supplier. Essity uses this approach to a large extent for virgin pulp and it is one of our main KPIs: Currently, 98% of all fresh fiber wood pulp Essity is buying is either Forest Stewardship Council (FSC) or Program for the Endorsement of Forest Certification (PEFC) certified. The volumes are much smaller for all other potential risk raw materials, nevertheless Essity has decided to buy more sustainable cotton where the preferred scheme is Better Cotton Initiative (BCI). Essity is also requesting that any palm oil used in our products should be from sustainably managed plantations and Roundtable on Sustainable Palm Oil (RSPO) certified.
Regular review of purchasing practices
Purchasing practices are reviewed on a regular basis as part of yearly strategy work and exercises to make sure that relevant ESG requirements are met and respected. The review is primarily based on input from risk assessments made in the different spend categories, and on the yearly analysis of relevant legislations. Other initiatives to update processes and ways of working can come from the identification of adverse impacts in Essity supplier base, as gathered through ethical audits, through evaluation of actions taken historically, or through consulting risk indexes.
Recent adaptations of purchasing practices have included mandatory climate questionnaires already in the earliest stages of the new supplier qualification process and also more detailed questions about suppliers’ own due diligence process. Other adaptations have been to use the acceptance of Essity Global Supplier Standard as a knock-out criteria.