Procurement and supply chain
Article 964a ff. Code of Obligations
Concept and due diligence
A more sustainable supply chain brings a multitude of advantages for Arbonia and demonstrates responsibility towards society. It creates innovation and drives the development of new management and production methods forwards. The majority of our total emissions occur in Scope 3, in other words, the upstream and downstream value-added chain, so that there is a great potential here for reducing our emissions. Furthermore, a more sustainable supply chain provides business benefits, since it improves the monitoring of costs and resources and can thus lead to savings. On the whole, a sustainable procurement and supply chain improves reputation, strengthens customer relationships, and increases the interest of investors.
Arbonia also takes its responsibility very seriously with regard to upholding human rights and preventing child labour within its own scope of business and in relation to business partners. A policy targeting more sustainable procurement was developed in 2023. This policy aims to bring Arbonia’s strategic and operational procurement practices in line with the most important international standards, the UN Children’s Rights and Business Atlas, the German Act on Corporate Due Diligence Obligations in Supply Chains (LkSG), and the Swiss Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Affected Areas and Child Labour (VSoTr), as well as implementing the steps required to implement these principles. This guideline supports the sustainable and transparent expansion of Arbonia’s procurement processes, including ethical criteria. The due diligence process comprises a risk analysis according to the German LkSG as well as the Swiss Code of Obligations and currently contains suppliers of direct materials with a purchasing volume of more than CHF 0.5 million. However, the context of procurement and supply chain not only comprises all direct materials that enter inventory through purchasing and procurement, but also indirect materials such as tools and equipment, consultation, and rent. Such indirect materials are procured in the region of the respective companies as a matter of principle. Suppliers from countries with an elevated risk in relation to human freedom, child labour risk, and slavery risk are checked regardless of the purchasing volume. Specific product groups are also included in the risk analysis. When assigning product groups and countries to risk categories, Arbonia follows internationally recognised standards such as, for example, the UN Children’s Rights and Business Atlas.
Measures including evaluation of effectiveness
Arbonia has developed a Supplier Code of Conduct (Supplier CoC), which has been approved by Group Management. It is being successively expanded to all current suppliers and is part of all new supplier relationships and orders. In this document, our suppliers expressly commit themselves to the Universal Declaration of Human Rights of the United Nations, the UN Convention on the Elimination of All Forms of Discrimination Against Women, and the UN Convention on the Rights of the Child. For the risk analysis of the suppliers, Arbonia combines internal data with externally generated key figures, for which we have used the ESG ratings from EcoVadis since 2022. Suppliers without an external rating have to demonstrate in a suitable way – for example, with a code of conduct, that human rights are respected and that child labour and forced labour in particular are prevented.
Material risks and how they are handled (own scope of business and, where applicable, business relationships)
The main risks include above all liability risks as well as a reputation risk, such as in the case of ecological or human rights misconduct by direct or indirect suppliers. These are increased by the risk of a lack of transparency on the part of suppliers. In the area of transportation and logistics, risks such as climate-related interruptions of the supply chain and delivery delays can occur. In addition, there is the general risk of increasing procurement costs.
Key performance indicators
The key performance indicator is the proportion of production volume for which the suppliers can show an assessment according to EcoVadis or a code of conduct.
Focus on close supplier relationships
The most frequently used materials and semi-finished goods of Arbonia consist of wood, glass, steel, and aluminium. We preferably work with suppliers from the European Economic Area and ideally with local companies. Arbonia sources a good 99% of its entire procurement volume from EU or EFTA states, which ensures high standards in respect to ecological and social criteria. In the reporting year, 86.7% the purchasing volume was procured from local suppliers, in other words, from countries where we have our own production sites. This improves our ability to monitor the production means compared to a partnership with suppliers from remote regions.
Competence development and supplier assessment
As a corporate group, we are continuously raising awareness of ecological and social factors in direct and indirect purchasing. For this purpose, we provide the employees in our purchasing departments with modules of the EcoVadis Academy and a compliance e-learning course on the topic of fair supply chains. In addition, the expansion of category management is being continued, which sets framework conditions for strategic purchasing and concludes cross-company agreements with suppliers, among other things. In addition, this they continually collect and evaluate market information in order to react to potential risks in the supply chain early on. The category managers also ensure compliance with the guideline for sustainable procurement and the use of the supplier CoC.
We use EcoVadis ratings of our suppliers to include external risk assessments in the supplier evaluation process. Currently, suppliers of direct goods with a sales volume of CHF 0.5 million and up are evaluated. If an EcoVadis rating is not carried out, the supplier must show a code of conduct. Accordingly, 54.2% of the purchasing volume of direct goods was covered by such risk assessments in the reporting year (previous year: 48.5%). The risk analysis is to be continually expanded to all direct suppliers and later applied to indirect suppliers as well. Across all product groups, the coverage with risk assessments is 29.6% (previous year 26.2%). In addition to the described supplier evaluation, Category Management selectively carries out discussions and visits on site at suppliers in order to obtain better insights into their practices and risks as well as to identify any potentials for improvement.
More sustainable material procurement
For the procurement of wood as a raw material, certifications in accordance with PEFC and FSC® play a central role for the companies of the Wood Solutions Business Unit. These certificates are essential since they ensure the ecological and social responsibility along the entire supply chain and ensure that the wood is sourced from responsibly managed forests.
Expectations of customers
On the customer side as well, audits are increasingly being carried out to determine whether Arbonia complies with sustainability criteria. For example, the customers of Invado regularly check what materials the company uses to manufacture doors and frames and where the raw materials come from. For this reason as well, Arbonia prefers to work with suppliers who have proven themselves for years.
