Atlas Copco 2008 – tough ending to a record year Annual Report ...

SUSTAINABILITY REPORTBusiness PartnersAtlas Copco strives to be the preferred associate for its businesspartners – suppliers, sub-contractors, joint venture partnersand agents – and is committed to working closely withthem. Atlas Copco has only a few joint ventures.The purchasing process in the Group is decentralized and managedin the divisions. However, local purchasing (non-core) is inmost cases made by the individual units. Atlas Copco promoteslocal purchasing since it benefits the region where the Groupoperates and also facilitates close relationships and possibilities toachieve high quality and efficiency, as well as decreases the impacton the environment.Group companies select and evaluate business partners partlyon the basis of their commitment to social and environmentalperformance and development. To reinforce the Business Code ofPractice, a common ten-point checklist, based on the UN GlobalCompact and on the International Labor Organization’s Declarationon Fundamental Principles and Rights at Work, has beendeveloped to clarify the Group’s expectations on its business partners.Atlas Copco encourages all business partners to implementan environmental management system similar to Atlas Copco’s.The checklist forms the basis of the supplier evaluation guideline.The supplier evaluation template has been adapted to the differentbusinesses in the Group.Supplier evaluationsGroup companies report quantitative data of evaluated, approvedand rejected suppliers and those requiring development. Theyreport in which regions their suppliers are located and the statusof environmental and social evaluations. The reporting regardingsuppliers is new and is continuously being improved.Training is being given on a worldwide basis. In China, forexample, a Supply Chain Seminar was conducted for the secondtime in 2008. Local purchasers and Swedish representatives discussedthe importance of supplier evaluations to establish awarenessand ownership of the procedure. One conclusion from theseminars was a need for training of both purchasers and suppliersin these aspects.In certain markets it is necessary to work with suppliers thatdo not have the same standards as the Group. In such cases, AtlasCopco can contribute positively by providing experience andknow-how.In 2008, the reporting of business partners was restated toinclude a widened scope of suppliers. There was an increase in thereported number of suppliers and more than 20% of them aresubject to an assessment in order to establish the potential risk.In 2008, increased activities on supplier evaluations were conductedin the production units in Nasik, India, Sao Paolo, Brazil,and in Springs, South Africa, for example. In some places supplierswere invited to Suppliers’ Day, during which they wereinformed and trained in the Atlas Copco supplier evaluation procedure.The activities have in many cases resulted in safety, healthand environmental improvements. The supplier evaluations willcontinue to be a focused area.In 2008, approximately 3 600 significant suppliers, representing26% of the total number of suppliers, were evaluated by AtlasSupplier evaluations safeguard a sustainable supply chainAs suppliers of components to the Group’s production plants, businesspartners constitute an important part of the value chain. Many of thesebusiness partners act in countries where ethical, social, and environmentalstandards are different from those laid down in voluntary ethicalguidelines.Atlas Copco strives to have a capable and competitive supplier baseby seeking business opportunities and mitigating risks. The suppliersare selected and evaluated on the basis of objective factors includingquality, delivery, price, and reliability, but also on their commitment toenvironmental and social performance, and development.Steps in supplier evaluations1. The evaluation begins with an interview with managers about theenvironmental management system, laws and regulations, sitepermits, emergency preparedness training, maintenance, terms ofemployment, working hours, and so on.2. The next step is a tour of the production area, where the focus is onhealth and safety-related aspects: maintenance of machinery, ventilation,handling of hazardous waste, oil spills, risk for contamination,access to fire extinguishers, use of chemical products, and accessto personal protection equipment, toilets, drinking water, lighting,and first aid, as well as local legislation compliance.3. The evaluation is concluded with improvement suggestions. Theteam goes through the assessment checklist together with the suppliersand provides direct feedback on needed improvements.In cases of non-compliance with the Atlas Copco Business Code ofPractice, efforts are made to assist suppliers who show a willingnessto improve. However, if there is no demonstrated improvement, AtlasCopco will discontinue the business relationship.112 Atlas Copco 2008