Responsibility in the Supply Chain

The Schaeffler Group stands for corporate management characterized by moral integrity that will meet the dynamic challenges of the automotive industry by continually developing in the interests of its stakeholders. Sustainable procurement plays a central role in this process. The company places a high value on combining economic success with responsible action for the environment, people, and society.

Taking ecological and social criteria into consideration along the entire value chain and conserving resources are both integral parts of the Schaeffler Group’s corporate guidelines, and these apply both to the company and to its suppliers.

The Schaeffler Group obtained goods and services from approximately 34,000 suppliers in approximately 80 countries in 2017. The volume of these purchases related primarily to the Europe (63.8%) and Americas (16.2%) regions. The Greater China and Asia/Pacific regions accounted for 13.6% and 6.4%, respectively.

For the Schaeffler Group, responsible management of the company’s own supply chain means strengthening the awareness of service providers and suppliers for demands and expectations placed on them – for example, through open and constructive stakeholder dialogs. This applies to both high-quality, efficient cooperation and to the adherence to environmental and social obligations and standards. Additionally, national governments are making ever-increasing demands for responsible procurement. For example, the British Modern Slavery Act (MSA) requires that companies document concepts and measures to prevent modern slave labor in their supply chains.

The instances of implementation at Schaeffler and its suppliers described here contribute to the fulfillment of SDG 8, “Sustainable Economic Growth and Decent Work for All.” Especially the implementation of sustainability-related reviews for potential suppliers shows the ongoing orientation toward a transparent and sustainable value chain. Measures such as the Premium Supplier Circle and Premium Supplier Day – which align with SDG 17, “Partnerships for the Goals” – strengthen sustainable, long-term business partnerships and lay the foundation for shared, positive economic development. Schaeffler additionally participates in an initiative of the German Association of Automobile Manufacturers (VDA) to develop an industry-specific approach for sustainable supplier management. Starting in 2016, the working group “Sustainability in the Supply Chain,” comprised of sustainability experts from manufacturers and suppliers, worked together with the European Business Network for Corporate Social Responsibility to develop VDA guidelines and recommendations for standardized self-reporting on sustainability. The working group is currently preparing a further VDA recommendation and a guideline for a standardized sustainability audit procedure. This entails regular workshops to determine and produce an industry-specific sustainability survey.

Sustainable Supplier Management

In order to establish sustainability in procurement, it is necessary that partners comply with the voluntary commitments of the Schaeffler Group. The Supplier Code of Conduct (SCoC) of the Schaeffler Group defines the minimum requirements for suppliers pertaining, for example, to the respect for human rights or to behavior with regard to the issues of environment, health, and safety, or to the handling of information protected by data privacy legislation. The Supplier Code of Conduct of the Schaeffler Group is based on the principles of the United Nations Global Compact (UNGC) and the core labor standards of the International Labour Organization (ILO). Violations of fundamental principles, guidelines, and requirements of the SCoC are essentially viewed as a material breach of contract by the causal supplier and lead to an escalation process that can end in the exclusion of the supplier from business activities. Acknowledgment of the SCoC is an integral part of new contractual relationships with suppliers. Starting in 2018, it is intended that the SCoC is also subsequently accepted in writing by existing production material suppliers.

Appraisal of New Suppliers Through Initial Assessments

The Schaeffler Group examines potential new production material suppliers as to their compliance with environmental and social standards before they are integrated into its portfolio of suppliers. New business partners who do not fulfill the required minimum standards in what is known as an initial assessment (formerly potential analysis) regarding the issues of environmental protection and occupational health and safety (EHS) are excluded from the selection process or require a special approval.

The initial assessment is conducted on-site at the production facility of the supplier. If, for example, a supplier cannot verify that the contamination of water, air, and soil is being adequately prevented, this leads to a stop in the approval process.

Transparency in the Origin of Materials

The Schaeffler Group takes a responsible approach in the use of raw materials such as tin, carbide, tantalum, or gold, as the mining of such materials is used to finance violent conflicts and human rights abuses in some countries. The Schaeffler Group established a monitoring process in 2013 and provides information on material origins to companies that submit inquiries. The Schaeffler Group takes a “Reasonable Country of Origin Inquiries” (RCOI) approach to ascertain the regions from which sub tier suppliers obtain the components with critical raw materials, and also to initiate any specific measures in the supply chain that are necessary. With this, the Schaeffler Group fulfills the requirements placed on the supply chain by the “OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.”

“Premium Suppliers” as Preferred Partners in Innovation

In regular supplier reviews, Schaeffler and Continental assess strategic suppliers within the framework of their purchasing cooperation in a strategic selection process. Core factors for this highly detailed selection process are a positive risk assessment, positive contract status with commercial and quality-relevant contracts, global footprint, and registration in the shared purchasing platform SupplyOn. The status of quality certificates (ISO/TS 16949 or IATF 16949) or the quality result of the audit VDA 6.3 and the expectation of being “best in class” regarding quality and logistics performance also play into the selection process. Suppliers meeting all of the requirements are admitted to the “Premium Supplier Circle.” Premium Suppliers are preferred partners with whom Schaeffler hopes to have especially close relationships in creating shared growth, and who strive to achieve technology leadership, for example, through innovations in digitalization. This includes early integration in strategies and developments and active cooperation in cost analysis and product design.

In 2017, six new suppliers were admitted to the “Premium Supplier Circle,” the members of which fulfill the especially challenging requirements of the automobile industry. Together with Continental, Schaeffler regularly holds a “Premium Supplier Day” to deepen and intensify its long-term cooperation with suppliers. Newly accepted Premium Suppliers were announced at this event. A total of 32 suppliers from nine countries were invited to participate in the event. Schaeffler and Continental plan to develop an even closer partnership with these Premium Suppliers – in development and digitalization, among other areas – with the goal of further accelerating shared business success.