Supply Chain Resiliency
Supply chain resiliency contributes to value creation, as it protects the company’s reputation and increases revenue due to a strong position on the market. It also prevents profit losses from supply chain bottlenecks and secures the customers’ supply. Managing supply risks and promoting supply chain resiliency were particularly important in 2021, when the pandemic caused additional supply chain bottlenecks. However, Clariant was able to manage most of them.
Supply chain disruptions because of sustainability issues also increased in 2021. Therefore, Clariant took care to prepare its supply chain for the future by anticipating bottlenecks and choosing its suppliers accordingly. For example, it prefers to cooperate with suppliers that deal with climate change by reducing their emissions and providing emergency schemes for extreme weather events.
Long-established local and regional supply bases help Clariant to mitigate disruption risks. In 2021, this network was crucial, for example, for dealing with geopolitical issues, trade disputes, factory shutdowns, or blocked traffic routes.
However, Clariant’s procurement managers continuously review and adapt supply strategies. Further plans include creating more transparency through digital applications and the ability to illustrate how raw material issues affect the production of finished goods in order to see the sales at risk. These initiatives will further improve the resiliency of Clariant’s supply chain.
Clariant considers itself a front-runner in sustainability. The external environment in this context is shaped by a growing demand from customers and consumers for sustainable products, an evolving regulatory environment, and increasing interest in the circular economy and renewable raw materials. The company supports this shift by promoting innovation in biofuels, bio-based chemicals, and feedstock.
Clariant incorporates sustainability standards into its procurement practices, irrespective of material, product, geography, or risk potential. It demands transparency from its direct and indirect suppliers, for example, concerning emissions, labor rights, and human rights. Typically, suppliers that demonstrate good sustainability performance are also transparent about sustainability risks in their own supply chains.
Global responsibility for supply chain resiliency lies with Clariant’s Supply Risk Management, which reports to the head of Center of Expertise. It develops and deploys Clariant’s strategy for supply risk management and supports Group Procurement Services, Global Business Services, business units, and service units in reducing their risk exposure. Supply strategies are aligned with each business unit.
The Supplier Sustainability & Climate Initiatives team reports to the Chief Procurement Officer. There are four regional sustainability specialists for Europe, Asia-Pacific, Middle East and Africa, and the Americas. They are responsible for setting the sustainable procurement strategy and implementing supplier sustainability projects globally.
Clariant’s backbone for supply chain resiliency and sustainability comprises 79 production sites in 27 countries.
PRODUCTION SITES AND FACILITIES
|Continuing operations||Discontinued operations||Total 2021||2020||2019||2018||2017|
|Countries with production facilities||26 2||10 2||27 2||39||38||39||39|
|Production (in m t) 3||4.33||0.10||4.43||4.10||4.25||4.34||4.60|
|Investment in property, plant, and equipment (in CHF m)||357||288 1||273||237||248|
2 The sum does not add up as in some countries there are productions sites for both continuing and discontinuing operations.
3 Every three years, Clariant validates environmental data from all production sites. The last full reporting campaign was in 2020, including estimated discontinued data for Business Unit MasterbatchesMasterbatchesThese are plastic additives in the form of granules with dyestuffs or other additives used to dye or alter the properties of natural plastic. for the first half-year. In interim years, including 2021, the reduced reporting scope comprises the larger sites responsible for at least 95 % of production.
Evaluation of management approach
Clariant continuously enhances the breadth and depth of its Procurement Sustainability Roadmap. It sets annual targets for supply chain sustainability and tracks them monthly in management committee meetings. The company draws from insights and feedback gathered through external evaluations, industry benchmarks within and outside the chemical industry, and conference participation.
Clariant actively measures and manages the performance and behavior of its suppliers. For this purpose, the company has set individual targets that represent all its relevant specifications and needs. It conducts an annual supplier evaluation through a lean questionnaire, while holistic risk management processes are currently under construction.
Supply chain policy
Clariant selects and manages its suppliers, outsourcing partners, and service providers based on a comprehensive set of criteria. In addition to economic and product-specific aspects, the company considers environmental, labor, and human rights practices as well as integrity and ethics. In 2021, it outlined its principles in its Supplier Sustainability Journey.
Supply risk evaluation is an integral part of Clariant’s supply strategy. Therefore, its supply chain setup includes redundant sourcing, a notification system for crucial events, regular tracking of open orders, constant contact with its suppliers, emergency team meetings to define mitigation measures, cross-functional cooperation, and supply contracts to secure favorable prices.
In 2014, Clariant published a Supplier Code of Conduct (SCoC), which was updated and expanded in 2021 and published as the Supplier Code of EthicsCode of EthicsThe Code of Ethics is laying down Clariant’s commitments and is intended to be a guide with ethical principles and examples to enable all personnel and associated parties to act with the highest standards of integrity. in January 2022. The Supplier Code of EthicsCode of EthicsThe Code of Ethics is laying down Clariant’s commitments and is intended to be a guide with ethical principles and examples to enable all personnel and associated parties to act with the highest standards of integrity. reflects the principles of the UN Global CompactUN Global CompactThe UN Global Compact is a corporate sustainability initiative that supports companies do business responsibly by aligning their strategies and operations with Ten Principles on human rights, labour, environment and anti-corruption, and take strategic actions to advance boader societal goals, such as the UN Sustainable Develpment Goals, with an emphasis on collaboration and innovation. initiative, the global chemical industry’s Responsible Care® initiative, and Clariant’s Policy Statement on Human Rights and is part of the company’s general terms and conditions of purchase. It outlines principles for the sustainability performance of suppliers and sets standards related to people (the human scope), planet (the environmental scope), and integrity (the ethical scope).
Supply chain targets
In 2021, Clariant introduced new sustainability targets. They include reducing Scope 3 emissions by 14 % by 2030. As Scope 3 footprint mainly comes from purchased goods and services, Clariant strives to scout for and purchase low-carbon alternatives in its supply chain. Thus, suppliers strongly influence the company’s overall sustainability performance.
Clariant has also adopted its Procurement Sustainability Roadmap in alignment with the Sustainability Transformation team. It defines focus areas, strategies, and key performance indicators and applies them to the entire organization. In 2021, four out of eight indicators from this roadmap related directly to sustainability:
- increasing spend coverage with sustainability evaluation and decreasing spend with risk suppliers;
- number of new supplier sustainability assessment scorecards generated;
- number of new sustainability audit reports generated;
- number of suppliers that have improved their score in the sustainability assessments.
Clariant Group Procurement Services (GPS) organizes annual internal trainings so that employees can adequately evaluate performance in the supply chain. In 2021, GPS organized 37 trainings mainly for GPS experts, the corporate sustainability team, and sustainability experts from business units. Other opportunities to raise awareness included webinars, workshops, and exchange meetings. New employees in procurement also receive special trainings and support material. In 2021, Clariant introduced a number of remote training formats, mainly on Scope 3 greenhouse gas emissions.
Proportion of spending on local suppliers
Whenever possible, Clariant procures goods and services from local suppliers that fulfill all procurement criteria. Supporting regional economic development in this way is particularly relevant for – and encouraged in – key emerging markets such as Brazil, China, and India. Clariant defines local suppliers as suppliers based in the same country or region where it uses the materials and services.
RAW MATERIAL PROCUREMENT 1
|Continuing operations||Discontinued operations||Total 2021||2020||2019||2018||2017|
|Raw materials procured (in m t)||3.49||0.18||3.67||2.92||3.13||3.31||3.25|
|Percentage of the procurement budget that is used for significant locations of operation and spent on suppliers local to that operation (%)||n.a.||n.a.||87.1||87.6 5||88.0||88.3||87.4|
|Asia-Pacific (in CHF m)||286||216||501 4||426||597||672||627|
|Of which with local suppliers (in CHF m) 2||274||203||476 4||405||564||641||591|
|Number of local suppliers 3||981||558||1 422||2 296||2 422||2 527||2 800|
|Europe (in CHF m)||1 029||226||1 255||1 017||1 232||1 340||1 237|
|Of which with local suppliers (in CHF m) 2||946||143||1 088 4||909||1 117||1 228||1 122|
|Number of local suppliers 3||751||169||840||1 374||1 416||1 514||1 690|
|Latin America (in CHF m)||190||44||234||207||262||320||307|
|Of which with local suppliers (in CHF m) 2||148||13||161||140||176||213||209|
|Number of local suppliers 3||636||253||784||1 065||1 088||1 085||1 092|
|Middle East/Africa (in CHF m)||53||2||54 4||67||99||106||109|
|Of which with local suppliers (in CHF m) 2||33||1||33||37||55||57||56|
|Number of local suppliers 3||109||22||124||358||395||378||407|
|North America (in CHF m)||301||6||307||311||453||510||395|
|Of which with local suppliers (in CHF m) 2||286||3||288 4||285||419||464||359|
|Number of local suppliers 3||461||9||469||927||979||930||1 002|
|Grand Total (in CHF m)||1 859||493||2 352||2 027||2 642||2 948||2 674|
|Of which with local suppliers (in CHF m) 2||1 686||361||2 048 4||1 777||2 330||2 603||2 337|
|Number of local suppliers 3||2 938||1 011||3 639||6 020||6 300||6 434||6 991|
1 Duplicate counts possible. One supplier may supply to continuing and discontinued operations.
2 Raw material spending of Clariant production sites in this region
3 Regional suppliers that supplied Clariant (production) sites
4 The sum does not add up as the numbers are rounded.
5 Continuing operations only
To evaluate the risk profile and increase the sustainability performance of its supply chain, Clariant relies on external assessments and audits. The company is a member of the »Together for Sustainability« (TfS) initiative. TfS is a joint approach by the procurement leadership of large chemical companies and uses the internationally recognized EcoVadis evaluation platform. Clariant also considers the Responsible Care® initiative, the Sedex Members Ethical Trade Audit (SMETA), and the Cefic Safety and Quality Assessment for Sustainability (SQAS).
Clariant supports strategic suppliers that outperform their peers in assessments and audits and continuously improve their performance. It pays most attention to assessments and audits according to country and business risks, global category priorities, and purchase volumes. Outsourcing these assessments and audits to external providers guarantees process robustness, independence, confidentiality, and conformity with antitrust and competition laws.
Through the TfS initiative, Clariant also has online access to a large number of assessment scorecards and audit reports generated on behalf of other TfS members. In addition to an overall score, they contain individual scores for environmental topics, labor and human rights, ethics, and sustainable procurement. Furthermore, they provide detailed feedback on specific improvement areas and guidance on where and how to address the identified gaps.
In 2021, TfS members initiated 1 345 new supplier assessments and 3 858 reassessments, of which 69 % resulted in improved scores. At the end of the year, the TfS pool included 11 167 actively managed assessments. The number of new audits among TfS members amounted to 284, adding up to more than 2 000 audits conducted since 2012. Clariant correlates these assessments and audits against its own supplier base to determine the share of total spend covered by TfS assessments. Coverage reached 87 % in 2021, surpassing the company’s goal of 85 %.
Percentage of suppliers assessed via EcoVadis
|Continuing operations||Discontinued operations||Total 2021||2020||2019||2018||2017|
|Percentage of direct spend for raw materials from suppliers covered by shared sustainability ratings (EcoVadis)||86.6||88.2||86.9||84.4||78||74||65|
Negative environmental and social impacts in the supply chain and actions taken
Following a comprehensive approach for supplier assessment, Clariant monitors, measures, and improves supplier performance, identifies improvement opportunities, and embeds sustainability as an integral part of supplier selection and management. These actions decrease supply chain risks.
Clariant clearly and consistently outlines its expectations of suppliers. The company also makes clear how suppliers can improve their performance. If a TfS assessment yields an unsatisfactory result, Clariant develops Corrective Action Plans (CAPs). Depending on the TfS scores, CAPs can be recommended or mandatory. They can also be limited to particularly critical topics, for example, environmental policy, diversity and anti-discrimination measures, or labor and human rights. In 2021, 13 % of the 524 suppliers identified with significant negative environmental impact followed a CAP. CAPs are in accordance with the 2020 Supplier Sustainability Consequence Management Framework, which was integrated into the Supplier Sustainability Journey in 2021.
The Supplier Sustainability Consequence Management Framework has turned out to be a helpful tool to improve performance in the company’s supply chain and to mitigate sustainability risks. However, if suppliers do not improve over time, Clariant reduces purchase volumes and sometimes, but very rarely, terminates the business relationship.
Negative environmental and social impacts in the supply chain
|Number of suppliers assessed for environmental impacts||4 876||4 205||9 434||10 566||8 692|
|Number of suppliers identified as having actual or potential significant negative environmental impacts||524||472||784||955||666|
|Percentage of suppliers identified as having actual or potential significant negative environmental impacts and with whom improvements were agreed upon as a result of assessment||13||14||18||20||17|
|Number of suppliers assessed for social impacts||4 876||4 205||9 434||10 566||8 692|
|Number of suppliers identified as having actual or potential significant negative social impacts||357||342||1 060||1 205||598|
|Percentage of suppliers identified as having actual or potential significant negative social impacts and with whom improvements were agreed upon as a result of assessment||8.9||13.5||16||26||19|
Tier 2 evaluation
Transparency and visibility of Clariant’s multitiered supply chain remains a challenge. To strengthen its sustainable procurement program, Clariant aims to extend its approach beyond its own suppliers to include tier 2 suppliers. This approach helps to satisfy the demand by Clariant’s customers for transparency, to anticipate approaching regulations for sub-tier visibility, and to detect possible disruptions along its value chainValue chainThe value chain describes the series of steps in the production process, from raw materials through the various intermediate stages to the ﬁnished end product. at an earlier stage.
In 2020, Clariant joined a pilot program on sub-tier supplier assessments with other TfS member companies. In the context of this program, Clariant asks tier 1 suppliers of its strategic suppliers to disclose sustainability information to EcoVadis. Consequently, Clariant receives aggregated information on the sustainability performance of its tier 2 suppliers.
Clariant further refined this process in 2021 and requested 15 tier 1 suppliers to invite 73 of their suppliers to take an EcoVadis assessment. Thirty-six tier 2 suppliers agreed to share their EcoVadis scores with Clariant. They achieved a high average score, while only eight scored lower than required.
In 2022, Clariant is going to extend this program to other procurement activities, like renewable raw materials, to customer-driven transparency projects, and to greenhouse gas emissions. The Supplier Sustainability Consequence Management Framework will further assist Clariant’s tier 1 suppliers in evaluating, monitoring, and responding to tier 2 supplier TfS assessments. The framework provides systematic steps to engage with suppliers and to communicate Clariant’s expectations. Accompanying letters will be available in six languages.
Clariant procurement provides key suppliers with free annual trainings, webinars, and materials. They cover a variety of topics, including the TfS assessment and reassessment process, improving sustainability performance, and working on Corrective Action Plans (CAPs).
In 2021, Clariant invited suppliers in Europe, the Middle East, Africa, and India, as well as the Asia-Pacific region, North America, and Latin America to participate in trainings and webinars facilitated by TfS. They emphasized the importance of sustainable procurement and helped suppliers to understand the TfS requirements and opportunities as well as the EcoVadis methodology, so that they can further improve their assessment scores. These trainings will continue in 2022.
In 2019, EcoVadis granted Clariant its Sustainable Procurement Leadership Award for »Best Internal StakeholderStakeholderStakeholders are people or groups whose interests are linked in various ways with those of a company. They include shareholders, business partners, employees, neighbors, and the community. Engagement.« In the same year, riskmethods, a company assessing supplier risks, honored Clariant with the »TOP Sustainable Supply Chain Program« award. These awards acknowledge excellence in sustainable procurement practices and distinguish Clariant as best in class, driving internal engagement to roll out a global sustainable procurement program.
In 2021, Clariant received the EcoVadis platinum medal for its own EcoVadis assessment. The company scored particularly high in sustainable procurement, which acknowledges its advanced sustainability system of supply chain management.
Clariant also won the »Trailblazer« award for its sub-tier visibility approach at the riskmethods forum in 2021, and succeeded in the »Top Risk Management« program at the 2019 Procurement Leaders Academy with its holistic risk management approach.