Supply Chain Resiliency
Building a resilient supply chain ensuring business continuity and systematically integrating sustainability practices will remain paramount for Clariant. In an increasingly unpredictable environment, Clariant does not stand still and is determined to further strengthen its position by securing customer supply and balancing customer and consumer interests and demands for low-carbon material and products.
Aside from managing persisting turbulences in the supply chain related to the pandemic, additional challenges marked the reporting year 2022, such as the war on Ukraine, resulting in increased complexity, the risk of unpredictable energy costs, and additional logistic delays. In 2022, Clariant again took care to prepare its supply chain for the future by anticipating bottlenecks and choosing its suppliers accordingly. Clariant prefers to cooperate with suppliers that deal with climate change by reducing their emissions and providing emergency schemes for extreme weather events. For regular external evaluations of risk profiles and supplier assessments, Clariant engages in the industry initiative Together for Sustainability and collaborates with sustainability ratings provider EcoVadis. Read more about supplier evaluation.
Long-established local and regional supply bases help Clariant to mitigate disruption risks. In 2022, this network has again proven to be valuable in dealing with geopolitical issues, trade disputes, factory shutdowns, or blocked traffic routes. In addition, Clariant’s procurement managers continuously review and adapt supply strategies. Further priorities include increasing transparency through digital applications, such as tracking product carbon footprints, and the ability to illustrate how raw material issues affect the production of finished goods in order to see the sales at risk.
Through the Supplier Sustainability & Climate Initiatives team, which comprises five procurement experts with specific expertise and a responsibility for sustainable procurement, Clariant has made it a priority to integrate sustainability actions into procurement processes and its global supply chain. In line with customer and consumer interests, these actions aim to continuously increase the share of suppliers joining Clariant’s supplier sustainability program and the share of low-carbon and renewable raw materials sourced.
Clariant incorporates sustainability standards into its procurement practices and demands transparency from its direct and indirect suppliers on various topics such as emissions, labor rights, human rights, and sustainable procurement practices. Considering the impact of changing legislation with respect to due diligence in supply chains regarding human and labor rights has been another focus in 2022 and will require further analysis and actions in the future. Read more in the chapter Human and Labor Rights.
PRODUCTION SITES AND FACILITIES
|Continuing operations||Discontinued operations||Total 2022||2021||2020||2019||2018|
|Production sites 4||70||n.a.||70||79||126||118||125|
|Countries with production facilities||24||n.a.||24||27 2||39||38||39|
|Production (in m t) 3||3.80||n.a.||3.80||4.43||4.1||4.25||4.34|
|Investment in property, plant, and equipment (in CHF m)||n.a.||n.a.||209||357||288 1||273||237|
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.
4 Two sites that are not in the reporting scope are excluded from the count
RAW MATERIAL PROCUREMENT 1
|Continuing operations||Discontinued operations||Total 2022||2021||2020||2019||2018|
|Raw materials procured (in m t)||3.50||n.a.||3.50||3.67||2.92||3.13||3.31|
|Percentage of the procurement budget that is used for significant locations of operation and spent on suppliers local to that operation (%)||89.3||n.a.||89.3||87.1||87.6 4||88.0||88.3|
|Asia-Pacific (in CHF m)||376||n.a.||376||501||426||597||672|
|Of which with local suppliers (in CHF m) 2||367||n.a.||367||476||405||564||641|
|Number of local suppliers 3||679||n.a.||679||1 422||2 296||2 422||2 527|
|Europe (in CHF m)||1 164||n.a.||1 164||1 255||1 017||1 232||1 340|
|Of which with local suppliers (in CHF m) 2||1 058||n.a.||1 058||1 088||909||1 117||1 228|
|Number of local suppliers 3||751||n.a.||751||840||1 374||1 416||1 514|
|Latin America (in CHF m)||272||n.a.||272||234||207||262||320|
|Of which with local suppliers (in CHF m) 2||195||n.a.||195||161||140||176||213|
|Number of local suppliers 3||452||n.a.||452||784||1 065||1 088||1 085|
|Middle East/Africa (in CHF m)||72||n.a.||72||54||67||99||106|
|Of which with local suppliers (in CHF m) 2||43||n.a.||43||33||37||55||57|
|Number of local suppliers 3||78||n.a.||78||124||358||395||378|
|North America (in CHF m)||375||n.a.||375||307||311||453||510|
|Of which with local suppliers (in CHF m) 2||353||n.a.||353||288||285||419||464|
|Number of local suppliers 3||326||n.a.||326||469||927||979||930|
|Grand Total (in CHF m)||2 258||n.a.||2 258||2 352||2 027||2 642||2 948|
|Of which with local suppliers (in CHF m) 2||2 016||n.a.||2 016||2 048||1 777||2 330||2 603|
|Number of local suppliers 3||2 286||n.a.||2 286||3 639||6 020||6 300||6 434|
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 Continuing operations only
Clariant’s backbone for supply chain resiliency and sustainability comprises 70 production sites in 24 countries. Global responsibility 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 is responsible for setting the sustainable procurement strategy and implementing supplier sustainability projects globally. The team reports to the Head of Procurement and includes regional sustainability specialists for Europe, Asia-Pacific, Middle East and Africa, and the Americas.
Clariant continuously enhances the breadth and depth of its Procurement Sustainability Roadmap. It sets annual targets for supply chain sustainability, as well as Scope 3 GHG reductions, 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 allowing for comprehensive insights in Clariant’s key supplier base are under construction.
Supply chain policy
The Supplier Code of Ethics of January 2022 reflects the principles of the UN Global CompactUN Global CompactThe UN Global Compact is a corporate sustainability initiative that supports companies to do business responsibly by aligning their strategies and operations with ten principles on human rights, labor, environment and anti-corruption, and take strategic actions to advance broader societal goals, such as the UN Sustainable Development Goals, with an emphasis on collaboration and innovation. initiative, the global chemical industry’s Responsible Care® initiative, the OECD Conflict Minerals Guidance, 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).
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, sustainable procurement practices, as well as integrity and ethics. In 2021, Clariant published its Supplier Sustainability Journey, which outlines the company’s sustainability expectations toward suppliers.
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.
Supply chain targets
Compared to 2021, Clariant was able to reduce Scope 3 emissions (Category 1) from purchased goods and services around 4 % in 2022. In the years ahead, Clariant will intensify its activities around developing low-carbon solutions to be able to achieve the sustainability target it has set itself in 2021, which is a reduction of Scope 3 emissions of 14 % by 2030. In addition, collaboration with suppliers to set GHG reduction targets and disclose carbon footprints becomes more important. Read more about Clariants’ Sustainability Targets and the activities to change Clariants’ impact in the Chapter Resource Efficiency and Environmental Protection.
In its Procurement Sustainability Roadmap, Clariant defined the following indicators with respect to supply chain sustainability due diligence:
- spend covered by sustainability assessments or audits;
- spend with risk suppliers;
- number of new sustainability assessments (EcoVadis) generated;
- number of new sustainability audits generated;
- number of suppliers that have improved from one assessment or audit to the next.
»Over the past two years, we have had a particular emphasis on increasing the quality of the emission factors for our raw materials and to selectively switch supplies to sources with lower emissions.«
Bettina Siggelkow, Head of Sustainability Affairs
Partnerships and collaborations are increasingly important to leverage potential sustainable synergies. The Procurement team has started to work with Jiangxi Fuerxin Medicine Chemical Co., Ltd., a strategic supplier from China. Through purchases of hydropower and the future installation of solar panels, Jiangxi Fuerxin Medicine Chemical Co., Ltd., will reduce the carbon footprint of its operations and of the products supplied to Clariant. It is expected that this collaboration will lead to a reduction of approximately 870 tons CO2 per year, thereby contributing to the Clariant Scope 3 target achievement. Clariant is going to continue to explore potential collaborations as a differentiation opportunity.
Percentage of suppliers assessed via EcoVadis
|Continuing operations||Discontinued operations||Total 2022||2021||2020||2019||2018|
|Percentage of direct spend for raw materials from suppliers covered by shared sustainability ratings (EcoVadis)||89||n.a.||89||87||84||78||74|
Internal sustainability trainings
Clariant Group Procurement Services (GPS) organizes annual procurement-specific internal trainings so that employees can adequately evaluate performance in the supply chain and incorporate sustainability aspects into their purchasing decisions. In 2022, GPS organized 20 trainings mainly for procurement managers, the corporate sustainability team, and sustainability experts from business units. New employees in procurement also receive special training and support material. Clariant introduced several remote training formats, mainly on Scope 3 greenhouse gas emissions. 94 % of procurement employees have been trained in sustainability-related topics by the end of the reporting year.
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.
To evaluate the ESG risk profile and increase the sustainability performance of its supply chain, Clariant relies on the external assessments and audits of the »Together for Sustainability« (TfS) initiative. TfS is a non-profit organization with a joint approach by the procurement leadership of large chemical companies, that uses the internationally recognized EcoVadis evaluation platform to measure the sustainability performance of its chemical suppliers. Clariant also considers Responsible Care® audits, the Sedex Members Ethical Trade Audit (SMETA), and the Cefic Safety and Quality Assessment for Sustainability (SQAS).
Suppliers are selected for participation in an assessment or an audit based on 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. Clariant supports strategic suppliers that outperform their peers in assessments and audits and continuously improve their performance.
Through the TfS initiative, Clariant 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 2022, TfS members initiated 1 545 new supplier assessments and 5 477 reassessments, of which 64 % resulted in improved scores. At the end of the year, the TfS pool included 13 472 actively managed assessments. The number of new audits among TfS members amounted to 378. Clariant correlates these assessments and audits against its own supplier base to determine the share of total spend covered by TfS assessments, which in 2022 amounted to 89 %.
New suppliers, undergoing the Integrity Next self-assessment
In 2022, Clariant started business with more than 4 000 new suppliers. Small indirect spend vendors represented 70 % of them. These suppliers are invited to fill in the Integrity Next Self Assessment form, which covers other topics besides sustainability, such as cyber security or sanction list.
Negative environmental and social impacts in the supply chain and actions taken
Following a comprehensive approach for supplier assessments and audits, 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, as well as indicates to suppliers how they 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 2022, 44 % of the 400 suppliers identified with significant negative environmental impact followed a CAP. The identified negative environmental and social impacts were mostly related to weaknesses in suppliers’ sustainability management systems, such as a lack of measures in employee health and safety, limited reporting with respect to environment or labor and human rights, as well as missing sustainable procurement policies. The suppliers were mainly located in Asia, North America, and Latin America.
CAPs are determined in accordance with the Supplier Sustainability Journey and Consequence Management Framework. These have turned out to be helpful tools 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, although rarely, terminates the business relationship. In 2022, no business relationship with suppliers was terminated as a result of the environmental and social assessment, as Clariant focused on collaborating with its suppliers to close the gaps.
Negative environmental and social impacts in the supply chain
|Number of suppliers assessed for environmental impacts||4 242||4 876||4 205||9 434||10 566|
|Number of suppliers identified as having actual or potential significant negative environmental impacts||400||524||472||784||955|
|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||44||13||14||18||20|
|Number of suppliers assessed for social impacts||4 242||4 876||4 205||9 434||10 566|
|Number of suppliers identified as having actual or potential significant negative social impacts||242||357||342||1 060||1 205|
|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||47||9||14||16||26|
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 2022, 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 multiple 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. Additionally, TfS launched the TfS Academy in 2022, a complementary e-learning platform for buyers and suppliers. It provides support in multiple languages on various sustainability topics. Read more on TfS.