Sustainable supply chain
In our efforts to contribute to a more sustainable world, managing our supply chain sustainably is fundamental to long term success.
In our focus areas public health, business ethics, child labor and greenhouse gases, we have included our suppliers in the scope of our efforts. A proactive engagement with our partners upstream in the value chain is critical to our success. We have processes in place, and under development, to emphasize sustainable supply chain management, in particular for the sourcing of raw tobacco.
Our Supplier Code of Conduct
Our Supplier Code of Conduct is aligned with the Company’s Code of Conduct and forms the basis of our relationship with suppliers. It is an integral part in the majority of our significant business agreements.
Swedish Match has about 140 significant suppliers of direct material1), accounting for about 1.5 billion SEK in annual spend. Raw tobacco accounts for one third of this spend and we have a total of 61 suppliers of raw tobacco, when viewed individually per country.
During 2016, we have assigned external expertise to refine our initial classification of risk in relation to business ethics and human rights. The results of this risk assessment are used to focus and prioritize our activities to the areas where we see the largest risks. Activities include active dialogue and communication of Swedish Match’s requirements, follow-up on adherence, and proactive community investments. Our focus on tobacco growing is confirmed with this risk assessment.
In the past years we have worked to implement routines and systems to follow up on adherence to our Supplier Code of Conduct. The emphasis has been on suppliers of raw tobacco for smokeless products where we have implemented and actively participated in the development of a sector-common system, the Sustainable Tobacco Programme (STP). With this system we assure continuous improvement on the wide range of sustainability issues with our tier one and tier two suppliers2), including third-party review.
The due diligence process for other direct materials involves compliance and risk screening, as well as supplier assessments performed by purchasers in conjunction with supplier visits. This process is tailored to local conditions and is to date less formalized than the one for raw tobacco.
During 2016, our Procurement Network, made up of representatives from all operating units, have framed a common approach towards risk assessment, including sustainability aspects, and assurance of adherence to our Supplier Code of Conduct. In 2017, we will continue to develop this approach in more detail. We will systemize our common approach to assure compliance, as well as compile and track identified KPIs to communicate our progress towards more sustainable supply chain management.
1) A significant supplier of direct material is defined as a supplier with which Swedish Match has an annual spend of above 400,000 USD (~3.5 MSEK). Suppliers below spend limit that belong to an industry classified as high risk in relation to human rights violations have been included regardless of spend. This includes all tobacco suppliers which are also viewed as individual suppliers per country.
2) Tier one suppliers refer to the Company’s own suppliers and tier two suppliers refer to the suppliers of the Company’s suppliers.