SUPPLIER DEVELOPMENT AND MANAGEMENT

Transcription

1 2 SUPPLIER DEVELOPMENT AND MAGEMENT SUPPLIER DEVELOPMENT AND MAGEMENT We aim to guarantee transparency, suitability and sustainability of our supply chain, on the basis of harmonious, fair and mutually beneficial relationships with suppliers and contractors, thus generating direct impact on the business performance in terms of cost, quality and sustainability. GRI [204-1] Proportion of spending on local suppliers Value of total products made in the reporting period (COP) Value of products locally (COP Percentage of products locally (COP) Number of total suppliers Number of local suppliers Percentage of local suppliers Number of critical suppliers assessed in sustainability criteria Colombia Central America and the USA TOTAL USD COP USD COP USD COP USD COP 606,006,518 1,788,288,874, ,516, ,563,972,663 1,050,937,965 3,101,254,878,231 1,860,460,641 5,490,107,725, ,546,265 1,648,236,513, ,810, ,934,183,960 1,023,622,785 3,020,649,420,607 1,734,979,403 5,119,820,118, % 75.1% 97.4% 93% 3,264 1,528 3,943 8,735 3,078 1,201 3,883 8,162 94% 79% 98% 93% STRATEGIC APPROACH OF OUR MAGEMENT We are committed to leadership in the global management of the sustainable supply chain through our relationships with vendors and contractors, which represent our corporate values and principles, including sustainability, innovation, respect for human rights, and compliance with labor and environmental laws. Our influence in this area spreads throughout the three geographical areas where we operate (Central America and the, Colombia, and the USA), by means of the administration and management of aspects related to vendors and contractors that provide us with goods, such as: raw materials, production and maintenance services, administrative services, inputs, spare parts and equipment, transport, fuels, and technology.

2 Anexos 3 GRI [102-9] Total Suppliers per category Data Raw materials Administrative Transportation Fuels Technology Services Suppliers spend - Consumables, spare parts and equipment Colombia & Central America 73,536, ,424, ,699,465 USD 88,604,518 14,537,790 61,303,485 USD 171,905,295 21,692, ,705,063 USD USA Unit Description Additives, aggregates, gravels, gypsum, iron ore, clinker, slag, sand, bauxite Travel expenses, cleaning services, locative maintenance and gardening, marketing and advertising, security, communications, work uniforms (work wear), office supplies, fumigations, education and training consulting Transportation services for employess, Raw materials, final good ( bulk and bag cement) 72,343,451 9,001,034 38,287,129 USD Fuel, coal, energy, power, gas, oxygen. 16,541,086 1,490,525 29,089,279 USD 111,605,489 23,588, ,793,972 USD 71,470,009 23,780, ,059,571 USD Technological support, facilities, communication channels, call center, software. Contractors services, productive services, maintenance services mining operations. Sacks (cement paper bags) and packaging, heavy machinery, Cement kiln refractory bricks, filters and sleeves, explosives, hardware, electrical and electronic parts, bands and belts, tires. We are aware of the importance of identifying, valuing and mitigating our risk exposure, hence we continue to apply the whole vendor management cycle through these processes: Pre-selection, selection, performance assessment, audits, follow-up to certifications and management systems, vendor development and recognition. Argos Manual on Procurement of Suppliers of Good and Services, the Policy on Human Rights, the OHIS Policy, the Sustainability Policy, the Codes of Conduct, the principles of the Global Compact and the Sustainable Development Objectives (SDO) are some of the guidelines and policies that provide for controls that allow us to identify risks related to legal, environmental, economic and social matters, and mitigate them by fulfilling practices set forth by the Company, which ensure reliability and sustainability of services contracted and goods supplied. To see our Policies, go to: and sostenibilidad/politicas CRITICAL VENDOR SEGMENTATION In order to develop tailored tools and manage and mitigate risks associated, Argos has identified its critical suppliers based on criteria that leverage more reliable management and strengthen the supply chain. These criteria are: Critical suppliers for our integral management system ISO 9001, ISO 14001, OHSAS 18001, BASC (Business Alliance for Secure Commerce) and API (American Petroleum Institute), as applicable. Suppliers related to the product s physical-chemical features, i.e. the resistance and setting time may be affected somehow by the good or service supplied. Suppliers related with product transportation whose delivery times and quality affect our customer service level.

3 4 SUPPLIER DEVELOPMENT AND MAGEMENT Suppliers Suppliers related to packaging of our products that affect the conservation, presentation and authenticity thereof. that directly affect the quality of the environmental where our collaborators work, as well as their protection and security. For the definition and identification of critical segments, it is necessary to present the critical Suppliers s description in the analysis: Critical Suppliers means a good or service Suppliers who, in case of breaching the criteria, requirements and contractual policies, may cause a negative impact in (environmental, social and economic) aspects related to goodwill, operation and/or sustainability. The seven critical segments defined by Argos are as follows: i. High expenditure (Pareto) describes the Suppliers that account for 80% of our expenditure. These Suppliers pose both operational and economic risks for the supply chain, which limits our ability to substitute them easily. High expenditure Suppliers, also classified in one of the following segments, are considered critical Suppliers as well. ii. Raw material Suppliers are those who supply the raw materials that feed the production of our finished products. This segment is considered critical because of the environmental, social and operational risks it poses. iii. Contractors are Suppliers who perform services at Argos facilities. This segment also includes transport Suppliers. Their criticality is based mainly on the risks associated to health, safety, and environmental conditions, as well as occupational matters. iv. Not substitutable (unique) Suppliers are those whose product, service or experience may not be substituted. For example, exclusive representatives of important brands, Suppliers who supply a specific good or provide a specific service not available anywhere else, Suppliers with significant technical knowledge and development for the company, or Suppliers regulated by the government. v. High environmental impact Suppliers are those who provide environmental services or whose products may be risky or dangerous if not properly handled. They pose environmental, economic and operative risks. vi. Weights and measures: these Suppliers provide services that allow us to calibrate our scales and other measurement equipment to ensure precise weights and measures. Their products pose an operative risk because they may affect the proper use of our raw materials and the global quality of our final products. vii. Security: Suppliers who provide services to protect and secure our most strategic assets: our people and our facilities. RISK MAGEMENT The functionality of Avetta tool has enabled to assess the sustainability development and to develop a common and systematic approach for effective management of the health and safety of our contractors within the framework of the management system I PROMISE. By deploying such this tool in the assessment processes, transparency grows, thus enabling access to documents submitted by the Suppliers and the ability to select contractors and assess the sustainability performance to establish action plans focused on improving their rating and decrease the risk. In 2017, we advanced in measuring the Suppliers sustainability index; we identified risks and jointly defined action plans to improve risk management.

4 Anexos 5 The index was applied to 111 Suppliers in our critical segments. As well as in previous years, the best performance was evidenced in the social dimension, specifically in the criteria Industrial Safety and Occupational Health. This is mainly due to the implementation of the Industrial Safety and Occupational Health Policy and the definition of strategies to identify occupational risks on the basis of operation. The environmental dimension had the second highest index, with the Environmental Management System being the criteria with best averaged results, followed by the Innovation criterion in the economic dimension. Based on Good Sustainability Practices that the company seeks in its Suppliers and taking account of the gaps found in the results from the sustainability index, we have continued the Suppliers Development Program in terms of criteria related to Corporate Governance, Risk and Crisis Management, Environmental Management Systems, Eco-efficiency, and Relationship with Communities. For 2017, 144 Suppliers participated, increasing participation by 120% with respect to the previous year. We have continued implementing Suppliers development programs, aimed at building abilities that seek to improve their effectiveness and business strengthening, in order for them to be in conditions of meeting Argos needs and increase their competitiveness to seek opportunities in new markets. During the first semester of the year, we completed the program with 14 Suppliers in the influence areas of Cartagena and Medellín, and started a new Suppliers development cycle in partnership with SE (National Learning Service), where 34 Suppliers from different influence areas of our operations were benefited. GRI [308-2/ 414-2] Negative environmental impacts in the Supply Chain and actions taken Colombia (RCO) Central America and the USA Environmental Social Environmental Social Environmental Social Number of suppliers assessed true or potential impact true or potential negative impact with whom agreements were made based on the assessment Percentage of suppliers identified with significant, true or potential negative impact with whom agreements were made based on the assessment true or potential negative impacts with whom the contracting relationship was terminated Percentage of suppliers identified with significant, true or potential negative impact with whom the contracting relationship was terminated * 0* 0* 0* 93.1% 87.9% 0.0% 0.0% 0.0% 0.0% % 0% 0% 0% 0% 0% *The most assertive methodology is being assessed according to the process for closing gaps and reducing the risks identified for these regions.

5 6 SUPPLIER DEVELOPMENT AND MAGEMENT Significant actual and potential impacts identified Significant actual negative impacts in the assessment Significant potential negative Environmental RCO RCCA RUSA An inefficient waste disposition program / Lack of an environmental management system/measure, controlling and monitoring the use of natural resources Disposal of toxic and hazardous waste / Illegal mining Waste Disposal, There is not sufficient Company that offer Environmental Services/ lack of Knowledge on Environment Issue Significant actual and potential impacts identified Significant actual negative Significant potential negative Social RCO RCCA RUSA Occupational Safety and Health Administration illegal mining/ Lack of social security payment and extra hours to the employee/ Informal work Giving Work to unqualified Wokers /SISO With a view to strengthen the supply chain and increase the coverage of development programs, an e-learning program will be made available to Suppliers, which will enable to close gaps identified in the assessments. In 2017, the training scheme of the tool was designed and built, and recording of modules that will make up the program with Argos experts was started. In order to measure our management over time and set short- and long-term goals, Key Performance Indicators (KPIs) about the sustainability of the supply chain are set out, including: KPI GOAL YEAR OF COMPLIANCE Sustainability index for suppliers (IDS) Increase by 50% the coverage of the suppliers evaluated in sustainability Index of frequency and severity of incidents in Frequency index: 1.4 contractors Severity index: Coverage of the organization s supplier Increase the coverage of the supplier development program development program by 10% 2019 As well as in previous years, our Suppliers took part in the Sustainability Dialogs, which are a chance to report our management results and ask for feedback, expectations and suggestions regarding sustainability. Also, during the Sustainability Week, dissemination focused on ODS 14 Action for Climate took place by means of training on climate change and measurement of CO 2 emissions.