Suppliers are an important stakeholder group for UPM. Our sourcing network consists of suppliers ranging from private forest owners and local companies to large international corporations in many different cultures. The variety of suppliers both in size and cultures makes the task of securing responsible sourcing based on our harmonised requirements quite a challenge.
Ensuring that responsible sourcing forms an integral part of our supplier performance management. Working closely with our suppliers is the way to ensure that our suppliers understand and meet all of the company’s requirements on sustainability and responsibility.
For our own sourcing activities, we ensure internal compliance through Responsible Sourcing Rules.
Transparent and systematic supplier requirements are the basis for the company’s supplier selection process and supplier performance evaluation.
We require our suppliers to apply the principles of the Code of Conduct and to fulfil the criteria concerning social, environmental and economic responsibility. These supplier requirements are defined in the UPM Supplier and Third Party Code (Code). The Code is complemented with more detailed rules, guidelines and supplier requirements, such as the list of Restricted Substances for paper and pulp businesses.UPM is committed to take actions to ensure that slavery and human trafficking are not taking place in its supply chains or business. The company has issued statements describing these actions taken in compliance with the applicable legislation.
The key supplier requirements are also incorporated into contract obligations. Breaching UPM’s requirements or repeated low performance can lead to the termination of the supplier relationship.
We also encourage our suppliers to apply management systems based on internationally recognised standards and up-to-date techniques and practices. Suppliers’ environmental and social performance is followed through regular data collection and analysis.
Over 25,000 suppliers around the world deliver a variety of raw materials, products and services to UPM. We continuously evaluate the performance of our suppliers and seek to develop key supplier relationships. We have established long-term plans with some 300 suppliers in order to ensure systematic performance and quality development.
Internal stakeholders’ satisfaction to key suppliers’ responsibility is measured annually. As a result, our understanding of the complete lifecycle of products is continuously enhanced, and the social and environmental performance of UPM products is further improved.
Continuous risk assessment covering all aspects of our requirements reveals uncertainties in supplier performance. We identify critical suppliers by taking into account for example the size of the relationship, sole-sources and other significant pricing and availability related risks. We assesse also systematically the sustainability risks related to our suppliers. The key dimensions in our sustainability risk assessment are the country of origin (Transparency International), commodity risk and supply chain complexity. A pool of qualified, lead auditors addresses responsibility issues in the supply chain.
Based on the risk assessments we carry out, we select the suppliers whose performance we want to study more closely. The tools used for this are, for example, yearly questionnaires, joint development plans and supplier audits. If any non-conformancies are found, the supplier is obligated to make corrective actions. We follow actively the results of these actions, and are ready to support our suppliers with our know-how in order to help them to enhance their performance.
Although wood is the primary raw material for our businesses, we also purchase pulp, chemicals and recovered paper worldwide. The majority of the energy we purchase is used in pulp and paper productions.
Responsible sourcing is one of the focus areas within economic responsibility in UPM's corporate responsibility principles and targets. A key performance target is to further concentrate supplier spend to suppliers, who have qualified against the UPM Supplier Code. Furthermore the aim is to increase continuous supplier audits based on systematic risk assessment practices.
In 2016, 80% of supplier spend was qualified against the Supplier Code. Good progress was achieved in sourcing of raw materials for paper and label, where the qualified spend is 94%. Additional specific requirements are in place for areas such as wood, chemicals, safety, logistics, pulp and packaging.
Higher standards mean lower risks. This is why we make sure that our suppliers and third parties live up to our exacting standards defined by UPM Code of Conduct.
UPM expects all 25,000 of its suppliers to operate responsibly. But what is responsibility and how can it be assessed? In this series of articles, we will familiarize with the responsible sourcing stories from Brazil, China, and wood sourcing.