Suppliers are an important stakeholder group for us. Our sourcing network covers a broad range of suppliers ranging from private forest owners and local companies to large international corporations based in many different cultures. This great variety in our partner network is a challenge. We nevertheless ensure that all our suppliers operate responsibly in line with our harmonised requirements.
Our commitment to responsible sourcing is written into the UPM Code of Conduct, and we never compromise our standards of integrity under any circumstances. Responsible practices form an integral part of our supplier performance management and sourcing culture.
Responsible sourcing is one of our company-wide responsibility focus areas. UPM’s sourcing experts are trained regularly on all relevant environmental and social issues. One of our specific targets is to increase purchasing from qualified suppliers in order to facilitate systematic risk assessment and continuous auditing based on identified risks. We pay special attention to human rights and we are committed to eradicating all risk of slavery and human trafficking in our business and supply chain.
Transparent supplier requirements
Transparent and systematic supplier requirements form the basis for our supplier selection and performance evaluation processes.
The UPM Supplier and Third Party Code defines our minimum requirements concerning social, environmental and economic responsibility that apply to all our suppliers and third party intermediaries (e.g. agents, joint venture partners and distributors acting on behalf of UPM). We additionally expect our suppliers to advance the same requirements in their own supply chains.
In 2018, 83% of UPM’s total spend (including both direct and indirect materials and services) was qualified under the UPM Supplier and Third Party Code. In the case of raw materials, the figure was 94%.
All suppliers working on our premises must be apprised of UPM’s safety requirements. Various additional requirements apply to wood, chemicals, pulp, packaging materials, safety and logistics.
All of UPM’s wood, pulp and recovered paper suppliers are continuously evaluated for their performance in environmental issues, human rights and local community involvement. All raw materials sourced by UPM are either FSC- or PEFC-certified, or comply with the FSC Controlled Wood standard or Due Diligence requirements for PEFC.
Our supplier requirements are incorporated into our contractual obligations. Breaching UPM’s requirements or repeated low performance can lead to termination of the supplier relationship.
Risk assessment reveals weak links
In addition to conducting risk assessments as part of our supplier selection, we carry out continuous risk assessments covering our entire existing supplier base. Risk assessments are an integral part of our supplier management activities. We utilize them to reveal possible shortcomings in supplier performance and compliance.
We have introduced a risk management process that covers all of our counterparties. The process includes an automated screening and alert functionalities. Our supplier assessment process covers supplier-specific financial, quality and supply risks, as well as any potential human rights and environmental risks. Human rights and environmental risk assessment is based on the country of origin (Transparency International), commodity specific risk and supply chain complexity. We extend risk assessments to several tiers, especially when commodities are originating from forestry, agriculture and mining industries.
UPM is a member of the Together for Sustainability (TfS) initiative, which promotes and improves sustainability practices within its supply chains. TfS has established a standard approach for evaluating and improving the sustainability performance of suppliers. We use the standard to assess the human rights and environmental supplier risks further. It also helps us to scale up the coverage of our risk assessments.
Business continuity plans implemented for critical suppliers
We identify critical suppliers during our risk assessment process. A supplier is considered critical when it has a status of high risk and high business impact. High business impact is assessed based on
1) supplier’s volume
2) potential to create constraints on capacity
3) influence potential to productivity.
Each of the critical suppliers has a business continuity plan in place. In addition, they follow a high-risk supplier management process.
We permit no slips
We regularly monitor our suppliers’ environmental and social performance through regular data collection and analysis. Based on the risk assessments we carry out, we select suppliers whose performance we wish to examine more closely. The tools we use include yearly questionnaires, TfS assessments, joint development plans and supplier audits.
We annually evaluate our internal stakeholders’ satisfaction with our key suppliers and their responsibility track record. We thus deepen our understanding of the complete lifecycle of our products and continuously improve their social and environmental performance.
Moving forward together
We strive to continually upgrade our performance in cooperation with our suppliers. Supplier audits and joint development plans are among the key tools we use to ensure that we make ongoing progress together. UPM’s supplier audits are carried out both by UPM’s own trained auditors as well as external auditors, including TfS audits.
We regularly provide training to our sourcing experts to improve our auditing capabilities. Human rights are among the main focus areas of our supplier audits. Our audits extend beyond tier 1 in the supply chain whenever risks are identified.
When a non-conformity is identified, the supplier is required to take immediate corrective action. We perform active follow-up and share our know-how with our suppliers in order to help them enhance their performance. When corrective measures are neglected or prove insufficient, UPM may be prevailed to discontinue the partnership.
We encourage our suppliers to innovate more sustainable solutions together with us. In 2018 we organized a special challenge inviting our suppliers to create new circular economy innovations together with us.