Procurement and supply chain
For us, procurement is seen as a business opportunity – careful selection of suppliers enables us to be a model corporate citizen and enhances our competitiveness in the eyes of customers. We set high ethical and environmental standards for ourselves as well as our suppliers to ensure sustainability throughout the value chain.
Our Procurement Policy applies to all Tieto companies and employees in all countries of operation, and describes how purchases shall be handled in the group. Based on our company values, Code of Conduct and Operative Decision Making and Authority Policy, the Procurement Policy states that the Tieto Supplier Code of Conduct Rule should be implemented in all new supplier contracts. Thus, discussions about ethical and environmental topics are a regular part of procurement.
Our aim is that any and all external business undertakings providing goods, services, technology or subcontractors to or through Tieto on a regular basis should comply with the minimum requirements stated in our Supplier Code of Conduct Rule, either by signing the rule or by other means manifesting fulfilment. This rule touches upon human rights and labour conditions (including abolition of child and forced labour), environmental issues, anti-corruption, compliance and auditing. Our long-term target is that all suppliers serving Tieto on a regular basis will adhere to the principles of this code by 2017. By the end of 2014, 30% of all our regular suppliers1 have accepted our supplier code, representing 74% of our total spend. No violations of the Supplier Code were encountered during the year through audits or whistleblowing.
In Tieto, our group-level Procurement unit holds a key role in Procurement Policy and Supplier Code of Conduct Rule implementation, and works in close co-operation with our businesses, supporting sourcing as well as purchasing processes. Our Legal and Corporate Responsibility units assist Procurement where necessary. In addition, we appointed a full-time Chief Procurement Officer in 2014. Adding resources to procurement and supply chain management indicates the importance of this aspect on the management agenda.
On a higher level, our suppliers can be divided in direct and indirect categories. The direct categories consist of IT suppliers delivering products and services that are needed for customer deliveries. These include hardware, software and IT consultant resources. Indirect categories comprise suppliers that deliver products and services needed for our own operations, such as business support services, HR-services, facility management and travel services.
The vast majority of purchases within the group take place in the Nordic countries. In 2014, the total monetary value of procurement amounted to EUR 642 million, representing 41% of our revenues.
Developments in supplier compliance and relationship management
During the year, we initiated a Supplier Evaluation Programme for our most significant suppliers to ensure an environmentally and socially sustainable supply chain. About 200 of our biggest suppliers represent 80% of the spending, making it essential to have an aligned CR vision and perspective with regular suppliers. In addition, we will conduct a risk assessment in 2015 among the non-regular suppliers.
The Supplier Evaluation programme started with supplier base and current state analyses, and will continue in 2015 with self-evaluation surveys covering environmental aspects, human rights, labour conditions and anti-corruption. Surveys will first be sent, category by category, to our most significant suppliers.
Results of all the self-assessment surveys will be linked to the Tieto Supplier Relationship Management program (Supplier One), which was launched in 2014 for a limited number of our top vendors. The purpose of this program is to improve collaboration with our most significant suppliers by setting joint targets for the collaboration, formal governance and follow-up on vendors’ performance and how they adhere to the Supplier Code.
In general, first-tier suppliers enable easier control and thus better possibilities to address CR-related risks. Risks related to second and third-tier suppliers are more difficult to address, which is why we put a lot of effort to improve compliance during 2014. This work resulted in consolidation of the supplier base: the number of suppliers decreased from 9 000 in 2013 to 7 200 in 2014, which enables more centralized procurement with our preferred vendors.
During 2014, we also worked on minimizing CO2 emissions from business travel, for example through an internal campaign promoting virtual meetings, and by updating our travel policy to limit the usage of own cars on business trips. By establishing one single travel agency to serve 19 of our biggest operating countries, we achieved much better travel reporting and follow-up both for duty of care and environmental aspects.