November 04, 2020 - It is our goal to gradually establish transparency even in dynamic supply chains of identified potential risk raw materials. This is a permanent task since transparency cannot be created with the click of a button. That is why experts from different specialist units such as Procurement and Supplier Quality, Compliance and Corporate Responsibility work very closely together to advance the topic from different perspectives.
With the Human Rights Respect System (HRRS) we analyse and identify risks to human rights in our supply chain, and continuously develop our separate due diligence approach further for the supply chain.
Requirements for suppliers
Our three procurement units – “Mercedes-Benz Cars Procurement and Supplier Quality”, “Global Procurement Trucks and Buses”, and “International Procurement Services” – have been jointly responsible for the Group-wide Mercedes-Benz Group Supplier Network cooperation model since 2009. These units work together to ensure responsible procurement of materials and services and the implementation of the “Mercedes-Benz Group Supplier Sustainability Standards” in the supply chain. Our Supplier Sustainability Standards define our requirements for working conditions, upholding human rights, environmental protection, safety, business ethics, and compliance. They also serve as the guidelines for our sustainable supply chain management system.
We demand that our direct suppliers commit themselves to observing our sustainability standards, communicating them to their employees and to their upstream value chains, and then checking to ensure that the standards are complied with. For this process, Mercedes-Benz Cars has developed a block chain prototype that transparently represents the transmission of this information along the entire supply chain and makes it possible to trace it. This prototype is being followed by a further block chain pilot project.
We support our suppliers in their implementation with information and qualification measures. Our service providers also explicitly recognize these standards as a contractual component of their supplier agreements.
Social standards for work and service contracts
The awarding and performance of contracts for work and services are subject to standards that extend beyond existing legislation in many areas. These standards define our requirements with regard to occupational health and safety, accommodation, remuneration, use of temporary workers, commissioning of subcontractors, and the prevention of illegal false self-employment. These social principles are relevant to all orders that exceed a period of two months and are actually carried out on the business premises of Mercedes-Benz Group AG in Germany. All relevant contractors or service providers must sign a declaration that they comply with these standards. Only if they fulfil this prerequisite can they receive purchase orders. An auditing team from Procurement determines whether the standards are being complied with in Germany.
Monitoring of suppliers
Compliance with the standards is systematically reviewed. For example, the procurement units examine new production material suppliers in the course of their on-site assessments, also with regard to sustainability issues. Such examinations are even more thorough in high-risk countries. If there are any doubts regarding the sustainability performance of a new supplier, the responsible team initiates a deeper review. In critical cases we discuss the results of the analyses in management committees and take them into account in decisions on whether to award a contract.
Along with the assessment of new suppliers, we also examine sustainability risks at our existing direct suppliers as part of our regular risk assessments. Among other things, we conduct annual database research to identify any violations of our sustainability and compliance rules by our current suppliers. This is part of our supplier screening process. Mercedes-Benz Cars also conducts corporate social responsibility (CSR) audits and potential analysis of new suppliers. In 2019 Mercedes-Benz conducted 1,127 on-site audits and assessments.
We systematically follow up reports of violations. In case of anomalies discovered for example during audits or database research, we conduct further reviews and supplier surveys. Mercedes-Benz Cars does this by means of an online questionnaire. These surveys require suppliers to provide information about their sustainability management system and the measures they take to ensure that their own suppliers comply with sustainability standards. If the results of such surveys indicate insufficient sustainability performance, we instruct the supplier in question to improve the relevant processes.
In order to ensure an effective and sustainable supplier management system, we assign high priority to the comparability of the survey results. For this reason, we work with standardized instruments such as the industry-wide sustainability Self-Assessment Questionnaire developed by the European initiative Drive Sustainability.
For Mercedes-Benz, the lawful execution of labour and service contracts is a fundamental core requirement in terms of corporate and social responsibility. We strictly opposes any form of abuse of labour and service contracts. For this reason, a team of experts checks whether the suppliers comply with legal and collectively agreed framework conditions as well as Mercedes-Benz's own requirements when procuring services and non-production materials. The auditors for example examine the suppliers’ compliance with legal and collectively agreed regulations regarding working hours, remuneration, as well as accommodation and health and safety standards. These supplier audits focus, among other things, on service providers in the low-wage segment and on business areas with lower visibility.
The supplier audits are selected based on an internal risk assessment of the purchased products and services, and mainly throughout Germany. In addition, the supplier auditors also follow specific hints, for example through the whistleblower system BPO (Business Practices Office).
In case of findings during the audits, measures for remediation are developed and agreed with the suppliers. The supplier auditors also follow up on the subsequent implementation of the agreed measures.
The evaluation of new suppliers according to social standards is firmly embedded in the processes of our three procurement units. For example, International Procurement Services, which is responsible for the procurement of non-production material, evaluates all of the new suppliers in high-risk countries and socially critical procurement segments. Mercedes-Benz Cars Procurement and Supplier Quality conducts a potential analysis of all new suppliers. This analysis also addresses working times, remuneration, and freedom of association. Global Procurement Trucks & Buses has procurement employees conduct on-site assessments of all new suppliers to also see how they comply with social standards.
To assess the sustainability performance of our direct suppliers, we have developed an overarching Supplier Ambition Rating with which we bring together various methods for evaluating climate, environmental and human rights aspects.
Based on various indicators, we determine the sustainability score of our suppliers within the Supplier Ambition Rating and can thus comprehensively evaluate the Mercedes-Benz supplier network. In addition to reducing greenhouse gas emissions, the focus is on the environmentally-friendly use of resources and the socially responsible extraction of raw materials. Starting 2021, the results of the Supplier Ambition Rating will be an important criterion for awarding decisions.