Enel’s Sustainability Supply Chain Practice

Name of Company

Enel SpA

Country of Origin

Italy

Sector

Oil & Gas, Utilities

Region

South-America, North-America, Europe

Issue Covered

Human Rights, Labour, Environment, Anti-Corruption

Practices

Engagement with Suppliers

Sub Categories

Background

Over the last ten years, Enel has established a leading position worldwide in terms of sustainability. For this reason, Enel decided to set up the new organization and strategic guidelines for the group to look to the future orienting the group towards full integration and aligning it with the principles and the goal of sustainability.
The integration of sustainability into operational strategies and choices of the business is the key concept that guides Enel’s process of change.
Specifically ,Supply chain is considered a very important lever for business to create a positive impact in the world.

Description of Program or Activity

In Global Procurement Division there are three main phases going on to integrate the Environmental, Social, and Governance issues into the supply chain:

1) Qualification System;

2) General Term and Conditions;

3)Vendor Rating Process.

The Goal of these phases is to guarantee that the suppliers are aligned on Enel’s sustainability target such as Human Rights and Health and Safety performances.

During 2015 the Sustainable Supply Chain Project was launched which, through close collaboration between the Global Procurement and Sustainability Functions at both global and local level, aims to increasingly integrate environmental, social and governance issues into the strategy, by creating shared values with suppliers in the spirit of the circular economy.

A key element is represented by the standardization throughout the Group of the criteria for selecting, assessing and monitoring suppliers from the ethical viewpoint, but, above all, in relation to the impact on the Company. In particular, during the year a questionnaire was developed to assess, during the qualification stage, the level of maturity of suppliers in regard to the issues linked to ethics, human rights, and work practices, to environmental sustainability and fighting corruption, as well as to safety in the workplace.

For instance, in the format that each supplier has to fill, during the qualification stage, is requested if the company is a women-owned business.

Enel’s global system of qualifying suppliers enables an accurate assessment of the companies which intend to take part in the procurement procedures and represents a guarantee for Enel, since it is an updated list of subjects of certified reliability on which to draw;

The qualifying process requires, also in compliance with the law in force, the presentation of a series of documents (self-certification regarding the possession of the general prerequisites, financial statements, certification, etc.) and, among other things, the adhesion to the principles expressed by the Code of Ethics, by the Zero Tolerance of Corruption Plan and by the 231 Compliance Program, the Policy on Human Rights, the ten principles of the Global Compact with specific reference to the absence of any conflict of interests (including any potential conflict). All qualified suppliers have been requested, during the formalization of the contract, to provide specific documentation certifying they are up to date with the payment of social security contributions (impact on the company). In addition, for sectors with a high environmental impact, in the approval requirements, the supplier’s environmental performance was assessed with a specific evaluation model. The companies included in the Enel Register of qualified Companies are also constantly monitored, including through the use of external databases, in relation to events for which the company and its main exponents are responsible, social security contributions, criminal procedures.

In addition, Enel has established specific contractual clauses, which are periodically updated to take into consideration the various regulatory updates and to align to best practice, and which are included in all the tender contracts for works, services, and supplies. In particular, the General Contract Conditions consists of a General Part which contains the clauses that are applicable in all the countries, to which are added country-specific annexes containing specific clauses applicable in each individual country. Currently, there are 15 annexes in use (Italy, Spain, Portugal, Chile, Peru, Colombia, Brazil, Romania, Slovakia, Russia, Argentina, Guatemala, Panama, Mexico, Costa Rica). With these contractual clauses, Enel requires, among other things, its contractors and subcontractors to adhere to the ten principles of the UN Global Compact, the respect and protection of internationally recognized human rights, as well as respect of the ethical and social obligations on combating child labor and protecting women, equality of treatment, a ban on discrimination, freedom of union membership, association and representation, forced labor, environmental safety and protection, hygiene and sanitary conditions and other regulatory, pay, social security, insurance and tax conditions.

In order to guarantee respect for the aforementioned obligations and constantly check their fulfillment, Enel reserves the right to monitor and control its contractors and to terminate the contract in the case of violation.

The qualifying procedure is complemented by the Vendor Rating system, aimed at monitoring the performance of suppliers in terms of their correct conduct during the tender, and the quality, timeliness, and sustainability in performing the contract. The Vendor Rating index can be used as an element to assess tender invitations and to continue contractual relationships in compliance with the law in force.

In January 2015 a single global registration point was launched for suppliers and for all the companies in the Enel Group, a sole interface for the whole global procurement world. This new function immediately allows the supplier, using their unique username and password, to interact with all the companies in the Enel Group through the global dashboard (called “myHome”) and to use all the services available: responding to tender invitations, managing their own qualifying process, viewing their own Vendor Rating results, and so on. 

Lessons Learned

By implementing this phases, Enel has made progress in terms of effective and continuous collaboration with the suppliers. This brought the Company to improve the performances in the supply chain, indeed the 98% percentage of suppliers assessed with a corrective action plan whose ESG performance improved following the action plan. Suggestions by the suppliers are becoming key elements in Enel’s decision making, for instance, in developing the new phases.

Impact

With these processes, Enel guarantees the necessary quality standards, in terms of human rights and working conditions, health and safety at work, environmental responsibility and ethics. Through these monitoring and assessment procedures, Enel establishes a continuous dialogue with suppliers, with the purpose to collaborate with and not to sanction them, which leads to the highlighting of weaknesses and problems found and the sharing of corrective actions; i.e the result of the Vendor Rating indices are shared with suppliers and are always available on a website. One of the outputs of the sustainable supply chain project will be to have a public and continuous disclose and update the performance of the suppliers in the qualification phase, i.e. health & safety indices.