RAW MATERIAL PROCUREMENT
The main raw material groups in tire manufacturing are synthetic rubbers, fillers, chemicals, reinforcing materials and natural rubber.
We have more than 250 active raw material suppliers from more than 30 different countries that all follow the same rules, tyre raw materials originate from all over the world. Nokian Tyres’ supplier governance model includes risk assessment on several factors of all suppliers. Sustainability critical suppliers are committed to our Supplier Code of Conduct, which requires compliance with international human rights, labor rights and anti-corruption measures. Following the same logic, suppliers with identified potential quality risk must, at a minimum, have an ISO 9001 certified quality management system in place. We also prefer suppliers with an ISO 14001 certified environmental management system.
SUSTAINABLE PROCUREMENT – FROM RAW MATERIALS TO PREMIUM TYRES
The long and complex journey from raw materials to finished premium tyres involves the effort and quality assurance of thousands of professionals. It is, therefore, justified to say that all of our personnel are linked to product responsibility.
The work of Nokian Tyres’ own procurement unit is guided by the internal purchasing policy, which establishes the general principles of sustainable procurement. As a participant in the UN Global Compact initiative, we follow the UNGC’s ethical principles as well as our own, which also address the issues of responsibility in the supply chain.
Furthermore, we require all of our raw material suppliers to adhere to our Supplier Code of Conduct. Nokian Tyres has just published its new totally updated Supplier Code of Conduct in 2021 and all new suppliers proposing themselves as a supplier for Nokian Tyres must accept the Supplier Code of Conduct before approval. In addition, suppliers are strongly advised to have in place a code of conduct of their own that covers their own operations as well as their suppliers.
We evaluate the supply chain risks in order to understand where improvements are needed the most and for the purposes of allocating resources for audits and other evaluation measures.
In 2019, Nokian Tyres’ procurement team developed a classification model for assessing our global supplier risks, including raw material suppliers. The model was implemented in 2019. During 2020, all the suppliers were risk assessed according to the new classification model, and all new suppliers will go through this process. The assessment has four categories: quality, sustainability, business/strategic criticality and safety at work. Risk mitigation plans are created for suppliers that are classified as critical or medium critical in any of the four categories of the classification model. The plan can include actions such as sustainability on-site audits, requesting management system certifications, responding to self-assessments, etc. Due diligence check is done for all new suppliers according to Nokian Tyres’ Know Your Counterparty process.
EXTERNAL AUDITS HELP PARTNERS IMPROVE THEIR SUSTAINABILITY
One of the basic raw materials of tyres is natural rubber. As an agricultural product, it is the livelihood of many families living in countries where the local legislation and working conditions have not been fully developed. We only purchase natural rubber from processors approved by Nokian Tyres. We supervise their activities through audits, among other things.
Nokian Tyres started a partnership with an external auditor already in 2016 to improve sustainability in its natural rubber value chain. The natural rubber sustainability auditing process has been developed together with a consulting company, and it is based on Nokian Tyres’ Supplier Code of Conduct and principles that comply with the UN Global Compact goals. The audit model will be updated in 2022 to evaluate the suppliers’ alignment with the Nokian Tyres Sustainable Natural Rubber Policy. For our company, the audits guarantee that our requirements are followed in the best possible way, and they provide an opportunity for the audited companies to improve their activities and occupational safety.
In 2017, we audited four locations and initiated comprehensive corrective action programs to address the shortcomings identified in the process. Among other things, the programs include providing first aid training and revising employment contracts as well as the repair and cleaning of accommodation facilities.
In 2018, we audited four more locations and initiated corrective programs to address the shortcomings identified in the process. Four reaudited producers have made significant improvements on weaknesses highlighted during our first sustainability audits.
In 2019, we performed in total nine audits. Five new sites and four follow-up audits to verify the implemented improvement actions. We set a goal to audit all our major rubber processor partners by 2020, comprising at least 80 % of our natural rubber purchasing volume and this target was exceeded as 90 % of our natural rubber purchasing volume was audited.
Unfortunately, all the planned sustainability audits for 2020 were cancelled due to COVID situation globally, but in 2021 Nokian Tyres was able to re-establish the sustainability audits after the break. The company conducted two follow-up audits and two new sustainability audits of natural rubber processing plants that are suppliers of Nokian Tyres.
SELF-ASSESSMENTS AND QUALITY AUDITS FOCUS THE ATTENTION ON OCCUPATIONAL SAFETY, QUALITY AND HUMAN RIGHTS
In addition to the audits by external parties, we track the sustainability of our suppliers in connection with quality audits and site visits by our procurement professionals and suppliers’ self-assessments.
During the quality audits, we review the supplier’s production and evaluate the company’s quality management system. The audits specifically focus on the quality of the activities and raw materials. Furthermore, our purchasing personnel conduct supplier site visits that include an assessment of the working conditions, among other things. Where risks have been identified, the suppliers are requested to fill out a self-assessment related to the identified risks.