Supply Chain Sustainability
Suppliers, being one of our key stakeholders, form a critical part of our business success. We firmly believe in establishing mutually beneficial relationships by selecting partners who align with our values, business ethics, and commitment to sustainable practices. We have a strong global network of suppliers spread across many countries including Australia, Indonesia, South Africa, USA, Germany, etc. During the reporting period, 100% of our inputs were sourced sustainably. Around 5% of our input materials were sourced directly from MSMEs/small producers and 2.8% of total procurement from MSMEs/small producers were sourced from within the district and neighboring districts.
Supplier Code of Conduct (SCOC)
Our supplier code of conduct is based upon internationally accepted and advocated principles of human rights, labour, environment, ethical and fair business practices as described in United Nations Global Compact (UNGC). It serves as a guiding framework for all our supply chain business partners, including suppliers, contractors, consultants and agents, ensuring their compliance to the principles set out in the policy. All our suppliers are expected to comply with all applicable laws and regulations and prohibit child labour, forced or compulsory labour, discriminatory practices, harassment, promote freedom of association among workers and ensure fair wages and working hours. As a part of our commitment to promote sustainable sourcing, we conduct periodic assessments of our suppliers to assess their compliance with legal, behavioral, health and safety, and other essential norms of SCOC.
Supplier Evaluation and ESG Risk Assessment
We have taken proactive steps towards ensuring a sustainable and responsible supply chain through the initiation of a supply chain assessment programme for critical suppliers. Implemented in phases, this program aims to thoroughly evaluate and enhance the sustainability practices of our suppliers and business partners. Our supplier risk identification process helps us in identifying associated potential and actual ESG risks which are material to our supply chain, during two stages: on-boarding of new suppliers and evaluation/re-evaluation of the identified critical suppliers. Executive management is responsible for the oversight of effective implementation of the supply chain assessment programme which helps us in making informed purchase decisions.
We have initiated a supplier desk-assessment based on various nationally and internationally accepted frameworks & methodologies, wherein suppliers were requested to provide relevant information on their performance, adopted policies, and practices.
Our total procurement spent during the reporting period accounted to >INR 70,000 crores from nearly 7,000+ suppliers (this number includes small, medium, and large scale suppliers - fulfilling capex, opex, raw material, and services needs) around the globe, who are all Tier-1 suppliers. Out of these, 70 suppliers are identified as significant Tier-1 suppliers, who contributed to ~75% to the total procurement spent - and were assessed on various ESG parameters during FY 2022-23. The assessment process is being conducted in phases, and will be ongoing for the next 2-3 years.
Our ‘significant suppliers’ are classified in terms of business relevance to JSW Steel Limited. Furthermore, in the screening process for significant suppliers, we take into account risks for negative ESG impacts related to a country's political, social, economic, environmental, or regulatory situation along with sector-specific risks and commodity-specific risks such as emissions, energy consumption, etc.
Suppliers with the score of 75 and above on ESG performance are preferred. Additionally, based on the ESG assessment result, we plan to select high risk suppliers and support them to establish improvement or corrective action plans, and conduct continuous monitoring on the improved outcome.
During the reporting year, a total of 70 suppliers were assessed - wherein ~10% of them were identified as having substantial potential environmental and social impacts. Once our supply chain assessment progresses substantially, we plan to subsequently engage with our supply chain partners receiving an ESG score of <75, and support in the development of agreed corrective and preventive action plans.
As part of our Supplier Code of Conduct - we preserve the right to take necessary corrective actions at our sole discretion that may include, but not be limited to, capacity building of the suppliers to take remedial measures, allowing a time as deemed fit by us for the same, or termination of business relations with the concerned suppliers. However, currently no suppliers were terminated on the basis of identified actual/potential negative ESG impact.
Purchasing practices towards suppliers are continuously reviewed and monitored to ensure alignment with the Supplier Code of Conduct and to avoid potential conflicts with ESG requirements.
Promoting Growth through ESG Education and Awareness
In order to strengthen the supplier assessment program and promote understanding of ESG among suppliers, we conducted awareness programs. The topics of the ESG awareness program covered emissions management, energy security, water security, circularity, safety, etc. Moreover, we conducted awareness sessions for internal stakeholders responsible for managing the purchase related decisions, covering senior management and concerned employees. We will strive to continue to increase ESG awareness among our suppliers and employees.