Supply Chain

Material Topic: Supply Chain

Considering social and environmental factors (e.g., business ethics, human rights, safety, and carbon footprint of suppliers) in supply chain management

Key GRIs

• GRI 204: Procurement Practices 2016
• GRI 308: Supplier Environmental Assessment 2016
• GRI 414: Supplier Social Assessment 2016

NaDiVeG

• Respect for human rights
• Employee and social concerns
• Corruption Prevention
• Environmental Concerns

Most relevant SDG

Implementing sustainable procurement means caring about the environmental, social, and economic impacts of the goods and services the Company intends to purchase. At OMV, we aim to foster innovation, maximize value contribution, and enable supply chain growth. We achieve this by applying our sourcing and logistics expertise to ensure that the highest-quality materials and services are provided throughout our supply chain. It is of paramount importance to our organization to be fully compliant with all applicable legal requirements, as well as with our internal safety, environmental protection, and human rights standards when managing our supply chain. Our purchased goods and services are for all our business areas (C&M, E&P, R&M) and include, among others, those related to raw materials, wells, IT, consultancy, engi­neering, logistics, and retail.

Specific Policies and Commitments

To mitigate supply chain risks, including forced labor, slavery, human trafficking, and corruption, the OMV Group imposes the legal requirements and internal rules and standards applicable to OMV on its suppliers. Our suppliers are obligated to fully comply with the content of the OMV Code of Conduct, and our supply chain partners are required to sign the OMV Code of Conduct. In addition, our suppliers must accept the OMV General Conditions of Purchase, which further detail our business standards (e.g., labor rights), as an integral part of our contractual agreements. OMV reserves the right to terminate relationships with suppliers if non-compliance with applicable policies is discovered or if non-compliance is not addressed in a timely manner.

Governance

OMV Procurement is organized as an integrated function and covers day-to-day procurement activities across the entire OMV Group (including OMV Petrom and Borealis). OMV Procurement is led by the Chief Procurement Officer, who reports to the Chief Financial Officer. From an organizational perspective, OMV Procurement is split into several Procurement Units that cover aspects such as Operations & Materials, Raw Materials & Packaging, and Retail & Business Services. A dedicated Sustainable Procurement department was established in April 2022, responsible for defining the sustainable procurement agenda and for implementing and monitoring sustainable procurement ambitions and targets.

Management and Due Diligence Processes

Prequalification

Supplier prequalification is part of precontractual activities, during which OMV collects information from a potential supplier with the purpose of evaluating compliance with our HSSE and sustainability requirements. The goal of the prequalification process is to screen potential suppliers before bringing them on board to ensure that only those suppliers that meet our HSSE and sustainability standards can be considered for future collaboration.

The prequalification is based on a standardized list of elements and objectives that aligns with the OMV Group’s HSSE Management System (e.g., HSSE Policy, ISO 9001, 14001, 45001) and our Sustainability Framework (e.g., Sustainability Policy, Human Rights Policy, and Grievance Mechanisms). At Borealis, especially for raw materials and packaging, suppliers located in a so-called “high-risk” country are asked to submit a positive Together for Sustainability (TfS) Audit and Assessment report. We categorize high-risk countries by considering human rights, environmental, and ethical aspects.

Supplier Selection

Following prequalification, Procurement and business representatives select the best suppliers based on a predefined set of commercial and technical criteria during a tender process. In 2022, we continued to embed sustainability elements into sourcing activities (e.g., technologically innovative elements, carbon emissions, energy efficiency KPIs, as well as CDP and EcoVadis score) during several pilot projects.

Risk Assessments

Understanding a supplier’s risk is an important factor in deciding whether and how we do business with the supplier. In 2019, we began receiving daily alerts about our registered suppliers through SAP Ariba. These enable us to monitor their risks in four categories: Environmental and Social, Finance, Regulatory and Legal, and Operations. These risk alerts help us apply a preventive risk management process. Furthermore, OMV has a screening process in place to ensure that parties sanctioned by the EU or international organizations, such as the United Nations, are not accepted as procurement partners.

Audits

OMV conducts supplier audits as part of the prequalification process and/or during contract execution. The aim of the audits is to measure the performance of our suppliers and define actions that will enable them to optimize their performance and meet OMV requirements. During the audits, we pay special attention to the financial stability of our suppliers, their strategy and organization, supply chain, sustainability (e.g., human rights, carbon footprint management, environmental management, certifications, and social responsibility), and their cybersecurity performance. We also carry out yearly subject-specific audits on topics such as process safety, quality, and efficiency. During the supplier audits, we place great emphasis on understanding not only the management approach to the topics within the scope of the audits (e.g., HSSE aspects), but also how the topics are understood and applied by the employees on site (e.g., through discussions with workers and managers). All the audits with in-scope sustainability elements were performed remotely in 2022.

Each audit finding classified with a red flag is followed up and analyzed by Procurement in collaboration with business representatives and any other relevant function (e.g., HSSE, Legal, Internal auditing, and Compliance). Information on the outcome of the audit is made available to the supplier, and the supplier is requested to submit a proposed corrective plan with concrete measures and an implementation timeline. In 2022, seven audits resulted in follow-up measures.

Together for Sustainability (TfS)

Since 2021, OMV has been a member of Together for Sustainability (TfS). As a joint initiative and global network of 40 companies, TfS sets the de facto global standard for the environmental, social, and governance performance of chemical supply chains. The TfS program is based on the principles of the UN Global Compact and Responsible Care^®. Being a TfS member helps OMV further embed sustainability into its day-to-day business operations and further cascade sustainability requirements within our supply chain. In 2022, OMV Procurement defined TfS-related targets for 2025 and 2030:

• By 2025, we aim to run sustainability evaluations (TfS Audits¹ TfS Audits are conducted by an approved external auditor and can be on site, remote, or a hybrid of the two. They cover a single or combined business location such as a production site or warehouse. Sustainability performance is verified against a defined set of audit criteria. and TfS Assessments² TfS Assessments are conducted by TfS partner and service provider EcoVadis, a global leader in CSR assessments, via a secure online platform. The assessment questionnaire is adapted to the size, country of origin, and business sector of the company being assessed and results in a score at the end (the EcoVadis score).) for all suppliers covering >80% of the Procurement spend.
• By 2030, we aim to extend sustainability evaluations (i.e., TfS Audits and TfS Assessments) to all suppliers covering 90% of the Procurement spend.

CDP Supply Chain

We aim to continuously manage and decrease the carbon volume of our purchased goods and services. OMV is fully committed to climate change mitigation and responsible resource management. Only by working together with our suppliers will we be able to define joint low-carbon initiatives to continuously decrease the carbon emissions in the supply chain and meet our Paris Agreement commitments.

As part of its CDP Supply Chain membership, in 2022 OMV invited 231 suppliers to respond to the CDP climate change questionnaire. Suppliers were selected based on spend, estimated carbon emissions volume, and the carbon intensity of the goods and services purchased from them. In addition to reporting their emissions, we asked the suppliers whether they have carbon reduction targets in place, and invited them to share with us any initiatives or projects to reduce carbon emissions in which they would like us to participate.

Supplier Capacity Building

OMV works together with its suppliers to improve overall sustainability performance. For instance, in 2022, individual meetings and webinars were offered to our suppliers to help them better understand the requirements of the CDP climate change questionnaire or the TfS Assessment, and why this information is important to OMV. Additionally, the topics of sustainable procurement and low-carbon procurement were also included in the agenda of our annual strategic supplier meetings.

In Yemen, OMV conducted awareness building for local contractors on grievance management and Community Grievance Mechanisms (CGMs). OMV supported four local contractors working on establishing their own CGMs and is currently supporting a fifth contractor.

Local Content

We aim to support the local communities in the locations where we operate by fostering economic development. Local procurement strengthens the local economy and meets the local procurement expectations of neighboring communities. Increased local procurement has had the added benefit of reducing business disruption in recent years. The spend with local suppliers in 2022 on a Group level was 68.8%.

2022 Actions

In 2022, we actively engaged not only with our suppliers, but also with buyers on sustainable procurement practices. We conducted several awareness sessions on sustainable procurement. 174 buyers from OMV, OMV Petrom, and Borealis participated in these sessions. The focus was on talking to buyers about what sustainable procurement means, what TfS, EcoVadis, and supplier prequalification are all about, and what can be done to incorporate sustainability into core procurement processes and day-to-day operations (e.g., managing the carbon footprint of purchased goods and services and sustainability in tenders).

In March 2022, we organized the first Sustainability Supplier Day, with the aim of interacting and exchanging experiences with our suppliers and having the opportunity to build a stronger and more sustainable supply chain. More than 240 participants from the suppliers’ side and OMV attended the full-day event. Together with our suppliers, we addressed topics such as the circular economy, climate protection, and collaboration and innovation during six breakout sessions. Based on the feedback received from all the participants, we will continue with a follow-up session in 2023 to deep dive into topics such as the circular economy and supplier innovation.

In 2022, Borealis was confronted with reports of alleged human trafficking practices conducted by the main contractor and their subcontractor on a propane dehydrogenation (PDH) plant construction site in Kallo, Belgium. Borealis and the OMV Group have zero tolerance for any malpractice and put stringent measures in place to mitigate related risks. More information about the immediate measures taken can be found in Human Rights.

The OMV Group always seeks to improve and is strongly committed to further strengthening its processes and mitigation measures to prevent any maltreatment and disrespect of workers’ human rights in our contractor relations: At corporate level, we have further detailed our commitment to labor and contractor-related human rights in our new OMV Group Human Rights Policy Commitment and integrated these aspects in the new Human Rights e-learning module. OMV Petrom has set up a task force comprising representatives from Compliance, Procurement, HSSE, Sustainability, HR, and Legal, and developed a human rights violation prevention plan for OMV Petrom sites, both with the objective of intensifying human rights management in our business relationships. SapuraOMV has also developed a plan of short- and long-term measures to improve our human rights performance in business relations. Additionally, individual monitoring initiatives were implemented at local level throughout the Group to ensure our suppliers’ compliance with human rights. More information can be found in Human Rights.

Outlook

OMV Procurement is constantly striving to improve in various areas, and in the coming years, sustainable procurement will take high priority. Our three focus areas for the future will be:

• Sustainable suppliers (e.g., only suppliers who meet OMV’s sustainability requirements will be eligible to participate in tenders)
• Sustainable sourcing (e.g., we will aim to integrate sustainability criteria into award decisions, such as CO₂ emissions per kg product)
• Low-carbon procurement (e.g., we will aim to continuously manage and decrease the carbon volume of purchased goods and services)

Targets 2025

• Be an active member of TfS and conduct sustainability evaluations of all suppliers covering >80% of Procurement spend³ Suppliers covering 80% of Procurement spend are classed by OMV as A suppliers. We plan to increase the number of A suppliers engaged annually to 100% by 2025.
• Engage with suppliers covering 80% of Procurement spend and assess their carbon footprint as a foundation from which to define and run joint low-carbon initiatives

Targets 2030

• Extend sustainability evaluations to suppliers covering 90% of Procurement spend
• All suppliers covering >80% of Procurement spend to have carbon reduction targets in place

Status 2022

• 35% of A suppliers (suppliers covering >80% of Procurement spend) assessed
• 231 suppliers engaged with via CDP (vs. 137 in 2021)
• 75% of responding suppliers have a climate target in place (vs. 63% in 2021).

Most relevant SDGs

SDG targets:
8.3 Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation, and encourage the formalization and growth of micro-, small-, and medium-sized enterprises, including through access to financial services
8.7 Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking, and secure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms
8.8 Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment
13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries
16.5 Substantially reduce corruption and bribery in all their forms