Supply chain (GRI 2-6)
Geberit’s production processes entail a high in-house production depth, i.e. it largely purchases raw materials and semi-finished products with a high share of raw materials. As such, material costs constitute a relatively low share of Geberit’s net sales. A prudent procurement strategy with a strong regional and local orientation, institutionalised purchase processes and a strong focus on cooperative relationships with suppliers help to ensure that raw materials are available. This approach can also help minimise potential acute physical risks arising from climate change, see also TCFD Reporting.
The raw materials and semi-finished products procured by Geberit primarily come from suppliers in Western Europe (82.6% of procurement value). The share of the procurement volume from Eastern Europe amounts to 7.0%, that from Asia 9.2%, from America 0.9% and from Africa 0.3%. Owing to the high level of vertical integration as well as the very high share of Western European suppliers, the general risk profile of the supply chain is relatively low.
In 2022, Geberit procured raw materials (31.9%), semi-finished products (40.8%), and finished products (27.3%) with a procurement value of CHF 1,136.1 million (previous year CHF 1,061.3 million) from 1,710 suppliers around the globe.
As Geberit neither directly imports nor processes conflict minerals (tin, tantalum, tungsten, gold), it is not deemed to be an “importer” within the meaning of EU Regulation 2017/821. If products containing such metals are shipped to the USA, the provisions of the Dodd-Frank Act (Sec. 1502) apply.
Management approach procurement
Corporate Purchasing is responsible for procurement in all production plants worldwide (except in the USA, where purchasing is organised locally) and manages the procurement organisation through a team of lead buyers who are strategically responsible for various material groups. Various changes within Geberit’s operating environment mean that demands on procurement are constantly increasing. As a result, Geberit drafted a new procurement strategy in 2021 that aims to holistically assess its suppliers (“total value of ownership”) in areas including sustainability. In addition, new laws concerning responsible procurement have been developed – especially in Switzerland and Germany – resulting in binding reporting and due diligence obligations for companies with regard to their supply chains. Geberit closely monitors these developments and, in the reporting year, conducted an analysis of regulatory supply-chain due diligence obligations applicable in Switzerland and the EU. Thus, a study of the UNICEF Children’s Rights in the Workplace Index revealed that Geberit is served by suppliers from countries with an increased risk and must therefore implement a system of risk management as part of its legal duty of care. In force since 2007, this risk management system has been constantly expanded in recent years. Although Geberit is well-placed with its current approach, it is continuously developing its risk management system with suppliers in the interest of best practice.
Geberit’s suppliers are obligated to maintain comprehensive standards. The basis for this cooperation is the Code of Conduct for Suppliers, which is available in 15 languages and was supplemented by an Integrity Line for suppliers in 2017. The Code is guided, among other things, by the principles of the UN Global Compact, the Universal Declaration of Human Rights, and the International Labour Organisation’s (ILO) Declaration on Fundamental Principles and Rights at Work. The Code of Conduct is binding for every supplier. These include direct suppliers of raw materials and semi-finished products for use in production, as well as indirect suppliers such as those providing services or office materials. The Code comprises specific guidelines on quality and meeting environmental, labour law and social requirements and sets out compliance with human rights. The supplier must prepare appropriate documentation in order to demonstrate – upon request by Geberit – compliance with the provisions of the Code and ensure that these papers are available for inspection at all times. Should the supplier fail to comply with the obligations set out in this Code, then measures for improvement are implemented. Failure to comply on the part of the supplier is regarded as a serious obstacle to the continuation of the business relationship. If the supplier does not correct this non-compliance, Geberit can terminate the cooperation. When evaluating suppliers, Geberit strives to achieve the greatest possible degree of transparency. All new and existing partners are thus assessed by means of standardised processes according to the same criteria: company as a whole, quality, sustainability, price, procurement chain, delivery reliability, production and technology. As a rule, the selection of suppliers is required to include a quality audit covering clarification on environmental and occupational safety issues. Where an audit reveals inconsistencies in these criteria, an additional, in-depth audit is conducted.
Supplier management incorporates a risk management approach on environmental, occupational safety and human rights matters (including child labour) that is based on the assignment of suppliers to a particular risk category depending on production location (country) and material group (type of production process). Suppliers in the highest risk category pose an increased risk both in terms of production location and type of production process. In 2017, suppliers and material groups that had been added due to the acquisition of the ceramics business were systematically assessed and included in risk management. In addition, the classification of existing material groups into certain risk categories was reviewed. Since then, the classification has been updated on an annual basis. In the reporting year, 167 existing suppliers (previous year 171) were identified in the highest risk category, which corresponds to around 7% (previous year 8%) of the procurement value of Geberit.
A systematic planning and performance of audits is conducted for suppliers in the highest risk category. To ensure neutrality and the expertise required for the audits, Geberit also works with an external partner. This tried-and-tested procedure has been carried out for years and makes an important contribution to ensuring compliance with the duty of care in the supply chain at Geberit. In the coming year, the quality and EHS audits carried out will be included in the newly developed internal audit tool, which will make it easier to track the measures and assess their effectiveness.
In addition to this risk-based approach, the aim is to develop a concept for more intensive collaboration with suppliers for reducing CO2 emissions (Scope 3), including the definition of goals.
New employees in procurement also receive training in the process of sustainable procurement. Regular training of lead buyers on procurement and sustainability also takes place, plus participation in a working group of the UN Global Compact on sustainable supply chains.
For further information, see Business Report > Business and financial review > Financial Year 2022 > Procurement and logistics.
Assessment of new suppliers based on sustainability criteria (GRI 308-1, GRI 414-1)
All new suppliers undertake to comply with the Code of Conduct for Suppliers and hence also to international standards governing environmental protection, labour practices and human rights. The Code is guided, among other things, by the principles of the UN Global Compact, the Universal Declaration of Human Rights, and the International Labour Organisation’s (ILO) Declaration on Fundamental Principles and Rights at Work. As of the end of 2022, a total of 3,296 direct and indirect suppliers had signed the Code of Conduct. This equates to over 90% of the total procurement value.
In the Code of Conduct for Suppliers, suppliers undertake – wherever possible and appropriate – to ensure that their own suppliers and second-tier suppliers also adhere to the terms of the Code. Geberit may explicitly demand of a supplier that this Code also be extended to selected second-tier suppliers. When auditing suppliers, an analysis of their own most important suppliers and second-tier suppliers is included. Geberit aims to foster a collaborative relationship with its suppliers, where sustainability risks in the supply chain are jointly analysed and minimised.
Introduced in 2017, the Supplier Integrity Line allows suppliers to anonymously report any violations of the Code of Conduct by Geberit employees or by competitors. The hotline is free of charge for users and is operated by an independent service company in a total of eleven languages. Violations can also be reported online via an external website. No violations of the guidelines set out in the Code of Conduct for Suppliers were reported in 2022.
Sustainability-related impacts in the supply chain (GRI 308-2, GRI 414-2)
In 2022, four third-party audits were carried out at suppliers in China, Turkey and Bosnia and Herzegovina. The results showed that the majority of obligations set out in the Code of Conduct for Suppliers were complied with. Appropriate corrective measures were agreed in cases of non-compliance.