Abstract

With a very large and complex supply chain, that counts about 26,000 first-tier vendors,it is fundamental to set up a system that ensures an alignment between Saipem’s standards and those adopted by its vendors, to prevent and mitigate risks: that is why the Company since 2010launched the Sustainable Supply Chain project to further integratesustainability aspects into the overall process of supply chainmanagement.

The Experience

Saipem is one of the global leader in drilling services, as well as in the engineering, procurement, construction and installation of pipelines and complex projects, onshore and offshore, in the oil & gas market. The Company has more than 26,000 first-tier vendors registered in its vendors database, spread across the five continents.This large number represents a challenge when it comes to setting up a system that ensures alignment between Saipem’s standards and those adopted by the vendors.

For this reason the Company adopted a structured system of qualification and selection of vendors in order to reduce supply chain-related risks and to work with reliable vendors.

Supply Chain Management system has been implemented in Saipem since long time and it has been continuously integrated with additional aspects every time this emerged as necessary.

Starting from 2010 the Sustainable Supply Chain project was launched aimed at further integrating sustainability aspects into the overall process of vendor management from qualification, to selection, contract execution and feedback.This project was jointly coordinated by the Vendor Management and Sustainability Functions, with the full support of the Top Management.

Meanwhile, Saipem issued a new Human Rights Policy inspired by international principles and best practices, to reinforce its commitment on the topic and confirm the importance of the supply chain in reaching this commitment.

A comprehensive training activity on human and labour rights was also carried out for all Saipem employees that have recurring relations with vendors, to reinforce the effectiveness of the Sustainable Supply Chain Management system.

Now the sustainability aspects, in particular: - human and labour rights aspects, - protection of health and safety of workers, - ethical business and anti-corruption are fully integrated into theSupply Chain Management system, thus complying with UN Global CompactTen Principles and contributing to achieving the 17 Sustainable Development Goals (SDGs), in particular SDG 3 (“Good Health and Well Being”)and SDG 8 (“Decent Work and Economic Growth”).

The Supply Chain Management system can be summarised in three main phases: vendor qualification, contractual phase and vendor monitoring & feedback.

This allows to:

• assess the reliability of vendors in terms of technical, financial, ethical and organisational aspects,
• reinforce their capabilities and skills on sustainability issues,
• continuously monitor vendor performance through a feedback system.

During the vendor qualification phase, a vendor risk assessment is carried out to identify vendors based on ethical and sustainability risks depending on the country of operation and/or level of criticality of the products/services. From the human and labour rights perspective, vendors operating in countries classified as high risk are analysed based on the information and documents they submit during the qualification phase. Similarly, for specific commodity codes considered as high risk for health and safety, a specific assessment is carried out to evaluate the vendor’s HSE management system.

If operating in high risk countries, the vendor may be subject to an assessment visit also including labour rights aspects. The audit scope focuses on child and forced labour, freedom of association and the right to collective bargaining, working hours, discrimination, disciplinary practices, and health and safety.

For the contractual phase, Saipem is committed to manage relations with vendors in accordance with the highest ethical standards, in compliance with all the applicable laws and the Code of Ethics (in which human and labour rights are fundamental concepts), safeguarding its own reputation and that of its subsidiaries. Vendors shall declare to accept Saipem Organisation, Management and Control Model (“Model 231”),which includes the Saipem Code of Ethics, and receipt and acknowledgment of contents of the ‘Sustainability Policy’. When the value of the supply for specific activities, services and materials exceeds a predetermined amount, the specific vendor is subject to a counterparty risk assessment (the same process is also carried out during the vendor qualification phase).

Finally, vendor performance is continuously monitored and Saipem’s relevant functions are asked to provide feedback regarding respect for workers’ rights and the protection of health and safety (e.g. occurrence of accidents/injuries during work execution, compliance with applicable HSE legislation and contractual specifications, existence of legal proceedings for serious violations/offences).

Furthermore, suppliers and subcontractors are continuously engaged in initiatives and activities aimed to reinforce their capabilities and to align their skills to both Saipem and International standards. Some initiatives are here described.

Considering the type of business, a particular attention is paid on the protection of workers in terms of their health and safety, as part of labour rights protection. Several events, such as seminars and forums, are annually conducted in countries like Nigeria, Saudi Arabia or Indonesia to explain vendors the importance of these aspects, how to internally set up a risk assessment and a management system.

Another initiative called ‘Leading by Ethics’ campaign has been conducted in Nigeria, addressed both to our employees and our suppliers and aimed at improving their awareness on ethics and integrity behaviours in the business. 50 Nigerian suppliers were involved.For this initiative the UN Global Compact Network Nigeria was involved and the initiative was presented during a UNGC Workshop on Ethics and Compliance to representatives of companies and NGOs. Partnering at the local level with prestigious global partners helped Saipem spread its message, values and principles, as well as contribute to advancing SDG16 as well as SDG17.

Moreover, the HOPE (Human OPerational Environment) Training Programme has been designed to translate human rights commitment into practice. It consists of a theoretical and practical training to develop a better management and understanding of the key human rights risks and issues for the Oil & Gas industry and become familiar with Saipem’s existing framework, resources and behaviours in the specific areas of operations (including cultural/sustainability factors). The programme is specifically targeted to Saipem employees covering managerial positions at local level and involves also client’s representatives and main business partners and contractors. Based on an on-the-ground approach and specifically designed for the local context of interest, the programme is aimed at discussing and identifying appropriate solutions in the event of human rights issues that may emerge during the day-to-day activities in the relations with local stakeholders, including local communities.

Since the beginning of the Sustainable Supply Chain project more than 100 vendors were auditedon Human and Labour Rightsin high risk countries. Results demonstrate no major issues in sensitive areas such as child or forced labour, nevertheless main improvement opportunities were identified in health and safety management and respect of working hours, while there were positive results in terms of overall employee management, remuneration and workers’ representation.

All the results of the Sustainable Supply Chain project are publicly disclosed and contribute to Saipem sustainable performance and reporting systems.

Further, Vendors involved in the initiatives have provided positive feedback. These initiatives contributed to reinforce and increase their understanding and competences on sustainability risks and mitigation actions.

The continuous management and engagement of vendors are essential to guarantee a reduction or mitigation of potential risks associated with the supply chain, not only in terms of their technical and managerial capabilities, but in generaltheir comprehensive performance including ethical, social and HSE aspects.

These risks are not only associated with reputation aspects, but also with operational aspects since a vendor can be more exposed to risks of accidents, higher personnel turnover (which means losing skills and competences), and underperformance in terms of managerial and quality standards, overall.