SKF Supplier CO2 and Energy Reduction Initiative

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SKF requests that its most energy-intensive suppliers to report their carbon emissions to SKF, asks that all suppliers implement the enviornmental management systems (EMS) standard ISO 140001 and promotes energy performance excellence through the Energy Challenge and Excellence Awards. SKF also treats favourably machinery suppliers that submit details on the energy efficiency features of their products that will support SKF in meeting its annual 5% carbon reduction target.

SCI Information

Activity types Reporting and Monitoring, Purchasing Approaches, Mandatory supplier requirements
Organisation leading the initiative SKF
Region from which the initiative is led Europe, Sweden

 

Supplier's location Global
Supply chain sectors targeted Iron and steel

More than 10,000 suppliers of machinery, metals (semi-finished steel components), forging materials, and chemicals among others.

Program or partnership linkages CDP Supply Chain Program, ISO 14001, WRI-WBCSD GHG Protocol Scope 3 Value Chain Standard

The data collected from major suppliers is used to inform SKF's submission to the Carbon Disclosure Project Supply Chain Programme, where companies report on their Scope 3 supplier emissions. Suppliers are expected to seek ISO 14001 certification.

Policy linkages None

No legislative or governmental requirements for buyers or suppliers to undertake this action, or links to government programs.
 

Objective Buyer objectives:

Ethical responsibility, brand reputation (being a leader in industrial sustainability) and risk avoidance (addressing future energy price increases in a pro-active way, based on expectation that suppliers pass on savings to SKF). SKF set a target in 2007, to reduce the half a million tonnes of CO2 released by its manufacturing processes by 5% each year, regardless of production growth. Suppliers who are willing to engage in helping SKF achieve this target are treated favourably in stragic supplier selection. 



Supplier's drivers:
To engage in the establishment of a long term relationship with SKF. Although not a formalised policy, SKF procurement personnel will value a supplier for positive engagement with SKF's environmental aims, and will regard refusal or unwillingness to engage as a disincentive to partner with that supplier.
Date

The Code of Conduct and ISO 14001 were established in 2007. The Energy Challenge was introduced in 2008.

Initiative Summary

Description of the scheme

SKF has simultaneously implemented several initiatives to encourge reductions in supply chain emissions. [*1] SKF has an extensive supply chain base, with more than 10,000 suppliers of machinery, metals and chemicals, among others. SKF decided that engaging with all suppliers would be neither feasible nor effective, and therefore decided to focus its supply chain efforts on a narrower group of energy intensive, major suppliers.

 

Code of Conduct mandating ISO 14001

In 2007, a Code of Conduct developed by SKF was issued to its suppliers, expecting them to work towards the certification of the ISO 14001 environmental management system. There is no specific timeframe in which suppliers must achieve ISO 14001, but suppliers must submit credible action plans to SKF to demonstrate that they are moving towards this goal. SKF's 200 most significant suppliers were also asked to develop a similar code of conduct to their sub-suppliers. Since 2009, the 40 most energy-intensive of these suppliers have been requested to report their carbon emissions, via an Excel tool provided by SKF. These suppliers must provide both quantitative and qualitative data annually on energy and carbon management so that performance can be evaluated relative to other suppliers. Of the 44 major suppliers defined as energy-intensive,3 9 have fully complied with SKF’s request. Performance in these areas is included in the overall supplier evaluation and development process. Currently there are no penalties for companies who do not comply with reporting requirements, however this may change as the scheme is refined and further structure is introduced. For those that do comply with reporting requirements, acknowledgement of their cooperation is given by SKF.

 

The Energy Challenge and Excellence Award for Sustainability

SKF also created a scheme inviting certain product suppliers to voluntarily contribute to SKF's aim to increase its own energy efficiency, via the Energy Challenge. Launched at the end of 2008, the Energy Challenge is an 'invitation to innovation' to machine suppliers whereby suppliers are asked to submit an energy features document as part of their proposals for new machine orders. SKF also invites suppliers, as part of this Challenge, to propose new energy efficient tools and devices that can be fitted onto existing machinery owned by SKF. In order to guide and inspire suppliers, SKF suggests ideas for features that could reduce energy consumption, such as new ways to reduce the energy needed to drive air compressors, incorporating best-in-class energy efficiency measures or ways of reducing start off and power down times.

Machine suppliers are expected to include in their proposals how they will support SKF's annual 5% carbon reduction target. Willingness and an ability to engage with SKF on this commitment is treated favourably when selecting strategic suppliers.

SKF organises and awards the SKF Suppliers Excellence Award for Sustainability to recognise proactive sustainability performance and promote good practice in the supply chain. Last year, SKF gave this award to the Swedish forging supplier Arvika Smide AB, for the company’s significant focus on reducing energy use and related carbon emissions.

SKF is developing an approach to help those suppliers who appear from their responses to not be performing in line with the SKF expectations. Experts from SKF in Client Need Analysis - Energy and Sustainability (CNA-ES) are sent to perform assessments at the suppliers, aiming to help them identify and prioritise improving initiatives. CNA-ES is a system is designed to identify areas to save energy and improve environmental performance, and sits within the company's Energy and Sustainability Management (ESM) unit.

 

Requirements on or activities undertaken by the target group

SKF requires the most energy intensive of its major suppliers to report on carbon management strategies and their emissions attributable to SKF (emissions generated during production of goods sold to SKF) on an annual basis. The method used by suppliers to determine emissions attributable to SKF is not established. Suppliers must also give details of the supplier's energy policy, and its specific energy or CO2 targets.

Verification/certification

Data from suppliers is not verified by SKF, but taken on faith.

Tools and resources (includes use of external platforms for capturing suppliers' data)

SKF provides a CO2 reporting template for suppliers to fill out. It also provides a sample tool via its website that machine suppliers can use to respond to the Energy Challenge.

Impacts, Costs & Benefits

Costs
GHG Impact

SKF feels that requiring its major suppliers to report on their emissions is beneficial to SKF through its demonstration to investors and ratings agencies that it is addressing its environmental impact, and consequently managing risks in this area. Engaging with suppliers can be a source of competitive advantage by helping to streamline processes, improve quality and therefore reduce overall supplier risk.

Overall SKF feels that the most valuable approach has been the push towards environmental management systems within its suppliers. SKF has learnt that engaging with every supplier is not feasible, but environmental management systems can impose more structure and awareness within suppliers of the benefits of improving efficiency. SKF has embedded sustainability within senior management, and this has been essential to the progress so far achieved.

Benefits

Footnotes & References

  • [*1]

    However, SKFs sustainability efforts have focused on human rights issues among its supply chain thus far, rather than on environmental criteria. Source: Discussion with SKF Director of Sustainability 4 Jan 2012.