Due Diligence Compliance Report 2017
Actor’s details
| Actor’s name | Umicore Supply and Refining Business Group Energy & Surface Technologies |
| Location | Watertorenstraat 33, 2250 Olen, Belgium |
| Reporting Year-end | 31.12.2017 |
| Date of Report | 13.03.2018 |
| Senior Management responsible for this Report |
Bart Sap Watertorenstraat 33 |
| Administrator |
Jonas De Schaepmeester T: +32 499 46 71 57 Broekstraat 31 Rue du Marais |
| Compliance Report’s scope | The scope of this Compliance Report includes the cobalt procurement activities by Umicore Supply and Refining for the business units ‘Cobalt and Specialty Materials’ and ‘Rechargeable Battery Materials’ (including Umicore’s minority joint ventures) in the reporting year 2017. |
Section 1: Establish Strong Company Management Systems
Compliance Statement
Umicore’s management systems include policies and internal management structures. They are enacted by performing due diligence on the cobalt purchasing activities. In 2017, Umicore implemented systems and procedures to align its Sustainable Procurement Framework for Cobalt with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD, 2013).
In 2017, Umicore’s management systems including the procurement and operational practices were effectively applied.
1.1 Has Umicore created a company policy regarding due diligence for its supply chains of cobalt?
‘The Umicore Way’ describes Umicore’s mission and its core values on how to conduct business. It is at the heart of Umicore’s culture. Umicore has adopted a set of policies and charters to ensure its activities are conducted in line with the principles outlined in ‘The Umicore Way’. These include the Umicore Code of Conduct and Sustainable Procurement Charter.
The latter is the supply chain policy that applies Umicore’s principles to its suppliers and illustrates how they are implemented in the procurement activities. Umicore developed this charter in order to reflect its commitment to sustainable development in all areas of procurement – whether raw materials, energy, other goods or services. The document outlines Umicore’s commitment to its suppliers in terms of its own conduct and practices.
In addition, Umicore has adopted a policy on “Responsible global supply chain of minerals from conflict-affected and high risk areas”.
Bearing in mind the specific risks in the supply chain of cobalt, Umicore implemented this policy into a specific cobalt due diligence framework: Umicore’s “Sustainable Procurement Framework for Cobalt” (“the Framework”). The Framework reflects Umicore’s intentions to ensure that its cobalt supply chain and further processing follow sustainable business practices. The Framework defines Umicore’s responsibility for conducting risk-based due diligence, screening and monitoring of all its suppliers and their governance structures.
In the course of 2017, Umicore aligned the documentation and publication of its policies to ensure that the Framework is aligned with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD, 2013). As part of this alignment, a grievance mechanism for concerns and feedback related to supply chain issues is installed via the contact page on the company’s website.
The Framework includes a decision tree procedure, created to ensure the practical implementation of the Framework. The overall description of this decision tree can be found within the Framework Description, which is available on line. An internal procedure was developed to explain and document in detail all steps to be taken in the decision tree.
The following documents are available via Umicore’s website:
- The Umicore Way
- Code of Conduct
- Umicore’s Sustainable Procurement Charter
- Umicore policy on “Responsible global supply chain of minerals from conflict-affected and high risk areas”
- Umicore’s Sustainable Procurement Framework for Cobalt (Framework Description)
1.2 Has Umicore set up an internal management structure to support its supply chain due diligence?
The Umicore Sustainable Procurement Framework for Cobalt defines the governance for Umicore’s due diligence practices and risk assessment for the cobalt supply chain.
The Sustainability team in the Umicore Supply and Refining department administers the application of the Framework including the screening of risks in the affected cobalt sourcing and trading regions.
A dedicated cobalt sustainability committee, referred to as the “Approval Committee”, ensures that the principles and guidelines of the Framework are adhered to. This Approval Committee has the responsibility to evaluate due diligence findings, mitigation actions and procurement decisions. The Approval Committee includes the Executive Vice-President of Umicore’s business group Energy & Surface Technologies, the Senior Vice-President of Environment, Health and Safety, the Vice-President Supply and Refining as well as the Sustainability Manager. The Committee has meetings on an ad hoc basis and at least twice per year.
The governance structure, the due diligence and the risk assessment principles, as stated in the Framework, were implemented within Umicore for the reporting year 2017.
Section 2: Identify and Assess Risks in the Cobalt Supply Chain
Compliance Statement
Umicore established processes and controls to assess risks in its cobalt supply chain. The management systems to respond to the identified risk were applied for the reporting year 2017.
2.1 Supply Chain Traceability: Has Umicore established a system of controls in order to ensure transparency over its cobalt supply chain?
Umicore has a process in place that ensures that transport documents are obtained and that transactional details are recorded.
This procurement data provides information on the source of the raw materials and allows Umicore to consolidate the incoming cobalt material into a “materiality overview” in order to provide a view of the quantities of cobalt procured during 2017.
Additionally, Umicore is able to identify the mines from which the procured cobalt material originates through a chain of custody documentation and an additional origin confirmation from suppliers that source from several mining locations.
Umicore maps its entire internal raw material flow, production processes and product flows for all cobalt products. As a result, Umicore has an overview for each end product linked to the suppliers and mining locations.
2.2 Suppliers Research: Does Umicore perform research on its suppliers to identify risks in its cobalt supply chain?
As a preliminary step in the selection of a new supplier, Umicore performs a high-level check on the background of the potential business partner and only pursues a further business relationship if no indications of unsustainable business practices (such as inhumane treatment, forced and child labor, bribery, corruption, artisanal mining) were identified. Since 2017, for potential suppliers that would contribute more than 1% weight to the total yearly cobalt supply, this is documented in a pre-sourcing due diligence check.
At the beginning of a business relationship with a new supplier, the due diligence and risk assessment procedures set out in the Framework are initiated by Umicore.
Umicore establishes a background check for all suppliers of raw materials of cobalt based upon a desktop review and its knowledge of the market and the supplier. The background check includes several topics:
- Identification and screening of the supplier’s mother company (structure, policies, sustainability reporting…)
- Information of the mining site (general description, technology, certificates, local initiatives…)
- Information and screening of the shareholders
- Information gathered by Umicore’s supply team during local visits (environmental performance, technology, markets, cobalt volumes…)
- Media screening of sustainability issues including human rights violations, social issues, corruption and health and safety issues.
The internal Information Documentation department carries out daily media monitoring of relevant topics related to cobalt sourcing and of Umicore’s suppliers. Information obtained is used to update the background checks. The background checks are reassessed annually (except for suppliers of recycling feed or non-recurrent purchases).
2.3 Risk Identification and Assessment: Does Umicore perform risk identification and assessment on suppliers in its cobalt supply chain?
In 2017, Umicore performed risk identification and assessments steps as described in Umicore’s Framework by applying the following steps:
- Red Flag Check
- Materiality Testing
- Plant Visits
- Orange Flag Check
- Risk Mapping
1. Red Flag Check
Umicore performs a red flag check on its suppliers based on the collected information in the background check and a market and desktop research. The Framework procedure provides dedicated questions and screening guidelines to facilitate this red flag screening. The red flags are:
- any form of torture, cruel, inhuman and degrading treatment or punishment;
- any form of forced or compulsory labor;
- any form of child labor;
- any form of bribery and corruption linked to cobalt operations;
- hand-picking and/or artisanal mining (as primary source);
- supplier is not willing to accept the principles stated in the Umicore Charter or does not have similar policies in place.
For new suppliers of cobalt raw materials, the red flag check occurs as the first step in the decision tree. For existing suppliers, the red flag checks are reassessed when new issues are alerted based on the continuous monitoring, or after plant visits. The existing suppliers are reviewed at least once per year.
During the reporting year 2017, Umicore performed the red flag checks on its suppliers. An overview of the red flag indications and follow-up actions can be found in Annex to this report.
2. Materiality Testing
During the materiality testing, the contribution of each supplier to the total cobalt supply is calculated. This analysis includes all the cobalt purchases for Umicore’s entities involved in cobalt transformation. Based on this exercise, a first risk estimation is performed. All suppliers of cobalt that contribute more than 1% weight to the total yearly cobalt supply (referred to as “material” suppliers) are assessed in the decision tree. In addition, this analysis ensures that the sum of the cobalt coming from “material” suppliers exceeds 95% of Umicore’s total yearly cobalt supply.
In 2017, the suppliers that were considered as “material” to Umicore represented in total 95.2% of the cobalt purchases.
For 2017, the cobalt from recycling sources accounted for 8.8% of total cobalt weight.
For suppliers assessed as “non-material”, the due diligence and risk assessment procedures stop at this stage of the decision tree.
3. Plant Visits
Plant visits are performed to monitor and evaluate the practices of all “material” suppliers (except for non-recurrent suppliers and recyclers). During the plant visits, a sustainable procurement checklist is filled out. The checklists and visit reports are used as input to the risk mapping and to update the suppliers’ background check. The frequency of the plant visits depends on the country risk of the supplier. Suppliers in countries with a high or medium/high country risk score are visited at least every two years. Suppliers in low/medium or low risk countries have to be visited every five years.
In the reporting year 2017, one supplier did not allow Umicore to visit its mine and refinery. Based on the supplier’s low country risk, evaluation of the public reporting on sustainability performance and the previous visit, the Approval Committee decided to continue sourcing from this supplier. The other plant visits were executed in line with the required frequency as indicated in the Framework guidelines.
4. Orange Flag Check
An orange flag screening is performed for “material” suppliers. The orange flag check is completed based on the information collected from reports of plant visits and from desktop research. For a new supplier, the orange flag check is performed once the visit checklist has been filled out. For existing suppliers, the orange flag checks are re-assessed following either an alert of new issues or following plant visits and at least once a year. The orange flags are:
- Hand-picking and/or artisanal mining (as a secondary source);
- Supplier does not have minimum required legal permits and certificates;
- Supplier does not have procedures in place to minimize environmental impacts;
- Supplier does not have procedures in place to ensure a healthy and safe working environment.
In 2017, Umicore performed the orange flag checks in line with its Framework. An overview of the orange flag indications and follow-up actions can be found in Annex to this report.
5. Risk Mapping
A risk mapping is performed for all “material” suppliers based on the supplier’s risk (including scoring for country risk, supplier relationship, regulatory environment and sustainability commitments) and impact (including volumes as well as financial and reputation impact). Based on the outcome of the risk mapping (Low, Low/Medium, Medium/High, High) the next steps include the self-assessment questionnaire and/or third-party audits. If any of these steps lead to the identification of evidence for red flags, the relationship with this supplier will be stopped.
For existing suppliers, the risk assessment is re-evaluated ad hoc (if there are indications that a supplier’s performance has changed) or at latest every 3 years.
During the reporting year 2017, the risk mapping was performed for all suppliers and appropriate steps were taken according to the suppliers’ risk classification.
2.4 Risk Mitigation: Does Umicore perform risk mitigation actions as described in its “Sustainable Procurement Framework for Cobalt”?
Based on the outcome of the risk mapping (Low, Low/Medium, Medium/High, High) Umicore engages with the supplier in an appropriate follow-up and, if required, mitigation plan. The evolution of the mitigation plan is closely followed and if necessary checked during the next plant visits and/or (targeted) supplier reviews.
In 2017, two Approval Committee meetings reviewed identified risks and their subsequent follow-up measures.
Section 3: Design and Implement a Strategy to respond to Identified Risks
Compliance Statement
In 2017, Umicore effectively responded to identified risks.
3.1 Comments and Demonstration of Compliance
Umicore’s Framework ensures that identified risks are addressed and that follow-up on red and orange flag indications is performed, including the investigation of the indications, out-reach to stakeholders and discussion with the Approval Committee. All indications for red and orange flags that appeared in 2017, were investigated and evaluated by the Approval Committee. An overview of the indications and follow-up can be found in the Annex of this report.
Section 4: Arrange for an Independent Third-party Audit of Supply Chain Due Diligence
Compliance Statement
Umicore arranged for an independent third-party audit of its due diligence performance of cobalt procurement for the reporting year 2017.
4.1 Comments and Demonstration of Compliance
PwC Bedrijfsrevisoren bcvba/PwC Reviseurs d’Entreprises sccrl [1] provided their independent ISAE 3000 limited assurance report on this Compliance Report in respect of the activities undertaken by Umicore during the year 2017 to demonstrate compliance with Umicore’s Sustainable Procurement Framework for Cobalt. The limited assurance report is available to its customers and stakeholders upon request.
Section 5: Report on Supply Chain Due Diligence
Compliance Statement
For the year 2017, Umicore will publicly report on the implementation and adherence to the supply chain due diligence processes and controls that are set out in its Sustainable Procurement Framework for Cobalt.
5.1 Comments and Demonstration of Compliance
The Compliance Report is Umicore’s report on the due diligence of its cobalt supply chain. The report will be available on line as part of the company’s Annual Report for 2017. Relevant policies are publicly available, including The Umicore Way, Sustainable Procurement Charter, Code of Conduct, the Sustainable Procurement Framework for Cobalt and policy on Responsible global supply chain of minerals from conflict-affected and high risk areas.
Additionally, the limited assurance report by PwC Bedrijfsrevisoren bcvba/PwC Reviseurs d’Entreprises sccrl will be available on request to Umicore’s customers and stakeholders.
Management Conclusion
Umicore implemented effective management systems, procedures, processes and practices regarding its cobalt sourcing activities in line with the principles stated in the Sustainable Procurement Framework for Cobalt for the reporting year 2017. Umicore implemented systems and procedures to align the Framework with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD, 2013) in 2017. By performing due diligence practices on its cobalt supply chain, receiving third-party assurance, and publicly reporting, Umicore adheres to the five steps for risk-based due diligence of the OECD Guidance.
Umicore acknowledges that its work is never done and is committed to continuous improvement. The corrective actions identified in the Cobalt Due Diligence Compliance Report 2016 have been implemented and monitored in the course of 2017.
Other report comments
If users of this report wish to provide any feedback to Umicore, they can contact Umicore’s Sustainability Manager, Jonas De Schaepmeester (jonas.deschaepmeester@eu.umicore.com).
[1] PwC has performed the above mentioned engagement and report for the Umicore Sustainable Framework for Cobalt solely for use by Umicore CSM and RBM under a contract agreed upon with Umicore SA. PwC does not have any obligation towards any other person; PwC does not have nor accept any liability or responsibility (contractual, extra-contractual or otherwise) towards such other person.
Annex: Red/Orange Flag Indication and Follow-up Actions 2017
| Red/Orange Flag | Indication Description | Supplier Materiality | Supplier Country Risk | Follow-up Action | Status |
| Red Flag Indication: bribery and corruption linked to cobalt operations | Indications of bribery linked to the acquisition of supplier’s mineral assets | Material | High | An official investigation concerning the allegations of bribery in a case dating from 2010 is still pending. Umicore is awaiting the conclusions by official authorities to determine its position against this red flag indication. The Approval Committee decided to continue the business relation with this supplier in the meantime. | Open |
| Red Flag Indication: bribery and corruption linked to cobalt operations | Indications of fraud, bribery and corruption linked to the acquisition of supplier’s mineral assets | Material | High | Umicore reviewed the allegation and contacted the supplier for clarifications. No legal proceedings are pursued against this supplier. Umicore’s review made clear that the supplier is not involved in this case and therefore wrongly accused. The Approval Committee decided to close this case and continue the business relationship. | Closed |
| Red Flag Indication: bribery and corruption linked to cobalt operations | Indications of fraud, bribery and corruption linked to the acquisition of supplier’s mineral assets | Material | High | Allegations of bribery are made by media, however there is currently no investigation by official authorities. Umicore cannot make judgements based on the available information. Umicore will continue to monitor this case and review new information in order to make its assessment. In the meantime, the business relation with this supplier continues. | Open |
| Red Flag Indication: torture, cruel, inhuman and degrading treatment or punishment | Indications that security forces do not respect human rights | Material | High | In 2017, this was no longer an active supplier to Umicore. Umicore is committed to follow-up on this indication (including site-visit) when it becomes again an active supplier. | Open |
| Orange Flag Indication: hand-picking and/or artisanal mining (as a secondary source) | Indication that this supplier is using artisanal mined cobalt raw materials, alongside the materials for Umicore products | Material | Medium/High | This supplier is treating the raw materials that Umicore is delivering for its own products. The materials are produced in dedicated lines and therefore, there is no mixing of raw materials. This is not considered as a risk. Umicore discussed this topic with the supplier and was informed about the mitigation actions that were taken. Based on the assessment of the mitigation measures, the Approval Committee decided to close this case and continue the business relation with this supplier. |
Closed |
| Orange Flag Indication: healthy and safe working environment | A media report indicated the occurrence of a fatal incident in the supplier’s mine. This is an indication for unsafe working conditions | Immaterial | Low/Medium | Umicore discussed this topic with the supplier. Umicore evaluated the mitigation actions taken by this supplier and it is confident that effective steps have been taken to avoid similar incidents in future. The Approval Committee concluded that there are no indications that this supplier does not guarantee safe working conditions to its employees. The Approval Committee decided to close this case and continue the business relation with this supplier. | Closed |
| Orange Flag Indication: healthy and safe working environment | A media report indicated the occurrence of a fatal accident in the supplier’s processing plant. This is an indication for unsafe working conditions | Material | High | Umicore visited this supplier to discuss the incident and to evaluate mitigation actions that were taken. Umicore concluded that effective steps were taken and that the supplier is working at the highest standards of occupational health and safety. Based on this information, the Approval Committee decided to continue the business relationship with this supplier. | Closed |
| Orange Flag Indication: healthy and safe working environment | A media report indicated the occurrence of a fatal accident in a part of the supplier’s processing plant. This is an indication for unsafe working conditions | Material | Low | Umicore will discuss this topic with the supplier. Umicore is committed to evaluate the mitigation actions taken by this supplier to assure that effective steps will be taken to avoid similar incidents happening. Based on its assessment of the accident, the Approval Committee decided to continue the business relationship with this supplier in the meantime. | Open |
| Orange Flag Indication: healthy and safe working environment | A media report indicated the occurrence of a fatal incident in the supplier’s mine. This is an indication for unsafe working conditions | Immaterial | Low | Umicore will discuss this topic with the supplier. Umicore is committed to follow-up on this indication and make an assessment based on the available information. Based on its assessment of the accident, the Approval Committee decided to continue the business relationship with this supplier in the meantime. |
Open
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