Sustainable procurement

When selecting suppliers, we consider not only commercial criteria such as quality, price and availability, but also other aspects of sustainability. These include safety, environmental protection, labour, human rights and ethical business practices. Linde maintains business relationships with more than 100,000 suppliers in over 100 countries. The most important items we purchase include energy, gas cylinders and valves, tanks and tank equipment, vehicles, IT products, services and components for production sites, as well as equipment and consumables for the Healthcare business. In 2013, we purchased around EUR 11.1 billion worth of products and services worldwide (2012: around EUR 10.9 billion). Of this amount, approximately EUR 9.2 billion related to the Gases Division and approximately EUR 1.9 billion to the Engineering Division. More than 65 percent of the total was spent in OECD countries. In non-OECD countries, around 17 percent of the total in the Gases Division was spent in China, South Africa and Brazil. We purchase most of our products and services locally in the country in which they are required. This reduces the transport distances, resulting in cost savings and lower environmental emissions. Working with local companies also enables us to support the local economy.

Risk assessments

In 2013, we commissioned an external analysis of sustainability risks in the supply chain, focusing on country risk and product risk. We will use the findings as a basis to further develop the procedures we use for the selection and evaluation of suppliers. In 2014, we plan to conduct a global analysis of the supply chain with regard to conflict minerals that are listed in the US Dodd-Frank Act.

Sustainability standards

Our Code of Ethics requires that Linde employees maintain fair and honest working relationships with suppliers. At the same time, we expect our suppliers to adhere to prescribed standards. In 2013, the Executive Board of Linde AG approved a new global Code of Conduct for Suppliers that defines standards for safety, environmental protection and labour and human rights as well as ethical business practices. The Code of Conduct is based in particular on the principles of the UN Global Compact and the core labour standards set down by the International Labour Organisation (ILO). Compliance with the principles outlined in the Code of Conduct is a prerequisite for contractors looking to work with Linde. The Code of Conduct is part of our contractual agreement with suppliers worldwide. At Linde Engineering, for example, all new suppliers were required to comply with the Code of Conduct in the reporting year. Overall in the reporting year, 46 percent of our Gases and Engineering Divisions’ strategic suppliers were committed to comply with the Code of Conduct for Suppliers.

Regional and business-specific initiatives for supply-chain sustainability support the principles of the Code of Conduct for Suppliers. In South Africa, for example, Linde is a member of the Supplier Development Council, a corporate initiative that aims to encourage diversity along the supply chain.

Monitoring suppliers

We reserve the right to check whether suppliers comply with the standards set forth in the Code of Conduct. We use various tools to evaluate our suppliers, such as supplier self-assessments and audits. This is especially relevant for suppliers that are active in regions or product areas for which an increased risk has been identified. Along with the introduction of the new Code of Conduct for Suppliers, we have also continued to develop the requirements for audits of suppliers for our gases business that take into account quality standards as well as requirements regarding safety, environmental protection, labour standards and compliance. In 2013, the adapted audit catalogue was used for the first in time in several European countries, Brazil and the US. At Linde Engineering, 32 suppliers were audited in the reporting year. The principles of the UN Global Compact were an important part of these audits.

46%

of our Gases and Engineering Divisions’ strategic suppliers committed to comply with the Code of Conduct for Suppliers

Employees as well as suppliers, customers and other stakeholders can report violations of laws and our guidelines to our reporting system, the Linde Integrity Line. Three new cases involving suppliers were reported in 2013. If allegations of misconduct are substantiated, we work with the suppliers in question to define measures aimed at improvement. We reserve the right to terminate business relationships in the event of serious violations and/or if suppliers refuse to remedy the shortcomings. Investigations into Integrity Line reports led to the termination of supplier relationships in a small number of cases in the reporting year.

Training and incentives for suppliers

We include contractors in our environmental and safety management system. One example is the driver safety training we provide to the contractors who transport Linde gases. In 2013, for instance, we trained some 380 suppliers in India on topics such as process safety and fire protection. Another focus area for our cooperation with suppliers is the reduction of fuel and CO2 emissions associated with transportation.

Raising staff awareness

In 2013, we held training sessions on the implementation of the new Code of Conduct for Suppliers for procurement managers. We also set up a new information portal on supply chain sustainability on our company intranet.