Supply chain

Sustainable procurement

When selecting suppliers, we consider not only commercial criteria such as quality, price and availability, but also aspects such as safety and environmental protection. We maintain business relationships with suppliers in more than 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 plants, as well as equipment and consumables for our Healthcare business. In 2014, we spent around EUR 11.6 billion (2013: around EUR 11.1 billion) on purchasing goods and services worldwide. Of this amount, approximately EUR 9.6 billion related to the Gases Division and approximately EUR 2.0 billion to the Engineering Division. Around 73 percent of the total was spent in OECD countries. We purchase approximately 70 percent of our goods and services on average locally in the countries where they are needed. This cuts down the distances travelled and reduces costs and emissions. Working with local companies also enables us to support the local economy.

Global standards

In 2013, we introduced a global Code of Conduct for Suppliers, which defines minimum standards for safety, environmental protection, labour rights and human rights, as well as ethical business practices. By the end of 2014, around 80 percent of our strategic suppliers had signed up to the Code of Conduct. We also arranged for a risk analysis to be conducted for our supply chain. The analysis focused on country risk and product-specific risk. In 2014, based on the analysis, we requested around 100 suppliers in higher-risk areas to provide us with information about their sustainability performance. Once we have evaluated the results, we plan to introduce further measures.

Monitoring suppliers

Supplier reviews are conducted primarily in our Engineering Division, due to the specific requirements which apply to that division, especially on construction sites. In the course of our supplier approval process, we examine whether the various contractors have the necessary procedures in place to meet these requirements. In 2014, we carried out safety and environmental evaluations of around 300 contractors involved in our construction sites. We investigate any breaches of the Group’s requirements. During the year, five cases concerning supplier relationships were reported via the Group’s Integrity Line. In none of these five cases did the subsequent investigation result in the termination of the business relationship.

Incentives for suppliers

We also involve our suppliers in our own safety and environmental management processes. The aim is to ensure that suppliers comply with our requirements and that we help our suppliers to improve their performance. In 2014, we provided training on safety issues in the management of service providers at more than 500 sites which deal with contractors. In addition, we invited selected Chinese suppliers during the year to a workshop focusing on the importance of sustainability for successful business relationships. In 2015, we are planning to work together with around 50 selected suppliers to develop business continuity plans. These should ensure that the best possible way is found to resume business operations following unexpected events such as natural disasters. The aim is to identify potential risks and to remedy any weaknesses in procurement processes.