Supply chain

Sustainable procurement

We have business relationships with suppliers in more than 100 countries. When selecting suppliers, we consider not only commercial criteria such as quality, price and availability, but also aspects such as safety and the environment. 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 2015, we spent around EUR 10.5 billion (2014: EUR 11.6 billion) on purchasing goods and services worldwide. Of this amount, approximately EUR 9.0 billion related to the Gases Division and approximately EUR 1.5 billion to the Engineering Division. Around 78 percent of the total was spent in OECD countries. We purchase about 80 percent of the products and services 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. This sets out minimum requirements for safety, environmental protection, labour rights and human rights, and corporate integrity. Our new suppliers automatically sign up to the Code of Conduct and there has been a continual process of ensuring that those suppliers with whom contracts were signed prior to 2013 also agree to be bound by the Code. By the end of 2015, more than three quarters of our strategic suppliers had signed up to the Code. During the reporting year, we provided training on the implementation of the Code of Conduct for Suppliers to around 20 percent of employees working in procurement across the Group. More training is planned for 2016.

Evaluating our suppliers

We conduct random checks to ensure that our suppliers comply with the guidelines set out in our Code of Conduct. We focus in particular on suppliers in higher-risk areas, such as environmental protection, safety and social responsibility.

In 2015, we reviewed just under 1,000 suppliers to ensure that they complied with our guidance on environmental and safety issues and other issues relating to sustainability. We investigate any breaches of our requirements by our suppliers. When conducting audits of construction sites during the reporting year, we identified around 200 deviations from the Code, some of which related for example to work permit procedures and construction traffic. We then worked together with the contractors affected to devise measures to improve the situation and to monitor their implementation. Six cases were reported in 2015 via our Integrity Line relating solely to supplier relationships. In one case, the supplier relationship was terminated.

We also involve selected suppliers in the training we deliver on safety and environmental management. More than 1,000 employees of contractors, for example, took part in our global initiative, which aims to strengthen awareness of safety risks on construction sites in our Engineering Division. Drivers who are contractors as well as our own Linde drivers regularly participate in driver education programmes and training. Measures such as these are designed to ensure that suppliers comply with our requirements and that we help our suppliers to improve their performance.

In 2015, we worked together with 25 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 was to identify any potential risks and to remedy any weaknesses in procurement processes. This led to some suppliers introducing back-up systems for critical processes and increasing inventory levels of finished products and critical equipment parts.

In addition, we invited selected Chinese suppliers once again in 2015 to a workshop focusing on the importance of sustainability for successful business relationships.