Procurement heads towards a sustainable supply chain

With 15 years on the Dow Jones Sustainability World Index, a spot on “Fortune” magazine’s list of Companies that Change the World, and recognition by InfluenceMap as one of the most active utilities in the fight against climate change, our Group is regularly at the top of any ranking of the world’s most sustainable companies. In 2019, a series of accolades have also attested to Enel’s leadership in the field of sustainable Procurement, acknowledging the progress we have achieved on this front.

Procurement at the centre of transition

Making business sustainable is an essential requisite to face the challenges of the future. In line with this vision, Procurement at Enel today means sustainable supply chains, circular economy, digital innovation and sharing our values and goals with suppliers. “Our department is experiencing a profound change,” explains Salvatore Bernabei, Head of Global Procurement at Enel Group, “in which our role and the way we interact with stakeholders are being redefined in terms of a partnership, geared towards creating value.”

The transformation is inspired by the Group’s Open Power vision: openness towards both the inside and the outside of the company, in order to select the best innovative ideas. Bernabei stresses that Procurement today “is one of the crucial tools Enel uses to pursue its strategic goals: to become a genuinely data-driven company and a leader in the transition towards a sustainable energy model.” Which of course ties in with the UN’s Sustainable Development Goals (SDGs) Enel has committed to support.

Towards a sustainable supply chain

The supply chain’s sustainability is monitored from its earliest phases thanks to a Supplier qualification system that allows for the rigorous selection of companies entering the procurement process. The system evaluates aspects concerning health and safety, environmental impact, human rights and business ethics, in addition to technical, economic, financial and legal criteria as well as integrity and reputation. In recent years, health, people’s safety and environmental impact in particular have been increasingly integrated into every phase of the Procurement process – for example, by mapping all trade categories into classes with varying levels of H&S and environmental risk. Furthermore, a single contractual document (HSE Terms) has been drafted to clarify suppliers’ obligations in relation to health and safety issues.

As part of its process for tenders, our Group has defined a series of winning elements known as “K for sustainability” factors, which relate to requisites linked to social, environmental, health, safety and circular economy aspects, and can be applied in assessing offers. Finally, the new Supplier Performance Management process (an evolution of the previous Vendor Rating) aims to continuously evaluate and monitor suppliers’ performances also in terms of innovation and sustainability, in order to ensure constant improvement.

The K factors

The “K for sustainability” factors are organised in a library that is divided into levels – Environment, Health and Safety, Social, Circular Economy – made available to all of our global and national procurement departments. Some of the environmental K factors a supplier may have are, for example, an assessment of its carbon footprint (CO2 equivalent in accordance with ISO 14067), mitigating actions to curtail it, and the use of low-emission vehicles. Among the K factors for health, safety and social responsibility are the commitment to developing socially useful projects, the employment of people who trained under programmes sponsored by Enel, and having hired candidates who were unemployed, made redundant or at their first job.

Our focus on social responsibility is confirmed by the social clause applied in tenders that require substantial manpower, allowing for personnel to remain employed even if the procurement contract changes. The circular economy K factors include the participation in projects for the reuse of products or their components, a “Sustainable textile production” certification, and the use of sustainable packaging.

From linear to circular economy

We also decided our Procurement process should integrate circular economy, a business model with huge potential, capable of generating competitiveness and of combining innovation and sustainability.

The Circular Procurement strategy was launched in 2018 with the aim of purchasing goods, works and services that strive to reduce or avoid environmental impact and waste production during their life cycle.

The “Circular Economy Initiative for Suppliers’ Engagement” project involves around 200 suppliers worldwide in 12 trade categories, which today represent over 60% of our expenditure for materials. The initiative is based on the adoption of the Environmental Product Declaration (EPD), with the aim of objectively quantifying, certifying and communicating the impact generated by supplies over their entire life cycle (water consumption, CO2 emissions, impact on soil etc.). Furthermore, using an IT tool allows for data aggregation and the definition of industry benchmarks and targets for improvement.

This project enables Enel to measure the impact of its business on the planet’s resources and to mitigate such impact also by engaging suppliers in actions to assess and improve the environmental efficiency of the production cycle.

This is a first step towards the end goal of applying sustainability all across the value chain, from initial design to reuse, finally giving materials a second life and recycling them. In other words, it’s “Circularity by design”: a concept Enel has already started to implement with success, also thanks to the many tools that Open Innovability provides suppliers, startups and all interested stakeholders.

Enel receives recognition

The effectiveness of our model has been recognised with numerous awards and accolades in 2019. Our company was the only utility to qualify for the final round of London’s World Procurement Awards (with the “Procurement Transformation” project). We won the most prestigious Italian prize in the field, The Procurement Award 2019, in two categories: Best Negotiation Practices and Procurement Skills Development. We won international awards such as the CPO Master Awards organised by “Business International”, an EIPM Peter Kraljic Award and, finally, the Corporate Stars Startup Procurement Award for building outstanding relationships with the most innovative startups. This only confirms what Bernabei has defined as “our shared commitment with our industry and suppliers to innovate and redesign all of our procurement processes at a global level, in order to maximise value for all stakeholders.”