I recently had a conversation with one of our customers. He wanted to know what we can do to ensure that our products are manufactured responsibly through their entire lifecycle. At first, they did not believe it was possible and continued to challenge me: Although you can supervise your own manufacturing process, how do you identify risks at the very beginning of long supply chains?
I had to say that it’s not easy. Responsibility and monitoring is a long-term commitment and requires constant alertness. I asked Ilkka Nurmi, who is in charge of UPM Sourcing, whether he could recall when this issue was first brought up and what, in his opinion, is responsible sourcing.
“UPM purchases raw materials and products from nearly every continent. We want to know their origin and to make sure that they are produced in a sustainable manner. In other words, we want to make sure that the occupational safety of the employees has been ensured and that environmental impacts are under control. Naturally, the products themselves must also be safe,” Ilkka says, and adds that for UPM the work to ensure this started years ago. For example, the pulp supply chain right the way to the origin of the wood has been monitored since the 1990s. However, there is always something new to learn along the way.
Steps and trends
lkka and I also thought over the steps taken through the years. The first step was to establish the ways of working and guidelines, and to set them as requirements for all our suppliers. Furthermore, minimum requirements for financial, social and environmental responsibility were defined. Financial responsibility means, among other things, risk management and environmental responsibility includes the processing waste, whereas social responsibility involves issues like child labour and occupational safety.
The next step was to put these requirements together with the supplier selection process. At the same time, we established audit procedures where internal company representatives or assigned experts ensure on-site that the supplier is acting according to requirements.
Ilkka also highlighted the issues that various shareholders have taken up over the years. At the beginning, major attention was paid to wood as the quantitatively most important raw material. The aim was to ensure that the wood was of legal origin, that the forests had been managed in a sustainable manner, and that there was no harmful impact on biodiversity. Tools were developed to support the process, such as monitoring the origin of wood and forest certification. Since then, interest has expanded to other parts of the supply chain.
The risks are multidimensional: Which country, what product and how complex supply chain?
In 2013, we initiated a survey about human rights risks associated with the company’s operations and supply chains. The risks are related to, among other things, working conditions, voluntariness of work/forced labour, using hazardous materials and corruption. Based on the findings, we are able to identify risks better and to target the audits to right focus areas.
The challenges in sourcing keep increasing, which is why we need to do the work persistently and consciously. Counting all products and services, UPM has around 60,000 suppliers in about a hundred countries. Supply chains are long and not always very transparent. In a risk situation, our options are to require the supplier to improve its operations and to follow up on their progress, or in more serious situations, to terminate the contract and change the supplier. Responsible sourcing calls for both professional supplier management and co-operation between the different professionals in UPM.
Responsible sourcing means staying awake
UPM uses a significant amount of wood, pulp, recycled fibre, chemicals, fillers, pigments and other raw materials in the manufacturing process. And again, keeping the production running requires maintenance services and spare parts. Transportation is needed to move the products to customers and IT systems are needed for processing orders. For all that, staff are trained and informational materials are printed. All these need to be sourced.
UPM is committed to responsible sourcing and expects the same level of commitment and responsibility from suppliers. I asked Ilkka, what would be the key to improving operations? “I believe that truly responsible sourcing happens only in collaboration with the suppliers,” he said.
UPM has strengthened its collaboration with its suppliers, and for several raw materials the sourcing process is assessed to even further down the supply chain. UPM is currently participating to the selection of raw material suppliers for its pigment supplier in Asia. With joint audits, companies aims to ensure the quality of the raw materials, environmentally sound operations and acceptable working conditions.
Often just knowing the environmental and social impact of sourcing leads to improvements. Collaboration with suppliers has increased UPM’s understanding about product life cycles and ways to decrease the negative effects. In long-term supplier relations, trust increases transparency, and development can be monitored, for example, with different key performance indicators. One could summarise all this: responsible sourcing is challenging and requires staying constantly awake!
Environment and Responsibility, UPM
Senior Vice President