Cooperation with suppliers
In its relations with trading partners, Grupa LOTOS adheres to the principles of honest competition, openness to their expectations, and appreciation of people’s intellectual capital and competences. The LOTOS Group’s mission and system of values incorporate the principles of ethical, responsible and transparent business.
By trading with due respect for the law and a sense of responsibility for the consequences of its actions, the LOTOS Group:
- Promotes attitudes based on a strong ethical culture and seeks to continuously improve of that culture, both internally and in relations with its external trading partners,
- Makes sure that employee rights are respected and that the employees are guaranteed safe and healthy working conditions,
- Seeks to reduce its adverse environmental impact through rational use of resources and use of environmentally friendly technological solutions,
- Remains objective and impartial in business relations, trying to avoid conflicts of interest and prevent malpractice.
In 2015, our key suppliers whose supplies accounted for more than 10% of the Group’s total revenue were VITOL SA of Switzerland, Rosneft Oil Company of Russia, and Tatneft Europe AG of Switzerland.
Their shares in Grupa LOTOS’ purchases were 26.00%, 18.33%, and 15.79%, respectively.
Supplier selection and evaluation criteria
In 2015, as in the previous years, the LOTOS Group sought to ensure that calls for offer in every contractor selection process, and all contracts entered into with the existing or new suppliers, contained CSR clauses pertaining to:
- Rules and standards of conduct,
- Conflicts of interests,
- Anti-bribery and corruption,
- Environmental protection,
- Respect for human rights,
- Social impacts (social integration measures).
All LOTOS Group companies must obligatorily use these clauses in contracts with suppliers.
Aware of the importance of working with a local supplier base, we strive to partner with companies which offer the competencies we expect and meet our standards of cooperation. We seek to minimize the negative impact of fossil fuels in transport by sourcing 72% of the biocomponents (bioethanol and FAME) we use to produce our fuels from local suppliers.
LOTOS Groups’ spending on local suppliers
|Company name||Total spending on supplier products/services||Spending on local supplier products/services||Share of spending on local supplier products/services in total spending on products/services|
- The data does not account for settlements with employees, tax settlements related to VAT, excise duty and income tax, settlements with the Social Insurance Institution, customs duties, stockholding fee, local taxes and charges, and payments for perpetual usufruct of land.
- Grupa LOTOS’ domestic spending includes purchases from related entities (e.g. LOTOS Petrobaltic, LOTOS Kolej, LOTOS Serwis, LOTOS Straż, LOTOS Ochrona, LOTOS Lab, etc.)
- It needs to be emphasized, though, that the products which are essential to the Group’s operations and represent the largest proportion of its procurement costs are not available in sufficient quantities in the local market understood as the whole of Poland (crude oil, petroleum products and specialist equipment), this being the reason for the low share of local spending in total spending.
Our procurement practices
The LOTOS Group companies (excluding LOTOS Petrobaltic) are not required to conduct their tenders in accordance with the provisions of the Public Procurement Act. Nevertheless, we have decided to internally impose a certain order in this respect and to internally regulate our procurement processes. We have put in place certain instructions, procedures and directives the purpose of which is to enhance the legal security and efficiency of our procurement processes. Furthermore, we have introduced standardized contract forms to facilitate and optimize the process of entering into and pursuing business relationships.
In accordance with our internal procedure, each contract must contain corporate social responsibility clauses. The obligation to include such clauses in their contracts has also been imposed on other LOTOS Group companies by way of a relevant directive.
It is important to us to make every supplier of goods or services aware of our priorities with respect to minimizing the adverse impact of our business on the environment.
As part of the Integrated Management System (IMS) we have implemented and certified, we have in place a formalized procedure (applied at every stage of the procurement process) to analyse energy efficiency of solutions we select for our new projects or upgrades and of goods we intend to purchase (e.g. white appliances, car leases).
Our service providers are contractually obligated to ensure proper management of waste generated during the work they perform for us. This also applies to contractors and service providers in our key EFRA Project.
As part of its trading partner selection processes, Grupa LOTOS requires that all potential suppliers involved provide documents certifying that they pay the required social insurance contributions for their employees. In 2015, 100% of our trading partners met this requirement.
Contracts signed by the LOTOS Group contain OHS clauses whereby employees are guaranteed appropriate working and resting conditions, clauses concerning rules and standards of conduct, ethics-related clauses, and clauses concerning respect for human rights.
How we evaluate our suppliers
Supplier audits provide us with information on the degree to which our suppliers meet the quality requirements, as well as occupational safety and environmental protection standards, which are high on our list of priorities. With these audits we can be sure that all work is conducted in a safe manner, and we are also able to identify areas where improvement is needed.
We realize that satisfying our expectations may be a demanding task for suppliers, and therefore we provide them with detailed and accurate information on all audited areas.
Plans for the future
At Grupa LOTOS, we are currently embarking on an analysis of the organization’s indirect environmental impact; the analysis will also cover our suppliers. We hope that the methodology we develop and the analysis we will carry out will provide us with a useful insight into our suppliers’ environmental impacts. As a result of these efforts, we should be able to more effectively manage the environmental impact across our entire supply chain.
In 2016, we intend to ask every new supplier to fill out a survey containing questions on human rights, employment policies, and responsible business management. In this way we want to check whether our new contractors’ value systems and business conduct vision are consistent with the LOTOS Group’s vision and CSR principles.
Rules of cooperation that are clear for all
We make every effort to ensure that the standards and rules of conduct we impose are comprehensible to the trading partners we work or want to work with. This is why we have published a catalogue of CSR clauses and other documents on our website for stakeholders.
The published documents include a Declaration of Cooperation with Trading Partners, an electronic version of the Code of Ethics, the Catalogue of CSR Clauses, the Policy for Counteracting Malpractice, and the current Corporate Social Responsibility Strategy. Other materials published on the website include standard contract forms most frequently used by the LOTOS Group that suppliers may use in their business.
Activities undertaken by the LOTOS Group as part of the efforts to evaluate suppliers’ employment practices, respect for human rights, or impacts on local communities also include regular meetings with the trading partners. During such meetings we present our principles and standards; by exchanging experience we improve their knowledge on responsible business management, thus also contributing to the consolidation of good practice in the market.
We want to work only with partners who make every effort to ensure compliance with the law, and therefore we communicate our requirements to potential suppliers already at the stage of announcing a call for offers.
Grupa LOTOS operates an electronic Procurement Platform. The platform is an innovative tool supporting the procurement process in its vital aspects where great precision and the necessity to document taken steps are needed.
With the Procurement Platform we are able to shorten the time needed to announce calls for offers and reduce costs of tenders. The system also helps considerably speed up the preparation of various types of reports.