Impact, risk and opportunity management
S2-1 – Policies related to value chain workers
thyssenkrupp is committed to complying with recognized international sustainability standards, which concern social responsibility alongside good corporate governance and environmental due diligence. To minimize negative impacts on workers in the supply chain, we have established a groupwide policy for the compliance with and implementation of human rights and environmental due diligence obligations. Overarching information on the policy for human rights and environmental due diligence obligations can be found in the section headed “ESRS E2 Pollution.”
The policy is aimed at implementing the statutory requirements of the LkSG and of internationally recognized frameworks such as the UNGPs, the ILO Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprises. Violations of the aforementioned conventions that were identified in the reporting year are described in subsection “S2-4.”
The human and environmental rights anchored in the policy cover the material issues for thyssenkrupp that were identified in the materiality assessment: child labor, forced labor and trafficking in human beings, occupational safety and health, freedom of association, adequate wages and working time, discrimination and unequal treatment, the protection of free speech and privacy, land theft, the use of contractors and environmental obligations.
The policy identifies groupwide risk management processes that are used to identify, assess and reduce human rights and environmental risks within thyssenkrupp’s supply chains. We determine the risk for each supplier on the basis of a systematic risk analysis that takes account of the severity and reversibility of the risks and our degree of influence. The suppliers are assigned to an SCA (Supply Chain Act) risk category defined by thyssenkrupp. Further information can be found in subsection “S2-4.” The risks identified serve as the basis for preventive action that we take to minimize the potential negative human rights or environmental impacts on workers in the supply chain. The policy requires that group companies that identify a human rights or environmental violation initiate appropriate action to remedy problems and concerns and minimize their impacts. Violations can be identified through various sources and reported via various channels, including our publicly accessible whistleblower system. This accessible system is available to all persons, those affected or other third parties worldwide. Further information can be found in subsection “S2-3.”
The thyssenkrupp Supplier Code of Conduct (SCoC) is an integral element of our policy on compliance with and implementation of human rights and environmental due diligence obligations and formulates the requirements derived therefrom that we make of our suppliers. The SCoC specifies respect for human rights and compliance with fundamental labor standards; it must be recognized by our suppliers. In particular, we expect suppliers to exclude child labor, forced labor and trafficking in human beings and to ensure a non-discriminatory working environment and fair working conditions, i.e., adequate wages, working time and safety standards. Environmental protection is also a central component of the SCoC. Our suppliers are required to comply with applicable environmental regulations, reduce emissions, use resources responsibly and minimize the risks associated with handling hazardous substances. A further focus is integrity in commercial transactions. thyssenkrupp requires its suppliers to comply with all applicable laws, especially those relating to corruption prevention, antitrust and fair competition, data protection, anti-money laundering, trade compliance and the handling of conflicts of interest. We view transparent, comprehensible and ethically responsible business practices to be a condition for long-term cooperation.
We have developed the policy without an overarching and systematic approach to direct participation by stakeholder groups. However, the content was prepared in collaboration with various internal departments such as the Sustainability department in Purchasing and the Legal department. We also consulted other stakeholders such as the European Works Council, the Group Works Council, the IG Metall trade union and the world confederation of industrial trade unions. The policy design and the actions derived from it also took account of the interests of workers in the supply chain canvassed via interviews during audits or indirectly via thyssenkrupp’s involvement in initiatives such as econsense or the German Institute for Human Rights. We also draw on the complaints we receive as a way of including the perspectives of those affected in our SCA risk management system. The SCA risk management system was reviewed by an external law firm and assessed as appropriate.
At present, securing the jobs of workers in the value chain is not part of a policy. Although our double materiality assessment identified this issue as a potential negative impact, we currently have no specific indications of any actual violations or other problem cases.
S2-2 – Processes for engaging with value chain workers about impacts
thyssenkrupp is committed to its responsibility as a fair employer. This means that we take our social responsibility seriously and also expect our suppliers and business partners to comply with certain principles and standards. Clearly defined minimum standards are necessary to safeguard these values. For this reason, thyssenkrupp has signed the IFA on respect for human rights and compliance with minimum labor standards. In addition to recognizing the ILO Core Labor Standards and the Universal Declaration of Human Rights, the IFA covers principles for occupational safety and health, options for professional and personal development, the right to adequate compensation, a ban on child and forced labor and a ban on all forms of discrimination.
Our approach to our responsibility is not only a feature of our own corporate culture. As a fixed element of our relationships with suppliers, we also expect them to take a corresponding approach to respecting human rights and environmental concerns. Our expectations are contained in our SCoC (see previous subsection “S2-1”). Its implementation is reviewed by external auditors in the context of random supplier audits. When selecting the suppliers for audit, group companies should give particular priority to those suppliers with elevated risk potential. A central aspect of the audit is interviews with the supplier’s workers. In this way, we gain direct insights into their perspectives as well as potential and actual negative impacts. The group companies must then use targeted actions to implement and monitor any potential for improvement identified in this way. The actions form an active part of our SCA risk management.
Employees in our value chain can use the publicly accessible complaints procedure in accordance with the LkSG as a reporting and communication channel (see also subsection “S2-3”). In this way, they can submit information on actual or potential human rights or environmental violations anywhere in our value chain. In the course of investigating a complaint, we review the case and contact the person affected to enable us to properly and transparently clarify the situation by way of direct dialog. The Chief Compliance Officer reviews the effectiveness of the complaints procedure once yearly and reports the findings to the Executive Board of thyssenkrupp AG. If appropriate, workers should be questioned during supplier audits to establish whether they are familiar with the complaints procedure and have understood its various steps.
In addition to the direct relationships with our suppliers, thyssenkrupp is engaged in initiatives to improve global standards and promote human rights principles. Examples of this are our participation in the econsense company network and in working groups of the German Institute for Human Rights. Our participation in these initiatives enables us to indirectly capture the interests and perspectives of workers in the supply chain and integrate them systematically in our policies and actions.
Beyond this, thyssenkrupp currently has no uniform, cross-business and systematic process aimed at capturing the perspectives of workers across the value chain. Our approach is aligned with the current requirements of the LkSG, which focuses on direct suppliers and considers the upstream supply chain on an ad hoc basis.
S2-3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns
thyssenkrupp is working on an ongoing basis to analyze the human rights and environmental impacts of its business activities, identify potential and actual negative impacts for workers in the value chain at an early stage and implement suitable actions. To this end, the groupwide policy for compliance with human rights and environmental due diligence obligations was developed. This policy is embedded in an integrated and interdisciplinary SCA risk management system, which encompasses the following elements on the basis of the LkSG: risk analyses, processes to implement preventive and remedial actions, the definition of responsibilities, the publication of principles, a complaints procedure, and documentation and reporting. Further information can be found in subsection “S2-1.”
We implement many different actions to minimize human rights and environmental risks, especially relating to trafficking in human beings, child and forced labor, working conditions, occupational safety and health, discrimination, freedom of association and environmental concerns. The measures include acceptance of the thyssenkrupp SCoC by our suppliers, specific training for suppliers and a contractual commitment to complying with human rights and environmental standards. Compliance with our requirements is reviewed by, for example, random supplier audits (see preceding subsection “S2-2”) or self-declarations. If these reveal potential for improvement, the group companies systematically monitor its implementation. Further information can be found in the following subsection “S2-4”. In the case of particularly serious violations, we reserve the right to suspend or terminate the business relationship as a last resort. The relevant corporate functions, responsible persons and bodies of the respective group companies and the SCA Officer Group are systematically involved in implementing these measures and are informed of their progress. In addition, their effectiveness is reviewed on a regular basis.
Various reporting channels are available to enable us to fulfill our responsibility in relation to complying with human rights and identifying violations at an early stage. We have established low-threshold access for all stakeholders, including our employees, suppliers, suppliers’ workers, affected persons and other third parties. Our whistleblower system can be used to report violations and alleged cases. It can be accessed publicly via the thyssenkrupp website and is available in 34 languages. Reports can be submitted in an accessible manner from anywhere in the world and, if desired, anonymously. The latter is intended to enable potentially affected persons to use the system without fear of negative consequences or reprisals. thyssenkrupp guarantees that all reports received will be treated in confidence. Confidentiality and the protection of whistleblowers are central features of the complaints procedure. Other reporting channels include a telephone hotline. Contact is also possible via email or mail.
Suppliers are informed of the available options and reporting channels via training courses. They are explicitly requested to communicate the information provided to their workers and subsuppliers, without any threat of consequences should the reporting channels be used. Many group companies additionally implement their own measures to publicize the complaints procedure, for example, by sending an information leaflet with payslips.
The Compliance Investigations department holds central responsibility for managing the whistleblower system. Reports relating to global minimum labor standards – such as compliance with the ILO Core Labor Standards, protection from discrimination, the ban on child and forced labor, and appropriate occupational safety and health standards – can also be submitted via the International Committee’s whistleblower system, which is based on the IFA. The International Committee comprises representatives of thyssenkrupp, the European Works Council, the Group Works Council, the IG Metall trade union and IndustriALL Global Union. This system is primarily intended for thyssenkrupp’s own employees (see the section headed “ESRS S1 Own workforce”); if reports are received relating to external matters, it is ensured internally that these reports are forwarded to the persons responsible for processing.
thyssenkrupp categorically rejects all reprisals against persons who have acted in good faith to report actual or avoidable problems and concerns or support investigations. All available reporting channels and the associated measures to guarantee confidentiality and anonymity and to protect the rights of whistleblowers are regulated fully by thyssenkrupp’s whistleblowing rules of procedure. These stipulate that every report must be treated fairly, objectively and in accordance with statutory requirements. Whistleblowers must be able to have confidence that the information they provide will be taken seriously and that they will be protected from any disadvantage.
S2-4 – Taking action on material impacts, risks and opportunities related to value chain workers and the effectiveness of those actions
As part of our risk management system to comply with our human rights and environmental due diligence obligations, thyssenkrupp has implemented structured actions with the goal of mitigating material negative impacts on workers in the supply chain and risks to the company.
The risks we identified in the course of our system-based and systematic risk analyses in accordance with the LkSG serve as the basis for actions to mitigate potential negative impacts on workers in the supply chain. We perform a twice-yearly risk analysis for our direct suppliers – including transport and logistics providers – and ad hoc analyses for our indirect suppliers. These risk analyses enable us to identify potential negative impacts relating to human rights, occupational safety and health and environmental protection (SCA risk areas) on the basis of groupwide sustainability criteria. The individual risks underlying the SCA risk areas include the material topics identified for thyssenkrupp in the double materiality assessment. They can be found in the table of SCA risk areas and SCA individual risks.
The risk potential identified is an abstract calculation using external risk indices of the potential risk to which the supplier is exposed due to factors such as geographical location and industry. This abstract risk potential is refined by more in-depth analysis of a supplier-specific risk assessment (SCA risk category) based on information that is either already available or obtained for this purpose, such as certificates. On the basis of its own logic, thyssenkrupp distinguishes between five SCA risk categories (very low, low, moderate, high and very high). The suppliers’ SCA risk category therefore serves as the basis for taking suitable preventive action to reduce the risks.
In selecting the preventive action, the group companies are guided by a standardized catalog of actions developed by thyssenkrupp. The actions include, for example, ISO-compliant system certification or actions relating to specific raw materials such as the Aluminium Stewardship Initiative (ASI) certificate. The ASI certification standard is designed to minimize the risks in the aluminum value chain and is intended to address the human rights specified in internationally recognized standards such as the ILO Core Labor Standards, the OECD Guidelines for Multinational Enterprises and the UNGPs, for example, child and forced labor, discrimination and occupational safety. Suppliers associated with conflict materials within the meaning of the EU Conflict Minerals Regulation (tin, tantalum, tungsten and gold) must go through a specific due diligence process at the level of the thyssenkrupp group company. The goal of this process is to ensure that the supply chains of these raw materials are not used to finance armed conflicts or illegal armed groups. A verification process has also been defined in respect of mercury and the associated potential negative health impacts due to inadequate occupational safety and pollution. Each year, the responsible SCA Officer Business for the respective thyssenkrupp segment provides the respective group company with a list of the suppliers operating in states that have not ratified the Minamata Convention on Mercury. The group company must then investigate whether these suppliers procure products containing mercury or use mercury in their production processes. If this reveals a risk for a supplier, the group company must perform a detailed analysis on the basis of a mercury-specific questionnaire to assess any necessary safeguards.
As part of our supplier qualification, we have already established processes to prevent potential negative impacts in respect of human rights and environmental matters. For example, as a matter of principle, we expect potential new suppliers to recognize the requirements of our SCoC (see also subsection “S2-1”) and implement the defined standards accordingly.
We expect the same of our existing suppliers. Among other things, all forms of child labor are banned in accordance with the ILO Core Labor Standards to protect minors from exploitation, health risks and the consequences of poor education. Also banned are forced labor, including trafficking in human beings and modern slavery. The goal is to prevent a loss of self-determination and damage to physical and psychological health. thyssenkrupp is also unequivocally opposed to all forms of discrimination and unequal treatment, whether this is on the basis of gender, religion, nationality, political or other convictions, ethnic origin, disability, age or sexual orientation and identity. No person may be disadvantaged, favored or harassed on the basis of these or other characteristics. To optimally prevent accidents and work-related ill health, we require our suppliers to implement an appropriate occupational safety system that includes the identification, assessment and reduction of actual and potential accident and health risks, as well as the recording and investigation of incidents. Suitable training measures and instruction for workers in the supply chain, the provision of suitable protective equipment and appropriate contingency plan measures should also be elements of the supplier’s appropriate occupational safety management system. Moreover, the SCoC requires compliance with the respective national legislation relating to working time and wages. If there is no such national legislation, the international ILO standards shall apply. Respect for the rights of workers to establish a workers’ representative body, strike and conduct collective bargaining negotiations are also regulated by the SCoC. Other work-related rights relate to the freedom of expression and the protection of privacy, the use of contractors and environmental management requirements in respect of the response to harmful soil changes, water contamination, air pollution or excessive water consumption. Compliance with the SCoC is aimed at preventing all risks identified as material for thyssenkrupp and the potential and actual impacts for workers in the supply chain. In the case of suppliers for which our risk analysis has identified a high or very high risk, the group companies must additionally obtain a contractual commitment to comply with the SCoC. Through this contractual commitment, the supplier confirms that it will comply with the SCoC requirements and address them appropriately, both in its own operations and its supply chain. To ensure compliance with the requirements defined in the SCoC, we expect our direct suppliers to implement suitable management systems and business processes. We also expect their active collaboration in preventing violations and in the process to prevent violations in connection with one of the aforementioned topics.
To verify whether suppliers are complying with our requirements and acquire deeper insights into their practices, we rely on instruments such as self-declarations and audits conducted by third-party providers. In the reporting period, supplier audits focused on sites in China, India and Brazil. In these countries, there are particular challenges relating to fair working conditions, occupational safety, freedom of association and the ban on child and forced labor, so we are concentrating more on preventive action and controls. We include the interests of workers in the supply chain in our due diligence obligations in the form of interviews. If these audits identify violations or elevated risks, the supplier is required to take targeted corrective action and the thyssenkrupp group company must monitor its implementation. If necessary, a follow-up audit of the supplier must be carried out.
With our training formats, we aim to increase the awareness of our direct suppliers for human rights and environmental due diligence obligations and support them in implementing the resulting requirements. One key aspect of the content is to communicate the policy on human rights and environmental due diligence obligations in the upstream supply chain and purchasing processes. For this reason, our e-learning course for suppliers focuses on the requirements of the Supplier Code of Conduct and addresses all potential negative impacts identified by the double materiality assessment as material for thyssenkrupp. It also explores the legal basis and background to the necessity for human rights and environmental due diligence obligations, explains the relationships with global supply chains and the possible impacts on workers in the upstream supply chain of violations such as undignified working conditions, a lack of occupational safety or inadequate wages. The suppliers are also informed of their duties to cooperate when they sign the contractual commitment to comply with the SCoC.
Our complaints procedure is a further important approach for preventing and reducing negative impacts. It was established to enable early action to prevent violations of laws and internal group regulations and possible breaches of human and environmental rights and legal interests and to prevent harm to thyssenkrupp employees, business partners and their workers, affected third parties and thyssenkrupp itself. Further information on the complaints procedure can be found in subsection “S2-3.”
If a group company establishes that a violation of a human rights or environmental due diligence obligation has already occurred or is imminent, it must take appropriate remedial action without delay to prevent or end this violation or to mitigate the scale of the violation. The type of remedial action is to be decided on a case-by-case basis; direct dialog with those affected in the course of the investigation may be part of the action. If a violation of an obligation that has occurred cannot be remedied within a maximum period of six months, the group company must work with the supplier to develop a concept for ending or minimizing the violation. This should also consider actions that have already been initiated by the supplier itself, other customers or the authorities. However, an existing third-party concept does not release the thyssenkrupp group company from its obligation to agree its own action with the supplier. As a matter of principle, thyssenkrupp pursues the goal of supporting suppliers in complying with human rights and environmental due diligence obligations and of enabling them rather than immediately terminating the business relationship.
In the reporting period, we identified serious human rights violations relating to inadequate wages and working time and a lack of occupational safety at direct suppliers. The classification of severity depends on whether a violation is an individual case or systematic and whether it is reversible or not. Further actual negative impacts on workers in the supply chain that were not classified as serious also related to the topics of inadequate wages and working time and a lack of occupational safety, as well as violations of the freedom of association. All incidents were identified and monitored by supplier audits. Specific remedial action and improvement measures are defined to end all the violations identified; they must be implemented by the affected suppliers and monitored by the relevant thyssenkrupp group companies.
We continue to develop our SCA risk management system, including the risk analyses and the actions derived therefrom, and regularly review their effectiveness. The goal of this review of effectiveness is to identify any potential for improvement and include this in the further development of the risk management system. The review is the responsibility of our Chief Compliance Officer, who reports on the findings of the review at least once yearly to the Executive Board. We use a central tool for the operational implementation of the risk management process. The same tool is used to perform data-based risk analyses of our suppliers. The findings are immediately available to the responsible departments of the business units. In each case, the responsible group company must ensure that the preventive action by the supplier and available findings are documented in an audit-compliant manner.
The actions described in this report are implemented in the course of regular business operations and do not result in any significant capital expenditure (CapEx) or operating expenditure (OpEx). The actions are implemented continuously.
Regarding job security for workers in the supply chain, thyssenkrupp is currently taking no structural actions because there is no concrete indication of material violations. However, we already have long-term contracts with various suppliers of electricity, gas and raw materials such as iron ore, for example. These agreements ensure a high degree of planning certainty for both parties, especially in respect of human resource and production requirements.