Metrics and targets
S2-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities
In fiscal year 2023 / 2024, thyssenkrupp set itself a measurable target to foster sustainability in purchasing and systematically mitigate the risks of negative impacts on workers in the upstream supply chain. We aim to achieve the final target value stepwise before the end of fiscal year 2026 / 2027.
Based on the requirements of the LkSG, we regularly perform risk analyses as described in subsection “S2-4” to identify potentially high-risk suppliers in our supplier portfolio. If suppliers continue to be seen as an elevated risk (high or very high) despite the implementation of risk-mitigating measures, they are classified as high-risk suppliers. To manage the associated sustainability risks and reduce the negative impacts in the supply chain, we introduced the High Risk Supplier Reduction (HSR) as a metric. This describes the annual reduction in the share of suppliers that continue to be classified as high risk – even after risk-mitigating measures – in the total number of potentially high-risk suppliers. We have committed to taking targeted risk-mitigation measures to achieve a continuous improvement in sustainability performance across the supply chain. By fiscal year 2026 / 2027, the HSR is to be reduced gradually to a value of 36.4%. Based on the value for fiscal year 2023 / 2024, this represents an improvement of just under 50 percentage points.
By systematically identifying and reducing the number of high-risk suppliers, we want to contribute to strengthening human rights and environmental standards in the supply chain. The HSR serves as a key management element for identifying and mitigating potential negative impacts on workers in the upstream supply chain.
The HSR is calculated on the basis of the risks for our direct suppliers identified in the risk analysis and the measures taken to minimize negative impacts on people and the environment in the supply chain. Further information can be found in subsection “S2-4.” We use external risk indices to analyze country and industry risks and, in subsequent steps, link these with our business-specific purchasing data. In this calculation, we take account of the probability of occurrence, the anticipated severity and the irreversibility of a potential negative impact. We have also defined red flags – such as child and forced labor – that are assessed as a very high risk, irrespective of any other weightings used in the calculation. A risk analysis is performed for all active direct suppliers. In the tool we use for this purpose, we take advantage of the option to remove from the analysis those direct suppliers from which our purchasing volume was less than €10,000 within a defined time period. Another filter we can apply concerns suppliers whose business relationship will end in the foreseeable future.
The actions to reduce potential negative impacts on workers in the value chain and their effect are defined in a standardized catalog that is applicable groupwide. The group company responsible for the respective supplier is responsible for choosing specific actions from this catalog.
The HSR is assessed centrally each month by the system and the results notified to all those in the group with responsibility for implementation. The target value of 53.9% for this reporting year was exceeded. In fact, a figure of 43.9% was achieved.
The HSR target values were defined by the Supervisory Board of thyssenkrupp AG in fiscal year 2023 / 2024 and are a component of the LTI for the Executive Board and managers and of the NFTs. A description of the NFTs can be found in subsection “SBM-1” in the section headed “ESRS 2 General disclosures.”
The affected stakeholder group was not explicitly involved in formulating the targets. However, the content was developed in cooperation with various internal departments such as the Sustainability department in Purchasing and Human Resources. We identify improvement potential in connection with our implementation of human rights and environmental due diligence obligations in the course of the annual effectiveness review of the overarching SCA risk management system (see subsection “S2-4”). In addition, there may be a need for action at short notice due to a deterioration in the HSR, reports received via our publicly accessible complaints procedure, identified violations and audits and the associated interviews with workers in the supply chain.
Regarding job security for workers in the supply chain, thyssenkrupp has currently not formulated any target because there is no concrete indication of actual violations or problems.