During 2023, our Vendor Management and Vendor Rating model was revised, strengthening the due diligence and risk management process along the supply chain. In particular, an integrated Supply Chain Risk Management system articulated into various levels was implemented. Such Risk Management System is erforced during all phases of the supplier management process, from the qualification/selection phase to the contract execution phase, with particular attention given to risks related to the impact on business, on end customers and on ESG aspects.
Supplier qualification and selection stage
Risk assessment by product/service category
The process begins with a product/service category risk assessment (updated on yearly bases), to map spent categories by their degree of criticality, based on a joint assessment of the following criteria: impact on business and end customers, effect on the principles of the Group’s integrated management system and ESG parameters. The level of criticality of each product/service category is a key indicator in the new Supply Chain Risk Management model, since it affects both the supplier qualification process and the frequency of supplier monitoring, setting a differentiated qualification and monitoring mechanisms during the contract execution phase, based on the criticality level of the product/service category.
Predictive qualification rating and supplier screening
A predictive qualification rating is assigned to each of the Hera Group’s qualified suppliers, in view of their financial solidity and ESG maturity level, calculated through a questionnaire consisting of 11 mandatory and 36 optional questions.
During the qualification stage, through the above screening activity suppliers are segmented into risk clusters. This segmentation allows to identify risk mitigation actions and specific controls on certain suppliers belonging to higher risk clusters.
Management of bidder lists for tender invitations
In the tender phase, an invitation management system is applied by taking into consideration both the predictive qualification rating and the performance rating assigned during the contract execution phase. The invitation management system rewards suppliers with better scores, by ensuring greater business opportunities and more frequent invitations to tender.
Supplier Performance Monitoring Stage
Supplier vendor risk card
In order to ensure that the new model effectively enforces a responsible supply chain management, a risk analysis tool named “Vendor Risk Tool” has been developed. Such tool allows to segment active suppliers on the basis of relevant risk rating. The risk rating is calculated by evaluating the following quantitative and qualitative factors:
strategic positioning of the supplier, by product/service category criticality level and volumes awarded;
operating and financial indicators;
suppliers performance and non-conformities during execution phase;
ESG parameters;
organisational/reputational information that may affect the supplier’s performance (e.g.: news appearing in the press, etc.).
In line with the above, “Vendor Risk Cards” are periodically prepared for each supplier, providing a detailed representation of their degree of reliability. Furthermore, Vendor risk cards are enhanced with punctual suggestions as well as possible actions to mitigate actual and/or potential criticalities.
Non-conformities management, improvement plans and site inspections
Continuous monitoring of suppliers performance on active contracts is fully enforced through specific actions on clusters of suppliers with higher risk level. Moreover, site inspections are carried out by using certified third-party auditors, in order to monitor both technical-qualitative performance and ESG performance (with a particular focus on corporate social responsibility).
Improvement plans and specific corrective actions are implemented when any non-conformity is detected. Improvement plans and corrective actions are digitally managed trough Hera_Pro portal: by using such portal, suppliers can interactively follow Hera Group recommendations as well as the progress of improvement plans.
Performance rating
Performance rating is calculated taking into consideration both positive and negative performances, according to standard scoring tables which are shared with suppliers to motivate them in achieving better performances. In particular, there will be a score decrement in the event of a non-conformity detection. On the contrary, a score increment will be recognized in the occurrence of a particularly positive performance.
Supply Chain Risk and ESG Management
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Management and monitoring of esg factors along the supply chain
Management and monitoring of ESG factors
along the Supply Chain
Within the Supply Chain Risk Management model, the management and monitoring of ESG factors along the supply chain is given particular importance and covers every stage of the procurement process:
During the qualification phase, when suppliers request to be included in our vendor list, through the use of an ad hoc questionnaire with which their degree of ESG maturity is monitored and a score is assigned in the qualification rating. The requirements monitored indicatively include: quality certifications (ISO14001, ISO50001, ISO45001, SA8000, ISO37001, ISO27001, legality rating), sustainability report, governance system and a 231 supervisory body, reduction in the accident rate, percentage of employees with permanent contracts, ESG score, adoption and formalisation of sustainability policies/strategies, integration of ESG risks into the corporate risk management model, availability of CSR function and disclosure of the results, supply chain monitoring and supplier selection including reference to ESG factors, legal compliance (anti-bribery, anti-fraud, anti-laundering, conflict of interest, anti-competitive behaviour, cybersecurity, adoption of a code of ethics), employees’ health and safety, responsible personnel management and employee wellbeing (e.g.: working conditions, working hours and remuneration, human rights and child labour, diversity/inclusion/equal opportunities, welfare, remote working, whistle blowing channels...), professional development and training, recruitment and employees retention, environmental impacts, pollution, climate change, energy saving, renewable sources, greenhouse gas emissions, circular economy, volumes of plastic used and waste produced, management of water as a resource.
During the selection and contracting phase, both through rewarding criteria in the scoring model that reward good ESG conduct, and through the mandatory acceptance of Hera’s Code of Ethics and other prominent social and environmental documents, such as:
Model for the prevention of corruption; General Quality-Safety-Environment-Energy Regulations and Social Responsibility for contractors and/or self-employed workers operating within the Hera Group; Quality and Sustainability Policy; Personal Data Protection Policy;
Declaration of broad knowledge of the principles and regulations on Corporate Social Responsibility, and a commitment to comply with the principles and requirements included in these regulations and to participating in the monitoring and verification activities called for by the Hera Group, as well as evaluating any corrective measures required;
Compliance with the labour safety obligations established by Italian law; compliance with current regulations regarding the right to work of people belonging to protected categories; amount of disadvantaged employees in the company workforce compared to the total; registration in the regional register of social cooperatives;
Possession of the certificate of membership in the national register of environmental managers, specific to the activity pertaining to the product/service category where applicable;
Membership in the list of suppliers not subject to attempts at mafia infiltration (so-called White List) for suppliers belonging to product/service categories falling within the scope of activities having a particular risk of mafia infiltration; otherwise, submission of a formal commitment to apply for it.
During the contract execution phase, continuous monitoring of suppliers is ensured with particular attention given to compliance with environmental, energy efficiency, quality, safety, anti-corruption and corporate social responsibility requirements by all parties involved, covering the entire supply chain, including subcontractors and sub-suppliers. In addition, annual on-the-spot audits are carried out at suppliers’ sites who have a particularly critical level of risk, as evaluated by the vendor risk tool described under the Supply Chain Risk Management model. These audits are managed by hiring third-party auditors (duly certified in relation to the standards to be verified), to guarantee the process based on transparency and independence adopted by the Group, to verify compliance with the principles and standards involving ISO9001 45001 37001 SA8000 / Corporate Social Responsibility, that establish guidelines and requirements to ensure quality, efficiency and sustainability.
Each year, additional audits are carried out directly at Hera Group worksites by the Vendor Rating department, along with the Quality, Safety and Environment Department. These monitoring activities integrate the periodic audits of the company contract manager to assess the quality of performance and compliance with ESG requirements, including the proper management of any possible subcontracts, as well as the verification of CSR elements.
If any non-conformity is detected, during periodic monitoring or audits/inspections, specific corrective actions and improvement plans are implemented and their actual progress is checked.
Capacity-Building and initiatives to support
ESG growth for our suppliers
As of July 2024, a programme to support the growth and development of suppliers’ technical and qualitative capabilities will be activated. Within this programme, special attention will be given to “capacity building” tools, to stimulate the sustainable development of suppliers both in ESG (Environment – Social – Governance) area, and as regards technical-financial growth tools (factoring services, research and training of specialised personnel, support for the rental of vehicles and equipment, etc.).
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For more information
For further information on procedures for registration and qualification in the supplier list, monitoring and control of suppliers, management of non-conformities, supplier evaluation and assignment of the predictive qualification rating and performance rating, and the related limits within which suppliers may be invited to negotiated tenders, consult the following documents, which must be accepted by all Hera Group suppliers:
For additional details on the Vendor Management and Vendor Rating model, as well as on the results achieved and the targets defined, see our Sustainability Report
