Enel carries out structured analysis and monitoring of the procurement process. In particular, it carries out a risk assessment on 100% of the procurement merchandise categories. The main identified risks concern economic, environmental, social and reputational aspects.

84% of first-level suppliers3, equal to approximately 8,6004, was considered a critical supplier due to its strategic nature linked to the company business, purchasing volumes, and the potential economic, social and environmental impacts.

 

3 Known as tier 1.
4 Suppliers with outstanding contracts worth > 25,000 euro.

Supplier qualification system

In order to select the best suppliers, Enel has created the Supplier Qualification System in compliance with the laws and regulations on local and European Union procurement and in line with the Enel management model. The qualification system represents:

  • a guarantee for Enel, since it is an updated list of subjects of certified reliability (legal, economic and financial, technical/organizational, ethical and safety) on which to draw;
  • the possibility, in compliance with the laws in force, for suppliers to be called on for procurement tenders organized by Group companies.

The approval process requires, also in compliance with the law in force, the presentation of a series of documents (self-certification regarding the possession of the general prerequisites, financial statements, certification, etc.) and, among other things, the adhesion to the principles expressed in the Code of Ethics, the Zero Tolerance of Corruption Plan and the 231 Compliance Program, the Human Rights Policy, and the ten principles of the Global Compact with specific reference to the absence of any conflict of interests (including any potential conflict). All approved suppliers are requested, during the formalization of the contract, to provide specific documentation certifying they are up to date with the payment of social security contributions.

In 2017, the sustainability requirements (on human rights, environment and health and safety) that all companies requesting to be qualified have to meet have been updated, in line with the most advanced relative standards. As part of the human rights assessment questionnaire, which was formulated according to the guidelines of the internationally recognized UN Guiding Principles on Business and Human Rights and the UNICEF Children’s Rights and Business Principles, specific information is requested from suppliers about their impact on: a) the local communities in which they operate; b) inclusion and diversity; c) freedom of association; d) protection and privacy; e) forced labor and child labor; f) suppliers; and g) communication. Once it is completed, information is requested about any current proceedings and ethical certifications and policies that the supplier has. The merchandise categories considered to have a significant environmental impact, equal to 27% of all product categories under qualification, provide for the supplier’s environmental management methods (for example, ISO 14001 certification) to be analyzed, while for the product categories presenting a high health and safety risk to be contracted, equal to 47% of all product categories under qualification, the suppliers are evaluated by examining their company performance and the organizational and management quality in terms of their safety (for example, OHSAS 18001 certification).

It is important to highlight that the qualification system is supported by a reward- based evaluation mechanism: the companies that undergo the qualification process are encouraged to use virtuous tools and practices by awarding them higher ratings if their standards are in line with the Group’s expectations and international best practices.

Tenders

During 2017, 3,664 invitations for tenders were launched, 2,178 of which were online. In particular, online negotiations have prevented the printing of about 560,000 pages, reducing the environmental impact of these activities.

Enel’s commitment to introducing considerations for sustainability into tender processes has continued, through the introduction of a “K of sustainability” 5 ISO/TS 14067 is the ISO standard issued in 2013 that aims to improve the clarity and consistency of the quantification, reporting and communication of the carbon footprint of products (CFP). factor. A library was also developed in which the “Ks of sustainability” are cataloged in order to facilitate their dissemination.

Below are some examples of tenders in which considerations for sustainability have been introduced:

  • Infrastructures and Networks: supply of cables - an environmental sustainability criterion has been included in the technical requirements which requires suppliers to obtain ISO/TS 140675 certification and reduce CO2 emissions;
  • Italian Market: call center - a “social clause” was introduced, aimed at promoting the professional and territorial stability of the workers employed in call centers. The social clause makes it possible to reward any proposals for the relocation of a portion of workers through sustainable projects.

 

5 ISO/TS 14067 is the ISO standard issued in 2013 that aims to improve the clarity and consistency of the quantification, reporting and communication of the carbon footprint of products (CFP).

Integrity requirements

Since 2016, new checks have been defined and adopted at the Group level on integrity requirements for suppliers, with the aim of consolidating the existing control system through more incisive action to contrast corruption. Specific documentary criteria have been established to certify the legal requirements and good standing, which are standard and applicable to all phases of the procurement process, and the operating verification procedures have been defined, aimed at enhancing the prevention instruments available and aimed at impacting any aspects related to corruption issues and the factors that favor its spread. A culture of respect for rules and ethics has also been promoted.

The strengthening of the checks on the possession of the aforementioned requirements, both in the stage of admission to the Approval System and maintaining the approval and in the stage of assigning a contract, is focused on particular activities, goods and contracts which are considered more sensitive (“at risk”), identified for each country/geographic area: Italy, Argentina, Chile, Colombia, Peru, Romania, Russia, South Africa, North America, Mexico and Central America, India, Iberia and Brazil.

Contractual clauses

Enel has defined specific contractual clauses, included in all contracts for works, services and supplies that are updated periodically to take into account regulatory changes and to follow best international practices. In 2016, the sixth edition of the General Conditions of Contract was published. It consists of a General Part, containing the clauses applicable in all countries, plus the Country Annexes, containing the specific clauses applicable in each single country in question. Currently there are 15 Annexes in use (Italy, Spain, Portugal, Chile, Peru, Colombia, Brazil, Romania, Slovakia, Russia, Argentina, Guatemala, Panama, Mexico and Costa Rica). In 2016, specific general conditions were defined to be applied to contracts for the purchase, maintenance and support of software and cloud services and 9 Country Annexes: Argentina, Brazil, Chile, Colombia, Italy, Peru, Romania, Russia and Spain.

It is important to underline that Enel constantly monitors current and potential risks related to the activity throughout its supply chain. For example, since 2016 internal analyses have been underway to verify that suppliers of products containing/using cobalt respect human rights: in-depth research and interviews with the main suppliers have been conducted and specific contractual clauses have been introduced.

During the execution of the contract, Enel carries out several performance monitoring processes related to the safety of its contractors or people employed in various capacities (for example, subcontractors). If these analyses reveal a critical event, in addition to the provisions of the General Conditions of Contract (GCC) of the Enel Group and/or the existing contract, Enel may consider taking corrective action against the contractor involved.

Vendor Rating

Vendor Rating (VR) is a tool aimed at monitoring supplier performance both before and during the contract. The VR is based on an objective and systematic survey of information relating to certain indicators such as punctuality, quality, correctness and safety, as well as the behavior of contractors during the procurement and contract execution phases. In 2017, 429 merchandise groups and approximately 2,915 contractors were monitored through this process.

During 2017, an innovative VR tool was developed that will become operational over the next few months: Track&Rate, an app that allows plant and construction people who are in daily contact with suppliers to perform a real-time evaluation of their performance. This tool revolutionizes the entire VR process: the individual will contribute to a wealth of knowledge that will be used, together with data from the Business Lines’ management systems to calculate qualitative/ quantitative ratings that can be shared and used at various decision-making levels, with significant advantages for the Group. This is in line with Enel’s goal of being a data-driven company in which, thanks to the multi-channel nature of the tools and the active participation of the people who work for the Company, decisions are based on a global vision in line with the idea of Open Power.

If during the execution of the contract Enel detects critical issues concerning a contractor’s behavior, an improvement plan can be defined jointly with the supplier.

5,601

Number of tier 1 suppliers evaluated during 20176

10%

Percentage of tier 1 suppliers evaluated to whom corrective actions were assigned

98%

Percentage of suppliers evaluated with improvement corrective action plan whose ESG performance improved following the action plan

 

6 The value includes the assessments made during the tender phase and the awarding of the contract.

Monitoring systems

Within each phase of the procurement process, specific commissions are identified, made up of representatives from both the procurement area and the Business Lines, with the task of assessing and monitoring supplier performance. In particular, the following commissions were established:

  • qualification and Vendor Rating commission;
  • integrity committee.

The integrity committee, in which the Security Function also takes part, usually meets on a monthly basis or whenever a critical issue emerges regarding a supplier. Its aim is to share and analyze situations for which actions/ sanctions are to be taken against the supplying companies.

In addition, specific units have been set up at the individual country level, the Contract Controls Areas, which have the task of carrying out checks to ensure the responsible management of the supply chain and assessing and managing the risks in relation to joint and several liability (contractors and any subcontractors are contractually bound).

Training and information

In the last two years Enel has organized numerous meetings with contractors on sustainability issues aimed at the exchange of ideas and approaches. For example, in September 2017, a meeting was held in Peru entitled “Sustainable Supply Chain”, during which good practices were shared and actions identified to improve performance from an environmental, social and governance perspective. The meeting was attended, among others, by the national delegates of the United Nations Global Compact Network and the Global Reporting Initiative. At the end of the event, a cooperation agreement was signed with the GRI to provide training and IT tools to small and medium-sized enterprises so that they can quantify and manage their actions and publish their first Sustainability Reports.

In December 2017, an event was organized in Brazil that saw the participation of about 50 of the main local suppliers to discuss with Enel issues related to innovation and sustainability.

Furthermore, various training and information activities on occupational health and safety are carried out (see the “Occupational health and safety” chapter). Lastly, on the dedicated Internet portal (www.globalprocurement.enel.com), Enel has reserved a specific section for the publication of articles and information on the main business and sustainability issues.