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CompanySustainability Sustainability in the Supply Chain

Sustainability in the Supply Chain

Good cooperation with all suppliers is the foundation of our value chain. ZF actively maintains these partnerships and expects its business partners to respect and promote values such as environmental protection, quality and human rights.

Global Presence, Uniform Standards

As a globally active technology enterprise with its main emphasis on mobility, ZF produces at more than 160 locations. To procure the necessary production materials, ZF maintains a global network of around 53,000 suppliers – from small family-owned businesses up to large groups of companies.

Globally uniform procurement standards and specifications for our suppliers are essential in order to guarantee the high quality and delivery reliability of our products and to ensure that our values are maintained throughout the value chain.

Centralized Control

ZF has appointed a cross-functional Sourcing Decision Board with representatives from Commodity Purchasing, Program Purchasing, Logistics, Quality, Supplier Management, Engineering, Program Management and Operations. In this way we can ensure that environmental aspects, quality, technical and logistical requirements are also considered in the selection of suppliers along with pricing.

For this purpose, a dedicated position of Head of Sustainability Management Supply Chain was additionally created in materials management in the summer of 2019, with the objectives of increasing transparency in the supply chain, sensitizing suppliers to matters of sustainability including human rights, and initiating all necessary measures in case of violation.

In dealings with business partners, the ZF Code of Conduct serves as the central document for securing responsibility in the company. It is published in 27 languages and provides all employees at ZF with clear orientation as to how they should behave in everyday business relations. The ZF Code of Conduct also extends to respect for human rights and takes a clear stance in its rejection of human trafficking, forced labor and child labor. We also publish a more detailed description of our approach to human rights in our Declaration of Principles Concerning the Respect of Human Rights.

Social and Ecological Standards in the Supply Chain

All new and existing suppliers are expected to recognize the ZF Business Partner Principles and to reinforce the values and principles set out therein at their companies and in their own supply chains. They are based on valid principles and conventions, such as the principles of the UN Global Compact, the OECD Guidelines for Multinational Enterprises, the Universal Declaration of Human Rights, the UN Guiding Principles on Business and Human Rights, and the relevant conventions of the International Labour Organization (ILO).

The Business Partner Principles deal explicitly with topics such as human rights, labor standards, occupational health and safety, environmental protection, responsible raw materials procurement, business ethics and compliance. In particular, business partners are expected to refuse all forms of human trafficking, forced labor or child labor. They are also expected to respect freedom of association and the right to form interest groups, to provide fair and appropriate remuneration and working times, and to support qualification of their employees.

In Germany, external service providers must sign an additional declaration of compliance with collective agreements guaranteeing fair wages, normal working hours and the rejection of unregistered labor and tax evasion. This declaration also applies to subcontractors engaged by ZF and includes the provision that ZF may check compliance at any time.

Due Diligence

The values and standards that are important to us are not only part of the Business Partner Principles; they also define supplier selection. During the approval process, ZF requires potential new suppliers to submit a self-assessment in matters covered by the Business Partner Principles. For this purpose, ZF uses an adapted version of the Self-Assessment Questionnaire on CSR and Sustainability developed by the Drive Sustainability industrial initiative. This questionnaire covers information on the management of social, ecological and ethical topics at both a corporate and a locational level.

ZF has also implemented a comprehensive internal risk analysis process for compliance risks. The objective is to identify, assess and counteract compliance-related risks as early and effectively as possible. Detailed information can be found in the ZF Annual Report.

Continuous Testing Process

In 2019, a social media monitoring system was set up in which media are screened for negative CSR issues in our supply chain on a daily basis. This allows initial indications to be generated. In cases of suspicion, we enter into contact with our suppliers and initiate further investigations. Constant monitoring of the supply chain has the overall objective of minimizing risks and reinforcing our suppliers’ awareness of their consequences. ZF reserves the right to examine the business relations and implement appropriate measures should deviations or violations be identified.

We have also initiated a pilot project with 800 strategic suppliers that aims to improve the sustainability assessment of all suppliers. This takes standards into account such as SA 8000 for Human Rights & Labor or ISO 37001 for Anti-Bribery Management Systems, along with non-financial information that is required to be published under the provisions of the CSR Directive Implementation Act.

We take indications of possible violations in our supply chain very seriously. In addition to the contact channels in regular business transactions, ZF has established an electronic report system for this purpose: The ZF Trustline is available to all employees and business partners who wish to anonymously report suspicion of serious misconduct in relation to guidelines, regulations or laws.