Qualification, selection and monitoring of suppliers

The supplier qualification system of the Group aims to guarantee that products, services and works are able to ensure quality and reliability. The supplier selection and management process is based on the principles of transparency, clarity, integrity and non-discrimination. The qualification process considers qualitative aspects and those related to sustainability, with particular emphasis on social and environmental issues and compliance with the principles and values contained in the Code of Ethics, which must be accepted by all bidders, without the possibility of making exceptions or changes.

Within the scope of contracts subject to the Public Contracts Code, art. 30 “Principles for the award and execution of contracts and concessions“ requires economic operators to comply, when executing them, with environmental, social and labour obligations established by European and national legislation, collective agreements or international provisions listed in Annex X, including: ILO Conventions 87 (freedom of association and protection of the right to organise), ILO 98 (right to organise and collective bargaining), ILO 100 (equal pay), ILO 111 (discrimination in the field of labour and employment) ILO 29 (forced labour), ILO 105 (abolition of forced labour), ILO 138 (minimum age) and ILO 182 (worst forms of child labour), the Vienna Convention (protection of the ozone layer) and the Montreal Protocol (ozone-depleting substances). Explicit declaration of compliance may be requested in tender documents.

All Group contracts require that suppliers certify that they meet the general requirements and that, consequently, they have not been convicted of, among other things, offences involving the exploitation of child labour and other forms of human trafficking as defined in the Italian Legislative Decree 24/2014. In the case of public tenders, any finding of non-compliance is grounds for contract termination and reporting to ANAC (National Anti-Corruption Authority).

In case of public contracts pertaining economic values of common interest, as defined by Italian legislation, supplier selection is carried out, for each tender, by indicating the requirements of economic-financial and technical capacity in the calls, which are directly linked to the activity to which the tender refers. These requirements must be proportional and such as to ensure competitiveness, according to the regulations in force. Furthermore, it is also possible to establish qualification systems for the tender notice by publishing a community notice. After the selection has been made using the qualification systems, negotiated procedures can be carried out, in accordance with the protocol defined by the founding regulations of the system.

Together with the Prefectures of Reggio Emilia, Parma, Piacenza, Genoa and Turin, Iren Group has also executed “Legality Protocols” that aim to expand monitoring of enterprises in terms of the anti-Mafia laws, even beyond the cases envisaged by law. Based on these Protocols, contractors and subcontractors are monitored and, if they do not comply with the prefectural notices, they are excluded from contracts.

For more extensive monitoring of supplier companies, the Group has signed Legality Protocols with the Prefectures

With reference to contracts not regulated by the Public Contracts Code (so-called “under-threshold”), Iren Group uses supplier qualification procedures that consist of a specific questionnaire divided into sections concerning information on the company profile (attesting to information on turnover, certificates, etc.), on economic-financial capacity (balance sheet indices) and on organisational-operational data. The questionnaire also covers environmental, health and safety and corporate social responsibility issues. More specifically, for this last section, the supplier is required to declare:

if, in line with UNI ISO 26000 guidelines on corporate responsibility, initiatives have been identified to develop a socially responsible approach to business planning and management and, if so, to describe the initiatives adopted;
if the supplier publishes a Sustainability Report and, if so, to indicate where it can be found, or to attach a copy or excerpt of the significant sections;
if the supplier is willing to undergo a CSR Audit, in the instance it were to sign one or more contracts with the Group, and if it is willing to take part in Iren’s annual CSR survey (see page 264).

Also required is a declaration regarding the absence of serious violations, definitively ascertained, with respect to obligations relating to the payment of taxes, or social security contributions, according to Italian law or that of the State of establishment and serious violations, duly established, to the rules on health and safety at work.

Supplier social and environmental responsibility profiles are evaluated through the certification process

The process of qualification in the Supplier Register also includes the verification of possession of valid certifications, issued by independent bodies (i.e.: ISO certifications, SOA certifications, etc.), and of the economic eligibility requirements of the tender. Furthermore, certain economic indicators are acquired via companies specialising in commercial information (both for corporations and partnerships), which also contribute to determining the supplier’s score for qualification purposes. For under- threshold contracts, current provisions require the invitation of at least 5 suppliers among those included in the Supplier Register in order to guarantee competitiveness.

From the point of view of environmental protection, during qualification all potential suppliers of the Group are required to provide evidence of:

possession of ISO 14001 certification (issued by a recognised accreditation body);
possession of EMAS Certification;
possession of an Environmental Product Declaration – EPD;
possession of energy management systems in compliance with the ISO 50001 Standard;
possession of one or more environmental labels (EU Ecolabel, FSC, PEFC, Plastica Seconda Vita (Plastic Second Life), ANAB– ICEA, Natureplus® Certification, CIC Compostability);
the use of products from one or more of the labels mentioned above in the production process or service rendered, or of another label that highlights a focus on lowering environmental impacts;
the use of suppliers with ISO 14001 and/or EMAS Certification;
the use of work instructions that govern the management of waste, including hazardous waste, packaging and packaging waste, from their temporary storage to their disposal within the contract;
the use, with reference to the categories of products supplied, of recycled or recyclable material, with low emissions and low energy consumption;
the adoption, with reference to the categories of products supplied, of specific procedures for the storage and collection of recyclable materials in order to guarantee recycling;
the availability, with reference to the categories of products supplied, to recover or retain packaging after delivery to be reused and to decommission products to be replaced with proof of their disposal through the recovery of the material.
evidence of enrolment in the National Register of Environmental Managers.

From the 1,090 qualified suppliers in 2021, 757 reported having at least one of the above environmental profiles. Furthermore, more in-depth environmental profile assessments were conducted on 55 suppliers through category-specific questionnaires that require the compliance of the product/service with minimal environmental and rewarding criteria defined by the Ministry of the Environment.

CSR supplier survey (2021 edition)

Iren Group directly involves its suppliers in sustainability management processes to achieve mutual growth, intending to improve performance. In 2021, the Group carried out its fifth corporate social responsibility survey of 5,145 suppliers, using a questionnaire that explores how environmental, labour, business ethics and human rights policies are managed. A total of 1,332 suppliers responded to the questionnaire (26% of the total). The survey has seen a greater involvement of the suppliers belonging to the category of micro enterprises with less than 15 employees (47%) and a turnover within 1 million Euro (34%). The different composition of the base of companies that participated in the survey is also reflected in the results, summarised in the following graphs.

47% of suppliers have a policy that engages their suppliers on sustainability issues. Furthermore, the companies that took part in the survey in 2021 hired 2,096 employees (63% of whom were permanent, 37% under 30 years of age and 32% women) and employed 1,304 workers in the activities carried out for Iren Group. 56% of suppliers adopt human rights policies (equality of opportunity and treatment, prevention of discrimination, etc.), and 20% state that they have a person within their workforce who is officially responsible for human rights issues.

On aspects regarding human rights see page 92.

The most important activities carried out in 2021 to improve supply chain management include:

the implementation of automated systems to acquire, when filling in the qualification questionnaire, the general and fiscal data, the chamber of commerce visas, the turnover and the number of employees of potential suppliers;
the implementation of sections within the Supplier Register dedicated to Professional Services and Architecture and Engineering Services with dedicated qualification questionnaires;
extension of the groups of suppliers subject to reputational and reliability monitoring.

Being a member of the Iren Group Supplier Register means beginning a partnership that could, over time, provide for the identification of mandatory qualification profiles, with a view to improving the supply chain that Iren Group intends to use. It also means sharing the reputational and sustainability values that make up the fundamental elements of Group policy, also by being willing to report on CSR profiles, with rewards consequent to the participation shown.

Being part of the Supplier Register means starting a path of partnership

Many contracts envisage the allocation of technical scores awarded on the basis of the environmental impacts when carrying out the job, such as rewarding the adoption of impact mitigation measures at construction sites (dust, noise, traffic) or during the provision of the service (using low-emissions vehicles).

Compliance with the provisions related to the environment from contractors and subcontractors is required in the specifications. Furthermore, with regard to products, the Group promotes the selection of recyclable, renewable materials that minimise waste production and favour production systems with a low environmental impact. Some technical specifications also provide for the purchase of fairtrade products. Goods are tracked when the specifications require that they are sourced from a specific location.

If, in carrying out the activities that are the object of the contract, the contractor should generate situations of pollution, Iren Group will ask to implement all the necessary interventions for the safety, reclamation and environmental restoration of the area. In case of non-compliance with the environmental obligations, Iren can order the immediate suspension of the activities until the safeguard measures have been adjusted, without this resulting in requests for compensation for the interruption of the services, for the working site suspension, for the lack of profit and for any other charge connected directly or indirectly, nor constituting grounds for any extension of the contractual terms. This is without prejudice to Iren’s right to terminate the contract, without prejudice to its right to bring the consequent actions for compensation and damages.

The contractual documentation expressly prescribes that the supplies and services subject to the contract are carried out in compliance with the minimum social standards in terms of human rights and working conditions along the supply chain as defined by the fundamental Conventions of the International Labour Organisation and the United Nations General Assembly – on health and safety in the workplace, definition of minimum wage, working hours, social security, human rights, child labour, forced labour, discrimination, trade union freedom and the right to collective bargaining – and by the national legislation in force in the countries where the stages of the supply chain are carried out. The above contractual commitment, already declared during the tender through the signing of a special declaration, involves, in case of violations, the application of a penalty, without prejudice to the right to terminate the contract.

The monitoring and verification of compliance with the provisions of the contracts, in terms of both environmental and social and safety aspects, during the execution of the works, are under the control of the Group’s Works Supervision. Control occurs on two levels:

the first is documentary and involves checking the consistency and existence of all the documents declared in the contract;
the second is, on the other hand, the monitoring directly on the site of execution of the work, by the Works Supervisors of the Business Units and by the site assistants, of the compliance with the rules and laws in force by the contract workers operating within the site.

Qualified suppliers that have been awarded a tender are assessed by the internal departments that manage contracts and directly monitor the conduct of the supplier when carrying out the contracted works. This assessment generates a score, which is added to the qualification score. Any continuous negative outcome or serious failure in the execution of the work, of which the Procurement, Logistics and Services Department is notified, will lead to the suspension and subsequent exclusion from the Supplier Register for a set period.

In 2021, 1,323 suppliers were audited in total, 1,090 of which qualified.