Supply chain responsibility and circular procurement
The energy transition also poses major logistical challenges for our organisation. We have set ourselves the objective of connecting everyone in a timely and sustainable manner and eliminating backlogs by 2025. Our supply chain partners play a crucial role in achieving this. Alliander’s annual procurement volume is approximately €1.5 billion for products and services. Our largest procurement volumes are for construction projects, energy purchases, components and IT.
The role of Procurement
Despite scarcity in the raw materials markets, shortages due to the COVID-19 pandemic and a tight labour market for technical personnel, Alliander must still up the pace. Our procurement policy contributes directly to Alliander’s CSR policy with regard to the climate, raw materials and being an inclusive employer. We are drivers of change and initiatives in respect of supply chain responsibility. Together with our suppliers, we make a major contribution to sustainability. Our aim here is to make a net positive contribution to SDG 12, Responsible Production and Consumption. By entering into new forms of collaboration with our suppliers, quickly adopting innovations as they appear on the market and forming partnerships, we accelerate progress. Our Procurement department embodies our social responsibility in the way it interfaces with the market. Its tendering procedures uphold the principles of procurement law, such as being transparent and non-discriminatory. Sustainable procurement is an integral part of our tender invitation and evaluation criteria. In this process, we feel a responsibility for spending the revenue from our customer tariffs as fairly and transparently as possible.
CO2 score in tenders
When assessing our tenders, we include the energy consumption of components during their service life as far as possible. Working with an internal CO2 price ensures prioritisation of investments and purchased components that do most to reduce CO2 emissions.
A sustainable relationship with our suppliers
Together with our suppliers, we can make a major contribution to sustainability. Sustainable procurement is an integral part of our tender invitation/evaluation criteria. Our outsourcing policy incorporates provisions relating to human rights, working conditions, use of raw materials, recycling, and carbon emissions. Alliander requires work to be performed in line with safety protocols and standards for working with the gas and electricity infrastructure, such as VIAG and BEI. Suppliers’ staff must comply with these protocols and standards as well.
All contracted suppliers of Alliander have committed to the ‘Alliander Supplier Code of Conduct’. This code is based on OECD guidelines and requires suppliers as well as their suppliers and manufacturers to adhere to ethical and fair business practices. Infringements of the code can lead to the imposition on our part of sanctions such as termination of the contract or temporary suspension of work with or without notice of default. Suppliers can also expect Alliander to deal with them in accordance with ethical business practices. We want suppliers to see us as an attractive business partner. We aspire to be a ‘Customer of Choice’.
Compliance with agreements made with suppliers
Each year, we carry out multiple supply chain audits. In 2021, we performed a total of 14 audits to assess the quality of the products and services supplied (2020: 2; 2019: 11). CSR elements were assessed in eight audits. No critical deficiencies in these aspects have been reported. During the audits, compliance with the Code of Conduct and with the supply chain responsibility aspects are discussed, as well as the actions taken or to be taken in relation to any issues discussed. On top of the customary quality and product checks, we look at compliance with CSR requirements such as universal human rights, working conditions, health and safety and the environment. Outsourcing, investments and production in other countries sometimes lead to an increased risk regarding these aspects and for the recognition and observance of fundamental human rights. An organisation can involuntarily become involved in dubious practices such as child labour. Findings are shared with the supplier. We did not implement any measures with regard to suppliers in 2021.
In the event of proven negligence or violation of the agreements, we terminate the relationship or impose other sanctions in accordance with the contract and Alliander’s Supplier Code of Conduct. In the event of damage or risks, we communicate with our stakeholders, carry out investigations and implement temporary or structural measures. We keep in touch with and inform the parties concerned about the progress we make.
Circular operations
As a network operator, we use large quantities of materials and, indirectly, of raw materials. We have a responsibility to do the best we can when it comes to the sourcing and use of our materials. For a few years now we have been integrating circular procurement into our purchasing processes. All network operators use the same format for a raw materials passport.
We report on the ‘circular procurement’ percentage internally every quarter. We use this term to refer to the procurement of materials made largely from recycled constituents and/or materials that are recyclable after use. This applies to our primary assets: low-voltage and medium-voltage cables, gas pipes, distribution and power transformers and (smart) electricity and gas meters. The percentage of recycled or recyclable materials is determined based on raw material passports provided by our suppliers, which state these percentages. We therefore rely on the support and expertise of our suppliers to identify these percentages, and we validate their declarations with data provided by CE-Delft, an independent research and consultancy firm.
Circular materials flow
This figure shows the key materials that support our primary process. It displays a high percentage of plastics (jacketed pipes, cables, gas pipes), copper and aluminium (base metal for cables). Understanding the composition of our materials helps us manage risk against the backdrop of internationally increasing demand for raw materials for the energy transition.
Improved data quality
In 2021, we focused more on the accuracy of the raw materials passports. We audited a number of suppliers that significantly influence the KPI score and checked the evidence for the figures provided by them. We also tightened up how we calculate ‘circular procurement’. In determining ‘recyclable at end of useful life’, we will now look at the current state of the art, rather than the approach that our suppliers often use, which is the end-of-life state of the art (i.e. in 50 years’ time). This matches the approach that most parties use for life-cycle analyses in the Netherlands.
To further increase data quality and improve the management of raw material passports, the sector set up a database for central registration of all passports in 2020 and continues to invest in this resource. This functionality is included in the KSANDR platform, which network operators already used to record all the outage data relating to our main components. KSANDR is a non-profit organisation that aims to record, share and develop knowledge about the behaviour of the electricity grids in the Netherlands. In the coming years, we will make more use of this facility as a collective of network operators and suppliers.
Circular procurement
In 2021, the ‘circular procurement’ percentage was 27% 1 (2020: 23%). which is lower than the target of 45%. This is explained in part by the greatly increased demand for materials, combined with the market situation. As a result, we had to spend time looking for new suppliers and securing the delivery of assets. A further factor explaining the lower score is the tighter definition of ‘recycled out’ and a correction to raw material passports as a result of our audit. In addition to this, we started requesting raw material passports in tenders for all network-related assets in 2021.
We also manage based on the following flows and principles to implement circular operations even more concretely:
We have put measures in place to optimise how we use the items we already have, such as the redeployment programme, and the maintenance and replacement policy.
We avoid wasting raw materials in our organisation.
We recycle 90% of the remaining waste as high-grade materials.
- 1 The percentage of materials sourced through circular procurement is calculated based on an updated method. The method uses the recycled and recyclable percentages per material type as provided by the supplier. If this percentage is higher than the validated percentage, the validated percentage is used instead. See Supply chain responsibility and circular procurement. When raw material passports are used, the circularly sourced material is assessed at 40% (2020: 44%).
Making the best use of what already exists: reuse
Reuse of network components limits the use of new raw materials and reduces carbon emissions. In 2021, Alliander too faced scarcity in the market, so our practice of redeploying transformers, for example, helped minimise material shortages. Successful redeployment of network components is the responsibility of every party with a role in the materials supply chain. We also continuously optimise and expand our redeployment processes. This allowed us to redeploy more components this year, such as transformers, magnefix installations, suppression chokes and MVRs/network stations. In addition to making a substantial contribution to a sustainable Alliander, this resulted in cost savings of €10.3 million. Finally, in 2021, all the network operators in the Netherlands collectively endorsed the redeployment of network components. They have set up collaborations to ensure optimal reuse of existing equipment between organisations.