Supply chain responsibility and circular procurement
The energy transition poses major procurement and logistical challenges for our organisation. Our supply chain partners play a crucial role in achieving our objectives. Alliander’s annual procurement expenditure is approximately €2 billion for products and services. This will increase considerably in the coming years due to the energy transition. Contractors, components, energy purchasing and transmission tariffs are the main areas of procurement expenditure. Our societal role means that our procurement needs to be socially responsible.
Alliander must continue to accelerate, despite the scarcity of raw materials in the market, shortages due to the coronavirus pandemic, high energy prices, a tight labour market and geopolitical conditions, including the war in Ukraine. Our goal is to always weigh up price, quality and sustainability when procuring parts, materials and services.
Contributing to sustainability
Our procurement policy contributes directly to Alliander’s CSR policy. Together with our suppliers, we aim to make a net positive contribution to SDG 12 (Responsible Production and Consumption). We do so by entering into new forms of collaboration with our suppliers, adopting innovations as they appear on the market and forming partnerships. Our procurement department upholds 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. They include, for example, provisions relating to human rights, working conditions, use of raw materials, recycling and CO2 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. The employees of contractors and subcontractors must comply with these protocols and standards as well. In 2022, we further developed an ‘easy CSR’ toolkit that is accessible and broadly applicable to all Alliander purchases. This gives the supplier choices for making a concrete contribution to Alliander's CSR goals.
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 a network management-wide CO2 price guideline ensures we prioritise investments and purchased components that offer a greater CO2 reduction.
Code of conduct for suppliers
Alliander is committed to ensuring that suppliers comply with the Alliander Code of Conduct for Suppliers. 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. If the code is violated, we may impose sanctions. Suppliers can expect Alliander to deal with them in accordance with ethical business practices; we subscribe to and apply the principles of the EU Taxonomy including the OECD guidelines and ILO convention. More information can be found in the EU Taxonomy section elsewhere in this report. 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 2022, we performed a total of 23 audits to assess the quality of the products and services supplied (2021: 14). No critical deficiencies in respect of CSR aspects were 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 2022.
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 the parties concerned and inform them about the progress we make.
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. Circular procurement is integrated in our procurement processes. 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 them with data provided by DNVL, an independent research and consultancy firm. In 2022, we focused more on verifying the accuracy of the raw materials passports. All network operators use the same format for the raw materials passport: a shared understanding of circular performance is a prerequisite for effective impact management.
Circular materials flow
This figure shows the key materials that support our primary process. The percentages of plastics (jacketed pipes, cables, gas pipes), copper and aluminium (base metal for cables) are high. Understanding the composition of our materials helps us manage risk against the backdrop of internationally increasing demand for raw materials for the energy transition. The impact of the use of materials is not only determined by the quantity of the material used but also depends on the impact on human health, the ecotoxicity and scarcity of the material, and the CO2 footprint. These impacts are expressed in the eco-costs per kilogram of material. If materials are recycled or reused, these eco-costs will be significantly lower. In the figure showing the material flows, it can be seen that the level of reuse in the total material flows is still relatively small; however, any increase in reuse will also reduce the eco-costs.
Circular energy economy
The global energy transition is making products and raw materials increasingly difficult to source. Network operators and suppliers can act to mitigate this risk now by investing in a circular energy economy. Network operators and suppliers must work together to speed up innovation in products that are very long-lasting and vital to our society. To achieve this, a shared roadmap on circularity needs to be formulated and agreed quickly, as the demand for materials is expected to increase exponentially across the world by 2030.
In 2022, circular procurement accounted for 28% of total procurement (2021: 27%). This is lower than our target (35%). This was caused by the greatly increased demand for materials, combined with the market situation. This forced us to find new suppliers and take action to guarantee the delivery of installations. In 2021, we also started calculating our circular procurement percentage on the basis of more rigorously validated raw material passports. That has prompted us to adapt our long-term objective. We aim to achieve 45% circularity in our procurement by 2027.
We focus on the following flows and principles to further implement circular operations:
We optimise utilisation of the materials we already have, for example through 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.
Making the best use of what already exists: reuse
Redeployment contributes to both the energy transition and the raw materials transition. By redeploying network components from the low-voltage, medium-voltage, high-voltage and gas domains, we make sure we can fulfil our task and reduce costs at the same time. Reuse also allows us to postpone new investments and reduces our reliance on the supplier market, which is already stretched to the breaking point. In 2022, we reduced our costs by €11 million by reusing materials and overhauling network components. In addition, we reduced CO2 emissions by 780 tons by redeploying network components with a raw materials passport. We had 51 refurbished compact stations produced by refurbishment partners. To ensure that as many components as possible are returned for use in refurbishment projects, we opened recycling stations at our logistics and operational support sites in Almere, Ermelo and Apeldoorn. The technicians can now hand in leftover materials at these stations. We initiated a study last year to investigate how best to reuse power transformers. The results will be available in 2023.