Sustainability in the Supply Chain

The KION Group has consolidated procurement into a centrally managed global organization that supports the activities of both the Industrial Trucks and Services (ITS) and Supply Chain Solutions (SCS) segments. As part of the CTO function¹, this global procurement organization aims to create value through category expertise and optimized geographic sourcing as well as leverage global synergies and local flexibility to build up a sustainable, scalable procurement base. The goal is to ensure that supplier relationships are well managed and build productive partnerships with other KION Group divisions.

The KION Group has defined global purchasing roles and responsibilities, objectives, models, mandates, KPIs, decision-making bodies, committees, interfaces, and escalation models in order to achieve optimal results, reduce risks in the supply chain, and drive strategic growth and cost savings. Together, these provide the foundation for a targeted global procurement organization that serves the entire KION Group, including its subsidiaries.

Sustainable supply chain management requires an effective governance structure, high levels of process standardization, good quality data, and appropriate and workable policies that are intended to apply across all business units and legal entities within the KION Group. This is ensured by a central supplier sustainability department, which bears responsibility across all organizational units.

It is the duty of the procurement organization to inform all individuals entrusted with procurement activities in the Group of the sustainability standards to be followed when selecting and evaluating suppliers. In order to underline the importance of sustainability across all KION Group organizations, the Group has put sustainability KPIs in place to measure the efficacy of its sustainability strategy. These KPIs also play an important role in supplier relationships and inform procurement decisions.

The KION Group’s supply chain management thus designs and manages the flow of materials and information throughout the entire value creation process based not only on business criteria but also in terms of sustainability. This ensures that all important processes, from the procurement of the required materials to the completion of the end products and their delivery to the customer, are set up in a socially responsible and environmentally friendly way. However, the global procurement organization is exclusively concerned with the procurement of the required materials and the associated supplier management within the scope of these processes and procedures. Other areas of the KION Group and its subsidiaries are responsible for the subsequent stages from completion of the end product through to delivery to the customer.

In addition to procuring parts and services that make sustainable use of resources, the Group’s goal is to ensure that the various parts of the value chain live up to certain defined standards in terms of human dignity, working conditions, and environmental compatibility. To this end, the KION Group has set up an information and analysis system to record relevant data and information to support the effective management of the supply chains for its key procurement items and materials.

Principles of supplier conduct

The Group has laid down specific requirements and rules of conduct for responsible procurement in the KION Group Code of Compliance and in the Supplier Code of Conduct and obliges its suppliers to observe these requirements when entering into business agreements with KION Group companies. The Supplier Code of Conduct contains clear ecological and ethical guidelines in line with environmental, labor, and human rights standards and is available in multiple languages in KION’s most important procurement markets.

In addition, the KION Group’s General Purchasing Conditions—and individually agreed contracts—set out detailed requirements to ensure compliance with procurement obligations, applicable laws, and the KION Group Supplier Code of Conduct, as well as for maintaining transparency throughout the supply chain. All these policies are binding for the entire KION Group and all its legal entities, and are regularly audited to ensure that they are up to date and complete.

Three-phase ESG evaluation

In order to objectively and reliably assess the sustainability risks and performance of its key suppliers, the KION Group has introduced a three-phrase ESG (environmental, social, and governance) evaluation using the SaaS (software-as-a-service) platforms provided by EcoVadis and IntegrityNext. Since 2022, the KION Group has been running industry and country risk analysis on all suppliers—regardless of revenue or product supplied—using the EcoVadis “IQ” platform, in order to determine their risk profile with regard to sustainability.

The IntegrityNext platform is used in the next stage of the evaluation. Here, a self-assessment questionnaire is used to determine the supplier’s level of compliance with human rights, labor rights, and environmental protection. The assessment is carried out for strategic suppliers (A suppliers) and for business partners identified in the first step as high-risk suppliers. Alternatively, the assessment is carried out via EcoVadis. In this case, suppliers are required to undergo a sustainability assessment based on a review of their documentation. The result of the assessment is then evaluated and suppliers with an existing risk are prioritized according to the severity and likelihood of a possible risk occurring. Based on this prioritization, suppliers are contacted and asked to implement individual corrective measures. These measures are defined based on the existing risk and may include supplier audits, corrective action plans, supplier training, individual discussions, or various certifications (list not exhaustive). Ideally, the corrective measures should reduce the risk of rights infringement.

The results of this supplier evaluation are summarized as an “ESG KPI” and taken into account in various purchasing processes, such as supplier evaluation, the awarding of new projects, and the product group strategy.

This multi-phase evaluation process allows the KION Group to verify that its suppliers comply with specific standards in the areas of HSE, anti-corruption and anti-bribery, as well as upstream supply chain monitoring. Above all, this process ensures that suppliers are compliant with human rights, employee rights, and employment standards. It also brings the KION Group in line with various legal requirements, such as the German Supply Chain Duty of Care Act, as well as local laws like the UK Modern Slavery Act and the Canadian Modern Slavery Act. The system is flexible and can be adapted to changing requirements.

New suppliers are asked about their sustainability assessment as part of the supplier onboarding process and go through the above three-level ESG evaluation program. Existing suppliers are reviewed on an ongoing basis. These approaches give the KION Group a transparent way of tracking the sustainability performance of its suppliers and managing risks and opportunities related to the sustainability of the supply chains in a targeted way.

Emissions transparency in the supply chain

In July 2023, the KION Group made a commitment to the targets of the SBTi (Science Based Target initiative). This means that continually reducing CO₂ emissions within the KION Group supply chains is now a binding target. Since taking this step, CO₂ reduction and net-zero requirements have been incorporated into supplier relationships and the tactical design of the supply chain. With the help of external support, the KION Group has set up a project that aims to take a holistic approach to measuring and reducing CO₂ emissions in the supply chain (Scope 3.1 emissions) and take this issue into account in its purchasing processes. In 2024, workshops were held with selected suppliers to determine their maturity level in various material categories. Adapted according to the suppliers’ level of knowledge, the workshops provided them with basic training on calculating CO₂ emissions. If the calculations were already available, the results, decarbonization plans, and obstacles were discussed. The workshops provided the group with valuable insights to inform future actions. The project also addressed the integration of CO₂ transparency into purchasing processes, particularly in the tendering and awarding process, but also in the strategies for material categories and supplier evaluations. The foundation for this process was laid in 2024. In the coming years, the Group will work on collecting primary data to improve the transparency of CO₂ emissions in the supply chain.

Training of employees and suppliers

The KION Group has devised a range of training courses to educate its own employees on human rights and environmental protection in the supply chain. The aim here is to raise awareness among employees of the contribution they can make to compliance with human rights, labor rights, employment standards, and environmental protection in the supply chain. Other training courses cover environmental product requirements and general background information on the KION Group’s sustainability program.

There is also a training course specifically for suppliers. This course covers why suppliers should also address the issue of sustainability, and which topics the KION Group is currently passing on to suppliers and why. The training is available on the KION Group website and was produced in English with Chinese subtitles. It is also sent to suppliers via our sourcing portal.

Conflict Minerals and Conflict Areas

The KION Group’s strategy aligns economic, environmental, and social aspects. The global procurement organization’s top priority is to comply with all international laws and regulations while exceeding customer expectations. While not required to report on conflict minerals under the relevant European Union regulations, the Group recognizes the regulations and is working to include conflict minerals and conflict areas in the model for assessing and improving aspects of the sustainable supply chain. In order to improve transparency around these issues in the supply chain, the KION Group’s General Terms and Conditions of Purchase require that suppliers submit the standardized Conflict Minerals Reporting Template (CMRT). The KION Group has also decided to work with the SaaS platform provider Assent. Its compliance portal is used by more than 800 companies, and enables the KION Group to analyze product-specific supplier data as well as identify smelters or refiners in its supply chain based on the submitted CMRTs, which must be submitted to the KION Group annually by the suppliers.

Since 2022, the KION Group has participated in an annual industry initiative coordinated by Assent. It specifically encourages smelters and refineries to be assessed by industry-recognized auditing programs. Over 200 companies have taken part by signing a joint letter and providing a link to the auditing institutes. This underlines the significance of auditing to companies that have yet to undergo an assessment.

The Group-wide Responsible Minerals Sourcing Standard entered into force in 2023 in accordance with the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas published by the OECD, the European Conflict Minerals Regulation (EU) 2017/821, and the US Dodd-Frank Act. This standard clearly sets out the KION Group’s own commitments with respect to conflict minerals and also defines its expectations for its suppliers around the world in line with its Principles of Supplier Conduct. It applies to all KION Group companies worldwide and to all employees, in particular those involved in the development and procurement of goods and services.

Footnotes:
[1] The KION Group’s cross-brand and cross-regional approach to product development is designed to maintain universal standards and ensure international coordination of its technical operations around the globe. Functions such as research and development, procurement, and quality and sustainability management all fall under the remit of the Chief Technology Officer (CTO) of KION GROUP AG