Policies for Suppliers

Iren Group implements a structured procurement process that is in line with the principles of free competition, equal treatment, non-discrimination, transparency, proportionality and publicity in the instance provided by law, as well as inspired by the traceability of information, using suitably profiled IT systems, supplier rotation to ensure the best competition dynamics with a view to efficiency and efficacy, and the division of tasks. Also, all parties involved in any capacity in the procurement process are required, each within the scope of their jurisdiction, to scrupulously comply with the provisions of the law, the Group’s Code of Ethics, Model 231 and company procedures, particularly concerning the transparency and traceability of transactions and the confidentiality of any information they become aware.

The Group’s online Procurement Portal, through which public procedures and procedures for invitation to tender are managed, and the Supplier Register, divided into product categories which are functional to business needs, allow for better monitoring of the supply chain, which is a strategic aspect in the management of Group’s business activities.

The Group has adopted various tools to broaden supplier involvement in the sustainable development approach.

The Procurement Portal constitutes an important opportunity for economic operators interested in becoming suppliers of the Group, increasing opportunities for involvement. To guarantee absolute transparency and disclosure concerning engagement rules, the rules for admission to the Supplier Register, the participation rules for managed negotiation events and the general conditions of use for the platform are published on the Portal.

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 context of contracts that are subject to the Code for Public Procurement, Article 30 “Principles for awarding and executing contracts and concessions” requires economic operators to respect environmental, social and labour obligations when carrying out works, which are established by European and national legislation, by collective agreements or the international provisions listed in annex X, which include: ILO Convention no. 29 on forced labour, ILO Convention no. 105 on the abolition of forced labour, ILO Convention no. 138 on minimum age, ILO Convention no. 182 on the worst forms of child labour. 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 Italian Legislative Decree 24 of 4 March 2014. In addition, they must certify that they are up to date with obligations relating to the payment of social security contributions, a constraint ascertained through the acquisition of DURC. In the case of public tenders, any finding of non-compliance is grounds for contract termination and reporting to ANAC (National Anti-Corruption Authority).

Within public contracts for amounts of community interest, 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 call refers. These are requirements that 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.

With reference to awards that are attributable to excluded contracts (so-called “under-threshold”), or irrelevant to the contracts and concessions law, Iren Group uses supplier qualification procedures that consist of a specific questionnaire subdivided into sections concerning the company profile (attesting to information on turnover, certificates, etc.), information on economic-financial capacity (balance sheet indices) and information on organisational-operational data. Current provisions require that at least 5 suppliers from those included in the Supplier Register are invited, the management of which is centralised in the Iren parent company.

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

The qualification to be part of the Supplier Register requires the verification of being in possession of the certifications and of the course of validity of the same certifications, issued by independent bodies (i. e.: ISO certifications, SOA certifications, etc.), as well as the possession of economic eligibility requirements of the tender. During the qualification process suppliers are required to state:

• if, in line with UNI ISO 26000 guidelines on corporate responsibility, company initiatives to develop a socially responsible approach to business planning and management have been identified and, if so, to describe the initiatives adopted;
• if the supplier publishes its 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 carry out 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 121);
• not to have committed serious breaches, which have been definitively ascertained, against obligations concerning the payment of taxes and duties, or social security contributions, in accordance with Italian legislation or that of the State of establishment;
• not to have committed serious violations duly ascertained against occupational health and safety laws.

In the context of public procurement procedures, the lack of criminal convictions is also verified (by indirectly consulting their criminal record and record of offence related administrative sanctions) which, by nature and severity, entail the exclusion from contracts and sub-contracts (including offences related to safety, the use of child labour, etc.).

Furthermore, certain budgetary indicators are acquired via companies specialising in commercial information (both for corporations and partnerships), which contribute to determining the supplier’s score for qualification purposes.

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.

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, 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 2020, 1,479 suppliers were audited in total, 1,279 of which qualified. There are 183 qualified suppliers in the environmental sector and 255 in the safety sector.

Compliance with the provisions related to the environment from contractors and subcontractors is required in the specifications. The contract documentation expressly requires that the supplies and services under the contract be carried out following minimum social human rights standards. In order to monitor compliance with these standards, the Group requires suppliers to meet specific requirements. Furthermore, in regards 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 fair-trade products. Goods are tracked when the specifications require that they are sourced from a specific location.

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

The rules for admission to the Supplier Register also provide – related to the suppliers of goods and services with potential environmental impacts (suppliers of environmental services connected to the collection, transport, recovery and disposal of waste; remediation of soil and subsoil, etc.) – for the possibility of carrying out audits to verify compliance with applicable environmental laws, if any, conducted by qualified third parties. To this end, the following evidence is requested during qualification procedures:

• possession of ISO 14001 Certification (issued by a recognised accreditation body), or acquisition of significant and interrelated elements of the environmental system;
• 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, ANAB– ICEA, Natureplus® Certification, CIC Compostability);
• the use of products from one or more of the labels mentioned above in the production/service process, or of another label that highlights a focus on lowering the environmental impact;
• the use of suppliers holding ISO 14001 and/or EMAS Certification in the production/service process;
• the use of work instructions that govern the management of waste, including hazardous waste, packaging and packaging waste in the production/service process, from their temporary storage to their disposal within the contract;
• the use, with reference to the categories of products selected, of recycled or recyclable material, with low emissions and low energy consumption;
• the adoption, with reference to the categories of products selected, 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 selected, 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 1,279 qualified suppliers in 2020, 594 reported possession of at least one of the above environmental profiles. Furthermore, more in-depth environmental profile assessments were conducted on 750 under category-specific questionnaires that require the compliance of the product/service with minimal environmental and rewarding criteria defined by the Ministry of the Environment.

Over the year, 49 new suppliers were selected on the basis of environmental criteria.

The most important activities carried out in 2020 to improve supply chain management include:

• activation of an artificial intelligence system for activities relating to vendor management;
• upgrading and improving the integration between ERP (Enterprise Resource Planning) and the Remote E-Procurement Portal;
• updating of the information and documentation relating to the suppliers listed in the Register.

Membership to 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. These commonalities involve the willingness to report on the CSR profiles, with a view to rewarding the willingness shown and acted on.

Employment in suppliers companies

Iren Group is aware of the important role employment plays in ensuring the social development of the environment in which it operates. It contributes to maintaining employment levels not only through its own employees but also by promoting the development of the companies to which it commissions services and work, by requesting guarantees from them in terms of both personnel and safety policies through the application of some of its own standards; moreover, the Group often offers employees of supplier companies the possibility to use some of the company services and attend to information/training courses organised by the Group.

Particular attention is paid during the assessment stage to compliance with the regulations relevant to the correct application of the employment contracts and the payment of the relevant mandatory insurance and social security contributions; the specifications provide for the obligation of the supplier to comply with the laws concerning the protection of the workers and the National Collective Labour Agreements in force and applicable to the sector of reference. These obligations are controlled through the regular acquisition of DURC (statement of correct fulfilment of welfare contribution obligations) and the documents provided by occupational safety legislation (OSP – Operational Safety Plan, and DUVRI – Interference Risk Assessment Document). In the case of non-compliance with remuneration and social security contributions, the laws of alternative means are applied, meaning employees and social security funds are paid directly and these amounts are deducted from the amount paid to the contractors. Subcontracts are also authorised and monitored in compliance with the law. As well as fully implementing the regulations for employee health and safety, in many contracts the score attributed by the Group focuses on the commitment of the contractor to ensure, in line with the provisions established by the collective labour agreement of the so-called “social clause” and with the organisation it intends to implement, occupational safety through the hiring of the personnel of the outgoing contractor (the latter may be scored for the maintenance of the resources used). Furthermore, in regard to Contact Centre services, the awarding tenders state that the personnel costs cannot be lowered.

In order to participate in the public tenders of Iren Group, companies must comply with the obligations provided by Law 68/1999 on the recruitment of disabled workers. All the Group’s specifications include clauses designed to control the problem of undeclared employment, with regard to tendering and subcontracting.

During qualification procedures for the Register, and concerning information on operational and organisational capacity, companies are requested to indicate the number of employees on permanent and fixed-term contracts and to specify the ratio of permanent employees to the total number of employees, a ratio that increases the score in a directly proportional manner.

For tenders, Group contracts state that the contractor is responsible for complying with current sector legislation. As the contract is characterised by the assumption of the responsibility to achieve a result, the contractor is entrusted to organise the means and workforce needed to attain said result. In the context of public tenders, the bidder is required to specify the applicable National Collective Labour Agreement and the number of hours estimated for the performance of the contract. If an obvious anomaly were to become apparent when verifying the sustainability, the cost of the workforce employed to carry out the tender would also be investigated.

Suppliers health and safety

In day-to-day management, specific measures for the protection of health, safety and hygiene at work are required in contracts. In fact, tender and contractual documentation must include the Safety and Coordination Plan (SCP) and the Interference Risk Assessment Document (DUVRI). Further obligations regarding occupational health and safety to be implemented in the operational management phase of the contracts are defined by specific procedures.

The BS OHSAS 18001 or ISO 45001 certified systems adopted by the leading Group Companies are defined, documented and implemented in order to guarantee systematic control of aspects relating to the health and safety of both employees and workers of third-party companies operating on behalf of the Group, also thanks to procedures for controlling the operating methods adopted by contract workers in relation to compliance with safety requirements.

During the supplier evaluation phase, information on accidents that the company has recorded in the last three years is requested via the general questionnaire on the Procurement Portal. In addition, the CSR survey conducted on suppliers (see page 121 of the “Sustainability Report”) shows that in 2020 only 2% of the employees of the companies that carried out activities for Iren Group had cases of illness. During qualification procedures for the Register, suppliers are also investigated on the following aspects:

• the existence of a prevention and protection service, either within or outside of the company;
• the appointment of a safety contact that deals with individual contracts/orders;
• benefit, at least once in the last 3 years, of the INAIL rate reduction (ref. OT24 FORM);
• availability of an Occupational Health and Safety Management System certified pursuant to Article 30 of Italian Legislative Decree 81/08 and, if so, a request to specify whether it complies with the UNI-INAIL Guidelines or the OHSAS 18001 standard (in 2020, 212 of the 1,279 suppliers qualified during the year, for a total of 1,616 out of 6,015 qualified);
• systematic verification of the level of learning reached by each worker after every training event;
• the integration of Italian language courses within foreign workers’ training.

Furthermore, the Group carries out monitoring and control inspections on the activity carried out by the personnel of third-party companies working on construction sites and in plants, related to aspects of safety and hygiene at work. The monitoring of activities is guaranteed by internal supervisory inspections by the Works Management (pursuant to Article 26 of Italian Legislative Decree 81/2008) or by the Coordinator during the execution phase (on temporary and mobile construction sites pursuant to Title IV of Italian Legislative Decree 81/2008).

In contract/subcontract situations or, more generally, in situations where third parties operate at Group sites, the relevant documentation required to identify and communicate information on environmental risks and prevention measures, as well as any interference risks relating to the performance of activities by third-parties in those sites, is prepared. This documentation is prepared according to procedures specific to each Business Unit, in order to make the process as appropriate as possible to the characteristics of the individual contracted or subcontracted activities.

The Group procedure for the “management of accidents, near misses and occupational accidents” involves an accident report form for employees of third-party companies, through which third parties are required to inform the Group of the occurrence of any accidents in the context of the activities carried out on behalf of the Group and/or at sites where the Group has legal responsibility. The compilation of the form requires the involvement of the supplier company and the Works Management; information regarding the situations resulting in injury are collected in a database and subjected to in-depth analysis by the prevention and protection service of each Group Company, in collaboration with the Works Management. In 2020, a total of 33 accidents were recorded by third party companies, not including commuting accidents, one of which was fatal.

Training and information activites

In 2020, the Group provided over 1,060 hours of training to third-party companies, 12% related to occupational health and safety, involving 113 employees of the companies themselves. In addition to specialist training and operational training on the procedures relating to the introduction of new IT management systems (e.g. workforce management, customer relationship management, Just Iren and Iren Way), extensive information was given on work equipment, plant and the specific characteristics of the working environment, in terms of occupational health and safety (e.g. activities on work environments) and the prevention measures adopted to deal with the Covid-19 emergency.

Supplier portfolio and purchase volumes

In 2020, purchase orders were issued to 4,445 suppliers for over 1,283 million Euro.

Impacts on local areas

Sourcing of suppliers in the local areas of reference is well-established, both in terms of the number of active suppliers (56%), as well as the economic value of the orders (60%). This data highlights the importance of the effects of Iren Group on the territorial areas of reference.

Within the context of public tender procedures, in compliance with current legislation and community principles which require that all companies can compete, no matter their location, the Group does not select suppliers by geographical origin, but on quality and economic criteria, favouring the best value for money as the determining factor. In order to guarantee an adequate level of competition, where feasible, it arranges the tender into functional lots, so as to allow 124 2020 Sustainability Report separate awards and greater participation by economic operators, including those that are small and medium enterprises. Nonetheless, with reference to the instrumental tenders, which are carried out via invitation, or irrelevant to the Contracts and Concessions Law, Iren Group reserves a 50% share for local economic operators with suitable qualifications that are present in the Register when identifying the panel of qualified suppliers to invite to the tender. This measure aims to favour local development and, consequently, social cohesion. The economic impacts on local business generally occur due to subcontracting to local companies – within the limits allowed by law – that are able to work on a portion of the activities and apply more competitive prices given that they are already present in loco and guarantee efficient services due to their knowledge of the area. The large number of suppliers by geographical area and the relevant volumes ordered are shown below and refer to all purchases with exclusion of contracts for the supply of raw materials.

Suppliers by geographical area (% of number)

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supplier by gorgraphical area (% of Euro)

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Social cooperatives

The Group supports social cooperatives whose main aim is to ensure the incorporation of disadvantaged people within the world of work. Social cooperatives are active in particular in waste collection and environmental hygiene services. Within the general qualification questionnaire, suppliers are asked if the company’s main purpose is the social and professional integration of disadvantaged people or those with disabilities (pursuant to Article 4, subsection 1, Law 381/1999 “Social Cooperatives Regulation”).

In 2020, 3 new social cooperatives were acquired, making a total of 41 cooperatives present in the Procurement Portal. Of these, 24 have worked with Group companies in 2020. The overall order amount to social cooperatives was over 22 million Euro, representing 1.7% of the total value of Group orders. The order trends can vary significantly from one year to the next in relation to the signing of multi-year contracts, including ones for significant sums.

Disputes

In 2020, the Group lost, definitively, three lawsuits brought by employees of former suppliers/contractors of the Group against their employer for non-payment of wages, and in which Iren Group was held liable according to and for the effects of joint and several liabilities.

In these cases, since the plaintiffs’ employer failed to execute the judgement, the Group was forced to pay the amounts owed to the employees directly, reimbursed in full by the principal.