Sustainability within the Supply Chain

Procurement within the KION Group is centrally managed by the Group’s global procurement organization, which covers both industrial trucks & services (ITS) and supply chain solutions (SCS). As part of the CTO Organization¹, the global procurement organization maintains oversight of the different procurement categories and is able to optimize procurement geographically, in order to create added value, take advantage of global synergies and local flexibility, and build a sustainable and scalable foundation for the Group’s procurement activities. The aim is ensure that supplier relationships are well managed and build productive partnerships with other areas of the KION business.

In order to achieve the best results, reduce risks within the supply chain, and promote strategic growth and cost savings, the KION Group is currently developing and introducing a series of measures to support its global procurement operations, including: tasks and areas of responsibility, targets, models, mandates, department KPIs, decision-making boards, committees, interfaces, and escalation models. Together, these provide the foundation for a targeted global procurement organization that serves the entire KION Group, including each of its subsidiaries. One of the procurement organization’s key responsibilities is supply chain management. Sustainable supply chain management requires an effective governance structure, high levels of process standardization, good quality data, and appropriate and workable policies that apply across all business units and legal entities within the KION Group.

Ideally, the global procurement organization should involve all organizational units within the KION Group in its efforts to build a sustainable supply chain. In order to underline the importance of sustainability across all 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 managing supplier relationships and shaping procurement decision-making.

Supply chain management within the KION Group is about shaping and managing the flow of information and materials at all stages in the value chain, based on both business and sustainability criteria. The aim is to ensure that socially responsible and environmentally friendly practices are upheld in all key processes, from the procurement of the necessary materials, to the manufacturing of the end products, to the delivery of products to the customer. Within this, the global procurement organization is only responsible for procuring the necessary materials and managing the relationships with the relevant suppliers. Responsibility for manufacturing and the delivery of end products to the customers lies with other organizations within the KION Group and its subsidiaries.

In addition to promoting the sustainable use of materials in relation to its products and services, the KION Group is committed to ensuring that human rights, labor conditions, and environmental standards are upheld at each stage in the value chain. To this end, the KION Group is currently setting 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 KION Group Code of Compliance and Principles of Supplier Conduct define specific rules and requirements for responsible procurement that suppliers must adhere to when conducting business with KION Group companies. The Principles of Supplier Conduct, in particular, contain clear ecological and ethical guidelines in line with environmental, labor, and human rights standards and are available in the three main languages of 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 Principles of Supplier 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 robustly assess the sustainability risks and credentials 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. In 2022, the Group started using the IQ platform from EcoVadis to conduct general sector and country risk analyses for all its direct procurement suppliers—i.e. those that manufacture materials for the Group’s production operations—where the annual KION Group spend is over 100,000 euros, in order to better understand their sustainability risk profile (phase 1). In a next step, the company began using the IntegrityNext platform and its self-evaluation questionnaire to assess the extent to which these direct procurement suppliers comply with human rights, labor, and environmental standards (phase 2). Finally, it introduced a third, more rigorous evaluation, whereby it requests that suppliers undergo an EcoVadis assessment (phase 3). Thanks to this three-phase evaluation process, the KION Group can now verify that its suppliers comply with specific standards in the areas of HSE, anti-corruption and anti-bribery, product-related environmental protection, and upstream supply chain monitoring. More importantly, it can also check that they uphold human rights, labor, and employment standards.

New suppliers are asked about their sustainability credentials as part of the supplier onboarding process and must undergo the three-phase ESG evaluation described above. Existing suppliers are also assessed regularly (annually). By taking these actions, the KION Group aims to further increase transparency around the sustainability credentials of its suppliers and take targeted action to better manage the risks and opportunities for the sustainability of its supply chain.

If weaknesses are identified in a supplier’s operations, preventative measures and improvements are introduced, with progress monitored using mechanisms such as the EcoVadis platform. The supplier is then re-assessed to verify that the necessary improvements have been made.

Between 2020 and 2022, supplier audits and monitoring efforts were hampered by the restrictions imposed around the world in response to the COVID-19 pandemic. With just a few exceptions, most countries are expected to lift the bulk of these restrictions during 2023, which will allow more on-site audits and checks to be conducted across the supply chain. The KION Group intends to continue the roll-out of its three-phase ESG evaluation system, so that it can effectively manage the risks and opportunities presented by its global supplier base for all Group organizations, avoid duplication of efforts on-site, and harness the maximum number of synergies across the Group.

In July 2023, KION announced its official commitment to the Science Based Targets initiative (SBTi). As a result, ongoing efforts to reduce CO₂ emissions within the KION supply chains will be subject to a binding target and CO₂ reduction and net-zero requirements will play an importing role in shaping supplier relationships and the strategic development of the supply chain The global procurement organization is currently developing and introducing relevant initiatives, processes, and strategies, to enable to business to meet this target.

Diversity within the Supply Chain

The KION Group is committed to promoting diversity within its supplier base. Just as the Group benefits from the diversity of its workforce, so too the company recognizes that a diverse pool of suppliers can help bring fresh new perspectives to its products and services. The KION Group therefore deliberately seeks out partnerships with small and diverse suppliers with a strong track record (nationally registered companies classified as ‘small and underrepresented’ or owned and operated by women, minority groups, or military service veterans). The company works hard to build strong mutually beneficial relationships with these suppliers and the communities that they represent. In addition, the KION Group is proactive in strengthening its relationships with business leaders, community organizations, and trade associations that represent the interests of a diverse range of businesses.

German Supply Chain Due Diligence Act (LkSG)

In response to the provisions of the German Supply Chain Due Diligence Act (LkSG), which was adopted by the German government in 2021, the KION Group launched a thorough review of the supplier evaluation and assessment system in place across all its regions for both direct and indirect procurement categories. The three-phase ESG evaluation system described earlier is the result of this review. New sustainability requirements were also incorporated into the revised supplier assessment process.

A key element of the LkSG legislation is that companies must provide their own staff with training on the topics of human and environmental rights within the supply chain. KION procurement staff have therefore completed training on the measures in place across the Group to hold suppliers accountable with respect to human rights, labor rights, employment standards, and environmental standards. Further training and monitoring are planned from 2023 onwards as part of the comprehensive three-phase ESG evaluation system and other proactive sustainability initiatives.

Conflict Minerals and Conflict Zones

In devising its corporate strategy, the KION Group strives to achieve a balance between economic, environmental, and social factors. The key priority for the global procurement organization is to ensure compliance with all international laws and regulations, and at the same time exceed customer expectations by going beyond the minimum requirements. The KION Group is not required to report on conflict minerals under European Union regulations; however the Group acknowledges this legislation and is working to include conflict minerals and conflict zones as part of its system for assessing and improving the sustainability of its supply chain. To improve transparency around conflict minerals within its supply chain, the KION Group has included the standardized Conflict Minerals Reporting Template (CMRT) in its General Purchasing Conditions. The company has also joined over 200 others in using the Assent platform—an SaaS compliance platform that allows businesses to analyze product-specific data for their suppliers and also verify the practices of smelters and refineries as part of an industry-wide recognized audit/evaluation program.

The Group-wide Conflict Minerals Standard was introduced in 2023 in line with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the EU Conflict Minerals Regulation (Regulation (EU) 2017/821), and the US Dodd-Frank Act. This standard 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 the KION Principles of Supplier Conduct. The standard applies to all KION Group companies and all employees worldwide, especially those staff involved in developing and procuring goods and services on behalf of the Kion Group or any of its Group companies.

[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 KION Group’s Chief Technology Officer (CTO).
[2] ESG evaluation (phases 1 and 2) only available since 2022