Responsibility towards suppliers

To achieve strategic objectives in the Procurement area, we mainly focus on implementing a method of comprehensive management of procurement categories, a supplier management model (its elements include segmentation, classification, management rules) and global procurement standards. Also, rules of cooperation within the Group were defined and have been consistently implemented. This process is supported by the Procurement Policy put in place at the ORLEN Group as an umbrella document setting out the procurement management standards applicable across the Group and covering procedures, processes, tools, systems and procurement structures.

In most cases, our trading relations with suppliers are long-term to ensure that the ORLEN Group’s requirements are satisfied in a reliable manner. The suppliers provide raw materials and services necessary for the ORLEN Group to run its operations. Our purchases are related to investments, production and maintenance projects; we buy electricity, production chemicals, biocomponents, supplies for service stations, and general-purpose supplies (administration, IT, professional services, logistics). In 2019, the ORLEN Group cooperated with nearly 25 thousand suppliers.

The procurement categories in the Central Category Tree form an extensive and orderly procurement directory used at PKN ORLEN and the key companies of the ORLEN Group. The Central Category Tree has three levels of detail. The first level comprises 13 main categories. The second and third level are detailed category levels, corresponding to various product and service groups for a wide range of business needs.

In a significant step towards ensuring a responsible supply chain, PKN ORLEN incorporated responsible business and sustainability criteria into its procurement management standard. The Company promotes social responsibility among its suppliers and seeks to cooperate with trade partners that respect human rights and operate in compliance with the law, ensure safe and fair working conditions, follow the best standards of ethical conduct and care for the environment. CSR criteria have been defined and compiled into a single document entitled ‘Supplier Code of Conduct’. Compliance with the Code is a mandatory criterion in the process of trade partner selection at ORLEN Group companies. The suppliers are selected based on the ORLEN Group’s standardised and uniform social, environmental, legal, and ethical criteria. All existing and potential suppliers of the ORLEN Group are obliged to know and accept the requirements concerning human rights, compliance with the law, safe and decent working conditions, the highest ethical standards, and care for the natural environment.  Acceptance of the ‘Supplier Code of Conduct’ by tenderers and suppliers is a formal precondition for participation in procurement procedures. If a tenderer fails to accept the Code, its bid will not be considered in the procurement process because the formal criteria are not satisfied. The purpose of the Code is to promote responsibility among the ORLEN Group’s Stakeholders and encourage responsible practices among the suppliers. Moreover, every tenderer taking part in procurement procedures must read, understand and accept the ORLEN Group Anti-Corruption Policy and the PKN ORLEN Rules for Accepting and Offering Gifts.

In an effort to continuously improve procurement processes, the Group works to enhance and ensure greater consistency of vendor selection procedures. We developed a model for vendor selection in procurement category management strategies, and the key suppliers are evaluated on a regular basis as part of the supplier relationship assessment process. The selection and assessment criteria are based, among other things, on best market practices. They make it possible to mitigate reputation, financial and process risks, and ensure high quality of the supplier relationships.

The ongoing implementation of uniform procurement standards and systems across the ORLEN Group, a critical component of the Group’s procurement centralisation project, will be key in ensuring a responsible supply chain. It will contribute substantially to the uniformity and consistency of procurement processes across the Group, their transparency, knowledge sharing and improved communication with suppliers. The Procurement Improvement Programme launched in 2019, covering a number of recommended solutions to improve the efficiency of procurement, is also a pivotal initiative in terms of supplier relations. Among its key recommendations that have already been implemented are procurement planning and wider dissemination of tender notices, e.g. via business portals.

We attach particular importance to engaging with local businesses, based in the County of Płock and the Province of Warsaw. By using their services the ORLEN Group contributes to the development of the market and business in its close neighbourhood. Such suppliers know the local market and are often well aware of the needs and expectations of the ORLEN Group companies. Their close proximity also reduces costs, e.g. of transport and accommodation. In 2019, goods and services sourced  from Płock-based companies accounted for some 7.6%* of PKN ORLEN’s spending (*excluding purchases from suppliers of crude oil and natural gas). By cooperating with suppliers from its close neighbourhood the Company supports growth of the local market and implements the objectives of its CSR strategy within the supply chain.

At key foreign companies of the ORLEN Group: Unipetrol (Litvínov) and ORLEN Lietuva (Mažeikiai), spending on services provided by local suppliers was 1% and 1.06%, respectively, of their total expenditure in 2019.