2018 Corporate Responsibility Report
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Proposed actions 2018   Planned actions 2019
Increase and extend to all countries the number of ESG audits conducted with suppliers.
Quarterly monitoring of successful suppliers based on reputational, economic-financial and CSR ratings of external data sources.
    Implementation of the updated risk matrix in the whole group.

Level of fulfilment:
 Finalised, Major progress, Intermediate progress, Little progress,  Not started

The supply chain of Naturgy

Naturgy performs the procurement of works, goods and services, as well as the assessment, monitoring and development of suppliers in accordance with the general principles established in the company’s policies, rules and procedures, as well as internationally recognised principles of good governance of ensuring a uniform, efficient and sustainable model.

In 2018, Naturgy set up trade relations with a total of 8,670 suppliers which accounted for a total expenditure of Euros 3.147 billion.


Suppliers with contracts currently in force


Total purchase volume awarded (euros million)



Main indicators and targets

*NB: In 2018, the calculation system for the “percentage of purchase volume with acceptance of the Code of Ethics” indicator was modified. In 2017 the global amount awarded by country was used and the reported value was 82.3% and in 2018 the calculation takes into account those suppliers that are registered in the Achilles platform and which adhere to the Naturgy Supplier Code of Ethics, and so the 2017 indicator has been recalculated with this criterion.

Naturgy suppliers according to the nature of their activity

Two thirds of the overall amount awarded corresponds to service suppliers that fundamentally take part in the following business areas:

  • Development and maintenance of grids, both natural gas and electricity.
  • Operators and maintenance workers of energy plants.
  • Commercial management services.

The remaining third corresponds to suppliers that provide materials required for the construction and maintenance of grids and plants, as well as those support services that complement the general activity. The development of this activity has been carried out mainly in Argentina, Brazil, Chile, Spain, Mexico, Moldova and Panama, and, to a lesser extent, in Australia, Colombia, Kenya, Morocco, Peru, the Dominican Republic and South Africa.

Management of the supply chain

Purchasing model

The Purchasing and Supplier Management model introduces a management process with unified and overarching criteria for Naturgy’s entire scope of operations.

In the remaining cases, the contracting of suppliers from the country or region where the company performs its activities is encouraged, supporting the generation of a positive social impact through the creation of wealth and investment in the local community, generating economic inclusion in the company’s spheres of influence.

The levers and measures that activate Naturgy’s purchasing model are summed up in the following graph:


Levers and measures that activate Naturgy’s purchasing model


Elements to be highlighted in management of the Naturgy supply chain
Corporate Responsibility Policy It lays out the commitments, actions and indicators of the company for responsible management of its supply chain.
Supplier Code of Ethics Since 2016 all group suppliers have to adhere to the Supplier Code of Ethics.
Human Rights Policy Naturgy’s Human Rights Policy extends to the Supplier Code of Ethics. The assessment of suppliers includes issues related to human rights practices that are used to exclude suppliers in the event of an unsatisfactory response. In 2018, no breach of human rights by suppliers was detected.
Transparency in purchases and communication with suppliers

Mechanisms and communication channels have been established with the supplier that ensure free competition, objectivity, impartiality and transparency, and which facilitate access to the information necessary for them to take part in the procurement processes:

  • Use of secure electronic means for managing tenders and a specific section for suppliers on the Naturgy website.
  • The supplier portal is the online platform that provides the supplier with the technical regulations that apply in the procurement categories awarded, duly notifying any updates to the regulations, and managing orders.
  • The Supplier Channel is the online tool available to the supplier to sort out any doubts or incidents in the procurement process and has been established as a communications channel for any queries or suggestions.
Reporting Channel All suppliers, contractors and external collaborating companies can contact the Ethics and Compliance Committee through the email published in the Naturgy Supplier Code of Ethics.

Supply chain management process

In order to promote responsible management in the supply chain, Naturgy has a comprehensive purchase process, with application of unified and universal contractual conditions for the company’s entire sphere of operation.

Policies and procedures for supervising the management of subcontracted activities
General External Procurement Standard It sets out the general principles which have to be applied to all awarding or procurement of works, goods and services carried out by the group, guaranteeing a uniform, efficient and quality model for managing the procurement process in Naturgy.
General Supplier Quality Standard It represents the principles of the processes of evaluation, approval, monitoring and development of suppliers.
Counterparty Due Diligence Procedure Designed to cover the main legal and reputational risks involved in business relations with third parties, and, in particular, covering misconduct associated with the risk of corruption.

Risk management of the supply chain

The process of global supply chain management is based on the assessment of risk factors that are intrinsic in outsourcing a service or supply of a product. This allows us to put in place controls to minimise risks and to ensure a level of compliance by suppliers that is equivalent to the requirements that the group satisfies in the activities it performs internally.

Thus, risk mitigation mechanisms are established at three levels -high, medium or low- depending on the purchase categories that each supplier intends to supply and the country where it is carried out.

In the process of assessment of Naturgy suppliers, the following risk factors are taken into account

In addition, for suppliers with high risk, the company has established mechanisms for analysing aspects that could negatively affect its reputation and sustainability, and may even exclude suppliers for this reason. In accordance with the company’s Health and Safety Commitment, specific regulations have been introduced for classification of the health and safety risk of suppliers, by defining objective aspects and criteria for evaluation, requirements for classification, selection and evaluation of bids in adjudication procedures. In a complementary way, for those suppliers that perform activities classified as high risk, their performance is measured using objective metrics and the method established in the Naturgy “Health and Safety Standard: Assessment of performance of collaborating companies in health and safety issues”.

Naturgy has developed environmental specifications for suppliers and contractors that are attached to the corresponding contracts and which include minimum environmental management requirements for application during procurement.

40.20% of the volume of purchases from critical suppliers has an environmental management system with external certification.

Likewise, regarding the ESG risk (environment, social and good governance), Naturgy has an ESG risk matrix of its supply chain that has been reviewed in 2018. The differentiation within the “Atmosphere” aspect between “Climate change” and “Pollution” has been determined as a good practice, as has the introduction of a new social aspect “Freedom”, which will be implemented in the purchasing process in 2019.

Process map and sustainability criteria included in the ESG risk matrix:

Risk map by purchase category

Assessment of suppliers

Assessment of suppliers is introduced in the processes of business classification and approval of suppliers according to activity. Both processes are set out in the risk map by purchase category.

With the risk evaluation of the 324 purchase categories that are managed worldwide, and assessing the risks of 50 countries where the company usually contracts, we obtain the risk of each purchase category in accordance with its activity and the country where the activity is conducted.

This combination allows us to assign a high, medium or low risk to each purchase category, which is integrated into the map, thus obtaining the risk of each purchase category by country. Suppliers with a high level of risk in any of the assessed risk factors associated with the purchase categories they supply will be considered by the company as critical suppliers.

In 2018, the number of suppliers with a valid contract in critical activities was 2,584, representing 61.27% of the purchase volume. In addition, the number of critical non-tier 1 suppliers identified by the company was 116 suppliers, mainly corresponding to categories of purchase of critical products that represent 1.46% of the overall purchase volume.

Naturgy also identifies the suppliers with high risk in sustainability, considering those that reveal a high risk level in the health and safety and ESG factors. In 2018, the number of suppliers in this category was 1,234, representing 43.17% of the total purchase volume. In addition, eight non-tier 1 suppliers with high risk of sustainability have been identified.

Business classification of suppliers

This process is based on the assessment of compliance at business level of what is required by Naturgy in the different risk factors, in order to participate in the procurement process of goods and services. All suppliers must pass this process before maintaining commercial relations with Naturgy.

The classification is conducted using self-assessment questionnaires that take into consideration legal, economic- financial, criminal, solvency, experience, business organisation, quality, safety, human rights, environmental, social and employment practices criteria. The length and depth of the questionnaire increases depending on the level of risk of the purchasing category according to the Naturgy risk matrix, and is carried out, basically, by means of registration in the Achilles platform –a supplier classification system. Naturgy also requires that critical suppliers register in the Repro Community of the energy sector of Southern Europe and South America.

In 2018, Naturgy has evaluated a total of 6,979 suppliers, including potential and active ones, which have to be assessed on an annual basis. The result of the overall process shapes a suppliers tree in which they are classified in accordance with the purchase category for which they are able to supply services or products, and for which they have been rated as suitable with regard to the associated risk.

Furthermore, Naturgy has managed the ESG assessment of 6,906 suppliers, carried out in the Group’s main subsidiaries, where the Achilles tool is installed. The weight of ESG issues raised to high-risk level suppliers during the business classification process represents 65.6% of the total.

The high and medium level classification process includes obtaining a grade that enables suitable suppliers to be assessed in accordance with objective and measurable criteria, for use in the different stages of the bid processes. In addition, during the process the assessment of the suppliers in terms of sustainability is carried out, quantifying each suppliers’ relative position with respect to the market. All information is available to suppliers to undertake the actions they deem appropriate for improvement.

Official approval and management of supplier quality

Naturgy has introduced the goal whereby all suppliers that perform critical activities through being defined with a high risk in any of the ESG, quality and health and safety risk factors must be approved.

The approval process is based on audits conducted at the supplier's facilities or by distance depending on the critical nature, to check compliance with the specific requirements defined for the service or material. Any noncompliances detected during the audits lead to corrective actions that the supplier must introduce within the deadlines agreed between Naturgy and the supplier, and this deadline is always less than one year.

Naturgy also approves the non-tier 1 suppliers corresponding to categories of purchase of critical products, over which audits are conducted based fundamentally on quality-related aspects.

In 2018, 782 audits were performed on suppliers and sub-suppliers, of which 373 were conducted at the supplier’s facilities (129 audits of approval and 244 inspections of materials at source). The approval process may unveil anomalies that lead to a plan of corrective actions, or the non-approval of the supplier, which would prevent such supplier from performing this activity for Naturgy.

60% of the approval audits carried out at the suppliers’ premises has resulted in the need to submit a corrective action plan. Moreover, one supplier had their official approval either suspended or withdrawn for failing to pass this process as a consequence of breaches related to safety, quality and other issues

Monitoring, follow-up and development of suppliers

Monitoring of suppliers

Criteria considered in monitoring
Corporate image and reputation

In addition to what is established in the Code of Ethics, other analyses based on reputational risk and corporate social responsibility are carried out with suppliers assessed as suitable at the high risk level. Throughout 2018, 1,838 additional analyses were carried out on 1,069 suppliers.

In addition, reputational due diligence is performed on suppliers to analyse the alignment with Naturgy’s corporate responsibility undertakings. Based on the findings, the risk and the actions to be carried out are assessed.

In 2018, no supplier was disqualified on the grounds of fraud or unethical practices.

Economic-financial information

The main potential or active suppliers of Naturgy are analysed from the economic-financial point of view in order to prevent contractual breaches by suppliers.

In addition, in the evaluation process the supplier’s economic dependency ratio is measured with respect to Naturgy and is taken into account in the supplier’s global scoring that can be used in the supplier’s valuation during the contract award strategy.

Monitoring of suppliers

Criteria considered in monitoring
Performance follow-up

It is carried out with the most relevant suppliers and involves the performance of surveys with the Naturgy units to measure their level of satisfaction with suppliers and detailed aspects concerning quality, health and safety, operations and ESG.

In 2018, 627 performance evaluations were conducted with the heads of user units in Argentina, Brazil, Chile, Spain, Mexico, Moldova, and the Dominican Republic, assessing a total of 305 providers. The results and classification obtained are reported to the affected internal units of the company, also specifying their weak points and where they need to improve. In 2018, action plans have been agreed with 19 suppliers whose score in the performance measurement proved insufficient.

ESG audits

Suppliers classified with a high risk level are required to provide documentary evidence and/ or audits carried out from the point of view of corporate responsibility. In 2018, a total of 116 in situ audits were carried out with suppliers of Naturgy, mostly critical or with a high purchase volume, to check the data provided previously in the classification questionnaire and to obtain further information on aspects related to the systems of CSR, quality, safety, health and the environment.

In 2018, non-tier 1 critical suppliers were included in the ESG audit process, with 2 audits of tier 2 and tier 3 suppliers of material considered to be of high criticality from the ESG point of view.

In the case of suppliers of critical purchasing categories with current contracts, the self-assessment and quality control mechanisms are agreed upon prior to the delivery of products or services; monitoring audits are carried out based on the level of risk in the purchase category; equipment calibration control is carried out and there is verification that personnel performing high risk activities are authorised or certified to carry out said activities through accreditations or identification.

Also, products corresponding to critical categories are subjected to inspections, technical acceptance and FAT at the production centres.

Development of suppliers

The Corporate University, through its Extended University, offers a wide range of training to external partner companies, customers and suppliers of Naturgy, both technical as well as management. This enables companies to improve their operating efficiency, incorporate innovative methodologies and develop skills focused on excellence in operations and service.

The Extended University thus helps to establish a common planning and management model, contributing to the professionalisation of companies that form part of the value chain of Naturgy. The Extended University is fully consolidated as a strategic partner of the businesses, with a recurrent activity of more than 14,000 participants every year and 100,000 hours of training.

In addition, supplier segmentation actions are carried out by analysing the amount incurred and managing relations with strategic and important suppliers in order to obtain a mutual and lasting benefit, in an environment of collaboration and efficiency between both parties, sharing information, aligning strategies, seeking continuous improvement and encouraging innovation.

Bettercoal: responsible purchase of coal guarantee

In 2013, Naturgy became a member of Bettercoal, an initiative made up of major European energy companies that strive to attain the ongoing improvement of corporate responsibility in the coal supply chain. The initiative seeks to include social, environmental and ethical practices into the coal supply chain, with the aim of producing changes that benefit employees, communities, businesses and the environment.

During 2018, the company acquired 1,299,493 tonnes of coal (94% of the total acquired) under a formal agreement with suppliers, to cater to the requirements defined in the Bettercoal Code.

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