Material Issue
Human Rights

GRI 103-1

The unification of the Commercial, Procurement and Logistics areas under the same department, conducted in 2017, led to important advances in supplier relations. With a more integrated vision, we were able to tap synergies between these operations, which allowed us to implement improvement actions throughout the year for a more efficient management of the entire supply chain.

Regardless of supplier size, we seek to engage everyone in the best socio-environmental practices, with a view toward ensuring the responsible use of natural resources and respect for workers’ rights. Our Supplier Management Program encompasses four topics: cost/ value, quality, contractual compliance (agreements and legal coverage) and homologation (tax compliance and licenses).

For qualification, we demand compliance with the labor, environmental and tax laws and regulations in force in the countries where we operate, as well as the safety criteria adopted for our operations. Upon implementation of the Ariba system in 2018, all suppliers will receive a copy of our Code of Conduct and must agree to the terms defined therein.

We also require they sign a specific document that vetoes the use of child labor or forced labor; this is so even though in our supplier base there are no operations deemed at risk for human rights violations. Clauses are included that determine the provision of a safe and healthy working environment, freedom of association and no discrimination due to gender, race, social class, nationality, religion, physical or mental disability, sexual choice, association with unions or political affiliation, among others. GRI 407-1, 408-1, 409-1

Some companies receive technical visits from the Supply and Supplier Management areas. In the event of complaints alleging noncompliance with requirements related to human rights impacts, an investigation process is initiated to ascertain the facts and take the applicable actions, which may involve fines or contract termination. In 2017, no cases of violation of these conditions were registered. GRI 409-1

Supplier Collection

Criteria

Environmental

Requirements20

❯ Compliance with environmental legislation in the countries of operation
❯ ISO 14001 standard
❯ Health, workplace safety and environmental programs
❯ Environmental risk prevention programs
❯ Operating/Environmental Operation Licenses
❯ Federal Technical Registration with Ibama

Criteria

Socio-economic

Requirements20

❯ Compliance with all laws of the countries of operation (labor, tax, anti-corruption, etc.)
❯ Does not appear on the “Slave Labor Dirty List” published by the Brazilian Labor and Employment Ministry
❯ Signing of a document based on the SA 8000 standard, including non-use of forced or child labor, providing a safe and healthy working environment for workers, freedom to associate and nondiscrimination of any kind

Note 20: Requirements vary according to the nature of the contract and the activity of the supplier

In 2017, 53% of new suppliers were selected and included in the system based on labor practice criteria and 1% on environmental, human rights and social impact criteria. The target through 2025 is to engage 100% of critical suppliers in social-environmental risk prevention and mitigation programs. No cases representing violation of human rights aspects were reported in the year. GRI 414-1

Suppliers Selected on the Basis of Socio-Environmental Criteria GRI 308-1, 414-1

Supply Chain GRI 102-9

Our supplier registry covers widely diverse segments: raw material inputs, waste management, environmental management, energy supply, minerals and chemical products, fuels in general, health services, packaging supply, transportation in general, MRO (Maintenance, Repair and Other), facilities and IT, services and maintenance, among others. At the end of 2017, 53,844 companies were registered, compared to 61,269 in 2016.

We do not have a specific policy for hiring local suppliers, but whenever possible and, as a tie-breaking criterion, we give preference to suppliers near our units. We take into account the advantages represented by proximity to the operations, identification with the culture and the impulse given to local development provided by a long-term relationship with companies from the communities. In addition, our units have free to acquire non-critical services locally. We also encourage some suppliers, with larger purchase volumes, to open units close to our operations. In 2017, six in-company stores were installed near or inside the company’s units.

Our purchases totaled US$ 1,555 million in 2017, of which 75.6% were contracted from companies located in the regions where we operate.

Percentage of Products and Services Purchased Locally GRI 204-1

Note 21: In Brazilian operations, suppliers are considered to be located in the cities of the microregions where the company units are located. In Peru, it is they who sell products and services throughout the country.

Outsourcing Management

We have implemented an Outsourcing Management Program designed to optimize management and improve the relationships with contracted companies. It operates through 25 multidisciplinary work fronts to improve procedures, tools, flows, indicators and provide greater clarity and definition regarding roles and responsibilities throughout each step of the service management process.

In 2017, we reviewed the tool, which became even more efficient due to the inclusion/change of some procedures, including the revision of the service codes for the units in Brazil. The database, containing more than 7 thousand codes, numbered 156 after the update. We also standardized the outsourced employee concept and classification, through the procedure and indicator unification by all units. The invitation-to-bid letter procedure was also improved, with more precise information for the supplier regarding the conditions for contracting services, highlighting aspects such as quality, workplace health and safety, environmental aspects, performance and rationalization of incurred costs.

As one of the program’s initiatives, we conducted contract management training for professionals from the Três Marias and Juiz de Fora units, run by a consulting firm and representatives of the main interface areas (Supplies, Legal, Human and Organizational Development, SSMA, Controllership/Tax, Management and CSC). The objective was to strengthen understanding of the new system, presenting in detail our Contract Cell structure and to share concepts, facilitating communication and synergy with the areas.

The Três Marias, Juiz de Fora and Cajamarquilla units are pioneers in the establishment of the Contract Cell, whose commitment is to employ the best management practices. The aim is to reduce costs, mitigate risks, comply with legal obligations and company policies, and implement transparency and predictability for the contractor and contractees.

Ariba Project

One of the year’s main initiatives was the setup of the SAP Ariba platform, an advanced e-commerce solution that will bring greater efficiency, transparency and traceability throughout the entire supply chain. It is a system for exchanging documents and consulting information via the internet, including price quotes, purchase orders, delivery notifications, collection schedule, measurement sheet, invoicing, invoice payment and payment forecasting queries, among others.

The implementation was conducted by the Supply and IT areas in a gradual manner; this involved introduction of the modules that make up the tool over several months and specific training for the employees directly linked to the purchasing processes in the Corporate Center and the units. Currently, 100% of the strategic negotiations are already transacted over the platform, ensuring that our commercial relations with the market is conducted in a more traceable fashion, with higher visibility and better relationship management with our suppliers.

The idea is for the Ariba platform to provide us with an online database, with social, environmental and financial indicators (screening) for 100% of our suppliers. Thus, it is possible to manage our contracts with greater accuracy and lesser risk. Toward this end, the biggest challenge will be the revision of the entire Peruvian supplier base, especially in the mines, due to the large outsourced labor base in our operations in the country. For the beginning of 2018, we are planning an event with the leaders of the Peruvian suppliers and Nexa’s top management to pursue alignment of points of view.