Sourcing and suppliers What do we expect and require from our suppliers? Vaisala’s excellence in a high-mix, low volume business model depends on effective management of hundreds of suppliers and numerous strategic sub-contractors. To live up to our customer promise and stakeholder expectations, a reliable and responsible supply chain is a necessity for Vaisala. We have thorough requirements for our suppliers and we work together to enable continuous improvement in the supply chain. Vaisala’s suppliers have good quality, they are innovative and experts of their fields. Strategic sourcing Vaisala’s mission, vision and values provide a solid base for our sourcing strategy. The fundamental sentiment in Vaisala’s existence is to ensure added value and reliability for our customers, which we can achieve by managing external resources. Our vision is to strive for competitive advantage with external resources by using key technologies, bringing and creating innovations and utilizing leading solutions. In Vaisala, we value our relationships with suppliers and therefore, we want to have a reliable and collaborative approach to our supplier relationships, which means the development of our suppliers is truly important for Vaisala. Reliability in terms of on-time delivery and quality are very important for us. Collaboration is highly appreciated especially in product development projects with our suppliers.We also emphasize the significance of total cost of ownership (TCO) to our suppliers. It is important that our key suppliers know the requirements, are able to understand our business and products and are closely integrated to Vaisala. We make the most important sourcing and supplier decisions cross functionally inside Vaisala meaning that our key personnel in R&D and operations are involved in decision making.With the purpose of communicating our sustainability expectations better and ensuring a responsible supply chain from materials sourcing all the way to our distributors, Vaisala has integrated sustainable supply chain management into its sourcing strategy. The strategy emphasizes a long-term approach for better identifying and managing risks and opportunities, aligning our supply chain partners’ sustainability efforts with our own, and encouraging continuous development and closer collaboration through a constructive dialogue. Tools and resources are part of continuous supply chain management and environmental, social and governance topics are discussed and monitored regularly with key suppliers. Typical product supply chain Vaisala’s direct suppliers are typically located close to its manufacturing sites and R&D. We purchase subassemblies, components, and mechanical parts mainly from Finland and other European countries as well as the United States. The upstream supply chains resemble those of other typical global electronic manufacturing industry supply chains. In addition to the sensor factory in Helsinki, Finland, which produces sensors for all product families, Vaisala’s manufacturing involves assembly, configuration, and calibration of electronic and mechanical equipment. Typically, our products are highly customized according to customer specifications, and therefore all products are made to order, thus keeping inventories of finished goods low. Final products are shipped directly to customers from the manufacturing sites in Helsinki and in Boulder, Colorado. New Vaisala Partner Code of Conduct We have updated our Partner Code of Conduct and are now launching it to our partners.In this short recording, our Compliance Officer Anna Avilés tells about content of it and main changes done. How to become Vaisala’s supplier? Vaisala approves all potential suppliers before the issuance of contracts. The approval process depends on the type of the purchase. Therefore, a typical new supplier approval process starts with identifying the key sourcing requirements and analyzing the type of the purchase. In the next step, potential suppliers are identified and if there are no potential suppliers in the existing supplier base, a new supplier selection and evaluation process is undertaken to assess the suitable candidates. Vaisala Supplier Requirements document, which is verified through the Supplier environmental, social and governance Self-answer Questionnaire (SAQ) and supplier pre-assessment audit, is used in the selection and evaluation process. Lastly, the most suitable supplier is selected among potential suppliers.Vaisala has categorized suppliers into direct and indirect suppliers. Inside of both categories, suppliers are divided into four supplier groups depending on their relationship with Vaisala. The supplier categorization model consists of potential, approved, preferred and strategic suppliers. This categorization enables continuous improvement, idea and risk sharing and aligning of strategies and long term objectives between Vaisala and the supplier. Vaisala Partner Code of Conduct Vaisala's Supplier Requirements Substance compliance requirements for Vaisala parts Sustainability Suppliers are very important to Vaisala, and a lot of effort is placed on Supplier Relationship Management (SRM). To support this work, a supplier scorecard is updated and reviewed annually for defined key suppliers. The performance indicators in the area of sustainability cover environmental, social and governance issues. The social indicators measure workplace safety and the environmental indicator measures waste recovery rate of the supplier. It is important both for Vaisala and many of its customers that the same supplier requirements are applied through the whole supply chain. We aim to raise sustainability standards throughout the supply chain by working with our suppliers, encouraging them to improve their management system and to implement similar processes with their own suppliers. A governance indicator measures how well the supplier manages these requirements in their own supply chain.We have worked hard to increase transparency in our supply chain and maintain compliance with ever more rigorous legal requirements. We use a Supplier Sustainability Self-Assessment Questionnaire (SAQ) as part of supplier development in all categories in order to assess environmental, social and governance (ESG) risks. The questionnaire exposes risks related to environmental management, occupational safety, social responsibility, governance, and supply chain management. If a supplier’s score in the assessment does not meet Vaisala’s requirements, the supplier is expected to implement corrective measures to improve their sustainability as part of their comprehensive development plan. The self-assessment is conducted every two years, and any weaknesses are addressed in cooperation with the supplier. Tools for managing a sustainable supply chain:Vaisala Partner Code of ConductSupplier Sustainability Self-assessment Questionnaire (SAQ)Pre-assessment proceduresGuidance for suppliersAudits and quarterly meetings with key suppliers, as part of supplier management Responsible sourcing of minerals We are committed to responsible sourcing of minerals and require the same from our suppliers.Due to the enforcement of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission (SEC) requires many of Vaisala’s key customers to report on Conflict Minerals to the SEC. As a supplier, we are therefore required to declare any conflict minerals in our products and be able to show their origin.Vaisala follows the Organisation for Economic Co-operation and Development (OECD) Guidance and uses the Responsible Minerals Initiative’s (RMI) Conflict Minerals Reporting Template (CMRT) to document its compliance efforts with its customers. Hence, also Vaisala's suppliers must ensure that proper precautions are taken in order not to source any minerals that have their origin in conflict areas, currently including but not limited to the tin, tungsten, tantalum, and gold mined in the Democratic Republic of Congo (DRC) or in adjoining countries.If parts or products supplied to Vaisala by the supplier contain tin, tantalum, tungsten or gold, the supplier must ensure responsible sourcing of these minerals by implementing a Conflict Minerals policy that prohibits the purchase and use of minerals financing conflicts. Vaisala requires that its suppliers provide Vaisala with completed declarations. This is done using the Responsible Minerals Initiative’s (RMI) Conflict Minerals Reporting Template (CMRT), evidencing such commitment and documenting the countries of origin from which the supplier directly or indirectly sources tin, tantalum, tungsten, and gold as well as the compliance structure that the supplier has implemented.Vaisala analyses suppliers’ reporting templates with the help of an external service provider to identify smelters and refiners that may be linked to armed conflict. The smelters/refiners that have successfully completed an assessment against the Responsible Minerals Assurance Process (RMAP) standards or an equivalent cross-recognized assessment are considered to have adequate due diligence processes in place for responsible mineral procurement. When a smelter/refiner that may be linked to armed conflict is identified (for example a smelter in the DRC or one of its adjoining countries that is not participating in a recognized assessment program), suppliers are requested to take action to encourage the smelter to participate in an assessment program or to remove the smelter from their supply chains.As our suppliers are typically several tiers away from the smelters/refiners and not in the position to contact the smelters themselves, we also ask them to share the required actions with their suppliers. The performance of Vaisala’s conflict minerals program is monitored monthly, for example, by following the delivery rate of suppliers’ CMRTs and the number of issues identified.To contact Vaisala about conflict minerals reporting please send e-mail to [email protected].
