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Supply Chain ESG Management

Kia reflects ESG factors in its supplier management and purchasing policies. In particular, for safety issues, violations of the Code of Ethics, and acts that impede shared growth, which are key elements of ESG, penalties(e.g. exclusion of bidding) are given through an internal deliberation to encourage suppliers to pay more attention.

In 2022, overseas parts makers are also included in the supply chain ESG evaluation target so that Kia is managing the ESG levels of all global parts makers transacting with Kia. A group of companies that require intensive management, such as core partners and high-risk partners, are managed separately.

In addition, the ‘Supplier Code of Conduct' was developed by reflecting domestic and foreign laws and regulations, the OECD Due-diligence Guideline, the Responsible Business Alliance, and major initiatives in the automobile industry(e.g. Drive Sustainability). The ‘Supplier Code of Conduct’ is shared with all global suppliers and used for accurate supply chain ESG diagnosis and improvement.

Kia Supplier Code of Conduct

Purpose

Kia has enacted ‘Supplier Code of Conduct’ to establish a sustainable supply chain. This Code of Conduct strictly complies with the laws and regulations applicable to corporate management activities for all business partners, while requiring its partners to have the best operating practices in the field of ethical, environmental, labor/human rights, safety/health, and management systems. Kia expects that its partners will not only grow into a company that is respected by society, but also provide an opportunity for mutual growth by complying with this Code of Conduct.

Target

Applies to all business partners that provide goods and services to Kia or have entered into contracts for other transactions. All suppliers subject to this Code of Conduct may recommend that their entire supply chain, including business partners(i.e. sub-partners), comply with this Code of Conduct.

Main Components

Kia Supplier Code of Conduct
Ethics Environment Labor and Human rights Safety and Health Management system
Transparent management and anti-corruption
Avoiding Conflicts of Interest
Prevention of unfair trade
Prevention of counterfeit parts
Compliance with export restrictions
Information Security
Responsible Material sourcing
Establish of environmental management system
Energy use
Greenhouse gas emissions
Water resources usage
Air pollutants
Waste
Chemicals
No discrimination
Provision of wages and benefits
Working hours management
humane treatment
Guarantee freedom of association
Prohibition of child labor
Prohibition of forced labor
Establish Occupational safety and health system
Machine/facility safety management
Emergency response
Incident management
Safety diagnosis
Health care
Company Statement Disclosure
Appointment of person in charge
Risk Diagnosis/Check
Education and communication
information management
Operation of grievance handling system
Management of business partners (sub-partners)Compliance with the Code

Supplier Code of Conduct (PDF)

Carbon Neutrality in the Supply Chain

The scope of our 2045 carbon neutrality target includes our supply chain such as tier-1 suppliers and raw material suppliers. Estimated GHG emissions of our supply chain is about 15% of total GHG emissions generated throughout the life cycle of Kia’s products. We aim to achieve carbon neutrality by 2045, following a reduction of more than 10% to be achieved by 2030 through the energy transition of key suppliers, and a reduction more than 55% by 2040 by extending these efforts to include raw material suppliers.

Action Plan to Reduce Carbon Emissions in the Supply Chain

In 2021, Kia established a basic action plan to support its suppliers’ efforts to reduce their carbon emissions based on the results of a survey of their carbon emissions and reduction plans.

In 2022, we offered them training to improve awareness of carbon reduction and enhance working-level capabilities, while publishing and distributing an implementation guide that they must follow to promote carbon neutrality.

In the second half of 2022, we plan to specify the carbon reduction criteria and targets that will apply to suppliers and operate various support programs to contribute to their carbon reduction efforts through the construction or expansion of smart factories. In particular, the results of the 2021 supplier carbon emission survey show that the top 46 carbon emitters in the production of tires, aluminum wheels, and batteries, etc. account for 70%of the total supply chain emissions. We will induce them to pursue carbon reduction while helping them to establish their own carbon neutrality management system.

Status of Supply Chain (2020)

We manage ESG level of all suppliers. Based on the transaction size, as well as the characteristics and technological level of the supplier, we select our critical suppliers and suppliers at risk. We are conducting written/on-site evaluation, monitoring, and measures for all our tier-1 partners to improve the sustainability of the supply chain.

Status of Supply Chain (2020) table
Category Description Number of companies Amount of purchase
1st-tier Total No. of 1st-tier suppliers 1,860 100%
Domestic 380
Overseas 1,480*
Critical Suppliers 62 65%**
2st-tier Critical Suppliers 20 -

* Overseas suppliers : imported parts company + companies that do business with overseas factories
** Proportion of purchases from 1st-tier critical suppliers in total purchases from total 1st-tier suppliers

Supply Chain Management System

Supply Chain Management System table
Priority Category Contents
Managed items
(Annual Management Criteria)
Quality Quality management system, incoming defects ratio, claim cost reimbursement ratio, quality management
Delivery Operational failures of production lines, delivery rate for after-sales services, delivery rate for knockdown(KD)* parts
ESG perspective
(Frequently)
Safety Safety management manual, safety management organization/personnel, safety management training, safety accidents, risk management

* Exporting a knock-down (KD) kit containing the parts needed to assemble a product in the respective local market

To establish a systematic supply chain, Kia is implementing supply chain management policies such as quality, delivery, technology, win-win cooperation, safety management, quarantine, and eco-friendliness, and conducts supply chain evaluation to diagnose and respond to supply chain risks in advance. In particular, we are operating an evaluation process. Based on ESG issues, self-assessment(assessment done by suppliers themselves and pilot evaluation were conducted to establish an evaluation system.
The supply chain ESG management is operated for all suppliers, and we select critical suppliers and high-risk suppliers in consideration of the importance of technology and industry to promote prioritized improvement. Self-assessment is conducted for tier 1 suppliers, and written/on-site evaluations are conducted for high-risk suppliers to monitor and manage matters for improvement raised as a result of the evaluation.

Self-diagnosis for tier-1 suppliers
Written/on-site evaluation on critical suppliers and high-risk suppliers
Monitoring based on evaluation results
Analysis of result
Diagnosis of areas in need of improvement

Contingency Plans

For each emergency situation, Kia has a contingency system for supply, logistics, and production stages. Through supply chain diversification, Kia is prepared to mitigate or prevent production losses resulting from parts supply issues due to natural disasters and so on.
Generally, our parts procurement for each part is done from at least 3 or more suppliers, although it may vary according to the technical and physical characteristics of the parts.
In case imported parts are required urgently, Kia also has a flexible logistics systems that enables us to interchange between shipping and air transport at any time.
In all domestic manufacturing plants, there are buffer lines at each major sector so that a sudden stop in a production process will not affect other processes or to minimize its affect.
Each of the buffer lines have additional production capacity and storage space for at least half an hour's worth of production. Therefore, even if an accident occurs, the effect to the pre/post processes can be minimized.

Supply Chain Sustainability Goals

Supply Chain Sustainability Goals
Classification Performance Goals
2019 2020 2021 2022
Acquired ISO 45001 Occupational Health and Safety Management System Certificates for Tier 1 suppliers 98% 99% 100% 100%
Acquired ISO 14001 Environmental Management System Certificates for Tier 1 suppliers 91% 92% 100% 100%
Assessing Supply Chain ESG risk - 20% 20% 100%

Supply Chain Assessment & Correction Status

Supply Chain Assessment & Correction Status table
Classification Indicator Number of suppliers
(Percentage)
Supply Chain ESG Assessment 1st-tier suppliers subject to sustainability risk assessment* (domestic suppliers) 380 100% 380
(100%)
High risk1st-tier suppliers subject to sustainability risk assessment 19
(100%)
Critical Supplier Monitoring Critical 1st-tier suppliers subject to supply chain monitoring 62
(100%)
Critical 2nd-tier suppliers subject to supply chain monitoring 20
(100%)
Corrective actions Sustainability high risk suppliers that completed corrective measures 19
(100%)

Supplier Support Program (2021)

Kia continuously supports its suppliers through technology coaching, management consulting, training, and seminars.

Supplier Support Program (2021) Table
Category Technical Instructions (Quality Technology Support Group) Management Consulting (Supplier Support Group)
1st-tier Suppliers 26 83
2nd-tier Suppliers 37 18
Contents Technical guidance by industry Management consulting by division
Support Areas 14 industries including injection and rubber 8 divisions including R&D and production

Training Performance of Global Win-Win Cooperation Center (Job training, etc.)

454 courses

59,837 people

Status of Payments for Goods & Services

Status of Payments for Goods and Services table
Classification Payment Method Pay Period
Parts for Domestic Use SME Cash Weekly
Medium Sized Company (with annual sales under KRW 500 billion) Cash Weekly
Medium Sized Company (with annual sales over KRW 500 billion) 60-day promissory notes Weekly
Large corporations 60-day promissory notes Weekly
Exportable parts Cash Monthly