
Mutual Growth
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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 will continue to carry out supply chain ESG evaluation and strive for improvement. In addition, we will expand support for Suppliers to protect human rights and strengthen ethical management.
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
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 |
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.
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
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.
Composition of Supplier ESG Evaluation Indicators
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
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
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%) |
Supply Chain ESG evaluation Roadmap
Category | 2021 | 2022 | 2023(Plan) | |
---|---|---|---|---|
Written Assessment | Domestic | Done | Done | To be conducted |
Overseas | N/A | Done | To be conducted | |
On-site Due diligence | Domestic | Done | On-going | To be conducted |
Overseas | N/A | N/A | To be conducted |
Supplier Support Program (2021)
Kia continuously supports its suppliers through technology coaching, management consulting, training, and seminars.
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 peopleStatus of Payments for Goods & Services
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 |