You are here

The processes underpinning Enel’s procurement system

Enel carries out a risk assessment on 100% of its tier- 1 suppliers1, totaling around 8,600 companies, 80% of which have been considered critical in relation to their strategic position for the Company’s business, purchase volumes, and potential economic, social and environmental impacts. In 2016 the detailed analysis was completed of all the sectoral groups with the aim of identifying specific risks associated with each category. The main risks identified were: economic, environmental, social and reputational.

Enel’s global system of approving suppliers enables an accurate evaluation of the companies which intend to take part in the procurement procedures and represents:

  • a guarantee for Enel, since it is an updated list of subjects of certified reliability on which to draw; 
  • the possibility, in compliance with the laws in force, for suppliers to be called on for procurement tenders organized by Group companies. 

The approval process requires, also in compliance with the law in force, the presentation of a series of documents (self-certification regarding the possession of the general prerequisites, financial statements, certification, etc.) and, among other things, the adhesion to the principles expressed in the Code of Ethics, the Zero Tolerance of Corruption Plan and the 231 Compliance Program, the Policy on Human Rights, and the ten principles of the Global Compact with specific reference to the absence of any conflict of interests (including any potential conflict). All approved suppliers are requested, during the formalization of the contract, to provide specific documentation certifying they are up to date with the payment of social security contributions. In particular, as part of the questionnaire regarding human rights, which is designed in accordance with the indications of the internationally recognized principles contained in the UN’s “Guiding Principles on Business and Human Rights” and UNICEF’s “Children’s Rights and Business Principles”, suppliers are asked for specific information regarding their impact on: a) the local communities where they operate; b) inclusion and diversity; c) freedom of association; d) protecting privacy; e) forced labor and child labor; f) suppliers; g) communication. Finally, they are asked for information regarding any ongoing legal proceedings and any ethical policies which the supplier has adopted. The categories with a high environmental impact, 29% of the total, include in the approval requirements the request to implement an environmental management system that conforms to ISO 14001, while for high health and safety risk categories to be tendered, 48% of the total, suppliers are evaluated by examining their corporate performance and organizational and operational quality as regards the safety of such performance (for example OHSAS 18001 certification). 
During 2016 a specific operational order was issued which precisely defines at Group level the duration and the means of implementing the provisions, should the supplier violate the occupational health and safety requirements and repeat such violations. 
For some categories relating to the Market Division specific requirements are envisaged in relation to the evaluation linked to staff turnover and training. 
The companies included in the Enel Register of Approved Companies are also constantly monitored, including through the use of external databases, in relation to events for which the company and its main exponents are responsible (economic-financial reliability, administrative procedures taken against the company or its exponents), regular contributions and criminal procedures.

Requirements of good standing

In 2016, new operating practices were established and implemented regarding checks at Group level on the “Requirements of good standing” aimed at consolidating the existing control system through more incisive action to contrast corruption and in particular through:

  • the determination of specific documentary criteria to certify the legal requirements and good standing, which are standard and applicable to the procurement process (from the approval stage to the assignment of the individual contract); 
  • the identification of operational verification methods aimed at enhancing the prevention instruments available and impacting in a rational, complete and decisive way on cases of corruption and on the factors which favor its dissemination; 
  • the promotion of a widespread culture of respecting the rules and ethics.

The strengthening of the checks on the possession of the aforementioned requirements, both in the stage of admission to the Approval System and maintaining the approval and in the stage of assigning a contract, is focused on particular activities, goods and contracts which are considered more sensitive (“at risk”), identified for each country/geographic area: Italy, Argentina, Chile, Colombia, Peru, Romania, Russia, South Africa, North America, Mexico, Central America, India, Iberia and Brazil.

The “Good Standing Committee” has also been established, which includes the purchasing managers of the business units and the managers of the technical units responsible for the tender/contact/product group, the manager of the Supplier Management and Development area; members of the Security area; the head of the Legal Affairs area for Global Procurement. The Committee meets periodically (normally each month) with the aim of sharing and analyzing situations for which it is necessary to undertake actions or establish sanctions on suppliers.

In addition, in 2016 specific tenders were launched introducing assessment elements linked to sustainability. For example, in the tender for the supply of “Fireproof fire-retardant cables”, an assessment criterion was included relating to the reduction in the emission of corrosive gases below the current minimum limits allowed by the relevant law in force (CEI 20-37); while in the tender for “Smart Grids and Equipment” the realization by suppliers of socially useful projects regarding “Quality Education, Decent Work and Sustainable Economic Growth” was assessed.

Enel has established specific contractual clauses, which are included in all the contracts for works, services and supplies and are periodically reviewed to take into consideration the various regulatory updates and to align to international best practice. During 2016 the 6th edition of the General Contract Conditions was published which consists of a General Part which contains the clauses that are applicable in all the countries, to which are added country- specific annexes containing clauses applicable in each individual country. Currently there are 15 annexes in use (Italy, Spain, Portugal, Chile, Peru, Colombia, Brazil, Romania, Slovakia, Russia, Argentina, Guatemala, Panama, Mexico, and Costa Rica). In 2016 specific general conditions were defined which are applicable to contracts for the purchase, maintenance and support services of sofware and cloud services and 9 country-specific annexes: Argentina, Brazil, Chile, Colombia, Italy, Peru, Romania, Russia and Spain. Enel requires, among other things, its contractors and subcontractors to adhere to the ten principles of the UN Global Compact, the respect and protection of internationally recognized human rights, as well as respect of ethical and social obligations on combating child labor and protecting women, equality of treatment, a ban on discrimination, freedom of union membership, association and representation, forced labor, environmental safety and protection, hygiene and sanitary conditions and other regulatory, pay, social security, insurance and tax conditions. Contractual commitments are then envisaged for Enel’s contractors and subcontractors aimed at adopting conduct that is opposed to any form of corruption and extortion and to lead to conduct that does not harm the environment, favoring initiatives to promote greater environmental responsibility and the development and dissemination of technologies which respect the environment. In order to guarantee respect of the aforementioned obligations and constantly check their fulfillment, Enel reserves the right to monitor and control its contractors and to terminate the contract in the case of violation.

Sustainable Supply Chain Project

The Sustainable Supply Chain Project continued, which was launched in 2015 and aims to standardize across the whole scope of the Enel Group the criteria for monitoring companies from the viewpoint of their environmental impact, safety, and respect of human rights. The project aims to strengthen the Group’s positioning regarding the supply chain and valorize the Company’s key role in the process of changing and innovating its suppliers. In particular in 2016 the sustainability requirements were defined which will become obligatory during 2017, which the supplier must satisfy to be included in the Enel Register of Approved Companies. These requirements are broken down into three different sections for which the supplier must provide information and documentation linked to safety, environmental and human rights aspects. The supplier will be selected and constantly monitored also on issues such as: inclusion and diversity; the protection and privacy of workers, and verifying its own supply chain on issues linked to forced labor/child labor.

The approval procedure is complemented by the Vendor Rating system, aimed at monitoring the performance of suppliers in terms of their correct conduct during the tender, and quality, timeliness and sustainability in performing the contract. The Vendor Rating index can be used an element to evaluate tender invitations and to continue contractual relations in compliance with the law in force. In 2016, 937 groups of goods and around 3,300 contractors were monitored through this process.
The approval and Vendor Rating systems are implemented in all the companies in the Enel Group, both in Italy and abroad and for each of the processes the establishment of a specific evaluation commission is envisaged, including the heads of the Purchasing area of the business units and the heads of the technical units to which the tender/contact/ goods refer, and the head of the Supplier Management and Development area. This guarantees the same means of evaluation for all the Group’s suppliers (same rules and indicators); some of the suppliers subject to this evaluation are examined for a number of types of good.

Through these monitoring and evaluation procedures, Enel establishes a continuous dialogue with suppliers, with the purpose being collaborative not punitive, which leads to the highlighting of weaknesses and problems found and the sharing of corrective actions. In almost all cases the company’s performance improves and the working relationship with Enel continues to mutual satisfaction.

1 Tier-1 suppliers are all those with whom Enel has a current direct contract worth over 25,000 euro.
* Micro contracts are not considered; therefore, the total number of tier-1 suppliers is given with existing contracts worth over 25,000 euro.

6,145Number of tier-1 suppliers evaluated during 2016*
10%% of tier-1 suppliers evaluated to whom corrective actions were assigned
98%Percentage of suppliers evaluated with a corrective action plan whose ESG performance improved following the action plan
Reference SDGs: 
Main actionsTargets
% of approved suppliers evaluated for safety aspects: introduction of evaluation criteria for health and safety aspects for the main product groups100% by 2019
% of approved suppliers evaluated for environmental aspects: introduction of evaluation criteria for environmental aspects for the main product groups100% by 2019
% of approved suppliers evaluated for human rights or business ethics aspects for the main product groups100% by 2019
Sustainability Plan 2017-2019