Responsibility along the Value Chain

Sustainability in Supplier Management

Covestro regards adherence to sustainability standards within the supply chain as a fundamental factor in value creation and also an important lever for minimizing risks. For this reason, Covestro sets not only economic standards but also social, ethical and environmental standards, as well as those related to corporate responsibility when selecting new suppliers and in our relationships with existing suppliers. All required standards are defined in Covestro’s Supplier Code of Conduct, which is available online in 13 languages and provides the basis for collaboration. The Code is derived from the principles of the and our position on human rights. It is integrated across the Covestro Group into the electronic ordering systems and contracts. Furthermore, new and renewed supply agreements in particular generally contain special clauses requesting suppliers to adhere to the sustainability requirements contained in the Code of Conduct and entitling Covestro to verify their compliance.

Covestro has set ambitious and measurable targets through 2025 aimed at systematically promoting sustainability in supplier management. All suppliers must comply with our code of conduct, which they commit to by accepting the conditions of our purchase orders or contracts. Relevant suppliers accounting for a repeat purchasing value exceeding €100,000 per year are also assessed. They comply with Covestro’s sustainability requirements by meeting the minimum result as defined by us in the supplier assessments described below. In the year under review, around 95% of our total purchasing value was attributable to the aforementioned relevant suppliers. In addition, we work closely with our strategically most important suppliers to improve their sustainability performance. We have also incorporated this into our sustainability goals.

Evaluation methods and processes of the Together for Sustainability (TfS) initiative

Covestro is a member of AISBL, a joint initiative undertaken by the chemical industry that now numbers 22 companies. The nonprofit organization was founded in 2011 and pursues the goal of establishing a program of global standards for responsibly sourcing goods and services and standardizing supplier assessment methods worldwide. Covestro supports all criteria by the TfS initiative concerning the areas of ethics, employee rights, human rights, health and safety, and the environment.

As a member of TfS, Covestro is responsible for monitoring and auditing the sustainability performance of its suppliers. To support this, TfS offers the infrastructure for supplier assessments by third parties using online assessments and on-site audits. The results of these supplier assessments can be shared via an online platform. In the year under review, Covestro once again played an active role in all TfS work groups in designing and improving the program and the associated assessment process.

A standardized TfS assessment process evaluates how well suppliers maintain the required sustainability standards. Covestro uses a structured prioritization process to select the suppliers to be evaluated and initiates either an online assessment or an on-site audit for these suppliers – provided that there are no current results. In prioritizing the suppliers for these assessments, Covestro considers a combination of country and material risks. The risk assessment for country and material groups that we use for our risk analysis is based on recognized external sources.

EcoVadis SAS (EcoVadis), an established external provider accredited by TfS, conducts the online assessments. It evaluates suppliers’ business practices with regard to their sustainable orientation. The questionnaire suppliers complete for the online assessment is based on internationally recognized sustainability standards and includes 21 sustainability criteria grouped into the categories environmental protection, labor and human rights, ethics, and sustainable procurement. The questionnaire’s section on sustainable procurement also inquires on the extent to which the sustainability standards of upstream suppliers are considered.

The questionnaire is dynamically adapted by EcoVadis depending on factors such as the industrial sector, company size and country risk. Suppliers must document the responses provided to the questionnaire with corresponding supporting documents. The EcoVadis analysts assess supplier responses and supporting documents in consideration of international standards, such as the United Nations Global Compact, and consolidate the data into a scorecard available online that shows results by category. This scorecard provides information including a detailed overview of identified strengths and improvement areas as well as a weighted overall result for the suppliers analyzed.

External, independent auditors trained and accredited by TfS conduct on-site audits of selected companies – and follow-up audits, if needed – based on the TfS sustainability criteria. For the purpose of monitoring the quality of the audits, the initiating TfS member takes part in audits selected on a random basis and evaluates them using a standardized checklist.

Covestro analyzes and documents the online assessments and on-site audits, and – in the event of noncompliance with our sustainability requirements – jointly defines with suppliers specific improvement measures and corresponding targets. Covestro continuously verifies the implementation of the required improvements.

The following table shows the status of the supplier assessments.

Key data from the sustainability assessments of Covestro’s suppliers












Only suppliers accounting for a repeat purchasing value exceeding €100,000 per year are taken into account.


Online assessments (conducted by external, independent, TfS-accredited provider EcoVadis) and on-site audits (conducted by external, independent TfS-accredited auditors) of Covestro’s suppliers, both initiated by Covestro and shared within the TfS initiative, are taken into account. Only assessments of our active suppliers that are no more than three years old are taken into account.

Share of relevant purchasing value from suppliers meeting Covestro’s sustainability criteria1, 2










Supplier assessments conducted in the reporting year2





of which through online assessments





of which through on-site audits





Total supplier assessments conducted2





of which through online assessments





of which through on-site audits





Supplier assessments meeting Covestro’s sustainability requirements





Results of online assessments and on-site audits

At the end of 2019, 81% (previous year: 80%) of our relevant purchasing value was attributable to suppliers whose externally determined results* meet our sustainability requirements. Furthermore, 56% of our strategically most important suppliers who conducted a repeat assessment in 2019 have improved over their previous results.

In 2019, assessment results considered critical by Covestro were identified for nine suppliers; in other words, they failed to meet the required minimum result by a significant margin. This corresponds to 1% of all suppliers assessed (previous year: 1%). Covestro responds to such infractions with specific action plans and demands that the suppliers in question implement appropriate corrective measures; follow-up audits are conducted to verify compliance. None of the audits conducted revealed any indication of child or forced labor.

As in the previous year, Covestro had no cause to terminate a supplier relationship in the reporting year because the assessment revealed an unsatisfactory performance or a serious sustainability deficit, e.g., human rights violations like child labor or forced labor.

* The results provided by the external providers EcoVadis SAS and Together for Sustainability AISBL were not subject to the audit by KPMG AG Wirtschaftsprüfungsgesellschaft.

Sustainability training and dialogue

For Covestro, it is important for our own procurement staff, in particular, to have a comprehensive understanding of the significance of sustainability in the supply chain. Awareness was raised among employees again in 2019 in company-wide sustainability training plus region- and country-specific training on assessment methods and processes.

We continued promoting the implementation of four strategic principles in procurement (reliability, sustainability, cost transformation and innovation) in 2019. In addition, Regional Program Managers were posted in each of the , and regions in the previous year. They work to promote the permanent establishment and optimization of our sustainability program.

Dialogue and close collaboration are essential in enabling suppliers to successfully comply with Covestro’s sustainability requirements. We therefore offer our suppliers a range of opportunities for training and dialogue. This provides the foundation for building reliable relationships and enables us to identify and eliminate issues at an early stage. Continually improving our suppliers’ sustainability performance is a priority for Covestro and is supported by the TfS initiative, which regularly organizes supplier days and promotes further training, among other activities. TfS provides a wide range of information materials and various online training courses on its website.

Supplementary information

Part of the supplementary sustainability information (not form part of the statutory audit of the annual financial statements)

Procurement of key products

In 2019, the purchasing value of Covestro’s main sites in Germany, the United States and China accounted for just under 80% of Covestro’s global purchasing value. Most of this amount (around 78%) went to local suppliers in the individual countries.

Worldwide supplier assessment through the TfS initiative

Since the start of the industry initiative in 2011, the now 22 members of TfS have evaluated the sustainability performance of a total of 12,200 suppliers through online assessments and have performed 2,030 on-site audits.

All of the results from the online assessments and audits are available to members of the initiative on an online platform, thereby enabling continual monitoring of suppliers with a view to improvements. The TfS initiative also benefits our suppliers because their standardized assessment can be viewed by all TfS members. This means they do not have to complete multiple assessment surveys by various (potential) customers.

In 2019, TfS members across the globe conducted a total of 4,499 online assessments and 309 on-site audits.

At the TfS Steering Committee meeting held in Shanghai in February 2019, the next steps for the fruitful cooperation between TfS and China Petroleum and the Chemical Industry Federation (CPCIF) were the main topic of conversation. The first company with headquarters in the Asia-Pacific region was also welcomed as a new TfS member at this meeting.

In May 2019, agenda items at the annual general meeting of the TfS initiative included determining the new president and Steering Committee. At that meeting, Covestro’s Chief Procurement Officer, Dirk Jan de With, was elected to the TfS Steering Committee.

Conflict minerals

The Dodd-Frank Act in the United States obligates companies to disclose the origin of certain raw materials to ensure that “conflict minerals” such as tin, tungsten, tantalum and gold from the Democratic Republic of Congo or neighboring states do not enter their products through the supply chain. Covestro uses tin-containing compounds in production and therefore monitors all suppliers

Using a structured survey process, we verify that our suppliers and their upstream suppliers are obtaining tin-containing material free from conflict minerals. Confirmations of conflict mineral-free procurement are documented centrally in the respective material/supplier pairs in our database.

Our requirements regarding conflict minerals are clearly communicated in our Supplier Code of Conduct. Covestro has obtained confirmations of compliance regarding conflict minerals from 100% of suppliers from which it actively purchases such minerals (46 material/supplier pairs) and which are potentially affected by this issue. We update the list of potentially affected suppliers on an ongoing basis and monitor the validity of all existing supplier confirmations. To date, there have been no critical results and no need for action regarding this issue.

UN Global Compact
The world’s largest responsible corporate governance initiative. The member companies undertake to implement ten universal principles and regularly document their progress.
TfS/Together for Sustainability
An initiative undertaken by various companies in the chemical industry to standardize supplier assessments globally in order to improve sustainability practices in the supply chain
TfS/Together for Sustainability
An initiative undertaken by various companies in the chemical industry to standardize supplier assessments globally in order to improve sustainability practices in the supply chain
Comprises all countries in Europe, the Middle East, Africa and Latin America (excluding Mexico) in which Covestro is active
Region comprising the United States, Canada and Mexico in which Covestro is active
Comprises all countries in the Asia and Pacific region in which Covestro is active