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The analysis of suppliers' social, environmental and governance risks

06/09/2016 - 02:00 PM

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To assess risks which might jeopardize the sustainability of its supply chain - the so-called Environmental Social and Governance or ESG risks - Telecom Italia assesses:

  • the risks peculiar to the industrial sector (the so-called "Procurement Market") to which each supplier belongs, and
  • the risks of individual suppliers, based on the findings of sustainability surveys and audits.

Risks of Procurement Markets
According to the ESG risks management model adopted by Telecom Italia, the phases of the analysis for the Procurement Markets are:

  • Risk Identification and definition of an appropriate metrics;
  • Risk assessment of each ESG procurement market;
  • Definition of four major classes of risks in which a procurement market might fall, based on  two parameters: ESG risk and "spending" (the amount Telecom Italia spends for purchases made in that procurement market):

     AA = high ESG risk, high-spending
     AB = high ESG risk, low-spending
     BA = low ESG risk, high-spending
     BB = low ESG risk, low-spending

ESG Risks of a single supplier
Each supplier is assigned an ESG risk profile determined by:

  • the results of socio/environmental audits conducted by Telecom Italia on that supplier and its subcontractors;
  • its answers to the sustainability questionnaire  sent by Telecom Italia;
  • the procurement market to which the supplier belongs.