Table of contents
- Contractors and suppliers
- The Company’s responsible procurement policy
- Implementation of the sustainable procurement roadmap in 2021
- The sustainable procurement approach
- Payment terms
Contractors and suppliers
TotalEnergies’ activities generate hundreds of thousands of direct and indirect jobs worldwide. Present in more than 130 countries, the Company works with a network of over 100,000 suppliers of goods and services. In 2021, the Company’s purchases of goods and services (excluding petroleum products and vessel chartering by Trading & Shipping) represented approximately $25 billion worldwide. The allocation of expenditures at Company level is approximately 26% for goods (products, materials, etc.) and 74% for services (such as consulting services, materials supply operations, transportation, etc.).
In terms of social and environmental responsibility, the activities of the Company's subcontractors and suppliers are likely to present the same risks as those associated with TotalEnergies' activities. The main risks relate basically to human rights in the workplace (forced labor, child labor, discrimination, decent working conditions), health and safety and security, corruption, fraud, environment including climate, biodiversity, circular economy and responsible use of natural resources (water, forests).
The Company attaches particular importance to working with sustainable suppliers who respect both human rights and the environment, throughout its value chain. The Company expects its suppliers to adhere to the Fundamental principles of purchasing which derive from its own Code of Conduct. To that end, the Company has chosen to have the management of its supplier relations coordinated by a dedicated cross-functional entity, TotalEnergies Global Procurement, which is specifically tasked with providing Purchasing services and assisting the Company’s entities and sites(1).
(1) Excluding in particular Hutchinson, Saft Groupe, TotalEnergies Renouvelables France, TotalEnergies Electricité et Gaz France, Greenflex, TOTSA TotalEnergies Trading SA and SunPower Corporation.
The Company’s responsible procurement policy
Fundamental principles of purchasing
The Fundamental principles of purchasing specify the commitments that TotalEnergies requires its suppliers to meet in the following seven areas:
- Respect for human rights at work;
- Protection of health and safety and security at work;
- Action in favor of climate;
- Preservation of the environment;
- Prevention of corruption, conflicts of interest and combating of fraud;
- Compliance with competition law;
- Promotion of economic and social development.
These principles uphold the principles defined in the United Nations Universal Declaration of Human Rights, the fundamental conventions of the International Labor Organization, the UN Guiding Principles on Business and Human Rights, the UN Global Compact, the Voluntary Principles on Security and Human Rights and the OECD Guidelines for Multinational Enterprises.
TotalEnergies expects its suppliers to adhere to the Fundamental Principles of Purchasing and ensure compliance with those principles in their activities, and in particular to:
- be attentive to the day-to-day working conditions of their employees and their suppliers’ employees;
- ensure that their own suppliers and subcontractors adhere to those Fundamental Principles of Purchasing;
- agree to be audited in accordance with those principles;
- refer to the Ethics Committee(2) in case of doubt.
The rules set out in these Principles must be included or transposed into the agreements concluded with suppliers. To that end, these Principles are available for consultation by all suppliers in both French and English on TotalEnergies’ website.
The Company ensures that contractual conditions are negotiated in an equitable manner with its suppliers. TotalEnergies’ Code of Conduct restates this requirement and the three essential principles that guide TotalEnergies’ relations with its suppliers: dialogue, professionalism and compliance with commitments.
(2) The Ethics Committee ensures compliance with the Code of Conduct. Its Chairperson, who reports to the Chairman and Chief Executive Officer of TotalEnergies SE, presents an annual report on Ethics to the Gouvernance and Ethics Committee of the Board of Directors.
Update of the Fundamental Principles of Purchasing
At the end of 2020, the Company updated the first of the six Fundamental Principles of Procurement dealing with respect for Human rights at work. The objective of this update was to detail more precisely the Company's requirements in this area in order to ensure that they are fully understood by suppliers. In 2021, an awareness-raising campaign was conducted following this update to remind the Company’s buyers and purchasing lawyers of good practices. In addition, and in order to help Suppliers implement these Principles correctly, a Practical Guide on Human Rights at Work, together with a training plan, were prepared in 2021 for distribution to Suppliers in 2022.
In addition, in 2022, the Company updated the Fundamental Principles of Purchasing to better integrate climate, biodiversity, circular economy and responsible use of natural resources (water, forests). A new awareness-raising campaign of the suppliers will be conducted.
Sustainable procurement roadmap
The sustainable procurement approach was strengthened in 2020 with the creation of a dedicated department. Work on updating the sustainable procurement roadmap was carried out in 2021 and approved in early 2022. This roadmap is based on four pillars: climate and sustainable energy, human well-being, care for the environment and value creation for society. For each of these areas, sustainable procurement objectives have been defined as follows:
The Company has set goals for itself on the various topics:
- Climate and sustainable energy:
- Raising awareness on climate issues among buyers, in particular through the creation of an internal guide on “How to integrate climate issues throughout the purchasing process”;
- Measuring and tracking Scope 3 upstream GHG emissions(3) of TotalEnergies' purchases of goods and services;
- Integrate the cost of carbon emissions into the calculation of the total cost of acquisition of all goods and services that have a significant impact on its operations;
- Engage the 1,000 suppliers that account for 80% of Scope 3 upstream GHG emissions in a continuous improvement process;
- Ensure that by 2025 at least 90% of the Company's Top 400 suppliers have set targets for GHG emission reductions by 2030;
- Ensure that any new supplier qualified from 2022 and likely to join this Top 400 also have this objective.
- Well-being of people:
- Raise awareness on human rights issues among the Company's buyers;
- Raise awareness among the Company's suppliers: publish a Practical Guide on Human Rights at Work for suppliers;
- Audit 100% of priority suppliers (approximately 800 suppliers) on respect of human rights at work every 3 years;
- Pilot innovative systems to collect live feedback from workers on their working conditions in major operated projects such as EACOP and Tilenga (Workers' Voice Survey) from 2022;
- Address human rights risks related to raw material extraction beyond Tier 1 suppliers;
- Double procurement spending with adapted sector (sheltered employment for disabled) suppliers in France in the coming years.
- Care for the environment:
- Define an environmental audit framework for suppliers' sites in 2022 for deployment in 2023;
- Integrate environmental criteria (including climate, biodiversity, the sustainable use of resources and the circular economy) in calls for tenders for priority categories from 2022 onwards;
- Identify priority suppliers in the areas of water, forests and biodiversity and raise awareness among these suppliers to ensure that these issues are taken into account.
- Value creation for society:
- Continue the TotalEnergies SME Pool program and support at least 10 French SMEs each year;
- Ensure that payment terms are met at all times, especially for SMEs;
- Deploy the local content roadmap to support the sustainable use of local businesses and labor.
- Awareness-raising and training of suppliers and buyers:
- Engage the Company's suppliers in a sustainable development approach through a dedicated program and platform;
- Launch and deploy mandatory sustainable purchasing training for buyers in 2022.
The objectives of the roadmap are reviewed by the Executive Committee. The implementation of this roadmap is monitored by the Sustainable Procurement Committee which meets twice a year. The Committee includes TotalEnergies Global Procurement Management Committee and representatives from the Human Rights, HSE and Climate Change directorates.
(3) GHG Protocol-Categories 1, 2, 4, 5, and 8.
Implementation of the sustainable procurement roadmap in 2021
Climate and sustainable Energy
The Company integrates Climate issues into its purchasing decisions. Thus, the cost of carbon emissions is integrated into the calculation of the total cost of ownership for the highest emission categories (marine logistics, rotating machines, etc.).
In 2021, the Company also conducted the first estimate of supply chain GHG emissions in the scope of TotalEnergies Global Procurement. According to this study, carried out with the help of the specialized firm EcoAct, the emissions linked to the purchase of goods and services(4) would represent approximately 7 Mt CO2e per year. This initial estimate, which also made it possible to identify priority purchasing categories in terms of GHG emissions, must be completed and refined in 2022.
(4)Excluding in particular Hutchinson, Saft Groupe, TotalEnergies Renouvelables France, TotalEnergies Electricité et Gaz France, Greenflex, TOTSA TotalEnergies Trading SA and SunPower Corporation.
Since 2016, the Company has conducted audits on working conditions among suppliers. A targeted audit plan is defined each year and includes at-risk suppliers. These audits measure respect for human rights in the workplace, and cover topics including child labor, forced labor, discrimination, freedom of association and the right to collective bargaining, working conditions (overtime, days off) and workplace health and safety. These on-site audits, carried out by an independent external service provider, include interviews with workers.
Fewer than 30 audits per year were conducted between 2016 and 2018. Starting in 2019, the target has been increased to 100 audits per year. This goal was achieved in 2019, but could not be achieved in 2020 and 2021 mainly due to the COVID-19 health crisis.
Audit 2016-2021 & Targets 2022
Action plans are developed to remedy the non-conformities identified during these audits. In 2021, these audits covered more than 25,000 suppliers' workers.
A dedicated committee monitoring human rights audits of suppliers was also created in 2021 with the participation of the Company's human rights teams, members of the TotalEnergies Global Procurement Management Committee and the Sustainable procurement Department.
In 2022, the Company plans to audit 200 suppliers. The objective is to audit 100% of priority suppliers in terms of human rights (800 suppliers) via on-site and documentary audits by 2024.
In addition, the Company plans to implement and pilot innovative systems such as “workers' voice surveys” to gather live feedback from workers on their working conditions in major operated projects, including EACOP and Tilenga in Tanzania and Uganda.
Finally, several projects have been conducted in order to improve the transparency of the Company's supply chain, including traceability audits of the photovoltaic panel supply chain that were initiated in 2021 and will continue in 2022.
Adapted and protected sector
Lastly, the Company pays special attention to the adapted and protected sector (sheltered employment sector for disabled workers). In France, the Company’s purchases from this sector represented about €3 million in 2021. TotalEnergies is a member of the [email protected] (“Step by Step”) organization and provides its buyers with an online tool that can be used to identify potential suppliers and service providers in the sheltered employment sector by region and category. A number of meetings have been organized in liaison with Mission Handicap, the Company’s disabilities office, to familiarize buyers with the Company’s commitments and teach them how to use the online tool.
Care for the environment
In 2020, the priority categories regarding waste production, natural resource impairment and risks of pollution were identified. In 2021, a pilot circular economy/climate questionnaire integrated at the time of the evaluation of the supplier offer was deployed for the packing category. In 2022, all priority circular economy categories will have to incorporate this type of questionnaire. In 2022, an environmental audit framework for suppliers' sites should be defined for deployment of audits in 2023.
Value creation for society
TotalEnergies is committed to driving local economic development both in France and abroad.
In this respect, insofar as operational constraints allow, the Company uses local employment and subcontracting and also contributes to the development of local skills.
For the Company's major industrial projects, a local content development and management approach has been structured to strengthen the positive impact on local employment and economic activity. The main suppliers are thus methodically involved. Call for tenders include local content criteria aimed at ensuring at least equal opportunity for local subcontractors, or, depending on the local context, quantified contractual obligations (use of local subcontractors, employment, investment in local capacity) for subcontractors. Industrial capacity studies have been carried out or are under way for major projects in new countries such as South Africa and Iraq, as well as for offshore wind power projects.
To facilitate performance measurement, a web-connected digital reporting solution has been developed and is currently being deployed. It also makes it possible to calculate the impact of local purchases for major projects in terms of value creation and jobs created. A new reference framework of procedures with online training will allow the deployment of best practices for sustainably developing local content.
Additionally, in April 2019, TotalEnergies launched the TotalEnergies SME Pool program to help a dozen or so of the Company’s small and medium-sized suppliers grow their business. For one year, free of charge, these companies are introduced to other major groups and they receive guidance for their executives and support in their international growth through TotalEnergies France directorate. In September 2020, TotalEnergies received a Trophées Décision Achats award in the category CSR in recognition of this initiative. This pilot scheme proved so successful that the TotalEnergies SME Pool has now been established on a permanent basis. Twelve new SMEs received support through this program in 2020. The Company decided to extend the program into 2021 for the 2020 beneficiaries to allow them to benefit from it as much as possible after the COVID-19 crisis period.
Lastly, in the context of the development of good practices in business relations, since 2013 TotalEnergies has carried out regular awareness-raising programs with its employees on mediation as an alternative means of dispute resolution. In parallel with this, an email address ([email protected]) is available on the TotalEnergies website to enable the Company's suppliers to contact the dedicated internal mediator. Its mission is to facilitate relations between the Company and its French and international suppliers. The general purchasing terms and conditions also mention the possibility of recourse to mediation.
The sustainable procurement approach
Risk mapping and priority identification
In early 2020, TotalEnergies Global Procurement finalized the update of the CSR risk mapping for the Company's procurement of goods and services. This risk mapping examined CSR risks relating to human rights and fundamental freedom (working conditions and the right to organize, discrimination, health and safety, child labor, forced labor and modern slavery) as well as risks relating to the environment (depletion of natural resources; loss of biodiversity; climate change and greenhouse gases; waste and end-of-life management; air, water and soil pollution). This mapping is the result of methodological work carried out with support from AFNOR (the French standards association) during the second half of 2019, involving internal CSR experts as well as nearly 90% of TotalEnergies Global Procurement buyers.
Awareness-raising and training of employees
TotalEnergies has set up a number of channels of communication to raise its buyers’ awareness of risks and concerns relating to its supply chain. Buyers follow training modules that explain the Company's ethical commitments, particularly in terms of human rights. In addition, all new employees of TotalEnergies Global Procurement receive training which includes a section on sustainable procurement, presenting the Fundamental Principles of Purchasing and the sustainable procurement roadmap. Awareness-raising sessions are held regularly on specific topics. For example, in 2021, 100% of TotalEnergies Global Procurement buyers were trained in anti-corruption and anti-fraud rules, and 91% completed the online human rights module. On the subject of climate change, a practical guide for buyers was deployed in TotalEnergies Global Procurement in 2021, along with training sessions. Finally, sustainable procurement and sustainable development aspects are now systematically integrated into all purchasing events, such as the International Procurement Day in June 2021, which brought together 452 participants (buyers and procurement support functions) with a session dedicated to sustainable procurement as well as two spotlight sessions, on human rights and the climate.
Raising suppliers’ awareness
Every two years, TotalEnergies Global Procurement organizes a Suppliers Day which brings together the Company's strategic suppliers. Given the health context of the last two years, it was not possible to hold this event. However, TotalEnergies' International Procurement Office (IPO) in Shanghai, China, was able to organize two supplier days, attended by some 260 people, during which climate, human rights, the environment, compliance and safety were discussed. The subsidiaries also organize events on these topics, such as the supplier forum held by the Exploration & Production subsidiary in Mozambique, which brought together 107 suppliers and focused on respect for human rights in the workplace.
The commitment of suppliers to CSR aspects is now taking a new form. In 2021, TotalEnergies sent a letter to the 1,000 suppliers accounting for 80% of supply chain emissions to inform them of the launch of a supply chain climate initiative. In December 2021, the first webinar introducing the initiative was attended by more than 500 suppliers. In 2022, the Company plans to set up a digital platform to coordinate this community of suppliers and to extend the program to all the topics of the sustainable procurement roadmap.
The supplier approval process
The harmonization of the supplier qualification process led to the publication of an internal reference framework in 2018, and then to the implementation of a computerized qualification tool which has been gradually deployed since 2019.
The tool is used to automate and document the supplier qualification process, which has four steps:
- validation by the technical expert of the value of launching the qualification process;
- preliminary risk analysis to determine whether an in-depth analysis is needed for each criterion (HSE; anti-corruption; sustainable development, financial and technical responsibility);
- determination of the qualification status;
- monitoring and renewal of qualification. Qualifications are valid for three years.
The qualification process covers five criteria: anti-corruption, technical, HSE, financial and sustainable development. This last criterion allows assessment of the risk presented by the supplier in question regarding human rights and the environment. During this risk assessment, the Fundamental Principles of Purchasing are systematically sent to the supplier for signing, a questionnaire is sent and supporting documents are requested. Following the analysis of these elements, the supplier can be qualified on the sustainable development criterion. A non-qualification on this criterion leads to the non-qualification of the supplier, meaning that the Company cannot deal with it.
The qualification process also identifies suppliers using “conflict minerals”. Finally, pursuant to Rule 13p-1 of the U.S. Securities Exchange Act of 1934, as amended, which implemented certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, since 2014, TotalEnergies has filed with the United States Securities and Exchange Commission (SEC) an annual document relating to “conflict minerals”(5) sourced from the Democratic Republic of the Congo or neighboring countries. This document indicates whether, during the preceding calendar year, any such minerals were necessary for the operation or for the production of a product manufactured by TotalEnergies SE or one of its consolidated companies or contracted by TotalEnergies SE or one of its consolidated companies to be manufactured. The purpose of this regulation is to prevent the direct or indirect funding of armed groups in central Africa. For more information, please refer to TotalEnergies’ most recent publication or sec.gov.
More than 15,000 suppliers have been integrated in this qualification tool, representing about 15% of the Company' suppliers base and almost 25% of the suppliers with a spend over 50KUSD. Deployment slowed during the COVID-19 pandemic in 2020 and 2021, and is resuming in 2022.
(5) Rule 13p-1 defines “conflict minerals” (irrespective of their geographical origin) as: columbite-tantalite (coltan), cassiterite, gold and wolframite as well as their derivatives, which are limited to tantalum, tin and tungsten.
Supplier evaluation and improvement monitoring system
The Company evaluates supplier performance on sustainability in several ways. First, the Company ensures that suppliers adhere to its Fundamental Principles of Purchasing, which must be signed by the supplier at the time of qualification and are included in the contracts. During the qualification process, the supplier answers a CSR questionnaire that conditions its ability to work with the Company. Subsequently, effective compliance with the Fundamental Principles of Purchasing is verified through assessments such as the on-site human rights audits conducted each year by an external service provider on behalf of the Company. Whenever necessary, an action plan is put in place and followed by the teams, allowing improvement of the supplier's practices to be attested. The Company is also assessing the maturity of its suppliers as it did in 2021 on the subject of climate: a maturity assessment questionnaire has been sent to the Company's Top 200 suppliers. From 2022 onwards, this assessment will be carried out regularly on the Top 1,000 suppliers in parallel with the deployment of the supplier commitment program on the climate issue, in order to measure the impact of this program on supplier practices.
Leadership and sharing of best practices
The Company is aware of the importance of mobilizing its entire ecosystem in favor of sustainable development and sustainable purchasing. This is why TotalEnergies is heavily involved at the national and international level with its peers and other companies to advance practices and develop new standards. For example, TotalEnergies launched an industry initiative in 2018 with BP, Equinor and Shell to implement a platform allowing to mutualize suppliers' human rights audits. These founding members were joined by new members such as Wintershall, AkerBP, ConocoPhilips and Var Energy. The platform, which is operational since 2020, should be extended to other compagnies in the sector. The objective of this initiative is to promote better practices regarding respect for human rights at work in the industry, while trying to reduce the suppliers' "audit fatigue". TotalEnergies is also a member of the IPIECA Supply Chain Working Group. As an extension of the workshops held since 2015, TotalEnergies continued to take part in the Operationalization of the U.N. Guiding Principles organized by IPIECA, aimed at both oil and gas companies and EPC (Engineering, Procurement and Construction) contractors.
Since 2010 TotalEnergies has also been a signatory to the sustainable Supplier Relations Charter of the French Ministry of the Economy and Finance, which aims to develop sustainable and balanced relations between customers and suppliers. In 2021, the Company signed the new version of this Charter. TotalEnergies has also participated in the sustainable Purchasing Observatory's working groups since 2017.
The payment terms of invoices from suppliers and customers of TotalEnergies SE as of December 31, 2021, presented in the table below pursuant to the provisions of Article D. 441-4 of the French Commercial Code, are established within the boundaries of the parent company, and not TotalEnergies and therefore include invoices issued and received between TotalEnergies SE and its subsidiaries.
A significant portion of the invoices issued by TotalEnergies SE relates to internal services re-invoiced to the companies of the Company. Most of these companies are included in the scope of consolidation. Thus, 86% of the outstanding customer invoices due at the balance sheet date (i.e. 89% of the total amount including VAT) relate to consolidated companies.
In order to present only the invoices issued to non-consolidated companies or third parties, the table below has been restated for invoices issued and received by consolidated companies.