Supply Chain Talks | Lineas
Value chains are hot topic, and rightfully so. When you know that carbon emissions from the supply chain are on average 11.4 times higher than what is emitted directly 'on-site', you understand our interest. That is why last November, we launched a brand-new initiative: the Supply Chain Leaders Group. 8 members strong, this group will step up as ambassadors of engaged supply chains. In this blog series, we will exchange with each leader about how they engage their suppliers to reduce their emissions and - in doing so - help accelerate the climate transition.
For this blog edition, we talked to Christine Vanoppen, Reputation, Environment & Governance Manager at Lineas. Enjoy the read.
Nice to meet you Christine. Can you tell us about your role at Lineas?
As the responsible for ESG, I manage everything related to sustainability at Lineas. ESG is one of Lineas’ four levers for future growth, recognised by our executive management team. I am part of the Public Affairs Department. It is my job to look at ESG from a strategic programme perspective.
We have set up an ESG programme within a framework that is integrated in the company strategy. ESG is also transparently supported by our Board of Directors, who initiated due governance in the sense that we have an ESG committee, with whom I work very closely.
How do you relate this role to the topic of supply chains?
We are running freight trains, which is the most sustainable transport mode on land, currently available. Rail freight transportation emits six times less CO2 and is six times more energy efficient compared to other alternatives, such as road freight transport.
We drive up to the south of Italy, the north of Sweden, the east of Europe. We don’t drive those trains all by ourselves. At these far-away distances, we work together with a lot of subcontractors. They make up a substantial part of our footprint: more than 25%. So, it is crucial for us to monitor that supply chain.
As a freight transport company, you take up a dual role as buyer and supplier in multiple value chains. How does this help you to engrain the supplier engagement idea into the company structure?
When we engage with subcontractors to perform a transport service, we have clear ESG objectives. This requires a very good dialogue, about what we expect from them and what they can expect from us. But our customers - often important industrial companies – also inquire about our ESG performance. We hardly participate in tenders where there is no ESG questionnaire. In our sector, it is a requirement for being in business. I've seen this evolution accelerating over the past three years. A clear trend is emerging. Today, ESG performance and representation are very important, not only to our customers but also to our employees, and certainly to our shareholders as well.
Going back to your own supplier engagement programme, can you describe how it works on a practical level?
We started quite early with the thinking exercise of ‘how to engage our suppliers’. It's one of the first things I did when I started in this role in 2016.
Our supplier code of conduct forms an integral part of every purchase agreement. When a supplier wants to conclude an agreement with us, they must sign off on this code. This is not always straightforward, and we are still building experience in this respect. This is because some of our suppliers have their own ESG compliance instruments in place. It is important that, whatever the situation, we can sign off on a mutually agreed code of conduct that captures all the elements that are important to us.
We also have a tradition of auditing the performance of our suppliers. When we have an important new subcontractor on board, we go on-site and look at how they deal with security and safety. During these audits we ask our people (or an independent third party) to assess whether the supplier’s management system can guarantee their compliance with the agreed code of conduct. In this part of the process as well, it is very important to have a conversation and to discuss potential blocking factors.
For our Scope 3 emissions, we proposed that by 2026, 50% of our suppliers should have ‘science-based target-like' objectives.
This year, we initiated a second initiative in which we ask our most important suppliers to fill out an ESG questionnaire, as a way of gathering CO2 emission data and other sustainability related topics. We submitted Science Based Targets for CO2 reduction, and we are very happy to announce that the SBTi Organisation has validated our targets. For our scope 3 emissions (i.e. emissions originating in the supply chain), we proposed that by 2026, 50% of our suppliers should have ‘science-based target-like' objectives. This is to ensure that the level of seriousness we find with our suppliers is at the same level as what the Science Based Targets institute (SBTi) requires.
In the future, I would also like to expand this questionnaire to get a better understanding of our suppliers' ESG performance. We would then inquire about aspects that go beyond climate, like people and diversity management, governance policies, etc.
To what extent do you support suppliers with complying to the code of conduct?
Just signing off on the Code of conduct is not going to do the trick. You have to deploy it, provide training or at least make people aware about what this code of conduct entails. Why do we have these statements and what do they mean? And how do you translate them into the day-to-day working environment?
It happens that, for one reason or another, a supplier doesn't want to sign the code of conduct. In this case, we have a conversation to try to understand what their situation is. Each supplier’s context might be different from ours and we need to take this into account. That requires that we have to listen to our supplier, see where the blocking factor is and be of assistance.
How is this program integrated in the various departments of your company?
Two things were instrumental for us in the implementation of our supplier engagement program. A first key aspect is the focus of our CEO, Bernard Gustin. He has put ESG at the centre of our business. It's at the top of our strategic pyramid and at the heart of who we are and why we do what we do. On ESG level, this has enabled everything.
A second aspect is that we have a centralised procurement department, headed by a person who understands the importance of ESG very well. We sat together and assessed several areas within ESG that are related to procurement, such as the management of the subcontractors. We then worked out a programme on the very short, medium and on the longer term. The procurement department actively supports me in getting the ESG queries filled out and getting the CO2 or consumption data from our subcontractors.
Once suppliers are on board or subcontractors are rendering services, there is a very close cooperation with the Health, Safety and Security Department, because they also check on security and safety compliance.
It is very important to team up with the procurement department to look ahead, ask the critical questions and to agree on the actions and priorities.
Almost two years into the full deployment of the program, what would you consider the biggest ‘win’?
The efforts of the procurement department are quite impressive. When I look at our CO2 reporting, we have covered 80% of our subcontractors, which allowed us to refine Lineas’ carbon footprint calculation. Because without good data you cannot take the next step towards action. In addition, we also had a very good reply rate from our existing suppliers regarding the code of conduct.
It is very important to team up with the procurement department to look ahead, ask the critical questions and to agree on the actions and priorities. Without such a collaboration, Lineas would not be able to meet its ESG targets.
How do you see the current efforts evolve in the future?
The next step is to further improve our professional maturity with regards to ESG. We have a number of challenges that will require priority. Complying with CSRD requirements is an example. It is the end phase of an important process that we have to start now. I don't see this as a pure reporting requirement, but rather as an ESG management tool. Next year, we will initiate the materiality assessment, followed by a due gap analysis to further assess and develop our ESG programme.
The greening of our fleet is also on the agenda. Our electric trains have a much lower footprint than diesel fuelled transport, but we can still take steps forward to get this electricity green. Not an easy task, since the market is very complex.
We also think about how we can phase out diesel and we are testing biofuels, which is also quite complex. Getting there within a full ESG integrated model or governance will be a challenge for the future.
Do you see similar challenges occurring across the sector?
There is a very good collaboration throughout the sector. As chair of the UIC sustainability platform, I'm well placed to say this. UIC is the Paris-based organisation that represents the rail industry throughout the world. From where I am sitting, the work that is being delivered by the platform is impressive. The rail sector itself is very engaged, not only with regards to sustainability issues related to the supply chain, but on each aspect of ESG such as gender, diversity, governance, etc.
How could your supplier engagement programme inspire other companies?
Start small, but look at what is important. Until now, we have looked at our most important subcontractors. We haven’t covered the suppliers where we buy our office supplies. So that was the first step. Try to start with a manageable scope.
Secondly, get it signed off. There should be some legal aspect to what you try to enforce with your suppliers.
A third aspect is the relationship that you build with your suppliers, which will determine to a large extent the cooperation one can get on the ESG level.
One final question: What, from a policy or advocacy perspective, would help facilitate the wider roll-out of supplier engagement in Belgium and/or Europe?
I clearly see the added value of sectorial engagement, like what we are doing with the UIC platform. It really helps, because when we work with all the railway undertakings, we are often at the same level of awareness.
I also have high hopes for the upcoming CSRD regulations and especially for the CSDDD later. I expect that companies will report transparently, not only on what is going well but also on the topics where improvement is needed and how they will tackle these. It will make companies reflect, because they will have to indicate very concretely how they will improve: Did they set targets and, if so, how are they performing against them? I hope the EU will follow through here.
Thanks for sharing, Christine!