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Responsibility in building supplier relationships

As a socially responsible company KGHM is directed by fairness and responsibility at each stage of its business contacts. The Company has implemented an organised and transparent procurement process and developed a procurement ethics code. This stipulates the absolute transparency of the rules relating to the selection of suppliers and introduces a total ban on accepting any material benefits, including small gifts, from the participants in tender proceedings, which could put the Company’s good reputation into jeopardy. In its relations with suppliers, the Company takes into account CSR issues – one of the elements in the selection process are queries relating to environmental protection and safety and hygiene at work.


Open criteria

The “Procurement policy” is binding in the Company which – apart from the rational use of funds and making savings by the divisions and Group companies – is aimed at ensuring the transparency of the purchase decision process. This purpose is achieved, among other things, by applying an electronic Procurement Support System aimed at automating the selection of the best offers using clear and indisputable criteria. The use of particular modules of the system allows registering and making information available from the moment of accepting a request, through the tender procedure, to the selection of the most favourable offer and signing the respective contract.

The Auction Platform, which supports the auction and bidding process, automating the selection of the best offer, streamlining relationships with suppliers and reducing purchase costs, is an integral part of the Purchase Support System. Offers are evaluated based on the criteria included in the Terms of Reference (ToR) without the participation of the ordering party.

The employees of the Central Procurement Office and other people involved in the process are obliged to act in accordance with the law and internal KGHM regulations, including the “Principles for selecting providers of work and services, suppliers of goods and procedures for concluding contracts on behalf of KGHM Polska Miedź S.A.”. Abiding by those rules is necessary to maintain the effectiveness of purchases and also helps assure the shareholders, suppliers and other stakeholders of the professionalism and transparency of the process. In accordance with the “Principles” all suppliers have to be treated in the same way so as not to jeopardise the free competition principle. They also oblige the employees engaged in the procurement process to endeavour to meet the purchaser’s obligations stipulated in the contracts signed, and to demand that the counterparties complete the orders in accordance with the contract terms and conditions. Detailed principles of supplier relations are described in the “Code of ethics in the KGHM Polska Miedź S.A. Group”.


Counterparty scrutiny

KGHM suppliers registered in the SAP system

In its relations with suppliers, KGHM takes into account issues related to Corporate Social Responsibility – one of the elements in the selection process are the queries relating to environmental protection and safety and hygiene at work. In all Terms of Reference standard provisions were introduced obliging suppliers to give their consent to the conduct of an audit of the subject of the order by authorised employees of the KGHM Polska Miedź S.A. Purchase Department, on a mutually agreed date. A questionnaire form was also developed for potential and current counterparties, in which components relating to social responsibility are referred to as one of the criteria for evaluating potential suppliers, specifically from outside the European Union.

These actions are particularly important taking into account the expansion of the supplier market on a global scale, taking into consideration Asian markets. Although the share of foreign counterparties of KGHM Polska Miedź S.A. is currently relatively small, in 2011 there were 145 such suppliers, which constitutes 4.5% of all the Company’s counterparties, it should be noted that as of the moment of launching the Central Procurement Office, the number has doubled. The growth trend in this respect is constant and compliant with the Central Procurement Office’s operating strategy.


Strengthening the position of KGHM Polska Miedź S.A. as a solid and ethical business partner will increase the Company’s recognisability on external markets as a material and ethical purchaser, which will have an impact on the competitiveness of the offers acquired as a result of the tender procedures.

Developing a “Supplier Code of Ethics” is also planned and annual verification of the suppliers in terms of their compliance with KGHM requirements.

Provisions of the Code

In its relations with suppliers, KGHM accounts for issues related to responsible business – one of the elements of their selection are the queries regarding their compliance with environmental protection and safety and hygiene at work policies.

In accordance with the provisions of the “Code of ethics in the KGHM Polska Miedź S.A. Group” employees should be loyal to their company and aim to enhance its value, and care for its renown. It is their duty to maintain best relations with colleagues, clients and suppliers, and to treat them with respect and politely. As the Company is a responsible company, it cares first and foremost for the compliance of its actions with the law and with internal regulations. In the event of any doubts concerning these issues, the employees should refer them to their direct superior.

The Code bans establishing any cooperation with companies with which the Company’s employees responsible for procurement are in any manner related. The employees are obliged to notify their superiors of any potential conflicts of interest. Quick disclosure of such situation is necessary in order to maintain supplier confidence. Accepting pecuniary and non-pecuniary benefits in connection with exercising duties in respect of the Company is also forbidden. Such benefits also include the employee’s participation in events or training sessions organised by suppliers which are not specified in the signed contract. Such situation is treated as a gross violation of the basic duties of the employee.

Report on shortcuts
Jan Kochanowski (1530­-1584) – poet and playwright of the Renaissance period, graduate
of the Kraków Academy and the Universities of Koenigsberg and Padua, secretary to
King Zygmunt II August of Poland. Considered one of the most outstanding authors of the
Renaissance in Europe and the most eminent Slav poet who contributed to the development of the Polish literary language.
Teresa Bałuk-Ulewiczowa, Ph.D.
Insitute of English Philology
Jagiellonian University in Kraków