Each year, Newmont procures around $3.7 billion in goods and services from more than 9,000 suppliers worldwide, including hundreds of local suppliers based near our projects and operations. Understanding the risks present in our broad and dynamic supply chain and working with suppliers that share our values and goals are critical to our operations.
Sourcing and procurement
New suppliers and those with contracts up for renewal must read and acknowledge our Supplier Code of Conduct, which sets the minimum standards of responsible business conduct expected from those wishing to do business with, or on behalf of, Newmont. Suppliers, and all sub-contractors working on their behalf, must comply with our contract terms including provisions to adhere to our Code of Conduct and all policies and standards related to business integrity and ethics, health and safety, human rights and labor, and social responsibility.
Our current pre-qualification process screens new suppliers against anti-corruption and sanctioned third parties, environmental, labor practices, safety performance, human rights and impacts to society criteria, which ensures we give equal weight to non-technical aspects when awarding contracts.
While all our operations have processes in place to identify and manage supplier risks, the development of a global Supplier Risk Management (SRM) program will standardize and align our systems and processes, create efficiencies, and better manage costs over the life of the contract. Once fully implemented in 2018, our SRM program will greatly enhance our qualification process and enable our operations and functions to collectively identify, assess and manage supplier risk across our global supplier network.
Among the key deliverables of the program:
- Greater support for achieving our performance goals, such as eliminating fatalities, reducing injuries, increasing local procurement and integrating human rights considerations throughout our business operations;
- Clear roles and responsibilities across all functions, including performance metrics and audit requirements;
- Improved controls over “value leakage” from overpayments;
- Enterprise-wide alignment on defining risk for each function and what supplier risk means across the organization;
- A broader, more holistic view of the risks throughout our supply chain, such as the environmental impact of our commodities and the social impact as a result of the delivery of our supplies; and
- Fit-for-purpose supplier categorization and risk treatment plans that identify, assess and manage supplier risk throughout the supplier lifecycle.
Smelting and refining
The gold we produce is transported in the form of doré to refineries certified by the London Bullion Market Association (LBMA). Swiss refinery Valcambi refines the majority of gold produced in our North America, Peru and Ghana operations. The Perth Mint in Australia refines gold produced at our Australian mines, Swiss refinery Argo Heraeus refines the doré produced at our Merian mine in Suriname, and Asahi Holdings refines a small volume of our doré produced in Peru.
All four refineries comply with the LBMA Responsible Gold Guidance to ensure the entire chain of custody is responsible and does not source gold from areas and operations that finance conflict or degrade the environment. For more information about the refineries’ commitment to a responsible supply chain, please visit the Valcambi, Perth Mint, Argo Heraeus and Asahi Holdings websites.
The copper we produce is sold to smelters and manufacturers in the form of concentrate and cathode for further treatment. All copper sales contracts include requirements to comply with permits, approvals and other laws, agree to anti-bribery measures, and – when appropriate – acknowledge our Conflict-Free Gold Standard. Most of our copper concentrate is sold directly to smelters with which we have long-term relationships. However, when we produce more concentrate than anticipated, sales will occasionally be made to independent trading companies. To ensure our product is transferred, sold, offered or shipped only to acceptable buyers, we developed a Product Stewardship Standard that we plan to implement in 2018. This standard details the minimum requirements for managing and vetting downstream buyers other than our approved refineries and smelters, and establishes a set of environmental, social and governance criteria and a due diligence and audit process.
Through industry associations such as the World Gold Council (WGC) and the International Council on Mining and Metals (ICMM), we aim to better understand the potential impacts of our products, their uses and value streams.
More information about our products is included in our 2017 10-K report.
During the year, Newmont contracted with 682 new suppliers that were screened against anti-corruption and sanctioned third parties. The percentage of those screened against other key criteria were:
- 97 percent using criteria for impacts on society
- 46 percent using environmental criteria
- 46 percent using labor practices criteria
- 33 percent using human rights criteria
Data from our KCGM operation in Australia and Merian mine in Suriname are not included in these figures. KCGM, which is a joint venture, uses different systems that make it difficult to compare the data to our other operations. We will continue to evaluate options for including KCGM data in future reports. In mid-2017, Merian completed implementation of our global enterprise resource planning system based on SAP, allowing us to track this data beginning in 2018.
On a global level, much of the focus during the year was on developing our SRM program by working collaboratively with regions and functions. Key activities included:
- We conducted a global gap analysis on the supply chain contract lifecycle process that resulted in a fit-for-form global end-to-end process for category management, supplier pre-qualification, plan and scope, mobilization and contract closeout.
- A responsibility matrix was developed to set mandatory activities against key operational and functional roles throughout the life of a contract to engage relevant functions at the right time.
- A global tier and risk matrix was created to improve consistency in the identification of risks within each scope of work.
- We developed a supplier segmentation framework to accurately rate supplier risks and scope of work risks. Risk-relevant supplier management plans will be used during the supplier segmentation process.
- We established a cross-functional executive-level steering committee to provide strategic input and ensure alignment and accountability for identifying, controlling and monitoring risks.
- To ensure suppliers understood the SRM elements – in particular the pre-qualification tool – we engaged with local suppliers in Peru. In the early development of the program, one risk identified was that suppliers – in particular local and indigenous businesses – might perceive the pre-qualification process as a tool that could be used to exclude them for being a small business. Through engagement, we were able to reassure suppliers that the program’s objectives are to create transparency on potential risks and, if needed, offer additional support to mitigate risks.
Although the SRM program complements Newmont’s other upstream-focused programs and initiatives, we began to develop of a Responsible Sourcing strategy to align our efforts with downstream users’ expectations that the gold and copper has been produced in a manner that meets agreed-on environmental, social and governance standards and criteria.
Our internal cross-functional responsible sourcing working group – which includes representatives from key functions as well as an external responsible sourcing expert with Sustainable Enterprise Consulting – is taking a collaborative and consultative approach in developing the strategy. Insights from interviews with external responsible sourcing thought leaders and analysis of leading guidelines, initiatives, standards and codes are informing the strategy.
During the year, the working group held a workshop to discuss the insights and analysis and developed a draft framework and road map.
The working group is also building upon our SRM program, artisanal and small-scale mining strategy, Conflict-Free Gold Standard compliance, as well as industry initiatives and partnerships, to align the strategy with downstream users’ expectations.
Implementing our global SRM program will be an enterprise-wide area of focus that is expected to yield marked improvements in how we manage risks within our supply chain and result in significant cost savings. Among the key activities in 2018 to support the program:
- Update and implement our Supplier Management Standard to align with the requirements of the SRM program and ensure all risks are captured and tracked in our Integrated Management System;
- Update all contracts in the top two tiers to ensure transparency in spend compliance;
- Develop and implement the pre-qualification tool and treatment plans that will drive consistency in human rights pre-screening criteria to support our public targets for managing human rights risks within our supply chain;
- Finalize treatment plans and supporting documents and tools for all contracts in the top two tiers;
- Build an online lifecycle management toolkit to support process governance; and
- Finalize and launch a training program for Newmont employees and suppliers.
In 2018, we will complete development of our Responsible Sourcing strategy, including validating the strategy with company leaders and external experts. We will then begin implementing a fit-for-purpose strategic framework that addresses marketplace trends and downstream supply chain opportunities and risks; meets the expectations of gold and copper end-users and critical stakeholders; and positions Newmont as a trusted and leading source of responsible gold.
We will roll out a global skills development program for all supply chain personnel, taking concepts from our face-to-face training program in Ghana and combining them with an online platform so employees can connect the training with their individual development plans.
While we currently engage with critical suppliers in the planning phase and throughout the entire business relationship until the contract is closed out, given the extensive scope of the SRM program, we have pushed back to 2019 the implementation of a formal global Supplier Relationship Management program.