Supply chain and manufacturing reliability risk
Supply chain and manufacturing risk in production units and transportation refers to risks related to raw materials, energy, suppliers, production, storage units, and inbound/outbound transportation. Risks include major equipment failure or damage, natural disasters, strikes, and drastic shortages of raw materials, utilities or critical equipment.
The geographic distribution of production units around the world reduces the overall impact of one production unit being damaged or interrupted. Some specialty products are, however, produced only in a single plant.
Prevention and mitigation
Key risk areas are addressed with relevant dedicated policies and risk control programs, such as the property loss prevention program, process safety management procedures, the supplier qualification and assessment process, integrated resource planning and supply chain optimization systems, ERP (Emergency Response Plans), corporate and local crisis management procedures, business continuity planning (including for pandemic risk), and networking groups for manufacturing and supply chain managers.
Solvay takes out insurance to reduce the financial impact of events that could cause extensive damage and material business interruption. It deploys a property loss prevention program with the support of a large network of risk engineers assigned by the insurers. The program focuses on the prevention and mitigation of damage to assets and loss of profit due to fire, explosion, accidental chemical release, and other adverse events. The program has been reinforced across the Group and includes: engineering visits to all locations, monitoring and providing updates on the status of agreed risk improvement actions for all locations, meetings with the GBUs on reducing property and business interruption risks, road maps designed to reduce property and business interruption risks, business impact analysis and, loss prevention training for plant employees.
To identify supply chain risk, Solvay takes into account environmental, social, security of supply, and innovation criteria and identifies a mitigation action for each specific risk. These strategic management reviews take place on a regular basis.
- Some suppliers are identified as critical based on their strategic importance or because they might represent a business, country, or product risk. Those suppliers have to engage in a CSR assessment and a continuous improvement process. All critical suppliers must also formally confirm that they adhere to principles that are consistent with those set out in the Solvay Supplier Code;
- Solvay owns several mines and quarries for the extraction of trona, limestone, and salt. This reduces the risk of a disruption in its raw material supplies (availability, reliability, and price), as key suppliers are included in the property loss prevention program whenever possible.
In the field of energy supply, Solvay has consistently implemented programs to reduce its energy consumption for many years. While Solvay has industrial activities with high energy consumption, mainly in Europe (synthetic soda ash plants, polyamides), it also operates a range of industrial activities whose energy content is relatively low as a percentage of sales price, particularly in the fluorinated polymers business. The Group considers secure and reliable energy supplies to be particularly important and has taken the following strategic initiatives:
- technological leadership in processes and high-performance industrial operations to minimize energy consumption;
- diversification and flexible use of the different types and sources of primary energy;
- upstream integration in steam and electricity generation (gas cogeneration, biomass or secondary fuels cogeneration, etc.);
- periodic review of the condition of industrial sites’ energy assets and connections;
- a strategy of supply coverage with long-term partnerships and medium- to long-term contracts, with price-hedging protection mechanisms when needed;
- direct access to energy markets when possible (gas hubs, electrical grids, financial spot and futures exchanges);
- regular forecast reports on energy and raw material price trends sent to business to anticipate sales prices realignments.
Solvay Energy Services optimizes energy purchasing and consumption for the Group and helps GBUs manage energy and CO2 emissions.