Management of the supply chain

Responsible management

In 2018, the Viscofan Group allocated €452 million, which reflects the distribution of wealth among suppliers of goods and services.

The Viscofan Group carries out its activities by transforming raw materials through a physical and chemical complex process into casings customised to meet the requirements of our customers.

Aware of the strategic importance and the impact an adequate supply of raw materials and services has over the entire organisation, as well as the optimal management of the supply chain, the Viscofan Group is committed to its suppliers and establishes with them relationships based on respect and trust, on the quality of products and services, and on the reciprocal opportunity for growth and learning.

This is a commitment that we believe must be two-way and shall engage all the employees in the organisation in the use of best practices in product purchase management and any other service contracted.

Under this premise, Viscofan is considering new actions to be carried out so that the management of the supply chain is developed in accordance with ethical standards and environmental criteria, in line with the Group's ethical code.

Viscofan uses different raw materials in its production process. According to the technology used and the desired final product, different materials are required. The most important raw materials in our production process are the following:

Purchases of these raw materials, together with auxiliary raw materials for chemical processing - such as glycerine and caustic soda - represent 52% of the Group's total supply.

Viscofan has established a supplier approval system, included in the purchasing management policy, that allows a non-discriminatory treatment in the selection processes of suppliers and contractors, while seeking to ensure their compliance with quality, safety and cost criteria. In addition to this commitment, Viscofan expects suppliers to be innovative and efficient, to meet the legal and functional requirements, as well as the ethical practices required. In this sense and in accordance with our code of conduct and with our Human Rights policy, Viscofan rejects any type of child labour and, in accordance with this, our suppliers are asked to make a commitment similar to that included in our code of ethics.

In particular, our approval system for suppliers of raw materials and packaging includes a declaration of conformity on their performance commitments in accordance with internationally accepted ethical principles and human rights.

As of 2017, all the companies that make up the Viscofan Group have begun to request this commitment in the field of human rights and environmental criteria from 100% of the new suppliers of raw materials, and it is foreseen that this commitment will be ratified by 100% of the suppliers of raw materials in 2020.

To this end, all suppliers of raw materials, packaging and maintenance must approve an internal accreditation procedure comprising an on-site auditing by the quality team of Viscofan, or the completion of a questionnaire. In both cases, among other matters, the following systems are assessed: quality management (ISO 9001, IFS), food safety management in the case of suppliers of raw materials (FSSC 22000, BRC Global Standard, BRC Packaging), occupational health and safety management (OHSAS 18001/ISO 45001), environmental management (ISO 14001) and human rights management (UN Global Compact, BSCI).

For the production of collagen, the acquisition of animal hide (mainly cows) is required. In Europe this must comply with the European regulations of welfare of animals at the time of slaughter.

Commitment with local suppliers.

The activity of Viscofan Group in those countries where the company operates is aimed at generating value to all stakeholders, these including local suppliers. In 2018, 54% of raw material purchases made were from suppliers based in the countries where our plants are located, thus favouring the economic development of those regions (55% in 2017).

Supplier average payment period

In 2015, Law 31/2014 of December 3, modifying Corporate Enterprises Act with regards to corporate governance, took effect. It establishes that companies unable to present condensed income statements must mention their average payment periods to suppliers; these calculations must be based on the criteria approved by the Ministry of Finance and Public Administrations, in accordance with guidelines established in the third section of the Second Final Provision of Organic Law 2/2012, dated April 27, on budget stability and sustainability.

In compliance with this requirement, the average payment period of the Viscofan Group during 2018 was 28 days (2017: 26 days), which is lower than the maximum established by the late payment legislation.

The calculation of the average payment period was conducted as indicated in the Resolution of January 29, 2016, passed by the Spanish Institute of Accounting and Audits of Accounts ("Instituto de Contabilidad y Auditoría de Cuentas" - ICAC, in Spanish), on the information that needs to be included in the accounts annual report with regard to the supplier average payment period applicable to commercial transactions.

Note 18 of the notes to the consolidated financial statements reflects information on the average payment period to suppliers during the year.