As a service company, Air France-KLM’s business activity is heavily dependent on procurement which represented €12 billion in 2018. Fuel purchasing amounts to about 37.5% of this expenditure, followed by aircraft maintenance and components, airport and navigation fees and airport handling.
We make significant contributions to regional and national economies, both through our purchases and the trickle-down impact on other sectors.
- Air France purchases in France: €2.4 billion, of which more than 614 million euros in French regions
- KLM purchases in the Netherlands : €1.1 billion
- More than 3,900 suppliers worldwide
PURSUING A RESPONSIBLE PROCUREMENT PROCESS
Optimizing, innovating and making the supply chain more sustainable are Air France-KLM priorities which also contribute to improving profitability. For a number of years, our procurement policy has aimed to incorporate Corporate Social Responsibility principles into relations with suppliers by reinforcing control over ethical, social, environmental and supply chain risks.
The procurement process takes place in the following manner:
- Questionnaires are sent to suppliers, addressing a number of themes such as safety, environmental management and HR policy.
- The suppliers either sign the Sustainable Development Charter for suppliers which is based on the principles of the UN Global Compact, or provide their own equivalent document that may be approved upon analysis. Since 2015, this Charter has been supplemented by a Supplier Code of Conduct. Every year, the Group measures the percentage of suppliers who have signed the Sustainable Development Charter. In 2018, this figure reached 67%. The Group has set a target of 70% for 2019.
- Tender documentation, in many cases, list the criteria enabling the evaluation of the environmental impact of the product or service, which are then taken into account during the evaluation of the different supplier proposals. This is an integral part of the assessment of the total cost of ownership and the life cycle analysis.
- The supplier contract includes an ethical and environmental clause based on the relevant products and services.
To supplement the existing process, Procurement works with EcoVadis, a company specialized in the evaluation of suppliers based on Corporate Social Responsibility criteria.
The risk mapping process takes into account the different sectors of procurement and the countries in which the suppliers are based. It takes place at the beginning of the procurement process:
- Buyers must systematically verify the positioning of each supplier in the risk map.
- There are six levels of risk. In the event of a “high” or “severe level” of risk, suppliers are contacted by EcoVadis or an equivalent organization to address the following four themes: environment, social, ethics and sustainable procurement.
- In other cases, suppliers are encouraged to have themselves evaluated. They can then share their scores with other companies, which may prove to be a competitive advantage in terms of winning bids and contracts.
- Following the evaluation, suppliers having failed to reach an acceptable level will need to put in place corrective measures to meet the Procurement requirements. At Air France, these cases are discussed during the quarterly Steering Committee meetings, overseen by the Procurement and CSR departments.
The number of companies whose CSR performance was evaluated by EcoVadis increased by 9% in 2018, from 325 to 355. Furthermore, as part of a continuous improvement process, in 2019, the company’s goal is to evaluate 50 additional suppliers. In 2018, 55 “high risk” suppliers flagged by the risk mapping process were evaluated.
EMPOWERING THE BUYERS
Air France-KLM buyers are largely committed to respecting the Group’s social responsibility. On their first day in office, they sign a Code of Ethics outlining the ethical rules to be followed when dealing with suppliers. In light of the Anti-Bribery legislation, a Code of Ethics reminder has been sent around to the parties involved. These documents, the Procurement Sustainable Development Charter and the Code of Ethics are available on the Procurement website (www.af-klm.com/procurement), which initiates an ongoing dialogue with our suppliers.
An internal process has been established to develop the buyer’s skills through training, seminars, web information on best environmental practices, and an anti-corruption e-learning module. All new procurement staff receive training on the department’s CSR commitments, the duty of vigilance and the anti-bribery processes, and on how to use a sustainability scoring tool (EcoVadis). Within Procurement, a constant access to information relating to CSR (news, legislation, events, conferences, webinars, etc.) and the sharing of experience is encouraged. The 2018 Procurement Action Plan, communicated to the entire team, sets out the CSR undertakings as a strategic lever.
MOBILIZING AND INNOVATING WITH SUPPLIERS
The Supplier Relations Management Program (SRM) is aimed at building long-term relationships between Air France-KLM and its strategic suppliers. The program puts issues like Corporate Social Responsibility central to discussions, and seeks to move forward together on these points.
Our suppliers are bona fide partners in mutually-beneficial growth. We support their quest for innovative solutions and analysis of the environmental impact of products. During the drafting of a product specification, the prescriber and buyer work together to identify the environmental and social characteristics, thereby encouraging the supplier not only to develop the environmental performance of its products but also to engage in a wider commitment to sustainability.
Air France launched a new ambitious 2018 Purchase Plan aimed at arriving to more innovative solutions with its suppliers, and especially with small and medium size businesses and startups. Air France entrusts a significant part of its purchases to SMEs, which amounts to 20% of its purchases in France (excluding fees and fuel).
To promote and protect this eco system, Air France is a member of the SME Pact. Every year, an action plan is developed within the context of its relations with SMEs (Mid-caps, startups and VSBs). The actions initiated in 2017 and pursued in 2018 allowed Air France to attain the Excellent rating assigned by the partner committee of the SME Pact. These actions included a reduction of the settlement period, but also the advancement and introduction of innovations, such as the “start-up kit” which enables them to work in a more agile way with startups, and the realization of PoCs (“Proof of Concept” trials).
The KLM fuel purchasing department is very active in the acquisition of Sustainable Aviation Fuel which ensures the daily operation of flights from Los Angeles to Amsterdam which are partly fueled with bio kerosene.
MEASURES IN FAVOR OF RESPONSIBLE CATERING
Serving close to 85 million meals and snacks every year, Air France-KLM implements measures to promote responsible catering.
For its catering procurement, in partnership with its supplier Servair, Air France prioritizes local, seasonal products that are also sustainable, and particularly products sourced from organic agriculture and of certifiable, protected origin (AOP/AOC). For example, children’s meal trays include a number of organic products.
Whenever feasible, KLM chooses products and partners that share the sustainable mission, in order to contribute to the overall objective of attaining the Sustainable Development Goals. The catering policy focuses on environmental preservation in production areas and takes human rights, working conditions and animal welfare into account. It is applied to all flights departing from Amsterdam Schiphol Airport and, where possible, includes responsible products in catering from destinations. For KLM, it is important that the ingredients in meals, such as fish, chocolate, palm oil and soy, are sourced responsibly. To this end, KLM is a member of the Responsible Soy (RTRS) and Sustainable Palm Oil (RSPO) Round Tables and offers certified products on board its aircraft such as MSC-certified fish, “better life” egg and chicken, and UTZ certified coffee.
We donate a number of products from in-flight catering not distributed to passengers to charitable associations (see Waste and Circular Economy).