Sustainability website / Economic contribution / Procurement

Policy and approach

Policy and approach / Performance and goals

We engage with our suppliers, contractors and business partners to assess HSEC performance, training and practices in line with Xstrata’s Sustainable Development Standard 11: Suppliers, Contractors and Business Partners. Our Business Principles state our commitment to honour all contracts with suppliers and customers and to pay commercial rates for goods and services. Xstrata’s commodity businesses have a policy or common practices in place to give preference to locally-based suppliers, defined as suppliers from the operation’s local communities or area of influence. Factors that influence supplier selection include technical ability, past experience, safety, environmental and social performance, training, availability of local expertise and employment, availability of resources, reliability and reputation, innovation, method of work, cost, quality of product and service, use of local, indigenous or Historically Disadvantaged South African (HDSA)-owned or controlled suppliers.

Xstrata does not have a central procurement function, allowing our commodity businesses, divisions or individual operations to source products and services at the local level and enabling greater flexibility in purchasing based on specific commercial requirements. Where it makes good business sense, our commodity businesses co-operate to purchase materials and services jointly, for example to procure tyres and other equipment in short supply in Australia.

In South Africa, Xstrata’s businesses have adopted procurement policies which give preferential status to HDSA-owned, controlled and empowered companies for all capital goods, consumables and services. Where appropriate, Xstrata promotes the number and capability of HDSA suppliers by providing various types of support, including management training, transfer of technology and other forms of expertise. Suppliers continue to be assessed for health, safety, environmental and community performance, in line with Xstrata’s Sustainable Development Policy and Standards and for quality and competitive pricing. Where no appropriate HDSA supplier is available, the policies include the commitment for Xstrata to actively encourage non-HDSA suppliers to partner with HDSA-owned or controlled companies to supply capital goods, consumables and services.

Performance and goals

Policy and approach / Performance and goals

In 2007, Xstrata’s businesses increased the proportion of procurement spend with locally-based suppliers in the majority of regions. The table above shows the proportion of procurement expenditure calculated at a site or divisional level and aggregated at a regional level by commodity business.

In South Africa, Xstrata Alloys and Xstrata Coal set targets to increase the proportion of procurement spending to HDSA-suppliers to 50% of discretionary expenditure. In 2007, expenditure to HDSA suppliers increased to 50.3% and 46% respectively. Xstrata Coal is aiming to increase this proportion to 50% in 2008. Xstrata Alloys is targeting an increase to 55% of discretionary expenditure in 2008, an increase in the number of suppliers to facilitate greater spending with a larger number of black economic empowerment (BEE) compliant small and medium-sized companies, and a longer-term target of sourcing 80% of procurement spend from HDSA-suppliers by 2012.

Xstrata Nickel’s Koniambo project in New Caledonia assisted community representatives in the establishment of a local company in 2007 to broker services from small, local contractors and construction equipment owners-operators. The longer-term target is for this company itself to become self-sustaining in addition to assisting the project maximise local procurement and employment.