Supply Chain Management
POSCO strives to manage ESG risks related to the environment and human rights across the entire supply chain and to minimize negative impacts in order to create an eco-friendly steel ecosystem and ensure sustainability.
Supply Chain Management Council
POSCO operates the POSCO Group Supply Chain Management Council to establish a sustainable supply chain at the POSCO group level.
The council is chaired by the POSCO, Head of Purchasing and Investment Division (Senior Executive Vice President), with purchasing executives from each business unit within the group participating. They discuss strategies, issues, and risk management plans related to the supply chain, and coordinate joint responses as needed, leading the way in supply chain innovation.
- Participating Companies : POSCO, POSCO INTERNATIONAL, POSCO E&C, POSCO FUTURE M, etc
- Attendees : Executives responsible for the Purchasing Departments of each Business Site
- Agenda Items : Examination of sustainability-related issues including the supply chain environment, human rights, and carbon neutrality, along with training on supply chain risk management processes
- Meeting Frequency : Once in a every half year
- * 2023 Meeting Dates : (First Half) July 5 / (Second Half) November 16
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Group Supply Chain Management Council : Establishment of Group-level Supply Chain ESG Management Strategies and Joint Responses
- Establishment of Supply Chain Management Strategies : The council coordinates and integrates supply chain management strategies among various group companies to enhance the overall efficiency and sustainability of the supply chain.
- Supply Chain ESG Risk Management : Identifies and evaluates potential ESG risks within the supply chain and develops and implements strategies to mitigate these risks.
- Sharing of Supply Chain ESG Trends : Recognizes innovative supply chain management techniques and shares the latest trends to improve the efficiency of POSCO Group’s supply chain management.
- Setting Sustainability Goals : Set objectives to develop a sustainable supply chain that aligns with global environmental, social, and governance (ESG) standards, and formulate plans to achieve these objectives.
- Training and Competency Building : Offer educational opportunities to organization members to strengthen their ESG management skills, facilitating their contribution to building a sustainable supply chain.
- Cooperation Among Group Companies : Build partnerships to improve the sustainable competitiveness of the supply chain across group companies.
- Monitoring and Reporting Supply Chain ESG Performance : Consistently monitor the ESG performance of the supply chain and share the progress towards achieving sustainability goals.
ESG Purchasing Policy
In response to evolving external conditions, including the final approval of the European Union (EU)’s Corporate Sustainability Due Diligence Directive (CSDDD)1)
by the EU Parliament in April 2024, POSCO is enhancing its supply chain management strategy by implementing a new ESG purchasing policy
1) CSDDD: Corporate Sustainability Due Diligence Directive
Practice of Fair, Transparent, and Ethical Management
Suppliers interested in trading can apply for registration at any time, and in line with our fair purchasing policy, information on sourcing groups (purchasing item groups) is fully disclosed. Additionally, we operate an internal transaction review committee to prevent unfair internal transactions and ensure fair purchasing practices.
Strengthening Supply Chain Capabilities
To build a stable supply chain procurement system, we foster technical cooperation with small and medium-sized suppliers and operate support programs such as education and consulting.
Realization of ESG Purchasing
POSCO is actively implementing ESG purchasing by setting up a responsible minerals management system, managing ESG risks, enhancing communication with internal and external stakeholders, and creating social value through initiatives like the 1:1 matching Go Extra Mile (GEM) Fund with raw material suppliers.
Strengthening Purchasing Competitiveness
We enhance our purchasing competitiveness by adopting Total Cost of Ownership (TCO) purchasing, which takes into account comprehensive costs such as environmental impact, quality, and logistics.
Additionally, we implement purchasing strategies based on the characteristics of each item, such as selecting excellent suppliers and granting priority negotiation rights.
3R Purchasing
In our commitment to achieving carbon neutrality, POSCO defines environmentally friendly purchasing items based on the 3R (Recycle, Reduce, Reuse) perspective and initiatives by increasing the use of steel scrap, recycling by-products and waste and securing eco-friendly alternative raw materials to reduce carbon emissions.
| Category | Definition | Key Items |
|---|---|---|
| Recycle | Collection and utilization of discarded resources | Steel/STS scrap, waste shells, copper from waste cables |
| Reduce | Carbon and hazardous substance reduction items | Eco-refractories |
| Reuse | Reduction of new purchases through recycling | External repairs, recycling of used materials |
Supplier Code of Conduct
The Supplier Code of Conduct consists of a total of five areas: labor, safety and health, environment, ethics, and management systems, and includes the basic code of the Responsible Business Alliance (RBA) and items specified by POSCO.
All suppliers and partners seeking to conduct business with POSCO must agree to this code and they must first submit a ‘Compliance Agreement’ affirming their adherence to the Supplier Code of Conduct.
Supplier Code of Conduct (KOR)
Supplier Code of Conduct (ENG)
Supplier Code of Conduct Guideline (KOR)
Supply Chain ESG Management
POSCO operates a systematic ESG management process from the stage of registering new suppliers to performance evaluation and post-management according to contract fulfillment,
in order to build a sustainable supply chain and prevent ESG risks related to the environment, human rights, etc., within the supply chain.
Supplier Management Process
Ongoing Risk Management
ESG risk management, unethical practices, safety accidents, child labor, human rights violations, etc.
Supply risk management Changes in credit rating relative to registration criteria, Bidding participation performance, etc
Step 1. New Supplier Registration
POSCO manages purchased items by 'Sourcing Group.' The registration criteria for suppliers by sourcing group are always disclosed through SteelN.com,
and suppliers wishing to register must agree to the 'Supplier Code of Conduct' and 'Special Ethics Terms.' For new supplier registration applicants,
it is checked whether there are any violations in environmental regulations, serious accidents, wage arrears, tax payments, etc., and basic qualifications such as credit rating, financial capability, and supply capability are reviewed.
Afterward, the supplier's site is visited to investigate the actual conditions, and if necessary, quality stability is confirmed through quality tests.
Step 2. Performance Evaluation
POSCO conducts SRM assessments, which are supplier performance assessments, on a quarterly or annual basis for all suppliers with transaction records. The evaluation results are classified into five grades (Excellent, Good, Average, Weak, Poor), and differentiated supply chain management is implemented according to the evaluation grade.
Starting in 2023, POSCO is conducting supply chain ESG due diligence to identify and improve supply chain ESG risks, including environmental and human rights issues.
Step 3. Post-management
POSCO issues performance evaluation reports on a quarterly or annual basis and provides them to suppliers, offering feedback on the strengths and weaknesses of the suppliers based on the evaluation results and providing opportunities for improvement.
Suppliers who receive an Excellent rating are given various preferential benefits such as priority negotiation rights and exemption from deposit payments, while suppliers who receive a Poor rating are encouraged to voluntarily improve.
If the improvement is insufficient, participation in bidding is restricted for a minimum of 3 months to a maximum of 1 year.
Supply Chain ESG Audit Results
POSCO has established the 'Supply Chain ESG Due Diligence Process' in 2023, reflecting the EU’s Supply Chain Due Diligence Directive and the requirements of global ESG rating agencies, and conducts supply chain ESG due diligence annually.
Results of the 2023 Supply Chain Due Diligence Process Establishment
On-site Audit Results - Key Improvement Cases
Supply Chain Performance Management
In 2023, POSCO conducted on-site audits for 50 suppliers, achieving our 100% target. By 2030, we aim to conduct on-site audits for a cumulative total of 500 suppliers.
POSCO continuously monitors and evaluates registered suppliers to establish a robust supply chain.
Through this process, it takes punitive measures such as suspending transactions with suppliers that have ESG issues related to the environment and safety.
Additionally, suppliers with no bidding performance in the past year or no transaction performance in the past two years are being deregistered.
Results of the 2023 Supplier Performance Assessment
| Category | Metric | Unit | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|---|
| Evaluation Results | Total number of suppliers* | Count | 1,398 | 1,704 | 1,729 | 1,700 |
| Excellent | Count | 275 | 216 | 237 | 261 | |
| Poor | Count | 60 | 15 | 3 | 1 | |
| Post-management Measures | Percentage of improvement plans established for poor-rated suppliers | % | 100 | 100 | 100 | 100 |
| Percentage of improved suppliers | % | 50 | 70 | 77 | 86 |
* Based on equipment/material suppliers, including overlaps in sourcing groups