Examples of Supplier Engagement in 2022
Energy Efficiency and CO2 Reduction
In 2022 NSG established a new Procurement mission fully aligned with the Group’s mission “Changing our Surroundings, Improving our World”. The Procurement mission “Leveraging our Supply Chains, Improving our World” recognises the vital contribution that our supply partners can make to the planet and society and also to NSG’s own goals in the area of Sustainability. This section will set out NSG’s ambitions in this area and provide some examples of the initiatives we are working on in partnership with our suppliers.
The NSG Group has been implementing energy efficiency programs through mutual global cooperation across the Group for more than a decade. Procurement function, together with other central resources from Research and Development, Manufacturing Excellence, EH&S and local management teams are focused on reducing our energy consumption and costs across the entire Group.
In 2021, we launched a new project focused on Scope 3 emissions and engaged with key suppliers to better understand supply chain CO2 and to identify and share best practice with partners. This has resulted in improved accuracy of data collection and an increase in Scope 3 emissions reported in 2021 and 2020.
Scope 3 emissions include other CO2 emissions in NSG's value chain, for example, raw materials, transportation, services, business travel, employee commuting, emissions by our Joint Venture investments and certain emissions by our customers in the processing of our glass.
The details of Scope 3 emissions by category in 2022 as shown in the chart below.
To reduce emissions in the supply chain, the NSG Group has undertaken a number of initiatives. For example, for raw materials, which account for around 17 of the Group's total CO2 emissions, we have worked with key raw material suppliers to identify low carbon raw materials, which have been successfully tested on a large scale on our South American float lines resulting in reduced CO2 emissions as well as reduced energy consumption. We are also continuing to reduce carbon emissions in our supply chain by encouraging key raw material suppliers to shift to alternative fuels and promoting modal shifts in transport.
Energy
Energy costs, especially in Europe, were higher in 2022 than previous years. The long-standing Energy and Carbon Management programme has continued with several transformative energy and water projects identified and implemented. The implemented projects, especially those concerning energy efficiency, have helped to partially reduce the impact of the record high market prices.
The proportion of the Group’s electricity coming from renewable sources grew from 26% in 2021 to 32% in 2022. The commitment to increase this to 50% by 2024 remains. The Power Purchase Agreement (PPA) which began in January 2022 for electricity demand in Poland made a major contribution towards this improvement. The Poland PPA helped to reduce carbon emissions by 57,000 tonnes in 2022. Further offsite PPA’s were implemented in Argentina to support the existing operations and the business expansion as part of a strategy to manage cost and carbon emissions simultaneously.
Renewable electricity is planned to support Scope 1 emission reductions through the use of electric boost systems in future float furnaces and rebuilds. By combining these electricity systems with renewable electricity it will be possible to significantly further reduce carbon emissions.
An onsite solar project began operation in Rossford, USA in 2022 and construction was underway for projects in Aken (Germany), Maizuru (Japan), Sungai Buloh (Malaysia) and Rossford Phase 2 (USA) with these projects expected to be commissioned during 2023 and 2024. Carbon emissions will be reduced by producing renewable electricity onsite which is then directly consumed by NSG Group’s operations. These projects will utilise solar modules from NSG Group's customer First Solar therefore demonstrating products from within NSG Group.
Following on from the world first trials using hydrogen as a furnace fuel in the UK in August 2021, a similar trial was completed in February 2022 using biofuel. Here a liquid biofuel was supplied from Argent Energy, who are located close to the Greengate site in the UK, for a multi-day 100% furnace fuel conversion. The trial was supported by UK Government’s Industrial Fuel Switching programme and helped to prove that this type of fuel is another option for future long-term decarbonisation.
To build on the successes in 2021 with hydrogen firing trials, a series of agreements have been signed with partners to identify and develop projects. One example of this would be the Memorandum of Understanding signed with Vertex Hydrogen Limited in UK in late 2022. This project will see the delivery of low-carbon hydrogen to the Greengate site in St Helens later in the decade.
Synergies with Strategic Raw Material Suppliers
The manufacture and processing of glass making raw materials for use in NSG manufacturing lines makes up around 35% of scope 3 emissions or 15% of total NSG Group CO2 emissions. NSG is working closely with key supply partners to understand in detail the current primary emission factors of the raw materials to ensure the most accurate result of Scope 3 impact, including calculation method and third party verification. In addition, NSG will evaluate supplier roadmaps to 2030 and 2050 carbon reduction targets to ensure alignment with NSG targets. This work will inform the NSG sourcing strategy and drive the transition to a fully sustainable supply chain that can meet the published Science Based Targets for 2030 and beyond.
Low carbon raw materials
For an average float line approximately 17% of CO2 emissions result from the decomposition of carbonate raw materials. Therefore a focus on low carbon alternatives is a priority for NSG and is led by a dedicated Decarbonization Technology Team in R&D. They work directly with Procurement to identify viable low carbon batch materials that can be used to minimise CO2 emissions and reduce the energy required for melting. In early 2022 NSG completed a successful glass manufacturing trial using calcined dolomite. Handling and processing challenges were overcome to ensure a safe and controlled delivery of the material to the furnace and multiple KPI’s were monitored to evaluate the impact. Results demonstrated that not only were emissions lower but the energy required to melt the batch also reduced. A second larger trial is now planned for second half of 2023 to further consolidate the knowledge gained and optimize the process.
Other more speculative low carbon materials will also be trialed in 2023 to prove their technical suitability in the glassmaking process and expand the suite of potential solutions available to meet NSG emission targets.
NSG is taking steps to increase the use of recycled glass (cullet) in the production process. This includes not just the cullet generated during glass manufacturing and tertiary processing, but also returns from Customers and end users to maximise the recycled content of the batch. This in turn reduces the amount of carbonate raw materials necessary, thus reducing CO2 emissions. Procurement’s Supplier Development team are supporting the evaluation of new sources of supply to ensure compliance with minimum quality control standards and cleanliness requirements. We are also partnering with dedicated recycling companies who can clean and remove contamination of cullet sourced from other locations to make a product suitable for NSG, for example glass returns from the Automotive industry.
Reduced carbon in the Supply Chain
NSG continues to work closely with key suppliers to reduce carbon in their supply chains. The impact of transporting raw materials to NSG sites is considered in the supply footprint and partners are increasingly considering alternative fuels like electric, hydrogen or biofuel to run their site based vehicles and transport modes. Moving to renewable electricity is coming more into focus with the availability of solar and wind solutions, particularly where suppliers have large areas of reclaimed land or lakes to host the technology. Biofuel and wood chip is being progresses to transition energy sources to lower carbon and in some cases even the production process is being redesigned to minimize emissions. NSG is also investigating options for onsite hydrogen generation with carbon capture technology to reduce the CO2 impact from bought in gases. Through these strategic partnerships, NSG expect continued progress towards minimizing CO2 in their supply chain.
Transport & Warehousing
Transport and Warehousing activities account for 12% of the NSG Group's total procurement's spend across its global operations (3.5% warehousing : 8.5% transportation).
Regional breakdown as follows: European road transport accounts for 45%, SEA & India 3%, Japan 16%, and the Americas 36%.
Supplier engagement on CO2 reporting currently equates to ~80% coverage in Europe (primarily through bulk Float Glass partners known as 'Innenlader's', which is a truck trailer for Jumbo Sheets of Float Glass, and also through utilization of reporting within our transport management software Transporeon for curtain sided FTL (Full truckload) & LTL (Less than truckload) shipments), 37% coverage in Japan and 39% in North America. From these engagements we now collate detailed distance travelled data.
Emphasis in 2022 focused on continuous incremental efficiency gains through; reducing empty driven miles, modal shift from road to rail, ship or barge and increasing the relative payload of product carried. All of these initiatives will continue to further reduce our environmental impact.
In Europe, through selection of a consolidated strategic haulier base, enhanced reporting and visibility has led to efficiency gains through better haulier, lane management and flow triangulation, which is a method to calculate optimized transport routes, improvements in our network. It has also resulted in improvement of Track & Trace oversight. Through our Control Tower, which is a management of real-time transport data to improve decision making, we optimize return load opportunities with other clients, which means return load available from outbound destination resulting in lower overall transport cost for outbound and inbound loads. We have also developed governance and checks with the control tower across multiple NSG Business Units, to ensure we have standardized trailer types with direct and subcontracted hauliers.
Our North American automotive business has a return ratio approx 5:1. We have worked with our carriers to identify return shipments in order to reduce one-way shipments with our product. Over the past 15 years, our 4PL (4th party logistics) provider, a logistics partner, had identified their own backhauls for those routes as well. North America will be implementing SAP S4 HANA in 2024, including new technology that will allow our automotive business direct communication with our transportation suppliers via EDI (Electronic Data interchange) tendering.
Payload for bulk Float Glass road carriage by reducing TARE weight of the tractor and trailer units on larger proportions of the dedicated fleets has continued to improve – a recent investment has been made by the Innenlader provider in the UK and will be made with the partner in Italy.
In Europe we have been working to increase intermodal solutions for freight and raw materials, eg. where possible moving from truck to rail reducing GHG emissions up to 75%. We have increased and continue to expand on use of intermodal movements between our automotive operations, San Salvo (IT) to Poland and San Salvo (IT) to Witten (DE). Infrastructure issues on the rail network which had limited progress have now eased and so more focus is being placed on this in 2023.
Our Innenlader provider in Germany also operates an external warehouse on our behalf and now reports the facility achieves CO2 Neutrality with electrification throughout.
A project is underway to explore the use of HVO (Hydrotreated Vegetable oil) as opposed to Diesel for Innenladers in the UK (ex St Helens).
In North America, routes are continuously reviewed for qualification of intermodal conversions.
Our North American Automotive Glass Replacement Division routes their shipments from Distribution Center to Service Centre for the most optimal routes and then publishes those to the respective 4PL providers (4th party logistics provider) to competitive bid against. A bespoke system ensures all service centre returns are managed properly with efficient backhauls and optimization of routes. Returns from our Florida/Georgia service centers to Mexicali also utilize intermodal.
Sustainable Supply Chains
In March 2022 NSG’s Sustainability Committee approved Procurement’s proposal to proceed with a Sustainable Supply Chain (SSC) project. NSG Group established a Sustainability Policy in 2009 and this SSC project is a major step forward in preparing to meet the ever increasing ESG related responsibilities placed on Procurement and our suppliers. Working in line with ISO20400 with our partner ‘Action Sustainability’, Procurement together with a cross functional team, including senior global Business Unit representatives, has established 8 priority areas of action centred around the protection of the Environment and Labour & Human Rights. Key customers and suppliers were also engaged to ensure we develop our strategy and supplier partnerships to mitigate future materiality risks.
95% of our key suppliers have signed our Code of Conduct and this will remain our minimum entry point for doing business but in FY24 we have extended our reach by publishing a new Supply Chain Charter setting out our commitments and long-term aspirations for addressing the eight priority areas and how we can work with our suppliers to achieve them. Suppliers identified as preferred or strategic, and also those considered to operate in high or medium risk sectors, will be expected to sign up to the Supply Chain Charter and work with us on our journey to achieve key targets such as 30% GHG reduction in support of our 2030 SBTi commitment.
To successfully achieve our long term aspirations we will make fundamental changes to our Category Management strategies, Policies and Procedures and Sourcing Strategies which will be underpinned by new digital tools and processes as well as adaptation of our Procurement organization.