Interview with Ramón Zumárraga

Iberdrola works with more than 20,000 suppliers around the world, what role do they play in the company's activity?

Iberdrola is present in 26 countries, with its main markets being Europe (Spain, United Kingdom, Portugal, France, Germany, Italy and Greece), the United States, Brazil, Mexico and Australia. We are the largest electricity company in Europe and the second largest in the world. This would not be possible without this large network of suppliers, mostly local.

The role of our suppliers is fundamental, as they are Iberdrola's "hands" in many aspects linked to the development of our investments and our operation. We also collaborate with our suppliers to jointly innovate and improve services to our customers.

In addition, there is another equally important figure: we create 400,000 jobs, directly and indirectly, around the world. In other words, we provide visibility and certainty to a global supply chain. Iberdrola generates a direct, indirect and induced pull effect that will exceed 500,000 million in 2025.

You have been pioneers in obtaining the AENOR certificate for Sustainable Purchasing. How was the process to obtain this certification?

It has been an intense but relatively short process. When we decided to become certified, we had already done part of the homework. We had been ISO 9001 certified for years and we had been proactive in the sustainability traction with our suppliers. Already in 2006, we mediated Corporate Social Responsibility and we had targets to improve this CSR in the variable remuneration of the purchasing team.

In 2018 we generated a new and demanding ESG score. The following year, 2019, we implemented new digital supplier ESG and risk measurement tools fully integrated into decision making, and in 2020 a supplier ESG target was included in the long-term remuneration of the management team. This was an important endorsement of our project, but also a top requirement.

With this preliminary work, the certification process went fairly quickly, although we had the opportunity to have AENOR point out potential additional improvements that we are assessing.

Iberdrola operates in different markets with different regulations, how are purchases managed in other countries, do you have a centralised or decentralised management model?

Our model is centralised but mixed. We leverage our group-wide volume to leverage global strategic equipment purchases centrally, and we leverage local teams in different geographies to maintain very close contact with our extensive network of local suppliers.
 
This requires a very high level of coordination, which we achieve through unique procedures and systems, including ISO Sustainable Procurement, and also through meetings between colleagues from different countries to ensure best practices are applied and the market situation is shared. Every week we have a coordination committee of group purchasing managers to review the most relevant purchases and to assess the market situation, raw materials, planning, ESG...

What are the main pillars of your supplier evaluation model?

The basic pillars of our model are: ethics and transparency, sustainability, risk management of our suppliers and technical and quality requirements. These pillars allow us to have the best suppliers, and also make it necessary for our suppliers to improve and align themselves in aspects such as sustainability:

1. We require all suppliers to accept our code of ethics which guarantees the establishment of measures against fraud, corruption, discrimination... and guarantees the human and labour rights of workers.
2. We evaluate the most relevant suppliers in terms of sustainability, taking into account 43 factors within the ESG score, including human rights, climate change risks, circular economy or the contribution to the United Nations Sustainable Development Goals (SDGs).
3. Prior to any purchasing decision and during the execution of contracts we measure supplier risks, including credit, cyber, occupational health and safety, etc.
4. We require our suppliers to comply with the technical and quality aspects associated with each of the equipment, materials, works and services we contract, monitoring these aspects.

Digitalisation is a key factor at Iberdrola; how has it helped you manage the supplier and procurement ecosystem?

Without digitalisation, managing so many suppliers across so many geographies and with such a wide reach would not be possible. We are launching new platforms in 2019 for fully digital management of purchasing and supplier management processes. In addition, we have developed robotised processes (RPAs) for more administrative tasks and to establish controls and automation that improve transparency and consistency and make it easier for our buyers to focus on more value-added aspects.

Among others, we have robotised the issuance of sustainability improvement plans for those suppliers that do not yet meet our standards. In addition, we have developed and automated dynamic control towers in real time that allow management at all levels of the different purchasing metrics.

Iberdrola has incorporated the Sustainable Development Goals (SDGs) of the United Nations 2030 Agenda into its strategy. Does AENOR certification make it easier for you to continue advancing along this path?

The AENOR certification is recognition of a transparent, efficient and committed procurement strategy and model with society, the environment and the company itself. It confirms that our vision of leadership of the SDGs, our commitment to energy transition, our commitment to the environment and society was the path to follow.

It reaffirms our track record of more than 20 years and reaffirms our determination to set more demanding targets in this area. In fact, this year we have once again included the objective of improving supplier sustainability among the indicators of the strategic bonus for the long-term remuneration of senior management, with a higher level of demand.

In this sense, do you see certification as a tool to help communicate your commitment to sustainability to customers and society?

The fact that it is an entity of recognised prestige such as AENOR that certifies our purchases as "sustainable" gives it added value as we are in an environment in which society has a certain suspicion of greenwashing in many companies' declarations regarding their products and processes. Everything is declared as green, but it is not always so.

I am convinced that society and our customers recognise this certification as a guarantee that our strategy to promote sustainability in the supply chain is solid and real.

What does an organisation like Iberdrola expect from a certification body?

In addition to verifying that we comply with the requirements of the standard to be certified, it should also be a source of value and a catalyst for improvement. We hope that, based on the different models that the certifying company has been able to validate in other companies and sectors, it will provide us with new perspectives that will allow us to continue on the path of continuous improvement.
 
In this regard, thanks to the professionalism and collaborative spirit of the AENOR certifying team, we had the opportunity to discuss in depth some aspects of our process that could be subject to improvement for the future. We are aware that in order to continue to be leaders in sustainability in purchasing, we must set ourselves challenges and achieve improvements. This certification, which is innovative and in which we are pioneers, encourages us to continue with the continuous improvement of Iberdrola's Procurement processes and strategy.

This interview has been published in AENOR's 'La Revista de la Evaluación de la Conformidad' ('The Journal of Conformity Assessment'). It is a knowledge management company that helps to correct competitiveness gaps through conformity assessment (certification, verification, validation, inspection and testing), training and information services. 

As a global organisation, AENOR's activity in the international arena is growing year after year. This is materialised in different fields: certification, training, inspection services, validation and verification. Through one or more of these activities, AENOR is currently present in 90 countries in America, Europe, Asia and Africa.