Suppliers
NOVATEK is committed to building strategic, long-term and mutually beneficial relations with its counterparties.
To build a sustainable supply chain, the Company approved the Supplier Code of Conduct, defining the Company’s expectations and recommendations regarding supplier compliance with the principles of the UN Global Compact, the International Labor Organization, the Declaration on Fundamental Principles and Rights at Work and applicable environmental, occupational health and industrial safety laws. Before signing a contract, the Company informs its counterparties about this Code and expects them to comply with it. Our contracts also include the OHS requirements for any supplier to comply with.
Key supplier identification and supplier assessment for risk exposure
A decision to invite suppliers to participate in procurement procedures is taken with due regard to their rating scores. Rating scores are calculated through an assessment of the supplier’s performance under contracts that are already signed with the Company against defined and established criteria, such as the quality and term of developing detailed engineering design documentation, comments on quality as appraised at incoming inspections and on operation, as well as the general level of engagement with the supplier. Based on the appraisal results, a reliability level defined by the rating scale is assigned, ranging from A (high reliability level) to D (critical reliability level). The ESG criteria are taken into account in the rating structure indirectly: the Company, with all else being equal, gives priority to a supplier who has no or minimal negative environmental and social impacts.
100% OF SUPPLIERS of the core process equipment passed the audit for compliance with environmental and social criteria as part of their qualification process in 2024.
Supplier evaluation system and providing equal opportunities in procurement
The Company runs a qualification process to evaluate its counterparties before adding them to its pool of accredited suppliers. Along with evaluating potential suppliers, the Company conducts scheduled audits of accredited suppliers, namely annual desk audits and on-site accreditation audits once every three years. If a potential or accredited supplier fails to meet NOVATEK’s requirements, the Company provides them with feedback. The counterparty can use it to close the gap within a timeframe agreed upon with the Company. This approach gives organizations excluded from the tender an opportunity to succeed in future NOVATEK tenders.
The desk audit of potential suppliers was expanded to include a supplier questionnaire to understand what sustainability practices they have in place (including management of relevant risks). The questionnaire responses are used to assess the contribution of future suppliers to the Company’s sustainability strategy and, along with other factors, inform go/no-go decisions on business cooperation.
Key criteria for ESG assessment of suppliers as part of the accreditation and questionnaire procedures
Support for Russian manufacturers
The Company continues its consistent steps to engage major Russian enterprises in a range of R&D activities to reduce dependence on equipment imports. Contracts were signed with Russian manufacturers to perform R&D, including development of design documentation for core equipment for large-scale LNG projects. During the reporting period, the Company placed orders for Russian-manufactured LNG pumps, heat exchangers, compressors, and expanders. Other focus areas were marketing research and accreditation of new suppliers in friendly and neutral countries.
NOVATEK has expanded its import substitution policy regarding critical technologies and equipment. Under the new engagement format, a pool of technology partners was created for technical and methodological partnerships to design and manufacture core process equipment.
