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Topics of Importance Sustainable Supply Chain & Procurement

Management Approach

Enbridge’s Supply Chain

We work with hundreds of suppliers across North America, many of them major companies. Our suppliers cover a wide range of disciplines, including manufacturing, construction, engineering, distribution and consulting, but the majority of our annual spend is in the areas of pipe manufacturing, construction, maintaining the fitness of our systems and leak detection.

In 2015, our Supply Chain Management (SCM) teams managed the acquisition of approximately $10 billion in goods and services with approximately 20,000 suppliers serving our liquids pipelines, gas distribution, gas transportation and renewable energy businesses in Canada, the U.S. and internationally.

The following diagram illustrates our supply chain:

Supply Chain Infographic

SCM Management Structure

Our Gas Distribution (GD), Gas Pipelines, Processing & Energy Services (GPP&ES), and Corporate business segments each have groups that oversee their respective SCM functions. Our Liquids Pipelines business segment (LP) and Major Projects business unit (MP) have a combined group that oversees their SCM function.

Each group governs all aspects of SCM within its business segment—from tactical procurement and materials management, to strategic sourcing and contract management—in order to create maximum value for Enbridge and our stakeholders and to help us deliver the energy that people need.

The LP/MP SCM group also has a new dedicated SCM Sustainability team within it, with a primary function of further integrating environmental, social and governance (ESG) considerations and principles into supply chain decision-making within LP/MP, thereby enhancing our CSR and sustainability performance. This team is focused on ensuring meaningful local and Indigenous economic participation in our operations and projects.

Senior leaders from each of our SCM groups comprise an Enterprise Supply Chain Council, which ensures that our SCM goals and governing policies, processes and practices are as consistent and aligned as possible throughout the company. The Council also addresses emerging SCM issues and challenges and facilitates the pursuit of continuous SCM improvements.

SCM Governance

Enbridge’s Values

All of our business segments incorporate our core values—Safety, Integrity and Respect—into their SCM policies, procedures and practices. These values represent a constant guide by which we make our decisions as a company, and as individual employees, every day.

Policies

We incorporate Enbridge’s Statement on Business Conduct into our SCM policies, procedures and practices throughout the company.

An enterprise-wide SCM Policy also governs our acquisition activities for all goods and services. It mandates that SCM activities are to be conducted in an ethical manner that delivers the best overall value for Enbridge while ensuring adherence to our core values. It is also states that the SCM function is accountable for managing the risks associated with the acquisition of third-party materials and services.

In addition, our LP/MP and GD SCM groups are governed by a comprehensive SCM Protocol that sets out guidelines and standards for establishing the effective SCM controls that are essential to mitigating Enbridge’s risks and conducting activities in a manner that meets acceptable industry standards. The protocol requires that all SCM activities must adhere to Enbridge’s Statement on Business Conduct and Compliance Policy. Our SCM groups track and measure compliance to the Protocol through annual assessments.

Our SCM groups also follow several other established company policies and guidelines that define the way we relate with our stakeholders and the communities in which we operate, including:

Compliance with our policies is a condition of both conducting business with and on behalf of Enbridge.

Mitigating Supply Chain Risks

We identify supply chain risks as part of our risk management process, which involves the participation of a cross-functional team of experts.

To manage sustainability risks amongst our suppliers, we address multiple business factors that relate to sustainability, including:

  • environmental standards for suppliers’ processes, products or services,
  • fundamental human rights (e.g. freedom of association, promoting an inclusive and respectful workplace),
  • occupational health and safety,
  • business ethics (e.g. corruption, anti-competitive practices),
  • quality of management systems,
  • environmental management system certified to ISO 14001, the Eco-Management and Audit Scheme (EMAS) or equivalent management system with external independent audits, and
  • guidance regarding sub-contracting (i.e. requiring to replicate own standards down the supply chain).

Integrating ESG Factors to Improve SCM’s Sustainability Performance

Our goal is to acquire goods and services in an ethical manner. We integrate environmental, social and governance factors into our supplier selection and relationship management through a variety of means, including:

  • a supplier selection process that incorporates a range of sustainability metrics and that includes a supplier pre-qualification process that weighs heavily on safety,
  • use of a restricted-party screening tool that provides visibility into companies that we want to contract with and ensures no business is conducted with any company that is blacklisted as a result of a breach in conduct or international policy,
  • a robust and growing focus on Supplier Relationship Management via supplier forums and joint Enbridge-supplier steering committees,
  • supplier performance scorecards that include a range of sustainability metrics relevant to each specific business segment, such as safety, environment, quality and engagement of local and Aboriginal businesses,
  • supplier audits,
  • pipeline construction safety roundtables, and
  • collaborative initiatives with our own in-house CSR and sustainability specialists and with suppliers, NGOs and other companies on supply chain issues.

Pre-qualification

Our business segments use ISNetworld (ISN), a global resource for connecting corporations with safe, reliable contractors and suppliers, as a safety pre-qualification standard for service-providing suppliers.

In addition, we have formed a Pre-Qualification Committee that consists of leaders representing SCM, LP and MP Engineering, Operations, Control Systems and MP Quality. This committee provides an important forum for obtaining input into supplier pre-qualification and disqualification processes, and for sharing emerging issues. It also helps ensure that our standards regarding safety, quality, human rights and environmental practices are upheld throughout our supply chain.

Restricted-Party Screening

We utilize a world-leading organization that specializes in global trade management solutions to prescreen and monitor the suppliers with whom we are either doing or intend to do business to ensure that we do not inadvertently contract with suppliers (parent companies and/or their subsidiaries/affiliates) who have been barred due to any breaches in relevant standards and compliance regulations, globally.

This process involves a range of cross-functional departments—SCM, Law, Internal Audit, Compliance, Risk, Quality and Safety—and has proved invaluable, enabling us to disqualify some suppliers and raise awareness about supplier restrictions throughout Enbridge.

Supplier Performance Management

Our SCM groups hold regular formal meetings with key suppliers to ensure that existing agreements and supplier performance are reviewed, tracked and updated.

We also have a wide range of programs and initiatives in place to help ensure our suppliers deliver top performance, including:

Supplier Relationship Management – MP has created formal governance structures with key suppliers under a Supplier Relationship Management (SRM) program so that their performance can be tracked and improved, and so that MP can better manage its supplier relationships. By 2015, approximately two-thirds of MP’s spend was under active SRM.

LP has also established an SRM program that focuses on strategic suppliers whose role is critical to our success. Through their SRM program, LP engages with internal and external stakeholders regarding strategic categories of goods and services and their suppliers. Also, through ongoing communication, LP has analyzed its suppliers’ concerns and developed ways to collaboratively improve relationships, safety, community awareness and public engagement. LP’s communication efforts include providing suppliers opportunities to engage with our executive management. By 2015, approximately one-quarter of LP’s spend was under active SRM.

GPP&ES has a long-standing Strategic Alliance program that is designed to reduce costs and mitigate financial, operational, and legal risks with key suppliers. GPP&ES implements the program through a variety of means, including: communicating expectations, opportunities and issues; measuring service; monitoring safety; and annual review meetings. GPP&ES currently has six Strategic Alliance partners that are focused on compression services, compressor valves, and lubricants and chemicals.

GD maintains strong relationships with its supplier community by maintaining open lines of communication at all levels of the organization with respect to both ongoing business relationships and CSR initiatives. Independent of the formal process for supplier scorecards, qualifications and audits, this communication includes GD executives engaging with the supplier community regarding United Way, the Enbridge Ride to Conquer Cancer, and multiple community-based fundraising initiatives, including hospitals and shelters.

Scorecards – Some of our supplier contracts incorporate scorecards focused on financial and non-financial criteria. For example, LP/MP employ Master Service Agreements (MSAs) that incorporate scorecards that track safety, quality, corporate responsibility, Aboriginal engagement, financial, environmental and customer service performance metrics.

Similarly, GD uses Extended Alliance contracts to govern its relationships with its three largest suppliers, a customer services firm and two large pipeline construction companies. These contracts include scorecards for safety, quality, customer care and delivery-related objectives. GD gives each objective a weighting and a target score and then scores each supplier against the objectives. The supplier’s actual score becomes a variable that determines the rate at which GD pays the supplier. In areas where the supplier does not meet objectives, GD meets with the supplier to discuss appropriate corrective actions. Suppliers with Extended Alliance contracts must also meet regularly with GD, undergo various types of audits (quality assurance audits, for example) and meet the requirements of GD’s stringent quality assurance program.

Audits – We have a Vendor Audit Program whose objectives are to: identify supplier overbillings; detect non-compliance in areas pertaining to health and safety, track CSR and sustainability performance; recognize potential process improvements for Enbridge; and strengthen supplier awareness of Enbridge’s compliance expectations. Since this program’s inception in 2013 through to the end of 2015, LP/MP had completed—or was in the process of completing—audits of 23 suppliers that accounted for a total spend-under-audit of $2.9 billion. As part of this program, LP/MP is implementing improvement plans to remediate the gaps and risks identified to date.

Through ISNetworld, GPP&ES is a member of the Facility Audit Network (FAN) through which five pipeline companies agree to perform standardized audits of contractors and share the results with the other members.

Suppliers to GD who have Extended Alliance contracts must also undergo various types of audits—such as quality assurance (QA) audits, for example—and meet the requirements of GD’s stringent QA program, which includes qualified QA auditors performing independent audits on various areas of contractors’ work activities (including construction, maintenance and utility locates). Checklists are utilized to identify areas of non-compliance with policy, procedures and applicable codes. “Critical” or “high” non-conformance automatically triggers an “Area of Focus” for GD’s Quality Control team, which investigates root causes and develops corrective action in collaboration with all interested parties.

GD also audits its large materials suppliers. These audits cover the whole manufacturing process—from raw material receipt to the final finished product—and encompass all functions that impact whether the manufactured products will meet GD’s specifications and requirements. These functions include health, safety, the environment, personnel training and facilities. The GD audit team reviews the manufacturers’ safety procedures and their environment, health and safety programs to ensure safety is the top priority. Audit criteria include: where the manufacturers acquire their raw materials; how they store raw materials; environmental considerations, such as how they handle their waste products and fresh water supply; recycling programs; health and safety programs for employees; personnel training; emergency procedures; and workplace safety (hazards, ergonomics, noise, air quality).

Contractor Safety Incentive Program – Because safety is one of our core values, we are responsible for ensuring that it is extended to our suppliers of services and materials. Accordingly, MP has implemented a Contractor Safety Incentive Program for its major construction contractors, and our other business segments are following suit. The program includes a range of initiatives—from contractual safety mechanisms for large contractors that align their performance with our safety expectations via incentives and penalties; to incentives for incident-free performance on work sites (which could involve teams earning financial credits they could use for scholarships that they would award to eligible students).

Safety Roundtables – To ensure that our safety value is extended to our suppliers, we involve them in industry-organized safety roundtables.

The principal safety roundtable in which we participate is the Pipeline Construction Safety Roundtable (PCSR), which helps to raise the caliber of safety performance among pipeline owners and Mainline construction contractors. We led the establishment of this roundtable because we understand that many of the major contractors we hire are also being hired by other North American companies. By inviting all of the parties to join the conversation on how best to organize practices, training, equipment safety and leadership competency, we can help turn good practices into industry standards. For more information, please see the Sustainable Supply Chain & Procurement section of this report.

Project Construction

We currently have $26 billion in capital growth projects that are commercially secured and in execution. While GHG emissions associated with project construction are small compared to the overall lifetime impacts of operations, MP implements several measures aimed at increasing the efficiency of project teams during construction, including using locally sourced pipe whenever possible and local accommodations and trades services.

Labor Practices

We integrate labor factors into our SCM via our Statement on Business Conduct, which emphasizes our commitment to the specific standards of conduct that we expect of our directors, officers, employees, consultants and contractors in all of the countries where we do business.

We expect our suppliers to comply with our Statement on Business Conduct as part of their business dealings with us.

Human Rights

As part of their business dealings with us, we expect our suppliers to comply with the Statement on Business Conduct, which contains provisions that we respect human rights.

Additionally, all of our business segments have adopted policies that establish the rights of all employees and contractors to enjoy a workplace free of harassment and discrimination.

The provisions we set down in our Statement on Business Conduct are generally accepted international standards and principles, including those that make up the United Nations Global Compact (UNGC).

The UNGC, to which we became a signatory in 2003, brings companies together with UN agencies, labor and civil society to support principles in the areas of human rights, labor, and the environment. As a signatory, we are committed to supporting and advancing the UNGC’s principles and to making them part of our strategy, culture and daily operations. For more information, please see the Business Conduct & Ethics section of this report.

Child Labor

As a UNGC signatory, we are committed to Principle #5—the effective abolition of child labor. Compliance with this principle is a condition of both conducting business with and on behalf of Enbridge.

Forced and Compulsory Labor

We are also committed to UNGC Principle #4—the elimination of all forms of forced and compulsory labor. Compliance with this principle is a condition of both conducting business with and on behalf of Enbridge.