Supply chain management

Supply chain activities amplify our sustainable priorities across Eaton

Our sustainable priorities span five pillars: transparency, shareholder value, workforce, environment and community. And supply-chain practices are an integral part of each of these pillars.

Transparency between our company and our suppliers is important for maintaining our partnerships. Our expectations and explicit guidance govern our relationships with our suppliers. Our suppliers may report ethical or legal concerns through our Help Line. We drive supply chain responsibility and transparency by sharing our governance policies such as Eaton's Code of Ethics and our Supplier Code of Conduct, including our expectations pertaining to slavery, human trafficking and conflict minerals.

Suppliers representing 90% of our supplier spend have affirmed our Supplier Code of Conduct. Our goal is for 100% of our suppliers to affirm our code by 2030. 

We also invite our suppliers to disclose emissions data through the CDP Supply Chain Programme. For the 2020 reporting year, we received an A- Supplier Engagement Rating from the CDP in recognition of engagement efforts with our suppliers on greenhouse gas management practices and reporting. 

Shareholder value increases through proactive management of our supply chain. Our process for developing technology and justifying the associated commercialisation integrates supply chain considerations at all stages. We work with suppliers on quality and product stewardship as part of our standard processes during this important research. Additionally, our engagement with our suppliers enables us to mitigate risk and minimise financial instability.

We leverage the workforce principles we follow for our own employees with our supplier partnerships. We emphasise the importance of our suppliers' worker health and safety. Our suppliers must affirm commitments to responsible labour and human rights practices to gain and maintain our business. We seek diverse suppliers to grow and enhance the value of our products.

Environmental considerations provide an important basis for supplier interaction. Our Supplier Site Assessment process, described below, specifically includes a review of supplier EHS performance and product stewardship practices. We engage with our suppliers to gain a greater understanding of their environmental impacts and opportunities for continuous improvement.

Community empowerment is an area of shared importance for our company and our suppliers. We seek opportunities to partner with our suppliers to enhance the communities we serve and we actively monitor our suppliers for any potential negative community impacts based on the expectations described above.

Percentage of suppliers representing our supplier spend that have affirmed our Supplier Code of Conduct
Our goal is for all our suppliers to affirm our Supplier Code of Conduct by 2030
Our 2020 supplier engagement rating from CDP

Driving excellence and commitment to doing business right

Our One Eaton Supply Chain Management philosophy is a reflection of our core values and our commitment to doing business right. Our expectations for suppliers serve as an extension of these principles and our shared commitment to responsible sourcing practices.

To improve the quality of life and the environment through the use of our power management technologies and services, we must actively partner with our suppliers in support of this vision.

Now more than ever, our suppliers are key partners and continue to play a critical role in helping us achieve our vision and goals. Just as Eaton leaders and employees are working daily to be ethical, passionate, accountable, efficient, transparent and always learning, we expect our supplier partners to do the same.

We select suppliers based on a variety of sourcing criteria. Overall, we determine suppliers based on the total value creation for Eaton, not simply the cost of doing business. Our Executive Vice-President, Supply Chain Management, oversees the policies and procedures that govern Eaton's supplier selection and sourcing practices.

Eaton seeks supply chain partners that meet high standards. We seek suppliers embracing our safety culture. We seek suppliers who are industry leaders and deliver best-in-class:

  • Quality
  • Delivery
  • Cost
  • Technology
  • Flexibility
  • Sustainability

Our separate business lines identify long-term strategic suppliers that are growth-oriented, financially stable and focused on delivering customer value. We also value suppliers who serve multiple business lines. Consolidating our supply chain to emphasise strategic partnerships strengthens our offerings and reduces our risks.

Environmental considerations provide an important basis for supplier interaction. Our Supplier Site Assessment process, described below, specifically includes a review of supplier EHS performance and product stewardship practices. We engage with our suppliers to gain a greater understanding of their environmental impacts and opportunities for continuous improvement.

Cultivating supplier partnerships

Eaton's Supply Chain Management (SCM) function works with our supply base to ensure suppliers can efficiently and effectively support our businesses.  SCM emphasises four main objectives:

  • To manage the acquisition of goods and services.
  • To create value for our shareholders by driving effective cost management and operational efficiencies.
  • To provide risk management, governance and compliance.
  • To drive continuous improvement, supporting Eaton's growth.

Supply Chain Management works to ensure that our suppliers meet the same obligations to which we hold ourselves accountable. We convey these standards to our suppliers through our:

Suppliers are expected to meet these commitments and to ensure that their activities contributing to Eaton products provide:

  • A safe work environment for employees.
  • Environmental protection measures.
  • Continuous improvement commitment in Environmental, Health & Safety (EHS) performance.

We require suppliers to implement management systems identifying, documenting and addressing operational risks to EHS. These EHS management systems include:

  • Identification of key EHS risks and impacts.
  • The development of operational controls to address the risks and minimise the impacts.
  • Preparation of response plans to address emergencies.

Eaton also requires suppliers to comply with all applicable regulations.

Evaluating and addressing supply chain risks

Supply Chain Management undertakes rigorous annual examination processes in order to identify and mitigate a broad spectrum of supply chain risks. Our risk assessment process includes a risk scan of external sources, intelligence gathering and internal alignment of the risk landscape. We evaluate risks based on severity and probability.

We identify risks at the issue level and apply our evaluation across the spectrum of our business activities. For each identified risk, we explain how we are currently mitigating it based on specific activities. We monitor this process quarterly to account for any changes.

Additionally, SCM has established risk identification and contingency planning guidelines. These guidelines may be used for an ongoing sourcing process or to assess the stability of an existing supplier. These guidelines:

  • Provide an overview of the approaches to identify potential risks within the supply base.
  • Introduce processes and templates to validate potential risks and impacts resulting from supplier failures.
  • Provide a recommended checklist to initiate contingency planning and actions.

We have updated and simplified our Supplier Site Assessment (SSA) process. This process provides a deeper analysis of supplier performance and includes evaluations of supplier EHS and product stewardship practices.

We ask suppliers to affirm our Supplier Code of Conduct in addition to their acceptance of Eaton’s standard contractual terms and conditions. We also ask for adherence to all local and regional trade management regulations. The SSA results are reviewed to identify any gaps which may exist in the supplier operations and a formal corrective action plan addressing the identified gaps, if any, is required prior to conducting business.

SCM has also established crisis management guidelines to deploy in the event of a significant supplier disruption. These guidelines:

  • Define the crisis communications and management procedure.
  • Identify potential internal resources to support supplier crisis events or situations.
  • Identify external companies that will support supplier crisis events.

Developing and maintaining a diverse set of suppliers

We gain a competitive advantage by engaging a diverse supply base and by providing equal opportunities for diverse suppliers to compete for our business. Eaton's suppliers are our business partners and our partnerships must reflect the communities where we live, work and serve.

Eaton actively seeks small (SBE), veteran (VET), minority-owned (MBE), women-owned (WBE), LGBTQ-owned and historically underutilised business zone (HUBZone) suppliers to provide business opportunities. The supplier diversity team works to ensure our diverse set of suppliers meet the same obligations as any supplier to Eaton by providing quality products and services at competitive prices, as well as adhering to our ethical principles and the Supplier Code of Conduct. In 2020, Eaton purchased $1.9 billion in goods and services from small and diverse suppliers.

Our Executive Vice President of Supply Chain Management champions our supplier diversity team. The rest of the team consists of a director, manager and advocates. The team establishes multi-year goals for growth and provides input into our supply chain strategic plan. The team reports progress to:

  • Supply chain management and senior leaders
  • Customers
  • Government agencies and prime subcontractors
  • Community organisations

We strive to include a minimum of two diverse suppliers on each quotation. We seek suppliers by actively engaging the supply base, the extended supplier diversity team and our community partners. We understand and monitor performance on our diverse suppliers.

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