Our program focuses on integrating sustainability into the procurement process, encompassing supplier selection, risk assessment, continuous improvement, and capacity building. We strive to collaborate with businesses sharing our commitment to sustainability, strategically deploying procurement spend to meet operational requirements but also promoting fairness and competition.
We seek opportunities which enable us to reduce our environmental impact while focusing on safety, positive social change, transparency, and active supplier engagement.
We hold our suppliers to the same high standards we uphold ourselves. Our Supplier Code of Conduct is an extension of our Code of Business Conduct and Human Rights Policy, which outlines our commitment to trust, integrity, labor and human rights, environment, and business ethics. These guidelines are referenced as a clause in all supplier contracts, and suppliers are regularly informed of any updates or changes. We continue to develop practices to ensure Environment, Social and Governance (ESG) requirements highlighted in the Supplier Code are met. As detailed below, we screen potential suppliers on their ESG practices during the Request for Proposal (RFP) process, review supplier ESG risks leveraging a third-party cloud-solution platform and gain further insights during supplier performance reviews and risk assessment audits. Additionally, suppliers are expected to maintain documentation to demonstrate their compliance with the Supplier Code and demonstrate compliance upon request whether it be through site visits or inspections by CN personnel or designated agents.
CN prioritizes supplier safety and security, which is why eRailSafe is mandated for contractors and sub-contractors working for CN. This program ensures that contractors possess the required credentials and adhere to CN's safety standards when working on our property. eRailSafe is a prerequisite for CN contractors and their sub-contractors who operate on company premises, access sensitive documents, and utilize CN's I&T infrastructure.
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Our Request for Proposal (RFP) process considers weighted evaluation criteria on environment, social and governance (ESG) that influences the decision to award business. To identify suppliers with strong sustainability practices, proponents, including both current and potential suppliers, are expected to provide their response and supporting documentation highlighting their ESG practices. This includes environmental management, health and safety, human rights, diversity, equity and inclusion, and their sustainable procurement practices within their own supply chains. Significant ESG topics material to our business, but also sector-specific and commodity-specific risk areas are considered. Certain categories of spend tied to CN’s decarbonization journey (i.e., Fuel, and Locomotives) contain in-depth ESG assessment criteria and hold a significant weight in the overall RFP evaluation. Screening our suppliers on ESG provides a means to determine areas where there may be actual or potential ESG risks and opportunities within our supply chain.
To assess ongoing sustainability performance of our suppliers, since 2021, we have partnered with a third-party cloud-solution platform enabling us to help identify, manage, and monitor high ESG risk and opportunity suppliers. Currently, our scope is to onboard critical and high spend suppliers and request they respond to an ESG assessment of CN’s choosing or another equivalent ESG assessment, which is a requirement outlined in the supplier contracts and that must be met within a set timeframe. We use the responses, which consider country and industry specific risks, to monitor our suppliers’ sustainability performance and during performance reviews to discuss any improvement areas or corrective actions required based on the results of our risk framework. Additionally, suppliers that do not meet a minimum threshold are sent a corrective action request requiring performance improvement actions be taken within their next assessment period. This improvement request, along with re-assessment requests, are discussed during the ESG portion of supplier performance reviews. Through the assessment, suppliers have access to peer benchmarks to help them compare their performance within relative industries.
We strive to ensure that suppliers are guided by the same core safety value that guides us. We partner with our suppliers to help them achieve the same safety standards we expect of ourselves. Risk can be introduced by our contractors while working on-site at our yards and facilities and therefore, we have established a risk matrix to identify contractor requirements based on applicable safety standards. Since 2020, we have engaged a third-party cloud-solution platform to facilitate the mandatory reporting of safety statistics and the submission of documentation from our in-scope contractors. Contractors must meet these requirements and maintain an acceptable score on the platform to perform work on-site for CN, as detailed in their supplier contract. Follow-ups are performed should a contractor receive a low safety score or fail to comply with this requirement.
As we continue to build our existing human rights and supply chain due diligence practices, we are taking action to identify and mitigate risks associated with forced labor and child labor. These actions include undertaking a risk assessment for the top 100 tier 1 suppliers to help us begin to assess the specific risks of forced labor and child labor in our supply chains. This risk assessment results in a score for suppliers using weighted inputs of individual risk components based on country of operations, industry, products and adverse media reports. Further details and results of this assessment can be found in CN’s Fighting Against Forced Labour And Child Labour In Supply Chains - 2023 Annual Report.
The purpose of the supplier risk assessment audit is to examine the quality system of our suppliers and to ensure alignment with all applicable requirements and guidelines, including CN’s Supplier Code of Conduct. We have expanded our audit checklist to include ESG topics (i.e., human rights, safety, decarbonization, environment, etc.), encompassing the review of policies in place and a walkthrough of processes. Critical suppliers are scheduled to undergo risk assessment audits within a three-year period. New suppliers may be subject to an audit as part of onboarding. Risk assessment audits are also completed if a quality risk has been raised for any supplier. If deficiencies are found, we require our suppliers to build corrective action plans, and we review their progress until the issue is resolved.
Our sustainable procurement program is a cross-functional initiative driven by our Procurement and Supply Management team and is overseen by CN’s Assistant Vice-President of Procurement and Supply Management with support from executive management. To effectively execute our program, we engage our internal teams across the Company through one-on-one meetings as well as providing training sessions on our various sustainable procurement initiatives, including general sustainable procurement onboarding, supplier sustainability performance discussions, contractor safety and Indigenous procurement approaches. The goal of our internal engagement is to raise awareness, build knowledge, and enable successful implementation of our program. In 2023, 94% of Procurement and Supply Management staff participated in sustainable procurement training.
By embedding sustainability principles, fostering supplier collaboration, and promoting diversity, we aim to create a more sustainable and inclusive supply chain.
In 2023, we extended our EcoConnexions Partnership Program to our suppliers to recognize their efforts in embedding sustainability within their operations and supply chains, with a particular focus on climate action, resource efficiency and biodiversity.
To enable further collaboration and understanding of risks within the supply chain, we have started including ESG performance discussions as part of recurring supplier performance reviews starting with a phased roll out to our Significant Tier 1 Suppliers. Through these discussions, we set expectations on CN’s sustainable procurement program and requirements, provide guidance to suppliers on improvement areas and learn more about our suppliers' sustainability journeys.
Supplier Updates Consistent communication with our suppliers by e-mail, supplier portal and meetings to provide updates on key initiatives and discuss sustainable procurement.
Supplier Diversity Promote an inclusive supply chain & procurement process by supporting traditionally underrepresented suppliers.
Indigenous Business Opportunities Building relationships and identifying opportunities with Indigenous-owned businesses in communities where we operate.
For more information about our Sustainable Procurement Program, please contact our Procurement team. For more information on our Indigenous partnership program please visit our Indigenous Relations page. CONTACT US INDIGENOUS RELATIONS
Critical Supplier is defined as a supplier with annual procurement spend greater than $25M and/or essential to CN operations.
Diverse Supplier is defined as a supplier who has identified as at least 51% owned, operated and controlled by an individual or group that identified as women, Indigenous, persons with disabilities, visible minorities, LGBTQIA+ or veterans.
High Spend Supplier means a supplier not identified as a critical supplier, but for which annual procurement spend is at least $10M.
Indigenous Supplier is defined as a business that has identified as at least 51% owned, operated and controlled by an individual or group that identified as Indigenous (First Nations, Inuit, or Métis).
Tier 1 Supplier is defined as a direct supplier of CN and provides goods and services directly to CN.
Significant Tier 1 Supplier means a Tier 1 supplier that has been identified as a critical supplier, a high spend supplier, a supplier deemed to have substantial ESG impact to our business, or a combination thereof.