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Suppliers and business partners

Our ethical rules include cooperation with suppliers and business partners. The rules translate specific requirements into the Commitment to Ethical Conduct, which forms a part of contracts with suppliers and is publicly available on the company’s website. We monitor compliance with the rules set out in the Commitment to Ethical Conduct through compliance checks. Naturally, a breach of the rules may lead to the termination of the business relationship.

To reduce the risk of corruption, conflicts of interest and/or non-compliance with international sanction laws and regulations, regular due diligence of business partners plays a key role in the third-party verification system (compliance checks). Due diligence is a mandatory part of procurement, acquisitions, and also divestment processes for potentially high-risk business cases. More than 1,000 cases were subject to compliance checks in 2022.

In addition to ethical rules, we take account of the supplier’s overall responsible approach and sustainability activities. The aim is to support the suppliers in strengthening responsible behavior towards the environment and governance.


Sustainable Supply Chain

Having responsibility for a critical infrastructure, we focus intensely on maintaining a highly reliable and sustainable supply chain. CEZ Group has focused on evolving its policies and processes to ensure responsible procurement and purchasing, with particular attention to higher-risk aspects of the supply chain. We see the supply chain as a very important topic and, through our group-wide supply chain initiative, we strive to have the same quality of ESG data and information for the supply chain as for our own operations in the future.

Procurement and Selection Criteria

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Every year, we hold thousands of tenders for investment and maintenance projects, technical engineering works, supply materials and spare parts. From the procurement perspective, we categorize suppliers into four main groups: fuel, capital expenditure, services, and materials.

Our procurement and tendering processes are mainly centralized. The Purchasing Department takes care of the processes and provides related services in full for 23 CEZ Group companies.

Depending on their nature, tenders are either public (subject to Public Procurement Act No. 134/2016 Coll.) or non-public (subject to internal policies). Tenders follow applicable law and internal directives. Implementing tenders transparently while ensuring impartiality, efficiency, and optimal contract conditions is the main goal of purchasing departments.

By law, we inform about public tenders in the Public Procurement Bulletin and the National Electronic Tool (NEN), which are online tools enabling an unrestricted access of participants to information about tenders. Once the procurement process ends, we publish the result of the public tender there. As regards non-public tenders, we directly invite suppliers based on pre-defined rules. Afterwards, the whole process runs through an online CEZ Group supplier portal.

As part of the tender, we review many parameters (e.g., financial stability, ISO credentials, participant’s business in high-risk countries, and the effects of international sanctions) including reputational risks, risks related to law violations, and others. We enter into relationships only with suppliers willing to honor obligations specified in the Commitment to Ethical Conduct. Depending on the nature and purpose of the procurement, we consider the principles of social and environmental responsibility and benefits of innovation when setting conditions, evaluating tenders, and selecting suppliers.

We take a responsible approach to the procurement process and impose various social requirements on suppliers. The most common aspects are:

  • employment opportunities (e.g., education support, gaining experience and upskilling)
  • human and labor rights (e.g., prohibition of forced, child and illegal labor)
  • social inclusion (e.g., support for social enterprises, employment of vulnerable groups)
  • decent working conditions (e.g., equal pay, work-life balance, health and safety conditions at work, valid employment contracts)
  • local sourcing (e.g., support for SMEs, meeting financial commitments on time)
  • ethical purchasing (e.g., Fair Trade products, evaluation of offers not only according to the lowest price, fair relations in the supply chain)

For certain social aspects (e.g., illegal work), the supplier is contractually obliged to exercise due diligence and take all measures to prevent such cases, including with its subcontractors.

Some of our procurements are awarded under the reserved procurement regime. In these cases, only contractors employing at least 50% of their workforce with disabilities in sheltered workplaces may submit bids.

In the case of selected public tenders, the requirements of responsible procurement are directly reflected in the evaluation of the tenderers' bids. In any case, the supplier requirements are always included in the framework agreements or business contracts. The agreed terms and conditions entitle us to monitor compliance with the requirements and to terminate the framework agreement or contract if we find that the supplier has not complied with them.

Due to the importance of purchase-related activities for CEZ Group’s operations, the Internal Audit Department of ČEZ, a. s., focuses on them in its regular audits. The audits examine both the functionality of the purchasing processes and efficiency of the control mechanisms, emphasizing, among other things, anti-corruption measures. These audits review purchases for ČEZ, a. s., as well as purchases of the CEZ Group companies to which the Purchasing Department of ČEZ, a. s., provides its services, and purchases that the CEZ Group companies conduct on their own.

Our supply chains consist of both external companies and CEZ Group subsidiaries. In accordance with legal regulations, we have a long-term preference for local suppliers (mainly from Czechia or Europe) and keep supply chains as short as possible for several reasons: communication, environmental impact, local economic development, and costs.

Verification Process

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Material business cases in CEZ Group require third-party compliance checks. These compliance checks identify and mitigate the Group’s risks of becoming involved in unwanted business relations, reputational damage, financial loss, or criminal liability.

In practice, we use three types of internally conducted compliance checks, which differ in their scopes. A responsibility of the Compliance Department, compliance checks are based on the information from publicly available sources (e.g., commercial databases, sanction lists, the Internet). Compliance checks result in a third-party risk rating and, if necessary, proposals for further action. Depending on the type of compliance check, the outcome is valid for 6 or 12 months. More than 900 reviews take place annually.

For potentially high-risk business cases, a third-party due diligence is carried out by external experts.

Our suppliers and business partners are required to maintain the same level of business ethics and integrity that we ask of our own companies and their employees. Our standard supplier contracts include a commitment that suppliers will abide by the ethical rules and principles set out in the Commitment to Ethical Conduct (Supplier Code of Conduct). We reserve the right to monitor compliance with the Commitment by requesting information using a questionnaire and conducting on-site inspections.

From verification perspective, suppliers of nuclear power plants represent a specific category. Suppliers need to factor in the requirements of the Atomic Energy Act No. 263/2016 Coll., and the decrees of the State Office for Nuclear Safety. Suppliers of nuclear safety-relevant items and services undergo initial and repeated audits, and we continuously monitor the quality of their work.

We concentrate on key human resources issues during suppliers’ audits and during the actual onsite activities by suppliers’ workers. We actively communicate our concerns at regular meetings with suppliers, clarifying our requirements and expectations and agreeing on remediation actions where warranted.