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Supplier Screening
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Supplier Screening
Feb 14, 2025
The supplier screening process evaluates two major variables of analyses: i) Performance Assessment and ii) Strategic Potential, this analysis is complemented with the Management Concept of the Supply Chain and Business leaders to calibrate and validate the data according to Company's current and future strategies.
The information considered for supplier screening is detailed below:
ENVIRONMENTAL SUPPLIER SCREENING
The Supplier Environmental Screening identifies strategic suppliers that leverage the goals of decarbonization, materials and waste, water management and natural capital (biodiversity) that allows identifying strategic suppliers in environmental matters and prioritize the efforts that must be made in each of the defined environmental postulates.
The variables for classification are described below:
DECARBONIZATION:
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HIGH: GREATER THAN 500
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MEDIUM: BETWEEN 100 AND 500
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LOW: LESS THAN 100
MATERIALS AND WASTE
Spend of goods or services where waste is generated or that leverage circularity and waste treatment strategies.
WATER NEUTRALITY
Spend of goods or services where there is intensive use of materials that affect Ecopetrol's water footprint, or a waste treatment is carried out.
NATURAL CAPITAL (BIODIVERSITY)
Spend of goods or services that have an impact on the 0 Net Deforestation strategy, due to the use of wood.
RISK SCREENING METHODOLOGIES
RISK FACTORS ASSOCIATED WITH ECOPETROL'S FRAUD, CORRUPTION, MONEY LAUNDERING AND TERRORIST FINANCING
Ecopetrol's Ethics and Compliance area carries out the Segmentation of sources and risk factors associated with Ecopetrol's Fraud, Corruption, Money Laundering and Terrorist Financing, which allows the implementation of control measures, with a risk-based approach.
The controls and treatment plans are aimed at preventing ML/TF/FPADM risks in a differentiated manner for third parties based on their risk rating.
The risk criteria analysis seeks to obtain a complete view that contributes to informed decision-making regarding commercial relationships established with third parties.
The factors analyzed are:
The territorial jurisdiction information is updated every 2 months by the Ethics and Compliance Area and is considered for the supplier verification process. If a supplier is identified with a Medium or High risk, the supplier is asked for its policies, programs or ethical guidelines and internal control system, this evidence is analyzed by the Compliance area and the Supply Chain Process executes the actions defined for the supplier´s treatment, instead, if the supplier´s origin country is a Restricted Jurisdiction the company will be inmediatley blocked at Ecopetrol´s Supplier System Information.
RISK SCREENING METHODOLOGIES
SECTOR´S RISK AND OPPORTUNITY ANALYSIS
The Supply Chain Process designed the Market Indicators Surveillance System, through which 50 national and international indexes are monthly analyzed to measure and monitor inflation and key variables that directly or indirectly impact the goods and services rates required by Ecopetrol and its Business Group.
Additionally, global risks are monitored in Economic and Geopolitical, Environmental, Social and Technological aspects, covering each of the dimensions defined for sustainable (ESG) Supply Chain Management.
RISK´S DENTIFICATION AND MONITORING OF COMMODITIES, GOODS AND SERVICES REQUIRED
Committed to supporting the energy transition, the Supply Chain Process, through the monitoring of 10 key indicators, developed a historical price evolution monitoring board for the different goods and services required for the operation and, also, for the essential needs of the Energy Transition Strategy.
Currently, the Process is working on the deployment of a prospective analysis concerning the impacts of decarbonization, reduction of working hours and taxes, to count with risk anticipation mechanisms, containment measures and take advantage of market opportunities. As well, the Supply Chain seeks to generate the respective monetization of these variables impact on Ecopetrol’ s profit and loss statement (P&L).
NON-TIER 1 SUPPLIER SCREENING
The supply chain process allows a comprehensive segmentation in accordance with strategy, category of goods or services and the type of supplier. This means that in the identification of the procurement needs, the process takes into account those factors and determines the critical activities that must be directly contracted and performed by its tier 1 suppliers and the non-critical activities that could be subcontracted or provided by third parties (non-tier 1 suppliers).
Ecopetrol classifies its non-tier 1 suppliers, as follows:
Subcontractor: Natural or legal entity who carries out activities on behalf of Ecopetrol´s suppliers that are an essential part of the object and scope of the contract executed for Ecopetrol. All the subcontracts must be authorized and approved by Ecopetrol.
Provider: Natural or legal entity that performs activities on behalf of Ecopetrol´s suppliers that are not an essential part of the scope and object of the contract executed for Ecopetrol.
In 2024, for the first time, Ecopetrol carried out the non-tier 1 supplier screening, identifying subcontractors as its significant non-tier 1 suppliers due to, as it was mentioned above, this group carries out activities of the object and scope of the contract, therefore, their performance can directly impact Ecopetrol's operation.
Through this classification, Ecopetrol identified, for its 2024 management, 104 significant non-tier 1 suppliers.
ECOPETROL´S supplier screening RESULTS
Due to, Ecopetrol complemented its supplier screening process with the inclusion of subcontractors as significant non-tier 1 suppliers, for its 2024 management, the Company had a total of 235 significant suppliers (131 tier 1 + 104 non-tier 1).
This classification allowed Ecopetrol to focus its differentiated relationship mechanisms and extend its capacity development programs to its significant non-tier 1 suppliers to contribute to the strengthening of the different actors of its chain.
2024 KPI´s FOR SUPPLIER SCREENING
In 2024, the KPIs provided regarding Ecopetrol´s supplier screening results were audited by the international auditing firm EY.
