Workers in the value chain

The ‘Workers in the value chain’ chapter meets the disclosure requirements of ESRS S2 and is based on the results of the double materiality analysis. Material topics for the KION Group are managed in the context of the ‘Supply chain’ action field.

Material impacts, risks, and opportunities and their interaction with strategy and business model in relation to workers in the value chain

The double materiality analysis described in the ‘Description of the process to identify and assess material impacts, risks, and opportunities’ chapter identified two negative material impacts of the KION Group in relation to workers in the value chain within the ‘Other work-related rights’ sub-topic.

Forced labor in the metal supply chain (negative impact)

The KION Group is aware that extracting raw materials for iron and extracting non-ferrous metals, such as copper, zinc, cobalt, or lithium, and their subsequent processing through to the production of an end product, can – depending on the country, industry, and stage of production – have varying degrees of negative impact for workers in the upstream value chain. These negative impacts can include child labor, forced labor, forms of coercion and repression in the workplace (that are frequently part of modern slavery), disregard for workplace health and safety provisions, discrimination, non-payment of a living wage, or the use of force by security personnel. In accordance with the International Labour Organization (ILO), forced labor in the mining and metal working sector – especially in geopolitically sensitive regions – is classed as a substantial risk. This is a widespread and systemic negative risk.

KION Group products contain numerous components for assembly that feature, or consist of, a variety of metals. The KION Group is not directly involved in the extraction of raw materials as it purchases goods and components from manufacturers around the world instead. The KION Group’s direct influence on practices in the upstream value chain and thus on the material negative impact of forced labor in the metal industry is therefore limited. As part of its direct business relationships, the KION Group assesses and evaluates tier 1 suppliers using the ESG supplier risk management process described in the ‘Policies related to workers in the value chain’ chapter. Where necessary, an escalation process is initiated in line with the KION Group’s existing guidelines.

Child labor in manufacturing industry supply chains (negative impact)

Due to the global nature of the KION Group’s procurement activities, child labor has been identified as a potential negative impact in manufacturing industry supply chains and deemed material in the KION Group’s double materiality analysis. In accordance with the ILO, child labor in global manufacturing supply chains – especially in geopolitically sensitive regions – is classed as a substantial risk along with forced labor. Breaches of international labor standards and human rights, particularly cases of child labor, are reported throughout the industry. This is a widespread and systemic negative risk.

As explained above, the KION Group is not directly involved in the extraction or direct processing of raw materials, so it has limited direct influence on practices in the upstream value chain and thus on child labor in the manufacturing industry supply chains. As part of its direct business relationships, the KION Group assesses and evaluates tier 1 suppliers using the ESG supplier risk management process described in the following chapter. Where necessary, an escalation process is initiated in line with the KION Group’s existing guidelines.

Policies related to workers in the value chain

The following subchapters deal with the KION Group’s material policies related to workers in the value chain.

The KION Group has defined sustainability strategies, procedures, and requirements in order to assess the two aforementioned material impacts of the KION Group’s business on the upstream value chain and the workers in it, and to avoid, mitigate, or eliminate risk. The KION Group requires direct suppliers to act in accordance with the following policies, which is also demanded with regard to the interests, views, and rights of workers in the upstream value chain.

Principles of Supplier Conduct (code of conduct)

The KION Group Principles of Supplier Conduct contain specific requirements and rules of conduct for responsible procurement. The Principles of Supplier Conduct – which are available in German, English, and Chinese – formulate environmental, ethical, and social guidelines for the global supplier base. Furthermore, the Principles of Supplier Conduct contain specific requirements on working conditions, equal treatment, equal opportunities, and other work-related rights in accordance with the UN Guiding Principles on Business and Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work (in particular Convention Nos. 138 and 182), and the OECD Guidelines.

Also set out in the Principles of Supplier Conduct is the KION Group’s zero tolerance approach to child labor and forced labor, for example, as well as related requirements of suppliers in terms of environmental, social, and governance practices. The supplier’s obligation to prevent inhumane, discriminatory, and unsafe working conditions for their employees is a core principle. Moreover, every supplier must ensure that their suppliers, in turn, adhere to these principles and requirements.

The Principles of Supplier Conduct are an essential and integral part of the KION Group’s General Terms and Conditions of Purchase. All suppliers entering into a business relationship with the KION Group must fulfill this requirement and agree to the Principles of Supplier Conduct – either by acknowledging the General Terms and Conditions of Purchase or by concluding an individually negotiated agreement. In addition, both the General Terms and Conditions of Purchase of the KION Group and individual agreements contain further requirements and obligations for the supplier that are intended to ensure compliance with applicable law and responsible practices within the value chain.

The Head of Global Procurement is responsible for the Principles of Supplier Conduct and the General Terms and Conditions of Purchase of the KION Group. Both sets of requirements were compiled with the Legal and Compliance department of the KION Group and apply to all direct suppliers of the KION Group.

[[The KION Group Principles of Supplier Conduct are publicly available on the KION Group’s website at www.kiongroup.com/en/About-us/Suppliers/.]]

ESG Risk Management Standard for Suppliers*

To ensure that the actual and potential material impacts, risks, and opportunities for workers in the upstream value chain are assessed and that actual or potential negative impacts are minimized or eliminated, the KION Group has established a three-stage process for assessing supplier risk in terms of the environment, social responsibility, and corporate governance (ESG). This process is described in the ESG Risk Management Standard for Suppliers of the KION Group.

Every supplier in a direct business relationship with a KION Group company (tier 1 supplier) must be analyzed and assessed using the ESG supplier risk management process. This process assesses the efforts of suppliers to comply with and achieve certain labor-law, social, ethical, and environmental standards. Specific focuses of the ESG Risk Management Standard include workplace health and safety, anti-corruption and anti-bribery practices, product-related environmental protection, upstream supply chain monitoring, and, in particular, compliance with fundamental human rights, labor rights, and employment standards, which include questions about child labor and forced labor.

The first stage of the three-stage ESG supplier risk management process is the ESG supplier risk assessment, through which the KION Group monitors and assesses the extent to which direct suppliers comply with the standards. This encompasses global risk mapping followed by an additional assessment of individual supplier-specific risks. The KION Group uses the IQ product from EcoVadis for its global risk mapping. It provides an abstract assessment of the suppliers’ inherent sustainability risk profiles based on their country, sector, and goods risk. In addition, an individual risk assessment is carried out by service providers IntegrityNext and EcoVadis if a supplier is classified as high risk during global risk mapping, or if the KION Group specifically selects the supplier for an individual assessment. All new suppliers undergo an individual risk assessment.

The second stage of the process encompasses the ESG supplier risk analysis. In this phase, the KION Group decides on the weighting and priority of the specific ESG supplier risk as determined in the first stage. The severity and potential impacts of the identified risks, the significance of the suppliers for the KION Group’s operations, and potential alternative sources for procuring the relevant products are considered in this analysis. The ESG supplier risk thus determined is then systematically assigned to one of three categories: ‘low ESG risk’, ‘some degree of potential ESG risk’, or ‘high ESG risk’.

The results of this ESG supplier risk analysis determine whether and what kind of improvement actions will be taken in the third stage of the process. The first step of the third stage is to analyze suppliers in detail and assess them by means of a desk audit, which primarily involves questionnaires and documentation checks. The next steps are defined and agreed on the basis of the desk audit results. These can include on-site audits and specific actions, such as individually agreed remedial action. All suppliers passing an EcoVadis desk audit have the opportunity to attend training courses that support them in making improvements.

Should a supplier fail to comply with the ESG supplier risk management process – for example by refusing to provide information, preventing audit initiatives, or unilaterally failing to instigate remedial action plans – the escalation process is triggered in line with the current KION Group rules. Non-compliance can have a wide range of consequences for the supplier. The KION Group ultimately reserves the right to end the business relationship, with the supplier agreeing to this under the Principles of Supplier Conduct.

The ESG supplier risk assessment is carried out once a year and on an ad hoc basis as required. A regular risk analysis is performed for all direct tier 1 suppliers (as defined below) and the KION Group’s own subsidiaries. New suppliers are subject to this risk assessment as part of the introduction, selection, and contract award process for suppliers. The ad hoc risk analysis must be carried out if there is any change in the supplier’s business, if a new project is awarded, new businesses are acquired, new markets are entered, or if the KION Group becomes aware of misconduct.

As every (tier 1) supplier must be analyzed and assessed using the ESG supplier risk management process, the KION Group executes this process in a compliant, focused, and efficient manner, prioritizing suppliers on the basis of the following criteria (target groups):

• Tier 1 suppliers in direct procurement that, due to their country or industry, are subject to increased ESG supplier risk (high-risk countries), and/or
• Tier 1 suppliers in direct procurement that are considered to be category A suppliers (essential for the KION Group’s production processes), and/or
• Tier 1 suppliers in indirect procurement for specific categories that, due to their industry or country, are subject to increased ESG supplier risk as defined in the ESG Risk Management Standard for Suppliers.

For all other suppliers, the ESG supplier risk assessment is carried out on an ad hoc basis.

The ESG Risk Management Standard for direct Suppliers was developed in collaboration with the following internal functions during the preparation, drafting, and revision phases: the Procurement department, the Legal and Compliance department, the Sustainability department, and the HR department. The defined process applies to all direct suppliers of the KION Group and to its Operating Units.

The global Supplier Sustainability Team – part of the Procurement organization – is responsible for execution, compliance, quality, and effectiveness. The team leads the relevant processes at the start of each year and initiates the follow-up process in the third quarter. The ESG supplier risk management process itself is reviewed in December each year to check its effectiveness. All insights gathered during this phase are reviewed and the process is adapted where appropriate.

The KION Group has created an internal ESG supplier dashboard for information and reporting purposes in order to integrate the process of assessing ESG supplier risk into the KION Group’s procurement organization and its procurement strategy, and to manage the actual and potential material impacts, risks, and opportunities in the upstream value chain. All the results of the assessments are available in this dashboard and can be accessed by the global procurement team. Some procurement processes have also been updated to reflect the dashboard and now include sustainability criteria and the KION Group ESG supplier score, which is displayed in the ESG dashboard. Among these processes are the KION Group Standard on Sourcing and Awarding Committee (for direct and indirect procurement), requests for tender, and the supplier scorecard.

The results of the ESG supplier risk management process are taken into account in the decision-making process for awarding contracts, as are conflict minerals, for example. Special metrics and related targets are determined in order to monitor the strategy and track progress. The results also feed into the Supplier Performance Management department’s supplier performance score.

The ESG Risk Management Standard for Suppliers is available internally on the KION Group intranet. To facilitate understanding and compliance, the process has also been communicated via dedicated emails and training sessions for members of the Procurement team.

Sustainability is also a frequent topic in the Global Procurement Governance Council’s regular meetings and in regional and global quarterly meetings. The Global Procurement Governance Council is composed of the Head of Global Procurement and its global direct reports. The Council discusses and decides on general strategies, processes, governance, and developments. The quarterly meetings, which are attended by the heads of specific regions and global procurement categories, serve to monitor and manage procurement activity on the basis of KPIs, including those related to sustainability.

* The assessments by EcoVadis and IntegrityNext were not part of the audit carried out by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin.

Conflict Minerals Standard

The KION Group’s Conflict Minerals Standard is based on the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas of the Organisation for Economic Co-operation and Development (OECD). By specifically referring to the EU Conflict Minerals Regulation (Regulation (EU) 2017/821) and the US Dodd-Frank Act (section 1502), the KION Group has clearly formulated its commitment in this area.

Every year, the KION Group carries out due diligence checks in its supply chain in order to ascertain whether the goods that it is procuring from its suppliers, and that are ultimately used in the end products of the KION Group, potentially contain conflict minerals. The Head of Global Procurement and the Head of Sustainability & HSE are responsible for this.

The Conflict Minerals Standard applies to all direct suppliers. It was created by the relevant internal stakeholders, who drafted, checked, and reviewed it. The content of the standard can be viewed by anyone affected by it on the KION Group’s website and intranet. It has also been communicated in dedicated emails and training sessions.

[[The standard is available to the public on the KION Group’s website at www.kiongroup.com/en/About-us/Suppliers/.]]

Processes for engaging with value chain workers about impacts

During the first stage of the ESG supplier risk management process described in the ‘Policies related to workers in the value chain’ chapter, direct suppliers are provided with several self-assessment questionnaires by the service providers IntegrityNext and/or EcoVadis. In terms of material impacts, these cover various topics such as child labor, forced labor, discrimination, other labor-related rights, environmental topics, and internal procedural matters. Under the supervision of the Head of Global Procurement, the global Supplier Sustainability Team is responsible for the execution, compliance, quality, and effectiveness of the questionnaires. The ESG supplier risk management process itself is reviewed at the end of each year to check its effectiveness. All insights gathered during this phase are reviewed and the process is adapted where appropriate.

The KION Group, and specifically the Supplier Performance Management department within the procurement organization, is responsible for monitoring and developing the existing supplier base as well as potential new suppliers on a global level. As part of this remit, the department also carries out in-depth, on-site supplier assessments and a range of audits of potential new suppliers, and of selected suppliers as required. Key sustainability criteria were included for the first time in 2024. They were part of an initial pilot project that included employee surveys on topics such as child labor, forced labor, and violence in the workplace, as well as working conditions and fundamental environmental aspects of the company. This local supplier assessment also includes discussions with specific members of the workforce. Where the assessment identifies potential risks, further investigations are initiated in accordance with the ESG supplier risk management process as described in the ‘Policies related to workers in the value chain’ chapter.

The KION Group also offers its suppliers training on the Act on Corporate Due Diligence Obligations in Supply Chains (LkSG) and other sustainability topics, which, depending on the supplier’s structure, brings the Supplier Sustainability Team or other members of the procurement organization into contact with the supplier’s workforce.

To reinforce the inclusive nature and diversity of the supplier network, the KION Group supports a wide-ranging formal policy in the US on the advancement of companies owned or run by a member of an underrepresented group.

Processes to remediate negative impacts and channels for value chain workers to raise concerns

The KION Group provides a number of ways for internal and external whistleblowers to report potential breaches of the law or of other regulations. Actual or suspected breaches of the law or regulations can be reported to the Group’s Compliance department by email, telephone, or post. The KION Group can also be contacted through social media.

External whistleblowers can additionally make use of the KION Group whistleblowing system’s dedicated hotline to anonymously report actual or suspected compliance breaches. [[This system provides several channels for reporting concerns, such as an online form (www.kiongroup.com/whistleblowing), a hotline, and an email address (compliance@kiongroup.com).]]

[[The existence of these channels is clearly communicated on the website and in the KION Group Code of Compliance. They are accessible to the public at www.kiongroup.com/en/About-us/Compliance/ and in the information for suppliers of the KION Group.]]

It is standard policy at the KION Group to investigate and follow up on every compliance report, with each one being documented in the Compliance Case Management System and reviewed by the KION Group Compliance Case Manager. Depending on the nature of the report, either a Compliance Officer or a representative of another competent KION Group function is appointed to manage the investigation, close it, and follow-up on the report. The Compliance Case Manager monitors progress and prepares management reports. 

The KION Group continuously improves the whistleblowing system on the basis of feedback from whistleblowers and other users of the system. Anyone can make suggestions for improvements. In 2024, these were discussed by the Compliance department, the Compliance Committee, and any other internal stakeholders as appropriate. Questions on the whistleblowing system were included in the annual compliance risk assessment questionnaires that were filled out by the local KION Group sites in 2024. To date, no formal assessment of employees’ trust in the channels has been carried out. Corporate Compliance is responsible for the procedure for dealing with compliance incidents, which is set out in the KION Group’s policy on internal investigations. 

[[The KION Group Code of Compliance serves to protect whistleblowers and is available to the public on the KION Group’s website at www.kiongroup.com/en/About-us/Compliance/.]] The Code sets out that reprisals, threats, or attempted reprisals against a whistleblower are forbidden in internal investigations at the KION Group. 

In addition to its whistleblowing system, the KION Group screens news to identify cases that come to light through reports in the media and involve a potential breach of compliance. These incidents are also documented in the Compliance Case Management System.

In accordance with the ESG supplier risk management process described in the ‘Policies related to workers in the value chain’ chapter, the KION Group has defined a process for any infringements of protected rights in the supply chain. This process serves, in particular, to follow up any infringements categorized as a ‘Human rights or environmental breach in the supply chain’ and to take suitable remedial action. 

Once a report has been made via one of the aforementioned channels, the incident is assigned to be followed up by the global Supplier Sustainability Team, which is part of the procurement organization. The investigation is performed as described in the ESG supplier risk management process and is subject to the same requirements as for compliance case management. The aim is to analyze all incidents thoroughly, uniformly, and with the same level of detail.

There is no defined process for managing compensation for workers in the value chain. Workers have to make their case themselves and decisions are made following an individual review. 

Regular checks by the Compliance Committee of the KION Group and the Human Rights Committee are designed to monitor the effectiveness and efficiency of the process. 

Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions

The following subchapters deal with the KION Group’s material actions related to workers in the value chain.

The KION Group’s sustainability strategies, procedures, and requirements described in the ‘Policies related to workers in the value chain’ chapter are used as binding criteria for the selection of suppliers and give rise to specific actions. The sustainable approach to procurement follows a continuous improvement process across the phases of strategy development, risk assessment, risk mitigation, incident management, and corrective actions.

Two potential incidents of forced labor were identified through news screening, which were documented and processed via the Compliance Case Management System (see ‘Processes to remediate negative impacts and channels for value chain workers to raise concerns’).

One of the cases was closed promptly, as the affected company made a public pledge to take corrective action. The second case refers to the exposure of forced labor in a particular country. An ad hoc risk analysis of suppliers from this country was initiated to check that the conditions described are not prevalent at suppliers to the KION Group. The risk analysis was carried out for the majority of suppliers in the reporting year, and no cases of this type were identified. The risk analysis is scheduled to be completed in early 2025.

ESG supplier risk management including forced and child labor

In 2024, the three-stage ESG supplier risk management process described in the ‘Policies related to workers in the value chain’ chapter was used by the global Supplier Sustainability Team – as part of the Procurement organization – to determine actual or potential material negative impacts on workers or on the environment in its upstream value chain. The KION Group’s mandatory ESG supplier risk management process includes explicit questions on child labor and forced labor as well as on the supplier’s onward supply chain. The actions to be taken to prevent, mitigate, or remediate actual or potential negative impacts are defined in this process. The KION Group also expects compliance with the requirements to be replicated along the entire value chain and requires its suppliers to uphold the Principles of Supplier Conduct described in the ‘Policies related to workers in the value chain’ chapter in their supply chains.

As part of its management of the ESG risk management process for suppliers, the KION Group introduced a new strategic target in 2024. It is explained in more detail in the following chapter.

Transparency regarding conflict minerals

With respect to conflict mineral smelters or refiners (SOR), the KION Group has been participating in an annual smelter outreach initiative since 2022. This initiative, which is actively managed by service provider Assent, aims to approach directly those SORs that have not yet been, or have refused to be, assessed by local auditors regarding their conflict-free minerals sourcing. The initiative does not specifically target the KION Group’s suppliers but is a general due diligence initiative as part of an industry-recognized assessment program, with the objective of improving transparency globally.

Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

The following subchapter deals with a material target of the KION Group related to workers in the value chain.

The KION Group has been carrying out sustainability risk assessments of selected tier 1 suppliers through EcoVadis for several years. Explicit reference was made in this context to actual and potential impacts in the upstream value chain, including child labor and forced labor.

Due to the ever-growing importance of the topic and also to address LkSG requirements, the KION Group introduced the global ESG supplier risk management process in 2023. The process is presented in the ‘Policies related to workers in the value chain’ chapter.

Increase in spend on tier 1 suppliers with a low ESG risk

In order to strategically counter negative impacts on workers in the value chain, the KION Group defined a new target in the ‘Supply chain’ action field of its sustainability strategy in 2024. This target is driving the continual expansion of a very low-risk upstream value chain and preventing, mitigating, or remediating actual or potential negative impacts on the environment or human rights, such as exploitative child labor and forced labor. The KION Group is pursuing the new strategic target of increasing the proportion of annual spending on tier 1 suppliers in category A with a low ESG risk. Category A suppliers are strategic suppliers that are essential to production according to an ABC categorization based on the proportion of spend they account for (see ‘Strategy targets and target achievement in 2024’).

For 2024, the KION Group’s target was to raise the proportion to 31.5 percent. The base year was 2023 with a base value of 24 percent. The Procurement department, the Legal and Compliance department, the Sustainability department, and the HR department were all involved in formulating this groupwide target.

Metrics related to workers in the value chain

The following deals with a material metric of the KION Group related to workers in the value chain.

In 2024, the KION Group managed to increase the proportion of annual spending on tier 1 suppliers in category A with a low ESG risk to 60.5 percent.

The metric measures the proportion of spending on tier 1 suppliers in category A that were identified as low ESG risk by the ESG supplier risk assessment. This is calculated as a percentage of the total spend on direct tier 1 suppliers in category A. Tier 1 suppliers provide products or services directly to the KION Group, excluding sub-suppliers or downstream suppliers. Direct suppliers deliver materials that are directly incorporated into the end products. Category A suppliers are strategic suppliers that, according to an ABC categorization based on the proportion of spend they account for, receive a total of around 80 percent of overall expenditure on tier 1 suppliers and are therefore materially important to the KION Group.

Only external spending is taken into account. Intracompany transactions and expenditure for companies in which the KION Group holds a minority interest are excluded. The main source of the operating expenditure data is an internal database that predominantly contains primary data such as invoices and directly interfaces with the KION Group’s accounting systems. Since not all of the entities are linked to this database, it does not capture 100 percent of the Group’s operating expenditure. Entities that are not linked to this internal database are asked to identify their suppliers so that these can be included in the assessment.

The ESG risk levels – low, medium, and high – are calculated by external tools such as EcoVadis IQ, individual EcoVadis ratings, and individual Integrity Next ratings. Which tool is chosen depends on the suppliers’ preferences and their familiarity with the tools, and on how well the assessment methods are known in the industry. Following the initial risk categorization using the tools, the KION Group takes targeted corrective action, in accordance with the ESG Risk Management Standard, designed to minimize or prevent risk at suppliers with high ESG risk. Corrective action is optional for suppliers with a medium risk and depends on the decisions of the buyer and the department for supplier sustainability. Successfully implemented and documented corrective action can help to lower the initial risk level and keep track of the progress made by suppliers. As specified in the ESG risk management process, the decision to take corrective action is made for each supplier based on the findings of the ESG supplier risk assessment and the ESG risk analysis. The ESG risk assessment meets the requirements of the LkSG, which calls for risk analyses to be conducted to identify risks such as child labor and forced labor. The assessment process includes a global risk analysis, individual supplier assessments, weighting and prioritization, and the planning of corrective action. The ESG criteria and actions are based on and aligned with LkSG requirements.