Responsible supply chains

An integral part of MTS Group’s procurement documentation is the Participant CSR Questionnaire, which is mandatory for all contractors to complete. The availability of an up-to-date Participant Questionnaire in the system accelerates the supplier verification process for compliance with MTS requirements when bidding.

The Participant Questionnaire covers CSR and compliance topics, including general information on compliance and CSR practices, as well as the topics of occupational health & safety and environmental protection. When completing the Questionnaire, a supplier also puts his signature in order to certify that they have read and understood the following documents:

• MTS PJSC Anti-Corruption Laws Compliance Policy
• MTS PJSC Code of Business Conduct and Ethics
• MTS PJSC Supplier Code of Business Conduct

The submitted information is analyzed automatically. No participant can win a tender without completing a Questionnaire.

The implementation of an automated completion functionality for Supplier Questionnaires has increased the number of both completed Questionnaires and suppliers complying or on the path to complying with CSR standards and principles.

In 2019, some amendments were made to the Company’s procurement regulations:

• Controls have been established as part of the development process for an intellectual property risk management system
• The Participant Questionnaire has been expanded to cover information about subcontractors/joint contractors, as well as CSR topics
• Within the MTS StartUp Hub, a startup-driven procurement procedure has been introduced for innovative projects

In order to promote sustainability among its suppliers, MTS has developed educational initiatives on the following topics:

• Compliance
• Policies and codes aligned with our corporate strategy.

MTS has also launched its CSR Platform educational project to spread sustainability and CSR knowledge among partners and suppliers, including the Sustainable Business Development course. In 2019, MTS held a number of supplier conferences, where compliance function provided the MTS’s Anti-Corruption Tools for Procurement training. In addition, compliance and corruption risk prevention topics are included in the Supplier Questionnaire, Procurement Rules and Supplier Code.

Annual supplier assessment

Previously, supplier assessments were conducted via a country-wide survey of MTS supplier-facing employees who managed the relevant relationships during the year. The Net Promoter Score (NPS) was used to calculate the overall score. In 2019, a decision was made to switch to a new supplier evaluation system based on actual supplier performance data covering metrics such as deadlines, fines and claims. A project was launched to develop an integrated automated supplier evaluation system driven by insights from internal and external sources into suppliers, their activities and competitive environment.

In 2019, radio subsystem construction contractors were evaluated using actual data on deadline performance, claims and fines. The resulting scores were used to rank suppliers, and a series of meetings were held to discuss issues arising from the performance of MTS contracts and orders.

Supplier training course

The Sustainable Business Development course uses the webinar format and comprises eight lessons. Each lesson involves mandatory testing.

Lesson topics

• Sustainable development concept and principles
• Management for sustainable developmentIntegration of sustainable development goals into business practices
• Sustainable business development problems
• Sustainable business development strategies
• Sustainable development projects. Part 1 (social innovation)
• Sustainable development projects. Part 2
• New business models and designing for sustainable development

JAC audits

JAC targets enhancing the performance of those involved in the Information and Communication Technology (ICT) supply chains, including increased efficiency and productivity for companies and their suppliers, reducing pollution and any kind of environmental impact, improved conditions for workers, economic development and reducing risk to ensure continuity of supply.

Audits are undertaken according to the JAC CSR guidelines based on the internationally recognized CSR standards (SA8000, ISO 14000) and cover five main areas:

• Labor;
• Health & Safety;
• Environmental;
• Ethics;
• Management Systems.

On average, each JAC member company undertakes five audits per year. MTS undertook four audits in 2018, five audits in 2019, and has planned six audits for 2020.

Audit reports, corrective action plans and information on their implementation progress are stored in a single database and are available to all JAC members. This approach allows members of the association to save financial and time resources spent on undertaking audits. By joining forces, each JAC member is empowered for better supplier engagement. This allows JAC members to promptly identify weaknesses in operations, close gaps, and ultimately improve the sustainability of their supply chains.

Participation in the Climate Change Workstream working group allowed MTS to gain access to best practices in greenhouse gas emissions management. This has enabled the Company to improve the performance of its existing initiatives and define new objectives in greenhouse gas emissions management, including:

• identification of the most significant sources of greenhouse gas emissions and their volume in MTS’s supply chain
• setting targets to reduce greenhouse gas emissions in MTS’s supply chain, measuring and monitoring progress on targets
• setting requirements for suppliers to achieve emission reduction targets.

Joint procurement

MTS runs joint procurement procedures with a number of partners. In addition to the economic benefits, such cooperation enables the standardization of technical and functional requirements, approaches and methods.

In 2019, MTS PJSC continued providing procurement outsourcing to five partner companies for various procurement categories. Procurement takes place in the form of joint procedures, collaboration or individual procedures. The total budget of partner procurement procedures amounted to some RUB 1.3 billion.

MTS Auctions

The MTS Auctions platform was launched in 2017 to dispose of all types of idle property and equipment of MTS. The platform is not only a corporate marketplace for selling property but also an efficient tool for optimizing costs, creating additional income streams and effective disposal of asserts in the external market. This approach is aligned with our sustainable consumption model. All equipment and dead stock are sent for reuse, significantly reducing the amount of stored waste.

Starting from 2019, external companies may sell their assets via our platform, benefiting from the convenient sales tool with a transparent trading system we have brought to the market. In 2019, sales via the platform totaled RUB 1.15 billion, with MTS Group revenue at 45% of total sales.