Suppliers and business partners

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.

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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 Act No. 134/2016 Coll. on Public Procurement, as amended) 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.

According to Act No. 134/2016 Coll., on Public Procurement, as amended, 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 suppliers 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 electronic communication.

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, i.e., the Supplier Code of 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, where possible, impose various social requirements on suppliers. The most common aspects are:

• employment opportunities (e.g., education support, gaining experience and upskilling)
• 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.

At the same time, we take a responsible approach to public tenders in terms of environmental protection, sustainable development, the life cycle of supplies, and the impacts on biodiversity. Good examples are the use of recycled packaging, green cleaning requirements, reduced energy consumption, and other environmentally friendly solutions. For relevant public tenders, we require bidders to provide a certificate of compliance with environmental criteria.

In the case of selected public tenders, the requirements of responsible procurement are directly reflected in the evaluation of the tenderers' bids. In all cases, these 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 of responsible procurement and to terminate the framework agreement or contract if we find that the supplier has not complied with them.

The same applies to difficult and complex tenders for nuclear power plants. In these cases, the selection criteria are subject to specific technical, legal, security, and environmental requirements (e.g., uranium mining and processing).

If third parties feel that a tender lacks transparency and equal treatment, they can submit a complaint either to the tender organizer, via the Whistleblowing Hotline, or Office for the Protection of Competition as an independent authority in case of public tenders.

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 as well as 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, security, 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 help us to identify risk factors in potential business partners and suppliers early on and mitigate the Group’s risk 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. These compliance checks, which are the responsibility of the Compliance Department, 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 1000 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, particularly using a questionnaire and conducting on–site inspections. We express our expectations to suppliers and identify priorities for supplier approach to sustainable development. We reserve the right to verify the fulfillment of contract conditions at any time, and suppliers must provide necessary cooperation. We actively exercise this right and perform audits either remotely (i.e., questionnaires, substantiated evidence) or onsite. We apply seven auditing principles of ISO 19011 (Guidelines for Auditing Management Systems).

We monitor supplier activities in terms of environmental protection and social aspects. All our sites with an ISO 14001 certification (Environmental Management System – EMS) maintain registers of supplier environmental factors. When conducting EMS inspections, we check these aspects primarily. In 2023, we did not identify any suppliers whose activities had significant adverse out–of–compliance environmental or social impacts. At ČEZ Distribuce, 14 non– conformities were recorded for 10 suppliers, but none of them was identified as significant.

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.

Suppliers’ human resources management is also subject to verification in line with the Atomic Energy Act. As per the Act, suppliers must carry out their activities using their own qualified and experienced staff. Moreover, only supplier personnel with confidential security clearance can enter nuclear power plant vital zones. Therefore, suppliers must pay attention to staff turnover, which helps us manage quality control and safety performance.

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.