Supplier ​ESG Program

ESG CRITERIA INTO SUPPLIER SELECTION 

During the Supplier´s registration, selection, and assessment performance processes, Ecopetrol considers the following ESG factors: 

1. MANAGEMENT SYSTEMS, HSE AND TECHNICAL CERTIFICATIONS: 

Suppliers must be registered at Ecopetrol´s Supplier System Information, meeting different requirements such as: management systems certifications, HSE and technical certifications, among others according to their procurement category (economic activity). 

Weight: 100% 

2. PROMOTION OF THE NATIONAL INDUSTRY: 

National Government Legislation (Law 816 of 2003) aims to support the national industry through public procurement. During the selection process this is a mandatory evaluation factor.  

Weight: about 10% - 20% (if applicable) 

3. HSE (HEALTH, SAFETY Y ENVIRONMENT) CRITERIA: 

Evaluates if the supplier has the ISO-14001/2004 certification, or a HSE plan for the management of health and safety risks at work and environment protection; training programs; emergency response capacity or effectuate an analysis supplier real performance (positive or negative) in terms of disabling or fatal events. 

Average weight: determined according to the procurement strategy. 

4. LOCAL OFFER - GOODS AND SERVICES: 

Ecopetrol has in place a "Local contracting of goods and services for the supply chain policy” that promotes local contracting in the procurement strategies. This factor is optional and in accordance with each procurement strategy. 

Average weight: determined according to the procurement strategy. 

5. ACTIVITIES FOR VALUE GENERATION 

Promotes the deployment of activities to strengthen regional prosperity and well-being of municipalities of operation through business strengthening, innovation and development programs, and transfer of knowledge or technology. 

Average weight: determined according to the procurement strategy. 

6. PROMOTION OF PUBLIC FOOD PROCUREMENT POLICY 

Compliance with National Law 2046 of 2020, which seeks to promote the participation of small local and agricultural producers whose production systems belong to peasant, familial and community agriculture, or their legally constituted organizations. 

Weight: minimum 10% (if applicable) 

7. LOCAL EMPLOYMENT PRIORITIZATION 

Commitment to prioritize the employment of skilled and unskilled local labor. The supplier must present at least a commitment to contract 100% of the local unskilled labor and  

more than 30% of skilled local labor. 

Average weight: determined according to the procurement strategy. 

8. DIVERSITY AND INCLUSION - WORKFORCE: 

Promotes local hiring of people classified into one or more of the following groups: women, people with disabilities, first job, ethnic groups, and victims of armed conflict. This factor is optional and in accordance with each procurement strategy. 

Average weight: determined according to the procurement strategy. 

9. ENVIRONMENTAL CRITERIA: 

An environmental sustainability criterion is included in the suppliers´ selection process. During 2023, Ecopetrol counted with 34 "green clauses" for the correct execution of contracts in terms of environmental responsibility. This factor is optional and in accordance with each procurement strategy.  

However, as mentioned above, in December 2023 the document “Environmental Sustainability Guidelines for the Supply Chain Process” was formalized, which specifies the following selection criteria focused on the 4 environmental postulates defined by Ecopetrol: 

• Decarbonization: Reduction of Greenhouse Gas emissions (carbon intensity indicator or tons of CO2e reduced) 

• Zero water discharges: Water footprint calculation generated for the selection process or during the execution of the contract. 

• Natural Capital (Biodiversity): Actions that enhance the Net Zero Deforestation Goal through the commitment to the “Intersectoral Pact for Legal Timber in Colombia; count with the Colombian Environmental Seal (SAC) or National Certification Initiative Forest Stewardship Council (FSC), also known as the Voluntary Forest Certification Working Group (CFV). 

• Materials and waste: Percentage of recycled raw materials and/or reused and/or remanufactured products used in the manufacture of the good or in the provision of the service or alternatives for the resale of materials or buy back, indicating the value and/or the resale fee. 

Average weight: determined according to the procurement strategy. 

10. PERFORMANCE ASSESSMENT: 

Ecopetrol assesses the comprehensive ESG management of its suppliers, through 5 criteria distributed as follows:  

• Environmental: HSE aspects 

• Social: Labor and Commercial Aspect, and Milieu Management 

• Governance: Operational Efficiency, and Contract Terms 

Average weight: each factor has an individual weight of 100%. 

WORLD-CLASS TALENT 

INTERNAL TRAINING PROGRAM FOR SUPPLY OFFICIALS 

Supply Management recognizes the training, reskilling and installation of new capacities and abilities of the human talent to reach and maintain the competence level to face the challenges imposed by new T-ESG® trends, climate change and energy transition for which it has designed a training system for officials. 

The internal training program consist of:  

CONTRACT MONITORING OFFICIALS’ ACADEMY 

Contract monitoring officers are key interlocutors for the correct performance of the agreed contractual obligations; therefore, the supply chain process recognizes the importance of updating and strengthening their knowledge by designing training programs on high relevance topics for its function. during 2023, 32 workshops and forums were held with the attendance of 200 people average per session, covering critical topics such as payment management, information leak, third parties risk mitigation, SECOP, petition rights, blockage management, claims, particular economic activities, decarbonization, cybersecurity (archer the new technological tool in contractual cybersecurity diagnostics), disclosure of the practice work control, Opex estimates, performance assessment in SAP ARIBA (process and tool), prioritization of skilled local labor, Fieldglass digital platform, management and prevention of conflicts of interest and ethical conflicts and tax management. 

As well, contract monitoring officers received the International Association for Commercial and Contract Management (IACCM) Certificate. 

ENVIRONMENTAL MANAGEMENT TRAINING 

Committed to sustainable Environmental Management, the supply chain has a training program on relevant topics for the different actors in the process: Supply Chain Officials, Suppliers and Contract Monitoring Officials. Under this framework, in 2023, 10 training sessions were carried out with the participation of an average of 273 people per session.  

The 2023 Environmental Training Plan contemplated the following topics: 

ESG PROGRAM RESULTS

As a result of the above strategies, during 2023 Ecopetrol achieved the following results.

ENVIRONMENTAL SUSTAINABILITY INTO THE SUPPLY CHAIN:

Ecopetrol fosters environmental best practices among its suppliers, implementing the environmental procurement model in four postulates (Decarbonization, Waste and materiales, Natural Capital / Biodiversity, Zero water discharges), which are the base of the roadmap designed to achieve the goals that impact the Ecopetrol’s Group TESG strategy and the commitment with energy transition.

1. Decarbonization of the supply chain

Ecopetrol applies the decarbonization cycle with suppliers, impacting Scopes 1, 2 and 3 of the company’s GHG inventory.

The baseline of the GHG emissions inventory of the supply chain of goods and services is 873.195 tCO2e for 2019. Continuously, the GHG inventory for the supply chain of goods and services is improved: In 2023, Ecopetrol collected GHG emissions data from 341 Suppliers and services, corresponded to 20% of total GHG emissions inventory of the supply chain of goods and services.

From 2020, the GHG emissions of the supply chain of goods and services have been reducing. At the end of 2023, 100.045 tCO2e were reduced, 57% due to mitigation initiatives like energy efficiency, circular projects, use of green materials, sustainable mobility for employees, and so on. The 43% were reduced through compensation actions, based on the acquisition of carbon credits by suppliers, mainly in Nature based Solutions (NbS) projects, that also brought social co-benefits for Colombia.

The total emissions reduction in 2023 corresponds to 11% of total GHG inventory of goods and services supply chain, 30% higher than 2022 GHG reduction.

2. Waste and Materials

Ecopetrol adopted a circular economy model for the supply chain, which promotes the life extension of materials, the minimization of waste generation, through the reduction of non-renewables virgin materials, and the promotion of reuse due to remanufacture, reparation and buybacks. These circular mechanisms in the supply chain brought the following results:

• $50mM of income due to the sale of goods non-required for operation
• The materials showcase and the inside work between areas brought $92,9mM of avoided purchases, thanks to the use of available materials in other warehouses of Ecopetrol and subsidiaries. The fiexed assets showcase achieved $9,36mM due to reuse.
• It was designed and implemented the first circular economy contract, that allows the transformation of ferrous scrap in goods required by Ecopetrol, like pipeline racks, waste collection points, and so on. These transformations brought avoided spent of $112M.
• Six projects that incorporated circular economy practices into procurement business models were developed during 2023, that reflect triple impact: Savings of usd25,8M, reduction of 168 tCO2e, reduction of 25,1 m3 in water collection, and generation of 3 circular jobs.
• 3.3 tons of waste were used, corresponded to 80% of total waste generated in catering, non-industrial building maintenance and construction, and other facilities services, thanks to initiatives like the use of use of demolition and construction waste in landfills and embankments, ferrous scrap transformation, recycling, composting, and so on.
• The catering service achieved 73% in its circular indicator that measures the inputs and outputs of the process, due to the use of ecolabel inputs and the compost and vermiculture of waste. In 2021 the result of this indicator was 69%.

In September 2021, the United Nations Industrial Development Organization -UNIDO- recognized Ecopetrol as a leader company in the implementation of Chemical Leasing model, which is a service business model that shift from increasing sales volume of chemicals to a service pay approach that allows:

• Efficient use of chemical products
• Waste minimization
• Extent useful life of a chemical product
• Efficient resources use

3. Zero water discharges

a. Non-industrial facilities

Ecopetrol has defined a 2030 goal of saving 20% of water consumption in non-industrial facilities prioritized, into the zero water discharges strategy. The process has been implemented in two stages:

1. Measurement: Water consumption meters are installed in non-industrial facilities to measure baseline and continuous monitoring of water consumption in each building. At the end of 2023, 219 non-industrial facilities had installed water consumption meters, continuously generating data.
2. Intervention: With the data of water consumption meters, Ecopetrol analyzes the main causes of consumption, depending on the type of building, and implements water savings strategies for each non-industrial facility. At the end of 2023, 179 non-industrial facilities reduced 32% water consumption compared to 2021 baseline, exceeding the goal set, due to user awareness communication campaigns monitoring and control of consumption by production field, renovation of elements such as toilets, water consuming equipment in dining halls, laundry facilities, among others.

b. Indirect water footprint

In the zero water discharges roadmap, Ecopetrol reports and achieved the certification of its direct water footprint in big four assets. Complementary, Ecopetrol is calculating its indirect water footprint, thanks to supplier engagement of some procurement categories:

• Contracts that have intensive use of raw materials as pipeline, cement, barite, and calcium carbonate.
• Waste management through bioremediation, landfill, incineration, and dump

121 suppliers are part of the prioritized categories in Ecopetrol’s indirect water footprint, with whom Ecopetrol delivered workshops around the indirect water footprint.

4. Natural Capital / Biodiversity

Within the framework of the Ecopetrol Group's 2040 TESG strategy, Biodiversity has been defined as an outstanding element. Likewise, Nature-Based Solutions (NbS) have been identified as an efficient alternative to maintain Biodiversity and Ecosystem Services in strategic areas, as well as improve the livelihoods of local communities.

In this context and as the first topic to include in supply chain model, Ecopetrol looks to engage suppliers of logistics, construction, maintenance, office supplies and packaging to achieve Net Zero Deforestation in indirect operations, thanks to three types of actions:

• Sustainability criteria for the selection and evaluation of suppliers
• Training and collaboration with suppliers around natural capital
• Transparency and communication towards Net Positive Impact on Nature and Net Zero Deforestation in the supply chain.

155 suppliers were prioritized for this strategy, due to its potential use of wood in the service hired by Ecopetrol.

During 2023, a natural capital survey was responded by 83 suppliers, which allows to understand the state of art of Ecopetrol supply chain in biodiversity aspects.