7.1 Description of the supply chain

Extending the distribution network and ensuring it is maintained safely, including satellite plants and the actual running of the network, are the company’s key activities. Contracting service companies forms an essential part of these processes.

Madrileña Red de Gas has social responsibility incorporated into its business strategy, and promotes socially responsible practices through its procurements, aware of its capacity to influence its supply chain.

A total of 80% of procurements are made with 19 suppliers, of which 15 are service providers, one is a service provider and product supplier, and three are product suppliers.

We strive to buy from local suppliers, and encourage the suppliers and companies that we collaborate with to adopt behaviour guidelines that are consistent with our Code of Ethics. Significant operations for Madrileña Red de Gas are classed as those that exceed €20,000 a year. A total of 67% of significant purchases in 2021 were with local suppliers, i.e. from the Madrid region, helping to promote and strengthen local commerce.

In 2021 the company did not engage in any new outsourcing processes or undergo any significant changes in our supply chain.

7.2 We minimise risk as part of a transparent process

MRG has a General Contracting and Procurement Standard through which it controls and manages all processes, products and services supplied by external means. It has also defined the specifications relating to risk prevention, quality and the environment that must be included in all contracts and procurements, with guarantees not only that the environmental, quality and prevention commitments assumed by the company also apply to its suppliers, but that compliance with current legislation and appropriate protection for all workers involved in the process are fully observed.

The standardisation process for suppliers developed by the company means that, among other aspects, suppliers have the technical capacity needed to carry out their work. This capacity is determined according to the requirements established in the current legislation and standards for the sector, and according to the company’s specifications and procedures.

Working with appropriately standardised suppliers in critical business processes ensures higher levels of safety, quality, better delivery times and prices, and a respect for the environment in the service that they provide.

Suppliers that are critical to Madrileña Red de Gas are those that are involved in network building and maintenance works, regular inspections, home operations, readings, emergencies, installing and setting up receiving facilities, and manufacturers of polyethylene pipelines and polyethylene accessories. With the exception of manufacturers, these suppliers must conform to the standardisation established in the company’s internal regulations for relevant services, i.e. for services requiring compliance with specific technical and legal conditions in order for the work to be carried out, thus meeting the minimum requirements to take part in tender processes.

After an initial assessment stage conducted using the external IT tool, which checks compliance with requirements relating to economic and financial, solvency, legal, business structure requirements, experience and references provided, the relevant suppliers move on to a second stage of assessment to check compliance with technical and regulatory requirements relating to being accredited to perform the specific work in question. Suppliers not classed as relevant are only subject to the first assessment stage.

In 2021 standardisation work continued with suppliers using the external IT application, selecting 51 critical suppliers. Standardisation is reviewed periodically by running checks during the delivery of the service, through dialogue with the different company units to gather the necessary information relating to the service provided by the suppliers.

In the procurement process, long-term and trusting relationships are sought with suppliers by establishing objective and impartial selection mechanisms and ensuring that the principles set out in the Code of Conduct are always met.

All processes to award and contract suppliers are governed by the principles of need, efficacy, efficiency and flexibility, guaranteeing the company’s objectives regarding quality, price, delivery and service.

The MRG Procurement Unit establishes the purchasing strategy by conducting market analysis of potential suppliers, using technical specifications, the tender document, technical regulations and all necessary documentation provided by the various units of the company as reference material.
The need to conduct a tender process depends on whether or not framework agreements are in place, on whether any opportunities have been detected by Procurement or by request of the Business Unit.

A tender consists of the formal process of releasing a request for proposals that meets the following characteristics:

• There must be a fully documented series of conditions and rules that apply specifically to the tender for all companies taking part.
• At least three companies must be invited to submit proposals.
• The same form of communication must be used with them all.
• A single time and place for proposals to be submitted must be specified.

As a general criterion, proposals are requested from at least three companies, and this becomes mandatory when the budget exceeds €20,000. For proposals exceeding €100,000, an opening desk for proposals is set up by the unit inviting proposals, guaranteeing full transparency in the process at all times. If suggested by the particular unit or by the Legal Services Department, a lawyer may also attend the opening of proposals if deemed appropriate for that procedure.

Once the proposal process has come to an end, the contract documents are drawn up and signed after they have been reviewed and approved by the Legal Department.

In general, contracts cannot cover a period any longer than three years. Quality, environmental and operational safety requirements form part of the contract documentation, and must therefore be met by the supplier. The documentation also includes the penalty clauses imposed in the event of any unlawful breaches and criminal liability; the contracts require compliance with the law at all levels, in terms of both labour laws (H&S, quotations, compulsory training for the particular activity, etc.) and business laws (fiscal compliance, accreditation for the activity, etc.) in accordance with our Code of Ethics, policies and anti-corruption principles.

Adherence to the public offering.

The regulated character of our business includes specific public incentives to the natural gas sector, such as adherence to the public offering. Managing the services involved in connecting new supply points through public offering consists of publishing established prices and conditions for the distributor (in this case MRG) and the market type, which the installation companies concerned must adhere to.

In 2021 at Madrileña Red de Gas we maintained our public offering and sales campaigns as a sign of loyalty and commitment to our most traditional channel, namely the installation companies and the associations that represent them in Madrid, known as AGREMIA.

7.3 Communication and collaboration to achieve shared objectives

Corporate responsibility is understood by Madrileña Red de Gas as the series of strategic courses of action developed to establish trusting, stable, reliable and mutually beneficial relationships with our stakeholders, which includes suppliers.

Our relationship with our suppliers is of critical relevance to Madrileña Red de Gas, and our concerns include:

• Resolve all incident and complaints quickly and effectively.
• Meet contractual commitments and being open to negotiating and modifying clauses in order to improve the quality of our service.
• Maintain ethical, transparent and impartial conduct throughout the whole tender process.
• Guarantee that works are carried out in safe conditions and with all necessary means in place.
• Facilitate the process involved in coordinating business activities.
• Deal with all information needs to ensure the quality of the works carried out.
• Guarantee the personal data protection and information security.
• Ensure all computer tools are available designed to make the processes they are involved in easier and more agile.

Madrileña Red de Gas is a member of the Spanish Association of Purchases, Contracting and Procurement Professionals. This association is to promote and foster a sustainable purchasing management system by facilitating the exchange of knowledge and collaborative work, establishing strategic alliances with relevant entities from various production sectors.

Together with other businesses and suppliers, we take part in discussions to share the latest trends in sustainable development and sustainable plans for the supply chain. One example of this was the involvement of MRG in the Achilles Connect event titled “Climate Change and Energy Transition”, in which the importance of meeting sustainable development goals was discussed.