ESRS S2 – Workers in the Value Chain

Material Impacts, Risks and Opportunities

S2. Workers in the Value Chain

Use of Transitional Provisions According to ESRS 1 Appendix C

Bittium has decided to apply the transitional provision according to ESRS 1 Appendix C with regard to information under the S2 standard, and Bittium discloses that part of the sustainability topics under S2 have been assessed to be material on the basis of the company’s materiality assessment. Bittium will provide a brief description of how the company’s impacts related to these matters are taken into account in the business model and strategy. This reporting according to minimum disclosure requirements also includes a brief description of the following aspects of the matters in question: Bittium’s time-bound targets and progress towards them; Bittium’s policies and actions that have been taken to prevent, mitigate, remediate or eliminate the actual or potential adverse impacts; the results of such actions; and the metrics relevant to the matters in question.

Material Sustainability Matters Related to Workers in the Value Chain

The workers in Bittium’s value chain consist of workers employed by suppliers of goods. Most of them engage in the manufacturing of components required for production operations, their transport, or primary production activities that are indirectly linked to the components. Bittium’s value chain also includes people working in outsourced services, such as cleaning, occupational healthcare and transport services, and seasonal additional workforce acquired through outsourced services, such as consultants.

The following risk emerged as material in the process of identifying and assessing Bittium’s material impacts, risks and opportunities:

The materiality assessment found that human rights violations could occur in Bittium’s supply chain, especially if the minerals used in the products originated from conflict or high-risk areas. A significant proportion of the components purchased by Bittium originate from China, where human rights violations have been identified by international human rights organizations among many operators involved in primary production and further processing. The significance of monitoring is emphasized in high-risk areas, as insufficient visibility into the working conditions of value chain workers increases risks. Although information is required from suppliers, verifying its accuracy is challenging. (a more detailed description of the process to identify and assess material impacts, risks and opportunities is provided in section ESRS 2.)

The procurement of components is a key part of Bittium’s business model. The large number of external suppliers and the significant number of procurements increase the risk of shortcomings in parts of the supply chain, such as human rights violations, even though Bittium’s new supplier evaluation and continuous monitoring of previously approved suppliers includes the assessment of the suppliers’ compliance with labor laws and regulations. Production volumes are expected to increase as Bittium’s growth strategy is implemented, which may create a risk of increased work-related injuries or other health risks.

At the same time, pursuing more scalable production by investing in the automation of suppliers’ production activities will lead to the streamlining of operations, which will presumably lead not only to productivity growth and the increased precision of work but also to reduced stress on workers and better working conditions. In the value chain, these impacts would apply to component production, and they would not affect operators in the downstream value chain, such as the employees of transport companies, to the same extent. With regard to the identified risk, the highlighted issues included taking human rights into account throughout the value chain, particularly through procurement, and the policies related to these. When Bittium ensures that workers in the supply chain are provided with training and instructions as appropriately as possible, the supply chain can become more flexible and adaptable to changes. Procurement-related policies are aimed at preventing the use of forced labor and child labor in the value chain and promote good working conditions. By seeing to the promotion of the well-being, working conditions and occupational safety of suppliers’ workers, Bittium aims to enable the ethical operation of its supply chains, which may have positive impacts on the brand and Bittium’s ability to attract customers.

Targets Related to the Material Sustainability Matters

Bittium did not have any time-bound or outcome-oriented targets related to value chain workers in 2024. In its sustainability strategy, the company has set targets for its sustainability efforts for the period 2025–2028. Bittium’s management and persons in charge of various functions have been engaged in the company’s strategy work and target-setting. Bittium has set a long-term target of safeguarding the working conditions and rights of value chain workers. The development of supplier relationships from a sustainability perspective is among the company’s planned measures for 2025. Bittium’s goal is for the sustainability strategy to guide the procurement strategy and for sustainability to be integrated into procurement functions and processes.

Bittium’s time-bound and outcome-oriented target is to implement regular sustainability assessments of the entire supply chain by 2027. Ensuring sustainability and ethics in supply chains even more effectively through the appropriate implementation of assessment processes is an action that is related to this target. For 2025, Bittium has set a continuing the identification of risks related to the working conditions of value chain workers and safeguarding their rights for the company’s identified critical suppliers. The metric that will be used to assess this target is the number of audits conducted and the number of audited suppliers. All targets related to Bittium’s value chain workers cover the company’s own operations and value chain and the related relevant geographical regions. The year 2024 will be used as the base year for assessing progress. In setting the targets, Bittium utilized the impacts related to its value chain based on the challenges identified in the double materiality assessment relating to the transparency of value chain impacts and data collection, among other things.

Policies Related to the Material Sustainability Matters

Bittium is committed to operating in accordance with the policies and values described in its Code of Conduct. Identified critical suppliers of services and products are required to make a commitment to sustainable business practices and they must comply with Bittium’s Code of Conduct as well as Bittium’s supplier guidelines and the Bittium Supplier Manual. The guidelines include the key policies, practices, and requirements for Bittium’s supply chain. The requirements laid down in the Code of Conduct and the Bittium Supplier Manual are related, among other things, to business practices, anti-corruption, the prohibition of child labor and forced labor, environmental issues, occupational safety and human rights, including material-specific requirements. The policies are part of Bittium’s quality management, environmental management and information security management systems. The supplier’s commitment to ethical conduct, compliance with the applicable national and international laws, and respecting human rights are prerequisites for supplier approval. Bittium’s Code of Conduct includes a commitment to complying with the International Labour Organization (ILO) Convention and the UN Convention on the Rights of the Child and the Universal Declaration of Human Rights.

Bittium’s Code of Conduct and contractual terms cover the upstream and downstream value chain participants and all geographical regions from which Bittium makes purchases. Bittium’s Code of Conduct and Supplier Manual are publicly available to all stakeholders on the company’s website. The CEO, the Board of Directors and the operational management of the business segments are in charge of the implementation of Bittium’s policies, but the entire organization participates in putting the policies into action. Bittium has integrated ethical and social perspectives into its procurement process. The company strives to promote social responsibility, which is also required of the company’s identified critical supplier partners. Bittium has comprehensive procurement-related guidelines (Bittium Procurement Policy) in place, which specify aspects related to the ethical and sustainable perspectives of procurement and supply chain risk management, among other topics. The documents that guide the selection of suppliers of goods and services and their quality control include various supplier checklists, evaluation lists, manuals and general terms of agreement.

Actions and Resources Related to the Material Sustainability Matters

Bittium has drawn up contractual terms for its identified critical suppliers of goods and services. The aim is to apply these contractual terms to purchase orders placed by Bittium. The degree of application depends on the degree of approval of the supplier’s agreement. The general terms include, for example, terms pertaining to the avoidance of counterfeit materials, conflict minerals, certificates of conformity, the prevention of corruption and compliance with trade rules. In 2024, Bittium requested additional assurance from the identified critical suppliers to confirm that they do not use materials originating from Russia or Belarus in their production. 

With regard to the material risks concerning Bittium’s value chain workers and the management of these risks, the selection of identified critical suppliers plays a key role in ensuring that the selected suppliers are companies that operate sustainably and treat their workforce well, taking human rights perspectives into consideration. Bittium has a supplier selection process in place to support this. Supplier-related risks are monitored and managed on a continuous basis. As part of the continuous management of the supplier base, Bittium conducts audits mainly in response to identified risks or performance deficiencies and whenever Bittium’s needs or the supplier’s offering and capabilities change. When it is deemed necessary, Bittium establishes a regular audit routine for a supplier.

To promote more effective management of the supplier base and supplier data, Bittium continued to develop its supplier management tool in 2024. Although the most significant human rights risks are concentrated in the upstream value chain, operators in the downstream value chain, such as transport service providers, are also required to provide reports on matters such as working conditions and safety. However, some requirements may not apply to all suppliers. In its supplier assessments, Bittium determines whether there are sector-specific requirements that cannot be applied due to the sector. Bittium was not informed of any human rights violations in its value chain in 2024.

The supplier is required to have an up-to-date and documented risk management system that is used to ensure that risks are effectively identified, analyzed, managed, prevented and monitored. Bittium’s critical suppliers are required to have documented occupational safety methods and practices, as well as documented and implemented safety principles that cover buildings, employees, functions, documents and information systems. Bittium requires its identified critical suppliers to have an up-to-date, documented quality management system to ensure efficient planning, management and control of quality. The quality management system must satisfy the requirements of the ISO 9001, AQAP 2110 or ISO 13485 standard or other internationally recognized standard or regulation applicable to Bittium’s business, such as ISO 27001 or the Medical Device Regulation (MDR). Suppliers are required to have a documented internal audit program for their quality management system and operations. Matters related to suppliers’ workers are documented in the General Purchase Agreement concluded with identified critical suppliers or a corresponding agreement, and compliance with the provisions in question is assessed and evaluated in connection with supplier visits and audits (using the Bittium Supplier Audit Assessment Checklist, for example). The audit is initially carried out as a self-assessment against Bittium’s supplier requirements, followed by a review of additional clarifications with the supplier. If necessary, the supplier may be audited on-site by Bittium. A total of six supplier audits and six self-assessments were conducted in 2024. 

Bittium’s whistleblowing channel also provides value chain workers with the opportunity to report suspected misconduct to Bittium confidentially. In 2024, one whistleblowing report was made concerning the value chain, and it was addressed by taking appropriate measures. A more detailed description of the channel is provided in section G1.

Metrics Related to the Material Sustainability Matters

Bittium’s supplier engagement takes place both during the supplier selection process and subsequently in connection with quality monitoring activities, such as audits. This makes it possible to identify and measure any experiences and improvements related to value chain workers that may have been gained as a result of the activities. Compliance with Bittium’s guidelines related to suppliers was assessed in 2024 by means of supplier self-assessments and audits of critical suppliers. Bittium has not been informed of any incidents related to workers in the upstream or downstream value chain that would involve non-compliance with the UN Guiding Principles on Business and Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work or the OECD Guidelines for Multinational Enterprises. In 2024, no violations or non-conformities related to the use of child labor, forced labor, inappropriate disciplinary action, physical punishment, or health-related discriminatory practices were observed in Bittium’s or its subcontractors’ operations. 

Bittium audits its identified critical production material suppliers on a regular basis in accordance with the annual Supplier Audit Plan. The well-being, working conditions and occupational safety of the suppliers’ workers are also assessed in connection with the supplier audits (Bittium Supplier Audit Assessment Checklist). If any shortcomings are observed in the aforementioned areas, the supplier is urged to provide remedy and verification for it. The metric used is the number of observed shortcomings. Supplier compliance is verified by means of supplier surveys, requested supplier self-assessments and audits conducted by Bittium or a third party. Bittium may conduct a supplier audit, which covers the management system, technology, process or product and the safety management system. Bittium has set a long-term target of safeguarding the working conditions and rights of value chain workers. The metric that will be used to assess this target is the number of audits conducted and the number of audited suppliers. The company will continue to review these systematically in 2025.