Our Approach to Responsible Supply Chain
Our procurement is relatively decentralized with most occurring on an affiliate-by-affiliate basis. The Group Vice President Global Procurement has responsibility for procurement at the corporate level, with procurement managers in most affiliates.
We have decided to update and strengthen our supplier assessment processes at the corporate level. During 2014, we will design and pilot a more comprehensive and systematic assessment approach as part of a wider management program for global suppliers, setting new minimum thresholds for performance on environmental and social issues (labor practices, societal impacts and human rights). This will apply to both the screening of new suppliers and reviews of significant existing ones. We will provide an update on the detail and progress of this pilot in our 2014 Sustainability report.
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Our global requests for proposal (RFPs) require suppliers to respond to questions covering sustainability management systems, policies, measurement and reporting of economic, environmental and social impacts, and certifications.
In 2013, we inserted a specific sustainability clause into our standard supplier contract template, for use both at the affiliate and global level. This requires our suppliers to conduct their activities in an environmentally and socially responsible manner, accord with environmental, health, safety and employment policies, abide by relevant standards and legislation, and encourage their own contractors and subcontractors to follow these practices.
All suppliers can use a confidential integrity helpline to raise concerns about the SGS Code of Integrity.
Some types of sourcing, such as low-cost sourcing and major construction projects, have more potential for environmental and social impact than others, and here we tailor our approach.
Low cost sourcing
When engaging suppliers from low cost sourcing areas, it is important to ensure that lower costs are not achieved at the expense of workers or the environment. Our new Low Cost Country Sourcing (LCCS) initiative is focused on procuring lab consumables and CAPEX projects. Sustainability criteria are included at various stages through the supplier and product qualification process, for example:
- In our initial market study, we prefer suppliers with certification to relevant ISO standards, and who have a robust environmental policy
- Potential suppliers must answer questions about their sustainability objectives and those of their own suppliers, their product safety standards and certifications, packaging and transportation, and provide evidence
- We visit the supplier’s facility to check that EHS regulation is being followed (e.g. use of personal protective equipment) and environmental controls are in place (dust collection, noise reduction, adequate lighting). Workers are interviewed to determine their age and how they are treated by their employer. We also ask for waste management records
- The product qualification stage checks that the product meets safety standards
We have rejected potential suppliers who fail to meet our standards. Potential suppliers may also be asked to improve their performance if the audit identifies any gaps. LCCS is a new initiative; the next steps will include applying the principle of continuous improvement during supplier reviews.
Major construction projects
Major construction and leasehold improvement projects can have a long-lasting environmental impact. Consideration of green building design at as early a stage as possible can make this impact a positive one. Before the RFP phase for major construction projects, we introduce our Green Building Guidelines and Checklist, and our procurement team will work on this with the project manager and architect. In 2013, we used these tools to incorporate energy efficiency features in a new laboratory in France and in a new office building in Chile (see 2013 Sustainability Highlights for more details).
A significant part of our supply chain involves the processing of test samples, such as shipping and storage. We have been looking at process optimization, focusing on the Minerals business in West and East Africa. Through the implementation of an agile demand-based management system, we were able to substantially reduce inventory levels while at the same time improving transit times and shipping costs. A direct outcome of this was reducing our CO2 footprint through “smart logistics”, such as consolidation opportunities and vendor managed inventory (VMI) concepts. Through applied “smart logistics”, we were able to reduce the number of containers by eight and emergency airfreight shipments by 16%. The next steps in this project are a global roll-out of the optimization program for Minerals, with the possibility of mirroring this initiative across other business lines where appropriate.
Please see Our Approach to Energy and Climate Change for more examples of environmentally responsible purchasing, including Green IT, Green Buildings and Green Cars.