How We Manage Our Responsible Supply Chain
How We Manage Our Responsible Supply Chain
GRI Content: G4-12, G4-EC9, G4-EN32, G4-EN33, G4-LA14, G4-LA15, G4-HR4, G4-HR5, HR-10, HR-11, G4-SO9, G4-SO10
Our procurement is relatively decentralized, with most procurement occurring at affiliate level. The Vice President, Global Procurement has responsibility for procurement at the corporate level, with procurement managers in most affiliates. In early 2015, SGS appointed a Sustainability Manager, Sustainable Supply Chain who is responsible for overseeing a Group-wide sustainable supply chain management system.
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We have developed a Supplier Code of Conduct which will set out the basis of our responsible sourcing approach. The draft Code, which is planned for implementation in 2016, will define the minimum standards that we ask our suppliers to respect and adhere to when conducting business with SGS. Structured around our four sustainability pillars - Professional Excellence, People, Environment and Community – the Code is informed by the International Bill of Human Rights (namely the UN Declaration of Human Rights, the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights) and the International Labor Organization’s fundamental conventions on Rights at Work. The OECD Guidelines for Multinational Enterprises are also referenced.
The SGS Supplier Code of Conduct will apply to SGS suppliers and their affiliates and will cover all products and services that SGS purchases. Suppliers will be strongly encouraged to promote the requirements of this Code within their own supply chains, and we will give recognition to suppliers who do this.
Implementation of the SGS Supplier Code of Conduct will, from 2016, be facilitated by a newly designed supplier self-assessment process, which will evaluate suppliers’ abilities to adhere to our Code. Audits will be conducted by SGS contracted auditors using an audit protocol based on a review of performance against management systems and implementation, as well as specific topics such as the right to work of migrant workers, sub-contracting and home working, and environmental issues.
From Q2 2016 From Q3 2016 From Q4 2016 Global Contractors
Global contractors required to complete the SGS Supplier Self-Assessment Questionnaire
Supplier audits conducted by SGS. Suppliers provided with corrective action plans
Group monitoring of audit findings based on categorization of risk
In the event of a critical risk rating, supplier contracts will not be renewed
Local Suppliers Procurement managers in SGS affiliates to segment suppliers based on volume of procurement spend and perceived risk impacts
Local suppliers complete SGS Self- Assessment Questionnaire
Supplier audits conducted by SGS contracted auditors. Suppliers provided with corrective action plans
Our standard supplier contract template requires all suppliers to conduct their activities in accordance with environmental, health, safety and employment policies, as well as with relevant standards and legislation. Suppliers are also expected to encourage their own contractors and subcontractors to follow these practices.
SGS global requests for proposals (RFPs) require new suppliers to respond to questions covering sustainability management systems, policies, measurement and reporting of economic, environmental and social impacts, and certifications.
New suppliers must adhere to the SGS Code of Integrity and, once approved, the SGS Supplier Code of Conduct. They are also encouraged to use a confidential integrity helpline to raise concerns about possible violation of the SGS Code of Integrity.
We have developed a supplier scorecard for global suppliers which assesses them using six performance-based criteria: quality, service, responsiveness, innovation, competitiveness and sustainability. Based on a 360-degree appraisal process involving key stakeholders across SGS functions (e.g. Procurement, Finance, Operational Integrity, Innovation and Growth, and Sustainability), suppliers will have the opportunity to discuss and review their scorecard and address areas that indicate the need for improved service.
During 2015, we introduced global service agreements to ensure a consistent approach to the procurement of a particular commodity across our global network. In certain instances, global service agreements may result in amendments to supplier terms and conditions. The first global service agreement relates to fleet vehicles. (See the Green Cars section.) Procurement performance against our global service agreement is monitored via a central database and will be summarized in our online sustainability report from 2017 (based on 2016 data).
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 Low Cost Country Sourcing (LCCS) initiative is focused on procuring lab consumables and CAPEX projects. Sustainability criteria are included at various stages throughout 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 Environment 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 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.
With over 1,800 offices and laboratories globally, SGS holds an extensive inventory of fixed assets. There are a number of reasons why we deploy equipment: the relocation, refurbishment or closure of our labs; the changing nature of our lab work (which may require additional equipment to meet demand or specialist equipment); and new technologies that offer combined functionality resulting in older equipment being surplus to requirements.
EquipNet is a serviced web-based platform that enables our procurement managers to deploy fixed assets across the SGS network and externally. Using the tool, premium, late-model equipment can be sourced for a 25% to 75% discount on the price of new equipment, while saving lead times typically associated with purchasing new equipment, and minimizing waste through re-use. Using the world’s largest online venue for surplus equipment, MarketPlace™, companies can generate income from the sale of assets while also reducing the environmental and financial burden of disposing of equipment. The program has been implemented across the SGS network following its pilot in July 2015.
Building on our pilot supplier innovation project in 2014, we are expanding the SGS Supplier Innovation Club. The Club aims to engage our strategically important global and regional suppliers in collaborating on projects that deliver mutual market opportunities, operational efficiencies and sustainability benefits. During 2015, we held tailored Innovation Days with selected suppliers in Germany, Canada and the UK, and launched our strategy at a meeting of Global Procurement Managers in Hamburg in November 2015. The emerging themes during these Innovation Days included:
- Digitization of Customer Reporting – no longer producing and holding photographic or X-ray material
- Joint development of “common” reporting tools
- Re-useable testing devices
- Minimizing the use of reagents and recycling chemicals (hazardous)
- Reducing the energy consumption of devices
- Extending the life-span of equipment and devices (service and upgrading)
- Shortening the test cycle to improve productivity from devices (need fewer)
- Use of drones (optical) to inspect difficult areas – requires less people and equipment
- Improved communication devices to reduce travel
- Improve logistics services to reduce sample/equipment movements
Throughout 2016, Innovation Days with suppliers are planned in Asia, North America and Europe, and in March, we plan to host a Global Innovation Workshop at our headquarters in Geneva.
By 2020, we aim to have 50 Supplier Innovation Club members involved in a pipeline of 100 supplier-led innovation projects aimed at generating 5% incremental revenue (on a 2015 baseline).
See our case study on freight optimization to discover what we are doing to reduce unnecessary fuel costs and CO2 emissions from multiple deliveries to SGS facilities.
Please see How We Manage Energy and Climate Change for examples of environmentally responsible purchasing, including Green IT, Green Buildings and Green Cars.