Note 6: Supplier engagement
In line with both our sustainabilty agenda, and the supplier management process which forms part of the company’s ALPS continuous improvement program, we aim to use resources as effectively as possible. To make the most productive use of resources – specifically raw materials – we work closely with our suppliers. Together, we strive to identify and minimize supply chain risks, create value through continuous improvement and seek out collaboration and joint development opportunities in order to ensure a secure and sustainable supply of our products.
Supplier sustainability framework
Our supplier sustainability framework (see diagram) drives continuous improvement and supports the delivery of our sustainability objectives. The foundation of the framework is the company’s Business Partner Code of Conduct and includes processes for risk management and supplier performance.
Business Partner Code of Conduct
Our business partners are expected to follow the company’s core principles of safety, integrity and sustainability. The Business Partner Code of Conduct explains these core principles and specifies what we expect from our business partners. The code is available in 32 languages.
Suppliers sign the code to confirm their compliance with environmental, social, human rights and governance requirements. Signatories cover 98% of the product related (PR) spend and 83% of the non-product related (NPR) spend.
Together for Sustainability (TfS)
TfS online assessments (conducted by EcoVadis, a partner of TfS) and TfS on-site audits facilitate proactive supplier risk management in the chemical industry. AkzoNobel verifies its own activities against industry best practice and (for the fourth time overall) achieved the EcoVadis Gold recognition level in 2018.
TfS assessments of our suppliers covered 65% of spend in 2018. We use the EcoVadis score to determine the risk levels of our suppliers. In 2018, we included the EcoVadis sub-theme score on labor and human rights. Despite this stricter consideration of our risks, we have managed to increase the number of low risk suppliers, as shown in the diagram below.
Risk developments
in % of suppliers
While suppliers for the TfS online assessment are selected on global spend of more than €1 million, the selection criteria for the on-site audits includes the location of our supplier’s site (risk region) and the type of product (risk material) they are delivering to AkzoNobel. In 2018, we initiated 37 TfS audits.
The results of our TfS assessments and audits allow us to identify improvement activities with our suppliers. Out of 761 suppliers re-assessed by 2018 (cumulative), 489 improved their EcoVadis scores.
The TfS program is used for existing suppliers. New suppliers with an expected spend value greater than €100,000 are required to take part in an evaluation program, as described in our Supplier Selection process as part of ALPS. This program includes elements on sustainability (labor and human rights, environment, compliance and responsible procurement).
Supplier performance management
Our supplier performance management process includes suppliers who have a contractual relationship with us and/or have an impact on our value selling and resource productivity. The sustainability performance of suppliers in this group is measured using our Supplier Sustainability Balanced Scorecard (SSBS).
In 2018, we strengthened the compliance element of the SSBS by adding the EcoVadis sub-score on labor and human rights, and by monitoring the human rights controversies reported by the EcoVadis 360° report. In addition, our updated SSBS now includes specific measures on our suppliers’ eco-efficiency performance, including water and waste, greenhouse gases (GHG), energy use and circular economy.
From 2018 onwards, since we have reached our objectives in terms of SSBS deployed (100 suppliers), we report on supplier improvements. The SSBS score is used in the supplier management process which forms part of our ALPS continuous improvement program, in addition to measuring quality, delivery, cost and innovation performance.
|
2014 |
2015 |
2016 |
2017 |
2018 |
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|
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PR1 suppliers signed Business Partner CoC2,7 (% of spend) |
98 |
98 |
99 |
97 |
98 |
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NPR3 suppliers signed Business Partner CoC2,7 (% of spend) |
80 |
81 |
86 |
86 |
83 |
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Third party online sustainability assessments (TfS)4 |
534 |
722 |
875 |
950 |
953 |
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Third party on-site sustainability audits (TfS)5 |
15 |
54 |
131 |
219 |
270 |
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SSBS6 improvement in % against baseline |
– |
– |
– |
– |
11 |
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Every year, millions of liters of perfectly good paint are thrown away. Our Community RePaint initiative works across the Netherlands, Belgium and the UK, collecting left-over reusable paint and re-distributing it to communities, charities and people in need. In 2018, our Dulux brand celebrated 25 years of sponsoring Community RePaint schemes across the UK – benefiting more than five million people.
High risk raw materials
In 2017, we initiated a due diligence program of several raw materials in our supply chain identified as high risk raw materials impacting human rights, more specifically in terms of health and safety, working conditions and modern slavery. The raw materials in scope (which we mostly procure indirectly) are barite, cobalt, copper, cotton linters, mica minerals, palm oil, talc and tin. These raw materials have been identified using information provided by NGOs. In 2018, we prioritized cobalt, copper, mica minerals and tin (contained in our raw materials) and have started to request that suppliers delivering these materials (directly or indirectly) provide traceability/transparency of the raw materials back to the origin – smelter, refinery or mine. In 2019, we will pursue our due diligence program and continue to assess whether our materials are sourced in a sustainable manner.
AkzoNobel Leading Performance System, a company-wide continuous improvement program.
Business Partner Code of Conduct, Supplier Performance Management and Together for Sustainability are all elements of our supplier sustainability framework.
Explains what we stand for as a company, what we value and how we run our business. It brings our core principles of safety, integrity and sustainability to life and shows what they mean in practice.
Our Code of Conduct defines our core principles and how we work. It incorporates fundamental principles on issues such as business integrity, labor relations, human rights, health, safety, environment and security and community involvement.
Greenhouse gases, including CO2, CO, CH4, N2O and HFCs, which have a global warming impact. We also include the impact of VOCs in GHG reporting.
An economic system which is restorative and regenerative by design, and which aims to keep products, components, and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.