Suppliers and Business Partners
In view of developments on the international purchasing markets, being able to rely on the support of a network of committed top suppliers is of considerable strategic importance. We steer our worldwide purchasing on the basis of defined management processes and a Company-wide purchasing strategy. To survive in highly volatile markets, global transparency, speed and decisiveness are crucial. Throughout the world, we concentrate on strategic purchasing rather than short-term, tactical purchases. We expect our suppliers to satisfy our standards of corporate ethics. In our selection procedures, we therefore consider their performance in regard to corporate social responsibility. Our worldwide binding Purchasing Standards provide the guideline for the supplier selection.
Early Acceptance of Responsibility
We acknowledged our responsibility throughout the value chain as long ago as 1997 when we formulated our corporate Safety, Health and Environment standards. Based on these standards, our corporate purchasing departments have established processes for assessing how our suppliers operate in regard to safety, health, and the environment. As part of this, audits are regularly carried out, as appropriate for the products and services supplied, the region, and the type of business relationship. If our standards are not met, we come to an agreement with the supplier on improvement measures and, if necessary, carry out follow-up audits. If the supplier’s performance is again judged to be inadequate, as a final resort we terminate the business relationship and seek an alternative source of supply. About 20 percent of our purchasing volume is now accounted for by suppliers and other business partners whose production sites have been audited by Henkel.
Efficient Structures
We purchase raw materials, products and services from suppliers and other business partners in 125 countries. Some 80 percent of the total purchasing volume comes from member countries of the Organization for Economic Cooperation and Development (OECD). We have consolidated responsibility for sustainability standards in the supply chain in our newly created Global Purchasing Sustainability department.
Status of Supplier Assessment
Since 2007, we have been assessing our worldwide suppliers and other business partners systematically in terms of uniform sustainability criteria. We have surveyed our suppliers and other business partners on the topics of safety, health, environment, quality, human rights, employee standards, and anti-corruption. At the same time, the questionnaire again clearly communicated our concrete expectations concerning sustainable and socially responsible business practices.
Until the end of 2008, we have been able to assess approximately 70 percent of our suppliers and other business partners for raw materials and packagings. While 38 percent of the suppliers and other business partners satisfy our sustainability criteria, we have agreed improvement measures concerning individual criteria with a further 60 percent. We found that two percent pursued unacceptable business practices and have therefore initiated the termination of our business relationship with these suppliers.
Future Focus
From 2009, we intend to focus to a greater extent onopening up new purchasing markets outside the OECD member states. This will not affect the demands we make on our suppliers and other business partners. To communicate our expectations with regard to sustainable business practices to new business partners in these markets, we will be introducing a Henkel supplier code in 2009, as a basis for all contractual relationships. In 2008, we already created sector-specific questionnaires to pursue our supplier assessments still further. Moreover, we aim to increase the percentage of our purchasing volume sourced from audited suppliers year by year until 2012. We provide special support to strategically important suppliers, helping them to develop further.
Supplier Assessment Instruments
