Responsible Sourcing

Global supply chains are very complex – raw materials are often handled by many different companies and travel long distances before reaching their final destination. This creates challenges for companies when seeking to boost sustainability at every step in their supply chain. To accommodate these increasingly globalized value chains and complex procurement activities we, at Henkel, ensure a holistic supplier management process. Together with our business partners, we are further shaping our collaborative approach and driving this process forward.

Expectations towards our supplier base and binding supplier code

We place the same exacting demands on our suppliers and business partners worldwide. We expect them to conduct themselves in a manner consistent with our sustainability requirements. In selecting and working with our business partners, we consider alongside key commercial and operating indicators their performance with regard to safety, health, environment, social standards and fair business practices as decisive criteria. This is based on our globally applicable Safety, Health and Environmental Protection ‏(SHE) Standards that we formulated as early as 1997, thereby demonstrating even at that time our commitment to assuming responsibility along the entire value chain. 

Compliance with the cross-sector Code of Conduct of the German Association of Materials Management, Purchasing, and Logistics ‏(BME) is also mandatory for our suppliers worldwide. Henkel joined the BME in 2009, as its code is based on the ten principles of the United Nations Global Compact and is therefore internationally applicable. Alongside our Responsible Sourcing Policy, the BME code also serves as the basis for contractual relationships with our strategic suppliers, who have either recognized the cross-sector BME code – and hence the principles of the Global Compact – or produced their own comparable code of conduct. Additionally, our Corporate Standard Purchasing continues to apply for our employees.

Cooperation with strategic suppliers and partners

We collaborate intensively with our strategic suppliers to ensure the procurement of sustainable raw materials. We aim to initiate positive change throughout the value chain through joint projects for process optimization, resource efficiency, innovation, and environmental and social standards. Furthermore, Henkel has been honoring sustainable innovations by its suppliers.

Henkel has engaged in targeted dialog with its most important strategic partners on the subjects of sustainable innovations and responsible supply chains, for many years. The dialog centers on the definition and implementation of a common plan for Henkel’s sustainability goals for 2025 and beyond. We use target agreements with our strategic suppliers to manage transparency, sustainability performance and innovation potential in the area of sustainable sourcing solutions. As part of our risk management approach, we are working to improve the transparency of our upstream supply chains with regard to sustainability risks. To drive climate action across the value chain, we also require selected suppliers e.g. in the raw materials and packaging sectors to be transparent about the emissions levels of the product portfolio supplied to us. The suppliers selected for participation in this so-called Climate Engagement Program collectively account for more than 50 percent of our Scope 3.1 Raw material and packaging footprint. We expect them to make a contribution to reducing CO₂ emissions along their supply chains in line with our science-based targets. In addition, we encourage sustainable innovation by engaging in dialog with suppliers and setting individual targets. This is how we ensure that focus topics such as biodegradability are systematically integrated into Henkel’s holistic approach to sustainability.ty.

Our six-step Responsible Sourcing Process is a central element of our strategic risk management and compliance approach, which focuses on risk identification and defining appropriate measures to minimize and mitigate risk. Based on the assessment result of our suppliers’ sustainability performance we support our buyers in working with their partners to continuously improve sustainability performance in the value chain. These continuous improvement processes are based primarily on knowledge transfer and competence building with respect to process optimization, resource efficiency, and environmental and social standards. 

The Responsible Sourcing Process is an integral component of our sourcing activities. This process is initiated before the start of any new cooperation. It culminates in a recurring cycle of review, analysis and continuous improvement with existing suppliers. Using this process for the audit and assessment of the sustainability performance of our suppliers, we cover about 97 percent of our purchasing volume in the areas of packaging, raw materials, and contract manufacturing.

Henkel has a clear policy of doing business in an ethical and legal manner. This is inseparably linked with our commitment to respecting internationally acknowledged human rights.  We closely track human-rights-related developments at both global and national level, to support us on the design of appropriate due diligence measures. Our implementation of due diligence obligations is guided by the UN Guiding Principles on Business and Human Rights. In addition, the OECD Due Diligence Guidance for Responsible Business Conduct acts as a benchmark for our approach, which we continuously review and develop as necessary. To identify, prevent or mitigate human rights and environmental risks, Henkel has established a company-wide risk management and due diligence process. We have been continuing to add more depth to our approach and as of 2022, we have established a cross-business unit and cross-function Human Rights Office to oversee our due diligence processes. The coordination and project management of the processes runs through a Human Rights Coordination Panel, and the implementation of the processes is carried out by the members of the panel and their teams. By expanding and further formalizing our activities we aim to drive forward our commitment to due diligence. 

Henkel conducts annual and ad hoc risk analyses to identify potential human rights and environmental risks. The risk analysis, which is subject to continuous improvements, serves as the basis for defining and prioritizing preventive measures. 

We have essentially identified the following areas with potential exposure for systemic human rights risks in our upstream supply chain at present: raw materials based on palm oil and palm kernel oil, raw materials associated with the sourcing of so-called “conflict minerals” and mica. We are closely monitoring these areas with regard to their potential impact on human rights. 

In order to reduce risks in the palm oil industry, we have made a commitment to procure our palm-oil-based raw materials in line with the principles and criteria of the Roundtable on Sustainable Palm Oil ‏(RSPO). We also work closely with stakeholders along the value chain, from our suppliers to the RSPO, NGOs and smallholder farmers, to promote sustainable practices and respect for human rights. 

For the materials associated with the identified 3TGs ‏(tin, tungsten, tantalum, gold) and mica, we go beyond our standard measures and have introduced additional due diligence procedures. Recognizing that systemic risks often extend beyond our direct suppliers, we have implemented comprehensive procedures in line with the OECD Due Diligence Guidance to collect information on the origin of raw materials. We check whether the source complies with the standards of the Responsible Mineral Initiative ‏(RMI) and adheres to them. As part of the RMI process, external auditors are commissioned to carry out audits to confirm that the RMI requirements are met. We have established a general approach for all minerals in scope to have our suppliers disclose the origin of minerals and ensure sourcing through an established procurement process in line with our values.

All the Conflict Minerals Reporting Templates ‏(CMRT’s) are regularly reinvestigated and updated and published company wide. For more information, please see Conflict Minerals ‏(henkel-northamerica.com)and our Responsible Sourcing Policy responsible-sourcing-policy.pdf ‏(henkel.com)
 

Together for a sustainable supply chain

In 2011, Henkel and five other companies in the chemical industry co-founded the initiative “Together for Sustainability - Chemical Supply Chains for a Better World”(TfS). It is based on the principles of the United Nations Global Compact and the Responsible Care Initiative of the International Council of Chemical Associations ‏(ICCA). TfS aims to harmonize increasingly complex supply chain management processes with regard to sustainability and to optimize dialog among worldwide business partners. Above all, synergies are to be created so that resources can be used more efficiently and with a minimum of administrative effort, not only among the member companies but also with all of our shared suppliers.

At the heart of the audits and online assessments of the TfS initiative is the core idea: “An audit for one is an audit for all!”.  Suppliers then only have to undergo one assessment or one audit. The audits are carried out by a number of selected, independent audit companies. For the online assessments, TfS works with EcoVadis, a sustainability performance assessment specialist. Performance is assessed in the areas of management, environment, health and safety, labor and human rights, and issues of ethical corporate governance. As a number of TfS members are direct suppliers of Henkel, and these suppliers also assess and audit their suppliers, we achieve sustainable impact along the value chain.

One significant milestone in the history of the TfS initiative was the release of the Scope 3 Product Carbon Footprint ‏(PCF) Guideline for the Chemical Industry in 2022. TfS members have worked with global NGOs, corporate sustainability experts, chemical industry experts, and organizations such as the World Economic Forum (WEF) and the World Business Council for Sustainable Development (WBCSD) to ensure compatibility of the TfS PCF Guidelines with global best practices for emissions accounting. Henkel was represented by experts in the PCF working groups. The recently updated guideline consolidates existing PCF calculation approaches with regard to the specifics of the chemical industry, and enables business and industrial customers as well as consumers to establish direct comparability and an assessment of the climate impact of chemical products in the future. In 2024, the TfS initiative officially launched the PCF Exchange – a standardized data platform enabling suppliers and companies to generate and securely exchange PCF data from across their entire supply chains, creating consistency and comparability across the chemical industry.

Responsible Sourcing together with our partners

In addition to our work in the TfS initiative, Henkel is a member of AIM-Progress, a forum of companies from the consumer goods industry. The objective here is also to encourage member companies to share experiences in the area of sustainable sourcing and utilize synergies. The forum also focuses on holding regional supplier events to communicate and improve sustainability performance within the value chain.
In line with our strong belief in the power of multi-stakeholder and cross-industry initiatives, we are also a founding member of the “Action for Sustainable Derivatives” (ASD). It brings together organizations from along the palm oil derivative supply chain to support efforts to increase transparency and promote compliance with NDPE (No Deforestation, No Peat, No Exploitation) principles, with the overall aim of positively transforming the palm oil industry.