Our supplier management – setting standards for good relations
Procurement of products and services in widely differing markets and locations presents special challenges to our procurement organization.
To ensure that quality, environmental protection and social standards are observed at all stages in the supply chain, we take our responsibility seriously in our day-to-day dealings with currently around 94,000 suppliers. The Group-wide policy guidelines issued by the Procurement Community [ 65 ]
set out the principles of our procurement policy, which clearly reflect our values and leadership principles. Procurement has established a wide range of initiatives to support our sustainability objectives, for example, as part of our Climate Program
Clear requirements for suppliers
At the end of 2009, we introduced a Supplier Code of Conduct [ 67 ]
based on the principles of the UN Global Compact [ 68 ]
. This code of conduct covers ethics, employee relations, management systems and health, safety, environmental protection and quality (HSEQ). The issues addressed include a ban on corruption and child labor, the observation of human rights, the assurance of product safety and health and safety in the workplace, and the responsible use of natural resources. Bayer expects its suppliers to accept the sustainability principles set out in this code of conduct, which forms an integral part of our supplier selection and evaluation process. In 2010, it was integrated into our Group-wide electronic ordering system and contracts.
Global Supplier Days focus on sustainability
Supplier Days are designed to help suppliers implement sustainability in their own companies. The first Supplier Day took place in China in 2010.
In 2010, we provided information on our understanding of sustainability to more than 400 of our most important suppliers. Through this global dialogue we aim to show suppliers the demands we make on sustainable procurement and how they can meet requirements in their own companies. Bayer MaterialScience organized a first Supplier Day in China in March 2010. This was very successful and 90 representatives from 54 companies in Asia took up the invitation to this event. Further Supplier Days were held in 2010, for example in Germany, Spain, the United Kingdom and India. To give our partners an incentive for sustainable conduct, Bayer Crop-Science, the largest local Bayer procurement organization in India, awards a sustainability prize for its suppliers.
Training our procurement staff
We use a web-based training program to familiarize our procurement staff with present and future challenges relating to our code of conduct. The three training modules are mandatory and cover the principles of sustainability, the content of the code of conduct and instructions on selecting and evaluating suppliers that specify a four-step procedure to implement the code of conduct. The content of these modules is continuously updated and adapted to the needs of the target group. In addition to strategic procurement staff, a further 200 employees with procurement functions were included in the training program in 2010.
Reviewing suppliers’ observance of our sustainability principles
Supplier self-assessments and audits are used to check whether the demands made by the Bayer Supplier Code of Conduct are being implemented and complied with along the supply chain.
The suppliers to be checked are selected using a country-based risk approach based on our country index for sustainability risks derived from the risk assessments of various international indices such as the Corruption Perception Index [ 66 ]
published by Transparency International.
On the basis of this risk approach, we used standard questionnaires in 2010 to evaluate 147 suppliers, mainly from China but also from India, Thailand, the Philippines and Guatemala. Together with the evaluations performed in 2009, based on procurement spending we have already covered 50 percent of suppliers in the risk category and will continue to increase this percentage. In addition, 124 suppliers from non-risk countries were evaluated in 2010. They were selected by the subgroups using business-related criteria. These checks were supplemented by country-specific projects, for example an evaluation of more than 200 suppliers in India.
Together with an independent external auditor we had pilot sustainability studies carried out on suppliers in China in 2010. In the future, we intend to carry out random audits on the data provided by suppliers in self-assessment questionnaires and check up on the agreed development activities.
The data compiled from the supplier questionnaires and audits are used to determine whether specific suppliers meet Bayer’s requirements or whether we need to define further development measures and goals in collaboration with them. Action plans were drawn up with several suppliers in 2010. These are documented centrally and their implementation is tracked. So far, we have not identified any infringements that were so serious that they resulted in exclusion or termination of contracts with suppliers.
Our process is also subject to continual evaluation and we have set ourselves ambitious targets up to 2015. We also regularly review and, if necessary, revise all modules, for example our sustainability standards, supplier questionnaire and the supplier development process.
Almost one year after introduction of the Bayer Supplier Code of Conduct, we reviewed our processes together with an external consultancy. The recommendations made on the basis of this review have already been integrated into our targets for 2011:
Expand the present country-based risk approach: additional reviews of strategic and key suppliers from non-risk countries
Step up the number of sustainability-specific supplier audits by independent, external auditors
Improve central reporting and monitoring through stepwise integration of sustainability assessments into a Group-wide supplier management system.
Human rights as a benchmark
Bayer pays special attention to respect for human rights. Our Supplier Code of Conduct is based on the principles of the UN Global Compact and also takes up the sustainability principles and our Human Rights Position. The purpose of this code of conduct is to strengthen the common understanding by Bayer and its suppliers of how sustainability is implemented in our day-to-day business. Special attention is paid to the protection of employees and to ensuring that they are treated fairly and respectfully. Another key focus is on checking that the ban on child labor is enforced.
Unfortunately, child labor is still widespread in many countries. In a number of countries in which we are present and maintain business operations, children are still used for activities such as field work to contribute to the subsistence of families. In keeping with our Human Rights Position, we require suppliers along our entire supply chain to refrain from using child labor.
For many years, Bayer CropScience has taken resolute and systematic action against child labor in our cotton seed supply chain in India and helps assert children’s rights through the Bayer CropScience Child Care Program [ 71 ]
. The prime aim of this program is to alter attitudes to child labor. Farming can be pursued profitably even if children are not part of the workforce. Education plays a key role in securing a lasting improvement in children’s living situation.
Our “Learning for Life” [ @69 ]
initiative, which comprises projects established in conjunction with local non-governmental organizations and educational institutions as part of our Child Care Program, helps provide better education opportunities. Schools and training centers offer children a wide range of opportunities, from reintegration into the regular school system to vocational training. More than 2,400 children and young people benefited from these offers between 2005 and 2010. The focus of the program is currently on vocational training. Further information and more detailed figures can be found on the Internet.
These educational activities are supplemented by contractual agreements with seed producers. In addition, the fields used for cotton seed production are checked at least six times each season. Moreover, we pay a bonus to suppliers who strictly enforce the ban on child labor, and run training sessions to enhance agricultural efficiency. Graduated sanctions are applied for non-compliance. These range from oral warnings to termination of the contract in the case of repeated non-compliance. Once a year, corporate auditors Ernst & Young, India, conduct an unannounced on-site inspection of farms selected on a random basis.
Two indicators are used to measure the success of this extensive range of activities. The table shows the development since the “Kharif” season of 2005/2006.
|4_Results of field monitoring: production of cotton seed in the “Kharif” season in India|
|Child labor incidence rate per acre* monitored||0.57||0.15||0.014||0.01||0.002||0.001|
|Child labor cases as per total workforce in %||13.9||2.8||0.31||0.24||0.06||0.03|
* 1 acre = 4,046.86 m²
In 2010, we started to present our Child Care Program [ @70 ]
in the cotton seed sector to interested stakeholders and step up dialogue with them. Systematic field monitoring in the vegetable farming sector was continued in 2010. As announced, we also started to roll out the program to the production of seeds for hybrid rice.