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More Henkel Corporate Reporting 2014
In line with our sustainability strategy, we intend to achieve more with less. To do this, we have introduced an updated, five-step Responsible Supply Chain Process. This focuses on two main challenges. First, ensuring that all of our suppliers comply with our defined sustainability standards. Second, we aim to purposefully work with our strategic suppliers to continuously improve sustainability standards in our value chain – for example, through knowledge transfer and continued education about process optimization, resource efficiency, and environmental and social standards. This process is performed both at the beginning of our relationship with a supplier and as a regular check of our existing suppliers.
Step 1: Risk assessment
Henkel uses an early warning system for sustainability risks in global purchasing markets. We begin by estimating the potential risks in a market or a region. In doing so, we concentrate on countries identified by international institutions as being associated with heightened levels of risk. The assessment includes the criteria of human rights, corruption, and the legal environment.
We also appraise a second dimension, that of risk value chains. These are industries and sectors that we consider to potentially represent a specific risk for our company. This is how Henkel identifies risk countries, value chains and, therefore, purchasing markets that score high in terms of hot topics.
Step 2: Assessment
We use supplier self-assessments based on questionnaires and also have assessments performed by independent experts. Both of these cover our expectations in the areas of safety, health, environment; quality; human rights; employee standards; and anticorruption. Around 1,100 assessments were performed in 2014.
Step 3: Analysis
Based on the risk assessments and assessments, we classify suppliers according to a “traffic light” system. A “red” score always leads to an audit. In the case of a “yellow” score, the areas where improvement is needed are identified and the supplier is audited if necessary.
Step 4: Audit
Henkel works with independent audit companies to audit compliance with defined standards. Our audits include on-site inspections, e.g., at production sites, and discussions with local employees. Follow-up measures after an audit ensure that suppliers implement the corrective actions that have been specified. Repeated serious non-compliance leads to prompt termination of the supplier relationship. In this area, we also actively participate in cross-sectoral initiatives with the aim of improving the transparency and efficiency of supplier audits and helping to establish cross-company standards. We conducted a total of 141 audits in 2014.
Step 5: Further development
As part of our supplier management activities, we work intensively with our suppliers to improve sustainability performance. We strive to initiate positive changes throughout the value chain, through training programs and joint projects on process optimization, resource efficiency, and environmental and social standards. On the whole, all of the strategic suppliers and other business partners that were assessed in 2014 satisfied our expectations. We terminated one supplier relationship because of socially unethical practices.
The sustainability performance of suppliers and other business partners is also a core element at Henkel’s annual “Supplier Relationship Events.” In 2014, an agreement was reached with all strategic suppliers on targets for disclosure of their carbon and water footprint. The targets and annual progress are recorded in a kind of roadmap, thus creating greater transparency in the supply chain. In addition to this, Henkel has been honoring particularly innovative and sustainable solutions by its suppliers since 2008.