Responsible Sourcing. Creating an FMCG Manufacturer approach

Transcription

1 Responsible Sourcing Creating an FMCG Manufacturer approach

2 Reputations Hard to Build easy to Lose!

3 Responsible Sourcing in the Supply Chain Your company has high Corporate Social Responsibility (CSR) aspirations, including Responsible Sourcing Can you be sure these are not put at risk by issues such as poor labour standards in your supply chains? Are you overwhelmed by the prospect of mitigating these risks by yourself? Are you unclear why you should be concerned anyway? We believe we can help you

4 So, what is CSR? Labour Standards Health & Safety Business Ethics Environmental Impacts Increasingly, the reputations of FMCG companies are linked to sourcing through their supply and value chains, where impacts (and exposure to risk) are the greatest!

5 How do companies walk the talk in their Supply Chains? Via.. Codes Assessments Audits Corrective Actions/Remediation But to inconsistent scope, standards, processes, degrees of scrutiny, etc.

6 Example: Labour Standards All or most are based upon standards defined by the Core ILO Conventions : freedom of association and the effective recognition of the right to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour and the elimination of discrimination in respect of employment and occupation The Conventions are ratified (or not) by Governments. Many FMCG Companies are signatories to the UN Global Compact, which builds further on the ILO

7 United Nations Global Compact A strategic policy initiative for businesses in the areas of : human rights, labour, environment and anti-corruption It asks companies to embrace, support and enact, within their sphere of influence.. So, where do individual FMCG companies stand?

8 Benchmarking: Corporate Citizenship Company Report 8 FMCG companies CSR policies reviewed All broadly align with key elements of UNGC and ILO Only real differences exist to reflect specific sector requirements

9 In Summary, the issue is We are all asking our suppliers for similar assurances, but Using different words in questions, Against similar, but different standards, On different systems, With different audit protocols Confusing for both suppliers and ourselves Leading to audit fatigue So we realised we needed to streamline this

10 Other Sectors EICC - Electronics Industry Code of Conduct (GeSi) WRAP - Apparel ETI - UK based, multi stakeholder initiative BSCI - Continental Europe retailer led ICTI - Toy Industry But no harmonised standard and approach exist yet GSCP (Global Social Compliance Programme) is trying to achieve this But all are based upon the same ILO and UNGC, and all require a similar approach to implementation. AIM-PROGRESS A solution for the FMCG sector?

11 Programme for Responsible Sourcing

12 Who s involved? A range of FMCG Brands, within AIM and the GMA

13 OK, so what are we trying to do? The objective is to: - improve the effectiveness and efficiency of the evaluation process, - Through a common methodology - Through enabling exchange of audit protocols - with the ultimate aim of raising CSR performance within the supply chain - and reducing the burden of audit overload amongst suppliers.

14 And, what are we not trying to do? Not Create a new set of codes We build upon existing company policies We are code agnostic Not Create new audit standards We shall deploy existing best practices where possible Steal with Pride Work to highest factor principles Or we shall deploy mutual recognition where practical Raise the floor and build awareness

15 Our intent in working together: to work jointly on the evaluation of responsible sourcing programmes, to increase efficiency to seek convergence to recognise an individual s choice Additional information:

16 Our Evaluation Scope Labour Standards Defined by relevant ILO Conventions, Global Compact etc Health and Safety Occupational H&S and Process Safety Environmental Mngt. Concerned with site standards, i.e. water, energy, waste, and emissions controls etc. ( i.e. the HOW ) Not environmental impact of products (i.e. the WHAT) Business Integrity At individual level: Bribery & Corruption At Organisational Level : Tax fraud, Price Cartels

17 Vision: Deploy Common Methods to Maximise our Synergies Step 1: Initial risk Determination Step 2: Supplier Assessment Step 3: Further Risk Evaluation Step 4: Audit Validation Step 5: Corrective Improvement Plans Independent Activity: Common Method: Independent Activity: Common Method: Independent Activity: Individual buying companies determine which suppliers are requested to follow the assessment process. Supplier completes a site self-assessment questionnaire to a common format Individual buying companies determine which suppliers will be asked to perform an audit 3 rd Party Accredited Auditors conduct a site audit to a common protocol and format Individual buying companies Determine the corrective improvement plans. Steps 2 and 4 can be done collaboratively With acknowledgement to GeSI for the model

18 Vision: Deploy Data Exchange to Drive Efficiencies (for all) The Problem Suppliers Buyers The Solution Suppliers Buyers Common Approach & System Audit Fatigue Audit for One, Audit for All

19 Our Key Work Streams Mutual Recognition Benchmarking our assessment approaches Raising the floor by sharing good practice Promoting audit data exchange and learn by doing SEDEX Deployment Group Using an established data exchange system Deploying best practice assessment methods Maximising our synergy and efficiencies Upstream Engagement Agricultural sectors Promoting Supplier Awareness

20 Pause for Q & A What areas do you think we are missing or not addressing sufficiently? Is there anything that you are doing which we could learn from?

21 A common data exchange platform

22 Sedex Supplier Ethical Data Exchange Louise Nicholls Sedex Board Member 5 th June 2009

23 Outline 1. About Sedex 2. Sedex s project with AIM-PROGRESS 3. Project successes 4. Challenges and future opportunities 5. Why collaborate?

24 What Sedex is Sedex is A not-for-profit membership organisation for companies who wish to address ethical and responsible issues in their supply chains A web-based database that enables global suppliers to share data about ethical and responsible practices with their customers in a common way A tool that enables companies to analyse and risk rate information Sedex does not set policy pass, fail, certify, or score suppliers conduct social audits Issue certificates promote suppliers

25 Membership includes More than 280 retailers, brands, manufacturers, agents and importers

26 More than 20,000 sites of employment in 134 countries, across many sectors Europe: 47%; Asia & Australasia: 34%; Africa: 8%; South & Central America: 6%, Middle East: 3%; North America: 2%

27 AIM-PROGRESS and Sedex Objectives PROGRESS-Sedex Working How AIM-PROGRESS came Group to work with Sedex RFP process for system in members joined together in October 2007 PROGRESS-Sedex working group (PSWG) formed, with a dedicated Sedex project manager Why AIM-PROGRESS is working with Sedex Proven governance structure Proven system Industry expertise Critical mass of suppliers Currently half AIM-PROGRESS companies are members of Sedex (PROGRESS-Sedex Working Group)

28 PROGRESS-Sedex Working Group Project How Sedex is supporting PSWG members On-boarding thousands of suppliers Training Reducing duplication of cost and effort Driving synergies and best practice Co-ordinating system development needs Additional value to PROGRESS Key supplier dialogue Networking and access across industries Benefit from best practice of existing membership

29 What Sedex gains from the relationship AIM-PROGRESS is helping Sedex get to the next level Global recognition Deeper understanding of brand manufacturer perspective Invaluable input into governance & strategy Ability to invest for the future Links to external stakeholders relevant to the community

30 Project successes to date More than 4,000 PSWG suppliers are currently engaged with Sedex 5,000+ suppliers are targeted for engagement in 2009 Suppliers response rate of 75% has increased from 68% in Nov 08 Supplier overlap and advantages of synergy are becoming increasingly apparent 33% of sites belong to shared suppliers Key supplier dialogue maximises advantages of overlap Additional 1110 suppliers have proactively linked to other customers

31 Challenges & opportunities Build awareness: Initial low supplier response rate needs to be improved upon; success rate with manufacturing suppliers is lower than for retailer suppliers Embed within companies: Success requires company support and understanding throughout the procurement and standards practices within organisations Company commitment: How to ensure supplier commitment other than by making it a term of trade More collaboration: Build a consistent message to suppliers that multiple customers are working together System usability: Sedex continues to improve its system to meet the needs of its members and their supply chains

32 Why collaborate? From Supplier resistance I can t see the benefits to my business 1. Added cost; little value 2. Customer request is not from core business function 3. Request is coming from only one customer 4. Suppliers own policies and processes to deal with these issues are not recognised 5. Customer message is: comply or no business To Supplier motivation This is helpful to my business 1. Valuable information is provided as part of the process 2. Compliance with clear customer policy; communication from buyer 3. Meets multiple customer requirements 4. Suppliers are engaged; own policies / processes are recognised 5. Customer message is: Demonstrate continuous improvement

33 Thank you. Sedex Information Exchange 2 nd Floor, Downstream Building 1 London Bridge London SE1 9BG (0) sedex@sedex.org.uk

34 Perspectives from a Supplier Tania Pascoe, Givaudan

35 Givaudan: Leadership in Fragrances and Flavours A large majority of AIM-Progress members are existing FMCG customers of Givaudan

36 The reality : complexity in the supply chain Givaudan Global F&F Purchasing Key Figures 2007 Quantities (Tn) # Materials # Suppliers Fragrances 120 4,000 1,000 Flavours ,000 2,200 Total ,000 3,200

37 The reality: complexity in the supply chain

38 Ethical sourcing: the issues? Balance of needs between people and the environment Security of supply (political / economic / climate) Intensive farming (mono-cropping / pesticides / fertilizers) Labour standards Competition for land use Water supply / water pollution

39 Managing complexity in the supply chain Small holders Large scale farming Co-operatives Large manufacturers 000 s of raw materials from 000 s of suppliers 000 s of customers with individual sourcing standards and questionnaires Givaudan s SD strategy and sourcing guidelines

40 An opportunity: managing complexity in the supply chain Small holders Large scale farming Co-operatives Large manufacturers 000 s of raw materials from 000 s of suppliers 000 s of customers with individual sourcing standards and questionnaires Givaudan s SD strategy and sourcing guidelines

41 Givaudan s experience with Sedex enthusiasm roll-out to our suppliers perceived value unknown learning and competence

42 Sedex: key learnings As a supplier to FMCG companies it does make sense for Givaudan to participate in a globally accepted programme as Sedex One new customer request every month for ethical performance data Each takes half a day to complete and is different to the others Over 20 customers have now asked for SEDEX information It helps us to drive improvements and consistency in our organisation The Sedex approach fits well within our own sustainability approach,

43 Sedex roll-out to our suppliers We are now reviewing rolling out Sedex to our suppliers Starting with selection of large suppliers Challenge will be small suppliers It will help us to assess how we are meeting our own sustainability goals and where improvements might be needed We need to take into account that it is only a self-assessment! Which might initiate a closer look through a dedicated audit

44 Perspectives from a Supplier Tania Pascoe, Givaudan

45 Perspectives from the Retail Sector Louise Nicholls M&S Head of Responsible Sourcing

46 Sustainability How we do Business Plan A Issue Management CSR Time 1990s

47 M&S Ethical Trading Journey Founder members of ETI. M&S Embark on defined auditing programme initially audited only big suppliers in high risk suppliers where we thought we had enough business to make change happen 2002 Discussions started about developing a joint audit system supply base complaining about inconsistent messaging, duplicate audits, COST to their businesses. Sedex formed. 2004/5 Sedex was initially voluntary this got us to 70% first tier supplier coverage, only when we made Sedex mandatory did we get to 100%. Started to focus on driving consistency of audits M&S Using Sedex and audit for all first tier suppliers and rolling out Sedex self assessment to selected second tier. Starting to evaluate environmental module.

48 What have we committed to as members of ETI? Adopting the ETI Base Code Monitoring supplier performance Sticking with suppliers who demonstrate willingness to address problems, and supporting these suppliers to improve; but Stop doing business with suppliers who persistently fail to make agreed changes Reporting annually on progress to ETI Participating in joint projects and activities

49 Our Model Awareness Raising Creating Tools and Training Innovative Projects Supplier Working Groups Monitoring Identifying Issues

50 The audit process We use a continuous improvement model not a pass & fail system Ethical audits are different not just about systems. The workers are consulted and their views are important. Transparency and openness are essential - we would rather find the issues and work with Suppliers to resolve them Commitment to improving is essential suppliers will not lose business if they show willingness to improve

51 What have we learnt from compliance data? 1.7 million workers (60% F, 40% M) 5 % agency labour 88 Countries 19% % temporary labour 55 Languages Sites 1224 Audits 146 food, 778 clothing, 9 NMP, 341 Home YTD What are the main 14% Wages issues? 50% Health & Safety 20% Working Hours

52 Making audits more effective

53 Engage, Support and Learn

54 How to drive change- collaborate! Encourage convergence to common standards But, audit is only one tool in the toolbox Enable the supplier to derive value from it and keep costs low from monitoring Encourage effective workplace dialogue Share data, experiences and challenges SEDEX and AIM-Progress are great examples Make it easy to be involved Communicate, communicate Together we can make a bigger difference

55 AIM-PROGRESS Agricultural sector initiative links David Howson, Bacardi

56 AIM-Progress initial focus on sugarcane Many AIM-Progress members buy sugar and its derivatives in large quantities Sugarcane under the spotlight: Growth of biofuel Human rights Environmental issues AIM-Progress wanted to formalise link with proactive sugarcane initiative BSI the most credible global roundtable focused on improving standards in the sugarcane industry

57 Better Sugarcane Initiative The Members: Multi-stakeholder groups from millers, refiners and growers to brokers, traders, consumers NGOs and action groups The Mission: To ensure that current and future sugarcane production is produced sustainably The Action so far: Version 1 of the BSI Standards has been published Currently undergoing public consultation The target is to reach an agreed set of sugarcane standards suitable for all level of the industry to be measured against for certification

58 Benefits of the link...to AIM-Progress An opportunity to understand what good looks like currently in the sugarcane industry and what are the key areas for improvement An opportunity to engage at producer & broker level in the correct regions An opportunity to ensure better management practice consistency and alignment To avoid duplication of supplier engagement by different companies on the same issues...to the BSI Potential increase in BSI membership Increased leverage of large multinational buying companies to help influence suppliers/brokers to acceptance of BSI Standards

59 Summary Reputations - hard to build and easy to lose! AIM Progress an FMCG sector solution Common data should be shared Collaborate through the supply chain Together we are greater than the sum of our parts

60 Responsible Sourcing Creating an FMCG Manufacturer approach Thank You

61 Final Q & A What would stop you joining this or something like it? Any suggestions for further development?