A company’s supply chain is a highly important resource – collaboration between companies at every step in the chain can open up powerful opportunities to minimize the overall environmental impact and maximize the overall positive social impact. At Henkel, our global supply chain includes business partners from more than 120 countries. Together, we want to drive progress toward 100 percent responsible sourcing.
Within our purchasing department, we are strongly committed to contribute to Henkel‘s Purposeful Growth agenda and its ambitions with our 100% Responsible Sourcing Strategy.
Bertrand Conquéret, Chief Procurement Officer (CPO) at Henkel and President of the TfS initiative
Our Foundation: Risk Management & Compliance
The key objective of our robust Risk Management & Compliance pillar is to drive sustainability risk-based supply assessments to enable informed decision-making towards risk mitigation and management as well as assessing and enhancing supplier sustainability performance. Focus of this strategic core pillar is on risk due diligence, policies and standards, supplier compliance as well as supply chain transparency and traceability.
Our three focal areas
Our 100% Responsible Sourcing Strategy puts Henkel’s three sustainability strategic focal areas of climate-positive, circular economy and social progress at the core of its sourcing agenda.
In the area of climate-positive, Henkel purchasing will contribute to a low-carbon economy by driving reduction of supply chain greenhouse gas emissions and implementing sourcing solutions positively impacting our path towards becoming a climate-positive company by 2040.
In our circular economy focus, Henkel’s sourcing organization will enable circularity by sourcing raw materials and packaging from sustainable sources aimed at closing the loop and deploying circular economy solutions to stop depletion of finite resources.
To contribute to social progress, Henkel purchasing is committed to actively incorporate sustainable practices along the entire value chain and in collaboration with our suppliers and partners, creating sustainable business value while respecting human rights in all of our activities.
Our strategic enablers
The strategic enablers will support us in accelerating our efforts by intensifying our internal and external collaboration with business partners and key stakeholders. Our key account-based sourcing model allows us to drive transformation by fully integrating the respective sustainability strategies of the business units in our responsible sourcing agenda. Our Global Purchasing Sustainability Network with experts from all Business Units, material groups and regions is a key element in our strategy execution. Furthermore, we will focus on sustainable innovations, boosting innovation of digital solutions and on driving the change to a 100 percent responsible sourcing mindset by empowering internal and external stakeholders through capability building opportunities.
Responsible Sourcing Process
Our six-stage “Responsible Sourcing Process” is a core element of our supplier assessment approach. It focuses on two main aspects: First, ensuring that all our suppliers comply with our defined sustainability standards. Second, we aim to purposefully collaborate with our suppliers and strategic partners 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 an integral part of all our purchasing activities worldwide and is implemented in all regions, in all business units and for all material groups. We perform this process both at the beginning of our relationship with a supplier and as a regular check of our existing suppliers.
Step 1: Pre-check and risk assessment
Henkel uses an early warning system for sustainability risks in global purchasing markets. We begin by evaluating the potential risks in a region or country. In doing so, we concentrate on countries identified by international institutions as being associated with heightened levels of sustainability risks. The assessment includes the criteria “human rights,” “corruption” and “legal environment” as well as risk value chains. Risk value chains are related to industries and sectors that we consider to potentially represent a sustainability risk for our company. This helps us to identify countries and purchasing markets that may require special precautions.
The most prominent contemporary example for a risk country associated with materials posing a sustainability risk are the eastern provinces of the Democratic Republic of the Congo (DRC), where various armies, rebel groups, and outside actors have profited from mining while contributing to violence and exploitation during wars in the region. The four mined minerals which are extracted from Eastern Congo and its neighboring countries are the so called ‘conflict minerals’. These minerals embrace Columbite-tantalite (ore of tantalum), Cassiterite (ore of tin), Wolframite (source of tungsten) and Gold, used for the final production of the metals Tantalum, Tin, Tungsten and Gold, known as 3TGs.
Since it is difficult to know, if a sourced raw material is funding human rights abuses or other crimes, we request every year that our direct suppliers of metals provide recognized documentation as evidence that they do not purchase or process metals from such critical sources.
Step 2: Onboarding
The results of the pre-check and the risk assessment then flow into our supplier onboarding process. We expect our suppliers to acknowledge our Supplier Code of Conduct as well as our Responsible Sourcing Policy. Our onboarding process is anchored in a globally uniform registration system and provides a standardized summary of our sustainability requirements.
Step 3: Initial assessment or audit
At the start of a new business relationship, new suppliers are asked to either disclose existing sustainability performance results, or to undergo a sustainability self-assessment that provides transparency about their sustainability performance. Our assessment approach uses questionnaires drawn up by EcoVadis, an independent sustainability assessment specialist. These questionnaires cover expectations in the areas of safety, health, environment, quality, human rights, employee standards and anti-corruption.
Selected suppliers undergo initial audits as an alternative to the self-assessment questionnaires. In this process, Henkel works with independent audit companies to check compliance with the defined standards in audits. Our audits consist of on-site inspections (e.g., at production sites) and include both factory inspections and discussions with employees at all levels of the hierarchy.
Step 4: Analysis of the performance assessment
External sustainability experts, as well as the supplier owners in our Purchasing team, analyze the results of the audits or the results of the self-assessment questionnaire to identify sustainability deficits and improvement areas. At the same time, the suppliers are assigned to different sustainability risk classes. A standardized process following an assessment or audit ensures that our suppliers implement the corrective actions that have been specified. Repeated serious non-compliance leads to termination of the supplier relationship.
Step 5: Corrective actions and continuous improvement process
Independently of the results of an audit or assessment, we ask our assessed suppliers to draw up a Corrective Action Plan and to work on the defined improvement areas. We monitor the progress made in implementing the Corrective Action Plan together with our suppliers in the course of the period until the re-assessment or re-audit takes place.
Step 6: Re-Assessment / Re-Audit
We use recurring re-assessments or re-audits to monitor the performance progress of our suppliers and ensure a continuous improvement cycle consisting of evaluation, analysis and corrective measures. The resulting transparency about the development of our suppliers’ sustainability performance is made accessible in real time via digital platforms.
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). At the heart of the initiative is the core idea: “An audit for one is an audit for all!”. 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
Around 16,000 assessments and audits have been conducted since TfS was founded. Performance is assessed in the areas of management, environment, health and safety, labor and human rights, and issues of ethical corporate governance. The TfS initiative has grown strongly in recent years and now consists of 31 members that represent a total spend of more than 228 billion euro (status: May 2021).
In September 2020, TfS launched its new strategic framework “TfS Grow&Deliver.” This new strategy builds on the initiative’s past achievements and will pivot TfS from an initiative focused on measurement to a community that delivers tangible impact. TfS members will continue their commitment to promoting higher standards, as well as improving the insights and data gathered from assessments and audits. This will enable TfS to train suppliers in topics and areas that offer the largest potential sustainability impact. TfS has also decided to expand its work in emerging markets such as China and India. Taking collaborative action is another building block for the new strategy. In this way, TfS aims to further extend its contribution to sustainability. On top of this, fostering the TfS community is another key factor that will enable TfS to achieve its aims.
Since May 2019, Bertrand Conquéret, Chief Procurement Officer (CPO) at Henkel, has been President of the TfS initiative. He played a key role in developing the new “Grow&Deliver” strategy.