Overview
Managing sustainability criteria
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Focus on procurement:
Managing sustainability criteria
Bayer is one of the major purchasers of raw materials, goods and services in the world market today. This is why procurement plays a central role in the company’s sustainability policy. The internal risk management processes undergo continual development and are designed to ensure that suppliers meet high social and ecological standards.
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| “Procurement plays a central role in a company’s sustainability policy.”
Professor Christopher Jahns from the European Business School (EBS) in Oestrich-Winkel |
This is why Bayer takes great care when selecting its suppliers. Clear principles control cooperation with suppliers throughout the entire Group. “We expect suppliers to support the principles of our ‘Program for Legal Compliance and Corporate Responsibility’ and that they operate their business accordingly,” explains Dr. Udo Murek, spokesman for the Group-wide “Bayer Procurement Community.” “Our publication ‘Requirements for suppliers’ lets prospective business partners know that internationally recognized, ethical principles regarding human rights, working conditions, environmental protection and the fight against corruption must be upheld in areas that come under the Group’s sphere of influence,” he adds.
Bayer also takes further precautions. The Bayer Procurement Community has launched a systematic cross-divisional procedure in which suppliers are questioned about the basic principles of their sustainability policy. Almost 95 percent of Bayer’s purchasing volume derives from countries that are members of the Organization for Economic Cooperation and Development (OECD). “In the first step, we assume that these suppliers meet the minimum ecological and social standards,” explains Murek. “It is more difficult to establish whether suppliers from non-oecd countries with greater social and political risks meet these high standards. That is why we have started our survey with them.”
To ensure that suppliers indeed operate in accordance with Bayer’s principles, the Supplier Relationship Management System (SUPREME) was introduced in spring 2003. “SUPREME allows Bayer to assess suppliers according to social commitment and ecological activities as well as to aspects of price and quality,” says Murek.
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| “SUPREME allows Bayer to assess suppliers according to social commitment and ecological activities as well as to aspects of price and quality.” Dr. Udo Murek, spokesman for the Group-wide purchasing organization, the “Bayer Procurement Community” |
Professor Jahns believes that this type of system is “essential to make sure that all suppliers meet the minimum standards.” He helps companies such as Bayer to identify all their supply risks and, if necessary, introduce measures to safeguard their standards. “One of the biggest challenges in this respect is to convince companies of the importance of supply risk management in the first place,” explains Jahns. He is aware that as long as there are no problems that damage the company’s image, most believe that their suppliers’ commitments are sufficient. However, Jahns is convinced that a separate supply risk management system would pay off in the long term.
Checking suppliers
The Bayer Group has already realized the expediency of introducing a supply risk management system. So that each subgroup does not have to develop its own supplier management system, the Global Community Support staff division of Bayer Business Services assumes this function for the entire Group. “When short-listing suppliers, purchasing agents must determine whether the company that wants to do business with us is committed to sustainability as we understand it,” explains Udo Murek. “If this is not the case, we usually exclude the supplier from the remaining selection process.” Criteria which we consider totally unacceptable are child labor and forced labor since they contradict our values and our Human Rights Position
.Bayer assesses particularly important strategic suppliers approximately every three years. The aim is to establish long-term partnerships. “Before terminating an agreement with a supplier whose services are considered inadequate in the area of sustainability, we check ways in which they could improve the situation,” states Murek. “This is already a concrete component of our communications with our suppliers.” Projects by the Bayer CropScience and Bayer MaterialScience subgroups to qualify suppliers and monitor transport and distribution safety are already in place in China
. A consistent approach to suppliers and customized programs can make an important contribution to reducing child labor, even in a difficult social environment, as the programs that Bayer CropScience has undertaken with Indian cotton seed smallholders illustrate .
Further developing supply risk management
Risk management in the Group’s procurement departments is to be revised by 2010 as part of the “Procurement Roadmap 2010”. The roadmap will focus on whether all the supply risks have been identified, whether the safeguards are working properly, and whether Procurement’s contribution to the Group’s social and ecological objectives has to be defined more precisely. At the same time, Murek believes it is important to take cooperation with suppliers to a new level, for example by involving them in development discussions and conducting internal and external audits. Bayer aims to develop its strategies in cooperation with external partners, including the European Business School’s Supply Management Institute headed by Professor Jahns and other industrial companies.
Jahns believes that a procurement department that champions this topic could play a pioneering role: “Supply risk management has not yet been established in most companies.” Bayer has already solved an important conflict of objectives that Jahns is familiar with from many other companies – in cases of doubt when procurement departments are faced with the question of whether they should choose the company offering the cheaper product or the one that complies with ethical principles, they can now make their decision based on clear in-house specifications. “Bayer places greater value on company principles relating to sustainability than on short-term profit,” says Murek.
Jahns believes that a procurement department that champions this topic could play a pioneering role: “Supply risk management has not yet been established in most companies.” Bayer has already solved an important conflict of objectives that Jahns is familiar with from many other companies – in cases of doubt when procurement departments are faced with the question of whether they should choose the company offering the cheaper product or the one that complies with ethical principles, they can now make their decision based on clear in-house specifications. “Bayer places greater value on company principles relating to sustainability than on short-term profit,” says Murek.
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