Purchasing & Supplier Management

In view of developments on the international purchasing markets, being able to rely on the support of a network of committed top suppliers is of considerable strategic importance. We steer our worldwide purchasing on the basis of defined management processes and a company-wide purchasing strategy. To survive in highly volatile markets, global transparency, speed and decisiveness are crucial. Throughout the world, we concentrate on strategic purchasing rather than short-term, tactical purchases. We expect our suppliers to satisfy our standards of corporate ethics. In our selection procedures, we therefore consider their performance in regard to corporate social responsibility. Our worldwide binding Purchasing Standards provide the guideline for the supplier selection as well as our corporate Safety, Health and Environment Standards which we formulated as early as 1997. We have consolidated responsibility for sustainability standards in the supply chain in our “Global Purchasing Sustainability” department.

Worldwide purchasing markets

Our supplier base currently includes suppliers and other business partners from about 131 countries. Approximately 80 percent of our purchasing expenditure goes to countries in the Organization for Economic Cooperation and Development (OECD). We are, however, increasingly opening up new purchasing markets in states that are not OECD members. We place the same demands on suppliers from these countries as well. We assess our suppliers in a comprehensive process that covers sustainability performance and risks as well as key commercial and operating indicators.

Supplier assessment instruments and status in 2009

Our supplier assessment is a multiple stage process, which makes use of four instruments: supplier code, self-assessment, audits, and further development:

Graphic Supplier assessment instruments

Supplier code: The cross-sector Code of Conduct of the German Association of Materials Management, Purchasing and Logistics (BME) is our globally valid supplier code. Henkel signed on to the BME initiative in 2009, as it is based on the ten principles of the United Nations Global Compact and can therefore be used internationally. The BME code serves as the basis for contractual relationships with our strategic suppliers. This means that they have either recognized the cross-sector BME code – and hence the principles of the Global Compact – or produced their own comparable code of conduct. The same applies to all new suppliers that wish to enter into a contractual relationship with Henkel (see box “Sustainability check”).

Self-assessment: In addition, we continue to pursue a strategy of supplier self-assessment on the basis of sector-specific questionnaires. These underline our expectations in the areas of safety, health, environment, quality, human rights, employee standards, and anti-corruption. In 2010, the focus was on the renewed assessment of strategically important suppliers. These include suppliers of key raw materials and packaging materials, as well as business partners in telecommunications and technical materials. On the whole, the strategic suppliers and other business partners that were assessed in 2010 satisfied our standards of corporate ethics. In one case, however, we terminated the supplier relationship due to inadequate environment standards.

The recognition of the supplier code and the results of the self-assessment converge in our “On-boarding Process” for suppliers (see box).

Graphic Supplier On-boarding Process

A globally uniform computer-aided registration system anchors our sustainability requirements in standardized form in our supplier management processes. In several steps, a profile is created for each supplier. In this way, we document recognition of the supplier code and analyze the results of the supplier’s self-assessment.

Audits and risk assessment: The systematic expansion of the audit program for our supply chain will be the main focus of our work in the coming years. Our activities concentrate to a greater extent on countries identified by international institutions as being associated with heightened levels of risk, and on suppliers and service providers that potentially represent a specific risk for our company. In this way, year by year, we will continuously increase the percentage of suppliers audited in accordance with our sustainability criteria.

Focus on analysis of risk markets

Our adhesives and soldering pastes for the electronics industry contain metals – mainly silver, copper and tin – to make them electrically conductive. In some countries, mining of these metals is often associated with military conflicts and human rights violations. In 2010, we reviewed our direct suppliers of metals and requested them to supply documentary evidence that they did not purchase or process metals from critical regions. In the USA and other countries, we are collaborating closely with electronics industry associations to define an official auditing process for metals suppliers.

Further development: Our supplier assessments are focused not only on the current performance of our suppliers in regard to sustainability and social responsibility. Rather, we aim to purposely work with our suppliers to improve sustainability standards in our supply chain – for example, through knowledge transfer and continued education about process optimizations, resource efficiency, and environmental and social standards. In a pilot project, we have begun to include strategic raw materials suppliers in our reporting system to record the relevant environmental data. To ensure comparability of this information, we work closely with these suppliers and continuously improve the quality and transparency of the data.
Specifications for the purchase of palm oil and palm kernel oil

So that we can contribute to the responsible production of palm oil and palm kernel oil, we have participated in the Round Table for Sustainable Palm Oil (RSPO) initiative since 2003. In particular, we promote the development of special marketing and certification models for palm oil from sustainable cultivation. Our aim is that, from 2015 onwards, all of the palm oil and palm kernel oil supplied in the form of raw materials for our products should be covered throughout by RSPO certificates for sustainably cultivated palm oil.

In 2008, we became the first company in the world to purchase certificates for sustainably produced palm kernel oil, for the products of our Terra brand. Since then we have initiated further steps toward achieving our aim. Our laundry detergents Le Chat Eco Efficacité in France and Persil Eco Power in Belgium, together with our Ecocert-certified cosmetics products, have also been covered by corresponding palm kernel oil certificates since 2010.

Firmly embedded purchasing management standards

To truly assume responsibility worldwide, it is essential for the principles of sustainability to be understood and internalized throughout our purchasing organization. We have therefore set up a worldwide training program for our Purchasing Management Standards, which were revised in 2009. First of all, six regional training courses were organized to explain the new guidelines, including the mandatory requirements on the sustainability profile of our suppliers, to the responsible managers in the various countries. Local training courses were then held to impart the content to more than 90 percent of our purchasing employees