Chapter 17 Purchasing, corporate social responsibility and ethics

Program Business principles and procurement Towards a sustainable society: about ‘People, Planet, Profit’ Sustainable purchasing: The way to sustainable supply chains Trust, business integrity and ethics

Business principles and procurement Global sourcing is broadly developed Regulation regarding labor and environment often limited Consumers do not accept atrocities in the production How can purchasers contribute to sustainability? Companies draw up principles that form a context for doing business Some principles are: respecting international law, fair competing, integrity

Shell business principles  Our values  Sustainable development and  Responsibilities o to shareholders o to customers o to employees o To whom we do business with o to society  Principle 1: Economic  Principle 2: Competition  Principle 3: Business integrity  Principle 4: Political activities  Principle 5: Health, safety, security and the environment  Principle 6: Local communities  Principle 7: Communication and engagement  Principle 8: Compliance  Living by our principles

Sustainability: ‘People, Planet, Profit’ Sustainability - Corporate Social Responsibility Finding solutions without harming the needs of future generations Focus from shareholder to stakeholders:  People: Labor circumstances  Planet: Usage of natural resources  Profit: Financial development Weigh decisions based on these three criteria

Ethical responsibilities Be ethical Legal responsibilities Obey the law Economic responsibilities Be profitable Philanthropic responsibilities Be a good corporate citizen Carroll’s Pyramid of corporate social Responsibility Carroll, 1991

Sustainable Purchasing Suppliers form an important source of competitive ability Suppliers also form risks considering sustainability Companies like Philips are busy considering these issues  Developing a standard  Self-assessment and audit  Plan of action with corrective measures  Suppliers are willing to cooperate Continuing this approach from first tier to second tier suppliers is still a long way to go

Self assessment supplier sustainability Answer options Score on Performance/Implementation yes/no/NA1: Failures do exist ; Implementation: beginner stage / just started 2: Failures potentially exist; Implementation: work in progress, > 50% completed 3: Failures do not exist; Fully Implemented 9.1 GENERAL 9.1.1Has the top management of your company laid down and signed-off policies covering at least Environment, Health and Safety, Child Labour, Forced Labour, Discrimination, Compensation and Work Hours and which are in compliance with all applicable local laws and regulations? 9.1.2Does your company make sure that these policies are communicated to and understood by every employee ? 9.1.3Does your company make sure in a structural way that these rules are known and respected by its own supply base and subcontractors. 9.2 Environment Does your company have an environmental strategy/policy in place? 9.2.1Is your company ISO certified? If no, does your company have an Environmental Management System equivalent to ISO 14001? 9.2.3Does your company produce an annual environmental report and is a copy provided to their customers? Does your company currently do business with a Philips Product Division? If yes, does your company fully comply with the environmental banned and relevant substance lists appropriate to the Philips Product Division you supply? Does your company consider reduction of environmental impact during the product creation process ?

Self assessment supplier sustainability Answer options Score on Performance/Implementation yes/no/NA1: Failures do exist ; Implementation: beginner stage / just started 2: Failures potentially exist; Implementation: work in progress, > 50% completed 3: Failures do not exist; Fully Implemented 9.3 HEALTH AND SAFETY Is there a written safety and health policy available signed-off by Top Management and communicated, in which is laid down how to protect the health and safety of the employees and contract labour and minimize any adverse effect on the environment? 9.3.2Does your company provide appropriate training to ensure that employees and managers are aware of their own responsibility for the health and safety of themselves and others and that they have adequate competence on occupational health, safety and environmental matters? 9.3.4Is a fire prevention system in place that is compliant with local applicable regulations and company insurance clauses. Does the system cover the whole company and its annexes, tested and is in perfect working conditions. 9.4 CHILD LABOUR 9.4.1Are written policies and procedures in place to prevent the use of child labour and to implement programs and procedures to the transition of any child found to be performing child labour? 9.4.2Does the youngest age of workers comply with legal requirements and according to convention 138 of the International Labour organization? 9.5 FORCED LABOUR 9.5.1Are written policies and procedures in place to prevent forced and compulsory labour and are these in compliance with applicable legal requirements?

Self assessment supplier sustainability Answer options Score on Performance/Implementation yes/no/NA1: Failures do exist ; Implementation: beginner stage / just started 2: Failures potentially exist; Implementation: work in progress, > 50% completed 3: Failures do not exist; Fully Implemented 9.5.3Is voluntary presence of employees fully respected and not forced in any way and at any moment against their own will ? 9.6 COLLECTIVE BARGAINING AND RIGHT TO ORGANIZE 9.6.1Does your company respects the right of all personnel to form and join trade unions of their choice and to bargain collectively in accordance with ILO C98? 9.6.2Does your company acknowledge unions in discussions of labour conditions? 9.6.3Does your company, in those situations in which the right to freedom of association and collective bargaining are restricted under law, facilitate the development of parallel means of independent and free association and bargaining for all personnel? 9.7 DISCRIMINATION 9.7.1Are written policies and procedures in place to ensure equal opportunities or eliminate/ avoid discrimination? (e.g. gender, race, religion, ethnic minority, sexual orientation, disability) 9.7.2Does your company make sure that each employee receives and understands all applicable rules with respect to non-discrimination ? Such as: race, color, sex, age, language, religion, political or other opinion national or social origin, property, birth or other status.

Trust, integrity and ethics As companies become more dependent on each other, trust becomes more important.  In a research project by the Centre of Advanced Purchasing Studies (CAPS) it was found that real partnerships among the over 300 companies that were investigated were less than 1% of the total number of supplier relationships. Purchasing is sensitive for ethical issues through contacts with suppliers Code of conduct  Increasing importance because of e-auctions  NEVI’s code of conduct

Building trust in supplier relations Business integrity/ organization behavior Skills and competence/knowledge and management Principles/ethics Trustworthiness Creativity competence Leadership Trust Supply chain excellence

Conclusions Corporate social responsibility (CSR) clearly has increased in importance during the past years. Since suppliers are an important part of the company's value chain today, supplier relationships have become an important focus area of sustainability programs. The basic idea behind CSR is to meet the needs of current generations without sacrificing the resources for future generations