CSR & supply chain management Engaging your suppliers and consumers in your CSR agenda Nicoleta Rusu 30 October 2009

2 The headlines Child workers, some as young as 10, have been found working in a textile factory in conditions close to slavery to produce clothes that appear destined for Gap Kids, one of the most successful arms of the high street giant. A County Tyrone general manufacturing company has been prosecuted for the unauthorised discharge of trade effluent into a wastewater treatment works Nike has been accused of using child labour in the production of its soccer balls in Pakistan. In recent months it has been revealed how many high street names including Cafe Rouge, Carluccio's, Zizzi's and Garfunkel's pay staff below the minimum wage Proactively managing our supply chain is vital

3 Sustainable Supply Chain - a definition “Management of raw materials and services from suppliers to manufacturer/service provider to customer and back with improvement of the social and environmental impacts explicitly considered”. Source: “Business guide to a Supply Chain – A Practical Guide”, Sustainable New Zealand Business Council for Sustainable Development

4 Why Sustainable Procurement / supply chain management is important to CSR Sustainable Procurement is of critical strategic importance for companies and has additional magnitude in today's high-pressure environment Because most high profile social and environmental risks are traditionally found in the supply chain, responsible supply chain management is a growing area of interest for companies and their stakeholders A better integration of corporate responsibility issues into companies' sourcing policies and processes is a way to manage more effectively risk that might arise in the supply chain …. … It might also create new opportunities in terms of savings, innovation, supplier relation management and competitive advantages. Source CR Index 2007

5 A case study - sustainable procurement at KPMG CSR Procurement Diversity Sustainable Procurement HR & Professional Services Facilities Marketing Technology Travel Age Disability Gender Race / ethnicity Religion / belief Sexual orientation Carbon emissions Charitable giving Community Ethical supply-chain Product composition Reduce / reuse / recycle

6 Sustainable Procurement – the business case Our clients are demanding it Our competitors are not far behind us We are advising our clients to implement such programmes Leveraging the full value and innovation available in the marketplace Legislation and regulation increasing requirements Wholly aligned with KPMG’s values

7 Programme structure Supplier audit Programme components Supplier Code of Conduct Supplier selection Supplier inclusion Supporting activities Supplier baselining Specification Client reporting Small business mentoring Tier 1 supplier performance monitoring Supplier development Reporting

8 Specification Purchasing decisions impact CSR with respect to: Meeting the needs of a diverse workforce Minimising environmental impacts CSR and diversity considerations mapped against different spend areas Objective: Ensure that CSR and diversity considerations are incorporated in the specification of the goods/services concerned

9 Supplier Inclusion Links directly with the diversity agenda KPMG Baselining exercise – a questionnaire sent to approx 1000 significant suppliers Helps us understand: the diversity of our supply-base the CSR and diversity performance of our suppliers Objective: Understand the demographics of our supply base and remove any barriers that prevent SMEs from selling to KPMG

10 Supplier Selection Series of closed, impact-focused questions designed and incorporated within the firm’s standard Request for Information / Proposal Supplier responses to the evaluation as part of the tendering process The questions – consistent with those in the Supplier Baselining activity Objective: Evaluate from the CSR perspective both the specification of the goods / services and the performance of the supplier

11 Supplier Code of Conduct Supplier Code of Conduct set up in 2007 Closely linked to the UN Global Compact Comprises 10 principles, under the following headings: Business Conduct Labor Conditions and Human Rights Environment Objective: Require all suppliers to sign-up to our Supplier Code of Conduct as an integral part of their contract with KPMG

12 Supplier Development Process does not end upon selection of suppliers Supplier Audits conducted Suppliers may be required to implement remedial actions, if found to be acting contrary to CSR / Code of Conduct principles KPMG may offer support from own experience (generally during supplier workshop) Objective: Ensure that Sustainable Procurement forms part of ongoing supplier management and development activity

13 Programme structure Supplier audit Programme components Supplier Code of Conduct Supplier selection Supplier inclusion Supporting activities Supplier baselining Specification Client reporting Small business mentoring Tier 1 supplier performance monitoring Supplier development Reporting

14 Presenter’s contact details Nicoleta Rusu KPMG in Moldova +373 (22) The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2009 KPMG Moldova S.R.L., the Moldovan member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in Moldova.