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More Henkel Corporate Reporting 2015
The results of our assessments and audits from the TfS initiative are a core element of our five- step Responsible Supply Chain Process. This focuses on two main challenges. First, ensuring that all of our suppliers comply with our defined sustainability standards. Second, we aim to purposefully work with our strategic suppliers 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 performed both at the beginning of our relationship with a supplier and as a regular check of our existing suppliers.
Step 1: Risk assessment
Henkel uses an early warning system for sustainability risks in global purchasing markets. We begin by estimating the potential risks in a market or a region. In doing so, we concentrate on countries identified by international institutions as being associated with heightened levels of risk. The assessment includes the criteria of human rights, corruption, and the legal environment. We also appraise a second dimension, that of risk value chains. These are industries and sectors that we consider to potentially represent a risk for our company. This helps us to identify countries and purchasing markets that may require special precautions.
Step 2: Assessment
We use supplier self-assessments based on questionnaires and have them examined as TfS assessments by the independent experts EcoVadis. These cover our expectations in the areas of safety, health, environment, quality, human rights, employee standards, and anticorruption.
Step 3: Analysis
Based on the risk assessments and the suppliers’ self-assessments, we classify suppliers according to a “traffic light” system. A “red” score always leads to an audit. In the case of a “yellow” score, the areas where improvement is needed are identified and the supplier is audited if necessary.
Step 4: Audit
Henkel works with independent audit companies to audit compliance with the defined standards in TfS audits. Our audits include on-site inspections, e.g., at production sites, and discussions with local employees. Follow-up measures after an audit ensure that suppliers implement the corrective actions that have been specified. Repeated serious non-compliance leads to prompt termination of the supplier relationship. In this area, we also actively participate in cross-sectoral initiatives with the aim of improving the transparency and efficiency of supplier audits and helping to establish cross-company standards.
In 2015, we conducted a total of 687 assessments and audits. In the case of repeat audits, 78 percent of the suppliers audited had improved their sustainability performance. Overall, we did not receive any notification throughout 2015 of an infringement by any of our strategic suppliers which would have given cause for terminating our relationship with that supplier.
Step 5: Further development
As part of our supplier management activities, we work intensively with our suppliers to improve sustainability standards. We strive to initiate positive changes throughout the value chain, through training programs and joint projects. Our target for 2020 is to work with our partners to improve the working conditions for one million people employed in our supply chains.