“76% of you are meeting our sustainability standards,” said Thomas Udesen, CPO of life science giant Bayer, to a room full of the company’s suppliers. “But 24% of you are not, and that isn’t good enough.”
It’s not often you hear a CPO addressing their supply base in this way, but Udesen had a point to make. He was speaking at Bayer’s 2019 supplier day, where more than one hundred of its most important partners were present to hear the company’s short- to long-term priorities and offer ideas on how they can contribute. This year, creating a greener and more socially responsible supply chain was a key theme.
It is, therefore, perhaps less surprising that Udesen issued his challenge to those in the room.
“76% can be a place for us to move ahead from,” he later said, “but 24% non-compliance is still a significant amount and we have thousands of other suppliers not in attendance who also must meet our sustainability standards. There’s a lot of work for us to do.”
It’s a significant challenge – one made especially difficult by the complexity and opaqueness that exist in supply chains such as Bayer’s. To further the company’s aims, a large section of the supplier day’s agenda was dedicated to sustainability. Presentations from its core procurement sustainability team, panel discussions with cross-industry experts, and ideation sessions all formed part of its push to not only spread awareness of its sustainability targets, but to also open closer collaborations with suppliers to boost performance that way.
Bayer’s recently updated Supplier Code of Conduct sets out the ethical, social and environmental standards the company applies to its partners. Often termed the ‘baseline’ that suppliers must refer to, it contains expectations on everything from people and labour practices to environmental performance, as well as the governance and management systems needed to facilitate both. An additional detailed guidance document also provides examples that illustrate how suppliers can implement Bayer’s expectations.
But having a robust code of conduct is not enough on its own; compliance documents like these need people and teams that are able and willing to implement them. It’s for this reason that Bayer has a dedicated procurement sustainability team responsible for ensuring its suppliers adhere to the standards.
A key member of this team is Janina Lukas, one of Bayer’s procurement sustainability managers.
An unconventional hire, Lukas spent most of her career working for ethical and human rights nongovernmental organisations before joining Bayer procurement in 2015, where she leads several of its sustainability supplier development initiatives.
“She was initially doubtful about coming into the industry,” Udesen says in a later interview with Procurement Leaders. “Her main concern was whether she would receive the freedom and power to create an impact here, but we’ve given our team full autonomy when it comes to driving sustainability.
“We have €24bn spend across over 100,000 suppliers worldwide, all of whom we can directly influence on sustainability,” he says. “That’s millions of lives we can have a positive impact on, whether it be through reducing greenhouse gas emissions or improving labour relations.”
Lukas echoed these sentiments when she explained Bayer’s sustainability in procurement strategy during one of the supplier day’s sustainability sessions.
“Over 20 soccer fields worth of forest is lost to deforestation every minute. There are more than 40 million people in modern slavery, while one person will die early every five seconds from air pollution by 2050. Big businesses like ours can either add to or help reduce these numbers – we’re determined to do the latter,” she explained.
Lukas’ role is to develop and implement tools and frameworks that enable suppliers to improve sustainability performance and positively affect these issues.
Overall, the Bayer approach is highly integrated and builds on strong cross-team and cross-functional collaboration between procurement, business partnering teams, key countries as well as the company’s health, safety and sustainability function.
“The first step is our sustainability evaluation,” she says. “These are carried out by a third party and provide a supplier evaluation score, assessed across environmental, ethical and social practices.”
If a supplier is found to be noncompliant, Lukas steps in to help improve their sustainability performance.
Additional activities within this approach include bespoke corrective action plans, webinars and face-to-face training sessions. The latter two are often organised in partnership with the industry initiatives that Bayer is a member of, such as Together for Sustainability, Pharma Supply Chain Initiative and econsense. This helps the company address challenges that are felt across the industry rather than only in a single company.
While a portfolio of tools is still being developed, the first successes are already visible. Lukas highlights an example of the face-to-face training sessions in action.
“We had a case recently with suppliers in Mexico and China that had improvement potential,” she says. “We used an econsense training curriculum which saw these suppliers go through multiple classroom training days where they learnt how to apply best practice on-site and also received hands-on support. They discovered ways to apply new policies and had follow-ups with us on the changes they made. In the next evaluation we’ll see if they have improved.”
These initiatives obviously require investment on Bayer’s part, both in terms of the personnel hired and the time spent in rolling the projects out. But both Lukas and Udesen see a clear return on that investment.
“It’s good business to do so,” Udesen says. “Reducing waste, creating a cleaner environment, improving working conditions – all these outcomes will translate into more dollars and dimes for Bayer, whether that be through using less energy or having happier staff.”
But Bayer cannot achieve this on its own. Its success as a business is closely linked to that of its suppliers; both must work together to affect change.
“One company, regardless of its size, cannot achieve these aims on its own,” Lukas says. “It needs to be done across the entire value chain; we need our suppliers to support and implement these standards.
“If we can achieve that, we can have a positive and lasting impact.”
This article is a piece of independent writing by a member of Procurement Leaders’ content team.