A company’s supply chain is a highly important resource – collaboration between companies at every step in the chain can open up powerful opportunities to minimize the overall environmental impact and maximize the overall positive social impact. At Henkel, our global supply chain includes suppliers and business partners from 115 countries. Together, we want to drive progress toward 100 percent responsible sourcing.
Our responsible sourcing approach focuses on sustainability aspects along our supply chains for the benefit of people and our planet with the aim of driving transformational change together with our partners. For this reason, we maintain intensive dialog and collaboration with our suppliers to promote sustainable practices and respect for human rights. Our mission is to go beyond compliance, to drive impact and change across our entire value chain, and to create sustainable value for our customers.
Our ongoing ambition is to commit to 100 percent responsible sourcing together with our partners. We aim to take responsible sourcing decisions globally, across all regions, business units, and material groups, based on our responsible sourcing strategy. We are convinced that we can only establish sustainable procurement practices if every single decision-maker in the global supply chains acts in the spirit of sustainability. This requires a fundamental recognition of this responsibility, as well as adopting the right attitude and building skills and knowledge.
Within our purchasing department, we are strongly committed to contribute to Henkel‘s Purposeful Growth agenda and its ambitions with our 100% Responsible Sourcing Strategy.
Bertrand Conquéret, Chief Procurement Officer (CPO) at Henkel
Our Foundation: Risk Management & Compliance
Our strategy is based on our comprehensive risk management and compliance approach. The aim here is to gather and provide transparent key figures on the sustainability performance and risks of our suppliers as a basis for fact-based decision-making in sourcing processes and the awarding of contracts. The transparency gained in this area also benefits dialogue and cooperation with our suppliers.
Our strategic approach
Our 100% Responsible Sourcing Strategy puts Henkel’s dimensions of the 2030+ sustainability ambition framework – regenerative planet, thriving communities and trusted partner – at the core of its sourcing agenda. To this end, we focus on the following areas:
Together we enable a climate-neutral future by driving reduction of supply chain greenhouse gas emissions, implementing circular sourcing solutions and protecting nature and biodiversity.
Together we commit to drive sustainable practices by supporting equity, education and wellbeing of people in our supply chains while respecting human rights in all our activities.
Together we secure a high-performing, transparent and sustainable supply chain and collaborate with our suppliers and partners to drive transformation and create sustainable business value.
Key enablers for implementation
In order to implement our 100% Responsible Sourcing Strategy, the following factors are key enablers – collaboration, transformation, innovation, and empowerment. We accelerate our efforts by intensifying our internal and external collaboration with business partners and key stakeholders. Our global purchasing structure allows us to drive transformation by fully integrating the respective sustainability strategies of the business units and functions in our responsible sourcing agenda. Furthermore, we will focus on sustainable innovations, boosting innovation of digital solutions and on driving the change to a 100 percent responsible sourcing mindset by empowering internal and external stakeholders through capability building opportunities.
Responsible Sourcing Process
Our six-stage “Responsible Sourcing Process” is a central element of our strategic risk management and compliance approach, which focuses on risk identification and defining appropriate measures to minimize risk. Based on the assessment of our suppliers’ sustainability performance, we use the resulting transparency to support our buyers in working with suppliers to continuously improve our suppliers’ sustainability performance . These continuous improvement processes are based primarily on knowledge transfer and competence building with respect to process optimization, resource efficiency, and environmental and social standards. This process is an integral part of all our purchasing activities.
Step 1: Pre-check and risk assessment
This approach to assessing sustainability risks in the supply chain is part of the Group-wide risk management system. We assess risk potential at the regional and country level, as well as at the level of the value chain, including industry-specific risks. In doing so, we concentrate on countries identified by international institutions as being associated with heightened levels of sustainability risks. The assessment includes criteria related to human rights, environment and corruption.
The most prominent contemporary example for a risk country associated with materials posing a sustainability risk are the eastern provinces of the Democratic Republic of the Congo (DRC), where various armies, rebel groups, and outside actors have profited from mining while contributing to violence and exploitation during wars in the region. The four mined minerals which are extracted from Eastern Congo and its neighboring countries are the so called ‘conflict minerals’. These minerals embrace Columbite-tantalite (ore of tantalum), Cassiterite (ore of tin), Wolframite (source of tungsten) and Gold, used for the final production of the metals Tantalum, Tin, Tungsten and Gold, known as 3TGs.
Conflict-free supply chains are an integral part of our Responsible Sourcing Policy, in accordance with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas we conduct appropriate supply chain due diligence. We require our suppliers to engage in line with the requirements of the applicable legal frameworks on Conflict Minerals (including but not limited to the OECD Due Diligence Guidance, the EU Regulation and the Dodd-Frank Act). Suppliers have to provide documentary evidence that all the materials they source are conflict-free. Since Henkel has no direct business relationship with the smelters, we expect our suppliers to engage with these smelters on a conflict-free verified basis with the requirement to use exclusively Responsible Minerals Initiative (RMI) or other OECD recognized business initiative validated sources.
Step 2: Onboarding
The results of the pre-check and the risk assessment are then incorporated into our onboarding process for supplier. We expect them to acknowledge our Supplier Code of Conduct as well as our Responsible Sourcing Policy. Our onboarding process is anchored in a globally uniform registration system and provides a standardized summary of our sustainability requirements.
Step 3: Initial assessment or audit
At the start of a new business relationship, suppliers are asked to either disclose existing sustainability performance results, or to undergo a self-assessment that provides transparency about their sustainability performance. We do this for the significant share of our external purchasing volume using an assessment methodology developed by EcoVadis, an independent sustainability assessment specialist. These questionnaires cover expectations in the areas of safety, health, environment, quality, human rights, employee standards and anti-corruption.
Moreover, in 2021, we introduced the software-as-a-service solution IntegrityNext for suppliers with lower purchasing volumes. This software solution is based on a compact self-assessment questionnaire on sustainability performance and risks.
Selected suppliers undergo initial audits as an alternative to the evaluation of self-assessment questionnaires. Henkel works with specialized independent audit companies to check compliance with the defined standards. Our audits consist of on-site inspections (e.g., at production sites) and include both factory inspections and discussions with employees at all levels of the hierarchy.
Step 4: Analysis of the performance assessment
External sustainability experts, as well as the supplier owners in our Purchasing team, analyze the results of the audits or the results of the self-assessment questionnaire to identify sustainability deficits and improvement areas. At the same time, the suppliers are assigned to different sustainability risk classes. A standardized process ensures that our suppliers implement the corrective actions that have been specified. Repeated serious non-compliance leads to termination of the supplier relationship.
Step 5: Corrective actions and continuous improvement process
Regardless of the results of an audit or assessment, we ask our assessed suppliers to draw up a Corrective Action Plan and to work on the defined areas of potential improvement. We monitor the progress made in implementation together with our suppliers during the period until the re-assessment or re-audit takes place.
Step 6: Re-Assessment / Re-Audit
We use recurring re-assessments or re-audits to monitor the performance progress of our suppliers and ensure a continuous improvement cycle consisting of evaluation, analysis and corrective measures. Data on the measured sustainability performance of our suppliers is made available in real time via digital platforms.
Together for a sustainable supply chain
In 2011, Henkel and five other companies in the chemical industry co-founded the initiative “Together for Sustainability – Chemical Supply Chains for a Better World” (TfS). It is based on the principles of the United Nations Global Compact and the Responsible Care Initiative of the International Council of Chemical Associations (ICCA). At the heart of the initiative is the core idea: “An audit for one is an audit for all!”. TInternational Council of Chemical Associations (ICCA). TfS aims to harmonize increasingly complex supply chain management processes with regard to sustainability and to optimize dialog among worldwide business partners. Above all, synergies are to be created so that resources can be used more efficiently and with a minimum of administrative effort, not only among the member companies but also with all of our shared suppliers.
At the heart of the audits and online assessments of the TfS initiative is the core idea: “An audit for one is an audit for all!”. Suppliers then only have to undergo one assessment or one audit. The audits are carried out by a number of selected, independent audit companies. For the online assessments, TfS works with EcoVadis, a sustainability performance assessment specialist. Performance is assessed in the areas of management, environment, health and safety, labor and human rights, and issues of ethical corporate governance. In 2022, TfS had a pool of around 14,270 active TfS assessments and audits. In the same year, around 2,800 Henkel suppliers underwent a TfS assessment or audit. The TfS initiative has grown strongly in recent years and consists of members that are internationally operating chemical companies.
In 2022, the original core elements of the TfS initiative, TfS audits and online assessments, were expanded with the addition of two key elements: A Scope 3 Product Carbon Footprint (PCF) Guideline for the Chemical Industry was released. The new guideline consolidates existing PCF calculation approaches with regard to the specifics of the chemical industry and enables business and industrial customers as well as consumers to establish direct comparability and an assessment of the climate impact of products in the future. The TfS initiative also launched a free, central learning platform, the TfS Academy, for all member companies and their affiliated suppliers. The Academy is a customized learning and development platform focused on sustainability issues in the supply chain. It is designed to provide employees of TfS member companies and their suppliers with continuing education on key sustainability topics.
In September 2020, TfS launched its new strategic framework “TfS Grow&Deliver.” This new strategy builds on the initiative’s past achievements and will pivot TfS from an initiative focused on measurement to a community that delivers tangible impact. TfS members will continue their commitment to promoting higher standards, as well as improving the insights and data gathered from assessments and audits. This will enable TfS to train suppliers in topics and areas that offer the largest potential sustainability impact. TfS has also decided to expand its work in emerging markets such as China and India. Taking collaborative action is another building block for the new strategy. In this way, TfS aims to further extend its contribution to sustainability. On top of this, fostering the TfS community is another key factor that will enable TfS to achieve its aims.