We collaborate closely with our suppliers across the entire supply chain. This engagement helps us bring the best thinking to the table, benefiting both our business and our brands.
With members from over 20 leading global suppliers, our Supplier Sustainability Board guides the development of supplier-related sustainability activities and goals.
Implementing a New Supplier Scorecard
In 2010, P&G issued its first environmental sustainability supplier scorecard. The scorecard relies on accepted worldwide measurement standards and sound science, including protocols from the World Resources Institute, the World Business Council for Sustainable Development and the Carbon Disclosure Project. P&G's goal in deploying the scorecard is to improve supply chain collaboration around environmental issues, and encourage the sharing of ideas and capabilities to deliver more sustainable products and services for our consumers.
Year-one results showed that the scorecard was relevant across the wide range of industries our suppliers represent. Most suppliers were able to report on the majority of metrics we requested. The scorecard also proved to be an effective way to generate sustainable innovation ideas from our suppliers, 38% of whom submitted ideas in the first year.
In 2011 we issued a revised scorecard, incorporating supplier feedback from the prior year’s process. Unlike the first year, when the scorecard was not mandatory to complete, the 2011 scorecard factors into a supplier’s rating and will affect its ability to do more business with P&G. Details on this open-source tool can be found at www.pgsupplier.com.
As part of our effort to create an initiative that can have far reaching cross-industry impact, P&G suppliers are also encouraged to use the scorecard within their own supply chains. We hope this endeavor will inspire a new industry standard. The scorecard is “open code” for use by any organization to help promote a working discussion and determine common supply chain evaluation processes across all industries.
Supplier Diversity Program
Our consumers, customers, and suppliers become more diverse every day. As a result, our success depends on an ability to understand their changing needs and work effectively with customers and suppliers around the world. Supplier Diversity is one important way we achieve our goal of touching lives and improving life.
In 1972, P&G established a program to identify and work with minority-owned businesses in the United States. Today, the Supplier Diversity Initiative constitutes a fundamental business strategy to identify and work with minority- and women-owned businesses.
Sustainability Guidelines for Supplier Relations
The foundation of our Sustainability Guidelines for Supplier Relations is our Statement of Purpose, Values and Principles. We operate within the spirit and letter of the law and maintain high ethical standards wherever we conduct business. We will actively seek business relationships with suppliers who share our values and promote the application of these high standards among those with whom they do business.
Summary of our supplier guidelines:
- We expect our suppliers to comply with all applicable laws of their country, including laws relating to employment, discrimination, environment, and health and safety. Suppliers who knowingly violate laws or have repeated problems conforming to them will not receive our business.
- Commercial bribery is illegal and subject to criminal penalties in many countries, including the United States. Any personal payment or bribe to individuals employed by P&G’s customers or suppliers—or receipt of a bribe or personal payment by P&G employees—is strictly prohibited. Even in locations where such activity may not, technically speaking, be illegal, it is absolutely prohibited by Company policy.
- P&G supports universal human rights, particularly those of our employees, the communities within which we operate, and the parties with whom we do business. In our business award decisions, we will continue to place substantial value upon incumbent and potential suppliers who consistently respect basic human rights.
- P&G utilizes fair employment practices, striving to provide a safe, healthy, and productive work environment for employees. The Company respects employees’ right to freedom of association, third-party consultation, and collective bargaining where allowed by law. The Company expects suppliers to uphold the same standards. Specifically:
- We will not conduct business with suppliers employing child, prison, indentured, or bonded labor, or using corporal punishment or other forms of mental and physical coercion as a form of discipline.
- We expect suppliers to conduct their business without unacceptable worker treatment such as harassment, discrimination, physical or mental punishment, or other forms of abuse.
- At a minimum, we expect our suppliers to comply with all applicable wage and hour laws and rules and regulations, including minimum wage, overtime, and maximum hours.
- We expect suppliers to provide a safe work environment, to prevent accidents and injury, and to minimize exposure to health risks.
- We seek to do business with suppliers who share our concerns for and commitment to preserving the environment. At a minimum, suppliers must meet all current and applicable environmental rules, regulations, and laws in their countries.
The management system is owned by the Global Vice President—Purchasing. It has three components:
Communicate: All purchasing personnel who interface with suppliers are trained on the supplier guidelines and how to conduct supplier assessments. We communicate the guidelines to our suppliers once a year and reinforce our expectations in our contracts. This makes compliance with the guidelines a condition of business; therefore, non-compliance is grounds for disqualification for all new and ongoing supply agreements.
Last year, purchasing personnel who interface with suppliers received forced labor/human trafficking awareness training. This training focused on definitions, why it is important to combat these practices, and what our personnel can do to eradicate it.
Check: Ongoing periodic performance assessments are conducted using third-party auditors. Emphasis is placed on suppliers that are high risk because of the country of operation or potential hazard. This strengthens our compliance program by using professional auditors while refocusing P&G resources on collaborating with suppliers on appropriate corrective actions.
Our supplier assessment program stems from our membership in a trade association, AIM-PROGRESS, where 23 member companies are working together to increase the efficiency of the supplier auditing process. Half of the members, including P&G, are using a common assessment and data sharing platform hosted by the Supplier Ethical Data Exchange (Sedex). This approach should lower costs for our suppliers by allowing them to reapply others’ audits for P&G and P&G audits for other customers through a mutual recognition program enabled by following an industry standardized methodology.
In 2011/2012, our preferred third-party audit firm continued to conduct assessments of our high-risk suppliers. In addition, P&G conducted quality assurance assessments of the auditor company to be sure that they are adequately trained and following our procedures.
Correct non-compliance: When potential non-compliance issues are identified, they are communicated to the supplier as part of the closing meeting. Corrective actions—including formal notification and a remediation action plan—are then implemented. In some cases we require immediate action to achieve compliance, or we halt business. These include child labor or forced labor, and egregious health and safety violations presenting immediate danger to human health. If a compliance issue is not resolved in a timely manner, the business relationship is terminated.