RESPONSIBLE SOURCING

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 business partners from more than 120 countries. Together, we want to drive progress toward 100 percent responsible sourcing.

Enabling purposeful growth through responsible sourcing

With our leading approach to responsible sourcing, we aim to enable purposeful growth by driving sustainability throughout our supply chain – for the benefit of people and the planet. 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 100% Responsible Sourcing Strategy emphasizes our aim to make 100 percent responsible sourcing decisions globally, across all regions, business units, and material groups. The strategic framework is built on our robust risk management as well as compliance approach. It reflects the key aspects of Henkel’s Purposeful Growth strategy while putting the three sustainability focal areas of climate-positive, circular economy and social progress at the heart of our responsible sourcing agenda. Our contributions to these focal areas are facilitated by the four key strategic enablers of collaboration, transformation, innovation and empowerment that will guide our progress toward 100 percent responsible sourcing.

Bertrand Conquéret, President Global Supply Chain and Corporate Senior Vice President Purchasing

   

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 and President of the TfS initiative

Responsible Sourcing Process

Our six-stage “Responsible Sourcing Process” is a core 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.

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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 then flow into our supplier onboarding process. We expect our suppliers 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 following an assessment or audit 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

Independently 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 improvement areas. We monitor the progress made in implementing the Corrective Action Plan together with our suppliers in the course of 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. The resulting transparency about the development of our suppliers’ sustainability performance is made accessible in real time via digital platforms.

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 then flow into our supplier onboarding process. We expect our suppliers 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 following an assessment or audit 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

Independently 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 improvement areas. We monitor the progress made in implementing the Corrective Action Plan together with our suppliers in the course of 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. The resulting transparency about the development of our suppliers’ sustainability performance is made accessible 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). 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.