In seeking to promote social responsibility and good environmental performance throughout our business we work with our suppliers and contractors to support human rights standards and sound environmental practices in our supply chain. In 2004, we will include auditing of their performance.

Commitment counts - Accounting for suppliers’ performance - Full implementation by 2005 - Audits  - Making it daily business - Reaching beyond the first tier - What do suppliers think? - Claudia Cordera, Forma vitrum, Mexico

For the first time we can now account for our suppliers’ and licence manufacturers’ performance on basic labour rights and environmental management. The programme to promote social and environmental responsibility in our supply chain, which began in 2001, requires suppliers to complete a self-evaluation questionnaire. For production materials, social and environmental issues account for one third of the total rating of a supplier or licensee, which also includes quality and commercial aspects.

Our commitments to the United Nations Universal Declaration of Human Rights, the United Nations Global Compact and the International Chamber of Commerce’s (ICC’s) Business Charter for Sustainable Development form the basis for our programme. We also believe that this process will help us identify violations of human rights or sound environmental management among our suppliers, which could eventually represent a risk to our company if not properly addressed.

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So far we have evaluated the social and environmental performance of suppliers of production materials, services, office equipment and engineering work, as well as our licence manufacturers, covering 31% of the total value of purchasing in Novo Nordisk. The target for 2003 was to cover 90% of suppliers in these groups that could be characterised as having a high business impact, being manufacturers of substances or using
environmentally hazardous processes, or industries or companies located in countries known for human rights violations. However, we only managed to evaluate 69%.

The results show that most unsatisfactory answers to our questionnaire are related to environmental management rather than human rights. This could be due to the location of our suppliers (see map below). Although human rights violations also take place in Europe, the basic labour rights are usually in place due to controlled regulation or a long tradition of union affiliation at factories. However, some companies seem to be unsure about how to manage their environmental impacts.

All companies have received feedback from us and, in case of unsatisfactory conditions, have been asked for an action plan to improve performance. Only minor violations were found.

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Our production facility in Brazil prepared its programme on supplier evaluation in 2003 and the first results will be available in 2004. This means that all Novo Nordisk production facilities worldwide are now operating with the same programme to evaluate their suppliers on social and environmental issues.

In 2004, we will also address R&D suppliers and partners, marketing and sales affiliates, and should then, by 2005, have reached our target of full implementation, namely that all major areas of purchase will be covered by the programme.

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Quality audits are a very important part of a pharmaceutical company’s operations. In 2004, social and environmental audits of suppliers will be added to our assurance system. We carried out four pilot audits in Serbia, Brazil, the UK and India in 2003. The social and environmental audits will be carried out by our internal auditors, who will be trained for the new task. Suppliers and licence manufacturers will be audited against the issues in our questionnaire, which they are familiar with through the yearly evaluations.

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The programme has been integrated into daily business using the Balanced Scorecard, where the overall target is cascaded down the organisation to the relevant functions. Furthermore, social and environmental evaluation of suppliers and licence manufacturers will be included in our Quality Management System. Purchasers participate in one or two annual updates and training sessions, at which they discuss difficult issues, and new trends or changes are presented.

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87.8% of our suppliers are situated in Europe and North America, and 12.2% in Asia, mainly in Japan. Given this situation, we believe that the best way for Novo Nordisk to promote good labour standards and sound environmental management beyond the first tier of suppliers, is to help our suppliers do the same. As part of this approach we will be launching a website in 2004, open to everybody, but providing a special service to our suppliers, who wil be able to access our concepts and tools. Other companies that are starting to work with their suppliers on social and environmental issues may also find the website useful.

Geographical distribution of suppliers
(click to view map as pdf file)

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It is important for us to know what suppliers think about the programme and whether it has had any impact. We asked suppliers in 2003 and the results were very encouraging. The programme has apparently had a positive impact on how many suppliers operate internally; of the 44% who didn’t think so, the majority (79%) replied that their standards were already adequate. Not least, the programme has had a noteworthy impact on how 39% of suppliers operate with their suppliers. This supports our strategy of working with our suppliers on these issues to reach beyond the first tier.

What do suppliers think?
(click to view table as pdf file)

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Forma vitrum is a supplier of glass for Penfill® production. Forma vitrum de México, S.A. de C.V. has been evaluated on social and environmental issues since the programme began in 2002.

“In the beginning we were surprised to be asked such questions by a customer. They are dealing with issues which we are usually asked about by authorities, not customers. Getting the information to complete the questionnaire involved looking into local legislation and translating this information, not only into English, but also to make it fit the questions in the questionnaire.

“After the team from Novo Nordisk visited us, we took some steps to improve the working environment, for instance with regard to minimising the temperature and noise inside the production areas. We also started working on our ISO 14001 environmental management system. As part of this we now pose questions to our own suppliers regarding risk and datasheets for solvents and waste handling etc.

“So far we have not requested social performance data from our suppliers, since these are audited by the government authorities.

“We would like to get summary information about what Novo Nordisk is doing to address these issues. We know that we are working in different business areas and have different processes, but we could use the information for inspiration, and as guidance as to where they would like us to develop further.

“Having replied to this questionnaire and been rated satisfactorily by Novo Nordisk may prove to be an asset for us and provide added value in a competitive situation. When you take care of the company as a whole, eg your employees, you get better results; it helps improve the quality of our products and the relationships with our customers.”