Supply chain.


Why is buying sustainably important?

We spend £446 million a year to run our business and our role is to make sure that our suppliers reach the standards that matter to the world for the long term.

"We use suppliers to bring in products and services that we have actively decided not to make or deliver ourselves. This does not mean that we are absolved of responsibility for how those services are delivered, made, or how they may negatively impact on society and the environment.

We collaborate with our suppliers to maintain best practice and will continue a programme of continuous improvement across all of our supply chain.We continue to review opportunities to work with social enterprise and the third sector through engagement in the procurement process."

Alex Wolny - Group Procurement Director

Our supply chain in numbers

(Download XLS:) Download Excel

 

2009

2010

2011

2012

2011 versus 2012

Spend with suppliers

£316m

£369m

£439m

£446m

+2%

Number of suppliers

2,284

2,102

2,077

2,005

-3%

Number of key suppliers

50

40

40

140*

+250%

Percentage of supplier spend operating in high risk countries (as defined by FTSE4Good)*

2%

15%

16%

9%

Please note that as we have increased our key suppliers from 40 to 140 this is not a direct comparison.

OUR APPROACH

Without our suppliers we couldn’t deliver services to our customers. And, we couldn’t deliver the high standards and trusted expertise our customers expect from us. By engaging with our existing suppliers we work collaboratively to identify how to optimise the supply chain and take the opportunity to recognise and reward innovation and leadership.

Our approach is to apply a constantly improving set of standards, which we expect all of our suppliers to work towards and support collaborative. That way we’re working together to mutually improve standards and processes.

OUR FOCUS

We are seeking to influence and support a greater number of our suppliers to adopt, as a minimum, our CSR standards. To support this, we have revised our definition of a ’key supplier’’ to encompass a wider base of our suppliers, This has resulted in our key suppliers increasing to 140 in 2012.

GOVERNANCE AND POLICY

All our suppliers must be compliant with our sustainable procurement policy. We continually review our governance model and policies to ensure they remain relevant in today’s market, whilst maintaining standards such as anti-bribery and corruption.

You can see our standards of doing business in the standards and policies section of our corporate website.

We expect our suppliers to:

  • maintain effective policies and procedures to manage their environmental impact;
  • respect fundamental human rights including worker representation;
  • have a positive impact on the communities in which they operate;
  • maintain responsible health and safety practices;
  • be committed to equal opportunities in employment; and
  • adopt ethical business practices…

BENCHMARKING OUR PERFORMANCE

Our procurement environmental management system represents our commitment to improving the way we manage our direct and indirect supply chain impacts. In 2012, the scope of this system was extended to include Legal & General Investment Management and we gained ISO14001 recertification until 2015.

We continue to validate and benchmark our approach to supplier management against external organisations, including the:

  • Financial Services Purchasing Forum;
  • Business in the Community Corporate Responsibility Index;
  • Dow Jones Sustainability Index;
  • EIRIS
  • UN Global Compact;
  • our suppliers, including Bureau Veritas and SGS.
    We will continue to embed our sustainable procurement policies into our business. In particular we have updated our CSR standards to align with our latest code of ethics and our anti-bribery and corruption policies. We have also delivered training on CSR evaluation and engagement to more of our procurement employees.

2012 HIGHLIGHTS

There have been a number of emerging areas of focus within our supply chain in 2012.

Social enterprise integration

During 2012, our procurement and supply chain teams have been looking to establish opportunities to introduce social enterprises to our supply chain. This was inspired by the Breedon Review which looked at new ways for companies to support small to medium sized enterprises in the economy.

We have embedded the process of engaging with social enterprises into our procurement processes, and invited firms to bid for numerous services. Our first indications are that social enterprises have struggled to compete on national level contracts because of their physical scale to deliver.

We have also engaged with Social Firms UK to deliver training and awareness to our procurement and supply chain teams. The training helps ensure that contracts up for tender are made available where social enterprises can find them.

To understand the practicalities of dealing with social enterprises our procurement team have been involved in the first step into the UK micro finance market in the form of www.se-assist.co.uk

Extending best practice in procurement

We have also offered our support for our overseas subsidiaries and joint ventures to develop sustainable procurement policies within their own organisations.

Long-term commodities

We’ve also been talking to a number of NGO experts around the long-term impact of commodities and the pressures on their availability in the future. As a second tier supplier with little direct exposure to raw materials, we have just started to understand this approach to doing business and managing risk.

LOOKING FORWARD

We’ll continue with our approach of collaboration and engagement with suppliers. We’ll also continue our work to embed CSR into our procurement and supply chain practices, taking every opportunity to improve.

On the governance and target side of things, we will commit to:

  • ensuring that 100% of key suppliers comply with our standards;
  • adopting the prompt payment code for small to medium sized enterprises; and
  • continuing to work with our overseas subsidiaries to move towards a global sustainable procurement policy.
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