Note 5: Supplier engagement

In order to make the most productive use of resources, especially raw materials, we work closely with suppliers, identifying and minimizing supply chain risks, creating value through continuous improvement and seeking out collaboration and joint development opportunities to ensure a secure and sustainable supply of products.

Supplier segmentation

We have segmented suppliers based on an assessment of their performance, our business relationship and potential risks and opportunities. One segment includes suppliers in emerging markets who require special attention for labor conditions, environmental performance, business integrity and security of supply of raw materials. The other segment includes suppliers with a high level of spend, dependency, or potential for partnership, joint innovation and collaboration on long-term sustainability initiatives. In 2017, supplier segmentation was integrated into the Supplier Management process under the ALPS Source program.

Supplier sustainability framework

Our supplier sustainability framework supports continuous improvement and delivery of our shared goals. The foundation is AkzoNobel’s Code of Conduct for business partners, while the framework includes processes for supplier support visits, Together for Sustainability (TfS) assessment and key supplier management.

Business Partner Code of Conduct

Suppliers sign the code to confirm their compliance with environmental, social and governance requirements. Signatories cover 97% of the product related (PR) spend and 86% of the non-product related (NPR) spend.

Supplier support visits

This well-established program – designed to develop suppliers in emerging markets with particular risks – is now an integral part of our supplier selection, strategy and collaboration processes.

Together for Sustainability (TfS)

TfS assessments and audits facilitate proactive supplier risk management in the chemical industry. AkzoNobel verifies its own activities against industry best practice, and achieved the EcoVadis Gold recognition level for the third time in 2017.

TfS assessment of our suppliers covered more than 63% of spend in 2017, while the average score improved by 3%, including a positive impact on the human rights score.

The diagram below shows suppliers assessed by EcoVadis with risk levels set by AkzoNobel based on the supplier’s EcoVadis score. The proportion of “low risk” suppliers is increasing as a result of our improvement activities during the year.

Key supplier management

Our key supplier management process focuses on suppliers with whom we have: contractual relationships; opportunities for meaningful value creation; partnerships or joint innovation projects; or who have a material impact on our upstream carbon footprint. In 2017, the number of suppliers in this group increased from 35 to 150, representing 80% of our upstream carbon footprint. Key suppliers work with us on a balanced scorecard assessment of their sustainability maturity level based on fulfilling the minimum TfS score criteria and aligning on annual improvement objectives, including carbon footprint reduction. The scorecard now also includes KPIs on energy, waste, water and circular raw materials. From 2018, KPIs will include human rights.

ALPS Source

In 2017, under ALPS Source, we introduced our Supplier Management process, which measures supplier performance on quality, delivery, innovation and sustainability.